LINCOLN BENEFIT LIFE COMPANY
Supplement Dated May 1, 2011
To the following Prospectuses, as supplemented
CONSULTANT SOLUTIONS (CLASSIC, PLUS, ELITE, SELECT) PROSPECTUS DATED MAY 1, 2011
CONSULTANT I PROSPECTUS DATED MAY 1, 2011
LBL ADVANTAGE PROSPECTUS DATED MAY 1, 2004
CONSULTANT II PROSPECTUS DATED MAY 1, 2004
PREMIER PLANNER PROSPECTUS DATED MAY 1, 2004
The following information supplements the prospectus for your variable
annuity contract issued by Lincoln Benefit Life Company.
SUPPLEMENTAL INFORMATION
ABOUT LINCOLN BENEFIT LIFE COMPANY
INDEX
PAGE
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Item 3(c) Risk Factors............................................................... 1
Item 11(a) Description of Business.................................................... 8
Item 11(b) Description of Property.................................................... 10
Item 11(c) Legal Proceedings.......................................................... 10
Item 11(e) Financial Statements and Notes to Financial Statements..................... 10
Item 11(f) Selected Financial Data.................................................... 44
Item 11(h) Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 44
Item 11(j) Quantitative and Qualitative Disclosures About Market Risk................. 59
Item 11(k) Directors, Executive Officers, Promoters and Control Persons............... 59
Item 11(l) Executive Compensation..................................................... 61
Item 11(m) Security Ownership of Certain Beneficial Owners and Management............. 87
Item 11(n) Transactions with Related Persons, Promoters and Certain Control Persons... 89
Other Information...................................................................... 91
ITEM 3(C). RISK FACTORS
This document contains "forward-looking statements" that anticipate results
based on our estimates, assumptions and plans that are subject to uncertainty.
These statements are made subject to the safe-harbor provisions of the Private
Securities Litigation Reform Act of 1995. We assume no obligation to update any
forward-looking statements as a result of new information or future events or
developments.
These forward-looking statements do not relate strictly to historical or
current facts and may be identified by their use of words like "plans,"
"seeks," "expects," "will," "should," "anticipates," "estimates," "intends,"
"believes," "likely," "targets" and other words with similar meanings. These
statements may address, among other things, our strategy for growth, product
development, investment results, regulatory approvals, market position,
expenses, financial results, litigation and reserves. We believe that these
statements are based on reasonable estimates, assumptions and plans. However,
if the estimates, assumptions or plans underlying the forward-looking
statements prove inaccurate or if other risks or uncertainties arise, actual
results could differ materially from those communicated in these
forward-looking statements.
In addition to the normal risks of business, we are subject to significant
risks and uncertainties, including those listed below, which apply to us as an
insurer and a provider of other financial services. These risks
constitute our cautionary statements under the Private Securities Litigation
Reform Act of 1995 and readers should carefully review such cautionary
statements as they identify certain important factors that could cause actual
results to differ materially from those in the forward-looking statements and
historical trends. These cautionary statements are not exclusive and are in
addition to other factors discussed elsewhere in this document, in our filings
with the Securities and Exchange Commission ("SEC") or in materials
incorporated therein by reference.
CHANGES IN UNDERWRITING AND ACTUAL EXPERIENCE COULD MATERIALLY AFFECT
PROFITABILITY OF BUSINESS CEDED TO ALLSTATE LIFE INSURANCE COMPANY ("ALIC")
Our product pricing includes long-term assumptions regarding investment
returns, mortality, morbidity, persistency and operating costs and expenses of
the business, which is ceded to ALIC. We establish target returns for each
product based upon these factors and the average amount of capital that we and
ALIC must hold to support in-force contracts taking into account rating
agencies and regulatory requirements. We monitor and manage our pricing and
overall sales mix to achieve target new business returns on a portfolio basis,
which could result in the discontinuation or de-emphasis of products or
distribution relationships and a decline in sales. Profitability from new
business emerges over a period of years depending on the nature and life of the
product and is subject to variability as actual results may differ from pricing
assumptions. Additionally, many of our products have fixed or guaranteed terms
that limit our ability to increase revenues or reduce benefits, including
credited interest, once the product has been issued.
ALIC's profitability depends on the adequacy of investment spreads, the
management of market and credit risks associated with investments, the
sufficiency of premiums and contract charges to cover mortality and morbidity
benefits, the persistency of policies to ensure recovery of acquisition
expenses, and the management of operating costs and expenses within anticipated
pricing allowances. Legislation and regulation of the insurance marketplace and
products could also affect the profitability of our business ceded to ALIC.
CHANGES IN RESERVE ESTIMATES MAY ADVERSELY AFFECT OUR OPERATING RESULTS CEDED
TO ALIC
The reserve for life-contingent contract benefits is computed on the basis
of long-term actuarial assumptions of future investment yields, mortality,
morbidity, persistency and expenses. We periodically review the adequacy of
these reserves on an aggregate basis and if future experience differs
significantly from assumptions, adjustments to reserves may be required which
could have a material adverse effect on our operating results ceded to ALIC.
CHANGES IN MARKET INTEREST RATES MAY LEAD TO A SIGNIFICANT DECREASE IN THE
SALES AND PROFITABILITY OF SPREAD-BASED PRODUCTS CEDED TO ALIC
Our ability to manage our spread-based products, such as fixed annuities, is
dependent upon maintaining profitable spreads between investment yields and
interest crediting rates on business ceded to ALIC. When market interest rates
decrease or remain at relatively low levels, proceeds from investments that
have matured or have been prepaid or sold may be reinvested at lower yields,
reducing investment spread. Lowering interest crediting rates on some products
in such an environment can partially offset decreases in investment yield.
However, these changes could be limited by market conditions, regulatory
minimum rates or contractual minimum rate guarantees on many contracts and may
not match the timing or magnitude of changes in investment yields. Decreases in
the interest crediting rates offered on products could make those products less
attractive, leading to lower sales and/or changes in the level of policy loans,
surrenders and withdrawals. Non-parallel shifts in interest rates, such as
increases in short-term rates without accompanying increases in medium- and
long-term rates, can influence customer demand for fixed annuities, which could
impact the level and profitability of new customer deposits. Increases in
market interest rates can also have negative effects on the business ceded to
ALIC, for example by increasing the attractiveness of other investments to our
customers, which can lead to higher surrenders at a time when our fixed income
investment asset values are lower as a result
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of the increase in interest rates. This could lead to the sale of fixed income
securities at a loss. For certain products, principally fixed annuity and
interest-sensitive life products, the earned rate on assets could lag behind
rising market yields. We may react to market conditions by increasing crediting
rates, which could narrow spreads and reduce profitability on the business
ceded to ALIC.
A LOSS OF KEY PRODUCT DISTRIBUTION RELATIONSHIPS COULD MATERIALLY AFFECT SALES,
RESULTS OF OPERATIONS AND CASH FLOWS CEDED TO ALIC
Certain products are distributed under agreements with other members of the
financial services industry that are not affiliated with us. Termination of one
or more of these agreements due to, for example, a change in control of one of
these distributors or market conditions that make it difficult to achieve our
target return on certain products, resulting in relatively uncompetitive
pricing, or a decision by us to discontinue selling products through a
distribution channel, could have a detrimental effect on our sales, results of
operations or cash flows ceded to ALIC if it were to result in an elevated
level of surrenders of in-force contracts sold through terminated distribution
relationships.
CHANGES IN TAX LAWS MAY DECREASE SALES AND PROFITABILITY OF PRODUCTS CEDED TO
ALIC
Under current federal and state income tax law, certain products we offer,
primarily life insurance and annuities, receive favorable tax treatment. This
favorable treatment may give certain of our products a competitive advantage
over noninsurance products. Congress from time to time considers legislation
that would reduce or eliminate the favorable policyholder tax treatment
currently applicable to life insurance and annuities. Congress also considers
proposals to reduce the taxation of certain products or investments that may
compete with life insurance or annuities. Legislation that increases the
taxation on insurance products or reduces the taxation on competing products
could lessen the advantage or create a disadvantage for certain of our products
making them less competitive. Such proposals, if adopted, could have a material
adverse effect on ALIC's profitability and financial condition or our ability
to sell such products and could result in the surrender of some existing
contracts and policies. In addition, changes in the federal estate tax laws
could negatively affect the demand for the types of life insurance used in
estate planning.
RISKS RELATING TO INVESTMENTS
WE ARE SUBJECT TO MARKET RISK AND DECLINES IN CREDIT QUALITY WHICH MAY
ADVERSELY IMPACT INVESTMENT INCOME, CAUSE ADDITIONAL REALIZED LOSSES, AND CAUSE
INCREASED UNREALIZED LOSSES
We are subject to the risk that we will incur losses due to adverse changes
in interest rates or credit spreads. We are subject to risks associated with
potential declines in credit quality related to specific issuers or specific
industries and a general weakening in the economy, which are typically
reflected through credit spreads. Credit spread is the additional yield on
fixed income securities above the risk-free rate (typically defined as the
yield on U.S. Treasury securities) that market participants require to
compensate them for assuming credit, liquidity and/or prepayment risks. Credit
spreads vary (i.e. increase or decrease) in response to the market's perception
of risk and liquidity in a specific issuer or specific sector and are
influenced by the credit ratings, and the reliability of those ratings,
published by external rating agencies.
A decline in market interest rates or credit spreads could have an adverse
effect on our investment income as we invest cash in new investments that may
earn less than the portfolio's average yield. In a declining interest rate
environment, borrowers may prepay or redeem securities more quickly than
expected as they seek to refinance at lower rates. An increase in market
interest rates or credit spreads could have an adverse effect on the value of
our investment portfolio by decreasing the fair values of the fixed income
securities that comprise a substantial majority of our investment portfolio. A
decline in the quality of our investment portfolio as a result of adverse
economic conditions or otherwise could cause additional realized losses on
securities.
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DETERIORATING FINANCIAL PERFORMANCE IMPACTING SECURITIES COLLATERALIZED BY
RESIDENTIAL AND COMMERCIAL MORTGAGE LOANS MAY LEAD TO WRITE-DOWNS AND IMPACT
OUR RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Changes in residential or commercial mortgage delinquencies, loss severities
or recovery rates, declining residential or commercial real estate prices and
the quality of service provided by service providers on securities in our
portfolio could lead us to determine that write-downs are necessary in the
future.
CONCENTRATION OF OUR INVESTMENT PORTFOLIO IN ANY PARTICULAR SEGMENT OF THE
ECONOMY MAY HAVE ADVERSE EFFECTS ON OUR OPERATING RESULTS AND FINANCIAL
CONDITION
The concentration of our investment portfolio in any particular industry,
collateral types, group of related industries or geographic sector could have
an adverse effect on our investment portfolio and consequently on our results
of operations and financial condition. Events or developments that have a
negative impact on any particular industry, group of related industries or
geographic region may have a greater adverse effect on the investment portfolio
to the extent that the portfolio is concentrated rather than diversified.
THE DETERMINATION OF THE AMOUNT OF REALIZED CAPITAL LOSSES RECORDED FOR
IMPAIRMENTS OF OUR INVESTMENTS IS HIGHLY SUBJECTIVE AND COULD MATERIALLY IMPACT
OUR OPERATING RESULTS AND FINANCIAL CONDITION
The determination of the amount of realized capital losses recorded for
impairments vary by investment type and is based upon our periodic evaluation
and assessment of known and inherent risks associated with the respective asset
class. Such evaluations and assessments are revised as conditions change and
new information becomes available. We update our evaluations regularly and
reflect changes in other-than-temporary impairments in our results of
operations. The assessment of whether other-than-temporary impairments have
occurred is based on our case-by-case evaluation of the underlying reasons for
the decline in fair value. There can be no assurance that we have accurately
assessed the level of or amounts recorded for other-than-temporary impairments
taken in our financial statements. Furthermore, historical trends may not be
indicative of future impairments and additional impairments may need to be
recorded in the future.
THE DETERMINATION OF THE FAIR VALUE OF OUR FIXED INCOME SECURITIES IS HIGHLY
SUBJECTIVE AND COULD MATERIALLY IMPACT OUR OPERATING RESULTS AND FINANCIAL
CONDITION
In determining fair values we generally utilize market transaction data for
the same or similar instruments. The degree of management judgment involved in
determining fair values is inversely related to the availability of market
observable information. The fair value of assets may differ from the actual
amount received upon sale of an asset in an orderly transaction between market
participants at the measurement date. Moreover, the use of different valuation
assumptions may have a material effect on the assets' fair values. The
difference between amortized cost and fair value, net of deferred income taxes,
is reflected as a component of accumulated other comprehensive income in
shareholder's equity. Changing market conditions could materially effect the
determination of the fair value of securities and unrealized net capital gains
and losses could vary significantly. Determining fair value is highly
subjective and could materially impact our operating results and financial
condition.
RISKS RELATING TO THE INSURANCE INDUSTRY
OUR FUTURE RESULTS ARE DEPENDENT IN PART ON OUR ABILITY TO SUCCESSFULLY OPERATE
IN AN INSURANCE INDUSTRY THAT IS HIGHLY COMPETITIVE
The insurance industry is highly competitive. Our competitors include other
insurers and, because many of our products include a savings or investment
component, securities firms, investment advisers, mutual funds, banks and other
financial institutions. Many of our competitors have well-established national
reputations and market similar products. Because of the competitive nature of
the insurance industry, including competition for producers such as exclusive
and independent agents, there can be no assurance that we will continue to
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effectively compete with our industry rivals, or that competitive pressures
will not have a material adverse effect on our business or operating results
ceded to ALIC. Furthermore, certain competitors operate using a mutual
insurance company structure and therefore may have dissimilar profitability and
return targets. Our ability to successfully operate may also be impaired if we
are not effective in filling critical leadership positions, in developing the
talent and skills of our human resources, in assimilating new executive talent
into our organization, or in deploying human resource talent consistently with
our business goals.
DIFFICULT CONDITIONS IN THE ECONOMY GENERALLY COULD ADVERSELY AFFECT OUR
BUSINESS AND OPERATING RESULTS
As with most businesses, we believe difficult conditions in the economy,
such as significant negative macroeconomic trends, including relatively high
and sustained unemployment, reduced consumer spending, lower home prices, and
substantial increases in delinquencies on consumer debt, including defaults on
home mortgages, and the relatively low availability of credit could have an
adverse effect on our business and operating results.
General economic conditions could adversely affect us in the form of
consumer behavior and pressure investment results. Consumer behavior changes
could include decreased demand for our products. In addition, holders of some
of our interest-sensitive life insurance and annuity products may engage in an
elevated level of discretionary withdrawals of contractholder funds. Our
investment results could be adversely affected as deteriorating financial and
business conditions affect the issuers of the securities in our investment
portfolio.
THERE CAN BE NO ASSURANCE THAT ACTIONS OF THE U.S. FEDERAL GOVERNMENT, FEDERAL
RESERVE AND OTHER GOVERNMENTAL AND REGULATORY BODIES FOR THE PURPOSE OF
STABILIZING THE FINANCIAL MARKETS AND STIMULATING THE ECONOMY WILL ACHIEVE THE
INTENDED EFFECT
In response to the financial crises affecting the banking system, the
financial markets and the broader economy in recent years, the U.S. federal
government, the Federal Reserve and other governmental and regulatory bodies
have taken actions such as purchasing mortgage-backed and other securities from
financial institutions, investing directly in banks, thrifts and bank and
savings and loan holding companies and increasing federal spending to stimulate
the economy. There can be no assurance as to the long term impact such actions
will have on the financial markets or on economic conditions, including
potential inflationary affects. Continued volatility and any further economic
deterioration could materially and adversely affect our business, financial
condition and results of operations.
LOSSES FROM LITIGATION MAY BE MATERIAL TO OUR OPERATING RESULTS OR CASH FLOWS
CEDED TO ALIC
As is typical for a large company, our ultimate parent The Allstate
Corporation and its subsidiaries are involved in various legal actions,
including class action litigation challenging a range of company practices and
coverage provided by our insurance products. In the event of an unfavorable
outcome in one or more of these matters, the ultimate liability may be in
excess of amounts currently reserved and may be material to our operating
results or cash flows ceded to ALIC for a particular annual period.
WE ARE SUBJECT TO EXTENSIVE REGULATION AND POTENTIAL FURTHER RESTRICTIVE
REGULATION MAY INCREASE OUR OPERATING COSTS AND LIMIT OUR GROWTH
As an insurance company with separate accounts that are regulated as
investment companies, we are subject to extensive laws and regulations. These
laws and regulations are complex and subject to change. Moreover, they are
administered and enforced by a number of different governmental authorities,
including state insurance regulators, state securities administrators, the SEC,
the FINRA, the U.S. Department of Justice, and state attorneys general, each of
which exercises a degree of interpretive latitude. Consequently, we are subject
to the risk that compliance with any particular regulator's or enforcement
authority's interpretation of a legal issue may not result in compliance with
another's interpretation of the same issue, particularly when compliance is
judged in hindsight. In addition, there is risk that any particular regulator's
or enforcement authority's interpretation of a
5
legal issue may change over time to our detriment, or that changes in the
overall legal environment may, even absent any particular regulator's or
enforcement authority's interpretation of a legal issue changing, cause us to
change our views regarding the actions we need to take from a legal risk
management perspective, thus necessitating changes to our practices that may,
in some cases, limit our ability to grow and improve the profitability of our
business ceded to ALIC. Furthermore, in some cases, these laws and regulations
are designed to protect or benefit the interests of a specific constituency
rather than a range of constituencies. For example, state insurance laws and
regulations are generally intended to protect or benefit purchasers or users of
insurance products. In many respects, these laws and regulations limit our
ability to grow and improve the profitability of our business ceded to ALIC.
In recent years, the state insurance regulatory framework has come under
public scrutiny and members of Congress have discussed proposals to provide for
federal chartering of insurance companies. We can make no assurances regarding
the potential impact of state or federal measures that may change the nature or
scope of insurance regulation.
REGULATORY REFORMS, AND THE MORE STRINGENT APPLICATION OF EXISTING REGULATIONS,
MAY MAKE IT MORE EXPENSIVE FOR US TO CONDUCT OUR BUSINESS
The federal government has enacted comprehensive regulatory reforms for
financial services entities. As part of a larger effort to strengthen the
regulation of the financial services market, certain reforms are applicable to
the insurance industry, including the establishment of a Federal Insurance
Office within the Department of Treasury.
These regulatory reforms and any additional legislation or regulatory
requirements imposed upon us in connection with the federal government's
regulatory reform of the financial services industry and any more stringent
enforcement of existing regulations by federal authorities, may make it more
expensive for us to conduct our business.
REINSURANCE MAY BE UNAVAILABLE AT CURRENT LEVELS AND PRICES, WHICH MAY LIMIT
OUR ABILITY TO WRITE NEW BUSINESS
Market conditions beyond our control impact the availability and cost of the
reinsurance we purchase. No assurances can be made that reinsurance will remain
continuously available to us to the same extent and on the same terms and rates
as is currently available. If we were unable to maintain our current level of
reinsurance or purchase new reinsurance protection in amounts that we consider
sufficient and at prices that we consider acceptable, either ALIC would have to
accept an increase in exposure risk, or we would have to reduce our insurance
writings, or develop or seek other alternatives.
REINSURANCE SUBJECTS US TO THE CREDIT RISK OF OUR REINSURERS AND MAY NOT BE
ADEQUATE TO PROTECT US AGAINST LOSSES ARISING FROM CEDED INSURANCE, WHICH COULD
HAVE A MATERIAL ADVERSE EFFECT ON OUR OPERATING RESULTS CEDED TO ALIC
The collectability of reinsurance recoverables is subject to uncertainty
arising from a number of factors, including changes in market conditions,
whether insured losses meet the qualifying conditions of the reinsurance
contract and whether reinsurers, or their affiliates, have the financial
capacity and willingness to make payments under the terms of a reinsurance
treaty or contract. Our inability to collect a material recovery from a
reinsurer could have a material adverse effect on operating results ceded to
ALIC.
A LARGE SCALE PANDEMIC, THE CONTINUED THREAT OF TERRORISM OR ONGOING MILITARY
ACTIONS MAY HAVE AN ADVERSE EFFECT ON THE LEVEL OF CLAIM LOSSES WE INCUR AND
CEDE TO ALIC, THE VALUE OF OUR INVESTMENT PORTFOLIO, OUR COMPETITIVE POSITION,
MARKETABILITY OF PRODUCT OFFERINGS, LIQUIDITY AND OPERATING RESULTS
A large scale pandemic, the continued threat of terrorism, within the United
States and abroad, or ongoing military and other actions and heightened
security measures in response to these types of threats, may cause
6
significant volatility and losses in our investment portfolio from declines in
the equity markets and from interest rate changes in the United States, Europe
and elsewhere, and result in loss of life, disruptions to commerce and reduced
economic activity. Some of the assets in our investment portfolio may be
adversely affected by reduced economic activity caused by a large scale
pandemic or the continued threat of terrorism. Additionally, a large scale
pandemic or terrorist act could have a material adverse effect on the sales,
profitability, competitiveness, marketability of product offerings, liquidity,
and operating results.
A DOWNGRADE IN ALIC'S FINANCIAL STRENGTH RATINGS MAY HAVE AN ADVERSE EFFECT ON
OUR COMPETITIVE POSITION, THE MARKETABILITY OF OUR PRODUCT OFFERINGS, AND OUR
LIQUIDITY, OPERATING RESULTS CEDED TO ALIC AND FINANCIAL CONDITION
Financial strength ratings are important factors in establishing the
competitive position of insurance companies and generally have an effect on an
insurance company's business. On an ongoing basis, rating agencies review the
financial performance and condition of insurers and could downgrade or change
the outlook on an insurer's ratings due to, for example, a change in an
insurer's statutory capital; a change in a rating agency's determination of the
amount of risk-adjusted capital required to maintain a particular rating; an
increase in the perceived risk of an insurer's investment portfolio; a reduced
confidence in management or a host of other considerations that may or may not
be under the insurer's control. The insurance financial strength ratings of
ALIC from A.M. Best, Standard & Poor's and Moody's are subject to continuous
review, and the retention of current ratings cannot be assured. A downgrade in
any of these ratings could have a material adverse effect on our sales, our
competitiveness, the marketability of our product offerings, and our liquidity
and operating results ceded to ALIC.
CHANGES IN ACCOUNTING STANDARDS ISSUED BY THE FINANCIAL ACCOUNTING STANDARDS
BOARD ("FASB") OR OTHER STANDARD-SETTING BODIES MAY ADVERSELY AFFECT OUR
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Our financial statements are subject to the application of generally
accepted accounting principles, which are periodically revised, interpreted
and/or expanded. Accordingly, we are required to adopt new guidance or
interpretations, or could be subject to existing guidance as we enter into new
transactions, which may have a material adverse effect on our results of
operations and financial condition that is either unexpected or has a greater
impact than expected. For a description of changes in accounting standards that
are currently pending and, if known, our estimates of their expected impact,
see Note 2 of the financial statements.
THE CHANGE IN OUR UNRECOGNIZED TAX BENEFIT DURING THE NEXT 12 MONTHS IS SUBJECT
TO UNCERTAINTY
We have disclosed our estimate of net unrecognized tax benefits and the
reasonably possible increase or decrease in its balance during the next 12
months in Note 10 of the financial statements. However, actual results may
differ from our estimate for reasons such as changes in our position on
specific issues, developments with respect to the governments' interpretations
of income tax laws or changes in judgment resulting from new information
obtained in audits or the appeals process.
THE OCCURRENCE OF EVENTS UNANTICIPATED IN OUR DISASTER RECOVERY SYSTEMS AND
MANAGEMENT CONTINUITY PLANNING OR A SUPPORT FAILURE FROM EXTERNAL PROVIDERS
DURING A DISASTER COULD IMPAIR OUR ABILITY TO CONDUCT BUSINESS EFFECTIVELY
The occurrence of a disaster such as a natural catastrophe, an industrial
accident, a terrorist attack or war, events unanticipated in our disaster
recovery systems or a support failure from external providers, could have an
adverse effect on our ability to conduct business and on our results of
operations ceded to ALIC and financial condition, particularly if those events
affect our computer-based data processing, transmission, storage, and retrieval
systems. In the event that a significant number of our managers could be
unavailable in the event of a disaster, our ability to effectively conduct our
business could be severely compromised.
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ITEM 11(A).DESCRIPTION OF BUSINESS
Lincoln Benefit Life Company ("Lincoln Benefit") was incorporated under the
laws of the State of Nebraska in 1938. Lincoln Benefit is a wholly owned
subsidiary of Allstate Life Insurance Company ("ALIC"), a stock life insurance
company incorporated under the laws of the State of Illinois. ALIC is a wholly
owned subsidiary of Allstate Insurance Company ("AIC"), a stock
property-liability insurance company organized under the laws of the State of
Illinois. All of the outstanding capital stock of Allstate Insurance Company is
owned by Allstate Insurance Holdings, LLC, which is wholly owned by The
Allstate Corporation (the "Corporation" or "Allstate"), a publicly owned
holding company incorporated under the laws of the State of Delaware. The
Allstate Corporation is the largest publicly held personal lines insurer in the
United States. Widely known through the "You're In Good Hands With Allstate(R)"
slogan, Allstate is reinventing protection and retirement to help individuals
in approximately 16 million households protect what they have today and better
prepare for tomorrow. Customers can access Allstate products and services such
as auto insurance and homeowners insurance through more than 13,000 exclusive
Allstate agencies and financial representatives in the United States and
Canada. Allstate is the 2/nd/ largest personal property and casualty insurer in
the United States on the basis of 2009 statutory direct premiums earned. In
addition, according to A.M. Best, it is the nation's 16/th/ largest issuer of
life insurance business on the basis of 2009 ordinary life insurance in force
and 21/st/ largest on the basis of 2009 statutory admitted assets.
8
In our reports, we occasionally refer to statutory financial information.
All domestic United States insurance companies are required to prepare
statutory-basis financial statements. As a result, industry data is available
that enables comparisons between insurance companies, including competitors
that are not subject to the requirement to prepare financial statements in
conformity with accounting principles generally accepted in the United States
of America ("GAAP"). We frequently use industry publications containing
statutory financial information to assess our competitive position.
We provide life insurance, retirement and investment products. Our principal
products are interest-sensitive, traditional and variable life insurance, and
fixed annuities including deferred and immediate. We sell products through
multiple intermediary distribution channels, including Allstate exclusive
agencies and exclusive financial specialists and independent agents (including
master brokerage agencies). Through March 31, 2010, we also sold products
through broker-dealers. Although we continue to service in force contracts sold
through this distribution channel, we no longer solicit new sales through
direct relationships with broker-dealers.
We compete on a wide variety of factors, including the scope of our
distribution systems, the type of our product offerings, the recognition of our
brands, our financial strength and ratings, our differentiated product features
and prices, and the level of customer service that we provide.
The market for life insurance, retirement and investment products continues
to be highly fragmented and competitive. As of December 31, 2010, there were
approximately 470 groups of life insurance companies in the United States, most
of which offered one or more similar products. In addition, because many of
these products include a savings or investment component, our competition
includes domestic and foreign securities firms, investment advisors, mutual
funds, banks and other financial institutions. Competitive pressure continues
to grow due to several factors, including cross marketing alliances between
unaffiliated businesses, as well as consolidation activity in the financial
services industry.
We have reinsurance agreements whereby all premiums, contract charges,
interest credited to contractholder funds, contract benefits and substantially
all expenses are ceded to ALIC and non-affiliated reinsurers. Assets that
support general account product liabilities are owned and managed by ALIC under
the terms of the reinsurance agreements.
Lincoln Benefit is subject to extensive regulation, primarily at the state
level. The method, extent and substance of such regulation varies by state but
generally has its source in statutes that establish standards and requirements
for conducting the business of insurance and that delegate regulatory authority
to a state regulatory agency. In general, such regulation is intended for the
protection of those who purchase or use insurance products. These rules have a
substantial effect on our business and relate to a wide variety of matters,
including insurance company licensing and examination, agent licensing, price
setting, trade practices, policy forms, statutory accounting methods, corporate
governance, the nature and amount of investments, claims practices,
participation in guaranty funds, reserve adequacy, insurer solvency,
transactions with affiliates, the payment of dividends, and underwriting
standards. For a discussion of statutory financial information, see Note 11 of
the financial statements. For a discussion of regulatory contingencies, see
Note 9 of the financial statements. Notes 9 and 11 are incorporated in this
Item 11(a) by reference.
In recent years, the state insurance regulatory framework has come under
increased federal scrutiny. Legislation that would provide for increased
federal regulation of insurance, including the federal chartering of insurance
companies, has been proposed. Moreover, as part of an effort to strengthen the
regulation of the financial services market, the Dodd-Frank Wall Street Reform
and Consumer Protection Act was enacted. Hundreds of regulations must be
promulgated and implemented pursuant to this new law, and we cannot predict
what the final regulations will require but do not expect a material impact on
Lincoln Benefit's operations. The new law also creates the Federal Office of
Insurance ("FIO") within the Treasury Department. The FIO will monitor the
insurance industry, provide advice to the new Financial Stability Oversight
Council, represent the U.S. on international insurance matters and study the
current regulatory system and submit a report to Congress
9
in 2012. In addition, state legislators and insurance regulators continue to
examine the appropriate nature and scope of state insurance regulation. We
cannot predict whether any specific state or federal measures will be adopted
to change the nature or scope of the regulation of insurance business or what
effect any such measures would have on Lincoln Benefit.
ITEM 11(B).DESCRIPTION OF PROPERTY
Lincoln Benefit occupies office space in Lincoln, Nebraska and Northbrook,
Illinois that is owned by Allstate Insurance Company. Expenses associated with
these facilities are allocated to us on a direct basis.
ITEM 11(C).LEGAL PROCEEDINGS
Information required for Item 11(c) is incorporated by reference to the
discussion under the heading "Regulation and Compliance" and under the heading
"Legal and regulatory proceedings and inquiries" in Note 9 of the financial
statements.
ITEM 11(E).FINANCIAL STATEMENTS AND NOTES TO FINANCIAL STATEMENTS
LINCOLN BENEFIT LIFE COMPANY
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
YEAR ENDED DECEMBER 31,
-----------------------
2010 2009 2008
($ IN THOUSANDS) ------- ------- -------
REVENUES
Net investment income............................. $12,067 $11,783 $13,940
Realized capital gains and losses................. 694 1,480 5,952
------- ------- -------
INCOME FROM OPERATIONS BEFORE INCOME TAX EXPENSE.. 12,761 13,263 19,892
Income tax expense................................ 4,451 4,634 6,918
------- ------- -------
NET INCOME........................................ 8,310 8,629 12,974
------- ------- -------
OTHER COMPREHENSIVE INCOME (LOSS), AFTER-TAX
Change in unrealized net capital gains and losses. 4,584 5,783 (4,351)
------- ------- -------
COMPREHENSIVE INCOME.............................. $12,894 $14,412 $ 8,623
======= ======= =======
See notes to financial statements.
10
LINCOLN BENEFIT LIFE COMPANY
STATEMENTS OF FINANCIAL POSITION
DECEMBER 31,
-----------------------
2010 2009
($ IN THOUSANDS, EXCEPT PAR VALUE DATA) ----------- -----------
ASSETS
Investments
Fixed income securities, at fair value (amortized cost $304,848 and
$299,787).................................................................. $ 320,456 $ 308,343
Short-term, at fair value (amortized cost $11,593 and $8,557)................ 11,593 8,557
----------- -----------
Total investments........................................................ 332,049 316,900
Cash............................................................................ 3,550 10,063
Reinsurance recoverable from Allstate Life Insurance Company.................... 18,365,058 18,689,074
Reinsurance recoverable from non-affiliates..................................... 1,906,574 1,766,824
Other assets.................................................................... 105,159 110,400
Separate accounts............................................................... 2,017,185 2,039,647
----------- -----------
TOTAL ASSETS............................................................. $22,729,575 $22,932,908
=========== ===========
LIABILITIES
Contractholder funds............................................................ $17,247,071 $17,633,027
Reserve for life-contingent contract benefits................................... 3,011,317 2,805,387
Unearned premiums............................................................... 19,478 21,656
Deferred income taxes........................................................... 5,833 3,300
Payable to affiliates, net...................................................... 4,931 14,749
Current income taxes payable.................................................... 4,386 4,656
Other liabilities and accrued expenses.......................................... 93,507 97,513
Separate accounts............................................................... 2,017,185 2,039,647
----------- -----------
TOTAL LIABILITIES........................................................ 22,403,708 22,619,935
----------- -----------
COMMITMENTS AND CONTINGENT LIABILITIES (NOTE 9)
SHAREHOLDER'S EQUITY
Common stock, $100 par value, 30 thousand shares authorized, 25 thousand shares
issued and outstanding........................................................ 2,500 2,500
Additional capital paid-in...................................................... 180,000 180,000
Retained income................................................................. 133,222 124,912
Accumulated other comprehensive income:
Unrealized net capital gains and losses...................................... 10,145 5,561
----------- -----------
Total accumulated other comprehensive income............................. 10,145 5,561
----------- -----------
TOTAL SHAREHOLDER'S EQUITY............................................... 325,867 312,973
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY............................... $22,729,575 $22,932,908
=========== ===========
See notes to financial statements.
11
LINCOLN BENEFIT LIFE COMPANY
STATEMENTS OF SHAREHOLDER'S EQUITY
YEAR ENDED DECEMBER 31,
---------------------------
2010 2009 2008
($ IN THOUSANDS) -------- -------- --------
COMMON STOCK...................................... $ 2,500 $ 2,500 $ 2,500
-------- -------- --------
ADDITIONAL CAPITAL PAID-IN........................ 180,000 180,000 180,000
-------- -------- --------
RETAINED INCOME
Balance, beginning of year........................ 124,912 116,283 103,309
Net income........................................ 8,310 8,629 12,974
-------- -------- --------
Balance, end of year.............................. 133,222 124,912 116,283
-------- -------- --------
ACCUMULATED OTHER COMPREHENSIVE INCOME
Balance, beginning of year........................ 5,561 (222) 4,129
Change in unrealized net capital gains and losses. 4,584 5,783 (4,351)
-------- -------- --------
Balance, end of year.............................. 10,145 5,561 (222)
-------- -------- --------
TOTAL SHAREHOLDER'S EQUITY........................ $325,867 $312,973 $298,561
======== ======== ========
See notes to financial statements.
12
LINCOLN BENEFIT LIFE COMPANY
STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31,
-----------------------------
2010 2009 2008
($ IN THOUSANDS) -------- --------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income............................................................ $ 8,310 $ 8,629 $ 12,974
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Amortization and other non-cash items.............................. 1,241 932 143
Realized capital gains and losses.................................. (694) (1,480) (5,952)
Changes in:
Policy benefit and other insurance reserves.................... 4,240 19,349 (5,052)
Income taxes................................................... (205) (2,174) 2,065
Receivable/payable to affiliates, net.......................... (9,818) (21,280) 14,117
Other operating assets and liabilities......................... (943) 369 (24,195)
-------- --------- --------
Net cash provided by (used in) operating activities......... 2,131 4,345 (5,900)
-------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of fixed income securities........................ 27,166 46,330 101,584
Collections on fixed income securities................................ 38,691 35,334 7,693
Purchases of fixed income securities.................................. (71,478) (151,234) (64,497)
Change in short-term investments, net................................. (3,023) 72,143 (54,347)
-------- --------- --------
Net cash (used in) provided by investing activities......... (8,644) 2,573 (9,567)
-------- --------- --------
NET (DECREASE) INCREASE IN CASH....................................... (6,513) 6,918 (15,467)
CASH AT BEGINNING OF YEAR............................................. 10,063 3,145 18,612
-------- --------- --------
CASH AT END OF YEAR................................................... $ 3,550 $ 10,063 $ 3,145
======== ========= ========
See notes to financial statements.
13
NOTES TO FINANCIAL STATEMENTS
1. GENERAL
BASIS OF PRESENTATION
The accompanying financial statements include the accounts of Lincoln
Benefit Life Company (the "Company"), a wholly owned subsidiary of Allstate
Life Insurance Company ("ALIC"), which is wholly owned by Allstate Insurance
Company ("AIC"). All of the outstanding common stock of AIC is owned by
Allstate Insurance Holdings, LLC, a wholly owned subsidiary of The Allstate
Corporation (the "Corporation"). These financial statements have been prepared
in conformity with accounting principles generally accepted in the United
States of America ("GAAP").
To conform to the current year presentation, certain amounts in the prior
years' financial statements and notes have been reclassified.
The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the amounts reported
in the financial statements and accompanying notes. Actual results could differ
from those estimates.
NATURE OF OPERATIONS
The Company sells life insurance, retirement and investment products. The
principal products are interest-sensitive, traditional and variable life
insurance and fixed annuities including deferred and immediate.
The Company is authorized to sell life insurance and retirement products in
all states except New York, as well as in the District of Columbia, the U.S.
Virgin Islands and Guam. For 2010, the top geographic locations for statutory
premiums and annuity considerations were California, Florida and Texas. No
other jurisdiction accounted for more than 5% of statutory premiums and annuity
considerations. All statutory premiums and annuity considerations are ceded
under reinsurance agreements. The Company distributes its products through
multiple distribution channels, including Allstate exclusive agencies, which
include exclusive financial specialists, and independent agents (including
master brokerage agencies).
The Company has exposure to market risk as a result of its investment
portfolio. Market risk is the risk that the Company will incur realized and
unrealized net capital losses due to adverse changes in interest rates and
credit spreads. The Company also has certain exposures to changes in equity
prices in its equity-indexed annuities and separate accounts liabilities, which
are transferred to ALIC in accordance with reinsurance agreements. Interest
rate risk is the risk that the Company will incur a loss due to adverse changes
in interest rates relative to the interest rate characteristics of its interest
bearing assets. This risk arises from the Company's investment in
interest-sensitive assets. Interest rate risk includes risks related to changes
in U.S. Treasury yields and other key risk-free reference yields. Credit spread
risk is the risk that the Company will incur a loss due to adverse changes in
credit spreads. This risk arises from many of the Company's primary activities,
as the Company invests substantial funds in spread-sensitive fixed income
assets.
The Company monitors economic and regulatory developments that have the
potential to impact its business. The ability of banks to affiliate with
insurers may have a material adverse effect on all of the Company's product
lines by substantially increasing the number, size and financial strength of
potential competitors. Furthermore, federal and state laws and regulations
affect the taxation of insurance companies and life insurance and annuity
products. Congress from time to time considers legislation that would reduce or
eliminate the favorable policyholder tax treatment currently applicable to life
insurance and annuities. Congress also considers proposals to reduce the
taxation of certain products or investments that may compete with life
insurance or annuities. Legislation that increases the taxation on insurance
products or reduces the taxation on competing products could lessen the
advantage or create a disadvantage for certain of the Company's products
14
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
making them less competitive. Such proposals, if adopted, could have an adverse
effect on the Company's and ALIC's financial position or ability to sell such
products and could result in the surrender of some existing contracts and
policies. In addition, changes in the federal estate tax laws could negatively
affect the demand for the types of life insurance used in estate planning.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVESTMENTS
Fixed income securities include bonds, residential mortgage-backed
securities ("RMBS"), commercial mortgage-backed securities ("CMBS") and
asset-backed securities ("ABS"). Fixed income securities, which may be sold
prior to their contractual maturity, are designated as available for sale and
are carried at fair value. The difference between amortized cost and fair
value, net of deferred income taxes, is reflected as a component of accumulated
other comprehensive income. Cash received from calls, principal payments and
make-whole payments is reflected as a component of proceeds from sales and cash
received from maturities and pay-downs is reflected as a component of
investment collections within the Statements of Cash Flows.
Short-term investments, including money market funds and other short-term
investments, are carried at fair value.
Investment income consists primarily of interest and is recognized on an
accrual basis using the effective yield method. Interest income for certain
RMBS, CMBS and ABS is determined considering estimated principal repayments
obtained from third party data sources and internal estimates. Actual
prepayment experience is periodically reviewed and effective yields are
recalculated on a retrospective basis when differences arise between the
prepayments originally anticipated and the actual prepayments received and
currently anticipated. For other-than-temporarily impaired fixed income
securities, the effective yield method utilizes the difference between the
amortized cost basis at impairment and the cash flows expected to be collected.
Accrual of income is suspended for other-than-temporarily impaired fixed income
securities when the timing and amount of cash flows expected to be received is
not reasonably estimable.
Realized capital gains and losses include gains and losses on investment
sales and write-downs in value due to other-than-temporary declines in fair
value. Realized capital gains and losses on investment sales include calls and
prepayments and are determined on a specific identification basis.
The Company recognizes other-than-temporary impairment losses on fixed
income securities in earnings when a security's fair value is less than its
amortized cost and the Company has made the decision to sell or it is more
likely than not the Company will be required to sell the fixed income security
before recovery of its amortized cost basis. Additionally, if the Company does
not expect to receive cash flows sufficient to recover the entire amortized
cost basis of a fixed income security, the credit loss component of the
impairment is recorded in earnings, with the remaining amount of the unrealized
loss related to other factors recognized in other comprehensive income ("OCI").
RECOGNITION OF PREMIUM REVENUES AND CONTRACT CHARGES, AND RELATED BENEFITS AND
INTEREST CREDITED
The Company has reinsurance agreements whereby all premiums, contract
charges, interest credited to contractholder funds, contract benefits and
substantially all expenses are ceded to ALIC and non-affiliated reinsurers (see
Notes 3 and 8). Amounts reflected in the Statements of Operations and
Comprehensive Income are presented net of reinsurance.
Traditional life insurance products consist principally of products with
fixed and guaranteed premiums and benefits, primarily term and whole life
insurance products. Premiums from these products are recognized as
15
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
revenue when due from policyholders. Benefits are reflected in contract
benefits and recognized in relation to premiums, so that profits are recognized
over the life of the policy.
Immediate annuities with life contingencies provide insurance protection
over a period that extends beyond the period during which premiums are
collected. Premiums from these products are recognized as revenue when received
at the inception of the contract. Benefits and expenses are recognized in
relation to premiums. Profits from these policies come from investment income,
which is recognized over the life of the contract.
Interest-sensitive life contracts, such as universal life and single premium
life, are insurance contracts whose terms are not fixed and guaranteed. The
terms that may be changed include premiums paid by the contractholder, interest
credited to the contractholder account balance and contract charges assessed
against the contractholder account balance. Premiums from these contracts are
reported as contractholder fund deposits. Contract charges consist of fees
assessed against the contractholder account balance for the cost of insurance
(mortality risk), contract administration and surrender of the contract prior
to contractually specified dates. These contract charges are recognized as
revenue when assessed against the contractholder account balance. Contract
benefits include life-contingent benefit payments in excess of the
contractholder account balance.
Contracts that do not subject the Company to significant risk arising from
mortality or morbidity are referred to as investment contracts. Fixed
annuities, including market value adjusted annuities, equity-indexed annuities
and immediate annuities without life contingencies, are considered investment
contracts. Consideration received for such contracts is reported as
contractholder fund deposits. Contract charges for investment contracts consist
of fees assessed against the contractholder account balance for maintenance,
administration and surrender of the contract prior to contractually specified
dates, and are recognized when assessed against the contractholder account
balance.
Interest credited to contractholder funds represents interest accrued or
paid on interest-sensitive life contracts and investment contracts. Crediting
rates for certain fixed annuities and interest-sensitive life contracts are
adjusted periodically by the Company to reflect current market conditions
subject to contractually guaranteed minimum rates. Crediting rates for indexed
annuities are generally based on an equity index, such as the Standard & Poor's
("S&P") 500 Index.
Contract charges for variable life and variable annuity products consist of
fees assessed against the contractholder account balances for contract
maintenance, administration, mortality, expense and surrender of the contract
prior to the contractually specified dates. Contract benefits incurred for
variable annuity products include guaranteed minimum death, income, withdrawal
and accumulation benefits.
REINSURANCE
The Company has reinsurance agreements whereby all premiums, contract
charges, interest credited to contractholder funds, contract benefits and
substantially all expenses are ceded to ALIC and non-affiliated reinsurers (see
Notes 3 and 8). Reinsurance recoverables and the related reserve for
life-contingent contract benefits and contractholder funds are reported
separately in the Statements of Financial Position. Reinsurance does not
extinguish the Company's primary liability under the policies written.
Therefore, the Company regularly evaluates the financial condition of its
reinsurers and establishes allowances for uncollectible reinsurance as
appropriate.
Investment income earned on the assets that support contractholder funds and
the reserve for life-contingent contract benefits is not included in the
Company's financial statements as those assets are owned and managed by ALIC
under the terms of the reinsurance agreements.
16
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
INCOME TAXES
The income tax provision is calculated under the liability method. Deferred
tax assets and liabilities are recorded based on the difference between the
financial statement and tax bases of assets and liabilities at the enacted tax
rates. The principal assets and liabilities giving rise to such differences are
unrealized capital gains and losses on investments. A deferred tax asset
valuation allowance is established when there is uncertainty that such assets
will be realized.
RESERVE FOR LIFE-CONTINGENT CONTRACT BENEFITS
The reserve for life-contingent contract benefits payable under insurance
policies, including traditional life insurance and life-contingent immediate
annuities, is computed on the basis of long-term actuarial assumptions of
future investment yields, mortality, morbidity, policy terminations and
expenses (see Note 7). These assumptions, which for traditional life insurance
are applied using the net level premium method, include provisions for adverse
deviation and generally vary by characteristics such as type of coverage, year
of issue and policy duration.
CONTRACTHOLDER FUNDS
Contractholder funds represent interest-bearing liabilities arising from the
sale of products such as interest-sensitive life and fixed annuities.
Contractholder funds are comprised primarily of deposits received and interest
credited to the benefit of the contractholder less surrenders and withdrawals,
mortality charges and administrative expenses (see Note 7). Contractholder
funds also include reserves for secondary guarantees on interest-sensitive life
insurance and certain fixed annuity contracts and reserves for certain
guarantees on variable annuity contracts.
SEPARATE ACCOUNTS
Separate accounts assets are carried at fair value. The assets of the
separate accounts are legally segregated and available only to settle separate
account contract obligations. Separate accounts liabilities represent the
contractholders' claims to the related assets and are carried at an amount
equal to the separate accounts assets. Investment income and realized capital
gains and losses of the separate accounts accrue directly to the
contractholders and therefore, are not included in the Company's Statements of
Operations and Comprehensive Income. Deposits to and surrenders and withdrawals
from the separate accounts are reflected in separate accounts liabilities and
are not included in cash flows.
Absent any contract provision wherein the Company provides a guarantee,
variable annuity and variable life insurance contractholders bear the
investment risk that the separate accounts' funds may not meet their stated
investment objectives. The risk and associated cost of these contract
guarantees are ceded to ALIC in accordance with the reinsurance agreements.
ADOPTED ACCOUNTING STANDARD
DISCLOSURES ABOUT FAIR VALUE MEASUREMENTS
In January 2010, the Financial Accounting Standards Board ("FASB") issued
new accounting guidance which expands disclosure requirements relating to fair
value measurements. The guidance adds requirements for disclosing amounts of
and reasons for significant transfers into and out of Levels 1 and 2 and
requires gross rather than net disclosures about purchases, sales, issuances
and settlements relating to Level 3 measurements. The guidance also provides
clarification that fair value measurement disclosures are required for each
class of assets and liabilities. Disclosures about the valuation techniques and
inputs used to measure fair value for
17
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
measurements that fall in either Level 2 or Level 3 are also required. The
Company adopted the provisions of the new guidance as of December 31, 2010,
except for disclosures about purchases, sales, issuances and settlements in the
roll forward of activity in Level 3 fair value measurements, which are required
for fiscal years beginning after December 15, 2010. Disclosures are not
required for earlier periods presented for comparative purposes. The new
guidance affects disclosures only; and therefore, the adoption had no impact on
the Company's results of operations or financial position.
PENDING ACCOUNTING STANDARD
CONSOLIDATION ANALYSIS CONSIDERING INVESTMENTS HELD THROUGH SEPARATE ACCOUNTS
In April 2010, the FASB issued guidance clarifying that an insurer is not
required to combine interests in investments held in a qualifying separate
account with its interests in the same investments held in the general account
when performing a consolidation evaluation. The guidance is effective for
fiscal years beginning after December 15, 2010 with early adoption permitted.
The adoption of this guidance is not expected to have a material impact on the
Company's results of operations or financial position.
3. RELATED PARTY TRANSACTIONS
BUSINESS OPERATIONS
The Company uses services performed by its affiliates, AIC, ALIC and
Allstate Investments LLC, and business facilities owned or leased and operated
by AIC in conducting its business activities. In addition, the Company shares
the services of employees with AIC. The Company reimburses its affiliates for
the operating expenses incurred on behalf of the Company. The Company is
charged for the cost of these operating expenses based on the level of services
provided. Operating expenses, including compensation, retirement and other
benefit programs, allocated to the Company were $204.8 million, $202.9 million
and $227.0 million in 2010, 2009 and 2008, respectively. Of these costs, the
Company retains investment related expenses on the invested assets of the
Company. All other costs are ceded to ALIC under the reinsurance agreements.
BROKER-DEALER AGREEMENTS
The Company has a service agreement with Allstate Distributors, LLC
("ADLLC"), a broker-dealer company owned by ALIC, whereby ADLLC promotes and
markets products sold by the Company. In return for these services, the Company
recorded expense of $6.9 million, $4.6 million and $5.1 million in 2010, 2009
and 2008, respectively, that was ceded to ALIC under the terms of the
reinsurance agreements.
The Company receives distribution services from Allstate Financial Services,
LLC ("AFS"), an affiliated broker-dealer company, for certain variable life
insurance contracts sold by Allstate exclusive agencies. For these services,
the Company incurred commission and other distribution expenses of $8.5
million, $9.1 million and $18.4 million in 2010, 2009 and 2008, respectively,
that were ceded to ALIC.
REINSURANCE
The following table summarizes amounts that were ceded to ALIC and reported
net in the Statements of Operations and Comprehensive Income under the
reinsurance agreements:
2010 2009 2008
($ IN THOUSANDS) ---------- ---------- ----------
Premiums and contract charges.............. $ 782,113 $ 734,369 $ 691,267
Interest credited to contractholder funds,
contract benefits and expenses........... 1,683,487 1,621,011 1,468,505
18
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Reinsurance recoverables due from ALIC totaled $18.37 billion and $18.69
billion as of December 31, 2010 and 2009, respectively.
INCOME TAXES
The Company is a party to a federal income tax allocation agreement with the
Corporation (see Note 10).
INTERCOMPANY LOAN AGREEMENT
The Company has an intercompany loan agreement with the Corporation. The
amount of intercompany loans available to the Company is at the discretion of
the Corporation. The maximum amount of loans the Corporation will have
outstanding to all its eligible subsidiaries at any given point in time is
limited to $1 billion. The Corporation may use commercial paper borrowings,
bank lines of credit and repurchase agreements to fund intercompany borrowings.
The Company had no amounts outstanding under the intercompany loan agreement as
of December 31, 2010 and 2009.
4. INVESTMENTS
FAIR VALUES
The amortized cost, gross unrealized gains and losses and fair value for
fixed income securities are as follows:
GROSS UNREALIZED
AMORTIZED --------------- FAIR
COST GAINS LOSSES VALUE
($ IN THOUSANDS) --------- ------- ------- --------
DECEMBER 31, 2010
U.S. government and agencies..... $ 70,426 $ 3,513 $ (383) $ 73,556
Municipal........................ 2,999 177 -- 3,176
Corporate........................ 154,261 9,345 (19) 163,587
Foreign government............... 4,998 92 -- 5,090
RMBS............................. 55,376 2,429 (3) 57,802
CMBS............................. 8,523 427 (87) 8,863
ABS.............................. 8,265 117 -- 8,382
-------- ------- ------- --------
Total fixed income securities. $304,848 $16,100 $ (492) $320,456
======== ======= ======= ========
DECEMBER 31, 2009
U.S. government and agencies..... $ 79,982 $ 1,852 $ (283) $ 81,551
Municipal........................ 2,999 96 -- 3,095
Corporate........................ 131,466 6,192 (85) 137,573
RMBS............................. 66,326 1,733 (84) 67,975
CMBS............................. 10,520 57 (873) 9,704
ABS.............................. 8,494 -- (49) 8,445
-------- ------- ------- --------
Total fixed income securities. $299,787 $ 9,930 $(1,374) $308,343
======== ======= ======= ========
19
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
SCHEDULED MATURITIES
The scheduled maturities for fixed income securities are as follows as of
December 31, 2010:
AMORTIZED FAIR
COST VALUE
($ IN THOUSANDS) --------- --------
Due in one year or less................ $ 4,501 $ 4,585
Due after one year through five years.. 151,933 159,481
Due after five years through ten years. 76,126 81,207
Due after ten years.................... 8,647 8,999
-------- --------
241,207 254,272
RMBS and ABS........................... 63,641 66,184
-------- --------
Total............................... $304,848 $320,456
======== ========
Actual maturities may differ from those scheduled as a result of prepayments
by the issuers. Because of the potential for prepayment on RMBS and ABS, they
are not categorized by contractual maturity. CMBS are categorized by
contractual maturity because they generally are not subject to prepayment risk.
NET INVESTMENT INCOME
Net investment income for the years ended December 31 is as follows:
2010 2009 2008
($ IN THOUSANDS) ------- ------- -------
Fixed income securities.............. $12,480 $12,098 $13,302
Short-term and other investments..... 21 107 992
------- ------- -------
Investment income, before expense. 12,501 12,205 14,294
Investment expense................ (434) (422) (354)
------- ------- -------
Net investment income......... $12,067 $11,783 $13,940
======= ======= =======
REALIZED CAPITAL GAINS AND LOSSES
The Company recognized net realized capital gains of $694 thousand, $1.5
million and $6.0 million in 2010, 2009 and 2008, respectively. Realized capital
gains and losses in 2010 and 2009 did not include any other-than-temporary
impairment losses and therefore, none were included in other comprehensive
income. No other-than-temporary impairment losses were included in accumulated
other comprehensive income as of December 31, 2010 and 2009.
Gross gains of $652 thousand, $1.5 million and $8.2 million were realized on
sales of fixed income securities during 2010, 2009 and 2008, respectively.
There were no gross losses realized on sales of fixed income securities in 2010
and 2008. Gross losses of $3 thousand were realized on sales of fixed income
securities during 2009.
20
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
UNREALIZED NET CAPITAL GAINS AND LOSSES
Unrealized net capital gains and losses included in accumulated other
comprehensive income are as follows:
GROSS UNREALIZED
FAIR --------------- UNREALIZED NET
VALUE GAINS LOSSES GAINS (LOSSES)
($ IN THOUSANDS) -------- ------- ------- --------------
DECEMBER 31, 2010
Fixed income securities............................... $320,456 $16,100 $ (492) $15,608
Short-term investments................................ 11,593 -- -- --
-------
Unrealized net capital gains and losses, pre-tax... 15,608
Deferred income taxes.............................. (5,463)
-------
Unrealized net capital gains and losses, after-tax. $10,145
=======
GROSS UNREALIZED
FAIR --------------- UNREALIZED NET
VALUE GAINS LOSSES GAINS (LOSSES)
-------- ------- ------- --------------
DECEMBER 31, 2009
Fixed income securities............................... $308,343 $ 9,930 $(1,374) $ 8,556
Short-term investments................................ 8,557 -- -- --
-------
Unrealized net capital gains and losses, pre-tax... 8,556
Deferred income taxes.............................. (2,995)
-------
Unrealized net capital gains and losses, after-tax. $ 5,561
=======
CHANGE IN UNREALIZED NET CAPITAL GAINS AND LOSSES
The change in unrealized net capital gains and losses for the years ended
December 31 is as follows:
2010 2009 2008
($ IN THOUSANDS) ------- ------- -------
Fixed income securities................................. $ 7,052 $ 8,895 $(6,691)
Short-term investments.................................. -- 2 (2)
------- ------- -------
Total................................................ 7,052 8,897 (6,693)
Deferred income taxes................................... (2,468) (3,114) 2,342
------- ------- -------
Increase (decrease) in unrealized net capital gains and
losses................................................ $ 4,584 $ 5,783 $(4,351)
======= ======= =======
PORTFOLIO MONITORING
The Company has a comprehensive portfolio monitoring process to identify and
evaluate each fixed income security whose carrying value may be
other-than-temporarily impaired.
For each fixed income security in an unrealized loss position, the Company
assesses whether management with the appropriate authority has made the
decision to sell or whether it is more likely than not the Company will be
required to sell the security before recovery of the amortized cost basis for
reasons such as liquidity, contractual or regulatory purposes. If a security
meets either of these criteria, the security's decline in fair value is
considered other than temporary and is recorded in earnings.
If the Company has not made the decision to sell the fixed income security
and it is not more likely than not the Company will be required to sell the
fixed income security before recovery of its amortized cost basis, the
21
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Company evaluates whether it expects to receive cash flows sufficient to
recover the entire amortized cost basis of the security. The Company calculates
the estimated recovery value by discounting the best estimate of future cash
flows at the security's original or current effective rate, as appropriate, and
compares this to the amortized cost of the security. If the Company does not
expect to receive cash flows sufficient to recover the entire amortized cost
basis of the fixed income security, the credit loss component of the impairment
is recorded in earnings, with the remaining amount of the unrealized loss
related to other factors recognized in other comprehensive income.
The Company's portfolio monitoring process includes a quarterly review of
all securities to identify instances where the fair value of a security
compared to its amortized cost is below established thresholds. The process
also includes the monitoring of other impairment indicators such as ratings,
ratings downgrades and payment defaults. The securities identified, in addition
to other securities for which the Company may have a concern, are evaluated for
potential other-than-temporary impairment using all reasonably available
information relevant to the collectability or recovery of the security.
Inherent in the Company's evaluation of other-than-temporary impairment for
these fixed income securities are assumptions and estimates about the financial
condition and future earnings potential of the issue or issuer. Some of the
factors considered in evaluating whether a decline in fair value is other than
temporary are: 1) the financial condition, near-term and long-term prospects of
the issue or issuer, including relevant industry specific market conditions and
trends, geographic location and implications of rating agency actions and
offering prices; 2) the specific reasons that a security is in an unrealized
loss position, including overall market conditions which could affect
liquidity; and 3) the length of time and extent to which the fair value has
been less than amortized cost.
The following table summarizes the gross unrealized losses and fair value of
fixed income securities by the length of time that individual securities have
been in a continuous unrealized loss position.
LESS THAN 12 MONTHS 12 MONTHS OR MORE
--------------------------- -------------------------- TOTAL
NUMBER FAIR UNREALIZED NUMBER FAIR UNREALIZED UNREALIZED
OF ISSUES VALUE LOSSES OF ISSUES VALUE LOSSES LOSSES
($ IN THOUSANDS) --------- ------- ---------- --------- ------ ---------- ----------
DECEMBER 31, 2010
U.S. government and agencies. 1 $ 9,546 $(383) -- $ -- $ -- $ (383)
Corporate.................... 1 4,968 (19) -- -- -- (19)
RMBS......................... 3 385 (3) -- -- -- (3)
CMBS......................... -- -- -- 1 1,916 (87) (87)
-- ------- ----- -- ------ ----- -------
Total..................... 5 $14,899 $(405) 1 $1,916 $ (87) $ (492)
== ======= ===== == ====== ===== =======
DECEMBER 31, 2009
U.S. government and agencies. 2 $41,469 $(283) -- $ -- $ -- $ (283)
Corporate.................... 5 11,269 (71) 1 3,485 (14) (85)
RMBS......................... 1 4,543 (84) -- -- -- (84)
CMBS......................... 2 3,475 (27) 1 1,158 (846) (873)
ABS.......................... 1 8,445 (49) -- -- -- (49)
-- ------- ----- -- ------ ----- -------
Total..................... 11 $69,201 $(514) 2 $4,643 $(860) $(1,374)
== ======= ===== == ====== ===== =======
As of December 31, 2010, all of the unrealized losses are related to fixed
income securities with an unrealized loss position less than 20% of amortized
cost, the degree of which suggests that these securities do not pose a high
risk of being other-than-temporarily impaired. All of the unrealized losses are
related to investment grade fixed income securities. Investment grade is
defined as a security having a rating of Aaa, Aa, A or Baa from Moody's, a
rating of AAA, AA, A or BBB from S&P, Fitch, Dominion or Realpoint, a rating of
aaa, aa, a or bbb from A.M. Best, or a comparable internal rating if an
externally provided rating is not available.
22
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Unrealized losses on investment grade securities are principally related to
widening credit spreads or rising interest rates since the time of initial
purchase.
As of December 31, 2010, the Company has not made the decision to sell and
it is not more likely than not the Company will be required to sell fixed
income securities with unrealized losses before recovery of the amortized cost
basis.
MUNICIPAL BONDS
The principal geographic distribution of municipal bond issuers represented
in the Company's municipal bond portfolio included 84% and 16% in Washington
and Puerto Rico, respectively, as of December 31, 2010 and 83% and 17% in
Washington and Puerto Rico, respectively, as of December 31, 2009.
CONCENTRATION OF CREDIT RISK
As of December 31, 2010, the Company is not exposed to any credit
concentration risk of a single issuer and its affiliates greater than 10% of
the Company's shareholder's equity.
OTHER INVESTMENT INFORMATION
As of December 31, 2010, fixed income securities and short-term investments
with a carrying value of $10.0 million were on deposit with regulatory
authorities as required by law.
5. FAIR VALUE OF ASSETS AND LIABILITIES
Fair value is defined as the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. The hierarchy for inputs used in
determining fair value maximizes the use of observable inputs and minimizes the
use of unobservable inputs by requiring that observable inputs be used when
available. Assets and liabilities recorded on the Statements of Financial
Position at fair value are categorized in the fair value hierarchy based on the
observability of inputs to the valuation techniques as follows:
LEVEL 1:Assets and liabilities whose values are based on unadjusted quoted
prices for identical assets or liabilities in an active market that the
Company can access.
LEVEL 2:Assets and liabilities whose values are based on the following:
(a)Quoted prices for similar assets or liabilities in active markets;
(b)Quoted prices for identical or similar assets or liabilities in
markets that are not active; or
(c)Valuation models whose inputs are observable, directly or indirectly,
for substantially the full term of the asset or liability.
LEVEL 3:Assets and liabilities whose values are based on prices or valuation
techniques that require inputs that are both unobservable and
significant to the overall fair value measurement. Unobservable inputs
reflect the Company's estimates of the assumptions that market
participants would use in valuing the assets and liabilities.
The availability of observable inputs varies by instrument. In situations
where fair value is based on internally developed pricing models or inputs that
are unobservable in the market, the determination of fair value requires more
judgment. The degree of judgment exercised by the Company in determining fair
value is typically greatest for instruments categorized in Level 3. In many
instances, valuation inputs used to measure fair value fall into
different levels of the fair value hierarchy. The category level in the fair
value hierarchy is determined
23
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
based on the lowest level input that is significant to the fair value
measurement in its entirety. The Company uses prices and inputs that are
current as of the measurement date, including during periods of market
disruption. In periods of market disruption, the ability to observe prices and
inputs may be reduced for many instruments.
The Company has two types of situations where investments are classified as
Level 3 in the fair value hierarchy. The first is where quotes continue to be
received from independent third-party valuation service providers and all
significant inputs are market observable; however, there has been a significant
decrease in the volume and level of activity for the asset when compared to
normal market activity such that the degree of market observability has
declined to a point where categorization as a Level 3 measurement is considered
appropriate. The indicators considered in determining whether a significant
decrease in the volume and level of activity for a specific asset has occurred
include the level of new issuances in the primary market, trading volume in the
secondary market, the level of credit spreads over historical levels,
applicable bid-ask spreads, and price consensus among market participants and
other pricing sources.
The second situation where the Company classifies securities in Level 3 is
where specific inputs significant to the fair value estimation models are not
market observable. This relates to the Company's use of broker quotes.
In determining fair value, the Company principally uses the market approach
which generally utilizes market transaction data for the same or similar
instruments. To a lesser extent, the Company uses the income approach which
involves determining fair values from discounted cash flow methodologies. For
the majority of Level 2 and Level 3 valuations, a combination of the market and
income approaches is used.
SUMMARY OF SIGNIFICANT VALUATION TECHNIQUES FOR ASSETS AND LIABILITIES MEASURED
AT FAIR VALUE ON A RECURRING BASIS
LEVEL 1 MEASUREMENTS
. FIXED INCOME SECURITIES: Comprise U.S. Treasuries. Valuation is based on
unadjusted quoted prices for identical assets in active markets that the
Company can access.
. SHORT-TERM: Comprise actively traded money market funds that have daily
quoted net asset values for identical assets that the Company can access.
. SEPARATE ACCOUNT ASSETS: Comprise actively traded mutual funds that have
daily quoted net asset values for identical assets that the Company can
access. Net asset values for the actively traded mutual funds in which
the separate account assets are invested are obtained daily from the
fund managers.
LEVEL 2 MEASUREMENTS
. FIXED INCOME SECURITIES:
U.S. GOVERNMENT AND AGENCIES: The primary inputs to the valuation
include quoted prices for identical or similar assets in markets that
are not active, contractual cash flows, benchmark yields and credit
spreads.
MUNICIPAL: The primary inputs to the valuation include quoted prices for
identical or similar assets in markets that are not active, contractual
cash flows, benchmark yields and credit spreads.
CORPORATE, INCLUDING PRIVATELY PLACED: The primary inputs to the
valuation include quoted prices for identical or similar assets in
markets that are not active, contractual cash flows, benchmark yields
and credit spreads. Also included are privately placed securities valued
using a discounted cash flow model that is widely accepted in the
financial services industry and uses market observable inputs and inputs
derived principally from, or corroborated by, observable market data.
The primary inputs to the
24
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
discounted cash flow model include an interest rate yield curve, as well
as published credit spreads for similar assets in markets that are not
active that incorporate the credit quality and industry sector of the
issuer.
FOREIGN GOVERNMENT: The primary inputs to the valuation include quoted
prices for identical or similar assets in markets that are not active,
contractual cash flows, benchmark yields and credit spreads.
RMBS--U.S. GOVERNMENT SPONSORED ENTITIES ("U.S. AGENCY"), PRIME
RESIDENTIAL MORTGAGE-BACKED SECURITIES ("PRIME") AND ALT-A RESIDENTIAL
MORTGAGE-BACKED SECURITIES ("ALT-A"); ABS: The primary inputs to the
valuation include quoted prices for identical or similar assets in
markets that are not active, contractual cash flows, benchmark yields,
prepayment speeds, collateral performance and credit spreads.
CMBS: The primary inputs to the valuation include quoted prices for
identical or similar assets in markets that are not active, contractual
cash flows, benchmark yields, collateral performance and credit spreads.
. SHORT-TERM: The primary inputs to the valuation include quoted prices
for identical or similar assets in markets that are not active,
contractual cash flows, benchmark yields and credit spreads. For certain
short-term investments, amortized cost is used as the best estimate of
fair value.
LEVEL 3 MEASUREMENTS
. FIXED INCOME SECURITIES:
CORPORATE: Valued based on models that are widely accepted in the
financial services industry with certain inputs to the valuation model
that are significant to the valuation, but are not market observable.
RMBS--PRIME AND ALT-A: Valued based on non-binding broker quotes.
CMBS: The primary inputs to the valuation include quoted prices for
identical or similar assets in markets that exhibit less liquidity
relative to those markets supporting Level 2 fair value measurements,
contractual cash flows, benchmark yields, collateral performance and
credit spreads. Due to the reduced availability of actual market prices
or relevant observable inputs as a result of the decrease in liquidity
that has been experienced in the market for these securities, certain
CMBS are categorized as Level 3.
CONTRACTHOLDER FUNDS: Derivatives embedded in certain life and annuity
contracts are valued internally using models widely accepted in the
financial services industry that determine a single best estimate of
fair value for the embedded derivatives within a block of contractholder
liabilities. The models primarily use stochastically determined cash
flows based on the contractual elements of embedded derivatives,
projected option cost and applicable market data, such as interest rate
yield curves and equity index volatility assumptions. These are
categorized as Level 3 as a result of the significance of non-market
observable inputs.
25
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The following table summarizes the Company's assets and liabilities measured
at fair value on a recurring and non-recurring basis as of December 31, 2010:
QUOTED PRICES SIGNIFICANT
IN ACTIVE OTHER SIGNIFICANT
MARKETS FOR OBSERVABLE UNOBSERVABLE BALANCE AS OF
IDENTICAL ASSETS INPUTS INPUTS DECEMBER 31,
(LEVEL 1) (LEVEL 2) (LEVEL 3) 2010
($ IN THOUSANDS) ---------------- ----------- ------------ -------------
ASSETS:
Fixed income securities:
U.S. government and agencies.............. $ 31,007 $ 42,549 $ -- $ 73,556
Municipal................................. -- 3,176 -- 3,176
Corporate................................. -- 162,735 852 163,587
Foreign government........................ -- 5,090 -- 5,090
RMBS...................................... -- 50,922 6,880 57,802
CMBS...................................... -- 6,947 1,916 8,863
ABS....................................... -- 8,382 -- 8,382
---------- -------- --------- ----------
Total fixed income securities......... 31,007 279,801 9,648 320,456
Short-term investments....................... 11,543 50 -- 11,593
Separate account assets...................... 2,017,185 -- -- 2,017,185
---------- -------- --------- ----------
TOTAL RECURRING BASIS ASSETS.......... 2,059,735 279,851 9,648 2,349,234
---------- -------- --------- ----------
TOTAL ASSETS AT FAIR VALUE................... $2,059,735 $279,851 $ 9,648 $2,349,234
========== ======== ========= ==========
% of total assets at fair value.............. 87.7% 11.9% 0.4% 100.0%
LIABILITIES:
Contractholder funds:
Derivatives embedded in life and annuity
contracts............................... $ -- $ -- $(494,149) $ (494,149)
---------- -------- --------- ----------
TOTAL LIABILITIES AT FAIR VALUE.............. $ -- $ -- $(494,149) $ (494,149)
========== ======== ========= ==========
% of total liabilities at fair value......... -- % -- % 100.0% 100.0%
26
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The following table summarizes the Company's assets and liabilities measured
at fair value on a recurring and non-recurring basis as of December 31, 2009:
QUOTED PRICES SIGNIFICANT
IN ACTIVE OTHER SIGNIFICANT
MARKETS FOR OBSERVABLE UNOBSERVABLE BALANCE AS OF
IDENTICAL ASSETS INPUTS INPUTS DECEMBER 31,
(LEVEL 1) (LEVEL 2) (LEVEL 3) 2009
($ IN THOUSANDS) ---------------- ----------- ------------ -------------
ASSETS:
Fixed income securities:
U.S. government and agencies.............. $ 29,273 $ 52,278 $ -- $ 81,551
Municipal................................. -- 3,095 -- 3,095
Corporate................................. -- 136,484 1,089 137,573
RMBS...................................... -- 67,975 -- 67,975
CMBS...................................... -- 8,546 1,158 9,704
ABS....................................... -- 8,445 -- 8,445
---------- --------- -------- ----------
Total fixed income securities......... 29,273 276,823 2,247 308,343
Short-term investments....................... 8,507 50 -- 8,557
Separate account assets...................... 2,039,647 -- -- 2,039,647
---------- --------- -------- ----------
TOTAL RECURRING BASIS ASSETS.......... 2,077,427 276,873 2,247 2,356,547
---------- --------- -------- ----------
TOTAL ASSETS AT FAIR VALUE................... $2,077,427 $ 276,873 $ 2,247 $2,356,547
========== ========= ======== ==========
% of total assets at fair value.............. 88.2% 11.7% 0.1% 100.0%
LIABILITIES:
Contractholder funds:
Derivatives embedded in life and annuity
contracts............................... $ -- $(199,765) $(15,526) $ (215,291)
---------- --------- -------- ----------
TOTAL LIABILITIES AT FAIR VALUE.............. $ -- $(199,765) $(15,526) $ (215,291)
========== ========= ======== ==========
% of total liabilities at fair value......... -- % 92.8% 7.2% 100.0%
27
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The following table presents the rollforward of Level 3 assets and
liabilities held at fair value on a recurring basis during the year ended
December 31, 2010.
TOTAL REALIZED AND UNREALIZED
GAINS (LOSSES) INCLUDED IN:
----------------------------- PURCHASES,
OCI ON SALES,
BALANCE AS OF STATEMENT OF ISSUANCES AND TRANSFERS TRANSFERS BALANCE AS OF
DECEMBER 31, NET FINANCIAL SETTLEMENTS, INTO OUT OF DECEMBER 31,
2009 INCOME/(1)/ POSITION NET LEVEL 3 LEVEL 3 2010
($ IN THOUSANDS) ------------- ---------- ------------ ------------- --------- --------- -------------
ASSETS
Fixed income securities:
Corporate................ $ 1,089 $ (1) $ -- $ 7,740 $ -- $ (7,976) $ 852
RMBS..................... -- (17) 131 9,459 -- (2,693) 6,880
CMBS..................... 1,158 -- 758 -- -- -- 1,916
-------- ------- ---- ------- --------- -------- ---------
TOTAL RECURRING
LEVEL 3 ASSETS......... $ 2,247 $ (18) $889 $17,199 $ -- $(10,669) $ 9,648
======== ======= ==== ======= ========= ======== =========
LIABILITIES
Contractholder funds:
Derivatives embedded in
life and annuity
contracts............... $(15,526) $(4,877) $ -- $ -- $(473,746) $ -- $(494,149)
-------- ------- ---- ------- --------- -------- ---------
TOTAL RECURRING
LEVEL 3 LIABILITIES.... $(15,526) $(4,877) $ -- $ -- $(473,476) $ -- $(494,149)
======== ======= ==== ======= ========= ======== =========
--------
/(1)/The amount above attributable to fixed income securities is reported in
the Statements of Operations and Comprehensive Income as net investment
income. The amount above attributable to derivatives embedded in life and
annuity contracts is reported as a component of contract benefits and is
ceded in accordance with the Company's reinsurance agreements.
Transfers between level categorizations may occur due to changes in the
availability of market observable inputs, which generally are caused by changes
in market conditions such as liquidity, trading volume or bid-ask spreads.
Transfers between level categorizations may also occur due to changes in the
valuation source. For example, in situations where a fair value quote is not
provided by the Company's independent third-party valuation service provider
and as a result the price is stale or has been replaced with a broker quote,
the security is transferred into Level 3. Transfers in and out of level
categorizations are reported as having occurred at the beginning of the quarter
in which the transfer occurred. Therefore, for all transfers into Level 3, all
realized and changes in unrealized gains and losses in the quarter of transfer
are reflected in the Level 3 rollforward table.
There were no transfers between Level 1 and Level 2 during 2010.
Transfers out of Level 3 during 2010, including those related to Corporate
fixed income securities and RMBS, included situations where a broker quote was
used in a prior period and a fair value quote became available from the
Company's independent third-party valuation service provider in the current
period. A quote utilizing the new pricing source was not available as of the
prior period, and any gains or losses related to the change in valuation source
for individual securities were not significant.
Transfers into Level 3 during 2010 also included derivatives embedded in
equity-indexed life and annuity contracts due to refinements in the valuation
modeling resulting in an increase in significance of non-market observable
inputs.
28
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The following table provides the total gains and (losses) included in net
income during 2010 for Level 3 assets still held as of December 31, 2010.
($ IN THOUSANDS)
ASSETS
Fixed income securities:
Corporate.......................................... $ (2)
RMBS............................................... (11)
CMBS............................................... (1)
-------
TOTAL RECURRING LEVEL 3 ASSETS................. $ (14)
=======
LIABILITIES
Contractholder funds:
Derivatives embedded in life and annuity contracts. $(4,877)
-------
TOTAL RECURRING LEVEL 3 LIABILITIES............ $(4,877)
=======
The amounts in the table above represent losses included in net income
during 2010 for the period of time that the asset was determined to be in Level
3. The amounts attributable to fixed income securities are reported in the
Statements of Operations and Comprehensive Income in net investment income. The
amount attributable to derivatives embedded in life and annuity contracts is
reported as a component of contract benefits and is ceded in accordance with
the Company's reinsurance agreements.
The following table presents the rollforward of Level 3 assets and
liabilities held at fair value on a recurring basis during the year ended
December 31, 2009.
TOTAL GAINS
TOTAL REALIZED AND (LOSSES)
UNREALIZED GAINS INCLUDED IN
(LOSSES) INCLUDED IN: NET INCOME
- ---------------------- PURCHASES, FOR FINANCIAL
OCI ON SALES, NET TRANSFERS INSTRUMENTS
BALANCE AS OF STATEMENT OF ISSUANCES AND IN AND/ BALANCE AS OF STILL HELD AS OF
DECEMBER 31, NET FINANCIAL SETTLEMENTS, OR (OUT) DECEMBER 31, DECEMBER 31,
2008 INCOME/(1)/ POSITION NET OF LEVEL 3 2009 2009/(2)/
($ IN THOUSANDS) ------------- ---------- ------------ ------------- ------------- ------------- ----------------
ASSETS
Fixed income securities:
Corporate................ $ 1,307 $ (2) $ 96 $ (216) $(96) $ 1,089 $ (2)
CMBS..................... -- -- 535 -- 623 1,158 --
ABS...................... 6,002 288 (19) (6,271) -- -- --
-------- ------- ---- ------- ---- -------- -------
TOTAL RECURRING
LEVEL 3 ASSETS......... $ 7,309 $ 286 $612 $(6,487) $527 $ 2,247 $ (2)
======== ======= ==== ======= ==== ======== =======
LIABILITIES
Contractholder funds:
Derivatives embedded in
life and annuity
contracts............... $(36,544) $19,984 $ -- $ 1,034 $ -- $(15,526) $19,984
-------- ------- ---- ------- ---- -------- -------
TOTAL RECURRING
LEVEL 3 LIABILITIES.... $(36,544) $19,984 $ -- $ 1,034 $ -- $(15,526) $19,984
======== ======= ==== ======= ==== ======== =======
--------
/(1)/The amount above attributable to fixed income securities is reported in
the Statements of Operations and Comprehensive Income as follows: $288
thousand in realized capital gains and losses and $(2) thousand in net
investment income. The amount above attributable to derivatives embedded
in life and annuity contracts is reported as a component of contract
benefits and is ceded in accordance with the Company's reinsurance
agreements.
/(2)/The amount above attributable to fixed income securities is reported as a
component of net investment income in the Statements of Operations and
Comprehensive Income. The amount above attributable to derivatives
embedded in life and annuity contracts is reported as a component of
contract benefits and is ceded in accordance with the Company's
reinsurance agreements.
29
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The following table presents the rollforward of Level 3 assets and
liabilities held at fair value on a recurring basis during the year ended
December 31, 2008.
TOTAL GAINS
TOTAL REALIZED AND (LOSSES)
UNREALIZED GAINS (LOSSES) INCLUDED IN
INCLUDED IN: NET INCOME
------------------------ PURCHASES, FOR FINANCIAL
OCI ON SALES, INSTRUMENTS
BALANCE AS OF STATEMENT OF ISSUANCES AND BALANCE AS OF STILL HELD AS OF
JANUARY 1, NET FINANCIAL SETTLEMENTS, DECEMBER 31, DECEMBER 31,
2008 INCOME/(1)/ POSITION NET 2008 2008/(2)/
($ IN THOUSANDS) ------------- ---------- ------------ ------------- ------------- ----------------
ASSETS
Fixed income securities:
Corporate......................... $ 1,500 $ (1) $ -- $ (192) $ 1,307 $ (2)
ABS............................... 10,484 181 (434) (4,229) 6,002 (1)
------- -------- ----- ------- -------- --------
TOTAL RECURRING LEVEL 3 ASSETS... $11,984 $ 180 $(434) $(4,421) $ 7,309 $ (3)
======= ======== ===== ======= ======== ========
LIABILITIES
Contractholder funds:
Derivatives embedded in life and
annuity contracts................ $ (256) $(36,498) $ -- $ 210 $(36,544) $(36,498)
------- -------- ----- ------- -------- --------
TOTAL RECURRING LEVEL 3
LIABILITIES..................... $ (256) $(36,498) $ -- $ 210 $(36,544) $(36,498)
======= ======== ===== ======= ======== ========
--------
/(1)/The amount above attributable to fixed income securities is reported in
the Statements of Operations and Comprehensive Income as follows: $185
thousand in realized capital gains and losses and $(5) thousand in net
investment income. The amount above attributable to derivatives embedded
in life and annuity contracts is reported as a component of contract
benefits and is ceded in accordance with the Company's reinsurance
agreements.
/(2)/The amount above attributable to fixed income securities is reported as a
component of net investment income in the Statements of Operations and
Comprehensive Income. The amount above attributable to derivatives
embedded in life and annuity contracts is reported as a component of
contract benefits and is ceded in accordance with the Company's
reinsurance agreements.
As of December 31, 2010 and 2009, financial instruments not carried at fair
value included contractholder funds on investment contracts. The carrying value
and fair value of contractholder funds on investment contracts were $12.69
billion and $11.66 billion, respectively, as of December 31, 2010 and were
$13.64 billion and $12.64 billion, respectively, as of December 31, 2009.
The fair value of contractholder funds on investment contracts is based on
the terms of the underlying contracts utilizing prevailing market rates for
similar contracts adjusted for the Company's own credit risk. Deferred
annuities included in contractholder funds are valued using discounted cash
flow models which incorporate market value margins, which are based on the cost
of holding economic capital, and the Company's own credit risk. Immediate
annuities without life contingencies are valued at the present value of future
benefits using market implied interest rates which include the Company's own
credit risk.
6. DERIVATIVE FINANCIAL INSTRUMENTS
The Company has derivatives embedded in non-derivative host contracts that
are required to be separated from the host contracts and accounted for at fair
value. The Company does not use derivatives for trading purposes. The Company's
embedded derivatives are equity options in life and annuity product contracts,
which provide equity returns to contractholders; and guaranteed minimum
accumulation and withdrawal benefits in variable annuity contracts.
30
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The following table provides a summary of the volume and fair value
positions of embedded derivative financial instruments as well as their
reporting location in the Statement of Financial Position as of December 31,
2010. None of these derivatives are designated as accounting hedging
instruments.
VOLUME - FAIR
NOTIONAL VALUE, GROSS GROSS
BALANCE SHEET LOCATION AMOUNT NET ASSET LIABILITY
($ IN THOUSANDS) ---------------------- ---------- --------- ----- ---------
Equity index and forward starting options
in life and annuity product contracts... Contractholder funds $4,351,559 $(473,746) $-- $(473,746)
Guaranteed accumulation benefits.......... Contractholder funds 228,195 (18,422) -- (18,422)
Guaranteed withdrawal benefits............ Contractholder funds 32,473 (1,981) -- (1,981)
---------- --------- --- ---------
TOTAL DERIVATIVES......................... $4,612,227 $(494,149) $-- $(494,149)
========== ========= === =========
The following table provides a summary of the volume and fair value
positions of embedded derivative financial instruments as well as their
reporting location in the Statement of Financial Position as of December 31,
2009. None of these derivatives are designated as accounting hedging
instruments.
VOLUME - FAIR
NOTIONAL VALUE, GROSS GROSS
BALANCE SHEET LOCATION AMOUNT NET ASSET LIABILITY
($ IN THOUSANDS) ---------------------- ---------- --------- ----- ---------
Equity index and forward starting options
in life and annuity product contracts... Contractholder funds $4,018,238 $(199,765) $-- $(199,765)
Guaranteed accumulation benefits.......... Contractholder funds 237,005 (13,690) -- (13,690)
Guaranteed withdrawal benefits............ Contractholder funds 37,835 (1,836) -- (1,836)
---------- --------- --- ---------
TOTAL DERIVATIVES......................... $4,293,078 $(215,291) $-- $(215,291)
========== ========= === =========
For the year ended December 31, 2010 gains and losses from valuation and
settlements on embedded derivative financial instruments recorded in interest
credited to contractholder funds and contract benefits were $31.0 million and
$(4.9) million, respectively, which in turn were ceded to ALIC. For the year
ended December 31, 2009 gains and losses from valuation and settlements on
embedded derivative financial instruments recorded in interest credited to
contractholder funds and contract benefits were $(166.3) million and $21.0
million, respectively, which in turn were ceded to ALIC.
OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS
There were no off-balance-sheet financial instruments as of December 31,
2010 or 2009.
7. RESERVE FOR LIFE-CONTINGENT CONTRACT BENEFITS AND CONTRACTHOLDER FUNDS
As of December 31, the reserve for life-contingent contract benefits
consists of the following:
2010 2009
($ IN THOUSANDS) ---------- ----------
Traditional life insurance..................... $1,363,098 $1,280,461
Immediate fixed annuities...................... 680,467 686,057
Accident and health insurance.................. 961,030 831,211
Other.......................................... 6,722 7,658
---------- ----------
Total reserve for life-contingent contract
benefits.................................. $3,011,317 $2,805,387
========== ==========
31
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The following table highlights the key assumptions generally used in
calculating the reserve for life-contingent contract benefits:
PRODUCT MORTALITY INTEREST RATE ESTIMATION METHOD
------------------------- ------------------------ ------------------------ ------------------------
Traditional life Actual company Interest rate Net level premium
insurance experience plus loading assumptions range from reserve method using the
4.0% to 8.0% Company's withdrawal
experience rates
Immediate fixed annuities 1983 individual annuity Interest rate Present value of
mortality table with assumptions range from expected future benefits
internal modifications; 1.2% to 8.8% based on historical
1983 individual annuity experience
mortality table; Annuity
2000 mortality table
with internal
modifications
Accident and health Actual company Unearned premium;
insurance experience plus loading additional contract
reserves for mortality
risk
Other:
Variable annuity 100% of Annuity 2000 Interest rate Projected benefit ratio
guaranteed minimum mortality table assumptions range from applied to cumulative
death benefits 4.2% to 5.2% assessments
As of December 31, contractholder funds consist of the following:
2010 2009
($ IN THOUSANDS) ----------- -----------
Interest-sensitive life insurance..... $ 4,314,502 $ 3,844,319
Investment contracts:
Fixed annuities.................... 12,728,648 13,675,700
Other investment contracts......... 203,921 113,008
----------- -----------
Total contractholder funds..... $17,247,071 $17,633,027
=========== ===========
32
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The following table highlights the key contract provisions relating to
contractholder funds:
PRODUCT INTEREST RATE WITHDRAWAL/SURRENDER CHARGES
------------------------------------- ------------------------------------- ----------------------------------
Interest-sensitive life insurance Interest rates credited range from 0% Either a percentage of account
to 11.5% for equity-indexed life balance or dollar amount
(whose returns are indexed to the S&P grading off generally over 20
500) and 2.7% to 6.0% for all other years
products
Fixed annuities Interest rates credited range from 0% Either a declining or a level
to 8.8% for immediate annuities; 0% percentage charge generally
to 14.0% for equity-indexed annuities over nine years or less.
(whose returns are indexed to the S&P Additionally, approximately
500); and 1.0% to 8.5% for all other 19.0% of fixed annuities are
products subject to market value
adjustment for discretionary
withdrawals.
Other investment contracts:
Guaranteed minimum income, Interest rates used in establishing Withdrawal and surrender
accumulation and withdrawal reserves range from 1.8% to 10.3% charges are based on the terms
benefits on variable annuities and of the related interest-sensitive
secondary guarantees on life insurance or fixed annuity
interest-sensitive life insurance contract.
and fixed annuities
Contractholder funds activity for the years ended December 31 is as follows:
2010 2009
($ IN THOUSANDS) ----------- -----------
Balance, beginning of year........... $17,633,027 $17,787,376
Deposits............................. 1,521,086 1,751,516
Interest credited.................... 743,075 821,046
Benefits............................. (504,789) (523,905)
Surrenders and partial withdrawals... (1,811,355) (1,826,122)
Contract charges..................... (471,729) (417,398)
Net transfers from separate accounts. 18,788 14,400
Other adjustments.................... 118,968 26,114
----------- -----------
Balance, end of year................. $17,247,071 $17,633,027
=========== ===========
33
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The table below presents information regarding the Company's variable
annuity contracts with guarantees. The Company's variable annuity contracts may
offer more than one type of guarantee in each contract; therefore, the sum of
amounts listed exceeds the total account balances of variable annuity
contracts' separate accounts with guarantees.
DECEMBER 31,
-------------------
2010 2009
($ IN MILLIONS) --------- ---------
IN THE EVENT OF DEATH
Separate account value............................... $ 1,318.1 $ 1,405.4
Net amount at risk/(1)/.............................. $ 126.3 $ 213.1
Average attained age of contractholders.............. 57 years 57 years
AT ANNUITIZATION (INCLUDES INCOME BENEFIT GUARANTEES)
Separate account value............................... $ 252.8 $ 263.7
Net amount at risk/(2)/.............................. $ 40.9 $ 75.9
Weighted average waiting period until annuitization
options available.................................. 3 years 3 years
FOR CUMULATIVE PERIODIC WITHDRAWALS
Separate account value............................... $ 33.1 $ 37.8
Net amount at risk/(3)/.............................. $ 0.3 $ 0.6
ACCUMULATION AT SPECIFIED DATES
Separate account value............................... $ 233.7 $ 236.8
Net amount at risk/(4)/.............................. $ 18.9 $ 26.9
Weighted average waiting period until guarantee
date............................................... 9 years 10 years
--------
/(1)/Defined as the estimated current guaranteed minimum death benefit in
excess of the current account balance as of the balance sheet date.
/(2)/Defined as the estimated present value of the guaranteed minimum annuity
payments in excess of the current account balance.
/(3)/Defined as the estimated current guaranteed minimum withdrawal balance
(initial deposit) in excess of the current account balance as of the
balance sheet date.
/(4)/Defined as the estimated present value of the guaranteed minimum
accumulation balance in excess of the current account balance.
As of December 31, 2010, liabilities for guarantees included reserves for
variable annuity death benefits of $6.7 million, variable annuity income
benefits of $19.8 million, variable annuity accumulation benefits of $18.4
million, variable annuity withdrawal benefits of $2.0 million and
interest-sensitive life and fixed annuity guarantees of $163.7 million. As of
December 31, 2009, liabilities for guarantees included reserves for variable
annuity death benefits of $7.7 million, variable annuity income benefits of
$24.7 million, variable annuity accumulation benefits of $13.7 million,
variable annuity withdrawal benefits of $1.8 million and interest-sensitive
life and fixed annuity guarantees of $72.8 million.
8. REINSURANCE
The Company has reinsurance agreements under which it reinsures all of its
business to ALIC or other non-affiliated reinsurers. Under the agreements,
premiums, contract charges, interest credited to contractholder funds, contract
benefits and substantially all expenses are reinsured. The Company purchases
reinsurance to limit aggregate and single losses on large risks. The Company
cedes a portion of the mortality risk on certain life policies under
coinsurance agreements to a pool of twelve non-affiliated reinsurers.
34
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
As of December 31, 2010, 90.6% of the total reinsurance recoverables were
related to ALIC and 9.4% were related to non-affiliated reinsurers. At both
December 31, 2010 and 2009, 97% of the Company's non-affiliated reinsurance
recoverables are due from companies rated A or better by S&P.
The effects of reinsurance on premiums and contract charges for the years
ended December 31 are as follows:
2010 2009 2008
($ IN THOUSANDS) ---------- ---------- ----------
PREMIUMS AND CONTRACT CHARGES
Direct................................ $1,228,272 $1,194,526 $1,138,747
Assumed............................... 7,465 7,849 8,576
Ceded:
Affiliate.......................... (782,113) (734,369) (691,267)
Non-affiliate...................... (453,624) (468,006) (456,056)
---------- ---------- ----------
Premiums and contract charges, net of
reinsurance......................... $ -- $ -- $ --
========== ========== ==========
The effects of reinsurance on interest credited to contractholder funds,
contract benefits and expenses for the years ended December 31 are as follows:
2010 2009 2008
($ IN THOUSANDS) ----------- ----------- -----------
INTEREST CREDITED TO CONTRACTHOLDER FUNDS,
CONTRACT BENEFITS AND EXPENSES
Direct..................................... $ 2,186,031 $ 2,159,262 $ 2,065,299
Assumed.................................... 8,153 11,101 8,922
Ceded:
Affiliate............................... (1,683,487) (1,621,011) (1,468,505)
Non-affiliate........................... (510,697) (549,352) (605,716)
----------- ----------- -----------
Interest credited to contractholder funds,
contract benefits and expenses, net of
reinsurance.............................. $ -- $ -- $ --
=========== =========== ===========
9. GUARANTEES AND CONTINGENT LIABILITIES
GUARANTEES
In the normal course of business, the Company provides standard
indemnifications to contractual counterparties in connection with numerous
transactions, including acquisitions and divestitures. The types of
indemnifications typically provided include indemnifications for breaches of
representations and warranties, taxes and certain other liabilities, such as
third party lawsuits. The indemnification clauses are often standard
contractual terms and are entered into in the normal course of business based
on an assessment that the risk of loss would be remote. The terms of the
indemnifications vary in duration and nature. In many cases, the maximum
obligation is not explicitly stated and the contingencies triggering the
obligation to indemnify have not occurred and are not expected to occur.
Consequently, the maximum amount of the obligation under such indemnifications
is not determinable. Historically, the Company has not made any material
payments pursuant to these obligations.
The aggregate liability balance related to all guarantees was not material
as of December 31, 2010.
35
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
REGULATION AND COMPLIANCE
The Company is subject to changing social, economic and regulatory
conditions. From time to time, regulatory authorities or legislative bodies
seek to impose additional regulations regarding agent and broker compensation,
regulate the nature of and amount of investments, and otherwise expand overall
regulation of insurance products and the insurance industry. The Company has
established procedures and policies to facilitate compliance with laws and
regulations, to foster prudent business operations, and to support financial
reporting. The Company routinely reviews its practices to validate compliance
with laws and regulations and with internal procedures and policies. As a
result of these reviews, from time to time the Company may decide to modify
some of its procedures and policies. Such modifications, and the reviews that
led to them, may be accompanied by payments being made and costs being
incurred. The ultimate changes and eventual effects of these actions on the
Company's business, if any, are uncertain.
LEGAL AND REGULATORY PROCEEDINGS AND INQUIRIES
BACKGROUND
The Company and certain affiliates are involved in a number of lawsuits,
regulatory inquiries, and other legal proceedings arising out of various
aspects of its business. As background to the "Proceedings" subsection below,
please note the following:
. These matters raise difficult and complicated factual and legal issues
and are subject to many uncertainties and complexities, including the
underlying facts of each matter; novel legal issues; variations between
jurisdictions in which matters are being litigated, heard, or
investigated; differences in applicable laws and judicial
interpretations; the length of time before many of these matters might
be resolved by settlement, through litigation, or otherwise; the fact
that some of the lawsuits are putative class actions in which a class
has not been certified and in which the purported class may not be
clearly defined; the fact that some of the lawsuits involve multi-state
class actions in which the applicable law(s) for the claims at issue is
in dispute and therefore unclear; and the current challenging legal
environment faced by large corporations and insurance companies.
. The outcome of these matters may be affected by decisions, verdicts, and
settlements, and the timing of such decisions, verdicts, and
settlements, in other individual and class action lawsuits that involve
the Company, other insurers, or other entities and by other legal,
governmental, and regulatory actions that involve the Company, other
insurers, or other entities. The outcome may also be affected by future
state or federal legislation, the timing or substance of which cannot be
predicted.
. In the lawsuits, plaintiffs seek a variety of remedies which may include
equitable relief in the form of injunctive and other remedies and
monetary relief in the form of contractual and extra-contractual
damages. In some cases, the monetary damages sought may include punitive
or treble damages. Often specific information about the relief sought,
such as the amount of damages, is not available because plaintiffs have
not requested specific relief in their pleadings. When specific monetary
demands are made, they are often set just below a state court
jurisdictional limit in order to seek the maximum amount available in
state court, regardless of the specifics of the case, while still
avoiding the risk of removal to federal court. In the Company's
experience, monetary demands in pleadings bear little relation to the
ultimate loss, if any, to the Company.
. In connection with regulatory examinations and proceedings, government
authorities may seek various forms of relief, including penalties,
restitution and changes in business practices. The Company may not be
advised of the nature and extent of relief sought until the final stages
of the examination or proceeding.
36
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
. For the reasons specified above, it is not possible to make meaningful
estimates of the amount or range of loss that could result from the
matters described below in the "Proceedings" subsection. The Company
reviews these matters on an ongoing basis and follows appropriate
accounting guidance when making accrual and disclosure decisions. When
assessing reasonably possible and probable outcomes, the Company bases
its decisions on its assessment of the ultimate outcome following all
appeals.
. Due to the complexity and scope of the matters disclosed in the
"Proceedings" subsection below and the many uncertainties that exist,
the ultimate outcome of these matters cannot be reasonably predicted. In
the event of an unfavorable outcome in one or more of these matters, the
ultimate liability may be in excess of amounts currently reserved, if
any, and may be material to the Company's operating results or cash
flows for a particular quarterly or annual period. However, based on
information currently known to it, management believes that the ultimate
outcome of all matters described below, as they are resolved over time,
is not likely to have a material adverse effect on the financial
position of the Company.
PROCEEDINGS
Legal proceedings involving Allstate agencies and AIC may impact the
Company, even when the Company is not directly involved, because the Company
sells its products through a variety of distribution channels including
Allstate agencies. Consequently, information about the more significant of
these proceedings is provided in the following paragraph.
AIC is defending certain matters relating to its agency program
reorganization announced in 1999. These matters are in various stages of
development.
. These matters include a lawsuit filed in 2001 by the U.S. Equal
Employment Opportunity Commission ("EEOC") alleging retaliation under
federal civil rights laws (the "EEOC I" suit) and a class action filed
in 2001 by former employee agents alleging retaliation and age
discrimination under the Age Discrimination in Employment Act ("ADEA"),
breach of contract and ERISA violations (the "Romero I" suit). In 2004,
in the consolidated EEOC I and Romero I litigation, the trial court
issued a memorandum and order that, among other things, certified
classes of agents, including a mandatory class of agents who had signed
a release, for purposes of effecting the court's declaratory judgment
that the release is voidable at the option of the release signer. The
court also ordered that an agent who voids the release must return to
AIC "any and all benefits received by the [agent] in exchange for
signing the release." The court also stated that, "on the undisputed
facts of record, there is no basis for claims of age discrimination."
The EEOC and plaintiffs asked the court to clarify and/or reconsider its
memorandum and order and in January 2007, the judge denied their
request. In June 2007, the court granted AIC's motions for summary
judgment. Following plaintiffs' filing of a notice of appeal, the U.S.
Court of Appeals for the Third Circuit ("Third Circuit") issued an order
in December 2007 stating that the notice of appeal was not taken from a
final order within the meaning of the federal law and thus not
appealable at this time. In March 2008, the Third Circuit decided that
the appeal should not summarily be dismissed and that the question of
whether the matter is appealable at this time will be addressed by the
Third Circuit along with the merits of the appeal. In July 2009, the
Third Circuit vacated the decision which granted AIC's summary judgment
motions, remanded the cases to the trial court for additional discovery,
and directed that the cases be reassigned to another trial court judge.
In January 2010, the cases were assigned to a new judge for further
proceedings in the trial court.
