-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, P8Vu8M/5q8lLLNvhvS+Iijj6Ot8cPCZ6blpBtUAYSRjmYbmn2dhgciqY/8UMNhDd EgETWhgfjjvFjg+pM5at+Q== 0000897101-99-000356.txt : 19990405 0000897101-99-000356.hdr.sgml : 19990405 ACCESSION NUMBER: 0000897101-99-000356 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 10 FILED AS OF DATE: 19990402 EFFECTIVENESS DATE: 19990402 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SELECT LIFE VARIABLE ACCOUNT CENTRAL INDEX KEY: 0000897899 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 410451140 STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: SEC FILE NUMBER: 333-69431 FILM NUMBER: 99586833 BUSINESS ADDRESS: STREET 1: 20 WASHINGTON AVE SOUTH CITY: MINNEAPOLIS STATE: MN ZIP: 55440 BUSINESS PHONE: 6123427143 MAIL ADDRESS: STREET 1: 20 WASHINGTON AVENUE SOUTH CITY: MINNEAPOLIS STATE: MN ZIP: 55401 FORMER COMPANY: FORMER CONFORMED NAME: NWNLS SELECT LIFE VARIABLE ACCOUNT DATE OF NAME CHANGE: 19950728 FORMER COMPANY: FORMER CONFORMED NAME: SELECT LIFE VAR ACCO OF NORTHWESTERN NATIONAL LIFE INS CO DATE OF NAME CHANGE: 19930714 485BPOS 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 2, 1999 REGISTRATION NO. 333-69431 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 PRE-EFFECTIVE AMENDMENT NO. 1 TO FORM S-6 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ----------------- SELECT*LIFE VARIABLE ACCOUNT (Exact Name of Unit Investment Trust) RELIASTAR LIFE INSURANCE COMPANY (Name of Depositor) Stewart D. Gregg Counsel ReliaStar Life Insurance Company 20 Washington Avenue South Minneapolis, Minnesota 55401 ----------------- It is proposed that this filing will become effective [ ] immediately upon filing pursuant to paragraph (b) of Rule 485 [ ] on (date) pursuant to paragraph (b) of Rule 485 [ ] 60 days after filing pursuant to paragraph (a) of Rule 485 [ ] on (date) pursuant to paragraph (a) of Rule 485 Title of securities being registered: Variable life insurance contracts issued by a registered separate account. Approximate date of Proposal Public Offering: As soon as practicable after the Registration Statement becomes effective. The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. SELECT*LIFE VARIABLE ACCOUNT CROSS REFERENCE SHEET (RECONCILIATION AND TIE SHEET) ITEM NUMBER OF FORM N-8B-2 HEADING IN THE PROSPECTUS - --------------- -------------------------------------------------- 1 Cover Page 2 Cover Page 3 Not Applicable 4 Distribution of the Policies 5 ReliaStar Life Insurance Company and the Variable Account 6 The Variable Account 7 Not Applicable 8 Not Applicable 9 Not Applicable 10 Summary; Death Benefit; Payment and Allocation of Premiums; Death Benefit Guarantee; Accumulation Value; Policy Lapse and Reinstatement; Surrender Benefits; Additional Information on the Investments of the Variable Account; Transfers; Policy Loans; Free Look and Conversion Rights; Voting Rights; General Provisions; Appendix A; Appendix B 11 Deductions and Charges; Investments of the Variable Account 12 Additional Information on the Investments of the Variable Account 13 Deductions and Charges 14 The Policies; General Provisions; Distribution of the Policies 15 Payment and Allocation of Premiums; Additional Information on the Investments of the Variable Account 16 Payment and Allocation of Premiums; Surrender Benefits; Additional Information on the Investments of the Variable Account 17 Surrender Benefits; Policy Loans; Free Look and Conversion Rights; General Provisions 18 The Variable Account; Additional Information on the Investments of the Variable Account; Payment and Allocation of Premiums 19 Voting Rights; General Provisions 20 Not Applicable 21 Policy Loans i ITEM NUMBER OF FORM N-8B-2 HEADING IN THE PROSPECTUS - --------------- ------------------------------------------------- 22 Not Applicable 23 Bonding Arrangements 24 Definitions; General Provisions 25 ReliaStar Life Insurance Company 26 Not Applicable 27 ReliaStar Life Insurance Company; Other Contracts Issued by Us 28 Management 29 ReliaStar Life Insurance Company 30 Not Applicable 31 Not Applicable 32 Not Applicable 33 Not Applicable 34 Not Applicable 35 Not Applicable 36 Not Applicable 37 Not Applicable 38 Distribution of the Policies 39 Distribution of the Policies 40 Distribution of the Policies 41 Distribution of the Policies 42 Management 43 Not Applicable 44 Additional Information on the Investments of the Variable Account; Payment and Allocation of Premiums; Deductions and Charges 45 Not Applicable 46 Additional Information on the Investments of the Variable Account; Deductions and Charges 47 Additional Information on the Investments of the Variable Account 48 ReliaStar Life Insurance Company; State Regulation 49 Not Applicable 50 The Variable Account 51 Cover Page; The Policies; Death Benefit; Payment and Allocation of Premiums; Deductions and Charges; Policy Lapse and Reinstatement; General Provisions; Free Look and Conversion Rights ii ITEM NUMBER OF FORM N-8B-2 HEADING IN THE PROSPECTUS - --------------- ------------------------------------------------- 52 Additional Information on the Investments of the Variable Account 53 Federal Tax Matters 54 Not Applicable 55 Not Applicable 56 Not Applicable 57 Not Applicable 58 Not Applicable 59 Financial Statements iii [LOGO] RELIASTAR 20 Washington Avenue South Minneapolis, Minnesota 55401 --------------------------- FLEXDESIGN VUL FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICIES ISSUED BY SELECT*LIFE VARIABLE ACCOUNT OF RELIASTAR LIFE INSURANCE COMPANY ReliaStar Life Insurance Company is offering the flexible premium variable life insurance policy (FlexDesign VUL) described in this prospectus. ReliaStar designed the Policy to provide (1) a death benefit payable when the insured person dies; and (2) maximum flexibility regarding premium payments and death benefits. Subject to certain restrictions, Policy owners may: o vary the frequency and amount of premium payments; o increase or decrease the level of death benefits payable under the Policy; and o allocate premiums to: -- the Fixed Account, an account that provides a minimum specified rate of interest; and -- Sub-Accounts of Select*Life Variable Account, a variable account allowing you to invest in certain portfolios of the following Funds: The Alger American Fund Neuberger Berman Advisers Management Trust Fidelity Variable Insurance Products Fund Northstar Galaxy Trust Fidelity Variable Insurance Products Fund II OCC Accumulation Trust Janus Aspen Series Putnam Variable Trust
If you allocate net premiums to Sub-Accounts of Select*Life Variable Account, the amount of the Policy's death benefit may, and the total value attributed to a Policy will, vary to reflect the investment performance of the Sub-Accounts you select. The Policy's primary purpose is to provide insurance protection for the beneficiary. ReliaStar does not claim that investing in the Policy is in any way similar or comparable to a systematic investment plan of a mutual fund. Generally, the Policy will remain in force as long as the cash surrender value (that is, the amount that ReliaStar would pay if you surrender the Policy) is sufficient to pay certain monthly charges. However, under certain circumstances the Policy provides a death benefit guarantee that allows the Policy to remain in force without regard to the cash surrender value (See "Death Benefit Guarantee"). INTERESTS IN THE POLICIES AND SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF OR GUARANTEED BY A BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY. THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED THESE SECURITIES OR DETERMINED THAT THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. Please read this prospectus carefully and keep it for future reference. Call 1-800-456-6965 to obtain a current prospectus for any of the Funds. The current prospectuses for the Funds must accompany this prospectus and should be read in conjunction with this prospectus. THE DATE OF THIS PROSPECTUS IS APRIL 30, 1999 1 TABLE OF CONTENTS DEFINITIONS................................................................ 5 PART 1. SUMMARY The Policy................................................................. 7 Free Look Rights........................................................... 8 Premium Payments........................................................... 8 The Variable Account....................................................... 8 The Fixed Account.......................................................... 8 The Funds.................................................................. 8 Charges Against the Accumulation Value.................................... 10 Charge Upon Lapse or Total Surrender of the Policy........................ 11 Surrenders................................................................ 11 Partial Withdrawals....................................................... 11 Loans..................................................................... 11 Transfers................................................................. 12 Death Benefit Overview.................................................... 12 Adjusting the Death Benefit............................................... 12 Death Benefit Guarantee................................................... 12 Lapse..................................................................... 12 Taxation of Death Benefit Proceeds........................................ 12 Taxation of the Policy.................................................... 13 PART 2. DETAILED INFORMATION ReliaStar Life Insurance Company.......................................... 13 The Policies.............................................................. 13 Deductions and Charges.................................................... 13 Premium Expense Charge.................................................... 14 Monthly Deduction......................................................... 14 Cost of Insurance........................................................ 14 Monthly Administrative Charge............................................ 14 Monthly Amount Charge.................................................... 14 Monthly Mortality and Expense Risk Charge................................ 15 Optional Insurance Benefit Charges....................................... 15 Surrender Charge.......................................................... 15 General.................................................................. 15 Montana Residents........................................................ 16 Partial Withdrawal and Transfer Charges................................... 16 Modification of Charges................................................... 16 Investment Advisory Fees and Other Fund Expenses.......................... 16 Fund Expenses............................................................. 17 The Variable Account...................................................... 19 Investments of the Variable Account....................................... 19 Performance Information................................................... 19 Death Benefit............................................................. 20 Death Benefit Qualification Tests......................................... 20 Guideline Premium Test................................................... 20 Cash Value Accumulation Test............................................. 21 Which Death Benefit Qualification Test to Choose.......................... 21 Death Benefit Options..................................................... 21 Level Amount Option...................................................... 21 Variable Amount Option................................................... 21 Face Amount Plus Premium Amount Option................................... 21 Which Death Benefit Option to Choose...................................... 22 Requested Changes in Face Amount.......................................... 22 Increases................................................................ 22 Decreases................................................................ 22 2 Effect of Requested Changes in Face Amount............................... 23 Insurance Protection...................................................... 23 Changing the Death Benefit Option......................................... 24 Accelerated Benefit Rider................................................. 24 Payment and Allocation of Premiums........................................ 25 Issuing the Policy........................................................ 25 Coverage................................................................. 25 Minimum Initial Premium.................................................. 25 Temporary Insurance...................................................... 25 Allocating Premiums....................................................... 25 Crediting Net Premiums................................................... 26 Refunding Premiums....................................................... 26 Amount and Timing of Premiums............................................. 26 Planned Periodic Premiums................................................. 27 Paying Premiums by Mail................................................... 27 Death Benefit Guarantee................................................... 27 Requirements for the Death Benefit Guarantee.............................. 28 Accumulation Value........................................................ 28 Specialized Uses of the Policy............................................ 29 Policy Lapse and Reinstatement............................................ 29 Lapse.................................................................... 29 Reinstatement............................................................ 30 Surrender Benefits........................................................ 30 Total Surrender........................................................... 30 Partial Withdrawal........................................................ 30 Effect of Partial Withdrawals............................................ 30 Transfers................................................................. 31 Telephone/Fax Instructions............................................... 31 Dollar Cost Averaging Service............................................ 32 Portfolio Rebalancing Service............................................ 32 Transfer Limits.......................................................... 33 Transfer Charges......................................................... 33 Policy Loans.............................................................. 33 General.................................................................. 33 Immediate Effect of Policy Loans......................................... 33 Effect on Investment Performance......................................... 34 Effect on Policy Coverage................................................ 34 Interest................................................................. 34 Repayment of Loan Amount................................................. 34 Tax Considerations....................................................... 35 1035 Exchanges........................................................... 35 Free Look and Conversion Rights........................................... 35 Free Look Rights......................................................... 35 Conversion Rights........................................................ 35 General Option......................................................... 35 Connecticut............................................................ 35 Additional Information on the Investments of the Variable Account......... 36 Investment Limits......................................................... 36 Addition, Deletion, or Substitution of Investments........................ 36 Voting Rights............................................................. 37 Disregarding Voting Instructions......................................... 37 Paid-up Life Insurance Option............................................. 38 General Provisions........................................................ 38 Ownership................................................................. 38 Proceeds.................................................................. 38 Beneficiary............................................................... 38 Postponement of Payments.................................................. 38 Settlement Options........................................................ 39 Interest on Settlement Options........................................... 39 3 Incontestability.......................................................... 39 Misstatement of Age and Sex............................................... 39 Suicide................................................................... 40 Termination............................................................... 40 Amendment................................................................. 40 Reports................................................................... 40 Annual Statement......................................................... 40 Projection Report........................................................ 40 Other Reports............................................................ 40 Dividends................................................................. 40 Collateral Assignment..................................................... 40 Optional Insurance Benefits............................................... 41 Accelerated Benefit Rider................................................ 41 Accidental Death Benefit Rider........................................... 41 Additional Insured Rider................................................. 41 Waiver of Monthly Deduction Rider........................................ 41 Children's Insurance Rider............................................... 41 Cost of Living Increase Rider............................................ 41 Extended Death Benefit Guarantee Rider................................... 41 Term Insurance Rider..................................................... 41 Waiver of Specified Premium Rider........................................ 41 Federal Tax Matters....................................................... 42 Introduction.............................................................. 42 Tax Status of the Policy.................................................. 42 Tax Treatment of Policy Benefits.......................................... 42 In General............................................................... 42 Modified Endowment Contracts............................................. 42 Distributions from Modified Endowment Contracts.......................... 43 Distributions from Policies That Are Not Modified Endowment Contracts.... 43 Policy Loans............................................................. 43 Multiple Policies........................................................ 43 Taxation of ReliaStar Life Insurance Company.............................. 43 Possible Changes in Taxation.............................................. 43 Other Considerations...................................................... 44 Legal Developments Regarding Employment-Related Benefit Plans............. 44 Preparing for Year 2000................................................... 44 Distribution of the Policies.............................................. 44 Management................................................................ 46 Executive Officers........................................................ 48 State Regulation.......................................................... 49 Montana Residents......................................................... 49 Legal Proceedings......................................................... 49 Bonding Arrangements...................................................... 49 Legal Matters............................................................. 49 Experts................................................................... 49 Registration Statement Contains Further Information....................... 50 Financial Statements...................................................... 50 Appendices............................................................... A-1 THE POLICY MAY NOT BE AVAILABLE IN ALL JURISDICTIONS. THIS PROSPECTUS CONSTITUTES AN OFFERING OR SOLICITATION ONLY IN THOSE JURISDICTIONS WHERE SUCH OFFERING OR SOLICITATION MAY LAWFULLY BE MADE. RELIASTAR HAS NOT AUTHORIZED ANY PERSON TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS REGARDING THE POLICY OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR THE ACCOMPANYING FUND PROSPECTUSES. DO NOT RELY ON ANY SUCH INFORMATION OR REPRESENTATIONS. 4 DEFINITIONS ACCUMULATION VALUE. The total value attributable to a specific Policy, which equals the sum of the Variable Accumulation Value (the total of the values in each Sub-Account of the Variable Account) and the Fixed Accumulation Value (the value in the Fixed Account). See "Accumulation Value" at page 28, and Appendix B. AGE. The Insured's age at the last birthday determined as of the beginning of each Policy Year. CASH SURRENDER VALUE. The Accumulation Value less any Surrender Charge, Loan Amount and unpaid Monthly Deductions. CASH VALUE. The Accumulation Value less any Surrender Charge. CODE. Internal Revenue Code of 1986, as amended. DEATH BENEFIT. The amount determined under the applicable Death Benefit Option. We will reduce the proceeds payable to the beneficiary upon the Insured's death by any Loan Amount and any unpaid Monthly Deductions. See "Death Benefit" at page 20. DEATH BENEFIT GUARANTEE. A feature guaranteeing that the Policy will not lapse during the Death Benefit Guarantee Period specified in your Policy if, on each Monthly Anniversary, the total premiums paid on the Policy, less any partial withdrawals and any Loan Amount, equals or exceeds the total required Minimum Monthly Premium payments specified in your Policy. See "Death Benefit Guarantee" at page 27. DEATH BENEFIT OPTION. One of three death benefit options available under the Policy (the Level Amount Option, the Variable Amount Option, and the Face Amount Plus Premium Amount Option). See "Death Benefit -- Death Benefit Options" at page 21. FACE AMOUNT. The minimum Death Benefit under the Policy as long as the Policy remains in force except for Option C when withdrawals exceed premiums. See "Death Benefit" at page 20. FIXED ACCOUNT. ReliaStar Life Insurance Company's assets other than those allocated to the Variable Account or any other separate account. See Appendix A. FIXED ACCUMULATION VALUE. The value attributable to a specific Policy based on amounts in the Fixed Account. Unlike the Variable Accumulation Value, the Fixed Accumulation Value will not reflect the investment performance of the Funds. See "Accumulation Value" at page 28 and Appendix B. FUNDS. Any open-end management investment company (or portfolio thereof) or unit investment trust (or series thereof) in which a Sub-Account invests. See "Summary" at page 7 and "Investments of the Variable Account" at page 19. INITIAL PREMIUM TRANSFER DATE. The Initial Premium Transfer Date shown on the Policy Data Page. It is generally 16 days after the print date of the Policy or if later the date we receive from you final material required to put the Policy in force. This may vary by state. INSURED. The person upon whose life we issue the Policy. ISSUE DATE. The date insurance coverage under a Policy begins. LOAN AMOUNT. The sum of all unpaid Policy loans including unpaid interest due thereon. See "Policy Loans" at page 33. MINIMUM MONTHLY PREMIUM. A monthly premium amount that we determine when we issue the Policy. Your Policy will specify this amount. See "Death Benefit Guarantee" at page 27. MONTHLY ANNIVERSARY. The same date in each succeeding month as the Policy Date. If the Monthly Anniversary falls on a date other than a Valuation Date, then the Monthly Anniversary will be the next Valuation Date. The first Monthly Anniversary is on the Policy Date. MONTHLY DEDUCTION. A monthly charge we deduct from the Accumulation Value of the Policy. See "Deductions and Charges -- Monthly Deduction" at page 14. NET PREMIUM. The premium you pay less a Premium Expense Charge. 5 PLANNED PERIODIC PREMIUM. The scheduled premium you select of a level amount at a fixed interval. The Policy will show the initial Planned Periodic Premium you select. See "Payment and Allocation of Premiums -- Planned Periodic Premiums" at page 27. POLICY. FlexDesign VUL, the flexible premium variable life insurance policy described in this prospectus. POLICY ANNIVERSARY. The same date in each succeeding year as the Policy Date. If the Policy Anniversary falls on a date other than a Valuation Date, the Policy Anniversary will be the next Valuation Date. POLICY DATE. The date shown on your Policy that ReliaStar uses to determine Policy Years, Policy Months, Monthly Anniversaries, and Policy Anniversaries. POLICY MONTH. A one-month period beginning on a Monthly Anniversary. POLICY YEAR. A 12-month period beginning on a Policy Anniversary. PREMIUM EXPENSE CHARGE. An amount (currently 5%) ReliaStar deducts from each premium payment resulting in the Net Premium. See "Deductions and Charges -- Premium Expense Charge" at page 14. RATE CLASS. A group of Insureds we determine based on our expectation that they will have similar mortality experience. SEC. Securities and Exchange Commission. SIGNATURE GUARANTEE. A guarantee of your signature by a member firm of the New York, American, Boston, Midwest, Philadelphia, or Pacific Stock Exchange, or by a commercial bank which is a member of the Federal Deposit Insurance Corporation, or, in certain cases, by a member firm of the National Association of Securities Dealers, Inc. that has entered into an appropriate agreement with us. SUB-ACCOUNT. A sub-division of the Variable Account that invests exclusively in the shares of a specified Fund. SURRENDER CHARGE. A charge imposed upon total surrender or lapse of the Policy during the first 10 Policy Years and the first 10 years following any requested increase in Face Amount. See "Deduction and Charges -- Surrender Charge" at page 15. UNIT VALUE. The unit measure by which we determine the value of the Policy's interest in each Sub-Account. See Appendix C. VALUATION DATE. Each day the New York Stock Exchange is open for business except for days that a Sub-Account's corresponding Fund does not value its shares. The New York Stock Exchange is currently closed on weekends and on the following holidays: New Year's Day; Rev. Dr. Martin Luther King, Jr. Day; Presidents' Day; Good Friday; Memorial Day; July Fourth; Labor Day; Thanksgiving Day; and Christmas Day. See Appendix A. VALUATION PERIOD. The period beginning at the close of business on a Valuation Date and ending at the close of business on the next Valuation Date. See Appendix A. VARIABLE ACCOUNT. Select*Life Variable Account, a separate investment account we established to receive and invest Net Premiums paid under the Policy and other variable life insurance policies we issue. See "The Variable Account" at page 8. VARIABLE ACCUMULATION VALUE. The value attributable to a specific Policy based on amounts in the Variable Account. See "Accumulation Value" at page 28 and Appendix B. WE, US, OUR, THE COMPANY, OR RELIASTAR. ReliaStar Life Insurance Company YOU, YOUR. The Policy owner as designated in the application for the Policy or as subsequently changed. If a Policy has been absolutely assigned, the assignee is the Policy owner. A collateral assignee is not the Policy owner. 6 PART 1. SUMMARY This is a brief summary of the Policy's features. Please read the entire Prospectus and the Policy for more detailed information. THE POLICY FlexDesign VUL is a flexible premium variable life insurance contract with death benefits, cash values, and other features of traditional life insurance contracts. The Policies are: o "FLEXIBLE PREMIUM" because you do not have to pay premiums according to a fixed schedule; and o "VARIABLE" because Accumulation Values and, under certain circumstances, the Death Benefit will increase and decrease based on the investment performance of the Funds corresponding to the Sub-Accounts to which you allocate your premium payments. Under current Federal tax law, as long as the Policy qualifies as life insurance, Accumulation Value increases will be subject to the same Federal income tax treatment as traditional life insurance cash values. Therefore, any increases should accumulate on a tax deferred basis until you request a distribution. See "Federal Tax Matters -- Tax Status of the Policy." The following chart outlines the various features, charges, and expenses of the Policies. Additional, detailed information pertaining to charges and expenses is contained in this Summary and in "Deductions and Charges." HOW FLEXDESIGN VUL WORKS [FLOW CHART] PREMIUM PAYMENTS MINUS PREMIUM EXPENSE CHARGES Invested in Variable Sub-Account or Fixed Account Fund Managers Fixed Account Alger Fidelity Janus Northstar Putnam OpCap Neuberger Berman DEATH BENEFIT PLUS INVESTMENT RETURN (Net of Fund Expenses) MINUS MONTHLY DEDUCTIONS Monthly Amount Charge Mortality and Expense Risk Change Monthly Administrative Charge Optional Benefit Charges Cost of Insurance MINUS PARTIAL WITHDRAWALS EQUALS ACCUMULATION VALUE MINUS SURRENDER CHARGES AND POLICY LOANS EQUALS CASH SURRENDER VALUE 7 FREE LOOK RIGHTS o If you return the Policy to us by midnight of the 10th day after you receive it, we will send you a refund of all premiums paid unless otherwise stipulated by state law. See "Free Look and Conversion Rights -- Free Look Rights." o Certain states may require a longer period of time for the free look period and refund a different amount. PREMIUM PAYMENTS o You choose when to pay and how much to pay. o We may refuse to accept any premium less than $25. o You cannot pay additional premiums after Age 100 except as needed to keep your Policy in force for the remainder of the current Policy Year. o We may refuse any premium that would disqualify your Policy as life insurance under Section 7702 of the Code. o You may be required to pay premiums to maintain the Death Benefit Guarantee in order to keep the Policy in force during at least the first several Policy Years. See "Death Benefit Guarantee" and "Payment and Allocation of Premiums -- Amount and Timing of Premiums." o We deduct a Premium Expense Charge (5.00% of each premium payment) and credit the remaining premium (the Net Premium) to the Variable Account or the Fixed Account according to your instructions. See "Deductions and Charges -- Premium Expense Charge." THE VARIABLE ACCOUNT o Select*Life Variable Account is one of our separate (Select*Life Variable accounts and consists of several Sub-Accounts. We only Account) invest premiums from our variable life insurance policies in the Variable Account. o We invest any Net Premiums you allocate to each Sub-Account in shares of the Fund related to that Sub-Account. o Variable Accumulation Value will vary with the investment performance of the Funds and the charges deducted from the Variable Accumulation Value. See "Accumulation Value." THE FIXED ACCOUNT o Consists of all of our assets other than those in our separate accounts (including the Variable Account). o We credit interest of at least 3% per year on any amounts you allocate to the Fixed Account. o We may, in our sole discretion, credit interest in excess of 3%. See Appendix A, "The Fixed Account." THE FUNDS o You can instruct ReliaStar to place your Net Premium, in or transfer to, up to 17 of 29 investment portfolios over the lifetime of your Policy. o We will first place the portion of the initial allocation of your Net Premium directed to the Variable Account in the Fidelity VIP Money Market Sub-Account and this will count against the 17 investment portfolio limit. See "Allocating Premiums". 8 The following chart lists the currently available Funds and outlines certain of their important characteristics. INVESTMENT FUNDS
ADVISER/ FUND GROUP FUND SUBADVISER MONEY MARKET FIXED INCOME GROWTH INCOME ======================================================================================================== Alger Alger American Fred Alger American Growth Management, Inc. New York, N.Y. Portfolio ------------------------------------------------------------------------------------ Alger American Fred Alger MidCap Management, Inc. Growth Portfolio ------------------------------------------------------------------------------------ Alger American Fred Alger Small Management, Inc. Capitalization Portfolio ======================================================================================================== Fidelity VIP Fidelity Management X Investments(R) Equity-Income & Research Company Boston, Mass. Portfolio ------------------------------------------------------------------------------------ VIP Growth Fidelity Management Portfolio & Research Company ------------------------------------------------------------------------------------ VIP Fidelity Management X High Income & Research Company Portfolio ------------------------------------------------------------------------------------ VIP Fidelity Management X Money Market & Research Company Portfolio ------------------------------------------------------------------------------------ VIP II Fidelity Management Contrafund & Research Company Portfolio ------------------------------------------------------------------------------------ VIP II Fidelity Management X Index 500 & Research Company Portfolio ------------------------------------------------------------------------------------ Fidelity VIP II Fidelity Management X Investments(R) Investment & Research Company is a registered Grade Bond trademark of Portfolio FMR Corp. ======================================================================================================== Janus Aspen Series Janus Aggressive Capital Denver, Co. Growth Corporation Portfolio ------------------------------------------------------------------------------------ Aspen Series Janus Growth Capital Portfolio Corporation ------------------------------------------------------------------------------------ Aspen Series Janus International Capital Growth Corporation Portfolio ------------------------------------------------------------------------------------ Aspen Series Janus Worldwide Capital Growth Corporation Portfolio ========================================================================================================
[WIDE TABLE CONTINUED FROM ABOVE]
PRIMARY FUND GROUP INTERNATIONAL BALANCED GROWTH AGGRESSIVE GROWTH OBJECTIVE(S) INVESTMENTS =================== =============== ========== ======== ================== ========================== ========================= Alger X Long-term capital Equity securities of American appreciation large companies New York, N.Y. ----------------------------------------------------------------------------------------------------------- X Long-term capital Equity securities appreciation within the range of S&P MidCap 400 Index ----------------------------------------------------------------------------------------------------------- X Long-term capital Equity securities appreciation within the range of Russell 2000 Growth and S&P SmallCap 600 Indexes =============================================================================================================================== Fidelity Reasonable income; Income-producing Investments(R) also considers potential equity securities and Boston, Mass. for capital appreciation debt obligations ----------------------------------------------------------------------------------------------------------- X Capital appreciation Common stocks ----------------------------------------------------------------------------------------------------------- High current income Income-producing debt securities, preferred stocks and convertible securities, with an emphasis on lower-quality debt securities ----------------------------------------------------------------------------------------------------------- High current income U.S. dollar-denominated consistent with money market preservation of capital securities and liquidity ----------------------------------------------------------------------------------------------------------- X Capital appreciation Securities of companies whose value the adviser believes is not fully recognized by the public ----------------------------------------------------------------------------------------------------------- Total return that Common stocks of corresponds to that of S&P 500 S&P 500 Index ----------------------------------------------------------------------------------------------------------- Fidelity High current income Investment-grade Investments(R) consistent with intermediate fixed is a registered preservation of capital income securities trademark of FMR Corp. =============================================================================================================================== Janus X Long-term growth of Nondiversified portfolio capital of common stocks ----------------------------------------------------------------------------------------------------------- Denver, Co. X Long-term capital Diversified common growth stocks ----------------------------------------------------------------------------------------------------------- X Long-term capital Foreign issuers of growth common stocks ----------------------------------------------------------------------------------------------------------- X Long-term capital Foreign and domestic growth common stocks ===============================================================================================================================