. A putative nationwide class action has also been filed by former
employee agents alleging various violations of ERISA, including a worker
classification issue. These plaintiffs are challenging certain
amendments to the Agents Pension Plan and are seeking to have exclusive
agent independent
37
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
contractors treated as employees for benefit purposes. This matter was
dismissed with prejudice by the trial court, was the subject of further
proceedings on appeal, and was reversed and remanded to the trial court
in 2005. In June 2007, the court granted AIC's motion to dismiss the
case. Following plaintiffs' filing of a notice of appeal, the Third
Circuit issued an order in December 2007 stating that the notice of
appeal was not taken from a final order within the meaning of the
federal law and thus not appealable at this time. In March 2008, the
Third Circuit decided that the appeal should not summarily be dismissed
and that the question of whether the matter is appealable at this time
will be addressed by the Third Circuit along with the merits of the
appeal. In July 2009, the Third Circuit vacated the decision which
granted AIC's motion to dismiss the case, remanded the case to the trial
court for additional discovery, and directed that the case be reassigned
to another trial court judge. In January 2010, the case was assigned to
a new judge for further proceedings in the trial court.
In these agency program reorganization matters, plaintiffs seek compensatory
and punitive damages, and equitable relief. AIC has been vigorously defending
these lawsuits and other matters related to its agency program reorganization.
OTHER MATTERS
Various other legal, governmental, and regulatory actions, including state
market conduct exams, and other governmental and regulatory inquiries are
pending from time to time that involve the Company and specific aspects of its
conduct of business. Like other members of the insurance industry, the Company
is the target of a number of lawsuits and proceedings, some of which involve
claims for substantial or indeterminate amounts. These actions are based on a
variety of issues and target a range of the Company's practices. The outcome of
these disputes is currently unpredictable. However, based on information
currently known to it and the existence of the reinsurance agreements with
ALIC, management believes that the ultimate outcome of all matters described in
this "Other Matters" subsection, in excess of amounts currently reserved, if
any, as they are resolved over time, is not likely to have a material effect on
the operating results, cash flows or financial position of the Company.
10. INCOME TAXES
The Company joins the Corporation and its other domestic subsidiaries (the
"Allstate Group") in the filing of a consolidated federal income tax return and
is party to a federal income tax allocation agreement (the "Allstate Tax
Sharing Agreement"). Under the Allstate Tax Sharing Agreement, the Company pays
to or receives from the Corporation the amount, if any, by which the Allstate
Group's federal income tax liability is affected by virtue of inclusion of the
Company in the consolidated federal income tax return. The Company also has a
supplemental tax sharing agreement with respect to reinsurance ceded to ALIC to
allocate the tax benefits and costs related to such reinsurance. Effectively,
these agreements result in the Company's annual income tax provision being
computed, with adjustments, as if the Company filed a separate return, adjusted
for the reinsurance ceded to ALIC.
The Internal Revenue Service ("IRS") is currently examining the Allstate
Group's 2007 and 2008 federal income tax returns. The IRS has completed its
examination of the Allstate Group's federal income tax returns through 2006 and
the statute of limitations has expired on years prior to 2005. Any adjustments
that may result from IRS examinations of tax returns are not expected to have a
material effect on the results of operations, cash flows or financial position
of the Company.
The Company had no liability for unrecognized tax benefits as of
December 31, 2010 or 2009, and believes it is reasonably possible that the
liability balance will not significantly increase within the next twelve
months. No amounts have been accrued for interest or penalties.
38
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The components of the deferred income tax assets and liabilities as of
December 31 are as follows:
2010 2009
($ IN THOUSANDS) ------- -------
DEFERRED ASSETS
Tax credit carryforward................... $ 7 $ --
------- -------
Total deferred assets.................. 7 --
------- -------
DEFERRED LIABILITIES
Unrealized net capital gains........... (5,463) (2,995)
Other liabilities...................... (377) (305)
------- -------
Total deferred liabilities......... (5,840) (3,300)
------- -------
Net deferred liabilities........ $(5,833) $(3,300)
======= =======
Although realization is not assured, management believes it is more likely
than not that the deferred tax assets will be realized based on the Company's
assessment that the deductions ultimately recognized for tax purposes will be
fully utilized.
The components of income tax expense for the years ended December 31 are as
follows:
2010 2009 2008
($ IN THOUSANDS) ------ ------ ------
Current..................... $4,386 $4,447 $7,054
Deferred.................... 65 187 (136)
------ ------ ------
Total income tax expense. $4,451 $4,634 $6,918
====== ====== ======
As of December 31, 2010, the Company has tax credit carryforwards of $7
thousand which will be available to offset future tax liabilities. These
carryforwards will expire at the end of 2029 and 2030.
The Company paid income taxes of $4.7 million, $6.8 million and $4.9 million
in 2010, 2009 and 2008, respectively.
A reconciliation of the statutory federal income tax rate to the effective
income tax rate on income from operations for the years ended December 31 is as
follows:
2010 2009 2008
---- ---- ----
Statutory federal income tax rate. 35.0% 35.0% 35.0%
Other............................. (0.1) (0.1) (0.2)
---- ---- ----
Effective income tax rate......... 34.9% 34.9% 34.8%
==== ==== ====
11. STATUTORY FINANCIAL INFORMATION
The Company prepares its statutory-basis financial statements in conformity
with accounting practices prescribed or permitted by the State of Nebraska.
Prescribed statutory accounting practices include a variety of publications of
the National Association of Insurance Commissioners ("NAIC"), as well as state
laws, regulations and general administrative rules. Permitted statutory
accounting practices encompass all accounting practices not so prescribed. The
State of Nebraska requires insurance companies domiciled in its state to
prepare statutory-basis financial statements in conformity with the NAIC
Accounting Practices and Procedures Manual, subject to any deviations
prescribed or permitted by the State of Nebraska Insurance Commissioner.
39
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Statutory accounting practices differ from GAAP primarily since they require
charging policy acquisition and certain sales inducement costs to expense as
incurred, establishing life insurance reserves based on different actuarial
assumptions, and valuing certain investments and establishing deferred taxes on
a different basis.
Statutory net income for 2010, 2009, and 2008 was $8.7 million, $8.5 million
and $7.8 million, respectively. Statutory capital and surplus was $310.8
million and $306.0 million as of December 31, 2010 and 2009, respectively.
DIVIDENDS
The ability of the Company to pay dividends is dependent on business
conditions, income, cash requirements of the Company and other relevant
factors. The payment of shareholder dividends by the Company without the prior
approval of the state insurance regulator is limited to formula amounts based
on net income and capital and surplus, determined in conformity with statutory
accounting practices, as well as the timing and amount of dividends paid in the
preceding twelve months. The maximum amount of dividends that the Company can
pay during 2011 without prior approval of the Nebraska Department of Insurance
is $31.1 million. The Company did not pay any dividends in 2010.
12. OTHER COMPREHENSIVE INCOME
The components of other comprehensive income (loss) on a pre-tax and
after-tax basis for the years ended December 31 are as follows:
2010
--------------------------
PRE-TAX TAX AFTER-TAX
($ IN THOUSANDS) ------- ------- ---------
Unrealized net holding gains arising during the period................. $ 7,746 $(2,711) $ 5,035
Less: reclassification adjustment of realized capital gains and losses. 694 (243) 451
------- ------- -------
Unrealized net capital gains and losses................................ 7,052 (2,468) 4,584
------- ------- -------
Other comprehensive income............................................. $ 7,052 $(2,468) $ 4,584
======= ======= =======
2009
--------------------------
PRE-TAX TAX AFTER-TAX
------- ------- ---------
Unrealized net holding gains arising during the period................. $10,135 $(3,547) $ 6,588
Less: reclassification adjustment of realized capital gains and losses. 1,238 (433) 805
------- ------- -------
Unrealized net capital gains and losses................................ 8,897 (3,114) 5,783
------- ------- -------
Other comprehensive income............................................. $ 8,897 $(3,114) $ 5,783
======= ======= =======
2008
--------------------------
PRE-TAX TAX AFTER-TAX
------- ------- ---------
Unrealized net holding losses arising during the period................ $(3,078) $ 1,077 $(2,001)
Less: reclassification adjustment of realized capital gains and losses. 3,615 (1,265) 2,350
------- ------- -------
Unrealized net capital gains and losses................................ (6,693) 2,342 (4,351)
------- ------- -------
Other comprehensive loss............................................... $(6,693) $ 2,342 $(4,351)
======= ======= =======
40
LINCOLN BENEFIT LIFE COMPANY
SCHEDULE I--SUMMARY OF INVESTMENTS
OTHER THAN INVESTMENTS IN RELATED PARTIES
DECEMBER 31, 2010
AMOUNT AT
WHICH
SHOWN IN
AMORTIZED FAIR THE BALANCE
COST VALUE SHEET
($ IN THOUSANDS) --------- -------- -----------
TYPE OF INVESTMENT
Fixed maturities:
Bonds:
United States government, government agencies and authorities..... $ 70,426 $ 73,556 $ 73,556
States, municipalities and political subdivisions................. 2,999 3,176 3,176
Foreign governments............................................... 4,998 5,090 5,090
Public utilities.................................................. 14,013 15,063 15,063
All other corporate bonds......................................... 140,248 148,524 148,524
Asset-backed securities............................................... 8,265 8,382 8,382
Residential mortgage-backed securities................................ 55,376 57,802 57,802
Commercial mortgage-backed securities................................. 8,523 8,863 8,863
-------- -------- --------
Total fixed maturities............................................ 304,848 320,456 320,456
Short-term investments................................................... 11,593 11,593 11,593
-------- -------- --------
Total investments................................................. $316,441 $332,049 $332,049
======== ======== ========
41
LINCOLN BENEFIT LIFE COMPANY
SCHEDULE IV--REINSURANCE
PERCENTAGE
CEDED TO ASSUMED OF AMOUNT
GROSS OTHER FROM OTHER NET ASSUMED
AMOUNT COMPANIES/(1)/ COMPANIES AMOUNT TO NET
($ IN THOUSANDS) ------------ ------------- ---------- ------ ----------
YEAR ENDED DECEMBER 31, 2010
Life insurance in force.......... $358,242,997 $364,544,022 $6,301,025 $-- -- %
============ ============ ========== ===
Premiums and contract charges:
Life and annuities............ $ 1,111,971 $ 1,119,436 $ 7,465 $-- -- %
Accident and health insurance. 116,301 116,301 -- -- -- %
------------ ------------ ---------- ---
$ 1,228,272 $ 1,235,737 $ 7,465 $-- -- %
============ ============ ========== ===
YEAR ENDED DECEMBER 31, 2009
Life insurance in force.......... $349,952,260 $356,581,252 $6,628,992 $-- -- %
============ ============ ========== ===
Premiums and contract charges:
Life and annuities............ $ 1,072,840 $ 1,080,689 $ 7,849 $-- -- %
Accident and health insurance. 121,686 121,686 -- -- -- %
------------ ------------ ---------- ---
$ 1,194,526 $ 1,202,375 $ 7,849 $-- -- %
============ ============ ========== ===
YEAR ENDED DECEMBER 31, 2008
Life insurance in force.......... $337,177,898 $344,250,029 $7,072,131 $-- -- %
============ ============ ========== ===
Premiums and contract charges:
Life and annuities............ $ 1,017,339 $ 1,025,915 $ 8,576 $-- -- %
Accident and health insurance. 121,408 121,408 -- -- -- %
------------ ------------ ---------- ---
$ 1,138,747 $ 1,147,323 $ 8,576 $-- -- %
============ ============ ========== ===
--------
/(1)/No reinsurance or coinsurance income was netted against premiums ceded in
2010, 2009 and 2008.
42
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholder of
Lincoln Benefit Life Company
Lincoln, NE
We have audited the accompanying Statements of Financial Position of Lincoln
Benefit Life Company (the "Company"), an affiliate of The Allstate Corporation,
as of December 31, 2010 and 2009, and the related Statements of Operations and
Comprehensive Income, Shareholder's Equity, and Cash Flows for each of the
three years in the period ended December 31, 2010. Our audits also included
Schedule I--Summary of Investments--Other than Investments in Related Parties
and Schedule IV--Reinsurance. 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 in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also 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, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Lincoln Benefit Life Company as of
December 31, 2010 and 2009, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 2010, in
conformity with accounting principles generally accepted in the United States
of America. Also, in our opinion, Schedule I--Summary of Investments--Other
than Investments in Related Parties and Schedule IV--Reinsurance, when
considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
/s/ Deloitte & Touche LLP
Chicago, Illinois
March 11, 2011
43
ITEM 11(F).SELECTED FINANCIAL DATA
LINCOLN BENEFIT LIFE COMPANY
5-YEAR SUMMARY OF SELECTED FINANCIAL DATA
2010 2009 2008 2007 2006
($ IN THOUSANDS) ----------- ----------- ----------- ----------- -----------
OPERATING RESULTS
Net investment income................ $ 12,067 $ 11,783 $ 13,940 $ 14,257 $ 13,948
Realized capital gains and losses.... 694 1,480 5,952 (417) (1,255)
Total revenues....................... 12,761 13,263 19,892 13,840 12,693
Net income........................... 8,310 8,629 12,974 9,005 8,260
FINANCIAL POSITION
Investments.......................... $ 332,049 $ 316,900 $ 310,031 $ 301,201 $ 276,322
Total assets......................... 22,729,575 22,932,908 22,655,371 23,700,007 23,862,919
Reserve for life-contingent contract
benefits and contractholder
funds.............................. 20,258,388 20,438,414 20,368,562 20,169,001 20,322,077
Shareholder's equity................. 325,867 312,973 298,561 289,938 276,626
ITEM 11(H).MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
The following discussion highlights significant factors influencing the
financial position and results of operations of Lincoln Benefit Life Company
(referred to in this document as "we", "Lincoln Benefit", "our", "us" or the
"Company"). It should be read in conjunction with the financial statements and
related notes found under Item 11(e) contained herein. We operate as a single
segment entity, based on the manner in which we use financial information to
evaluate business performance and to determine the allocation of resources.
The most important factors we monitor to evaluate the financial condition
and performance of our company include:
. For operations: premiums and contract charges ceded to ALIC, and
invested assets;
. For investments: credit quality/experience, realized capital gains and
losses, investment income, unrealized capital gains and losses,
stability of long-term returns, cash flows and asset duration; and
. For financial condition: financial strength ratings and capital
positions.
APPLICATION OF CRITICAL ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America ("GAAP") requires
management to adopt accounting policies and make estimates and assumptions that
affect amounts reported in the financial statements. The most critical
estimates include those used in determining:
. Fair value of financial assets
. Impairment of fixed income securities
In making these determinations, management makes subjective and complex
judgments that frequently require estimates about matters that are inherently
uncertain. Many of these policies, estimates and related judgments are common
in the insurance and financial services industries; others are specific to our
businesses and operations. It is reasonably likely that changes in these
estimates could occur from period to period and result in a material impact on
our financial statements.
44
A brief summary of each of these critical accounting estimates follows. For
a more detailed discussion of the effect of these estimates on our financial
statements, and the judgments and assumptions related to these estimates, see
the referenced sections of this document. For a complete summary of our
significant accounting policies, see Note 2 of the financial statements.
FAIR VALUE OF FINANCIAL ASSETS Fair value is defined as the price that would
be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. We categorize
our financial assets measured at fair value into a three-level hierarchy based
on the observability of inputs to the valuation techniques as follows:
LEVEL 1:Financial asset values are based on unadjusted quoted prices for
identical assets in an active market that we can access.
LEVEL 2:Financial asset values are based on the following:
(a)Quoted prices for similar assets in active markets;
(b)Quoted prices for identical or similar assets in markets that are not
active; or
(c)Valuation models whose inputs are observable, directly or indirectly,
for substantially the full term of the asset.
LEVEL 3:Financial asset values are based on prices or valuation techniques that
require inputs that are both unobservable and significant to the
overall fair value measurement. Unobservable inputs reflect our
estimates of the assumptions that market participants would use in
valuing the financial assets.
Observable inputs are inputs that reflect the assumptions market
participants would use in valuing financial assets that are developed based on
market data obtained from independent sources. In the absence of sufficient
observable inputs, unobservable inputs reflect our estimates of the assumptions
market participants would use in valuing financial assets and are developed
based on the best information available in the circumstances. The degree of
management judgment involved in determining fair values is inversely related to
the availability of market observable information.
We are responsible for the determination of fair value of financial assets
and the supporting assumptions and methodologies. We gain assurance on the
overall reasonableness and consistent application of valuation input
assumptions, valuation methodologies and compliance with accounting standards
for fair value determination through the execution of various processes and
controls designed to ensure that our financial assets are appropriately valued.
We monitor fair values received from third parties and those derived internally
on an ongoing basis.
We employ independent third-party valuation service providers, broker quotes
and internal pricing methods to determine fair values. We obtain or calculate
only one single quote or price for each financial instrument.
Valuation service providers typically obtain data about market transactions
and other key valuation model inputs from multiple sources and, through the use
of proprietary models, produce valuation information in the form of a single
fair value for individual securities for which a fair value has been requested
under the terms of our agreements. For certain security types, fair values are
derived from the valuation service providers' proprietary valuation models. The
inputs used by the valuation service providers include, but are not limited to,
market prices from recently completed transactions and transactions of
comparable securities, interest rate yield curves, credit spreads, liquidity
spreads, currency rates, and other information, as applicable. Credit and
liquidity spreads are typically implied from completed transactions and
transactions of comparable securities. Valuation service providers also use
proprietary discounted cash flow models that are widely accepted in the
financial services industry and similar to those used by other market
participants to value the same financial instruments. The valuation models take
into account, among other things, market observable information as of the
measurement date, as described above, as well as the specific attributes of the
security being valued including its
45
term, interest rate, credit rating, industry sector, and where applicable,
collateral quality and other issue or issuer specific information. Executing
valuation models effectively requires seasoned professional judgment and
experience. In cases where market transactions or other market observable data
is limited, the extent to which judgment is applied varies inversely with the
availability of market observable information.
For certain of our financial assets measured at fair value, where our
valuation service providers cannot provide fair value determinations, we obtain
a single non-binding price quote from a broker familiar with the security who,
similar to our valuation service providers, may consider transactions or
activity in similar securities among other information. The brokers providing
price quotes are generally from the brokerage divisions of leading financial
institutions with market making, underwriting and distribution expertise
regarding the security subject to valuation.
The fair value of certain financial assets, including privately placed
corporate fixed income securities, for which our valuation service providers or
brokers do not provide fair value determinations, is determined using valuation
methods and models widely accepted in the financial services industry.
Internally developed valuation models, which include inputs that may not be
market observable and as such involve some degree of judgment, are considered
appropriate for each class of security to which they are applied.
Our internal pricing methods are primarily based on models using discounted
cash flow methodologies that develop a single best estimate of fair value. Our
models generally incorporate inputs that we believe are representative of
inputs other market participants would use to determine fair value of the same
instruments, including yield curves, quoted market prices of comparable
securities, published credit spreads, and other applicable market data.
Additional inputs that are used include internally-derived assumptions such as
liquidity premium and credit ratings, as well as instrument-specific
characteristics that include, but are not limited to, coupon rate, expected
cash flows, sector of the issuer, and call provisions. Our internally assigned
credit ratings are developed at a more detailed level than externally published
ratings and allow for a more precise match of these ratings to other market
observable valuation inputs, such as credit and sector spreads, when performing
these valuations. Due to the existence of non-market observable inputs, such as
liquidity premiums, judgment is required in developing these fair values. As a
result, the fair value of these financial assets may differ from the amount
actually received to sell an asset in an orderly transaction between market
participants at the measurement date. Moreover, the use of different valuation
assumptions may have a material effect on the financial assets' fair values.
For the majority of our financial assets measured at fair value, all
significant inputs are based on market observable data and significant
management judgment does not affect the periodic determination of fair value.
The determination of fair value using discounted cash flow models involves
management judgment when significant model inputs are not based on market
observable data. However, where market observable data is available, it takes
precedence, and as a result, no range of reasonably likely inputs exists from
which the basis of a sensitivity analysis could be constructed.
We believe our most significant exposure to changes in fair value is due to
market risk. Our exposure to changes in market conditions is discussed fully in
the Market Risk section of the MD&A.
We employ specific control processes to determine the reasonableness of the
fair values of our financial assets. Our processes are designed to ensure that
the values received or internally estimated are accurately recorded and that
the data inputs and the valuation techniques utilized are appropriate,
consistently applied, and that the assumptions are reasonable and consistent
with the objective of determining fair value. For example, on a continuing
basis, we assess the reasonableness of individual security values received from
valuation service providers and those derived from internal models that exceed
certain thresholds as compared to previous values received from those valuation
service providers or derived from internal models. In addition, we may validate
the reasonableness of fair value by comparing information obtained from our
valuation service providers to other third party valuation sources for selected
securities. We perform ongoing price validation procedures such as
46
back-testing of actual sales, which corroborate the various inputs used in
internal pricing models to market observable data. When fair value
determinations are expected to be more variable, we validate them through
reviews by members of management who have relevant expertise and who are
independent of those charged with executing investment transactions.
We also perform an analysis to determine whether there has been a
significant decrease in the volume and level of activity for the asset when
compared to normal market activity, and if so, whether transactions may not be
orderly. Among the indicators we consider in determining whether a significant
decrease in the volume and level of market activity for a specific asset has
occurred include the level of new issuances in the primary market, trading
volume in the secondary market, level of credit spreads over historical levels,
bid-ask spread, and price consensuses among market participants and sources. If
evidence indicates that prices are based on transactions that are not orderly,
we place little, if any, weight on the transaction price and will estimate fair
value using an internal pricing model. As of December 31, 2010 and 2009, we did
not alter fair values provided by our valuation service providers or brokers or
substitute them with an internal pricing model.
The following table identifies fixed income and short-term investments as of
December 31, 2010 by source of value determination:
FAIR PERCENT
VALUE TO TOTAL
($ IN THOUSANDS) -------- --------
Fair value based on internal sources......... $ 12,444 3.7%
Fair value based on external sources/(1)/.... 319,605 96.3
-------- -----
Total........................................ $332,049 100.0%
======== =====
--------
/(1)/Includes $6.9 million that are valued using broker quotes.
For more detailed information on our accounting policy for the fair value of
financial assets and the financial assets by level in the fair value hierarchy,
see Notes 2 and 5 of the financial statements.
IMPAIRMENT OF FIXED INCOME SECURITIES For fixed income securities classified
as available for sale, the difference between fair value and amortized cost,
net of deferred income taxes, is reported as a component of accumulated other
comprehensive income on the Statements of Financial Position and is not
reflected in the operating results of any period until reclassified to net
income upon the consummation of a transaction with an unrelated third party or
when a write-down is recorded due to an other-than-temporary decline in fair
value. We have a comprehensive portfolio monitoring process to identify and
evaluate each fixed income security whose carrying value may be
other-than-temporarily impaired.
For each fixed income security in an unrealized loss position, we assess
whether management with the appropriate authority has made the decision to sell
or whether it is more likely than not we will be required to sell the security
before recovery of the amortized cost basis for reasons such as liquidity,
contractual or regulatory purposes. If a security meets either of these
criteria, the security's decline in fair value is considered other than
temporary and is recorded in earnings.
If we have not made the decision to sell the fixed income security and it is
not more likely than not we will be required to sell the fixed income security
before recovery of its amortized cost basis, we evaluate whether we expect to
receive cash flows sufficient to recover the entire amortized cost basis of the
security. We use our best estimate of future cash flows expected to be
collected from the fixed income security discounted at the security's original
or current effective rate, as appropriate, to calculate a recovery value and
determine whether a credit loss exists. The determination of cash flow
estimates is inherently subjective and methodologies may vary depending on
facts and circumstances specific to the security. All reasonably available
information relevant to the collectability of the security, including past
events, current conditions, and reasonable and supportable
47
assumptions and forecasts, are considered when developing the estimate of cash
flows expected to be collected. That information generally includes, but is not
limited to, the remaining payment terms of the security, prepayment speeds,
foreign exchange rates, the financial condition and future earnings potential
of the issue or issuer, expected defaults, expected recoveries, the value of
underlying collateral, vintage, geographic concentration, available reserves or
escrows, current subordination levels, third party guarantees and other credit
enhancements. Other information, such as industry analyst reports and
forecasts, sector credit ratings, financial condition of the bond insurer for
insured fixed income securities, and other market data relevant to the
realizability of contractual cash flows, may also be considered. The estimated
fair value of collateral will be used to estimate recovery value if we
determine that the security is dependent on the liquidation of collateral for
ultimate settlement. If the estimated recovery value is less than the amortized
cost of the security, a credit loss exists and an other-than-temporary
impairment for the difference between the estimated recovery value and
amortized cost is recorded in earnings. The portion of the unrealized loss
related to factors other than credit remains classified in accumulated other
comprehensive income. If we determine that the fixed income security does not
have sufficient cash flow or other information to estimate a recovery value for
the security, we may conclude that the entire decline in fair value is deemed
to be credit related and the loss is recorded in earnings.
Once assumptions and estimates are made, any number of changes in facts and
circumstances could cause us to subsequently determine that a fixed income
security is other-than-temporarily impaired, including: 1) general economic
conditions that are worse than previously forecasted or that have a greater
adverse effect on a particular issuer or industry sector than originally
estimated; 2) changes in the facts and circumstances related to a particular
issue or issuer's ability to meet all of its contractual obligations; and 3)
changes in facts and circumstances that result in changes to management's
intent to sell or result in our assessment that it is more likely than not we
will be required to sell before recovery of the amortized cost basis. Changes
in assumptions, facts and circumstances could result in additional charges to
earnings in future periods to the extent that losses are realized. The charge
to earnings, while potentially significant to net income, would not have a
significant effect on shareholder's equity, since our securities are designated
as available for sale and carried at fair value and as a result, any related
unrealized loss, net of deferred income taxes, would already be reflected as a
component of accumulated other comprehensive income in shareholder's equity.
The determination of the amount of other-than-temporary impairment is an
inherently subjective process based on periodic evaluation of the factors
described above. Such evaluations and assessments are revised as conditions
change and new information becomes available. We update our evaluations
regularly and reflect changes in other-than-temporary impairments in results of
operations as such evaluations are revised. The use of different methodologies
and assumptions in the determination of the amount of other-than-temporary
impairments may have a material effect on the amounts presented within the
financial statements.
For additional detail on investment impairments, see Note 4 of the financial
statements.
OPERATIONS
OVERVIEW AND STRATEGY We are a wholly owned subsidiary of Allstate Life
Insurance Company ("ALIC"), which is a wholly owned subsidiary of Allstate
Insurance Company ("AIC"), a wholly owned subsidiary of Allstate Insurance
Holdings, LLC, which is wholly owned by The Allstate Corporation (the
"Corporation"). We provide life insurance, retirement and investment products.
Our products include interest-sensitive, traditional and variable life
insurance and fixed annuities such as deferred and immediate annuities. Our
products are sold through multiple distribution channels including Allstate
exclusive agencies, which include exclusive financial specialists, and
independent agents (including master brokerage agencies).
48
NET INCOME Net income for the years ended December 31 is presented in the
following table:
2010 2009 2008
($ IN THOUSANDS) ------- ------- -------
Net investment income............. $12,067 $11,783 $13,940
Realized capital gains and losses. 694 1,480 5,952
Income tax expense................ (4,451) (4,634) (6,918)
------- ------- -------
Net income........................ $ 8,310 $ 8,629 $12,974
======= ======= =======
We have reinsurance agreements whereby all premiums, contract charges,
interest credited to contractholder funds, contract benefits and substantially
all expenses are ceded to ALIC and other non-affiliated reinsurers, and are
reflected net of such reinsurance in the Statements of Operations and
Comprehensive Income. Our results of operations include net investment income
and realized capital gains and losses recognized in connection with the assets
that are not transferred under the reinsurance agreements.
NET INCOME decreased 3.7% in 2010 compared to 2009 and 33.5% in 2009
compared to 2008. The decrease in 2010 was due to lower net realized capital
gains. The decrease in 2009 was due to lower net realized capital gains and
lower net investment income.
INCOME TAX EXPENSE decreased 3.9% in 2010 compared to 2009 and 33.0% in 2009
compared to 2008. These changes were due to the proportional change in the
income on which the income tax expense was determined.
FINANCIAL POSITION The financial position for the years ended December 31 is
presented in the following table:
2010 2009
($ IN THOUSANDS) ----------- -----------
Fixed income securities/(1)/.................. $ 320,456 $ 308,343
Short-term/(2)/............................... 11,593 8,557
----------- -----------
Total investments.......................... $ 332,049 $ 316,900
=========== ===========
Cash.......................................... $ 3,550 $ 10,063
Reinsurance recoverable from ALIC............. 18,365,058 18,689,074
Reinsurance recoverable from non-affiliates... 1,906,574 1,766,824
Contractholder funds.......................... 17,247,071 17,633,027
Reserve for life-contingent contract benefits. 3,011,317 2,805,387
Separate accounts assets and liabilities...... 2,017,185 2,039,647
--------
/(1)/Fixed income securities are carried at fair value. Amortized cost basis
for these securities was $304.8 million and $299.8 million as of
December 31, 2010 and 2009, respectively.
/(2)/Short-term investments are carried at fair value. Amortized cost basis for
these securities was $11.6 million and $8.6 million as of December 31,
2010 and 2009, respectively.
Total investments increased to $332.0 million as of December 31, 2010 from
$316.9 million as of December 31, 2009 primarily due to purchases of fixed
income securities and increased net unrealized capital gains on fixed income
securities.
49
FIXED INCOME SECURITIES by type are listed in the table below.
PERCENT TO PERCENT TO
FAIR VALUE AS OF TOTAL FAIR VALUE AS OF TOTAL
DECEMBER 31, 2010 INVESTMENTS DECEMBER 31, 2009 INVESTMENTS
($ IN THOUSANDS) ----------------- ----------- ----------------- -----------
U.S. government and agencies........... $ 73,556 22.1% $ 81,551 25.7%
Municipal.............................. 3,176 1.0 3,095 1.0
Corporate.............................. 163,587 49.3 137,573 43.4
Foreign government..................... 5,090 1.5 -- --
Residential mortgage-backed securities
("RMBS")............................. 57,802 17.4 67,975 21.4
Commercial mortgage-backed securities
("CMBS")............................. 8,863 2.7 9,704 3.1
Asset-backed securities ("ABS")........ 8,382 2.5 8,445 2.7
-------- ---- -------- ----
Total fixed income securities.......... $320,456 96.5% $308,343 97.3%
======== ==== ======== ====
As of December 31, 2010, all of the fixed income securities portfolio was
rated investment grade, which is defined as a security having a rating of Aaa,
Aa, A or Baa from Moody's, a rating of AAA, AA, A or BBB from Standard & Poor's
("S&P"), Fitch, Dominion, or Realpoint, a rating of aaa, aa, a, or bbb from
A.M. Best, or a comparable internal rating if an externally provided rating is
not available.
The following table summarizes the fair value and unrealized net capital
gains and losses for fixed income securities by credit rating as of
December 31, 2010.
AAA AA A
-------------------- ------------------ --------------------
FAIR UNREALIZED FAIR UNREALIZED FAIR UNREALIZED
VALUE GAIN/(LOSS) VALUE GAIN/(LOSS) VALUE GAIN/(LOSS)
($ IN THOUSANDS) -------- ----------- ------- ----------- -------- -----------
U.S. government and agencies........... $ 73,556 $3,130 $ -- $ -- $ -- $ --
Municipal
Tax exempt.......................... -- -- 509 9 -- --
Taxable............................. -- -- 2,667 168 -- --
Corporate
Public.............................. 3,094 99 32,761 1,740 102,130 6,641
Privately placed.................... 5,079 79 15,824 639 -- --
Foreign government..................... -- -- 5,090 92 -- --
RMBS
U.S. government sponsored entities
("U.S. Agency")................... 48,133 2,292 -- -- -- --
Prime residential mortgage-backed
securities ("Prime").............. 2,789 5 -- -- 4,180 77
Alt-A residential mortgage-backed...
securities ("Alt-A")................ -- -- -- -- 2,700 52
CMBS................................... 6,947 427 1,916 (87) -- --
ABS.................................... -- -- 8,382 117 -- --
-------- ------ ------- ------ -------- ------
Total fixed income securities.......... $139,598 $6,032 $67,149 $2,678 $109,010 $6,770
======== ====== ======= ====== ======== ======
50
BAA TOTAL
------------------ --------------------
FAIR UNREALIZED FAIR UNREALIZED
VALUE GAIN/(LOSS) VALUE GAIN/(LOSS)
------ ----------- -------- -----------
U.S. government and agencies.. $ -- $ -- $ 73,556 $ 3,130
Municipal
Tax exempt................. -- -- 509 9
Taxable.................... -- -- 2,667 168
Corporate
Public..................... 4,699 128 142,684 8,608
Privately placed........... -- -- 20,903 718
Foreign government............ -- -- 5,090 92
RMBS
U.S. Agency................ -- -- 48,133 2,292
Prime...................... -- -- 6,969 82
Alt-A...................... -- -- 2,700 52
CMBS.......................... -- -- 8,863 340
ABS........................... -- -- 8,382 117
------ ---- -------- -------
Total fixed income securities. $4,699 $128 $320,456 $15,608
====== ==== ======== =======
RMBS, CMBS AND ABS are structured securities that are primarily
collateralized by residential and commercial real estate loans and other
consumer or corporate borrowings. The cash flows from the underlying collateral
paid to the securitization trust are generally applied in a pre-determined
order and are designed so that each security issued by the trust, typically
referred to as a "class", qualifies for a specific original rating. For
example, the "senior" portion or "top" of the capital structure, or rating
class, which would originally qualify for a rating of Aaa typically has
priority in receiving principal repayments on the underlying collateral and
retains this priority until the class is paid in full. In a sequential
structure, underlying collateral principal repayments are directed to the most
senior rated Aaa class in the structure until paid in full, after which
principal repayments are directed to the next most senior Aaa class in the
structure until it is paid in full. Senior Aaa classes generally share any
losses from the underlying collateral on a pro-rata basis after losses are
absorbed by classes with lower original ratings. The payment priority and class
subordination included in these securities serves as credit enhancement for
holders of the senior or top portions of the structures. These securities
continue to retain the payment priority features that existed at the
origination of the securitization trust. Other forms of credit enhancement may
include structural features embedded in the securitization trust, such as
overcollateralization, excess spread and bond insurance. The underlying
collateral can have fixed interest rates, variable interest rates (such as
adjustable rate mortgages ("ARM")) or may contain features of both fixed and
variable rate mortgages.
RMBS, including U.S. Agency, Prime and Alt-A, totaled $57.8 million, with
100% rated investment grade, as of December 31, 2010. The RMBS portfolio is
subject to interest rate risk, but unlike other fixed income securities, is
additionally subject to significant prepayment risk from the underlying
residential mortgage loans. The credit risk associated with our RMBS portfolio
is mitigated due to the fact that 83.3% of the portfolio consists of securities
that were issued by or have underlying collateral guaranteed by U.S. government
agencies.
CMBS totaled $8.9 million, with 100% rated investment grade, as of
December 31, 2010. The CMBS portfolio is subject to credit risk, but unlike
certain other structured securities, is generally not subject to prepayment
risk due to protections within the underlying commercial mortgage loans. All of
the CMBS investments are traditional conduit transactions collateralized by
commercial mortgage loans, broadly diversified across property types and
geographical area.
51
ABS totaled $8.4 million, with 100% rated investment grade, as of
December 31, 2010. Credit risk is managed by monitoring the performance of the
underlying collateral. Many of the securities in the ABS portfolio have credit
enhancement with features such as overcollateralization, subordinated
structures, reserve funds, guarantees and/or insurance.
SHORT-TERM INVESTMENTS Our short-term investment portfolio was $11.6 million
and $8.6 million as of December 31, 2010 and 2009, respectively.
UNREALIZED NET CAPITAL GAINS totaled $15.6 million as of December 31, 2010
compared to $8.6 million as of December 31, 2009. The improvement since
December 31, 2009 was primarily a result of declining risk-free interest rates
and tightening of credit spreads in certain sectors. The following table
presents unrealized net capital gains and losses, pre-tax and after-tax as of
December 31.
2010 2009
($ IN THOUSANDS) ------- -------
U.S. government and agencies....................... $ 3,130 $ 1,569
Municipal.......................................... 177 96
Corporate.......................................... 9,326 6,107
Foreign government................................. 92 --
RMBS............................................... 2,426 1,649
CMBS............................................... 340 (816)
ABS................................................ 117 (49)
------- -------
Unrealized net capital gains and losses, pre-tax... 15,608 8,556
Deferred income taxes.............................. (5,463) (2,995)
------- -------
Unrealized net capital gains and losses, after-tax. $10,145 $ 5,561
======= =======
The unrealized net capital gain for the fixed income portfolio totaled $15.6
million and comprised $16.1 million of gross unrealized gains and $492 thousand
of gross unrealized losses as of December 31, 2010. This is compared to
unrealized net capital gain for the fixed income portfolio totaling $8.6
million, comprised of $9.93 million of gross unrealized gains and $1.37 million
of gross unrealized losses as of December 31, 2009.
52
Gross unrealized gains and losses as of December 31, 2010 on fixed income
securities by type and sector are provided in the table below.
AMORTIZED
GROSS UNREALIZED COST AS A FAIR VALUE
PAR AMORTIZED --------------- FAIR PERCENT OF AS A PERCENT OF
VALUE COST GAINS LOSSES VALUE PAR VALUE PAR VALUE
($ IN THOUSANDS) -------- --------- ------- ------ -------- ---------- ---------------
Corporate:
Consumer goods (cyclical
and non-cyclical)........ $ 56,050 $ 56,363 $ 3,573 $ (19) $ 59,917 100.6% 106.9%
Financial services......... 19,000 19,000 872 -- 19,872 100.0 104.6
Banking.................... 17,000 16,994 1,103 -- 18,097 100.0 106.5
Energy..................... 16,000 16,098 719 -- 16,817 100.6 105.1
Utilities.................. 14,000 14,013 1,050 -- 15,063 100.1 107.6
Capital goods.............. 11,000 11,110 1,046 -- 12,156 101.0 110.5
Transportation............. 7,350 7,565 374 -- 7,939 102.9 108.0
Basic industry............. 7,000 7,123 372 -- 7,495 101.8 107.1
Technology................. 6,000 5,995 236 -- 6,231 99.9 103.9
-------- -------- ------- ----- --------
Total corporate fixed income
portfolio................... 153,400 154,261 9,345 (19) 163,587 100.6 106.6
-------- -------- ------- ----- --------
U.S. government and
agencies.................... 67,320 70,426 3,513 (383) 73,556 104.6 109.3
Municipal..................... 3,000 2,999 177 -- 3,176 100.0 105.9
Foreign government............ 5,000 4,998 92 -- 5,090 100.0 101.8
RMBS.......................... 55,362 55,376 2,429 (3) 57,802 100.0 104.4
CMBS.......................... 8,500 8,523 427 (87) 8,863 100.3 104.3
ABS........................... 8,070 8,265 117 -- 8,382 102.4 103.9
-------- -------- ------- ----- --------
Total fixed income securities. $300,652 $304,848 $16,100 $(492) $320,456 101.4 106.6
======== ======== ======= ===== ========
The consumer goods sector had the only gross unrealized losses in our
corporate fixed income securities portfolio as of December 31, 2010. In
general, credit spreads remain wider than at initial purchase for most of the
securities with gross unrealized losses.
We have a comprehensive portfolio monitoring process to identify and
evaluate each fixed income security that may be other-than-temporarily
impaired. The process includes a quarterly review of all securities to identify
instances where the fair value of a security compared to its amortized cost is
below established thresholds. The process also includes the monitoring of other
impairment indicators such as ratings, ratings downgrades and payment defaults.
The securities identified, in addition to other securities for which we may
have a concern, are evaluated based on facts and circumstances for inclusion on
our watch-list. All investments in an unrealized loss position as of
December 31, 2010 were included in our portfolio monitoring process for
determining whether declines in value were other than temporary.
The extent and duration of a decline in fair value for fixed income
securities have become less indicative of actual credit deterioration with
respect to an issue or issuer. While we continue to use declines in fair value
and the length of time a security is in an unrealized loss position as
indicators of potential credit deterioration, our determination of whether a
security's decline in fair value is other than temporary has placed greater
emphasis on our analysis of the underlying credit and collateral and related
estimates of future cash flows.
As of December 31, 2010, all of the $492 thousand of unrealized losses are
related to fixed income securities with an unrealized loss position less than
20% of amortized cost, the degree of which suggests that these securities do
not pose a high risk of being other-than-temporarily impaired. As of
December 31, 2010, we
53
do not have the intent to sell and it is not more likely than not we will be
required to sell these securities before the recovery of their amortized cost
basis.
We also monitor the quality of our fixed income portfolio by categorizing
certain investments as "problem," "restructured," or "potential problem."
Problem fixed income securities are in default with respect to principal or
interest and/or are investments issued by companies that have gone into
bankruptcy subsequent to our acquisition. Fixed income securities are
categorized as restructured when the debtor is experiencing financial
difficulty and we grant a concession. Potential problem fixed income securities
are current with respect to contractual principal and/or interest, but because
of other facts and circumstances, we have concerns regarding the borrower's
ability to pay future principal and interest according to the original terms,
which causes us to believe these investments may be classified as problem or
restructured in the future.
As of December 31, 2010 and 2009, we did not have any fixed income
securities categorized as problem, restructured or potential problem.
NET INVESTMENT INCOME The following table presents net investment income for
the years ended December 31.
2010 2009 2008
($ IN THOUSANDS) ------- ------- -------
Fixed income securities........... $12,480 $12,098 $13,302
Short-term and other investments.. 21 107 992
------- ------- -------
Investment income, before expense. 12,501 12,205 14,294
Investment expense................ (434) (422) (354)
------- ------- -------
Net investment income............. $12,067 $11,783 $13,940
======= ======= =======
Net investment income increased 2.4% or $284 thousand in 2010 compared to
2009, after decreasing 15.5% or $2.2 million in 2009 compared to 2008. The 2010
increase was primarily due to higher average investment balances. The 2009
decrease was primarily due to lower yields.
REALIZED CAPITAL GAINS AND LOSSES The following table presents realized
capital gains and losses and the related tax effect for the years ended
December 31.
2010 2009 2008
($ IN THOUSANDS) ----- ------ -------
Realized capital gains and losses, pre-tax... $ 694 $1,480 $ 5,952
Income tax expense........................... (243) (518) (2,083)
----- ------ -------
Realized capital gains and losses, after-tax. $ 451 $ 962 $ 3,869
===== ====== =======
Net realized capital gains in 2010 comprised entirely of gross gains of $694
thousand. Net realized capital gains of $1.5 million in 2009 comprised gross
gains of $1.5 million and gross losses of $8 thousand. The net realized capital
gains in 2010, 2009 and 2008 were related to sales of investments.
CASH As of December 31, 2010, our cash balance was $3.6 million compared to
$10.1 million as of December 31, 2009. Fluctuations in our cash flows generally
result from differences in the timing of reinsurance payments to and from ALIC
and changes in short-term investments.
REINSURANCE RECOVERABLE, CONTRACTHOLDER FUNDS AND RESERVE FOR
LIFE-CONTINGENT CONTRACT BENEFITS Under GAAP, when reinsurance contracts do not
relieve the ceding company of legal liability to contractholders, the ceding
company is required to report reinsurance recoverables arising from these
contracts separately as assets. The liabilities for the contracts are reported
as contractholder funds, reserve for life-contingent contract benefits, or
separate accounts liabilities depending on the characteristics of the
contracts. We reinsure all reserve liabilities
54
with ALIC or other non-affiliated reinsurers. Reinsurance recoverables and the
related reserve for life-contingent contract benefits and contractholder funds
are reported separately in the Statements of Financial Position, while the
assets which support the separate accounts liabilities are reflected as
separate accounts assets.
As of December 31, 2010, contractholder funds decreased to $17.25 billion
from $17.63 billion as of December 31, 2009 as a result of new and additional
deposits on fixed annuities and interest-sensitive life policies and interest
credited to contractholder funds being more than offset by surrenders,
withdrawals, benefit payments and related contract charges. The reserve for
life-contingent contract benefits increased to $3.01 billion as of December 31,
2010 from $2.81 billion as of December 31, 2009 due primarily to the aging of
the in-force block of certain business and sales of traditional life insurance,
partially offset by benefits paid and policy lapses. Reinsurance recoverables
from ALIC decreased by $324.0 million and reinsurance recoverables from
non-affiliates increased $139.8 million.
We purchase reinsurance after evaluating the financial condition of the
reinsurer, as well as the terms and price of coverage. As of December 31, 2010,
97% of reinsurance recoverables due from non-affiliated companies were
reinsured under uncollateralized reinsurance agreements with companies that had
a financial strength rating of A or above, as measured by S&P. In certain
cases, these ratings refer to the financial strength of the affiliated group or
parent company of the reinsurer. We continuously monitor the creditworthiness
of reinsurers in order to determine our risk of recoverability on an individual
and aggregate basis, and a provision for uncollectible reinsurance is recorded
if needed. No amounts have been deemed unrecoverable in the three years ended
December 31, 2010.
MARKET RISK
Market risk is the risk that we will incur losses due to adverse changes in
interest rates and credit spreads. We also have certain exposures to changes in
equity prices in our equity-indexed annuities and separate accounts
liabilities, which are transferred to ALIC in accordance with our reinsurance
agreements.
OVERVIEW In formulating and implementing guidelines for investing funds, we
seek to earn returns that contribute to attractive and stable profits and
long-term capital growth.
We manage our exposure to market risk through the use of asset allocation,
duration, and as appropriate, through the use of stress tests. We have asset
allocation limits that place restrictions on the total funds that may be
invested within an asset class. We have duration limits on our investment
portfolio and, as appropriate, on individual components of the portfolio. These
duration limits place restrictions on the amount of interest rate risk that may
be taken. Comprehensive day-to-day management of market risk within defined
tolerance ranges occurs as portfolio managers buy and sell within their
respective markets based upon the acceptable boundaries established by
investment policies.
INTEREST RATE RISK is the risk that we will incur a loss due to adverse
changes in interest rates relative to the interest rate characteristics of our
interest bearing assets. This risk arises from our investment in
interest-sensitive assets. Interest rate risk includes risks related to changes
in U.S. Treasury yields and other key risk-free reference yields.
One of the measures used to quantify interest rate exposure is duration.
Duration measures the price sensitivity of assets to changes in interest rates.
For example, if interest rates increase 100 basis points, the fair value of an
asset with a duration of 5 is expected to decrease in value by 5%. Our asset
duration was 3.4 and 3.7 as of December 31, 2010 and 2009, respectively.
To calculate duration, we project asset cash flows and calculate their net
present value using a risk-free market interest rate adjusted for credit
quality, sector attributes, liquidity and other specific risks. Duration is
calculated by revaluing these cash flows at alternative interest rates and
determining the percentage change in
55
aggregate fair value. The projections include assumptions (based upon
historical market experience and our experience) that reflect the effect of
changing interest rates on the prepayment, lapse, leverage and/or option
features of instruments, where applicable. The preceding assumptions relate
primarily to mortgage-backed securities, and municipal and corporate
obligations.
Based upon the information and assumptions used in the duration calculation,
and interest rates in effect as of December 31, 2010, we estimate that a 100
basis point immediate, parallel increase in interest rates ("rate shock") would
decrease the net fair value of the assets by $11.3 million, which is the same
amount as December 31, 2009. The selection of a 100 basis point immediate
parallel change in interest rates should not be construed as our prediction of
future market events, but only as an illustration of the potential effect of
such an event.
To the extent that conditions differ from the assumptions we used in these
calculations, duration and rate shock measures could be significantly impacted.
Additionally, our calculations assume that the current relationship between
short-term and long-term interest rates (the term structure of interest rates)
will remain constant over time. As a result, these calculations may not fully
capture the effect of non-parallel changes in the term structure of interest
rates and/or large changes in interest rates.
CREDIT SPREAD RISK is the risk that we will incur a loss due to adverse
changes in credit spreads ("spreads"). This risk arises from many of our
primary activities, as we invest funds in spread-sensitive fixed income assets.
We manage the spread risk in our assets. One of the measures used to
quantify this exposure is spread duration. Spread duration measures the price
sensitivity of the assets to changes in spreads. For example, if spreads
increase 100 basis points, the fair value of an asset exhibiting a spread
duration of 5 is expected to decrease in value by 5%.
Spread duration is calculated similarly to interest rate duration. As of
December 31, 2010, the spread duration of assets was 3.5, compared to 3.6 as of
December 31, 2009. Based upon the information and assumptions we use in this
spread duration calculation, and spreads in effect as of December 31, 2010, we
estimate that a 100 basis point immediate, parallel increase in spreads across
all asset classes, industry sectors and credit ratings ("spread shock") would
decrease the net fair value of the assets by $10.1 million, compared to $8.4
million as of December 31, 2009. The selection of a 100 basis point immediate
parallel change in spreads should not be construed as our prediction of future
market events, but only as an illustration of the potential effect of such an
event.
EQUITY PRICE RISK is the risk that we will incur losses due to adverse
changes in the general levels of the equity markets. As of December 31, 2010
and 2009, we had separate accounts assets related to variable annuity and
variable life contracts with account values totaling $2.02 billion and $2.04
billion, respectively. Equity risk exists for contract charges based on
separate account balances and guarantees for death and/or income benefits
provided by our variable products. All variable life and annuity contract
charges and fees, liabilities and benefits, including guarantees for death
and/or income are ceded to ALIC in accordance with the reinsurance agreements,
thereby limiting our equity risk exposure. In 2006, ALIC disposed of
substantially all of its variable annuity business through reinsurance
agreements with The Prudential Insurance Company of America, a subsidiary of
Prudential Financial Inc. and therefore mitigated this aspect of ALIC's risk.
The Company was not a direct participant of this agreement and its reinsurance
agreements with ALIC remain unchanged.
As of December 31, 2010 and 2009 we had $4.38 billion and $4.16 billion,
respectively, in equity-indexed annuity liabilities that provide customers with
interest crediting rates based on the performance of the S&P 500. All contract
charges and fees, and liabilities and benefits related to equity-indexed
annuity liabilities are ceded to ALIC in accordance with the reinsurance
agreements, thereby limiting our equity risk exposure.
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CAPITAL RESOURCES AND LIQUIDITY
CAPITAL RESOURCES consist of shareholder's equity. The following table
summarizes our capital resources as of December 31.
2010 2009 2008
($ IN THOUSANDS) -------- -------- --------
Common stock, retained income and additional
capital paid-in............................. $315,722 $307,412 $298,783
Accumulated other comprehensive income (loss). 10,145 5,561 (222)
-------- -------- --------
Total shareholder's equity.................... $325,867 $312,973 $298,561
======== ======== ========
SHAREHOLDER'S EQUITY increased in 2010 due to net income and increased
unrealized net capital gains. Shareholder's equity increased in 2009, due to
net income and a favorable change in unrealized net capital gains and losses.
FINANCIAL RATINGS AND STRENGTH We share the insurance financial strength
ratings of our parent, ALIC, as our business is reinsured to ALIC. The
following table summarizes ALIC's financial strength ratings as of December 31,
2010.
RATING AGENCY RATING
------------- ----------------
A.M. Best Company, Inc....................... A+ ("Superior")
Standard & Poor's Ratings Services........... A+ ("Strong")
Moody's Investors Service, Inc............... A1 ("Good")
ALIC's ratings are influenced by many factors including operating and
financial performance, asset quality, liquidity, asset/liability management,
overall portfolio mix, financial leverage (i.e., debt), exposure to risks, the
current level of operating leverage and AIC's ratings.
State laws specify regulatory actions if an insurer's risk-based capital
("RBC"), a measure of an insurer's solvency, falls below certain levels. The
NAIC has a standard formula for annually assessing RBC. The formula for
calculating RBC for life insurance companies takes into account factors
relating to insurance, business, asset and interest rate risks. As of
December 31, 2010, our RBC was within the range that we target.
The NAIC has also developed a set of financial relationships or tests known
as the Insurance Regulatory Information System to assist state regulators in
monitoring the financial condition of insurance companies and identifying
companies that require special attention or actions by insurance regulatory
authorities. The NAIC analyzes financial data provided by insurance companies
using prescribed ratios, each with defined "usual ranges". Generally,
regulators will begin to monitor an insurance company if its ratios fall
outside the usual ranges for four or more of the ratios. If an insurance
company has insufficient capital, regulators may act to reduce the amount of
insurance it can issue. Our ratios are within these ranges.
LIQUIDITY SOURCES AND USES Our potential sources of funds principally
include the activities as follows.
. Receipt of insurance premiums
. Contractholder fund deposits
. Reinsurance recoveries
. Receipts of principal and interest on investments
. Sales of investments
. Intercompany loans
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. Capital contributions from parent
Our potential uses of funds principally include the activities as follows.
. Payment of contract benefits, surrenders and withdrawals
. Reinsurance cessions and payments
. Operating costs and expenses
. Purchase of investments
. Repayment of intercompany loans
. Dividends to parent
. Tax payments/settlements
CASH FLOWS As reflected in our Statements of Cash Flows, net cash provided
by (used in) operating activities was $2.1 million, $4.3 million and $(5.9)
million in 2010, 2009 and 2008, respectively. Fluctuations in net cash provided
by operating activities primarily occur as a result of changes in net
investment income and differences in the timing of reinsurance payments to and
from ALIC.
Under the terms of reinsurance agreements, all premiums and deposits,
excluding variable annuity and life contract deposits allocated to separate
accounts and those reinsured to non-affiliated reinsurers, are transferred to
ALIC, which maintains the investment portfolios supporting our products.
Payments of contractholder claims, benefits, contract surrenders and
withdrawals and certain operating costs (excluding investment-related
expenses), are reimbursed by ALIC, under the terms of the reinsurance
agreements. We continue to have primary liability as a direct insurer for risks
reinsured. Our ability to meet liquidity demands is dependent on ALIC's and
other reinsurers' ability to meet those obligations under the reinsurance
programs.
Our ability to pay dividends is dependent on business conditions, income,
cash requirements and other relevant factors. The payment of shareholder
dividends without the prior approval of the state insurance regulator is
limited by Nebraska law to formula amounts based on net income and capital and
surplus, determined in conformity with statutory accounting practices, as well
as the timing and amount of dividends paid in the preceding twelve months. The
maximum amount of dividends that we can pay during 2011 without prior approval
of the Nebraska Department of Insurance is $31.1 million.
CONTRACTUAL OBLIGATIONS Due to the reinsurance agreements that we have in
place, our contractual obligations are ceded to ALIC and other non-affiliated
reinsurers.
REGULATION AND LEGAL PROCEEDINGS
We are subject to extensive regulation and we are involved in various legal
and regulatory actions, all of which have an effect on specific aspects of our
business. For a detailed discussion of the legal and regulatory actions in
which we are involved, see Note 9 of the financial statements.
PENDING ACCOUNTING STANDARDS
There are several pending accounting standards that we have not implemented
either because the standard has not been finalized or the implementation date
has not yet occurred. For a discussion of these pending standards, see Note 2
of the financial statements.
The effect of implementing certain accounting standards on our financial
results and financial condition is often based in part on market conditions at
the time of implementation of the standard and other factors we are
58
unable to determine prior to implementation. For this reason, we are sometimes
unable to estimate the effect of certain pending accounting standards until the
relevant authoritative body finalizes these standards or until we implement
them.
ITEM 11(J).QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information required for Item 11(j) is incorporated by reference to the
material under the caption "Market Risk" in Item 11(h) of this report.
ITEM 11(K).DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
IDENTIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS:
Directors are elected at each annual meeting of shareholders, for a term of
one year. The biographies of each of the directors below contains information
regarding the person's service as a director, business experience, director
positions held currently or at any time during the last five years, and the
experiences, qualifications, attributes or skills that caused the company
management to determine that a director should serve as such for Lincoln
Benefit. Unless otherwise indicated, each director and executive officer has
served for at least five years in the business position currently or most
recently held.
ROBERT K. BECKER, 55, has been Senior Vice President since March 2010.
Mr. Becker is also the Chairman of the Board, Chief Executive Officer and
Manager of Allstate Financial Services, LLC ("AFS, LLC") and Vice President of
Allstate Life Insurance Company. Mr. Becker is responsible for Allstate's
broker dealer operations as well as recruiting, training and product strategy
for registered representatives of AFS, LLC and third party relationships. At
Allstate since 2000, Mr. Becker has progressed through various roles, including
Regional Financial Services Manager, Regional Distribution Leader and Assistant
Field Vice President. Prior to joining Allstate, Mr. Becker spent over 20 years
with MetLife Insurance Company, where he held various leadership positions.
Mr. Becker's professional designations include LUTCF, CLU, ChFC, CFP, and CLTC.
Currently, Mr. Becker also serves as a director with Allstate Life Insurance
Company, which is affiliated with Lincoln Benefit. Mr. Becker has proven
leadership experience with using excellent customer service to grow business in
a competitive environment.
ANURAG CHANDRA, 33, has been a director and Senior Vice President since
March 2011. Mr. Chandra is also a Senior Vice President of Allstate Life
Insurance Company. Mr. Chandra has broad responsibilities for driving long-term
strategy and for improving the operational base for the Allstate Financial
group of companies. More specifically, Mr. Chandra will have direct
accountability for product development, underwriting, wholesaling and asset
liability management. Prior to joining Allstate in January 2011, Mr. Chandra
was an executive vice president and chief operating officer for HealthMarkets,
Inc. Under his leadership, the company transformed from a niche individual
health insurance manufacturer to one of the largest independent distributors in
the United States. Prior to that role, Mr. Chandra was a principal at Aquiline
Capital Partners, a global private equity firm that took advantage of market
conditions to launch successful new insurance and financial services companies.
Mr. Chandra has also held senior operating and strategic development roles at
Nationwide Financial Services and Conseco/Bankers Life and Casualty. Currently,
Mr. Chandra also serves as a director for Allstate Life Insurance Company,
which is affiliated with Lincoln Benefit. Mr. Chandra has extensive experience
with the day-to-day management of company operations.
LAWRENCE W. DAHL, 51, has been a director since 1999 and President and Chief
Operating Officer since November 2005. In his current role, Mr. Dahl manages
the distribution relationships for Lincoln Benefit. Mr. Dahl began his Allstate
career in 1987 in the Tax Department before becoming the Executive Vice
President of Administration for Lincoln Benefit, where he was responsible for
Marketing, Field Technology, Compliance, Planning and Strategy. Mr. Dahl
progressed through various other leadership positions, including Executive Vice
President of Sales and President of Distribution before becoming the President
and Chief Operating Officer.
59
Mr. Dahl has also earned a juris doctor degree and a Certified Public Account
designation. Over the course of his career with Lincoln Benefit, Mr. Dahl has
gained deep knowledge of the life insurance industry as well as extensive
experience with distribution and sales.
MATTHEW S. EASLEY, 55, has been a director since March 2009 and Senior Vice
President since March 2010. Mr. Easley is also a Vice President for Allstate
Life Insurance Company. Mr. Easley is responsible for Product Management,
Underwriting, and Asset Liability Management within the Allstate Financial
group of companies. Prior to joining Allstate, Mr. Easley spent 23 years at
Nationwide Financial including 11 years as the head of Annuity and Pension
Actuarial, where he started a 401(k) business with a new-to-the-world business
model, created a synthetic asset segmentation method, co-invented a patented
retirement planning software and led a team to create a new strategic plan as
part of the initial public offering of Nationwide Financial Services stock.
Currently, Mr. Easley also serves as a director for Allstate Life Insurance
Company, which is affiliated with Lincoln Benefit. Mr. Easley possesses
extensive insurance business, product and liability management experience.
SUSAN L. LEES, 53, has been director and Senior Vice President, General
Counsel and Secretary since August 2008. Ms. Lees is also Senior Vice
President, General Counsel and Secretary of Allstate Life Insurance Company. At
Allstate for over 20 years, Ms. Lees progressed through various counsel
positions throughout Allstate before become an assistant vice president in
1999. As the leader of the Corporate Law division of Allstate Law and
Regulation, Ms. Lees gained extensive experience working with a number of the
business areas throughout the enterprise, including Allstate Life Insurance
Company. Currently, Ms. Lees serves as a director for Life Insurance Council of
New York. She also serves as a director for Allstate Life Insurance Company,
which is affiliated with Lincoln Benefit. Ms. Lees has a deep understanding of
insurance business generally, as well as applicable laws and regulations,
including corporate and securities laws and corporate governance matters. In
addition, Ms. Lees has extensive knowledge regarding Lincoln Benefit's
business, including its employees, products, agencies and customers.
JOHN C. PINTOZZI, 45, has been director, Senior Vice President and Chief
Financial Officer since March 2005. Mr. Pintozzi also is Senior Vice President
and Chief Financial Officer for Allstate Life Insurance Company. In these
positions, Mr. Pintozzi is responsible for the planning and analysis, capital
allocation, valuation and compliance functions as well as Allstate Federal
Savings Bank. Prior to Allstate, Mr. Pintozzi was an audit partner with
Deloitte & Touche, specializing in the insurance and financial services
industries. He is a Certified Public Accountant and holds memberships with the
American Institute of Certified Public Accountants and the Illinois CPA
Society. In addition, Mr. Pintozzi currently serves as a director for Allstate
Life Insurance Company, which is affiliated with Lincoln Benefit. Mr. Pintozzi
has extensive experience in corporate and insurance company finance and
accounting.
MATTHEW E. WINTER, 54, has been a director since December 2009, Chief
Executive Officer and Chairman of the Board since March 2010. Mr. Winter is
also the President and Chief Executive Officer of Allstate Life Insurance
Company and Senior Vice President of Allstate Insurance Company, each a parent
organization of Lincoln Benefit. Prior to Allstate, Mr. Winter was the Vice
Chairman of American International Group, President and Chief Executive Officer
of American General Life Companies, and Executive Vice President for MassMutual
Financial Group. For a brief period in 2009, Mr. Winter served as a director of
EP Global Communications, a magazine publication and distribution company.
Currently, Mr. Winter also serves as a director for Allstate Insurance Company
and Allstate Life Insurance Company, each of which is affiliated with Lincoln
Benefit. Mr. Winter was also a former Chairman of the Houston Food Bank Board
of Directors. Mr. Winter has extensive experience leading major life insurance
and financial services providers, working with financial and estate planning
products and overseeing the operations of insurance companies.
60
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS.
No directors or executive officers have been involved in any legal
proceedings that are material to an evaluation of the ability or integrity of
any director or executive officer of Lincoln Benefit.
ITEM 11(L).EXECUTIVE COMPENSATION
COMPENSATION DISCUSSION AND ANALYSIS ("CD&A")
OVERVIEW
Executive officers of Lincoln Benefit also serve as officers of other
subsidiaries of The Allstate Corporation ("Allstate") and receive no
compensation directly from Lincoln Benefit. They are employees of an Allstate
subsidiary. Allocations have been made for each named executive based on the
amount of the named executive's compensation allocated to Lincoln Benefit under
the Amended and Restated Service and Expense Agreement among Allstate Insurance
Company, Allstate and certain affiliates, as amended effective January 1, 2009,
to which Lincoln Benefit is a party (the "Service and Expense Agreement").
Those allocations are reflected in the Summary Compensation Table set forth
below and in this disclosure, except where noted. The named executives may have
received additional compensation for services rendered to other Allstate
subsidiaries, and those amounts are not reported. Lincoln Benefit's directors
receive no compensation for serving as directors in addition to their
compensation as employees of an Allstate affiliate.
Each year the Compensation and Succession Committee (the "Committee") of the
Allstate Board of Directors and members of Allstate management review the
overall design of Allstate's executive compensation program to ensure
compensation is aligned with both annual and long-term performance. At target
levels of performance, annual and long-term incentive awards are designed to
constitute a significant percentage of an executive's total core compensation
and provide a strong link to Allstate's performance. Additionally, the delivery
of the largest portion of incentive compensation through stock options provides
even greater alignment with stockholder interests because the stock price must
appreciate from the date of grant for any value to be delivered to executives.
Allstate has made changes to its executive compensation program for 2011.
Allstate has eliminated any excise tax gross-ups in new change-in-control
agreements. Allstate has also made changes to the annual incentive program for
2011 to continue to better align executive compensation with enterprise
performance. The key program change, which will apply to all bonus eligible
employees across the enterprise, will be to reduce the number of measures and
provide for greater use of enterprise-wide corporate goals. Allstate believes
this action will focus employees on those goals which will more effectively
drive sustainable long-term growth for stockholders.
COMPENSATION PHILOSOPHY
Allstate's compensation philosophy is based on these central beliefs:
. Executive compensation should be aligned with performance and
stockholder value. Accordingly, a significant amount of executive
compensation should be in the form of equity.
. The compensation of our executives should vary both with appreciation in
the price of Allstate stock and with Allstate's performance in achieving
strategic short and long-term business goals designed to drive stock
price appreciation.
. Allstate's compensation program should inspire our executives to strive
for performance that is better than the industry average.
. A greater percentage of compensation should be at risk for executives
who bear higher levels of responsibility for Allstate's performance.
. Allstate should provide competitive levels of compensation for
competitive levels of performance and superior levels of compensation
for superior levels of performance.
61
Allstate's executive compensation program has been designed around these
beliefs and includes programs and practices that ensure alignment between the
interests of its stockholders and executives and delivery of compensation
consistent with the corresponding level of performance. These objectives are
balanced with the goal of attracting, motivating, and retaining highly talented
executives to compete in our complex and highly regulated industry.
Some of Allstate's key practices we believe support this approach include:
. Providing a significant portion of executive pay through stock options,
creating direct alignment with stockholder interests.
. Establishment of stock ownership guidelines for senior executives that
drive further alignment with stockholder interests. Each named executive
officer, except Mr. Dahl, is required to hold four times salary.
. Stock option repricing is not permitted.
. A robust governance process for the design, approval, administration,
and review of our overall compensation program.
. Utilization of annual incentive plan caps to limit maximum award
opportunities and support enterprise risk management strategies.
. Inclusion of a clawback feature in the Annual Executive Incentive Plan
and the 2009 Equity Incentive Plan that provides the ability to recover
compensation from Allstate executive officers in the event of certain
financial restatements.
. Incorporation of discretion in the annual executive incentive plan to
allow for the adjustment of awards to reflect individual performance.
Allstate's philosophy and practices have provided us with the tools to
create an effective executive compensation program as detailed below.
NAMED EXECUTIVES
This CD&A describes the executive compensation program at Allstate and
specifically describes total 2010 compensation for the following named
executives of Lincoln Benefit*:
. Matthew E. Winter--Chairman of the Board and Chief Executive Officer
. John C. Pintozzi--Senior Vice President and Chief Financial Officer
. Lawrence W. Dahl--President and Chief Operating Officer
. Matthew S. Easley--Senior Vice President
. Robert K. Becker--Senior Vice President
* Reflects titles in effect as of December 31, 2010.
COMPENSATION PRACTICES
Allstate reviews the design of its executive compensation program and
executive pay levels on an annual basis and performance and goal attainment
within this design throughout the year. As part of that review, Allstate
considers available data regarding compensation paid to similarly-situated
executives at companies against which it competes for executive talent. With
respect to the compensation program for 2010, the Committee considered
compensation data for the peer companies listed on page 63 for Mr. Winter, as
well as proxy information from select S&P 100 companies with fiscal 2009
revenue of between $15 and $60 billion with which Allstate competes for
executive talent. Towers Watson, an independent compensation consultant,
recommended
62
modifications to the peer insurance companies that Allstate uses in
benchmarking compensation for certain executives for 2010. The Committee
approved removing from the peer insurance companies Cincinnati Financial
Corporation due to its relative size and CNA Financial Corporation because it
is closely held. ACE Ltd, AFLAC Inc., and Manulife Financial Corporation were
added to augment the peer insurance companies with similarly sized insurers.
With respect to the named executives other than Mr. Winter, Allstate
management considered compensation surveys that provided information on
companies of broadly similar size and business mix as Allstate, as well as
companies with a broader market context. The compensation surveys considered
include the Mercer Property & Casualty Insurance Company Survey, the 2009
Towers Perrin Diversified Insurance Survey, and the Towers Perrin Compensation
Data Bank. The Diversified Insurance Survey includes 18 insurance organizations
with assets ranging from $848 million to $108 billion. The Towers Perrin
Compensation Data Bank provides compensation data on 90 of the Fortune 100
companies. The Mercer Property & Casualty Insurance Company Survey includes
compensation data for 27 property and casualty insurance companies with at
least $2 billion in annual premiums. In addition, in its executive pay and
performance discussions, Allstate management considered information regarding
other companies in the financial services industries.
PEER INSURANCE COMPANIES
ACE Ltd.* Manulife Financial Corporation*
AFLAC Inc.* MetLife Inc.
The Chubb Corporation The Progressive Corporation
The Hartford Financial Services Prudential Financial, Inc.
Group, Inc.
Lincoln National Corporation The Travelers Companies, Inc.
--------
* Added in 2010
CORE ELEMENTS OF EXECUTIVE COMPENSATION PROGRAM
Allstate's executive compensation program design balances fixed and variable
compensation elements and provides alignment with both short and long term
business goals through annual and long-term incentives. Allstate's incentives
are designed to balance overall corporate, business unit, and individual
performance with respect to measures Allstate believes correlate to the
creation of stockholder value and align with Allstate's strategic vision and
operating priorities. The following table lists the core elements of Allstate's
executive compensation program.
POTENTIAL FOR
VARIABILITY WITH
CORE ELEMENT PURPOSE PERFORMANCE
------------ -------------------------------------- ----------------
Annual salary Provides a base level of competitive Low
cash compensation for executive talent
Annual cash incentive awards Reward performance on key strategic, High
operational, and financial measures
over the year
Long-term equity incentive awards Align the interests of executives Moderate to High
with long-term shareholder value and
retain executive talent
63
SALARY
Mr. Winter's salary was set by the Allstate Board of Directors based on the
Committee's recommendation. The salaries of the other named executives are set
by Allstate management. In recommending executive base salary levels, Allstate
uses the 50/th/ percentile of its peer insurance companies for Mr. Winter and
the 50/th/ percentile of insurance and general industry data for the other
named executives as a guideline to align with Allstate's pay philosophy for
competitive positioning in the market for executive talent.
. The average enterprise-wide merit and promotional increases are based on
a combination of U.S. general and insurance industry market data and are
set at levels intended to be competitive.
. Annual merit increases for the named executives are based on evaluations
of their performance using the average enterprise-wide merit increase as
a guideline.
. The base salaries for each named executive were reviewed in February
of 2010. Allstate established a new base salary for each named
executive other than Mr. Winter based on individual performance and
in line with the enterprise-wide merit increase.
. Allstate did not adjust the base salary for Mr. Winter, which had
just been established in the last quarter of 2009 when he joined the
corporation.
INCENTIVE COMPENSATION
The Committee approves performance measures and goals for cash incentive
awards during the first quarter of the year. The performance measures and goals
are aligned with Allstate's objectives and tied to its strategic vision and its
operating priorities. They are designed to reward Allstate executives for
actual performance, to reflect objectives that will require significant effort
and skill to achieve, and to drive Allstate stockholder value.
After the end of the year for annual cash incentive awards and after the end
of the three-year cycle for long-term cash incentive awards, the Committee
reviews the extent to which Allstate has achieved the various performance
measures and approves the actual amount of all cash incentive awards for
Allstate executive officers. The Committee may adjust the amount of an annual
cash incentive award but has no authority to increase the amount of an award
payable to Mr. Winter above the described plan limits. Allstate management
approves the actual amount of cash incentive awards to the other named
executives. Allstate pays the cash incentive awards in March, after the end of
the year for the annual cash incentive awards and after the end of the
three-year cycle for the long-term cash incentive awards. Long-term cash
incentives have been discontinued, and the last three year cycle ended in 2010.
Typically the Committee also approves grants of equity awards on an annual
basis during a meeting in the first quarter. By making these awards and
approving performance measures and goals for the annual cash incentive awards
during the first quarter, Allstate is able to balance these elements of core
compensation to align with its business goals.
ANNUAL CASH INCENTIVE AWARDS
In 2010 Allstate executives had the opportunity to earn an annual cash
incentive award based on the achievement of performance measures over a
one-year period. The annual incentive plans are designed to provide all of the
named executives with cash awards based on a combination of corporate and
business unit performance measures for each of Allstate's main business units:
Allstate Protection, Allstate Financial, and Allstate Investments. Lincoln
Benefit is part of Allstate Financial.
The maximum amount of Mr. Winter's award was the lesser of a stockholder
approved maximum under the Annual Executive Incentive Plan of $8.5 million or
25% of the 1.0% of Operating Income pool. Operating Income is defined under the
"Performance Measures" caption on page 85. Although these limits established the
64
maximum annual cash incentive awards that could be paid to Mr. Winter, the
Committee retained complete discretion to pay any lesser amount. Mr. Winter's
actual award was based on the achievement of certain performance measures as
detailed below, including assessments of his individual performance and overall
corporate and Allstate Financial business unit performance. None of the named
executives other than Mr. Winter participate in the Operating Income pool.
For 2010, the Committee adopted corporate and Allstate Financial business
unit level annual performance measures and weighted them as applied to
Mr. Winter in accordance with his responsibility for Allstate's overall
corporate performance and the performance of the Allstate Financial business
unit. Allstate management utilized the same performance measures and weighting
with respect to each of the named executives other than Mr. Winter. Each
measure is assigned a weight expressed as a percentage of the total annual cash
incentive award opportunity, with all weights adding to 100%.
The following table lists the performance measures and related target goals
for 2010 as well as the weighting factors and the actual results applicable to
the named executives. The performance measures were designed to focus executive
attention on key strategic, operational, and financial measures including top
line growth and profitability. For each performance measure, the Committee
approved a threshold, target, and maximum goal. The target goals for the
performance measures were based on evaluations of our historical performance
and plans to drive projected performance. A description of each performance
measure is provided under the "Performance Measures" caption on page 85.
ANNUAL CASH INCENTIVE AWARD PERFORMANCE MEASURES, TARGET, AND WEIGHTING/(1)/
ACHIEVEMENT
RELATIVE TO
THRESHOLD,
PERFORMANCE TARGET,
MEASURE WEIGHTING TARGET ACTUAL/(2)/ MAXIMUM GOALS
----------- --------- ------------- ------------- ---------------
CORPORATE-LEVEL PERFORMANCE MEASURE........... 20%
Adjusted Operating Income Per Diluted $4.30 $3.00 Between
Share.................................... threshold and
target
ALLSTATE FINANCIAL PERFORMANCE MEASURES....... 80%
Adjusted Operating Income.................. $425 million $474 million Exceeded
maximum
Adjusted Operating Return on Equity........ 6.6% 7.7% Exceeded
maximum
Allstate Exclusive Agency Proprietary and $256 million $262 million Between target
AWD Weighted Sales....................... and maximum
Allstate Financial Portfolio Excess Total 55 63 Between target
Return (in basis points)................. and maximum
--------
/(1)/Information regarding Allstate's performance measures is disclosed in the
limited context of its annual cash incentive awards and should not be
understood to be statements of Allstate management's expectations or
estimates of results or other guidance. Allstate specifically cautions
investors not to apply these statements to other contexts.
/(2)/Stated as a percentage of target goals with a range from 0% to 250%, the
actual performance comprises 54% for Adjusted Operating Income Per Diluted
Share performance, and 189% for Allstate Financial performance. The
weighted results stated as a percentage of the target goals for all named
executives was 162%.
65
Target award opportunities approved by Allstate are stated as a percentage
of annual base salary. Annual cash incentive awards are calculated using base
salary, as adjusted by any merit and promotional increases granted during the
year on a prorated basis. In setting target incentive levels for named
executives, Allstate gives the most consideration to market data primarily
focusing on pay levels at peer group companies with which it directly competes
for executive talent and stockholder investment. As a result of leveraging
external market data, Mr. Winter had the highest target award opportunity of
125%, followed by Mr. Pintozzi with a target award opportunity of 60%, followed
by Messrs. Easley and Becker with a target award opportunity of 50%, followed
by Mr. Dahl with a target award opportunity of 35%.
In calculating the annual cash incentive awards, Allstate achievement with
respect to each performance measure is expressed as a percentage of the target
goal, with interpolation applied between the threshold and target goals and
between the target and maximum goals. Unless otherwise adjusted by Allstate,
the amount of each named executive's annual cash incentive award is the sum of
the amounts calculated using the calculation below for all of the performance
measures.
Actual performance interpolated relative to X Weighting X Target award opportunity as a X Salary**
threshold and target on a range of 50% to percentage of salary**
100% and relative to target and maximum
on a range of 100% to 250%*
--------
* Actual performance below threshold results in 0%
** Base salary, as adjusted by any merit and promotional increases granted
during the year on a prorated basis.
Following the end of the performance year, the performance of each named
executive was evaluated. Based on a subjective evaluation of each executive's
contributions and performance individual adjustments were made to the formula
driven annual incentive amounts. The recommendations were considered and
approved by the Committee for Mr. Winter and by Allstate management for the
other named executives.
LONG-TERM INCENTIVE AWARDS--CASH AND EQUITY
As part of total core compensation, Allstate historically has provided three
forms of long-term incentive awards: stock options, restricted stock units, and
long-term cash incentive awards. In 2009, Allstate discontinued future cycles
of the long-term cash incentive plan. The relative mix of various forms of
these awards is driven by Allstate's objectives in providing the specific form
of award, as described below.
LONG-TERM INCENTIVE AWARDS--EQUITY
Allstate grants larger equity awards to executives with the broadest scope
of responsibility, consistent with Allstate's philosophy that a significant
amount of executive compensation should be in the form of equity and that a
greater percentage of compensation should be at risk for executives who bear
higher levels of responsibility for Allstate's performance. However, from time
to time, larger equity awards are granted to attract new executives. Allstate
annually reviews the mix of equity incentives provided to the named executives.
The mix consisted of 65% stock options and 35% restricted stock units for
Mr. Winter. Other employees eligible for equity incentive awards, including the
named executives other than Mr. Winter, had the choice of receiving the value
of their equity incentive awards in the following proportions between stock
options and restricted stock units:
. 25% stock options and 75% restricted stock units;
. 65% stock options and 35% restricted stock units;
. 50% stock options and 50% restricted stock units; or
. 75% stock options and 25% restricted stock units
66
The elections are reflected in the Grants of Plan-Based Awards at Fiscal
Year-End 2010 table. Stock options, which are performance-based, require growth
in the Allstate stock price to deliver any value to an executive. The
restricted stock units provide alignment with Allstate stockholder interests
along with providing an effective retention tool.
STOCK OPTIONS
Stock options represent the opportunity to buy shares of Allstate's stock at
a fixed exercise price at a future date. Allstate uses them to align the
interests of Allstate's executives with long-term stockholder value, as the
stock price must appreciate from the date of grant for any value to be
delivered to executives.
Key elements:
. Under Allstate's stockholder-approved equity incentive plan, the
exercise price cannot be less than the fair market value of a share on
the date of grant.
. Stock option repricing is not permitted. In other words, absent an event
such as a stock split, if the Committee cancels an award and substitutes
a new award, the exercise price of the new award cannot be less than the
exercise price of the cancelled award.
. All stock option awards have been made in the form of nonqualified stock
options.
. The options granted to the named executives in 2010 become exercisable
in three installments, 50% on the second anniversary of the grant date
and 25% on each of the third and fourth anniversary dates, and expire in
ten years, except in certain change-in-control situations or under other
special circumstances approved by the Committee.
RESTRICTED STOCK UNITS
Each restricted stock unit represents Allstate's promise to transfer one
fully vested share of stock in the future if and when the restrictions expire
(when the unit "vests"). Because restricted stock units are based on and
payable in stock, they serve to reinforce the alignment of interests of
Allstate's executives and Allstate's stockholders. In addition, because
restricted stock units have a real, current value that is forfeited, except in
some circumstances, if an executive terminates employment before the restricted
stock units vest, they provide a retention incentive. Under the terms of the
restricted stock unit awards, the executives have only the rights of general
unsecured creditors of Allstate and no rights as stockholders until delivery of
the underlying shares.
Key elements:
. The restricted stock units granted to the named executives in 2010 vest
in three installments, 50% on the second anniversary of the grant date
and 25% on each of the third and fourth anniversary dates, except in
certain change-in-control situations or under other special
circumstances approved by Allstate.
. The restricted stock units granted to the named executives in 2010
include the right to receive previously accrued dividend equivalents
when the underlying restricted stock unit vests.
TIMING OF EQUITY AWARDS AND GRANT PRACTICES
The Committee grants equity incentive awards to current employees on an
annual basis normally during a meeting in the first fiscal quarter, after the
issuance of Allstate's prior fiscal year-end earnings release. Throughout the
year, the Committee grants equity incentive awards in connection with new hires
and promotions and in recognition of achievements. Equity incentive awards to
employees other than Allstate executive officers also may be granted by an
equity award committee which currently consists of Allstate's chief executive
officer. The equity award committee may grant restricted stock units and stock
options in connection with new hires and
67
promotions and in recognition of achievements. The grant date for awards other
than annual awards is fixed as the first business day of a month following the
committee action.
STOCK OWNERSHIP GUIDELINES
Because Allstate believes management's interests must be linked with those
of Allstate's stockholders, Allstate instituted stock ownership guidelines in
1996 that require each of the named executives, other than Mr. Dahl, to own
common stock, including restricted stock units, worth a multiple of base
salary, as of March 1 following the fifth year after assuming a senior
management position. Unexercised stock options do not count towards meeting the
stock ownership guidelines. For the named executives, the goal is four times
salary. Mr. Winter has until March 2015 to meet his goal. Messrs. Easley and
Pintozzi have met their respective goals. Mr. Becker has until March 2014 to
meet his goal. After a named executive meets the guideline for the position, if
the value of his or her shares does not equal the specified multiple of base
salary solely due to the fact that the value of the shares has declined, the
executive is still deemed to be in compliance with the guideline. However, an
executive in that situation may not sell shares acquired upon the exercise of
an option or conversion of an equity award except to satisfy tax withholding
obligations, until the value of his or her shares again equals the specified
multiple of base salary. In accordance with Allstate's policy on insider
trading, all officers, directors, and employees are prohibited from engaging in
transactions with respect to any securities issued by Allstate or any of its
subsidiaries that might be considered speculative or regarded as hedging, such
as selling short or buying or selling options.
LONG-TERM INCENTIVE AWARDS--CASH
There were no pay-outs on any long-term cash incentive awards for the
2008-2010 cycle, the final cycle under the Long-Term Executive Incentive
Compensation Plan. Long-term cash incentive awards were originally designed to
reward executives for collective results attained over a three-year performance
cycle. Only Messrs. Pintozzi and Easley were eligible for these awards. There
were three performance measures for the 2008-2010 cycle: average adjusted
return on equity relative to peers, which was weighted at 50% of the potential
award, Allstate Protection growth in policies in force, and Allstate Financial
return on total capital, both weighted at 25% of the potential award. The
Allstate Protection growth in policies in force measure had target set at 5.0%,
with actual performance of -5.9%. The Allstate Financial return on total
capital measure had target set at 9.5%, with actual performance of -12.6%. The
selection and weighting of these measures was intended to focus executive
attention on the collective achievement of Allstate's long-term financial goals
across its various product lines. A description of each performance measure is
provided under the "Performance Measures" caption on page 85.
The average adjusted return on equity relative to peers measure compared
Allstate's performance to a group of other insurance companies. If the average
adjusted return on equity had exceeded the average risk free rate of return on
three-year Treasury notes over the three-year cycle, plus 200 basis points,
Allstate's ranked position relative to the peer group would have determined the
percentage of the total target award for this performance measure to be paid.
However, the average adjusted return on equity did not exceed the average risk
free rate of return, plus 200 basis points, resulting in no payout.
68
OTHER ELEMENTS OF COMPENSATION
To remain competitive with other employers and to attract, retain, and
motivate highly talented executives and other employees, we provide the
benefits listed in the following table.
OTHER ALL FULL-TIME
OFFICERS AND REGULAR
NAMED AND CERTAIN PART-TIME
BENEFIT OR PERQUISITE EXECUTIVES MANAGERS EMPLOYEES
--------------------- ------------ --------------- -------------
401(k)/(1)/ and defined benefit pension................................ (check mark) (check mark) (check mark)
Supplemental retirement benefit........................................ (check mark) (check mark)
Health and welfare benefits/(2)/....................................... (check mark) (check mark) (check mark)
Supplemental long-term disability and executive physical program....... (check mark) (check mark)/(3)/
Deferred compensation.................................................. (check mark) (check mark)
Tax preparation and financial planning services........................ (check mark) (check mark)/(4)/
Mobile phones, ground transportation and personal use of aircraft/(5)/. (check mark) (check mark)
--------
/(1)/Allstate contributed $.50 for every dollar of basic pre-tax deposits made
in 2010 on the first 3 percent of eligible pay and $.25 for every dollar
of basic pre-tax deposits made in 2010 on the next 2 percent of eligible
pay for eligible participants, including the named executives.
/(2)/Including medical, dental, vision, life, accidental death and
dismemberment, long-term disability, and group legal insurance.
/(3)/An executive physical program is available to all officers.
/(4)/All officers are eligible for tax preparation services. Financial planning
services were provided to Mr. Winter only.
/(5)/Ground transportation is available to Mr. Winter. In limited circumstances
approved by Allstate's CEO, Mr. Winter is permitted to use Allstate's
corporate aircraft for personal purposes. Mr. Winter did not use the
corporate aircraft for personal purposes in 2010. Mobile phones are
available to members of Allstate's senior management team, other officers,
and certain managers, and certain employees depending on their job
responsibilities.
RETIREMENT BENEFITS
Each named executive participates in two different defined benefit pension
plans. The Allstate Retirement Plan (ARP) is a tax qualified defined benefit
pension plan available to all of Allstate's regular full-time and regular
part-time employees who meet certain age and service requirements. The ARP
provides an assured retirement income related to an employee's level of
compensation and length of service at no cost to the employee. As the ARP is a
tax qualified plan, federal tax law places limits on (1) the amount of an
individual's compensation that can be used to calculate plan benefits and
(2) the total amount of benefits payable to a participant under the plan on an
annual basis. These limits may result in a lower benefit under the ARP than
would have been payable if the limits did not exist for certain of our
employees. Therefore, the Allstate Insurance Company Supplemental Retirement
Income Plan (SRIP) was created for the purpose of providing ARP-eligible
employees whose compensation or benefit amount exceeds the federal limits with
an additional defined benefit in an amount equal to what would have been
payable under the ARP if the federal limits described above did not exist.
CHANGE-IN-CONTROL AND POST-TERMINATION BENEFITS
Since a change-in-control or other triggering event may never occur,
Allstate does not view change-in-control benefits or post-termination benefits
as compensation. Consistent with Allstate compensation objectives, Allstate
offers these benefits to attract, motivate, and retain certain highly talented
executives. A change-in-control of Allstate could have a disruptive impact on
both Allstate and its executives. Allstate's change-in-control benefits and
post-termination benefits are designed to mitigate that impact and to maintain
the connection between the interests of Allstate's executives and Allstate
stockholders. Allstate's change-in-control
69
agreements entered into prior to January 1, 2011, provide an excise tax
gross-up to mitigate the possible disparate tax treatment for similarly
situated employees. However, starting in 2011, new change-in-control agreements
will not include an excise tax gross-up provision. Of the named executives,
Messrs. Winter, Pintozzi, and Easley are subject to change-in-control
agreements.
As part of the change-in-control benefits, executives with change-in-control
agreements receive previously deferred compensation and equity awards that
might otherwise be eliminated by new directors elected in connection with a
change-in-control, and also receive certain protections for cash incentive
awards and benefits if an executive's employment is terminated within a
two-year period after a change-in-control. The change-in-control and
post-termination arrangements which are described in the "Potential Payments as
a Result of Termination or Change-in-Control" section are not provided
exclusively to the named executives. A larger group of management employees is
eligible to receive many of the post-termination benefits described in that
section.
EXECUTIVE COMPENSATION TABLES
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning the compensation of
the named executives for all services rendered to Lincoln Benefit in 2009 and
2010, allocated to Lincoln Benefit in a manner consistent with the allocation
of compensation expenses under the Service and Expense Agreement.
CHANGE IN
PENSION VALUE
AND
NONQUALIFIED
NON-EQUITY DEFERRED
STOCK OPTION INCENTIVE PLAN COMPENSATION ALL OTHER
SALARY BONUS AWARDS AWARDS COMPENSATION EARNINGS COMPENSATION TOTAL
NAME/(1)/ YEAR ($)/(2)/ ($) ($)/(3)/ ($)/(4)/ ($)/(5)/ ($)/(6)/ ($)/(7)/ ($)
-------- ---- ------- ----- ------- ------- -------------- ------------- ------------ ---------
Matthew E. Winter........... 2010 172,200 0 210,943 391,756 347,930 1,100/(8)/ 10,082 1,134,011
(CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER) --
John C. Pintozzi............ 2010 130,757 0 94,860 94,859 157,535 8,735/(9)/ 7,528 494,274
(SENIOR VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER) 2009 120,224 7,436 55,594 106,439 75,456 10,673 9,053 384,875
Lawrence W. Dahl............ 2010 274,586 0 53,428 17,810 137,159 136,233/(10)/ 36,639 655,855
(PRESIDENT--CHIEF OPERATING
OFFICER) 2009 253,299 0 25,195 48,246 113,091 235,494 97,306 772,631
Matthew S. Easley........... 2010 121,588 0 87,172 29,058 94,335 6,276/(11)/ 9,496 347,925
(SENIOR VICE PRESIDENT) 2009 114,709 0 45,652 87,398 72,160 6,064 8,708 334,691
Robert K. Becker............ 2010 89,294 0 18,609 55,811 81,067 35,616/(12)/ 6,763 287,160
(SENIOR VICE PRESIDENT)
--------
/(1)/Messrs. Winter and Becker were not named executives for fiscal year 2009.
/(2)/Reflects amounts for 2009 that were paid in 2009 which, due to the timing
of Allstate's payroll cycle, included amounts earned in 2008.
/(3)/The aggregate grant date fair value of restricted stock unit awards
computed in accordance with Financial Accounting Standards Board ("FASB")
Accounting Standards Codification Topic 718 ("ASC 718"). The number of
restricted stock units granted in 2010 to each named executive is provided
in the Grants of Plan-Based Awards table on page 73. The fair value of
restricted stock unit awards is based on the final closing price of
Allstate's stock as of the date of grant. The final closing price in part
reflects the payment of future dividends expected.
70
/(4)/The aggregate grant date fair value of option awards computed in
accordance with FASB ASC 718. The fair value of each option award is
estimated on the date of grant using a binomial lattice model. The fair
value of each option award is estimated on the date of grant using the
assumptions as set forth in the following table:
2010 2009
------------- -------------
Weighted average expected term............... 7.8 years 8.1 years
Expected volatility.......................... 23.7 - 52.3% 26.3 - 79.2%
Weighted average volatility.................. 35.1% 38.3%
Expected dividends........................... 2.4 - 2.8% 2.6%
Weighted average expected dividends.......... 2.6% 2.6%
Risk-free rate............................... 0.1 - 3.9% 0.0 - 3.7%
The number of options granted in 2010 to each named executive is provided in
the Grants of Plan-Based Awards table on page 73.
/(5)/Amounts earned under the annual incentive plan are paid in the year
following performance. Amounts earned under the Long-Term Executive
Incentive Compensation Plan are paid in the year following the performance
cycle. The amounts shown in the table above include amounts earned in 2010
and 2009 and payable under these plans in 2011 and 2010, respectively. The
break-down for each component is as follows:
ANNUAL CASH LONG-TERM
INCENTIVE CASH INCENTIVE
NAME YEAR AWARD AMOUNT CYCLE AWARD AMOUNT
---- ---- ------------ --------- --------------
Mr. Winter... 2010 $347,930 2008-2010 $ 0
Mr. Pintozzi. 2010 $157,535 2008-2010 $ 0
2009 $ 54,970 2007-2009 $20,486
Mr. Dahl..... 2010 $137,159 2008-2010 $ 0
2009 $ 50,748* 2007-2009 $ 0
Mr. Easley... 2010 $ 94,335 2008-2010 $ 0
2009 $ 52,444 2007-2009 $19,716
Mr. Becker... 2010 $ 81,067 2008-2010 $ 0
-----
* In 2009, as President and Chief Operating Officer of Lincoln Benefit,
Mr. Dahl participated in a cash-based sales incentive plan (the "Sales
Incentive Plan") based on first year premiums for universal life and term
policies as well as annuity deposits sold by one of Lincoln Benefit's
distribution channels. Payments related to the Sales Incentive Plan totaled
$62,343 for 2009. Mr. Dahl did not participate in the Sales Incentive Plan
in 2010. No other named executives of Lincoln Benefit participated in the
Sales Incentive Plan.
/(6)/Amounts reflect the aggregate increase in actuarial value of the pension
benefits as set forth in the Pension Benefits table, accrued during 2010
and 2009. These are benefits under the Allstate Retirement Plan (ARP) and
the Allstate Insurance Company Supplemental Retirement Income Plan (SRIP).
Non-qualified deferred compensation earnings are not reflected since our
Deferred Compensation Plan does not provide above-market earnings. The
pension plan measurement date is December 31. (See note 16 to Allstate's
audited financial statements for 2010.)
/(7)/The "All Other Compensation for 2010--Supplemental Table" provides details
regarding the amounts for 2010 for this column.
/(8)/Reflects increases in the actuarial value of the benefits provided to
Mr. Winter pursuant to the SRIP of $1,100.
/(9)/Reflects increases in the actuarial value of the benefits provided to
Mr. Pintozzi pursuant to the ARP and SRIP of $4,396 and $4,339,
respectively.
/(10)/Reflects increases in the actuarial value of the benefits provided to
Mr. Dahl pursuant to the ARP and SRIP of $82,402 and $53,831,
respectively.
/(11)/Reflects increases in the actuarial value of the benefits provided to
Mr. Easley pursuant to the ARP and SRIP of $3,098 and $3,178,
respectively.
/(12)/Reflects increases in the actuarial value of the benefits provided to
Mr. Becker pursuant to the ARP and SRIP of $23,305 and $12,311,
respectively.
71
ALL OTHER COMPENSATION FOR 2010--SUPPLEMENTAL TABLE
(In dollars)
The following table describes the incremental cost of other benefits
provided in 2010 that are included in the "All Other Compensation" column.
TOTAL
401(K) PTO ALL OTHER
NAME MATCH/(1)/ PAYOUT OTHER/(2)/ COMPENSATION
---- --------- ------ --------- ------------
Mr. Winter... 2010 1,400 0 8,682 10,082
Mr. Pintozzi. 2010 2,009 0 5,519 7,528
Mr. Dahl..... 2010 4,900 21,539 10,200 36,639
Ms. Easley... 2010 2,009 0 7,487 9,496
Mr. Becker... 2010 1,986 0 4,777 6,763
--------
/(1)/Each of the named executives participated in our 401(k) plan during 2010.
The amount shown is the amount allocated to their accounts as employer
matching contributions. Mr. Winter will not be vested in the employer
matching contribution until he has completed three years of vesting
service.
/(2)/"Other" consists of premiums for group life insurance and personal
benefits and perquisites consisting of cell phones, tax preparation
services, financial planning, executive physicals, ground transportation,
and supplemental long-term disability coverage. There was no incremental
cost for the use of mobile phones. Allstate provides supplemental
long-term disability coverage to regular full-time and regular part-time
employees whose annual earnings exceed the level which produces the
maximum monthly benefit provided by the Group Long Term Disability
Insurance Plan. This coverage is self-insured (funded and paid for by
Allstate when obligations are incurred). No obligations for the named
executives were incurred in 2010 and so no incremental cost is reflected
in the table. None of the personal benefits and perquisites individually
exceeded the greater of $25,000 or 10% of the total amount of these
benefits for the named executives, except for the payment to Mr. Dahl, in
accordance with Nebraska law, of $21,539 for paid time off accrued but not
taken in 2010.
72
GRANTS OF PLAN-BASED AWARDS AT FISCAL YEAR-END 2010/(1)/
The following table provides information about non-equity incentive plan
awards and equity awards granted to our named executives during the fiscal year
2010 to the extent the expense for such awards was allocated to Lincoln Benefit
under the Service and Expense Agreement.
ALL OTHER ALL OTHER
STOCK OPTION
ESTIMATED FUTURE PAYOUTS AWARDS: AWARDS: EXERCISE
UNDER NON-EQUITY INCENTIVE NUMBER OF NUMBER OF OR BASE
PLAN AWARDS/(2)/ SHARES OF SECURITIES PRICE OF
--------------------------- STOCK OR UNDERLYING OPTION
GRANT THRESHOLD TARGET MAXIMUM UNITS OPTIONS AWARDS
NAME DATE PLAN NAME ($) ($) ($) (#) (#) ($/SHR)/(3)/
---- -------------- ----------------------- --------- ------- --------- --------- ---------- -----------
Mr. Winter... -- Annual cash incentive 107,625 215,250 1,104,233
Feb. 22, 2010 Restricted stock units 6,716
Feb. 22, 2010 Stock options 39,571 $31.41
Mr. Pintozzi. -- Annual cash incentive 39,219 78,439 196,097
Feb. 22, 2010 Restricted stock units 3,020
Feb. 22, 2010 Stock options 9,582 $31.41
Mr. Dahl..... -- Annual cash incentive 48,006 96,012 240,029
Feb. 22, 2010 Restricted stock units 1,701
Feb. 22, 2010 Stock options 1,799 $31.41
Mr. Easley... -- Annual cash incentive 36,475 72,949 182,373
Feb. 22, 2010 Restricted stock units 2,775
Feb. 22, 2010 Stock options 2,935 $31.41
Mr. Becker... -- Annual cash incentive 22,307 44,613 111,533
Feb. 22, 2010 Restricted stock units 592
Feb. 22, 2010 Stock options 5,638 $31.41
GRANT DATE
FAIR VALUE ($)/(4)/
-------------------
STOCK OPTION
NAME AWARDS AWARDS
---- -------- --------
Mr. Winter...
$210,943
$391,756
Mr. Pintozzi.
$ 94,860
$ 94,859
Mr. Dahl.....
$ 53,428
$ 17,810
Mr. Easley...
$ 87,172
$ 29,058
Mr. Becker...
$ 18,609
$ 55,811
--------
/(1)/Awards under the annual executive incentive plans and the 2009 Equity
Incentive Plan.
/(2)/The amounts in these columns consist of the threshold, target, and maximum
annual cash incentive awards for the named executives. The threshold
amount for each named executive is fifty percent of target, as the minimum
amount payable if threshold performance is achieved. If threshold is not
achieved the payment to named executives would be zero. The target amount
is based upon achievement of certain performance measures set forth in the
"Annual Cash Incentive Awards" section. The maximum amount payable to
Mr. Winter is the lesser of a stockholder approved maximum under the
Annual Executive Incentive Plan of $8.5 million or 25% of the award pool.
The award pool is equal to 1.0% of Operating Income. None of the other
named executives participate in the operating income pool. A description
of the Operating Income performance measure is provided under the
"Performance Measures" caption on page 85.
/(3)/The exercise price of each option is equal to the fair market value of
Allstate's common stock on the date of grant. Fair market value is equal
to the closing sale price on the date of grant or, if there was no such
sale on the date of grant, then on the last previous day on which there
was a sale.
/(4)/The aggregate grant date fair value of restricted stock units was $31.41
and for stock option awards was $9.90 for 2010, computed in accordance
with FASB ASC 718. The assumptions used in the valuation are discussed in
footnotes 3 and 4 to the Summary Compensation Table on pages 70 and 71.