9
ADVISER/ FUND GROUP FUND SUBADVISER MONEY MARKET FIXED INCOME GROWTH INCOME ========================================================================================================== Neuberger Advisers Neuberger Berman X Berman Management Management/ Trust Limited Neuberger Berman, Maturity Bond LLC Portfolio ------------------------------------------------------------------------------------- New York, N.Y. Advisers Neuberger Berman Management Management/ Trust Partners Neuberger Berman, Portfolio LLC ------------------------------------------------------------------------------------- Advisers Neuberger Berman Management Management/ Trust Socially Neuberger Berman, Responsive LLC Portfolio ========================================================================================================== Northstar Emerging Northstar Investment Growth Management Stamford, Conn. Portfolio Corporation ------------------ ---------------------- Growth + Value Northstar Investment Portfolio Management Corporation/ Navellier Fund Management, Inc. ------------------------------------------------------------------------------------- High Yield Northstar Investment X Portfolio Management Corporation ------------------------------------------------------------------------------------- International Northstar Investment Value Portfolio Management Corporation/Brandes Investment Partners, L.P. ------------------------------------------------------------------------------------- Research Northstar Investment Enhanced Management Index Portfolio Corporation/ J.P. Morgan Investment Management Inc. ========================================================================================================== OCC OCC Accumulation OpCap Trust Equity Advisors New York, N.Y. Portfolio ------------------------------------------------------------------------------------- OCC Accumulation OpCap Trust Global Advisors Equity Portfolio ------------------------------------------------------------------------------------- OCC Accumulation OpCap Trust Managed Advisors Portfolio ------------------------------------------------------------------------------------- OCC Accumulation OpCap Trust Small Advisors Cap Portfolio ========================================================================================================== Putnam Putnam Putnam Investment X Investments, Inc. VT Growth and Management, Inc. Income Fund ------------------------------------------------------------------------------------- Boston, Mass. Putnam Putnam Investment VT New Management, Inc. Opportunities Fund ------------------------------------------------------------------------------------- Putnam Putnam Investment VT Voyager Fund Management, Inc. ==========================================================================================================
[WIDE TABLE CONTINUED FROM ABOVE]
PRIMARY FUND GROUP INTERNATIONAL BALANCED GROWTH AGGRESSIVE GROWTH OBJECTIVE(S) INVESTMENTS ============================================================================================================================ Neuberger High current income Short to Berman consistent with low intermediate term risk to principal and investment-grade debt liquidity and securities secondarily total return --------------------------------------------------------------------------------------------------------- New York, N.Y. X Capital growth Common stocks of medium- and large- capitalization companies --------------------------------------------------------------------------------------------------------- X Long-term Common stocks of capital growth companies that meet both financial and social criteria ============================================================================================================================ Northstar X Long-term capital Common stocks appreciation --------------------------------------------------------------------------------------------------------- Stamford, Conn. X Capital appreciation Equity securities from investing in a diversified portfolio of equity securities --------------------------------------------------------------------------------------------------------- High current yield and High-yield bonds capital appreciation --------------------------------------------------------------------------------------------------------- X Long-term capital International equities appreciation --------------------------------------------------------------------------------------------------------- X Long-term capital Common stocks appreciation ============================================================================================================================ OCC X Long-term capital Securities of appreciation undervalued New York, N.Y. companies --------------------------------------------------------------------------------------------------------- X Long-term capital Global investments in appreciation equity securities --------------------------------------------------------------------------------------------------------- X Growth of capital Common stocks, bonds and cash equivalents --------------------------------------------------------------------------------------------------------- X Capital appreciation Equity securities of companies under $1 billion ============================================================================================================================ Putnam Capital growth & Common stocks Investments, Inc. current income --------------------------------------------------------------------------------------------------------- Boston, Mass. X Long-term capital Common stocks appreciation --------------------------------------------------------------------------------------------------------- X Capital appreciation Common stocks ============================================================================================================================
For each Fund's expenses, see "Investment Advisory Fees and Other Fund Expenses". For additional information on the Funds, see page 17 of this Prospectus. CHARGES AGAINST THE ACCUMULATION VALUE The Accumulation Value of the Policy is subject to the Monthly Deduction charges. Except for the Monthly Mortality and Expense Risk Charge, we will deduct the Monthly Deduction each month from 10 both the Fixed Accumulation Value and the Variable Accumulation Value on a proportionate basis depending on their relative Accumulation Values at that time. We will deduct the Monthly Mortality and Expense Risk Charge on a proportionate basis from each Sub-Account of the Variable Account depending on their relationship to the Variable Accumulation Value at that time. See "Deductions and Charges -- Monthly Deduction". The Monthly Deduction includes: o A charge for the cost of insurance -- varies based on the Insured's Sex, Age, Rate Class and Face Amount. o Monthly Administrative Charge -- currently $8.25 per month and guaranteed not to exceed $12.00 per month. o Monthly Mortality and Expense Risk Charge -- currently equal to 1/12 of .35% of the Variable Accumulation Value and guaranteed not to exceed 1/12 of .60% of the Variable Accumulation Value. o Monthly Amount Charge -- a monthly charge that varies by the Insured's Issue Age, Sex and Face Amount and is assessed during the first 10 Policy Years (and first 10 years after a Face Amount increase). The maximum amount of this charge is $3.333 per $1,000 of Face Amount for a male Issue Age 85. o Any charges for optional insurance benefits -- vary depending upon the benefit(s) selected. CHARGE UPON LAPSE OR TOTAL SURRENDER OF THE POLICY o We assess a Surrender Charge if your Policy lapses or if you surrender the Policy during the first 10 Policy Years (or during the first 10 years following a Face Amount increase). o We will determine the maximum Surrender Charge for the initial Face Amount and any requested increases in Face Amount on the Policy Date and on the effective date of any such requested increase. o The Surrender Charge for the initial Face Amount will depend on the initial Face Amount, the Insured's Age on the Policy Date, and the Insured's sex. o You do not pay this charge if the Policy remains in force during the entire relevant 10-year period. See "Deductions and Charges -- Surrender Charge". SURRENDERS o In general, you will receive the Cash Surrender Value if you surrender the Policy. o To determine the Cash Surrender Value, we reduce your Accumulation Value by the Surrender Charge, if any, and any Loan Amount and unpaid Monthly Deductions. See "Surrender Benefits -- Total Surrender". PARTIAL WITHDRAWALS o Once each Policy Year, you can withdraw part of your Cash Surrender Value. o You will not incur a Surrender Charge, but partial withdrawals are subject to a processing charge (currently $10, guaranteed not to exceed $25). See "Surrender Benefits -- Partial Withdrawal". LOANS o Depending on your state of residence, you can borrow up to 90% of your Policy's Cash Value less any existing Loan Amount. o Interest is payable in advance for each Policy Year and accrues daily at an effective annual rate that will not exceed 4.762%. o After the 10th Policy Year, we currently charge interest at an annual rate of 2.913% (guaranteed not to exceed 3.382%) on the portion of your Loan Amount that is not in excess of (1) the Accumulation Value, less (2) the total of all premiums paid net of all partial withdrawals. o We reserve the right to limit borrowing during the first Policy Year. See "Policy Loans". 11 TRANSFERS o Currently, you can transfer all or part of your Accumulation Value among the investment options. o We currently allow up to 24 transfers per year. o There are certain restrictions on transfers from the Fixed Account. o We currently assess no charge for transfers. However, we reserve the right to assess a maximum charge of $25 for each transfer. See "Transfers". DEATH BENEFIT OVERVIEW You may choose one of two Death Benefit Qualification Tests for compliance with Code Section 7702's definition of "life insurance": (1) the Guideline Premium Test; and (2) the Cash Value Accumulation Test. You also can choose one of three Death Benefit Options: o Level Amount Option -- whereby the Death Benefit until Age 100 is the greater of the Face Amount or the corridor percentage of Accumulation Value; o Variable Amount Option -- whereby the Death Benefit until Age 100 is equal to the greater of the Face Amount plus the Accumulation Value, or the corridor percentage of Accumulation Value; or o Face Plus Premium Amount Option -- whereby the Death Benefit until Age 100 is the greater of the Face Amount plus premiums less withdrawals, or the corridor percentage of the Accumulation Value. See "Death Benefit". The Death Benefit until Age 100 under the Level Amount Option and the Variable Amount Option will never be less than the Face Amount as long as the Policy is in force and there is no Loan Amount or unpaid Monthly Deductions. The Death Benefit until Age 100 under the Face Plus Premium Amount Option may be less than Face Amount if cumulative withdrawals exceed cumulative premiums paid. After Age 100, the Death Benefit under all Death Benefit Options will be the Accumulation Value. We will reduce the proceeds payable upon the death of the Insured under any Death Benefit Option by any Loan Amount and any unpaid Monthly Deductions. Under certain circumstances, you may receive a part of the Death Benefit when the Insured has been diagnosed as having a terminal illness. See "Accelerated Benefit Rider". ADJUSTING THE DEATH BENEFIT Although we reserve the right to limit Face Amount increases and decreases during the first two Policy Years, you have flexibility to adjust the Death Benefit by increasing or decreasing the Face Amount. You cannot decrease the Face Amount below the Minimum Face Amount shown in the Policy. Any increase in the Face Amount may require additional evidence of insurability satisfactory to us and will result in additional charges. See "Death Benefit -- Requested Changes in Face Amount". Generally, you may also change the Death Benefit Option at any time after the second Policy Year. See "Death Benefit -- Change in Death Benefit Option". See "Death Benefit -- Insurance Protection" for a discussion of available techniques to adjust the amount of insurance protection to satisfy changing insurance needs. DEATH BENEFIT GUARANTEE If you meet the requirements for the Death Benefit Guarantee, we will not lapse your Policy during the Death Benefit Guarantee Period even if the Cash Surrender Value is not sufficient to cover the Monthly Deduction that is due. See "Death Benefit Guarantee". LAPSE If the Death Benefit Guarantee is not in effect, the Policy will lapse if the Cash Surrender Value is less than the Monthly Deduction due and if you do not make a sufficient payment during the grace period of 61 days. See "Policy Lapse and Reinstatement". TAXATION OF DEATH BENEFIT PROCEEDS Under current Federal tax law, as long as the Policy qualifies as life insurance the Death Benefit under the Policy will be subject to the same Federal income tax treatment as proceeds of traditional life 12 insurance. Therefore, the Death Benefit should not be taxable income to the beneficiary. See "Federal Tax Matters -- Tax Status of the Policy". TAXATION OF THE POLICY The Company intends for the Policy to satisfy the definition of a life insurance contract under Section 7702 of the Code. Under certain circumstances, a Policy could be treated as a "modified endowment contract." The Company will monitor Policies and will attempt to notify an owner on a timely basis if his or her Policy is in jeopardy of becoming a modified endowment contract. See "Federal Tax Matters" for further discussion of the tax status of a Policy and the tax consequences of being treated as a life insurance contract or a modified endowment contract. A Policy lapse, surrender, partial withdrawal or loan may have adverse tax consequences in certain circumstances. See "Federal Tax Matters." PART 2. DETAILED INFORMATION RELIASTAR LIFE INSURANCE COMPANY ReliaStar Life Insurance Company is a stock life insurance company organized in 1885 and incorporated under the laws of the State of Minnesota. We are a direct, wholly owned subsidiary of ReliaStar Financial Corp. We offer individual life insurance and annuities, employee benefits and retirement contracts. Our Home Office is at 20 Washington Avenue South, Minneapolis, Minnesota 55401 (telephone 612-372-5507). From time to time, we may publish in advertisements, sales literature, and reports, the ratings and other information assigned to us by one or more independent rating organizations such as A.M. Best Company, Standard & Poor's, Moody's, and Duff & Phelps. The purpose of the ratings is to reflect our financial strength and/or claims-paying ability and should not be considered as bearing on the investment performance of assets held in the Variable Account. Each year the A.M. Best Company reviews the financial status of many insurers, culminating in the assignment of Best's Ratings. These ratings reflect their current opinion of the relative financial strength and operating performance of an insurance company in comparison to the norms of the life/health insurance industry. We have been assigned a rating of A+ by A.M. Best, which is a rating assigned to companies demonstrating superior overall performance and a very strong ability to meet obligations to policyholders over a long period. Such ratings do not reflect the investment in the Variable Account. ReliaStar is a charter member of the Insurance Marketplace Standard Association ("IMSA"). Companies that belong to IMSA subscribe to a rigorous set of standards that cover the various aspects of sales and service for individually sold life insurance and annuities. IMSA members have adopted policies and procedures that demonstrate a commitment to honesty, fairness and integrity in all customer contacts involving sales and service of individual life insurance and annuity products. THE POLICIES The Policies are flexible premium variable life insurance contracts with death benefits, cash values, and other features of traditional life insurance contracts. DEDUCTIONS AND CHARGES We deduct certain charges in connection with the Policy to compensate us for (1) providing the insurance benefits of the Policy (including any riders), (2) administering the Policy, (3) assuming certain risks in connection with the Policy, and (4) incurring expenses in distributing the Policy. We deduct some charges from each premium payment. We deduct certain other charges monthly from both the Fixed Account and the Variable Account, or from the Variable Account only. We also assess a charge for each partial withdrawal and we may assess a charge for each transfer. We may realize a profit on one or more of these charges, such as the mortality and expense risk charge. We may use any such profits for any proper corporate purpose, including, among other things, payments of sales expenses. The Surrender Charge usually exceeds the Accumulation Value in the early Policy Years. This occurs because the Surrender Charge is usually more than the accumulated Minimum Monthly Premiums less Policy Charges in the early Policy Years. 13 PREMIUM EXPENSE CHARGE We deduct the Premium Expense Charge from each premium payment. The Premium Expense Charge equals 5.00% of each premium payment. The amount remaining after we deduct the Premium Expense Charge is called the Net Premium. MONTHLY DEDUCTION We deduct the charges described below from the Accumulation Value of the Policy on a monthly basis. The total of these charges is called the Monthly Deduction. Except for the Monthly Mortality and Expense Risk Charge, we will deduct the Monthly Deduction each month from both the Fixed Accumulation Value and the Variable Accumulation Value on a proportionate basis depending on their relative Accumulation Values at that time. We will deduct the Monthly Mortality and Expense Risk Charge on a proportionate basis from each Sub-Account of the Variable Account depending on their relationship to the Variable Accumulation Value at that time. For purposes of determining these proportions, we reduce the Fixed Accumulation Value by the Loan Amount. Because the cost of insurance portion of the Monthly Deduction can vary from month to month, the Monthly Deduction itself will vary in amount from month to month. If the Cash Surrender Value is not sufficient to cover the Monthly Deduction on a Monthly Anniversary, the Policy may lapse. See "Death Benefit Guarantee" and "Policy Lapse and Reinstatement". COST OF INSURANCE. We will determine the monthly cost of insurance by multiplying the applicable cost of insurance rate or rates by the net amount at risk under the Policy. The net amount at risk under the Policy for a Policy Month is (1) the Death Benefit at the beginning of the Policy Month divided by 1.002466 (which reduces the net amount at risk, solely for purposes of computing the cost of insurance, by taking into account assumed monthly earnings at an annual rate of 3%), less (2) the Accumulation Value at the beginning of the Policy Month (reduced by any charges for rider benefits). As a result, the net amount at risk may be affected by changes in the Accumulation Value or in the Death Benefit. The Rate Class of an Insured may affect the cost of insurance. A Rate Class is a group of Insureds we determine based upon our expectation that they will have similar mortality experience. We currently place Insureds into standard Rate Classes or into substandard Rate Classes that involve a higher mortality risk. In an otherwise identical Policy, an Insured in the standard Rate Class will have a lower cost of insurance than an Insured in a Rate Class with higher mortality risks. If there is an increase in the Face Amount and the Rate Class applicable to the increase is different from that for the initial Face Amount or any prior requested increases in Face Amount, the net amount at risk will be calculated separately for each Rate Class. For purposes of determining the net amount at risk for each Rate Class, we will first assume the Accumulation Value to be part of the initial Face Amount. If the Accumulation Value is greater than the initial Face Amount, it will then be assumed to be part of each increase in order, starting with the first increase. We base cost of insurance rates on the sex, Age, Face Amount, Policy Year and Rate Class(es) of the Insured. The actual monthly cost of insurance rates will reflect our expectations as to future experience. They will not, however, be greater than the guaranteed cost of insurance rates shown in the Policy, which are based on the Commissioner's 1980 Standard Ordinary Mortality Tables for smokers or nonsmokers, respectively. MONTHLY ADMINISTRATIVE CHARGE. Each month we deduct an administrative charge of $8.25 which is guaranteed not to exceed $12.00 each month. MONTHLY AMOUNT CHARGE. Each month during the first 10 Policy Years (and for 10 years following any requested increase in Face Amount) we will deduct a monthly charge per $1,000 of Face Amount. The amount of this charge will vary by the Insured's Sex, Rate Class, Issue Age and Face Amount on the Policy Date (or on the effective date of any Face Amount increase). These Monthly Amount Charges are shown in Appendix F. Any decreases in Face Amount or any change in Face Amount resulting from a change in the Death Benefit Option will not affect the Monthly Amount Charge. The maximum amount of this charge is $3.333 per $1,000 of Face Amount for a male Issue Age 85 for Insureds of Age 85. This charge compensates us for expenses relating to the distribution of the Policy, including agents' commissions, advertising, and the printing of the prospectus and sales literature for new sales of the Policy. A portion of this charge may also contribute to Company profits. 14 MONTHLY MORTALITY AND EXPENSE RISK CHARGE. Each month we will deduct a charge currently equal to 1/12 of .35% of the Variable Accumulation Value (minus the portion of the following charges taken from the Variable Accumulation Value: the cost of insurance charge, the Monthly Amount Charge, the Monthly Administrative Charge, and the cost of any riders). We guarantee that the Mortality and Expense Risk Charge will not exceed 1/12 of .60% of the Variable Accumulation Value for the duration of the Policy. The mortality and expense risk we assume is that our Cost of Insurance charges and other expense charges are not sufficient to cover our costs of death benefits, and any other expenses incurred in issuing and administering the Policies. OPTIONAL INSURANCE BENEFIT CHARGES. Each month we deduct charges for any optional insurance benefits added to the Policy by rider. See "General Provisions -- Optional Insurance Benefits". SURRENDER CHARGE GENERAL. During the first 10 years the Policy is in force and the first 10 years following a requested increase in the Face Amount, there is a Surrender Charge if you surrender the Policy or the Policy lapses. We will determine the maximum Surrender Charge for the initial Face Amount or any requested increase in Face Amount on the Policy Date or on the effective date of any requested increase. The Surrender Charge for the initial Face Amount reduces in equal monthly increments until it becomes zero at the end of 10 years. For any requested increase in Face Amount, an additional Surrender Charge begins at zero, increases in equal monthly increments until it reaches the maximum after three years, and then reduces in equal monthly increments until it becomes zero at the end of 10 years. Thus if the Policy remains in force during the entire relevant 10-year period, you do not pay the Surrender Charge. The Surrender Charge will vary depending on the Insured's Age, sex, and Rate Class on the Policy Date or on the effective date of an increase in Face Amount. The maximum amount of the Surrender Charge is $5.50 per thousand for a female Insured at Issue Age 65. The Surrender Charge for the initial Face Amount or any requested increase in Face Amount is determined by multiplying (1) the applicable Surrender Charge per $1,000 of Face Amount from Appendix E by (2) the initial Face Amount or the Face Amount of the increase, as applicable, and by (3) the applicable percentage from the Surrender Charge Percentage Table below, and then dividing this amount by 1000. EXAMPLE. The following example illustrates how we determine the Surrender Charge. Assume that a male, Age 35 buys a Policy with an initial Face Amount of $100,000 and surrenders the Policy at the end of the third Policy Year. Based on these assumptions, the Surrender Charge will be the result of multiplying (1) $19.00 (from Appendix D for a male Age 35) by (2) $100,000 (the initial Face Amount) and by (3) 70% (the applicable percentage from the Surrender Charge Percentage Table), and then dividing by 1000, which results in a Surrender Charge of $1,330 (($19.00 x $100,000 x 70%) / 1000). The additional Surrender Charge for requested increases in Face Amount will be calculated in the same manner as illustrated in the example above, except that the different Surrender Charge Percentages apply for requested increases in Face Amount. 15 SURRENDER CHARGE PERCENTAGE TABLE
THE FOLLOWING PERCENTAGES OF THE SURRENDER CHARGE WILL BE PAYABLE FOR: IF SURRENDER OR LAPSE OCCURS IN THE LAST MONTH OF POLICY YEAR:* INITIAL FACE AMOUNT FACE AMOUNT INCREASES - --------------------------------- --------------------- ---------------------- 0 100% 0% 1 90% 23.3% 2 80% 46.7% 3 70% 70% 4 60% 60% 5 50% 50% 6 40% 40% 7 30% 30% 8 20% 20% 9 10% 10% 10 0% 0%
*For requested increases, years are measured from the date of the increase. MONTANA RESIDENTS. Appendix C, Appendix D, Appendix E and the preceding illustrations of the Surrender Charge do not apply to Policies issued in Montana. The Insured's sex does not affect the Surrender Charge applied to Policies issued in Montana. Therefore, the Surrender Charge made on Policies issued in Montana will differ from the charge made in other states. PARTIAL WITHDRAWAL AND TRANSFER CHARGES We currently make no charge for transfers and assess a $10.00 charge for each partial withdrawal. These charges are guaranteed not to exceed $25.00 per transfer or partial withdrawal for the duration of the Policy. The transfer charge will not be imposed on transfers that occur as a result of Policy loans or the exercise of conversion rights. MODIFICATION OF CHARGES ReliaStar may modify any of the charges under the Policy, as well as the minimum Face Amount set forth in this Prospectus, because of special circumstances that result in lower sales, administrative, or mortality expenses. For example, special circumstances may exist in connection with group or sponsored arrangements, sales to our policyholders or those of affiliated insurance companies, or sales to employees or clients of members of our affiliated group of insurance companies. The amount of any reductions will reflect the reduced sales effort and administrative costs resulting from, or the different mortality experience expected as a result of, the special circumstances. Reductions will not be unfairly discriminatory against any person, including the affected Policy owners and owners of all other policies funded by the Variable Account. Persons purchasing under a sponsored arrangement may apply for simplified underwriting. If we approve such simplified underwriting, the cost of insurance may increase as a result of higher than anticipated mortality experience. However, any such increase will not cause the cost of insurance charge to exceed the guaranteed rates set forth in the Policy. INVESTMENT ADVISORY FEES AND OTHER FUND EXPENSES Because the Variable Account purchases shares of the Funds, the net asset value of the Variable Account's investments will reflect the investment advisory fees and other expenses incurred by the Funds. Set forth on the next page is information provided by each Fund on its total 1998 annual expenses as a percentage of the Fund's average net assets. See the prospectuses for the Funds for more information concerning these expenses. 16 FUND EXPENSES
TOTAL INVESTMENT MANAGEMENT OTHER FUND AMOUNT FUND FEES EXPENSES EXPENSES - ------------------------------------------------------------------ ------------ ---------- ----------------- Alger American Growth Portfolio (a) .............................. 0.75% 0.04% 0.79% Alger American MidCap Growth Portfolio (a) ....................... 0.80% 0.04% 0.84% Alger American Small Capitalization Portfolio (a) ................ 0.85% 0.04% 0.89% Fidelity VIP Equity-Income Portfolio (a) (b) ..................... 0.49% 0.09% 0.58% Fidelity VIP Growth Portfolio (a) (b) ............................ 0.59% 0.09% 0.68% Fidelity VIP High Income Portfolio (a) ........................... 0.58% 0.12% 0.70% Fidelity VIP Money Market Portfolio .............................. 0.20% 0.10% 0.30% Fidelity VIP II Contrafund Portfolio (a) (b) ..................... 0.59% 0.11% 0.70% Fidelity VIP II Index 500 Portfolio (a) (b) ...................... 0.24% 0.11% 0.35% Fidelity VIP II Investment Grade Bond Portfolio (a) .............. 0.43% 0.14% 0.57% Janus Aggressive Growth Portfolio (a) (c) ........................ 0.72% 0.03% 0.75% Janus Growth Portfolio (a) (c) ................................... 0.65% 0.03% 0.68% Janus International Growth Portfolio (a) (c) ..................... 0.66% 0.20% 0.86% Janus Worldwide Growth Portfolio (a) (c) ......................... 0.65% 0.07% 0.72% Neuberger Berman Advisers Management Trust Limited Maturity Bond Portfolio (a) (d) ................................. 0.65% 0.11% 0.76% Neuberger Berman Advisers Management Trust Partners Portfolio (a) (d) ............................................... 0.78% 0.06% 0.84% Neuberger Berman Advisers Management Trust Socially Responsive Portfolio (a) (d) (e) ................................ 0.85% 0.65% 1.50% Northstar Galaxy Trust Emerging Growth Portfolio (f) ............. 0.75% 0.15% 0.90% Northstar Galaxy Trust Growth + Value Portfolio (f) .............. 0.75% 0.05% 0.80% Northstar Galaxy Trust High Yield Bond Portfolio (f) ............. 0.75% 0.05% 0.80% Northstar Galaxy Trust International Value Portfolio (f) ......... 1.00% 0.00% 1.00% Northstar Galaxy Trust Research Enhanced Index Portfolio (f) ..... 0.75% 0.15% 0.90% OCC Equity Portfolio (a) (g) ..................................... 0.80% 0.14% 0.94% OCC Global Equity Portfolio (a) (g) .............................. 0.80% 0.33% 1.13% OCC Managed Portfolio (a) (g) .................................... 0.78% 0.04% 0.82% OCC Small Cap Portfolio (a) (g) .................................. 0.80% 0.08% 0.88% Putnam VT Growth and Income Fund ................................. 0.46% 0.04% 0.50% Putnam VT New Opportunities Fund ................................. 0.56% 0.05% 0.61% Putnam VT Voyager Fund ........................................... 0.54% 0.04% 0.58%
(a) The Company or its affiliates may receive compensation from an affiliate or affiliates of certain of the Funds based upon an annual percentage of the average net assets held in that Fund by the Company and by certain of the Company's insurance company affiliates. These amounts are intended to compensate the Company or the Company's affiliates for administrative, record keeping, and in some cases distribution, and other services provided by the Company and its affiliates to Funds and/or the Funds' affiliates. Payments of such amounts by an affiliate or affiliates of the Funds do not increase the fees paid by the Funds or their shareholders. The percentage paid may vary from one Fund company to another. (b) A portion of the brokerage commissions that certain portfolios pay was used to reduce Portfolio expenses. In addition, certain Portfolios have entered into arrangements with their custodian whereby credits realized as a result of uninvested cash balances are used to reduce custodian expenses. Including these reductions, the total operating expenses presented in the table would have been: 0.57% for Fidelity VIP Equity-Income Portfolio; 0.66% for Fidelity VIP Growth Portfolio; 0.28% for Fidelity VIP II Index 500 Portfolio; and 0.66% for Fidelity VIP II Contrafund Portfolio. (c) The fees and expenses in the table above are based on net expenses after expense offset arrangements for the fiscal year ended December 31, 1998. The information is net of fee reductions from Janus Capital. Fee reductions for the Aggressive Growth, Growth, International Growth, and Worldwide Growth Portfolios reduce the management fee to the level of the 17 corresponding Janus retail fund. Without such reductions, the Management Fee, Other Expenses and Total Investment Fund Annual Expenses would have been: 0.72%, 0.03%, and 0.75% for Janus Aggressive Growth Portfolio; 0.72%, 0.03%, and 0.75% for Janus Growth Portfolio; 0.75%, 0.20%, and 0.95% for Janus International Growth Portfolio; and 0.67%, 0.07%, and 0.74% for Janus Worldwide Growth Portfolio. Janus Capital has agreed to continue these fee reductions until at least the next annual renewal of the advisory agreement. (d) Neuberger Berman Advisers Management Trust is comprised of separate Portfolios, the following of which are available as funding options under the contract: Limited Maturity Bond Portfolio, Partners Portfolio and Socially Responsive Portfolio ("Portfolio series"). Unlike the other funding options available under the Policy, each of the Portfolio series invests all of its net investable assets in AMT Limited Maturity Bond Investments, AMT Partners Investments and AMT Socially Responsive Investments, respectively, of Advisors Managers Trust ("Investment series"). The investment series in turn, invest directly in securities. For a more complete discussion of this structure, please see the prospectus for Neuberger Berman Advisers Management Trust Limited Maturity Bond Portfolio, Partners Portfolio and Socially Responsive Portfolio. Please note that the figures reported under "Management Fees" and "Other Expenses" include the aggregate of (i) the management fees paid by the Investment series, (ii) the administration fees paid by the Portfolio series, and (iii) all other expenses in the aggregate for the Investment series and Portfolio series, respectively. (e) Neuberger Berman Management Inc. ("NBMI") has undertaken to reimburse the Socially Responsive Portfolio for certain operating expenses, including the compensation of Neuberger Berman Advisers Management Trust and excluding taxes, interest, extraordinary expenses, brokerage commissions and transaction costs, that exceed in the aggregate, 1.50% of the average daily net asset value of the Socially Responsive Portfolio. The Socially Responsive Portfolio had not commenced operations as of December 31, 1998, and therefore these expense figures are estimated. Estimated expenses are expected to be 2.50% for the fiscal period ending December 31, 1999, prior to the reimbursement. The expense reimbursement policy is subject to termination upon 60 days' written notice. There can be no assurance that this policy will be continued after April 30, 2000. See "Expense Limitation" in the Socially Responsive Portfolio prospectus for further information. (f) The fee and expense information for the Northstar Galaxy Trust Emerging Growth Portfolio and International Value Portfolio has been restated to reflect current fees and expenses effective November 9, 1998. The fee and expense information for the Northstar Galaxy Trust Research Enhanced Index Portfolio has been restated to reflect current fees and expenses effective April 30, 1999. The investment adviser to the Northstar Galaxy Trust has agreed to reimburse the Northstar Growth + Value Portfolio and High Yield Bond Portfolio for any expenses in excess of 0.80% of each Portfolio's average daily net assets. It has also agreed to reimburse the Emerging Growth, Research Enhanced Index, and International Value Portfolios for amounts in excess of 0.90%, 0.90% and 1.00%, respectively. In the absence of the investment adviser's expense reimbursements, the Total Investment Fund Annual Expenses that would have been paid by each Portfolio during its fiscal year ended December 31, 1998 would have been: Northstar Galaxy Trust Growth + Value Portfolio: 1.02%; Northstar Galaxy Trust High Yield Bond Portfolio: 1.23%; Northstar Galaxy Trust Research Enhanced Index Portfolio: 1.29%; Northstar Galaxy Trust Emerging Growth Portfolio: 1.14%. For the Northstar Galaxy Trust International Value Portfolio, on an annualized basis, absent expense reimbursement, the actual expenses for this Portfolio are 1.68%. Expense reimbursements are voluntary. There is no assurance of ongoing reimbursement. The Northstar Galaxy Trust Emerging Growth Portfolio (formerly the Northstar Galaxy Trust Income and Growth Portfolio) operated under an investment objective of seeking income balanced with capital appreciation from inception through November 8, 1998, when the investment objective was modified to seeking long-term capital appreciation. The Northstar Galaxy Trust Research Enhanced Index Portfolio (formerly the Northstar Galaxy Trust Multi-Sector Bond Portfolio) operated under an investment objective of seeking current income while preserving capital through April 29, 1999, when the investment objective was modified to seeking long-term capital appreciation. (g) Management Fees reflect effective management fees after taking into effect any waiver. Other Expenses are shown net of expense offsets afforded the Portfolios. Total Portfolio Expenses for 18 the Equity, Small Cap and Managed Portfolios are limited by OpCap Advisors so that their respective annualized operating expenses (net of expense offsets) do not exceed 1.00% of average daily net assets. Total Portfolio Expenses for the Global Equity Portfolio are limited to 1.25% of average daily net assets (net of expense offsets). THE VARIABLE ACCOUNT On October 11, 1984, we established the Select*Life Variable Account as one of our separate accounts pursuant to the laws of the State of Minnesota. The Variable Account: o will receive and invest the Net Premiums paid and allocated to it under this Policy; o currently receives and invests net premiums for other classes of flexible premium variable life insurance policies we issue and may do so for additional classes in the future; o meets the definition of a "separate account" under the federal securities laws; and o is registered with the SEC as a unit investment trust under the Investment Company Act of 1940 ("1940 Act"). Such registration does not involve supervision by the SEC of the management or investment policies or practices of the Variable Account, us, or the Funds. We own the Variable Account's assets. However, Minnesota law provides that we cannot charge the Variable Account with liabilities arising out of any other business we may conduct. We are required to maintain assets which are at least equal to the reserves and other liabilities of the Variable Account. We may transfer assets which exceed these reserves and liabilities to our general account (the Fixed Account). INVESTMENTS OF THE VARIABLE ACCOUNT There are currently 29 investment options (Funds) available under the Variable Account. However, we only permit you to participate in a maximum of 17 investment options over the lifetime of your Policy. The Summary, "Additional Information on the Investments of the Variable Account" in this Prospectus describes the Funds currently offered. You also should read the Funds' prospectuses for more detailed information, particularly because several of the Funds and portfolios may have objectives that are quite similar. Please call the telephone number listed on the first page of this Prospectus to request a Fund's prospectus. THERE IS NO ASSURANCE THAT ANY FUND WILL ACHIEVE ITS INVESTMENT OBJECTIVE(S). PERFORMANCE INFORMATION Performance information for the Sub-Accounts of the Variable Account and the Funds available for investment by the Variable Account may appear in advertisements, sales literature, or reports to Policy owners or prospective purchasers. Such performance information for the Sub-Accounts will reflect deductions of Fund expenses and be adjusted to reflect the Mortality and Expense Risk Charge, but will not reflect deductions for the cost of insurance or the Surrender Charge. We will accompany quotations of performance information for the Funds by performance information for the Sub-Accounts. Performance information for the Funds will take into account all fees and charges at the Fund level, but will not reflect any deductions from the Variable Account. Performance information reflects only the performance of a hypothetical investment during a particular time period in which the calculations are based. We may provide performance information showing total returns and average annual total returns for periods prior to the date a Sub-Account commenced operation. We will calculate such performance information based on the assumption that the Sub-Accounts were in existence for the same periods as those indicated for the Funds, with the level of charges at the Variable Account level that were in effect at the inception of the Sub-Accounts. We may also provide individualized hypothetical illustrations of Accumulation Value, Cash Surrender Value and Death Benefit based on historical investment returns of the Funds. These illustrations will reflect deductions for Fund expenses and Policy and Variable Account charges, including the Monthly 19 Deduction, Premium Expense Charge and the Surrender Charge. We will base these hypothetical illustrations on the actual historical experience of the Funds as if the Sub-Accounts had been in existence and a Policy issued for the same periods as those indicated for the Funds. We may compare performance of the Sub-Accounts and/or the Funds in advertisements and sales literature: o to other variable life insurance issuers in general o to the performance of particular types of variable life insurance policies investing in mutual funds o to investment series of mutual funds with investment objectives similar to each of the Sub-Accounts, whose performance is reported by Lipper Analytical Services, Inc. and Morningstar, Inc. (independent services that monitor and rank the performances of variable life insurance issuers in each of the major categories of investment objectives on an industry-wide basis), or reported by other series, companies, individuals or other industry or financial publications of general interest, such as FORBES, MONEY, THE WALL STREET JOURNAL, BUSINESS WEEK, BARRON'S, KIPLINGER'S, and FORTUNE o to the Standard & Poor's Index of 500 common stocks and the Dow Jones Industrials, which are widely used measures of stock market performance We may also compare the performance of each Sub-Account to other widely recognized indices. Unmanaged indices may assume the reinvestment of dividends, but typically do not reflect any "deduction" for the expense of operating or managing an investment portfolio. DEATH BENEFIT If the Insured dies while the Policy is in force, we will pay the Death Benefit reduced by any Loan Amount and unpaid Monthly Deductions. This amount is called the proceeds. We may pay all or part of the proceeds in cash to your beneficiaries or under one or more of the settlement options we offer (see "General Provisions -- Settlement Options"). DEATH BENEFIT QUALIFICATION TESTS You choose one of the two Death Benefit Qualification Tests for compliance with the Code Section 7702 definition of life insurance. These tests are the Cash Value Accumulation Test and the Guideline Premium Test. You cannot change this choice after issue. GUIDELINE PREMIUM TEST. The Death Benefit will be determined with reference to the requirements for the Guideline Premium test for qualifying a Policy as a life insurance contract under Code Section 7702(a) (2). Under these requirements, the sum of the premiums paid under a Policy may not exceed the "guideline premium limitations," as defined in Code Section 7702(a). The Death Benefit at any time is not less than the Accumulation Value multiplied by the Corridor Percentages, which vary according to the Age of the Insured (as defined in Code Section 7702(d)). 20 GUIDELINE PREMIUM TEST CORRIDOR PERCENTAGE TABLE
CORRIDOR CORRIDOR CORRIDOR INSURED'S AGE ON PERCENTAGE OF INSURED'S AGE ON PERCENTAGE OF INSURED'S AGE ON PERCENTAGE OF PREVIOUS POLICY ACCUMULATION PREVIOUS POLICY ACCUMULATION PREVIOUS POLICY ACCUMULATION ANNIVERSARY VALUE ANNIVERSARY VALUE ANNIVERSARY VALUE - ------------------ -------------- ------------------ -------------- ------------------ ------------- 40 or younger 250% 54 157 68 117 41 243 55 150 69 116 42 236 56 146 70 115 43 229 57 142 71 114 44 222 58 138 72 113 45 215 59 134 73 111 46 209 60 130 74 109 47 203 61 128 75-90 105 48 197 62 126 91 104 49 191 63 124 92 103 50 185 64 122 93 102 51 178 65 120 94 101 52 171 66 119 95 or older 100 53 164 67 118
CASH VALUE ACCUMULATION TEST. The Death Benefit is never less than the amount required for this Policy to be deemed "life insurance" based on the Cash Value Accumulation Test as defined in Code Section 7702(b). Generally, the Cash Value Accumulation Test requires that under the terms of a life insurance policy, the Death Benefit must be sufficient so that the Accumulation Value does not at any time exceed the net single premium required to fund the future benefits under the Policy. The net single premiums under the Policy vary according to the Age, sex, and Rate Class of the Insured. The net single premium is calculated using a 4% interest rate and using the guaranteed mortality charges as of the time the Policy is issued. The corridor percentage for the Cash Value Accumulation Test is then equal to 100% divided by the net single premium for the current Age, Sex, and Rate Class. WHICH DEATH BENEFIT QUALIFICATION TEST TO CHOOSE The Cash Value Accumulation Test does not limit the amount of premium that may be paid into a Policy. If you desire to pay premiums in excess of the guideline premium test limitations you should elect the Cash Value Accumulation Test. However, any premium that would increase the net amount at risk is subject to evidence of insurability satisfactory to us. Required increases in the minimum death benefit due to growth in Accumulation Value will generally be greater under the Cash Value Accumulation Test than under the Guideline Premium Test. The Guideline Premium Test limits the amount of premium that may be paid into a Policy. If you do not desire to pay premiums in excess of the Guideline Premium Test limitations, you should consider the Guideline Premium Test. DEATH BENEFIT OPTIONS The Policy provides three Death Benefit Options as shown below. You choose the Death Benefit Option on the application for the Policy. Subject to certain limitations, you can change the Death Benefit Option after issuance of the Policy. See "Death Benefit -- Change in Death Benefit Option". The Death Benefit prior to Age 100 depends on the Death Benefit Option chosen as described below regardless of the Death Benefit Option chosen. The Death Benefit after Age 100 is the Accumulation Value. OPTION A. (Level Amount Option.) Prior to Age 100, the Death Benefit is the greater of the current Face Amount of the Policy or the Corridor Percentage of Accumulation Value on the Valuation Date on or next following the date of the Insured's death. Under Option A, the Death Benefit will remain level unless the corridor percentage of Accumulation Value exceeds the current Face Amount, in which case the amount of the Death Benefit will vary as the Accumulation Value varies. OPTION B. (Variable Amount Option.) Prior to Age 100, the Death Benefit is equal to the greater of the current Face Amount plus the Accumulation Value of the Policy, or the corridor percentage of the Accumulation Value on the Valuation Date on or next following the date of the Insured's death. Under Option B, the amount of the Death Benefit will always vary as the Accumulation Value varies. OPTION C. (Face Amount Plus Premium Amount Option.) Prior to Age 100, the Death Benefit is the greater of the Face Amount plus cumulative premiums less cumulative withdrawals, or the Corridor 21 Percentage of the Accumulation Value on the Valuation Date following the date of the Insured's death. Under Option C, the amount of the Death Benefit will vary as the premiums are paid or withdrawals are made, or if the Corridor Percentage of the Accumulation Value exceeds the current Face Amount. WHICH DEATH BENEFIT OPTION TO CHOOSE If you prefer to have premium payments and favorable investment performance reflected partly in the form of an increasing Death Benefit, you should choose the Variable Amount Option. If you are satisfied with the amount of your existing insurance coverage and prefer to have premium payments and favorable investment performance reflected to the maximum extent in the Accumulation Value and lower cost of insurance charges, you should choose the Level Amount Option. If you require a specific Death Benefit which would include a return of the premium paid, such as under an employer sponsored benefit plan, Option C may meet your needs. REQUESTED CHANGES IN FACE AMOUNT Subject to certain limitations, you may request an increase or decrease in the Face Amount. We reserve the right to limit increases and decreases in the Face Amount during the first two Policy Years. INCREASES. For an increase in the Face Amount, you must submit a written request to us. We may also require additional evidence of insurability satisfactory to us. The effective date of the increase will be the Monthly Anniversary on or next following our approval of the increase. The increase may not be less than $5,000. We will currently permit increases up to the Insured's Age 85, if our requirements are met. We will deduct any charges associated with the increase (the increases in the cost of insurance and the Surrender Charge upon lapse or total surrender -- see "Effect of Requested Changes in Face Amount" below) from the Accumulation Value, whether or not you pay an additional premium in connection with the increase. You will be entitled to limited free look rights with respect to requested increases in Face Amount. See "Free Look Rights". DECREASES. For a decrease in the Face Amount, you must submit a written request to us. Any decrease in the Face Amount will be effective on the Monthly Anniversary on or next following our receipt of a written request. You cannot request a decrease in the Face Amount more frequently than once every six months. The Face Amount remaining in force after any requested decrease may not be less than the Minimum Face Amount shown in the Policy. Under our current rules, the Minimum Face Amount is $25,000, but we reserve the right to establish a different Minimum Face Amount in the future. If, following a decrease in Face Amount, the Policy would no longer qualify as life insurance under Federal tax law (see "Federal Tax Matters -- Tax Status of the Policy"), we will limit the decrease to the extent necessary to meet these requirements. For purposes of determining the cost of insurance, we will apply decreases in the Face Amount to reduce the current Face Amount in the following order: (1) The Face Amount provided by the most recent increase; (2) The next most recent increases successively; and (3) The Face Amount when the Policy was issued. By reducing the current Face Amount in this manner, the Rate Class applicable to the most recent increase in Face Amount will be eliminated first, then the Rate Class applicable to the next most recent increase, and so on, for the purposes of calculating the cost of insurance. This assumption will affect the cost of insurance under the Policy only if different Rate Classes have been applied to the current Face Amount. A Rate Class is a group of Insureds we determine based upon our expectation that they will have similar mortality experience. We currently place Insureds into standard Rate Classes or into substandard Rate Classes that involve a higher mortality risk (for example, a 200% Rate Class or a 300% Rate Class). In an otherwise identical Policy, an Insured in the standard Rate Class will have a lower cost of insurance than an Insured in a substandard Rate Class with higher mortality risks. See "Deductions and Charges -- Monthly Deduction". For example, assume that the initial Face Amount was $50,000 with a standard Rate Class, and that successive increases of $25,000 (at a Rate Class of 200%) and $50,000 (at a Rate Class of 300%) were added. If a decrease of $50,000 or less is requested, the amount of insurance at a 300% Rate Class will 22 be reduced first. If a decrease of more than $50,000 is requested, the amount at a 300% Rate Class will be eliminated, and the excess over $50,000 will next reduce the amount of insurance at a 200% Rate Class. EFFECT OF REQUESTED CHANGES IN FACE AMOUNT. An increase or decrease in Face Amount will affect the Monthly Deduction because the cost of insurance depends upon the Face Amount. The charge for certain optional insurance benefits may also be affected. See "Deductions and Charges -- Monthly Deduction". An increase in the Face Amount will increase the Surrender Charge and Monthly Amount Charge, but a decrease in the Face Amount will not reduce the Surrender Charge or the Monthly Amount Charge. The Surrender Charge is, however, imposed only upon lapse or total surrender of the Policy and not upon a requested decrease in Face Amount. See "Deductions and Charges -- Surrender Charge". An increase in the Face Amount will increase the Minimum Monthly Premium as of the effective date of the increase. Therefore, additional premium payments may be required to maintain the Death Benefit Guarantee. A decrease in the Face Amount will reduce the Minimum Monthly Premium as of the effective date of the decrease. A Face Amount decrease may also shorten the Death Benefit Guarantee Period if a term insurance rider is attached. See "Death Benefit Guarantee". The additional Surrender Charge on a requested increase in the Face Amount will reduce the Cash Surrender Value (which is the Accumulation Value less any Surrender Charge, Loan Amount and unpaid Monthly Deductions). If the resulting Cash Surrender Value is not sufficient to cover the Monthly Deduction, the Policy may lapse unless the Death Benefit Guarantee is in effect. See "Policy Lapse and Reinstatement -- Lapse" and "Death Benefit Guarantee". INSURANCE PROTECTION As your insurance needs change, you may increase or decrease the pure insurance protection provided by the Policy (that is, the difference between the Death Benefit and the Accumulation Value) in one of several ways. These ways include o increasing or decreasing the Face Amount of insurance, changing the level of premium payments, and, o making a partial withdrawal under the Policy. Although the consequences of each of these methods will depend upon the individual circumstances, they may be generally summarized as follows: o AN INCREASE IN THE FACE AMOUNT (which is generally subject to underwriting approval -- see "Death Benefit -- Requested Changes in Face Amount") will likely increase the amount of pure insurance protection, depending on the amount of Accumulation Value and the resultant corridor percentage limitation. If the insurance protection is increased, the Policy charges generally will increase as well. o A DECREASE IN THE FACE AMOUNT will, subject to the corridor percentage limitations (see "Death Benefit -- Death Benefit Options"), decrease the pure insurance protection without reducing the Accumulation Value. If the Face Amount is decreased, the Cost of Insurance charges generally will decrease as well. (Note that the Surrender Charge will not be reduced. See "Deductions and Charges -- Surrender Charge".) o A CHANGE IN THE LEVEL OF PREMIUM can have a variety of effects, as follows. Under the Level Amount Option, until the corridor percentage of Accumulation Value exceeds the Face Amount, (a) an increased level of premium payments will reduce the amount of pure insurance protection, and (b) a reduced level of premium payments will increase the amount of pure insurance protection. Under the Variable Amount Option, until the corridor percentage of Accumulation Value exceeds the Face Amount plus the Accumulation Value, the level of premium payments will not affect the amount of pure insurance protection. (However, both the Accumulation Value and the Death Benefit will be increased if premium payments are increased, and reduced if premium payments are reduced.) 23 Under the Face Plus Premium Amount Option, until the corridor percentage of Accumulation Value exceeds the Face Amount, the level of premium payments will affect the amount of pure insurance protection. Under any Death Benefit Option, if the Death Benefit is the corridor percentage of Accumulation Value, then (a) an increased level of premium payments will increase the amount of pure insurance protection (subject to underwriting approval -- see "Payment and Allocation of Premiums -- Amount and Timing of Premiums"), and (b) a reduced level of premium payments will reduce the pure insurance protection. o A PARTIAL WITHDRAWAL will reduce the Death Benefit. See "Surrender Benefits -- Partial Withdrawal". However, it has a limited effect on the amount of pure insurance protection and charges under the Policy, because the decrease in the Death Benefit is usually equal to the amount of Accumulation Value withdrawn. The primary use of a partial withdrawal is to withdraw Accumulation Value. Furthermore, it results in a reduced amount of Accumulation Value and increases the possibility that the Policy will lapse. YOU SHOULD CONSIDER THE TECHNIQUES DESCRIBED IN THIS SECTION FOR CHANGING THE AMOUNT OF PURE INSURANCE PROTECTION UNDER THE POLICY (FOR EXAMPLE, CHANGING THE FACE AMOUNT, MAKING A PARTIAL WITHDRAWAL, AND CHANGING THE AMOUNT OF PREMIUM PAYMENTS) TOGETHER WITH THE OTHER RESTRICTIONS AND CONSIDERATIONS DESCRIBED ELSEWHERE IN THIS PROSPECTUS. CHANGING THE DEATH BENEFIT OPTION After the second Policy Year, you may change the Death Benefit Option. We allow changes from Option A to Option B, from Option B to Option A, and, currently, from Option C to Option A. We will not allow changes to Option C after issue. You must submit a written request to change the Death Benefit Option. A change in the Death Benefit Option will also change the Face Amount. If the Death Benefit Option is changed from the Level Amount Option to the Variable Amount Option, the Face Amount will be decreased by an amount equal to the Accumulation Value on the effective date of the change. You cannot change from the Level Amount Option to the Variable Amount Option if the resulting Face Amount would fall below the minimum Face Amount (currently $25,000). If you change the Death Benefit Option from the Variable Amount Option to the Level Amount Option, we will increase the Face Amount by an amount equal to the Policy's Accumulation Value on the effective date of the change. If you change from Option C to Option A, we will increase the Face Amount by an amount equal to cumulative premiums less cumulative withdrawals taken. An increase or decrease in Face Amount resulting from a change in the Death Benefit Option will affect the future Monthly Deductions because the cost of insurance depends upon the Face Amount. A change in the Face Amount resulting from a change in the Death Benefit Option may also affect the charge for certain optional insurance benefits. See "Deductions and Charges -- Monthly Deduction". However, a Face Amount change resulting from a Death Benefit Option change will not affect the Surrender Charge. Changes in the Death Benefit Option do not currently require additional evidence of insurability. ACCELERATED BENEFIT RIDER Under certain circumstances, the Accelerated Benefit Rider allows a Policy owner to accelerate benefits from the Policy that we otherwise would pay upon the Insured's death. The benefit may vary state-by-state and you should consult your registered representative as to whether and to what extent the rider is available in a particular state and on any particular Policy. Generally, we will provide an Accelerated Benefit if the Insured has a terminal illness that will result in the death of the Insured within 12 months, as certified by a physician. The Accelerated Benefit will not be more than 50% of the amount that would be payable at the death of the Insured. The Accelerated Benefit will first be used to pay off any outstanding Policy loans and interest due. The remainder of the Accelerated Benefit will be paid in a lump sum to the Policy owner. Limitations, as described in the Accelerated Benefit Rider, may apply. 24 We will establish a lien against the Policy for the amount of the Accelerated Benefit plus an administrative charge, plus interest on the lien. We will first use any proceeds from the Policy to repay this lien. We will reduce the your access to the Cash Value by the amount of the lien. We also will reduce the proceeds payable to the beneficiary by the amount of the lien. We will assess an administrative charge of up to $300 at the time the we pay the Accelerated Benefit. The Accelerated Benefit will not affect the premium payable on the Policy. Receipt of a benefit under the Accelerated Benefit Rider may give rise to Federal or state income tax. Consult a competent tax advisor for further information. The above information is not a complete summary of the Rider. All of the terms and provisions of the Accelerated Benefit Rider are set forth in the Rider and you should refer to the Rider in order to fully ascertain its benefits and limitations. PAYMENT AND ALLOCATION OF PREMIUMS ISSUING THE POLICY An individual applying for a Policy must complete an application and personally deliver it to our licensed agent. We will only issue a Policy to an applicant Age 85 or less who supplies evidence of insurability satisfactory to us. The minimum Face Amount is currently $25,000, but we reserve the right to specify a different minimum Face Amount for issuing a new Policy. Acceptance is subject to our underwriting rules and we reserve the right to reject an application for any reason permitted by law. COVERAGE. Coverage under a Policy begins on the later of the Issue Date or the date we receive at least the minimum initial premium (see immediately following section). In general, if the applicant pays at least the minimum initial premium with the application, the Issue Date will be the later of the date of the application or the date of any medical examination required by our underwriting procedures. However, if underwriting approval has not occurred within 45 days after we receive the application or if you authorize premiums to be paid by bank account monthly deduction, the Issue Date will be the date of underwriting approval. If you authorize premiums to be paid by government allotment, the Issue Date generally will be, subject to our underwriting approval, the first day of the month in which we receive the first Minimum Monthly Premium through government allotment, whether or not a Minimum Monthly Premium is collected with the application. If a Minimum Monthly Premium is collected with the application, it will be allocated to the Sub-Accounts of the Variable Account and the Fixed Account on the Valuation Date next following the Issue Date. MINIMUM INITIAL PREMIUM. The minimum initial premium is three Minimum Monthly Premiums (see "Death Benefit Guarantee"). If, however, you authorize premiums to be paid by bank account monthly deduction or government allotment, we will accept one Minimum Monthly Premium together with the required authorization forms. The Minimum Monthly Premium is specified in the Policy and determines the payments required to maintain the Death Benefit Guarantee. TEMPORARY INSURANCE. At the time the application is taken, the applicant can receive temporary insurance coverage by paying a premium equal to 10% of annualized Minimum Monthly Premium. The temporary insurance will be for the Face Amount specified in the premium receipt and will be effective until the earliest of the following: o The date the coverage under the Policy is effective. o The date the applicant receives an offer for an alternative policy, a notice of termination of temporary insurance coverage, or notice that we have rejected the application. o The date of death of the proposed Insured, any proposed additional Insured's, or any proposed Insured child. o The 180th day after the date of the receipt for the temporary insurance. ALLOCATING PREMIUMS We will credit the initial Net Premium and any premiums received prior to the Initial Premium Transfer Date to the Fidelity VIP Money Market Sub-Account on the later of the Policy Date or the date we receive your premium. On the Initial Premium Transfer Date, we will transfer the Variable Accumulation Value in the Fidelity VIP Money Market Sub-Account to the Fixed Account and the 25 Sub-Accounts of the Variable Account as you designated on the Policy application. After the Initial Premium Transfer Date, we credit premiums to the Fixed Account and the Sub-Accounts of the Variable Account as you designated on the Policy application. You may change the premium allocation at any time by notifying us in writing. Changes will not be effective until the date we receive your request and will only affect premiums we receive on or after that date. The new premium allocation may be 100% to any Account or divided in whole percentage points totaling 100%. We reserve the right to adjust any allocation to eliminate fractional percentages. Changing the current premium allocation will not affect the allocation of existing Accumulation Value. CREDITING NET PREMIUMS. We will credit Net Premiums on the latest of the following dates: o The Valuation Date following the date of underwriting approval. o The Valuation Date on or next following the Policy Date. o The Valuation Date on or next following the date we receive at least the required minimum initial premium payment. o In the case of Policies issued under government allotment programs, the Valuation Date next following the Issue Date. REFUNDING PREMIUMS. We will return all premiums paid without interest if any of the following occur: o We send notice to the applicant that the insurance is declined. o The applicant refuses an offer for an alternative policy. o The applicant does not supply required medical exams or tests within 30 days of the date of the application. o The applicant returns the Policy under the limited free look right. See "Free Look and Conversion Rights -- Free Look Rights". AMOUNT AND TIMING OF PREMIUMS The amount and frequency of premium payments will affect the Accumulation Value, the Cash Surrender Value, and how long the Policy will remain in force (including affecting whether the Death Benefit Guarantee is in effect -- see "Death Benefit Guarantee"). After the initial premium, you may determine the amount and timing of subsequent premium payments within the following restrictions: o In most cases, we will require that you pay cumulative premiums sufficient to maintain the Death Benefit Guarantee to keep the Policy in force during at least the first several Policy Years. See "Death Benefit Guarantee." o We may choose not to accept any premium less than $25. o We reserve the right to limit the amount of any premium payment. In general, during the first Policy Year we will not accept total premium payments in excess of $250,000 on the life of any Insured, whether such payments are received on a Policy or on any other insurance policy issued by us or our affiliates. Also, we will not accept any premium payment in excess of $50,000 on any Policy after the first Policy Year. We may waive any of these premium limitations. o We may require additional evidence of insurability satisfactory to us if any premium would increase the difference between the Death Benefit and the Accumulation Value (that is, the net amount at risk). A premium payment would increase the net amount at risk if at the time of payment the Death Benefit would be based upon the applicable corridor percentage of Accumulation Value. See "Death Benefit -- Death Benefit Options". o In no event may the total of all premiums paid, both scheduled and unscheduled, exceed the current maximum premium payments allowed for life insurance under Section 7702 of the Code. If at any time you pay a premium that would result in total premiums exceeding the current maximum premiums allowed, we will only accept that portion of the premium which would make total premiums equal the maximum. We will return any part of the premium in excess of that amount, and we will not accept further premiums until allowed by the current maximum premium limitations. 26 o You may pay additional premiums (other than Planned Periodic Premiums) at any time while the Policy is in force before Age 100. We may limit the number and amount of these additional payments. However you may always pay premiums if needed to keep your Policy in force for the remainder of the current Policy Year. o If you want to make a large premium payment under this Policy, and you wish to avoid Modified Endowment Contract classification, you may contact us in writing before making the payment and we will tell you the maximum amount which you can pay into the Policy. See "Federal Tax Matters -- Tax Status of the Policy". PLANNED PERIODIC PREMIUMS You may choose a Planned Periodic Premium schedule which indicates a preference as to future amounts and frequency of payment. You may pay Planned Periodic Premiums annually, semi-annually, quarterly or, if you choose, you can pay the Planned Periodic Premiums by bank account monthly deduction or government allotment. Your Policy will show the amount and frequency of your initial Planned Periodic Premium. You may change the Planned Periodic Premium at any time by written request. We may limit the amount of any increase. Failure to make any Planned Periodic Premium payment will not, however, necessarily result in lapse of the Policy. On the other hand, making Planned Periodic Premium payments will not guarantee that the Policy remains in force. See "Death Benefit Guarantee" and "Policy Lapse and Reinstatement". PAYING PREMIUMS BY MAIL You may pay Planned Periodic Premiums and Unscheduled Additional Premiums to the Company by mailing the payments to: ReliaStar Life Insurance Company P.O. Box 1880 Minneapolis, Minnesota 55480-1880 DEATH BENEFIT GUARANTEE If you meet the requirements described below, we guarantee that we will not lapse the Policy even if the Cash Surrender Value is not sufficient to cover the Monthly Deduction that is due. This feature of the Policy is called the "Death Benefit Guarantee". Each Policy will specify the Death Benefit Guarantee Period. For a standard rated Policy without any term insurance riders the Death Benefit Guarantee Period expires at the Insured's Age 65 for Issue Ages 0 through 60, or at the end of five Policy Years for Issue Ages 61 through 80, or at the end of three Policy Years for Issue Ages 81 through 85. The Death Benefit Guarantee Period is shorter for substandard rated policies or if any term insurance rider is attached. In general, the two most significant benefits from the Death Benefit Guarantee are as follows: o First, during the early Policy Years, the Cash Surrender Value will generally not be sufficient to cover the Monthly Deduction, so that the Death Benefit Guarantee will be necessary to avoid lapse of the Policy. See "Policy Lapse and Reinstatement". This occurs because the Surrender Charge usually exceeds the Accumulation Value in these years. In this regard, you should consider that if you request an increase in Face Amount, an additional Surrender Charge would apply for the 10 years following the increase, which could create a similar possibility of lapse as exists during the early Policy Years. o Second, to the extent the Cash Surrender Value declines due to poor investment performance, or due to an additional Surrender Charge after a requested increase, the Cash Surrender Value may not be sufficient even in later Policy Years to cover the Monthly Deduction, so that the Death Benefit Guarantee may also be necessary in later Policy Years to avoid lapse of the Policy. Thus, even though the Policy permits premium payments that are less than the Minimum Monthly Premiums, you may lose the significant protection provided by the Death Benefit Guarantee by paying less than the Minimum Monthly Premiums. 