73
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END 2010
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END 2010
The following table summarizes the outstanding equity awards of the named
executives as of December 31, 2010, allocated in a manner consistent with the
allocation of compensation expenses to Lincoln Benefit under the Service and
Expense Agreement for 2010. The percentage of each equity award actually
allocated to Lincoln Benefit has varied over the years during which these
awards were granted depending on the extent of services rendered by such
executive to Lincoln Benefit and the arrangements in place at the time of such
equity awards between Lincoln Benefit and the executive's Allstate-affiliated
employer. Because the aggregate amount of such equity awards attributable to
services rendered to Lincoln Benefit by each named executive cannot be
calculated without unreasonable effort, the allocated amount of each equity
award provided for each named executive in the following table is the amount
determined by multiplying each named executive's equity award for services
rendered to Allstate and all of its affiliates by the percentage used for
allocating such named executive's compensation to Lincoln Benefit in 2010 under
the Service and Expense Agreement.
OPTION AWARDS/(1)/ STOCK AWARDS
------------------------------------------------------------------------ ------------------------------------
NUMBER
OF
SHARES
OR UNITS
NUMBER OF NUMBER OF OF STOCK MARKET VALUE
SECURITIES SECURITIES THAT OF SHARES OR
UNDERLYING UNDERLYING HAVE UNITS OF
OPTION UNEXERCISED UNEXERCISED OPTION OPTION NOT STOCK THAT
GRANT OPTIONS (#) OPTIONS (#) EXERCISE EXPIRATION STOCK AWARD VESTED HAVE NOT
NAME DATE EXERCISABLE/(2)/ UNEXERCISABLE/(3)/ PRICE DATE GRANT DATE (#)/(4)/ VESTED/(5)/
---- -------------- --------------- ----------------- -------- -------------- -------------- -------- ------------
Mr. Winter... Nov. 2, 2009 2,406 7,219 $29.64 Nov. 2, 2019 Nov. 2, 2009 1,694 $ 54,019
Feb. 22, 2010 0 39,571 $31.41 Feb. 22, 2020 Feb. 22, 2010 6,716 $214,100
AGGREGATE
MARKET VALUE
------------
$268,119
Mr. Pintozzi. Sep. 30, 2002 513 0 $35.17 Sep. 30, 2012
Feb. 7, 2003 1,435 0 $31.78 Feb. 7, 2013
Feb. 6, 2004 2,041 0 $45.96 Feb. 6, 2014
Feb. 22, 2005 5,616 0 $52.57 Feb. 22, 2015
Feb. 21, 2006 5,562 0 $53.84 Feb. 21, 2016
Feb. 21, 2006 3,690 0 $53.84 Feb. 21, 2016
Feb. 20, 2007 4,094 1,365 $62.24 Feb. 20, 2017 Feb. 20, 2007 753 $ 23,998
Feb. 26, 2008 4,872 4,872 $48.82 Feb. 26, 2018 Feb. 26, 2008 1,057 $ 33,710
Feb. 27, 2009 2,542 15,312 $16.83 Feb. 27, 2019 Feb. 27, 2009 3,592 $114,526
Feb. 22, 2010 0 9,582 $31.41 Feb. 22, 2020 Feb. 22, 2010 3,020 $ 96,279
AGGREGATE
MARKET VALUE
------------
$268,513
Mr. Dahl..... May 15, 2001 4,224 0 $42.00 May 15, 2011
Feb. 7, 2002 5,868 0 $33.38 Feb. 7, 2012
Feb. 7, 2003 3,200 0 $31.78 Feb. 7, 2013
Feb. 6, 2004 3,333 0 $45.96 Feb. 6, 2014
Feb. 22, 2005 2,492 0 $52.57 Feb. 22, 2015
Feb. 21, 2006 3,418 0 $53.84 Feb. 21, 2016
Feb. 20, 2007 2,154 719 $62.24 Feb. 20, 2017 Feb. 20, 2007 397 $ 12,656
Feb. 26, 2008 2,747 2,747 $48.82 Feb. 26, 2018 Feb. 26, 2008 596 $ 19,001
Feb. 27, 2009 1,127 6,382 $16.83 Feb. 27, 2019 Feb. 27, 2009 1,497 $ 47,724
Feb. 22, 2010 0 1,799 $31.41 Feb. 22, 2020 Feb. 22, 2010 1,701 $ 54,228
AGGREGATE
MARKET VALUE
------------
$133,609
74
OPTION AWARDS/(1)/ STOCK AWARDS
------------------------------------------------------------------------ ------------------------------------
NUMBER
OF
SHARES
OR UNITS
NUMBER OF NUMBER OF OF STOCK MARKET VALUE
SECURITIES SECURITIES THAT OF SHARES OR
UNDERLYING UNDERLYING HAVE UNITS OF
OPTION UNEXERCISED UNEXERCISED OPTION OPTION NOT STOCK THAT
GRANT OPTIONS (#) OPTIONS (#) EXERCISE EXPIRATION STOCK AWARD VESTED HAVE NOT
NAME DATE EXERCISABLE/(2)/ UNEXERCISABLE/(3)/ PRICE DATE GRANT DATE (#)/(4)/ VESTED/(5)/
---- -------------- --------------- ----------------- -------- -------------- -------------- -------- ------------
Mr. Easley. May 9, 2005 6,150 0 $57.04 May 9, 2015
Feb. 21, 2006 5,274 0 $53.84 Feb. 21, 2016
Feb. 21, 2006 3,690 0 $53.84 Feb. 21, 2016
Feb. 20, 2007 3,940 1,314 $62.24 Feb. 20, 2017 Feb. 20, 2007 724 $ 23,096
Feb. 26, 2008 4,712 4,712 $48.82 Feb. 26, 2018 Feb. 26, 2008 1,023 $ 32,599
Feb. 27, 2009 4,191 12,573 $16.83 Feb. 27, 2019 Feb. 27, 2009 2,950 $ 94,044
Feb. 22, 2010 0 2,935 $31.41 Feb. 22, 2020 Feb. 22, 2010 2,775 $ 88,476
AGGREGATE
MARKET VALUE
------------
$238,215
Mr. Becker. Feb. 6, 2004 595 0 $45.96 Feb. 6, 2014
Feb. 22, 2005 465 0 $52.57 Feb. 22, 2015
Feb. 21, 2006 561 0 $53.84 Feb. 21, 2016
Feb. 20, 2007 410 137 $62.24 Feb. 20, 2017 Feb. 20, 2007 76 $ 2,418
Feb. 26, 2008 501 501 $48.82 Feb. 26, 2018 Feb. 26, 2008 109 $ 3,464
Feb. 27, 2009 1,190 3,569 $16.83 Feb. 27, 2019 Feb. 27, 2009 838 $ 26,704
Feb. 22, 2010 0 5,638 $31.41 Feb. 22, 2020 Feb. 22, 2010 592 $ 18,887
AGGREGATE
MARKET VALUE
------------
$ 51,473
--------
/(1)/The options granted in 2010 vest in three installments of 50% on the
second anniversary date and 25% on each of the third and fourth
anniversaries dates. The other options vest in four installments on the
first four anniversaries of the grant date. The exercise price of each
option is equal to the fair market value of Allstate's common stock on the
date of grant. For options granted prior to 2007, fair market value is
equal to the average of high and low sale prices on the date of grant, and
for options granted in 2007 and thereafter, fair market value is equal to
the closing sale price on the date of grant or in each case, if there was
no sale on the date of grant, then on the last previous day on which there
was a sale.
/(2)/The aggregate value and aggregate number of exercisable in-the-money
options as of December 31, 2010, for each of the named executives is as
follows: Mr. Winter $5,391 (2,406 aggregate number exercisable),
Mr. Pintozzi $38,401 (3,977 aggregate number exercisable), Mr. Dahl
$17,281 (4,327 aggregate number exercisable), Mr. Easley $63,069 (4,191
aggregate number exercisable), and Mr. Becker $17,907 (1,190 aggregate
number exercisable)
/(3)/The aggregate value and aggregate number of unexercisable in-the-money
options as of December 31, 2010, for each of the named executives is as
follows: Mr. Winter $34,770 (46,791 aggregate number exercisable),
Mr. Pintozzi $234,947 (24,894 aggregate number unexercisable), Mr. Dahl
$96,895 (8,181 aggregate number unexercisable), Mr. Easley $190,598
(15,508 aggregate number unexercisable), and Mr. Becker $56,370 (9,207
aggregate number unexercisable).
/(4)/The restricted stock unit awards granted in 2010 vest in three
installments of 50% on the second anniversary of the grant date and 25% on
each of the third and fourth anniversary dates. The other restricted stock
unit awards vest in one installment on the fourth anniversary of the grant
date, unless otherwise noted.
/(5)/Amount is based on the closing price of Allstate common stock of $31.88 on
December 31, 2010.
OPTION EXERCISES AND STOCK VESTED AT FISCAL YEAR-END 2010
The following table summarizes the options exercised by the named executives
during 2010 and the restricted stock and restricted stock unit awards that
vested during 2010, allocated in a manner consistent with the allocation of
compensation expenses to Lincoln Benefit under the Service and Expense
Agreement for 2010.
75
OPTION EXERCISES AND STOCK VESTED AT FISCAL YEAR-END 2010
OPTION AWARDS
(AS OF 12/31/10) STOCK AWARDS
-------------------------------- -------------------------------
NUMBER OF SHARES NUMBER OF SHARES
ACQUIRED ON VALUE REALIZED ACQUIRED ON VALUE REALIZED
NAME EXERCISE (#) ON EXERCISE ($) VESTING (#) ON VESTING ($)
---- ---------------- --------------- ---------------- --------------
Mr. Winter... 0 $ 0 $ 0 $ 0
Mr. Pintozzi. 2,562 $36,015 1,087 $33,921
Mr. Dahl..... 4,851 $33,820 516 $16,110
Mr. Easley... 0 $ 0 1,043 $32,551
Mr. Becker... 0 $ 0 84 $ 2,637
RETIREMENT BENEFITS
Each named executive participates in two different defined benefit pension
plans. Pension expense for each named executive under these plans has been
accrued annually over the course of the executive's career with Allstate. The
aggregate amount of the annual accrual specifically allocated to Lincoln
Benefit over that period of time has varied depending on the extent of services
rendered by such executive to Lincoln Benefit and the arrangements in place at
the time of accrual between Lincoln Benefit and the executive's
Allstate-affiliated employer. Because the aggregate amount of such annual
accruals earned prior to 2010 attributable to services rendered to Lincoln
Benefit by each named executive cannot be calculated without unreasonable
effort, the present value of accumulated benefit provided for each named
executive in the following table is the amount determined by multiplying the
present value of such named executive's accumulated pension benefit for
services rendered to Allstate and all of its affiliates over the course of such
named executive's career with Allstate by the percentage used for allocating
such named executive's compensation to Lincoln Benefit under the Service and
Expense Agreement in 2010.
PENSION BENEFITS
NUMBER OF PRESENT
YEARS VALUE OF PAYMENTS
CREDITED ACCUMULATED DURING LAST
NAME PLAN NAME SERVICE (#) BENEFIT/(1)(2)/ ($) FISCAL YEAR ($)
---- ------------------------------------ ----------- ----------------- ---------------
Mr. Winter/(3)/. Allstate Retirement Plan 1.2 0 0
Supplemental Retirement Income Plan 1.2 1,100 0
Mr. Pintozzi.... Allstate Retirement Plan 8.3 19,939 0
Supplemental Retirement Income Plan 8.3 20,553 0
Mr. Dahl........ Allstate Retirement Plan 23.9 522,155 0
Supplemental Retirement Income Plan 23.9 437,358 0
Mr. Easley...... Allstate Retirement Plan 5.7 10,343 0
Supplemental Retirement Income Plan 5.7 15,229 0
Mr. Becker...... Allstate Retirement Plan 10.0 116,258 0
Supplemental Retirement Income Plan 10.0 90,137 0
--------
/(1)/These amounts are estimates and do not necessarily reflect the actual
amounts that will be paid to the named executives, which will only be known
at the time they become eligible for payment. Accrued benefits were
calculated as of December 31, 2010, and used to calculate the Present Value
of Accumulated Benefits at December 31, 2010. December 31 is our pension
plan measurement date used for financial statement reporting purposes.
The amounts listed in this column are based on the following assumptions:
. Discount rate of 6%, payment form assuming 80% paid as a lump sum and
20% paid as an annuity, lump-sum/annuity conversion segmented interest
rates of 5.0% for the first five years, 6.5% for the
76
next 15 years, and 7% for all years after 20 and the 2011 combined static
Pension Protection Act funding mortality table with a blend of 50% males
and 50% females (as required under the Internal Revenue Code), and
post-retirement mortality for annuitants using the 2011 Internal Revenue
Service mandated annuitant table; these are the same as those used for
financial reporting year-end disclosure as described in the notes to
Allstate's consolidated financial statements. (See note 16 to Allstate's
audited financial statements for 2010.)
. Based on guidance provided by the Securities and Exchange Commission, we
have assumed normal retirement age which is age 65 under both the ARP
and SRIP, regardless of any announced or anticipated retirements.
. No assumption for early termination, disability, or pre-retirement
mortality.
/(2)/The figures shown in the table above reflect the present value of the
current accrued pension benefits calculated using the assumptions described
in the preceding footnote. If the named executives' employment terminated
on December 31, 2010, the present value of the non-qualified pension
benefits for each named executive earned through December 31, 2010, is
shown in the following table:
LUMP SUM
NAME PLAN NAME AMOUNT ($)
---- ------------------------------------ ----------
Mr. Winter... Supplemental Retirement Income Plan 1,159
Mr. Pintozzi. Supplemental Retirement Income Plan 22,528
Mr. Dahl..... Supplemental Retirement Income Plan 660,832
Mr. Easley... Supplemental Retirement Income Plan 15,895
Mr. Becker... Supplemental Retirement Income Plan 118,725
The amount shown is based on the lump sum methodology (i.e., interest rate
and mortality table) used by the Allstate pension plans in 2011, as required
under the Pension Protection Act. Specifically, the interest rate for 2011
is based on 20% of the average August 30-year Treasury Bond rate from the
prior year and 80% of the average corporate bond segmented yield curve from
August of the prior year. The mortality table for 2011 is the 2011 combined
static Pension Protection Act funding mortality table with a blend of 50%
males and 50% females, as required under the Internal Revenue Code.
/(3)/Mr. Winter is not currently vested in the Allstate Retirement Plan or the
Supplemental Retirement Income Plan.
The benefits and value of benefits shown in the Pension Benefits table are
based on the following material factors:
ALLSTATE RETIREMENT PLAN ("ARP")
The ARP has two different types of benefit formulas (final average pay and
cash balance) which apply to participants based on their date of hire or
individual choice made prior to the January 1, 2003 introduction of a cash
balance design. Of the named executives, Messrs. Winter, Pintozzi, and Easley
are eligible to earn cash balance benefits. Benefits under the final average
pay formula are earned and stated in the form of a straight life annuity
payable at the normal retirement date (age 65). Participants who earn final
average pay benefits may do so under one or more benefit formulas based on when
they become members of the ARP and their years of service.
Mr. Dahl and Mr. Becker earn ARP benefits under the post-1988 final average
pay formula which is the sum of the Base Benefit and the Additional Benefit, as
defined as follows:
. Base Benefit =1.55% of the participant's average annual compensation,
multiplied by credited service after 1988 (limited to 28 years of
credited service)
77
. Additional Benefit =0.65% of the amount, if any, of the participant's
average annual compensation that exceeds the participant's covered
compensation (the average of the maximum annual salary taxable for
Social Security over the 35-year period ending the year the participant
would reach Social Security retirement age) multiplied by credited
service after 1988 (limited to 28 years of credited service)
Since Mr. Dahl earned benefits between January 1, 1978, and December 31,
1988, one component of his ARP benefit will be based on the following benefit
formula:
1. Multiply years of credited service from 1978 through 1988 by 2 1/8%.
2. Then, multiply the percentage from step (1) by
a. Average annual compensation (five-year average) at December 31, 1988,
and by
b. Estimated Social Security at December 31, 1988.
3. Then, subtract 2(b) from 2(a). The result is the normal retirement allowance
for service from January 1, 1978, through December 31, 1988.
4. The normal retirement allowance is indexed for final average pay. In
addition, there is an adjustment of 18% of the normal retirement allowance
as of December 31, 1988, to reflect a conversion to a single life annuity.
For participants eligible to earn cash balance benefits, pay credits are
added to the cash balance account on a quarterly basis as a percent of
compensation and based on the participant's years of vesting service as follows:
CASH BALANCE PLAN PAY CREDITS
PAY CREDIT
VESTING SERVICE %
--------------- ----------
Less than 1 year................. 0%
1 year, but less than 5 years.... 2.5%
5 years, but less than 10 years.. 3%
10 years, but less than 15 years. 4%
15 years, but less than 20 years. 5%
20 years, but less than 25 years. 6%
25 years or more................. 7%
SUPPLEMENTAL RETIREMENT INCOME PLAN ("SRIP")
SRIP benefits are generally determined using a two-step process:
(1) determine the amount that would be payable under the ARP formula specified
above if the federal limits described above did not apply, then (2) reduce the
amount described in (1) by the amount actually payable under the ARP formula.
The normal retirement date under the SRIP is age 65. If eligible for early
retirement under the ARP, an eligible employee is also eligible for early
retirement under the SRIP.
OTHER ASPECTS OF THE PENSION PLANS
For the ARP and SRIP, eligible compensation consists of salary, annual cash
incentive awards, pre-tax employee deposits made to Allstate's 401(k) plan and
Allstate's cafeteria plan, holiday pay, and vacation pay. Eligible compensation
also includes overtime pay, payment for temporary military service, and
payments for short term disability, but does not include long-term cash
incentive awards or income related to the exercise of stock options and the
vesting of restricted stock and restricted stock units. Compensation used to
determine benefits under the ARP is limited in accordance with the Internal
Revenue Code. For final average pay benefits, average annual compensation is
the average compensation of the five highest consecutive calendar years within
the last ten consecutive calendar years preceding the actual retirement or
termination date.
78
Payment options under the ARP include a lump sum, straight life annuity, and
various survivor annuity options. The lump sum under the final average pay
benefit is calculated in accordance with the applicable interest rate and
mortality as required under the Internal Revenue Code. The lump sum payment
under the cash balance benefit is generally equal to a participant's cash
balance account balance. Payments from the SRIP are paid in the form of a lump
sum using the same interest rate and mortality assumptions used under the ARP.
TIMING OF PAYMENTS
The earliest retirement age that a named executive may retire with unreduced
retirement benefits under the ARP and SRIP is age 65. However, a participant
earning final average pay benefits is entitled to an early retirement benefit
on or after age 55 if he or she terminates employment after the completion of
20 or more years of service. A participant earning cash balance benefits who
terminates employment with at least three years of vesting service is entitled
to a lump sum benefit equal to his or her cash balance account balance.
Currently, none of the named executives are eligible for an early retirement
benefit.
SRIP benefits earned through December 31, 2004 (Pre 409A SRIP Benefits) are
generally payable at age 65, the normal retirement date under the ARP. Pre 409A
SRIP Benefits may be payable earlier upon reaching age 50 if disabled,
following early retirement at age 55 or older with 20 years of service, or
following death in accordance with the terms of the SRIP. SRIP benefits earned
after December 31, 2004 (Post 409A SRIP Benefits) are paid on the January 1
following termination of employment after reaching age 55 (a minimum six month
deferral period applies), or following death in accordance with the terms of
the SRIP.
Eligible employees are vested in the normal retirement benefit under the ARP
and the SRIP on the earlier of the completion of five years of service or upon
reaching age 65 for participants with final average pay benefits or the
completion of three years of service or upon reaching age 65 for participants
whose benefits are calculated under the cash balance formula.
. Mr. Winter's SRIP benefit is not currently vested but would become
payable following death. Mr. Winter will turn 65 on January 22, 2022.
. Mr. Pintozzi's Pre 409A SRIP benefit would become payable as early as
January 1, 2011, but is immediately payable upon death. Mr. Pintozzi's
Post 409A Benefit would be paid on January 1, 2021, or immediately upon
death. Mr. Pintozzi will turn 65 on May 18, 2030.
. Mr. Dahl's Pre 409A SRIP Benefit would become payable as early as
January 1, 2015, but is immediately payable upon death or disability.
Mr. Dahl's Post 409A Benefit would be paid on January 1, 2015, or
immediately upon death. Mr. Dahl will turn 65 on August 2, 2024.
. Mr. Easley's Post 409A Benefit would become payable as early as
January 1, 2011, but is immediately payable upon death. Mr. Easley's
Post 409A Benefit would be paid on January 1, 2012, or immediately upon
death. Mr. Easley will turn 65 on March 28, 2021.
. Mr. Becker's Pre 409A SRIP Benefit would become payable as early as
January 1, 2021, but is immediately payable upon death or disability.
Mr. Becker's Post 409A Benefit would be paid on January 1, 2011, or
immediately upon death. Mr. Becker will turn 65 on July 9, 2020.
EXTRA SERVICE AND PENSION BENEFIT ENHANCEMENT
No additional service is granted under the ARP or the SRIP. Generally,
Allstate has not granted additional service credit outside of the actual
service used to calculate ARP and SRIP benefits.
NON-QUALIFIED DEFERRED COMPENSATION
The aggregate amount of the annual accrual specifically allocated to Lincoln
Benefit over each named executive's career with Allstate has varied depending
on the extent of services rendered by such executive to
79
Lincoln Benefit and the arrangements in place at the time of accrual between
Lincoln Benefit and the executive's Allstate-affiliated employer. Because the
aggregate earnings and balance attributable to services rendered to Lincoln
Benefit by each named executive cannot be calculated without unreasonable
effort, the aggregate earnings and aggregate balance provided for each named
executive in the following table is the amount determined by multiplying the
value of such named executive's non-qualified deferred compensation benefit for
services rendered to Allstate and all of its affiliates over the course of such
named executive's career with Allstate by the percentage used for allocating
such named executive's compensation to Lincoln Benefit under the Service and
Expense Agreement in 2010.
NON-QUALIFIED DEFERRED COMPENSATION AT FISCAL YEAR-END 2010
EXECUTIVE REGISTRANT AGGREGATE AGGREGATE AGGREGATE
CONTRIBUTIONS CONTRIBUTIONS EARNINGS WITHDRAWALS/ BALANCE
IN LAST FY IN LAST FY IN LAST FY DISTRIBUTIONS AT LAST FYE
NAME ($) ($) ($)/(1)/ ($) ($)/(2)/
---- ------------- ------------- ---------- ------------- -----------
Mr. Winter... 0 0 0 0 0
Mr. Pintozzi. 0 0 0 0 0
Mr. Dahl..... 0 0 0 0 0
Ms. Easley... 0 0 0 0 0
Mr. Becker... 0 0 0 0 0
--------
/(1)/Aggregate earnings were not included in the named executive's prior year
compensation.
/(2)/There are no amounts reported in the Aggregate Balance at Last FYE column
that were reported in the 2010 or 2009 Summary Compensation Tables.
In order to remain competitive with other employers, Allstate allows
employees, including the named executives, whose annual compensation exceeds
the amount specified in the Internal Revenue Code (e.g., $245,000 in 2010), to
defer up to 80% of their salary and/or up to 100% of their annual cash
incentive award that exceeds that amount under the Deferred Compensation Plan.
Allstate does not match participant deferrals and does not guarantee a stated
rate of return.
Deferrals under the Deferred Compensation Plan are credited with earnings,
or are subject to losses, based on the results of the investment option or
options selected by the participants. The investment options available in 2010
under the Deferred Compensation Plan are Stable Value, S&P 500, International
Equity, Russell 2000, and Bond Funds--options available in 2010 under our
401(k) plan. Under the Deferred Compensation Plan, deferrals are not actually
invested in these funds, but instead are credited with earnings or losses based
on the funds' investment experience, which are net of administration and
investment expenses. Because the rate of return is based on actual investment
measures in our 401(k) plan, no above-market earnings are paid. Similar to
participants in our 401(k) plan, participants can change their investment
elections daily. Investment changes are effective the next business day. The
Deferred Compensation Plan is unfunded; participants have only the rights of
general unsecured creditors.
Deferrals under the Deferred Compensation Plan are segregated into Pre 409A
balances and Post 409A balances. A named executive may elect to begin receiving
a distribution of a Pre 409A balance upon separation from service or in one of
the first through fifth years after separation from service. In either event,
the named executive may elect to receive payment of a Pre 409A balance in a
lump sum or in annual cash installment payments over a period of two to ten
years. An irrevocable distribution election is required before making any Post
409A deferrals into the plan. The distribution options available to the Post
409A balances are similar to those available to the Pre 409A balances, except
the earliest distribution date is six months following separation from service.
Upon a showing of unforeseeable emergency, a plan participant may be allowed to
access certain funds in a deferred compensation account earlier than the dates
specified above.
80
POTENTIAL PAYMENTS AS A RESULT OF TERMINATION OR CHANGE-IN-CONTROL
The following table lists the compensation and benefits that Allstate would
pay or provide to the named executives in various scenarios involving a
termination of employment, other than compensation and benefits generally
available to all salaried employees.
COMPENSATION ELEMENTS
NON-
QUALIFIED
BASE SEVERANCE ANNUAL RESTRICTED PENSION
TERMINATION SCENARIOS SALARY PAY INCENTIVE STOCK OPTIONS STOCK UNITS BENEFITS/(1)/
--------------------- ------------ ----------------- -------------- ---------------- ------------- --------------
VOLUNTARY TERMINATION... Ceases None Forfeited Unvested are Forfeited Distributions
immediately unless forfeited, commence
terminated vested expire per plan
on last day at the earlier
of fiscal of three
year months or
normal
expiration
INVOLUNTARY Ceases None Forfeited Unvested are Forfeited Distributions
TERMINATION/(3)/....... immediately unless forfeited, commence
terminated vested expire per plan
on last day at the earlier
of fiscal of three
year months or
normal
expiration
RETIREMENT/(4)/......... Ceases None Pro rated for Continue to RSUs Distributions
Immediately the year vest upon continue to commence
based on normal or vest upon per plan
actual health normal
performance retirement; retirement.
for the year unvested Forfeited in
forfeited upon early
early retirement.
retirement. All
expire at
earlier of five
years or
normal
expiration
TERMINATION DUE TO Ceases Lump sum Pro rated at Vest Vest Immediately
CHANGE IN CONTROL/(5)/. Immediately equal to a target immediately immediately payable
multiple of (reduced by upon a change upon a upon a
salary, a any actually in control change in change in
multiple of paid) control control
annual
incentive at
target and
pension
enhancement/(6)/
DEATH................... One month None Pro rated for Vest Vest Distributions
salary paid year based immediately immediately commence
upon death on actual and expire at per plan
performance earlier of two
for the year years or
normal
expiration
HEALTH,
WELFARE AND
DEFERRED OTHER
TERMINATION SCENARIOS COMPENSATION/(2)/ BENEFITS
--------------------- ------------------ ----------------
VOLUNTARY TERMINATION... Distributions None
commence per
participant
election
INVOLUNTARY Distributions None
TERMINATION/(3)/....... commence per
participant
election
RETIREMENT/(4)/......... Distributions None
commence per
participant
election
TERMINATION DUE TO Immediately Outplacement
CHANGE IN CONTROL/(5)/. payable upon a services
change in control provided;
continuation
coverage
subsidized/(7)/
DEATH................... Payable within None
90 days
81
NON-
QUALIFIED
BASE SEVERANCE ANNUAL RESTRICTED PENSION DEFERRED
TERMINATION SCENARIOS SALARY PAY INCENTIVE STOCK OPTIONS STOCK UNITS BENEFITS/(1)/ COMPENSATION/(2)/
--------------------- ------------ --------- -------------- --------------- ----------- ------------ ----------------
DISABILITY....... Ceases None Pro rated for Vest Forfeited Participant Distributions
Immediately year based immediately may commence per
on actual and expire at request participant
performance earlier of two payment if election
for the year years or age 50 or
normal older
expiration
HEALTH,
WELFARE AND
OTHER
TERMINATION SCENARIOS BENEFITS
--------------------- -------------
DISABILITY....... Supplemental
Long Term
Disability
benefits
--------
/(1)/See the section titled Pension Benefits for further detail on
non-qualified pension benefits and timing of payments.
/(2)/See the Non-Qualified Deferred Compensation section for additional
information on the Deferred Compensation Plan and distribution options
available.
/(3)/Examples of "Involuntary Termination" independent of a change-in-control
include performance-related terminations; terminations for employee
dishonesty and violation of Allstate rules, regulations, or policies; and
terminations resulting from lack of work, rearrangement of work, and
reduction in force.
/(4)/Retirement for purposes of the annual cash incentive plans is defined as
voluntary termination on or after the date the named executive attains age
55 with at least 20 years of service. The "normal retirement date" under
the equity awards is the date on or after the date the named executive
attains age 60 with at least one year of service. The "health retirement
date" is the date on which the named executive terminates for health
reasons after attaining age 50, but before attaining age 60, with at least
ten years of continuous service. The "early retirement date" is the date
the named executive attains age 55 with 20 years of service.
/(5)/Of the named executives, only Messrs. Winter, Pintozzi, and Easley are
subject to change-in-control agreements. In general, a change-in-control
is one or more of the following events: (1) any person acquires 30% or
more of the combined voting power of Allstate common stock within a
12-month period; (2) any person acquires more than 50% of the combined
voting power of Allstate common stock; (3) certain changes are made to the
composition of the Board; or (4) the consummation of a merger,
reorganization, or similar transaction. These triggers were selected
because, in a widely held company the size of Allstate, they could each
result in a substantial change in management. Effective upon a
change-in-control, the named executives become subject to covenants
prohibiting competition and solicitation of employees, customers, and
suppliers at any time until one year after termination of employment.
During the two-year period following a change-in-control, the
change-in-control agreements provide for a minimum salary, annual cash
incentive awards, and other benefits. In addition, they provide that the
named executives' positions, authority, duties, and responsibilities will
be at least commensurate in all material respects with those held prior to
the change-in-control. If a named executive incurs legal fees or other
expenses in an effort to enforce the change-in-control agreement, Allstate
will reimburse the named executive for these expenses unless it is
established by a court that the named executive had no reasonable basis
for the claim or acted in bad faith.
/(6)/For those named executives subject to change-in-control agreements,
severance benefits would be payable if the named executive's employment is
terminated either by Allstate without "cause" or by the executive for
"good reason" as defined in the agreements during the two-year period
following the change-in-control. Cause means the named executive has been
convicted of a felony or other crime involving fraud or dishonesty, has
willfully or intentionally breached the change-in-control agreement, has
habitually neglected his or her duties, or has engaged in willful or
reckless material misconduct in the performance of his or her duties. Good
reason includes a material diminution in a named executive's base
compensation, authority, duties, or responsibilities, a material change in
the geographic location where the named executive performs services, or a
material breach of the change-in-control agreement by Allstate. Mr.
Winter's cash severance payment would be three times salary and three
times annual incentive at target. Messrs. Pintozzi's and Easley's cash
severance payments would be two times their respective salary and two
times their respective annual incentive at target.
For the named executives subject to change-in-control agreements, the
pension enhancement is a lump sum payment equal to the positive difference,
if any, between: (a) the sum of the lump-sum values of each maximum annuity
that would be payable to the named executive under any defined benefit plan
(whether or not qualified under Section 401(a) of the Internal Revenue Code)
if the named executive had: (i) become fully vested in all such benefits,
(ii) attained as of the named executive's termination date an age that is
two years (three years for Mr. Winter) greater than the named executive's
actual age, (iii) accrued a number of years of service that is two years
(three years for Mr. Winter) greater than the number of years of service
actually accrued by the named executive as of the named executive's
termination date, and (iv) received a lump-sum severance benefit consisting
of two times base salary (three for Mr. Winter), two (three for Mr. Winter)
times annual incentive cash compensation calculated at target, plus the 2010
annual incentive cash award as covered compensation in equal monthly
installments during the two-year period following the named executive's
termination date (a three-year period applies to Mr. Winter); and (b) the
lump-sum values of the maximum annuity benefits vested and payable to named
executive under each defined benefit plan that is qualified under
Section 401(a) of the Internal Revenue Code plus the aggregate amounts
simultaneously or previously paid to the named executive under the defined
benefit plans (whether or not qualified under Section 401(a)). The
calculation of the lump sum amounts payable under this formula does not
impact the benefits payable under the ARP or the SRIP.
/(7)/For the named executives subject to change-in-control agreements, if the
named executive's employment is terminated by reason of death during the
two-year period commencing on the date of a change-in-control, the named
executive's estate or beneficiary will be entitled to survivor and other
benefits, including retiree medical coverage, if eligible, that are not
less favorable than the most favorable benefits available to the estates
or surviving families of peer executives at Allstate. In the event of
termination by reason of disability, Allstate will pay disability and
other benefits, including supplemental long-term disability benefits and
retiree medical coverage, if eligible, that are not less favorable than
the most favorable benefits available to disabled peer executives. In
addition, such survivor or disability benefits shall not be materially
less favorable, in the aggregate, than the most favorable benefits in
effect during the 90-day period preceding the change-in-control.
82
ESTIMATE OF POTENTIAL PAYMENTS UPON TERMINATION/(1)/
The table below describes the amount of compensation payable to each named
executive or the value of benefits provided to the named executives, calculated
in a manner consistent with the allocation of compensation expenses to Lincoln
Benefit under the Service and Expense Agreement for 2010, that exceed the
compensation or benefits generally available to all salaried employees in each
termination scenario. The "Total" column in the following table does not
reflect compensation or benefits previously accrued or earned by the named
executives such as deferred compensation and non-qualified pension benefits.
The payment of the 2010 annual cash incentive award and any 2010 salary earned
but not paid in 2010 due to Allstate's payroll cycle are not included in these
tables because these amounts are payable to the named executives regardless of
termination, death, or disability. Benefits and payments are calculated
assuming a December 31, 2010, employment termination date.
RESTRICTED
STOCK STOCK
OPTIONS-- UNITS-- WELFARE EXCISE TAX
UNVESTED UNVESTED BENEFITS AND REIMBURSEMENT
AND AND OUTPLACEMENT AND TAX
SEVERANCE ACCELERATED ACCELERATED SERVICES GROSS-UP/(2)/ TOTAL
NAME ($) ($) ($) ($) ($) ($)
---- --------- ----------- ----------- ------------ ------------- ---------
MR. WINTER
Voluntary Termination/Retirement/(3)/..... 0 0 0 0 0 0
Involuntary Termination................... 0 0 0 0 0
Termination due to Change-in-Control/(4)/. 1,202,254 34,770 268,119 10,263/(5)/ 448,200 1,963,606
Death..................................... 34,770 268,119 0 0 302,889
Disability................................ 34,770 0 637,274/(6)/ 0 672,044
MR. PINTOZZI
Voluntary Termination/Retirement/(3)/..... 0 0 0 0 0 0
Involuntary Termination................... 0 0 0 0 0
Termination due to Change-in-Control/(4)/. 442,285 234,947 268,513 13,593/(5)/ 0 959,338
Death..................................... 0 234,947 268,513 0 0 503,460
Disability................................ 0 234,947 0 707,459/(6)/ 0 942,406
MR. DAHL
Voluntary Termination/Retirement/(3)/..... 0 0 0 0 0 0
Involuntary Termination................... 0 0 0 0 0
Termination due to Change-in-Control/(4)/. 0 96,895/(7)/ 133,609/(7)/ 0 0 230,504
Death..................................... 96,895 133,609 0 0 230,504
Disability................................ 96,895 0 703,387/(6)/ 0 800,282
MR. EASLEY
Voluntary Termination/Retirement/(3)/..... 0 0 0 0 0 0
Involuntary Termination................... 0 0 0 0 0
Termination due to Change-in-Control/(4)/. 381,650 190,598 238,215 12,614/(5)/ 0 823,077
Death..................................... 190,598 238,215 0 0 428,813
Disability................................ 190,598 0 397,373/(6)/ 0 587,971
MR. BECKER
Voluntary Termination/Retirement/(3)/..... 0 0 0 0 0 0
Involuntary Termination................... 0 0 0 0 0
Termination due to Change-in-Control/(4)/. 0 56,370/(7)/ 51,473/(7)/ 0 0 107,843
Death..................................... 0 56,370 51,473 0 0 107,843
Disability................................ 0 56,370 0 186,591/(6)/ 0 242,961
--------
/(1)/A "0" indicates that either there is no amount payable to the named
executive or no amount payable to the named executive that is not also
made available to all salaried employees.
/(2)/Certain payments made as a result of a change in control are subject to a
20% excise tax imposed on the named executive by Section 4999 of the Code.
The Excise Tax Reimbursement and Tax Gross-up is the amount Allstate would
pay to the named executive as reimbursement for the 20% excise tax plus a
tax gross-up for any taxes incurred by the named executive resulting from
the reimbursement of such excise tax. The estimated amounts of
reimbursement of any resulting excise taxes were determined without regard
to the effect that restrictive covenants and any other facts and
circumstances may have on the amount of excise taxes, if any, that
ultimately might be payable in the event these payments were made to a
named executive which is not subject to reliable advance prediction or a
reasonable estimate. Allstate believes providing an excise tax gross-up
mitigates the possible disparate tax treatment for similarly situated
employees and is appropriate in this limited circumstance to prevent the
intended value of a benefit from being significantly and arbitrarily
reduced. However, starting in 2011, new change-in-control agreements will
not include an excise tax gross-up provision.
83
/(3)/As of December 31, 2010 none of the named executives was eligible to
retire in accordance with Allstate's policy or the terms of any of the
Allstate compensation and benefit plans including the equity incentive
plans.
/(4)/The values in this change-in-control row represent amounts paid if both
the change-in-control and termination occur on December 31, 2010. If there
was a change-in-control that did not result in a termination, the amounts
payable to each named executive would be as follows:
STOCK OPTIONS-- TOTAL--
UNVESTED AND RESTRICTED STOCK UNITS-- UNVESTED AND
ACCELERATED UNVESTED AND ACCELERATED ACCELERATED
NAME ($) ($) ($)
---- --------------- ------------------------ ------------
Mr. Winter... 34,770 268,119 302,889
Mr. Pintozzi. 234,947 268,513 503,460
Mr. Dahl..... 96,895 133,609 230,504
Mr. Easley... 190,598 238,215 428,813
Mr. Becker... 56,370 51,473 107,843
A change-in-control also would accelerate the distribution of non-qualified
deferred compensation and SRIP benefits for Messrs. Winter, Pintozzi, and
Easley. Within five business days after the effective date of a
change-in-control, each named executive subject to a change-in-control
agreement would receive any deferred compensation account balances and a
lump sum payment equal to the present value of the named executive's SRIP
benefit. Please see the Non-Qualified Deferred Compensation at Fiscal Year
End 2010 table and footnote 2 to the Pension Benefits table in the
Retirement Benefits section for details regarding the applicable amounts for
each named executive.
/(5)/The Welfare Benefits and Outplacement Services amount includes the cost to
provide certain welfare benefits to the named executive and family during
the period which the named executive is eligible for continuation coverage
under applicable law. The amount shown reflects Allstate's costs for these
benefits or programs assuming an 18-month continuation period. The value
of outplacement services for Mr. Winter is $20,000 and $15,000 for Messrs.
Pintozzi and Easley.
/(6)/The named executives are eligible to participate in Allstate's
supplemental long-term disability plan for employees whose annual earnings
exceed the level which produces the maximum monthly benefit provided by
the Allstate Long Term Disability Plan (Basic Plan). The benefit is equal
to 50% of the named executive's qualified annual earnings divided by
twelve and rounded to the nearest one hundred dollars, reduced by $7,500,
which is the maximum monthly benefit payment that can be received under
the Basic Plan. The amount reflected assumes the named executive remains
totally disabled until age 65 and represents the full present value of the
monthly benefit payable until age 65.
/(7)/Messrs. Dahl and Becker did not have change-in control agreements in
place. However, pursuant to the terms of their equity awards unvested
stock options and restricted stock units would have become immediately
payable upon a change-in control.
RISK MANAGEMENT AND COMPENSATION
Allstate management has reviewed its compensation policies and practices and
believes that they are appropriately structured, that they are consistent with
its key operating priority of keeping Allstate financially strong, and that
they avoid providing incentives for employees to engage in unnecessary and
excessive risk taking. Allstate believes that executive compensation has to be
examined in the larger context of an effective risk management framework and
strong internal controls. The Allstate Board and its Audit Committee both play
an important role in risk management oversight, including reviewing how
management measures, evaluates, and manages the corporation's exposure to risks
posed by a wide variety of events and conditions. In addition, the Compensation
and Succession Committee of Allstate employs an independent executive
compensation consultant each year to assess Allstate's executive pay levels,
practices, and overall program design.
A review and assessment of potential compensation-related risks was
conducted by Allstate management and reviewed by the Chief Risk Officer.
Performance related incentive plans were analyzed using a process developed in
conjunction with our independent executive compensation consultant.
The 2010 risk assessment specifically noted that our compensation programs:
. provide a balanced mix of cash and equity through annual and long-term
incentives to align with short-term and long-term business goals.
. utilize a full range of performance measures that Allstate believes
correlate to long-term Allstate shareholder value creation.
84
. incorporate strong governance practices, including paying cash incentive
awards only after a review of executive and corporate performance.
. enable the use of negative discretion to adjust annual incentive
compensation payments when formulaic payouts are not warranted due to
other circumstances.
Furthermore, to ensure Allstate's compensation programs do not motivate
imprudent risk taking, awards to Allstate executive officers, including
Mr. Winter, made after May 19, 2009, under the 2009 Equity Incentive Plan and
awards made under the Annual Executive Incentive Plan are subject to clawback
in the event of certain financial restatements.
PERFORMANCE MEASURES
Information regarding our performance measures is disclosed in the limited
context of Allstate's annual and long-term cash incentive awards and should not
be understood to be statements of management's expectations or estimates of
results or other guidance. We specifically caution investors not to apply these
statements to other contexts.
The following are descriptions of the performance measures used for
Allstate's annual cash incentive awards for 2010 and its long-term cash
incentive awards for the 2008-2010 cycle which may be applied to compensation
of Lincoln Benefit's named executives. These measures are not GAAP measures.
They were developed uniquely for incentive compensation purposes and are not
reported items in our financial statements. Some of these measures use non-GAAP
measures and operating measures. The Committee has approved the use of non-GAAP
and operating measures when appropriate to drive executive focus on particular
strategic, operational, or financial factors or to exclude factors over which
our executives have little influence or control, such as capital market
conditions.
ANNUAL CASH INCENTIVE AWARDS FOR 2010
OPERATING INCOME: This measure is used to assess financial performance. This
measure is equal to net income adjusted to exclude the after tax effects of the
items listed below:
. Realized capital gains and losses (which includes the related effect on
the amortization of deferred acquisition and deferred sales inducement
costs) except for periodic settlements and accruals on certain non-hedge
derivative instruments.
. Gains and losses on disposed operations.
. Adjustments for other significant non-recurring, infrequent, or unusual
items, when (a) the nature of the charge or gain is such that it is
reasonably unlikely to recur within two years or (b) there has been no
similar charge or gain within the prior two years.
CORPORATE MEASURE
ADJUSTED OPERATING INCOME PER DILUTED SHARE: This measure is used to assess
financial performance. The measure is equal to net income adjusted to exclude
the after-tax effects of the items listed below, divided by the weighted
average shares outstanding on a diluted basis:
. Realized capital gains and losses (which includes the related effect on
the amortization of deferred acquisition and deferred sales inducement
costs) except for periodic settlements and accruals on certain non-hedge
derivative instruments.
. Gains and losses on disposed operations.
. Adjustments for other significant non-recurring, infrequent, or unusual
items, when (a) the nature of the charge or gain is such that it is
reasonably unlikely to recur within two years or (b) there has been no
similar charge or gain within the prior two years.
85
. Restructuring and related charges.
. Effects of acquiring businesses.
. Negative operating results of sold businesses.
. Underwriting results of the Discontinued Lines and Coverages segment.
. Any settlement, awards, or claims paid as a result of lawsuits and other
proceedings brought against Allstate subsidiaries regarding the scope
and nature of coverage provided under insurance policies issued by such
companies.
ALLSTATE FINANCIAL MEASURES
ADJUSTED OPERATING INCOME: This is a measure Allstate management uses to
assess the profitability of the business. The Allstate Financial segment
measure, operating income, is adjusted to exclude the after tax effects of
restructuring and related charges and the potential amount by which 2010
guaranty fund assessments related to insured solvencies exceed $6 million. For
disclosure of the Allstate Financial segment measure see footnote 18 to
Allstate's audited financial statements.
ADJUSTED OPERATING RETURN ON EQUITY: This is a measure Allstate management
uses to assess profitability and capital efficiency. This measure is calculated
using adjusted operating income, as defined above, as the numerator, and
Allstate Financial's adjusted average subsidiary shareholder's equity as the
denominator. Adjusted subsidiary shareholder's equity is the sum of
subsidiaries' shareholder's equity for Allstate Life Insurance Company,
Allstate Bank, a proportionate share of American Heritage Life Investment
Corporation and certain other minor entities and excludes the effect of
unrealized net capital gains and losses, net of tax and deferred acquisition
costs. The average adjusted shareholder's equity is calculated by dividing the
sum of Allstate Financial's adjusted shareholder's equity at year-end 2009 and
at the end of each quarter of 2010 by five.
ALLSTATE EXCLUSIVE AGENCY PROPRIETARY AND AWD WEIGHTED SALES: This operating
measure is used to quantify the current year sales of financial products
through Allstate's Exclusive Agency proprietary distribution channel, including
agencies and direct, and the Allstate Workplace Division. The measure is
calculated by applying a percentage or factor against the premium or deposits
of life insurance, annuities and Allstate Workplace Division products that vary
based on the relative expected profitability of the specific product. For
non-Allstate Workplace Division proprietary products sold through Allstate
Financial Services channel, the percentage or factors are consistent with those
used for production credits by Allstate Protection.
ALLSTATE FINANCIAL PORTFOLIO RELATIVE TOTAL RETURN:
PORTFOLIO RELATIVE TOTAL RETURN: Management uses the three following
measures to assess the value of active portfolio management relative to the
total return of a market based benchmark. The measure is calculated as the
difference, in basis points, of the specific portfolio total return over a
designated benchmark. Total return is principally determined using industry
standards and the same sources used in preparing the financial statements to
determine fair value. (See footnotes to our audited financial statements for
our methodologies for estimating the fair value of our investments.) In
general, total return represents the annualized increase or decrease, expressed
as a percentage, in the value of the portfolio. Time weighted returns are
utilized. The designated benchmark is a composite of pre-determined, customized
indices which reflect the investment risk parameters established in investment
policies by the boards of the relevant subsidiaries, weighted in proportion to
our investment plan, in accordance with our investment policy. The specific
measures and investments included are listed below:
. PROPERTY LIABILITY PORTFOLIO RELATIVE TOTAL RETURN: Total return for
Property-liability investments and Kennett investments.
. ALLSTATE FINANCIAL PORTFOLIO RELATIVE TOTAL RETURN: Total return for
Allstate Financial investments.
86
. ALLSTATE PENSION PLANS PORTFOLIO RELATIVE TOTAL RETURN: Total return for
the Allstate Retirement Plan and Agents Pension Plan investments.
LONG-TERM CASH INCENTIVE AWARDS
AVERAGE ADJUSTED RETURN ON EQUITY RELATIVE TO PEERS: This measure is used to
assess Allstate's financial performance against its peers. It is calculated as
Allstate's ranked position relative to the insurance company peer group based
upon three-year average adjusted return on equity, calculated on the same basis
for Allstate and each of the peer insurance companies. Three-year average
adjusted return on equity is the sum of the annual adjusted return on equity
for each of the three years in the cycle divided by three. The annual adjusted
return on equity is calculated as the ratio of net income divided by the
average of shareholders' equity at the beginning and at the end of the year
after excluding the component of accumulated other comprehensive income for
unrealized net capital gains and losses.
ALLSTATE FINANCIAL RETURN ON TOTAL CAPITAL: This is a measure management
uses to measure the efficiency of capital utilized in the business. Three-year
Allstate Financial return on total capital is the sum of the annual adjusted
return on subsidiaries' shareholder's equity for each of the three years
divided by three. The annual adjusted return on subsidiaries' shareholder's
equity is the Allstate Financial measure, net income, divided by the average
subsidiaries' shareholder's equity at the beginning and at the end of the year.
The subsidiaries' shareholder's equity is the sum of the subsidiaries'
shareholder's equity for Allstate Life Insurance Company, Allstate Bank,
American Heritage Life Investment Corporation, and certain other minor
entities, adjusted to exclude the loan protection business and excluding the
component of accumulated other comprehensive income for unrealized net capital
gains. (See note 18 to Allstate's audited financial statements for Allstate
Financial net income.)
ALLSTATE PROTECTION GROWTH IN POLICIES IN FORCE OVER THREE-YEAR CYCLE: This
is a measure used by management to assess growth in the number of policies in
force, which is a driver of premiums written. The measure is calculated as the
sum of the percent increase in each of the three years in the total number of
policies in force at the end of the year over the beginning of the year. The
measure excludes property insurance, Allstate Motor Club, and the loan
protection business and includes Allstate Canada.
ITEM 11(M).SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS.
The following table shows the number of Lincoln Benefit shares owned by any
beneficial owner who owns more than five percent of any class of Lincoln
Benefit's voting securities.
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT OF
TITLE OF CLASS BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS
(A) (B) (C) (D)
-------------- -------------------------------- ------------------------------- ----------
Capital Stock Allstate Life Insurance Company 100,000 100%
3100 Sanders Road,
Northbrook, IL 60062
N/A Allstate Insurance Company Indirect voting and investment N/A
2775 Sanders Road, power of shares owned by
Northbrook, IL 60062 Allstate Life Insurance
Company
N/A The Allstate Corporation Indirect voting and investment N/A
2775 Sanders Road, power of shares owned by
Northbrook, IL 60062 Allstate Life Insurance
Company
87
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table shows the number of shares of Allstate common stock
beneficially owned by each director and named executive officer of Lincoln
Benefit individually, and by all executive officers and directors of Lincoln
Benefit as a group. Shares reported as beneficially owned include shares held
indirectly through the Allstate 401(k) Savings Plan and other shares held
indirectly, as well as shares subject to stock options exercisable on or prior
to May 9, 2011 and restricted stock units for which restrictions expire on or
prior to May 9, 2011. The percentage of Allstate shares of common stock
beneficially owned by any Lincoln Benefit director, named executive officer or
by all directors and executive officers of Lincoln Benefit as a group does not
exceed 1%. The following share amounts are as of March 10, 2011. As of
March 10, 2010, none of these shares were pledged as security.
COMMON STOCK SUBJECT TO
OPTIONS EXERCISABLE AND
RESTRICTED STOCK UNITS
FOR WHICH RESTRICTIONS
EXPIRE ON OR PRIOR
AMOUNT AND NATURE OF TO MAY 9, 2011 -
BENEFICIAL OWNERSHIP OF INCLUDED IN
ALLSTATE COMMON STOCK COLUMN (A)
NAME OF BENEFICIAL OWNER (A) (B)
------------------------ ------------------------ ------------------------
Anurag Chandra........... 0 0
Robert K. Becker......... 17,535 12,162
Lawrence W. Dahl......... 34,755 33,178
Matthew S. Easley........ 95,825 89,126
Susan L. Lees............ 39,344 27,732
John C. Pintozzi......... 102,679 97,514
Matthew E. Winter........ 8539 8385
ALL DIRECTORS AND
EXECUTIVE OFFICERS AS
A GROUP................ 281,142 255,935
88
ITEM 11(N)TRANSACTIONS WITH RELATED PERSONS, PROMOTERS AND CERTAIN CONTROL
PERSONS.
TRANSACTIONS WITH RELATED PERSONS.
This table describes certain intercompany agreements involving Lincoln
Benefit and the following companies:
. Allstate Life Insurance Company ("ALIC"), the direct parent of Lincoln
Benefit;
. Allstate Insurance Company ("AIC"), an indirect parent of Lincoln
Benefit; and
. The Allstate Corporation ("AllCorp"), the ultimate indirect parent of
Lincoln Benefit.
APPROXIMATE DOLLAR VALUE
OF THE AMOUNT INVOLVED IN RELATED PERSON(S) INVOLVED IN THE TRANSACTION/1/ AND
THE TRANSACTION, PER FISCAL THE APPROXIMATE DOLLAR VALUE OF THE AMOUNT OF THE
TRANSACTION DESCRIPTION YEAR RELATED PERSON'S INTEREST IN THE TRANSACTION ($)
----------------------- ----------------------- ---------------------------------------------------
($) ALIC AIC ALLCORP
Investment Management Agreement 2008 131,668,584 68,941,225/2/ 51,404,171 677,981
among Allstate Investments, LLC,
Allstate Insurance Company, The 2009 142,073,012 76,392,634/2/ 54,248,353 1,151,990
Allstate Corporation and certain
affiliates effective January 1, 2007. 2010 130,793,008 73,282,918/2/ 47,445,127 687,957
Tax Sharing Agreement among The 2008 465,439,826/3/ (109,322,083) 633,316,282 (121,960,368)
Allstate Corporation and certain
affiliates dated as of November 12, 2009 (1,173,212,154)/3/ (534,572,879) (467,570,173) (121,813,486)
1996, as supplemented by Supplemental
Intercompany Tax Sharing Agreement 2010 (113,770,599)/3/ (621,234,096) 647,559,256 (146,676,325)
between Allstate Life Insurance
Company and Lincoln Benefit Life
Company effective December 21, 2000.
Cash Management Services Master 2008 1,338,376/4/ 198,098/5/ 816,143/5/ N/A
Agreement between Allstate Insurance
Company, Allstate Bank (aka Allstate 2009 1,527,072/4/ 158,312/5/ 1,052,781/5/
Federal Savings Bank), and certain
affiliates dated March 16, 1999, as 2010 967,620/4/ 76,166/5/ 694,117/5/
amended by Amendment No.1 effective
January 5, 2001, and Amendment No. 2
entered into November 8, 2002, between
Allstate Insurance Company, Allstate
Bank and Allstate Motor Club, Inc., and
as supplemented by the Premium
Depository Service Supplement dated as
of September 30, 2005, the Variable
Annuity Service Supplement dated
November 10, 2005, and the Sweep
Agreement Service Supplement dated as
of October 11, 2006.
--------
/1/ Each identified Related Person is a Party to the transaction.
/2/ Gross amount of expense received under the transaction.
/3/ Total amounts paid to Internal Revenue Service.
/4/ Each identified Related Person is a Party to the transaction.
/5/ Total fees collected for all bank accounts covered under the transaction.
89
APPROXIMATE DOLLAR VALUE
OF THE AMOUNT INVOLVED IN RELATED PERSON(S) INVOLVED IN THE TRANSACTION/1/ AND
THE TRANSACTION, PER FISCAL THE APPROXIMATE DOLLAR VALUE OF THE AMOUNT OF THE
TRANSACTION DESCRIPTION YEAR RELATED PERSON'S INTEREST IN THE TRANSACTION ($)
----------------------- ------------------------ -------------------------------------------------
($) ALIC AIC ALLCORP
Amended and Restated Service and 2008 3,295,180,640 215,640,945/2/ 2,186,281,461/2/ 5,351,262/2/
Expense Agreement between Allstate
Insurance Company, The Allstate 2009 3,451,765,246 180,154,068/2/ 1,937,571,496/2/ 2,510,800/2/
Corporation and certain affiliates effective
January 1, 2004, as amended by 2010 3,619,106,706 175,950,701/2/ 1,823,391,816/2/ 4,191,150/2/
Amendment No. 1 effective January 1,
2009, and as supplemented by New York
Insurer Supplement to Amended and
Restated Service and Expense Agreement
between Allstate Insurance Company, The
Allstate Corporation, Allstate Life
Insurance Company of New York and
Intramerica Life Insurance Company,
effective March 5, 2005.
Reinsurance Agreements between Lincoln 2008 766,582,944/6/ 766,582,944/6/ N/A N/A
Benefit Life Company and Allstate Life
Insurance Company: Coinsurance 2009 873,759,209/6/ 873,759,209/6/
Agreement effective December 31, 2001;
Modified Coinsurance Agreement 2010 888,764,276/6/ 888,764,276/6/
effective December 31, 2001; Modified
Coinsurance Agreement effective
December 31, 2001.
Intercompany Loan Agreement among 2008 400,040,660 50,014,792/7/ 1,732,736 400,040,660
The Allstate Corporation, Allstate Life
Insurance Company, Lincoln Benefit Life 2009 86,111,674 0/8/ 86,111,674 86,111,674
Company and other certain subsidiaries of
The Allstate Corporation dated 2010 149,971,764 149,971,764 149,971,764 149,971,764
February 1, 1996.
Agreement for the Settlement of State and 2008 2,089,067 356,331/9/ 1,732,736 N/A
Local Tax Credits among Allstate
Insurance Company and certain affiliates 2009 941,379 193,504/9/ 441,024
effective January 1, 2007.
2010 835,435 236,540/9/ 474,132
--------
/1/ Each identified Related Person is a Party to the transaction.
/2/ Gross amount of expense received under the transaction.
/6/ Net reinsurance income.
/7/ Amounts loaned and repaid.
/8/ No loans outstanding at year end.
/9/ Value of transfer transactions.
90
REVIEW AND APPROVAL OF INTERCOMPANY AGREEMENTS
All intercompany agreements to which Lincoln Benefit is a party are approved
by Lincoln Benefit's Board of Directors as well as by the board of any other
affiliate of The Allstate Corporation which is a party to the agreement.
Intercompany agreements are also submitted for approval to the Nebraska
Department of Insurance, Lincoln Benefit's domestic regulator, and any
additional states in which Lincoln Benefit might be commercially domiciled
pursuant to the applicable state's insurance holding company systems act. This
process is documented in an internal procedure that captures the review and
approval process of all intercompany agreements. All approvals are maintained
in Lincoln Benefit's corporate records.
While there is no formal process for the review and approval of related
person transactions between unaffiliated entities specific to Lincoln Benefit,
all directors and executive officers of Lincoln Benefit are subject to the
Allstate Code of Ethics ("Code"). The Code includes a written conflict of
interest policy that was adopted by the Board of Directors of the Allstate
Corporation, the ultimate parent company of Lincoln Benefit. Any potential
relationship or activity that could impair independent thinking and judgment,
including holding a financial interest in a business venture that is similar to
Allstate, or in a business that has a relationship with Allstate, must be
disclosed to Human Resources. Human Resources will work with representatives
from the Law Department, including Enterprise Business Conduct, to determine
whether an actual conflict of interest exists. Each director and executive
officer must sign a Code of Ethics certification annually.
INDEPENDENCE STANDARDS FOR DIRECTORS
Although not subject to the independence standards of the New York Stock
Exchange, for purposes of this S-1 registration statement, Lincoln Benefit has
applied the independence standards required for listed companies of the New
York Stock Exchange to the Board of Directors. Applying these standards,
Lincoln Benefit has been determined that none of the directors are considered
to be independent.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board of Directors of Lincoln Benefit does not have a compensation
committee. All compensation decisions are made by The Allstate Corporation, as
the ultimate parent company of Lincoln Benefit. No executive officer of Lincoln
Benefit served as a member of the compensation committee of another entity for
which any executive officer served as a director for Lincoln Benefit.
OTHER INFORMATION
A section entitled "Experts" is added to your prospectus as follows:
EXPERTS
The financial statements and the related financial statement schedules
included herein have been audited by Deloitte & Touche LLP, an independent
registered public accounting firm, as stated in their report appearing herein.
Such financial statements and financial statement schedules are included in
reliance upon the report of such firm given upon their authority as experts in
accounting and auditing.
PRINCIPAL UNDERWRITER
Contingent on regulatory approval, ALFS, Inc ("ALFS") is expected to merge
into Allstate Distributors, LLC ("ADLLC"), effective April 29, 2011. At that
time, ALFS will assign its rights and delegate its duties as principal
underwriter to ADLLC. This change will have no effect on Lincoln Benefit's
obligations to you under your Contract. The section of your prospectus
concerning the principal underwriter is amended accordingly.
Contingent on regulatory approval, ADLLC serves as distributor of the
securities registered herein. The securities offered herein are sold on a
continuous basis, and there is no specific end date for the offering.
91
ADLLC, an affiliate of Lincoln Benefit, is a wholly owned subsidiary of
Allstate Life Insurance Company. ADLLC is a registered broker dealer under the
Securities and Exchange Act of 1934, as amended, and is a member of the
Financial Industry Regulatory Authority. ADLLC is not required to sell any
specific number or dollar amount of securities, but will use its best efforts
to sell the securities offered.
ADMINISTRATION
We have primary responsibility for all administration of the Contracts and
the Variable Account. We entered into an administrative services agreement with
The Prudential Insurance Company of America ("PICA") whereby, PICA or an
affiliate provides administrative services to the Variable Account and the
Contracts on our behalf. In addition, PICA entered into a master services
agreement with se/2/, inc., of 5801 SW 6th Avenue, Topeka, Kansas 66636,
whereby se/2/, inc. provides certain business process outsourcing services with
respect to the Contracts. se/2/, inc. may engage other service providers to
provide certain administrative functions. These service providers may change
over time, and as of December 31, 2010, consisted of the following: Keane BPO,
LLC (administrative services) located at 625 North Michigan Avenue, Suite 1100,
Chicago, IL 60611; RR Donnelly Global Investment Markets (compliance printing
and mailing) located at 111 South Wacker Drive, Chicago, IL 60606; Jayhawk File
Express, LLC (file storage and document destruction) located at 601 E. 5th
Street, Topeka, KS 66601-2596; Co-Sentry.net, LLC (back-up printing and
disaster recovery) located at 9394 West Dodge Rd, Suite 100, Omaha, NE 68114;
Convey Compliance Systems, Inc. (withholding calculations and tax statement
mailing) located at 3650 Annapolis Lane, Suite 190, Plymouth, MN 55447;
Spangler Graphics, LLC (compliance mailings) located at 29305 44th Street,
Kansas City, KS 66106; Veritas Document Solutions, LLC (compliance mailings)
located at 913 Commerce Ct, Buffalo Grove, IL 60089; Records Center of Topeka,
a division of Underground Vaults & Storage, Inc. (back-up tapes storage)
located at 1540 NW Gage Blvd. #6, Topeka, KS 66618; EquiSearch Services, Inc.
(lost shareholder search) located at 11 Martime Avenue, Suite 665, White
Plains, NY 10606; ZixCorp Systems, Inc. (email encryption) located at 2711 N.
Haskell Ave., Suite 2300, Dallas, TX 75204; DST Systems, Inc. (FAN mail,
positions, prices) located at 333 West 11 Street, 5th Floor, Kansas City, MO
64105.
In administering the Contracts, the following services are provided, among
others:
. maintenance of Contract Owner records;
. Contract Owner services;
. calculation of unit values;
. maintenance of the Variable Account; and
. preparation of Contract Owner reports.
92
THE CONSULTANT SOLUTIONS VARIABLE ANNUITIES
(CLASSIC, PLUS, ELITE, SELECT)
LINCOLN BENEFIT LIFE COMPANY
STREET ADDRESS: 5801 SW 6TH AVE. TOPEKA, KS 66606-0001
MAILING ADDRESS: P.O. BOX 758561, TOPEKA, KS 66675-8561
TELEPHONE NUMBER: 800-457-7617 / FAX NUMBER: 1-785-228-4584
1940 ACT FILE NUMBER: 811-07924
1933 ACT FILE NUMBER: 333-109688
PROSPECTUS DATED MAY 1, 2011
--------------------------------------------------------------------------------
Lincoln Benefit Life Company ("LINCOLN BENEFIT") is the issuer of the following
individual and group flexible premium deferred variable annuity contracts
(each, a "CONTRACT"):
. CONSULTANT SOLUTIONS CLASSIC
. CONSULTANT SOLUTIONS PLUS
. CONSULTANT SOLUTIONS ELITE
. CONSULTANT SOLUTIONS SELECT
EFFECTIVE NOVEMBER 30, 2006, THIS PRODUCT IS NO LONGER BEING OFFERED FOR SALE.
This prospectus contains information about each Contract that you should know
before investing. Please keep it for future reference. Not all Contracts may be
available in all states or through your sales representative. Please check with
your sales representative for details.
Each Contract currently offers several investment alternatives ("INVESTMENT
ALTERNATIVES"). The Investment Alternatives include up to 2 fixed account
options ("FIXED ACCOUNT OPTIONS"), depending on the Contract, and include 46*
variable sub-accounts ("VARIABLE SUB-ACCOUNTS") of the Lincoln Benefit Life
Variable Annuity Account ("VARIABLE ACCOUNT"). Each Variable Sub-account
invests exclusively in shares of the following underlying funds ("FUNDS"):
AIM VARIABLE INSURANCE FUNDS (INVESCO
VARIABLE INSURANCE FUNDS) PIMCO VARIABLE INSURANCE TRUST
THE ALGER PORTFOLIOS THE RYDEX VARIABLE TRUST
FIDELITY(R) VARIABLE INSURANCE T. ROWE PRICE EQUITY SERIES, INC.
PRODUCTS
VAN ECK VIP TRUST
JANUS ASPEN SERIES
THE UNIVERSAL INSTITUTIONAL FUNDS,
LEGG MASON PARTNERS VARIABLE EQUITY INC.
TRUST
LEGG MASON PARTNERS VARIABLE INCOME
TRUST
MFS(R) VARIABLE INSURANCE TRUST/(SM)/
OPPENHEIMER VARIABLE ACCOUNT FUNDS
* Certain Variable Sub-Accounts are closed to Contract owners not invested in
the specified Variable Sub-Accounts by a designated date. Please see pages
34-36 for more information.
Each Fund has multiple investment Portfolios ("PORTFOLIOS"). Not all of the
Funds and/or Portfolios, however, may be available with your Contract. You
should check with your sales representative for further information on the
availability of the Funds and/or Portfolios. Your annuity application will list
all available Portfolios.
For CONSULTANT SOLUTIONS PLUS CONTRACTS, each time you make a purchase payment,
we will add to your Contract value ("CONTRACT VALUE") a credit enhancement
("CREDIT ENHANCEMENT") of up to 5% (depending on the issue age and your total
purchase payments) of such purchase payment. Expenses for this Contract may be
higher than a Contract without the Credit Enhancement. Over time, the amount of
the Credit Enhancement may be more than offset by the fees associated with the
Credit Enhancement.
WE (Lincoln Benefit) have filed a Statement of Additional Information, dated
May 1, 2011, with the Securities and Exchange Commission ("SEC"). It contains
more information about each Contract and is incorporated herein by reference,
which means that it is legally a part of this prospectus. Its table of contents
appears on page 76 of this prospectus. For a free copy, please write or call us
at the address or telephone number above, or go to the SEC's Web site
(http://www.sec.gov). You can find other information and documents about us,
including documents that are legally part of this prospectus, at the SEC's Web
site.
1 PROSPECTUS
IMPORTANT THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THE SECURITIES
NOTICES DESCRIBED IN THIS PROSPECTUS, NOR HAS IT PASSED ON THE ACCURACY OR THE ADEQUACY OF THIS
PROSPECTUS. ANYONE WHO TELLS YOU OTHERWISE IS COMMITTING A FEDERAL CRIME.
THE CONTRACTS MAY BE DISTRIBUTED THROUGH BROKER-DEALERS THAT HAVE RELATIONSHIPS WITH
BANKS OR OTHER FINANCIAL INSTITUTIONS OR BY EMPLOYEES OF SUCH BANKS. HOWEVER, THE
CONTRACTS ARE NOT DEPOSITS IN, OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, SUCH
INSTITUTIONS OR ANY FEDERAL REGULATORY AGENCY. INVESTMENT IN THE CONTRACTS INVOLVES
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
THE CONTRACTS ARE NOT FDIC INSURED.
2 PROSPECTUS
TABLE OF CONTENTS
--------------------------------------------------------------------------------
PAGE
-----------------------------------------------
OVERVIEW
-----------------------------------------------
Important Terms 4
-----------------------------------------------
Overview of Contracts 5
-----------------------------------------------
The Contracts at a Glance 6
-----------------------------------------------
How the Contracts Work 10
-----------------------------------------------
Expense Tables 11
-----------------------------------------------
Financial Information 15
-----------------------------------------------
CONTRACT FEATURES
-----------------------------------------------
The Contracts 15
-----------------------------------------------
Purchases 17
-----------------------------------------------
Contract Loans for 403(b) Contracts 19
-----------------------------------------------
Contract Value 20
-----------------------------------------------
Investment Alternatives 34
-----------------------------------------------
The Variable Sub-accounts 34
-----------------------------------------------
The Fixed Account Options 38
-----------------------------------------------
Transfers 42
-----------------------------------------------
Expenses 45
-----------------------------------------------
Access to Your Money 50
-----------------------------------------------
PAGE
-----------------------------------------------------------
Income Payments 51
-----------------------------------------------------------
Death Benefits 57
-----------------------------------------------------------
OTHER INFORMATION
-----------------------------------------------------------
More Information 63
-----------------------------------------------------------
Taxes 67
-----------------------------------------------------------
About Lincoln Benefit Life Company 75
-----------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS 76
-----------------------------------------------------------
APPENDIX A - CONTRACT COMPARISON CHART 77
-----------------------------------------------------------
APPENDIX B - MARKET VALUE ADJUSTMENT 78
-----------------------------------------------------------
APPENDIX C - EXAMPLE OF CALCULATION OF INCOME
PROTECTION BENEFIT 80
-----------------------------------------------------------
APPENDIX D - WITHDRAWAL ADJUSTMENT EXAMPLE - DEATH
BENEFITS 81
-----------------------------------------------------------
APPENDIX E - CALCULATION OF ENHANCED EARNINGS DEATH
BENEFIT 82
-----------------------------------------------------------
APPENDIX F - WITHDRAWAL ADJUSTMENT EXAMPLE -
ACCUMULATION BENEFIT 84
-----------------------------------------------------------
APPENDIX G - SUREINCOME WITHDRAWAL BENEFIT OPTION
CALCULATION EXAMPLES 85
-----------------------------------------------------------
APPENDIX H - ACCUMULATION UNIT VALUES 87
-----------------------------------------------------------
3 PROSPECTUS
IMPORTANT TERMS
--------------------------------------------------------------------------------
This prospectus uses a number of important terms that you may not be familiar
with. The index below identifies the page that describes each term. The first
use of each term in this prospectus appears in highlights.
PAGE
---------------------------------------------
AB Factor 22
---------------------------------------------
Accumulation Benefit 22
---------------------------------------------
TrueReturn Accumulation Benefit Option 21
---------------------------------------------
Accumulation Phase 10
---------------------------------------------
Accumulation Unit 15
---------------------------------------------
Accumulation Unit Value 15
---------------------------------------------
Annual Increase Death Benefit Option 7
---------------------------------------------
Annuitant 16
---------------------------------------------
Automatic Additions Program 17
---------------------------------------------
Automatic Portfolio Rebalancing Program 45
---------------------------------------------
Beneficiary 16
---------------------------------------------
Benefit Base 30
---------------------------------------------
Benefit Payment 29
---------------------------------------------
Benefit Payment Remaining 29
---------------------------------------------
Benefit Year 29
---------------------------------------------
Co-Annuitant 16
---------------------------------------------
*Contract 15
---------------------------------------------
Contract Anniversary 7
---------------------------------------------
Contract Owner ("You") 15
---------------------------------------------
Contract Value 20
---------------------------------------------
Contract Year 7
---------------------------------------------
Credit Enhancement 18
---------------------------------------------
Dollar Cost Averaging Program 44
---------------------------------------------
Due Proof of Death 57
---------------------------------------------
Enhanced Earnings Death Benefit Option 59
---------------------------------------------
Excess of Earnings Withdrawal 59
---------------------------------------------
Fixed Account Options 38
---------------------------------------------
Free Withdrawal Amount 48
---------------------------------------------
Funds 1
---------------------------------------------
Guarantee Period Account 39
---------------------------------------------
Guarantee Options 21
---------------------------------------------
Income Plan 51
---------------------------------------------
Income Protection Benefit Option 55
---------------------------------------------
In-Force Earnings 59
---------------------------------------------
In-Force Premium 59
---------------------------------------------
PAGE
----------------------------------------------------------
Investment Alternatives 34
----------------------------------------------------------
IRA Contract 7
----------------------------------------------------------
Issue Date 10
----------------------------------------------------------
Lincoln Benefit ("We") 63
----------------------------------------------------------
Market Value Adjustment 42
----------------------------------------------------------
Maximum Anniversary Value (MAV) Death Benefit Option 57
----------------------------------------------------------
Payout Phase 10
----------------------------------------------------------
Payout Start Date 10
----------------------------------------------------------
Payout Withdrawal 53
----------------------------------------------------------
Portfolios 64
----------------------------------------------------------
Qualified Contract 62
----------------------------------------------------------
Return of Premium ("ROP") Death Benefit 57
----------------------------------------------------------
Rider Application Date 7
----------------------------------------------------------
Rider Anniversary 21
----------------------------------------------------------
Rider Date 21
----------------------------------------------------------
Rider Fee 7
----------------------------------------------------------
Rider Maturity Date 21
----------------------------------------------------------
Rider Period 21
----------------------------------------------------------
Rider Trade-In Option 27
----------------------------------------------------------
Right to Cancel 19
----------------------------------------------------------
SEC 1
----------------------------------------------------------
Settlement Value 57
----------------------------------------------------------
Spousal Protection Benefit (Co-Annuitant) Option 47
----------------------------------------------------------
Standard Fixed Account Option 39
----------------------------------------------------------
SureIncome Withdrawal Benefit Option 28
----------------------------------------------------------
Systematic Withdrawal Program 51
----------------------------------------------------------
Tax Qualified Contract 70
----------------------------------------------------------
Transfer Period Accounts 32
----------------------------------------------------------
Trial Examination Period 6
----------------------------------------------------------
TrueBalance/SM/ Asset Allocation Program 36
----------------------------------------------------------
Withdrawal Benefit Factor 29
----------------------------------------------------------
Withdrawal Benefit Payout Phase 30
----------------------------------------------------------
Valuation Date 18
----------------------------------------------------------
Variable Account 64
----------------------------------------------------------
Variable Sub-account 34
----------------------------------------------------------
* In certain states a Contract may be available only as a group Contract. If
you purchase a group Contract, we will issue you a certificate that represents
your ownership and that summarizes the provisions of the group Contract.
References to "Contract" in this prospectus include certificates, unless the
context requires otherwise. References to "Contract" also include all four
Contracts listed on the cover page of this prospectus, unless otherwise noted.
However, we administer each Contract separately.
4 PROSPECTUS
OVERVIEW OF CONTRACTS
--------------------------------------------------------------------------------
The Contracts offer many of the same basic features and benefits. They differ
primarily with respect to the charges imposed, as follows:
.. The CONSULTANT SOLUTIONS CLASSIC CONTRACT has a mortality and expense risk
charge of 1.25%, an administrative expense charge of 0.10%*, and a
withdrawal charge of up to 7% with a 7-year withdrawal charge period;
.. The CONSULTANT SOLUTIONS PLUS CONTRACT offers a Credit Enhancement of up to
5% on purchase payments, a mortality and expense risk charge of 1.45%, an
administrative expense charge of 0.10%*, and a withdrawal charge of up to
8.5% with an 8-year withdrawal charge period;
.. The CONSULTANT SOLUTIONS ELITE CONTRACT has a mortality and expense risk
charge of 1.60%, an administrative expense charge of 0.10%*, and a
withdrawal charge of up to 7% with a 3-year withdrawal charge period; and
.. The CONSULTANT SOLUTIONS SELECT CONTRACT has a mortality and expense risk
charge of 1.70%, an administrative expense charge of 0.10%*, and no
withdrawal charges.
Other differences among the Contracts relate to available Fixed Account
Options. For a side-by-side comparison of these differences, please refer to
Appendix A of this prospectus.
* The administrative expense charge may be increased, but will never exceed
0.25%. Once your Contract is issued, we will not increase the administrative
expense charge for your Contract.
5 PROSPECTUS
THE CONTRACTS AT A GLANCE
--------------------------------------------------------------------------------
The following is a snapshot of the Contracts. Please read the remainder of this
prospectus for more information.
FLEXIBLE PAYMENTS WE ARE NO LONGER OFFERING NEW CONTRACTS. You can add to your Contract as often
and as much as you like, but each subsequent payment must be at least $1,000
($100 for automatic payments).
We reserve the right to accept a lesser initial purchase payment amount for
each Contract. We may limit the cumulative amount of purchase payments to a
maximum of $1,000,000 in any Contract. You must maintain a minimum Contract
Value of $1,000.
For CONSULTANT SOLUTIONS PLUS CONTRACTS, each time you make a purchase payment,
we will add to your Contract Value a Credit Enhancement of up to 5% of such
purchase payment.
----------------------------------------------------------------------------------------------------------
TRIAL EXAMINATION PERIOD You may cancel your Contract within 20 days of receipt or any longer period as
your state may require ("TRIAL EXAMINATION PERIOD"). Upon cancellation, we will
return your purchase payments adjusted, to the extent federal or state law
permits, to reflect the investment experience of any amounts allocated to the
Variable Account, including the deduction of mortality and expense risk charges
and administrative expense charges. If you cancel your Contract during the
Trial Examination Period, the amount we refund to you will not include any
Credit Enhancement. See "Trial Examination Period" for details.
----------------------------------------------------------------------------------------------------------
EXPENSES Each Portfolio pays expenses that you will bear indirectly if you invest in a
Variable Sub-account. You also will bear the following expenses:
CONSULTANT SOLUTIONS CLASSIC CONTRACTS
. Annual mortality and expense risk charge equal to 1.25% of average daily
net assets.
. Withdrawal charges ranging from 0% to 7% of purchase payments withdrawn.
CONSULTANT SOLUTIONS PLUS CONTRACTS
. Annual mortality and expense risk charge equal to 1.45% of average daily
net assets.
. Withdrawal charges ranging from 0% to 8.5% of purchase payments withdrawn.
CONSULTANT SOLUTIONS ELITE CONTRACTS
. Annual mortality and expense risk charge equal to 1.60% of average daily
net assets.
. Withdrawal charges ranging from 0% to 7% of purchase payments withdrawn.
CONSULTANT SOLUTIONS SELECT CONTRACTS
. Annual mortality and expense risk charge equal to 1.70% of average daily
net assets.
. No withdrawal charges.
6 PROSPECTUS
ALL CONTRACTS
. Annual administrative expense charge of 0.10% average daily net assets (up
to 0.25% for future Contracts).
. Annual contract maintenance charge of $40 (reduced to $30 if Contract Value
is at least $2000, and waived in certain cases).
. If you select the MAXIMUM ANNIVERSARY VALUE (MAV) ENHANCED DEATH BENEFIT
OPTION ("MAV DEATH BENEFIT OPTION") you will pay an additional mortality
and expense risk charge of 0.20% (up to 0.50% for Options added in the
future).
. If you select the Annual Increase Enhanced Death Benefit Option ("ANNUAL
INCREASE DEATH BENEFIT OPTION"), you will pay an additional mortality and
expense risk charge of 0.30% (up to 0.50% for options added in the future).
. If you select the ENHANCED EARNINGS DEATH BENEFIT OPTION you will pay an
additional mortality and expense risk charge of 0.25% or 0.40% (up to 0.35%
or 0.50% for Options added in the future) depending on the age of the
oldest Owner, the Co-Annuitant, and/or oldest Annuitant on the date we
receive the completed application or request to add the benefit, whichever
is later ("RIDER APPLICATION DATE").
. If you select the TRUERETURN ACCUMULATION BENEFIT OPTION you would pay an
additional annual fee ("RIDER FEE") of 0.50% (up to 1.25% for Options added
in the future) of the BENEFIT BASE in effect on each Contract anniversary
("CONTRACT ANNIVERSARY") during the Rider Period. You may not select the
TrueReturn Accumulation Benefit Option together with the SureIncome
Withdrawal Benefit Option.
. If you select the SUREINCOME WITHDRAWAL BENEFIT OPTION ("SUREINCOME
OPTION") you would pay an additional annual fee ("SUREINCOME OPTION FEE")
of 0.50% (up to 1.25% for Options added in the future) of the BENEFIT BASE
on each Contract Anniversary (See the SureIncome Option Fee section). You
may not select the SureIncome Option together with the TrueReturn
Accumulation Benefit Option.
. If you select the INCOME PROTECTION BENEFIT OPTION you will pay an
additional mortality and expense risk charge of 0.50% (up to 0.75% for
Options added in the future) during the Payout Phase of your Contract.
. If you select the SPOUSAL PROTECTION BENEFIT (CO-ANNUITANT) OPTION you
would pay an additional annual fee ("RIDER FEE") of 0.10% (up to 0.15% for
Options added in the future) of the Contract Value ("CONTRACT VALUE") on
each Contract Anniversary. This Option is available only for Individual
Retirement Annuity ("IRA") Contracts qualified under Section 408 of the
Internal Revenue Code. For Contracts purchased on or after May 1, 2005, we
may discontinue offering the Spousal Protection Benefit (Co-Annuitant)
Option at any time. NO RIDER FEE IS CHARGED FOR THE SPOUSAL PROTECTION
BENEFIT (CO-ANNUITANT) OPTION FOR CONTRACT OWNERS WHO ADDED THE OPTION
PRIOR TO MAY 1, 2005.
. Transfer fee equal to 1.00% (subject to increase to up to 2.00%) of the
amount transferred after the 12/th/ transfer in any Contract Year
("CONTRACT YEAR"), but not more than $25. A Contract Year is measured from
the date we issue your Contract or a Contract Anniversary.
. State premium tax (if your state imposes one)
. NOT ALL OPTIONS ARE AVAILABLE IN ALL STATES
. WE MAY DISCONTINUE OFFERING ANY OF THESE OPTIONS AT ANY TIME.
----------------------------------------------------------------------------------
7 PROSPECTUS
-----------------------------------------------------------------------------------------------------------
INVESTMENT ALTERNATIVES Each Contract offers several investment alternatives including:
. up to 2 Fixed Account Options that credit interest at rates we guarantee,
and
. 46 Variable Sub-accounts investing in Portfolios offering professional
money management by these investment advisers:
. Invesco Advisers, Inc.
. Fred Alger Management, Inc.
. Fidelity Management & Research Company
. Janus Capital Management LLC
. MFS(TM) Investment Management
. OppenheimerFunds, Inc.
. Pacific Investment Management Company LLC
. Security Global Investors (formerly Rydex Investments)
. Legg Mason Partners Fund Advisor, LLC
. T. Rowe Price Associates, Inc.
. Van Eck Associates Corporation
. Van Kampen Asset Management
. Morgan Stanley Investment Management, Inc./(1)/
(1) Morgan Stanley Investment Management Inc., the adviser to the UIF
Portfolios, does business in certain instances using the name Van Kampen.
Not all Fixed Account Options are available in all states or with all Contracts.
To find out current rates being paid on the Fixed Account Option(s), or to find
out how the Variable Sub-accounts have performed, please call us at
800-457-7617.
-----------------------------------------------------------------------------------------------------------
SPECIAL SERVICES For your convenience, we offer these special services:
. AUTOMATIC PORTFOLIO REBALANCING PROGRAM
. AUTOMATIC ADDITIONS PROGRAM
. DOLLAR COST AVERAGING PROGRAM
. SYSTEMATIC WITHDRAWAL PROGRAM
. TRUEBALANCE/SM/ ASSET ALLOCATION PROGRAM
-----------------------------------------------------------------------------------------------------------
INCOME PAYMENTS You can choose fixed income payments, variable income payments, or a
combination of the two. You can receive your income payments in one of the
following ways (you may select more than one income plan):
. life income with guaranteed number of payments
. joint and survivor life income with guaranteed number of payments
. guaranteed number of payments for a specified period
. life income with cash refund
. joint life income with cash refund
. life income with installment refund
. joint life income with installment refund
In addition, we offer an Income Protection Benefit Option that guarantees that
your variable income payments will not fall below a certain level.
-----------------------------------------------------------------------------------------------------------
8 PROSPECTUS
------------------------------------------------------------------------------------------------
DEATH BENEFITS If you die before the Payout Start Date, we will pay a death benefit subject to
the conditions described in the Contract. In addition to the death benefit
included in your Contract ("ROP DEATH BENEFIT"), the death benefit options we
currently offer include:
. MAV DEATH BENEFIT OPTION;
. ANNUAL INCREASE DEATH BENEFIT OPTION; AND
. ENHANCED EARNINGS DEATH BENEFIT OPTION.
------------------------------------------------------------------------------------------------
TRANSFERS Before the Payout Start Date, you may transfer your Contract Value among the
investment alternatives, with certain restrictions. The minimum amount you may
transfer is $100 or the amount remaining in the investment alternative, if
less. The minimum amount that can be transferred into the Standard Fixed
Account or Market Value Adjusted Account Options is $100.
A charge may apply after the 12/th/ transfer in each Contract Year.
------------------------------------------------------------------------------------------------
WITHDRAWALS You may withdraw some or all of your Contract Value at any time during the
Accumulation Phase and during the Payout Phase in certain cases. In general,
you must withdraw at least $50 at a time. If any withdrawal reduces your
Contract Value to less than $1,000, we will treat the request as a withdrawal
of the entire Contract Value, unless the SureIncome Withdrawal Benefit Option
is in effect under your Contract. Withdrawals taken prior to annuitization
(referred to in this prospectus as the Payout Phase) are generally considered
to come from the earnings in the Contract first. If the Contract is
tax-qualified, generally all withdrawals are treated as distributions of
earnings. Withdrawals of earnings are taxed as ordinary income and, if taken
prior to age 59 1/2, may be subject to an additional 10% federal tax penalty. A
withdrawal charge and a MARKET VALUE ADJUSTMENT may also apply.
------------------------------------------------------------------------------------------------
9 PROSPECTUS
HOW THE CONTRACTS WORK
--------------------------------------------------------------------------------
Each Contract basically works in two ways.
First, each Contract can help you (we assume you are the "CONTRACT OWNER") save
for retirement because you can invest in your Contract's investment
alternatives and generally pay no federal income taxes on any earnings until
you withdraw them. You do this during what we call the "ACCUMULATION PHASE" of
the Contract. The Accumulation Phase begins on the date we issue your Contract
(we call that date the "ISSUE DATE") and continues until the Payout Start Date,
which is the date we apply your money to provide income payments. During the
Accumulation Phase, you may allocate your purchase payments to any combination
of the Variable Sub-Accounts and/or Fixed Account Options. If you invest in a
Fixed Account Option, you will earn a fixed rate of interest that we declare
periodically. If you invest in any of the Variable Sub-Accounts, your
investment return will vary up or down depending on the performance of the
corresponding Portfolios.
Second, each Contract can help you plan for retirement because you can use it
to receive retirement income for life and/or for a pre-set number of years, by
selecting one of the income payment options (we call these "INCOME PLANS")
described on page 51. You receive income payments during what we call the
"PAYOUT PHASE" of the Contract, which begins on the Payout Start Date and
continues until we make the last payment required by the Income Plan you
select. During the Payout Phase, if you select a fixed income payment option,
we guarantee the amount of your payments, which will remain fixed. If you
select a variable income payment option, based on one or more of the Variable
Sub-Accounts, the amount of your payments will vary up or down depending on the
performance of the corresponding Portfolios. The amount of money you accumulate
under your Contract during the Accumulation Phase and apply to an Income Plan
will determine the amount of your income payments during the Payout Phase.
The timeline below illustrates how you might use your Contract.
[FLOW CHART]
Other income payment options are also available. See "INCOME PAYMENTS."
As the Contract Owner, you exercise all of the rights and privileges provided
by the Contract. If you die, any surviving Contract Owner or, if there is none,
the BENEFICIARY will exercise the rights and privileges provided by the
Contract. See "The Contracts." In addition, if you die before the Payout Start
Date, we will pay a death benefit to any surviving Contract Owner or, if there
is none, to your Beneficiary. See "Death Benefits."
Please call us at 800-457-7617 if you have any question about how the Contracts
work.
10 PROSPECTUS
EXPENSE TABLES
--------------------------------------------------------------------------------
THE TABLE BELOW LISTS THE EXPENSES THAT YOU WILL BEAR DIRECTLY OR INDIRECTLY
WHEN YOU BUY A CONTRACT. THE TABLE AND THE EXAMPLES THAT FOLLOW DO NOT REFLECT
PREMIUM TAXES THAT MAY BE IMPOSED BY THE STATE WHERE YOU RESIDE. FOR MORE
INFORMATION ABOUT VARIABLE ACCOUNT EXPENSES, SEE "EXPENSES," BELOW. FOR MORE
INFORMATION ABOUT PORTFOLIO EXPENSES, PLEASE REFER TO THE PROSPECTUSES FOR THE
PORTFOLIOS.
CONTRACT OWNER TRANSACTION EXPENSES
Withdrawal Charge (as a percentage of purchase payments withdrawn)*
Number of Complete Years Since We Received the Purchase Payment
Being Withdrawn/Applicable Charge:
----------------------------------------------------------------------------------------------------
Contract: 0 1 2 3 4 5 6 7 8+
Consultant Solutions Classic 7% 7% 6% 5% 4% 3% 2% 0% 0%
Consultant Solutions Plus 8.5% 8.5% 8.5% 7.5% 6.5% 5.5% 4% 2.5% 0%
Consultant Solutions Elite: 7% 6% 5% 0% 0% 0% 0% 0% 0%
Consultant Solutions Select: None
All Contracts:
Annual Contract Maintenance Charge $40**
Transfer Fee up to 2.00% of the amount transferred, but not more than $25***
Premium Taxes 0% to 4.00% of Purchase Payment****
Loan Interest Rate 7.25%*****
* Each Contract Year, you may withdraw a portion of your purchase payments
(and/or your earnings, in the case of Charitable Remainder Trusts) without
incurring a withdrawal charge ("Free Withdrawal Amount"). See "Withdrawal
Charges" for more information.
** Reduced to $30 if Contract Value is not less than $2000, and waived in
certain cases. See "Expenses."
*** Applies solely to the 13th and subsequent transfers within a Contract Year,
excluding transfers due to dollar cost averaging and automatic portfolio
rebalancing. We are currently assessing a transfer fee of 1.00% of the amount
transferred, however, we reserve the right to raise the transfer fee to up to
2.00% of the amount transferred. The transfer fee will never be greater than
$25.
**** Some States charge premium taxes that generally range from 0 to 4%. We are
responsible for paying these taxes, and will deduct them from your Contract
Value. Our current practice is to not charge for these taxes until the Payout
Start Date or surrender of the Contract. See "Premium Taxes" for more
information.
***** For more information, see "Contract Loans for 403(b) Contracts." The loan
interest rate is subject to change.
VARIABLE ACCOUNT ANNUAL EXPENSES (AS A PERCENTAGE OF AVERAGE DAILY NET ASSET
VALUE DEDUCTED FROM EACH VARIABLE SUB-ACCOUNT)
If you select the basic Contract without any optional benefits, your Variable
Account expenses would be as follows:
Mortality and Expense Administrative Total Variable Account
Basic Contract (without any optional benefit) Risk Charge Expense Charge* Annual Expense
----------------------------------------------------------------------------------------------------------------------------
Consultant Solutions Classic 1.25% 0.10% 1.35%
----------------------------------------------------------------------------------------------------------------------------
Consultant Solutions Plus 1.45% 0.10% 1.55%
----------------------------------------------------------------------------------------------------------------------------
Consultant Solutions Elite 1.60% 0.10% 1.70%
----------------------------------------------------------------------------------------------------------------------------
Consultant Solutions Select 1.70% 0.10% 1.80%
----------------------------------------------------------------------------------------------------------------------------
* We reserve the right to raise the administrative expense charge to 0.25%. If
we increase this charge, we will amend the prospectus, accordingly. However, we
will not increase the charge once we issue your Contract.
Each Contract also offers optional riders that may be added to the Contract.
For each optional rider you select, you would pay the following additional
mortality and expense risk charge associated with each rider.
MAV Death Benefit Option Currently 0.20%, up to a maximum of
0.50% for Options added in the future
*
Annual Increase Death Benefit Option Currently 0.30%, up to a maximum of
0.50% for Options added in the future
*
Enhanced Earnings Death Benefit Currently 0.25%, up to a maximum of
Option (issue age 0-70) 0.35% for Options added in the future
*
Enhanced Earnings Death Benefit Currently 0.40%, up to a maximum of
Option (issue age 71-79) 0.50% for Options added in the future
*
11 PROSPECTUS
If you select the Options with the highest possible combination of mortality
and expense risk charges during the Accumulation Phase, your Variable Account
expenses would be as follows, assuming current expenses:
Contract with the MAV Death Benefit Option,
Annual Increase Death Benefit Option, and Mortality and Expense Administrative Total Variable Account
Enhanced Earnings Death Benefit Option (issue age 71-79) Risk Charge* Expense Charge* Annual Expense
----------------------------------------------------------------------------------------------------------------------------
Consultant Solutions Classic 2.15% 0.10% 2.25%
----------------------------------------------------------------------------------------------------------------------------
Consultant Solutions Plus 2.35% 0.10% 2.45%
----------------------------------------------------------------------------------------------------------------------------
Consultant Solutions Elite 2.50% 0.10% 2.60%
----------------------------------------------------------------------------------------------------------------------------
Consultant Solutions Select 2.60% 0.10% 2.70%
----------------------------------------------------------------------------------------------------------------------------
* As described above the administrative expense charge and the mortality and
expense charge for certain Options may be higher in the future if you add this
Option to your Contract. However, we will not increase the administrative
expense charge once we issue your Contract, and we will not increase the charge
for an Option once we add the Option to your Contract. If we increase any of
these charges, we will amend the prospectus, accordingly.
TRUERETURN ACCUMULATION BENEFIT OPTION ANNUAL FEE
(ANNUAL RATE AS A PERCENTAGE OF BENEFIT BASE ON A CONTRACT ANNIVERSARY)
TrueReturn Accumulation Benefit Option Currently 0.50%, up to
a maximum of 1.25%
for Options added in
the future. *
------------------------------------------------------------------------------------
* If we increase this charge, we will amend the prospectus, accordingly. See
"TrueReturn Accumulation Benefit Option" for details.
SPOUSAL PROTECTION BENEFIT (CO-ANNUITANT) OPTION ANNUAL FEE
(ANNUAL RATE AS A PERCENTAGE OF CONTRACT VALUE ON A CONTRACT ANNIVERSARY)
Spousal Protection Benefit (Co-Annuitant) Option Currently 0.10%, up to
a maximum of 0.15%
for Options added in
the future *
------------------------------------------------------------------------------------
* For Options added on or after 5/1/2005. If we increase this charge, we will
amend the prospectus, accordingly. See "Spousal Protection Benefit
(Co-Annuitant) Option" for details.
SUREINCOME OPTION FEE
(ANNUAL RATE AS A PERCENTAGE OF BENEFIT BASE ON A CONTRACT ANNIVERSARY)
SureIncome Withdrawal Benefit Option Currently 0.50%, up to
a maximum of 1.25%
for SureIncome
Options added in the
future *
------------------------------------------------------------------------------------
* If we increase this charge, we will amend the prospectus, accordingly. See
"SureIncome Withdrawal Benefit Option" for details.
INCOME PROTECTION BENEFIT OPTION FEE (PAYOUT PHASE ONLY)*
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)
Income Protection Benefit Option Currently 0.50%, up to
a maximum of 1.25%
for Options added in
the future*
------------------------------------------------------------------------------------
* See "Income Payments - Income Protection Benefit Option," below, for a
description of the Income Protection Benefit Option. You may add this Option
when you elect to receive annuity benefits. We begin to deduct the charge for
this Option on the Payout Start Date. Currently, the charge for this Option is
0.50% of the average daily net Variable Account assets supporting the variable
income payments to which the Income Protection Benefit Option applies. We will
charge you the Option charge in effect when you choose to apply this Option to
your Contract. We reserve the right to raise the Income Protection Benefit
Option charge to up to 0.75%. If we increase this charge, we will amend the
prospectus accordingly. Once your Income Protection Benefit Option is in
effect, however, we will not change the option charge you will pay for this
Option. See "Expenses - Mortality and Expense Risk Charge," below, for details.
12 PROSPECTUS
PORTFOLIO ANNUAL EXPENSES - MINIMUM AND MAXIMUM
The next table shows the minimum and maximum total operating expenses charged
by the Portfolios that you may pay periodically during the time that you own
the Contract. Advisors and/or other service providers of certain Portfolios may
have agreed to waive their fees and/or reimburse Portfolio expenses in order to
keep the Portfolios' expenses below specified limits. The range of expenses
shown in this table does not show the effect of any such fee waiver or expense
reimbursement. More detail concerning each Portfolio's fees and expenses
appears in the second table below and in the prospectus for each Portfolio.
Minimum Maximum
----------------------------------------------------------------------------
Total Annual Portfolio Operating Expenses/(1)/ (expenses
that are deducted from Portfolio assets, which may include
management fees, distribution and/or services (12b-1) fees,
and other expenses) 0.47% 3.21%
----------------------------------------------------------------------------
(1)Expenses are shown as a percentage of Portfolio average daily net assets
(before any waiver or reimbursement) as of December 31, 2010.
EXAMPLE 1
This Example is intended to help you compare the cost of investing in the
Contracts with the cost of investing in other variable annuity contracts. These
costs include Contract owner transaction expenses, Contract fees, Variable
Account annual expenses, and Portfolio fees and expenses.
The example shows the dollar amount of expenses that you would bear directly or
indirectly if you:
.. invested $10,000 in the Contract for the time periods indicated;
.. earned a 5% annual return on your investment;
.. surrendered your Contract, or you began receiving income payments for a
specified period of less than 120 months, at the end of each time period;
.. elected the MAV Death Benefit Option and the Annual Increase Death Benefit
Option;
.. elected the Enhanced Earnings Death Benefit Option (assuming issue age
71-79);
.. elected the Spousal Protection Benefit (Co-Annuitant) Option; and
.. elected the TrueReturn Accumulation Benefit Option or SureIncome Withdrawal
Benefit Option.
THE EXAMPLE DOES NOT INCLUDE ANY TAXES OR TAX PENALTIES YOU MAY BE REQUIRED TO
PAY IF YOU SURRENDER YOUR CONTRACT.
The first line of the example assumes that the maximum fees and expenses of any
of the Portfolios are charged. The second line of the example assumes that the
minimum fees and expenses of any of the Portfolios are charged. Your actual
expenses may be higher or lower than those shown below.
Consultant Solutions Classic Consultant Solutions Plus
1 Year 3 Years 5 Years 10 Years 1 Year 3 Years 5 Years 10 Years
------------------------------------------------------------------------------------------
Costs Based on Maximum
Annual Portfolio Expenses $1,331 $2,692 $3,935 $6,987 $1,475 $2,950 $4,216 $7,088
------------------------------------------------------------------------------------------
Costs Based on Minimum
Annual Portfolio Expenses $1,072 $1,963 $2,797 $5,100 $1,217 $2,226 $3,090 $5,241
------------------------------------------------------------------------------------------
Consultant Solutions Elite Consultant Solutions Select
1 Year 3 Years 5 Years 10 Years 1 Year 3 Years 5 Years 10 Years
------------------------------------------------------------------------------------------
Costs Based on Maximum
Annual Portfolio Expenses $1,361 $2,690 $3,720 $7,173 $ 779 $2,299 $3,772 $7,256
------------------------------------------------------------------------------------------
Costs Based on Minimum
Annual Portfolio Expenses $1,104 $1,969 $2,603 $5,356 $ 522 $1,581 $2,662 $5,463
------------------------------------------------------------------------------------------
13 PROSPECTUS
EXAMPLE 2
This Example uses the same assumptions as Example 1 above, except that it
assumes you decided not to surrender your Contract, or you began receiving
income payments for a specified period of at least 120 months, at the end of
each time period.