27 REQUIREMENTS FOR THE DEATH BENEFIT GUARANTEE The Death Benefit Guarantee will be in effect if the sum of all premiums paid minus any partial withdrawals and any loans are equal to or greater than the sum of the Minimum Monthly Premiums since the Policy Date. You must satisfy the requirements for the Death Benefit Guarantee as of each Monthly Anniversary, even though you do not have to pay premiums monthly. EXAMPLE: The Policy Date is January 1, 2000. The Minimum Monthly Premium is $100 per month. No Policy loans or partial withdrawals are taken and no Face Amount changes have occurred. Case 1. You pay $100 each month. The Death Benefit Guarantee is maintained. Case 2. You pay $1,000 on January 1, 2000. The $1,000 maintains the Death Benefit Guarantee without your paying any additional premiums for the next 10 months (through October 31, 2000). However, you must pay at least $100 by November 1, 2000 to maintain the Death Benefit Guarantee through November 30, 2000. We will determine (and the Policy will indicate) the amount of the initial Minimum Monthly Premium at issuance of the Policy. The initial Minimum Monthly Premium will depend upon the Insured's sex, Age at issue, Rate Class, optional insurance benefits added by rider, and the initial Face Amount. The following Policy changes may change the Minimum Monthly Premium: o A requested increase or decrease in the Face Amount (see "Death Benefit -- Requested Changes in Face Amount"). o A change in the Death Benefit Option (see "Death Benefit -- Changing the Death Benefit Option"). o The addition or termination of a Policy rider (see "General Provisions -- Optional Insurance Benefits"). We will notify you in writing of any changes in the Minimum Monthly Premium. If you have not made sufficient premium payments to maintain the Death Benefit Guarantee as of any Monthly Anniversary, we will send you notice of the premium payment required to maintain the Death Benefit Guarantee. If we do not receive the required premium payment within 61 days from the date of our notice, the Death Benefit Guarantee will terminate. You can reinstate the Death Benefit Guarantee within the first 5 Policy Years by paying any past due Minimum Monthly Premiums. After the first 5 Policy Years, a lapsed Death Benefit Guarantee cannot be reinstated. Even if the Death Benefit Guarantee terminates, the Policy will not necessarily lapse. For a discussion of the circumstances under which the Policy may lapse, see "Policy Lapse and Reinstatement". ACCUMULATION VALUE The Accumulation Value of the Policy (that is, the total value attributable to a specific Policy in the Variable Account and the Fixed Account) is equal to the sum of the Variable Accumulation Value (the value attributable to the Variable Account) plus the Fixed Accumulation Value (the value attributable to the Fixed Account). You should distinguish the Accumulation Value from the Cash Surrender Value that would actually be paid to you upon total surrender of the Policy, which is the Accumulation Value less any Surrender Charge, Loan Amount and unpaid Monthly Deductions. See "Surrender Benefits -- Total Surrender". You should also distinguish the Accumulation Value from the Cash Value, which determines the amount available for Policy loans, and is the Accumulation Value less any Surrender Charge. See "Policy Loans." The Variable Accumulation Value will generally vary daily and will increase or decrease to reflect the investment performance of the Funds in which Sub-Accounts of the Variable Account have been invested. We will increase the Variable Accumulation Value by: o any Net Premiums credited to the Variable Account, and o any transfers from the Fixed Account. 28 We will reduce the Variable Accumulation Value by: o the Monthly Deduction attributable to the Variable Account, o partial withdrawals from the Variable Account, o any transfer and partial withdrawal charges attributable to the Variable Account, and o any amounts transferred from the Variable Account to the Fixed Account (including amounts transferred from the Variable Account to the Fixed Account as security for Policy loans -- see "Policy Loans"). We will increase the Fixed Accumulation Value by: o any Net Premiums credited to the Fixed Account, o any interest credited to the Fixed Account (determined at our discretion, but guaranteed not to be less than 3%), and o any amounts transferred from the Variable Account to the Fixed Account (including amounts transferred to the Fixed Account as security for Policy loans -- see "Policy Loans"). We will reduce the Fixed Accumulation Value by: o the Monthly Deduction attributable to the Fixed Account, o partial withdrawals from the Fixed Account, o any transfer and partial withdrawal charges attributable to the Fixed Account, and o any amounts transferred from the Fixed Account to the Variable Account. See Appendix B for a detailed discussion of the calculation of Accumulation Value. Appendix C includes an illustration of various Accumulation Values, Cash Surrender Values, and Death Benefits, assuming different levels of premium payments and various investment returns for selected Ages and Face Amounts. SPECIALIZED USES OF THE POLICY Because the Policy provides for an accumulation of Cash Surrender Value as well as a Death Benefit, the Policy can be used for various individual and business financial planning purposes. Purchasing the Policy in part for such purposes entails certain risks. For example, if the investment performance of the Sub-Accounts to which Accumulation Value is allocated is poorer than expected or if sufficient premiums are not paid, the Policy may lapse or may not accumulate sufficient Accumulation Value or Cash Surrender Value to fund the purpose for which the Policy was purchased. Withdrawals and Policy loans may significantly affect current and future Accumulation Value, Cash Surrender Value, or Death Benefit proceeds. Depending upon Sub-Account investment performance and the amount of a Policy loan, the loan may cause a Policy to lapse. Because the Policy is designed to provide benefits on a long-term basis, before purchasing a Policy for a specialized purpose a purchaser should consider whether the long-term nature of the Policy is consistent with the purpose for which it is being considered. Using a Policy for a specialized purpose may have tax consequences. See "Federal Tax Matters". POLICY LAPSE AND REINSTATEMENT LAPSE. Unlike traditional life insurance policies, the failure to make a Planned Periodic Payment will not by itself cause the Policy to lapse (terminate). If the Death Benefit Guarantee is not in effect, the Policy will lapse only if, as of any Monthly Anniversary, the Cash Surrender Value is less than the Monthly Deduction due, and a grace period of 61 days expires without a sufficient payment. During the early Policy Years, the Cash Surrender Value will generally not be sufficient to cover the Monthly Deduction, so that premium payments sufficient to maintain the Death Benefit Guarantee will be required to avoid lapse. See "Death Benefit Guarantee". The Policy does not lapse, and the insurance coverage continues, until the expiration of a 61-day grace period which begins on the date we send you written notice indicating that the Cash Surrender 29 Value is less than the Monthly Deduction due. Our written notice will indicate the amount of the payment required to avoid lapse. If you do not make a sufficient payment within the grace period, then the Policy will lapse without value. If the Insured dies during the grace period, the proceeds payable will equal the amount of the Death Benefit on the Valuation Date on or next following the date of the Insured's death, reduced by any Loan Amount and any unpaid Monthly Deductions. If the Death Benefit Guarantee is in effect, we will not lapse the Policy. See "Death Benefit Guarantee". REINSTATEMENT. Reinstatement means putting a lapsed Policy back in force. You may reinstate a lapsed Policy by written request any time within five years after it has lapsed if it has not been surrendered for its Cash Surrender Value. To reinstate the Policy and any riders you must submit evidence of insurability satisfactory to us and you must pay a premium large enough to keep the Policy in force for at least two months. A lapsed Death Benefit Guarantee cannot be reinstated after the fifth Policy Year. SURRENDER BENEFITS Subject to certain limitations, you may make a total surrender of the Policy or a partial withdrawal of the Policy's Cash Surrender Value by sending us a written request. We will determine the amount available for a total surrender or partial withdrawal at the end of the Valuation Period when we receive your written request. Generally, we will pay any amounts from the Variable Account upon total surrender or partial withdrawal within seven days after we receive your written request. We may postpone payments, however, in certain circumstances. See "General Provisions -- Postponement of Payments". TOTAL SURRENDER You may surrender the Policy at any time for its Cash Surrender Value by making a written request. The Cash Surrender Value is the Accumulation Value of the Policy reduced by any Surrender Charge, Loan Amount and unpaid Monthly Deductions. If the Cash Surrender Value at the time of a surrender exceeds $25,000, the written request must include a Signature Guarantee. Appendix C shows an illustration of Accumulation Values, Cash Surrender Values, and Death Benefits assuming different levels of premium payments and investment returns for selected Ages and Face Amounts. PARTIAL WITHDRAWAL After the first Policy Year, you may withdraw part of the Cash Surrender Value by sending us a written request. If the amount being withdrawn exceeds $25,000, then the written request must include a Signature Guarantee. We currently allow only one partial withdrawal in any Policy Year. We currently make a $10 charge for each partial withdrawal. We guarantee that this charge will not exceed $25 for each partial withdrawal. See "Deductions and Charges -- Partial Withdrawal and Transfer Charges". The amount of any partial withdrawal must be at least $500 and, during the first 10 Policy Years, may not be more than 20% of the Cash Surrender Value on the date we receive your written request. Unless you specify a different allocation, we make partial withdrawals from the Fixed Account and the Sub-Accounts of the Variable Account on a proportionate basis based upon the Accumulation Value. We will determine these proportions at the end of the Valuation Period during which we receive your written request. For purposes of determining these proportions, we first subtract any outstanding Loan Amount from the Fixed Accumulation Value. EFFECT OF PARTIAL WITHDRAWALS. We will reduce the Accumulation Value by the amount of any partial withdrawal. We will also reduce the Death Benefit by the amount of the withdrawal, or, if the Death Benefit is based on the corridor percentage of Accumulation Value (see "Death Benefit -- Death Benefit Options"), by an amount equal to the corridor percentage times the amount of the partial withdrawal. If the Level Amount Option is in effect, we will reduce the Face Amount by the amount of the partial withdrawal. When increases in the Face Amount have occurred previously, we reduce the current Face Amount by the amount of the partial withdrawal in the following order: 30 (1) The Face Amount provided by the most recent increase; (2) The next most recent increases successively; and (3) The Face Amount when the Policy was issued. (This assumption also applies to requested decreases in Face Amount -- see "Death Benefit -- Requested Changes in Face Amount".) Thus, partial withdrawals may affect the way in which the cost of insurance is calculated and the amount of pure insurance protection under the Policy. See "Death Benefit -- Requested Changes in Face Amount", "Deductions and Charges -- Monthly Deduction" and "Death Benefit -- Insurance Protection". We do not allow a partial withdrawal if the Face Amount after a partial withdrawal would be less than the minimum Face Amount (currently $25,000). If the Variable Amount Option or the Face Plus Premium Amount Option is in effect, a partial withdrawal does not affect the Face Amount. A partial withdrawal may also cause the termination of the Death Benefit Guarantee because we deduct the amount of the partial withdrawal from the total premiums paid in calculating whether you have paid sufficient premiums in order to maintain the Death Benefit Guarantee. Like partial withdrawals, Policy loans are a means of withdrawing money from the Policy. See "Policy Loans". A partial withdrawal or a Policy loan may have tax consequences depending on the circumstances of such withdrawal or loan. See "Federal Tax Matters -- Tax Status of the Policy". TRANSFERS You may transfer all or part of the Variable Accumulation Value between the Sub-Accounts or to the Fixed Account subject to any conditions the Funds whose shares are involved may impose. You must make your transfer request in writing unless you have completed a telephone transfer authorization form. You may also direct us to automatically make periodic transfers under the Dollar Cost Averaging or Portfolio Rebalancing services as described below. To transfer all or part of the Variable Accumulation Value from a Sub-Account, we redeem Accumulation Units and reinvest their values in other Sub-Accounts, or the Fixed Account, as you direct in your request. We will effect transfers, and determine all values in connection with transfers, at the end of the Valuation Period during which we receive your request, except as otherwise specified for the Dollar Cost Averaging or Portfolio Rebalancing services. With respect to future Net Premium payments, however, your current premium allocation will remain in effect unless (1) you have requested the Portfolio Rebalancing service, or (2) you are transferring all of the Variable Accumulation Value from the Variable Account to the Fixed Account in exercise of conversion rights. See "Free Look and Conversion Rights -- Conversion Rights". Transfers from the Fixed Account to the Variable Account are subject to the following additional restrictions: o your transfer request must be postmarked no more than 30 days before or after the Policy Anniversary in any year, and only one transfer is permitted during this period, o you may only transfer up to 50% of the Fixed Accumulation Value, less any Loan Amount, unless the balance, after the transfer, would be less than $1,000, in which event you may transfer the full Fixed Accumulation Value, less any Loan Amount, and o you must transfer at least the lesser of $500 or the total Fixed Accumulation Value, less any Loan Amount. Some of these restrictions may be waived for transfers due to the Portfolio Rebalancing Service. TELEPHONE/FAX INSTRUCTIONS. You are allowed to enter certain types of instructions either by telephone or by fax if you complete a telephone/fax instruction authorization form. If you complete the form, you can enter the following types of instructions by telephone or fax: o transfers between Sub-Accounts o changes of allocations among fund options 31 By completing the telephone/fax form, you agree that we will not be liable for any loss, liability, cost or expense when we act in accordance with the telephone/fax transfer instructions that we receive or are recorded on voice recording equipment. If we later determine that you did not make a telephone/fax transfer request or the request was made without your authorization, and loss results from such unauthorized transfer, you bear the risk of this loss. We consider any requests made via fax as telephone requests and such requests are bound by the conditions in the telephone/fax transfer authorization form you sign. Any fax request should include your name, daytime telephone number, Policy number and, in the case of transfers, the names of the Sub-Accounts from which and to which money will be transferred and the allocation percentage. ReliaStar will employ reasonable procedures to confirm that instructions communicated by telephone/fax are genuine. If we do not employ such procedures, we may be liable for any losses due to unauthorized or fraudulent instructions. Such procedures may include, among others, requiring forms of personal identification prior to acting upon telephone/fax instructions, providing written confirmation of such instructions, and/or tape recording telephone instructions. DOLLAR COST AVERAGING SERVICE. You may request this service if your Face Amount is at least $100,000 and your Accumulation Value, less any Loan Amount, is at least $5,000. If you request this service, you direct us to automatically make specific periodic transfers of a fixed dollar amount from any of the Sub-Accounts to one or more of the Sub-Accounts or to the Fixed Account. We do not permit transfers from the Fixed Account under this service. You may request that we make transfers of this type on a monthly, quarterly, semi-annual, or annual basis. This service is intended to allow you to use "Dollar Cost Averaging", a long term investment method which provides for regular investments over time. We make no guarantees that Dollar Cost Averaging will result in a profit or protect against loss. You may discontinue this service at any time by notifying us in writing. If you are interested in the Dollar Cost Averaging service, you may obtain a separate application form and full information concerning this service and its restrictions from us or our registered representative. We will discontinue the Dollar Cost Averaging service immediately (1) on receipt of any request to begin a Portfolio Rebalancing service, (2) if the Policy is in the grace period on any date when Dollar Cost Averaging transfers are scheduled, or (3) if the specified transfer amount from any Sub-Account is more than the Accumulation Value in that Sub-Account. We reserve the right to discontinue, modify, or suspend this service. Any such modification or discontinuation would not affect any Dollar Cost Averaging service requests already commenced. PORTFOLIO REBALANCING SERVICE. You may request this service if your Face Amount is at least $200,000 and your Accumulation Value, less any Loan Amount, is at least $10,000. If you request this service, you direct us to automatically make periodic transfers to maintain your specified percentage allocation of Accumulation Value, less any Loan Amount, among the Sub-Accounts of the Variable Account and the Fixed Account. We will also change your allocation of future Net Premium payments to be equal to this specified percentage allocation. You may request that we make transfers under this service on a quarterly, semi-annual, or annual basis. This service is intended to maintain the allocation you have selected consistent with your personal objectives. The Accumulation Value in each Sub-Account of the Variable Account and the Fixed Account will grow or decline at different rates over time. Portfolio Rebalancing will periodically transfer Accumulation Values from those accounts that have increased in value to those accounts that have increased at a slower rate or declined in value. If all accounts decline in value, it will transfer Accumulation Values from those that have decreased less in value to those that have decreased more in value. We make no guarantees that Portfolio Rebalancing will result in a profit or protect against loss. You may discontinue this service at any time by notifying us in writing. If you are interested in the Portfolio Rebalancing service you may obtain a separate application form and full information concerning this service and its restrictions from us or our registered representative. If you are using the Portfolio Rebalancing service, we will discontinue this service immediately (1) on receipt of any request to change the allocation of premiums to the Fixed Account and Sub-Account of the Variable Account, (2) on receipt of any request to begin a Dollar Cost Averaging service, (3) upon receipt of any request to transfer Accumulation Value among the accounts, or (4) if the policy is in the 32 grace period or the Accumulation Value, less any Loan Amount, is less than $7,500 on any Valuation Date when Portfolio Rebalancing transfers are scheduled. We reserve the right to discontinue, modify, or suspend this service. Any such modification or discontinuation could affect Portfolio Rebalancing services currently in effect, but only after 30 days notice to affected Policy owners. TRANSFER LIMITS. We currently allow unlimited transfers in a Policy Year, although we reserve the right to limit you to no more than twelve transfers per year. All transfers that are effective on the same Valuation Date will be treated as one transfer transaction. Transfers made due to the Dollar Cost Averaging or Portfolio Rebalancing services do not currently count toward the limit on number of transfers. TRANSFER CHARGES. While there is currently no charge imposed on the first 24 transfers in a Policy Year, we reserve the right to make a charge not to exceed $25 per transfer for the duration of the Policy. Further, no charge currently is made for transfers to implement Dollar Cost Averaging and Portfolio Rebalancing. See "Deductions and Charges -- Partial Withdrawal and Transfer Charges". In no event, however, will we impose any charge in connection with the exercise of a conversion right or transfers occurring as the result of Policy Loans. All transfers are also subject to any charges and conditions imposed by the Fund whose shares are involved. We will treat all transfers that are effective on the same Valuation Date as one transfer transaction for the purpose of assessing any transfer charge. POLICY LOANS GENERAL. As long as the Policy remains in effect, you may borrow money from us using the Policy as security for the loan. We reserve the right to limit loans during the first Policy year (except that persons in Indiana may take loans during the first Policy year). The maximum amount you may borrow at any time is equal to the loan value of the Policy, which is equal to 90% of the Cash Value (100% in Texas) less the existing Loan Amount. If the Policy is in force as paid-up life insurance, the loan value is equal to the Cash Value on the next Policy Anniversary less any existing Loan Amount and loan interest to that date. Each Policy loan must be at least $500 ($200 in Connecticut). After Age 65, we currently allow you to borrow 100% of the Cash Surrender Value. You can make loan requests in writing or by telephoning us on any Valuation Date. Any loan request in excess of $25,000 will require a Signature Guarantee. Telephone loan requests cannot exceed $10,000. We currently do not require any election form to make telephone loan requests. We will employ reasonable procedures to confirm that loan requests made by telephone are genuine. In the event we do not employ such procedures, we may be liable for any losses due to unauthorized or fraudulent instructions. Such procedures may include, among others, requiring forms of personal identification prior to acting upon telephone instructions, providing written confirmations of such instructions and/or tape recording telephone instructions. Policy loans have priority over the claims of any assignee or other person. You may repay a Policy loan in whole or in part at any time. We will normally pay the loan proceeds to you within seven days after we receive your request. We may postpone payment of loan proceeds to you under certain circumstances. See "General Provisions -- Postponement of Payments". Payments you make generally will be treated as premium payments, rather than Policy loan repayments, unless you indicate that we should treat the payment otherwise or unless we decide, at our discretion, to apply the payment as a Policy loan repayment. As a result, unless you indicate that a payment is a loan repayment, all payments you make to the Policy will generally be subject to the Premium Expense Charge. See "Deductions and Charges -- Premium Expense Charge". IMMEDIATE EFFECT OF POLICY LOANS. When we make a Policy loan, we will segregate an amount equal to the Policy loan (which includes interest payable in advance) within the Accumulation Value of your Policy and hold it in the Fixed Account as security for the loan. As described below, you will pay interest to us on the Policy loan, but we will also credit interest to you on the amount held in the Fixed Account as security for the loan. We will include the amount segregated in the Fixed Account as security for the Policy loan as part of the Fixed Accumulation Value under the Policy, but we will credit that amount with interest on a basis different from other amounts in the Fixed Account. 33 Unless you specify differently, amounts held as security for the Policy loan will come proportionately from the Fixed Accumulation Value and the Variable Accumulation Value (with the proportions being determined as described below). We will transfer assets equal to the portion of the Policy loan coming from the Variable Accumulation Value from the Sub-Accounts of the Variable Account to the Fixed Account, THEREBY REDUCING THE POLICY VALUE HELD IN THE SUB-ACCOUNTS. We do not treat these transfers as transfers for the purposes of assessing the transfer charge or calculating the limit on the number of transfers. EFFECT ON INVESTMENT PERFORMANCE. Amounts coming from the Variable Account as security for Policy loans will no longer participate in the investment performance of the Variable Account. We will credit all amounts held in the Fixed Account as security for Policy loans (that is, the Loan Amount) with interest at an effective annual rate equal to 3.00%. WE WILL NOT CREDIT ADDITIONAL INTEREST TO THESE AMOUNTS. On the Policy Anniversary, we will allocate any interest credited on these amounts to the Fixed Account and the Variable Account according to the premium allocation then in effect (see "Payment and Allocation of Premiums -- Allocating Premiums"). Although you may repay Policy loans in whole or in part at any time, Policy loans will permanently affect the Policy's potential Accumulation Value. As a result, to the extent that the Death Benefit depends upon the Accumulation Value (see "Death Benefit -- Death Benefit Options"), Policy loans will also affect the Death Benefit under the Policy. This effect could be favorable or unfavorable depending on whether the investment performance of the assets allocated to the Sub-Account(s) is less than or greater than the interest being credited on the assets transferred to the Fixed Account while the loan is outstanding. Compared to a Policy under which no loan is made, values under the Policy will be lower when such interest credited is less than the investment performance of assets held in the Sub-Account(s). EFFECT ON POLICY COVERAGE. We will notify you if, on any Monthly Anniversary, the Loan Amount is greater than the Accumulation Value, less the then applicable Surrender Charge. If we do not receive sufficient payment within 61 days from the date we send notice to you, the Policy will lapse and terminate without value. Our written notice to you will indicate the amount of the payment required to avoid lapse. The Policy may, however, later be reinstated. See "Policy Lapse and Reinstatement". A Policy loan may also cause termination of the Death Benefit Guarantee, because we deduct the Loan Amount from the total premiums paid in calculating whether you have paid sufficient premiums in order to maintain the Death Benefit Guarantee. See "Death Benefit Guarantee". We will reduce proceeds payable upon the death of the Insured by any Loan Amount. INTEREST. The interest rate charged on Policy loans will be an annual rate of 4.762%, payable in advance. After the 10th Policy Year, we currently charge interest at an annual rate of 2.913% (guaranteed not to exceed 3.382%), payable in advance, on that portion of your Loan Amount that is not in excess of (1) the Accumulation Value, less (2) the total of all premiums paid less all partial withdrawals. We will charge interest on any excess of this amount at the annual rate of 4.762%, payable in advance. Interest is payable in advance (for the rest of the Policy Year) at the time any Policy loan is made and at the beginning of each Policy Year thereafter (for that entire Policy Year). If you do not pay interest when due, we will deduct it from the Cash Surrender Value as an additional Policy loan (see "Immediate Effect of Policy Loans" above) and we will add it to the existing Loan Amount. Because we charge interest in advance, we will refund any interest that we have not earned to you upon lapse or surrender of the Policy or repayment of the Policy Loan. REPAYMENT OF LOAN AMOUNT. You may repay the Loan Amount any time. If not repaid, we will deduct the Loan Amount from any amount payable under the Policy. As described above, unless you provide us with notice to the contrary, we generally will treat any payments on the Policy as premium payments, which are subject to the Premium Expense Charge, rather than repayments on the Loan Amount. Any repayments on the Loan Amount will result in amounts being reallocated from the Fixed Account and to the Sub-Accounts of the Variable Account according to your current premium allocation. TAX CONSIDERATIONS. A Policy loan may have tax consequences depending on the circumstances of the loan. See "Federal Tax Matters -- Tax Status of the Policy". 34 1035 EXCHANGES. We reserve the right to permit a Policy Loan prior to the first Policy Anniversary for Policies issued pursuant to a transfer of Cash Values from another life insurance policy under Section 1035(a) of the Code, as amended. In the event of such a Policy Loan, the Policy Loan will be treated for all purposes as made on the Policy Issue Date. FREE LOOK AND CONVERSION RIGHTS FREE LOOK RIGHTS The Policy provides for a "free look" period after application for and issuance of the Policy. The Policy also provides for a "free look" period after any requested increase in Face Amount. During the free look period after application for and issuance of the Policy, you have a right to return the Policy for cancellation. You must return the Policy to your agent or us and ask us to cancel the Policy by midnight of the 10th day after receiving the Policy. Upon cancellation of the Policy, you will receive a refund of premiums paid for the Policy. During the free look period after a requested increase in Face Amount, you have the right to cancel the increase. You must request cancellation of the increase by midnight of the 10th day after receiving the new Policy Data Page reflecting the increase. Upon requesting cancellation of the increase, you will receive a refund, if you so request, or otherwise a restoration to the Policy's Accumulation Value (allocated among the Fixed Account and the Sub-Accounts of the Variable Account as if it were a Net Premium payment), in an amount equal to all Monthly Deductions attributable to the increase in Face Amount, including rider cost arising from the increase. CONVERSION RIGHTS During the first two Policy Years and the first two years following a requested increase in Face Amount, we provide you with an option to convert the Policy or any requested increase in Face Amount to a life insurance policy under which the benefits do not vary with the investment experience of the Variable Account. For policies issued in all states, except Connecticut, we make this option available by permitting you to transfer all or a part of your Variable Accumulation Value to the Fixed Account. For policies issued in Connecticut, you may exchange this Policy for a different permanent fixed benefit life insurance policy that we offer in that state. The two conversion right options are discussed below. GENERAL OPTION. In all states except Connecticut, you may exercise your conversion right by transferring all or any part of your Variable Accumulation Value to the Fixed Account. If, at any time during the first two Policy Years or the first two years following a requested increase in Face Amount, you request transfer from the Variable Account to the Fixed Account and indicate that you are making the transfer in exercise of your conversion right, we will not assess any transfer charge on the transfer, and the transfer will not count against the limit on the number of transfers. At the time of such transfer, there is no effect on the Policy's Death Benefit, Face Amount, net amount at risk, Rate Class(es) or Issue Age -- only the method of funding the Accumulation Value under the Policy will be affected. See "Death Benefit", "Accumulation Value" and Appendix A, "The Fixed Account". If you transfer all of the Variable Accumulation Value from the Variable Account to the Fixed Account and indicate that you are making this transfer in exercise of your Conversion Right, we will automatically credit all future premium payments on the policy to the Fixed Account unless you request a different allocation. CONNECTICUT. During the first two Policy Years and during the first 24 months following a requested increase in Face Amount, you may convert the Policy or the Face Amount increase to any fixed benefit whole life insurance policy we offer. We will not require any evidence of insurability for the conversion. In order to convert to a new policy, we must receive a written conversion request. If the entire Policy is being converted, you must surrender the Policy to us. The conversion must be made while the Policy is in force; and any outstanding Loan Amount must be repaid. The new policy will have the same Issue Age and rate class as the Policy. If you are converting the entire Policy, the effective date of the conversion will be the date on which we receive both your written conversion request and the Policy. If you are converting a Face Amount increase, the effective date of the conversion will be the date on which we receive your written conversion request. 35 On the effective date of the conversion, the new policy will have, at your option, either: (1) A death benefit which is equal to the Death Benefit of the Policy on the effective date of the conversion, or in the case of a Face Amount increase, a death benefit equal to the increase in Face Amount; or (2) A net amount at risk which equals the Death Benefit of the Policy on the effective date of the conversion, less the Accumulation Value on that date, or in the case of a Face Amount increase, a net amount at risk which equals the Face Amount increase on the effective date of conversion less the Accumulation Value on that date which is considered to be part of the Face Amount increase. The conversion will be subject to an equitable adjustment in payments and Policy values to reflect variances, if any, in the payments and Policy values under the Policy and the new policy. We may require an additional premium payment. The old Policy's Surrender Charge will not be applied. The new Policy's provisions and charges will be the same as those that would have been in effect had the new Policy been issued on the Policy Date. ADDITIONAL INFORMATION ON THE INVESTMENTS OF THE VARIABLE ACCOUNT INVESTMENT LIMITS Although the Variable Account currently consists of 29 investment options, we currently only permit you to participate in a maximum of 17 investment options over the lifetime of your Policy. The initial allocation of your premium to the Fidelity VIP Money Market Sub-Account will count against the 17 investment option limitation. You do not have to choose your investment options in advance, but once you participate in the 17th Fund since your Policy was issued, you would only be able to transfer within those 17 Funds already used and which are still available. The Fund shares may be available to fund benefits under both variable annuity and variable life contracts and policies. This could result in an irreconcilable conflict between the interests of the holders of the different types of variable contracts. The Funds have advised us that they will monitor for such conflicts and will promptly provide us with information regarding any such conflicts should they arise or become imminent, and we will promptly advise the Funds if we become aware of any such conflicts. If any such material irreconcilable conflict arises, we will arrange to eliminate and remedy such conflict up to and including establishing a new management investment company and segregating the assets underlying the variable policies and contracts at no cost to the holders of the policies and contracts. There also is a possibility that one Fund might become liable for any misstatement, inaccuracy or incomplete disclosure in another Fund's prospectus. The Funds distribute dividends and capital gains. However, we automatically reinvest distributions in additional Fund shares, at net asset value. The Sub-Account receives the distributions which are then reflected in the Unit Value of that Sub-Account. See "Accumulation Value". ReliaStar has entered into service arrangements with the managers or distributors of certain of the Funds. Under these arrangements, ReliaStar or its affiliates may receive compensation from affiliates of the Funds. This compensation is for providing administrative, recordkeeping, distribution and other services to the Funds or their affiliates. Such compensation is paid based upon assets invested in the particular Funds, or based on the aggregated net asset goals. Payments of such amounts by an affiliate or affiliates of the Funds do not increase the fees paid by the Funds or their shareholders. The percentage paid may vary from one Fund to another. ADDITION, DELETION, OR SUBSTITUTION OF INVESTMENTS We reserve the right, subject to compliance with applicable law, to make additions to, deletions from, or substitutions for the shares that are held by the Variable Account or that the Variable Account may purchase. o We reserve the right to establish additional Sub-Accounts of the Variable Account, each of which would invest in a new Fund, or in shares of another investment company, with a specified investment objective. We may establish new Sub-Accounts when, in our sole discretion, marketing needs or investment conditions warrant, and we will make any new Sub-Accounts available to existing Policy owners on a basis we determine. 36 o We may eliminate one or more Sub-Accounts, or prohibit additional new premium or transfers into a Sub-Account, if, in our sole discretion, marketing, tax, regulatory requirements or investment conditions warrant. o We reserve the right to eliminate the shares of any of the Funds and to substitute shares of another Fund or of another open-end, registered investment company. We will not substitute any shares attributable to your interest in a Sub-Account of the Variable Account without notice and prior approval of the SEC, to the extent required by the Investment Company Act of 1940 or other applicable law. Nothing contained herein shall prevent the Variable Account from: o Purchasing other securities of other Funds or classes of policies, o Permitting a conversion between Funds or classes of policies on the basis of requests made by Policy owners, or o Substituting the shares of one fund for shares of another fund in the event of a merger of funds or similar transaction. In the event of any such substitution, deletion or change, we may make appropriate changes in this and other policies to reflect such substitution, deletion or change. If you allocated all or a portion of your investments to any of the current funds that are being substituted for or deleted, you may transfer the portion of the Accumulation Value affected without paying a transfer charge. If we deem it to be in the best interests of persons having voting rights under the Policies, we may: o operate the Variable Account as a management company under the 1940 Act, o deregister the Variable Account under the 1940 Act in the event such registration is no longer required, or o combine the Variable Account with our other separate accounts. VOTING RIGHTS You have the right to instruct us how to vote the Fund shares attributable to the Policy at regular meetings and special meetings of the Funds. We will vote the Fund shares held in Sub-Accounts according to the instructions received, as long as: o The Variable Account is registered as a unit investment trust under the Investment Company Act of 1940; and o The Variable Account's assets are invested in Fund shares. If we determine that, because of applicable law or regulation, we do not have to vote according to the voting instructions received, we will vote the Fund shares at our discretion. All persons entitled to voting rights and the number of votes they may cast are determined as of a record date, selected by us, not more than 90 days before the meeting of the Fund. All Fund proxy materials and appropriate forms used to give voting instructions will be sent to persons having voting interests. We will vote any Fund shares held in the Variable Account for which we do not receive timely voting instructions, or which are not attributable to Policy owners, in proportion to the instructions received from all Policy owners having a voting interest in the Fund. Any Fund shares held by us or any of our affiliates in general accounts will, for voting purposes, be allocated to all separate accounts having voting interests in the Fund in proportion to each account's voting interest in the respective Fund, and will be voted in the same manner as are the respective account's votes. Owning the Policy does not give you the right to vote at meetings of our stockholders. DISREGARDING VOTING INSTRUCTIONS. We may, when required by state insurance regulatory authorities, disregard voting instructions if the instructions require that the shares be voted so as to cause a change in the subclassification or investment objective of any Fund or to approve or disapprove an investment advisory contract for any Fund. In addition, we may disregard voting instructions in favor of changes initiated by a Policy owner in the investment policy or the investment adviser of any Fund if we 37 reasonably disapprove of such changes. We would disapprove a change only if the proposed change is contrary to state law or prohibited by state regulatory authorities, or we determine that the change would have an adverse effect on the Variable Account in that the proposed investment policy for a Fund may result in speculative or unsound investments. In the event we do disregard voting instructions, we will include a summary of that action and the reasons for such action in the next annual report to owners. PAID-UP LIFE INSURANCE OPTION Before Age 100, if the Insured is living and the Policy is in force, you may make a written request to direct us to apply the Cash Surrender Value of the Policy to purchase paid-up life insurance. The amount by which this insurance will exceed its cash value cannot be greater than the amount by which the Policy's Death Benefit exceeds the Policy's Accumulation Value. We will pay you in cash any Cash Surrender Value not used to purchase paid-up life insurance. Any cash paid out or Policy loans forgiven may be considered a taxable event. GENERAL PROVISIONS OWNERSHIP While the Insured is alive, subject to the Policy's provisions you may: o Change the amount and frequency of premium payments. o Change the allocation of premiums. o Change the Death Benefit Option. o Change the Face Amount. o Make transfers between accounts. o Surrender the Policy for cash. o Make a partial withdrawal for cash. o Receive a cash loan. o Assign the Policy as collateral. o Change the beneficiary. o Transfer ownership of the Policy. o Enjoy any other rights the Policy allows. PROCEEDS At the Insured's death, the proceeds payable include the Death Benefit then in force: o Plus any additional amounts provided by rider on the life of the Insured; o Plus any Policy loan interest that we have collected but not earned; o Minus any Loan Amount; and o Minus any unpaid Monthly Deductions. BENEFICIARY You may name one or more beneficiaries on the application when you apply for the Policy. You may later change beneficiaries by written request. You may also name a beneficiary whom you cannot change without his or her consent (irrevocable beneficiary). If no beneficiary is surviving when the Insured dies, we will pay the Death Benefit to you, if surviving, or otherwise to your estate. POSTPONEMENT OF PAYMENTS We generally make payments from the Variable Account for Death Benefits, cash surrender, partial withdrawal, or loans within seven days after we receive all the documents required for the payments. We may, however, delay making a payment when we are not able to determine the Variable Accumulation Value because (1) the New York Stock Exchange is closed, other than customary weekend or holiday closings, or the SEC restricts trading on the New York Stock Exchange, (2) the SEC by order permits postponement for the protection of Policyholders, or (3) the SEC determines that an emergency exists which makes disposing of securities not reasonably practicable, or which makes it not reasonably practicable to determine the value of the Variable Account's net assets. We may also postpone transfers and allocations to and from any Sub-Account of the Variable Account under these circumstances. We may delay any of the payments that we make from the Fixed Account for up to six months from the date we receive the documents required. We will pay interest at an effective annual rate of 3.50% if 38 we delay payment more than 30 days. We will not credit any additional interest to any delayed payments. The time a payment from the Fixed Account may be delayed and the rate of interest paid on such amounts may vary among states. SETTLEMENT OPTIONS Settlement Options are ways you can choose to have the Policy's proceeds paid. These Settlement Options apply to proceeds paid: o At the Insured's death. o On total surrender of the Policy. We pay the proceeds to one or more payees. We may pay the proceeds in a lump sum or we may apply the proceeds to one of the following Settlement Options. You may request that we use a combination of Options. You must apply at least $2,500 to any Option for each payee under that Option. Under an installment Option, each payment must be at least $25.00. We may adjust the interval to make each payment at least $25.00. Proceeds applied to any Option no longer earn interest at the rate applied to the Fixed Account or participate in the investment performance of the Funds. Option 1 -- Proceeds are left with us to earn interest. Withdrawals and any changes are subject to our approval. Option 2 -- Proceeds and interest are paid in equal installments of a specified amount until the proceeds and interest are all paid. Option 3 -- Proceeds and interest are paid in equal installments for a specified period until the proceeds and interest are all paid. Option 4 -- The proceeds provide an annuity payment with a specified number of months "certain". The payments are continued for the life of the primary payee. If the primary payee dies before the certain period is over, the remaining payments are paid to a contingent payee. Option 5 -- The proceeds provide a life income for two payees. When one payee dies, the surviving payee receives two-thirds of the amount of the joint monthly payment for life. INTEREST ON SETTLEMENT OPTIONS. We base the interest rate for proceeds applied under Options 1 and 2 on the interest rate we declare on funds that we consider to be in the same classification based on the Option, restrictions on withdrawal, and other factors. The interest rate will never be less than an effective annual rate of 2.0%. In determining amounts we pay under Options 3, 4,and 5, we assume interest at an effective annual rate of 2%. Also, for Option 3 and "certain" periods under Option 4, we credit any excess interest we may declare on funds that we consider to be in the same classification based on the Option, restrictions on withdrawal, and other factors. INCONTESTABILITY After the Policy has been in force during the Insured's lifetime for two years from the Policy's Issue Date, we cannot claim the Policy is void or refuse to pay any proceeds unless the Policy has lapsed. If you make a Face Amount increase or a premium payment which requires proof of insurability, the corresponding Death Benefit increase has its own two-year contestable period measured from the effective date of the increase. If the Policy is reinstated, we measure the contestable period from the date of reinstatement with respect to statements made on the application for reinstatement. MISSTATEMENT OF AGE AND SEX If the Insured's Age or sex or both are misstated (except where unisex rates apply), the Death Benefit will be the amount that the most recent cost of insurance would purchase using the current cost of insurance rate for the correct Age and sex. 39 SUICIDE If the Insured commits suicide, whether sane or insane, within two years of the Policy's Issue Date (one year in Colorado and North Dakota), we do not pay the Death Benefit. Instead, we refund all premiums paid for the Policy and any attached riders, minus any Loan Amounts and partial withdrawals. If you make a Face Amount increase or a premium payment which requires proof of insurability, the corresponding Death Benefit increase has its own two-year suicide limitation for the proceeds associated with that increase. If the Insured commits suicide, whether sane or insane, within two years of the effective date of the increase, we pay the Death Benefit prior to the increase and refund the cost of insurance for that increase. TERMINATION The Policy terminates when any of the following occurs: o The Policy lapses. See "Policy Lapse and Reinstatement". o The Insured dies. o You surrender the Policy for its Cash Surrender Value. o We amend the Policy according to the amendment provision described below and you do not accept the amendment. AMENDMENT We reserve the right to amend the Policy in order to include any future changes relating to the following: o Any SEC rulings and regulations. o The Policy's qualification for treatment as a life insurance policy under the following: -- The Code as amended. -- Internal Revenue Service rulings and regulations. -- Any requirements imposed by the Internal Revenue Service. REPORTS ANNUAL STATEMENT. We will send you an Annual Statement once each year, showing the Face Amount, Death Benefit, Accumulation Value, Cash Surrender Value, Loan Amount, premiums paid, Planned Periodic Premiums, interest credits, partial withdrawals, transfers, and charges since the last statement. Additional statements are available upon request. We may make a charge not to exceed $50 for each additional Annual Statement you request. PROJECTION REPORT. Upon request, we will provide you a report projecting future results based on the Death Benefit Option you specify, the Planned Periodic Premiums you specify, and the Accumulation Value of your Policy at the end of the prior Policy Year. We may make a charge not to exceed $50 for each Projection Report you request after the first report and after the first report in a Policy Year. OTHER REPORTS. The Company will mail to you at your last known address of record at least annually a report containing such information as may be required by any applicable law. Call 1-800-456-6965 if you need copies of financial reports, prospectuses, or historical account information. DIVIDENDS The Policy does not entitle you to participate in our surplus. We do not pay you dividends under the Policy. The Sub-Account receives any dividends paid by the related Fund. Any such dividend is credited to you through the calculation of the Sub-Account's daily Unit Value. COLLATERAL ASSIGNMENT You may assign the benefits of the Policy as collateral for a debt. This limits your rights to the Cash Surrender Value and the beneficiary's rights to the proceeds. An assignment is not binding on us until we receive written notice. 40 OPTIONAL INSURANCE BENEFITS The Policy can include additional benefits, in the form of riders to the Policy, if our requirements for issuing such benefits are met. We currently offer the following benefit riders, although some riders may not be available in some states. ACCELERATED BENEFIT RIDER. Under certain circumstances we pay a part of the Death Benefit to you when the Insured has been diagnosed as having a terminal illness. See "Accelerated Benefit Rider". ACCIDENTAL DEATH BENEFIT RIDER. Provides an additional benefit if the Insured dies from an accidental injury. ADDITIONAL INSURED RIDER. Provides level term coverage to age 100 on a family member of the Insured. WAIVER OF MONTHLY DEDUCTION RIDER. The Monthly Deduction for the Policy is waived while the Insured is totally disabled under the terms of the rider. CHILDREN'S INSURANCE RIDER. Provides up to $10,000 of term life insurance on the life of each of the Insured's children, up to age 25. COST OF LIVING INCREASE RIDER. Provides optional increases in Face Amount on the life of the Insured every two years based on the cost of living without evidence of insurability. EXTENDED DEATH BENEFIT GUARANTEE RIDER. Provides a death benefit guarantee to Age 100 for payment of the guideline annual premium each year or on a cumulative basis. TERM INSURANCE RIDER. Provides level term insurance on the Insured if death occurs prior to the Insured's Age 100. The current cost of insurance rates for the rider are different than for the base Policy. In addition, the base Policy's Monthly Amount Charges per $1,000 and Surrender Charge do not apply to coverage under the rider. However, the Term Insurance Rider will cause the Death Benefit Guarantee Period of the base Policy to be shortened. After the tenth Policy Year if the base Death Benefit is equal to the Accumulation Value multiplied by the corridor percentage (see "Death Benefit"), you may ask us to replace the Term Insurance Rider amount with base coverage without providing evidence of insurability. We must replace the entire rider amount if any amount is replaced. Neither Surrender Charges nor Monthly Amount Charges will apply to the new additional base coverage. Cost of insurance rates on this new additional base coverage will be equal to the cost of insurance rates for the base coverage based on the original rider issue date. There may be times in which it will be to your economic advantage to include a significant portion of your insurance coverage under a term rider. In some other circumstances, it may be in your interest to obtain a Policy without term rider coverage. These circumstances depend on many factors, including the premium levels and amount and duration of coverage you choose, as well as the age, sex, and rate class of the Insured. WAIVER OF SPECIFIED PREMIUM RIDER. Contributes a specified amount of premium to the Policy each month while the Insured is totally disabled under the terms of the rider. This rider may not be available in all states. Ask your registered representative about the availability of this rider in your state. 41 FEDERAL TAX MATTERS INTRODUCTION The following summary provides a general description of the Federal income tax considerations associated with the Policy and does not purport to be complete or to cover all tax situations. This discussion is not intended as tax advice. Counsel or other competent tax advisors should be consulted for more complete information. This discussion is based upon the Company's understanding of the present Federal income tax laws. No representation is made as to the likelihood of continuation of the present Federal income tax laws or as to how they may be interpreted by the Internal Revenue Service (the "IRS"). Any qualified plan contemplating the purchase of a life policy should consult a tax advisor. TAX STATUS OF THE POLICY In order to qualify as a life insurance contract for Federal income tax purposes and to receive the tax treatment normally accorded life insurance contracts under Federal tax law, a Policy must satisfy certain requirements which are set forth in the Internal Revenue Code. Guidance as to how these requirements are to be applied is limited. Nevertheless, the Company believes that a Policy issued on the basis of a standard risk class should satisfy the applicable requirements. There is less guidance with respect to Policies issued on a substandard basis (i.e., a premium class involving higher than standard mortality risk), and it is not clear whether such a Policy would satisfy the applicable requirements, particularly if the owner pays the full amount of premiums permitted under the Policy. If it is subsequently determined that a Policy does not satisfy the applicable requirements, the Company may take appropriate steps to bring the Policy into compliance with such requirements and reserves the right to restrict Policy transactions in order to do so. In certain circumstances, owners of variable life insurance contracts have been considered for Federal income tax purposes to be the owners of the assets of the variable account supporting their policies due to their ability to exercise investment control over these assets. Where this is the case, the policy owners have been currently taxed on income and gains attributable to the variable account assets. There is little guidance in this area, and some features of the Policies, such as the flexibility of an owner to allocate premium payments and Policy Accumulation Values, have not been explicitly addressed in published rulings. While the Company believes that the Policies do not give owners investment control over Variable Account assets, the Company reserves the right to modify the Policies as necessary to prevent an owner from being treated as the owner of the Variable Account assets supporting the Policy. In addition, the Code requires that the investments of the Variable Account be "adequately diversified" in order for the Policies to be treated as life insurance contracts for Federal income tax purposes. It is intended that the Variable Account, through the Funds, will satisfy these diversification requirements. The following discussion assumes that the Policy will qualify as a life insurance contract for Federal income tax purposes. TAX TREATMENT OF POLICY BENEFITS IN GENERAL. The Company believes that the Death Benefit under a Policy should be excludible from the gross income of the Beneficiary. Federal, state and local transfer, and other tax consequences of ownership or receipt of Policy proceeds depend on the circumstances of each owner or beneficiary. A tax advisor should be consulted on these consequences. Generally, the owner will not be deemed to be in constructive receipt of the Policy Accumulation Value until there is a distribution. When distributions from a Policy occur, including payments arising from any maturity benefits, or when loans are taken out from or secured by (e.g., by assignment), a Policy, the tax consequences depend on whether the Policy is classified as a "Modified Endowment Contract." MODIFIED ENDOWMENT CONTRACTS. Under the Internal Revenue Code, certain life insurance contracts are classified as "Modified Endowment Contracts," with less favorable tax treatment than other life insurance contracts. Due to the flexibility of the Policies as to premiums and benefits, the individual circumstances of each Policy will determine whether it is classified as a Modified Endowment Contract. 42 The rules are too complex to be summarized here, but generally depend on the amount of premiums paid during the first seven Policy Years. Certain changes in a Policy after it is issued could also cause it to be classified as a Modified Endowment Contract. A current or prospective owner should consult with a competent advisor to determine whether a Policy transaction will cause the Policy to be classified as a Modified Endowment Contract. The Company will monitor the Policies, however, and will attempt to notify an owner on a timely basis if it believes that such owner's Policy is in jeopardy of becoming a Modified Endowment Contract. DISTRIBUTIONS FROM MODIFIED ENDOWMENT CONTRACTS. POLICIES CLASSIFIED AS MODIFIED ENDOWMENT CONTRACTS ARE SUBJECT TO THE FOLLOWING TAX RULES: (1) All distributions, including distributions upon surrender and withdrawals, will be treated as ordinary income subject to tax up to an amount equal to the excess (if any) of the unloaned Policy Accumulation Value (Cash Surrender Value for surrenders) immediately before the distribution plus prior distributions over the owner's total investment in the Policy at that time. "Total investment in the Policy" means the aggregate amount of any premiums or other considerations paid for a Policy, plus any previously taxed distributions, minus any credited dividends. (2) Loans taken from or secured by (e.g., by assignment) such a Policy are treated as distributions and taxed accordingly. (3) A 10 percent additional income tax is imposed on the amount included in income except where distribution or loan is made when the owner has attained age 591/2 or is disabled, or where the distribution is part of a series of substantially equal periodic payments for the life (or life expectancy) of the owner or the joint lives (or joint life expectancies) of the owner and the owner's beneficiary or designated beneficiary. DISTRIBUTIONS FROM POLICIES THAT ARE NOT MODIFIED ENDOWMENT CONTRACTS. Distributions from a Policy that is not a Modified Endowment Contract are generally treated first as a recovery of an owner's investment in the Policy and only after the recovery of all investment in the Policy as taxable income. However, certain distributions which must be made in order to enable the Policy to continue to qualify as a life insurance contract for Federal income tax purposes if Policy benefits are reduced during the first 15 Policy Years may be treated in whole or in part as ordinary income subject to tax. Loans from or secured by a Policy that is not a Modified Endowment Contract are not treated as distributions, except that upon a lapse of a Policy any outstanding Policy loan will be deemed to be distributed. Finally, neither distributions from nor loans from or secured by a Policy that is not a Modified Endowment Contract are subject to the 10 percent additional tax. POLICY LOANS. In general, interest on a loan from a Policy will not be deductible. Before taking out a Policy loan, you should consult a tax advisor as to the tax consequences. MULTIPLE POLICIES. All Modified Endowment Contracts that we (or our affiliates) issue to the same owner during any calendar year are treated as one Modified Endowment Contract for purposes of determining the amount includible in the owner's income when a taxable distribution occurs. TAXATION OF RELIASTAR LIFE INSURANCE COMPANY We do not initially expect to incur any income tax burden upon the earnings or the realized capital gains attributable to the Variable Account. Based on this expectation, we currently make no charge to the Variable Account for Federal income taxes which may be attributable to the Account. If, however, we determine that we may incur such tax burden, we may assess a charge for such burden from the Variable Account. We may also incur state and local taxes, in addition to premium taxes, in several states. At present these taxes are not significant. If there is a material change in state or local tax laws, we may make charges for such taxes, if any, attributable to the Variable Account. POSSIBLE CHANGES IN TAXATION Although the likelihood of legislative changes is uncertain, there is always the possibility that the tax treatment of the Policy could change by legislation or other means. Moreover, it is also possible that 43 any change could be retroactive (that is, effective prior to the date of the change). You should consult a tax adviser with respect to legislative developments and their effect on the Policy. OTHER CONSIDERATIONS The foregoing discussion is general and is not intended as tax advice. Any person concerned about these tax implications should consult a competent tax advisor. This discussion is based on our understanding of the present Federal income tax laws as they are currently interpreted by the Internal Revenue Service. We make no representations as to the likelihood of continuation of these current laws and interpretations. In addition, the foregoing discussion is not exhaustive and special rules not described in this Prospectus may be applicable in certain situations. Moreover, we have made no attempt to consider any applicable state or other tax laws. LEGAL DEVELOPMENTS REGARDING EMPLOYMENT-RELATED BENEFIT PLANS The Policy is based on actuarial tables which distinguish between men and women and therefore provide different benefits to men and women of the same Age. Employers and employee organizations should consider, in consultation with legal counsel, the impact of the Supreme Court decision of July 6, 1983 in ARIZONA GOVERNING COMMITTEE V. NORRIS. That decision stated that optional annuity benefits provided under an employee's deferred compensation plan could not, under Title VII of the Civil Rights Act of 1964, vary between men and women on the basis of sex. Employers and employee organizations should also consider, in consultation with legal counsel, the impact of Title VII generally, and comparable state laws that may be applicable, on any employment-related insurance or benefit plan for which a Policy may be purchased. Because of the NORRIS decision, the charges under the Policy that vary depending on sex may in some cases not vary on the basis of the Insured's sex. Unisex rates to be provided by us will apply, if requested on the application, for tax-qualified plans and those plans where an employer believes that the NORRIS decision applies. In this case, references made to the mortality tables applicable to this Policy are to be disregarded and substituted with an 80% male 20% female blend of the 1980 Commissioner's Standard Ordinary Smoker and Non-Smoker Mortality Tables, Age Last Birthday. PREPARING FOR YEAR 2000 Like all financial services providers, the Company utilizes systems that may be affected by Year 2000 transition issues and it relies on service providers, including the Funds, that also may be affected. The Company has developed, and is in the process of implementing, a Year 2000 transition plan, and is confirming that its service providers are also so engaged. The resources that are being devoted to this effort are substantial. It is difficult to predict with precision whether the amount of resources ultimately devoted, or the outcome of these efforts, will have any negative impact on the Company. However, as of the date of this prospectus, it is not anticipated that Policy owners will experience negative effects on their investment, or on the services provided in connection therewith, as a result of Year 2000 transition implementation. The Company currently anticipates that its systems will be Year 2000 compliant on or about by the end of the second quarter of 1999, but there can be no assurance that the Company will be successful, or that interaction with other service providers will not impair the Company's services at that time. DISTRIBUTION OF THE POLICIES We intend to sell the Policies in all jurisdictions where we are licensed. The Policies will be distributed by the general distributor, Washington Square Securities, Inc., (WSSI), a Minnesota corporation, which is an affiliate of ours. WSSI is a securities broker-dealer registered with the SEC and is a member of the National Association of Securities Dealers, Inc. It is primarily a mutual funds dealer and has dealer agreements under which it markets shares of many mutual funds. It also markets limited partnerships and other tax-sheltered or tax-deferred investments, and acts as general distributor (principal underwriter) for variable annuity and variable life insurance products issued by us. The Policies will be sold by licensed insurance agents who are also registered representatives of WSSI or of other broker-dealers registered with the SEC under the Securities Exchange Act of 1934 who are members of the National Association of Securities Dealers, Inc. The Policies may also be sold through other broker-dealers authorized by WSSI and applicable law to do so. Registered representatives of such broker-dealers may be paid on a different basis than described below. 44 The Policies will be sold by licensed insurance agents who are also registered representatives of broker-dealers registered with the SEC under the Securities Exchange Act of 1934 who are members of the National Association of Securities Dealers, Inc. Registered representatives who sell the Policies will receive commissions based on a commission schedule. In the first Policy Year, commissions generally will be no more than 50% of the premiums paid up to the annualized Minimum Monthly Premium, plus 2% of additional premiums. In any subsequent Policy Year, commissions generally will be 2% of premiums paid in that year. Corresponding commissions will be paid upon a requested increase in Face Amount. In addition, a commission of .25% of the average monthly Accumulation Value excluding any Loan Amount during each Policy Year may be paid. Further, registered representatives may be eligible to receive certain overrides and other benefits based on the amount of earned commissions. For all Policies which use the Select*Life Variable Account, the aggregate amount paid to WSSI under our Distribution Agreement was $45,011,491 in 1998, $34,572,698 in 1997, and $30,988,102 in 1996. 45 MANAGEMENT The following is a list of the current directors and executive officers of the Company, their principal occupation and business experience.
TERM PRINCIPAL OCCUPATION DIRECTORS EXPIRES AND BUSINESS EXPERIENCE - ------------------ --------- ------------------------------------------------------------------------- Richard R. Crowl 1999 Senior Vice President, General Counsel and Secretary of ReliaStar Financial Corp. since 1996; Senior Vice President and General Counsel of ReliaStar Life Insurance Company, Northern Life Insurance Company, ReliaStar Life Insurance Company of New York and ReliaStar United Services Life Insurance Company since 1996; Senior Vice President and General Counsel of Washington Square Advisers, Inc. since 1986; Vice President and Associate General Counsel of ReliaStar Financial Corp. from 1989 to 1996; Vice President and Associate General Counsel of ReliaStar Life Insurance Company from 1985 to 1996; Director and Senior Vice President of various subsidiaries of ReliaStar Financial Corp. Michael J. Dubes 1999 President and Chief Executive Officer of Northern Life Insurance Company since 1994; Senior Vice President, Individual Insurance of ReliaStar Life Insurance Company from 1987 to 1994; Chairman of Washington Square Securities, Inc. from 1987 to 1994; Director and Officer of various subsidiaries of ReliaStar Financial Corp. John H. Flittie 1999 Vice Chairman, President and Chief Operating Officer of ReliaStar Life Insurance Company since 1996; President, Chief Operating Officer, and Director of ReliaStar Financial Corp. and ReliaStar Life Insurance Company since 1993; Vice Chairman of ReliaStar Life Insurance Company of New York since 1995; Chief Executive Officer and President of ReliaStar Life Insurance Company of New York from 1996 to 1998; Chairman and Director of Washington Square Securities, Inc. since 1996; Chairman and Director of PrimeVest Financial Services since 1996; Vice Chairman and President of ReliaStar United Services Life Insurance Company and ReliaStar Life Insurance Company of New York since 1995; Senior Executive Vice President and Chief Operating Officer of ReliaStar Financial Corp. and ReliaStar Life Insurance Company from 1992 to 1993; Senior Executive Vice President and Chief Operating Officer of ReliaStar Financial Corp. from 1991 to 1992; Executive Vice President and Chief Financial Officer of ReliaStar Financial Corp. and ReliaStar Life Insurance Company from 1989 to 1991; Senior Vice President and Chief Financial Officer of ReliaStar Financial Corp. since 1985; Director of Community First BankShares, Inc. and Director and Officer of various subsidiaries of ReliaStar Financial Corp. Wayne R. Huneke 1999 Senior Vice President of ReliaStar Financial Corp. and ReliaStar Life Insurance Company since 1994; Chief Financial Officer and Treasurer of ReliaStar Financial Corp. and ReliaStar Life Insurance Company from 1994 to 1998; Vice President, Treasurer and Chief Accounting Officer from 1990 to 1994; Director and Officer of various subsidiaries of ReliaStar Financial Corp. Mark S. Jordahl 1999 Senior Vice President and Chief Investment Officer of ReliaStar Life Insurance Company and ReliaStar Financial Corp. since 1998; Vice President of ReliaStar Life Insurance Company and ReliaStar Financial Corp. from 1987 to 1998; Director and Officer of various subsidiaries of ReliaStar Financial Corp.