Consultant Solutions Classic Consultant Solutions Plus
1 Year 3 Years 5 Years 10 Years 1 Year 3 Years 5 Years 10 Years
------------------------------------------------------------------------------------------
Costs Based on Maximum
Annual Portfolio Expenses $736 $2,182 $3,595 $6,987 $753 $2,228 $3,663 $7,088
------------------------------------------------------------------------------------------
Costs Based on Minimum
Annual Portfolio Expenses $477 $1,453 $2,457 $5,100 $495 $1,503 $2,537 $5,241
------------------------------------------------------------------------------------------
Consultant Solutions Elite Consultant Solutions Select
1 Year 3 Years 5 Years 10 Years 1 Year 3 Years 5 Years 10 Years
------------------------------------------------------------------------------------------
Costs Based on Maximum
Annual Portfolio Expenses $766 $2,265 $3,720 $7,173 $779 $2,299 $3,772 $7,256
------------------------------------------------------------------------------------------
Costs Based on Minimum
Annual Portfolio Expenses $509 $1,544 $2,603 $5,356 $522 $1,581 $2,662 $5,463
------------------------------------------------------------------------------------------
PLEASE REMEMBER THAT YOU ARE LOOKING AT EXAMPLES AND NOT A REPRESENTATION OF
PAST OR FUTURE EXPENSES. YOUR RATE OF RETURN MAY BE HIGHER OR LOWER THAN 5%,
WHICH IS NOT GUARANTEED. THE EXAMPLES DO NOT ASSUME THAT ANY PORTFOLIO EXPENSE
WAIVERS OR REIMBURSEMENT ARRANGEMENTS ARE IN EFFECT FOR THE PERIODS PRESENTED.
THE EXAMPLES REFLECT THE FREE WITHDRAWAL AMOUNTS, IF APPLICABLE, AND THE
DEDUCTION OF THE ANNUAL CONTRACT MAINTENANCE CHARGE OF $30 EACH YEAR. THE ABOVE
EXAMPLES ASSUME YOU HAVE SELECTED THE MAV DEATH BENEFIT OPTION, THE ANNUAL
INCREASE DEATH BENEFIT OPTION, THE ENHANCED EARNINGS DEATH BENEFIT OPTION
(ASSUMING THE OLDEST CONTRACT OWNER AND CO-ANNUITANT, OR, IF THE CONTRACT OWNER
IS A NON-LIVING PERSON, THE OLDEST ANNUITANT, ARE AGE 71 OR OLDER, AND ALL ARE
AGE 79 OR YOUNGER ON THE RIDER APPLICATION DATE), THE SPOUSAL PROTECTION
BENEFIT (CO-ANNUITANT) OPTION, AND THE TRUERETURN ACCUMULATION BENEFIT OPTION
OR SUREINCOME WITHDRAWAL BENEFIT OPTION. IF ANY OR ALL OF THESE FEATURES WERE
NOT ELECTED, THE EXPENSE FIGURES SHOWN ABOVE WOULD BE SLIGHTLY LOWER.
14 PROSPECTUS
FINANCIAL INFORMATION
--------------------------------------------------------------------------------
To measure the value of your investment in the Variable Sub-Accounts during the
Accumulation Phase, we use a unit of measure we call the "ACCUMULATION UNIT."
Each Variable Sub-Account has a separate value for its Accumulation Units we
call "ACCUMULATION UNIT VALUE." Accumulation Unit Value is analogous to, but
not the same as, the share price of a mutual fund.
Accumulation Unit Values for the lowest and highest available combinations of
Contract charges that affect Accumulation Unit Values for each Contract are
shown in Appendix H of this prospectus. The Statement of Additional Information
contains the Accumulation Unit Values for all other available combinations of
Contract charges that affect Accumulation Unit Values for each Contract. The
financial statements of Lincoln Benefit and the financial statements of the
Variable Account, which are comprised of the financial statements of the
underlying sub-accounts, appear in the Statement of Additional Information.
THE CONTRACTS
--------------------------------------------------------------------------------
CONTRACT OWNER
Each CONTRACT is an agreement between you, the Contract Owner, and Lincoln
Benefit, a life insurance company. As the Contract Owner, you may exercise all
of the rights and privileges provided to you by the Contract. That means it is
up to you to select or change (to the extent permitted):
.. the investment alternatives during the Accumulation and Payout Phases,
.. the amount and timing of your purchase payments and withdrawals,
.. the programs you want to use to invest or withdraw money,
.. the income payment plan(s) you want to use to receive retirement income,
.. the Annuitant (either yourself or someone else) on whose life the income
payments will be based,
.. the Beneficiary or Beneficiaries who will receive the benefits that the
Contract provides when the last surviving Contract Owner dies, or, if the
Contract Owner is a non-living person, an Annuitant dies, and
.. any other rights that the Contract provides, including restricting income
payments to Beneficiaries.
If you die prior to the Payout Start Date, any surviving joint Contract Owner,
or, if none, the Beneficiary, may exercise the rights and privileges provided
to them by the Contract. If the sole surviving Contract Owner dies after the
Payout Start Date, the Primary Beneficiary will receive any guaranteed income
payments scheduled to continue.
If the Annuitant dies prior to the Payout Start Date and the Contract Owner is
a non-living person, we will pay the death benefit to the current Contract
Owner.
The Contract cannot be jointly owned by both a living and a non-living person.
The CONSULTANT SOLUTIONS SELECT is not available for purchase by non-living
persons. The maximum age of any Contract Owner on the date we receive the
completed application for each Contract is 90.
If you select the MAV Death Benefit Option, the Annual Increase Death Benefit
Option, or the Enhanced Earnings Death Benefit Option, the maximum age of any
Contract Owner on the Rider Application Date is currently 79. If you select the
Spousal Protection Benefit (Co-Annuitant) Option, the maximum age of any
Contract Owner on the Rider Application Date is currently age 90. If you select
the SureIncome Withdrawal Benefit Option, the maximum age of any Contract Owner
on the Rider Application Date is currently age 85.
The Contract can also be purchased as an IRA or TSA (also known as a 403(b)).
The endorsements required to qualify these annuities under the Code may limit
or modify your rights and privileges under the Contract. We use the term
"QUALIFIED CONTRACT" to refer to a Contract issued as an IRA, 403(b), or with a
Qualified Plan.
Except for certain Qualified Contracts, you may change the Contract Owner at
any time by written notice in a form satisfactory to us. Until we receive your
written notice to change the Contract Owner, we are entitled to rely on the
most recent information in our files. We will provide a change of ownership
form to be signed by you and filed with us. Once we accept the change, the
change will take effect as of the date you signed the request. We will not be
liable for any payment or settlement made prior to accepting the change.
Accordingly, if you wish to change the Contract Owner, you should deliver your
written notice to us promptly. Each change is subject to any payment we make or
other action we take before we accept it. Changing ownership of this Contract
may cause adverse tax consequences and may not be allowed under Qualified
Contracts. Please consult with a competent tax advisor prior to making a
request for a change of Contract Owner.
15 PROSPECTUS
ANNUITANT
The ANNUITANT is the individual whose age determines the latest Payout Start
Date and whose life determines the amount and duration of income payments
(other than under Income Plan 3). If the Contract is a Non-Qualified Contract,
you also may designate a joint Annuitant, who is a second person on whose life
income payments depend. Additional restrictions may apply in the case of
Qualified Plans. The maximum age of the Annuitant on the date we receive the
completed application for each Contract is 90.
If the Owner is a living person, the Owner may change the Annuitant before the
Payout Start Date by written request in a form satisfactory to us. Once we
accept a change, it takes effect on the date you signed the request. Each
change is subject to any payment we make or other action we take before we
accept it.
If you select the MAV Death Benefit Option, Annual Increase Death Benefit
Option, or Enhanced Earnings Death Benefit Option, the maximum age of any
Annuitant on the Rider Application Date is 79.
If you select the Spousal Protection Benefit (Co-Annuitant) Option, the maximum
age of any Annuitant on the Rider Application date is age 90. If you select the
Income Protection Benefit Option, the oldest Annuitant and joint Annuitant (if
applicable) must be age 75 or younger on the Payout Start Date. If you select
the SureIncome Withdrawal Benefit Option, the maximum age of any Annuitant on
the Rider Application Date is currently age 85.
If you select an Income Plan that depends on the Annuitant or a joint
Annuitant's life, we may require proof of age and sex before income payments
begin and proof that the Annuitant or joint Annuitant is still alive before we
make each payment.
CO-ANNUITANT
Contract Owners of IRA Contracts that meet the following conditions and that
elect the Spousal Protection Benefit Option must name their spouse as a
CO-ANNUITANT:
.. the individually owned Contract must be either a traditional, Roth or
Simplified Employee Pension IRA;
.. the Contract Owner must be age 90 or younger on the Rider Application Date;
.. and the Co-Annuitant must be age 79 or younger on the Rider Application
Date; and
.. the Co-Annuitant must be the sole Primary Beneficiary under the Contract.
Under the Spousal Protection Benefit Option, the Co-Annuitant will be
considered to be an Annuitant during the Accumulation Phase, except the
Co-Annuitant will not be considered to be an Annuitant for purposes of
determining the Payout Start Date and the "Death of Annuitant" provision of
your Contract does not apply upon the death of the Co-Annuitant. If you are
single when you purchase this Contract, and are married later, you may add the
Spousal Protection Benefit Option within six months of your marriage only if
you provide proof of marriage in a form satisfactory to us. You may change the
Co-Annuitant to a new spouse within six months of re-marriage only if you
provide proof of remarriage in a form satisfactory to us. At any time, there
may only be one Co-Annuitant under your Contract. The Co-Annuitant will be
considered an Owner for the purposes of determining the age or birthday of the
Owners under the MAV Death Benefit Option, the Annual Increase Death Benefit
Option and the Enhanced Earnings Death Benefit Option. See "Spousal Protection
Benefit Option and Death of Co-Annuitant" for more information.
BENEFICIARY
You may name one or more Primary and Contingent Beneficiaries when you apply
for a Contract. The Primary Beneficiary is the person who may, in accordance
with the terms of the Contract, elect to receive the death settlement ("DEATH
PROCEEDS") or become the new Contract Owner pursuant to the Contract if the
sole surviving Contract Owner dies before the Payout Start Date. If the sole
surviving Contract Owner dies after the Payout Start Date, the Beneficiary will
receive any guaranteed income payments scheduled to continue. A Contingent
Beneficiary is the person selected by the Contract Owner who will exercise the
rights of the Primary Beneficiary if all named Primary Beneficiaries die before
the death of the sole surviving Contract Owner.
You may change or add Beneficiaries at any time, unless you have designated an
irrevocable Beneficiary. We will provide a change of Beneficiary form to be
signed by you and filed with us. After we accept the form, the change of
Beneficiary will be effective as of the date you signed the form. Until we
accept your written notice to change a Beneficiary, we are entitled to rely on
the most recent Beneficiary information in our files. We will not be liable for
any payment or settlement made prior to accepting the change. Accordingly, if
you wish to change your Beneficiary, you should deliver your written notice to
us promptly. Each Beneficiary change is subject to any payment made by us or
any other action we take before we accept the change.
You may restrict income payments to Beneficiaries. We will provide a form to be
signed by you and filed with us. Once we accept the form, the restriction will
take effect as of the date you signed the request. Any restriction is subject
to any payment made by us or any other action we take before we accept the
request.
If you did not name a Beneficiary or, unless otherwise provided in the
Beneficiary designation, if a named Beneficiary is no longer living and there
are no other surviving Primary or Contingent Beneficiaries when the
16 PROSPECTUS
sole surviving Contract Owner dies, the new Beneficiary will be:
.. your spouse or, if he or she is no longer living,
.. your surviving children equally, or if you have no surviving children,
.. your estate.
If more than one Beneficiary survives you, we will divide the death benefit
among the surviving Beneficiaries according to your most recent written
instructions. If you have not given us written instructions in a form
satisfactory to us, we will pay the death benefit in equal amounts to the
surviving Beneficiaries. If there is more than one Beneficiary in a class
(e.g., more than one Primary Beneficiary) and one of the Beneficiaries
predeceases the Contract Owner (the Annuitant if the Contract owner is not a
living person), the remaining Beneficiaries in that class will divide the
deceased Beneficiary's share in proportion to the original share of the
remaining Beneficiaries.
For purposes of this Contract, in determining whether a living person,
including a Contract Owner, Primary Beneficiary, Contingent Beneficiary, or
Annuitant ("Living Person A") has survived another living person, including a
Contract Owner, Primary Beneficiary, Contingent Beneficiary, or Annuitant
("Living Person B"), Living Person A must survive Living Person B by at least
24 hours. Otherwise, Living Person A will be conclusively deemed to have
predeceased Living Person B.
Where there are multiple Beneficiaries, we will only value the death proceeds
at the time the first Beneficiary submits the necessary documentation in good
order. Any death proceed amounts attributable to any Beneficiary which remain
in the Variable Sub-accounts are subject to investment risk. If there is more
than one Beneficiary taking shares of the death proceeds, each Beneficiary will
be treated as a separate and independent owner of his or her respective share
of the death proceeds. Each Beneficiary will exercise all rights related to his
or her share of the death proceeds, including the sole right to select a death
settlement option, subject to any restrictions previously placed upon the
Beneficiary. Each Beneficiary may designate a Beneficiary(ies) for his or her
respective share, but that designated Beneficiary(ies) will be restricted to
the death settlement option chosen by the original Beneficiary.
If there is more than one Beneficiary and one of the Beneficiaries is a
corporation, trust or other non-living person, all Beneficiaries will be
considered to be non-living persons.
MODIFICATION OF THE CONTRACT
Only a Lincoln Benefit officer may approve a change in or waive any provision
of the Contract. Any change or waiver must be in writing. None of our agents
has the authority to change or waive the provisions of the Contract. We may not
change the terms of the Contract without your consent, except to conform the
Contract to applicable law or changes in the law. If a provision of the
Contract is inconsistent with state law, we will follow state law.
ASSIGNMENT
You may not assign an interest in this Contract as collateral or security for a
loan. However, you may assign periodic income payments under this Contract
prior to the Payout Start Date. No Beneficiary may assign benefits under the
Contract until they are due. We will not be bound by any assignment until the
assignor signs it and files it with us. We are not responsible for the validity
of any assignment. Federal law prohibits or restricts the assignment of
benefits under many types of retirement plans and the terms of such plans may
themselves contain restrictions on assignments. An assignment may also result
in taxes or tax penalties. YOU SHOULD CONSULT WITH AN ATTORNEY BEFORE TRYING TO
ASSIGN PERIODIC INCOME PAYMENTS UNDER YOUR CONTRACT.
PURCHASES
--------------------------------------------------------------------------------
MINIMUM PURCHASE PAYMENTS
The minimum initial purchase payment for Classic Contracts is $1,200 (Qualified
or Non-Qualified Contracts); the minimum initial purchase payment for all other
Non-Qualified Contracts is $10,000, ($2,000 for Qualified Contracts). All
subsequent purchase payments under a Contract must be $1,000 or more ($100 for
automatic payments). For CONSULTANT SOLUTIONS PLUS CONTRACTS, purchase payments
do not include any Credit Enhancements. You may make purchase payments at any
time prior to the Payout Start Date; however, any additional payments after the
initial purchase payment may be limited in some states. Please consult with
your representative for details. The total amount of purchase payments we will
accept for each Contract without our prior approval is $1,000,000. We reserve
the right to accept a lesser initial purchase payment amount or lesser
subsequent purchase payment amounts. We reserve the right to limit the
availability of the investment alternatives for additional investments. We also
reserve the right to reject any application. We may apply certain limitations,
restrictions, and/or underwriting standards as a condition of our issuance of a
Contract and/or acceptance of purchase payments.
AUTOMATIC ADDITIONS PROGRAM
You may make subsequent purchase payments of $100 or more per month by
automatically transferring money from your bank account. Please consult with
your sales representative for detailed information. The AUTOMATIC
17 PROSPECTUS
ADDITIONS PROGRAM is not available for making purchase payments into the Dollar
Cost Averaging Fixed Account Option.
ALLOCATION OF PURCHASE PAYMENTS
At the time you apply for a Contract, you must decide how to allocate your
purchase payment among the investment alternatives. The allocation you specify
on your application will be effective immediately. All allocations must be in
whole percents that total 100% or in whole dollars. You can change your
allocations by calling 1-800-457-7617.
We will allocate your purchase payments to the investment alternatives
according to your most recent instructions on file with us. Unless you notify
us otherwise, we will allocate subsequent purchase payments according to the
allocation for the previous purchase payment. We will effect any change in
allocation instructions at the time we receive written notice of the change in
good order.
For CONSULTANT SOLUTIONS SELECT CONTRACTS, the maximum amount that can be
allocated during any single day to certain selected funds is $25,000. Please
see the current list of funds affected by this restriction on page 43.
We will credit the initial purchase payment that accompanies your completed
application to your Contract within 2 business days after we receive the
payment at our home office. If your application is incomplete, we will ask you
to complete your application within 5 business days. If you do so, we will
credit your initial purchase payment to your Contract within that 5 business
day period. If you do not, we will return your purchase payment at the end of
the 5 business day period unless you expressly allow us to hold it until you
complete the application. We will credit subsequent purchase payments to the
Contract at the close of the business day on which we receive the purchase
payment at our home office.
We use the term "business day" to refer to each day Monday through Friday that
the New York Stock Exchange is open for business. We also refer to these days
as "VALUATION DATES." Our business day closes when the New York Stock Exchange
closes for regular trading, usually 4:00 p.m. Eastern Time (3:00 p.m. Central
Time). If we receive your purchase payment after 3:00 p.m. Central Time on any
Valuation Date, we will credit your purchase payment using the Accumulation
Unit Values computed for the next Valuation Date.
There may be circumstances where the New York Stock Exchange is open, however,
due to inclement weather, natural disaster or other circumstances beyond our
control, our offices may be closed or our business processing capabilities may
be restricted. Under those circumstances, your Contract Value may fluctuate
based on changes in the Accumulation Unit Values, but you may not be able to
transfer Contract Value, or make a purchase or redemption request.
With respect to both your initial purchase payment and any subsequent purchase
payment that is pending investment in our Variable Account, we may hold the
amount temporarily in a suspense account and may earn interest on amounts held
in that suspense account. You will not be credited with any interest on amounts
held in that suspense account.
CREDIT ENHANCEMENT
For CONSULTANT SOLUTIONS PLUS CONTRACTS, each time you make a purchase payment,
we will add to your Contract Value a Credit Enhancement equal to 4% of the
purchase payment if the oldest Contract Owner, or, if the Contract Owner is a
non-living person, the oldest Annuitant, is age 85 or younger on the date we
receive the completed application for the Contract ("Application Date"). If the
oldest Contract Owner or, if the Owner is a non-living person, the oldest
Annuitant is age 86 or older and 90 or younger on the Application Date, we will
add to your Contract Value a Credit Enhancement equal to 2% of the purchase
payment. The thresholds apply individually to each CONSULTANT SOLUTIONS PLUS
CONTRACT you own. The additional Credit Enhancements and their corresponding
thresholds are as follows:
ADDITIONAL CREDIT CUMULATIVE PURCHASE
ENHANCEMENT FOR LARGE PAYMENTS LESS CUMULATIVE
CONTRACTS WITHDRAWALS MUST EXCEED:
0.50% of the purchase payment $ 500,000
1.00% of the purchase payment $1,000,000
If, during the first Contract Year only, the cumulative purchase payments less
cumulative withdrawals exceed the thresholds, the additional credit enhancement
will apply to prior purchase payments, less cumulative withdrawals, and will be
added to the Contract Value as of the date of the most recent purchase payment.
The additional credit enhancement will be applied only once to any given
purchase payment, current or prior.
If you exercise your right to cancel the Contract during the Trial Examination
Period, the amount we refund to you will not include any Credit Enhancement.
See "TRIAL EXAMINATION PERIOD" below for details. The CONSULTANT SOLUTIONS PLUS
CONTRACT may not be available in all states.
We will allocate any Credit Enhancements to the investment alternatives
according to the allocation instructions you have on file with us at the time
we receive your purchase payment. We will allocate each Credit Enhancement
among the investment alternatives in the same proportions as the most recent
purchase payment. We do not consider Credit Enhancements to be investments in
the Contract for income tax purposes.
We use a portion of the withdrawal charge and mortality and expense risk charge
to help recover the cost of providing the Credit Enhancement under the
Contract. See "Expenses." Under certain circumstances (such as a period of poor
market performance) the cost associated with the Credit Enhancement may exceed
the sum of the
18 PROSPECTUS
Credit Enhancement and any related earnings. You should consider this
possibility before purchasing the Contract.
TRIAL EXAMINATION PERIOD
You may cancel your Contract by providing us with written notice within the
Trial Examination Period, which is the 20 day period after you receive the
Contract, or such longer period that your state may require. If you exercise
this "RIGHT TO CANCEL," the Contract terminates and we will pay you the full
amount of your purchase payments allocated to the Fixed Account. We also will
return your purchase payments allocated to the Variable Account adjusted, to
the extent federal or state law permits, to reflect investment gain or loss,
including the deduction of mortality and expense risk charges and
administrative expense charges, that occurred from the date of allocation
through the date of cancellation. If your Contract is qualified under Code
Section 408(b), we will refund the greater of any purchase payments or the
Contract Value.
For CONSULTANT SOLUTIONS PLUS CONTRACTS, we have received regulatory relief to
enable us to recover the amount of any Credit Enhancement applied to Contracts
that are cancelled during the Trial Examination Period. The amount we return to
you upon exercise of this Right to Cancel will not include any Credit
Enhancement. In states where required, we will return the amount of your
purchase payments. In other states, we will return the amount of your purchase
payments, reduced by the amount of any mortality and expense risk charges and
administrative expense charges deducted prior to cancellation, and adjusted by
any investment gain or loss associated with:
.. your Variable Account purchase payments; and
.. any portion of the Credit Enhancement assigned to the Variable Sub-accounts.
We reserve the right to allocate your purchase payments to the PIMCO VIT Money
Market - Administrative Shares Sub-Account during the Trial Examination Period.
For Contracts purchased in California by persons age 60 and older, you may
elect to defer until the end of the Trial Examination Period allocation of your
purchase payment to the Variable Sub-accounts. Unless you instruct otherwise,
upon making this election, your purchase payment will be allocated to the PIMCO
VIT Money Market - Administrative Shares Sub-Account. On the next Valuation
Date 40 day after the issue date, your Contract Value will then be reallocated
in accordance with your most recent investment allocation instructions.
State laws vary and may require a different period, other variations or
adjustments. Please refer to your Contract for any state specific information.
CONTRACT LOANS FOR 403(B) CONTRACTS
--------------------------------------------------------------------------------
Subject to the restrictions described below, we will make loans to the Contract
Owner of a Contract used in connection with a Tax Sheltered Annuity Plan ("TSA
Plan") under Section 403(b) of the Internal Revenue Code. Such loans may not be
available in all states. Loans are not available under non-qualified Contracts.
We will only make loans after the right to cancel period and before the Payout
Start Date. All loans are subject to the terms of the Contract, the relevant
qualified plan, and the Internal Revenue Code, which impose restrictions on
loans. Loans may not be available with all rider options.
We will not make a loan to you if the total of the requested loan and your
unpaid outstanding loans will be greater than the amount available for full
withdrawal, including any applicable Market Value Adjustment, under your
Contract on the date of the loan. In addition, you may not borrow a loan if the
total of the requested loan and all of your loans under TSA Plans with the same
employer is more than the lesser of (a) or (b) where:
(a)equals $50,000 minus the excess of the highest outstanding loan balance
during the prior 12 months over the current outstanding loan balance; and
(b)equals the greater of $10,000 or half of the amount available for full
withdrawal.
The minimum loan amount is $1,000.
To request a Contract loan, write to us at the address given on the first page
of the prospectus. You alone are responsible for ensuring that your loan and
repayments comply with tax requirements. Some of these requirements are stated
in Section 72 of the Internal Revenue Code. Please seek advice from your plan
administrator or tax advisor.
When we make a loan, we will transfer an amount equal to the loan amount from
the Variable Account and/or the Fixed Account Options to the Loan Account as
collateral for the loan. The Loan Account is an account established for amounts
transferred from the Variable Sub-accounts or Fixed Account Options as security
for an outstanding Contract loan. We will transfer to the Loan Account amounts
from each Variable Sub-account in proportion to the total assets in all
Variable Sub-accounts. If your loan amount is greater than your Contract Value
in the Variable Sub-accounts, we will transfer the remaining required
collateral from the Market Value Adjusted or Standard Fixed Account Option. If
your loan amount is greater than your contract value in the Variable
Sub-accounts and the Market Value Adjusted or Standard Fixed Account
19 PROSPECTUS
Option, we will transfer the remaining required collateral from the Dollar Cost
Averaging Fixed Account Options.
We will not charge a Withdrawal Charge on the loan or on the transfer from the
Variable Sub-accounts or any of the Fixed Account Options. We may, however,
apply a Market Value Adjustment to a transfer from the Market Value Adjusted
Fixed Account to the Loan Account. If we do, we will increase or decrease the
amount remaining in the Market Value Adjusted Fixed Account by the amount of
the Market Value Adjustment, so that the net amount transferred to the Loan
Account will equal the desired loan amount. We will charge a Withdrawal Charge
and apply a Market Value Adjustment, if applicable, on a distribution to repay
the loan in full, in the event of loan default.
We will credit interest to the amounts in the Loan Account. The annual interest
rate credited to the Loan Account will be the greater of: (a) an annual
effective rate of 3%; or (b) the loan interest rate minus 2.25%. The value of
the amounts in the Loan Account are not affected by the changes in the value of
the Variable Sub-accounts.
When you take out a loan, we will set the loan interest rate. That rate will
apply to your loan until it is repaid. From time to time, we may change the
loan interest rate applicable to new loans. We also reserve the right to change
the terms of new loans.
We will subtract the outstanding Contract loan balance, including accrued but
unpaid interest, from:
(1)the Death Proceeds;
(2)full withdrawal proceeds;
(3)the amount available for partial withdrawal; and
(4)the amount applied on the Payout Start Date to provide income payments.
If a New Owner elects to continue the Contract under Death of Owner Option D,
the new Contract Value will be reduced by the amount of the loan outstanding
plus accrued interest and the loan will be canceled.
Usually you must repay a Contract loan within five years of the date the loan
is made. Scheduled payments must be level, amortized over the repayment period,
and made at least quarterly. We may permit a repayment period of 15 or 30 years
if the loan proceeds are used to acquire your principal residence. We may also
permit other repayment periods.
You must mark your loan repayments as such. We will assume that any payment
received from you is a Purchase Payment, unless you tell us otherwise.
Generally, loan payments are allocated to the Variable Sub-account(s) in the
proportion that you have selected for your most recent Purchase Payment.
Allocations of loan payments are not permitted to the Fixed Accounts (Standard
Fixed Account, Market Value Adjusted Account, and Dollar Cost Averaging Fixed
Account Option). If your Purchase
Payment allocation includes any of the Fixed Accounts, the percentages
allocated to the Fixed Accounts will be allocated instead to the PIMCO Money
Market Sub-account.
If you do not make a loan payment when due, we will continue to charge interest
on your loan. We also will declare the entire loan in default. We will subtract
the defaulted loan balance plus accrued interest from any future distribution
under the Contract and keep it in payment of your loan. Any defaulted amount
plus interest will be treated as a distribution for tax purposes (as permitted
by law). As a result, you may be required to pay taxes on the defaulted amount
and incur the early withdrawal tax penalty. Until we are permitted by law to
extinguish a defaulted loan, we will continue to charge interest and add unpaid
interest to your outstanding loan balance.
If the total loan balance exceeds the amount available for full withdrawal, we
will mail written notice to your last known address. The notice will state the
amount needed to maintain the Contract in force. If we do not receive payment
of this amount within 31 days after we mail this notice, we will terminate your
Contract.
We may defer making any loan for 6 months after you ask us for a loan, unless
the loan is to pay a premium to us.
CONTRACT VALUE
--------------------------------------------------------------------------------
On the Issue Date, the CONTRACT VALUE is equal to your initial purchase payment
(for CONSULTANT SOLUTIONS PLUS CONTRACTS, your initial purchase payment plus
the Credit Enhancement).
Thereafter, your Contract Value at any time during the Accumulation Phase is
equal to the sum of the value of your Accumulation Units in the Variable
Sub-accounts you have selected, plus your value in the Fixed Account Option(s)
offered by your Contract.
ACCUMULATION UNITS
To determine the number of Accumulation Units of each Variable Sub-account to
allocate to your Contract, we divide (i) the amount of the purchase payment or
transfer you have allocated to a Variable Sub-account by (ii) the Accumulation
Unit Value of that Variable Sub-account next computed after we receive your
payment or transfer. For example, if we receive a $10,000 purchase payment
allocated to a Variable Sub-account when the Accumulation Unit Value for the
Sub-account is $10, we
20 PROSPECTUS
would credit 1,000 Accumulation Units of that Variable Sub-account to your
Contract. For CONSULTANT SOLUTIONS PLUS CONTRACTS, we would credit your
Contract additional Accumulation Units of the Variable Sub-account to reflect
the Credit Enhancement paid on your purchase payment. See "Credit Enhancement."
Withdrawals and transfers from a Variable Sub-account would, of course, reduce
the number of Accumulation Units of that Sub-account allocated to your Contract.
ACCUMULATION UNIT VALUE
As a general matter, the Accumulation Unit Value for each Variable Sub-Account
for each Contract will rise or fall to reflect:
.. changes in the share price of the Portfolio in which the Variable
Sub-Account invests, and
.. the deduction of amounts reflecting the mortality and expense risk charge,
administrative expense charge, and any provision for taxes that have
accrued since we last calculated the Accumulation Unit Value.
We determine any applicable withdrawal charges, Rider Fees (if applicable),
transfer fees, and contract maintenance charges separately for each Contract.
They do not affect the Accumulation Unit Value. Instead, we obtain payment of
those charges and fees by redeeming Accumulation Units. For details on how we
compute Accumulation Unit Values, please refer to the Statement of Additional
Information.
We determine a separate Accumulation Unit Value for each Variable Sub-Account
for each Contract on each Valuation Date. We also determine a separate set of
Accumulation Unit Values that reflect the cost of each optional benefit, or
available combination thereof, offered under the Contract.
YOU SHOULD REFER TO THE PROSPECTUSES FOR THE FUNDS FOR A DESCRIPTION OF HOW THE
ASSETS OF EACH PORTFOLIO ARE VALUED, SINCE THAT DETERMINATION DIRECTLY BEARS ON
THE ACCUMULATION UNIT VALUE OF THE CORRESPONDING VARIABLE SUB-ACCOUNT AND,
THEREFORE, YOUR CONTRACT VALUE.
TRUERETURN ACCUMULATION BENEFIT OPTION
We offer the TRUERETURN ACCUMULATION BENEFIT OPTION, which is available for an
additional fee. The TrueReturn Accumulation Benefit Option guarantees a minimum
Contract Value on the "RIDER MATURITY DATE." The Rider Maturity Date is
determined by the length of the Rider Period which you select. The Option
provides no minimum Contract Value if the Option terminates before the Rider
Maturity Date. See "Termination of the TrueReturn Accumulation Benefit Option"
below for details on termination.
The TrueReturn Accumulation Benefit Option is available at time of application
for the Contract, or the date we receive a written request to add the option,
whichever is later, subject to availability and issue requirements. Currently,
you may not add the TrueReturn Option to your Contract after Contract issue
without prior approval if your Contract Value is greater than $1,000,000 at the
time you try to add the TrueReturn Option. Currently, you may have only one
TrueReturn Accumulation Benefit Option in effect on your Contract at one time.
You may have only either the TrueReturn Accumulation Benefit Option or the
SureIncome Option in effect on your Contract at one time. The TrueReturn
Accumulation Benefit Option has no maximum issue age, however the Rider
Maturity Date must occur before the latest Payout Start Date, which is the
later of the youngest Annuitant's 99th birthday or the 10th Contract
Anniversary. Once added to your Contract, the TrueReturn Accumulation Benefit
Option may be cancelled at any time on or after the 5th Rider Anniversary by:
.. notifying us in writing in a form satisfactory to us; or
.. changing your investment allocations or making other changes so that that
the allocation of investment alternatives no longer adheres to the
investment requirements for the TrueReturn Accumulation Benefit Option. For
more information regarding investment requirements for this Option, see the
"Investment Requirements" section below.
The "RIDER ANNIVERSARY" is the anniversary of the Rider Date. We reserve the
right to extend the date on which the TrueReturn Accumulation Benefit Option
may be cancelled to up to the 10th Rider Anniversary at any time in our sole
discretion. Any change we make will not apply to a TrueReturn Accumulation
Benefit Option that was added to your Contract prior to the implementation date
of the change.
When you add the TrueReturn Accumulation Benefit Option to your Contract, you
must select a Rider Period and a Guarantee Option. The Rider Period and
Guarantee Option you select determine the AB Factor, which is used to determine
the Accumulation Benefit, described below. The "RIDER PERIOD" begins on the
Rider Date and ends on the Rider Maturity Date. The "RIDER DATE" is the date
the TrueReturn Accumulation Benefit Option was made a part of your Contract. We
currently offer Rider Periods ranging from 8 to 20 years depending on the
Guarantee Option you select. You may select any Rider Period from among those
we currently offer, provided the Rider Maturity Date occurs prior to the latest
Payout Start Date. We reserve the right to offer additional Rider Periods in
the future, and to discontinue offering any of the Rider Periods at any time.
We currently offer two "GUARANTEE OPTIONS," Guarantee Option 1 and Guarantee
Option 2. The Guarantee Option you select has specific investment requirements,
which are described in the "Investment Requirements" section below and may
depend upon the Rider Date. We reserve the right to offer additional Guarantee
Options in the future, and to discontinue offering any of the Guarantee Options
at any time. After
21 PROSPECTUS
the Rider Date, the Rider Period and Guarantee Option may not be changed.
The TrueReturn Accumulation Benefit Option may not be available in all states.
We may discontinue offering the TrueReturn Accumulation Benefit Option at any
time.
ACCUMULATION BENEFIT.
On the Rider Maturity Date, if the Accumulation Benefit is greater than the
Contract Value, the Contract Value will be increased to equal the Accumulation
Benefit. The excess amount of any such increase will be allocated to the PIMCO
Money Market Variable Sub-account. You may transfer the excess amount out of
the PIMCO Money Market Variable Sub-account and into another investment
alternative at any time thereafter. However, each transfer you make will count
against the 12 transfers you can make each Contract Year without paying a
transfer fee. Prior to the Rider Maturity Date, the Accumulation Benefit will
not be available as a Contract Value, Settlement Value, or Death Proceeds.
Additionally, we will not pay an Accumulation Benefit if the TrueReturn
Accumulation Benefit Option is terminated for any reason prior to the Rider
Maturity Date. After the Rider Maturity Date, the TrueReturn Accumulation
Benefit Option provides no additional benefit.
The "ACCUMULATION BENEFIT" is equal to the Benefit Base multiplied by the AB
Factor. The "AB FACTOR" is determined by the Rider Period and Guarantee Option
you selected as of the Rider Date. The following table shows the AB Factors
available for the Rider Periods and Guarantee Options we currently offer.
AB FACTORS
RIDER PERIOD GUARANTEE GUARANTEE
(NUMBER OF YEARS) OPTION 1 OPTION 2
-------------------------------------
8 100.0% NA
-------------------------------------
9 112.5% NA
-------------------------------------
10 125.0% 100.0%
-------------------------------------
11 137.5% 110.0%
-------------------------------------
12 150.0% 120.0%
-------------------------------------
13 162.5% 130.0%
-------------------------------------
14 175.0% 140.0%
-------------------------------------
15 187.5% 150.0%
-------------------------------------
16 200.0% 160.0%
-------------------------------------
17 212.5% 170.0%
-------------------------------------
18 225.0% 180.0%
-------------------------------------
19 237.5% 190.0%
-------------------------------------
20 250.0% 200.0%
-------------------------------------
The following examples illustrate the Accumulation Benefit calculations under
Guarantee Options 1 and 2 on the Rider Maturity Date. For the purpose of
illustrating the Accumulation Benefit calculation, the examples assume the
Benefit Base is the same on the Rider Date and the Rider Maturity Date.
Example 1: Guarantee Option 1
Guarantee Option: 1
Rider Period: 15
AB Factor: 187.5%
Rider Date: 1/2/04
Rider Maturity Date: 1/2/19
Benefit Base on Rider Date: $50,000
Benefit Base on rider Maturity Date: $50,000
On the Rider Maturity Date (1/2/19):
Accumulation Benefit =Benefit Base on Rider Maturity
Date X AB Factor
=$50,000 X 187.5%
=$93,750
Example 2: Guarantee Option 2
Guarantee Option: 2
Rider Period: 15
AB Factor: 150.0%
Rider Date: 1/2/04
Rider Maturity Date: 1/2/19
Benefit Base on Rider Date: $50,000
Benefit Base on rider Maturity Date: $50,000
On the Rider Maturity Date (1/2/19):
Accumulation Benefit =Benefit Base on Rider Maturity
Date X AB Factor
=$50,000 X 150.0%
=$75,000
Guarantee Option 1 offers a higher AB Factor and more rider periods than
Guarantee Option 2. Guarantee Option 1 and Guarantee Option 2 have different
investment restrictions. See "Investment Requirements" below for more
information.
BENEFIT BASE.
The Benefit Base is used solely for purposes of determining the Rider Fee and
the Accumulation Benefit. The Benefit Base is not available as a Contract
Value, Settlement Value, or Death Proceeds. On the Rider Date, the "Benefit
Base" is equal to the Contract Value. After the Rider Date, the Benefit Base
will be recalculated for purchase payments and withdrawals as follows:
.. The Benefit Base will be increased by purchase payments (and Credit
Enhancements for CONSULTANT SOLUTIONS PLUS CONTRACTS) made prior to or on
the first Contract Anniversary following the Rider Date. Subject to the
terms and conditions of your Contract, you may add purchase payments after
this date, but they will not be included in the calculation of the Benefit
Base. THEREFORE, IF YOU PLAN TO MAKE PURCHASE PAYMENTS AFTER THE FIRST
CONTRACT ANNIVERSARY FOLLOWING THE RIDER DATE, YOU SHOULD CONSIDER
CAREFULLY WHETHER THIS OPTION IS APPROPRIATE FOR YOUR NEEDS.
.. The Benefit Base will be decreased by a Withdrawal Adjustment for each
withdrawal you make. The Withdrawal Adjustment is equal to (a) divided by
(b), with the result multiplied by (c), where:
(a) = the withdrawal amount;
22 PROSPECTUS
(b) = the Contract Value immediately prior to the withdrawal; and
(c) = the Benefit Base immediately prior to the withdrawal.
Withdrawals taken prior to annuitization (referred to in this prospectus as the
Payout Phase) are generally considered to come from the earnings in the
Contract first. If the Contract is tax-qualified, generally all withdrawals are
treated as distributions of earnings. Withdrawals of earnings are taxed as
ordinary income and, if taken prior to age 59 1/2, may be subject to an
additional 10% federal tax penalty. A withdrawal charge also may apply. See
Appendix G for numerical examples that illustrate how the Withdrawal Adjustment
is applied.
The Benefit Base will never be less than zero.
INVESTMENT REQUIREMENTS.
If you add the TrueReturn Option to your Contract, you must adhere to certain
requirements related to the investment alternatives in which you may invest
during the Rider Period. The specific requirements will depend on the model
portfolio option ("Model Portfolio Option") you have selected and the effective
date of your TrueReturn Option. These requirements are described below in more
detail. These requirements may include, but are not limited to, maximum
investment limits on certain Variable Sub-accounts or on certain Fixed Account
Options, exclusion of certain Variable Sub-accounts or of certain Fixed Account
Options, required minimum allocations to certain Variable Sub-accounts, and
restrictions on transfers to or from certain investment alternatives.
We may also require that you use the Automatic Portfolio Rebalancing Program.
We may change the specific requirements that are applicable to a Guarantee
Option or a Model Portfolio Option available under a Guarantee Option at any
time in our sole discretion. Any changes we make will not apply to a TrueReturn
Option that was made part of your Contract prior to the implementation date of
the change, except for changes made due to a change in investment alternatives
available under the Contract. Any changes we make will not apply to a new
TrueReturn Option elected subsequent to the change pursuant to the Rider
Trade-In Option.
If you have an outstanding loan balance, you may not elect the TrueReturn
Option until the outstanding balance has been repaid. If you elect the
TrueReturn Option, we will not make a policy loan to you until the TrueReturn
Option matures or is cancelled.
When you add the TrueReturn Option to your Contract, you must allocate your
entire Contract Value as follows:
1) to a model portfolio option ("Model Portfolio Option") available with the
Guarantee Option you selected, as defined below; or
2) to the DCA Fixed Account Option and then transfer all purchase payments (and
Credit Enhancements for CONSULTANT SOLUTIONS PLUS Contracts) and interest
according to a Model Portfolio Option available for use with the Guarantee
Option you selected; or
3) to a combination of (1) and (2) above.
For (2) and (3) above, the requirements for the DCA Fixed Account Option must
be met. See the "Dollar Cost Averaging Fixed Account Option" section of this
prospectus for more information.
On the Rider Date, you must select only one of the Model Portfolio Options in
which to allocate your Contract Value. After the Rider Date, you may transfer
your entire Contract Value to any of the other Model Portfolio Options
available with your Guarantee Option. We currently offer several Model
Portfolio Options with each of the available Guarantee Options. The Model
Portfolio Options that are available under Guarantee Options may differ
depending upon the effective date of your TrueReturn Option. Please refer to
the Model Portfolio Option 1, Model Portfolio Option 2 and TrueBalance/SM/
Model Portfolio Options sections below for more details. We may add other Model
Portfolio Options in the future. We also may remove Model Portfolio Options in
the future anytime prior to the date you select such Model Portfolio Option. In
addition, if the investment alternatives available under the Contract change,
we may revise the Model Portfolio Options. The following table summarizes the
Model Portfolio Options currently available for use with each Guarantee Option
under the TrueReturn Option:
GUARANTEE OPTION 1 GUARANTEE OPTION 2
---------------------------------------------------
*Model Portfolio Option 1 *Model Portfolio Option 2
*TrueBalance *TrueBalance
Conservative Model Conservative Model
Portfolio Option Portfolio Option
*TrueBalance Moderately *TrueBalance Moderately
Conservative Model Conservative Model
Portfolio Option Portfolio Option
*TrueBalance Moderate
Model Portfolio Option
*TrueBalance Moderately
Aggressive Model
Portfolio Option
*TrueBalance Aggressive
Model Portfolio Option
---------------------------------------------------
You may not allocate any of your Contract Value to the Standard Fixed Account
Option or to the MVA Fixed Account Option. You must transfer any portion of
your Contract Value that is allocated to the Standard Fixed Account Option or
to the MVA Fixed Account Option to the Variable Sub-accounts prior to adding
the TrueReturn Option to your Contract. Transfers from the MVA Fixed Account
Option may be subject to a Market Value Adjustment. You may allocate any
portion of your purchase payments (and Credit Enhancements for CONSULTANT
SOLUTIONS PLUS CONTRACTS) to the DCA
23 PROSPECTUS
Fixed Account Option on the Rider Date, provided the DCA Fixed Account Option
is available with your Contract and in your state. See the "Dollar Cost
Averaging Fixed Account Option" section of this prospectus for more
information. We use the term "Transfer Period Account" to refer to each
purchase payment allocation made to the DCA Fixed Account Option for a
specified term length. At the expiration of a Transfer Period Account any
remaining amounts in the Transfer Period Account will be transferred to the
Variable Sub-Accounts according to the percentage allocations for the Model
Portfolio Option you selected.
Any subsequent purchase payments (and Credit Enhancements for CONSULTANT
SOLUTIONS PLUS CONTRACTS) made to your Contract will be allocated to the
Variable Sub-Accounts according to your most recent instructions on file with
us. You must comply with any required percentage allocations for the Model
Portfolio Option you have selected. You may also request that purchase payments
(and Credit Enhancement for CONSULTANT SOLUTIONS PLUS CONTRACTS) be allocated
to the DCA Fixed Account Option.
MODEL PORTFOLIO OPTION 1.
If you choose Model Portfolio Option 1 or transfer your entire Contract Value
into Model Portfolio Option 1, you must allocate a certain percentage of your
Contract Value into each of three asset categories. Please note that certain
investment alternatives are not available under Model Portfolio Option 1. You
may choose the Variable Sub-Accounts in which you want to invest, provided you
maintain the percentage allocation requirements for each category. You may also
make transfers among the Variable Sub-Accounts within each category at any
time, provided you maintain the percentage allocation requirements for each
category. However, each transfer you make will count against the 12 transfers
you can make each Contract Year without paying a transfer fee.
Effective May 1, 2005, certain Variable Sub-Accounts under Model Portfolio 1
have been reclassified into different asset categories. These changes apply to
TrueReturn Accumulation Benefit Options effective both prior to and on or after
May 1, 2005. The following table describes the percentage allocation
requirements for Model Portfolio Option 1 and Variable Sub-Accounts available
under each category:
MODEL PORTFOLIO OPTION 1
--------------------------------------------------------------------------------
20% Category A
50% Category B
30% Category C
0% Category D
--------------------------------------------------------------------------------
CATEGORY A
Fidelity VIP Money Market - Service Class 2 Sub-Account
PIMCO VIT Money Market - Administrative Shares Sub-Account
--------------------------------------------------------------------------------
CATEGORY B
Fidelity VIP Investment Grade Bond - Service Class 2 Sub-Account
Legg Mason Western Asset Variable Global High Yield Bond - Class II Sub-Account
MFS High Income - Service Class Sub-Account
PIMCO VIT Foreign Bond (U.S. Dollar-Hedged) - Administrative Shares Sub-Account
PIMCO VIT Real Return - Administrative Shares Sub-Account
PIMCO VIT Total Return - Administrative Shares Sub-Account
UIF U.S. Real Estate, Class II Sub-Account
Invesco V.I. Government Securities, Series II Sub-Account
--------------------------------------------------------------------------------
CATEGORY C
Invesco V.I. Basic Value - Series II Sub-Account
Invesco V.I. Core Equity - Series II Sub-Account
Invesco V.I. Mid Cap Core Equity - Series II Sub-Account
Fidelity VIP Contrafund(R) - Service Class 2 Sub-Account
Fidelity VIP Equity-Income - Service Class 2 Sub-Account
Fidelity VIP Index 500 - Service Class 2 Sub-Account
Fidelity VIP Overseas - Service Class 2 Sub-Account
Fidelity VIP Asset Manager/(SM)/ - Service Class 2 Sub-Account
Janus Aspen Series Overseas - Service Shares Sub-Account
Janus Aspen Series Forty - Service Shares Sub-Account
Janus Aspen Series Perkins Mid Cap Value - Service Shares Sub-Account
Janus Aspen Series Balanced - Service Shares Sub-Account
Legg Mason ClearBridge Variable Fundamental All Cap Value Portfolio - Class I
Sub-Account
Legg Mason ClearBridge Variable Large Cap Value - Class I Sub-Account
MFS Investors Trust - Service Class Sub-Account
MFS Total Return - Service Class Sub-Account
MFS Investors Growth Stock - Service Class Sub-Account
MFS Value - Service Class Sub-Account
Oppenheimer Small- & Mid-Cap Growth/VA - Service Shares Sub-Account/(1)/
Oppenheimer Main Street Small- & Mid-Cap(R)/VA - Service Shares Sub-Account/(2)/
Rydex SGI VT U.S. Long Short Momentum Sub-Account (formerly, Rydex SGI VT
All-Cap Opportunity Sub-Account)
T. Rowe Price Equity Income - II Sub-Account
T. Rowe Price Blue Chip Growth - II Sub-Account
Van Eck VIP Multi-Manager Alternatives Sub-Account
Invesco Van Kampen V.I. Growth and Income, Series II Sub-Account
--------------------------------------------------------------------------------
CATEGORY D (VARIABLE SUB-ACCOUNTS NOT AVAILABLE UNDER MODEL PORTFOLIO OPTION 1)
Invesco V.I. Capital Appreciation - Series II Sub-Account/(1)/
Alger LargeCap Growth - Class S Sub-Account
Alger Capital Appreciation - Class S Sub-Account
Alger MidCap Growth - Class S Sub-Account
Fidelity VIP Growth - Service Class 2 Sub-Account
MFS New Discovery - Service Class Sub-Account
Oppenheimer Global Securities/VA - Service Shares Sub-Account
UIF Growth, Class II Sub-Account/(2)/
Van Eck VIP Emerging Markets Sub-Account
Van Eck VIP Global Hard Assets Sub-Account
Invesco Van Kampen V.I. Mid Cap Growth, Series II Sub-Account
--------------------------------------------------------------------------------
(1)Effective as of November 19, 2010, the following Variable Sub-Account closed
to all Contract Owners except those Contract Owners who had contract value
invested in the Variable Sub-Account as of the closure date:
Invesco V.I. Capital Appreciation, Series II Sub-Account
Contract Owners who had contract value invested in this Variable Sub-Account
as of the closure date may continue to submit additional investments into the
Variable Sub-Account thereafter, although they will not be permitted to
invest in the Variable Sub-Account if they withdraw or otherwise transfer
their entire contract value from the Variable Sub-Account following the
closure date. Contract Owners who did not have contract value invested in
this Variable Sub-Account as of the specified closure date may not invest in
the Variable Sub-Account.
24 PROSPECTUS
Effective as of August 30, 2010, the following Variable Sub-Account closed to
all Contract Owners except those Contract Owners who had contract value
invested in the Variable Sub-Account as of the closure date:
Oppenheimer Small- & Mid-Cap Growth/VA - Service Shares Sub-Account
Contract Owners who had contract value invested in this Variable Sub-Account
as of the closure date may continue to submit additional investments into the
Variable Sub-Account thereafter, although they will not be permitted to
invest in the Variable Sub-Account if they withdraw or otherwise transfer
their entire contract value from the Variable Sub-Account following the
closure date. Contract Owners who did not have contract value invested in
this Variable Sub-Account as of the specified closure date may not invest in
the Variable Sub-Account.
(2)Effective May 1, 2011, the following Portfolios changed their names:
PREVIOUS NAME NEW NAME
-----------------------------------------------------------------------------
Oppenheimer Main Street Small Cap Oppenheimer Main Street Small- &
Fund(R)/VA - Service Shares Mid-Cap Fund(R)/VA - Service Shares
-----------------------------------------------------------------------------
UIF Capital Growth, Class II UIF Growth, Class II
-----------------------------------------------------------------------------
EACH CALENDAR QUARTER, WE WILL USE THE AUTOMATIC PORTFOLIO REBALANCING PROGRAM
TO AUTOMATICALLY REBALANCE YOUR CONTRACT VALUE IN EACH VARIABLE SUB-ACCOUNT AND
RETURN IT TO THE PERCENTAGE ALLOCATION REQUIREMENTS FOR MODEL PORTFOLIO
OPTION 1. WE WILL USE THE PERCENTAGE ALLOCATIONS AS OF YOUR MOST RECENT
INSTRUCTIONS.
MODEL PORTFOLIO OPTION 2.
The investment requirements under Model Portfolio Option 2 depend on the
effective date of your TrueReturn Accumulation Benefit Option.
Rider Date prior to May 1, 2005
If your TrueReturn Accumulation Benefit Option Rider Date is prior to May 1,
2005, and you choose Model Portfolio Option 2 or transfer your entire Contract
Value into Model Portfolio Option 2 under Guarantee Option 2, you must allocate
your Contract Value among four asset categories in accordance with the
percentage allocation requirements set out in the table below. You may choose
the Variable Sub-Accounts in which you want to invest, provided you maintain
the percentage allocation requirements for each category. You may also make
transfers among the Variable Sub-Accounts within each category at any time,
provided you maintain the percentage allocation requirements for each category.
However, each transfer you make will count against the 12 transfers you can
make each Contract Year without paying a transfer fee.
The following table describes the percentage allocation requirements for Model
Portfolio Option 2 (Rider Date prior to May 1, 2005) and the Variable
Sub-Accounts available under each category:
MODEL PORTFOLIO OPTION 2
(RIDER DATE PRIOR TO MAY 1, 2005)
--------------------------------------------------------------------------------
10% Category A
20% Category B
50% Category C
20% Category D
--------------------------------------------------------------------------------
CATEGORY A
Fidelity VIP Money Market - Service Class 2 Sub-Account
PIMCO VIT Money Market - Administrative Shares Sub-Account
--------------------------------------------------------------------------------
CATEGORY B
Fidelity VIP Investment Grade Bond - Service Class 2 Sub-Account
Legg Mason Western Asset Variable Global High Yield Bond - Class II Sub-Account
MFS High Income - Service Class Sub-Account
PIMCO VIT Foreign Bond (U.S. Dollar-Hedged) - Administrative Shares Sub-Account
PIMCO VIT Real Return - Administrative Shares Sub-Account
PIMCO VIT Total Return - Administrative Shares Sub-Account
UIF U.S. Real Estate, Class II Sub-Account
Invesco V.I. Government Securities, Series II Sub-Account
--------------------------------------------------------------------------------
CATEGORY C
Invesco V.I. Basic Value - Series II Sub-Account
Invesco V.I. Mid Cap Core Equity - Series II Sub-Account
Fidelity VIP Equity-Income - Service Class 2 Sub-Account
Fidelity VIP Index 500 - Service Class 2 Sub-Account
Fidelity VIP Asset Manager/(SM)/ - Service Class 2 Sub-Account
Janus Aspen Series Perkins Mid Cap Value - Service Shares Sub-Account
Janus Aspen Series Balanced - Service Shares Sub-Account
Legg Mason ClearBridge Variable Large Cap Value - Class I Sub-Account
MFS Investors Trust - Service Class Sub-Account
MFS Total Return - Service Class Sub-Account
MFS Value - Service Class Sub-Account
Oppenheimer Small- & Mid-Cap Growth/VA - Service Shares Sub-Account/(1)/
Premier VIT OpCap Balanced Sub-Account
T. Rowe Price Equity Income - II Sub-Account
Van Eck VIP Multi-Manager Alternatives Sub-Account
Invesco Van Kampen V.I. Growth and Income, Series II Sub-Account
--------------------------------------------------------------------------------
CATEGORY D
Invesco V.I. Capital Appreciation - Series II Sub-Account/(1)/
Invesco V.I. Core Equity - Series II Sub-Account
Alger LargeCap Growth - Class S Sub-Account
Alger Capital Appreciation - Class S Sub-Account
Alger MidCap Growth - Class S Sub-Account
Fidelity VIP Contrafund(R) - Service Class 2 Sub-Account
Fidelity VIP Growth - Service Class 2 Sub-Account
Fidelity VIP Overseas - Service Class 2 Sub-Account
Janus Aspen Series Overseas - Service Shares Sub-Account
Janus Aspen Series Forty - Service Shares Sub-Account
Legg Mason ClearBridge Variable Fundamental All Cap Value Portfolio - Class I
Sub-Account
MFS New Discovery - Service Class Sub-Account
MFS Investors Growth Stock - Service Class Sub-Account
Oppenheimer Global Securities/VA - Service Shares Sub-Account
Oppenheimer Main Street Small- & Mid-Cap(R)/VA - Service Shares Sub-Account/(2)/
Rydex SGI VT U.S. Long Short Momentum Sub-Account (formerly, Rydex SGI VT
All-Cap Opportunity Sub-Account)
T. Rowe Price Blue Chip Growth - II Sub-Account
UIF Growth, Class II Sub-Account/(2)/
Van Eck VIP Emerging Markets Sub-Account
Van Eck VIP Global Hard Assets Sub-Account
Invesco Van Kampen V.I. Mid Cap Growth, Series II Sub-Account
--------------------------------------------------------------------------------
(1)Effective as of November 19, 2010, the following Variable Sub-Account closed
to all Contract Owners except those Contract Owners who had contract value
invested in the Variable Sub-Account as of the closure date:
Invesco V.I. Capital Appreciation, Series II Sub-Account
Contract Owners who had contract value invested in this Variable Sub-Account
as of the closure date may continue to submit additional investments into the
Variable Sub-Account thereafter,
25 PROSPECTUS
although they will not be permitted to invest in the Variable Sub-Account if
they withdraw or otherwise transfer their entire contract value from the
Variable Sub-Account following the closure date. Contract Owners who did not
have contract value invested in this Variable Sub-Account as of the specified
closure date may not invest in the Variable Sub-Account.
Effective as of August 30, 2010, the following Variable Sub-Account closed to
all Contract Owners except those Contract Owners who had contract value
invested in the Variable Sub-Account as of the closure date:
Oppenheimer Small- & Mid-Cap Growth/VA - Service Shares Sub-Account
Contract Owners who had contract value invested in this Variable Sub-Account
as of the closure date may continue to submit additional investments into the
Variable Sub-Account thereafter, although they will not be permitted to
invest in the Variable Sub-Account if they withdraw or otherwise transfer
their entire contract value from the Variable Sub-Account following the
closure date. Contract Owners who did not have contract value invested in
this Variable Sub-Account as of the specified closure date may not invest in
the Variable Sub-Account.
(2)Effective May 1, 2011, the following Portfolios changed their names:
PREVIOUS NAME NEW NAME
-----------------------------------------------------------------------------
Oppenheimer Main Street Small Cap Oppenheimer Main Street Small- &
Fund(R)/VA - Service Shares Mid-Cap Fund(R)/VA - Service Shares
-----------------------------------------------------------------------------
UIF Capital Growth, Class II UIF Growth, Class II
-----------------------------------------------------------------------------
EACH CALENDAR QUARTER, WE WILL USE THE AUTOMATIC PORTFOLIO REBALANCING PROGRAM
TO AUTOMATICALLY REBALANCE YOUR CONTRACT VALUE IN EACH VARIABLE SUB-ACCOUNT AND
RETURN IT TO THE PERCENTAGE ALLOCATION REQUIREMENTS FOR MODEL PORTFOLIO OPTION
2 (RIDER DATE PRIOR TO MAY 1, 2005). WE WILL USE THE PERCENTAGE ALLOCATIONS AS
OF YOUR MOST RECENT INSTRUCTIONS.
Rider Date on or after May 1, 2005
If your TrueReturn Accumulation Benefit Option Rider Date is on or after May 1,
2005, and you choose Model Portfolio Option 2 or transfer your entire Contract
Value into Model Portfolio Option 2 under Guarantee Option 2, you may allocate
your Contract Value among any of a selected group of available Variable
Sub-Accounts listed below. However, you may not allocate your Contract Value
among any of the excluded Variable Sub-Accounts listed below. You may choose to
invest in or transfer among any of the available Variable Sub-Accounts,
however, each transfer you make will count against the 12 transfers you can
make each Contract Year without paying a transfer fee.
The following table lists the available and excluded Variable Sub-Accounts
under Model Portfolio Option 2 (Rider Date on or after May 1, 2005):
MODEL PORTFOLIO OPTION 2 (RIDER DATE ON OR AFTER MAY 1, 2005)
--------------------------------------------------------------------------------
Available
--------------------------------------------------------------------------------
Invesco V.I. Basic Value - Series II Sub-Account
Invesco V.I. Core Equity - Series II Sub-Account
Invesco V.I. Mid Cap Core Equity - Series II Sub-Account
Fidelity VIP Contrafund(R) - Service Class 2 Sub-Account
Fidelity VIP Equity-Income - Service Class 2 Sub-Account
Fidelity VIP Index 500 - Service Class 2 Sub-Account
Fidelity VIP Investment Grade Bond - Service Class 2 Sub-Account
Fidelity VIP Overseas - Service Class 2 Sub-Account
Fidelity VIP Asset Manager/(SM)/ - Service Class 2 Sub-Account
Fidelity VIP Money Market - Service Class 2 Sub-Account
Janus Aspen Series Overseas - Service Shares Sub-Account
Janus Aspen Series Forty - Service Shares Sub-Account
Janus Aspen Series Perkins Mid Cap Value - Service Shares Sub-Account
Janus Aspen Series Balanced - Service Shares Sub-Account
Legg Mason ClearBridge Variable Fundamental All Cap Value Portfolio - Class I
Sub-Account/(3)/
Legg Mason Western Asset Variable Global High Yield Bond - Class II Sub-Account
Legg Mason ClearBridge Variable Large Cap Value - Class I Sub-Account
MFS Investors Trust - Service Class Sub-Account
MFS High Income - Service Class Sub-Account
MFS Investors Growth Stock - Service Class Sub-Account
MFS Total Return - Service Class Sub-Account
MFS Value - Service Class Sub-Account
PIMCO VIT Foreign Bond (U.S. Dollar-Hedged) - Administrative Shares Sub-Account
PIMCO VIT Money Market - Administrative Shares Sub-Account
PIMCO VIT Real Return - Administrative Shares Sub-Account
PIMCO VIT Total Return - Administrative Shares Sub-Account
Oppenheimer Small- & Mid-Cap Growth/VA - Service Shares Sub-Account/(1)/
Oppenheimer Main Street Small- & Mid-Cap(R)/VA - Service Shares Sub-Account/(2)/
Rydex SGI VT U.S. Long Short Momentum Sub-Account (formerly, Rydex SGI VT
All-Cap Opportunity Sub-Account)
T. Rowe Price Equity Income - II Sub-Account
T. Rowe Price Blue Chip Growth - II Sub-Account
UIF U.S. Real Estate, Class II Sub-Account
Van Eck VIP Multi-Manager Alternatives Sub-Account
Invesco Van Kampen V.I. Growth and Income, Series II Sub-Account
Invesco V.I. Government Securities, Series II Sub-Account
MODEL PORTFOLIO OPTION 2 (RIDER DATE ON OR AFTER MAY 1, 2005)
--------------------------------------------------------------------------------
Excluded
--------------------------------------------------------------------------------
Invesco V.I. Capital Appreciation - Series II Sub-Account/(1)/
Alger LargeCap Growth - Class S Sub-Account
Alger Capital Appreciation - Class S Sub-Account
Alger MidCap Growth - Class S Sub-Account
Fidelity VIP Growth - Service Class 2 Sub-Account
MFS New Discovery - Service Class Sub-Account
Oppenheimer Global Securities/VA - Service Shares Sub-Account
UIF Growth Class II Sub-Account/(2)/
Van Eck VIP Emerging Markets Sub-Account
Van Eck VIP Global Hard Assets Sub-Account
Invesco Van Kampen VT Mid Cap Growth, Series II Sub-Account
--------------------------------------------------------------------------------
(1)Effective as of November 19, 2010, the following Variable Sub-Account closed
to all Contract Owners except those Contract Owners who had contract value
invested in the Variable Sub-Account as of the closure date:
Invesco V.I. Capital Appreciation, Series II Sub-Account
26 PROSPECTUS
Contract Owners who had contract value invested in this Variable Sub-Account
as of the closure date may continue to submit additional investments into the
Variable Sub-Account thereafter, although they will not be permitted to
invest in the Variable Sub-Account if they withdraw or otherwise transfer
their entire contract value from the Variable Sub-Account following the
closure date. Contract Owners who did not have contract value invested in
this Variable Sub-Account as of the specified closure date may not invest in
the Variable Sub-Account.
Effective as of August 30, 2010, the following Variable Sub-Account closed to
all Contract Owners except those Contract Owners who had contract value
invested in the Variable Sub-Account as of the closure date:
Oppenheimer Small- & Mid-Cap Growth/VA - Service Shares Sub-Account
Contract Owners who had contract value invested in this Variable Sub-Account
as of the closure date may continue to submit additional investments into the
Variable Sub-Account thereafter, although they will not be permitted to
invest in the Variable Sub-Account if they withdraw or otherwise transfer
their entire contract value from the Variable Sub-Account following the
closure date. Contract Owners who did not have contract value invested in
this Variable Sub-Account as of the specified closure date may not invest in
the Variable Sub-Account.
(2)Effective May 1, 2011, the following Portfolios changed their names:
PREVIOUS NAME NEW NAME
-----------------------------------------------------------------------------
Oppenheimer Main Street Small Cap Oppenheimer Main Street Small- &
Fund(R)/VA - Service Shares Mid-Cap Fund(R)/VA - Service Shares
-----------------------------------------------------------------------------
UIF Capital Growth, Class II UIF Growth, Class II
-----------------------------------------------------------------------------
TRUEBALANCE/SM/ MODEL PORTFOLIO OPTIONS.
If you choose one of the TrueBalance/SM/ Model Portfolio Options or transfer
your entire Contract Value into one of the TrueBalance/SM/ Model Portfolio
Options, you may not choose the Variable Sub-Accounts or make transfers among
the Variable Sub-Accounts in the TrueBalance Model Portfolio Option. Each
TrueBalance Model Portfolio involves an allocation of assets among a group of
pre-selected Variable Sub-Accounts. You cannot make transfers among the
Variable Sub-Accounts nor vary the Variable Sub-Accounts that comprise a
TrueBalance Model Portfolio Option. If you choose a TrueBalance Model Portfolio
Option, we will invest and periodically reallocate your Contract Value
according to the allocation percentages and requirements for the TrueBalance
Model Portfolio Option you have selected currently. For more information
regarding the TrueBalance program, see the "TrueBalance/SM/ Asset Allocation
Program" section of this prospectus. However, note that the restrictions
described in this section, specifically the restrictions on transfers and the
requirement that all of your Contract Value be allocated to a TrueBalance Model
Portfolio Option, apply to the TrueBalance program only if you have added the
TrueReturn Option to your Contract.
PLEASE NOTE ONLY CERTAIN TRUEBALANCE MODEL PORTFOLIO OPTIONS ARE AVAILABLE WITH
YOUR TRUERETURN OPTION AS SUMMARIZED IN THE TABLE UNDER INVESTMENT REQUIREMENTS
ABOVE.
CANCELLATION OF THE TRUERETURN OPTION.
You may not cancel the TrueReturn Option or make transfers, changes to your
investment allocations, or changes to the Automatic Portfolio Rebalancing
Program that are inconsistent with the investment restrictions applicable to
your Guarantee Option and/or Model Portfolio Option prior to the 5th Rider
Anniversary. Failure to comply with the investment requirements for any reason
may result in the cancellation of the TrueReturn Option. On or after the 5th
Rider Anniversary, we will cancel the TrueReturn Option if you make transfers,
changes to your investment allocations, or changes to the Automatic Portfolio
Rebalancing Program that are inconsistent with the investment requirements
applicable to your Guarantee Option and/or Model Portfolio Option. We will not
cancel the TrueReturn Option or make any changes to your investment allocations
or to the Automatic Portfolio Rebalancing Program that are inconsistent with
the investment restrictions applicable to your Guarantee Option until we
receive notice from you that you wish to cancel the TrueReturn Option. No
Accumulation Benefit will be paid if you cancel the Option prior to the Rider
Maturity Date.
DEATH OF OWNER OR ANNUITANT.
If the Contract Owner or Annuitant dies before the Rider Maturity Date and the
Contract is continued under Option D of the Death of Owner or Death of
Annuitant provision as described on page 61 of this prospectus, then the
TrueReturn Option will continue, unless the new Contract Owner elects to cancel
this Option. If the TrueReturn Option is continued, it will remain in effect
until terminated. If the Contract is not continued under Option D, then the
TrueReturn Option will terminate on the date we receive a Complete Request for
Settlement of the Death Proceeds.
If an Annuitant dies before the Payout Start Date, and the Contract is
continued under Category 1 of the Death of Annuitant provision of the Contract,
the TrueReturn Accumulation Benefit Option will remain in effect until
terminated. If the Contract is not continued under Category 1, then the
TrueReturn Accumulation Benefit Option will terminate on the date we receive a
complete request for settlement of the Death Proceeds.
RIDER TRADE-IN OPTION.
We offer a "Rider Trade-In Option" that allows you to cancel your TrueReturn
Accumulation Benefit Option and immediately add a new TrueReturn Accumulation
Benefit Option ("NEW OPTION"), provided all of the following conditions are met:
.. The trade-in must occur on or after the 5th Rider Anniversary and prior to
the Rider Maturity Date.
27 PROSPECTUS
.. The New Option will be made a part of your Contract on the date the
existing TrueReturn Accumulation Benefit Option is cancelled, provided it
is cancelled for reasons other than the termination of your Contract.
.. The New Option must be a TrueReturn Accumulation Benefit Option that we
make available for use with the Rider Trade-In Option.
.. The issue requirements and terms and conditions of the New Option must be
met as of the date the New Option is made a part of your Contract.
For example, if you trade-in your TrueReturn Accumulation Benefit Option:
.. the new Rider Fee will be based on the Rider Fee percentage applicable to a
new TrueReturn Accumulation Benefit Option at the time of trade-in;
.. the Benefit Base for the New Option will be based on the Contract Value as
of the new Rider Date;
.. the AB Factor will be determined by the Rider Periods and Guarantee Options
available with the New Option;
.. the Model Portfolio Options will be determined by the Model Portfolio
Options offered with the Guarantee Options available with the New Option;
.. any waiting period for canceling the New Option will start again on the new
Rider Date;
.. any waiting period for exercising the Rider Trade-In Option will start
again on the new Rider Date; and
.. the terms and conditions of the Rider Trade-In Option will be according to
the requirements of the New Option.
Currently, we are also making the SureIncome Option available at the time of
your first utilization of this TrueReturn Accumulation Benefit Option Rider
Trade-In Option. We may discontinue offering the SureIncome Option under the
Rider Trade-In Option for new TrueReturn Accumulation Benefit Options added in
the future at anytime at our discretion. If we do so, TrueReturn Options issued
prior to this time will continue to have the SureIncome Option available at the
time of the first utilization of this TrueReturn Rider Trade-In Option. You may
cancel your TrueReturn Accumulation Benefit Option and immediately add a new
SureIncome Option, provided all of the following conditions are met:
.. The trade-in must occur on or after the 5th Rider Anniversary and prior to
the Rider Maturity Date. We reserve the right to extend the date at which
time the trade-in may occur to up to the 10th anniversary of the Rider Date
at any time in our sole discretion. Any change we make will not apply to a
TrueReturn Accumulation Benefit Option that was added to your Contract
prior to the implementation date of the change.
.. The new SureIncome Option will be made a part of your Contract on the date
the existing TrueReturn Accumulation Benefit Option is cancelled, provided
it is cancelled for reasons other than the termination of your Contract.
.. The new SureIncome Option must be a SureIncome Option that we make
available for use with this Rider Trade-In Option.
.. The issue requirements and terms and conditions of the new SureIncome
Option must be met as of the date the new SureIncome Option is made a part
of your Contract.
You should consult with your sales representative before trading in your
TrueReturn Accumulation Benefit Option.
TERMINATION OF THE TRUERETURN OPTION.
The TrueReturn Option will terminate on the earliest of the following to occur:
.. on the Rider Maturity Date;
.. on the Payout Start Date;
.. on the date your Contract is terminated;
.. on the date the Option is cancelled;
.. on the date we receive a Complete Request for Settlement of the Death
Proceeds; or
.. on the date the Option is replaced with a New Option under the Rider
Trade-In Option.
We will not pay an Accumulation Benefit if the TrueReturn Option is terminated
for any reason prior to the Rider Maturity Date.
SUREINCOME WITHDRAWAL BENEFIT OPTION
We offer the SureIncome Withdrawal Benefit Option, which is available for an
additional fee. The SureIncome Option provides a guaranteed withdrawal benefit
that gives you the right to take limited partial withdrawals that total an
amount equal to your purchase payments plus any applicable credit enhancements
(subject to certain restrictions). Therefore, regardless of the subsequent
fluctuations in the value of your Contract Value, you are entitled to a Benefit
Payment each Benefit Year until your Benefit Base is exhausted (terms defined
below).
The SureIncome Option guarantees an amount up to the "BENEFIT PAYMENT
REMAINING" which will be available for withdrawal from the Contract each
"BENEFIT YEAR" until the "BENEFIT BASE" (defined below) is reduced to zero. If
the Contract Value is reduced to zero and the Benefit Base is still greater
than zero, we will distribute an amount equal to the Benefit Base to the
Contract Owner as described below under the "WITHDRAWAL BENEFIT PAYOUT PHASE".
For purposes of the SureIncome Option, "withdrawal" means the gross amount of a
withdrawal before any
28 PROSPECTUS
applicable charges such as withdrawal charges, fees, taxes or adjustments
including any applicable Market Value Adjustments and surrender charges. Under
the SureIncome Option, we currently do not treat a withdrawal that reduces the
Contract Value to less than $1,000 as a withdrawal of the entire Contract Value.
The "RIDER DATE" is the date the SureIncome Option was made a part of your
Contract. The initial Benefit Year is the period between the Rider Date and the
first Contract Anniversary after the Rider Date. Each subsequent Benefit Year
will coincide with (the same as) the Contract Year.
The SureIncome Option is available at issue of the Contract, or may be added
later, subject to availability and issue requirements. You may not add the
SureIncome Option to your Contract after Contract issue without our prior
approval if your Contract Value is greater than $1,000,000 at the time you try
to add the SureIncome Option. You may have only one SureIncome Option in effect
on your Contract at one time. You may only have either the TrueReturn
Accumulation Benefit Option, or the SureIncome Option in effect on your
Contract at the same time. The SureIncome Option is only available if the
oldest Contract Owner and oldest Annuitant are age 85 or younger on the
effective date of the Rider (the "Rider Application Date") (The maximum age may
depend on your state). The SureIncome Option is not available to be added to a
Contract categorized as a Tax Sheltered Annuity as defined under Internal
Revenue Code Section 403(b) at this time. We reserve the right to make the
SureIncome Option available to such Contracts on a nondiscriminatory basis in
the future at our discretion. Once added to your Contract, the SureIncome
Option may be cancelled at any time on or after the 5th calendar year
anniversary of the Rider Date by notifying us in writing in a form satisfactory
to us.
The SureIncome Option may not be available in all states. We may discontinue
offering the SureIncome Option at any time to new Contract Owners and to
existing Contract Owners who did not elect the SureIncome Option prior to the
date of discontinuance.
WITHDRAWAL BENEFIT FACTOR
The "WITHDRAWAL BENEFIT FACTOR" is used to determine the "BENEFIT PAYMENT" and
Benefit Payment Remaining. We currently offer a Withdrawal Benefit Factor equal
to 8%. We reserve the right to make other Withdrawal Benefit Factors available
in the future for new SureIncome Options and/or to eliminate the current
Withdrawal Benefit Factor. Once a Withdrawal Benefit Factor has been
established for a SureIncome Option, it cannot be changed after the Rider Date
unless that SureIncome Option is terminated.
BENEFIT PAYMENT AND BENEFIT PAYMENT REMAINING
The Benefit Payment is the amount available at the beginning of each Benefit
Year that you may withdraw during that Benefit Year. The Withdrawal Benefit
Factor and the Benefit Base are used to determine your Benefit Payment. The
Benefit Payment Remaining is the amount remaining after any previous
withdrawals in a Benefit Year that you may withdraw without reducing your
Benefit Base by more than the amount of the withdrawal and without reducing
your Benefit Payment available in future Benefit Years. Please note that any
premiums or withdrawals made on a Contract Anniversary would be applied to the
Benefit Year that just ended on that Contract Anniversary.
At the beginning of each Benefit Year, the Benefit Payment Remaining is equal
to the Benefit Payment.
During each Benefit Year the Benefit Payment Remaining will be increased by
purchase payments (and Credit Enhancements for CONSULTANT SOLUTIONS PLUS
CONTRACTS) multiplied by the Withdrawal Benefit Factor (currently 8% for new
SureIncome Options) and reduced by the amount of each withdrawal. The Benefit
Payment Remaining will never be less than zero.
On the Rider Date, the Benefit Payment is equal to the greater of:
.. The Contract Value multiplied by the Withdrawal Benefit Factor (currently
8% for new SureIncome Options); or
.. The value of the Benefit Payment of the previous Withdrawal Benefit Option
(attached to your Contract) that is being terminated under a rider trade-in
option (see "Rider Trade-In Option" below for more information), if
applicable.
After the Rider Date, the Benefit Payment will be increased by purchase
payments (and Credit Enhancements for CONSULTANT SOLUTIONS PLUS CONTRACTS)
multiplied by the Withdrawal Benefit Factor and affected by withdrawals as
follows:
.. If the withdrawal is less than or equal to the Benefit Payment Remaining in
effect immediately prior to the withdrawal, the Benefit Payment is
unchanged.
.. If the withdrawal is greater than the Benefit Payment Remaining in effect
immediately prior to the withdrawal, the Benefit Payment will be the lesser
of:
. The Benefit Payment immediately prior to the withdrawal; or
. The Contract Value immediately prior to withdrawal less the amount of
the withdrawal, multiplied by the Withdrawal Benefit Factor.
At our discretion, the Benefit Payment available during a Benefit Year may be
increased on a nondiscriminatory basis and without prior notice in order to
satisfy IRS minimum distribution requirements on the Contract under which this
Option has been elected. We are currently not increasing the Benefit Payment
available to satisfy IRS minimum distribution requirements, which may result in
a withdrawal greater than the Benefit Payment Remaining.
29 PROSPECTUS
BENEFIT BASE
The Benefit Base is not available as a Contract Value or Settlement Value. The
Benefit Base is used solely to help calculate the Rider Fee, the amount that
may be withdrawn and payments that may be received under the SureIncome Option.
On the Rider Date, the Benefit Base is equal to the Contract Value. After the
Rider Date, the Benefit Base will be increased by purchase payments (and Credit
Enhancements for CONSULTANT SOLUTIONS PLUS CONTRACTS) and decreased by
withdrawals as follows:
.. If the withdrawal is less than or equal to the Benefit Payment Remaining in
effect immediately prior to the withdrawal, the Benefit Base will be
reduced by the amount of the withdrawal.
If the withdrawal is greater than the Benefit Payment Remaining in effect
immediately prior to the withdrawal, the Benefit Base will be the lesser of:
.. The Contract Value immediately prior to withdrawal less the amount of the
withdrawal; or
.. The Benefit Base immediately prior to withdrawal less the amount of the
withdrawal.
The Benefit Base may also be reduced in other situations as detailed in the
"Owner and Assignment of Payments or Interest" section below.
IF THE BENEFIT BASE IS REDUCED TO ZERO, THIS SUREINCOME OPTION WILL TERMINATE.
For numerical examples that illustrate how the values defined under the
SureIncome Option are calculated, see Appendix I.
CONTRACT OWNER AND ASSIGNMENT OF PAYMENTS OR INTEREST
If you change the Contract Owner or assign any payments or interest under this
Contract, as allowed, to any living or non-living person other than your spouse
on or after the first calendar year anniversary of the Rider Date, the Benefit
Base will be recalculated to be the lesser of the Contract Value and the
Benefit Base at the time of assignment.
CONTRACT VALUE
If your Contract Value is reduced to zero due to fees or withdrawals and your
Benefit Base is still greater than zero, your Contract will immediately enter
the Withdrawal Benefit Payout Phase. Under the SureIncome Option, we currently
do not treat a withdrawal that reduces the Contract Value to less than $1,000
as a withdrawal of the entire Contract Value. We reserve the right to change
this at any time.
WITHDRAWAL BENEFIT PAYOUT PHASE
Under the Withdrawal Benefit Payout Phase, the Accumulation Phase of the
Contract ends and the Contract enters the Payout Phase subject to the following:
.. The "WITHDRAWAL BENEFIT PAYOUT START DATE" is the date the Withdrawal
Benefit Payout Phase is entered and the Accumulation Phase of the Contract
ends.
.. No further withdrawals, purchase payments or any other actions associated
with the Accumulation Phase can be made after the Withdrawal Benefit Payout
Start Date.
.. The Payout Start Date is the first day of the next Benefit Year after the
Withdrawal Benefit Payout Start Date. We reserve the right to allow other
Payout Start Dates to be requested on a nondiscriminatory basis without
prior notice.
.. During the Withdrawal Benefit Payout Phase, we will make scheduled fixed
income payments to the Owner (or new Contract Owner) at the end of each
month starting one month after the Payout Start Date. The amount of each
payment will be equal to the Benefit Payment divided by 12, unless a
payment frequency other than monthly is requested in a form acceptable to
us and received by us before the first payment is made (the amount of each
payment will be adjusted accordingly; i.e. if the payment frequency
requested is quarterly, the amount of each payment will be equal to the
Benefit Payment divided by 4). Payments will be made over a period certain
such that total payments made will equal the Benefit Base on the Payout
Start Date; therefore, the final payment may be reduced. If your Contract
is a qualified contract, meaning an individual retirement annuity qualified
as defined under Internal Revenue Code Section 408(b) or a Tax Sheltered
Annuity as defined under Internal Revenue Code Section 403(b), the period
certain cannot exceed that which is required by Internal Revenue Code
Section 401(a)(9) and regulations promulgated thereunder. Therefore, the
amount of each payment under this Option may be larger so that the sum of
the payments made over this period equals the Benefit Base on the Payout
Start Date. Additionally, if your Contract is a qualified contract, we will
not permit a change in the payment frequency or level.
.. If your Contract is a non-qualified contract, we reserve the right to allow
other payment frequencies or levels to be requested on a nondiscriminatory
basis without prior notice. In no event will we allow more than one change
in the payment frequency or level during a Contract Year.
30 PROSPECTUS
.. If the Contract Owner dies before all payments have been made, the
remaining payments will continue to be made to the new Contract Owner as
scheduled.
.. Once all scheduled payments have been paid, the Contract will terminate.
Generally, you may not make withdrawals, purchase payments or any other actions
associated with the Accumulation Phase after the Withdrawal Benefit Payout
Start Date.
EXAMPLE
BEGINNING OF BENEFIT YEAR 1*
Contract Value = $100,000
Benefit Base = $100,000
Benefit Payment = $8,000
Benefit Payment Remaining = $8,000
In this example, you can take a Benefit Payment of up to $8,000 in Benefit Year
1. If a withdrawal of $6,000 is taken then the following values would apply:
Contract Value = $94,000 (Assuming that your Contract Value has not been
affected by any other factors)
Benefit Base = $94,000
Benefit Payment = $8,000
Benefit Payment Remaining = $2,000
BEGINNING OF BENEFIT YEAR 2
Contract Value = $70,000 (Assuming that your contract value has declined due to
poor performance)
Benefit Base = $94,000
Benefit Payment = $8,000
Benefit Payment Remaining = $8,000 (resets at the beginning of each Benefit
Year)
In Benefit Year 2 you have the right to a Benefit Payment of $8,000 and since
you have not taken any withdrawals yet in Benefit Year 2, the Benefit Payment
Remaining would also be $8,000 at the beginning of Benefit Year 2.
* THIS EXAMPLE ASSUMES AN INITIAL CONTRACT VALUE OF $100,000, NO ADDITIONAL
PURCHASE PAYMENTS, A WITHDRAWAL BENEFIT FACTOR OF 8% AND DOES NOT TAKE INTO
ACCOUNT FEES OR CHARGES.
INVESTMENT REQUIREMENTS
If you add the SureIncome Option to your Contract, you must adhere to certain
requirements related to the investment alternatives in which you may invest.
The specific requirements are described below in more detail and will depend on
your currently selected Model Portfolio Option and your Withdrawal Benefit
Factor. These requirements may include, but are not limited to, maximum
investment limits on certain Variable Sub-Accounts or on certain Fixed Account
Options, exclusion of certain Variable Sub-Accounts or of certain Fixed Account
Options, required minimum allocations to certain Variable Sub-Accounts, and
restrictions on transfers to or from certain investment alternatives. We may
also require that you use the Automatic Portfolio Rebalancing Program. We may
change the specific requirements that are applicable at any time in our sole
discretion. Any changes we make will not apply to a SureIncome Option that was
made a part of your Contract prior to the implementation date of the change,
except for changes made due to a change in investment alternatives available
under the Contract. This restriction does not apply to a new Option elected
pursuant to the Rider Trade-In Option. We reserve the right to have
requirements unique to specific Withdrawal Benefit Factors if we make other
Withdrawal Benefit Factors available in the future, including specific model
portfolio options ("Model Portfolio Options") as described below, available
only to certain Withdrawal Benefit Factors.
When you add the SureIncome Option to your Contract, you must allocate your
entire Contract Value as follows:
1) to a MODEL PORTFOLIO OPTION available as described below;
2) to the DCA Fixed Account Option and then transfer all purchase payments (and
Credit Enhancements for Consultant Solutions Plus Contracts) and interest to
the Variable Sub-Accounts; or
3) to a combination of (1) and (2) above.
For (2) and (3) above, the requirements for the DCA Fixed Account Option must
be met. See the "Dollar Cost Averaging Fixed Account Option" section of this
prospectus for more information.
On the Rider Date, you must select only one of the Model Portfolio Options in
which to allocate your Contract Value. After the Rider Date, you may transfer
your entire Contract Value to any of the other available Model Portfolio
Options. We currently offer several Model Portfolio Options. The Model
Portfolio Options that are available may differ depending upon the effective
date of your Withdrawal Benefit Option and your Withdrawal Benefit Factor.
Please refer to the Model Portfolio Option and TrueBalance/SM/ Model Portfolio
Options sections for more details. We may add other Model Portfolio Options in
the future. We also may remove Model Portfolio Options in the future anytime
prior to the date you select such Model Portfolio Option. In addition, if the
investment alternatives available under the Contract change, we may revise the
Model Portfolio Options. The following table summarizes the Model Portfolio
Options currently available for use:
*MODEL PORTFOLIO OPTION 1
--------------------------------------------------------------------------------
*TrueBalance Conservative Model Portfolio Option
*TrueBalance Moderately Conservative Model Portfolio Option
*TrueBalance Moderate Model Portfolio Option
*TrueBalance Moderately Aggressive Model Portfolio Option
*TrueBalance Aggressive Model Portfolio Option
--------------------------------------------------------------------------------
31 PROSPECTUS
You may not allocate any of your Contract Value to the Standard Fixed Account
Option or to the Market Value Adjusted Fixed Account Option. You must transfer
any portion of your Contract Value that is allocated to the Standard Fixed
Account Option or to the Market Value Adjusted Fixed Account Option to the
Variable Sub-Accounts prior to adding the SureIncome Option to your Contract.
Transfers from the Market Value Adjusted Fixed Account Option may be subject to
a Market Value Adjustment. You may allocate any portion of your purchase
payments (and Credit Enhancements for CONSULTANT SOLUTIONS PLUS CONTRACTS) to
the DCA Fixed Account Option on the Rider Date, provided the DCA Fixed Account
Option is available with your Contract and in your state. See the "Dollar Cost
Averaging Fixed Account Option" section of this prospectus for more
information. We use the term "TRANSFER PERIOD ACCOUNT" to refer to each
purchase payment allocation made to the DCA Fixed Account Option for a
specified term length. At the expiration of a Transfer Period Account any
remaining amounts in the Transfer Period Account will be transferred to the
Variable Sub-Accounts according to your most recent percentage allocation
selections.
Any subsequent purchase payments (and Credit Enhancements for CONSULTANT
SOLUTIONS PLUS CONTRACTS) made to your Contract will be allocated to the
Variable Sub-Accounts according to your specific instructions or your
allocation for the previous purchase payment, unless you request that the
purchase payment (and Credit Enhancement for CONSULTANT SOLUTIONS PLUS
CONTRACTS) be allocated to the DCA Fixed Account Option. Purchase payments
allocated to the DCA Fixed Account Option must be $500 or more. Any withdrawals
you request will reduce your Contract Value invested in each of the investment
alternatives on a pro rata basis in the proportion that your Contract Value in
each bears to your total Contract Value in all Variable Sub-Accounts, unless
you request otherwise.
MODEL PORTFOLIO OPTION 1.
If you choose Model Portfolio Option 1 or transfer your entire Contract Value
into Model Portfolio Option 1, you currently may allocate up to 100% of your
Contract Value in any manner you choose to the Available Variable Sub-Accounts
shown in the table below. You may not allocate ANY PORTION of your Contract
Value to the Excluded Variable Sub-Accounts. You may make transfers among any
of the Available Variable Sub-Accounts. However, each transfer you make will
count against the 12 transfers you can make each Contract Year without paying a
transfer fee.
Currently the Available Variable Sub-Accounts and the Excluded Variable
Sub-Accounts are as follows:
--------------------------------------------------------------------------------
Available
--------------------------------------------------------------------------------
Invesco AIM V.I. Basic Value - Series II Sub-Account
Invesco V.I. Core Equity - Series II Sub-Account
Invesco V.I. Mid Cap Core Equity - Series II Sub-Account
Fidelity VIP Contrafund(R) - Service Class 2 Sub-Account
Fidelity VIP Equity-Income - Service Class 2 Sub-Account
Fidelity VIP Index 500 - Service Class 2 Sub-Account
Fidelity VIP Investment Grade Bond - Service Class 2 Sub-Account
Fidelity VIP Overseas - Service Class 2 Sub-Account
Fidelity VIP Asset Manager/(SM)/ - Service Class 2 Sub-Account
Fidelity VIP Money Market - Service Class 2 Sub-Account
Janus Aspen Series Overseas - Service Shares Sub-Account
Janus Aspen Series Forty - Service Shares Sub-Account
Janus Aspen Series Perkins Mid Cap Value - Service Shares Sub-Account
Janus Aspen Series Balanced - Service Shares Sub-Account
Legg Mason ClearBridge Variable Fundamental All Cap Value - Class II Sub-Account
Legg Mason Western Asset Variable Global High Yield Bond - Class II Sub-Account
Legg Mason ClearBridge Variable Large Cap Value - Class II Sub-Account
MFS Investors Trust - Service Class Sub-Account
MFS High Income - Service Class Sub-Account
MFS Investors Growth Stock - Service Class Sub-Account
MFS Total Return - Service Class Sub-Account
MFS Value - Service Class Sub-Account
Oppenheimer Small- & Mid-Cap Growth/VA - Service Shares Sub-Account/(1)/
Oppenheimer Main Street Small- & Mid-Cap(R)/VA - Service Shares Sub-Account/(2)/
PIMCO VIT Foreign Bond (U.S. Dollar-Hedged) - Administrative Shares Sub-Account
PIMCO VIT Money Market - Administrative Shares Sub-Account
PIMCO VIT Real Return - Administrative Shares Sub-Account
PIMCO VIT Total Return - Administrative Shares Sub-Account
Rydex SGI VT U.S. Long Short Momentum Sub-Account (formerly, Rydex SGI VT
All-Cap Opportunity Sub-Account)
T. Rowe Price Equity Income - II Sub-Account
T. Rowe Price Blue Chip Growth - II Sub-Account
UIF U.S. Real Estate, Class II Sub-Account
Van Eck VIP Multi-Manager Alternatives Sub-Account
Invesco Van Kampen V.I. Growth and Income, Series II Sub-Account
Invesco V.I. Government Securities, Series II Sub-Account
--------------------------------------------------------------------------------
Excluded
--------------------------------------------------------------------------------
Invesco V.I. Capital Appreciation - Series II Sub-Account/(1)/
Alger LargeCap Growth - Class S Sub-Account
Alger Capital Appreciation - Class S Sub-Account
Alger MidCap Growth - Class S Sub-Account
Fidelity VIP Growth - Service Class 2 Sub-Account
MFS New Discovery - Service Class Sub-Account
Oppenheimer Global Securities/VA - Service Shares Sub-Account
UIF Growth, Class II Sub-Account/(2)/
Van Eck VIP Emerging Markets Sub-Account
Van Eck VIP Global Hard Assets Sub-Account
Invesco Van Kampen V.I. Mid Cap Growth, Series II
--------------------------------------------------------------------------------
(1)Effective as of November 19, 2010, the following Variable Sub-Account closed
to all Contract Owners except those Contract Owners who had contract value
invested in the Variable Sub-Account as of the closure date:
Invesco V.I. Capital Appreciation, Series II Sub-Account
32 PROSPECTUS
Contract Owners who had contract value invested in this Variable Sub-Account
as of the closure date may continue to submit additional investments into the
Variable Sub-Account thereafter, although they will not be permitted to
invest in the Variable Sub-Account if they withdraw or otherwise transfer
their entire contract value from the Variable Sub-Account following the
closure date. Contract Owners who did not have contract value invested in
this Variable Sub-Account as of the specified closure date may not invest in
the Variable Sub-Account.
Effective as of August 30, 2010, the following Variable Sub-Account closed to
all Contract Owners except those Contract Owners who had contract value
invested in the Variable Sub-Account as of the closure date:
Oppenheimer Small- & Mid-Cap Growth/VA - Service Shares Sub-Account
Contract Owners who had contract value invested in this Variable Sub-Account
as of the closure date may continue to submit additional investments into the
Variable Sub-Account thereafter, although they will not be permitted to
invest in the Variable Sub-Account if they withdraw or otherwise transfer
their entire contract value from the Variable Sub-Account following the
closure date. Contract Owners who did not have contract value invested in
this Variable Sub-Account as of the specified closure date may not invest in
the Variable Sub-Account.
(2)Effective May 1, 2011, the following Portfolios changed their names:
PREVIOUS NAME NEW NAME
-----------------------------------------------------------------------------
Oppenheimer Main Street Small Cap Oppenheimer Main Street Small- &
Fund(R)/VA - Service Shares Mid-Cap Fund(R)/VA - Service Shares
-----------------------------------------------------------------------------
UIF Capital Growth, Class II UIF Growth, Class II
-----------------------------------------------------------------------------
TRUEBALANCE/SM/ MODEL PORTFOLIO OPTIONS.
If you choose one of the TrueBalance/SM/ Model Portfolio Options or transfer
your entire Contract Value into one of the TrueBalance/SM/ Model Portfolio
Options, you may not choose the Variable Sub-Accounts or make transfers among
the Variable Sub-Accounts in the TrueBalance Model Portfolio Option. Each
TrueBalance Model Portfolio involves an allocation of assets among a group of
pre-selected Variable Sub-Accounts. You cannot make transfers among the
Variable Sub-Accounts nor vary the Variable Sub-Accounts that comprise a
TrueBalance Model Portfolio Option. If you choose a TrueBalance Model Portfolio
Option, we will invest and periodically reallocate your Contract Value
according to the allocation percentages and requirements for the TrueBalance
Model Portfolio Option you have selected currently. For more information
regarding the TrueBalance program, see the "TrueBalance/SM/ Asset Allocation
Program" section of this prospectus. However, note that the restrictions
described in this section, specifically the restrictions on transfers and the
requirement that all of your Contract Value be allocated to a TrueBalance Model
Portfolio Option, apply to the TrueBalance program only if you have added the
SureIncome Option to your Contract.
CANCELLATION OF THE SUREINCOME OPTION
You may not cancel the SureIncome Option prior to the 5th calendar year
anniversary of the Rider Date. On or after the 5th calendar year anniversary of
the Rider Date you may cancel the rider by notifying us in writing in a form
satisfactory to us. We reserve the right to extend the date at which time the
cancellation may occur to up to the 10th calendar year anniversary of the Rider
Date at any time in our sole discretion. Any change we make will not apply to a
SureIncome Option that was added to your Contract prior to the implementation
date of the change.
RIDER TRADE-IN OPTION
We offer a "RIDER TRADE-IN OPTION" that allows you to cancel your SureIncome
Option and immediately add a new Withdrawal Benefit Option ("New SureIncome
Option"). We may also offer other Options ("Other New Options") under the Rider
Trade-In Option. However, you may only select one Option under this Rider
Trade-In Option at the time you cancel your SureIncome Option. Currently, we
are also making the TrueReturn Accumulation Benefit Option available at the
time of your first utilization of this Rider Trade-In Option so that you have
the ability to switch from the SureIncome Option to the TrueReturn Accumulation
Benefit Option. We may discontinue offering the TrueReturn Option under the
Rider Trade-In Option for New SureIncome Options added in the future at anytime
at our discretion.
This Rider Trade-in Option is available provided all of the following
conditions are met:
.. The trade-in must occur on or after the 5th calendar year anniversary of
the Rider Date. We reserve the right to extend the date at which time the
trade-in may occur to up to the 10th calendar year anniversary of the Rider
Date at any time in our sole discretion. Any change we make will not apply
to a SureIncome Option that was added to your Contract prior to the
implementation date of the change.
.. The New Option will be made a part of your Contract on the date the
existing Option is cancelled, provided it is cancelled for reasons other
than the termination of your Contract.
.. The New Option must be an Option that we make available for use with this
Rider Trade-In Option.
.. The issue requirements and terms and conditions of the New Option must be
met as of the date the New Option is made a part of your Contract.
If the New Option is a SureIncome Option, the New Option must provide that the
new Benefit Payment be greater than or equal to your current Benefit Payment as
of the date the Rider Trade-In Option is exercised, if applicable.
33 PROSPECTUS
You should consult with your sales representative before trading in your
SureIncome Option.
DEATH OF OWNER OR ANNUITANT.
If the Contract Owner dies before the Rider Maturity Date and the Contract is
continued under Option D of the Death of Owner provision of your Contract, as
described on page 61 of your prospectus, then the SureIncome Option will
continue, unless the new Contract Owner elects to cancel this Option. If the
SureIncome Option is continued, it will remain in effect until terminated. If
the Contract is not continued under Option D, then the SureIncome Option will
terminate on the date we receive a Complete Request for Settlement of the Death
Proceeds.
If an Annuitant dies before the Payout Start Date, and the Contract is
continued under Category 1 of the Death of Annuitant provision of the Contract,
the SureIncome Option will remain in effect until terminated. If the Contract
is not continued under Category 1, then the SureIncome Option will terminate on
the date we receive a complete request for settlement of the Death Proceeds.
TERMINATION OF THE SUREINCOME OPTION
This SureIncome Option will terminate on the earliest of the following to occur:
.. The Benefit Base is reduced to zero;
.. On the Payout Start Date (except if the Contract enters the Withdrawal
Benefit Payout Phase as defined under the Withdrawal Benefit Payout Phase
section);
.. On the date the Contract is terminated;
.. On the date the SureIncome Option is cancelled;
.. On the date we receive a Complete Request for Settlement of the Death
Proceeds; or
.. On the date the SureIncome Option is replaced with a New Option under the
Rider Trade-In Option.
INVESTMENT ALTERNATIVES: THE VARIABLE SUB-ACCOUNTS
--------------------------------------------------------------------------------
You may allocate your purchase payments to up to 46 Variable Sub-accounts. Each
Variable Sub-account invests in the shares of a corresponding Portfolio. Each
Portfolio has its own investment objective(s) and policies. We briefly describe
the Portfolios below.
For more complete information about each Portfolio, including expenses and
risks associated with each Portfolio, please refer to the prospectuses for the
Funds. We will mail to you a prospectus for each Portfolio related to the
Variable Sub-Accounts to which you allocate your purchase payment.
YOU SHOULD CAREFULLY CONSIDER THE INVESTMENT OBJECTIVES, RISKS, CHARGES AND
EXPENSES OF THE INVESTMENT ALTERNATIVES WHEN MAKING AN ALLOCATION TO THE
VARIABLE SUB-ACCOUNTS. TO OBTAIN ANY OR ALL OF THE UNDERLYING PORTFOLIO
PROSPECTUSES, PLEASE CONTACT US AT 800-457-7617.
PORTFOLIO INVESTMENT OBJECTIVE INVESTMENT ADVISER
--------------------------------------------------------------------------------------------------------------
AIM VARIABLE INSURANCE FUNDS (INVESCO VARIABLE INSURANCE FUNDS)
--------------------------------------------------------------------------------------------------------------
Invesco V.I. Basic Value Fund - Series Long-term growth of capital
II
----------------------------------------------------------------------------------
Invesco V.I. Capital Appreciation Fund Growth of capital INVESCO ADVISERS, INC.