46
TERM PRINCIPAL OCCUPATION DIRECTORS EXPIRES AND BUSINESS EXPERIENCE - --------------------- --------- ---------------------------------------------------------------------------- Kenneth U. Kuk 1999 Senior Vice President of ReliaStar Financial Corp. and ReliaStar Life Insurance Company since 1996; Vice President, Strategic Marketing of ReliaStar Financial Corp. and ReliaStar Life Insurance Company since 1996; Vice President of Investments of ReliaStar Financial Corp. from 1991 to 1996; President of Washington Square Advisers, Inc. since 1995; Chairman of ReliaStar Mortgage Corporation since 1988; Director and Officer of various subsidiaries of ReliaStar Financial Corp. Susan W. A. Mead 1999 Vice President, Strategic Marketing and Planning of ReliaStar Financial Corp. since 1998; Vice President, Corporate Communications and Community Relations of ReliaStar Financial Corp. from 1996 to 1998; President, ReliaStar Printing & Fulfillment Services of ReliaStar Financial Corp. since 1996; Second Vice President, Corporate Communications and Community Relations of ReliaStar Financial Corp. from 1992 to 1996; Director and Officer of various subsidiaries of ReliaStar Financial Corp. William R. Merriam 1999 Senior Vice President, Life & Health Reinsurance of ReliaStar Life Insurance Company since 1991; Vice President from 1984 to 1991. James R. Miller 1999 Senior Vice President, Chief Financial Officer and Treasurer of ReliaStar Financial Corp. and of ReliaStar Life Insurance Company since 1997; Vice President, Corporate Development of ReliaStar Financial Corp. from 1985 to 1992; Executive Vice President and Chief Operating Officer of Northern Life Insurance Company from 1992 to 1997. Robert C. Salipante 1999 Senior Vice President, Personal Financial Services, of ReliaStar Financial Corp. and ReliaStar Life Insurance Company since 1996; President and Chief Executive Officer of ReliaStar Life Insurance Company of New York since 1998; Executive Vice President of ReliaStar Life Insurance Company of New York from 1996 to 1998; Senior Vice President, of Individual Division and Technology of ReliaStar Life Insurance Company in 1996; Senior Vice President of Strategic Marketing and Technology of ReliaStar Financial Corp. and ReliaStar Life Insurance Company from 1994 to 1996; Senior Vice President and Chief Financial Officer of ReliaStar Financial Corp. and ReliaStar Life Insurance Company from 1992 to 1994; Executive Vice President of Ameritrust Corporation from 1988 to 1992. John G. Turner 1999 Chairman and Chief Executive Officer of ReliaStar Financial Corp. and ReliaStar Life Insurance Company since 1993; Chairman of ReliaStar United Services Life Insurance Company and ReliaStar Life Insurance Company of New York since 1995; Chairman of Northern Life Insurance Company since 1992; Chairman, President and Chief Executive Officer of ReliaStar Financial Corp. and ReliaStar Life Insurance Company in 1993; President and Chief Executive Officer of ReliaStar Financial Corp. and ReliaStar Life Insurance Company from 1991 to 1993; President and Chief Operating Officer of ReliaStar Financial Corp. from 1989 to 1991; President and Chief Operating Officer of ReliaStar Life Insurance Company from 1986 to 1991; Director and Officer of various subsidiaries of ReliaStar Financial Corp.
47 The Executive Committee and Finance Committee of our Board of Directors consists of Directors Flittie, Huneke, Salipante, Crowl and Turner. EXECUTIVE OFFICERS John G. Turner Chairman and Chief Executive Officer John H. Flittie Vice Chairman, President and Chief Operating Officer Richard R. Crowl Senior Vice President and General Counsel Wayne R. Huneke Senior Vice President Mark S. Jordahl Senior Vice President and Chief Investment Officer Kenneth U. Kuk Senior Vice President William R. Merriam Senior Vice President James R. Miller Senior Vice President, Chief Financial Officer and Treasurer Robert C. Salipante Senior Vice President
All of the foregoing executive officers have been officers or employees of ours for the past five years, except for James R. Miller, who has been an employee of ours since 1997. However, Mr. Miller has been employed by an affiliate of ours since 1991. The following is a list of the current directors and executive officers of the of the principal underwriter and their business addresses.
NAME AND PRINCIPAL BUSINESS ADDRESS POSITIONS AND OFFICES - -------------------------- ------------------------------------------------------ John H. Flittie* Director; Chairman Anne W. Dowdle* Director Michael J. Dubes Director 1501 Fourth Avenue Seattle, Washington 98111 James R. Gelder Director 20 Security Drive Avon, Connecticut 06001 Wayne R. Huneke* Director Robert C. Salipante* Director Jeffrey A. Montgomery* President and Chief Executive Officer Kenneth S. Cameranesi* Executive Vice President and Chief Operations Officer Gene Grayson* Vice President, National Sales and Marketing David Braun* Assistant Vice President Karin Callanan* Assistant Vice President Susan M. Bergen* Secretary Margaret B. Wall Treasurer and Chief Financial Officer Loralee A. Renelt* Assistant Secretary Allen Kidd Assistant Secretary 222 North Arch Road Richmond, Virginia 23236
- ------------------ * 20 Washington Avenue South Minneapolis, Minnesota 55401 48 STATE REGULATION We are subject to the laws of the State of Minnesota governing insurance companies and to regulation and supervision by the Insurance Division of the State of Minnesota. We file an annual statement in a prescribed form with the Insurance Division each year, and in each state we do business, covering our operations for the preceding year and our financial condition as of the end of that year. Our books and accounts are subject to review by the Insurance Division and a full examination of our operations is conducted periodically (usually every three years) by the National Association of Insurance Commissioners. This regulation does not, however, involve supervision or management of our investment practices or policies. In addition, we are subject to regulation under the insurance laws of other jurisdictions in which we operate. We are also subject to supervision and verification by the State of Minnesota regarding participating business allocated to the Participation Fund Account, which was established in connection with the reorganization and demutualization of the Company in 1989. The Participation Fund Account was established for the purpose of maintaining the dividend practices relative to certain policies previously issued by the Company's former Mutual Department. The Participation Fund Account is not a separate account as described under Minnesota Statutes Chapter 61A. An annual examination of the Participation Fund Account is made by independent consulting actuaries representing the Insurance Division of the State of Minnesota. MONTANA RESIDENTS If you are a resident of Montana, you should disregard all Policy provisions described in the prospectus that are based on the sex of the Insured. We will issue this Policy in Montana on a unisex basis. You also should disregard references made to the mortality tables applicable to this Policy and substitute these references with an 80% male 20% female blend of the 1980 Commissioner's Standard Ordinary Smoker and Non-Smoker Mortality Tables, Age Last Birthday. LEGAL PROCEEDINGS The Company and its affiliates, like other life insurance companies, are involved in lawsuits, including class action lawsuits. In some class action and other lawsuits involving insurers, substantial damages have been sought and/or material settlement payments have been made. Although the outcome of any litigation cannot be predicted with certainty, the Company believes that at the present time there are not pending or threatened lawsuits that are reasonably likely to have a material adverse impact on the Variable Account or the Company. BONDING ARRANGEMENTS The Company maintains a blanket bond is maintained providing $25,000,000 coverage for our officers and employees and those of Washington Square Securities, Inc., (WSSI), subject to a $500,000 deductible. LEGAL MATTERS Legal matters in connection with the Variable Account and the Policy described in this Prospectus have been passed upon by Stewart D. Gregg, Esquire, Attorney for the Company. EXPERTS The financial statements of ReliaStar's Select*Life Variable Account as of December 31, 1998 and for each of the three years then ended and the annual consolidated financial statements of ReliaStar Life Insurance Company and subsidiaries included in this Prospectus have been audited by Deloitte & Touche, independent auditors, as stated in their reports which are included herein, and have been so included in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing. Actuarial matters included in this Prospectus have been examined by Craig A. Krogstad, F.S.A., M.A.A.A., as stated in the opinion filed as an exhibit to the Registration Statement. 49 REGISTRATION STATEMENT CONTAINS FURTHER INFORMATION A Registration Statement has been filed with the SEC under the Securities Act of 1933 with respect to the Policies. This Prospectus does not contain all information included in the Registration Statement, its amendments and exhibits. For further information concerning the Variable Account, the Funds, the Policies and us, please refer to the Registration Statement. Statements in this Prospectus concerning provisions of the Policy and other legal documents are summaries. Please refer to the documents as filed with the SEC for a complete statement of the provisions of those documents. Information may be obtained from the SEC's principal office in Washington, D.C., for a fee it prescribes, or examined there without charge. FINANCIAL STATEMENTS The financial statements for the Variable Account reflect the operations of the Variable Account and its Sub-Accounts as of December 31, 1998 and for each of the three years in the period then ended. The financial statements are audited. The periods covered are not necessarily indicative of the longer term performance of the assets held in the Variable Account. The financial statements of ReliaStar Life Insurance Company and subsidiaries which are included in this Prospectus should be distinguished from the financial statements of the Variable Account and should be considered only as bearing upon the ability of ReliaStar Life Insurance Company to meet its obligations under the Policies. They should not be considered as bearing on the investment performance of the assets held in the Variable Account. These financial statements are as of December 31, 1998 and for each of the two years in the period ended December 31, 1998. The financial statements are audited. The periods covered are not necessarily indicative of the longer term performance of the Company. 50 INDEPENDENT AUDITORS' REPORT Board of Directors ReliaStar Life Insurance Company and Policy Owners of Select*Life Variable Account: We have audited the accompanying combined statement of assets and liabilities of ReliaStar Select*Life Variable Account as of December 31, 1998 and the related combined statements of operations and changes in policy owners' equity for each of the years ended December 31, 1998, 1997 and 1996 (consisting of the portfolios listed within the combined statements of operations and changes in policy owners' equity). These financial statements are the responsibility of the management of ReliaStar Life Insurance Company. Our responsibility is to express an opinion on these financial statements based on our audits. We have conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures include confirmation of the securities owned as of December 31, 1998, by correspondence with the account custodians. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of each of the respective portfolios constituting the Select*Life Variable Account as of December 31, 1998 and the results of its operations and changes in its policy owners' equity for the years ended December 31, 1998, 1997 and 1996, in conformity with generally accepted accounting principles. DELOITTE & TOUCHE LLP Minneapolis, Minnesota February 16, 1999 51 (This page has been left blank intentionally.) 52 RELIASTAR SELECT*LIFE VARIABLE ACCOUNT COMBINED STATEMENT OF ASSETS AND LIABILITIES December 31, 1998 (In Thousands, Except Shares)
ASSETS: SHARES COST MARKET VALUE - ------------------------------------------------------ ------------ ----------- ------------- Investments in mutual funds at market value: The Alger American Fund: Alger American Growth Portfolio ..................... 110,036 $ 5,066 $ 5,856 Alger American MidCap Growth Portfolio .............. 76,499 2,007 2,209 Alger American Small Capitalization ................. 60,803 2,564 2,674 Fidelity's Variable Insurance Products Fund (VIP) and Variable Insurance Products II Fund (VIP II): Equity-Income Portfolio ............................. 3,869,245 72,118 98,356 Growth Portfolio .................................... 3,375,268 95,675 151,448 High Income Portfolio ............................... 1,779,927 21,204 20,523 Money Market Portfolio .............................. 13,966,601 13,967 13,967 Overseas Portfolio .................................. 1,572,860 28,021 31,536 Asset Manager Portfolio ............................. 2,349,652 35,741 42,670 Contrafund Portfolio . .............................. 1,908,504 34,980 46,644 Index 500 Portfolio ................................. 334,662 36,603 47,271 Investment Grade Bond Portfolio ..................... 383,976 4,673 4,976 Janus Aspen Series: Aggressive Growth Portfolio ......................... 58,502 1,291 1,614 Growth Portfolio .................................... 185,299 3,819 4,362 International Growth Portfolio ...................... 156,879 3,158 3,337 Worldwide Growth Portfolio .......................... 513,585 13,481 14,940 Neuberger&Berman Advisers Management Trust: Limited Maturity Bond Portfolio ..................... 143,481 1,975 1,983 Partners Portfolio .................................. 519,302 9,974 9,830 Northstar Galaxy Trust: Northstar Growth + Value Portfolio .................. 98,487 1,584 1,848 Northstar High Yield Bond Portfolio ................. 108,511 518 528 Northstar Emerging Growth Portfolio ................. 178,831 2,262 2,525 Northstar International Value Portfolio ............. 146,098 1,586 1,619 Northstar Multi-Sector Bond Portfolio ............... 288,488 1,458 1,393 OCC Accumulation Trust: Equity Portfolio .................................... 33,873 1,257 1,311 Global Equity Portfolio ............................. 47,440 739 732 Managed Portfolio ................................... 126,269 5,442 5,523 Small Cap Portfolio ................................. 95,470 2,360 2,205 Putnam Variable Trust: Putnam VT Asia Pacific Growth Fund .................. 342,989 3,350 2,857 Putnam VT Diversified Income Fund ................... 239,510 2,601 2,512 Putnam VT Growth and Income Fund .................... 1,170,068 29,373 33,663 Putnam VT New Opportunities Fund .................... 1,321,655 25,541 34,442 Putnam VT Utilities Growth and Income Fund .......... 218,123 3,293 3,968 Putnam VT Voyager Fund .............................. 1,759,215 59,584 80,660 -------- -------- Total Investments ................................... $527,265 Total Assets ...................................... $679,982 ======== LIABILITIES AND POLICY OWNERS' EQUITY: - ------------------------------------------------------- Due from ReliaStar Life Insurance Company for contract charges ................................ $ (6) Policy Owners' Equity ................................ 679,988 -------- Total Liabilities and Policy Owners' Equity ......... $679,982 ========
The accompanying notes are an integral part of the financial statements. 53 RELIASTAR SELECT*VARIABLE ACCOUNT COMBINED STATEMENTS OF OPERATIONS AND CHANGES IN POLICYOWNERS' EQUITY For the years ended December 31, 1998, 1997 and 1996 (In Thousands)
TOTAL ALL FUNDS COMBINED ------------------------------------------------------------ 1998 1997 1996 ------------------ ------------------ ------------------ Net investment income: Reinvested dividend income ............................... $ 7,644 $ 5,580 $ 2,990 Reinvested capital gains ................................. 34,463 14,480 8,110 Administrative expenses .................................. (4,152) (2,742) (1,935) --------------- --------------- --------------- Net investment income (loss) and capital gains ......... 37,955 17,318 9,165 --------------- --------------- --------------- Realized and unrealized gains (losses): Net realized gains (losses) on redemptions of fund shares .......................................... 12,939 6,393 3,085 Increase (decrease) in unrealized appreciation of investments .......................................... 55,885 46,873 15,731 --------------- --------------- --------------- Net realized and unrealized gains (losses) ............. 68,824 53,266 18,816 --------------- --------------- --------------- Additions (reductions) from operations ................. 106,779 70,584 27,981 --------------- --------------- --------------- Policy Owners' transactions: Net premium payments ..................................... 184,473 141,159 108,108 Transfers between funds and/or fixed account ............. (251) 74 95 Policy loans ............................................. (5,343) (4,385) (2,266) Loan collateral interest crediting ....................... 462 292 174 Surrenders ............................................... (16,659) (8,917) (5,080) Death benefits ........................................... (1,646) (588) (203) Cost of insurance charges ................................ (34,996) (26,634) (19,202) Death benefit guarantee charges .......................... (630) (439) (459) Monthly expense charges .................................. (5,413) (4,207) (2,932) --------------- --------------- --------------- Additions (reductions) for policy owners' transactions .......................................... 119,997 96,355 78,235 --------------- --------------- --------------- Net additions (reductions) for the year ................ 226,776 166,939 106,216 Policy Owners' Equity, beginning of the year .............. 453,212 286,273 180,057 --------------- --------------- --------------- Policy Owners' Equity, end of the year .................... $ 679,988 $ 453,212 $ 286,273 =============== =============== =============== Units Outstanding, beginning of the year .................. 21,952,826.717 15,861,312.070 10,541,629.343 Units Outstanding, end of the year ........................ 29,584,452.030 21,952,826.717 15,861,312.070 Net Asset Value per Unit: Select*Life I ............................................ -- -- -- Select*Life Series 2000 .................................. -- -- --
The accompanying notes are an integral part of the financial statements. 54 COMBINED STATEMENTS OF OPERATIONS AND CHANGES IN POLICYOWNERS' EQUITY, CONTINUED
ALGER AMERICAN ALGER AMERICAN GROWTH PORTFOLIO MIDCAP GROWTH PORTFOLIO - ----------------------------------------------------- -------------------------------------------------- 1998 1997 1996 1998 1997 1996 -------------- -------------- -------------- -------------- -------------- -------------- $ 3 $ -- $ -- $ -- $ -- $ -- 182 -- -- 61 -- -- (16) -- -- (8) (1) -- -------------- -------------- -------------- -------------- -------------- -------------- 169 -- -- 53 (1) -- -------------- -------------- -------------- -------------- -------------- -------------- 37 -- -- (30) -- -- 789 1 -- 218 (16) -- -------------- -------------- -------------- -------------- -------------- -------------- 826 1 -- 188 (16) -- -------------- -------------- -------------- -------------- -------------- -------------- 995 1 -- 241 (17) -- -------------- -------------- -------------- -------------- -------------- -------------- 2,300 175 -- 1,205 132 -- 2,512 175 -- 512 263 -- (40) (1) -- -- (2) -- -- -- -- -- -- -- (19) -- -- (9) -- -- -- -- -- (11) -- -- (194) (6) -- (82) (5) -- (4) -- -- (4) -- -- (28) (1) -- (12) (1) -- -------------- -------------- -------------- -------------- -------------- -------------- 4,527 342 -- 1,599 387 -- -------------- -------------- -------------- -------------- -------------- -------------- 5,522 343 -- 1,840 370 -- 343 -- -- 370 -- -- -------------- -------------- -------------- -------------- -------------- -------------- $ 5,865 $ 343 $ -- $ 2,210 $ 370 $ -- ============== ============== ============== ============== ============== ============== 34,697.106 -- -- 37,772.926 -- -- 402,669.328 34,697.106 -- 172,814.592 37,772.926 -- $ 14.429571 $ 9.823427 $ -- $ 12.659555 $ 9.793978 $ -- $ 14.592177 $ 9.854808 $ -- $ 12.802277 $ 9.825275 $ --
[WIDE TABLE CONTINUED FROM ABOVE]
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO -------------------------------------------------- 1998 1997 1996 -------------- -------------- -------------- $ -- $ -- $ -- 155 -- -- (8) (1) -- -------------- -------------- -------------- 147 (1) -- -------------- -------------- -------------- 6 (5) -- 133 (23) -- -------------- -------------- -------------- 139 (28) -- -------------- -------------- -------------- 286 (29) -- -------------- -------------- -------------- 1,373 235 -- 555 452 -- (19) -- -- -- -- -- (8) (2) -- -- -- -- (124) (14) -- (6) -- -- (18) (2) -- -------------- -------------- -------------- 1,753 669 -- -------------- -------------- -------------- 2,039 640 -- 640 -- -- -------------- -------------- -------------- $ 2,679 $ 640 $ -- ============== ============== ============== 63,628.672 -- -- 230,199.995 63,628.672 -- $ 11.505655 $ 10.039295 $ -- $ 11.635433 $ 10.071361 $ --
The accompanying notes are an integral part of the financial statements. 55 RELIASTAR SELECT*LIFE VARIABLE ACCOUNT COMBINED STATEMENTS OF OPERATIONS AND CHANGES IN POLICYOWNERS' EQUITY, CONTINUED For the years ended December 31, 1998, 1997 and 1996 (In Thousands)
FIDELITY'S VIP EQUITY-INCOME PORTFOLIO ----------------------------------------------- 1998 1997 1996 ------------- ------------- ------------- Net investment income: Reinvested dividend income .................................. $ 1,175 $ 1,013 $ 67 Reinvested capital gains .................................... 4,180 5,096 1,929 Administrative expenses ..................................... (705) (551) (458) ------------- ------------- ------------- Net investment income (loss) and capital gains ............ 4,650 5,558 1,538 ------------- ------------- ------------- Realized and unrealized gains (losses): Net realized gains (losses) on redemptions of fund shares ... 2,533 1,778 812 Increase (decrease) in unrealized appreciation of investments 2,086 9,445 3,943 ------------- ------------- ------------- Net realized and unrealized gains (losses) ................ 4,619 11,223 4,755 ------------- ------------- ------------- Additions (reductions) from operations .................... 9,269 16,781 6,293 ------------- ------------- ------------- Policy Owners' transactions: Net premium payments ........................................ 18,161 17,102 15,950 Transfers between funds and/or fixed account ................ (2,096) (1,313) (782) Policy loans ................................................ (1,121) (1,209) (576) Loan collateral interest crediting .......................... 113 76 49 Surrenders .................................................. (3,152) (1,627) (977) Death benefits .............................................. (264) (160) (72) Cost of insurance charges ................................... (4,711) (4,240) (3,423) Death benefit guarantee charges ............................. (114) (111) (115) Monthly expense charges ..................................... (659) (596) (475) ------------- ------------- ------------- Additions (reductions) for policy owners' transactions .... 6,157 7,922 9,579 ------------- ------------- ------------- Net additions (reductions) for the year ................... 15,426 24,703 15,872 Policy Owners' Equity, beginning of the year ................. 82,910 58,207 42,335 ------------- ------------- ------------- Policy Owners' Equity, end of the year ....................... $ 98,336 $ 82,910 $ 58,207 ============= ============= ============= Units Outstanding, beginning of the year ..................... 3,053,047.193 2,622,030.390 2,023,713.030 Units Outstanding, end of the year ........................... 3,348,679.958 3,053,047.193 2,622,030.390 Net Asset Value per Unit: Select*Life I ............................................... $ 38.822462 $ 35.058961 $ 27.587247 Select*Life Series 2000 ..................................... $ 23.531218 $ 21.080180 $ --
The accompanying notes are an integral part of the financial statements. 56 COMBINED STATEMENTS OF OPERATIONS AND CHANGES IN POLICYOWNERS' EQUITY, CONTINUED
FIDELITY'S VIP FIDELITY'S VIP GROWTH PORTFOLIO HIGH INCOME PORTFOLIO - ----------------------------------------------------------------- ------------------------------------------------------------- 1998 1997 1996 1998 1997 1996 - --------------------- --------------------- --------------------- --------------------- ------------------- ------------------- $ 537 $ 526 $ 156 $ 1,415 $ 1,063 $ 832 14,057 2,357 3,939 899 131 163 (971) (722) (557) (160) (132) (103) ----------------- ----------------- ----------------- ----------------- --------------- --------------- 13,623 2,161 3,538 2,154 1,062 892 ----------------- ----------------- ----------------- ----------------- --------------- --------------- 4,873 2,098 980 210 301 162 22,732 14,061 3,837 (3,436) 1,318 473 ----------------- ----------------- ----------------- ----------------- --------------- --------------- 27,605 16,159 4,817 (3,226) 1,619 635 ----------------- ----------------- ----------------- ----------------- --------------- --------------- 41,228 18,320 8,355 (1,072) 2,681 1,527 ----------------- ----------------- ----------------- ----------------- --------------- --------------- 21,080 21,483 21,247 5,161 5,072 4,359 (1,512) (1,822) 329 (469) (1,001) (267) (1,618) (1,280) (758) (268) (282) (67) 138 92 57 21 15 9 (4,327) (2,498) (1,807) (740) (397) (286) (370) (160) (53) (88) (39) (10) (6,378) (5,741) (4,894) (1,230) (1,198) (995) (168) (163) (173) (31) (29) (32) (956) (876) (739) (144) (140) (121) ----------------- ----------------- ----------------- ----------------- --------------- --------------- 5,889 9,035 13,209 2,212 2,001 2,590 ----------------- ----------------- ----------------- ----------------- --------------- --------------- 47,117 27,355 21,564 1,140 4,682 4,117 104,273 76,918 55,354 19,377 14,695 10,578 ----------------- ----------------- ----------------- ----------------- --------------- --------------- $ 151,390 $ 104,273 $ 76,918 $ 20,517 $ 19,377 $ 14,695 ================= ================= ================= ================= =============== =============== 3,971,201.581 3,452,718.980 2,622,289.757 916,625.159 773,942.356 577,083.123 4,282,470.411 3,971,201.581 3,452,718.980 1,053,934.152 916,625.159 773,942.356 $ 49.996221 $ 36.130923 $ 29.496120 $ 28.427207 $ 29.952917 $ 25.660930 $ 26.727479 $ 19.160956 $ -- $ 15.116470 $ 15.800365 $ --
[WIDE TABLE CONTINUED FROM ABOVE]
FIDELITY'S VIP MONEY MARKET PORTFOLIO - ------------------------------------------------------------- 1998 1997 1996 - --------------------- ------------------- ------------------- $ 669 $ 556 $ 417 -- -- -- (92) (67) (68) ----------------- --------------- --------------- 577 489 349 ----------------- --------------- --------------- -- -- -- -- -- -- ----------------- --------------- --------------- -- -- -- ----------------- --------------- --------------- 577 489 349 ----------------- --------------- --------------- 10,376 10,226 7,798 (7,227) (5,733) (4,502) (31) (147) (97) 18 13 7 (285) (802) (164) (7) (43) (1) (817) (755) (698) (55) (8) (8) (74) (73) (62) ----------------- --------------- --------------- 1,898 2,678 2,273 ----------------- --------------- --------------- 2,475 3,167 2,622 11,493 8,326 5,704 ----------------- --------------- --------------- $ 13,968 $ 11,493 $ 8,326 ================= =============== =============== 875,038.346 654,425.374 454,516.667 1,021,422.904 875,038.346 654,425.374 $ 17.399235 $ 16.628903 $ 15.890521 $ 12.941412 $ 12.269546 $ --
The accompanying notes are an integral part of the financial statements. 57 RELIASTAR SELECT*LIFE VARIABLE ACCOUNT COMBINED STATEMENTS OF OPERATIONS AND CHANGES IN POLICYOWNERS' EQUITY, CONTINUED For the years ended December 31, 1998, 1997 and 1996 (In Thousands)
FIDELITY'S VIP OVERSEAS PORTFOLIO ------------------------------------------------------------- 1998 1997 1996 ----------------- ----------------- ----------------- Net investment income: Reinvested dividend income ...................................... $ 551 $ 411 $ 202 Reinvested capital gains . ...................................... 1,626 1,630 223 Administrative expenses ......................................... (247) (220) (119) ----------------- ----------------- ----------------- Net investment income (loss) and capital gains ................ 1,930 1,821 306 ----------------- ----------------- ----------------- Realized and unrealized gains (losses): Net realized gains (losses) on redemptions of fund shares ....... 1,235 724 354 Increase (decrease) in unrealized appreciation of investments ... 187 5 1,706 ----------------- ----------------- ----------------- Net realized and unrealized gains (losses) .................... 1,422 729 2,060 ----------------- ----------------- ----------------- Additions (reductions) from operations ........................ 3,352 2,550 2,366 ----------------- ----------------- ----------------- Policy Owners' transactions: Net premium payments ............................................ 5,928 7,156 6,819 Transfers between funds and/or fixed account .................... (2,715) (1,515) (582) Policy loans .................................................... (396) (379) (235) Loan collateral interest crediting .............................. 44 28 16 Surrenders ...................................................... (889) (690) (493) Death benefits .................................................. (60) (18) (17) Cost of insurance charges ....................................... (1,589) (1,667) (1,500) Death benefit guarantee charges ................................. (37) (43) (47) Monthly expense charges ......................................... (241) (253) (227) ----------------- ----------------- ----------------- Additions (reductions) for policy owners' transactions ........ 45 2,619 3,734 ----------------- ----------------- ----------------- Net additions (reductions) for the year ....................... 3,397 5,169 6,100 Policy Owners' Equity, beginning of the year ..................... 28,117 22,948 16,848 ----------------- ----------------- ----------------- Policy Owners' Equity, end of the year ........................... $ 31,514 $ 28,117 $ 22,948 ================= ================= ================= Units Outstanding, beginning of the year ......................... 1,733,459.426 1,536,316.506 1,229,928.330 Units Outstanding, end of the year ............................... 1,752,679.671 1,733,459.426 1,536,316.506 Net Asset Value per Unit: Select*Life I ................................................... $ 22.444163 $ 20.066499 $ 18.132967 Select*Life Series 2000 ......................................... $ 15.745282 $ 13.964753 $ --
The accompanying notes are an integral part of the financial statements. 58 COMBINED STATEMENTS OF OPERATIONS AND CHANGES IN POLICYOWNERS' EQUITY, CONTINUED
FIDELITY'S VIP II FIDELITY'S VIP II ASSET MANAGER PORTFOLIO CONTRAFUND PORTFOLIO - ----------------------------------------------------------------- ----------------------------------------------------------- 1998 1997 1996 1998 1997 1996 - --------------------- --------------------- --------------------- --------------------- --------------------- --------------- $ 1,161 $ 1,010 $ 840 $ 180 $ 94 $ -- 3,484 2,533 692 1,324 247 22 (323) (270) (210) (229) (104) (48) ----------------- ----------------- ----------------- ----------------- ----------------- ------------- 4,322 3,273 1,322 1,275 237 (26) ----------------- ----------------- ----------------- ----------------- ----------------- ------------- 274 346 169 651 61 25 660 2,222 1,834 7,367 3,113 1,155 ----------------- ----------------- ----------------- ----------------- ----------------- ------------- 934 2,568 2,003 8,018 3,174 1,180 ----------------- ----------------- ----------------- ----------------- ----------------- ------------- 5,256 5,841 3,325 9,293 3,411 1,154 ----------------- ----------------- ----------------- ----------------- ----------------- ------------- 5,834 6,096 6,607 16,875 12,617 7,406 (717) (651) (1,215) 605 767 730 (482) (371) (209) (197) (66) (21) 51 38 26 6 1 -- (1,458) (694) (545) (882) (307) (60) (60) (68) (25) (130) (10) -- (2,041) (2,034) (1,948) (2,823) (1,815) (837) (52) (56) (61) (15) -- -- (255) (264) (262) (512) (344) (155) ----------------- ----------------- ----------------- ----------------- ----------------- ------------- 820 1,996 2,368 12,927 10,843 7,063 ----------------- ----------------- ----------------- ----------------- ----------------- ------------- 6,076 7,837 5,693 22,220 14,254 8,217 36,580 28,743 23,050 24,427 10,173 1,956 ----------------- ----------------- ----------------- ----------------- ----------------- ------------- $ 42,656 $ 36,580 $ 28,743 $ 46,647 $ 24,427 $ 10,173 ================= ================= ================= ================= ================= ============= 2,034,040.832 1,892,481.312 1,704,151.254 1,334,244.465 686,514.792 160,147.180 2,091,427.861 2,034,040.832 1,892,481.312 1,974,535.451 1,334,244.465 686,514.792 $ 24.280390 $ 21.274161 $ 17.774921 $ 13.286083 $ 10.304064 $ -- $ 17.348504 $ 15.079031 $ -- $ 23.909755 $ 18.395120 $ --
[WIDE TABLE CONTINUED FROM ABOVE]
FIDELITY'S VIP II INDEX 500 PORTFOLIO - ------------------------------------------------------------- 1998 1997 1996 - --------------------- ------------------- ------------------- $ 278 $ 95 $ 33 644 193 84 (229) (91) (40) ----------------- --------------- --------------- 693 197 77 ----------------- --------------- --------------- 1,033 427 80 6,585 2,896 793 ----------------- --------------- --------------- 7,618 3,323 873 ----------------- --------------- --------------- 8,311 3,520 950 ----------------- --------------- --------------- 16,991 9,635 3,577 3,742 3,272 1,125 (264) (104) (9) 14 4 1 (670) (188) (76) (59) (3) (4) (2,579) (1,225) (447) (30) (7) (5) (434) (226) (86) ----------------- --------------- --------------- 16,711 11,158 4,076 ----------------- --------------- --------------- 25,022 14,678 5,026 22,261 7,583 2,557 ----------------- --------------- --------------- $ 47,283 $ 22,261 $ 7,583 ================= =============== =============== 981,434.839 441,948.368 181,509.017 1,628,829.448 981,434.839 441,948.368 $ 29.701980 $ 23.332252 $ 17.724683 $ 28.934443 $ 22.547720 $ --
The accompanying notes are an integral part of the financial statements. 59 RELIASTAR SELECT*LIFE VARIABLE ACCOUNT COMBINED STATEMENTS OF OPERATIONS AND CHANGES IN POLICYOWNERS' EQUITY, CONTINUED For the years ended December 31, 1998, 1997 and 1996 (In Thousands)
FIDELITY'S VIP II INVESTMENT GRADE BOND PORTFOLIO -------------------------------------------- 1998 1997 1996 ------------ ------------ ------------ Net investment income: Reinvested dividend income .................................. $ 206 $ 194 $ 139 Reinvested capital gains .................................... 25 -- -- Administrative expenses ..................................... (36) (27) (24) ------------ ------------ ------------ Net investment income (loss) and capital gains ............ 195 167 115 ------------ ------------ ------------ Realized and unrealized gains (losses): Net realized gains (losses) on redemptions of fund shares ... 128 16 12 Increase (decrease) in unrealized appreciation of investments 47 94 (51) ------------ ------------ ------------ Net realized and unrealized gains (losses) ................ 175 110 (39) ------------ ------------ ------------ Additions (reductions) from operations .................... 370 277 76 ------------ ------------ ------------ Policy Owners' transactions: Net premium payments ........................................ 2,363 907 986 Transfers between funds and/or fixed account ................ (1,154) (169) (300) Policy loans ................................................ (50) (37) (19) Loan collateral interest crediting .......................... 4 2 1 Surrenders .................................................. (106) (69) (47) Death benefits .............................................. (7) (2) (5) Cost of insurance charges ................................... (280) (225) (211) Death benefit guarantee charges ............................. (7) (5) (6) Monthly expense charges ..................................... (30) (28) (27) ------------ ------------ ------------ Additions (reductions) for policy owners' transactions .... 733 374 372 ------------ ------------ ------------ Net additions (reductions) for the year ................... 1,103 651 448 Policy Owners' Equity, beginning of the year ................. 3,872 3,221 2,773 ------------ ------------ ------------ Policy Owners' Equity, end of the year ....................... $ 4,975 $ 3,872 $ 3,221 ============ ============ ============ Units Outstanding, beginning of the year ..................... 276,930.635 247,189.999 214,771.624 Units Outstanding, end of the year ........................... 333,810.100 276,930.635 247,189.999 Net Asset Value per Unit: Select*Life I ............................................... $ 17.100659 $ 15.837535 $ 14.638773 Select*Life Series 2000 ..................................... $ 13.807112 $ 12.685026 $ --
The accompanying notes are an integral part of the financial statements. 60 COMBINED STATEMENTS OF OPERATIONS AND CHANGES IN POLICYOWNERS' EQUITY, CONTINUED
JANUS ASPEN SERIES JANUS ASPEN SERIES AGGRESSIVE GROWTH PORTFOLIO GROWTH PORTFOLIO - -------------------------------------------- -------------------------------------------- 1998 1997 1996 1998 1997 1996 - ------------ ------------ ------------ ------------ ------------ ------------ $ -- $ -- $ -- $ 41 $ 1 $ -- -- -- -- 32 -- -- (7) -- -- (10) -- -- - ------------ ------------ ------------ ------------ ------------ ------------ (7) -- -- 63 1 -- - ------------ ------------ ------------ ------------ ------------ ------------ 95 (1) -- (16) -- -- 317 6 -- 541 2 -- - ------------ ------------ ------------ ------------ ------------ ------------ 412 5 -- 525 2 -- - ------------ ------------ ------------ ------------ ------------ ------------ 405 5 -- 588 3 -- - ------------ ------------ ------------ ------------ ------------ ------------ 884 109 -- 1,477 157 -- 194 156 -- 2,294 136 -- (4) 1 -- 2 (3) -- 2 -- -- -- 1 -- (15) -- -- (74) -- -- -- -- -- (8) -- -- (88) (6) -- (132) (7) -- (4) -- -- (2) -- -- (13) (1) -- (22) (1) -- - ------------ ------------ ------------ ------------ ------------ ------------ 956 259 -- 3,535 283 -- - ------------ ------------ ------------ ------------ ------------ ------------ 1,361 264 -- 4,123 286 -- 264 -- -- 286 -- -- - ------------ ------------ ------------ ------------ ------------ ------------ $ 1,625 $ 264 $ -- $ 4,409 $ 286 $ -- ============ ============ ============ ============ ============ ============ 24,053.408 -- -- 28,040.816 -- -- 110,510.717 24,053.408 -- 319,301.091 28,040.816 -- $ 14.550679 $ 10.925142 $ -- $ 13.665622 $ 10.154694 $ -- $ 14.714669 $ 10.960002 $ -- $ 13.819668 $ 10.187114 $ --
[WIDE TABLE CONTINUED FROM ABOVE]
JANUS ASPEN SERIES INTERNATIONAL GROWTH PORTFOLIO - -------------------------------------------- 1998 1997 1996 - ------------ ------------ ------------ $ 35 $ 1 $ -- 5 -- -- (16) (1) -- - ------------ ------------ ------------ 24 -- -- - ------------ ------------ ------------ 52 (1) -- 190 (11) -- - ------------ ------------ ------------ 242 (12) -- - ------------ ------------ ------------ 266 (12) -- - ------------ ------------ ------------ 1,711 250 -- 745 623 -- (11) (2) -- 1 -- -- (18) -- -- -- -- -- (167) (13) -- (5) -- -- (26) (2) -- - ------------ ------------ ------------ 2,230 856 -- - ------------ ------------ ------------ 2,496 844 -- 844 -- -- - ------------ ------------ ------------ $ 3,340 $ 844 $ -- ============ ============ ============ 87,549.532 -- -- 296,248.488 87,549.532 -- $ 11.158415 $ 9.594712 $ -- $ 11.284244 $ 9.625377 $ --
The accompanying notes are an integral part of the financial statements. 61 RELIASTAR SELECT*VARIABLE ACCOUNT COMBINED STATEMENTS OF OPERATIONS AND CHANGES IN POLICYOWNERS' EQUITY, CONTINUED For the years ended December 31, 1998, 1997 and 1996 (In Thousands)
JANUS ASPEN SERIES WORLDWIDE GROWTH PORTFOLIO -------------------------------------------- 1998 1997 1996 ------------ ------------ ------------ Net investment income: Reinvested dividend income .................................. $ 210 $ 5 $ -- Reinvested capital gains .................................... 81 -- -- Administrative expenses ..................................... (57) (3) -- ------------ ------------ ------------ Net investment income (loss) and capital gains ............ 234 2 -- ------------ ------------ ------------ Realized and unrealized gains (losses): Net realized gains (losses) on redemptions of fund shares ... 99 -- -- Increase (decrease) in unrealized appreciation of investments 1,475 (16) -- ------------ ------------ ------------ Net realized and unrealized gains (losses) ................ 1,574 (16) -- ------------ ------------ ------------ Additions (reductions) from operations .................... 1,808 (14) -- ------------ ------------ ------------ Policy Owners' transactions: Net premium payments ........................................ 7,344 906 -- Transfers between funds and/or fixed account ................ 4,415 1,582 -- Policy loans ................................................ (13) (4) -- Loan collateral interest crediting .......................... 1 -- -- Surrenders .................................................. (90) (1) -- Death benefits .............................................. (53) -- -- Cost of insurance charges ................................... (755) (49) -- Death benefit guarantee charges ............................. (12) -- -- Monthly expense charges ..................................... (106) (7) -- ------------ ------------ ------------ Additions (reductions) for policy owners' transactions .... 10,731 2,427 -- ------------ ------------ ------------ Net additions (reductions) for the year ................... 12,539 2,413 -- Policy Owners' Equity, beginning of the year ................. 2,413 -- -- ------------ ------------ ------------ Policy Owners' Equity, end of the year ....................... $ 14,952 $ 2,413 $ -- ============ ============ ============ Units Outstanding, beginning of the year ..................... 245,314.904 -- -- Units Outstanding, end of the year ........................... 1,180,179.061 245,314.904 -- Net Asset Value per Unit: Select*Life I ............................................... $ 12.539787 $ 9.804994 $ -- Select*Life Series 2000 ..................................... $ 12.681124 $ 9.836310 $ --
The accompanying notes are an integral part of the financial statements. 62 COMBINED STATEMENTS OF OPERATIONS AND CHANGES IN POLICYOWNERS' EQUITY, CONTINUED
NEUBERGER&BERMAN NEUBERGER&BERMAN ADVISERS MANAGEMENT TRUST ADVISERS MANAGEMENT TRUST LIMITED MATURITY BOND PORTFOLIO PARTNERS PORTFOLIO - -------------------------------------------- -------------------------------------------- 1998 1997 1996 1998 1997 1996 - ------------ ------------ ------------ ------------ ------------ ------------ $ 79 $ -- $ -- $ 11 $ -- $ -- -- -- -- 342 -- -- (9) -- -- (45) (2) -- - ------------ ------------ ------------ ------------ ------------ ------------ 70 -- -- 308 (2) -- - ------------ ------------ ------------ ------------ ------------ ------------ (21) -- -- (137) 3 -- 1 7 -- (164) 20 -- - ------------ ------------ ------------ ------------ ------------ ------------ (20) 7 -- (301) 23 -- - ------------ ------------ ------------ ------------ ------------ ------------ 50 7 -- 7 21 -- - ------------ ------------ ------------ ------------ ------------ ------------ 1,242 209 -- 5,576 484 -- (296) 896 -- 3,196 1,288 -- (2) (2) -- (55) (2) -- -- -- -- 2 1 -- (2) -- -- (58) (2) -- (5) -- -- -- -- -- (94) (6) -- (518) (26) -- (2) -- -- (11) -- -- (11) (1) -- (64) (3) -- - ------------ ------------ ------------ ------------ ------------ ------------ 830 1,096 -- 8,068 1,740 -- - ------------ ------------ ------------ ------------ ------------ ------------ 880 1,103 -- 8,075 1,761 -- 1,103 -- -- 1,761 -- -- - ------------ ------------ ------------ ------------ ------------ ------------ $ 1,983 $ 1,103 $ -- $ 9,836 $ 1,761 $ -- ============ ============ ============ ============ ============ ============ 107,550.694 -- -- 170,599.212 -- -- 185,303.929 107,550.694 -- 914,725.581 170,599.212 -- $ 10.584999 $ 10.221530 $ -- $ 10.640408 $ 10.292965 $ -- $ 10.704404 $ 10.254171 $ -- $ 10.760407 $ 10.325813 $ --
[WIDE TABLE CONTINUED FROM ABOVE]
NORTHSTAR GALAXY TRUST GROWTH + VALUE PORTFOLIO - -------------------------------------------- 1998 1997 1996 - ------------ ------------ ------------ $ -- $ 1 $ -- 14 7 -- (8) (1) -- - ------------ ------------ ------------ 6 7 -- - ------------ ------------ ------------ -- 1 -- 277 (13) -- - ------------ ------------ ------------ 277 (12) -- - ------------ ------------ ------------ 283 (5) -- - ------------ ------------ ------------ 1,061 187 -- 59 497 -- 4 (2) -- -- -- -- (4) (1) -- (94) -- -- (115) (10) -- (3) -- -- (11) (1) -- - ------------ ------------ ------------ 897 670 -- - ------------ ------------ ------------ 1,180 665 -- 665 -- -- - ------------ ------------ ------------ $ 1,845 $ 665 $ -- ============ ============ ============ 65,399.595 -- -- 151,938.013 65,399.595 -- $ 12.022926 $ 10.156905 $ -- $ 12.158465 $ 10.189337 $ --
The accompanying notes are an integral part of the financial statements. 63 RELIASTAR SELECT*LIFE VARIABLE ACCOUNT COMBINED STATEMENTS OF OPERATIONS AND CHANGES IN POLICYOWNERS' EQUITY, CONTINUED For the years ended December 31, 1997, 1996 and 1995 (In Thousands)
NORTHSTAR GALAXY TRUST HIGH YIELD BOND PORTFOLIO -------------------------------------------- 1998 1997 1996 ------------ ------------ ------------ Net investment income: Reinvested dividend income .................................. $ 24 $ 1 $ -- Reinvested capital gains .................................... 1 -- -- Administrative expenses ..................................... (2) -- -- ------------ ------------ ------------ Net investment income (loss) and capital gains ............. 23 1 -- ------------ ------------ ------------ Realized and unrealized gains (losses): Net realized gains (losses) on redemptions of fund shares ... (43) -- -- Increase (decrease) in unrealized appreciation of investments 11 (1) -- ------------ ------------ ------------ Net realized and unrealized gains (losses) ................. (32) (1) -- ------------ ------------ ------------ Additions (reductions) from operations ..................... (9) -- -- ------------ ------------ ------------ Policy Owners' transactions: Net premium payments ........................................ 482 52 -- Transfers between funds and/or fixed account ................ 35 9 -- Policy loans ................................................ 2 (2) -- Loan collateral interest crediting .......................... -- -- -- Surrenders .................................................. (1) -- -- Death benefits .............................................. (5) -- -- Cost of insurance charges ................................... (28) (2) -- Death benefit guarantee charges ............................. (1) -- -- Monthly expense charges ..................................... (3) -- -- ------------ ------------ ------------ Additions (reductions) for policy owners' transactions ..... 481 57 -- ------------ ------------ ------------ Net additions (reductions) for the year .................... 472 57 -- Policy Owners' Equity, beginning of the year ................. 57 -- -- ------------ ------------ ------------ Policy Owners' Equity, end of the year ....................... $ 529 $ 57 $ -- ============ ============ ============ Units Outstanding, beginning of the year ..................... 5,488.146 -- -- Units Outstanding, end of the year ........................... 50,566.068 5,488.146 -- Net Asset Value per Unit: Select*Life I ............................................... $ 10.351379 $ 10.373728 $ -- Select*Life Series 2000 ..................................... $ 10.468149 $ 10.406855 $ --
The accompanying notes are an integral part of the financial statements. 64 COMBINED STATEMENTS OF OPERATIONS AND CHANGES IN POLICYOWNERS' EQUITY, CONTINUED
NORTHSTAR GALAXY TRUST NORTHSTAR GALAXY TRUST EMERGING GROWTH PORTFOLIO INTERNATIONAL VALUE PORTFOLIO - -------------------------------------------- ------------------------------------------- 1998 1997 1996 1998 1997 1996 - ------------ ------------ ------------ ------------ ------------ ------------ $ 58 $ 36 $ 13 $ 21 $ 1 $ -- 107 9 38 68 -- -- (11) (5) (3) (7) -- -- - ------------ ------------ ------------ ------------ ------------ ------------ 154 40 48 82 1 -- - ------------ ------------ ------------ ------------ ------------ ------------ 10 3 2 47 -- -- 181 83 (2) 33 -- -- - ------------ ------------ ------------ ------------ ------------ ------------ 191 86 -- 80 -- -- - ------------ ------------ ------------ ------------ ------------ ------------ 345 126 48 162 1 -- - ------------ ------------ ------------ ------------ ------------ ------------ 990 826 413 975 144 -- (2) 47 68 218 258 -- (13) (11) -- (4) -- -- -- -- -- 2 -- -- (27) (21) -- (9) (2) -- -- (1) -- -- -- -- (179) (96) (39) (96) (8) -- (1) -- -- (3) -- -- (30) (19) (7) (11) (1) -- - ------------ ------------ ------------ ------------ ------------ ------------ 738 725 435 1,072 391 -- - ------------ ------------ ------------ ------------ ------------ ------------ 1,083 851 483 1,234 392 -- 1,441 590 107 392 -- -- - ------------ ------------ ------------ ------------ ------------ ------------ $ 2,524 $ 1,441 $ 590 $ 1,626 $ 392 $ -- ============ ============ ============ ============ ============ ============ 90,105.753 42,551.251 8,746.326 38,707.007 -- -- 134,480.431 90,105.753 42,551.251 137,264.427 38,707.007 -- $ 12.082938 $ 10.383806 $ -- $ 11.712172 $ 10.097293 $ -- $ 18.810805 $ 16.036372 $ -- $ 11.844211 $ 10.129526 $ --
[WIDE TABLE CONTINUED FROM ABOVE]
NORTHSTAR GALAXY TRUST MULTI-SECTOR BOND PORTFOLIO - --------------------------------------------------------- 1998 1997 1996 - -------------------- -------------------- --------------- $ 77 $ 34 $ 14 -- 3 5 (7) (3) (1) ------------- ------------- ----------- 70 34 18 ------------- ------------- ----------- (16) 2 1 (56) (12) 3 ------------- ------------- ----------- (72) (10) 4 ------------- ------------- ----------- (2) 24 22 ------------- ------------- ----------- 866 296 124 58 42 52 (5) (8) -- -- -- -- (13) (13) -- -- (1) -- (86) (41) (15) (3) -- -- (12) (5) (2) ------------- ------------- ----------- 805 270 159 ------------- ------------- ----------- 803 294 181 589 295 114 ------------- ------------- ----------- $ 1,392 $ 589 $ 295 ============= ============= =========== 41,273.079 22,576.638 9,904.096 96,571.672 41,273.079 22,576.638 $ 10.296187 $ 10.240441 $ -- $ 14.457253 $ 14.264010 $ --
The accompanying notes are an integral part of the financial statements. 65 RELIASTAR SELECT*LIFE VARIABLE ACCOUNT COMBINED STATEMENTS OF OPERATIONS AND CHANGES IN POLICYOWNERS' EQUITY, CONTINUED For the years ended December 31, 1998, 1997 and 1996 (In Thousands)
OCC ACCUMULATION TRUST EQUITY PORTFOLIO -------------------------------------------- 1998 1997 1996 ------------ ------------ ------------ Net investment income: Reinvested dividend income .................................. $ 3 $ -- $ -- Reinvested capital gains .................................... 12 -- -- Administrative expenses ..................................... (5) -- -- ------------ ------------ ------------ Net investment income (loss) and capital gains ............ 10 -- -- ------------ ------------ ------------ Realized and unrealized gains (losses): Net realized gains (losses) on redemptions of fund shares ... 6 1 -- Increase (decrease) in unrealized appreciation of investments 46 8 -- ------------ ------------ ------------ Net realized and unrealized gains (losses) ................ 52 9 -- ------------ ------------ ------------ Additions (reductions) from operations .................... 62 9 -- ------------ ------------ ------------ Policy Owners' transactions: Net premium payments ........................................ 822 52 -- Transfers between funds and/or fixed account ................ 297 151 -- Policy loans ................................................ 1 (2) -- Loan collateral interest crediting .......................... -- -- -- Surrenders .................................................. (10) -- -- Death benefits .............................................. -- -- -- Cost of insurance charges ................................... (59) (2) -- Death benefit guarantee charges ............................. (1) -- -- Monthly expense charges ..................................... (9) -- -- ------------ ------------ ------------ Additions (reductions) for policy owners' transactions .... 1,041 199 -- ------------ ------------ ------------ Net additions (reductions) for the year ................... 1,103 208 -- Policy Owners' Equity, beginning of the year ................. 208 -- -- ------------ ------------ ------------ Policy Owners' Equity, end of the year ....................... $ 1,311 $ 208 $ -- ============ ============ ============ Units Outstanding, beginning of the year ..................... 19,312.138 -- -- Units Outstanding, end of the year ........................... 109,118.612 19,312.138 -- Net Asset Value per Unit: Select*Life I ............................................... $ 11.895001 $ 10.719660 $ -- Select*Life Series 2000 ..................................... $ 12.029100 $ 10.753858 $ --
The accompanying notes are an integral part of the financial statements. 66 COMBINED STATEMENTS OF OPERATIONS AND CHANGES IN POLICYOWNERS' EQUITY, CONTINUED
OCC ACCUMULATION TRUST OCC ACCUMULATION TRUST GLOBAL EQUITY PORTFOLIO MANAGED PORTFOLIO - -------------------------------------------- -------------------------------------------- 1998 1997 1996 1998 1997 1996 - ------------ ------------ ------------ ------------ ------------ ------------ $ 8 $ 1 $ -- $ 17 $ -- $ -- 28 14 -- 56 -- -- (4) (1) -- (24) (1) -- - ------------ ------------ ------------ ------------ ------------ ------------ 32 14 -- 49 (1) -- - ------------ ------------ ------------ ------------ ------------ ------------ (5) (1) -- 2 -- -- 22 (29) -- 74 7 -- - ------------ ------------ ------------ ------------ ------------ ------------ 17 (30) -- 76 7 -- - ------------ ------------ ------------ ------------ ------------ ------------ 49 (16) -- 125 6 -- - ------------ ------------ ------------ ------------ ------------ ------------ 348 51 -- 3,191 357 -- 86 272 -- 1,487 804 -- (2) 1 -- (1) (1) -- -- -- -- -- -- -- (7) -- -- (17) -- -- -- -- -- (76) -- -- (39) (5) -- (294) (16) -- (1) -- -- (4) -- -- (5) (1) -- (32) (1) -- - ------------ ------------ ------------ ------------ ------------ ------------ 380 318 -- 4,254 1,143 -- - ------------ ------------ ------------ ------------ ------------ ------------ 429 302 -- 4,379 1,149 -- 302 -- -- 1,149 -- -- - ------------ ------------ ------------ ------------ ------------ ------------ $ 731 $ 302 $ -- $ 5,528 $ 1,149 $ -- ============ ============ ============ ============ ============ ============ 31,784.854 -- -- 112,854.997 -- -- 67,997.586 31,784.854 -- 507,204.969 112,854.997 -- $ 10.662721 $ 9.487891 $ -- $ 10.778607 $ 10.143089 $ -- $ 10.782965 $ 9.518205 $ -- $ 10.900163 $ 10.175476 $ --
[WIDE TABLE CONTINUED FROM ABOVE]
OCC ACCUMULATION TRUST SMALL CAP PORTFOLIO - -------------------------------------------- 1998 1997 1996 - ------------ ------------ ------------ $ 3 $ -- $ -- 33 -- -- (10) (1) -- - ------------ ------------ ------------ 26 (1) -- - ------------ ------------ ------------ (13) -- -- (151) (4) -- - ------------ ------------ ------------ (164) (4) -- - ------------ ------------ ------------ (138) (5) -- - ------------ ------------ ------------ 1,525 254 -- 340 420 -- (4) -- -- -- -- -- (6) -- -- -- -- -- (140) (10) -- (3) -- -- (18) (1) -- - ------------ ------------ ------------ 1,694 663 -- - ------------ ------------ ------------ 1,556 658 -- 658 -- -- - ------------ ------------ ------------ $ 2,214 $ 658 $ -- ============ ============ ============ 64,284.089 -- -- 237,553.351 64,284.089 -- $ 9.223192 $ 10.220080 $ -- $ 9.327299 $ 10.252721 $ --
The accompanying notes are an integral part of the financial statements. 67 RELIASTAR SELECT*LIFE VARIABLE ACCOUNT COMBINED STATEMENTS OF OPERATIONS AND CHANGES IN POLICYOWNERS' EQUITY, CONTINUED For the years ended December 31, 1998, 1997 and 1996 (In Thousands)
PUTNAM VT ASIA PACIFIC GROWTH FUND -------------------------------------------- 1998 1997 1996 ------------ ------------ ------------ Net investment income: Reinvested dividend income .................................. $ 105 $ 39 $ 8 Reinvested capital gains .................................... -- -- -- Administrative expenses ..................................... (18) (15) (8) ------------ ------------ ------------ Net investment income (loss) and capital gains ............ 87 24 -- ------------ ------------ ------------ Realized and unrealized gains (losses): Net realized gains (losses) on redemptions of fund shares ... (4) 4 14 (Increase) decrease in unrealized appreciation of investments (145) (410) 54 ------------ ------------ ------------ Net realized and unrealized (losses) gains ................ (149) (406) 68 ------------ ------------ ------------ Additions (reductions) from operations .................... (62) (382) 68 ------------ ------------ ------------ Policy Owners' transactions: Net premium payments ........................................ 1,150 1,417 1,193 Transfers between funds and/or fixed account ................ (206) (122) 204 Policy loans ................................................ (14) (9) (2) Loan collateral interest crediting .......................... 1 -- -- Surrenders .................................................. (51) (24) (5) Death benefits .............................................. (1) (2) -- Cost of insurance charges ................................... (183) (194) (130) Death benefit guarantee charges ............................. (1) -- -- Monthly expense charges ..................................... (32) (34) (21) ------------ ------------ ------------ Additions (reductions) for policy owners' transactions .... 663 1,032 1,239 ------------ ------------ ------------ Net additions (reductions) for the year ................... 601 650 1,307 Policy Owners' Equity, beginning of the year ................. 2,258 1,608 301 ------------ ------------ ------------ Policy Owners' Equity, end of the year ....................... $ 2,859 $ 2,258 $ 1,608 ============ ============ ============ Units Outstanding, beginning of the year ..................... 236,947.013 144,086.091 29,436.771 Units Outstanding, end of the year ........................... 317,373.587 236,947.013 144,086.091 Net Asset Value per Unit: Select*Life I ............................................... $ -- $ -- $ -- Select*Life Series 2000 ..................................... $ 9.003039 $ 9.525464 $ --
The accompanying notes are an integral part of the financial statements. 68 COMBINED STATEMENTS OF OPERATIONS AND CHANGES IN POLICYOWNERS' EQUITY, CONTINUED