- Series II/(1)/
----------------------------------------------------------------------------------
Invesco V.I. Core Equity Fund - Series Growth of capital
II
----------------------------------------------------------------------------------
Invesco V.I. Mid Cap Core Equity Fund - Long-term growth of capital
Series II
----------------------------------------------------------------------------------
Invesco Van Kampen V.I. Mid Cap Growth, Capital growth
Series II
----------------------------------------------------------------------------------VAN KAMPEN ASSET
Invesco V.I. Government Securities, High current return consistent with MANAGEMENT
Series II preservation of capital
----------------------------------------------------------------------------------
Invesco Van Kampen V.I. Growth and Long-term growth of capital and income.
Income, Series II
----------------------------------------------------------------------------------
THE ALGER PORTFOLIOS
--------------------------------------------------------------------------------------------------------------
Alger LargeCap Growth Portfolio - Long-term capital appreciation
Class S
----------------------------------------------------------------------------------FRED ALGER MANAGEMENT, INC.
Alger Capital Appreciation Portfolio - Long-term capital appreciation
Class S
----------------------------------------------------------------------------------
Alger MidCap Growth Portfolio - Class S Long-term capital appreciation
----------------------------------------------------------------------------------
FIDELITY(R) VARIABLE INSURANCE PRODUCTS
--------------------------------------------------------------------------------------------------------------
Fidelity VIP Asset Manager/(SM)/ High total return with reduced risk
Portfolio - Service Class 2 over the long term by allocating its
assets among stocks, bonds, and
short-term instruments.
--------------------------------------------------------------------------------------------------------------
34 PROSPECTUS
PORTFOLIO INVESTMENT OBJECTIVE INVESTMENT ADVISER
-----------------------------------------------------------------------------------------------------------
Fidelity VIP Contrafund(R) Portfolio - Long-term capital appreciation
Service Class 2
----------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio - Reasonable income. The fund will also FIDELITY MANAGEMENT &
Service Class 2 consider the potential for capital RESEARCH COMPANY
appreciation. The fund's goal is to
achieve a yield which exceeds the
composite yield on the securities
comprising the Standard & Poor's
500/(SM)/ Index (S&P 500(R)).
----------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio - Service To achieve capital appreciation
Class 2
----------------------------------------------------------------------------------
Fidelity VIP Index 500 Portfolio - Investment results that correspond to
Service Class 2 the total return of common stocks
publicly traded in the United States
as represented by the Standard &
Poor's 500/(SM)/ Index (S&P 500(R))
----------------------------------------------------------------------------------
Fidelity VIP Investment Grade Bond As high a level of current income as is
Portfolio - Service Class 2 consistent with the preservation of
capital
-----------------------------------------------------------------------------------------------------------
Fidelity VIP Money Market Portfolio - As high a level of current income as is
Service Class 2 consistent with preservation of
capital and liquidity.
-----------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio - Long-term growth of capital
Service Class 2
-----------------------------------------------------------------------------------------------------------
JANUS ASPEN SERIES
-----------------------------------------------------------------------------------------------------------
Janus Aspen Series Balanced Portfolio - Long-term capital growth, consistent
Service Shares with preservation of capital and
balanced by current income
----------------------------------------------------------------------------------JANUS CAPITAL MANAGEMENT
Janus Aspen Series Overseas Portfolio - Long-term growth of capital. LLC
Service Shares
----------------------------------------------------------------------------------
Janus Aspen Series Forty Portfolio - Long-term growth of capital
Service Shares
----------------------------------------------------------------------------------
Janus Aspen Series Perkins Mid Cap Capital appreciation
Value Portfolio - Service Shares
----------------------------------------------------------------------------------
LEGG MASON PARTNERS VARIABLE EQUITY
TRUST
----------------------------------------------------------------------------------
-------------------------
Legg Mason ClearBridge Variable Long-term capital growth with current
Fundamental All Cap Value Portfolio - income as a secondary consideration LEGG MASON PARTNERS FUND
Class I ADVISOR, LLC
----------------------------------------------------------------------------------
Legg Mason ClearBridge Variable Large Long-term growth of capital with
Cap Value Portfolio - Class I current income as a secondary objective
----------------------------------------------------------------------------------
LEGG MASON PARTNERS VARIABLE INCOME
TRUST
-----------------------------------------------------------------------------------------------------------
Legg Mason Western Asset Variable Maximum total return, consistent with LEGG MASON PARTNERS FUND
Global High Yield Bond Portfolio - preservation of capital ADVISOR, LLC
Class II
-----------------------------------------------------------------------------------------------------------
MFS(R) VARIABLE INSURANCE TRUST/(SM)/
-----------------------------------------------------------------------------------------------------------
MFS High Income Series - Service Class Total return with an emphasis on high
current income, but also considering
capital appreciation
----------------------------------------------------------------------------------
MFS Investors Growth Stock Series - Capital appreciation
Service Class MFS(TM) INVESTMENT
----------------------------------------------------------------------------------MANAGEMENT
MFS Investors Trust Series - Service Capital appreciation
Class
----------------------------------------------------------------------------------
MFS New Discovery Series - Service Class Capital appreciation
----------------------------------------------------------------------------------
MFS Total Return Series - Service Class Total return
----------------------------------------------------------------------------------
MFS Value Series - Service Class Capital appreciation
----------------------------------------------------------------------------------
OPPENHEIMER VARIABLE ACCOUNT FUNDS
-----------------------------------------------------------------------------------------------------------
Oppenheimer Global Securities Fund/VA - Long-term capital appreciation by
Service Shares investing a substantial portion of
assets in securities of foreign OPPENHEIMERFUNDS, INC.
issuers, growth-type companies,
cyclical industries and special
situations that are considered to have
appreciation possibilities.
----------------------------------------------------------------------------------
Oppenheimer Main Street Small- & Capital appreciation.
Mid-Cap Fund(R)/VA - Service
Shares/(3)/
----------------------------------------------------------------------------------
Oppenheimer Small- & Mid-Cap Growth Capital appreciation by investing in
Fund/VA - Service Shares/(1)/ "growth type" companies.
----------------------------------------------------------------------------------
PIMCO VARIABLE INSURANCE TRUST
-----------------------------------------------------------------------------------------------------------
PIMCO VIT Foreign Bond Portfolio (U.S. Maximum total return, consistent with
Dollar- Hedged) - Administrative Shares preservation of capital and prudent
investment management.
----------------------------------------------------------------------------------
PIMCO VIT Money Market Portfolio - Maximum current income, consistent with
Administrative Shares preservation of capital and daily
liquidity
----------------------------------------------------------------------------------
35 PROSPECTUS
PORTFOLIO INVESTMENT OBJECTIVE INVESTMENT ADVISER
------------------------------------------------------------------------------------------------------------
PIMCO VIT Real Return Portfolio - Maximum real return, consistent with
Administrative Shares preservation of capital and prudent PACIFIC INVESTMENT
investment management MANAGEMENT COMPANY LLC
----------------------------------------------------------------------------------
PIMCO VIT Total Return Portfolio - Maximum total return, consistent with
Administrative Shares preservation of capital and prudent
investment management.
----------------------------------------------------------------------------------
THE RYDEX VARIABLE TRUST
------------------------------------------------------------------------------------------------------------
Rydex SGI VT U.S. Long Short Momentum Long-term capital appreciation. RYDEX INVESTMENTS
Sub- Account (formerly, Rydex SGI VT
All-Cap Opportunity Sub-Account)
------------------------------------------------------------------------------------------------------------
T. ROWE PRICE EQUITY SERIES, INC.
------------------------------------------------------------------------------------------------------------
T. Rowe Price Blue Chip Growth Long-term capital growth. Income is a
Portfolio - II secondary objective. T. ROWE PRICE ASSOCIATES,
----------------------------------------------------------------------------------INC.
T. Rowe Price Equity Income Portfolio - Substantial dividend income as well as
II long-term growth of capital through
investments in the common stocks of
established companies.
----------------------------------------------------------------------------------
THE UNIVERSAL INSTITUTIONAL FUNDS, INC.
------------------------------------------------------------------------------------------------------------
UIF Growth Portfolio, Class II/(3)/ Long-term capital appreciation by
investing primarily in growth-oriented MORGAN STANLEY INVESTMENT
equity securities of large MANAGEMENT, INC./(2)/
capitalization companies.
----------------------------------------------------------------------------------
UIF U.S. Real Estate Portfolio, Class II Above average current income and
long-term capital appreciation by
investing primarily in equity
securities of companies in the U.S.
real estate industry, including real
estate investment trusts.
----------------------------------------------------------------------------------
VAN ECK VIP TRUST
------------------------------------------------------------------------------------------------------------
Van Eck VIP Multi-Manager Alternatives Consistent absolute (positive) returns
Fund in various market cycles
----------------------------------------------------------------------------------VAN ECK ASSOCIATES
Van Eck VIP Emerging Markets Fund Long-term capital appreciation by CORPORATION
investing primarily in equity
securities in emerging markets around
the world
----------------------------------------------------------------------------------
Van Eck VIP Global Hard Assets Fund Long-term capital appreciation by
investing primarily in "hard asset
securities" with income as a secondary
consideration
----------------------------------------------------------------------------------
(1)Effective as of November 19, 2010, the following Variable Sub-Account closed
to all Contract Owners except those Contract Owners who had contract value
invested in the Variable Sub-Account as of the closure date:
Invesco V.I. Capital Appreciation, Series II Sub-Account
Contract Owners who had contract value invested in this Variable Sub-Account
as of the closure date may continue to submit additional investments into the
Variable Sub-Account thereafter, although they will not be permitted to
invest in the Variable Sub-Account if they withdraw or otherwise transfer
their entire contract value from the Variable Sub-Account following the
closure date. Contract Owners who did not have contract value invested in
this Variable Sub-Account as of the specified closure date may not invest in
the Variable Sub-Account.
Effective as of August 30, 2010, the following Variable Sub-Account closed to
all Contract Owners except those Contract Owners who had contract value
invested in the Variable Sub-Account as of the closure date:
Oppenheimer Small- & Mid-Cap Growth/VA - Service Shares Sub-Account
Contract Owners who had contract value invested in this Variable Sub-Account
as of the closure date may continue to submit additional investments into the
Variable Sub-Account thereafter, although they will not be permitted to
invest in the Variable Sub-Account if they withdraw or otherwise transfer
their entire contract value from the Variable Sub-Account following the
closure date. Contract Owners who did not have contract value invested in
this Variable Sub-Account as of the specified closure date may not invest in
the Variable Sub-Account.
(2)Morgan Stanley Investment Management Inc., the investment advisor to the Van
Kampen UIF Portfolios, does business in certain instances as Van Kampen.
(3)Effective May 1, 2011, the following Portfolios changed their names:
PREVIOUS NAME NEW NAME
-----------------------------------------------------------------------------
Oppenheimer Main Street Small Cap Oppenheimer Main Street Small- &
Fund(R)/VA - Service Shares Mid-Cap Fund(R)/VA - Service Shares
-----------------------------------------------------------------------------
UIF Capital Growth, Class II UIF Growth, Class II
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AMOUNTS YOU ALLOCATE TO VARIABLE SUB-ACCOUNTS MAY GROW IN VALUE, DECLINE IN
VALUE, OR GROW LESS THAN YOU EXPECT, DEPENDING ON THE INVESTMENT PERFORMANCE OF
THE PORTFOLIOS IN WHICH THOSE VARIABLE SUB-ACCOUNTS INVEST. YOU BEAR THE
INVESTMENT RISK THAT THE PORTFOLIOS MIGHT NOT MEET THEIR INVESTMENT OBJECTIVES.
SHARES OF THE PORTFOLIOS ARE NOT DEPOSITS IN, OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, ANY BANK AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
36 PROSPECTUS
TRUEBALANCE/SM/ ASSET ALLOCATION PROGRAM
THE TRUEBALANCE ASSET ALLOCATION PROGRAM ("TRUEBALANCE PROGRAM") IS NO LONGER
OFFERED FOR NEW ENROLLMENTS. IF YOU ENROLLED IN THE TRUEBALANCE PROGRAM PRIOR
TO JANUARY 31, 2008, YOU MAY REMAIN IN THE PROGRAM. IF YOU TERMINATE YOUR
ENROLLMENT OR OTHERWISE TRANSFER YOUR CONTRACT VALUE OUT OF THE PROGRAM, YOU
MAY NOT RE-ENROLL.
There is no additional charge for the TrueBalance program. Participation in the
TrueBalance program may be limited if you have elected certain Contract Options
that impose restrictions on the investment alternatives which you may invest,
such as the Income Protection Benefit Option, the TrueReturn Accumulation
Benefit Option or a Withdrawal Benefit Option. See the sections of this
prospectus discussing these Options for more information.
Asset allocation is the process by which your Contract Value is invested in
different asset classes in a way that matches your risk tolerance, time
horizon, and investment goals. Theoretically, different asset classes tend to
behave differently under various economic and market conditions. By spreading
your Contract Value across a range of asset classes, you may, over time, be
able to reduce the risk of investment volatility and potentially enhance
returns. Asset allocation does not guarantee a profit or protect against loss
in a declining market.
Your sales representative helps you determine whether participating in an asset
allocation program is appropriate for you. You complete a questionnaire to
identify your investment style. Based on your investment style, you select one
asset allocation model portfolio among the available model portfolios which may
range from conservative to aggressive. Your Contract Value is allocated among
the Variable Sub-Accounts according to your selected model portfolio. Not all
Variable Sub-Accounts are available in any one model portfolio, and you must
only allocate your Contract Value to the limited number of Variable
Sub-Accounts available in the model portfolio you select. You should not select
a model portfolio without first consulting with your sales representative.
Lincoln Benefit and the principal underwriter of the Contracts, Allstate
Distributors, L.L.C., Inc., do not intend to provide any personalized
investment advice in connection with the TrueBalance program and you should not
rely on this program as providing individualized investment recommendations to
you.
Lincoln Benefit retained an independent investment management firm ("investment
management firm") to construct the TrueBalance model portfolios. The investment
management firm does not provide advice to Lincoln Benefit's Contract Owners.
Neither Lincoln Benefit nor the investment management firm is acting for any
Contract Owner as a "fiduciary" or as an "investment manager," as such terms
are defined under applicable laws and regulations relating to the Employee
Retirement Income Security Act of 1974 (ERISA).
The investment management firm does not take into account any information about
any Contract Owner or any Contract Owner's assets when creating, providing or
maintaining any TrueBalance model portfolio. Individual Contract Owners should
ultimately rely on their own judgment and/or the judgment of a financial
advisor in making their investment decisions. Neither Lincoln Benefit nor the
investment management firm is responsible for determining the suitability of
the TrueBalance model portfolios for the Contract Owners' purposes.
Each of the five model portfolios specifies an allocation among a mix of
Variable Sub-Accounts that considers the investment goals of the applicable
investment style. On the business day we accept your participation in the
TrueBalance program, we will automatically reallocate any existing Contract
Value in the Variable Sub-Accounts according to the model portfolio you
selected. If any portion of your existing Contract Value is allocated to the
Standard Fixed Account or MVA Fixed Account Options and you wish to allocate
any portion of it to the model portfolio, you must transfer that portion to the
Variable Sub-Accounts. In addition, as long as you participate in the
TrueBalance program, you must allocate all of your purchase payments (and
Credit Enhancements for CONSULTANT SOLUTIONS PLUS CONTRACTS) to the Fixed
Account Options and/or the Variable Sub-Accounts currently offered in your
model portfolio. Any purchase payments (and Credit Enhancements for CONSULTANT
SOLUTIONS PLUS CONTRACTS) you allocate to the DCA Fixed Account Option will be
automatically transferred, along with interest, in equal monthly installments
to the Variable Sub-Accounts according to the model portfolio you selected.
We use the term "Transfer Period Account" to refer to each purchase payment
allocation made to the DCA Fixed Account Option for a specified term length. At
the expiration of a Transfer Period Account any remaining amounts in the
Transfer Period Account will be transferred to the Variable Sub-Account
according to the percentage allocation for the model portfolio you selected.
Lincoln Benefit may offer new or revised TrueBalance model portfolios at any
time, and may retain a different investment management firm to create any such
new or revised TrueBalance model portfolios. Lincoln Benefit will not
automatically reallocate your Contract Value allocated to the Variable
Sub-Accounts to match any new or revised model portfolios that are offered. If
you are invested in the TrueBalance model portfolio, your registered
representative or the selling broker-dealer will notify you of any new or
revised TrueBalance model portfolios that may be made available. If you wish to
invest in accordance with a new or revised TrueBalance model portfolio, you
must submit a transfer request to transfer your Contract Value in your existing
TrueBalance model portfolio to the new TrueBalance
37 PROSPECTUS
model portfolio. If you do not request a transfer to a new TrueBalance model
portfolio, we will continue to rebalance your Contract Value in accordance with
your existing TrueBalance model portfolio. At any given time, you may only
elect a TrueBalance model portfolio that is available at the time of election.
You may select only one model portfolio at a time. However, you may change your
selection of model portfolio at any time, provided you select only a currently
available model portfolio. Each change you make in your model portfolio
selection will count against the 12 transfers you can make each Contract Year
without paying a transfer fee. You should consult with your sales
representative before making a change to your model portfolio selection to
determine whether the new model portfolio is appropriate for your needs.
Since the performance of each Variable Sub-Account may cause a shift in the
percentage allocated to each Variable Sub-Account, at least once every calendar
quarter we will automatically rebalance all of your Contract Value in the
Variable Sub-Accounts according to your currently selected model portfolio.
Unless you notify us otherwise, any purchase payments you make after electing
the TrueBalance program will be allocated to your model portfolio and/or to the
Fixed Account Options according to your most recent instructions on file with
us. Once you elect to participate in the TrueBalance program, you may allocate
subsequent purchase payments to any of the Fixed Account Options available with
your Contract and/or to any of the Variable Sub-Accounts included in your model
portfolio, but only according to the allocation specifications of that model
portfolio. You may not allocate subsequent purchase payments to a Variable
Sub-Account that is not included in your model portfolio. Subsequent purchase
payments allocated to the Variable Sub-Accounts will be automatically
rebalanced at the end of the next calendar quarter according to the allocation
percentages for your currently selected model portfolio.
You may not make transfers from the Variable Sub-Accounts to any of the other
Variable Sub-Accounts. You may make transfers, as allowed under the contract,
from the Fixed Account Options to other Fixed Account Options or to the
Variable Sub-Accounts included in your model portfolio, but only according to
the allocation specifications of that model portfolio. You may make transfers
from the Variable Sub-Accounts to any of the Fixed Account Options, except the
DCA Fixed Account Option. Transfers to Fixed Account Options may be
inconsistent with the investment style you selected and with the purpose of the
TrueBalance program. However, all of your Contract Value in the Variable
Sub-Accounts will be automatically rebalanced at the end of the next calendar
quarter according to the percentage allocations for your currently selected
model portfolio. You should consult with your sales representative before
making transfers.
If you own the TrueReturn Accumulation Benefit Option, on the Rider Maturity
Date the Contract Value may be increased due to the TrueReturn Accumulation
Benefit Option. Any increase will be allocated to the PIMCO VIT Money Market -
Administrative Shares Sub-Account. You may make transfers from this Variable
Sub-Account to the Fixed Account Options (as allowed) or the Variable
Sub-Accounts included in your model portfolio, but only according to the
allocation specification of that model portfolio. All of your Contract Value in
the Variable Sub-Accounts will be automatically rebalanced at the end of the
next calendar quarter according to the percentage allocations for your
currently selected model portfolio.
If you make a partial withdrawal from any of the Variable Sub-Accounts, your
remaining Contract Value in the Variable Sub-Accounts will be automatically
rebalanced at the end of the next calendar quarter according to the percentage
allocations for your currently selected model portfolio. If you are
participating in the Systematic Withdrawal Program when you add the TrueBalance
program or change your selection of model portfolios, you may need to update
your withdrawal instructions. If you have any questions, please consult your
sales representative.
Your participation in the TrueBalance program is subject to the program's terms
and conditions, and you may change model portfolios or terminate your
participation in the TrueBalance program at any time by notifying us in a form
satisfactory to us. We reserve the right to modify or terminate the TrueBalance
program at any time.
INVESTMENT ALTERNATIVES: THE FIXED ACCOUNT OPTIONS
--------------------------------------------------------------------------------
You may allocate all or a portion of your purchase payments (and Credit
Enhancements for CONSULTANT SOLUTIONS PLUS CONTRACTS) to the FIXED ACCOUNT
OPTIONS. The Fixed Account Options we offer include the DOLLAR COST AVERAGING
FIXED ACCOUNT OPTION, the STANDARD FIXED ACCOUNT OPTION, and the MARKET VALUE
ADJUSTED FIXED ACCOUNT OPTION. We may offer additional Fixed Account Options in
the future. Some Options are not available in all states. In addition, Lincoln
Benefit may limit the availability of some Fixed Account Options. Please
consult with your representative for current information. The Fixed Account
supports our insurance and annuity obligations. The Fixed Account consists of
our general assets other than those in segregated asset accounts. We have sole
38 PROSPECTUS
discretion to invest the assets of the Fixed Account, subject to applicable
law. Any money you allocate to the Fixed Account does not entitle you to share
in the investment experience of the Fixed Account.
DOLLAR COST AVERAGING FIXED ACCOUNT OPTION
The Dollar Cost Averaging Fixed Account Option ("DCA Fixed Account Option") is
one of the investment alternatives that you can use to establish a Dollar Cost
Averaging Program, as described on page 44.
This option allows you to allocate purchase payments (and Credit Enhancements
for CONSULTANT SOLUTIONS PLUS CONTRACTS) to the Fixed Account that will then
automatically be transferred, along with interest, in equal monthly
installments to the investment alternatives that you have selected. In the
future, we may offer other installment frequencies in our discretion. Each
purchase payment allocated to the DCA Fixed Account Option must be at least
$100.
At the time you allocate a purchase payment to the DCA Fixed Account Option,
you must specify the term length over which the transfers are to take place. We
use the term "Transfer Period Account" to refer to each purchase payment
allocation made to the DCA Fixed Account Option for a specified term length.
You establish a new Transfer Period Account each time you allocate a purchase
payment to the DCA Fixed Account Option. We currently offer term lengths from
which you may select for your Transfer Period Account(s), ranging from 3 to 12
months. We may modify or eliminate the term lengths we offer in the future.
Refer to Appendix A for more information.
Your purchase payments (and Credit Enhancements for CONSULTANT SOLUTIONS PLUS
CONTRACTS) will earn interest while in the DCA Fixed Account Option at the
interest rate in effect at the time of the allocation, depending on the term
length chosen for the Transfer Period Account and the type of Contract you
have. The interest rates may also differ from those available for other Fixed
Account Options. The minimum interest rate associated with the DCA Fixed
Account Option is based upon state requirements and the date an application to
purchase a Contract is signed. This minimum interest rate will not change after
Contract issue.
You must transfer all of your money, plus accumulated interest, out of a
Transfer Period Account to other investment alternatives in equal monthly
installments during the term of the Transfer Period Account. We reserve the
right to restrict the investment alternatives available for transfers from any
Transfer Period Account. You may not transfer money from the Transfer Period
Accounts to any of the Fixed Account Options available under your Contract. The
first transfer will occur on the 25th day after you establish a Transfer Period
Account and monthly thereafter. If we do not receive an allocation instruction
from you when we receive the purchase payment, we will transfer each
installment to the money market Variable Sub-account until we receive a
different allocation instruction. At the expiration of a Transfer Period
Account any remaining amounts in the Transfer Period Account will be
transferred to the PIMCO VIT Money Market - Administrative Shares Sub-Account
unless you request a different investment alternative. Transferring Contract
Value to the PIMCO VIT Money Market - Administrative Shares Sub-Account in this
manner may not be consistent with the theory of dollar cost averaging described
on page 45.
If you discontinue the DCA Fixed Account Option before the expiration of a
Transfer Period Account, we will transfer any remaining amount in the Transfer
Period Account to the PIMCO VIT Money Market - Administrative Shares
Sub-Account unless you request a different investment alternative.
If you have a TrueReturn Option or SureIncome Option, at the expiration of a
Transfer Period Account or if you discontinue the DCA Fixed Account Option any
amounts remaining in the Transfer Period Account will be transferred according
to the investment requirements applicable to the Option you selected.
You may not transfer money into the DCA Fixed Account Option or add to an
existing Transfer Period Account. You may not use the Automatic Additions
Program to allocate purchase payments to the DCA Fixed Account Option.
The DCA Fixed Account Option currently is not available if you have selected
the CONSULTANT SOLUTIONS SELECT CONTRACT.
The DCA Fixed Account Option may not be available in your state. Please check
with your representative for availability.
STANDARD FIXED ACCOUNT OPTION
If you have selected the CONSULTANT SOLUTIONS CLASSIC CONTRACT, you may
allocate purchase payments or transfer amounts into the Standard Fixed Account
Option. Each such allocation establishes a "GUARANTEE PERIOD ACCOUNT" within
the Standard Fixed Account Option ("Standard Fixed Guarantee Period Account"),
which is defined by the date of the allocation. You may not allocate a purchase
payment or transfer to any existing Guarantee Period Account. Each purchase
payment or transfer allocated to a Standard Fixed Guarantee Period Account must
be at least $100.
The Standard Fixed Account Option is not available in all states.
At the time you allocate a purchase payment or transfer amount to the Standard
Fixed Account Option, you must select the Guarantee Period for that allocation
from among the available Standard Fixed Guarantee Periods. We currently offer
Standard Fixed Guarantee Periods of 1 year in length for CONSULTANT SOLUTIONS
CLASSIC. For CONSULTANT SOLUTIONS PLUS, SELECT and ELITE
39 PROSPECTUS
CONTRACTS, we currently are not offering the Standard Fixed Account Option.
Refer to Appendix A for more information. We may offer other Guarantee Periods
in the future. If you allocate a purchase payment to the Standard Fixed Account
Option, but do not select a Standard Fixed Guarantee Period for the new
Standard Fixed Guarantee Period Account, we will allocate the purchase payment
or transfer to a new Standard Fixed Guarantee Period Account with the same
Standard Fixed Guarantee Period as the Standard Fixed Guarantee Period Account
of your most recent purchase payment or transfer. If we no longer offer that
Standard Fixed Guarantee Period, then we will allocate the purchase payment or
transfer to a new Standard Fixed Guarantee Period Account with the next
shortest term currently offered. If you have not made a prior allocation to a
Guarantee Period Account, then we will allocate the purchase payment or
transfer to a new Standard Fixed Guarantee Period Account of the shortest
Standard Fixed Guarantee Period we are offering at that time.
Some Standard Fixed Guarantee Periods are not available in all states. Please
check with your representative for availability.
The amount you allocate to a Standard Fixed Guarantee Period Account will earn
interest at the interest rate in effect for that Standard Fixed Guarantee
Period at the time of the allocation. Interest rates may differ depending on
the type of Contract you have and may also differ from those available for
other Fixed Account Options. The minimum interest rate associated with the
Standard Fixed Account Option is based upon state requirements and the date an
application to purchase a Contract is signed. This minimum interest rate will
not change after Contract issue.
In any Contract Year, the combined amount of withdrawals and transfers from a
Standard Fixed Guarantee Period Account may not exceed 30% of the amount used
to establish that Standard Fixed Guarantee Period Account. This limitation is
waived if you withdraw your entire Contract Value. It is also waived for
amounts in a Standard Fixed Guarantee Period Account during the 30 days
following its renewal date ("30-DAY WINDOW"), described below, and for a single
withdrawal made by your surviving spouse within one year of continuing the
Contract after your death.
Amounts under the 30% limit that are not withdrawn in a Contract Year do not
carry over to subsequent Contract Years.
At the end of a Standard Fixed Guarantee Period and each year thereafter, we
will declare a renewal interest rate that will be guaranteed for 1 year.
Subsequent renewal dates will be on the anniversaries of the first renewal
date. Prior to a renewal date, we will send you a notice that will outline the
options available to you. During the 30-Day Window following the expiration of
a Standard Fixed Guarantee Period Account, the 30% limit for transfers and
withdrawals from that Guarantee Period Account is waived and you may elect to:
.. transfer all or part of the money from the Standard Fixed Guarantee Period
Account to establish a new Guarantee Period Account within the Standard
Fixed Account Option; or
.. transfer all or part of the money from the Standard Fixed Guarantee Period
Account to other investment alternatives available at the time; or
.. withdraw all or part of the money from the Standard Fixed Guarantee Period
Account. Withdrawal charges and taxes may apply.
Withdrawals taken to satisfy IRS minimum distribution rules will count against
the 30% limit. The 30% limit will be waived for a Contract Year to the extent
that:
.. you have already exceeded the 30% limit and you must still make a
withdrawal during that Contract Year to satisfy IRS minimum distribution
rules; or
.. you have not yet exceeded the 30% limit but you must make a withdrawal
during that Contract Year to satisfy IRS minimum distribution rules, and
such withdrawal will put you over the 30% limit.
The money in the Standard Fixed Guarantee Period Account will earn interest at
the declared renewal rate from the renewal date until the date we receive
notification of your election. If we receive notification of your election to
make a transfer or withdrawal from a renewing Standard Fixed Guarantee Period
Account on or before the renewal date, the transfer or withdrawal will be
deemed to have occurred on the renewal date. If we receive notification of your
election to make a transfer or withdrawal from the renewing Standard Fixed
Guarantee Period Account after the renewal date, but before the expiration of
the 30-Day Window, the transfer or withdrawal will be deemed to have occurred
on the day we receive such notice. Any remaining balance not withdrawn or
transferred from the renewing Standard Fixed Guarantee Period Account will
continue to earn interest until the next renewal date at the declared renewal
rate. If we do not receive notification from you within the 30-Day Window, we
will assume that you have elected to renew the Standard Fixed Guarantee Period
Account and the amount in the renewing Standard Fixed Guarantee Period Account
will continue to earn interest at the declared renewal rate until the next
renewal date, and will be subject to all restrictions of the Standard Fixed
Account Option.
The Standard Fixed Account Option currently is available only with the
CONSULTANT SOLUTIONS CLASSIC CONTRACT.
MARKET VALUE ADJUSTED FIXED ACCOUNT OPTION
You may allocate purchase payments or transfer amounts into the Market Value
Adjusted Fixed Account Option. Each such allocation establishes a Guarantee
Period
40 PROSPECTUS
Account within the Market Value Adjusted Fixed Account Option ("Market Value
Adjusted Fixed Guarantee Period Account"), which is defined by the date of the
allocation and the length of the initial interest rate guarantee period
("MARKET VALUE ADJUSTED FIXED GUARANTEE PERIOD"). You may not allocate a
purchase payment or transfer to any existing Guarantee Period Account. Each
purchase payment or transfer allocated to a Market Value Adjusted Fixed
Guarantee Period Account must be at least $100.
At the time you allocate a purchase payment or transfer amount to the Market
Value Adjusted Fixed Account Option, you must select the Guarantee Period for
that allocation from among the Guarantee Periods available for the Market Value
Adjusted Fixed Account Option. We currently offer Market Value Adjusted Fixed
Guarantee Periods of 1, 3, 5, 7, and 10 years. Refer to Appendix A for more
information. We may offer other Guarantee Periods in the future. If you
allocate a purchase payment to the Market Value Adjusted Fixed Account Option,
but do not select a Market Value Adjusted Fixed Guarantee Period for the new
Market Value Adjusted Fixed Guarantee Period Account, we will allocate the
purchase payment or transfer to a new Market Value Adjusted Fixed Guarantee
Period Account with the same Market Value Adjusted Fixed Guarantee Period as
the Market Value Adjusted Fixed Guarantee Period Account of your most recent
purchase payment or transfer. If we no longer offer that Market Value Adjusted
Fixed Guarantee Period, then we will allocate the purchase payment or transfer
to a new Market Value Adjusted Fixed Guarantee Period Account with the next
shortest term currently offered. If you have not made a prior allocation to a
Market Value Adjusted Fixed Guarantee Period Account, then we will allocate the
purchase payment or transfer to a new Market Value Adjusted Fixed Guarantee
Period Account of the shortest Market Value Adjusted Fixed Guarantee Period we
are offering at that time. The Market Value Adjusted Fixed Account Option is
not available in all states. Please check with your representative for
availability.
The amount you allocate to a Market Value Adjusted Fixed Guarantee Period
Account will earn interest at the interest rate in effect for that Market Value
Adjusted Fixed Guarantee Period at the time of the allocation. Interest rates
may differ depending on the type of Contract you have and may also differ from
those available for other Fixed Account Options.
Withdrawals and transfers from a Market Value Adjusted Fixed Guarantee Period
Account may be subject to a Market Value Adjustment. A Market Value Adjustment
may also apply to amounts in the Market Value Adjusted Fixed Account Option if
we pay Death Proceeds or if the Payout Start Date begins on a day other than
during the 30-day period after such Market Value Adjusted Fixed Guarantee
Period Account expires ("30-Day MVA Window"). We will not make a Market Value
Adjustment if you make a transfer or withdrawal during the 30-Day MVA Window.
We apply a Market Value Adjustment to reflect changes in interest rates from
the time you first allocate money to a Market Value Adjusted Fixed Guarantee
Period Account to the time the money is taken out of that Market Value Adjusted
Fixed Guarantee Period Account under the circumstances described above. We use
the U.S. Treasury Note Constant Maturity Yield as reported in Federal Reserve
Statistical Release H.15 ("Treasury Rate") to calculate the Market Value
Adjustment. We do so by comparing the Treasury Rate for a maturity equal to the
Market Value Adjusted Fixed Guarantee Period at the time the Market Value
Adjusted Fixed Guarantee Period Account is established with the Treasury Rate
for the same maturity at the time the money is taken from the Market Value
Adjusted Fixed Guarantee Period Account.
The Market Value Adjustment may be positive or negative, depending on changes
in interest rates. As such, you bear the investment risk associated with
changes in interest rates. If interest rates have increased since the
establishment of a Market Value Adjusted Fixed Guarantee Period Account, the
Market Value Adjustment, together with any applicable withdrawal charges,
premium taxes, and income tax withholdings could reduce the amount you receive
upon full withdrawal from a Market Value Adjusted Fixed Guarantee Period
Account to an amount less than the purchase payment used to establish that
Market Value Adjusted Fixed Guarantee Period Account.
Generally, if at the time you establish a Market Value Adjusted Fixed Guarantee
Period Account, the Treasury Rate for a maturity equal to that Market Value
Adjusted Fixed Guarantee Period is higher than the applicable Treasury Rate at
the time money is to be taken from the Market Value Adjusted Fixed Guarantee
Period Account, the Market Value Adjustment will be positive. Conversely, if at
the time you establish a Market Value Adjusted Fixed Guarantee Period Account,
the applicable Treasury Rate is lower than the applicable Treasury Rate at the
time the money is to be taken from the Market Value Adjusted Fixed Guarantee
Period Account, the Market Value Adjustment will be negative.
For example, assume that you purchase a Contract and allocate part of the
initial purchase payment (and Credit Enhancements for CONSULTANT SOLUTIONS PLUS
CONTRACTS) to the Market Value Adjusted Fixed Account Option to establish a
5-year Market Value Adjusted Fixed Guarantee Period Account. Assume that the
5-year Treasury Rate at that time is 4.50%. Next, assume that at the end of the
3rd year, you withdraw money from the Market Value Adjusted Fixed Guarantee
Period Account. If, at that time, the 5-year Treasury Rate is 4.20%, then the
Market Value Adjustment will be positive.
41 PROSPECTUS
Conversely, if the 5-year Treasury Rate at that time is 4.80%, then the Market
Value Adjustment will be negative.
The formula used to calculate the Market Value Adjustment and numerical
examples illustrating its application are shown in Appendix B of this
prospectus.
At the end of a Market Value Adjusted Fixed Guarantee Period, the Market Value
Adjusted Fixed Guarantee Period Account expires and we will automatically
transfer the money from such Guarantee Period Account to establish a new Market
Value Adjusted Fixed Guarantee Period Account with the same Market Value
Adjusted Fixed Guarantee Period, unless you notify us otherwise. The new Market
Value Adjusted Fixed Guarantee Period Account will be established as of the day
immediately following the expiration date of the expiring Market Value Adjusted
Guarantee Period Account ("New Account Start Date.") If the Market Value
Adjusted Fixed Guarantee Period is no longer being offered, we will establish a
new Market Value Adjusted Fixed Guarantee Period Account with the next shortest
Market Value Adjusted Fixed Guarantee Period available. Prior to the expiration
date, we will send you a notice, which will outline the options available to
you. During the 30-Day MVA Window a Market Value Adjustment will not be applied
to transfers and withdrawals from the expiring Market Value Adjusted Fixed
Guarantee Period Account and you may elect to:
.. transfer all or part of the money from the Market Value Adjusted Fixed
Guarantee Period Account to establish a new Guarantee Period Account within
the Market Value Adjusted Fixed Account Option; or
.. transfer all or part of the money from the Market Value Adjusted Fixed
Guarantee Period Account to other investment alternatives available at the
time; or
.. withdraw all or part of the money from the Market Value Adjusted Fixed
Guarantee Period Account. Withdrawal charges and taxes may apply.
The money in the Market Value Adjusted Fixed Guarantee Period Account will earn
interest at the interest rate declared for the new Market Value Adjusted Fixed
Guarantee Period Account from the New Account Start Date until the date we
receive notification of your election. If we receive notification of your
election to make a transfer or withdrawal from an expiring Market Value
Adjusted Fixed Guarantee Period Account on or before the New Account Start
Date, the transfer or withdrawal will be deemed to have occurred on the New
Account Start Date. If we receive notification of your election to make a
transfer or withdrawal from the expiring Market Value Adjusted Fixed Guarantee
Period Account after the New Account Start Date, but before the expiration of
the 30-Day MVA Window, the transfer or withdrawal will be deemed to have
occurred on the day we receive such notice. Any remaining balance not withdrawn
or transferred will earn interest for the term of the new Market Value Adjusted
Fixed Guarantee Period Account, at the interest rate declared for such Account.
If we do not receive notification from you within the 30-Day Window, we will
assume that you have elected to transfer the amount in the expiring Market
Value Adjusted Fixed Guarantee Period Account to establish a new Market Value
Adjusted Fixed Guarantee Period Account with the same Market Value Adjusted
Fixed Guarantee Period, and the amount in the new Market Value Adjusted Fixed
Guarantee Period Account will continue to earn interest at the interest rate
declared for the new Market Value Adjusted Fixed Guarantee Period Account, and
will be subject to all restrictions of the Market Value Adjusted Fixed Account
Option. If we no longer offer that Market Value Adjusted Fixed Guarantee
Period, the Market Value Adjusted Fixed Guarantee Period for the new Market
Value Adjusted Fixed Guarantee Period Account will be the next shortest term
length we offer for the Market Value Adjusted Fixed Account Option at that
time, and the interest rate will be the rate declared by us at that time for
such term.
INVESTMENT ALTERNATIVES: TRANSFERS
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TRANSFERS DURING THE ACCUMULATION PHASE
During the Accumulation Phase, you may transfer Contract Value among the
investment alternatives. You may not transfer Contract Value to the DCA Fixed
Account Option or add to an existing Transfer Period Account. You may request
transfers in writing on a form that we provided or by telephone according to
the procedure described below.
You may make up to 12 transfers per Contract Year without charge. Currently, a
transfer fee equal to 1.00% of the amount transferred applies to each transfer
after the 12th transfer in any Contract Year. This fee may be changed, but in
no event will it exceed 2.00% of the amount transferred. Multiple transfers on
a single Valuation Date are considered a single transfer for purposes of
assessing the transfer fee. If you added the TrueReturn Accumulation Benefit
Option or SureIncome Option to your Contract, certain restrictions on transfers
apply. See the "TrueReturn Accumulation Benefit Option" and "SureIncome
Withdrawal Benefit Option" sections of this prospectus
42 PROSPECTUS
for more information. In any event, the transfer fee will never be greater than
$25.
The minimum amount that you may transfer from the Standard Fixed Account
Option, Market Value Adjusted Fixed Account Option or a Variable Sub-account is
$100 or the total remaining balance in the Standard Fixed Account Option,
Market Value Adjusted Fixed Account Option or the Variable Sub-account, if
less. These limitations do not apply to the DCA Fixed Account Option. The total
amount that you may transfer or withdraw from a Standard Fixed Guarantee Period
Account in a Contract Year is 30% of the amount used to establish that
Guarantee Period Account. See "Standard Fixed Account Option". The minimum
amount that can be transferred to the Standard Fixed Account Option and the
Market Value Adjusted Fixed Account Option is $100.
We will process transfer requests that we receive before 3:00 p.m. Central Time
on any Valuation Date using the Accumulation Unit Values for that Date. We will
process requests completed after 3:00 p.m. on any Valuation Date using the
Accumulation Unit Values for the next Valuation Date. The Contract permits us
to defer transfers from the Fixed Account Options for up to 6 months from the
date we receive your request. If we decide to postpone transfers from any Fixed
Account Option for 30 days or more, we will pay interest as required by
applicable law. Any interest would be payable from the date we receive the
transfer request to the date we make the transfer.
For CONSULTANT SOLUTIONS SELECT CONTRACTS, the maximum amount that may be
allocated during any single day to certain selected funds by telephone, fax,
Internet, overnight or express mail services, same day messenger, or in person
is $25,000. All trades exceeding this daily limit must be made by first class
US Mail. The funds currently affected by this restriction are:
Fidelity VIP Overseas - Service Class 2 Sub-Account
Janus Aspen Series Overseas - Service Shares Sub-Account
Oppenheimer Global Securities/VA - Service Shares Sub-Account
Van Eck VIP Emerging Markets Sub-Account
MFS High Income - Service Class Sub-Account
Legg Mason Western Asset Variable Global High Yield Bond - Class II Sub-Account
We reserve the right to waive any transfer restrictions.
TRANSFERS DURING THE PAYOUT PHASE
During the Payout Phase, you may make transfers among the Variable Sub-Accounts
so as to change the relative weighting of the Variable Sub-Accounts on which
your variable income payments will be based. You may make up to 12 transfers
per Contract Year within each Income Plan. You may not convert any portion of
your fixed income payments into variable income payments. You may not make
transfers among Income Plans. You may make transfers from the variable income
payments to the fixed income payments to increase the proportion of your income
payments consisting of fixed income payments, unless you have selected the
Income Protection Benefit Option.
TELEPHONE OR ELECTRONIC TRANSFERS
You may make transfers by telephone by calling 800-457-7617. The cut-off time
for telephone transfer requests is 3:00 p.m. Central Time. In the event that
the New York Stock Exchange closes early, i.e., before 3:00 p.m. Central Time,
or in the event that the Exchange closes early for a period of time but then
reopens for trading on the same day, we will process telephone transfer
requests as of the close of the Exchange on that particular day. We will not
accept telephone requests received from you at any telephone number other than
the number that appears in this paragraph or received after the close of
trading on the Exchange. If you own the Contract with a joint Contract Owner,
unless we receive contrary instructions, we will accept instructions from
either you or the other Contract Owner.
We may suspend, modify or terminate the telephone transfer privilege, as well
as any other electronic or automated means we previously approved, at any time
without notice.
We use procedures that we believe provide reasonable assurance that the
telephone transfers are genuine. For example, we tape telephone conversations
with persons purporting to authorize transfers and request identifying
information. Accordingly, we disclaim any liability for losses resulting from
allegedly unauthorized telephone transfers. However, if we do not take
reasonable steps to help ensure that a telephone authorization is valid, we may
be liable for such losses.
MARKET TIMING & EXCESSIVE TRADING
The Contracts are intended for long-term investment. Market timing and
excessive trading can potentially dilute the value of Variable Sub-Accounts and
can disrupt management of a Portfolio and raise its expenses, which can impair
Portfolio performance and adversely affect your Contract Value. Our policy is
not to accept knowingly any money intended for the purpose of market timing or
excessive trading. Accordingly, you should not invest in the Contract if your
purpose is to engage in market timing or excessive trading, and you should
refrain from such practices if you currently own a Contract.
We seek to detect market timing or excessive trading activity by reviewing
trading activities. Portfolios also may report suspected market-timing or
excessive trading activity to us. If, in our judgment, we determine that the
transfers are part of a market timing strategy or are otherwise harmful to the
underlying Portfolio, we will impose the trading limitations as described below
under "Trading Limitations." Because there is no universally accepted
definition of what constitutes market timing or excessive trading, we will use
our reasonable judgment based on all of the circumstances.
43 PROSPECTUS
While we seek to deter market timing and excessive trading in Variable
Sub-Accounts, because our procedures involve the exercise of reasonable
judgment, we may not identify or prevent some market timing or excessive
trading. Moreover, imposition of trading limitations is triggered by the
detection of market timing or excessive trading activity, and the trading
limitations are not applied prior to detection of such trading activity.
Therefore, our policies and procedures do not prevent such trading activity
before it is detected. As a result, some investors may be able to engage in
market timing and excessive trading, while others are prohibited, and the
Portfolio may experience the adverse effects of market timing and excessive
trading described above.
TRADING LIMITATIONS
We reserve the right to limit transfers among the investment alternatives in
any Contract year, require that all future transfer requests be submitted
through U.S. Postal Service First Class Mail thereby refusing to accept
transfer requests via telephone, facsimile, Internet, or overnight delivery, or
to refuse any transfer request, if:
.. we believe, in our sole discretion, that certain trading practices, such as
excessive trading, by, or on behalf of, one or more Contract Owners, or a
specific transfer request or group of transfer requests, may have a
detrimental effect on the Accumulation Unit Values of any Variable
Sub-Account or on the share prices of the corresponding Portfolio or
otherwise would be to the disadvantage of other Contract Owners; or
.. we are informed by one or more of the Portfolios that they intend to
restrict the purchase, exchange, or redemption of Portfolio shares because
of excessive trading or because they believe that a specific transfer or
group of transfers would have a detrimental effect on the prices of
Portfolio shares.
In making the determination that trading activity constitutes market timing or
excessive trading, we will consider, among other things:
.. the total dollar amount being transferred, both in the aggregate and in the
transfer request;
.. the number of transfers you make over a period of time and/or the period of
time between transfers (note: one set of transfers to and from a Variable
Sub-Account in a short period of time can constitute market timing);
.. whether your transfers follow a pattern that appears designed to take
advantage of short term market fluctuations, particularly within certain
Variable Sub-Account underlying Portfolios that we have identified as being
susceptible to market timing activities (e.g., International, High Yield,
and Small Cap Variable Sub-Accounts);
.. whether the manager of the underlying Portfolio has indicated that the
transfers interfere with Portfolio management or otherwise adversely impact
the Portfolio; and
.. the investment objectives and/or size of the Variable Sub-Account
underlying Portfolio.
We seek to apply these trading limitations uniformly. However, because these
determinations involve the exercise of discretion, it is possible that we may
not detect some market timing or excessive trading activity. As a result, it is
possible that some investors may be able to engage in market timing or
excessive trading activity, while others are prohibited, and the Portfolio may
experience the adverse effects of market timing and excessive trading described
above.
If we determine that a Contract Owner has engaged in market timing or excessive
trading activity, we will require that all future transfer requests be
submitted through U.S. Postal Service First Class Mail thereby refusing to
accept transfer requests via telephone, facsimile, Internet, or overnight
delivery. If we determine that a Contract Owner continues to engage in a
pattern of market timing or excessive trading activity we will restrict that
Contract Owner from making future additions or transfers into the impacted
Variable Sub-Account(s) or will restrict that Contract Owner from making future
additions or transfers into the class of Variable Sub-Account(s) if the
Variable Sub-Accounts(s) involved are vulnerable to arbitrage market timing
trading activity (e.g., International, High Yield, and Small Cap Variable
Sub-Accounts).
In our sole discretion, we may revise our Trading Limitations at any time as
necessary to better deter or minimize market timing and excessive trading or to
comply with regulatory requirements.
SHORT TERM TRADING FEES
The underlying Portfolios are authorized by SEC regulation to adopt and impose
redemption fees if a Portfolio's Board of Directors determines that such fees
are necessary to minimize or eliminate short-term transfer activity that can
reduce or dilute the value of outstanding shares issued by the Portfolio. The
Portfolio will set the parameters relating to the redemption fee and such
parameters may vary by Portfolio. If a Portfolio elects to adopt and charge
redemption fees, these fees will be passed on to the Contract Owner(s)
responsible for the short-term transfer activity generating the fee.
We will administer and collect redemption fees in connection with transfers
between the Variable Sub-Accounts and forward these fees to the Portfolio.
Please consult the Portfolio's prospectus for more complete information
regarding the fees and charges associated with each Portfolio.
DOLLAR COST AVERAGING PROGRAM
Through our Dollar Cost Averaging Program, you may automatically transfer a
fixed dollar amount on a regular basis from any Variable Sub-Account or any
Fixed Account Option to any of the other Variable
44 PROSPECTUS
Sub-Accounts. You may not use the Dollar Cost Averaging Program to transfer
amounts to the Fixed Account Options. This program is available only during the
Accumulation Phase.
We will not charge a transfer fee for transfers made under this Program, nor
will such transfers count against the 12 transfers you can make each Contract
Year without paying a transfer fee.
The theory of dollar cost averaging is that if purchases of equal dollar
amounts are made at fluctuating prices, the aggregate average cost per unit
will be less than the average of the unit prices on the same purchase dates.
However, participation in this Program does not assure you of a greater profit
from your purchases under the Program nor will it prevent or necessarily reduce
losses in a declining market. Call or write us for instructions on how to
enroll.
AUTOMATIC PORTFOLIO REBALANCING PROGRAM
Once you have allocated your money among the Variable Sub-Accounts, the
performance of each Sub-Account may cause a shift in the percentage you
allocated to each Sub-Account. If you select our Automatic Portfolio
Rebalancing Program, we will automatically rebalance the Contract Value in each
Variable Sub-Account and return it to the desired percentage allocations. Money
you allocate to the Fixed Account will not be included in the rebalancing.
We will rebalance your account quarterly, semi-annually, or annually. We will
measure these periods according to your instructions. We will transfer amounts
among the Variable Sub-Accounts to achieve the percentage allocations you
specify. You can change your allocations at any time by contacting us in
writing or by telephone. The new allocation will be effective with the first
rebalancing that occurs after we receive your written or telephone request. We
are not responsible for rebalancing that occurs prior to receipt of proper
notice of your request.
Example:
Assume that you want your initial purchase payment split among 2 Variable
Sub-accounts. You want 40% to be in the PIMCO VIT Foreign Bond (U.S.
Dollar-Hedged) - Administrative Shares Sub-Account Variable Sub-account and
60% to be in the Fidelity VIP Index 500 - Service Class 2 Sub-Account
Variable Sub-account. Over the next 2 months the bond market does very well
while the stock market performs poorly. At the end of the first quarter, the
PIMCO VIT Foreign Bond (U.S. Dollar-Hedged) - Administrative Shares
Sub-Account Variable Sub-account now represents 50% of your holdings because
of its increase in value. If you choose to have your holdings in a Contract
or Contracts rebalanced quarterly, on the first day of the next quarter we
would sell some of your units in the PIMCO VIT Foreign Bond (U.S.
Dollar-Hedged) - Administrative Shares Sub-Account Variable Sub-account for
the appropriate Contract(s) and use the money to buy more units in the
Fidelity VIP Index 500 - Service Class 2 Sub-Account Variable Sub-account so
that the percentage allocations would again be 40% and 60% respectively.
The transfers made under the program do not count towards the 12 transfers you
can make without paying a transfer fee, and are not subject to a transfer fee.
Portfolio rebalancing is consistent with maintaining your allocation of
investments among market segments, although it is accomplished by reducing your
Contract Value allocated to the Variable Sub-Accounts that performed better
during the previous time period.
EXPENSES
--------------------------------------------------------------------------------
As a Contract Owner, you will bear, directly or indirectly, the charges and
expenses described below.
CONTRACT MAINTENANCE CHARGE
During the Accumulation Phase, on each Contract Anniversary, we will deduct a
$40 contract maintenance charge from your assets invested in the PIMCO Money
Market Variable Sub-account ($30 if the Contract value is equal to or greater
than $2,000.) If there are insufficient assets in that Variable Sub-account, we
will deduct the balance of the charge proportionally from the other Variable
Sub-accounts. We also will deduct this charge if you withdraw your entire
Contract Value, unless your Contract qualifies for a waiver. During the Payout
Phase, we will deduct the charge proportionately from each income payment.
The charge is to compensate us for the cost of administering the Contracts and
the Variable Account. Maintenance costs include expenses we incur in billing
and collecting purchase payments; keeping records; processing death claims,
cash withdrawals, and policy changes; proxy statements; calculating
Accumulation Unit Values and income payments; and issuing reports to Contract
Owners and regulatory agencies. We cannot increase the charge. We will waive
this charge for a Contract Anniversary if, on that date:
.. your Contract Value is equal to or greater than $50,000; or
.. your entire Contract Value is allocated to the Fixed Account Options or,
after the Payout Start Date, if all income payments are fixed income
payments.
45 PROSPECTUS
We also reserve the right to waive this charge if you own more than one
Contract and the Contracts meet certain minimum dollar amount requirements. In
addition, we reserve the right to waive this charge for all Contracts.
ADMINISTRATIVE EXPENSE CHARGE
We currently deduct an administrative expense charge daily at an annual rate of
0.10% of the average daily net assets you have invested in the Variable
Sub-accounts. We intend this charge to cover actual administrative expenses
that exceed the revenues from the contract maintenance charge. There is no
necessary relationship between the amount of administrative charge imposed on a
given Contract and the amount of expenses that may be attributed to that
Contract. We assess this charge each day during the Accumulation Phase and the
Payout Phase. We may increase this charge for Contracts issued in the future,
but in no event will it exceed 0.25%. We guarantee that after your Contract is
issued we will not increase this charge for your Contract.
MORTALITY AND EXPENSE RISK CHARGE
We deduct a mortality and expense risk charge daily from the net assets you
have invested in the Variable Sub-Accounts. We assess mortality and expense
risk charges during the Accumulation and Payout Phases of the Contract, except
as noted below. The annual mortality and expense risk charge for the Contracts
without any optional benefit are as follows:
Consultant Solutions Classic 1.25%
-----------------------------------
Consultant Solutions Plus 1.45%
-----------------------------------
Consultant Solutions Elite 1.60%
-----------------------------------
Consultant Solutions Select 1.70%
-----------------------------------
The mortality and expense risk charge is for all the insurance benefits
available with your Contract (including our guarantee of annuity rates and the
death benefits), for certain expenses of the Contract, and for assuming the
risk (expense risk) that the current charges will not be sufficient in the
future to cover the cost of administering the Contract. The mortality and
expense risk charge also helps pay for the cost of the Credit Enhancement under
the CONSULTANT SOLUTIONS PLUS CONTRACT. If the charges under the Contract are
not sufficient, then we will bear the loss. We charge an additional amount for
the optional benefits to compensate us for the additional risk that we accept
by providing these options.
You will pay additional mortality and expense risk charges if you add any
optional benefits to your Contract. The additional mortality and expense risk
charge you pay will depend upon which of the options you select:
.. MAV Death Benefit Option: The current mortality and expense risk charge for
this option is 0.20%. This charge may be increased, but will never exceed
0.50%. We guarantee that we will not increase the mortality and expense
risk charge for this option after you have added it to your Contract. We
deduct the charge for this option only during the Accumulation Phase.
.. Annual Increase Death Benefit Option: The current mortality and expense
risk charge for this option is 0.30%. This charge may be increased, but
will never exceed 0.50%. We guarantee that we will not increase the
mortality and expense risk charge for this option after you have added it
to your Contract. We deduct the charge for this option only during the
Accumulation Phase.
.. Enhanced Earnings Death Benefit Option: The current mortality and expense
risk charge for this option is:
. 0.25% (maximum of 0.35%) if the oldest Contract Owner and Co-Annuitant,
or, if the Contract is owned by a non-living person, the oldest
Annuitant, are age 70 or younger on the Rider Application Date;
. 0.40% (maximum of 0.50%) if the oldest Contract Owner or, if older, the
Co-Annuitant, or, if the Contract is owned by a non-living person, the
oldest Annuitant, is age 71 or older and age 79 or younger on the Rider
Application Date.
. The charges may be increased but they will never exceed the maximum
charges shown above. We guarantee that we will not increase the
mortality and expense risk charge for this option after you have added
it to your Contract. However, if your spouse elects to continue the
Contract in the event of your death and if he or she elects to continue
the Enhanced Earnings Death Benefit Option, the charge will be based on
the age of the new Contract Owner at the time the Contract is continued.
Refer to the Death Benefit Payments provision in this prospectus for
more information. We deduct the charge for this option only during the
Accumulation Phase.
.. Income Protection Benefit Option: The current mortality and expense risk
charge for this option is 0.50%. This charge may be increased, but will
never exceed 0.75%. We guarantee that we will not increase the mortality
and expense risk for this option after you have added it to your Contract.
This option may be added to your Contract on the Payout Start Date. The
charge will be deducted only during the Payout Phase.
TRUERETURN ACCUMULATION BENEFIT OPTION FEE
We charge a separate annual Rider Fee for the TrueReturn Accumulation Benefit
Option. The current annual Rider Fee is 0.50% of the Benefit Base. We
46 PROSPECTUS
deduct the Rider Fee on each Contract Anniversary during the Rider Period or
until you terminate the Option, if earlier. We reserve the right to increase
the Rider Fee to up to 1.25%. We currently charge the same Rider Fee regardless
of the Rider Period and Guarantee Option you select, however we reserve the
right to charge different fees for different Rider Periods and Guarantee
Options in the future. However, once we issue your Option, we cannot change the
Rider Fee that applies to your Contract. If you elect to exercise the Rider
Trade-In Option, the new Rider Fee will be based on the Rider Fee percentage
applicable to a new TrueReturn Accumulation Benefit Option at the time of
trade-in.
The Rider Fee is deducted only from the Variable Sub-account(s) on a pro rata
basis in the proportion that your value in each Variable Sub-account bears to
your total value in all Variable Sub-accounts. Rider Fees will decrease the
number of Accumulation Units in each Variable Sub-account. If you terminate the
Option, or terminate the Contract by a total withdrawal, prior to the Rider
Maturity Date on a date other than the Contract Anniversary, we will deduct a
Rider Fee that is prorated based on the number of full months between the
Contract Anniversary immediately prior to the termination and the date of the
termination. However, if the Option is terminated due to death of the Contract
Owner or Annuitant, we will not charge a Rider Fee unless the date we receive a
Complete Request for Settlement of the Death Proceeds is also a Contract
Anniversary. If the Option is terminated on the Payout Start Date, we will not
charge a Rider Fee unless the Payout Start Date is also a Contract Anniversary.
Additionally, if you elect to exercise the Rider Trade-In Option and cancel the
Option on a date other than a Contract Anniversary, we will not deduct a Rider
Fee on the date the Option is terminated. Refer to the "TrueReturn Accumulation
Benefit Option" section of this prospectus for more information.
SPOUSAL PROTECTION BENEFIT (CO-ANNUITANT) OPTION FEE
We charge a separate annual Rider Fee for the Spousal Protection Benefit
(Co-Annuitant) Option. The current annual Rider Fee is 0.10% of the Contract
Value. This fee applies to Options added on or after May 1, 2005. For Options
added prior to May 1, 2005, there is no charge associated with the Options. We
deduct the Rider Fee on each Contract Anniversary and in certain circumstances
on the date you terminate the Option. We reserve the right to increase the
annual Rider Fee on newly issued Options to up to 0.15% of the Contract Value.
We also reserve the right to charge different Rider Fees for new Spousal
Protection Benefit (Co-Annuitant) Options we offer in the future. However, once
we issue your Option, we cannot change the Rider Fee that applies to your
Contract.
The Rider Fee is deducted only from the Variable Sub-Account(s) on a pro-rata
basis in the proportion that your value in each Variable Sub-Account bears to
your total value in all Variable Sub-Accounts. Rider Fees will decrease the
number of Accumulation Units in each Variable Sub-Account. If, at the time the
Rider Fee is deducted, the Rider Fee exceeds the total value in all Variable
Sub-Accounts, the excess of the Rider Fee over the total value in all Variable
Sub-Accounts will be waived.
The first Rider Fee will be deducted on the first Contract Anniversary
following the Rider Date. A Rider Fee will be deducted on each subsequent
Contract Anniversary while the Rider is in force.
For the first Contract Anniversary following the Rider Date, the Rider Fee is
equal to the number of full months from the Rider Date to the first Contract
Anniversary, divided by twelve, multiplied by 0.10%, with the result multiplied
by the Contract Value as of the first Contract Anniversary. For subsequent
Contract Anniversaries, the Rider Fee is equal to 0.10% multiplied by the
Contract Value as of that Contract Anniversary.
If the Rider is terminated for any reason on a Contract Anniversary, we will
deduct a full Rider Fee. If the Option is terminated on a date other than a
Contract Anniversary, we will deduct a pro rata Rider Fee, except we will not
charge any Rider Fee if the Option is terminated on the Payout Start Date or
due to the death of the Contract Owner or Annuitant. If we charge a Rider Fee
on the termination of the Option, the Rider Fee will be reduced pro rata, so
that you are only charged for the number of full months this Option was in
effect.
SUREINCOME WITHDRAWAL BENEFIT OPTION FEE
We charge a separate annual Rider Fee for the SureIncome Option ("SureIncome
Option Fee" or "Rider Fee"). The current annual Rider Fee is 0.50% of the
Benefit Base. We deduct the Rider Fee on each Contract Anniversary up to and
including the date you terminate the Option. We reserve the right to increase
the Rider Fee to up to 1.25% of the Benefit Base. We also reserve the right to
charge different Rider Fees for different Withdrawal Benefit Factors we may
offer in the future. However, once we issue your SureIncome Option, we cannot
change the Rider Fee that applies to your Option. If you elect to exercise the
Rider Trade-In Option, the new Rider Fee will be based on the Rider Fee
percentage applicable to a new SureIncome Option at the time of trade-in.
The Rider Fee is deducted only from the Variable Sub-Account(s) on a pro-rata
basis in the proportion that your Contract Value in each Variable Sub-Account
bears to your total Contract Value in all Variable Sub-Accounts. Rider Fees
will decrease the number of Accumulation Units in each Variable Sub-Account.
If, at the time the Rider Fee is deducted, the Rider Fee exceeds the total
Contract Value in all Variable Sub-Accounts, the excess of the Rider Fee over
the total Contract Value in all Variable Sub-Accounts will be waived.
47 PROSPECTUS
The first Rider Fee will be deducted on the first Contract Anniversary
following the Rider Date. A Rider Fee will be deducted on each subsequent
Contract Anniversary the SureIncome Option is in force.
For the first Contract Anniversary following the Rider Date, the Rider Fee is
equal to the number of full months from the Rider Date to the first Contract
Anniversary, divided by twelve, multiplied by 0.50%, with the result multiplied
by the Benefit Base as of the first Contract Anniversary. For subsequent
Contract Anniversaries, the Rider Fee is equal to the 0.50% multiplied by the
Benefit Base as of that Contract Anniversary.
If the SureIncome Option is terminated for any reason on a Contract
Anniversary, we will deduct a full Rider Fee. If the SureIncome Option is
terminated on a date other than a Contract Anniversary, we will deduct a pro
rata Rider Fee, except we will not charge any Rider Fee if the SureIncome
Option is terminated on the Payout Start Date or due to the death of the
Contract Owner or Annuitant. If we charge a Rider Fee on the termination of the
SureIncome Option, the Rider Fee will be reduced pro rata, so that you are only
charged for the number of full months the SureIncome Option was in effect.
TRANSFER FEE
We impose a fee upon transfers in excess of 12 during any Contract Year. The
current fee is equal to 1.00% of the dollar amount transferred. This fee may be
increased, but in no event will it exceed 2.00% of the dollar amount
transferred. In any event, the transfer fee will never be greater than $25. We
will not charge a transfer fee on transfers that are part of a Dollar Cost
Averaging Program or Automatic Portfolio Rebalancing Program.
WITHDRAWAL CHARGE
For all of the contracts except the CONSULTANT SOLUTIONS SELECT, we may assess
a withdrawal charge from the purchase payment(s) you withdraw. The amount of
the charge will depend on the number of years that have elapsed since we
received the purchase payment being withdrawn. A schedule showing the
withdrawal charges applicable to each Contract appears on page 11. If you make
a withdrawal before the Payout Start Date, we will apply the withdrawal charge
percentage in effect on the date of the withdrawal, or the withdrawal charge
percentage in effect on the following day, whichever is lower.
Withdrawals also may be subject to tax penalties or income tax. You should
consult with your tax counsel or other tax advisor regarding any withdrawals.
Withdrawals from the Market Value Adjusted Fixed Account Option may be subject
to a market value adjustment. Refer to page 41 for more information on market
value adjustments.
FREE WITHDRAWAL AMOUNT
You can withdraw up to the Free Withdrawal Amount each Contract Year without
paying the withdrawal charge. The Free Withdrawal Amount for a Contract Year is
equal to 15% of all purchase payments (excluding Credit Enhancements for
CONSULTANT SOLUTIONS PLUS CONTRACTS) that are subject to a withdrawal charge as
of the beginning of that Contract Year, plus 15% of the purchase payments added
to the Contract during the Contract Year. The withdrawal charge applicable to
Contracts owned by Charitable Remainder Trusts is described below.
Purchase payments no longer subject to a withdrawal charge will not be used to
determine the Free Withdrawal Amount for a Contract Year, nor will they be
assessed a withdrawal charge, if withdrawn. The Free Withdrawal Amount is not
available in the Payout Phase.
You may withdraw up to the Free Withdrawal Amount in each Contract Year it is
available without paying a withdrawal charge; however, the amount withdrawn may
be subject to a Market Value Adjustment or applicable taxes. If you do not
withdraw the entire Free Withdrawal Amount in a Contract Year, any remaining
portion may not be carried forward to increase the Free Withdrawal Amount in a
later Contract Year.
For purposes of assessing the withdrawal charge, we will treat withdrawals as
coming from the oldest purchase payments first as follows:
1) Purchase payments that no longer are subject to withdrawal charges;
2) Free Withdrawal Amount (if available);
3) Remaining purchase payments subject to withdrawal charges, beginning with
the oldest purchase payment;
4) Any earnings not previously withdrawn.
However, for federal income tax purposes, earnings are considered to come out
first, which means that you will pay taxes on the earnings portion of your
withdrawal.
If the Contract Owner is a Charitable Remainder Trust, the Free Withdrawal
Amount in a Contract Year is equal to the greater of:
.. The Free Withdrawal Amount described above; or
.. Earnings as of the beginning of the Contract Year that have not been
previously withdrawn.
For purposes of assessing the withdrawal charge for a Charitable Remainder
Trust-Owned Contract, we will treat withdrawals as coming from the earnings
first and then the oldest purchase payments as follows:
1) Earnings not previously withdrawn;
2) Purchase payments that are no longer subject to withdrawal charges;
3) Free Withdrawal Amount in excess of earnings;
4) Purchase payments subject to withdrawal charges, beginning with the oldest
purchase payment.
48 PROSPECTUS
If you have selected the CONSULTANT SOLUTIONS SELECT CONTRACT, there are no
withdrawal charges applicable and, therefore, no Free Withdrawal Amount.
Amounts withdrawn may be subject to a Market Value Adjustment or applicable
taxes.
ALL CONTRACTS
We do not apply a withdrawal charge in the following situations:
.. the death of the Contract Owner or Annuitant (unless the Settlement Value
is used);
.. withdrawals taken to satisfy IRS minimum distribution rules for the
Contract; or
.. withdrawals that qualify for one of the waivers described below.
We use the amounts obtained from the withdrawal charge to pay sales commissions
and other promotional or distribution expenses associated with marketing the
Contracts, and to help defray the cost of the Credit Enhancement for the
CONSULTANT SOLUTIONS PLUS CONTRACTS. To the extent that the withdrawal charge
does not cover all sales commissions and other promotional or distribution
expenses, or the cost of the Credit Enhancement, we may use any of our
corporate assets, including potential profit which may arise from the mortality
and expense risk charge or any other charges or fee described above, to make up
any difference.
Withdrawals taken prior to annuitization (referred to in this prospectus as the
Payout Phase) are generally considered to come from the earnings in the
Contract first. If the Contract is tax-qualified, generally all withdrawals are
treated as distributions of earnings. Withdrawals of earnings are taxed as
ordinary income and, if taken prior to age 59 1/2, may be subject to an
additional 10% federal tax penalty. You should consult your own tax counsel or
other tax advisers regarding any withdrawals.
CONFINEMENT WAIVER. We will waive the withdrawal charge on all withdrawals
taken under your Contract if the following conditions are satisfied:
1. you, or, if the Contract Owner is not a living person, the Annuitant, are
first confined to a long term care facility or a hospital for at least 90
consecutive days. You or the Annuitant must first enter the long term care
facility or hospital at least 30 days after the Issue Date,
2. we receive your request for withdrawal and written proof of the stay no
later than 90 days following the end of your or the Annuitant's stay at the
long term care facility or hospital, and
3. Due proof of confinement is received by us prior to or at the time of, a
request for a withdrawal.
"DUE PROOF" includes, but is not limited to, a letter signed by a physician
stating the dates the Owner or Annuitant was confined, the name and location of
the Long Term Care Facility or Hospital, a statement that the confinement was
medically necessary, and, if released, the date the Owner or Annuitant was
released from the Long Term Care Facility or Hospital.
TERMINAL ILLNESS WAIVER. We will waive the withdrawal charge on all
withdrawals under your Contract if:
1. you or the Annuitant, if the Contract Owner is not a living person, are
diagnosed by a physician as having a terminal illness (as defined in the
Contract) at least 30 days after the Issue Date, and
2. you provide Due Proof of diagnosis to us before or at the time you request
the withdrawal.
"DUE PROOF" includes, but is not limited to, a letter signed by a physician
stating that the Owner or Annuitant has a Terminal Illness and the date the
Terminal Illness was first diagnosed.
UNEMPLOYMENT WAIVER. We will waive the withdrawal charge on one partial or a
full withdrawal taken under your Contract, if you meet the following
requirements:
1. you or the Annuitant, if the Contract Owner is not a living person, become
unemployed at least one year after the Issue Date,
2. you or the Annuitant receive unemployment compensation (as defined in the
Contract) for at least 30 days as a result of that unemployment, and
3. you or the Annuitant claim this benefit within 180 days of your or the
Annuitant's initial receipt of unemployment compensation, and
we receive due proof that you are or have been unemployed and that unemployment
compensation has been received for at least thirty consecutive days prior to or
at the time of the request for withdrawal.
"UNEMPLOYMENT COMPENSATION" means unemployment compensation received from a
unit of state or federal government in the U.S. "DUE PROOF" includes, but is
not limited to, a legible photocopy of an unemployment compensation payment
that meets the above described criteria with regard to dates and a signed
letter from you stating that you or the Annuitant meet the above described
criteria.
You may exercise this benefit once over the term of the Contract. Amounts
withdrawn may be subject to Market Value Adjustments.
These waivers do not apply under the CONSULTANT SOLUTIONS SELECT.
Please refer to your Contract for more detailed information about the terms and
conditions of these waivers.
The laws of your state may limit the availability of these waivers and may also
change certain terms and/or
49 PROSPECTUS
benefits available under the waivers. You should consult your Contract for
further details on these variations. Also, even if you do not pay a withdrawal
charge because of these waivers, a Market Value Adjustment may apply and you
still may be required to pay taxes or tax penalties on the amount withdrawn.
You should consult your tax advisor to determine the effect of a withdrawal on
your taxes.
PREMIUM TAXES
Some states and other governmental entities (e.g., municipalities) charge
premium taxes or similar taxes. We are responsible for paying these taxes and
will deduct them from your Contract Value. Some of these taxes are due when the
Contract is issued, others are due when income payments begin or upon
surrender. Our current practice is not to charge anyone for these taxes until
income payments begin or when a total withdrawal occurs including payment upon
death. We may some time in the future discontinue this practice and deduct
premium taxes from the purchase payments. Premium taxes generally range from 0%
to 4%, depending on the state.
At the Payout Start Date, we deduct the charge for premium taxes from each
investment alternative in the proportion that the Contract Value in the
investment alternative bears to the total Contract Value.
DEDUCTION FOR VARIABLE ACCOUNT INCOME TAXES
We are not currently maintaining a provision for taxes. In the future, however,
we may establish a provision for taxes if we determine, in our sole discretion,
that we will incur a tax as a result of the operation of the Variable Account.
We will deduct for any taxes we incur as a result of the operation of the
Variable Account, whether or not we previously made a provision for taxes and
whether or not it was sufficient. Our status under the Internal Revenue Code is
briefly described in the "Taxes" section of this prospectus.
OTHER EXPENSES
Each Portfolio deducts management fees and other expenses from its assets. You
indirectly bear the charges and expenses of the Portfolios whose shares are
held by the Variable Sub-accounts. These fees and expenses are described in the
prospectuses for the Portfolios. For a summary of Portfolio annual expenses,
see page 13. We receive compensation from the investment advisers,
administrators or distributors, or their affiliates, of the Portfolios in
connection with the administrative services we provide to the Portfolios. We
collect this compensation under agreement between us and the Portfolio's
investment adviser, administrators or distributors, and is calculated based on
a percentage of the average assets allocated to the Portfolio.
ACCESS TO YOUR MONEY
--------------------------------------------------------------------------------
WITHDRAWALS
You can withdraw some or all of your Contract Value at any time prior to the
Payout Start Date. Withdrawals also are available under limited circumstances
on or after the Payout Start Date. See "Income Plans" on page 51.
The amount payable upon withdrawal is the Contract Value (or portion thereof)
next computed after we receive the request for a withdrawal at our home office,
adjusted by any applicable Market Value Adjustment, less any applicable
withdrawal charges, income tax withholding, penalty tax, contract maintenance
charge, Rider Fee, and any premium taxes. We will pay withdrawals from the
Variable Account within 7 days of receipt of the request, subject to
postponement in certain circumstances. You can withdraw money from the Variable
Account or the Fixed Account Option(s) available under your Contract. To
complete a partial withdrawal from the Variable Account, we will cancel
Accumulation Units in an amount equal to the withdrawal and any applicable
charges, fees and taxes.
You must name the investment alternative from which you are taking the
withdrawal. If none is named, then the withdrawal request is incomplete and
cannot be honored.
In general, you must withdraw at least $50 at a time.
Withdrawals from the Standard Fixed Account Option may be subject to a
restriction. See "Standard Fixed Account Option" on page 39.
Withdrawals taken prior to the Payout Start Date are generally considered to
come from the earnings in the Contract first. If the Contract is tax-qualified,
generally all withdrawals are treated as distributions of earnings. Withdrawals
of earnings are taxed as ordinary income and, if taken prior to age 59 1/2, may
be subject to an additional 10% federal penalty tax. If any withdrawal reduces
your Contract Value to less than $1,000, we will treat the request as a
withdrawal of the entire Contract Value, unless the SureIncome Withdrawal
Benefit Option is currently attached to your Contract. If you request a total
withdrawal, we may require that you return your Contract to us. Your Contract
will terminate if you withdraw all of your Contract Value, subject to certain
exceptions if the SureIncomeWithdrawal Benefit Option is currently attached to
your Contract. See "SureIncome Withdrawal Benefit Option" for more details. We
will, however, ask you to confirm your withdrawal request before terminating
your Contract. If we terminate your Contract, we will distribute to you its
Contract Value, adjusted by any applicable Market Value Adjustment, less
withdrawal and other charges and taxes.
50 PROSPECTUS
WRITTEN REQUESTS AND FORMS IN GOOD ORDER. Written requests must include
sufficient information and/or documentation, and be sufficiently clear, to
enable us to complete your request without the need to exercise discretion on
our part to carry it out. You may contact our Customer Service Center to learn
what information we require for your particular request to be in "good order."
Additionally, we may require that you submit your request on our form. We
reserve the right to determine whether any particular request is in good order,
and to change or waive any good order requirements at any time.
POSTPONEMENT OF PAYMENTS
We may postpone the payment of any amounts due from the Variable Account under
the Contract if:
1. The New York Stock Exchange is closed for other than usual weekends or
holidays, or trading on the Exchange is otherwise restricted,
2. An emergency exists as defined by the SEC, or
3. The SEC permits delay for your protection.
We may delay payments or transfers from the Fixed Account Option(s) available
under your Contract for up to 6 months or shorter period if required by law. If
we delay payment or transfer for 30 days or more, we will pay interest as
required by law.
SYSTEMATIC WITHDRAWAL PROGRAM
You may choose to receive systematic withdrawal payments on a monthly,
quarterly, semi-annual, or annual basis at any time prior to the Payout Start
Date. Please consult your sales representative or call us at 800-457-7617 for
more information.
Depending on fluctuations in the value of the Variable Sub-Accounts and the
value of the Fixed Account Options, systematic withdrawals may reduce or even
exhaust the Contract Value. Income taxes may apply to systematic withdrawals.
Please consult your tax advisor before taking any withdrawal.
We will make systematic withdrawal payments to you or your designated payee. At
our discretion, we may modify or suspend the Systematic Withdrawal Program and
charge a processing fee for the service. If we modify or suspend the Systematic
Withdrawal Program, existing systematic withdrawal payments will not be
affected.
MINIMUM CONTRACT VALUE
If your request for a partial withdrawal would reduce your Contract Value to
less than $1,000, we may treat it as a request to withdraw your entire Contract
Value, unless the SureIncome Withdrawal Benefit Option is currently attached to
your Contract. Your Contract will terminate if you withdraw all of your
Contract Value. We will, however, ask you to confirm your withdrawal request
before terminating your Contract. If we terminate your Contract, we will
distribute to you its Contract Value, adjusted by any applicable Market Value
Adjustment, less withdrawal and other charges and applicable taxes.
INCOME PAYMENTS
--------------------------------------------------------------------------------
PAYOUT START DATE
The Payout Start Date is the day that we apply your Contract Value, adjusted by
any applicable Market Value Adjustment and less applicable taxes, to an Income
Plan. The first income payment may occur no sooner than 30 days after the Issue
Date. The Payout Start Date must occur on or before the later of:
.. the youngest Annuitant's 99th birthday, or
.. the 10th Contract Anniversary.
You may change the Payout Start Date at any time by notifying us in writing of
the change at least 30 days before the scheduled Payout Start Date. Absent a
change, we will use the Payout Start Date stated in your Contract.
INCOME PLANS
An "Income Plan" is a series of payments made on a scheduled basis to you or to
another person designated by you. You may select more than one Income Plan. If
you choose more than one Income Plan, you must specify what proportions of your
Contract Value, adjusted by any Market Value Adjustment and less any applicable
taxes, should be allocated to each such Income Plan. For tax reporting
purposes, your cost basis and any gain on the Contract will be allocated
proportionally to each Income Plan you select based on the proportion of your
Contract Value applied to each such Income Plan. We reserve the right to limit
the number of Income Plans that you may select. If you choose to add the Income
Protection Benefit Option, certain restrictions may apply as described under
"Income Protection Benefit Option," below.
If you do not select an Income Plan, we will make income payments in accordance
with Income Plan 1 with a Guaranteed Payment Period of 10 years. On the Payout
Start Date, the portion of the Contract Value in any Fixed Account Option,
adjusted by any applicable Market Value Adjustment and less any applicable
taxes, will be used to derive fixed income payments; the portion of the
Contract Value in any Variable Sub-account, less any applicable taxes, will be
used to derive variable income payments.
If any Contract Owner dies during the Payout Phase, the new Contract Owner will
be the surviving Contract
51 PROSPECTUS
Owner. If there is no surviving Contract Owner, the new Contract Owner will be
the Beneficiary(ies) as described in the "Beneficiary" section of this
prospectus. Any remaining income payments will be paid to the new Contract
Owner as scheduled. Income payments to Beneficiaries may be subject to
restrictions established by the Contract Owner. After the Payout Start Date,
you may not make withdrawals (except as described below) or change your choice
of Income Plan.
Currently seven Income Plans are available. Depending on the Income Plan(s) you
choose, you may receive:
.. fixed income payments;
.. variable income payments; or
.. a combination of the two.
Partial annuitizations are not allowed. Your total Contract Value, adjusted by
any applicable Market Value Adjustment, and less any applicable taxes, must be
applied to your Income Plan(s) on the Payout Start Date.
A portion of each payment will be considered taxable and the remaining portion
will be a non-taxable return of your investment in the Contract, which is also
called the "basis". Once the basis in the Contract is depleted, all remaining
payments will be fully taxable. If the Contract is tax-qualified, generally,
all payments will be fully taxable. Taxable payments taken prior to age 59 1/2
may be subject to an additional 10% federal tax penalty.
The seven Income Plans are:
INCOME PLAN 1 - LIFE INCOME WITH GUARANTEED NUMBER OF PAYMENTS. Under this
plan, we make periodic income payments for at least as long as the Annuitant
lives. If the Annuitant dies in the Payout Phase, we will continue to pay
income payments until the guaranteed number of payments has been paid. The
number of months guaranteed ("Guaranteed Payment Period") may be 0 months, or
range from 60 to 360 months. If the Annuitant is age 90 or older as of the
Payout Start Date, the Guaranteed Payment Period may range from 60 to 360
months.
INCOME PLAN 2 - JOINT AND SURVIVOR LIFE INCOME WITH GUARANTEED NUMBER OF
PAYMENTS. Under this plan, we make periodic income payments for at least as
long as either the Annuitant or the joint Annuitant, named at the time the
Income Plan was selected, lives. If both the Annuitant and joint Annuitant die
in the Payout Phase, we will continue to pay the income payments until the
guaranteed number of payments has been paid. The Guaranteed Payment Period may
be 0 months, or range from 60 to 360 months. If either the Annuitant or joint
Annuitant is age 90 or older as of the Payout Start Date, the Guaranteed
Payment Period may range from 60 to 360 months. You may elect a reduced
survivor plan of 50%, 66% or 75% of the payment amount. If you do not elect a
reduced survivor amount, the payments will remain at 100%. If you elect a
reduced survivor payment plan, the amount of each income payment initially will
be higher but a reduction will take place at the later of 1) the death of an
Annuitant; or 2) at the end of the guaranteed payment period.
INCOME PLAN 3 - GUARANTEED NUMBER OF PAYMENTS. Under this plan, we make
periodic income payments for the period you have chosen. These payments do not
depend on the Annuitant's life. The shortest number of months guaranteed is 60
(120 if the Payout Start Date occurs prior to the third Contract Anniversary).
The longest number of months guaranteed is 360 or the number of months between
the Payout Start Date and the date that the Annuitant reaches age 100, if
greater. In no event may the number of months guaranteed exceed 600. We will
deduct the mortality and expense risk charge from the assets of the Variable
Sub-account supporting this Income Plan even though we may not bear any
mortality risk. You may make withdrawals, change the length of the guaranteed
payment period, or change the frequency of income payments under Income Plan 3.
See "Modifying Payments" and "Payout Withdrawals" below for more details.
INCOME PLAN 4 - LIFE INCOME WITH CASH REFUND. Under this plan, we make periodic
income payments until the death of the Annuitant. If the death of the Annuitant
occurs before the total amount applied to an Income Plan is paid out, we will
pay a lump sum payment of the remaining amount. Payments under this plan are
available only as fixed income payments.
INCOME PLAN 5 - JOINT LIFE INCOME WITH CASH REFUND. Under this plan, we make
periodic income payments until the deaths of both the Annuitant and joint
Annuitant. If the deaths of both the Annuitant and joint Annuitant occur before
the total amount applied to an Income Plan is paid out, we will pay a lump sum
payment of the remaining amount. Currently, a reduced survivor plan is not
available. Payments under this plan are available only as fixed income payments.
INCOME PLAN 6 - LIFE INCOME WITH INSTALLMENT REFUND. Under this plan, we make
periodic income payments until the later of (1) the death of the Annuitant, or
(2) the total amount paid out under the annuity is equal to the total amount
applied to the Income Plan. If the death of the Annuitant occurs before the
total amount applied to an Income Plan is paid out, we will continue to make
payments in the same manner until any remaining payments are paid out. Payments
under this plan are available only as fixed income payments.
INCOME PLAN 7 - JOINT LIFE INCOME WITH INSTALLMENT REFUND. Under this plan, we
make periodic income payments until the later of (1) the deaths of both the
Annuitant and joint Annuitant, or (2) the total amount paid out under the
annuity is equal to the total amount applied to the Income Plan. If the deaths
of both the Annuitant and joint Annuitant occur before the total amount applied
to an Income Plan is paid out, we will
52 PROSPECTUS
continue to make payments in the same manner until any remaining payments are
paid out. Currently, a reduced survivor plan is not available. Payments under
this plan are available only as fixed income payments.
If you choose an Income Plan with payments that continue for the life of the
Annuitant or joint Annuitant, we may require proof of age and sex of the
Annuitant or joint Annuitant before starting income payments, and proof that
the Annuitant or joint Annuitant is alive before we make each payment. Please
note that under Income Plans 1 and 2, if you do not select a Guaranteed Payment
Period, it is possible that the payee could receive only one income payment if
the Annuitant and any joint Annuitant both die before the second income
payment, or only two income payments if they die before the third income
payment, and so on.
The length of any Guaranteed Payment Period under your selected Income Plan
generally will affect the dollar amounts of each income payment. As a general
rule, longer Guarantee Payment Periods result in lower income payments, all
other things being equal. For example, if you choose an Income Plan with
payments that depend on the life of the Annuitant but with no guaranteed
payments, the income payments generally will be greater than the income
payments made under the same Income Plan with a specified Guaranteed Payment
Period.
MODIFYING PAYMENTS
After the Payout Start Date, you may make the following changes under Income
Plan 3:
.. You may request to modify the length of the Guaranteed Payment Period.
Currently, we allow you to make this change once each Contract Year. We
reserve the right to change this practice at any time without prior notice.
If you elect to change the length of the Guaranteed Payment Period, the new
Guaranteed Payment Period must be within the original minimum and maximum
period you would have been permitted to select on the Payout Start Date.
However, the maximum payment period permitted will be shortened by the
period elapsed since the original Guaranteed Payment Period began. If you
change the length of your Guaranteed Payment Period, we will compute the
present value of your remaining payments, using the same assumptions we
would use if you were terminating the income payments, as described in
Payout Withdrawal. We will then adjust the remaining payments to equal what
that value would support based on those same assumptions and based on the
revised Guaranteed Payment Period.
.. You may request to change the frequency of your payments. We currently
allow you to make this change once each Contract Year. We reserve the right
to change this practice at any time without prior notice. Changes to either
the frequency of payments or length of the Guaranteed Payment Period will
result in a change to the payment amount and may change the amount of each
payment that is taxable to you.
Modifying payments of this Contract may not be allowed under Qualified
Contracts. In order to satisfy required minimum distributions ("RMD") under
current Treasury regulations, once income payments have begun over a Guaranteed
Payment Period, the Guaranteed Payment Period cannot be changed even if the new
period is shorter than the maximum permitted. Please consult with a competent
tax advisor prior to making a request to modify payments if your Contract is
subject to RMD requirements.
Any change to either the frequency of payments or length of a Guaranteed
Payment Period will take effect on the next payment date after we accept the
requested change.
PAYOUT WITHDRAWAL
You may terminate all or a portion of the income payments being made under
Income Plan 3 at any time and withdraw their present value ("Withdrawal
Value"), subject to a Payout Withdrawal Charge, by requesting a withdrawal
("Payout Withdrawal") in writing. For variable income payments, the withdrawal
value is equal to the present value of the variable income payments being
terminated, calculated using a discount rate equal to the assumed investment
rate that was used in determining the initial variable payment. For fixed
income payments, the withdrawal value is equal to the present value of the
fixed income payments being terminated, calculated using a discount rate equal
to the applicable current interest rate (this may be the initial interest rate
in some states.) The applicable current interest rate is the rate we are using
on the date we receive your Payout Withdrawal request to determine income
payments for a new annuitization with a payment period equal to the remaining
payment period of the income payments being terminated.
A Payout Withdrawal must be a least $50. If any Payout Withdrawal reduces the
value of the remaining income payments to an amount not sufficient to provide
an initial payment of at least $20, we reserve the right to terminate the
Contract and pay you the present value of the remaining income payments in a
lump sum. If you withdraw the entire value of the remaining income payments,
the Contract will terminate.
You must specify the Investment Alternative(s) from which you wish to make a
Payout Withdrawal. If you withdraw a portion of the value of your remaining
income payments, the payment period will remain unchanged and your remaining
payment amounts will be reduced proportionately.
53 PROSPECTUS
PAYOUT WITHDRAWAL CHARGE
To determine the Payout Withdrawal Charge, we assume that purchase payments are
withdrawn first, beginning with the oldest payment. When an amount equal to all
purchase payments have been withdrawn, additional withdrawals will not be
assessed a Payout Withdrawal Charge.
Payout Withdrawals will be subject to a Payout Withdrawal Charge for each
Contract as follows:
Number of Complete Years Since We Received the Purchase
Payment Being Withdrawn/Applicable Charge:
CONTRACT: 0 1 2 3 4 5 6 7 8+
---------------------------------------------------------------------------------------
Consultant Solutions Classic 7% 7% 6% 5% 4% 3% 2% 0% 0%
Consultant Solutions Plus 8.5% 8.5% 8.5% 7.5% 6.5% 5.5% 4% 2.5% 0%
Consultant Solutions Elite 7% 6% 5% 0% 0% 0% 0% 0% 0%
Consultant Solutions Select None
ADDITIONAL INFORMATION. We may make other Income Plans available. You may
obtain information about them by writing or calling us. On the Payout Start
Date, you must specify the portion of the Contract Value to be applied to
variable income payments and the portion to be applied to fixed income
payments. For the portion of your Contract Value to be applied to variable
income payments, you must also specify the Variable Sub-Accounts on which to
base the variable income payments as well as the allocation among those
Variable Sub-Accounts. If you do not tell us how to allocate your Contract
Value among fixed and variable income payments, we will apply your Contract
Value in the Variable Account to variable income payments and your Contract
Value in the Fixed Account to fixed income payments.
We will apply your Contract Value, adjusted by any applicable Market Value
Adjustment, less applicable taxes to your Income Plan(s) on the Payout Start
Date. We can make income payments in monthly, quarterly, semi-annual or annual
installments, as you select. If the Contract Value is less than $2,000 or not
enough to provide an initial payment of at least $20, and state law permits, we
may:
.. terminate the Contract and pay you the Contract Value, adjusted by any
applicable Market Value Adjustment and less any applicable taxes, in a lump
sum instead of the periodic payments you have chosen, or
.. reduce the frequency of your payments so that each payment will be at least
$20.
VARIABLE INCOME PAYMENTS
The amount of your variable income payments depends upon the investment results
of the Variable Sub-accounts you select, the premium taxes you pay, the age and
sex of the Annuitant, and the Income Plan you choose. We guarantee that the
payments will not be affected by (a) company mortality experience or (b) the
amount of our administration expenses.
We cannot predict the total amount of your variable income payments, which may
be more or less than your total purchase payments because (a) variable income
payments vary with the investment results of the underlying Portfolios; and
(b) under some of the Income Plans, we make income payments only so long as an
Annuitant is alive or any applicable Guaranteed Payment Period has not yet
expired.
In calculating the amount of the periodic payments in the annuity tables in the
Contracts, we used an assumed investment rate ("AIR", also known as benchmark
rate) of 3%. Currently, you may choose either a 6%, 5%, or 3% AIR per year. If
you select the Income Protection Benefit Option, however, the 3% AIR must
apply. The 6% and 5% AIR may not be available in all states (check with your
representative for availability). Currently, if you do not choose one, the 3%
AIR will automatically apply. We reserve the right to offer other assumed
investment rates. If the actual net investment return of the Variable
Sub-accounts you choose is less than the AIR, then the dollar amount of your
variable income payments will decrease. The dollar amount of your variable
income payments will increase, however, if the actual net investment return
exceeds the AIR. The dollar amount of the variable income payments stays level
if the net investment return equals the AIR. With a higher AIR, your initial
income payment will be larger than with a lower AIR. While income payments
continue to be made, however, this disparity will become smaller and, if the
payments have continued long enough, each payment will be smaller than if you
had initially chosen a lower AIR.
Please refer to the Statement of Additional Information for more detailed
information as to how we determine variable income payments.
You may also elect a variable income payment stream consisting of level
monthly, quarterly or semi-annual payments. If you elect to receive level
monthly, quarterly or semi-annual payments, the payments must be recalculated
annually. You may only elect to receive level payments at or before the Payout
Start Date. If you have elected level payments for an Income Plan(s), you may
not make any variable to fixed payment transfers within such Income Plan(s). We
will determine the amount of each annual payment as described above, place this
amount in our general account, and then distribute it in level monthly,
quarterly or semi-annual payments. The
54 PROSPECTUS
sum of the level payments will exceed the annual calculated amount because of
an interest rate factor we use, which may vary from year to year, but will not
be less than 2% per year. If the Annuitant dies while you are receiving level
payments, you will not be entitled to receive any remaining level payments for
that year (unless the Annuitant dies before the end of the Guaranteed Payment
Period). For example, if you have selected Income Plan 1 with no Guaranteed
Payment Period and the Annuitant dies during the year, the Beneficiary will not
be entitled to receive the remaining level payments for that year.
INCOME PROTECTION BENEFIT OPTION
We offer an Income Protection Benefit Option, which may be added to your
Contract on the Payout Start Date for an additional mortality and expense risk
charge if you have selected variable income payments subject to the following
conditions:
.. The Annuitant and joint Annuitant, if applicable, must be age 75 or younger
on the Payout Start Date.
.. You must choose Income Plan 1 or 2 and the Guaranteed Payment Period must
be for at least 120 months, unless the Internal Revenue Service requires a
different payment period.
.. You may apply the Income Protection Benefit Option to more than one Income
Plan.
.. The AIR must be 3% for the Income Plan(s) that you wish to apply this
benefit to.
.. You may only add the Income Protection Benefit Option on the Payout Start
Date and, once added, the option cannot be cancelled.
.. You may not add the Income Protection Benefit Option without our prior
approval if your Contract Value is greater than $1,000,000 at the time you
choose to add the Income Protection Benefit Option.
.. You may not convert variable income payments to fixed income payments.
If you select the Income Protection Benefit Option, we guarantee that your
variable income payments under each of the Income Plans to which the option is
applied will never be less that 85% of the initial variable amount income value
("Income Protection Benefit"), as calculated on the Payout Start Date under
such Income Plans, unless you have elected a reduced survivor payment plan
under Income Plan 2. If you have elected a reduced survivor payment plan, we
guarantee that your variable income payments to which the option is applied
will never be less than 85% of the initial variable amount income value prior
to the later of 1) the death of an Annuitant; or 2) the end of the guaranteed
payment period. On or after the later of these events, we guarantee that your
variable income payments will never be less than 85% of the initial variable
amount income value multiplied by the percentage you elected for your reduced
survivor plan. See Appendix C for numerical examples that illustrate how the
Income Protection Benefit is calculated.
If you add the Income Protection Benefit Option to your Contract, the mortality
and expense risk charge during the Payout Phase will be increased. Currently,
the charge for this option is 0.50%. We may change the amount we charge, but it
will not exceed 0.75%. Once the option is issued, we will not increase what we
charge you for the benefit.
INVESTMENT REQUIREMENTS.
If you add the Income Protection Benefit Option to your Contract, you must
adhere to certain requirements related to the investment alternatives in which
you may invest during the Payout Phase with respect to the assets supporting
the variable income payments to which the Income Protection Benefit Option
applies. These requirements may include, but are not limited to, maximum
investment limits on certain Variable Sub-accounts, exclusion of certain
Variable Sub-accounts, required minimum allocations to certain Variable
Sub-accounts, and restrictions on transfers to or from certain investment
alternatives. We may also require that you use the Automatic Portfolio
Rebalancing Program. We may change the specific requirements that are
applicable at any time in our sole discretion. Any changes we make will not
apply to the Income Protection Benefit Option if it was added to your Contract
prior to the implementation date of the change, except for changes made due to
a change in Variable Sub-accounts available under the Contract.
When you add the Income Protection Benefit Option to your Contract, you must
allocate to a model portfolio option the entire portion of your Contract Value
allocated to the Variable Sub-accounts.
We currently offer one Model Portfolio Option; however, we may add more Model
Portfolio Options in the future. Transfers made for purposes of adhering to
your Model Portfolio Option will not count towards the number of free transfers
you may make each Contract Year.
THE FOLLOWING TABLE SUMMARIZES THE MODEL PORTFOLIO OPTION CURRENTLY AVAILABLE
FOR USE WITH THE INCOME PROTECTION BENEFIT OPTION:
*Model Portfolio Option 1
Each calendar quarter, we will use the Automatic Portfolio Rebalancing Program
to automatically rebalance your Contract Value in each Variable Sub-account and
return it to the percentage allocations for your Model Portfolio Option, using
the percentage allocations as of your most recent instructions.
MODEL PORTFOLIO OPTION 1
You must allocate a certain percentage of the portion of your Contract Value
allocated to the Variable
55 PROSPECTUS
Sub-accounts into each of three asset categories. You may choose the Variable
Sub-accounts in which you want to invest, provided you maintain the percentage
allocation requirements for each category. You may also make transfers among
the Variable Sub-accounts within each category at any time, provided you
maintain the percentage allocation requirements for each category. However,
each transfer you make will count against the 12 transfers you can make each
Contract Year without paying a transfer fee.
The following table describes the percentage allocation requirements for Model
Portfolio Options 1 and Variable Sub-accounts available under each category:
MODEL PORTFOLIO OPTION 1
--------------------------------------------------------------------------------
20% Category A
50% Category B
30% Category C
--------------------------------------------------------------------------------
CATEGORY A
Fidelity VIP Money Market - Service Class 2 Sub-Account
PIMCO VIT Money Market - Administrative Shares Sub-Account
MODEL PORTFOLIO OPTION 1
--------------------------------------------------------------------------------
CATEGORY B
Fidelity VIP Investment Grade Bond - Service Class 2 Sub-Account
Legg Mason Western Asset Variable Global High Yield Bond - Class II Sub-Account
MFS High Income - Service Class Sub-Account
PIMCO VIT Foreign Bond (U.S. Dollar-Hedged) - Administrative Shares Sub-Account
PIMCO VIT Real Return - Administrative Shares Sub-Account
PIMCO VIT Total Return - Administrative Shares Sub-Account
UIF U.S. Real Estate, Class II Sub-Account
Invesco V.I. Government Securities, Series II Sub-Account
--------------------------------------------------------------------------------
CATEGORY C
Invesco V.I. Basic Value - Series II Sub-Account
Invesco V.I. Core Equity - Series II Sub-Account
Invesco V.I. Mid Cap Core Equity - Series II Sub-Account
Fidelity VIP Contrafund(R) - Service Class 2 Sub-Account
Fidelity VIP Equity-Income - Service Class 2 Sub-Account
Fidelity VIP Index 500 - Service Class 2 Sub-Account
Fidelity VIP Overseas - Service Class 2 Sub-Account
Fidelity VIP Asset Manager/(SM)/ - Service Class 2 Sub-Account
Janus Aspen Series Overseas - Service Shares Sub-Account
Janus Aspen Series Forty - Service Shares Sub-Account
Janus Aspen Series Perkins Mid Cap Value - Service Shares Sub-Account
Janus Aspen Series Balanced - Service Shares Sub-Account
Legg Mason ClearBridge Variable Fundamental All Cap Value - Class II Sub-Account
Legg Mason ClearBridge Variable Large Cap Value - Class II Sub-Account
MFS Investors Trust - Service Class Sub-Account
MFS Investors Growth Stock - Service Class Sub-Account
MFS Total Return - Service Class Sub-Account
MFS Value - Service Class Sub-Account
Oppenheimer Small- & Mid-Cap Growth/VA - Service Shares Sub-Account/(1)/
Oppenheimer Main Street Small Cap(R)/VA - Service Shares Sub-Account
Rydex SGI VT U.S. Long Short Momentum Sub-Account (formerly, Rydex SGI VT
All-Cap Opportunity Sub-Account)
T. Rowe Price Equity Income - II Sub-Account
T. Rowe Price Blue Chip Growth - II Sub-Account
Van Eck VIP Multi-Manager Alternatives Sub-Account
Invesco Van Kampen V.I. Growth and Income, Series II Sub-Account
--------------------------------------------------------------------------------
(1)Effective as of August 30, 2010, the following Variable Sub-Account closed
to all Contract Owners except those Contract Owners who had contract value
invested in the Variable Sub-Account as of the closure date:
Oppenheimer Small- & Mid-Cap Growth/VA - Service Shares Sub-Account
Contract Owners who had contract value invested in this Variable Sub-Account
as of the closure date may continue to submit additional investments into the
Variable Sub-Account thereafter, although they will not be permitted to
invest in the Variable Sub-Account if they withdraw or otherwise transfer
their entire contract value from the Variable Sub-Account following the
closure date. Contract Owners who did not have contract value invested in
this Variable Sub-Account as of the specified closure date may not invest in
the Variable Sub-Account.
FIXED INCOME PAYMENTS
We guarantee income payment amounts derived from any Fixed Account Option for
the duration of the Income Plan. The guaranteed income payment amounts will
change if the frequency of payments or the length of the payment period changes.
We calculate the fixed income payments by:
.. adjusting the portion of the Contract Value in any Fixed Account Option on
the Payout Start Date by any applicable Market Value Adjustment;
.. deducting any applicable taxes; and
.. applying the resulting amount to the greater of: (a) the appropriate income
payment factor for the selected Income Plan from the Income Payment Table
in your Contract; or (b) such other income payment factor as we are
offering on the Payout Start Date.
We may defer your request to make a withdrawal from fixed income payments for a
period of up to 6 months or whatever shorter time state law may require. If we
defer payments for 30 days or more, we will pay interest as required by law
from the date we receive the withdrawal request to the date we make payment.
CERTAIN EMPLOYEE BENEFIT PLANS
The Contracts offered by this prospectus contain income payment tables that
provide for different payments to men and women of the same age, except in
states that require unisex tables. We reserve the right to use income payment
tables that do not distinguish on the basis of sex to the extent permitted by
applicable law. In certain employment-related situations, employers are
required by law to use the same income payment tables for men and women.
Accordingly, if the Contract is used in connection with an employment-related
retirement or benefit plan and we do not offer unisex annuity tables in your
state, you should consult with legal counsel as to whether the Contract is
appropriate.
56 PROSPECTUS
DEATH PROCEEDS
Under certain conditions, described below, we will pay a death settlement
("DEATH PROCEEDS") for this Contract on the death of the Contract Owner,
Annuitant, or Co-Annuitant if the death occurs prior to the Payout Start Date.
The Death Proceeds will not exceed the Contract Value plus $1 million. If the
Owner or Annuitant dies after the Payout Start Date, we will pay remaining
income payments as described in the "Payout Phase" section of your Contract.
See "Income Payments" on page 51 for more information.
We will determine the value of the Death Proceeds as of the end of the
Valuation Date during which we receive the first Complete Request for
Settlement (the next Valuation Date, if we receive the request after 3:00 p.m.
Central Time). In order to be considered a "COMPLETE REQUEST FOR SETTLEMENT," a
claim for distribution of the Death Proceeds must include "DUE PROOF OF DEATH"
in any of the following forms of documentation:
.. A certified copy of the death certificate;
.. A certified copy of a decree of a court of competent jurisdiction as to the
finding of death; or
.. Any other proof acceptable to us.
"DEATH PROCEEDS" are determined based on when we receive a Complete Request for
Settlement:
.. If we receive a Complete Request for Settlement within 180 days of the
death of the Contract Owner, Annuitant, or Co-Annuitant, as applicable, the
Death Proceeds are equal to the "DEATH BENEFIT."
.. If we receive a Complete Request for Settlement more than 180 days after
the death of the Contract Owner, Annuitant, or Co-Annuitant, as applicable,
the Death Proceeds are equal to the greater of the Contract Value or
Settlement Value. We reserve the right to waive or extend, in a
nondiscriminatory manner, the 180-day period in which the Death Proceeds
will equal the Death Benefit.
Where there are multiple Beneficiaries, we will only value the Death Proceeds
at the time the first Beneficiary submits the necessary documentation in good
order. Any Death Proceeds amounts attributable to any Beneficiary which remain
in the Variable Sub-accounts are subject to investment risk.
DEATH BENEFIT OPTIONS
In addition to the ROP Death Benefit included in your Contract, we offer the
following death benefit options which may be added to your Contract:
.. MAV Death Benefit Option
.. Annual Increase Death Benefit Option
.. Enhanced Earnings Death Benefit Option
The amount of the Death Benefit depends on which death benefit option(s) you
select. Not all death benefit options are available in all states.
You may select any combination of death benefit options on the issue date of
your Contract or at a later date, subject to state availability and issue age
restrictions. You may not add any of the death benefit options to your Contract
after Contract issue without our prior approval if your Contract Value is
greater than $1,000,000 at the time you want to add an option.
The "DEATH BENEFIT" is equal to the Enhanced Earnings Death Benefit (if
selected) plus the greatest of:
.. The Contract Value;
.. The Settlement Value;
.. The ROP Death Benefit;
.. The MAV Death Benefit Option (if selected); or
.. The Annual Increase Death Benefit Option (if selected).
The "SETTLEMENT VALUE" is the amount that would be paid in the event of a full
withdrawal of the Contract Value.
The "ROP DEATH BENEFIT" is equal to the sum of all purchase payments (and
Credit Enhancements for CONSULTANT SOLUTIONS PLUS CONTRACTS), reduced by a
proportional withdrawal adjustment for each withdrawal. The withdrawal
adjustment is equal to the withdrawal amount divided by the Contract Value
immediately prior to the withdrawal, and the result is multiplied by:
The sum of all purchase payments (and Credit Enhancements for CONSULTANT
SOLUTIONS PLUS CONTRACTS) made prior to the withdrawal, less any prior
withdrawal adjustments.
MAXIMUM ANNIVERSARY VALUE DEATH BENEFIT OPTION.
The MAV Death Benefit Option is available only if the oldest Contract Owner and
Co-Annuitant, or, if the Contract is owned by a non-living person, the oldest
Annuitant, are age 79 or younger on the Rider Application Date. There is an
additional mortality and expense risk charge for this death benefit option,
currently equal to 0.20%. We may change what we charge for this death benefit
option, but it will never exceed 0.50%. Once added to your Contract, we
guarantee that we will not increase the mortality and expense risk charge you
pay for this death benefit option.
On the date we issue the rider for this benefit ("Rider Date"), the MAV DEATH
BENEFIT is equal to the Contract Value. After the Rider Date and prior to the
date we determine the Death Proceeds (see "Death Proceeds" on page 57), the MAV
Death Benefit is recalculated each
57 PROSPECTUS
DEATH BENEFITS
--------------------------------------------------------------------------------
time a purchase payment or withdrawal is made as well as on each Contract
Anniversary as follows:
.. Each time a purchase payment is made, the MAV Death Benefit is increased by
the amount of the purchase payment (and Credit Enhancement for CONSULTANT
SOLUTIONS PLUS CONTRACTS).
.. Each time a withdrawal is made, the MAV Death Benefit is reduced by a
proportional withdrawal adjustment, defined as the withdrawal amount
divided by the Contract Value immediately prior to the withdrawal, and the
result multiplied by the most recently calculated MAV Death Benefit.
.. On each Contract Anniversary until the first Contract Anniversary following
the 80th birthday of the oldest Contract Owner or Co-Annuitant, whichever
occurs first, or, if the Contract is owned by a non-living person, the
oldest Annuitant, the MAV Death Benefit is recalculated as the greater of
the Contract Value on that date or the most recently calculated MAV Death
Benefit.
If no purchase payments or withdrawals are made after the Rider Date, the MAV
Death Benefit will be equal to the greatest of the Contract Value on the Rider
Date and the Contract Values on each subsequent Contract Anniversary after the
Rider Date through the first Contract Anniversary following the 80th birthday
of the oldest Contract Owner or Co-Annuitant, whichever occurs first, or, if
the Contract is owned by a non-living person, the oldest Annuitant, but before
the date we determine the Death Proceeds. If, upon death of the Contract Owner,
the Contract is continued under Option D as described on page 61, and if the
New Contract Owner is age 80 or younger on the date we determine the Death
Proceeds, then the MAV Death Benefit Option will continue. The MAV Death
Benefit will continue to be recalculated for purchase payments (and Credit
Enhancements for CONSULTANT SOLUTIONS PLUS CONTRACTS), withdrawals, and on each
Contract Anniversary after the date we determine the Death Proceeds until the
earlier of:
.. The first Contract Anniversary following the 80th birthday of either the
oldest Contract Owner or the Co-Annuitant, whichever is earlier, or, if the
Contract is owned by a non-living person, the oldest Annuitant. (After the
80th birthday of either the oldest Contract Owner or the Co-Annuitant,
whichever is earlier, or, if the Contract is owned by a non-living person,
the oldest Annuitant, the MAV Death Benefit will be recalculated only for
purchase payments (and Credit Enhancements for CONSULTANT SOLUTIONS PLUS
CONTRACTS) and withdrawals); or
.. The date we next determine the Death Proceeds.
ANNUAL INCREASE DEATH BENEFIT OPTION.
The Annual Increase Death Benefit Option is only available if the oldest
Contract Owner and Co-Annuitant, or, if the Contract is owned by a non-living
person, the oldest Annuitant, are age 79 or younger on the Rider Application
Date. There is an additional mortality and expense risk charge for this death
benefit option, currently equal to 0.30%. We may change what we charge for this
death benefit option, but it will never exceed 0.50%. Once added to your
Contract, we guarantee that we will not increase the mortality and expense risk
charge you pay for this death benefit option.
On the date we issue the rider for this benefit ("Rider Date"), the Annual
Increase Death Benefit is equal to the Contract Value. The Annual Increase
Death Benefit, plus purchase payments (and Credit Enhancements for CONSULTANT
SOLUTIONS PLUS CONTRACTS) made after the Rider Date and less withdrawal
adjustments for withdrawals made after the Rider Date, will accumulate interest
on a daily basis at a rate equivalent to 5% per year (may be 3% in certain
states), subject to the "Cap" defined below. This accumulation will continue
until the earlier of:
(a) the first Contract Anniversary following the 80th birthday of the oldest
Contract Owner or Co-Annuitant, whichever occurs first, or, if the Contract is
owned by a non-living person, the oldest Annuitant; or
(b) the date we determine the Death Proceeds.
After the 5% interest accumulation (may be 3% in certain states) ends, the
Annual Increase Death Benefit will continue to be increased by purchase
payments (and Credit Enhancements for CONSULTANT SOLUTIONS PLUS CONTRACTS) and
reduced by withdrawal adjustments for withdrawals until the death benefit
option terminates. The withdrawal adjustment is a proportional adjustment,
defined as the withdrawal amount divided by the Contract Value immediately
prior to the withdrawal, and the result multiplied by the amount of the Annual
Increase Death Benefit immediately prior to the withdrawal.
The Annual Increase Death Benefit Cap is equal to:
.. 200% of the Contract Value as of the Rider Date; plus
.. 200% of purchase payments (and Credit Enhancements for CONSULTANT SOLUTIONS
PLUS CONTRACTS) made after the Rider Date, but excluding any purchase
payments (and Credit Enhancements for CONSULTANT SOLUTIONS PLUS CONTRACTS)
made in the 12-month period immediately prior to the death of a Contract
Owner or the Co-Annuitant, or, if the Contract is owned by a non-living
person, an Annuitant; minus
.. Withdrawal adjustments for any withdrawals made after the Rider Date. Refer
to Appendix E for withdrawal adjustment examples.
58 PROSPECTUS
If, upon death of the Contract Owner, the Contract is continued under Option D
as described on page 63, and if the New Contract Owner is age 80 or younger on
the date we determine the Death Proceeds, then the Annual Increase Death
Benefit Option will continue. The amount of the Annual Increase Death Benefit
as of the date we determine the Death Proceeds, plus subsequent purchase
payments (and Credit Enhancements for CONSULTANT SOLUTIONS PLUS CONTRACTS),
less withdrawal adjustments for any subsequent withdrawals, will accumulate
daily at a rate equivalent to 5% per year (may be 3% in certain states) from
the date we determine the Death Proceeds, until the earlier of:
.. The first Contract Anniversary following the 80th birthday of either the
oldest Contract Owner or the Co-Annuitant, whichever is earlier, or, if the
Contract is owned by a non-living person, the oldest Annuitant. (After the
80th birthday of either the oldest Contract Owner or the Co-Annuitant,
whichever is earlier, or, if the Contract is owned by a non-living person,
the oldest Annuitant, the Annual Increase Death Benefit will be
recalculated only for purchase payments and withdrawals (and Credit
Enhancements for CONSULTANT SOLUTIONS PLUS CONTRACTS)); or
.. The date we next determine the Death Proceeds.
ENHANCED EARNINGS DEATH BENEFIT OPTION.
The "ENHANCED EARNINGS DEATH BENEFIT OPTION" is only available if the oldest
Contract Owner and Co-Annuitant, or, if the Contract is owned by a non-living
person, the oldest Annuitant, are age 79 or younger on the Rider Application
Date. There is an additional mortality and expense risk charge for this death
benefit option, currently equal to:
.. 0.25%, if the oldest Contract Owner and Co-Annuitant, or, if the Contract
is owned by a non-living person, the oldest Annuitant, are age 70 or
younger on the Rider Application Date; and
.. 0.40%, if the oldest Contract Owner or, if older, the Co-Annuitant, or, if
the Contract is owned by a non-living person, the oldest Annuitant, is age
71 or older and age 79 or younger on the Rider Application Date.
We may change what we charge for this death benefit option, but it will never
exceed 0.35% for issue ages 0-70 and 0.50% for issue ages 71-79. Once added to
your Contract, we guarantee that we will not increase the mortality and expense
risk charge you pay for this death benefit option. However, if your spouse
elects to continue the Contract in the event of your death and if he or she
elects to continue the Enhanced Earnings Death Benefit Option, the mortality
and expense risk charge for the death benefit option will be based on the ages
of the oldest new Contract Owner and the Co-Annuitant, or, if the Contract is
owned by a non-living person, the oldest Annuitant, at the time the Contract is
continued.
If the oldest Contract Owner and Co-Annuitant, or, if the Contract is owned by
a non-living person, the oldest Annuitant, are age 70 or younger on the Rider
Application Date, the Enhanced Earnings Death Benefit is equal to the lesser of:
.. 100% of "IN-FORCE PREMIUM" (excluding purchase payments (and Credit
Enhancements for CONSULTANT SOLUTIONS PLUS CONTRACTS) made after the date
we issue the rider for this benefit ("Rider Date") and during the
twelve-month period immediately prior to the death of a Contract Owner or
Co-Annuitant, or, if the Contract is owned by a non-living person, an
Annuitant); or
.. 40% of "IN-FORCE EARNINGS"
calculated as of the date we determine the Death Proceeds.
If the oldest Contract Owner or, if older, the Co-Annuitant, or, if the
Contract is owned by a non-living person, the oldest Annuitant, is age 71 or
older and age 79 or younger on the Rider Application Date, the Enhanced
Earnings Death Benefit is equal to the lesser of:
.. 50% of "In-Force Premium" (excluding purchase payments (and Credit
Enhancements for CONSULTANT SOLUTIONS PLUS CONTRACTS) made after the Rider
Date and during the twelve-month period immediately prior to the death of a
Contract Owner or Co-Annuitant, or, if the Contract is owned by a
non-living person, an Annuitant); or
.. 25% of "In-Force Earnings"
calculated as of the date we determine the Death Proceeds.
In-Force Earnings are equal to the current Contract Value less In-Force
Premium. If this quantity is negative, then In-Force Earnings are equal to zero.
In-Force Premium is equal to the Contract Value on the Rider Date, plus the sum
of all purchase payments, including any associated credit enhancements, made
after the Rider Date, less the sum of all "EXCESS-OF-EARNINGS WITHDRAWALS" made
after the Rider Date.
An EXCESS-OF-EARNINGS WITHDRAWAL is equal to the excess, if any, of the amount
of the withdrawal over the amount of the In-Force Earnings immediately prior to
the withdrawal.
Refer to Appendix E for numerical examples that illustrate how the Enhanced
Earnings Death Benefit Option is calculated.
If, upon death of the Contract Owner, the Contract is continued under Option D
as described on page 61, and if the New Contract Owner is younger than age 80
on the date we determine the Death Proceeds, then this death benefit option
will continue unless the New Contract Owner elects to terminate the death
benefit
59 PROSPECTUS
option. If the death benefit option is continued, the following will apply as
of the date we determine the Death Proceeds upon continuation:
.. The Rider Date will be changed to the date we determine the Death Proceeds;
.. The In-Force Premium is equal to the Contract Value as of the new Rider
Date plus all purchase payments, including any associated credit
enhancements, made after the Rider Date, less the sum of all the
Excess-of-Earnings Withdrawals made after the Rider Date;
.. The Enhanced Earnings Death Benefit after the new Rider Date will be
determined as described above, but using the ages of the oldest Contract
Owner and Co-Annuitant, or, if the Contract is owned by a non-living
person, the oldest Annuitant, as of the new Rider Date.
.. The mortality and expense risk charge, for this rider, will be determined
as described above, but using the ages of the oldest Contract Owner and
Co-Annuitant, or, if the Contract is owned by a non-living person, the
oldest Annuitant, as of the new Rider Date.
If the Contract Owner's, Co-Annuitant's or Annuitant's age is misstated, the
Enhanced Earnings Death Benefit and the mortality and expense risk charge for
this death benefit option will be calculated according to the corrected age as
of the Rider Date. Your Contract Value will be adjusted to reflect the
mortality and expense risk charge for this death benefit option that should
have been assessed based on the corrected age.
ALL OPTIONS.
WE RESERVE THE RIGHT TO IMPOSE LIMITATIONS ON THE INVESTMENT ALTERNATIVES IN
WHICH YOU MAY INVEST AS A CONDITION OF THESE OPTIONS. THESE RESTRICTIONS MAY
INCLUDE, BUT ARE NOT LIMITED TO, MAXIMUM INVESTMENT LIMITS ON CERTAIN
INVESTMENT ALTERNATIVES, EXCLUSION OF CERTAIN INVESTMENT ALTERNATIVES, REQUIRED
MINIMUM ALLOCATIONS TO CERTAIN INVESTMENT ALTERNATIVES, RESTRICTIONS ON
TRANSFERS TO AND FROM CERTAIN INVESTMENT ALTERNATIVES, AND/OR THE REQUIRED USE
OF AUTOMATIC PORTFOLIO REBALANCING. CURRENTLY, NO SUCH RESTRICTIONS ARE BEING
IMPOSED.
These death benefit options will terminate and the corresponding Rider Fee will
cease on the earliest of the following to occur:
.. the date the Contract is terminated;
.. if, upon the death of the Contract Owner, the Contract is continued under
Option D as described in the Death of Owner section on page 61, and the New
Owner is older than age 80 (age 80 or older for the Enhanced Earnings Death
Benefit Option) on the date we determine the Death Proceeds. The death
benefit option will terminate on the date we determine the Death Proceeds;
.. if the Contract is not continued in the Accumulation Phase under either the
Death of Owner or Death of Annuitant provisions of the Contract. The death
benefit option will terminate on the date we determine the Death Proceeds;
.. on the date the Contract Owner (if the current Contract Owner is a living
person) is changed for any reason other than death unless the New Contract
Owner is a trust and the Annuitant is a current Contract Owner;
.. on the date the Contract Owner (if the current Contract Owner is a
non-living person) is changed for any reason unless the New Contract Owner
is a non-living person or is a current Annuitant; or
.. the Payout Start Date.
Notwithstanding the preceding, in the event of the Contract Owner's death, if
the Contract Owner's spouse elects to continue the Contract (as permitted in
the Death of Owner provision below) he or she may terminate the Enhanced
Earnings Death Benefit at that time.
DEATH BENEFIT PAYMENTS
DEATH OF CONTRACT OWNER
If a Contract Owner dies prior to the Payout Start Date, then the surviving
Contract Owners will be the "New Contract Owners". If there are no surviving
Contract Owners, then subject to any restrictions previously placed upon them,
the Beneficiaries will be the New Contract Owners.
If there is more than one New Contract Owner taking a share of the Death
Proceeds, each New Contract Owner will be treated as a separate and independent
Contract Owner of his or her respective share of the Death Proceeds. Each New
Contract Owner will exercise all rights related to his or her share of the
Death Proceeds, including the sole right to elect one of the Option(s) below,
subject to any restrictions previously placed upon the New Contract Owner. Each
New Contract Owner may designate a Beneficiary(ies) for his or her respective
share, but that designated Beneficiary(ies) will be restricted to the Option
chosen by the original New Contract Owner.
The Options available to each New Contract Owner will be determined by the
applicable following Category in which the New Contract Owner is defined. An
Option will be deemed to have been chosen on the day we receive written
notification in a form satisfactory to us.
NEW CONTRACT OWNER CATEGORIES
CATEGORY 1. If your spouse (or Annuitant's spouse in the case of a grantor
trust-owned Contract) is the sole New Contract Owner of the entire Contract,
your spouse must choose from among the death settlement Options A, B, C, D, or
E described below. If he or she does not choose one of these Options, then
Option D will apply.
60 PROSPECTUS
CATEGORY 2. If the New Contract Owner is a living person who is not your
spouse (or Annuitant's spouse in the case of a grantor trust-owned Contract),
or there is more than one New Contract Owner, all of whom are living persons,
each New Contract Owner must choose from among the death settlement Options A,
B, C, or E described below. If a New Contract Owner does not choose one of
these Options, then Option C will apply for that New Contract Owner.
CATEGORY 3. If there are one or more New Contract Owner(s) and at least one of
the New Contract Owners is a non-living person such as a corporation or a
trust, all New Contract Owners are considered to be non-living persons for
purposes of the death settlement options. Each New Contract Owner must choose
death settlement Option A or C described below. If a New Contract Owner does
not choose one of these Options, then Option C will apply for that New Contract
Owner.
The death settlement options we currently offer are:
OPTION A. The New Contract Owner may elect to receive the Death Proceeds in a
lump sum.
OPTION B. The New Contract Owner may elect to apply the Death Proceeds to one
of the Income Plans described above. Such income payments must begin within one
year of the date of death and must be payable:
.. Over the life of the New Contract Owner; or
.. For a guaranteed payment period of at least 5 years (60 months), but not to
exceed the life expectancy of the New Contract Owner; or
.. Over the life of the New Contract Owner with a guaranteed payment period of
at least 5 years (60 months), but not to exceed the life expectancy of the
New Contract Owner.
OPTION C. The New Contract Owner may elect to receive the Contract Value
payable within 5 years of the date of death. The Contract Value, as of the date
we receive the first Complete Request for Settlement, will be reset to equal
the Death Proceeds as of that date. Any excess amount of the Death Proceeds
over the Contract Value on that date will be allocated to the PIMCO Money
Market Variable Sub-account unless the New Contract Owner provides other
allocation instructions.
The New Contract Owner may not make any additional purchase payments under this
option. Withdrawal charges will be waived for any withdrawals made during the
5-year period after the date of death; however, amounts withdrawn may be
subject to Market Value Adjustments. The New Contract Owner may exercise all
rights set forth in the Transfers provision.
If the New Contract Owner dies before the Contract Value is completely
withdrawn, the New Contract Owner's Beneficiary(ies) will receive the greater
of the remaining Settlement Value or the remaining Contract Value within 5
years of the date of the original Contract Owner's death.
OPTION D. The New Contract Owner may elect to continue the Contract in the
Accumulation Phase. If the Contract Owner was also the Annuitant, then the New
Contract Owner will be the new Annuitant. This Option may only be exercised
once per Contract. The Contract Value, as of the date we receive the first
Complete Request for Settlement, will be reset to equal the Death Proceeds as
of that date.
Unless otherwise instructed by the continuing spouse, the excess, if any, of
the Death Proceeds over the Contract Value will be allocated to the
Sub-accounts of the Variable Account. This excess will be allocated in
proportion to your Contract Value in those Sub-accounts as of the end of the
Valuation Date that we receive the complete request for settlement except that
any portion of this excess attributable to the Fixed Account Options will be
allocated to the PIMCO Money Market Variable Sub-account.
Within 30 days after the date we determine the Death Proceeds, the New Contract
Owner may transfer all or a portion of the excess of the Death Proceeds, if
any, into any combination of Variable Sub-accounts, the Standard Fixed Account
and the Market Value Adjusted Fixed Account without incurring a transfer fee.
Any such transfer does not count as one of the free transfers allowed each
Contract Year and is subject to any minimum allocation amount specified in this
Contract.
The New Contract Owner may make a single withdrawal of any amount within one
year of the date of your death without incurring a Withdrawal Charge; however,
the amount withdrawn may be subject to a Market Value Adjustment and a 10% tax
penalty if the New Contract Owner is under age 59 1/2.
OPTION E. For Nonqualified Contracts, the New Contract Owner may elect to make
withdrawals at least annually of amounts equal to the "ANNUAL REQUIRED
DISTRIBUTION" calculated for each calendar year. The first such withdrawal must
occur within:
.. One year of the date of death;
.. The same calendar year as the date we receive the first Complete Request
for Settlement; and
.. One withdrawal frequency.
The New Contract Owner must select the withdrawal frequency (monthly,
quarterly, semi-annual, or annual). Once this option is elected and frequency
of withdrawals is chosen, they cannot be changed by the New Contract Owner and
become irrevocable.
In the calendar year in which the Death Proceeds are determined, the ANNUAL
REQUIRED DISTRIBUTION is equal to the Contract Value on the date of the first
distribution divided by the "Life Expectancy" of the New Contract Owner and the
result multiplied by a fraction that represents the portion of the calendar
year remaining after the date of the first distribution. (The Contract Value,
as of the date we receive the Complete Request
61 PROSPECTUS
for Settlement, will be reset to equal the Death Proceeds as of that date. The
Contract Value on the date of the first distribution may be more or less than
the Contract Value as of the date we receive the Complete Request for
Settlement.) The Life Expectancy in that calendar year is equal to the life
expectancy value from IRS Tables based on the age of the New Contract Owner as
of his or her birthday in the same calendar year.
In any subsequent calendar year, the Annual Required Distribution is equal to
the Contract Value as of December 31 of the prior year divided by the remaining
Life Expectancy of the New Contract Owner. In each calendar year after the
calendar year in which the first distribution occurred, the Life Expectancy of
the New Contract Owner is the Life Expectancy calculated in the previous
calendar year minus one (1) year. If the Life Expectancy is less than one (1),
the Annual Required Distribution is equal to the Contract Value.
If the New Contract Owner dies before the Contract Value is completely
withdrawn, the scheduled withdrawals will continue to be paid to the New
Contract Owner's Beneficiary(ies). The Contract Value invested in the Variable
Sub-Accounts will be subject to investment risk until it is withdrawn.
We reserve the right to offer additional death settlement options.
DEATH OF ANNUITANT
If the Annuitant dies prior to the Payout Start Date, then the surviving
Contract Owners will have the Options available to the New Contract Owner,
determined by the applicable following category in which the New Contract Owner
is defined, unless:
.. The Annuitant was also the Contract Owner, in which case the Death of Owner
provisions above apply; or
.. The Contract Owner is a grantor trust established by a living person, in
which case the Beneficiary(ies) will be deemed the New Contract Owners and
the Death of Contract Owner provisions above will apply.
SURVIVING CONTRACT OWNER CATEGORIES
CATEGORY 1. If the Owner is a living person, the Contract will continue in the
Accumulation Phase with a new Annuitant. The Contract Value will not be
increased by any excess of the Death Proceeds over the Contract Value as of the
date that we determine the value of the Death Proceeds.
The new Annuitant will be:
.. A person you name by written request, subject to the conditions described
in the Annuitant section of this Contract; otherwise,
.. The youngest Owner; otherwise,
.. The youngest Beneficiary.
CATEGORY 2. If the Owner is a corporation, trust, or other non-living person,
the Owner must choose between the following two options:
OPTION A. The Owner may elect to receive the Death Proceeds in a lump sum.
OPTION B. The Owner may elect to receive the Contract Value payable within 5
years of the Annuitant's date of death. Under this Option, the excess, if any,
of the Death Proceeds over the Contract Value, as of the date that we determine
the value of the Death Proceeds, will be added to the Contract Value. Unless
otherwise instructed by the Owner, this excess will be allocated to the PIMCO
Money Market Variable Sub-account. During the 5 year period that follows the
Annuitant's date of death, the Owner may exercise all rights as set forth in
the Transfers section. Withdrawal Charges will be waived for any withdrawals
made during this 5 year period, however, the amount withdrawal may be subject
to a Market Value Adjustment.
No additional purchase payments may be added to the Contract under this
section. Withdrawal Charges will be waived for any withdrawals made during this
5 year period.
We reserve the right to offer additional death settlement options.
QUALIFIED CONTRACTS
The death settlement options for Qualified Plans, including IRAs, may be
different to conform with the individual tax requirements of each type of
Qualified Plan. Please refer to your Endorsement for IRA plans, if applicable,
for additional information on your death settlement options. In the case of
certain qualified plans, the terms of the plans may govern the right to
benefits, regardless of the terms of the Contract.
SPOUSAL PROTECTION BENEFIT (CO-ANNUITANT) OPTION AND DEATH OF CO-ANNUITANT
We offer a Spousal Protection Benefit (Co-Annuitant) Option that may be added
to your Contract subject to the following conditions:
.. The individually owned Contract must be either a traditional, Roth, or
Simplified Employee Pension IRA.
.. The Contract Owner's spouse must be the sole Primary Beneficiary of the
Contract and will be the named Co-Annuitant.
.. The Contract Owner must be age 90 or younger on the Rider Application Date;
and the Co-Annuitant must be age 79 or younger on the Rider Application
Date.
.. The option may only be added when we issue the Contract or within 6 months
of the Contract Owner's marriage. We may require proof of marriage in a
form satisfactory to us. Currently, you may not add the option to your
Contract without
62 PROSPECTUS
our prior approval if your Contract Value is greater than $1,000,000 at the
time you choose to add the Option.
Under the Spousal Protection Benefit Option, the Co-Annuitant will be
considered to be an Annuitant under the Contract during the Accumulation Phase
except that the Co-Annuitant will not be considered to be an Annuitant for
purposes of determining the Payout Start Date and the "Death of Annuitant"
provision of your Contract does not apply on the death of the Co-Annuitant.
You may change the Co-Annuitant to a new spouse only if you provide proof of
remarriage in a form satisfactory to us. Once we accept a change, the change
will take effect on the date you signed the request. Each change is subject to
any payment we make or other action we take before we accept it. At any time,
there may only be one Co-Annuitant under your Contract.
There is an annual Rider Fee of 0.10% of the Contract Value for Options added
on or after May 1, 2005. For Options added prior to this date, there is no
charge for this Option. We reserve the right to assess an annual Rider Fee not
to exceed 0.15% for Options added in the future. Once this Option is added to
your Contract, we guarantee that we will not increase what we charge you for
this Option. For Contracts purchased on or after May 1, 2005, we may
discontinue offering the Spousal Protection Benefit (Co-Annuitant) Option at
any time.
The option will terminate upon the date your written termination request is
accepted by us or will terminate on the earliest of the following occurrences:
.. upon the death of the Co-Annuitant (as of the date we determine the Death
Proceeds);
.. upon the death of the Contract Owner (as of the date we determine the Death
Proceeds);
.. on the date the Contract is terminated;
.. on the Payout Start Date; or
.. on the date you change the beneficiary of the Contract and the change is
accepted by us;
.. for options added on or after May 1, 2005, the Contract Owner may terminate
the option upon the divorce of the Contract Owner and the Co-Annuitant by
providing written notice and proof of divorce in a form satisfactory to us;
.. for options added prior to May 1, 2005, the Owner may terminate this option
at anytime by written notice in a form satisfactory to us.
Once the Option is terminated, a new Spousal Protection Benefit (Co-Annuitant)
Option cannot be added to the Contract unless the last Option attached to the
Contract was terminated due to divorce or a change of beneficiary.
DEATH OF CO-ANNUITANT. If the Co-Annuitant dies prior to the Payout Start
Date, subject to the following conditions, the Contract will be continued
according to Option D under the "Death of Owner" provision of your Contract:
.. The Co-Annuitant must have been your legal spouse on the date of his or her
death; and
.. Option D of the "Death of Owner" provision of your Contract has not
previously been exercised.
The Contract may only be continued once under Option D under the "Death of
Owner" provision. For a description of Option D, see the "Death of Owner"
section of this prospectus.
MORE INFORMATION
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LINCOLN BENEFIT LIFE COMPANY
Lincoln Benefit is the issuer of the Contract. Lincoln Benefit is a stock life
insurance company organized under the laws of the state of Nebraska in 1938.
Our legal domicile and principal business address is P.O. Box 80469, Lincoln,
Nebraska. Lincoln Benefit is a wholly-owned subsidiary of Allstate Life
Insurance Company ("Allstate Life"), a stock life insurance company
incorporated under the laws of the State of Illinois.
Allstate Life is a wholly-owned subsidiary of Allstate Insurance Company
("Allstate"), a stock property-liability insurance company incorporated under
the laws of the State of Illinois. All of the capital stock issued and
outstanding of Allstate Insurance Company is owned by Allstate Insurance
Holdings, LLC, which is wholly owned by The Allstate Corporation.
We are authorized to conduct life insurance and annuity business in the
District of Columbia, Guam, U.S. Virgin Islands and all states except New York.
We will market the Contract everywhere we conduct variable annuity business.
The Contracts offered by this prospectus are issued by us and will be funded in
the Variable Account and/or the Fixed Account.
Under our reinsurance agreement with Allstate Life, substantially all contract
related transactions are transferred to Allstate Life and substantially all of
the assets backing our reinsured liabilities are owned by Allstate Life.
Accordingly, the results of operations with respect to applications received
and contracts issued by Lincoln Benefit are not reflected in our financial
statements. The amounts reflected in our financial statements relate only to
the investment of those assets of Lincoln Benefit that are not transferred to
Allstate Life under the reinsurance agreement. These assets represent our
general account and are invested and managed by Allstate Life. While the
reinsurance agreement provides
63 PROSPECTUS
us with financial backing from Allstate Life, it does not create a direct
contractual relationship between Allstate Life and you.
Under the Company's reinsurance agreements with Allstate Life, the Company
reinsures all reserve liabilities with Allstate Life except for variable
contracts. The Company's variable Contract assets and liabilities are held in
legally-segregated, unitized separate accounts and are retained by the Company.
However, the transactions related to such variable contracts such as premiums,
expenses and benefits are transferred to Allstate Life.
Effective June 1, 2006, Allstate Life entered into an agreement ("the
Agreement") with Prudential Financial, Inc. and its subsidiary, The Prudential
Insurance Company of America ("PICA") pursuant to which Allstate Life sold,
through a combination of coinsurance and modified coinsurance reinsurance,
substantially all of its variable annuity business, including that of its
subsidiary Lincoln Benefit. Pursuant to the Agreement Allstate Life and PICA
also entered into an administrative services agreement which provides that PICA
or an affiliate administer the Variable Account and the Contracts. The benefits
and provisions of the Contracts have not been changed by these transactions and
agreements. None of the transactions or agreements have changed the fact that
we are primarily liable to you under your Contract.
VARIABLE ACCOUNT
Lincoln Benefit Life Variable Annuity Account was originally established in
1992, as a segregated asset account of Lincoln Benefit. The Variable Account
meets the definition of a "separate account" under the federal securities laws
and is registered with the SEC as a unit investment trust under the Investment
Company Act of 1940. The SEC does not supervise the management of the Variable
Account or Lincoln Benefit.
We own the assets of the Variable Account, but we hold them separate from our
other assets. To the extent that these assets are attributable to the Contract
Value of the Contracts offered by this prospectus, these assets are not
chargeable with liabilities arising out of any other business we may conduct.
Income, gains, and losses, whether or not realized, from assets allocated to
the Variable Account are credited to or charged against the Variable Account
without regard to our other income, gains, or losses. Our obligations arising
under the Contracts are general corporate obligations of Lincoln Benefit.
The Variable Account is divided into Sub-accounts. The assets of each
Sub-account are invested in the shares of one of the Portfolios. We do not
guarantee the investment performance of the Variable Account, its Sub-accounts
or the Portfolios. Values allocated to the Variable Account and the amount of
Variable Annuity payments will rise and fall with the values of shares of the
Portfolios and are also reduced by Contract charges. We may also use the
Variable Account to fund our other annuity contracts. We will account
separately for each type of annuity contract funded by the Variable Account.
We have included additional information about the Variable Account in the
Statement of Additional Information. You may obtain a copy of the Statement of
Additional Information by writing to us or calling us at 1-800-457-7617. We
have reproduced the Table of Contents of the Statement of Additional
Information on page 76.
THE PORTFOLIOS
DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS. We automatically reinvest all
dividends and capital gains distributions from the Portfolios in shares of the
distributing Portfolios at their net asset value.
VOTING PRIVILEGES. As a general matter, you do not have a direct right to vote
the shares of the Portfolios held by the Variable Sub-Accounts to which you
have allocated your Contract Value. Under current law, however, you are
entitled to give us instructions on how to vote those shares on certain
matters. Based on our present view of the law, we will vote the shares of the
Portfolios that we hold directly or indirectly through the Variable Account in
accordance with instructions that we receive from Contract Owners entitled to
give such instructions.
As a general rule, before the Payout Start Date, the Contract Owner or anyone
with a voting interest is the person entitled to give voting instructions. The
number of shares that a person has a right to instruct will be determined by
dividing the Contract Value allocated to the applicable Variable Sub-Account by
the net asset value per share of the corresponding Portfolio as of the record
date of the meeting. After the Payout Start Date the person receiving income
payments has the voting interest. The payee's number of votes will be
determined by dividing the reserve for such Contract allocated to the
applicable Sub-Account by the net asset value per share of the corresponding
Portfolio. The votes decrease as income payments are made and as the reserves
for the Contract decrease.
We will vote shares attributable to Contracts for which we have not received
instructions, as well as shares attributable to us, in the same proportion as
we vote shares for which we have received instructions, unless we determine
that we may vote such shares in our own discretion. We will apply voting
instructions to abstain on any item to be voted upon on a pro-rata basis to
reduce the votes eligible to be cast.
We reserve the right to vote Portfolio shares as we see fit without regard to
voting instructions to the extent permitted by law. If we disregard voting
instructions, we will include a summary of that action and our reasons for that
action in the next semi-annual financial report we send to you.
CHANGES IN PORTFOLIOS. If the shares of any of the Portfolios are no longer
available for investment by the
64 PROSPECTUS
Variable Account or if, in our judgment, further investment in such shares is
no longer desirable in view of the purposes of the Contract, we may eliminate
that Portfolio and substitute shares of another eligible investment fund. Any
substitution of securities will comply with the requirements of the Investment
Company Act of 1940. We also may add new Variable Sub-Accounts that invest in
additional underlying funds. We will notify you in advance of any change.
CONFLICTS OF INTEREST. Certain of the Portfolios sell their shares to separate
accounts underlying both variable life insurance and variable annuity
contracts. It is conceivable that in the future it may be unfavorable for
variable life insurance separate accounts and variable annuity separate
accounts to invest in the same Portfolio. The board of directors/trustees of
these Portfolios monitors for possible conflicts among separate accounts buying
shares of the Portfolios. Conflicts could develop for a variety of reasons. For
example, differences in treatment under tax and other laws or the failure by a
separate account to comply with such laws could cause a conflict. To eliminate
a conflict, the Portfolio's board of directors/trustees may require a separate
account to withdraw its participation in a Portfolio. A Portfolio's net asset
value could decrease if it had to sell investment securities to pay redemption
proceeds to a separate account withdrawing because of a conflict.
THE CONTRACTS
DISTRIBUTION. Contingent on regulatory approval, ALFS, Inc ("ALFS") is
expected to merge into Allstate Distributors, LLC ("ADLLC"), effective April
29, 2011. At that time, ALFS will assign its rights and delegate its duties as
principal underwriter to ADLLC. This change will have no effect on Lincoln
Benefit's obligations to you under your Contract.
ADLLC located at 3100 Sanders Road, Northbrook, IL 60062-7154 serves as
distributor of the Contracts. ADLLC, an affiliate of Lincoln Benefit, is a
wholly owned subsidiary of Allstate Life Insurance Company. ADLLC is registered
as a broker-dealer under the Securities Exchange Act of 1934, as amended, and
is a member of the Financial Industry Regulatory Authority ("FINRA").
ADLLC does not sell Contracts directly to purchasers. ADLLC enters into selling
agreements with affiliated and unaffiliated broker-dealers and banks to sell
the Contracts through their registered representatives. The broker-dealers are
registered with the SEC and are FINRA member firms. Their registered
representatives are licensed as insurance agents by applicable state insurance
authorities and appointed as agents of Lincoln Benefit in order to sell the
Contracts. Contracts also may be sold by representatives or employees of banks
that may be acting as broker-dealers without separate registration under the
Exchange Act, pursuant to legal and regulatory exceptions.
We will pay commissions to broker-dealers and banks which sell the Contracts.
Commissions paid vary, but we may pay up to a maximum sales commission of 7.5%
of total purchase payments. In addition, we may pay ongoing annual compensation
of up to 1.25% of Contract Value. Individual representatives receive a portion
of compensation paid to the broker-dealer or bank with which they are
associated in accordance with the broker-dealer's or bank's practices. We
estimate that commissions and annual compensation, when combined, will not
exceed 8.5% of total purchase payments. However, commissions and annual
compensation could exceed that amount because ongoing annual compensation is
related to Contract Value and the number of years the Contract is held.
From time to time, we pay asset-based compensation and/or marketing allowances
to banks and broker-dealers. These payments vary among individual banks and
broker dealers, and the asset-based payments may be up to 0.25% of Contract
Value annually. These payments are intended to contribute to the promotion and
marketing of the Contracts, and they vary among banks and broker-dealers. The
marketing and distribution support services include but are not limited to:
(1) placement of the Contracts on a list of preferred or recommended products
in the bank's or broker-dealer's distribution system; (2) sales promotions with
regard to the Contracts; (3) participation in sales conferences; and
(4) helping to defray the costs of sales conferences and educational seminars
for the bank or broker-dealer's registered representatives. A list of
broker-dealers and banks that ADLLC paid pursuant to such arrangements is
provided in the Statement of Additional Information, which is available upon
request. For a free copy, please write or call us at the address or telephone
number listed on the front page of this prospectus, or go to the SEC's Web site
(http://www.sec.gov).
To the extent permitted by FINRA rules and other applicable laws and
regulations, we may pay or allow other promotional incentives or payments in
the form of cash or non-cash compensation. We may not offer the arrangements to
all broker-dealers and banks and the terms of the arrangement may differ among
broker-dealers and banks.
Individual registered representatives, broker-dealers, banks, and branch
managers within some broker-dealers and banks participating in one of these
compensation arrangements may receive greater compensation for selling the
contract than for selling a different contact that is not eligible for the
compensation arrangement. While we take the compensation into account when
establishing contract charges, any such compensation will be paid by us or
ADLLC and will not result in any additional charge to you. Your registered
representative can provide you with more information about the compensation
arrangements that apply to the sale of the contract.
Lincoln Benefit does not pay ADLLC a commission for distribution of the
Contracts. ADLLC compensates its
65 PROSPECTUS
representatives who act as wholesalers, and their sales management personnel,
for Contract sales. This compensation is based on a percentage of premium
payments and/or a percentage of Contract values. The underwriting agreement
with ADLLC provides that we will reimburse ADLLC for expenses incurred in
distributing the Contracts, including any liability to Contract Owners arising
out of services rendered or Contracts issued.
Lincoln Benefit and ADLLC have also entered into wholesaling agreements with
certain independent contractors and their broker-dealers. Under these
agreements, compensation based on a percentage of premium payments and/or
Contract values is paid to the wholesaling broker-dealer for the wholesaling
activities of their registered representative.
ADMINISTRATION. We have primary responsibility for all administration of the
Contracts and the Variable Account. We entered into an administrative services
agreement with The Prudential Insurance Company of America ("PICA") whereby,
PICA or an affiliate provides administrative services to the Variable Account
and the Contracts on our behalf. In addition, PICA entered into a master
services agreement with se/2/, inc., of 5801 SW 6th Avenue, Topeka, Kansas
66636, whereby se/2/, inc. provides certain business process outsourcing
services with respect to the Contracts. se/2/, inc. may engage other service
providers to provide certain administrative functions. These service providers
may change over time, and as of December 31, 2010, consisted of the following:
Keane BPO, LLC (administrative services) located at 625 North Michigan Avenue,
Suite 1100, Chicago, IL 60611; RR Donnelly Global Investment Markets
(compliance printing and mailing) located at 111 South Wacker Drive, Chicago,
IL 60606; Jayhawk File Express, LLC (file storage and document destruction)
located at 601 E. 5th Street, Topeka, KS 66601-2596; Co-Sentry.net, LLC
(back-up printing and disaster recovery) located at 9394 West Dodge Rd, Suite
100, Omaha, NE 68114; Convey Compliance Systems, Inc. (withholding calculations
and tax statement mailing) located at 3650 Annapolis Lane, Suite 190, Plymouth,
MN 55447; Spangler Graphics, LLC (compliance mailings) located at 29305 44th
Street, Kansas City, KS 66106; Veritas Document Solutions, LLC (compliance
mailings) located at 913 Commerce Ct, Buffalo Grove, IL 60089; Records Center
of Topeka, a division of Underground Vaults & Storage, Inc. (back-up tapes
storage) located at 1540 NW Gage Blvd. #6, Topeka, KS 66618; EquiSearch
Services, Inc. (lost shareholder search) located at 11 Martime Avenue, Suite
665, White Plains, NY 10606; ZixCorp Systems, Inc. (email encryption) located
at 2711 N. Haskell Ave., Suite 2300, Dallas, TX 75204; DST Systems, Inc. (FAN
mail, positions, prices) located at 333 West 11 Street, 5th Floor, Kansas City,
MO 64105.
In administering the Contracts, the following services are provided, among
others:
.. maintenance of Contract Owner records;
.. Contract Owner services;
.. calculation of unit values;
.. maintenance of the Variable Account; and
.. preparation of Contract Owner reports.
We will send you Contract statements at least annually. We will also send you
transaction confirmations. You should notify us promptly in writing of any
address change. You should read your statements and confirmations carefully and
verify their accuracy. You should contact us promptly if you have a question
about a periodic statement or a confirmation. We will investigate all
complaints and make any necessary adjustments retroactively, but you must
notify us of a potential error within a reasonable time after the date of the
questioned statement. If you wait too long, we will make the adjustment as of
the date that we receive notice of the potential error.
We will also provide you with additional periodic and other reports,
information and prospectuses as may be required by federal securities laws.
ANNUITIES HELD WITHIN A QUALIFIED PLAN
If you use the Contract within an employer sponsored qualified retirement plan,
the plan may impose different or additional conditions or limitations on
withdrawals, waivers of withdrawal charges, death benefits, Payout Start Dates,
income payments, and other Contract features. In addition, adverse tax
consequences may result if Qualified Plan limits on distributions and other
conditions are not met. Please consult your Qualified Plan administrator for
more information. Lincoln Benefit no longer issues deferred annuities to
employer sponsored qualified retirement plans.
LEGAL PROCEEDINGS
There are no pending legal proceedings affecting the Variable Account. Lincoln
Benefit is engaged in routine lawsuits which, in our management's judgment, are
not of material importance to the respective total assets or material with
respect to the Variable Account.
LEGAL MATTERS
All matters of Nebraska law pertaining to the Contract, including the validity
of the Contract and our right to issue the Contract under Nebraska law, have
been passed upon by Susan L. Lees, General Counsel of Lincoln Benefit.
66 PROSPECTUS
TAXES
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THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX ADVICE. LINCOLN
BENEFIT MAKES NO GUARANTEE REGARDING THE TAX TREATMENT OF ANY CONTRACT OR
TRANSACTION INVOLVING A CONTRACT.
Federal, state, local and other tax consequences of ownership or receipt of
distributions under an annuity contract depend on your individual
circumstances. If you are concerned about any tax consequences with regard to
your individual circumstances, you should consult a competent tax adviser.
TAXATION OF LINCOLN BENEFIT LIFE COMPANY
Lincoln Benefit is taxed as a life insurance company under Part I of Subchapter
L of the Code. Since the Variable Account is not an entity separate from
Lincoln Benefit, and its operations form a part of Lincoln Benefit, it will not
be taxed separately. Investment income and realized capital gains of the
Variable Account are automatically applied to increase reserves under the
Contract. Under existing federal income tax law, Lincoln Benefit believes that
the Variable Account investment income and capital gains will not be taxed to
the extent that such income and gains are applied to increase the reserves
under the Contract. Accordingly, Lincoln Benefit does not anticipate that it
will incur any federal income tax liability attributable to the Variable
Account, and therefore Lincoln Benefit does not intend to make provisions for
any such taxes. If Lincoln Benefit is taxed on investment income or capital
gains of the Variable Account, then Lincoln Benefit may impose a charge against
the Variable Account in order to make provision for such taxes.
TAXATION OF VARIABLE ANNUITIES IN GENERAL
TAX DEFERRAL. Generally, you are not taxed on increases in the Contract Value
until a distribution occurs. This rule applies only where:
.. the Contract Owner is a natural person,
.. the investments of the Variable Account are "adequately diversified"
according to Treasury Department regulations, and
.. Lincoln Benefit is considered the owner of the Variable Account assets for
federal income tax purposes.
NON-NATURAL OWNERS. Non-natural owners are also referred to as Non Living
Owners in this prospectus. As a general rule, annuity contracts owned by
non-natural persons such as corporations, trusts, or other entities are not
treated as annuity contracts for federal income tax purposes. The income on
such contracts does not enjoy tax deferral and is taxed as ordinary income
received or accrued by the non-natural owner during the taxable year.
EXCEPTIONS TO THE NON-NATURAL OWNER RULE. There are several exceptions to the
general rule that annuity contracts held by a non-natural owner are not treated
as annuity contracts for federal income tax purposes. Contracts will generally
be treated as held by a natural person if the nominal owner is a trust or other
entity which holds the contract as agent for a natural person. However, this
special exception will not apply in the case of an employer who is the nominal
owner of an annuity contract under a non-Qualified deferred compensation
arrangement for its employees. Other exceptions to the non-natural owner rule
are: (1) contracts acquired by an estate of a decedent by reason of the death
of the decedent; (2) certain qualified contracts; (3) contracts purchased by
employers upon the termination of certain Qualified Plans; (4) certain
contracts used in connection with structured settlement agreements; and
(5) immediate annuity contracts, purchased with a single premium, when the
annuity starting date is no later than a year from purchase of the annuity and
substantially equal periodic payments are made, not less frequently than
annually, during the annuity period.
GRANTOR TRUST OWNED ANNUITY. Contracts owned by a grantor trust are considered
owned by a non-natural owner. Grantor trust owned contracts receive tax
deferral as described in the Exceptions to the Non-Natural Owner Rule section.
In accordance with the Code, upon the death of the annuitant, the death benefit
must be paid. According to your Contract, the Death Benefit is paid to the
beneficiary. A trust named beneficiary, including a grantor trust, has two
options for receiving any death benefits: 1) a lump sum payment, or 2) payment
deferred up to five years from date of death.
DIVERSIFICATION REQUIREMENTS. For a Contract to be treated as an annuity for
federal income tax purposes, the investments in the Variable Account must be
"adequately diversified" consistent with standards under Treasury Department
regulations. If the investments in the Variable Account are not adequately
diversified, the Contract will not be treated as an annuity contract for
federal income tax purposes. As a result, the income on the Contract will be
taxed as ordinary income received or accrued by the Contract owner during the
taxable year. Although Lincoln Benefit does not have control over the
Portfolios or their investments, we expect the Portfolios to meet the
diversification requirements.
OWNERSHIP TREATMENT. The IRS has stated that a contract owner will be
considered the owner of separate account assets if he possesses incidents of
ownership in those assets, such as the ability to exercise investment control
over the assets. At the time the diversification regulations were issued, the
Treasury Department announced that the regulations do not provide guidance
concerning circumstances in which investor control of the separate account
investments may cause a Contract
67 PROSPECTUS
owner to be treated as the owner of the separate account. The Treasury
Department also stated that future guidance would be issued regarding the
extent that owners could direct sub-account investments without being treated
as owners of the underlying assets of the separate account.
Your rights under the Contract are different than those described by the IRS in
private and published rulings in which it found that Contract owners were not
owners of separate account assets. For example, if your contract offers more
than twenty (20) investment alternatives you have the choice to allocate
premiums and contract values among a broader selection of investment
alternatives than described in such rulings. You may be able to transfer among
investment alternatives more frequently than in such rulings. These differences
could result in you being treated as the owner of the Variable Account. If this
occurs, income and gain from the Variable Account assets would be includible in
your gross income. Lincoln Benefit does not know what standards will be set
forth in any regulations or rulings which the Treasury Department may issue. It
is possible that future standards announced by the Treasury Department could
adversely affect the tax treatment of your Contract. We reserve the right to
modify the Contract as necessary to attempt to prevent you from being
considered the federal tax owner of the assets of the Variable Account.
However, we make no guarantee that such modification to the Contract will be
successful.
TAXATION OF PARTIAL AND FULL WITHDRAWALS. If you make a partial withdrawal
under a Non-Qualified Contract, amounts received are taxable to the extent the
Contract Value, without regard to surrender charges, exceeds the investment in
the Contract. The investment in the Contract is the gross premium paid for the
contract minus any amounts previously received from the Contract if such
amounts were properly excluded from your gross income. If you make a full
withdrawal under a Non-Qualified Contract, the amount received will be taxable
only to the extent it exceeds the investment in the Contract.
TAXATION OF ANNUITY PAYMENTS. Generally, the rule for income taxation of
annuity payments received from a Non-Qualified Contract provides for the return
of your investment in the Contract in equal tax-free amounts over the payment
period. The balance of each payment received is taxable. For fixed annuity
payments, the amount excluded from income is determined by multiplying the
payment by the ratio of the investment in the Contract (adjusted for any refund
feature or period certain) to the total expected value of annuity payments for
the term of the Contract. If you elect variable annuity payments, the amount
excluded from taxable income is determined by dividing the investment in the
Contract by the total number of expected payments. The annuity payments will be
fully taxable after the total amount of the investment in the Contract is
excluded using these ratios. If any variable payment is less than the
excludable amount you should contact a competent tax advisor to determine how
to report any unrecovered investment. The federal tax treatment of annuity
payments is unclear in some respects. As a result, if the IRS should provide
further guidance, it is possible that the amount we calculate and report to the
IRS as taxable could be different. If you die, and annuity payments cease
before the total amount of the investment in the Contract is recovered, the
unrecovered amount will be allowed as a deduction for your last taxable year.
PARTIAL ANNUITIZATION
Effective January 1, 2011, an individual may partially annuitize their
non-qualified annuity if the contract so permits. The Small Business Jobs Act
of 2010 included a provision which allows for a portion of a non-qualified
annuity, endowment or life insurance contract to be annuitized while the
balance is not annuitized. The annuitized portion must be paid out over 10 or
more years or over the lives of one or more individuals. The annuitized portion
of the contract is treated as a separate contract for purposes of determining
taxability of the payments under IRC section 72. We do not currently permit
partial annuitization.
TAXATION OF LEVEL MONTHLY VARIABLE ANNUITY PAYMENTS. You may have an option to
elect a variable income payment stream consisting of level monthly payments
that are recalculated annually. Although we will report your levelized payments
to the IRS in the year distributed, it is possible the IRS could determine that
receipt of the first monthly payout of each annual amount is constructive
receipt of the entire annual amount. If the IRS were to take this position, the
taxable amount of your levelized payments would be accelerated to the time of
the first monthly payout and reported in the tax year in which the first
monthly payout is received.
WITHDRAWALS AFTER THE PAYOUT START DATE. Federal tax law is unclear regarding
the taxation of any additional withdrawal received after the Payout Start Date.
It is possible that a greater or lesser portion of such a payment could be
taxable than the amount we determine.
DISTRIBUTION AT DEATH RULES. In order to be considered an annuity contract for
federal income tax purposes, the Contract must provide:
.. if any Contract Owner dies on or after the Payout Start Date but before the
entire interest in the Contract has been distributed, the remaining portion
of such interest must be distributed at least as rapidly as under the
method of distribution being used as of the date of the Contract Owner's
death;
.. if any Contract Owner dies prior to the Payout Start Date, the entire
interest in the Contract will be distributed within 5 years after the date
of the Contract Owner's death. These requirements are satisfied if any
portion of the Contract Owner's interest that is payable to (or for the
benefit of) a designated Beneficiary is distributed over the life of such
Beneficiary (or over a period not extending
68 PROSPECTUS
beyond the life expectancy of the Beneficiary) and the distributions begin
within 1 year of the Contract Owner's death. If the Contract Owner's
designated Beneficiary is the surviving spouse of the Contract Owner, the
Contract may be continued with the surviving spouse as the new Contract
Owner;
.. if the Contract Owner is a non-natural person, then the Annuitant will be
treated as the Contract Owner for purposes of applying the distribution at
death rules. In addition, a change in the Annuitant on a Contract owned by
a non-natural person will be treated as the death of the Contract Owner.
We administer certain spousal rights under the Contract and related tax
reporting in accordance with our understanding of the Defense of Marriage Act
(which defines a "marriage" as a legal union between a man and a woman and a
"spouse" as a person of the opposite sex). Depending on the state in which your
Contract is issued, we may offer certain spousal benefits to civil union
couples or same-sex marriage spouses. You should be aware, however, that
federal tax law does not recognize civil unions or same-sex marriages.
Therefore, we cannot permit a civil union partner or same-sex spouse to
continue the Contract within the meaning of the tax law upon the death of the
first partner under the Contract's "spousal continuance" provision. Please note
there may be federal tax consequences at the death of the first civil union or
same-sex marriage partner. Civil union couples and same-sex marriage spouses
should consider that limitation before selecting a spousal benefit under the
Contract.
TAXATION OF ANNUITY DEATH BENEFITS. Death Benefit amounts are included in
income as follows:
.. if distributed in a lump sum, the amounts are taxed in the same manner as a
total withdrawal, or
.. if distributed under an Income Plan, the amounts are taxed in the same
manner as annuity payments.
PENALTY TAX ON PREMATURE DISTRIBUTIONS. A 10% penalty tax applies to the
taxable amount of any premature distribution from a non-Qualified Contract. The
penalty tax generally applies to any distribution made prior to the date you
attain age 59 1/2. However, no penalty tax is incurred on distributions:
.. made on or after the date the Contract Owner attains age 59 1/2,
.. made as a result of the Contract Owner's death or becoming totally disabled,
.. made in substantially equal periodic payments (as defined by the Code) over
the Contract Owner's life or life expectancy, or over the joint lives or
joint life expectancies of the Contract Owner and the Beneficiary,
.. made under an immediate annuity, or
.. attributable to investment in the Contract before August 14, 1982.
You should consult a competent tax advisor to determine how these exceptions
may apply to your situation.
SUBSTANTIALLY EQUAL PERIODIC PAYMENTS. With respect to non-Qualified Contracts
using substantially equal periodic payments or immediate annuity payments as an
exception to the penalty tax on premature distributions, any additional
withdrawal or other material modification of the payment stream would violate
the requirement that payments must be substantially equal. Failure to meet this
requirement would mean that the income portion of each payment received prior
to the later of 5 years or the Contract Owner's attaining age 59 1/2 would be
subject to a 10% penalty tax unless another exception to the penalty tax
applied. The tax for the year of the modification is increased by the penalty
tax that would have been imposed without the exception, plus interest for the
years in which the exception was used. A material modification does not include
permitted changes described in published IRS rulings. You should consult a
competent tax advisor prior to creating or modifying a substantially equal
periodic payment stream.
TAX FREE EXCHANGES UNDER INTERNAL REVENUE CODE SECTION 1035. A 1035 exchange
is a tax-free exchange of a non-Qualified life insurance contract, endowment
contract or annuity contract into a non-Qualified annuity contract. The
contract owner(s) must be the same on the old and new contract. Basis from the
old contract carries over to the new contract so long as we receive that
information from the relinquishing company. If basis information is never
received, we will assume that all exchanged funds represent earnings and will
allocate no cost basis to them.
PARTIAL EXCHANGES. The IRS has issued rulings that permit partial exchanges of
annuity contracts. Effective June 30, 2008, a partial exchange, of a deferred
annuity contract for another deferred annuity contract, will qualify for
tax-deferral only if no amount is withdrawn or surrendered from either contract
for a period of 12 months. The 12 month period begins on the date when exchange
proceeds are treated as premiums paid for the recipient contract. Withdrawals
from, annuitizations, taxable Owner or Annuitant changes, or surrenders of
either contract within the 12 month period will retroactively negate the
partial exchange, unless one of the following applies:
.. the contract owner is at least 59 1/2 or dies; or becomes totally disabled
or obtains a divorce or suffers a loss of employment after the partial
exchange was completed and prior to the withdrawal, annuitization, Owner or
Annuitant change, or surrender;
.. if the annuity is owned by an entity, the annuitant dies after the partial
exchange was completed and prior to the withdrawal, annuitization, Owner or
Annuitant change or surrender;
69 PROSPECTUS
.. the withdrawal is allocable to investment in the Contract before August 14,
1982; or,
.. the annuity is a qualified funding asset within the meaning of Code section
130(d).
If a partial exchange is retroactively negated, the amount originally
transferred to the recipient contract is treated as a withdrawal from the
source contract, taxable to the extent of any gain in that contract on the date
of the exchange. An additional 10% tax penalty may also apply if the Contract
Owner is under age 59 1/2. Your Contract may not permit partial exchanges.
TAXATION OF OWNERSHIP CHANGES. If you transfer a non-Qualified Contract
without full and adequate consideration to a person other than your spouse (or
to a former spouse incident to a divorce), you will be taxed on the difference
between the Contract Value and the investment in the Contract at the time of
transfer. Any assignment or pledge (or agreement to assign or pledge) of the
Contract Value is taxed as a withdrawal of such amount or portion and may also
incur the 10% penalty tax.
AGGREGATION OF ANNUITY CONTRACTS. The Code requires that all non-Qualified
deferred annuity contracts issued by Lincoln Benefit (or its affiliates) to the
same Contract Owner during any calendar year be aggregated and treated as one
annuity contract for purposes of determining the taxable amount of a
distribution.
INCOME TAX WITHHOLDING
Generally, Lincoln Benefit is required to withhold federal income tax at a rate
of 10% from all non-annuitized distributions. The customer may elect out of
withholding by completing and signing a withholding election form. If no
election is made or no U.S. taxpayer identification number is provided we will
automatically withhold the required 10% of the taxable amount. In certain
states, if there is federal withholding, then state withholding is also
mandatory.
Lincoln Benefit is required to withhold federal income tax using the wage
withholding rates for all annuitized distributions. The customer may elect out
of withholding by completing and signing a withholding election form. If no
election is made, we will automatically withhold using married with three
exemptions as the default. If no U.S. taxpayer identification number is
provided, we will automatically withhold using single with zero exemptions as
the default. In certain states, if there is federal withholding, then state
withholding is also mandatory.
Election out of withholding is valid only if the customer provides a U.S.
residence address and taxpayer identification number.
Generally, Code Section 1441 provides that Lincoln Benefit as a withholding
agent must withhold 30% of the taxable amounts paid to a non-resident alien. A
non- resident alien is someone other than a U.S. citizen or resident alien. We
require an original IRS Form W-8BEN at issue to certify the owners' foreign
status. Withholding may be reduced or eliminated if covered by an income tax
treaty between the U.S. and the non-resident alien's country of residence if
the payee provides a U.S. taxpayer identification number on a fully completed
Form W-8BEN. A U.S. taxpayer identification number is a social security number
or an individual taxpayer identification number ("ITIN"). ITINs are issued by
the IRS to non-resident alien individuals who are not eligible to obtain a
social security number. The U.S. does not have a tax treaty with all countries
nor do all tax treaties provide an exclusion or lower withholding rate for
annuities.
TAX QUALIFIED CONTRACTS
The income on tax sheltered annuity (TSA) and IRA investments is tax deferred,
and the income from annuities held by such plans does not receive any
additional tax deferral. You should review the annuity features, including all
benefits and expenses, prior to purchasing an annuity as a TSA or IRA. Tax
Qualified Contracts are contracts purchased as or in connection with:
.. Individual Retirement Annuities (IRAs) under Code Section 408(b);
.. Roth IRAs under Code Section 408A;
.. Simplified Employee Pension (SEP IRA) under Code Section 408(k);
.. Savings Incentive Match Plans for Employees (SIMPLE IRA) under Code
Section 408(p);
.. Tax Sheltered Annuities under Code Section 403(b);
.. Corporate and Self Employed Pension and Profit Sharing Plans under Code
Section 401; and
.. State and Local Government and Tax-Exempt Organization Deferred
Compensation Plans under Code Section 457.
Lincoln Benefit reserves the right to limit the availability of the Contract
for use with any of the retirement plans listed above or to modify the Contract
to conform with tax requirements. If you use the Contract within an employer
sponsored qualified retirement plan, the plan may impose different or
additional conditions or limitations on withdrawals, waiver of charges, death
benefits, Payout Start Dates, income payments, and other Contract features. In
addition, adverse tax consequences may result if Qualified Plan limits on
distributions and other conditions are not met. Please consult your Qualified
Plan administrator for more information. Lincoln Benefit no longer issues
deferred annuities to employer sponsored qualified retirement plans.
The tax rules applicable to participants with tax qualified annuities vary
according to the type of contract and the terms and conditions of the
endorsement. Adverse tax consequences may result from certain transactions such
as excess contributions, premature distributions, and, distributions that do
not conform to specified commencement and minimum distribution rules. Lincoln
Benefit can issue an individual retirement
70 PROSPECTUS
annuity on a rollover or transfer of proceeds from a decedent's IRA, TSA, or
employer sponsored retirement plan under which the decedent's surviving spouse
is the beneficiary. Lincoln Benefit does not offer an individual retirement
annuity that can accept a transfer of funds for any other, non-spousal,
beneficiary of a decedent's IRA, TSA, or employer sponsored qualified
retirement plan.
Please refer to your Endorsement for IRAs or 403(b) plans, if applicable, for
additional information on your death settlement options. In the case of certain
Qualified Plans, the terms of the Qualified Plan Endorsement and the plans may
govern the right to benefits, regardless of the terms of the Contract.
TAXATION OF WITHDRAWALS FROM AN INDIVIDUALLY OWNED TAX QUALIFIED CONTRACT. If
you make a partial withdrawal under a Tax Qualified Contract other than a Roth
IRA, the portion of the payment that bears the same ratio to the total payment
that the investment in the Contract (i.e., nondeductible IRA contributions)
bears to the Contract Value, is excluded from your income. We do not keep track
of nondeductible contributions, and generally all tax reporting of
distributions from Tax Qualified Contracts other than Roth IRAs will indicate
that the distribution is fully taxable.
"Qualified distributions" from Roth IRAs are not included in gross income.
"Qualified distributions" are any distributions made more than five taxable
years after the taxable year of the first contribution to any Roth IRA and
which are:
.. made on or after the date the Contract Owner attains age 59 1/2,
.. made to a beneficiary after the Contract Owner's death,
.. attributable to the Contract Owner being disabled, or
.. made for a first time home purchase (first time home purchases are subject
to a lifetime limit of $10,000).
"Nonqualified distributions" from Roth IRAs are treated as made from
contributions first and are included in gross income only to the extent that
distributions exceed contributions.
REQUIRED MINIMUM DISTRIBUTIONS. Generally, Tax Qualified Contracts (excluding
Roth IRAs) require minimum distributions upon reaching age 70 1/2. Failure to
withdraw the required minimum distribution will result in a 50% tax penalty on
the shortfall not withdrawn from the Contract. Effective December 31, 2005, the
IRS requires annuity contracts to include the actuarial present value of other
benefits for purposes of calculating the required minimum distribution amount.
These other benefits may include accumulation, income, or death benefits. Not
all income plans offered under the Contract satisfy the requirements for
minimum distributions. Because these distributions are required under the Code
and the method of calculation is complex, please see a competent tax advisor.
THE DEATH BENEFIT AND TAX QUALIFIED CONTRACTS. Pursuant to the Code and IRS
regulations, an IRA (e.g., traditional IRA, Roth IRA, SEP IRA and SIMPLE IRA)
may not invest in life insurance contracts. However, an IRA may provide a death
benefit that equals the greater of the purchase payments or the Contract Value.
The Contract offers a death benefit that in certain circumstances may exceed
the greater of the purchase payments or the Contract Value. We believe that the
Death Benefits offered by your Contract do not constitute life insurance under
these regulations.
It is also possible that certain death benefits that offer enhanced earnings
could be characterized as an incidental death benefit. If the death benefit
were so characterized, this could result in current taxable income to a
Contract Owner. In addition, there are limitations on the amount of incidental
death benefits that may be provided under Qualified Plans, such as in
connection with a TSA or employer sponsored qualified retirement plan.
Lincoln Benefit reserves the right to limit the availability of the Contract
for use with any of the Qualified Plans listed above.
PENALTY TAX ON PREMATURE DISTRIBUTIONS FROM TAX QUALIFIED CONTRACTS. A 10%
penalty tax applies to the taxable amount of any premature distribution from a
Tax Qualified Contract. The penalty tax generally applies to any distribution
made prior to the date you attain age 59 1/2. However, no penalty tax is
incurred on distributions:
.. made on or after the date the Contract Owner attains age 59 1/2,
.. made as a result of the Contract Owner's death or total disability,
.. made in substantially equal periodic payments (as defined by the Code) over
the Contract Owner's life or life expectancy, or over the joint lives or
joint life expectancies of the Contract Owner and the Beneficiary,
.. made after separation from service after age 55 (does not apply to IRAs),
.. made pursuant to an IRS levy,
.. made for certain medical expenses,
.. made to pay for health insurance premiums while unemployed (applies only
for IRAs),
.. made for qualified higher education expenses (applies only for IRAs)
.. made for a first time home purchase (up to a $10,000 lifetime limit and
applies only for IRAs), and
71 PROSPECTUS
.. from an IRA or attributable to elective deferrals under a 401(k) plan,
403(b) annuity, or certain similar arrangements made to individuals who
(because of their being members of a reserve component) are ordered or
called to active duty after Sept. 11, 2001, for a period of more than 179
days or for an indefinite period; and made during the period beginning on
the date of the order or call to duty and ending at the close of the active
duty period.
During the first 2 years of the individual's participation in a SIMPLE IRA,
distributions that are otherwise subject to the premature distribution penalty,
will be subject to a 25% penalty tax.
You should consult a competent tax advisor to determine how these exceptions
may apply to your situation.
SUBSTANTIALLY EQUAL PERIODIC PAYMENTS ON TAX QUALIFIED CONTRACTS. With respect
to Tax Qualified Contracts using substantially equal periodic payments as an
exception to the penalty tax on premature distributions, any additional
withdrawal or other material modification of the payment stream would violate
the requirement that payments must be substantially equal. Failure to meet this
requirement would mean that the income portion of each payment received prior
to the later of 5 years or the taxpayer's attaining age 59 1/2 would be subject
to a 10% penalty tax unless another exception to the penalty tax applied. The
tax for the year of the modification is increased by the penalty tax that would
have been imposed without the exception, plus interest for the years in which
the exception was used. A material modification does not include permitted
changes described in published IRS rulings. You should consult a competent tax
advisor prior to creating or modifying a substantially equal periodic payment
stream.
INCOME TAX WITHHOLDING ON TAX QUALIFIED CONTRACTS. Generally, Lincoln Benefit
is required to withhold federal income tax at a rate of 10% from all
non-annuitized distributions that are not considered "eligible rollover
distributions." The customer may elect out of withholding by completing and
signing a withholding election form. If no election is made or if no U.S.
taxpayer identification number is provided, we will automatically withhold the
required 10% from the taxable amount. In certain states, if there is federal
withholding, then state withholding is also mandatory. Lincoln Benefit is
required to withhold federal income tax at a rate of 20% on all "eligible
rollover distributions" unless you elect to make a "direct rollover" of such
amounts to an IRA or eligible retirement plan. Eligible rollover distributions
generally include all distributions from Tax Qualified Contracts, including
TSAs but excluding IRAs, with the exception of:
.. required minimum distributions, or,
.. a series of substantially equal periodic payments made over a period of at
least 10 years, or,
.. a series of substantially equal periodic payments made over the life (joint
lives) of the participant (and beneficiary), or,
.. hardship distributions.
With respect to any Contract held under a Section 457 plan or by the trustee of
a Section 401 Pension or Profit Sharing Plan, we will not issue payments
directly to a plan participant or beneficiary. Consequently, the obligation to
comply with the withholding requirements described above will be the
responsibility of the plan.
For all annuitized distributions that are not subject to the 20% withholding
requirement, Lincoln Benefit is required to withhold federal income tax using
the wage withholding rates. The customer may elect out of withholding by
completing and signing a withholding election form. If no election is made, we
will automatically withhold using married with three exemptions as the default.
If no U.S. taxpayer identification number is provided, we will automatically
withhold using single with zero exemptions as the default. In certain states,
if there is federal withholding, then state withholding is also mandatory.
Election out of withholding is valid only if the customer provides a U.S.
residence address and taxpayer identification number.
Generally, Code Section 1441 provides that Lincoln Benefit as a withholding
agent must withhold 30% of the taxable amounts paid to a non-resident alien. A
non-resident alien is someone other than a U.S. citizen or resident alien. We
require an original IRS Form W-8BEN at issue to certify the owners' foreign
status. Withholding may be reduced or eliminated if covered by an income tax
treaty between the U.S. and the non-resident alien's country of residence if
the payee provides a U.S. taxpayer identification number on a fully completed
Form W-8BEN. A U.S. taxpayer identification number is a social security number
or an individual taxpayer identification number ("ITIN"). ITINs are issued by
the IRS to non-resident alien individuals who are not eligible to obtain a
social security number. The U.S. does not have a tax treaty with all countries
nor do all tax treaties provide an exclusion or lower withholding rate for
annuities.
CHARITABLE IRA DISTRIBUTIONS. The Pension Protection Act of 2006 included a
charitable giving incentive permitting tax-free IRA distributions for
charitable purposes. The Tax Relief, Unemployment Insurance Reauthorization,
and Job Creation Act of 2010 extended this provision until the end of 2011.
For distributions in tax years beginning after 2005 and before 2012, the Act
provides an exclusion from gross income, up to $100,000, for otherwise taxable
IRA distributions from a traditional or Roth IRA that are qualified charitable
distributions. To constitute a qualified charitable distribution, the
distribution must be made (1) directly by the IRA trustee to certain qualified
72 PROSPECTUS
charitable organizations and (2) on or after the date the IRA owner attains age
70 1/2. Distributions that are excluded from income under this provision are
not taken into account in determining the individual's deduction, if any, for
charitable contributions.
The IRS has indicated that an IRA trustee is not responsible for determining
whether a distribution to a charity is one that satisfies the requirements for
the new income tax exclusion added by the Pension Protection Act. As a result
the general rules for reporting IRA distributions apply.
INDIVIDUAL RETIREMENT ANNUITIES. Code Section 408(b) permits eligible
individuals to contribute to an individual retirement program known as an
Individual Retirement Annuity (IRA). Individual Retirement Annuities are
subject to limitations on the amount that can be contributed and on the time
when distributions may commence. Certain distributions from other types of
qualified retirement plans may be "rolled over" on a tax-deferred basis into an
Individual Retirement Annuity.
ROTH INDIVIDUAL RETIREMENT ANNUITIES. Code Section 408A permits eligible
individuals to make nondeductible contributions to an individual retirement
program known as a Roth Individual Retirement Annuity. Roth Individual
Retirement Annuities are subject to limitations on the amount that can be
contributed and on the time when distributions may commence.
A traditional Individual Retirement Account or Annuity may be converted or
"rolled over" to a Roth Individual Retirement Annuity. For distributions after
2007, the Pension Protection Act of 2006 allows distributions from qualified
retirement plans including tax sheltered annuities and governmental Section 457
plans to be rolled over directly into a Roth IRA, subject to the usual rules
that apply to conversions from a traditional IRA into a Roth IRA. The income
portion of a conversion or rollover distribution is taxable currently, but is
exempted from the 10% penalty tax on premature distributions. Prior to January
1, 2010, income and filing status limitations applied to rollovers from
non-Roth accounts to a Roth IRA. Effective January 1, 2005, the IRS requires
conversions of annuity contracts to include the actuarial present value of
other benefits for purposes of valuing the taxable amount of the conversion.
ANNUITIES HELD BY INDIVIDUAL RETIREMENT ACCOUNTS (COMMONLY KNOWN AS CUSTODIAL
IRAS). Code Section 408 permits a custodian or trustee of an Individual
Retirement Account to purchase an annuity as an investment of the Individual
Retirement Account. If an annuity is purchased inside of an Individual
Retirement Account, then the Annuitant must be the same person as the
beneficial owner of the Individual Retirement Account.
If you have a contract issued as an IRA under Code Section 408(b) and request
to change the ownership to an IRA custodian permitted under Section 408, we
will treat a request to change ownership from an individual to a custodian as
an indirect rollover. We will send a Form 1099R to report the distribution and
the custodian should issue a Form 5498 for the contract value contribution.
Generally, the death benefit of an annuity held in an Individual Retirement
Account must be paid upon the death of the Annuitant. However, in most states,
the Contract permits the custodian or trustee of the Individual Retirement
Account to continue the Contract in the accumulation phase, with the
Annuitant's surviving spouse as the new Annuitant, if the following conditions
are met:
1) The custodian or trustee of the Individual Retirement Account is the owner
of the annuity and has the right to the death proceeds otherwise payable
under the Contract;
2) The deceased Annuitant was the beneficial owner of the Individual Retirement
Account;
3) We receive a complete request for settlement for the death of the Annuitant;
and
4) The custodian or trustee of the Individual Retirement Account provides us
with a signed certification of the following:
(a) The Annuitant's surviving spouse is the sole beneficiary of the
Individual Retirement Account;
(b) The Annuitant's surviving spouse has elected to continue the Individual
Retirement Account as his or her own Individual Retirement Account; and
(c) The custodian or trustee of the Individual Retirement Account has
continued the Individual Retirement Account pursuant to the surviving
spouse's election.
SIMPLIFIED EMPLOYEE PENSION IRA (SEP IRA). Code Section 408(k) allows eligible
employers to establish simplified employee pension plans for their employees
using individual retirement annuities. These employers may, within specified
limits, make deductible contributions on behalf of the employees to the
individual retirement annuities. Employers intending to use the Contract in
connection with such plans should seek competent tax advice.
SAVINGS INCENTIVE MATCH PLANS FOR EMPLOYEES (SIMPLE IRA). Code Section 408(p)
allows eligible employers with 100 or fewer employees to establish SIMPLE
retirement plans for their employees using individual retirement annuities. In
general, a SIMPLE IRA consists of a salary deferral program for eligible
employees and matching or nonelective contributions made by employers.
Employers intending to purchase the Contract as a SIMPLE IRA should seek
competent tax and legal advice. SIMPLE IRA plans must include the provisions of
the Economic Growth and Tax Relief Reconciliation Act of 2007 (EGTRRA) to avoid
adverse tax consequences. If your current SIMPLE IRA plan uses
73 PROSPECTUS
IRS Model Form 5304-SIMPLE with a revision date of March 2002 or later, then
your plan is up to date. If your plan has a revision date prior to March 2002,
please consult with your tax or legal advisor to determine the action you need
to take in order to comply with this requirement.
TO DETERMINE IF YOU ARE ELIGIBLE TO CONTRIBUTE TO ANY OF THE ABOVE LISTED IRAS
(TRADITIONAL, ROTH, SEP, OR SIMPLE), PLEASE REFER TO IRS PUBLICATION 590 AND
YOUR COMPETENT TAX ADVISOR.
TAX SHELTERED ANNUITIES. Code Section 403(b) provides tax-deferred retirement
savings plans for employees of certain non-profit and educational
organizations. Under Section 403(b), any contract used for a 403(b) plan must
provide that distributions attributable to salary reduction contributions made
after 12/31/88, and all earnings on salary reduction contributions, may be made
only on or after the date the employee:
.. attains age 59 1/2,
.. severs employment,
.. dies,
.. becomes disabled, or
.. incurs a hardship (earnings on salary reduction contributions may not be
distributed on account of hardship).
These limitations do not apply to withdrawals where Lincoln Benefit is directed
to transfer some or all of the Contract Value to another 403(b) plan.
Generally, we do not accept funds in 403(b) contracts that are subject to the
Employee Retirement Income Security Act of 1974 (ERISA).
CAUTION: Under IRS regulations we can accept contributions, transfers and
rollovers only if we have entered into an information-sharing agreement, or its
functional equivalent, with the applicable employer or its plan administrator.
Unless your contract is grandfathered from certain provisions in these
regulations, we will only process certain transactions (e.g, transfers,
withdrawals, hardship distributions and, if applicable, loans) with employer
approval. This means that if you request one of these transactions we will not
consider your request to be in good order, and will not therefore process the
transaction, until we receive the employer's approval in written or electronic
form.
CORPORATE AND SELF-EMPLOYED PENSION AND PROFIT SHARING PLANS.
Section 401(a) of the Code permits corporate employers to establish various
types of tax favored retirement plans for employees. Self-employed individuals
may establish tax favored retirement plans for themselves and their employees
(commonly referred to as "H.R.10" or "Keogh"). Such retirement plans may permit
the purchase of annuity contracts. Lincoln Benefit no longer issues annuity
contracts to employer sponsored qualified retirement plans.
There are two owner types for contracts intended to qualify under
Section 401(a): a qualified plan fiduciary or an annuitant owner.
.. A qualified plan fiduciary exists when a qualified plan trust that is
intended to qualify under Section 401(a) of the Code is the owner. The
qualified plan trust must have its own tax identification number and a
named trustee acting as a fiduciary on behalf of the plan. The annuitant
should be the person for whose benefit the contract was purchased.
.. An annuitant owner exists when the tax identification number of the owner
and annuitant are the same, or the annuity contract is not owned by a
qualified plan trust. The annuitant should be the person for whose benefit
the contract was purchased.
If a qualified plan fiduciary is the owner of the contract, the qualified plan
must be the beneficiary so that death benefits from the annuity are distributed
in accordance with the terms of the qualified plan. Annuitant owned contracts
require that the beneficiary be the annuitant's spouse (if applicable), which
is consistent with the required IRS language for qualified plans under
Section 401(a). A completed Annuitant Owned Qualified Plan Designation of
Beneficiary form is required in order to change the beneficiary of an annuitant
owned Qualified Plan contract.
STATE AND LOCAL GOVERNMENT AND TAX-EXEMPT ORGANIZATION DEFERRED COMPENSATION
PLANS. Section 457 of the Code permits employees of state and local
governments and tax-exempt organizations to defer a portion of their
compensation without paying current taxes. The employees must be participants
in an eligible deferred compensation plan. In eligible governmental plans, all
assets and income must be held in a trust/custodial account/annuity contract
for the exclusive benefit of the participants and their beneficiaries. To the
extent the Contracts are used in connection with a non-governmental eligible
plan, employees are considered general creditors of the employer and the
employer as owner of the Contract has the sole right to the proceeds of the
Contract. Under eligible 457 plans, contributions made for the benefit of the
employees will not be includible in the employees' gross income until
distributed from the plan. Lincoln Benefit no longer issues annuity contracts
to 457 plans.
74 PROSPECTUS
ABOUT LINCOLN BENEFIT LIFE COMPANY
--------------------------------------------------------------------------------
Rule 12h-7 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act") exempts an insurance company from filing reports under the Exchange Act
when the insurance company issues certain types of insurance products that are
registered under the Securities Act of 1933 and such products are regulated
under state law. The variable annuities described in this prospectus fall
within the exemption provided under rule 12h-7. We rely on the exemption
provided under rule 12h-7 and do not file reports under the Exchange Act.
75 PROSPECTUS
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
ADDITIONS, DELETIONS, OR SUBSTITUTIONS OF INVESTMENTS
------------------------------------------------------------------
THE CONTRACTS
------------------------------------------------------------------
CALCULATION OF ACCUMULATION UNIT VALUES
------------------------------------------------------------------
CALCULATION OF VARIABLE INCOME PAYMENTS
------------------------------------------------------------------
--------------------------------------------------------------------------------
GENERAL MATTERS
-------------------------------------
EXPERTS
-------------------------------------
FINANCIAL STATEMENTS
-------------------------------------
ACCUMULATION UNIT VALUES
-------------------------------------
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. WE DO NOT AUTHORIZE ANYONE TO PROVIDE
ANY INFORMATION OR REPRESENTATIONS REGARDING THE OFFERING DESCRIBED IN THIS
PROSPECTUS OTHER THAN AS CONTAINED IN THIS PROSPECTUS.
76 PROSPECTUS
APPENDIX A
CONTRACT COMPARISON CHART
--------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------
Feature Classic Plus Elite
----------------------------------------------------------------------------------------------------------------------------
up to 5% depending on
issue age and amount of
Credit Enhancement None purchase payments None
----------------------------------------------------------------------------------------------------------------------------
Mortality and Expense
Risk Charge
(Base Contract) 1.25% 1.45% 1.60%
----------------------------------------------------------------------------------------------------------------------------
Withdrawal Charge 8.5/ 8.5/ 8.5/ 7.5/
(% of purchase payment) 7/ 7/ 6/ 5/ 4/ 3/ 2 6.5/ 5.5/ 4/2.5 7/ 6/ 5
----------------------------------------------------------------------------------------------------------------------------
Withdrawal Charge Confinement, Terminal Illness, Confinement, Terminal Confinement, Terminal
Waivers Unemployment Illness, Unemployment Illness, Unemployment
------------------------------------------------------------------------------------
Feature Classic Select
------------------------------------------------------------------------------------
Credit Enhancement None None
------------------------------------------------------------------------------------
Mortality and Expense
Risk Charge
(Base Contract) 1.25% 1.70%
------------------------------------------------------------------------------------
Withdrawal Charge
(% of purchase payment) 7/ 7/ 6/ 5/ 4/ 3/ 2 None
------------------------------------------------------------------------------------
Withdrawal Charge Confinement, Terminal Illness,
Waivers Unemployment N/A
The Fixed Account Options available depend on the type of Contract you have
purchased and the state in which your Contract was issued. The following tables
summarize the availability of the Fixed Account Options in general. Please
check with your representative for specific details for your state.
DCA Fixed Account Option*
---------------------------------------------------
Classic Plus Elite Select
---------------------------------------------------
6-month 6-month 6-month N/A
Transfer Periods ---------------------------------
12-month 12-month 12-month N/A
Standard Fixed Account Option (not available in all states)**
-----------------------------------------------------------------------------------------------
Classic Plus Elite Select
-----------------------------------------------------------------------------------------------
1-year N/A N/A N/A
--------------------------------------------------------
N/A N/A N/A N/A
Guarantee Periods --------------------------------------------------------
N/A N/A N/A N/A
--------------------------------------------------------
N/A N/A N/A N/A
MVA Fixed Account Option (not available in all states)***
-----------------------------------------------------------------------------------------------------
Classic Plus Elite Select
-----------------------------------------------------------------------------------------------------
1-year 1-year 1-year 1-year
--------------------------------------------------------------
3-year 3-year 3-year 3-year
--------------------------------------------------------------
Guarantee Periods 5-year 5-year 5-year 5-year
--------------------------------------------------------------
7-year 7-year 7-year 7-year
--------------------------------------------------------------
10-year 10-year 10-year 10-year
* At the time you allocate a purchase payment to the DCA Fixed Account Option,
if you do not specify the term length over which the transfers are to take
place, the default transfer period will be 6 months for the 6-month option and
12 months for the 12 month option.
** May be available only in states where the MVA Fixed Account Option is not
offered.
*** Not available in states where the Standard Fixed Account Options are
offered.
77 PROSPECTUS
APPENDIX B - MARKET VALUE ADJUSTMENT
--------------------------------------------------------------------------------
The Market Value Adjustment is based on the following:
I = the Treasury Rate for a maturity equal to the term length of the
Guarantee Period for the week preceding the establishment of the Market
Value Adjusted Fixed Guarantee Period Account;
J = the Treasury Rate for a maturity equal to the term length of the Market
Value Adjusted Fixed Guarantee Period Account for the week preceding
the date amounts are transferred or withdrawn from the Market Value
Adjusted Fixed Guarantee Period Account, the date we determine the
Death Proceeds, or the Payout Start Date, as the case may be ("Market
Value Adjustment Date").
N = the number of whole and partial years from the Market Value Adjustment
Date to the expiration of the term length of the Market Value Adjusted
Fixed Guarantee Period Account.
Treasury Rate means the U.S. Treasury Note Constant Maturity yield as reported
in Federal Reserve Board Statistical Release H.15. If such yields cease to be
available in Federal Reserve Board Statistical Release H.15, then we will use
an alternate source for such information in our discretion.
The Market Value Adjustment factor is determined from the following formula:
.9 X [I-(J + .0025)] X N
To determine the Market Value Adjustment, we will multiply the Market Value
Adjustment factor by the amount transferred, withdrawn, paid as Death Proceeds,
or applied to an Income Plan from a Market Value Adjusted Fixed Guarantee
Period Account at any time other than during the 30 day period after such
Guarantee Period Account expires. NOTE: These examples assume that premium
taxes are not applicable.
EXAMPLES OF MARKET VALUE ADJUSTMENT
Purchase Payment: $10,000 allocated to a Market Value Adjusted
Fixed Guarantee Period Account
Guarantee Period: 5 years
Interest Rate: 4.50%
Full Withdrawal: End of Contract Year 3
Contract: Consultant Solutions Classic*
EXAMPLE 1: (ASSUMES DECLINING INTEREST RATES)
Step 1: Calculate Contract Value at = $10,000.00 X (1.045)/3/ =
End of Contract Year 3: $11,411.66
Step 2: Calculate the Free Withdrawal = .15 X $10,000 = $1,500
Amount:
Step 3: Calculate the Withdrawal = .06 X ($10,000 - $1,500) = $510
Charge:
Step 4: Calculate the Market Value I = 4.50%
Adjustment:
J = 4.20%
730 DAYS
N = _________ = 2
365 DAYS
Market Value Adjustment Factor: .9 X
[I - (J + .0025)] X N
= .9 X [.045 - (.042 + .0025)] X 2
= .0009
Market Value Adjustment = Market
Value Adjustment Factor X Amount
Subject To Market Value Adjustment:
= .0009 X $11,411.66 = $10.27
Step 5: Calculate the amount received = $11,411.66 - $510 + $10.27 =
by Contract owner as a result of $10,911.93
full withdrawal at the end of
Contract Year 3:
78 PROSPECTUS
EXAMPLE 2: (ASSUMES RISING INTEREST RATES)
Step 1: Calculate Contract Value at = $10,000.00 X (1.045)/3/ =
End of Contract Year 3: $11,411.66
Step 2: Calculate the Free Withdrawal = .15 X $10,000 = $1,500
Amount:
Step 3: Calculate the Withdrawal = .06 X ($10,000 - $1,500) = $510
Charge:
Step 4: Calculate the Market Value I = 4.50%
Adjustment:
J = 4.80%
730 DAYS
N = _________ = 2
365 DAYS
Market Value Adjustment Factor: .9 X
[I - (J + .0025)] X N
= .9 X [(.045 - (.048 + .0025)] X
(2) = -.0099
Market Value Adjustment = Market
Value Adjustment Factor X Amount
Subject To Market Value Adjustment:
= -.0099 X $11,411.66 = -($112.98)
Step 5: Calculate the amount received = $11,411.66 - $510 - $112.98 =
by Contract owner as a result of $10,788.68
full withdrawal at the end of
Contract Year 3:
* These examples assume the election of the CONSULTANT SOLUTIONS CLASSIC
CONTRACT for the purpose of illustrating the Market Value Adjustment
calculation. The amounts would be different under CONSULTANT SOLUTIONS PLUS,
CONSULTANT SOLUTIONS ELITE CONTRACTS, and CONSULTANT SOLUTIONS SELECT
CONTRACTS which have different expenses and withdrawal charges.
79 PROSPECTUS
APPENDIX C
EXAMPLE OF CALCULATION OF INCOME PROTECTION BENEFIT
--------------------------------------------------------------------------------
Appendix C illustrates how we calculate the amount guaranteed under the Income
Protection Benefit Option. Please remember that you are looking at an example
only. Please also remember that the Income Protection Benefit Option may only
be added to Income Plans 1 and/or 2, and only to those Income Plans for which
you have selected variable income payments.
To illustrate the calculation of the amount guaranteed under the Income
Protection Benefit Option, we assume the following:
Adjusted age of Annuitant on the Payout Start Date: 65
-----------------------------------------------------------------
Sex of Annuitant: male
-----------------------------------------------------------------
Income Plan selected: 1
-----------------------------------------------------------------
Payment frequency: monthly
-----------------------------------------------------------------
Amount applied to variable income payments under the
Income Plan: $100,000.00
-----------------------------------------------------------------
The example assumes that the withdrawal charge period has expired for all
purchase payments. In accordance with the terms of the Contract, the following
additional assumptions apply:
Assumed investment rate: 3%
--------------------------------------------------------------------------------------------
Guaranteed minimum variable income payment: 85% of the initial variable amount income value
--------------------------------------------------------------------------------------------
STEP 1 - CALCULATION OF THE INITIAL VARIABLE AMOUNT INCOME VALUE:
Using the assumptions stated above, the initial monthly income payment is $5.49
per $1,000 applied to variable income payments under Income Plan 1. Therefore,
the initial variable amount income value = $100,000 X $5.49/1000 = $549.00.
STEP 2 - CALCULATION OF THE AMOUNT GUARANTEED UNDER THE INCOME PROTECTION
BENEFIT OPTION:
guaranteed minimum variable income payment = 85% X initial variable amount
income value = 85% X $549.00 = $466.65.
STEP 3 - ILLUSTRATION OF THE EFFECT OF THE MINIMUM PAYMENT GUARANTEE UNDER THE
INCOME PROTECTION BENEFIT OPTION:
If in any month your variable income payments would fall below the amount
guaranteed under the Income Protection Benefit Option, your payment for that
month will equal the guaranteed minimum variable income payment. For example,
you would receive $466.65 even if the amount of your monthly income payment
would have been less than that as a result of declining investment experience.
On the other hand, if your monthly income payment is greater than the minimum
guaranteed $466.65, you would receive the greater amount.
80 PROSPECTUS
APPENDIX D
WITHDRAWAL ADJUSTMENT EXAMPLE - DEATH BENEFITS*
--------------------------------------------------------------------------------
Issue Date: January 1, 2005
Initial Purchase Payment: $50,000 (For CONSULTANT SOLUTIONS PLUS CONTRACTS,
assume a $2,000 Credit Enhancement would apply assuming issue age 85 or younger
(a $1,000 Credit Enhancement would apply assuming issue age 86-90)).
Death Benefit Amount
------------------------------------------------
Annual
ROP Value Increase Value**
----------------- -----------------
Classic, Classic,
Beginning Contract Elite Maximum Elite
Type of Contract Transaction Value After And Anniversary And
Date Occurrence Value Amount Occurrence Select Plus Value Select Plus
------------------------------------------------------------------------------------------------------------------
1/1/06 Contract Anniversary $ 55,000 _ $ 55,000 $ 50,000 $52,000 $ 55,000 $ 52,500 $54,600
------------------------------------------------------------------------------------------------------------------
7/1/06 Partial Withdrawal $ 60,000 $ 15,000 $ 45,000 $ 37,500 $39,000 $ 41,250 $ 40,339 $41,953
------------------------------------------------------------------------------------------------------------------
The following shows how we compute the adjusted death benefits in the example
above. Please note that the withdrawal reduces the Purchase Payment Value, the
Maximum Anniversary Value, and the Enhanced Beneficiary Value by the same
proportion as the withdrawal reduces the Contract Value.
Classic, Elite and Select
----------------------------------------------------------------------------------------------------------------------------------
ROP DEATH BENEFIT
----------------------------------------------------------------------------------------------------------------------------------
Partial Withdrawal Amount (a) $15,000
----------------------------------------------------------------------------------------------------------------------------------
Contract Value Immediately Prior to Partial Withdrawal (b) $60,000
----------------------------------------------------------------------------------------------------------------------------------
Value of Death Benefit Amount Immediately Prior to Partial Withdrawal (c) $50,000
----------------------------------------------------------------------------------------------------------------------------------
Withdrawal Adjustment [(a)/(b)]*(c) $12,500
----------------------------------------------------------------------------------------------------------------------------------
Adjusted Death Benefit $37,500
----------------------------------------------------------------------------------------------------------------------------------
MAV DEATH BENEFIT
----------------------------------------------------------------------------------------------------------------------------------
Partial Withdrawal Amount (a) $15,000
----------------------------------------------------------------------------------------------------------------------------------
Contract Value Immediately Prior to Partial Withdrawal (b) $60,000
----------------------------------------------------------------------------------------------------------------------------------
Value of Death Benefit Amount Immediately Prior to Partial Withdrawal (c) $55,000
----------------------------------------------------------------------------------------------------------------------------------
Withdrawal Adjustment [(a)/(b)]*(c) $13,750
----------------------------------------------------------------------------------------------------------------------------------
Adjusted Death Benefit $41,250
----------------------------------------------------------------------------------------------------------------------------------
ANNUAL INCREASE DEATH BENEFIT**
----------------------------------------------------------------------------------------------------------------------------------
Partial Withdrawal Amount (a) $15,000
----------------------------------------------------------------------------------------------------------------------------------
Contract Value Immediately Prior to Partial Withdrawal (b) $60,000
----------------------------------------------------------------------------------------------------------------------------------
Value of Death Benefit Amount Immediately Prior to Partial Withdrawal (assumes 181 days
worth of interest on $52,500 and $54,600, respectively) (c) $53,786
----------------------------------------------------------------------------------------------------------------------------------
Withdrawal Adjustment [(a)/(b)]*(c) $13,446
----------------------------------------------------------------------------------------------------------------------------------
Adjusted Death Benefit $40,339
----------------------------------------------------------------------------------------------------------------------------------
Plus
------------------------------------------------------------------------------------------------
ROP DEATH BENEFIT
------------------------------------------------------------------------------------------------
Partial Withdrawal Amount $15,000
------------------------------------------------------------------------------------------------
Contract Value Immediately Prior to Partial Withdrawal $60,000
------------------------------------------------------------------------------------------------
Value of Death Benefit Amount Immediately Prior to Partial Withdrawal $52,000
------------------------------------------------------------------------------------------------
Withdrawal Adjustment $13,000
------------------------------------------------------------------------------------------------
Adjusted Death Benefit $39,000
------------------------------------------------------------------------------------------------
MAV DEATH BENEFIT
------------------------------------------------------------------------------------------------
Partial Withdrawal Amount $15,000
------------------------------------------------------------------------------------------------
Contract Value Immediately Prior to Partial Withdrawal $60,000
------------------------------------------------------------------------------------------------
Value of Death Benefit Amount Immediately Prior to Partial Withdrawal $55,000
------------------------------------------------------------------------------------------------
Withdrawal Adjustment $13,750
------------------------------------------------------------------------------------------------
Adjusted Death Benefit $41,250
------------------------------------------------------------------------------------------------
ANNUAL INCREASE DEATH BENEFIT**
------------------------------------------------------------------------------------------------
Partial Withdrawal Amount $15,000
------------------------------------------------------------------------------------------------
Contract Value Immediately Prior to Partial Withdrawal $60,000
------------------------------------------------------------------------------------------------
Value of Death Benefit Amount Immediately Prior to Partial Withdrawal (assumes 181 days
worth of interest on $52,500 and $54,600, respectively) $55,937
------------------------------------------------------------------------------------------------
Withdrawal Adjustment $13,984
------------------------------------------------------------------------------------------------
Adjusted Death Benefit $41,953
------------------------------------------------------------------------------------------------
* For purpose of illustrating the withdrawal adjustment calculation, the
example assumes the same hypothetical Contract Values and Maximum Anniversary
Value for all Contracts, net of applicable fees and charges. Actual death
benefit amounts will differ due to the different fees and charges under each
Contract and the Credit Enhancement available under the CONSULTANT SOLUTIONS
PLUS CONTRACT. Please remember that you are looking at an example and that
your investment performance may be greater or lower than the figures shown.
**Calculations for the Annual Increase Death Benefit assume that interest
accumulates on a daily basis at a rate equivalent to 5% per year. There may
be certain states in which the Benefit provides for interest that accumulates
at a rate of 3% per year. If calculations assumed an interest rate of 3% per
year, the adjusted death benefit would be lower.
81 PROSPECTUS
APPENDIX E
CALCULATION OF ENHANCED EARNINGS DEATH BENEFIT*
--------------------------------------------------------------------------------
The following are examples of the Enhanced Earnings Death Benefit Option. For
illustrative purposes, the examples assume Earnings in each case. Please
remember that you are looking at examples and that your investment performance
may be greater or lower than the figures shown.
EXAMPLE 1: ELECTED WHEN CONTRACT WAS ISSUED WITHOUT ANY SUBSEQUENT ADDITIONS OR
WITHDRAWALS
In this example, assume that the oldest Contract Owner is age 55 on the Rider
Application Date and elects the Enhanced Earnings Death Benefit Option when the
Contract is issued. The Contract Owner makes an initial purchase payment of
$100,000. After four years, the Contract Owner dies. On the date Lincoln
Benefit receives a Complete Request for Settlement, the Contract Value is
$125,000. Prior to his death, the Contract Owner did not make any additional
purchase payments or take any withdrawals.
Excess of Earnings Withdrawals = $0
Purchase Payments in the 12 months prior to death = $0
In-Force Premium = $100,000
($100,000 + $0 - $0)
In-Force Earnings = $25,000
($125,000 - $100,000)
ENHANCED EARNINGS DEATH BENEFIT** = 40%*$25,000 = $10,000
Since In-Force Earnings are less than 100% of the In-Force Premium (excluding
purchase payments in the 12 months prior to death), the In-Force Earnings are
used to compute the Enhanced Earnings Death Benefit amount.
* For purposes of illustrating the calculation of Enhanced Earnings Death
Benefit Option, the example assumes the same hypothetical Contract Values for
all Contracts, net of applicable fees and charges. Actual death benefit
amounts will differ due to the different fees and charges under each Contract
and the Credit Enhancement available under the CONSULTANT SOLUTIONS PLUS
CONTRACT.
**If the oldest Contract Owner or Co-Annuitant had been over age 70, and both
were age 79 or younger on the Rider Application Date, the Enhanced Earnings
Death Benefit would be 25% of the In-Force Earnings ($6,250.00).
EXAMPLE 2: ELECTED WHEN CONTRACT WAS ISSUED WITH SUBSEQUENT WITHDRAWALS
In this example, assume the same facts as above, except that the Contract Owner
has taken a withdrawal of $10,000 during the second year of the Contract.
Immediately prior to the withdrawal, the Contract Value is $105,000. Here,
$5,000 of the withdrawal is in excess of the In-Force Earnings at the time of
the withdrawal. The Contract Value on the date Lincoln Benefit receives a
Complete Request for Settlement will be assumed to be $114,000.
Excess of Earnings Withdrawals = $5,000
($10,000 - $5,000)
Purchase Payments in the 12 months prior to death = $0
In-Force Premium = $95,000
($100,000 + $0 - $5,000)
In-Force Earnings = $19,000
($114,000 - $95,000)
ENHANCED EARNINGS DEATH BENEFIT** = 40%*$19,000 = $7,600
Since In-Force Earnings are less than 100% of the In-Force Premium (excluding
purchase payments in the 12 months prior to death), the In-Force Earnings are
used to compute the Enhanced Earnings Death Benefit amount.
* For purposes of illustrating the calculation of Enhanced Earnings Death
Benefit Option, the example assumes the same hypothetical Contract Values for
all Contracts, net of applicable fees and charges. Actual death benefit
amounts will differ due to the different fees and charges under each Contract
and the Credit Enhancement available under the CONSULTANT SOLUTIONS PLUS
CONTRACT.
**If the oldest Contract Owner or Co-Annuitant had been over age 70, and both
were age 79 or younger on the Rider Application Date, the Enhanced Earnings
Death Benefit would be 25% of the In-Force Earnings ($4,750.00).
EXAMPLE 3: ELECTED AFTER CONTRACT WAS ISSUED WITH SUBSEQUENT ADDITIONS AND
WITHDRAWALS
This example is intended to illustrate the effect of adding the Enhanced
Earnings Death Benefit Option after the Contract has been issued and the effect
of later purchase payments. In this example, assume there is no Co-Annuitant
and that the oldest Contract Owner is age 72 on the Rider Application Date. At
the time the Contract is issued, the Contract Owner makes a purchase payment of
$100,000. After two years pass, the Contract Owner elects to add the Enhanced
Earnings Death Benefit Option. On the date this Rider is added, the Contract
Value is $110,000. Two years
82 PROSPECTUS
later, the Contract Owner withdraws $50,000. Immediately prior to the
withdrawal, the Contract Value is $130,000. Another two years later, the
Contract Owner makes an additional purchase payment of $40,000. Immediately
after the additional purchase payment, the Contract Value is $130,000. Two
years later, the Contract Owner dies with a Contract Value of $140,000 on the
date Lincoln Benefit receives a Complete Request for Settlement.
Excess of Earnings Withdrawals = $30,000
($50,000 - $20,000)
Purchase Payments in the 12 months prior to death = $0
In-Force Premium = $120,000
($110,000 + $40,000 - $30,000)
In-Force Earnings = $20,000
($140,000 - $120,000)
ENHANCED EARNINGS DEATH BENEFIT** = 25%*$20,000 = $5,000
In this example, In-Force Premium is equal to the Contract Value on Rider
Application Date plus the additional purchase payment and minus the
Excess-of-Earnings Withdrawal.
Since In-Force Earnings are less than 50% of the In-Force Premium (excluding
purchase payments in the 12 months prior to death), the In-Force Earnings are
used to compute the Enhanced Earnings Death Benefit amount.
* For purposes of illustrating the calculation of Enhanced Earnings Death
Benefit Option, the example assumes the same hypothetical Contract Values for
all Contracts, net of applicable fees and charges. Actual death benefit
amounts will differ due to the different fees and charges under each Contract
and the Credit Enhancement available under the CONSULTANT SOLUTIONS PLUS
CONTRACT.
**If the oldest Contract Owner had been age 70 or younger on the Rider
Application Date, the Enhanced Earnings Death Benefit would be 40% of the
In-Force Earnings ($8,000.00).
EXAMPLE 4: SPOUSAL CONTINUATION:
This example is intended to illustrate the effect of a surviving spouse
electing to continue the Contract upon the death of the Contract Owner on a
Contract with the Enhanced Earnings Death Benefit Option and MAV Death Benefit
Option. In this example, assume that there is no Co-Annuitant and that the
oldest Contract Owner is age 60 at the time the Contract is purchased (with the
Enhanced Earnings Death Benefit Option but without any other option) with a
$100,000 purchase payment. Five years later the Contract Owner dies and the
surviving spouse elects to continue the Contract. The Contract Value and
Maximum Anniversary Value at this time are $150,000 and $160,000, respectively.
Excess of Earnings Withdrawals = $0
Purchase Payments in the 12 months prior to death = $0
In-Force Premium = $100,000
($100,000 + $0 - $0)
In-Force Earnings = $50,000
($150,000 - $100,000)
ENHANCED EARNINGS DEATH BENEFIT** = 40%*$50,000 = $20,000
Contract Value = $150,000
Death Benefit = $160,000
Enhanced Earnings Death Benefit = $20,000
Continuing Contract Value = $180,000
($160,000 + $20,000)
Since In-Force Earnings are less than 100% of the In-Force Premium (excluding
purchase payments in the 12 months prior to death), the In-Force Earnings are
used to compute the Enhanced Earnings Death Benefit amount.
Assume the surviving spouse is age 72 when the Contract is continued. At this
time, the surviving spouse has the option to continue the Enhanced Earnings
Death Benefit Option at an additional mortality and expense risk charge of
0.40% and with an In-Force Premium amount equal to the Contract Value and the
Rider Date reset to the date the Contract is continued. If this selection is
made, the Enhanced Earnings Death Benefit will be equal to the lesser of 25% of
the In-Force Earnings and 50% of In-Force Premium. Otherwise, the surviving
spouse may elect to terminate the Enhanced Earnings Death Benefit Option at the
time of continuation.
* For purposes of illustrating the calculation of Enhanced Earnings Death
Benefit Option, the example assumes the same hypothetical Contract Values and
Maximum Anniversary Values for all Contracts, net of applicable fees and
charges. Actual death benefit amounts will differ due to the different fees
and charges under each Contract and the Credit Enhancement available under
the CONSULTANT SOLUTIONS PLUS CONTRACT.
**If the oldest Contract Owner had been over age 70 , and both were age 79 or
younger on the Rider Application Date, the Enhanced Earnings Death Benefit
would be 25% of the In-Force Earnings ($12,500.00).
83 PROSPECTUS
APPENDIX F
WITHDRAWAL ADJUSTMENT EXAMPLE - ACCUMULATION BENEFIT*
--------------------------------------------------------------------------------
Rider Date: January 1, 2007
Initial Purchase Payment: $50,000 (For CONSULTANT SOLUTIONS PLUS CONTRACTS,
assume a $2,000 Credit Enhancement would apply assuming issue age 85 or younger
(a $1,000 Credit Enhancement would apply assuming issue age 86-90))
Initial Benefit Base: $50,000 for CONSULTANT SOLUTIONS CLASSIC, ELITE AND
SELECT CONTRACTS, $52,000 for CONSULTANT SOLUTIONS PLUS CONTRACTS (assuming
issue age 85 or younger)
Benefit Base
-----------------------
Beginning Transaction Contract Value Classic, Elite
Date Type of Occurrence Contract Value Amount After Occurrence and Select Plus
------------------------------------------------------------------------------------------------------
1/1/2008 Contract Anniversary $ 55,000 _ $ 55,000 $ 50,000 $52,000
------------------------------------------------------------------------------------------------------
7/1/2008 Partial Withdrawal $ 60,000 $ 15,000 $ 45,000 $ 37,500 $39,000
------------------------------------------------------------------------------------------------------
The following shows how we compute the adjusted Benefit Bases in the example
above. Please note the withdrawal reduces the Benefit Base by the same
proportion as the withdrawal reduces the Contract Value.
Classic, Elite and Select Plus
---------------------------------------------------------------------------------------------------------------
BENEFIT BASE
---------------------------------------------------------------------------------------------------------------
Partial Withdrawal Amount (a) $15,000 $15,000
---------------------------------------------------------------------------------------------------------------
Contract Value Immediately Prior to Partial Withdrawal (b) $60,000 $60,000
---------------------------------------------------------------------------------------------------------------
Value of Benefit Base Immediately Prior to Partial Withdrawal (c) $50,000 $52,000
---------------------------------------------------------------------------------------------------------------
Withdrawal Adjustment [(a)/(b)]*(c) $12,500 $13,000
---------------------------------------------------------------------------------------------------------------
Adjusted Benefit Base $37,500 $39,000
---------------------------------------------------------------------------------------------------------------
* For the purpose of illustrating the withdrawal adjustment calculation, the
example assumes the same hypothetical Contract Values, net of applicable fees
and charges. Actual Contract Values will differ due to the different fees and
charges under each Contract and the Credit Enhancement available under
CONSULTANT SOLUTIONS PLUS CONTRACTS. Please remember that you are looking at
an example and that your investment performance may be greater or lower than
the figures shown.
84 PROSPECTUS
APPENDIX G - SUREINCOME WITHDRAWAL BENEFIT OPTION CALCULATION EXAMPLES
--------------------------------------------------------------------------------
Example 1: Assume you purchase a Consultant Solutions contract with a $100,000
initial purchase payment and add the SureIncome Option at issue.
Your Benefit Base is $100,000, which is your initial purchase payment of
$100,000.
Your Benefit Payment is $8,000, which is 8% of your initial purchase payment.
Your Benefit Payment Remaining for this Benefit Year is $8,000, which is equal
to your Benefit Payment at the beginning of this Benefit Year.
Example 2: Assume Example 1 is continued and an additional purchase payment of
$40,000 is made in the first Benefit Year.
The Benefit Base is increased to $140,000, which is your prior Benefit Base
($100,000) plus your additional purchase payment ($40,000).
The Benefit Payment is increased to $11,200, which is your prior Benefit
Payment ($8,000) plus 8% of your additional purchase payment ($40,000).
The Benefit Payment Remaining is increased to $11,200, which is your Benefit
Payment Remaining prior to your additional purchase payment ($8,000) plus 8% of
your additional purchase payment ($40,000).
Example 3: Assume Example 1 is continued and a withdrawal of $8,000 is made
during the first Benefit Year.
The Benefit Base is reduced to $92,000, which is your prior Benefit Base
($100,000) less your withdrawal ($8,000).
The Benefit Payment is unchanged and remains $8,000.
The Benefit Payment Remaining in the first Benefit Year is $0, which is your
Benefit Payment Remaining prior to your withdrawal ($8,000) less your
withdrawal ($8,000).
Example 4: Assume example 1 is continued and a withdrawal of $25,000 is made
during the first Benefit Year. Assume the Contract Value prior to the
withdrawal was $130,000. Because the $25,000 withdrawal is larger than the
Benefit Payment Remaining, the Benefit Base and Benefit Payment will be
recalculated according to applicable formulas.
The Benefit Base is reduced to $75,000, determined by the following
calculation: the lesser of ($130,000 - $25,000) and ($100,000 - $25,000) =
$75,000.
The Benefit Payment remains $8,000, determined by the following calculation:
the lesser of ($8,000) and (8% x ($130,000 - $25,000)) = $8,000.
There is no Benefit Payment Remaining because the withdrawal has reduced it to
$0.
Example 5: Assume example 3 is continued and an additional withdrawal of $5,000
is taken in the same year (the first Benefit Year). Assume the Contract Value
prior to the additional withdrawal was $60,000. Because the $5,000 withdrawal
is larger than the Benefit Payment Remaining ($0), the Benefit Base and Benefit
Payment will be recalculated according to applicable formulas.
The Benefit Base is reduced to $55,000, determined by the following
calculation: the lesser of ($60,000 - $5,000) and ($92,000 - $5,000) = $55,000.
The Benefit Payment is reduced to $4,400, determined by the following formula:
the lesser of ($8,000) and ((8% x ($60,000 - $5,000)) = $4,400.
The Benefit Payment Remaining is unchanged at $0.
Example 6: Assume example 5 is continued and an additional Purchase Payment of
$40,000 is made in the same year (the first Benefit Year).
The Benefit Base is increased to $95,000, which is your prior Benefit Base
($55,000) plus your additional purchase payment ($40,000).
The Benefit Payment is increased to $7,600, which is your prior Benefit Payment
($4,400) plus 8% of your additional purchase payment ($40,000).
85 PROSPECTUS
The Benefit Payment Remaining is increased to $3,200, which is your Benefit
Payment Remaining prior to your additional purchase payment ($0) plus 8% of
your additional purchase payment ($40,000).
Example 7: Assume example 6 is continued and an additional withdrawal of $3,200
is taken in the same year (the first Benefit Year).
The Benefit Base is reduced to $91,800, which is your prior Benefit Base
($95,000) less your withdrawal ($3,200).
The Benefit Payment is unchanged and remains $7,600.
The Benefit Payment Remaining is reduced to $0, which is your Benefit Payment
Remaining prior to your withdrawal ($3,200) less your withdrawal ($3,200).
86 PROSPECTUS
APPENDIX H - ACCUMULATION UNIT VALUES
--------------------------------------------------------------------------------
Appendix H presents the Accumulation Unit Values and number of Accumulation
Units outstanding for each Variable Sub-Account since the Variable Sub-Accounts
were first offered under the Contracts. This Appendix includes Accumulation
Unit Values representing the highest and lowest available combinations of
Contract charges that affect Accumulation Unit Values for each Contract. The
Statement of Additional Information, which is available upon request without
charge, contains the Accumulation Unit Values for all other available
combinations of Contract charges that affect Accumulation Unit values for each
Contract. Please contract us at 800-457-7617 to obtain a copy of the Statement
of Additional Information.
The LBL Consultant Solutions Classic, Elite, Plus and Select Contracts and all
of the Variable Sub-Accounts shown below were first offered under the Contracts
on February 2, 2004, except for the Premier VIT OpCap Balanced Sub-Account
which was first offered under the Contracts on April 30, 2004; and the Janus
Aspen Perkins Small Company Value Portfolio - Service Shares Sub-Account and
Oppenheimer Small- & Mid-Cap Growth Fund/VA - Service Shares Sub-Account which
were first offered under the Contracts on May 1, 2005; and the Invesco V.I.
Core Equity - Series II Sub-Account which was first offered under the Contracts
on May 1, 2006; and the Legg Mason ClearBridge Variable Fundamental All Cap
Value Portfolio - Class I Shares Sub-Account and Legg Mason ClearBridge
Variable Large Cap Value Portfolio - Class I Shares Sub-Account which were
first offered under the Contracts on April 27, 2007 and Janus Aspen Overseas
Portfolio - Service Share Sub-Account which was first offered under the
Contracts on April 30, 2008.
The name of the following Sub-Accounts changed since December 31, 2010. The
name shown in the tables of Accumulation Units correspond to the name of the
Sub-Accounts as of December 31, 2010.
SUB-ACCOUNT NAME AS OF DECEMBER 31,
2010 (AS APPEARS IN THE FOLLOWING
TABLES OF ACCUMULATION UNIT VALUES) SUB-ACCOUNT NAME AS OF MAY 1, 2011
-----------------------------------------------------------------------------
UIF Capital Growth, Class II
Sub-Account UIF Growth, Class II Sub-Account
Invesco Van Kampen V.I. Government, Invesco V.I. Government Securities,
Series II Sub-Account Series II Sub-Account
Oppenheimer Main Street Small Cap Oppenheimer Main Street Small- &
Fund(R)/VA - Service Shares Mid-Cap Fund(R)/VA - Service Shares
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION CLASSIC
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
LOW
MORTALITY & EXPENSE = 1.25
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
-------------------------------------------------------------------------------------------------
ALGER CAPITAL APPRECIATION PORTFOLIO--CLASS S
2004 $10.000 $10.219 23,051
2005 $10.219 $11.509 74,712
2006 $11.509 $13.506 132,966
2007 $13.506 $17.746 141,537
2008 $17.746 $9.582 106,723
2009 $9.582 $14.244 103,782
2010 $14.244 $15.967 81,615
-------------------------------------------------------------------------------------------------
ALGER LARGE CAP GROWTH PORTFOLIO--CLASS S
2004 $10.000 $10.103 121,781
2005 $10.103 $11.134 212,340
2006 $11.134 $11.523 222,959
2007 $11.523 $13.598 210,459
2008 $13.598 $7.204 237,432
2009 $7.204 $10.465 192,485
2010 $10.465 $11.656 149,608
87 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION CLASSIC
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
LOW
MORTALITY & EXPENSE = 1.25
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
---------------------------------------------------------------------------------------------------------
ALGER MID CAP GROWTH PORTFOLIO--CLASS S
2004 $10.000 $10.628 94,790
2005 $10.628 $11.485 210,380
2006 $11.485 $12.450 308,342
2007 $12.450 $16.122 291,878
2008 $16.122 $6.605 291,655
2009 $6.605 $9.859 287,119
2010 $9.859 $11.562 207,809
---------------------------------------------------------------------------------------------------------
FIDELITY VIP ASSET MANAGER PORTFOLIO--SERVICE CLASS 2
2004 $10.000 $10.217 56,932
2005 $10.217 $10.460 111,219
2006 $10.460 $11.056 134,814
2007 $11.056 $12.561 148,955
2008 $12.561 $8.809 146,295
2009 $8.809 $11.190 119,875
2010 $11.190 $12.580 112,596
---------------------------------------------------------------------------------------------------------
FIDELITY VIP CONTRAFUND PORTFOLIO--SERVICE CLASS 2
2004 $10.000 $11.389 105,161
2005 $11.389 $13.106 523,173
2006 $13.106 $14.408 891,858
2007 $14.408 $16.672 862,174
2008 $16.672 $9.425 782,708
2009 $9.425 $12.596 702,455
2010 $12.596 $14.529 608,058
---------------------------------------------------------------------------------------------------------
FIDELITY VIP EQUITY-INCOME PORTFOLIO--SERVICE CLASS 2
2004 $10.000 $10.840 248,175
2005 $10.840 $11.290 457,976
2006 $11.290 $13.358 699,045
2007 $13.358 $13.344 675,449
2008 $13.344 $7.528 651,012
2009 $7.528 $9.646 556,829
2010 $9.646 $10.935 507,555
---------------------------------------------------------------------------------------------------------
FIDELITY VIP GROWTH PORTFOLIO--SERVICE CLASS 2
2004 $10.000 $9.809 193,118
2005 $9.809 $10.209 307,319
2006 $10.209 $10.734 362,183
2007 $10.734 $13.411 341,543
2008 $13.411 $6.971 316,734
2009 $6.971 $8.800 268,644
2010 $8.800 $10.752 234,521
88 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION CLASSIC
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
LOW
MORTALITY & EXPENSE = 1.25
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
-----------------------------------------------------------------------------------------------------------------
FIDELITY VIP INDEX 500 PORTFOLIO--SERVICE CLASS 2
2004 $10.000 $10.668 306,038
2005 $10.668 $11.004 812,899
2006 $11.004 $12.532 1,175,182
2007 $12.532 $13.002 1,100,162
2008 $13.002 $8.060 1,084,831
2009 $8.060 $10.043 981,330
2010 $10.043 $11.366 794,035
-----------------------------------------------------------------------------------------------------------------
FIDELITY VIP INVESTMENT GRADE BOND PORTFOLIO--SERVICE CLASS 2
2004 $10.000 $10.215 172,370
2005 $10.215 $10.269 496,639
2006 $10.269 $10.549 806,750
2007 $10.549 $10.831 811,904
2008 $10.831 $10.315 588,837
2009 $10.315 $11.750 550,819
2010 $11.750 $12.466 526,200
-----------------------------------------------------------------------------------------------------------------
FIDELITY VIP MONEY MARKET PORTFOLIO--SERVICE CLASS 2
2004 $10.000 $9.965 319,746
2005 $9.965 $10.104 913,007
2006 $10.104 $10.429 1,383,659
2007 $10.429 $10.797 1,358,656
2008 $10.797 $10.946 1,573,766
2009 $10.946 $10.850 1,408,990
2010 $10.850 $10.711 1,056,049
-----------------------------------------------------------------------------------------------------------------
FIDELITY VIP OVERSEAS PORTFOLIO--SERVICE CLASS 2
2004 $10.000 $10.931 72,197
2005 $10.931 $12.810 311,381
2006 $12.810 $14.883 762,307
2007 $14.883 $17.185 776,150
2008 $17.185 $9.500 781,458
2009 $9.500 $11.829 694,356
2010 $11.829 $13.167 617,998
-----------------------------------------------------------------------------------------------------------------
INVESCO V.I. BASIC VALUE FUND--SERIES II
FORMERLY, AIM V.I. BASIC VALUE FUND--SERIES II
2004 $10.000 $10.745 132,216
2005 $10.745 $11.176 223,522
2006 $11.176 $12.452 287,925
2007 $12.452 $12.451 280,725
2008 $12.451 $5.907 303,579
2009 $5.907 $8.610 262,919
2010 $8.610 $9.083 213,414
89 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION CLASSIC
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
LOW
MORTALITY & EXPENSE = 1.25
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
-------------------------------------------------------------------------------------------------------------------
INVESCO V.I. CAPITAL APPRECIATION FUND--SERIES II
FORMERLY, AIM V.I. CAPITAL APPRECIATION FUND--SERIES II
2004 $10.000 $10.303 25,665
2005 $10.303 $11.036 50,990
2006 $11.036 $11.547 61,199
2007 $11.547 $12.727 56,382
2008 $12.727 $7.203 52,348
2009 $7.203 $8.578 42,532
2010 $8.578 $9.749 34,260
-------------------------------------------------------------------------------------------------------------------
INVESCO V.I. CORE EQUITY--SERIES II
FORMERLY, AIM V.I. CORE EQUITY FUND--SERIES II
2006 $10.000 $10.800 173,314
2007 $10.800 $11.493 185,437
2008 $11.493 $7.900 185,880
2009 $7.900 $9.974 159,397
2010 $9.974 $10.749 157,890
-------------------------------------------------------------------------------------------------------------------
INVESCO V.I. MID CAP CORE EQUITY FUND--SERIES II
FORMERLY, AIM V.I. MID CAP CORE EQUITY FUND--SERIES II
2004 $10.000 $10.989 110,892
2005 $10.989 $11.629 253,522
2006 $11.629 $12.732 405,969
2007 $12.732 $13.725 387,292
2008 $13.725 $9.656 323,756
2009 $9.656 $12.370 277,636
2010 $12.370 $13.885 245,585
-------------------------------------------------------------------------------------------------------------------
INVESCO VAN KAMPEN V.I. GOVERNMENT FUND--SERIES II
FORMERLY, VAN KAMPEN LIT GOVERNMENT PORTFOLIO, CLASS II
2004 $10.000 $10.187 63,788
2005 $10.187 $10.379 164,577
2006 $10.379 $10.558 182,914
2007 $10.558 $11.145 211,170
2008 $11.145 $11.161 357,895
2009 $11.161 $11.105 185,515
2010 $11.105 $11.491 165,810
-------------------------------------------------------------------------------------------------------------------
INVESCO VAN KAMPEN V.I. GROWTH AND INCOME FUND--SERIES II
FORMERLY, VAN KAMPEN LIT GROWTH AND INCOME PORTFOLIO, CLASS II
2004 $10.000 $11.083 135,175
2005 $11.083 $11.996 493,860
2006 $11.996 $13.725 824,335
2007 $13.725 $13.881 783,069
2008 $13.881 $9.283 680,370
2009 $9.283 $11.365 614,322
2010 $11.365 $12.579 526,375
90 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION CLASSIC
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
LOW
MORTALITY & EXPENSE = 1.25
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
---------------------------------------------------------------------------------------------------------------------
INVESCO VAN KAMPEN V.I. MID CAP GROWTH FUND--SERIES II
FORMERLY, VAN KAMPEN LIT MID CAP GROWTH PORTFOLIO, CLASS II
2004 $10.000 $11.112 25,709
2005 $11.112 $12.180 47,131
2006 $12.180 $12.608 54,285
2007 $12.608 $14.626 48,758
2008 $14.626 $7.671 44,989
2009 $7.671 $11.833 35,133
2010 $11.833 $14.857 45,521
---------------------------------------------------------------------------------------------------------------------
JANUS ASPEN OVERSEAS PORTFOLIO--SERVICE SHARES
2008 $10.000 $7.074 105,650
2009 $7.074 $12.496 123,025
2010 $12.496 $15.411 123,784
---------------------------------------------------------------------------------------------------------------------
JANUS ASPEN PERKINS MID CAP VALUE PORTFOLIO--SERVICE SHARES
2004 $10.000 $11.303 68,978
2005 $11.303 $12.266 356,713
2006 $12.266 $13.924 564,227
2007 $13.924 $14.720 539,843
2008 $14.720 $10.470 471,189
2009 $10.470 $13.729 408,012
2010 $13.729 $15.625 316,553
---------------------------------------------------------------------------------------------------------------------
JANUS ASPEN PERKINS SMALL COMPANY VALUE PORTFOLIO--SERVICE SHARES
2005 $10.000 $10.974 77,386
2006 $10.974 $13.193 178,295
2007 $13.193 $12.219 196,175
2008 $12.219 $7.724 180,098
2009 $7.724 $7.321 0
---------------------------------------------------------------------------------------------------------------------
JANUS ASPEN SERIES BALANCED PORTFOLIO--SERVICE SHARES
2004 $10.000 $10.625 54,585
2005 $10.625 $11.285 153,996
2006 $11.285 $12.292 242,446
2007 $12.292 $13.373 234,531
2008 $13.373 $11.074 193,608
2009 $11.074 $13.719 209,853
2010 $13.719 $14.633 179,215
---------------------------------------------------------------------------------------------------------------------
JANUS ASPEN SERIES FOREIGN STOCK PORTFOLIO--SERVICE SHARES
2004 $10.000 $11.317 32,940
2005 $11.317 $11.861 115,107
2006 $11.861 $13.814 165,929
2007 $13.814 $16.114 179,041
2008 $16.114 $15.166 0
91 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION CLASSIC
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
LOW
MORTALITY & EXPENSE = 1.25
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
----------------------------------------------------------------------------------------------------------------------
JANUS ASPEN SERIES FORTY PORTFOLIO--SERVICE SHARES
2004 $10.000 $11.491 14,808
2005 $11.491 $12.759 76,819
2006 $12.759 $13.735 168,017
2007 $13.735 $18.512 143,770
2008 $18.512 $10.170 144,900
2009 $10.170 $14.650 134,229
2010 $14.650 $15.388 118,575
----------------------------------------------------------------------------------------------------------------------
JANUS ASPEN SERIES INTECH RISK-MANAGED CORE PORTFOLIO--SERVICE
SHARES
2004 $10.000 $11.339 39,658
2005 $11.339 $12.407 125,616
2006 $12.407 $13.558 164,908
2007 $13.558 $14.194 134,550
2008 $14.194 $8.928 125,288
2009 $8.928 $10.793 103,124
2010 $10.793 $11.587 0
----------------------------------------------------------------------------------------------------------------------
LEGG MASON CLEARBRIDGE VARIABLE FUNDAMENTAL ALL CAP VALUE
PORTFOLIO--CLASS I SHARES
FORMERLY, LEGG MASON CLEARBRIDGE VARIABLE FUNDAMENTAL VALUE
PORTFOLIO--CLASS I
2007 $10.000 $9.509 48,073
2008 $9.509 $5.949 43,169
2009 $5.949 $7.592 39,260
2010 $7.592 $8.733 32,930
----------------------------------------------------------------------------------------------------------------------
LEGG MASON CLEARBRIDGE VARIABLE LARGE CAP VALUE PORTFOLIO--CLASS I
SHARES
FORMERLY, LEGG MASON CLEARBRIDGE VARIABLE INVESTORS PORTFOLIO--
CLASS I
2007 $10.000 $9.749 96,362
2008 $9.749 $6.191 93,685
2009 $6.191 $7.604 79,400
2010 $7.604 $8.211 60,894
----------------------------------------------------------------------------------------------------------------------
LEGG MASON WESTERN ASSET VARIABLE GLOBAL HIGH YIELD BOND
PORTFOLIO--CLASS II SHARES
2004 $10.000 $10.871 168,236
2005 $10.871 $11.105 465,661
2006 $11.105 $12.089 703,308
2007 $12.089 $11.885 698,823
2008 $11.885 $8.104 589,498
2009 $8.104 $12.379 454,032
2010 $12.379 $14.007 377,768
92 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION CLASSIC
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
LOW
MORTALITY & EXPENSE = 1.25
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
----------------------------------------------------------------------------------------------------
MFS HIGH INCOME SERIES--SERVICE CLASS
2004 $10.000 $10.652 105,366
2005 $10.652 $10.724 209,209
2006 $10.724 $11.637 238,258
2007 $11.637 $11.655 216,819
2008 $11.655 $8.202 178,367
2009 $8.202 $11.751 144,690
2010 $11.751 $13.261 136,106
----------------------------------------------------------------------------------------------------
MFS INVESTORS GROWTH STOCK SERIES--SERVICE CLASS
2004 $10.000 $10.471 19,040
2005 $10.471 $10.767 229,340
2006 $10.767 $11.398 467,604
2007 $11.398 $12.483 434,299
2008 $12.483 $7.760 408,811
2009 $7.760 $10.648 318,596
2010 $10.648 $11.781 265,360
----------------------------------------------------------------------------------------------------
MFS INVESTORS TRUST SERIES--SERVICE CLASS
2004 $10.000 $10.810 9,814
2005 $10.810 $11.413 32,676
2006 $11.413 $12.689 38,786
2007 $12.689 $13.772 40,966
2008 $13.772 $9.068 32,809
2009 $9.068 $11.322 33,920
2010 $11.322 $12.384 28,628
----------------------------------------------------------------------------------------------------
MFS NEW DISCOVERY SERIES--SERVICE CLASS
2004 $10.000 $9.945 40,927
2005 $9.945 $10.304 92,908
2006 $10.304 $11.480 113,307
2007 $11.480 $11.579 100,633
2008 $11.579 $6.908 87,061
2009 $6.908 $11.103 91,123
2010 $11.103 $14.890 131,452
----------------------------------------------------------------------------------------------------
MFS TOTAL RETURN SERIES--SERVICE CLASS
2004 $10.000 $10.783 128,035
2005 $10.783 $10.914 326,074
2006 $10.914 $12.019 375,040
2007 $12.019 $12.323 335,392
2008 $12.323 $9.443 283,876
2009 $9.443 $10.966 279,887
2010 $10.966 $11.860 248,952
93 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION CLASSIC
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
LOW
MORTALITY & EXPENSE = 1.25
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
---------------------------------------------------------------------------------------------------------------
MFS VALUE SERIES--SERVICE CLASS
2004 $10.000 $11.175 45,846
2005 $11.175 $11.737 129,930
2006 $11.737 $13.954 194,233
2007 $13.954 $14.810 188,327
2008 $14.810 $9.826 163,225
2009 $9.826 $11.869 120,920
2010 $11.869 $13.023 95,563
---------------------------------------------------------------------------------------------------------------
OPPENHEIMER GLOBAL SECURITIES FUND/VA--SERVICE SHARES
2004 $10.000 $11.390 123,098
2005 $11.390 $12.817 340,222
2006 $12.817 $14.840 463,678
2007 $14.840 $15.529 425,468
2008 $15.529 $9.141 339,967
2009 $9.141 $12.566 318,882
2010 $12.566 $14.343 214,515
---------------------------------------------------------------------------------------------------------------
OPPENHEIMER MAIN STREET SMALL CAP FUND/VA--SERVICE SHARES
2004 $10.000 $11.324 138,676
2005 $11.324 $12.256 457,975
2006 $12.256 $13.864 760,414
2007 $13.864 $13.485 690,006
2008 $13.485 $8.247 595,786
2009 $8.247 $11.137 488,782
2010 $11.137 $13.520 394,097
---------------------------------------------------------------------------------------------------------------
OPPENHEIMER SMALL- & MID-CAP GROWTH FUND/VA--SERVICE SHARES
FORMERLY, OPPENHEIMER MIDCAP FUND/VA--SERVICE SHARES
2005 $10.000 $11.723 26,917
2006 $11.723 $11.877 87,641
2007 $11.877 $12.423 90,045
2008 $12.423 $6.224 86,645
2009 $6.224 $8.121 82,002
2010 $8.121 $10.188 73,066
---------------------------------------------------------------------------------------------------------------
PIMCO VIT FOREIGN BOND PORTFOLIO (U.S. DOLLAR-HEDGED)--
ADMINISTRATIVE SHARES
2004 $10.000 $10.382 75,187
2005 $10.382 $10.769 276,055
2006 $10.769 $10.857 508,415
2007 $10.857 $11.099 482,258
2008 $11.099 $10.688 356,974
2009 $10.688 $12.192 328,033
2010 $12.192 $13.050 307,466
94 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION CLASSIC
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
LOW
MORTALITY & EXPENSE = 1.25
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
-----------------------------------------------------------------------------------------------------------
PIMCO VIT MONEY MARKET PORTFOLIO--ADMINISTRATIVE SHARES
2004 $10.000 $9.959 167,490
2005 $9.959 $10.096 325,748
2006 $10.096 $10.420 459,580
2007 $10.420 $10.781 401,905
2008 $10.781 $10.875 447,414
2009 $10.875 $10.740 560,031
2010 $10.740 $10.600 537,780
-----------------------------------------------------------------------------------------------------------
PIMCO VIT REAL RETURN PORTFOLIO--ADMINISTRATIVE SHARES
2004 $10.000 $10.596 206,384
2005 $10.596 $10.671 648,012
2006 $10.671 $10.602 937,569
2007 $10.602 $11.576 902,299
2008 $11.576 $10.615 928,688
2009 $10.615 $12.398 713,734
2010 $12.398 $13.223 615,212
-----------------------------------------------------------------------------------------------------------
PIMCO VIT TOTAL RETURN PORTFOLIO--ADMINISTRATIVE SHARES
2004 $10.000 $10.283 249,949
2005 $10.283 $10.392 653,328
2006 $10.392 $10.647 1,083,265
2007 $10.647 $11.424 1,062,806
2008 $11.424 $11.812 823,099
2009 $11.812 $13.293 875,022
2010 $13.293 $14.178 871,323
-----------------------------------------------------------------------------------------------------------
PREMIER VIT OPCAP BALANCED PORTFOLIO
2004 $10.000 $10.805 38,773
2005 $10.805 $10.951 61,072
2006 $10.951 $11.970 86,922
2007 $11.970 $11.284 76,705
2008 $11.284 $7.661 66,388
2009 $7.661 $7.391 0
-----------------------------------------------------------------------------------------------------------
PREMIER VIT OPCAP RENAISSANCE PORTFOLIO
2004 $10.000 $11.229 121,721
2005 $11.229 $10.576 203,935
2006 $10.576 $11.620 218,567
2007 $11.620 $12.187 170,119
2008 $12.187 $11.013 0
-----------------------------------------------------------------------------------------------------------
RYDEX SGI VT US LONG SHORT MOMENTUM
FORMERLY, RYDEX VT ALL-CAP OPPORTUNITY
2004 $10.000 $10.599 15,602
2005 $10.599 $11.890 56,294
2006 $11.890 $13.065 91,432
2007 $13.065 $15.819 78,479
2008 $15.819 $9.249 92,524
2009 $9.249 $11.614 80,586
2010 $11.614 $12.741 74,184
95 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION CLASSIC
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
LOW
MORTALITY & EXPENSE = 1.25
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
------------------------------------------------------------------------------------------------------
T. ROWE PRICE BLUE CHIP GROWTH PORTFOLIO--II
2004 $10.000 $10.490 74,071
2005 $10.490 $10.932 438,125
2006 $10.932 $11.791 846,349
2007 $11.791 $13.084 814,281
2008 $13.084 $7.402 830,392
2009 $7.402 $10.354 670,845
2010 $10.354 $11.848 550,687
------------------------------------------------------------------------------------------------------
T. ROWE PRICE EQUITY INCOME PORTFOLIO--II
2004 $10.000 $11.106 299,734
2005 $11.106 $11.361 948,390
2006 $11.361 $13.299 1,402,991
2007 $13.299 $13.516 1,333,577
2008 $13.516 $8.498 1,156,148
2009 $8.498 $10.500 989,299
2010 $10.500 $11.885 793,746
------------------------------------------------------------------------------------------------------
UIF CAPITAL GROWTH PORTFOLIO, CLASS II
2004 $10.000 $10.383 14,496
2005 $10.383 $11.829 58,864
2006 $11.829 $12.114 88,585
2007 $12.114 $14.539 86,678
2008 $14.539 $7.265 87,977
2009 $7.265 $11.835 73,057
2010 $11.835 $14.316 71,085
------------------------------------------------------------------------------------------------------
UIF U.S. REAL ESTATE PORTFOLIO, CLASS II
2004 $10.000 $12.853 241,544
2005 $12.853 $14.804 448,864
2006 $14.804 $20.106 695,926
2007 $20.106 $16.407 515,759
2008 $16.407 $10.026 445,861
2009 $10.026 $12.709 374,792
2010 $12.709 $16.239 303,954
------------------------------------------------------------------------------------------------------
VAN ECK VIP EMERGING MARKETS FUND--INITIAL CLASS
FORMERLY, VAN ECK WORLDWIDE EMERGING MARKETS FUND
2004 $10.000 $12.106 13,596
2005 $12.106 $15.764 76,101
2006 $15.764 $21.694 140,010
2007 $21.694 $29.449 151,951
2008 $29.449 $10.231 88,994
2009 $10.231 $21.517 153,256
2010 $21.517 $26.924 141,498
96 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION CLASSIC
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
LOW
MORTALITY & EXPENSE = 1.25
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
----------------------------------------------------------------------------------------------------------------------
VAN ECK VIP GLOBAL HARD ASSETS FUND--INITIAL CLASS
FORMERLY, VAN ECK WORLDWIDE HARD ASSETS FUND
2004 $10.000 $12.455 25,156
2005 $12.455 $18.637 98,493
2006 $18.637 $22.889 151,158
2007 $22.889 $32.819 197,678
2008 $32.819 $17.442 80,392
2009 $17.442 $27.106 126,577
2010 $27.106 $34.558 69,632
----------------------------------------------------------------------------------------------------------------------
VAN ECK VIP MULTI-MANAGER ALTERNATIVE--INITIAL CLASS
FORMERLY, VAN ECK WORLDWIDE MULTI-MANAGER ALTERNATIVES FUND-CLS I
2004 $10.000 $9.917 33,863
2005 $9.917 $9.804 58,131
2006 $9.804 $10.509 63,097
2007 $10.509 $10.787 68,791
2008 $10.787 $9.247 106,076
2009 $9.247 $10.387 101,362
2010 $10.387 $10.757 99,575
* The Accumulation Unit Values in this table reflect a mortality and expense
risk charge of 1.25% and an administrative expense charge of 0.10%.
97 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION CLASSIC
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
HIGH
MORTALITY & EXPENSE = 2.15
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
---------------------------------------------------------------------------------------------------------
ALGER CAPITAL APPRECIATION PORTFOLIO--CLASS S
2004 $10.000 $10.134 0
2005 $10.134 $11.309 0
2006 $11.309 $13.152 0
2007 $13.152 $17.121 0
2008 $17.121 $9.160 0
2009 $9.160 $13.493 0
2010 $13.493 $14.987 0
---------------------------------------------------------------------------------------------------------
ALGER LARGE CAP GROWTH PORTFOLIO--CLASS S
2004 $10.000 $10.019 0
2005 $10.019 $10.942 0
2006 $10.942 $11.220 0
2007 $11.220 $13.120 0
2008 $13.120 $6.887 0
2009 $6.887 $9.913 0
2010 $9.913 $10.941 0
---------------------------------------------------------------------------------------------------------
ALGER MID CAP GROWTH PORTFOLIO--CLASS S
2004 $10.000 $10.539 0
2005 $10.539 $11.286 0
2006 $11.286 $12.123 0
2007 $12.123 $15.555 0
2008 $15.555 $6.314 18,946
2009 $6.314 $9.339 18,946
2010 $9.339 $10.853 0
---------------------------------------------------------------------------------------------------------
FIDELITY VIP ASSET MANAGER PORTFOLIO--SERVICE CLASS 2
2004 $10.000 $10.132 0
2005 $10.132 $10.279 0
2006 $10.279 $10.765 0
2007 $10.765 $12.119 0
2008 $12.119 $8.421 109
2009 $8.421 $10.600 109
2010 $10.600 $11.808 108
---------------------------------------------------------------------------------------------------------
FIDELITY VIP CONTRAFUND PORTFOLIO--SERVICE CLASS 2
2004 $10.000 $11.295 0
2005 $11.295 $12.880 303
2006 $12.880 $14.030 292
2007 $14.030 $16.085 280
2008 $16.085 $9.010 1,763
2009 $9.010 $11.932 1,704
2010 $11.932 $13.638 1,549
---------------------------------------------------------------------------------------------------------
FIDELITY VIP EQUITY-INCOME PORTFOLIO--SERVICE CLASS 2
2004 $10.000 $10.750 0
2005 $10.750 $11.095 0
2006 $11.095 $13.007 0
2007 $13.007 $12.875 0
2008 $12.875 $7.197 8,417
2009 $7.197 $9.137 8,329
2010 $9.137 $10.264 7,490
98 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION CLASSIC
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
HIGH
MORTALITY & EXPENSE = 2.15
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
-----------------------------------------------------------------------------------------------------------------
FIDELITY VIP GROWTH PORTFOLIO--SERVICE CLASS 2
2004 $10.000 $9.727 0
2005 $9.727 $10.032 0
2006 $10.032 $10.452 0
2007 $10.452 $12.939 0
2008 $12.939 $6.664 0
2009 $6.664 $8.336 0
2010 $8.336 $10.092 0
-----------------------------------------------------------------------------------------------------------------
FIDELITY VIP INDEX 500 PORTFOLIO--SERVICE CLASS 2
2004 $10.000 $10.579 0
2005 $10.579 $10.813 0
2006 $10.813 $12.202 0
2007 $12.202 $12.544 0
2008 $12.544 $7.705 1,127
2009 $7.705 $9.513 1,113
2010 $9.513 $10.669 1,102
-----------------------------------------------------------------------------------------------------------------
FIDELITY VIP INVESTMENT GRADE BOND PORTFOLIO--SERVICE CLASS 2
2004 $10.000 $10.130 0
2005 $10.130 $10.091 0
2006 $10.091 $10.272 0
2007 $10.272 $10.450 0
2008 $10.450 $9.861 2,057
2009 $9.861 $11.131 2,068
2010 $11.131 $11.702 1,842
-----------------------------------------------------------------------------------------------------------------
FIDELITY VIP MONEY MARKET PORTFOLIO--SERVICE CLASS 2
2004 $10.000 $9.882 0
2005 $9.882 $9.929 0
2006 $9.929 $10.155 0
2007 $10.155 $10.417 0
2008 $10.417 $10.465 3,763
2009 $10.465 $10.278 4,430
2010 $10.278 $10.054 4,467
-----------------------------------------------------------------------------------------------------------------
FIDELITY VIP OVERSEAS PORTFOLIO--SERVICE CLASS 2
2004 $10.000 $10.840 0
2005 $10.840 $12.588 0
2006 $12.588 $14.492 0
2007 $14.492 $16.580 0
2008 $16.580 $9.082 1,097
2009 $9.082 $11.205 1,129
2010 $11.205 $12.359 1,004
99 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION CLASSIC
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
HIGH
MORTALITY & EXPENSE = 2.15
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
------------------------------------------------------------------------------------------------------------
INVESCO V.I. BASIC VALUE FUND--SERIES II
FORMERLY, AIM V.I. BASIC VALUE FUND--SERIES II
2004 $10.000 $10.656 0
2005 $10.656 $10.982 0
2006 $10.982 $12.125 0
2007 $12.125 $12.013 0
2008 $12.013 $5.647 1,098
2009 $5.647 $8.155 1,086
2010 $8.155 $8.526 1,087
------------------------------------------------------------------------------------------------------------
INVESCO V.I. CAPITAL APPRECIATION FUND--SERIES II
FORMERLY, AIM V.I. CAPITAL APPRECIATION FUND--SERIES II
2004 $10.000 $10.217 0
2005 $10.217 $10.845 0
2006 $10.845 $11.244 0
2007 $11.244 $12.279 0
2008 $12.279 $6.886 0
2009 $6.886 $8.126 0
2010 $8.126 $9.151 0
------------------------------------------------------------------------------------------------------------
INVESCO V.I. CORE EQUITY--SERIES II
FORMERLY, AIM V.I. CORE EQUITY FUND--SERIES II
2006 $10.000 $10.734 0
2007 $10.734 $11.317 0
2008 $11.317 $7.708 0
2009 $7.708 $9.643 0
2010 $9.643 $10.298 0
------------------------------------------------------------------------------------------------------------
INVESCO V.I. MID CAP CORE EQUITY FUND--SERIES II
FORMERLY, AIM V.I. MID CAP CORE EQUITY FUND--SERIES II
2004 $10.000 $10.897 0
2005 $10.897 $11.427 0
2006 $11.427 $12.398 0
2007 $12.398 $13.242 0
2008 $13.242 $9.231 1,270
2009 $9.231 $11.718 1,268
2010 $11.718 $13.032 1,264
------------------------------------------------------------------------------------------------------------
INVESCO VAN KAMPEN V.I. GOVERNMENT FUND--SERIES II
FORMERLY, VAN KAMPEN LIT GOVERNMENT PORTFOLIO, CLASS II
2004 $10.000 $10.103 0
2005 $10.103 $10.200 0
2006 $10.200 $10.281 0
2007 $10.281 $10.753 0
2008 $10.753 $10.670 267
2009 $10.670 $10.520 267
2010 $10.520 $10.786 267
100 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION CLASSIC
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
HIGH
MORTALITY & EXPENSE = 2.15
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
---------------------------------------------------------------------------------------------------------------------
INVESCO VAN KAMPEN V.I. GROWTH AND INCOME FUND--SERIES II
FORMERLY, VAN KAMPEN LIT GROWTH AND INCOME PORTFOLIO, CLASS II
2004 $10.000 $10.991 0
2005 $10.991 $11.789 0
2006 $11.789 $13.365 0
2007 $13.365 $13.392 0
2008 $13.392 $8.874 6,338
2009 $8.874 $10.766 6,552
2010 $10.766 $11.807 5,971
---------------------------------------------------------------------------------------------------------------------
INVESCO VAN KAMPEN V.I. MID CAP GROWTH FUND--SERIES II
FORMERLY, VAN KAMPEN LIT MID CAP GROWTH PORTFOLIO, CLASS II
2004 $10.000 $11.019 0
2005 $11.019 $11.969 0
2006 $11.969 $12.277 0
2007 $12.277 $14.111 0
2008 $14.111 $7.333 0
2009 $7.333 $11.209 0
2010 $11.209 $13.945 0
---------------------------------------------------------------------------------------------------------------------
JANUS ASPEN OVERSEAS PORTFOLIO--SERVICE SHARES
2008 $10.000 $6.762 0
2009 $6.762 $11.837 0
2010 $11.837 $14.465 0
---------------------------------------------------------------------------------------------------------------------
JANUS ASPEN PERKINS MID CAP VALUE PORTFOLIO--SERVICE SHARES
2004 $10.000 $11.209 0
2005 $11.209 $12.053 577
2006 $12.053 $13.558 565
2007 $13.558 $14.202 531
2008 $14.202 $10.009 547
2009 $10.009 $13.005 521
2010 $13.005 $14.666 506
---------------------------------------------------------------------------------------------------------------------
JANUS ASPEN PERKINS SMALL COMPANY VALUE PORTFOLIO--SERVICE SHARES
2005 $10.000 $10.906 0
2006 $10.906 $12.993 0
2007 $12.993 $11.923 0
2008 $11.923 $7.468 0
2009 $7.468 $7.057 0
---------------------------------------------------------------------------------------------------------------------
JANUS ASPEN SERIES BALANCED PORTFOLIO--SERVICE SHARES
2004 $10.000 $10.537 0
2005 $10.537 $11.089 0
2006 $11.089 $11.970 0
2007 $11.970 $12.902 0
2008 $12.902 $10.586 0
2009 $10.586 $12.996 0
2010 $12.996 $13.735 0
101 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION CLASSIC
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
HIGH
MORTALITY & EXPENSE = 2.15
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
-----------------------------------------------------------------------------------------------------------------------
JANUS ASPEN SERIES FOREIGN STOCK PORTFOLIO--SERVICE SHARES
2004 $10.000 $11.223 0
2005 $11.223 $11.655 0
2006 $11.655 $13.452 0
2007 $13.452 $15.547 0
2008 $15.547 $14.589 0
-----------------------------------------------------------------------------------------------------------------------
JANUS ASPEN SERIES FORTY PORTFOLIO--SERVICE SHARES
2004 $10.000 $11.395 0
2005 $11.395 $12.539 0
2006 $12.539 $13.375 0
2007 $13.375 $17.861 0
2008 $17.861 $9.723 0
2009 $9.723 $13.877 0
2010 $13.877 $14.444 0
-----------------------------------------------------------------------------------------------------------------------
JANUS ASPEN SERIES INTECH RISK-MANAGED CORE PORTFOLIO--SERVICE
SHARES
2004 $10.000 $11.245 0
2005 $11.245 $12.192 0
2006 $12.192 $13.202 0
2007 $13.202 $13.695 0
2008 $13.695 $8.535 0
2009 $8.535 $10.224 0
2010 $10.224 $10.943 0
-----------------------------------------------------------------------------------------------------------------------
LEGG MASON CLEARBRIDGE VARIABLE FUNDAMENTAL ALL CAP VALUE
PORTFOLIO--CLASS I SHARES
FORMERLY, LEGG MASON CLEARBRIDGE VARIABLE FUNDAMENTAL VALUE
PORTFOLIO--CLASS I
2007 $10.000 $9.450 0
2008 $9.450 $5.858 2,596
2009 $5.858 $7.407 2,582
2010 $7.407 $8.443 2,570
-----------------------------------------------------------------------------------------------------------------------
LEGG MASON CLEARBRIDGE VARIABLE LARGE CAP VALUE PORTFOLIO--CLASS I
SHARES
FORMERLY, LEGG MASON CLEARBRIDGE VARIABLE INVESTORS PORTFOLIO--
CLASS I
2007 $10.000 $9.688 0
2008 $9.688 $6.096 0
2009 $6.096 $7.419 0
2010 $7.419 $7.939 0
-----------------------------------------------------------------------------------------------------------------------
LEGG MASON WESTERN ASSET VARIABLE GLOBAL HIGH YIELD BOND PORTFOLIO--
CLASS II SHARES
2004 $10.000 $10.781 0
2005 $10.781 $10.912 322
2006 $10.912 $11.771 310
2007 $11.771 $11.467 298
2008 $11.467 $7.747 1,488
2009 $7.747 $11.727 1,421
2010 $11.727 $13.147 1,283
102 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION CLASSIC
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
HIGH
MORTALITY & EXPENSE = 2.15
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
----------------------------------------------------------------------------------------------------
MFS HIGH INCOME SERIES--SERVICE CLASS
2004 $10.000 $10.563 0
2005 $10.563 $10.538 0
2006 $10.538 $11.331 0
2007 $11.331 $11.245 0
2008 $11.245 $7.842 3,928
2009 $7.842 $11.132 3,672
2010 $11.132 $12.448 3,380
----------------------------------------------------------------------------------------------------
MFS INVESTORS GROWTH STOCK SERIES--SERVICE CLASS
2004 $10.000 $10.384 0
2005 $10.384 $10.580 0
2006 $10.580 $11.098 0
2007 $12.125 $12.013 0
2008 $12.013 $7.419 155
2009 $7.419 $10.087 132
2010 $10.087 $11.058 129
----------------------------------------------------------------------------------------------------
MFS INVESTORS TRUST SERIES--SERVICE CLASS
2004 $10.000 $10.720 0
2005 $10.720 $11.215 0
2006 $11.215 $12.355 0
2007 $11.098 $12.043 0
2008 $12.043 $8.669 923
2009 $8.669 $10.725 918
2010 $10.725 $11.624 914
----------------------------------------------------------------------------------------------------
MFS NEW DISCOVERY SERIES--SERVICE CLASS
2004 $10.000 $9.862 0
2005 $9.862 $10.126 0
2006 $10.126 $11.178 0
2007 $11.178 $11.171 0
2008 $11.171 $6.604 1,098
2009 $6.604 $10.518 1,092
2010 $10.518 $13.976 1,087
----------------------------------------------------------------------------------------------------
MFS TOTAL RETURN SERIES--SERVICE CLASS
2004 $10.000 $10.694 0
2005 $10.694 $10.725 326
2006 $10.725 $11.703 314
2007 $11.703 $11.889 301
2008 $11.889 $9.027 2,083
2009 $9.027 $10.388 2,077
2010 $10.388 $11.133 2,061
103 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION CLASSIC
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
HIGH
MORTALITY & EXPENSE = 2.15
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
---------------------------------------------------------------------------------------------------------------
MFS VALUE SERIES--SERVICE CLASS
2004 $10.000 $11.082 0
2005 $11.082 $11.534 0
2006 $11.534 $13.587 0
2007 $13.587 $14.288 0
2008 $14.288 $9.393 858
2009 $9.393 $11.244 854
2010 $11.244 $12.224 850
---------------------------------------------------------------------------------------------------------------
OPPENHEIMER GLOBAL SECURITIES FUND/VA--SERVICE SHARES
2004 $10.000 $11.296 0
2005 $11.296 $12.595 0
2006 $12.595 $14.450 0
2007 $14.450 $14.982 0
2008 $14.982 $8.738 18,728
2009 $8.738 $11.903 18,643
2010 $11.903 $13.463 1,017
---------------------------------------------------------------------------------------------------------------
OPPENHEIMER MAIN STREET SMALL CAP FUND/VA--SERVICE SHARES
2004 $10.000 $11.230 0
2005 $11.230 $12.044 0
2006 $12.044 $13.500 0
2007 $13.500 $13.011 0
2008 $13.011 $7.884 2,247
2009 $7.884 $10.549 2,138
2010 $10.549 $12.690 1,809
---------------------------------------------------------------------------------------------------------------
OPPENHEIMER SMALL- & MID-CAP GROWTH FUND/VA--SERVICE SHARES
FORMERLY, OPPENHEIMER MIDCAP FUND/VA--SERVICE SHARES
2005 $10.000 $11.651 0
2006 $11.651 $11.697 0
2007 $11.697 $12.123 0
2008 $12.123 $6.018 0
2009 $6.018 $7.780 0
2010 $7.780 $9.671 0
---------------------------------------------------------------------------------------------------------------
PIMCO VIT FOREIGN BOND PORTFOLIO (U.S. DOLLAR-HEDGED)--
ADMINISTRATIVE SHARES
2004 $10.000 $10.296 0
2005 $10.296 $10.583 511
2006 $10.583 $10.572 574
2007 $10.572 $10.708 546
2008 $10.708 $10.218 4,709
2009 $10.218 $11.549 4,792
2010 $11.549 $12.249 4,688
104 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION CLASSIC
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
HIGH
MORTALITY & EXPENSE = 2.15
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
-----------------------------------------------------------------------------------------------------------
PIMCO VIT MONEY MARKET PORTFOLIO--ADMINISTRATIVE SHARES
2004 $10.000 $9.876 0
2005 $9.876 $9.922 602
2006 $9.922 $10.147 635
2007 $10.147 $10.401 596
2008 $10.401 $10.396 3,790
2009 $10.396 $10.174 3,856
2010 $10.174 $9.950 3,891
-----------------------------------------------------------------------------------------------------------
PIMCO VIT REAL RETURN PORTFOLIO--ADMINISTRATIVE SHARES
2004 $10.000 $10.508 0
2005 $10.508 $10.487 495
2006 $10.487 $10.324 477
2007 $10.324 $11.168 458
2008 $11.168 $10.148 918
2009 $10.148 $11.745 923
2010 $11.745 $12.412 908
-----------------------------------------------------------------------------------------------------------
PIMCO VIT TOTAL RETURN PORTFOLIO--ADMINISTRATIVE SHARES
2004 $10.000 $10.197 0
2005 $10.197 $10.212 0
2006 $10.212 $10.368 0
2007 $10.368 $11.022 0
2008 $11.022 $11.293 6,237
2009 $11.293 $12.592 6,277
2010 $12.592 $13.308 5,926
-----------------------------------------------------------------------------------------------------------
PREMIER VIT OPCAP BALANCED PORTFOLIO
2004 $10.000 $10.739 0
2005 $10.739 $10.785 0
2006 $10.785 $11.682 0
2007 $11.682 $10.911 0
2008 $10.911 $7.340 0
2009 $7.340 $7.061 0
-----------------------------------------------------------------------------------------------------------
PREMIER VIT OPCAP RENAISSANCE PORTFOLIO
2004 $10.000 $11.136 0
2005 $11.136 $10.393 0
2006 $10.393 $11.315 0
2007 $11.315 $11.758 0
2008 $11.758 $10.620 0
-----------------------------------------------------------------------------------------------------------
RYDEX SGI VT US LONG SHORT MOMENTUM
FORMERLY, RYDEX VT ALL-CAP OPPORTUNITY
2004 $10.000 $10.511 0
2005 $10.511 $11.684 0
2006 $11.684 $12.722 0
2007 $12.722 $15.263 0
2008 $15.263 $8.841 804
2009 $8.841 $11.001 799
2010 $11.001 $11.959 796
105 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION CLASSIC
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
HIGH
MORTALITY & EXPENSE = 2.15
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
------------------------------------------------------------------------------------------------------
T. ROWE PRICE BLUE CHIP GROWTH PORTFOLIO--II
2004 $10.000 $10.403 0
2005 $10.403 $10.743 348
2006 $10.743 $11.481 335
2007 $11.481 $12.623 321
2008 $12.623 $7.076 2,407
2009 $7.076 $9.808 2,378
2010 $9.808 $11.121 2,128
------------------------------------------------------------------------------------------------------
T. ROWE PRICE EQUITY INCOME PORTFOLIO--II
2004 $10.000 $11.014 0
2005 $11.014 $11.165 764
2006 $11.165 $12.949 737
2007 $12.949 $13.040 706
2008 $13.040 $8.124 18,755
2009 $8.124 $9.946 18,736
2010 $9.946 $11.156 2,148
------------------------------------------------------------------------------------------------------
UIF CAPITAL GROWTH PORTFOLIO, CLASS II
2004 $10.000 $10.297 0
2005 $10.297 $11.624 0
2006 $11.624 $11.796 0
2007 $11.796 $14.027 0
2008 $14.027 $6.945 336
2009 $6.945 $11.211 331
2010 $11.211 $13.437 327
------------------------------------------------------------------------------------------------------
UIF U.S. REAL ESTATE PORTFOLIO, CLASS II
2004 $10.000 $12.746 0
2005 $12.746 $14.547 654
2006 $14.547 $19.578 582
2007 $19.578 $15.830 630
2008 $15.830 $9.584 29,447
2009 $9.584 $12.038 29,312
2010 $12.038 $15.242 4,699
------------------------------------------------------------------------------------------------------
VAN ECK VIP EMERGING MARKETS FUND--INITIAL CLASS
FORMERLY, VAN ECK WORLDWIDE EMERGING MARKETS FUND
2004 $10.000 $12.005 0
2005 $12.005 $15.491 135
2006 $15.491 $21.124 130
2007 $21.124 $28.413 124
2008 $28.413 $9.781 119
2009 $9.781 $20.382 119
2010 $20.382 $25.272 114
106 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION CLASSIC
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
HIGH
MORTALITY & EXPENSE = 2.15
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
----------------------------------------------------------------------------------------------------------------------
VAN ECK VIP GLOBAL HARD ASSETS FUND--INITIAL CLASS
FORMERLY, VAN ECK WORLDWIDE HARD ASSETS FUND
2004 $10.000 $12.352 0
2005 $12.352 $18.314 0
2006 $18.314 $22.288 0
2007 $22.288 $31.665 0
2008 $31.665 $16.674 818
2009 $16.674 $25.677 789
2010 $25.677 $32.438 756
----------------------------------------------------------------------------------------------------------------------
VAN ECK VIP MULTI-MANAGER ALTERNATIVE--INITIAL CLASS
FORMERLY, VAN ECK WORLDWIDE MULTI-MANAGER ALTERNATIVES FUND-CLS I
2004 $10.000 $9.835 0
2005 $9.835 $9.634 0
2006 $9.634 $10.233 0
2007 $10.233 $10.407 0
2008 $10.407 $8.840 1,179
2009 $8.840 $9.840 1,172
2010 $9.840 $10.097 1,167
* The Accumulation Unit Values in this table reflect a mortality and expense
risk charge of 2.15% and an administrative expense charge of 0.10%.
107 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION ELITE
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
LOW
MORTALITY & EXPENSE = 1.6
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
---------------------------------------------------------------------------------------------------------
ALGER CAPITAL APPRECIATION PORTFOLIO--CLASS S
2004 $10.000 $10.186 4,734
2005 $10.186 $11.431 5,217
2006 $11.431 $13.368 10,380
2007 $13.368 $17.501 11,158
2008 $17.501 $9.416 23,230
2009 $9.416 $13.948 13,955
2010 $13.948 $15.579 5,543
---------------------------------------------------------------------------------------------------------
ALGER LARGE CAP GROWTH PORTFOLIO--CLASS S
2004 $10.000 $10.070 3,205
2005 $10.070 $11.059 4,438
2006 $11.059 $11.405 4,747
2007 $11.405 $13.411 3,856
2008 $13.411 $7.079 4,663
2009 $7.079 $10.247 4,047
2010 $10.247 $11.373 2,041
---------------------------------------------------------------------------------------------------------
ALGER MID CAP GROWTH PORTFOLIO--CLASS S
2004 $10.000 $10.593 16,990
2005 $10.593 $11.407 22,184
2006 $11.407 $12.323 32,839
2007 $12.323 $15.900 22,247
2008 $15.900 $6.490 21,572
2009 $6.490 $9.654 11,236
2010 $9.654 $11.282 7,031
---------------------------------------------------------------------------------------------------------
FIDELITY VIP ASSET MANAGER PORTFOLIO--SERVICE CLASS 2
2004 $10.000 $10.184 6,127
2005 $10.184 $10.390 16,830
2006 $10.390 $10.942 20,152
2007 $10.942 $12.387 18,915
2008 $12.387 $8.657 20,457
2009 $8.657 $10.957 12,979
2010 $10.957 $12.275 7,846
---------------------------------------------------------------------------------------------------------
FIDELITY VIP CONTRAFUND PORTFOLIO--SERVICE CLASS 2
2004 $10.000 $11.353 13,482
2005 $11.353 $13.018 50,412
2006 $13.018 $14.260 98,161
2007 $14.260 $16.442 98,587
2008 $16.442 $9.262 69,273
2009 $9.262 $12.334 49,531
2010 $12.334 $14.177 23,726
---------------------------------------------------------------------------------------------------------
FIDELITY VIP EQUITY-INCOME PORTFOLIO--SERVICE CLASS 2
2004 $10.000 $10.805 16,904
2005 $10.805 $11.214 25,309
2006 $11.214 $13.221 52,728
2007 $13.221 $13.160 47,153
2008 $13.160 $7.398 28,570
2009 $7.398 $9.445 20,770
2010 $9.445 $10.670 8,880
108 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION ELITE
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
LOW
MORTALITY & EXPENSE = 1.6
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
-----------------------------------------------------------------------------------------------------------------
FIDELITY VIP GROWTH PORTFOLIO--SERVICE CLASS 2
2004 $10.000 $9.777 2,742
2005 $9.777 $10.140 6,853
2006 $10.140 $10.623 8,255
2007 $10.623 $13.226 7,221
2008 $13.226 $6.850 5,106
2009 $6.850 $8.617 3,946
2010 $8.617 $10.492 2,279
-----------------------------------------------------------------------------------------------------------------
FIDELITY VIP INDEX 500 PORTFOLIO--SERVICE CLASS 2
2004 $10.000 $10.634 7,868
2005 $10.634 $10.930 38,047
2006 $10.930 $12.403 65,217
2007 $12.403 $12.823 59,035
2008 $12.823 $7.921 48,787
2009 $7.921 $9.834 31,067
2010 $9.834 $11.091 25,140
-----------------------------------------------------------------------------------------------------------------
FIDELITY VIP INVESTMENT GRADE BOND PORTFOLIO--SERVICE CLASS 2
2004 $10.000 $10.182 21,758
2005 $10.182 $10.199 49,266
2006 $10.199 $10.441 73,225
2007 $10.441 $10.682 66,985
2008 $10.682 $10.137 32,315
2009 $10.137 $11.506 24,417
2010 $11.506 $12.164 23,917
-----------------------------------------------------------------------------------------------------------------
FIDELITY VIP MONEY MARKET PORTFOLIO--SERVICE CLASS 2
2004 $10.000 $9.933 58,803
2005 $9.933 $10.036 68,484
2006 $10.036 $10.322 161,389
2007 $10.322 $10.648 125,834
2008 $10.648 $10.757 157,527
2009 $10.757 $10.624 92,275
2010 $10.624 $10.451 95,672
-----------------------------------------------------------------------------------------------------------------
FIDELITY VIP OVERSEAS PORTFOLIO--SERVICE CLASS 2
2004 $10.000 $10.896 3,480
2005 $10.896 $12.723 16,347
2006 $12.723 $14.730 67,797
2007 $14.730 $16.948 84,726
2008 $16.948 $9.336 62,637
2009 $9.336 $11.583 48,389
2010 $11.583 $12.847 18,960
109 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION ELITE
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
LOW
MORTALITY & EXPENSE = 1.6
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
------------------------------------------------------------------------------------------------------------
INVESCO V.I. BASIC VALUE FUND--SERIES II
FORMERLY, AIM V.I. BASIC VALUE FUND--SERIES II
2004 $10.000 $10.710 14,119
2005 $10.710 $11.100 26,910
2006 $11.100 $12.324 26,039
2007 $12.324 $12.279 15,073
2008 $12.279 $5.805 4,867
2009 $5.805 $8.431 2,549
2010 $8.431 $8.863 1,587
------------------------------------------------------------------------------------------------------------
INVESCO V.I. CAPITAL APPRECIATION FUND--SERIES II
FORMERLY, AIM V.I. CAPITAL APPRECIATION FUND--SERIES II
2004 $10.000 $10.270 209
2005 $10.270 $10.962 648
2006 $10.962 $11.429 1,382
2007 $11.429 $12.551 1,120
2008 $12.551 $7.078 840
2009 $7.078 $8.400 647
2010 $8.400 $9.513 927
------------------------------------------------------------------------------------------------------------
INVESCO V.I. CORE EQUITY--SERIES II
FORMERLY, AIM V.I. CORE EQUITY FUND--SERIES II
2006 $10.000 $10.774 15,396
2007 $10.774 $11.424 18,197
2008 $11.424 $7.825 13,767
2009 $7.825 $9.844 15,508
2010 $9.844 $10.572 7,904
------------------------------------------------------------------------------------------------------------
INVESCO V.I. MID CAP CORE EQUITY FUND--SERIES II
FORMERLY, AIM V.I. MID CAP CORE EQUITY FUND--SERIES II
2004 $10.000 $10.953 3,434
2005 $10.953 $11.550 9,987
2006 $11.550 $12.601 25,207
2007 $12.601 $13.536 25,250
2008 $13.536 $9.489 10,026
2009 $9.489 $12.113 7,481
2010 $12.113 $13.548 7,476
------------------------------------------------------------------------------------------------------------
INVESCO VAN KAMPEN V.I. GOVERNMENT FUND--SERIES II
FORMERLY, VAN KAMPEN LIT GOVERNMENT PORTFOLIO, CLASS II
2004 $10.000 $10.155 1,515
2005 $10.155 $10.309 3,666
2006 $10.309 $10.449 6,825
2007 $10.449 $10.992 5,828
2008 $10.992 $10.968 4,131
2009 $10.968 $10.875 2,469
2010 $10.875 $11.212 1,400
110 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION ELITE
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
LOW
MORTALITY & EXPENSE = 1.6
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
---------------------------------------------------------------------------------------------------------------------
INVESCO VAN KAMPEN V.I. GROWTH AND INCOME FUND--SERIES II
FORMERLY, VAN KAMPEN LIT GROWTH AND INCOME PORTFOLIO, CLASS II
2004 $10.000 $11.047 8,999
2005 $11.047 $11.915 42,450
2006 $11.915 $13.585 65,009
2007 $13.585 $13.689 61,062
2008 $13.689 $9.122 42,540
2009 $9.122 $11.129 24,464
2010 $11.129 $12.273 12,069
---------------------------------------------------------------------------------------------------------------------
INVESCO VAN KAMPEN V.I. MID CAP GROWTH FUND--SERIES II
FORMERLY, VAN KAMPEN LIT MID CAP GROWTH PORTFOLIO, CLASS II
2004 $10.000 $11.076 625
2005 $11.076 $12.098 1,444
2006 $12.098 $12.478 1,436
2007 $12.478 $14.424 713
2008 $14.424 $7.538 715
2009 $7.538 $11.587 659
2010 $11.587 $14.496 750
---------------------------------------------------------------------------------------------------------------------
JANUS ASPEN OVERSEAS PORTFOLIO--SERVICE SHARES
2008 $10.000 $6.951 5,243
2009 $6.951 $12.236 3,147
2010 $12.236 $15.037 4,829
---------------------------------------------------------------------------------------------------------------------
JANUS ASPEN PERKINS MID CAP VALUE PORTFOLIO--SERVICE SHARES
2004 $10.000 $11.266 12,402
2005 $11.266 $12.183 48,976
2006 $12.183 $13.781 59,842
2007 $13.781 $14.517 53,518
2008 $14.517 $10.289 34,104
2009 $10.289 $13.444 24,911
2010 $13.444 $15.246 13,338
---------------------------------------------------------------------------------------------------------------------
JANUS ASPEN PERKINS SMALL COMPANY VALUE PORTFOLIO--SERVICE SHARES
2005 $10.000 $10.947 17,047
2006 $10.947 $13.116 20,417
2007 $13.116 $12.103 23,686
2008 $12.103 $7.624 18,835
2009 $7.624 $7.217 0
---------------------------------------------------------------------------------------------------------------------
JANUS ASPEN SERIES BALANCED PORTFOLIO--SERVICE SHARES
2004 $10.000 $10.591 20,549
2005 $10.591 $11.209 24,673
2006 $11.209 $12.166 20,866
2007 $12.166 $13.188 19,377
2008 $13.188 $10.882 23,268
2009 $10.882 $13.434 15,495
2010 $13.434 $14.278 12,291
111 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION ELITE
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
LOW
MORTALITY & EXPENSE = 1.6
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
-----------------------------------------------------------------------------------------------------------------------
JANUS ASPEN SERIES FOREIGN STOCK PORTFOLIO--SERVICE SHARES
2004 $10.000 $11.280 282
2005 $11.280 $11.781 1,583
2006 $11.781 $13.672 5,830
2007 $13.672 $15.892 7,627
2008 $15.892 $14.940 0
-----------------------------------------------------------------------------------------------------------------------
JANUS ASPEN SERIES FORTY PORTFOLIO--SERVICE SHARES
2004 $10.000 $11.454 16
2005 $11.454 $12.673 5,639
2006 $12.673 $13.594 14,144
2007 $13.594 $18.257 18,465
2008 $18.257 $9.994 10,342
2009 $9.994 $14.345 10,515
2010 $14.345 $15.015 3,195
-----------------------------------------------------------------------------------------------------------------------
JANUS ASPEN SERIES INTECH RISK-MANAGED CORE PORTFOLIO--SERVICE
SHARES
2004 $10.000 $11.302 9,724
2005 $11.302 $12.323 16,649
2006 $12.323 $13.419 21,808
2007 $13.419 $13.998 20,140
2008 $13.998 $8.773 14,493
2009 $8.773 $10.569 9,316
2010 $10.569 $11.333 0
-----------------------------------------------------------------------------------------------------------------------
LEGG MASON CLEARBRIDGE VARIABLE FUNDAMENTAL ALL CAP VALUE
PORTFOLIO--CLASS I SHARES
FORMERLY, LEGG MASON CLEARBRIDGE VARIABLE FUNDAMENTAL VALUE
PORTFOLIO--CLASS I
2007 $10.000 $9.486 4,256
2008 $9.486 $5.914 1,123
2009 $5.914 $7.520 1,578
2010 $7.520 $8.619 1,081
-----------------------------------------------------------------------------------------------------------------------
LEGG MASON CLEARBRIDGE VARIABLE LARGE CAP VALUE PORTFOLIO--CLASS I
SHARES
FORMERLY, LEGG MASON CLEARBRIDGE VARIABLE INVESTORS PORTFOLIO--
CLASS I
2007 $10.000 $9.725 16,715
2008 $9.725 $6.154 14,358
2009 $6.154 $7.532 11,945
2010 $7.532 $8.104 3,027
-----------------------------------------------------------------------------------------------------------------------
LEGG MASON WESTERN ASSET VARIABLE GLOBAL HIGH YIELD BOND PORTFOLIO--
CLASS II SHARES
2004 $10.000 $10.836 18,080
2005 $10.836 $11.030 43,334
2006 $11.030 $11.964 67,099
2007 $11.964 $11.721 64,359
2008 $11.721 $7.963 43,788
2009 $7.963 $12.122 22,070
2010 $12.122 $13.667 14,823
112 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION ELITE
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
LOW
MORTALITY & EXPENSE = 1.6
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
----------------------------------------------------------------------------------------------------
MFS HIGH INCOME SERIES--SERVICE CLASS
2004 $10.000 $10.617 5,239
2005 $10.617 $10.651 8,859
2006 $10.651 $11.517 9,006
2007 $11.517 $11.495 8,010
2008 $11.495 $8.061 5,959
2009 $8.061 $11.507 4,547
2010 $11.507 $12.940 3,042
----------------------------------------------------------------------------------------------------
MFS INVESTORS GROWTH STOCK SERIES--SERVICE CLASS
2004 $10.000 $10.437 0
2005 $10.437 $10.694 20,459
2006 $10.694 $11.281 40,226
2007 $11.281 $12.310 35,303
2008 $12.310 $7.626 25,945
2009 $7.626 $10.427 17,812
2010 $10.427 $11.495 5,120
----------------------------------------------------------------------------------------------------
MFS INVESTORS TRUST SERIES--SERVICE CLASS
2004 $10.000 $10.775 1,497
2005 $10.775 $11.336 2,187
2006 $11.336 $12.558 2,311
2007 $12.558 $13.582 2,327
2008 $13.582 $8.911 2,892
2009 $8.911 $11.086 3,394
2010 $11.086 $12.084 1,009
----------------------------------------------------------------------------------------------------
MFS NEW DISCOVERY SERIES--SERVICE CLASS
2004 $10.000 $9.912 0
2005 $9.912 $10.235 1,241
2006 $10.235 $11.362 2,619
2007 $11.362 $11.419 2,212
2008 $11.419 $6.789 512
2009 $6.789 $10.872 580
2010 $10.872 $14.529 2,245
----------------------------------------------------------------------------------------------------
MFS TOTAL RETURN SERIES--SERVICE CLASS
2004 $10.000 $10.748 24,820
2005 $10.748 $10.841 43,498
2006 $10.841 $11.896 48,499
2007 $11.896 $12.153 36,646
2008 $12.153 $9.279 30,804
2009 $9.279 $10.738 24,445
2010 $10.738 $11.573 4,986
113 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION ELITE
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
LOW
MORTALITY & EXPENSE = 1.6
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
---------------------------------------------------------------------------------------------------------------
MFS VALUE SERIES--SERVICE CLASS
2004 $10.000 $11.139 1,555
2005 $11.139 $11.658 7,507
2006 $11.658 $13.810 10,015
2007 $13.810 $14.605 11,214
2008 $14.605 $9.656 15,987
2009 $9.656 $11.623 5,318
2010 $11.623 $12.707 1,869
---------------------------------------------------------------------------------------------------------------
OPPENHEIMER GLOBAL SECURITIES FUND/VA--SERVICE SHARES
2004 $10.000 $11.354 12,335
2005 $11.354 $12.730 23,494
2006 $12.730 $14.688 32,798
2007 $14.688 $15.315 24,924
2008 $15.315 $8.982 23,059
2009 $8.982 $12.305 10,881
2010 $12.305 $13.995 9,555
---------------------------------------------------------------------------------------------------------------
OPPENHEIMER MAIN STREET SMALL CAP FUND/VA--SERVICE SHARES
2004 $10.000 $11.287 4,631
2005 $11.287 $12.174 27,646
2006 $12.174 $13.721 40,614
2007 $13.721 $13.299 39,454
2008 $13.299 $8.105 24,375
2009 $8.105 $10.905 13,961
2010 $10.905 $13.191 7,439
---------------------------------------------------------------------------------------------------------------
OPPENHEIMER SMALL- & MID-CAP GROWTH FUND/VA--SERVICE SHARES
FORMERLY, OPPENHEIMER MIDCAP FUND/VA--SERVICE SHARES
2005 $10.000 $11.695 2,405
2006 $11.695 $11.807 10,770
2007 $11.807 $12.306 10,772
2008 $12.306 $6.143 10,137
2009 $6.143 $7.987 8,923
2010 $7.987 $9.984 12,682
---------------------------------------------------------------------------------------------------------------
PIMCO VIT FOREIGN BOND PORTFOLIO (U.S. DOLLAR-HEDGED)--
ADMINISTRATIVE SHARES
2004 $10.000 $10.348 4,619
2005 $10.348 $10.696 28,950
2006 $10.696 $10.745 45,056
2007 $10.745 $10.946 43,735
2008 $10.946 $10.503 23,896
2009 $10.503 $11.939 12,188
2010 $11.939 $12.733 10,058
114 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION ELITE
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
LOW
MORTALITY & EXPENSE = 1.6
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
-----------------------------------------------------------------------------------------------------------
PIMCO VIT MONEY MARKET PORTFOLIO--ADMINISTRATIVE SHARES
2004 $10.000 $9.927 4,061
2005 $9.927 $10.028 17,626
2006 $10.028 $10.313 110,294
2007 $10.313 $10.632 72,629
2008 $10.632 $10.687 73,225
2009 $10.687 $10.517 32,253
2010 $10.517 $10.343 20,402
-----------------------------------------------------------------------------------------------------------
PIMCO VIT REAL RETURN PORTFOLIO--ADMINISTRATIVE SHARES
2004 $10.000 $10.562 24,840
2005 $10.562 $10.599 77,486
2006 $10.599 $10.493 72,477
2007 $10.493 $11.416 60,196
2008 $11.416 $10.432 34,791
2009 $10.432 $12.141 21,242
2010 $12.141 $12.902 14,123
-----------------------------------------------------------------------------------------------------------
PIMCO VIT TOTAL RETURN PORTFOLIO--ADMINISTRATIVE SHARES
2004 $10.000 $10.250 19,456
2005 $10.250 $10.322 47,858
2006 $10.322 $10.538 83,160
2007 $10.538 $11.266 81,848
2008 $11.266 $11.608 60,359
2009 $11.608 $13.017 40,000
2010 $13.017 $13.834 33,201
-----------------------------------------------------------------------------------------------------------
PREMIER VIT OPCAP BALANCED PORTFOLIO
2004 $10.000 $10.779 3,706
2005 $10.779 $10.887 5,953
2006 $10.887 $11.858 5,951
2007 $11.858 $11.138 5,481
2008 $11.138 $7.535 3,960
2009 $7.535 $7.261 0
-----------------------------------------------------------------------------------------------------------
PREMIER VIT OPCAP RENAISSANCE PORTFOLIO
2004 $10.000 $11.193 12,083
2005 $11.193 $10.505 19,478
2006 $10.505 $11.501 22,405
2007 $11.501 $12.019 16,051
2008 $12.019 $10.859 0
-----------------------------------------------------------------------------------------------------------
RYDEX SGI VT US LONG SHORT MOMENTUM
FORMERLY, RYDEX VT ALL-CAP OPPORTUNITY
2004 $10.000 $10.565 310
2005 $10.565 $11.810 295
2006 $11.810 $12.931 8,282
2007 $12.931 $15.601 6,921
2008 $15.601 $9.088 5,207
2009 $9.088 $11.372 5,103
2010 $11.372 $12.432 3,286
115 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION ELITE
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
LOW
MORTALITY & EXPENSE = 1.6
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
------------------------------------------------------------------------------------------------------
T. ROWE PRICE BLUE CHIP GROWTH PORTFOLIO--II
2004 $10.000 $10.456 6,385
2005 $10.456 $10.858 40,786
2006 $10.858 $11.670 75,772
2007 $11.670 $12.903 81,626
2008 $12.903 $7.274 62,701
2009 $7.274 $10.138 40,435
2010 $10.138 $11.561 17,197
------------------------------------------------------------------------------------------------------
T. ROWE PRICE EQUITY INCOME PORTFOLIO--II
2004 $10.000 $11.070 26,985
2005 $11.070 $11.285 92,669
2006 $11.285 $13.162 137,043
2007 $13.162 $13.329 129,012
2008 $13.329 $8.351 99,308
2009 $8.351 $10.281 73,212
2010 $10.281 $11.597 25,536
------------------------------------------------------------------------------------------------------
UIF CAPITAL GROWTH PORTFOLIO, CLASS II
2004 $10.000 $10.349 13,593
2005 $10.349 $11.749 18,729
2006 $11.749 $11.990 17,724
2007 $11.990 $14.338 6,708
2008 $14.338 $7.139 4,442
2009 $7.139 $11.589 2,932
2010 $11.589 $13.968 450
------------------------------------------------------------------------------------------------------
UIF U.S. REAL ESTATE PORTFOLIO, CLASS II
2004 $10.000 $12.811 8,873
2005 $12.811 $14.704 41,284
2006 $14.704 $19.900 69,224
2007 $19.900 $16.181 49,043
2008 $16.181 $9.852 38,054
2009 $9.852 $12.444 33,843
2010 $12.444 $15.845 19,381
------------------------------------------------------------------------------------------------------
VAN ECK VIP EMERGING MARKETS FUND--INITIAL CLASS
FORMERLY, VAN ECK WORLDWIDE EMERGING MARKETS FUND
2004 $10.000 $12.067 1,588
2005 $12.067 $15.658 12,064
2006 $15.658 $21.471 13,500
2007 $21.471 $29.043 16,859
2008 $29.043 $10.054 11,964
2009 $10.054 $21.070 11,191
2010 $21.070 $26.271 2,198
116 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION ELITE
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
LOW
MORTALITY & EXPENSE = 1.6
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
----------------------------------------------------------------------------------------------------------------------
VAN ECK VIP GLOBAL HARD ASSETS FUND--INITIAL CLASS
FORMERLY, VAN ECK WORLDWIDE HARD ASSETS FUND
2004 $10.000 $12.415 10,175
2005 $12.415 $18.511 27,980
2006 $18.511 $22.654 38,120
2007 $22.654 $32.366 35,969
2008 $32.366 $17.140 19,035
2009 $17.140 $26.543 17,279
2010 $26.543 $33.720 8,793
----------------------------------------------------------------------------------------------------------------------
VAN ECK VIP MULTI-MANAGER ALTERNATIVE--INITIAL CLASS
FORMERLY, VAN ECK WORLDWIDE MULTI-MANAGER ALTERNATIVES FUND-CLS I
2004 $10.000 $9.885 0
2005 $9.885 $9.738 1,220
2006 $9.738 $10.401 1,929
2007 $10.401 $10.638 1,607
2008 $10.638 $9.087 2,544
2009 $9.087 $10.171 2,363
2010 $10.171 $10.496 574
* The Accumulation Unit Values in this table reflect a mortality and expense
risk charge of 1.60% and an administrative expense charge of 0.10%.
117 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION ELITE
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
HIGH
MORTALITY & EXPENSE = 2.5
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
---------------------------------------------------------------------------------------------------------
ALGER CAPITAL APPRECIATION PORTFOLIO--CLASS S
2004 $10.000 $10.101 0
2005 $10.101 $11.232 0
2006 $11.232 $13.015 0
2007 $13.015 $16.883 0
2008 $16.883 $9.000 0
2009 $9.000 $13.210 0
2010 $13.210 $14.620 0
---------------------------------------------------------------------------------------------------------
ALGER LARGE CAP GROWTH PORTFOLIO--CLASS S
2004 $10.000 $9.986 0
2005 $9.986 $10.867 0
2006 $10.867 $11.104 0
2007 $11.104 $12.937 0
2008 $12.937 $6.767 0
2009 $6.767 $9.705 0
2010 $9.705 $10.673 0
---------------------------------------------------------------------------------------------------------
ALGER MID CAP GROWTH PORTFOLIO--CLASS S
2004 $10.000 $10.505 0
2005 $10.505 $11.209 0
2006 $11.209 $11.998 0
2007 $11.998 $15.338 0
2008 $15.338 $6.204 0
2009 $6.204 $9.143 0
2010 $9.143 $10.587 0
---------------------------------------------------------------------------------------------------------
FIDELITY VIP ASSET MANAGER PORTFOLIO--SERVICE CLASS 2
2004 $10.000 $10.099 0
2005 $10.099 $10.209 0
2006 $10.209 $10.654 0
2007 $10.654 $11.950 0
2008 $11.950 $8.274 0
2009 $8.274 $10.377 0
2010 $10.377 $11.519 0
---------------------------------------------------------------------------------------------------------
FIDELITY VIP CONTRAFUND PORTFOLIO--SERVICE CLASS 2
2004 $10.000 $11.258 0
2005 $11.258 $12.792 0
2006 $12.792 $13.885 0
2007 $13.885 $15.861 0
2008 $15.861 $8.853 0
2009 $8.853 $11.681 0
2010 $11.681 $13.304 0
---------------------------------------------------------------------------------------------------------
FIDELITY VIP EQUITY-INCOME PORTFOLIO--SERVICE CLASS 2
2004 $10.000 $10.715 0
2005 $10.715 $11.019 0
2006 $11.019 $12.872 0
2007 $12.872 $12.695 0
2008 $12.695 $7.071 0
2009 $7.071 $8.945 0
2010 $8.945 $10.012 0
118 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION ELITE
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
HIGH
MORTALITY & EXPENSE = 2.5
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
-----------------------------------------------------------------------------------------------------------------
FIDELITY VIP GROWTH PORTFOLIO--SERVICE CLASS 2
2004 $10.000 $9.695 0
2005 $9.695 $9.964 0
2006 $9.964 $10.343 0
2007 $10.343 $12.759 0
2008 $12.759 $6.547 0
2009 $6.547 $8.161 0
2010 $8.161 $9.845 0
-----------------------------------------------------------------------------------------------------------------
FIDELITY VIP INDEX 500 PORTFOLIO--SERVICE CLASS 2
2004 $10.000 $10.545 0
2005 $10.545 $10.740 0
2006 $10.740 $12.076 0
2007 $12.076 $12.370 0
2008 $12.370 $7.571 0
2009 $7.571 $9.313 0
2010 $9.313 $10.408 0
-----------------------------------------------------------------------------------------------------------------
FIDELITY VIP INVESTMENT GRADE BOND PORTFOLIO--SERVICE CLASS 2
2004 $10.000 $10.097 0
2005 $10.097 $10.022 0
2006 $10.022 $10.166 0
2007 $10.166 $10.305 0
2008 $10.305 $9.689 0
2009 $9.689 $10.897 0
2010 $10.897 $11.415 0
-----------------------------------------------------------------------------------------------------------------
FIDELITY VIP MONEY MARKET PORTFOLIO--SERVICE CLASS 2
2004 $10.000 $9.850 0
2005 $9.850 $9.861 0
2006 $9.861 $10.049 0
2007 $10.049 $10.272 0
2008 $10.272 $10.282 0
2009 $10.282 $10.062 0
2010 $10.062 $9.808 0
-----------------------------------------------------------------------------------------------------------------
FIDELITY VIP OVERSEAS PORTFOLIO--SERVICE CLASS 2
2004 $10.000 $10.805 0
2005 $10.805 $12.502 0
2006 $12.502 $14.342 0
2007 $14.342 $16.349 0
2008 $16.349 $8.923 0
2009 $8.923 $10.970 0
2010 $10.970 $12.056 0
119 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION ELITE
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
HIGH
MORTALITY & EXPENSE = 2.5
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
------------------------------------------------------------------------------------------------------------
INVESCO V.I. BASIC VALUE FUND--SERIES II
FORMERLY, AIM V.I. BASIC VALUE FUND--SERIES II
2004 $10.000 $10.621 0
2005 $10.621 $10.907 0
2006 $10.907 $12.000 0
2007 $12.000 $11.845 0
2008 $11.845 $5.549 0
2009 $5.549 $7.984 0
2010 $7.984 $8.317 0
------------------------------------------------------------------------------------------------------------
INVESCO V.I. CAPITAL APPRECIATION FUND--SERIES II
FORMERLY, AIM V.I. CAPITAL APPRECIATION FUND--SERIES II
2004 $10.000 $10.184 0
2005 $10.184 $10.771 0
2006 $10.771 $11.127 0
2007 $11.127 $12.108 0
2008 $12.108 $6.766 0
2009 $6.766 $7.955 0
2010 $7.955 $8.927 0
------------------------------------------------------------------------------------------------------------
INVESCO V.I. CORE EQUITY--SERIES II
FORMERLY, AIM V.I. CORE EQUITY FUND--SERIES II
2006 $10.000 $10.708 0
2007 $10.708 $11.250 0
2008 $11.250 $7.634 0
2009 $7.634 $9.517 0
2010 $9.517 $10.127 0
------------------------------------------------------------------------------------------------------------
INVESCO V.I. MID CAP CORE EQUITY FUND--SERIES II
FORMERLY, AIM V.I. MID CAP CORE EQUITY FUND--SERIES II
2004 $10.000 $10.862 0
2005 $10.862 $11.349 0
2006 $11.349 $12.269 0
2007 $12.269 $13.058 0
2008 $13.058 $9.070 0
2009 $9.070 $11.472 0
2010 $11.472 $12.713 0
------------------------------------------------------------------------------------------------------------
INVESCO VAN KAMPEN V.I. GOVERNMENT FUND--SERIES II
FORMERLY, VAN KAMPEN LIT GOVERNMENT PORTFOLIO, CLASS II
2004 $10.000 $10.070 0
2005 $10.070 $10.130 0
2006 $10.130 $10.174 0
2007 $10.174 $10.603 0
2008 $10.603 $10.484 0
2009 $10.484 $10.299 0
2010 $10.299 $10.522 0
120 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION ELITE
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
HIGH
MORTALITY & EXPENSE = 2.5
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
---------------------------------------------------------------------------------------------------------------------
INVESCO VAN KAMPEN V.I. GROWTH AND INCOME FUND--SERIES II
FORMERLY, VAN KAMPEN LIT GROWTH AND INCOME PORTFOLIO, CLASS II
2004 $10.000 $10.955 0
2005 $10.955 $11.708 0
2006 $11.708 $13.227 0
2007 $13.227 $13.206 0
2008 $13.206 $8.719 0
2009 $8.719 $10.540 0
2010 $10.540 $11.518 0
---------------------------------------------------------------------------------------------------------------------
INVESCO VAN KAMPEN V.I. MID CAP GROWTH FUND--SERIES II
FORMERLY, VAN KAMPEN LIT MID CAP GROWTH PORTFOLIO, CLASS II
2004 $10.000 $10.984 0
2005 $10.984 $11.888 0
2006 $11.888 $12.149 0
2007 $12.149 $13.914 0
2008 $13.914 $7.205 0
2009 $7.205 $10.974 0
2010 $10.974 $13.604 0
---------------------------------------------------------------------------------------------------------------------
JANUS ASPEN OVERSEAS PORTFOLIO--SERVICE SHARES
2008 $10.000 $6.644 0
2009 $6.644 $11.588 0
2010 $11.588 $14.111 0
---------------------------------------------------------------------------------------------------------------------
JANUS ASPEN PERKINS MID CAP VALUE PORTFOLIO--SERVICE SHARES
2004 $10.000 $11.172 0
2005 $11.172 $11.971 0
2006 $11.971 $13.418 0
2007 $13.418 $14.004 0
2008 $14.004 $9.835 0
2009 $9.835 $12.732 0
2010 $12.732 $14.307 0
---------------------------------------------------------------------------------------------------------------------
JANUS ASPEN PERKINS SMALL COMPANY VALUE PORTFOLIO--SERVICE SHARES
2005 $10.000 $10.880 0
2006 $10.880 $12.916 0
2007 $12.916 $11.809 0
2008 $11.809 $7.371 0
2009 $7.371 $6.956 0
---------------------------------------------------------------------------------------------------------------------
JANUS ASPEN SERIES BALANCED PORTFOLIO--SERVICE SHARES
2004 $10.000 $10.502 0
2005 $10.502 $11.014 0
2006 $11.014 $11.846 0
2007 $11.846 $12.723 0
2008 $12.723 $10.402 0
2009 $10.402 $12.723 0
2010 $12.723 $13.399 0
121 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION ELITE
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
HIGH
MORTALITY & EXPENSE = 2.5
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
-----------------------------------------------------------------------------------------------------------------------
JANUS ASPEN SERIES FOREIGN STOCK PORTFOLIO--SERVICE SHARES
2004 $10.000 $11.186 0
2005 $11.186 $11.576 0
2006 $11.576 $13.312 0
2007 $13.312 $15.331 0
2008 $15.331 $14.368 0
-----------------------------------------------------------------------------------------------------------------------
JANUS ASPEN SERIES FORTY PORTFOLIO--SERVICE SHARES
2004 $10.000 $11.358 0
2005 $11.358 $12.453 0
2006 $12.453 $13.236 0
2007 $13.236 $17.612 0
2008 $17.612 $9.553 0
2009 $9.553 $13.586 0
2010 $13.586 $14.090 0
-----------------------------------------------------------------------------------------------------------------------
JANUS ASPEN SERIES INTECH RISK-MANAGED CORE PORTFOLIO--SERVICE
SHARES
2004 $10.000 $11.208 0
2005 $11.208 $12.109 0
2006 $12.109 $13.065 0
2007 $13.065 $13.504 0
2008 $13.504 $8.386 0
2009 $8.386 $10.010 0
2010 $10.010 $10.701 0
-----------------------------------------------------------------------------------------------------------------------
LEGG MASON CLEARBRIDGE VARIABLE FUNDAMENTAL ALL CAP VALUE
PORTFOLIO--CLASS I SHARES
FORMERLY, LEGG MASON CLEARBRIDGE VARIABLE FUNDAMENTAL VALUE
PORTFOLIO--CLASS I
2007 $10.000 $9.427 0
2008 $9.427 $5.823 0
2009 $5.823 $7.337 0
2010 $7.337 $8.332 0
-----------------------------------------------------------------------------------------------------------------------
LEGG MASON CLEARBRIDGE VARIABLE LARGE CAP VALUE PORTFOLIO--CLASS I
SHARES
FORMERLY, LEGG MASON CLEARBRIDGE VARIABLE INVESTORS PORTFOLIO--
CLASS I
2007 $10.000 $9.665 0
2008 $9.665 $6.060 0
2009 $6.060 $7.348 0
2010 $7.348 $7.835 0
-----------------------------------------------------------------------------------------------------------------------
LEGG MASON WESTERN ASSET VARIABLE GLOBAL HIGH YIELD BOND PORTFOLIO--
CLASS II SHARES
2004 $10.000 $10.746 0
2005 $10.746 $10.838 0
2006 $10.838 $11.649 0
2007 $11.649 $11.307 0
2008 $11.307 $7.612 0
2009 $7.612 $11.481 0
2010 $11.481 $12.826 0
122 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION ELITE
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
HIGH
MORTALITY & EXPENSE = 2.5
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
----------------------------------------------------------------------------------------------------
MFS HIGH INCOME SERIES--SERVICE CLASS
2004 $10.000 $10.529 0
2005 $10.529 $10.466 0
2006 $10.466 $11.214 0
2007 $11.214 $11.089 0
2008 $11.089 $7.705 0
2009 $7.705 $10.898 0
2010 $10.898 $12.143 0
----------------------------------------------------------------------------------------------------
MFS INVESTORS GROWTH STOCK SERIES--SERVICE CLASS
2004 $10.000 $10.350 0
2005 $10.350 $10.508 0
2006 $10.508 $10.983 0
2007 $12.000 $11.845 0
2008 $11.845 $7.289 0
2009 $7.289 $9.875 0
2010 $9.875 $10.788 0
----------------------------------------------------------------------------------------------------
MFS INVESTORS TRUST SERIES--SERVICE CLASS
2004 $10.000 $10.685 0
2005 $10.685 $11.139 0
2006 $11.139 $12.227 0
2007 $10.983 $11.876 0
2008 $11.876 $8.518 0
2009 $8.518 $10.500 0
2010 $10.500 $11.339 0
----------------------------------------------------------------------------------------------------
MFS NEW DISCOVERY SERIES--SERVICE CLASS
2004 $10.000 $9.830 0
2005 $9.830 $10.057 0
2006 $10.057 $11.063 0
2007 $11.063 $11.016 0
2008 $11.016 $6.489 0
2009 $6.489 $10.297 0
2010 $10.297 $13.634 0
----------------------------------------------------------------------------------------------------
MFS TOTAL RETURN SERIES--SERVICE CLASS
2004 $10.000 $10.659 0
2005 $10.659 $10.652 0
2006 $10.652 $11.582 0
2007 $11.582 $11.723 0
2008 $11.723 $8.870 0
2009 $8.870 $10.170 0
2010 $10.170 $10.860 0
123 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION ELITE
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
HIGH
MORTALITY & EXPENSE = 2.5
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
---------------------------------------------------------------------------------------------------------------
MFS VALUE SERIES--SERVICE CLASS
2004 $10.000 $11.046 0
2005 $11.046 $11.455 0
2006 $11.455 $13.447 0
2007 $13.447 $14.090 0
2008 $14.090 $9.229 0
2009 $9.229 $11.008 0
2010 $11.008 $11.924 0
---------------------------------------------------------------------------------------------------------------
OPPENHEIMER GLOBAL SECURITIES FUND/VA--SERVICE SHARES
2004 $10.000 $11.259 0
2005 $11.259 $12.509 0
2006 $12.509 $14.301 0
2007 $14.301 $14.774 0
2008 $14.774 $8.586 0
2009 $8.586 $11.653 0
2010 $11.653 $13.133 0
---------------------------------------------------------------------------------------------------------------
OPPENHEIMER MAIN STREET SMALL CAP FUND/VA--SERVICE SHARES
2004 $10.000 $11.193 0
2005 $11.193 $11.962 0
2006 $11.962 $13.360 0
2007 $13.360 $12.830 0
2008 $12.830 $7.747 0
2009 $7.747 $10.328 0
2010 $10.328 $12.379 0
---------------------------------------------------------------------------------------------------------------
OPPENHEIMER SMALL- & MID-CAP GROWTH FUND/VA--SERVICE SHARES
FORMERLY, OPPENHEIMER MIDCAP FUND/VA--SERVICE SHARES
2005 $10.000 $11.623 0
2006 $11.623 $11.627 0
2007 $11.627 $12.007 0
2008 $12.007 $5.939 0
2009 $5.939 $7.651 0
2010 $7.651 $9.476 0
---------------------------------------------------------------------------------------------------------------
PIMCO VIT FOREIGN BOND PORTFOLIO (U.S. DOLLAR-HEDGED)--
ADMINISTRATIVE SHARES
2004 $10.000 $10.262 0
2005 $10.262 $10.511 0
2006 $10.511 $10.462 0
2007 $10.462 $10.559 0
2008 $10.559 $10.039 0
2009 $10.039 $11.307 0
2010 $11.307 $11.949 0
124 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION ELITE
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
HIGH
MORTALITY & EXPENSE = 2.5
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
-----------------------------------------------------------------------------------------------------------
PIMCO VIT MONEY MARKET PORTFOLIO--ADMINISTRATIVE SHARES
2004 $10.000 $9.844 0
2005 $9.844 $9.854 0
2006 $9.854 $10.042 0
2007 $10.042 $10.257 0
2008 $10.257 $10.215 0
2009 $10.215 $9.961 0
2010 $9.961 $9.706 0
-----------------------------------------------------------------------------------------------------------
PIMCO VIT REAL RETURN PORTFOLIO--ADMINISTRATIVE SHARES
2004 $10.000 $10.474 0
2005 $10.474 $10.415 0
2006 $10.415 $10.217 0
2007 $10.217 $11.013 0
2008 $11.013 $9.971 0
2009 $9.971 $11.498 0
2010 $11.498 $12.108 0
-----------------------------------------------------------------------------------------------------------
PIMCO VIT TOTAL RETURN PORTFOLIO--ADMINISTRATIVE SHARES
2004 $10.000 $10.164 0
2005 $10.164 $10.142 0
2006 $10.142 $10.260 0
2007 $10.260 $10.868 0
2008 $10.868 $11.096 0
2009 $11.096 $12.328 0
2010 $12.328 $12.982 0
-----------------------------------------------------------------------------------------------------------
PREMIER VIT OPCAP BALANCED PORTFOLIO
2004 $10.000 $10.713 0
2005 $10.713 $10.721 0
2006 $10.721 $11.571 0
2007 $11.571 $10.768 0
2008 $10.768 $7.218 0
2009 $7.218 $6.936 0
-----------------------------------------------------------------------------------------------------------
PREMIER VIT OPCAP RENAISSANCE PORTFOLIO
2004 $10.000 $11.099 0
2005 $11.099 $10.322 0
2006 $10.322 $11.198 0
2007 $11.198 $11.595 0
2008 $11.595 $10.470 0
-----------------------------------------------------------------------------------------------------------
RYDEX SGI VT US LONG SHORT MOMENTUM
FORMERLY, RYDEX VT ALL-CAP OPPORTUNITY
2004 $10.000 $10.477 0
2005 $10.477 $11.604 0
2006 $11.604 $12.590 0
2007 $12.590 $15.050 0
2008 $15.050 $8.687 0
2009 $8.687 $10.771 0
2010 $10.771 $11.667 0
125 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION ELITE
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
HIGH
MORTALITY & EXPENSE = 2.5
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
------------------------------------------------------------------------------------------------------
T. ROWE PRICE BLUE CHIP GROWTH PORTFOLIO--II
2004 $10.000 $10.369 0
2005 $10.369 $10.670 0
2006 $10.670 $11.362 0
2007 $11.362 $12.447 0
2008 $12.447 $6.953 0
2009 $6.953 $9.602 0
2010 $9.602 $10.849 0
------------------------------------------------------------------------------------------------------
T. ROWE PRICE EQUITY INCOME PORTFOLIO--II
2004 $10.000 $10.978 0
2005 $10.978 $11.089 0
2006 $11.089 $12.815 0
2007 $12.815 $12.858 0
2008 $12.858 $7.982 0
2009 $7.982 $9.737 0
2010 $9.737 $10.882 0
------------------------------------------------------------------------------------------------------
UIF CAPITAL GROWTH PORTFOLIO, CLASS II
2004 $10.000 $10.263 0
2005 $10.263 $11.545 0
2006 $11.545 $11.674 0
2007 $11.674 $13.832 0
2008 $13.832 $6.824 0
2009 $6.824 $10.976 0
2010 $10.976 $13.108 0
------------------------------------------------------------------------------------------------------
UIF U.S. REAL ESTATE PORTFOLIO, CLASS II
2004 $10.000 $12.705 0
2005 $12.705 $14.448 0
2006 $14.448 $19.375 0
2007 $19.375 $15.610 0
2008 $15.610 $9.417 0
2009 $9.417 $11.785 0
2010 $11.785 $14.869 0
------------------------------------------------------------------------------------------------------
VAN ECK VIP EMERGING MARKETS FUND--INITIAL CLASS
FORMERLY, VAN ECK WORLDWIDE EMERGING MARKETS FUND
2004 $10.000 $11.966 0
2005 $11.966 $15.386 0
2006 $15.386 $20.905 0
2007 $20.905 $28.017 0
2008 $28.017 $9.610 0
2009 $9.610 $19.955 0
2010 $19.955 $24.654 0
126 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION ELITE
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
HIGH
MORTALITY & EXPENSE = 2.5
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
----------------------------------------------------------------------------------------------------------------------
VAN ECK VIP GLOBAL HARD ASSETS FUND--INITIAL CLASS
FORMERLY, VAN ECK WORLDWIDE HARD ASSETS FUND
2004 $10.000 $12.311 0
2005 $12.311 $18.189 0
2006 $18.189 $22.057 0
2007 $22.057 $31.224 0
2008 $31.224 $16.383 0
2009 $16.383 $25.138 0
2010 $25.138 $31.644 0
----------------------------------------------------------------------------------------------------------------------
VAN ECK VIP MULTI-MANAGER ALTERNATIVE--INITIAL CLASS
FORMERLY, VAN ECK WORLDWIDE MULTI-MANAGER ALTERNATIVES FUND-CLS I
2004 $10.000 $9.803 0
2005 $9.803 $9.568 0
2006 $9.568 $10.127 0
2007 $10.127 $10.262 0
2008 $10.262 $8.686 0
2009 $8.686 $9.633 0
2010 $9.633 $9.850 0
* The Accumulation Unit Values in this table reflect a mortality and expense
risk charge of 2.50% and an administrative expense charge of 0.10%.
127 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION PLUS
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
LOW
MORTALITY & EXPENSE = 1.45
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
---------------------------------------------------------------------------------------------------------
ALGER CAPITAL APPRECIATION PORTFOLIO--CLASS S
2004 $10.000 $10.200 27,034
2005 $10.200 $11.464 85,491
2006 $11.464 $13.427 127,011
2007 $13.427 $17.606 140,144
2008 $17.606 $9.487 131,667
2009 $9.487 $14.074 104,489
2010 $14.074 $15.744 103,711
---------------------------------------------------------------------------------------------------------
ALGER LARGE CAP GROWTH PORTFOLIO--CLASS S
2004 $10.000 $10.084 162,285
2005 $10.084 $11.091 310,193
2006 $11.091 $11.455 291,942
2007 $11.455 $13.491 242,972
2008 $13.491 $7.133 252,657
2009 $7.133 $10.340 217,489
2010 $10.340 $11.494 189,088
---------------------------------------------------------------------------------------------------------
ALGER MID CAP GROWTH PORTFOLIO--CLASS S
2004 $10.000 $10.608 133,976
2005 $10.608 $11.441 327,548
2006 $11.441 $12.377 436,382
2007 $12.377 $15.995 397,229
2008 $15.995 $6.539 448,194
2009 $6.539 $9.741 382,540
2010 $9.741 $11.401 312,036
---------------------------------------------------------------------------------------------------------
FIDELITY VIP ASSET MANAGER PORTFOLIO--SERVICE CLASS 2
2004 $10.000 $10.198 99,090
2005 $10.198 $10.420 153,559
2006 $10.420 $10.991 196,893
2007 $10.991 $12.461 181,005
2008 $12.461 $8.722 200,576
2009 $8.722 $11.056 174,938
2010 $11.056 $12.405 162,655
---------------------------------------------------------------------------------------------------------
FIDELITY VIP CONTRAFUND PORTFOLIO--SERVICE CLASS 2
2004 $10.000 $11.368 162,203
2005 $11.368 $13.056 636,774
2006 $13.056 $14.324 1,038,503
2007 $14.324 $16.540 915,580
2008 $16.540 $9.332 1,036,462
2009 $9.332 $12.446 860,886
2010 $12.446 $14.327 791,650
---------------------------------------------------------------------------------------------------------
FIDELITY VIP EQUITY-INCOME PORTFOLIO--SERVICE CLASS 2
2004 $10.000 $10.820 264,960
2005 $10.820 $11.246 642,154
2006 $11.246 $13.279 914,542
2007 $13.279 $13.239 882,993
2008 $13.239 $7.453 958,622
2009 $7.453 $9.531 838,502
2010 $9.531 $10.783 770,594
128 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION PLUS
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
LOW
MORTALITY & EXPENSE = 1.45
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
-----------------------------------------------------------------------------------------------------------------
FIDELITY VIP GROWTH PORTFOLIO--SERVICE CLASS 2
2004 $10.000 $9.971 95,874
2005 $9.791 $10.170 162,979
2006 $10.170 $10.671 179,143
2007 $10.671 $13.305 176,462
2008 $13.305 $6.902 239,711
2009 $6.902 $8.695 226,398
2010 $8.695 $10.603 196,977
-----------------------------------------------------------------------------------------------------------------
FIDELITY VIP INDEX 500 PORTFOLIO--SERVICE CLASS 2
2004 $10.000 $10.648 357,590
2005 $10.648 $10.961 1,013,570
2006 $10.961 $12.458 1,364,532
2007 $12.458 $12.899 1,221,783
2008 $12.899 $7.980 1,372,538
2009 $7.980 $9.923 1,179,069
2010 $9.923 $11.208 1,056,165
-----------------------------------------------------------------------------------------------------------------
FIDELITY VIP INVESTMENT GRADE BOND PORTFOLIO--SERVICE CLASS 2
2004 $10.000 $10.196 362,442
2005 $10.196 $10.229 877,078
2006 $10.229 $10.487 1,278,546
2007 $10.487 $10.746 1,490,496
2008 $10.746 $10.213 1,404,977
2009 $10.213 $11.610 1,239,977
2010 $11.610 $12.293 1,143,680
-----------------------------------------------------------------------------------------------------------------
FIDELITY VIP MONEY MARKET PORTFOLIO--SERVICE CLASS 2
2004 $10.000 $9.947 499,789
2005 $9.947 $10.065 1,298,309
2006 $10.065 $10.367 1,929,547
2007 $10.367 $10.712 1,860,555
2008 $10.712 $10.838 2,312,870
2009 $10.838 $10.720 1,916,252
2010 $10.720 $10.562 1,575,490
-----------------------------------------------------------------------------------------------------------------
FIDELITY VIP OVERSEAS PORTFOLIO--SERVICE CLASS 2
2004 $10.000 $10.911 112,867
2005 $10.911 $12.760 307,437
2006 $12.760 $14.796 827,908
2007 $14.796 $17.049 807,662
2008 $17.049 $9.406 916,161
2009 $9.406 $11.688 807,903
2010 $11.688 $12.983 685,772
129 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION PLUS
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
LOW
MORTALITY & EXPENSE = 1.45
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
------------------------------------------------------------------------------------------------------------
INVESCO V.I. BASIC VALUE FUND--SERIES II
FORMERLY, AIM V.I. BASIC VALUE FUND--SERIES II
2004 $10.000 $10.725 168,023
2005 $10.725 $11.133 344,954
2006 $11.133 $12.379 418,263
2007 $12.379 $12.352 293,495
2008 $12.352 $5.849 426,442
2009 $5.849 $8.507 343,201
2010 $8.507 $8.957 319,363
------------------------------------------------------------------------------------------------------------
INVESCO V.I. CAPITAL APPRECIATION FUND--SERIES II
FORMERLY, AIM V.I. CAPITAL APPRECIATION FUND--SERIES II
2004 $10.000 $10.284 25,081
2005 $10.284 $10.994 74,461
2006 $10.994 $11.479 125,960
2007 $11.479 $12.626 110,380
2008 $12.626 $7.132 125,423
2009 $7.132 $8.476 104,680
2010 $8.476 $9.613 90,374
------------------------------------------------------------------------------------------------------------
INVESCO V.I. CORE EQUITY--SERIES II
FORMERLY, AIM V.I. CORE EQUITY FUND--SERIES II
2006 $10.000 $10.785 274,689
2007 $10.785 $11.454 276,101
2008 $11.454 $7.857 288,185
2009 $7.857 $9.900 241,788
2010 $9.900 $10.648 206,986
------------------------------------------------------------------------------------------------------------
INVESCO V.I. MID CAP CORE EQUITY FUND--SERIES II
FORMERLY, AIM V.I. MID CAP CORE EQUITY FUND--SERIES II
2004 $10.000 $10.968 184,194
2005 $10.968 $11.584 295,988
2006 $11.584 $12.657 442,279
2007 $12.657 $13.617 404,724
2008 $13.617 $9.561 420,218
2009 $9.561 $12.223 365,382
2010 $12.223 $13.691 354,072
------------------------------------------------------------------------------------------------------------
INVESCO VAN KAMPEN V.I. GOVERNMENT FUND--SERIES II
FORMERLY, VAN KAMPEN LIT GOVERNMENT PORTFOLIO, CLASS II
2004 $10.000 $10.169 196,904
2005 $10.169 $10.339 330,133
2006 $10.339 $10.496 394,113
2007 $10.496 $11.057 382,399
2008 $11.057 $11.051 541,227
2009 $11.051 $10.973 477,547
2010 $10.973 $11.331 471,942
130 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION PLUS
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
LOW
MORTALITY & EXPENSE = 1.45
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
---------------------------------------------------------------------------------------------------------------------
INVESCO VAN KAMPEN V.I. GROWTH AND INCOME FUND--SERIES II
FORMERLY, VAN KAMPEN LIT GROWTH AND INCOME PORTFOLIO, CLASS II
2004 $10.000 $11.063 187,532
2005 $11.063 $11.950 597,525
2006 $11.950 $13.645 965,056
2007 $13.645 $13.771 913,686
2008 $13.771 $9.191 900,825
2009 $9.191 $11.230 788,311
2010 $11.230 $12.403 688,083
---------------------------------------------------------------------------------------------------------------------
INVESCO VAN KAMPEN V.I. MID CAP GROWTH FUND--SERIES II
FORMERLY, VAN KAMPEN LIT MID CAP GROWTH PORTFOLIO, CLASS II
2004 $10.000 $11.091 21,341
2005 $11.091 $12.133 28,367
2006 $12.133 $12.534 38,306
2007 $12.534 $14.510 38,611
2008 $14.510 $7.594 49,182
2009 $7.594 $11.692 81,540
2010 $11.692 $14.650 83,826
---------------------------------------------------------------------------------------------------------------------
JANUS ASPEN OVERSEAS PORTFOLIO--SERVICE SHARES
2008 $10.000 $7.003 153,801
2009 $7.003 $12.347 149,089
2010 $12.347 $15.197 152,251
---------------------------------------------------------------------------------------------------------------------
JANUS ASPEN PERKINS MID CAP VALUE PORTFOLIO--SERVICE SHARES
2004 $10.000 $11.282 130,218
2005 $11.282 $12.219 435,715
2006 $12.219 $13.842 636,948
2007 $13.842 $14.604 603,783
2008 $14.604 $10.366 628,536
2009 $10.366 $13.565 498,879
2010 $13.565 $15.407 458,370
---------------------------------------------------------------------------------------------------------------------
JANUS ASPEN PERKINS SMALL COMPANY VALUE PORTFOLIO--SERVICE SHARES
2005 $10.000 $10.959 52,116
2006 $10.959 $13.149 208,907
2007 $13.149 $12.153 204,185
2008 $12.153 $7.667 200,043
2009 $7.667 $7.261 0
---------------------------------------------------------------------------------------------------------------------
JANUS ASPEN SERIES BALANCED PORTFOLIO--SERVICE SHARES
2004 $10.000 $10.605 110,575
2005 $10.605 $11.241 317,819
2006 $11.241 $12.220 474,671
2007 $12.220 $13.267 419,411
2008 $13.267 $10.964 387,556
2009 $10.964 $13.555 378,329
2010 $13.555 $14.429 330,052
131 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION PLUS
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
LOW
MORTALITY & EXPENSE = 1.45
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
-----------------------------------------------------------------------------------------------------------------------
JANUS ASPEN SERIES FOREIGN STOCK PORTFOLIO--SERVICE SHARES
2004 $10.000 $11.296 17,349
2005 $11.296 $11.815 78,760
2006 $11.815 $13.733 125,898
2007 $13.733 $15.987 130,612
2008 $15.987 $15.037 0
-----------------------------------------------------------------------------------------------------------------------
JANUS ASPEN SERIES FORTY PORTFOLIO--SERVICE SHARES
2004 $10.000 $11.470 29,307
2005 $11.470 $12.710 109,414
2006 $12.710 $13.654 160,923
2007 $13.654 $18.366 194,043
2008 $18.366 $10.069 230,987
2009 $10.069 $14.475 199,558
2010 $14.475 $15.174 172,341
-----------------------------------------------------------------------------------------------------------------------
JANUS ASPEN SERIES INTECH RISK-MANAGED CORE PORTFOLIO--SERVICE
SHARES
2004 $10.000 $11.318 47,209
2005 $11.318 $12.359 136,370
2006 $12.359 $13.478 168,301
2007 $13.478 $14.082 157,185
2008 $14.082 $8.839 156,723
2009 $8.839 $10.665 133,212
-----------------------------------------------------------------------------------------------------------------------
LEGG MASON CLEARBRIDGE VARIABLE FUNDAMENTAL ALL CAP VALUE
PORTFOLIO--CLASS I SHARES
FORMERLY, LEGG MASON CLEARBRIDGE VARIABLE FUNDAMENTAL VALUE
PORTFOLIO--CLASS I
2007 $10.000 $9.496 77,930
2008 $9.496 $5.929 78,084
2009 $5.929 $7.551 64,493
2010 $7.551 $8.668 54,410
-----------------------------------------------------------------------------------------------------------------------
LEGG MASON CLEARBRIDGE VARIABLE LARGE CAP VALUE PORTFOLIO--CLASS I
SHARES
FORMERLY, LEGG MASON CLEARBRIDGE VARIABLE INVESTORS PORTFOLIO--
CLASS I
2007 $10.000 $9.735 115,189
2008 $9.735 $6.170 84,142
2009 $6.170 $7.563 69,529
2010 $7.563 $8.150 65,270
-----------------------------------------------------------------------------------------------------------------------
LEGG MASON WESTERN ASSET VARIABLE GLOBAL HIGH YIELD BOND PORTFOLIO--
CLASS II SHARES
2004 $10.000 $10.851 233,161
2005 $10.851 $11.062 729,975
2006 $11.062 $12.018 1,048,615
2007 $12.018 $11.791 1,007,552
2008 $11.791 $8.023 988,849
2009 $8.023 $12.232 724,610
2010 $12.232 $13.812 624,088
132 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION PLUS
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
LOW
MORTALITY & EXPENSE = 1.45
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
----------------------------------------------------------------------------------------------------
MFS HIGH INCOME SERIES--SERVICE CLASS
2004 $10.000 $10.632 173,571
2005 $10.632 $10.682 363,031
2006 $10.682 $11.568 409,143
2007 $11.568 $11.563 406,241
2008 $11.563 $8.121 391,449
2009 $8.121 $11.611 306,693
2010 $11.611 $13.077 294,022
----------------------------------------------------------------------------------------------------
MFS INVESTORS GROWTH STOCK SERIES--SERVICE CLASS
2004 $10.000 $10.452 27,908
2005 $10.452 $10.725 288,901
2006 $10.725 $11.331 530,447
2007 $11.331 $12.384 487,942
2008 $12.384 $7.683 536,714
2009 $7.683 $10.521 428,012
2010 $10.521 $11.617 388,447
----------------------------------------------------------------------------------------------------
MFS INVESTORS TRUST SERIES--SERVICE CLASS
2004 $10.000 $10.790 31,444
2005 $10.790 $11.369 69,837
2006 $11.369 $12.614 75,414
2007 $12.614 $13.663 71,252
2008 $13.663 $8.978 89,673
2009 $8.978 $11.187 85,026
2010 $11.187 $12.212 69,448
----------------------------------------------------------------------------------------------------
MFS NEW DISCOVERY SERIES--SERVICE CLASS
2004 $10.000 $9.926 79,708
2005 $9.926 $10.265 115,243
2006 $10.265 $11.413 143,917
2007 $11.413 $11.488 133,227
2008 $11.488 $6.840 145,739
2009 $6.840 $10.971 134,171
2010 $10.971 $14.683 134,012
----------------------------------------------------------------------------------------------------
MFS TOTAL RETURN SERIES--SERVICE CLASS
2004 $10.000 $10.763 270,271
2005 $10.763 $10.872 649,848
2006 $10.872 $11.948 786,417
2007 $11.948 $12.225 733,113
2008 $12.225 $9.349 623,702
2009 $9.349 $10.836 575,285
2010 $10.836 $11.695 513,670
133 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION PLUS
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
LOW
MORTALITY & EXPENSE = 1.45
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
---------------------------------------------------------------------------------------------------------------
MFS VALUE SERIES--SERVICE CLASS
2004 $10.000 $11.154 52,533
2005 $11.154 $11.692 155,911
2006 $11.692 $13.872 185,240
2007 $13.872 $14.693 178,813
2008 $14.693 $9.728 218,888
2009 $9.728 $11.728 183,765
2010 $11.728 $12.841 196,581
---------------------------------------------------------------------------------------------------------------
OPPENHEIMER GLOBAL SECURITIES FUND/VA--SERVICE SHARES
2004 $10.000 $11.369 135,685
2005 $11.369 $12.767 311,510
2006 $12.767 $14.753 416,951
2007 $14.753 $15.406 390,850
2008 $15.406 $9.050 394,574
2009 $9.050 $12.416 321,152
2010 $12.416 $14.143 280,674
---------------------------------------------------------------------------------------------------------------
OPPENHEIMER MAIN STREET SMALL CAP FUND/VA--SERVICE SHARES
2004 $10.000 $11.303 148,467
2005 $11.303 $12.209 444,920
2006 $12.209 $13.782 658,435
2007 $13.782 $13.379 616,978
2008 $13.379 $8.165 662,016
2009 $8.165 $11.004 576,312
2010 $11.004 $13.331 470,789
---------------------------------------------------------------------------------------------------------------
OPPENHEIMER SMALL- & MID-CAP GROWTH FUND/VA--SERVICE SHARES
FORMERLY, OPPENHEIMER MIDCAP FUND/VA--SERVICE SHARES
2005 $10.000 $11.707 31,034
2006 $11.707 $11.837 86,941
2007 $11.837 $12.356 79,497
2008 $12.356 $6.178 88,007
2009 $6.178 $8.044 77,979
2010 $8.044 $10.071 77,409
---------------------------------------------------------------------------------------------------------------
PIMCO VIT FOREIGN BOND PORTFOLIO (U.S. DOLLAR-HEDGED)--
ADMINISTRATIVE SHARES
2004 $10.000 $10.363 72,884
2005 $10.363 $10.728 336,138
2006 $10.728 $10.793 524,188
2007 $10.793 $11.011 473,852
2008 $11.011 $10.582 431,280
2009 $10.582 $12.047 415,232
2010 $12.047 $12.868 419,495
134 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION PLUS
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
LOW
MORTALITY & EXPENSE = 1.45
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
-----------------------------------------------------------------------------------------------------------
PIMCO VIT MONEY MARKET PORTFOLIO--ADMINISTRATIVE SHARES
2004 $10.000 $9.941 306,156
2005 $9.941 $10.057 529,839
2006 $10.057 $10.359 727,162
2007 $10.359 $10.696 706,907
2008 $10.696 $10.767 859,497
2009 $10.767 $10.612 907,129
2010 $10.612 $10.453 852,225
-----------------------------------------------------------------------------------------------------------
PIMCO VIT REAL RETURN PORTFOLIO--ADMINISTRATIVE SHARES
2004 $10.000 $10.577 266,929
2005 $10.577 $10.630 855,244
2006 $10.630 $10.540 1,126,346
2007 $10.540 $11.484 1,038,569
2008 $11.484 $10.510 1,164,877
2009 $10.510 $12.250 983,651
2010 $12.250 $13.039 897,156
-----------------------------------------------------------------------------------------------------------
PIMCO VIT TOTAL RETURN PORTFOLIO--ADMINISTRATIVE SHARES
2004 $10.000 $10.264 326,918
2005 $10.264 $10.352 781,636
2006 $10.352 $10.585 1,399,499
2007 $10.585 $11.333 1,362,786
2008 $11.333 $11.695 1,498,179
2009 $11.695 $13.134 1,507,227
2010 $13.134 $13.980 1,377,334
-----------------------------------------------------------------------------------------------------------
PREMIER VIT OPCAP BALANCED PORTFOLIO
2004 $10.000 $10.790 49,506
2005 $10.790 $10.914 88,648
2006 $10.914 $11.906 102,842
2007 $11.906 $11.200 100,376
2008 $11.200 $7.589 91,560
2009 $7.589 $7.317 0
-----------------------------------------------------------------------------------------------------------
PREMIER VIT OPCAP RENAISSANCE PORTFOLIO
2004 $10.000 $11.208 99,659
2005 $11.208 $10.535 156,525
2006 $10.535 $11.552 181,544
2007 $11.552 $12.091 133,825
2008 $12.091 $10.924 0
-----------------------------------------------------------------------------------------------------------
RYDEX SGI VT US LONG SHORT MOMENTUM
FORMERLY, RYDEX VT ALL-CAP OPPORTUNITY
2004 $10.000 $10.579 9,293
2005 $10.579 $11.844 42,301
2006 $11.844 $12.989 96,320
2007 $12.989 $15.694 104,063
2008 $15.694 $9.157 117,641
2009 $9.157 $11.475 103,531
2010 $11.475 $12.564 89,854
135 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION PLUS
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
LOW
MORTALITY & EXPENSE = 1.45
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
------------------------------------------------------------------------------------------------------
T. ROWE PRICE BLUE CHIP GROWTH PORTFOLIO--II
2004 $10.000 $10.470 118,706
2005 $10.470 $10.890 568,834
2006 $10.890 $11.722 1,046,476
2007 $11.722 $12.980 921,017
2008 $12.980 $7.329 1,076,189
2009 $7.329 $10.230 850,454
2010 $10.230 $11.683 736,797
------------------------------------------------------------------------------------------------------
T. ROWE PRICE EQUITY INCOME PORTFOLIO--II
2004 $10.000 $11.086 386,880
2005 $11.086 $11.318 1,352,680
2006 $11.318 $13.221 1,710,177
2007 $13.221 $13.409 1,570,162
2008 $13.409 $8.413 1,608,523
2009 $8.413 $10.374 1,377,891
2010 $10.374 $11.719 1,195,528
------------------------------------------------------------------------------------------------------
UIF CAPITAL GROWTH PORTFOLIO, CLASS II
2004 $10.000 $10.364 43,290
2005 $10.364 $11.783 100,577
2006 $11.783 $12.043 118,076
2007 $12.043 $14.424 101,174
2008 $14.424 $7.193 110,041
2009 $7.193 $11.694 91,860
2010 $11.694 $14.116 75,917
------------------------------------------------------------------------------------------------------
UIF U.S. REAL ESTATE PORTFOLIO, CLASS II
2004 $10.000 $12.829 290,164
2005 $12.829 $14.747 680,199
2006 $14.747 $19.988 844,038
2007 $19.988 $16.278 713,922
2008 $16.278 $9.926 725,507
2009 $9.926 $12.557 582,988
2010 $12.557 $16.013 449,938
------------------------------------------------------------------------------------------------------
VAN ECK VIP EMERGING MARKETS FUND--INITIAL CLASS
FORMERLY, VAN ECK WORLDWIDE EMERGING MARKETS FUND
2004 $10.000 $12.083 16,416
2005 $12.083 $15.703 107,894
2006 $15.703 $21.566 197,437
2007 $21.566 $29.216 217,317
2008 $29.216 $10.130 178,770
2009 $10.130 $21.260 178,220
2010 $21.260 $26.549 152,306
136 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION PLUS
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
LOW
MORTALITY & EXPENSE = 1.45
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
----------------------------------------------------------------------------------------------------------------------
VAN ECK VIP GLOBAL HARD ASSETS FUND--INITIAL CLASS
FORMERLY, VAN ECK WORLDWIDE HARD ASSETS FUND
2004 $10.000 $12.432 30,408
2005 $12.432 $18.565 144,710
2006 $18.565 $22.754 196,815
2007 $22.754 $32.560 208,194
2008 $32.560 $17.269 189,943
2009 $17.269 $26.783 172,839
2010 $26.783 $34.077 146,787
----------------------------------------------------------------------------------------------------------------------
VAN ECK VIP MULTI-MANAGER ALTERNATIVE--INITIAL CLASS
FORMERLY, VAN ECK WORLDWIDE MULTI-MANAGER ALTERNATIVES FUND-CLS I
2004 $10.000 $9.899 17,544
2005 $9.899 $9.766 49,850
2006 $9.766 $10.447 69,904
2007 $10.447 $10.701 67,655
2008 $10.701 $9.156 83,819
2009 $9.156 $10.264 84,209
2010 $10.264 $10.607 84,068
* The Accumulation Unit Values in this table reflect a mortality and expense
risk charge of 1.45% and an administrative expense charge of 0.10%.
137 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION PLUS
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
HIGH
MORTALITY & EXPENSE = 2.35
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
---------------------------------------------------------------------------------------------------------
ALGER CAPITAL APPRECIATION PORTFOLIO--CLASS S
2004 $10.000 $10.115 0
2005 $10.115 $11.265 0
2006 $11.265 $13.074 0
2007 $13.074 $16.985 0
2008 $16.985 $9.069 0
2009 $9.069 $13.331 0
2010 $13.331 $14.776 0
---------------------------------------------------------------------------------------------------------
ALGER LARGE CAP GROWTH PORTFOLIO--CLASS S
2004 $10.000 $10.000 0
2005 $10.000 $10.899 0
2006 $10.899 $11.154 0
2007 $11.154 $13.015 0
2008 $13.015 $6.818 626
2009 $6.818 $9.794 0
2010 $9.794 $10.787 0
---------------------------------------------------------------------------------------------------------
ALGER MID CAP GROWTH PORTFOLIO--CLASS S
2004 $10.000 $10.520 0
2005 $10.520 $11.242 0
2006 $11.242 $12.051 0
2007 $12.051 $15.431 0
2008 $15.431 $6.251 0
2009 $6.251 $9.226 0
2010 $9.226 $10.700 0
---------------------------------------------------------------------------------------------------------
FIDELITY VIP ASSET MANAGER PORTFOLIO--SERVICE CLASS 2
2004 $10.000 $10.113 0
2005 $10.113 $10.239 0
2006 $10.239 $10.702 0
2007 $10.702 $12.022 0
2008 $12.022 $8.337 1,129
2009 $8.337 $10.472 1,128
2010 $10.472 $11.642 1,127
---------------------------------------------------------------------------------------------------------
FIDELITY VIP CONTRAFUND PORTFOLIO--SERVICE CLASS 2
2004 $10.000 $11.274 0
2005 $11.274 $12.829 0
2006 $12.829 $13.947 0
2007 $13.947 $15.957 0
2008 $15.957 $8.920 0
2009 $8.920 $11.788 0
2010 $11.788 $13.446 0
---------------------------------------------------------------------------------------------------------
FIDELITY VIP EQUITY-INCOME PORTFOLIO--SERVICE CLASS 2
2004 $10.000 $10.730 0
2005 $10.730 $11.051 0
2006 $11.051 $12.930 0
2007 $12.930 $12.772 0
2008 $12.772 $7.125 1,122
2009 $7.125 $9.027 1,121
2010 $9.027 $10.120 1,120
138 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION PLUS
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
HIGH
MORTALITY & EXPENSE = 2.35
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
-----------------------------------------------------------------------------------------------------------------
FIDELITY VIP GROWTH PORTFOLIO--SERVICE CLASS 2
2004 $10.000 $9.709 0
2005 $9.709 $9.993 0
2006 $9.993 $10.390 0
2007 $10.390 $12.836 0
2008 $12.836 $6.597 0
2009 $6.597 $8.235 0
2010 $8.235 $9.951 0
-----------------------------------------------------------------------------------------------------------------
FIDELITY VIP INDEX 500 PORTFOLIO--SERVICE CLASS 2
2004 $10.000 $10.560 0
2005 $10.560 $10.771 0
2006 $10.771 $12.130 0
2007 $12.130 $12.444 0
2008 $12.444 $7.628 0
2009 $7.628 $9.398 0
2010 $9.398 $10.519 0
-----------------------------------------------------------------------------------------------------------------
FIDELITY VIP INVESTMENT GRADE BOND PORTFOLIO--SERVICE CLASS 2
2004 $10.000 $10.112 0
2005 $10.112 $10.051 0
2006 $10.051 $10.211 0
2007 $10.211 $10.367 0
2008 $10.367 $9.763 0
2009 $9.763 $10.997 0
2010 $10.997 $11.537 0
-----------------------------------------------------------------------------------------------------------------
FIDELITY VIP MONEY MARKET PORTFOLIO--SERVICE CLASS 2
2004 $10.000 $9.864 0
2005 $9.864 $9.890 0
2006 $9.890 $10.095 0
2007 $10.095 $10.334 0
2008 $10.334 $10.360 408
2009 $10.360 $10.154 0
2010 $10.154 $9.912 0
-----------------------------------------------------------------------------------------------------------------
FIDELITY VIP OVERSEAS PORTFOLIO--SERVICE CLASS 2
2004 $10.000 $10.820 0
2005 $10.820 $12.539 0
2006 $12.539 $14.406 0
2007 $14.406 $16.448 0
2008 $16.448 $8.991 925
2009 $8.991 $11.070 449
2010 $11.070 $12.185 448
139 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION PLUS
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
HIGH
MORTALITY & EXPENSE = 2.35
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
------------------------------------------------------------------------------------------------------------
INVESCO V.I. BASIC VALUE FUND--SERIES II
FORMERLY, AIM V.I. BASIC VALUE FUND--SERIES II
2004 $10.000 $10.636 0
2005 $10.636 $10.939 0
2006 $10.939 $12.053 0
2007 $12.053 $11.917 0
2008 $11.917 $5.591 0
2009 $5.591 $8.057 0
2010 $8.057 $8.406 0
------------------------------------------------------------------------------------------------------------
INVESCO V.I. CAPITAL APPRECIATION FUND--SERIES II
FORMERLY, AIM V.I. CAPITAL APPRECIATION FUND--SERIES II
2004 $10.000 $10.198 0
2005 $10.198 $10.803 0
2006 $10.803 $11.177 0
2007 $11.177 $12.181 0
2008 $12.181 $6.817 0
2009 $6.817 $8.028 0
2010 $8.028 $9.022 0
------------------------------------------------------------------------------------------------------------
INVESCO V.I. CORE EQUITY--SERIES II
FORMERLY, AIM V.I. CORE EQUITY FUND--SERIES II
2006 $10.000 $10.719 0
2007 $10.719 $11.279 0
2008 $11.279 $7.666 0
2009 $7.666 $9.571 0
2010 $9.571 $10.200 0
------------------------------------------------------------------------------------------------------------
INVESCO V.I. MID CAP CORE EQUITY FUND--SERIES II
FORMERLY, AIM V.I. MID CAP CORE EQUITY FUND--SERIES II
2004 $10.000 $10.877 0
2005 $10.877 $11.383 0
2006 $11.383 $12.324 0
2007 $12.324 $13.137 0
2008 $13.137 $9.139 0
2009 $9.139 $11.577 0
2010 $11.577 $12.849 0
------------------------------------------------------------------------------------------------------------
INVESCO VAN KAMPEN V.I. GOVERNMENT FUND--SERIES II
FORMERLY, VAN KAMPEN LIT GOVERNMENT PORTFOLIO, CLASS II
2004 $10.000 $10.084 0
2005 $10.084 $10.160 0
2006 $10.160 $10.220 0
2007 $10.220 $10.667 0
2008 $10.667 $10.563 0
2009 $10.563 $10.393 0
2010 $10.393 $10.634 0
140 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION PLUS
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
HIGH
MORTALITY & EXPENSE = 2.35
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
---------------------------------------------------------------------------------------------------------------------
INVESCO VAN KAMPEN V.I. GROWTH AND INCOME FUND--SERIES II
FORMERLY, VAN KAMPEN LIT GROWTH AND INCOME PORTFOLIO, CLASS II
2004 $10.000 $10.971 0
2005 $10.971 $11.743 0
2006 $11.743 $13.286 0
2007 $13.286 $13.286 0
2008 $13.286 $8.785 0
2009 $8.785 $10.636 0
2010 $10.636 $11.641 0
---------------------------------------------------------------------------------------------------------------------
INVESCO VAN KAMPEN V.I. MID CAP GROWTH FUND--SERIES II
FORMERLY, VAN KAMPEN LIT MID CAP GROWTH PORTFOLIO, CLASS II
2004 $10.000 $10.999 0
2005 $10.999 $11.923 0
2006 $11.923 $12.204 0
2007 $12.204 $13.998 0
2008 $13.998 $7.259 0
2009 $7.259 $11.074 0
2010 $11.074 $13.749 0
---------------------------------------------------------------------------------------------------------------------
JANUS ASPEN OVERSEAS PORTFOLIO--SERVICE SHARES
2008 $10.000 $6.694 0
2009 $6.694 $11.694 0
2010 $11.694 $14.262 0
---------------------------------------------------------------------------------------------------------------------
JANUS ASPEN PERKINS MID CAP VALUE PORTFOLIO--SERVICE SHARES
2004 $10.000 $11.188 0
2005 $11.188 $12.007 0
2006 $12.007 $13.478 0
2007 $13.478 $14.089 0
2008 $14.089 $9.909 0
2009 $9.909 $12.849 0
2010 $12.849 $14.460 0
---------------------------------------------------------------------------------------------------------------------
JANUS ASPEN PERKINS SMALL COMPANY VALUE PORTFOLIO--SERVICE SHARES
2005 $10.000 $10.891 0
2006 $10.891 $12.949 0
2007 $12.949 $11.858 0
2008 $11.858 $7.412 0
2009 $7.412 $6.999 0
---------------------------------------------------------------------------------------------------------------------
JANUS ASPEN SERIES BALANCED PORTFOLIO--SERVICE SHARES
2004 $10.000 $10.517 0
2005 $10.517 $11.046 0
2006 $11.046 $11.899 0
2007 $11.899 $12.799 0
2008 $12.799 $10.481 0
2009 $10.481 $12.839 0
2010 $12.839 $13.542 0
141 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION PLUS
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
HIGH
MORTALITY & EXPENSE = 2.35
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
----------------------------------------------------------------------------------------------------------------------
JANUS ASPEN SERIES FOREIGN STOCK PORTFOLIO--SERVICE SHARES
2004 $10.000 $11.202 0
2005 $11.202 $11.610 0
2006 $11.610 $13.372 0
2007 $13.372 $15.423 0
2008 $15.423 $14.462 0
----------------------------------------------------------------------------------------------------------------------
JANUS ASPEN SERIES FORTY PORTFOLIO--SERVICE SHARES
2004 $10.000 $11.374 0
2005 $11.374 $12.490 0
2006 $12.490 $13.295 0
2007 $13.295 $17.719 0
2008 $17.719 $9.625 0
2009 $9.625 $13.710 0
2010 $13.710 $14.241 0
----------------------------------------------------------------------------------------------------------------------
JANUS ASPEN SERIES INTECH RISK-MANAGED CORE PORTFOLIO--SERVICE
SHARES
2004 $10.000 $11.224 0
2005 $11.224 $12.144 0
2006 $12.144 $13.124 0
2007 $13.124 $13.585 0
2008 $13.585 $8.449 0
2009 $8.449 $10.101 0
2010 $10.101 $10.804 0
----------------------------------------------------------------------------------------------------------------------
LEGG MASON CLEARBRIDGE VARIABLE FUNDAMENTAL ALL CAP VALUE
PORTFOLIO--CLASS I SHARES
FORMERLY, LEGG MASON CLEARBRIDGE VARIABLE FUNDAMENTAL VALUE
PORTFOLIO--CLASS I
2007 $10.000 $9.436 0
2008 $9.436 $5.838 0
2009 $5.838 $7.367 0
2010 $7.367 $8.380 0
----------------------------------------------------------------------------------------------------------------------
LEGG MASON CLEARBRIDGE VARIABLE LARGE CAP VALUE PORTFOLIO--CLASS I
SHARES
FORMERLY, LEGG MASON CLEARBRIDGE VARIABLE INVESTORS PORTFOLIO--
CLASS I
2007 $10.000 $9.675 0
2008 $9.675 $6.075 0
2009 $6.075 $7.379 0
2010 $7.379 $7.879 0
----------------------------------------------------------------------------------------------------------------------
LEGG MASON WESTERN ASSET VARIABLE GLOBAL HIGH YIELD BOND
PORTFOLIO--CLASS II SHARES
2004 $10.000 $10.761 0
2005 $10.761 $10.870 0
2006 $10.870 $11.701 0
2007 $11.701 $11.376 0
2008 $11.376 $7.669 0
2009 $7.669 $11.585 0
2010 $11.585 $12.963 0
142 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION PLUS
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
HIGH
MORTALITY & EXPENSE = 2.35
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
----------------------------------------------------------------------------------------------------
MFS HIGH INCOME SERIES--SERVICE CLASS
2004 $10.000 $10.544 0
2005 $10.544 $10.497 0
2006 $10.497 $11.264 0
2007 $11.264 $11.156 0
2008 $11.156 $7.763 0
2009 $7.763 $10.998 0
2010 $10.998 $12.273 0
----------------------------------------------------------------------------------------------------
MFS INVESTORS GROWTH STOCK SERIES--SERVICE CLASS
2004 $10.000 $10.365 0
2005 $10.365 $10.539 0
2006 $10.539 $11.033 0
2007 $12.053 $11.917 0
2008 $11.917 $7.344 0
2009 $7.344 $9.965 0
2010 $9.965 $10.903 0
----------------------------------------------------------------------------------------------------
MFS INVESTORS TRUST SERIES--SERVICE CLASS
2004 $10.000 $10.700 0
2005 $10.700 $11.172 0
2006 $11.172 $12.282 0
2007 $11.033 $11.947 0
2008 $11.947 $8.582 0
2009 $8.582 $10.596 0
2010 $10.596 $11.461 0
----------------------------------------------------------------------------------------------------
MFS NEW DISCOVERY SERIES--SERVICE CLASS
2004 $10.000 $9.844 0
2005 $9.844 $10.086 0
2006 $10.086 $11.112 0
2007 $11.112 $11.082 0
2008 $11.082 $6.538 0
2009 $6.538 $10.391 0
2010 $10.391 $13.780 0
----------------------------------------------------------------------------------------------------
MFS TOTAL RETURN SERIES--SERVICE CLASS
2004 $10.000 $10.674 0
2005 $10.674 $10.684 0
2006 $10.684 $11.634 0
2007 $11.634 $11.794 0
2008 $11.794 $8.937 2,314
2009 $8.937 $10.263 1,124
2010 $10.263 $10.976 1,123
143 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION PLUS
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
HIGH
MORTALITY & EXPENSE = 2.35
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
---------------------------------------------------------------------------------------------------------------
MFS VALUE SERIES--SERVICE CLASS
2004 $10.000 $11.061 0
2005 $11.061 $11.489 0
2006 $11.489 $13.507 0
2007 $13.507 $14.175 0
2008 $14.175 $9.299 0
2009 $9.299 $11.108 0
2010 $11.108 $12.052 0
---------------------------------------------------------------------------------------------------------------
OPPENHEIMER GLOBAL SECURITIES FUND/VA--SERVICE SHARES
2004 $10.000 $11.275 0
2005 $11.275 $12.546 0
2006 $12.546 $14.365 0
2007 $14.365 $14.863 0
2008 $14.863 $8.651 0
2009 $8.651 $11.760 0
2010 $11.760 $13.274 0
---------------------------------------------------------------------------------------------------------------
OPPENHEIMER MAIN STREET SMALL CAP FUND/VA--SERVICE SHARES
2004 $10.000 $11.209 0
2005 $11.209 $11.997 0
2006 $11.997 $13.420 0
2007 $13.420 $12.907 0
2008 $12.907 $7.805 0
2009 $7.805 $10.422 0
2010 $10.422 $12.511 0
---------------------------------------------------------------------------------------------------------------
OPPENHEIMER SMALL- & MID-CAP GROWTH FUND/VA--SERVICE SHARES
FORMERLY, OPPENHEIMER MIDCAP FUND/VA--SERVICE SHARES
2005 $10.000 $11.635 0
2006 $11.635 $11.657 0
2007 $11.657 $12.056 0
2008 $12.056 $5.973 0
2009 $5.973 $7.706 0
2010 $7.706 $9.559 0
---------------------------------------------------------------------------------------------------------------
PIMCO VIT FOREIGN BOND PORTFOLIO (U.S. DOLLAR-HEDGED)--
ADMINISTRATIVE SHARES
2004 $10.000 $10.276 0
2005 $10.276 $10.541 0
2006 $10.541 $10.509 0
2007 $10.509 $10.623 0
2008 $10.623 $10.116 0
2009 $10.116 $11.410 0
2010 $11.410 $12.077 0
144 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION PLUS
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
HIGH
MORTALITY & EXPENSE = 2.35
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
-----------------------------------------------------------------------------------------------------------
PIMCO VIT MONEY MARKET PORTFOLIO--ADMINISTRATIVE SHARES
2004 $10.000 $9.858 0
2005 $9.858 $9.883 0
2006 $9.883 $10.087 0
2007 $10.087 $10.318 0
2008 $10.318 $10.292 0
2009 $10.292 $10.052 0
2010 $10.052 $9.810 0
-----------------------------------------------------------------------------------------------------------
PIMCO VIT REAL RETURN PORTFOLIO--ADMINISTRATIVE SHARES
2004 $10.000 $10.489 0
2005 $10.489 $10.446 0
2006 $10.446 $10.263 0
2007 $10.263 $11.079 0
2008 $11.079 $10.047 0
2009 $10.047 $11.603 0
2010 $11.603 $12.237 0
-----------------------------------------------------------------------------------------------------------
PIMCO VIT TOTAL RETURN PORTFOLIO--ADMINISTRATIVE SHARES
2004 $10.000 $10.178 0
2005 $10.178 $10.172 0
2006 $10.172 $10.306 0
2007 $10.306 $10.934 0
2008 $10.934 $11.180 1,432
2009 $11.180 $12.441 675
2010 $12.441 $13.121 674
-----------------------------------------------------------------------------------------------------------
PREMIER VIT OPCAP BALANCED PORTFOLIO
2004 $10.000 $10.724 0
2005 $10.724 $10.749 0
2006 $10.749 $11.618 0
2007 $11.618 $10.829 0
2008 $10.829 $7.270 0
2009 $7.270 $6.989 0
-----------------------------------------------------------------------------------------------------------
PREMIER VIT OPCAP RENAISSANCE PORTFOLIO
2004 $10.000 $11.115 0
2005 $11.115 $10.352 0
2006 $10.352 $11.248 0
2007 $11.248 $11.665 0
2008 $11.665 $10.534 0
-----------------------------------------------------------------------------------------------------------
RYDEX SGI VT US LONG SHORT MOMENTUM
FORMERLY, RYDEX VT ALL-CAP OPPORTUNITY
2004 $10.000 $10.491 0
2005 $10.491 $11.638 0
2006 $11.638 $12.647 0
2007 $12.647 $15.141 0
2008 $15.141 $8.753 0
2009 $8.753 $10.869 0
2010 $10.869 $11.791 0
145 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION PLUS
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
HIGH
MORTALITY & EXPENSE = 2.35
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
------------------------------------------------------------------------------------------------------
T. ROWE PRICE BLUE CHIP GROWTH PORTFOLIO--II
2004 $10.000 $10.383 0
2005 $10.383 $10.701 0
2006 $10.701 $11.413 0
2007 $11.413 $12.523 0
2008 $12.523 $7.005 0
2009 $7.005 $9.690 0
2010 $9.690 $10.965 0
------------------------------------------------------------------------------------------------------
T. ROWE PRICE EQUITY INCOME PORTFOLIO--II
2004 $10.000 $10.993 0
2005 $10.993 $11.121 0
2006 $11.121 $12.873 0
2007 $12.873 $12.936 0
2008 $12.936 $8.042 1,333
2009 $8.042 $9.826 0
2010 $9.826 $10.999 0
------------------------------------------------------------------------------------------------------
UIF CAPITAL GROWTH PORTFOLIO, CLASS II
2004 $10.000 $10.278 0
2005 $10.278 $11.579 0
2006 $11.579 $11.726 0
2007 $11.726 $13.915 0
2008 $13.915 $6.875 0
2009 $6.875 $11.076 0
2010 $11.076 $13.248 0
------------------------------------------------------------------------------------------------------
UIF U.S. REAL ESTATE PORTFOLIO, CLASS II
2004 $10.000 $12.722 0
2005 $12.722 $14.491 0
2006 $14.491 $19.462 0
2007 $19.462 $15.704 0
2008 $15.704 $9.488 0
2009 $9.488 $11.893 0
2010 $11.893 $15.028 0
------------------------------------------------------------------------------------------------------
VAN ECK VIP EMERGING MARKETS FUND--INITIAL CLASS
FORMERLY, VAN ECK WORLDWIDE EMERGING MARKETS FUND
2004 $10.000 $11.983 0
2005 $11.983 $15.431 0
2006 $15.431 $20.999 0
2007 $20.999 $28.186 0
2008 $28.186 $9.683 0
2009 $9.683 $20.137 0
2010 $20.137 $24.917 0
146 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION PLUS
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
HIGH
MORTALITY & EXPENSE = 2.35
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
----------------------------------------------------------------------------------------------------------------------
VAN ECK VIP GLOBAL HARD ASSETS FUND--INITIAL CLASS
FORMERLY, VAN ECK WORLDWIDE HARD ASSETS FUND
2004 $10.000 $12.329 0
2005 $12.329 $18.243 0
2006 $18.243 $22.156 0
2007 $22.156 $31.412 0
2008 $31.412 $16.508 0
2009 $16.508 $25.368 0
2010 $25.368 $31.982 0
----------------------------------------------------------------------------------------------------------------------
VAN ECK VIP MULTI-MANAGER ALTERNATIVE--INITIAL CLASS
FORMERLY, VAN ECK WORLDWIDE MULTI-MANAGER ALTERNATIVES FUND-CLS I
2004 $10.000 $9.817 0
2005 $9.817 $9.596 0
2006 $9.596 $10.172 0
2007 $10.172 $10.324 0
2008 $10.324 $8.752 0
2009 $8.752 $9.721 0
2010 $9.721 $9.955 0
* The Accumulation Unit Values in this table reflect a mortality and expense
risk charge of 2.35% and an administrative expense charge of 0.10%.
147 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION SELECT
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
LOW
MORTALITY & EXPENSE = 1.7
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
---------------------------------------------------------------------------------------------------------
ALGER CAPITAL APPRECIATION PORTFOLIO--CLASS S
2004 $10.000 $10.177 2,386
2005 $10.177 $11.409 39,056
2006 $11.409 $13.328 4,489
2007 $13.328 $17.432 18,890
2008 $17.432 $9.369 12,250
2009 $9.369 $13.864 8,797
2010 $13.864 $15.470 4,945
---------------------------------------------------------------------------------------------------------
ALGER LARGE CAP GROWTH PORTFOLIO--CLASS S
2004 $10.000 $10.061 13,364
2005 $10.061 $11.038 13,863
2006 $11.038 $11.371 10,863
2007 $11.371 $13.357 10,486
2008 $13.357 $7.044 20,165
2009 $7.044 $10.186 15,504
2010 $10.186 $11.294 14,306
---------------------------------------------------------------------------------------------------------
ALGER MID CAP GROWTH PORTFOLIO--CLASS S
2004 $10.000 $10.584 27,739
2005 $10.584 $11.385 54,020
2006 $11.385 $12.286 5,659
2007 $12.286 $15.837 32,351
2008 $15.837 $6.458 30,915
2009 $6.458 $9.596 15,709
2010 $9.596 $11.203 14,156
---------------------------------------------------------------------------------------------------------
FIDELITY VIP ASSET MANAGER PORTFOLIO--SERVICE CLASS 2
2004 $10.000 $10.174 20,705
2005 $10.174 $10.369 26,325
2006 $10.369 $10.910 19,985
2007 $10.910 $12.338 10,303
2008 $12.338 $8.614 15,530
2009 $8.614 $10.891 13,118
2010 $10.891 $12.189 8,427
---------------------------------------------------------------------------------------------------------
FIDELITY VIP CONTRAFUND PORTFOLIO--SERVICE CLASS 2
2004 $10.000 $11.342 45,341
2005 $11.342 $12.993 144,919
2006 $12.993 $14.218 32,667
2007 $14.218 $16.377 80,603
2008 $16.377 $9.216 102,855
2009 $9.216 $12.260 81,493
2010 $12.260 $14.077 53,895
---------------------------------------------------------------------------------------------------------
FIDELITY VIP EQUITY-INCOME PORTFOLIO--SERVICE CLASS 2
2004 $10.000 $10.795 46,651
2005 $10.795 $11.192 93,792
2006 $11.192 $13.182 19,478
2007 $13.182 $13.108 98,411
2008 $13.108 $7.361 102,049
2009 $7.361 $9.388 75,431
2010 $9.388 $10.595 78,583
148 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION SELECT
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
LOW
MORTALITY & EXPENSE = 1.7
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
-----------------------------------------------------------------------------------------------------------------
FIDELITY VIP GROWTH PORTFOLIO--SERVICE CLASS 2
2004 $10.000 $9.768 28,770
2005 $9.768 $10.120 55,605
2006 $10.120 $10.592 11,849
2007 $10.592 $13.173 75,363
2008 $13.173 $6.816 71,379
2009 $6.816 $8.565 57,607
2010 $8.565 $10.418 58,821
-----------------------------------------------------------------------------------------------------------------
FIDELITY VIP INDEX 500 PORTFOLIO--SERVICE CLASS 2
2004 $10.000 $10.624 125,438
2005 $10.624 $10.908 263,983
2006 $10.908 $12.366 43,696
2007 $12.366 $12.772 211,816
2008 $12.772 $7.881 225,131
2009 $7.881 $9.775 188,699
2010 $9.775 $11.013 186,215
-----------------------------------------------------------------------------------------------------------------
FIDELITY VIP INVESTMENT GRADE BOND PORTFOLIO--SERVICE CLASS 2
2004 $10.000 $10.173 48,708
2005 $10.173 $10.180 101,437
2006 $10.180 $10.410 31,813
2007 $10.410 $10.639 90,643
2008 $10.639 $10.086 138,607
2009 $10.086 $11.437 109,299
2010 $11.437 $12.079 73,245
-----------------------------------------------------------------------------------------------------------------
FIDELITY VIP MONEY MARKET PORTFOLIO--SERVICE CLASS 2
2004 $10.000 $9.924 168,709
2005 $9.924 $10.016 228,196
2006 $10.016 $10.291 33,135
2007 $10.291 $10.606 258,815
2008 $10.606 $10.703 280,115
2009 $10.703 $10.560 204,879
2010 $10.560 $10.378 115,332
-----------------------------------------------------------------------------------------------------------------
FIDELITY VIP OVERSEAS PORTFOLIO--SERVICE CLASS 2
2004 $10.000 $10.886 28,247
2005 $10.886 $12.698 49,873
2006 $12.698 $14.687 16,491
2007 $14.687 $16.880 84,356
2008 $16.880 $9.289 71,734
2009 $9.289 $11.514 59,741
2010 $11.514 $12.757 48,418
149 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION SELECT
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
LOW
MORTALITY & EXPENSE = 1.7
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
------------------------------------------------------------------------------------------------------------
INVESCO V.I. BASIC VALUE FUND--SERIES II
FORMERLY, AIM V.I. BASIC VALUE FUND--SERIES II
2004 $10.000 $10.701 11,482
2005 $10.701 $11.079 24,729
2006 $11.079 $12.288 8,519
2007 $12.288 $12.230 26,372
2008 $12.230 $5.776 28,022
2009 $5.776 $8.380 17,395
2010 $8.380 $8.801 15,645
------------------------------------------------------------------------------------------------------------
INVESCO V.I. CAPITAL APPRECIATION FUND--SERIES II
FORMERLY, AIM V.I. CAPITAL APPRECIATION FUND--SERIES II
2004 $10.000 $10.260 15,284
2005 $10.260 $10.940 18,497
2006 $10.940 $11.395 4,420
2007 $11.395 $12.501 9,752
2008 $12.501 $7.043 14,356
2009 $7.043 $8.349 12,418
2010 $8.349 $9.446 6,468
------------------------------------------------------------------------------------------------------------
INVESCO V.I. CORE EQUITY--SERIES II
FORMERLY, AIM V.I. CORE EQUITY FUND--SERIES II
2006 $10.000 $10.767 3,608
2007 $10.767 $11.405 16,749
2008 $11.405 $7.804 23,452
2009 $7.804 $9.807 16,715
2010 $9.807 $10.522 14,055
------------------------------------------------------------------------------------------------------------
INVESCO V.I. MID CAP CORE EQUITY FUND--SERIES II
FORMERLY, AIM V.I. MID CAP CORE EQUITY FUND--SERIES II
2004 $10.000 $10.943 2,665
2005 $10.943 $11.528 3,174
2006 $11.528 $12.564 10,458
2007 $12.564 $13.482 12,802
2008 $13.482 $9.442 35,385
2009 $9.442 $12.040 23,028
2010 $12.040 $13.453 21,748
------------------------------------------------------------------------------------------------------------
INVESCO VAN KAMPEN V.I. GOVERNMENT FUND--SERIES II
FORMERLY, VAN KAMPEN LIT GOVERNMENT PORTFOLIO, CLASS II
2004 $10.000 $10.145 28,946
2005 $10.145 $10.289 43,426
2006 $10.289 $10.419 5,556
2007 $10.419 $10.948 21,802
2008 $10.948 $10.914 24,600
2009 $10.914 $10.809 15,906
2010 $10.809 $11.133 41,188
150 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION SELECT
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
LOW
MORTALITY & EXPENSE = 1.7
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
---------------------------------------------------------------------------------------------------------------------
INVESCO VAN KAMPEN V.I. GROWTH AND INCOME FUND--SERIES II
FORMERLY, VAN KAMPEN LIT GROWTH AND INCOME PORTFOLIO, CLASS II
2004 $10.000 $11.037 16,781
2005 $11.037 $11.892 31,692
2006 $11.892 $13.544 12,839
2007 $13.544 $13.635 34,015
2008 $13.635 $9.076 41,700
2009 $9.076 $11.062 31,070
2010 $11.062 $12.187 27,922
---------------------------------------------------------------------------------------------------------------------
INVESCO VAN KAMPEN V.I. MID CAP GROWTH FUND--SERIES II
FORMERLY, VAN KAMPEN LIT MID CAP GROWTH PORTFOLIO, CLASS II
2004 $10.000 $11.066 1,962
2005 $11.066 $12.075 3,009
2006 $12.075 $12.441 3,261
2007 $12.441 $14.367 10,156
2008 $14.367 $7.500 5,141
2009 $7.500 $11.517 10,158
2010 $11.517 $14.395 7,082
---------------------------------------------------------------------------------------------------------------------
JANUS ASPEN OVERSEAS PORTFOLIO--SERVICE SHARES
2008 $10.000 $6.916 7,352
2009 $6.916 $12.163 7,507
2010 $12.163 $14.932 5,973
---------------------------------------------------------------------------------------------------------------------
JANUS ASPEN PERKINS MID CAP VALUE PORTFOLIO--SERVICE SHARES
2004 $10.000 $11.256 11,610
2005 $11.256 $12.159 21,644
2006 $12.159 $13.740 10,246
2007 $13.740 $14.459 34,280
2008 $14.459 $10.238 42,657
2009 $10.238 $13.363 30,080
2010 $13.363 $15.139 24,624
---------------------------------------------------------------------------------------------------------------------
JANUS ASPEN PERKINS SMALL COMPANY VALUE PORTFOLIO--SERVICE SHARES
2005 $10.000 $10.940 3,239
2006 $10.940 $13.093 2,462
2007 $13.093 $12.071 12,418
2008 $12.071 $7.596 19,904
2009 $7.596 $7.188 0
---------------------------------------------------------------------------------------------------------------------
JANUS ASPEN SERIES BALANCED PORTFOLIO--SERVICE SHARES
2004 $10.000 $10.581 10,013
2005 $10.581 $11.187 17,505
2006 $11.187 $12.130 1,999
2007 $12.130 $13.136 14,877
2008 $13.136 $10.828 22,471
2009 $10.828 $13.353 19,202
2010 $13.353 $14.178 20,105
151 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION SELECT
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
LOW
MORTALITY & EXPENSE = 1.7
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
-----------------------------------------------------------------------------------------------------------------------
JANUS ASPEN SERIES FOREIGN STOCK PORTFOLIO--SERVICE SHARES
2004 $10.000 $11.270 27,022
2005 $11.270 $11.758 6,336
2006 $11.758 $13.632 2,516
2007 $13.632 $15.829 6,797
2008 $15.829 $14.875 0
-----------------------------------------------------------------------------------------------------------------------
JANUS ASPEN SERIES FORTY PORTFOLIO--SERVICE SHARES
2004 $10.000 $11.443 1,269
2005 $11.443 $12.649 11,195
2006 $12.649 $13.554 2,354
2007 $13.554 $18.185 13,531
2008 $18.185 $9.944 14,716
2009 $9.944 $14.259 12,938
2010 $14.259 $14.910 10,052
-----------------------------------------------------------------------------------------------------------------------
JANUS ASPEN SERIES INTECH RISK-MANAGED CORE PORTFOLIO--SERVICE
SHARES
2004 $10.000 $11.292 4,773
2005 $11.292 $12.299 28,781
2006 $12.299 $13.379 901
2007 $13.379 $13.943 13,792
2008 $13.943 $8.729 10,922
2009 $8.729 $10.506 5,256
-----------------------------------------------------------------------------------------------------------------------
LEGG MASON CLEARBRIDGE VARIABLE FUNDAMENTAL ALL CAP VALUE
PORTFOLIO--CLASS I SHARES
FORMERLY, LEGG MASON CLEARBRIDGE VARIABLE FUNDAMENTAL VALUE
PORTFOLIO--CLASS I
2007 $10.000 $9.479 553
2008 $9.479 $5.904 8,461
2009 $5.904 $7.499 6,476
2010 $7.499 $8.587 6,522
-----------------------------------------------------------------------------------------------------------------------
LEGG MASON CLEARBRIDGE VARIABLE LARGE CAP VALUE PORTFOLIO--CLASS I
SHARES
FORMERLY, LEGG MASON CLEARBRIDGE VARIABLE INVESTORS PORTFOLIO--
CLASS I
2007 $10.000 $9.718 10,050
2008 $9.718 $6.144 8,585
2009 $6.144 $7.511 4,311
2010 $7.511 $8.074 3,403
-----------------------------------------------------------------------------------------------------------------------
LEGG MASON WESTERN ASSET VARIABLE GLOBAL HIGH YIELD BOND PORTFOLIO--
CLASS II SHARES
2004 $10.000 $10.286 17,645
2005 $10.826 $11.008 46,676
2006 $11.008 $11.929 15,302
2007 $11.929 $11.675 47,449
2008 $11.675 $7.924 53,932
2009 $7.924 $12.049 33,607
2010 $12.049 $13.571 22,444
152 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION SELECT
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
LOW
MORTALITY & EXPENSE = 1.7
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
----------------------------------------------------------------------------------------------------
MFS HIGH INCOME SERIES--SERVICE CLASS
2004 $10.000 $10.608 23,363
2005 $10.608 $10.631 20,622
2006 $10.631 $11.483 6,286
2007 $11.483 $11.449 23,290
2008 $11.449 $8.020 27,280
2009 $8.020 $11.438 18,164
2010 $11.438 $12.849 12,581
----------------------------------------------------------------------------------------------------
MFS INVESTORS GROWTH STOCK SERIES--SERVICE CLASS
2004 $10.000 $10.428 1,297
2005 $10.428 $10.673 14,429
2006 $10.673 $11.248 7,739
2007 $11.248 $12.262 18,306
2008 $12.262 $7.588 22,364
2009 $7.588 $10.365 18,949
2010 $10.365 $11.415 15,205
----------------------------------------------------------------------------------------------------
MFS INVESTORS TRUST SERIES--SERVICE CLASS
2004 $10.000 $10.765 1,311
2005 $10.765 $11.314 5,472
2006 $11.314 $12.521 1,693
2007 $12.521 $13.528 3,450
2008 $13.528 $8.867 5,345
2009 $8.867 $11.020 3,217
2010 $11.020 $11.999 1,719
----------------------------------------------------------------------------------------------------
MFS NEW DISCOVERY SERIES--SERVICE CLASS
2004 $10.000 $9.903 6,659
2005 $9.903 $10.215 7,704
2006 $10.215 $11.329 2,187
2007 $11.329 $11.374 10,252
2008 $11.374 $6.755 10,509
2009 $6.755 $10.807 13,125
2010 $10.807 $14.427 9,230
----------------------------------------------------------------------------------------------------
MFS TOTAL RETURN SERIES--SERVICE CLASS
2004 $10.000 $10.739 19,818
2005 $10.739 $10.820 51,781
2006 $10.820 $11.861 18,099
2007 $11.861 $12.104 20,247
2008 $12.104 $9.233 26,900
2009 $9.233 $10.674 20,112
2010 $10.674 $11.492 13,332
153 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION SELECT
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
LOW
MORTALITY & EXPENSE = 1.7
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
---------------------------------------------------------------------------------------------------------------
MFS VALUE SERIES--SERVICE CLASS
2004 $10.000 $11.128 3,382
2005 $11.128 $11.635 5,222
2006 $11.635 $13.770 2,124
2007 $13.770 $14.547 8,826
2008 $14.547 $9.608 4,507
2009 $9.608 $11.553 3,502
2010 $11.553 $12.618 2,399
---------------------------------------------------------------------------------------------------------------
OPPENHEIMER GLOBAL SECURITIES FUND/VA--SERVICE SHARES
2004 $10.000 $11.343 62,080
2005 $11.343 $12.706 86,497
2006 $12.706 $14.644 10,134
2007 $14.644 $15.254 111,096
2008 $15.254 $8.938 64,672
2009 $8.938 $12.231 44,368
2010 $12.231 $13.897 41,921
---------------------------------------------------------------------------------------------------------------
OPPENHEIMER MAIN STREET SMALL CAP FUND/VA--SERVICE SHARES
2004 $10.000 $11.277 35,420
2005 $11.277 $12.150 81,846
2006 $12.150 $13.681 11,584
2007 $13.681 $13.246 44,402
2008 $13.246 $8.064 43,930
2009 $8.064 $10.840 31,176
2010 $10.840 $13.099 26,227
---------------------------------------------------------------------------------------------------------------
OPPENHEIMER SMALL- & MID-CAP GROWTH FUND/VA--SERVICE SHARES
FORMERLY, OPPENHEIMER MIDCAP FUND/VA--SERVICE SHARES
2005 $10.000 $11.687 7,856
2006 $11.687 $11.787 7,348
2007 $11.787 $12.272 5,022
2008 $12.272 $6.120 7,593
2009 $6.120 $7.949 8,703
2010 $7.949 $9.927 6,348
---------------------------------------------------------------------------------------------------------------
PIMCO VIT FOREIGN BOND PORTFOLIO (U.S. DOLLAR-HEDGED)--
ADMINISTRATIVE SHARES
2004 $10.000 $10.339 9,772
2005 $10.339 $10.676 47,366
2006 $10.676 $10.714 8,948
2007 $10.714 $10.902 33,647
2008 $10.902 $10.451 27,562
2009 $10.451 $11.867 25,316
2010 $11.867 $12.644 20,331
154 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION SELECT
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
LOW
MORTALITY & EXPENSE = 1.7
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
-----------------------------------------------------------------------------------------------------------
PIMCO VIT MONEY MARKET PORTFOLIO--ADMINISTRATIVE SHARES
2004 $10.000 $9.918 158,641
2005 $9.918 $10.009 150,481
2006 $10.009 $10.283 27,607
2007 $10.283 $10.590 32,822
2008 $10.590 $10.634 91,586
2009 $10.634 $10.454 70,508
2010 $10.454 $10.271 58,599
-----------------------------------------------------------------------------------------------------------
PIMCO VIT REAL RETURN PORTFOLIO--ADMINISTRATIVE SHARES
2004 $10.000 $10.552 42,470
2005 $10.552 $10.579 122,346
2006 $10.579 $10.462 16,994
2007 $10.462 $11.371 42,156
2008 $11.371 $10.380 41,393
2009 $10.380 $12.068 32,397
2010 $12.068 $12.812 32,722
-----------------------------------------------------------------------------------------------------------
PIMCO VIT TOTAL RETURN PORTFOLIO--ADMINISTRATIVE SHARES
2004 $10.000 $10.240 58,540
2005 $10.240 $10.302 76,949
2006 $10.302 $10.507 28,759
2007 $10.507 $11.221 79,939
2008 $11.221 $11.550 109,474
2009 $11.550 $12.939 93,450
2010 $12.939 $13.737 84,488
-----------------------------------------------------------------------------------------------------------
PREMIER VIT OPCAP BALANCED PORTFOLIO
2004 $10.000 $10.772 5,494
2005 $10.772 $10.868 6,958
2006 $10.868 $11.826 560
2007 $11.826 $11.096 7,098
2008 $11.096 $7.499 9,792
2009 $7.499 $7.225 0
-----------------------------------------------------------------------------------------------------------
PREMIER VIT OPCAP RENAISSANCE PORTFOLIO
2004 $10.000 $11.182 31,488
2005 $11.182 $10.484 23,563
2006 $10.484 $11.467 6,181
2007 $11.467 $11.971 12,010
2008 $11.971 $10.815 0
-----------------------------------------------------------------------------------------------------------
RYDEX SGI VT US LONG SHORT MOMENTUM
FORMERLY, RYDEX VT ALL-CAP OPPORTUNITY
2004 $10.000 $10.555 418
2005 $10.555 $11.787 4,603
2006 $11.787 $12.893 5,562
2007 $12.893 $15.539 6,080
2008 $15.539 $9.043 13,735
2009 $9.043 $11.304 13,289
2010 $11.304 $12.345 12,260
155 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION SELECT
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
LOW
MORTALITY & EXPENSE = 1.7
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
------------------------------------------------------------------------------------------------------
T. ROWE PRICE BLUE CHIP GROWTH PORTFOLIO--II
2004 $10.000 $10.446 6,370
2005 $10.446 $10.837 57,136
2006 $10.837 $11.636 16,451
2007 $11.636 $12.852 54,684
2008 $12.852 $7.238 68,814
2009 $7.238 $10.078 50,583
2010 $10.078 $11.480 35,122
------------------------------------------------------------------------------------------------------
T. ROWE PRICE EQUITY INCOME PORTFOLIO--II
2004 $10.000 $11.060 57,291
2005 $11.060 $11.263 110,586
2006 $11.263 $13.123 28,044
2007 $13.123 $13.276 72,693
2008 $13.276 $8.309 93,184
2009 $8.309 $10.220 63,978
2010 $10.220 $11.515 56,769
------------------------------------------------------------------------------------------------------
UIF CAPITAL GROWTH PORTFOLIO, CLASS II
2004 $10.000 $10.340 2,987
2005 $10.340 $11.726 7,296
2006 $11.726 $11.954 1,579
2007 $11.954 $14.281 1,834
2008 $14.281 $7.103 3,770
2009 $7.103 $11.520 5,504
2010 $11.520 $13.870 4,539
------------------------------------------------------------------------------------------------------
UIF U.S. REAL ESTATE PORTFOLIO, CLASS II
2004 $10.000 $12.799 40,344
2005 $12.799 $14.675 59,925
2006 $14.675 $19.841 23,273
2007 $19.841 $16.117 49,639
2008 $16.117 $9.803 52,161
2009 $9.803 $12.369 39,348
2010 $12.369 $15.734 29,572
------------------------------------------------------------------------------------------------------
VAN ECK VIP EMERGING MARKETS FUND--INITIAL CLASS
FORMERLY, VAN ECK WORLDWIDE EMERGING MARKETS FUND
2004 $10.000 $12.055 2,104
2005 $12.055 $15.627 18,780
2006 $15.627 $21.408 5,890
2007 $21.408 $28.927 22,998
2008 $28.927 $10.004 15,749
2009 $10.004 $20.943 10,954
2010 $20.943 $26.087 7,376
156 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION
SELECT CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
LOW
MORTALITY & EXPENSE = 1.7
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
----------------------------------------------------------------------------------------------------------------------
VAN ECK VIP GLOBAL HARD ASSETS FUND--INITIAL CLASS
FORMERLY, VAN ECK WORLDWIDE HARD ASSETS FUND
2004 $10.000 $12.403 6,528
2005 $12.403 $18.475 31,637
2006 $18.475 $22.587 59,022
2007 $22.587 $32.238 35,164
2008 $32.238 $17.055 36,260
2009 $17.055 $26.383 36,520
2010 $26.383 $33.484 30,164
----------------------------------------------------------------------------------------------------------------------
VAN ECK VIP MULTI-MANAGER ALTERNATIVE--INITIAL CLASS
FORMERLY, VAN ECK WORLDWIDE MULTI-MANAGER ALTERNATIVES FUND-CLS I
2004 $10.000 $9.876 1,961
2005 $9.876 $9.719 2,232
2006 $9.719 $10.370 8,505
2007 $10.370 $10.595 5,710
2008 $10.595 $9.042 3,607
2009 $9.042 $10.110 2,562
2010 $10.110 $10.422 2,634
* The Accumulation Unit Values in this table reflect a mortality and expense
risk charge of 1.70% and an administrative expense charge of 0.10%.
157 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION SELECT
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
HIGH
MORTALITY & EXPENSE = 2.6
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
---------------------------------------------------------------------------------------------------------
ALGER CAPITAL APPRECIATION PORTFOLIO--CLASS S
2004 $10.000 $10.092 0
2005 $10.092 $11.210 0
2006 $11.210 $12.977 0
2007 $12.977 $16.815 0
2008 $16.815 $8.955 0
2009 $8.955 $13.130 0
2010 $13.130 $14.517 0
---------------------------------------------------------------------------------------------------------
ALGER LARGE CAP GROWTH PORTFOLIO--CLASS S
2004 $10.000 $9.977 0
2005 $9.977 $10.846 0
2006 $10.846 $11.071 0
2007 $11.071 $12.885 0
2008 $12.885 $6.733 0
2009 $6.733 $9.646 0
2010 $9.646 $10.597 0
---------------------------------------------------------------------------------------------------------
ALGER MID CAP GROWTH PORTFOLIO--CLASS S
2004 $10.000 $10.495 0
2005 $10.495 $11.187 0
2006 $11.187 $11.962 0
2007 $11.962 $15.277 0
2008 $15.277 $6.172 0
2009 $6.172 $9.087 0
2010 $9.087 $10.512 0
---------------------------------------------------------------------------------------------------------
FIDELITY VIP ASSET MANAGER PORTFOLIO--SERVICE CLASS 2
2004 $10.000 $10.089 0
2005 $10.089 $10.189 0
2006 $10.189 $10.622 0
2007 $10.622 $11.902 0
2008 $11.902 $8.233 0
2009 $8.233 $10.314 0
2010 $10.314 $11.438 0
---------------------------------------------------------------------------------------------------------
FIDELITY VIP CONTRAFUND PORTFOLIO--SERVICE CLASS 2
2004 $10.000 $11.247 0
2005 $11.247 $12.767 0
2006 $12.767 $13.843 0
2007 $13.843 $15.798 0
2008 $15.798 $8.809 0
2009 $8.809 $11.611 0
2010 $11.611 $13.210 0
---------------------------------------------------------------------------------------------------------
FIDELITY VIP EQUITY-INCOME PORTFOLIO--SERVICE CLASS 2
2004 $10.000 $10.705 0
2005 $10.705 $10.997 0
2006 $10.997 $12.834 0
2007 $12.834 $12.644 0
2008 $12.644 $7.035 0
2009 $7.035 $8.891 0
2010 $8.891 $9.942 0
158 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION SELECT
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
HIGH
MORTALITY & EXPENSE = 2.6
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
-----------------------------------------------------------------------------------------------------------------
FIDELITY VIP GROWTH PORTFOLIO--SERVICE CLASS 2
2004 $10.000 $9.686 0
2005 $9.686 $9.944 0
2006 $9.944 $10.313 0
2007 $10.313 $12.707 0
2008 $12.707 $6.514 0
2009 $6.514 $8.111 0
2010 $8.111 $9.776 0
-----------------------------------------------------------------------------------------------------------------
FIDELITY VIP INDEX 500 PORTFOLIO--SERVICE CLASS 2
2004 $10.000 $10.535 0
2005 $10.535 $10.719 0
2006 $10.719 $12.040 0
2007 $12.040 $12.320 0
2008 $12.320 $7.533 0
2009 $7.533 $9.257 0
2010 $9.257 $10.334 0
-----------------------------------------------------------------------------------------------------------------
FIDELITY VIP INVESTMENT GRADE BOND PORTFOLIO--SERVICE CLASS 2
2004 $10.000 $10.088 0
2005 $10.088 $10.002 0
2006 $10.002 $10.136 0
2007 $10.136 $10.263 0
2008 $10.263 $9.641 0
2009 $9.641 $10.831 0
2010 $10.831 $11.334 0
-----------------------------------------------------------------------------------------------------------------
FIDELITY VIP MONEY MARKET PORTFOLIO--SERVICE CLASS 2
2004 $10.000 $9.841 0
2005 $9.841 $9.842 0
2006 $9.842 $10.020 0
2007 $10.020 $10.231 0
2008 $10.231 $10.230 0
2009 $10.230 $10.001 0
2010 $10.001 $9.738 0
-----------------------------------------------------------------------------------------------------------------
FIDELITY VIP OVERSEAS PORTFOLIO--SERVICE CLASS 2
2004 $10.000 $10.795 0
2005 $10.795 $12.477 0
2006 $12.477 $14.299 0
2007 $14.299 $16.284 0
2008 $16.284 $8.878 0
2009 $8.878 $10.904 0
2010 $10.904 $11.971 0
159 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION SELECT
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
HIGH
MORTALITY & EXPENSE = 2.6
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
------------------------------------------------------------------------------------------------------------
INVESCO V.I. BASIC VALUE FUND--SERIES II
FORMERLY, AIM V.I. BASIC VALUE FUND--SERIES II
2004 $10.000 $10.611 0
2005 $10.611 $10.886 0
2006 $10.886 $11.964 0
2007 $11.964 $11.798 0
2008 $11.798 $5.521 0
2009 $5.521 $7.936 0
2010 $7.936 $8.258 0
------------------------------------------------------------------------------------------------------------
INVESCO V.I. CAPITAL APPRECIATION FUND--SERIES II
FORMERLY, AIM V.I. CAPITAL APPRECIATION FUND--SERIES II
2004 $10.000 $10.175 0
2005 $10.175 $10.750 0
2006 $10.750 $11.094 0
2007 $11.094 $12.059 0
2008 $12.059 $6.732 0
2009 $6.732 $7.907 0
2010 $7.907 $8.864 0
------------------------------------------------------------------------------------------------------------
INVESCO V.I. CORE EQUITY--SERIES II
FORMERLY, AIM V.I. CORE EQUITY FUND--SERIES II
2006 $10.000 $10.700 0
2007 $10.700 $11.230 0
2008 $11.230 $7.613 0
2009 $7.613 $9.481 0
2010 $9.481 $10.078 0
------------------------------------------------------------------------------------------------------------
INVESCO V.I. MID CAP CORE EQUITY FUND--SERIES II
FORMERLY, AIM V.I. MID CAP CORE EQUITY FUND--SERIES II
2004 $10.000 $10.852 0
2005 $10.852 $11.327 0
2006 $11.327 $12.233 0
2007 $12.233 $13.005 0
2008 $13.005 $9.025 0
2009 $9.025 $11.403 0
2010 $11.403 $12.624 0
------------------------------------------------------------------------------------------------------------
INVESCO VAN KAMPEN V.I. GOVERNMENT FUND--SERIES II
FORMERLY, VAN KAMPEN LIT GOVERNMENT PORTFOLIO, CLASS II
2004 $10.000 $10.061 0
2005 $10.061 $10.110 0
2006 $10.110 $10.144 0
2007 $10.144 $10.561 0
2008 $10.561 $10.431 0
2009 $10.431 $10.237 0
2010 $10.237 $10.447 0
160 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION SELECT
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
HIGH
MORTALITY & EXPENSE = 2.6
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
---------------------------------------------------------------------------------------------------------------------
INVESCO VAN KAMPEN V.I. GROWTH AND INCOME FUND--SERIES II
FORMERLY, VAN KAMPEN LIT GROWTH AND INCOME PORTFOLIO, CLASS II
2004 $10.000 $10.945 0
2005 $10.945 $11.685 0
2006 $11.685 $13.187 0
2007 $13.187 $13.153 0
2008 $13.153 $8.675 0
2009 $8.675 $10.476 0
2010 $10.476 $11.436 0
---------------------------------------------------------------------------------------------------------------------
INVESCO VAN KAMPEN V.I. MID CAP GROWTH FUND--SERIES II
FORMERLY, VAN KAMPEN LIT MID CAP GROWTH PORTFOLIO, CLASS II
2004 $10.000 $10.973 0
2005 $10.973 $11.864 0
2006 $11.864 $12.113 0
2007 $12.113 $13.859 0
2008 $13.859 $7.169 0
2009 $7.169 $10.907 0
2010 $10.907 $13.507 0
---------------------------------------------------------------------------------------------------------------------
JANUS ASPEN OVERSEAS PORTFOLIO--SERVICE SHARES
2008 $10.000 $6.611 0
2009 $6.611 $11.518 0
2010 $11.518 $14.012 0
---------------------------------------------------------------------------------------------------------------------
JANUS ASPEN PERKINS MID CAP VALUE PORTFOLIO--SERVICE SHARES
2004 $10.000 $11.162 0
2005 $11.162 $11.948 0
2006 $11.948 $13.378 0
2007 $13.378 $13.948 0
2008 $13.948 $9.785 0
2009 $9.785 $12.655 0
2010 $12.655 $14.206 0
---------------------------------------------------------------------------------------------------------------------
JANUS ASPEN PERKINS SMALL COMPANY VALUE PORTFOLIO--SERVICE SHARES
2005 $10.000 $10.873 0
2006 $10.873 $12.894 0
2007 $12.894 $11.777 0
2008 $11.777 $7.343 0
2009 $7.343 $6.927 0
---------------------------------------------------------------------------------------------------------------------
JANUS ASPEN SERIES BALANCED PORTFOLIO--SERVICE SHARES
2004 $10.000 $10.493 0
2005 $10.493 $10.992 0
2006 $10.992 $11.810 0
2007 $11.810 $12.672 0
2008 $12.672 $10.349 0
2009 $10.349 $12.646 0
2010 $12.646 $13.304 0
161 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION SELECT
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
HIGH
MORTALITY & EXPENSE = 2.6
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
-----------------------------------------------------------------------------------------------------------------------
JANUS ASPEN SERIES FOREIGN STOCK PORTFOLIO--SERVICE SHARES
2004 $10.000 $11.176 0
2005 $11.176 $11.553 0
2006 $11.553 $13.273 0
2007 $13.273 $15.270 0
2008 $15.270 $14.306 0
-----------------------------------------------------------------------------------------------------------------------
JANUS ASPEN SERIES FORTY PORTFOLIO--SERVICE SHARES
2004 $10.000 $11.348 0
2005 $11.348 $12.429 0
2006 $12.429 $13.197 0
2007 $13.197 $17.542 0
2008 $17.542 $9.505 0
2009 $9.505 $13.504 0
2010 $13.504 $13.991 0
-----------------------------------------------------------------------------------------------------------------------
JANUS ASPEN SERIES INTECH RISK-MANAGED CORE PORTFOLIO--SERVICE
SHARES
2004 $10.000 $11.198 0
2005 $11.198 $12.085 0
2006 $12.085 $13.026 0
2007 $13.026 $13.450 0
2008 $13.450 $8.343 0
2009 $8.343 $9.949 0
2010 $9.949 $10.633 0
-----------------------------------------------------------------------------------------------------------------------
LEGG MASON CLEARBRIDGE VARIABLE FUNDAMENTAL ALL CAP VALUE
PORTFOLIO--CLASS I SHARES
FORMERLY, LEGG MASON CLEARBRIDGE VARIABLE FUNDAMENTAL VALUE
PORTFOLIO--CLASS I
2007 $10.000 $9.420 0
2008 $9.420 $5.813 0
2009 $5.813 $7.316 0
2010 $7.316 $8.301 0
-----------------------------------------------------------------------------------------------------------------------
LEGG MASON CLEARBRIDGE VARIABLE LARGE CAP VALUE PORTFOLIO--CLASS I
SHARES
FORMERLY, LEGG MASON CLEARBRIDGE VARIABLE INVESTORS PORTFOLIO--
CLASS I
2007 $10.000 $9.658 0
2008 $9.658 $6.049 0
2009 $6.049 $7.328 0
2010 $7.328 $7.805 0
-----------------------------------------------------------------------------------------------------------------------
LEGG MASON WESTERN ASSET VARIABLE GLOBAL HIGH YIELD BOND PORTFOLIO--
CLASS II SHARES
2004 $10.000 $10.735 0
2005 $10.735 $10.817 0
2006 $10.817 $11.614 0
2007 $11.614 $11.262 0
2008 $11.262 $7.573 0
2009 $7.573 $11.411 0
2010 $11.411 $12.735 0
162 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION SELECT
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
HIGH
MORTALITY & EXPENSE = 2.6
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
----------------------------------------------------------------------------------------------------
MFS HIGH INCOME SERIES--SERVICE CLASS
2004 $10.000 $10.519 0
2005 $10.519 $10.446 0
2006 $10.446 $11.180 0
2007 $11.180 $11.044 0
2008 $11.044 $7.666 0
2009 $7.666 $10.832 0
2010 $10.832 $12.057 0
----------------------------------------------------------------------------------------------------
MFS INVESTORS GROWTH STOCK SERIES--SERVICE CLASS
2004 $10.000 $10.341 0
2005 $10.341 $10.488 0
2006 $10.488 $10.951 0
2007 $11.964 $11.798 0
2008 $11.798 $7.252 0
2009 $7.252 $9.815 0
2010 $9.815 $10.711 0
----------------------------------------------------------------------------------------------------
MFS INVESTORS TRUST SERIES--SERVICE CLASS
2004 $10.000 $10.675 0
2005 $10.675 $11.117 0
2006 $11.117 $12.191 0
2007 $10.951 $11.828 0
2008 $11.828 $8.475 0
2009 $8.475 $10.436 0
2010 $10.436 $11.259 0
----------------------------------------------------------------------------------------------------
MFS NEW DISCOVERY SERIES--SERVICE CLASS
2004 $10.000 $9.821 0
2005 $9.821 $10.037 0
2006 $10.037 $11.030 0
2007 $11.030 $10.972 0
2008 $10.972 $6.456 0
2009 $6.456 $10.234 0
2010 $10.234 $13.538 0
----------------------------------------------------------------------------------------------------
MFS TOTAL RETURN SERIES--SERVICE CLASS
2004 $10.000 $10.649 0
2005 $10.649 $10.631 0
2006 $10.631 $11.548 0
2007 $11.548 $11.676 0
2008 $11.676 $8.825 0
2009 $8.825 $10.109 0
2010 $10.109 $10.783 0
163 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION SELECT
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
HIGH
MORTALITY & EXPENSE = 2.6
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
---------------------------------------------------------------------------------------------------------------
MFS VALUE SERIES--SERVICE CLASS
2004 $10.000 $11.036 0
2005 $11.036 $11.433 0
2006 $11.433 $13.407 0
2007 $13.407 $14.033 0
2008 $14.033 $9.183 0
2009 $9.183 $10.941 0
2010 $10.941 $11.840 0
---------------------------------------------------------------------------------------------------------------
OPPENHEIMER GLOBAL SECURITIES FUND/VA--SERVICE SHARES
2004 $10.000 $11.249 0
2005 $11.249 $12.485 0
2006 $12.485 $14.258 0
2007 $14.258 $14.715 0
2008 $14.715 $8.542 0
2009 $8.542 $11.583 0
2010 $11.583 $13.040 0
---------------------------------------------------------------------------------------------------------------
OPPENHEIMER MAIN STREET SMALL CAP FUND/VA--SERVICE SHARES
2004 $10.000 $11.183 0
2005 $11.183 $11.939 0
2006 $11.939 $13.320 0
2007 $13.320 $12.778 0
2008 $12.778 $7.708 0
2009 $7.708 $10.265 0
2010 $10.265 $12.291 0
---------------------------------------------------------------------------------------------------------------
OPPENHEIMER SMALL- & MID-CAP GROWTH FUND/VA--SERVICE SHARES
FORMERLY, OPPENHEIMER MIDCAP FUND/VA--SERVICE SHARES
2005 $10.000 $11.615 0
2006 $11.615 $11.607 0
2007 $11.607 $11.974 0
2008 $11.974 $5.917 0
2009 $5.917 $7.614 0
2010 $7.614 $9.421 0
---------------------------------------------------------------------------------------------------------------
PIMCO VIT FOREIGN BOND PORTFOLIO (U.S. DOLLAR-HEDGED)--
ADMINISTRATIVE SHARES
2004 $10.000 $10.252 0
2005 $10.252 $10.490 0
2006 $10.490 $10.431 0
2007 $10.431 $10.517 0
2008 $10.517 $9.989 0
2009 $9.989 $11.239 0
2010 $11.239 $11.865 0
164 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION SELECT
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
HIGH
MORTALITY & EXPENSE = 2.6
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
------------------------------------------------------------------------------------------------------------------
PIMCO VIT MONEY MARKET PORTFOLIO--ADMINISTRATIVE SHARES
2004 $10.000 $9.835 0
2005 $9.835 $9.835 0
2006 $9.835 $10.012 0
2007 $10.012 $10.215 0
2008 $10.215 $10.164 0
2009 $10.164 $9.900 0
2010 $9.900 $9.638 0
------------------------------------------------------------------------------------------------------------------
PIMCO VIT REAL RETURN PORTFOLIO--ADMINISTRATIVE SHARES
2004 $10.000 $10.464 0
2005 $10.464 $10.395 0
2006 $10.395 $10.186 0
2007 $10.186 $10.969 0
2008 $10.969 $9.921 0
2009 $9.921 $11.429 0
2010 $11.429 $12.022 0
------------------------------------------------------------------------------------------------------------------
PIMCO VIT TOTAL RETURN PORTFOLIO--ADMINISTRATIVE SHARES
2004 $10.000 $10.155 0
2005 $10.155 $10.122 0
2006 $10.122 $10.230 0
2007 $10.230 $10.824 0
2008 $10.824 $11.040 0
2009 $11.040 $12.254 0
2010 $12.254 $12.890 0
------------------------------------------------------------------------------------------------------------------
PREMIER VIT OPCAP BALANCED PORTFOLIO
2004 $10.000 $10.706 0
2005 $10.706 $10.703 0
2006 $10.703 $11.539 0
2007 $11.539 $10.728 0
2008 $10.728 $7.183 0
2009 $7.183 $6.901 0
------------------------------------------------------------------------------------------------------------------
PREMIER VIT OPCAP RENAISSANCE PORTFOLIO
2004 $10.000 $11.089 0
2005 $11.089 $10.302 0
2006 $10.302 $11.164 0
2007 $11.164 $11.548 0
2008 $11.548 $10.428 0
------------------------------------------------------------------------------------------------------------------
RYDEX SGI VT US LONG SHORT MOMENTUM FORMERLY, RYDEX VT ALL-CAP
OPPORTUNITY
2004 $10.000 $10.467 0
2005 $10.467 $11.582 0
2006 $11.582 $12.553 0
2007 $12.553 $14.990 0
2008 $14.990 $8.643 0
2009 $8.643 $10.705 0
2010 $10.705 $11.584 0
165 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION SELECT
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
HIGH
MORTALITY & EXPENSE = 2.6
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
------------------------------------------------------------------------------------------------------
T. ROWE PRICE BLUE CHIP GROWTH PORTFOLIO--II
2004 $10.000 $10.359 0
2005 $10.359 $10.649 0
2006 $10.649 $11.329 0
2007 $11.329 $12.398 0
2008 $12.398 $6.918 0
2009 $6.918 $9.544 0
2010 $9.544 $10.772 0
------------------------------------------------------------------------------------------------------
T. ROWE PRICE EQUITY INCOME PORTFOLIO--II
2004 $10.000 $10.968 0
2005 $10.968 $11.067 0
2006 $11.067 $12.777 0
2007 $12.777 $12.807 0
2008 $12.807 $7.942 0
2009 $7.942 $9.678 0
2010 $9.678 $10.805 0
------------------------------------------------------------------------------------------------------
UIF CAPITAL GROWTH PORTFOLIO, CLASS II
2004 $10.000 $10.254 0
2005 $10.254 $11.522 0
2006 $11.522 $11.639 0
2007 $11.639 $13.776 0
2008 $13.776 $6.789 0
2009 $6.789 $10.909 0
2010 $10.909 $13.015 0
------------------------------------------------------------------------------------------------------
UIF U.S. REAL ESTATE PORTFOLIO, CLASS II
2004 $10.000 $12.693 0
2005 $12.693 $14.420 0
2006 $14.420 $19.318 0
2007 $19.318 $15.547 0
2008 $15.547 $9.370 0
2009 $9.370 $11.714 0
2010 $11.714 $14.764 0
------------------------------------------------------------------------------------------------------
VAN ECK VIP EMERGING MARKETS FUND--INITIAL CLASS
FORMERLY, VAN ECK WORLDWIDE EMERGING MARKETS FUND
2004 $10.000 $11.955 0
2005 $11.955 $15.355 0
2006 $15.355 $20.843 0
2007 $20.843 $27.905 0
2008 $27.905 $9.562 0
2009 $9.562 $19.834 0
2010 $19.834 $24.479 0
166 PROSPECTUS
CONSULTANT SOLUTIONS VARIABLE ANNUITIES: LBL CONSULTANT SOLUTION SELECT
CONTRACTS--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
HIGH
MORTALITY & EXPENSE = 2.6
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
----------------------------------------------------------------------------------------------------------------------
VAN ECK VIP GLOBAL HARD ASSETS FUND--INITIAL CLASS
FORMERLY, VAN ECK WORLDWIDE HARD ASSETS FUND
2004 $10.000 $12.300 0
2005 $12.300 $18.154 0
2006 $18.154 $21.992 0
2007 $21.992 $31.099 0
2008 $31.099 $16.301 0
2009 $16.301 $24.986 0
2010 $24.986 $31.420 0
----------------------------------------------------------------------------------------------------------------------
VAN ECK VIP MULTI-MANAGER ALTERNATIVE--INITIAL CLASS
FORMERLY, VAN ECK WORLDWIDE MULTI-MANAGER ALTERNATIVES FUND-CLS I
2004 $10.000 $9.794 0
2005 $9.794 $9.549 0
2006 $9.549 $10.097 0
2007 $10.097 $10.221 0
2008 $10.221 $8.642 0
2009 $8.642 $9.575 0
2010 $9.575 $9.780 0
* The Accumulation Unit Values in this table reflect a mortality and expense
risk charge of 2.60% and an administrative expense charge of 0.10%.
167 PROSPECTUS
LBL6535-4
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