PUTNAM VT PUTNAM VT DIVERSIFIED INCOME FUND GROWTH AND INCOME FUND - -------------------------------------------- -------------------------------------------- 1998 1997 1996 1998 1997 1996 - ------------ ------------ ------------ ------------ ------------ ------------ $ 88 $ 86 $ 63 $ 458 $ 283 $ 117 37 14 -- 2,991 690 204 (18) (13) (10) (201) (120) (60) - ------------ ------------ ------------ ------------ ------------ ------------ 107 87 53 3,248 853 261 - ------------ ------------ ------------ ------------ ------------ ------------ 18 16 10 435 123 125 (182) 6 25 243 2,475 1,043 - ------------ ------------ ------------ ------------ ------------ ------------ (164) 22 35 678 2,598 1,168 - ------------ ------------ ------------ ------------ ------------ ------------ (57) 109 88 3,926 3,451 1,429 - ------------ ------------ ------------ ------------ ------------ ------------ 895 785 696 10,650 10,331 6,047 (71) (100) (65) (1.739) 1,033 1,274 (10) (10) (4) (145) (71) (38) 1 -- -- 10 3 1 (53) (27) (17) (753) (288) (109) (1) (3) (1) (129) (27) (5) (166) (130) (92) (2,010) (1,524) (784) (1) -- (1) (14) (4) (2) (24) (21) (15) (333) (252) (130) - ------------ ------------ ------------ ------------ ------------ ------------ 570 494 501 5,537 9,201 6,254 - ------------ ------------ ------------ ------------ ------------ ------------ 513 603 589 9,463 12,652 7,683 1,998 1,395 806 24,199 11,547 3,864 - ------------ ------------ ------------ ------------ ------------ ------------ $ 2,511 $ 1,998 $ 1,395 $ 33,662 $ 24,199 $ 11,547 ============ ============ ============ ============ ============ ============ 150,285.794 112,611.941 70,401.445 1,169,049.817 691,973.875 282,045.753 191,652.487 150,285.794 112,611.941 1,409,556.585 1,169,049.817 691,973.875 $ 13.128436 $ 13.418177 $ 12.597066 $ 23.505531 $ 20.529605 $ 16.669506 13.108403 $ 13.290543 $ -- $ 23.912286 $ 20.717931 $ --
[WIDE TABLE CONTINUED FROM ABOVE]
PUTNAM VT NEW OPPORTUNITIES FUND -------------------------------------------- 1998 1997 1996 ------------ ------------- ------------ $ -- $ -- $ -- 353 -- -- (175) (92) (44) ------------ ------------- ------------ 178 (92) (44) ------------ ------------- ------------ 416 239 99 5,506 3,361 (86) ------------ ------------- ------------ 5,922 3,600 13 ------------ ------------- ------------ 6,100 3,508 (31) ------------ ------------- ------------ 11,786 11,656 8,025 (1,903) (862) 1,664 (121) (100) (8) 4 1 -- (683) (271) (64) (44) (8) -- (2,195) (1,770) (804) (5) -- -- (412) (343) (154) ------------ ------------- ------------ 6,427 8,303 8,659 ------------ ------------- ------------ 12,527 11,811 8,628 21,924 10,113 1,485 ------------ ------------- ------------ $ 34,451 $ 21,924 $ 10,113 ============ ============= ============ 1,197,940.702 681,263.859 110,223.166 1,513,397.971 1,197,940.702 681,263.859 $ -- $ -- $ -- $ 22.763799 $ 18.301715 $ --
The accompanying notes are an integral part of the financial statements. 69 RELIASTAR SELECT*VARIABLE ACCOUNT COMBINED STATEMENTS OF OPERATIONS AND CHANGES IN POLICYOWNERS' EQUITY, CONTINUED For the years ended December 31, 1998, 1997 and 1996 (In Thousands)
PUTNAM VT UTILITIES GROWTH AND INCOME FUND -------------------------------------------- 1998 1997 1996 ------------ ------------ ------------ Net investment income: Reinvested dividend income .................................... $ 87 $ 61 $ 41 Reinvested capital gains ...................................... 149 84 -- Administrative expenses ....................................... (24) (14) (11) ------------ ------------ ------------ Net investment income (loss) and capital gains .............. 212 131 30 ------------ ------------ ------------ Realized and unrealized gains (losses): Net realized gains (losses) on redemptions of fund shares ..... 149 40 71 Increase (decrease) in unrealized appreciation of investments . 100 338 83 ------------ ------------ ------------ Net realized and unrealized gains (losses) .................. 249 378 154 ------------ ------------ ------------ Additions (reductions) from operations ...................... 461 509 184 ------------ ------------ ------------ Policy Owners' transactions: Net premium payments .......................................... 1,035 903 663 Transfers from (to) fixed account ............................. 108 50 (104) Policy loans .................................................. (34) (17) (36) Loan collateral interest crediting ............................ 2 1 1 Surrenders .................................................... (96) (24) (35) Death benefits ................................................ (4) (3) (4) Cost of insurance charges ..................................... (237) (168) (117) Death benefit guarantee charges ............................... (3) (1) (1) Monthly expense charges ....................................... (37) (26) (19) ------------ ------------ ------------ Additions (reductions) for policy owners' transactions ...... 734 715 348 ------------ ------------ ------------ Net additions (reductions) for the year ..................... 1,195 1,224 532 Policy Owners' Equity, beginning of the year ................... 2,771 1,547 1,015 ------------ ------------ ------------ Policy Owners' Equity, end of the year ......................... $ 3,966 $ 2,771 $ 1,547 ============ ============ ============ Units Outstanding, beginning of the year ....................... 152,514.030 107,970.108 81,748.531 Units Outstanding, end of the year ............................. 190,123.952 152,514.030 107,970.108 Net Asset Value per Unit: Select*Life I ................................................. $ 20.947449 $ 18.375382 $ 14.583970 Select*Life Series 2000 ....................................... $ 20.861089 $ 18.153329 $ --
The accompanying notes are an integral part of the financial statements. 70 COMBINED STATEMENTS OF OPERATIONS AND CHANGES IN POLICYOWNERS' EQUITY, CONTINUED
PUTNAM VT VOYAGER FUND - -------------------------------------------- 1998 1997 1996 - ------------- ------------ ------------ $ 144 $ 68 $ 48 3,517 1,472 811 (470) (284) (171) - ------------- ------------ ------------ 3,191 1,256 688 - ------------- ------------ ------------ 915 218 169 10,198 7,940 921 - ------------- ------------ ------------ 11,113 8,158 1,090 - ------------- ------------ ------------ 14,304 9,414 1,778 - ------------- ------------ ------------ 22,816 20,897 16,198 (1,602) 169 2,466 (428) (263) (187) 27 16 6 (2,127) (969) (395) (170) (40) (6) (4,567) (3,626) (2,268) (27) (12) (8) (839) (683) (430) - ------------- ------------ ------------ 13,083 15,489 15,376 - ------------- ------------ ------------ 27,387 24,903 17,154 53,267 28,364 11,210 - ------------- ------------ ------------ $ 80,654 $ 53,267 $ 28,364 ============= ============ ============ 2,601,649.957 1,750,710.230 781,013.273 3,169,909.581 2,601,649.957 1,750,710.230 $ 25.423734 $ 20.608071 $ 16.420248 $ 25.445248 $ 20.460670 $ --
The accompanying notes are an integral part of the financial statements. 71 RELIASTAR SELECT*LIFE VARIABLE ACCOUNT NOTES TO FINANCIAL STATEMENTS 1. ORGANIZATION: ReliaStar Select*Life Variable Account (the "Account") is a separate account of ReliaStar Life Insurance Company ("ReliaStar Life"), a wholly owned subsidiary of ReliaStar Financial Corp. The Account is registered as a unit investment trust under the Investment Company Act of 1940. Payments received under the polices are allocated to sub-accounts of the Account, each of which is invested in one of the following funds during the year:
THE ALGER AMERICAN FUND FIDELITY VIP FIDELITY VIP II - ----------------------------------- ------------------------- -------------------------------- Growth Portfolio Equity-Income Portfolio Asset Manager Portfolio MidCap Growth Portfolio Growth Portfolio Contrafund Portfolio Small Capitalization Portfolio High Income Portfolio Index 500 Portfolio Money Market Portfolio Investment Grade Bond Portfolio Overseas Portfolio JANUS ASPEN SERIES NEUBERGER&BERMAN ADVISERS MANAGEMENT TRUST - ----------------------------------- ------------------------------------------- Aggressive Growth Portfolio Limited Maturity Bond Portfolio Growth Portfolio Partners Portfolio International Growth Portfolio Worldwide Growth Portfolio NORTHSTAR GALAXY TRUST OCC ACCUMULATION TRUST PUTNAM VARIABLE TRUST - ---------------------------------- ------------------------- ----------------------------------- Growth + Value Fund Portfolio Equity Portfolio Putnam VT Asia Pacific Growth Fund High Yield Bond Portfolio Global Equity Portfolio Putnam VT Diversified Income Fund Emerging Growth Portfolio Managed Portfolio Putnam VT Growth and Income Fund International Value Portfolio Small Capitalization Putnam VT New Opportunities Fund Multi-Sector Bond Portfolio Portfolio Putnam VT Utilities Growth and Income Fund Putnam VT Voyager Fund
Fred Alger Management, Inc. is the investment adviser for the three portfolios of The Alger American Fund and is paid fees for its services by The Alger American Funds Portfolios. Fidelity Management & Research Company is the investment adviser for Fidelity Variable Insurance Products Fund (VIP) and Variable Insurance Products Fund II (VIP II) and is paid for its services by the VIP and VIP II Portfolios. Janus Capital Corporation is the investment adviser for the four portfolios of Janus Aspen Series and is paid fees for its services by the Janus Aspen Series Portfolios. Neuberger&Berman Management is the investment adviser for the two portfolios of the Advisers Management Trust and is paid fees for its services by the Neuberger&Berman Advisers Management Trust Funds. Northstar Investment Management Corporation, an affiliate of ReliaStar Life, is the investment adviser for the five Northstar Galaxy Trust Portfolios and is paid fees for its services by the Portfolios. OpCap Advisors is the investment adviser for the four Portfolios of the OCC Accumulation Trust and is paid fees for its services by the OCC Accumulation Trust Funds. Putnam Investment Management, Inc. is the investment adviser for Putnam Variable Trust and is paid fees for its services by Putnam Variable Trust. See the related funds' prospectuses for further information. On May 3, 1993, ReliaStar Life added the sub-accounts investing in shares of Index 500 Portfolio. On January 1, 1994, sub-accounts investing in Putnam VT Diversified Income Fund, Putnam VT Growth and Income Fund, Putnam VT Utilities Growth and Income Fund and Putnam VT Voyager Fund were made available through the Select*Life Series 2000 policies and on May 2, 1994, sub-accounts investing in Putnam Variable Trust were made available to Select*Life I policies. On December 30, 1994, sub-accounts investing in the Northstar Galaxy Trust Portfolios were made available to Select*Life Series 2000 policies. On April 30, 1995, sub-accounts investing in the VIP II Contrafund Portfolio, Putnam VT Asia Pacific Growth Fund and Putnam VT New Opportunities Fund were made available to Select*Life Series 2000 policies. 72 RELIASTAR SELECT*LIFE VARIABLE ACCOUNT NOTES TO FINANCIAL STATEMENTS (CONTINUED) 1. ORGANIZATION, CONTINUED: On August 8, 1997, sub-accounts investing in Northstar Galaxy Trust Growth + Value Portfolio, Northstar Galaxy Trust High Yield Bond Portfolio, Northstar Galaxy Trust International Value Portfolio, Alger American, Janus Aspen Series, OCC Accumulation Trust, and Neuberger&Berman Management Trust were made available to Select*Life policies. On July 29, 1998, Northstar Variable Trust Portfolio changed its name to Northstar Galaxy Trust Portfolio (GT). Also on July 29, 1998, the Northstar Variable Trust Growth Portfolio changed its name to Northstar Galaxy Trust Growth + Value Portfolio. On November 9, 1998, Northstar Galaxy Trust Income and Growth Portfolio changed its name to Northstar Galaxy Trust Emerging Growth Portfolio. 2. SIGNIFICANT ACCOUNTING POLICIES: SECURITIES VALUATION TRANSACTIONS AND RELATED INVESTMENT INCOME: The market value of investments in the sub-accounts is based on the closing net asset values of the fund shares held at the end of the year. Investment transactions are accounted for on the trade date (date the order to purchase or redeem is executed) and dividend income and capital gain distributions are recorded on the ex-dividend date. Net realized gains and losses on redemptions of shares of the funds are determined on the basis of specific identification of fund share costs. 3. FEDERAL INCOME TAXES: Under current tax law, the income, gains, and losses from the separate account investments are not taxable to either the Account or ReliaStar Life. 4. POLICY CHARGES: Certain charges are made by ReliaStar Life to Policy Owners' Variable Accumulation Values in the Account in accordance with the terms of the policies. These charges may include: cost of insurance, computed as set forth in the policies; a monthly expense charge as set forth in the policies: death benefit guarantee charge; optional insurance benefit charges based upon the policy terms for optional benefits; and surrender charges and sales charge refunds, as set forth in the policies. 73 RELIASTAR SELECT*LIFE VARIABLE ACCOUNT NOTES TO FINANCIAL STATEMENTS (CONTINUED) 5. INVESTMENTS: For the year ended December 31, 1998, investment activity in the funds was as follows (in thousands):
COST OF PROCEEDS INVESTING FUND PURCHASES FROM SALES - ----------------------------------------------------------- ----------- ----------- The Alger American Fund: Alger American Growth Portfolio .................... $ 7,063 $ 2,374 Alger American MidCap Growth Portfolio ............. 7,361 5,711 Alger American Small Capitalization ................ 7,351 5,457 Fidelity's VIP and VIP II: Equity-Income Portfolio ............................ 16,847 6,047 Growth Portfolio ................................... 28,954 9,428 High Income Portfolio .............................. 11,682 7,318 Money Market Portfolio ............................. 51,397 48,927 Overseas Portfolio ................................. 10,913 8,935 Asset Manager Portfolio ............................ 7,340 2,197 Contrafund Portfolio ............................... 16,538 2,335 Index 500 Portfolio ................................ 24,771 7,382 Investment Grade Bond Portfolio .................... 3,908 2,980 Janus Aspen Series: Aggressive Growth Portfolio ........................ 3,903 2,961 Growth Portfolio ................................... 4,263 711 International Growth Portfolio ..................... 7,833 5,581 Worldwide Growth Portfolio ......................... 14,821 3,868 Neuberger&Berman Advisers Management Trust: Limited Maturity Bond Portfolio .................... 1,801 901 Partners Portfolio ................................. 9,517 1,147 Northstar Galaxy Trust: Northstar Growth + Value Portfolio ................. 1,172 268 Northstar High Yield Bond Portfolio ................ 1,208 705 Northstar Emerging Growth Portfolio ................ 1,003 111 Northstar International Value Portfolio ............ 6,442 5,295 Northstar Multi-Sector Bond Portfolio .............. 1,501 615 OCC Accumulation Trust: Equity Portfolio ................................... 1,141 90 Global Equity Portfolio ............................ 965 553 Managed Portfolio .................................. 4,947 650 Small Cap Portfolio ................................ 1,825 114 Putnam Variable Trust: Putnam VT Asia Pacific Growth Fund ................. 4,858 4,109 Putnam VT Diversified Income Fund .................. 955 277 Putnam VT Growth and Income Fund ................... 10,546 1,759 Putnam VT New Opportunities Fund ................... 10,410 3,810 Putnam VT Utilities Growth and Income Fund ......... 2,136 1,186 Putnam VT Voyager Fund ............................. 20,487 4,208 -------- -------- Total .............................................. $305,859 $148,010 ======== ========
74 INDEPENDENT AUDITORS' REPORT Board of Directors and Shareholder ReliaStar Life Insurance Company (A Wholly Owned Subsidiary of ReliaStar Financial Corp.) Minneapolis, Minnesota We have audited the accompanying consolidated balance sheets of ReliaStar Life Insurance Company and Subsidiaries (the Company) as of December 31, 1998 and 1997, and the related statements of income, shareholder's equity, and cash flows for each of the two years in the period ended December 31, 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of ReliaStar Life Insurance Company and Subsidiaries as of December 31, 1998 and 1997 and the results of their operations and their cash flows for each of the two years in the period ended December 31, 1998 in conformity with generally accepted accounting principles. DELOITTE & TOUCHE LLP Minneapolis, Minnesota February 4, 1999 75 RELIASTAR LIFE INSURANCE COMPANY AND SUBSIDIARIES (A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.) CONSOLIDATED BALANCE SHEETS (IN MILLIONS)
DECEMBER 31 ------------------------------- 1998 1997 -------------- -------------- ASSETS Fixed Maturity Securities (Amortized Cost: 1998, $11,106.5; 1997, $10,655.9) .......................................... $ 11,609.9 $ 11,146.7 Equity Securities (Cost: 1998, $48.1; 1997, $21.2) ......... 49.1 23.0 Mortgage Loans on Real Estate .............................. 2,154.8 2,270.7 Real Estate and Leases ..................................... 53.3 74.5 Policy Loans ............................................... 702.3 663.3 Other Invested Assets ...................................... 113.5 81.3 Short-Term Investments ..................................... 116.0 130.3 ----------- ----------- Total Investments ......................................... 14,798.9 14,389.8 Cash ....................................................... -- 23.5 Accounts and Notes Receivable .............................. 245.1 176.7 Reinsurance Receivable ..................................... 417.7 324.4 Deferred Policy Acquisition Costs .......................... 1,215.5 1,091.9 Present Value of Future Profits ............................ 422.5 480.0 Property and Equipment, Net ................................ 110.0 106.3 Accrued Investment Income .................................. 195.8 200.6 Other Assets ............................................... 272.0 552.3 Participation Fund Account Assets .......................... 311.6 316.6 Assets Held in Separate Accounts ........................... 4,310.6 3,149.3 ----------- ----------- Total Assets .............................................. $ 22,299.7 $ 20,811.4 =========== =========== LIABILITIES Future Policy and Contract Benefits ........................ $ 13,519.8 $ 13,329.4 Pending Policy Claims ...................................... 431.8 338.2 Other Policyholder Funds ................................... 304.6 286.5 Notes and Mortgages Payable -- Unaffiliated ................ 8.2 252.7 Note Payable -- Parent ..................................... 100.0 100.0 Income Taxes ............................................... 225.4 205.2 Other Liabilities .......................................... 529.8 463.0 Participation Fund Account Liabilities ..................... 311.6 316.6 Liabilities Related to Separate Accounts ................... 4,305.1 3,143.8 ----------- ----------- Total Liabilities ......................................... 19,736.3 18,435.4 ----------- ----------- SHAREHOLDER'S EQUITY Common Stock (Shares Issued: 2.0) .......................... 2.5 2.5 Additional Paid-In Capital ................................. 1,057.4 1,057.4 Accumulated Other Comprehensive Income ..................... 260.8 226.1 Retained Earnings .......................................... 1,242.7 1,090.0 ----------- ----------- Total Shareholder's Equity ................................ 2,563.4 2,376.0 ----------- ----------- Total Liabilities and Shareholder's Equity ............... $ 22,299.7 $ 20,811.4 =========== ===========
The accompanying notes are an integral part of the consolidated financial statements. 76 RELIASTAR LIFE INSURANCE COMPANY AND SUBSIDIARIES (A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.) CONSOLIDATED STATEMENTS OF INCOME (IN MILLIONS)
YEAR ENDED DECEMBER 31 ---------------------------- 1998 1997 ------------- ------------ REVENUES Premiums ....................................................... $ 1,007.9 $ 884.3 Net Investment Income .......................................... 1,109.8 1,003.7 Realized Investment Gains, Net ................................. 17.3 11.7 Policy and Contract Charges .................................... 427.6 332.9 Other Income ................................................... 73.7 75.1 ---------- --------- Total ......................................................... 2,636.3 2,307.7 ---------- --------- BENEFITS AND EXPENSES Benefits to Policyholders ...................................... 1,549.4 1,375.8 Sales and Operating Expenses ................................... 473.9 408.6 Amortization of Deferred Policy Acquisition Costs and Present Value of Future Profits ............................... 192.4 146.1 Interest Expense ............................................... 6.9 7.1 Dividends and Experience Refunds to Policyholders .............. 29.4 24.8 ---------- --------- Total ......................................................... 2,252.0 1,962.4 ---------- --------- Income from Continuing Operations Before Income Taxes .......... 384.3 345.3 Income Tax Expense ............................................. 136.4 122.0 ---------- --------- Income from Continuing Operations .............................. 247.9 223.3 Income (Loss) from Discontinued Operations, Net of Tax ......... (7.2) 3.2 ---------- --------- Net Income .................................................... $ 240.7 226.5 ========== =========
The accompanying notes are an integral part of the consolidated financial statements. 77 RELIASTAR LIFE INSURANCE COMPANY AND SUBSIDIARIES (A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.) CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY (IN MILLIONS)
YEAR ENDED DECEMBER 31 ------------------------------------------------------------ 1998 1997 ----------------------------- ---------------------------- TOTAL COMPREHENSIVE TOTAL COMPREHENSIVE EQUITY INCOME EQUITY INCOME ----------- --------------- ----------- -------------- COMMON STOCK Beginning and End of Year ................ $ 2.5 $ 2.5 --------- ------- --------- ------- ADDITIONAL PAID-IN CAPITAL Beginning of Year ........................ 1,057.4 538.9 Capital Contribution from Parent ......... -- 518.5 --------- ------- --------- ------- End of Year ............................. 1,057.4 1,057.4 --------- ------- --------- ------- ACCUMULATED OTHER COMPREHENSIVE INCOME Beginning of Year ........................ 226.1 140.8 Change for the Year ...................... 34.7 $ 34.7 85.3 $ 85.3 --------- ------- --------- ------- End of Year ............................. 260.8 226.1 --------- ------- --------- ------- RETAINED EARNINGS Beginning of Year ........................ 1,090.0 925.3 Net Income ............................... 240.7 240.7 226.5 226.5 Dividends to Shareholder ................. (88.0) (61.8) --------- ------- --------- ------- End of Year ............................. 1,242.7 1,090.0 --------- ------- --------- ------- Comprehensive Income ..................... $ 275.4 $ 311.8 ======= ======= Total Shareholder's Equity ............... $ 2,563.4 $ 2,376.0 ========= =========
The accompanying notes are an integral part of the consolidated financial statements. 78 RELIASTAR LIFE INSURANCE COMPANY AND SUBSIDIARIES (A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.) CONSOLIDATED STATEMENTS OF CASH FLOWS (IN MILLIONS)
YEAR ENDED DECEMBER 31 ----------------------- 1998 1997 --------- --------- OPERATING ACTIVITIES Net Income ....................................................... $ 240.7 $ 226.5 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities Interest Credited to Insurance Contracts ....................... 586.8 548.9 Future Policy Benefits ......................................... (685.6) (396.9) Capitalization of Policy Acquisition Costs ..................... (258.7) (212.7) Amortization of Deferred Policy Acquisition Costs and Present Value of Future Profits ............................... 192.4 146.1 Deferred Income Taxes .......................................... 15.5 8.1 Net Change in Receivables and Payables ......................... 14.0 30.1 Other Assets ................................................... 295.4 (94.8) Realized Investment Gains, Net ................................. (17.3) (11.7) Other .......................................................... (20.9) 1.8 --------- --------- Net Cash Provided by Operating Activities ...................... 362.3 245.4 --------- --------- INVESTING ACTIVITIES Proceeds from Sales of Fixed Maturity Securities ................. 535.8 474.0 Proceeds from Maturities or Repayment of Fixed Maturity Securities 1,096.6 910.7 Cost of Fixed Maturity Securities Acquired ....................... (2,062.9) (1,431.6) Sales (Purchases) of Equity Securities, Net ...................... (27.4) 15.9 Proceeds of Mortgage Loans Sold, Matured or Repaid ............... 654.4 350.4 Cost of Mortgage Loans Acquired .................................. (539.9) (649.4) Sales of Real Estate and Leases, Net ............................. 23.7 14.1 Policy Loans Issued, Net ......................................... (39.0) (41.5) Sales (Purchases) of Other Invested Assets, Net .................. 7.1 (10.1) Sales (Purchases) of Short-Term Investments, Net ................. 14.3 (31.0) Cash Acquired from Contribution of Security -- Connecticut ....... -- 10.8 --------- --------- Net Cash Used by Investing Activities ........................... (337.3) (387.7) --------- --------- FINANCING ACTIVITIES Deposits to Insurance Contracts .................................. 1,634.9 1,429.3 Maturities and Withdrawals from Insurance Contracts .............. (1,350.9) (1,299.5) Increase in Notes and Mortgages Payable .......................... 24.0 82.1 Repayment of Notes and Mortgages Payable ......................... (268.5) (.2) Dividends to Shareholder ......................................... (88.0) (61.8) --------- --------- Net Cash Provided (Used) by Financing Activities ................ (48.5) 149.9 --------- --------- Increase (Decrease) in Cash ...................................... (23.5) 7.6 Cash at Beginning of Year ........................................ 23.5 15.9 --------- --------- Cash at End of Year .............................................. $ -- $ 23.5 ========= =========
The accompanying notes are an integral part of the consolidated financial statements. 79 RELIASTAR LIFE INSURANCE COMPANY AND SUBSIDIARIES (A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. CHANGES IN ACCOUNTING PRINCIPLES ACCOUNTING FOR TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND EXTINGUISHMENTS OF LIABILITIES Effective for transactions occurring on or after January 1, 1998, ReliaStar Life Insurance Company (ReliaStar Life or the Company) adopted those provisions of Statement of Financial Accounting Standards (SFAS) No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities," which were deferred by SFAS No. 127, "Deferral of the Effective Date of Certain Provisions of FASB Statement No. 125." Effective for transactions occurring on or after January 1, 1997, the Company adopted those provisions of SFAS No. 125 which were not deferred by SFAS No. 127. SFAS No. 125 requires a company to recognize the financial and servicing assets it controls and the liabilities it has incurred and to derecognize financial assets when control has been surrendered in accordance with the criteria provided in SFAS No. 125. The adoption of this standard had no effect on the financial results of the Company. REPORTING COMPREHENSIVE INCOME Effective January 1, 1998, the Company adopted SFAS No. 130, "Reporting Comprehensive Income." SFAS No. 130 establishes standards for the reporting and display of comprehensive income and its components in a company's full set of financial statements. Comprehensive income encompasses all changes in shareholder's equity from transactions and other events and circumstances from nonowner sources. Adoption of this standard had no effect on the financial results of the Company. EMPLOYERS' DISCLOSURES ABOUT PENSIONS AND OTHER POSTRETIREMENT BENEFITS Effective December 31, 1998, the Company adopted SFAS No. 132, "Employers' Disclosures about Pensions and Other Postretirement Benefits." SFAS No. 132 requires new disclosures relating to a company's pension and other postretirement benefit plans. Adoption of this standard had no effect on the financial results of the Company. ACCOUNTING FOR THE COSTS OF COMPUTER SOFTWARE DEVELOPED OR OBTAINED FOR INTERNAL USE Effective January 1, 1998, the Company adopted Statement of Position (SOP) No. 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use." SOP No. 98-1 provides guidance on accounting for costs associated with computer software developed or obtained for internal use. Adoption of this standard did not have a significant effect on the financial results of the Company. NOTE 2. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES NATURE OF OPERATIONS The Company is principally engaged in the business of providing life insurance and related financial services products. The Company provides and distributes individual life insurance and annuities; employee benefit products and services; life and health reinsurance and retirement plans. The Company operates primarily in the United States and, through its subsidiaries, is authorized to conduct business in all 50 states. PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of ReliaStar Life and its subsidiaries and exclude the effects of all material intercompany transactions. ReliaStar Life is a wholly owned subsidiary of ReliaStar Financial Corp. (ReliaStar). ReliaStar Life's principal subsidiaries are Northern Life Insurance Company (Northern), Security-Connecticut Life Insurance Company (Security-Connecticut), ReliaStar Life Insurance Company of New York (RLNY) and ReliaStar Reinsurance Group (UK), Ltd. Effective December 31, 1998, ReliaStar United Services Life Insurance Company, an affiliate, merged with and into ReliaStar Life. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and 80 RELIASTAR LIFE INSURANCE COMPANY AND SUBSIDIARIES (A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 2. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. INVESTMENTS Fixed maturity securities (bonds and redeemable preferred stocks) are classified as available-for-sale and are carried at fair value. Equity securities (common stocks and nonredeemable preferred stocks) are carried at fair value. Mortgage loans on real estate are carried at amortized cost less an impairment allowance for estimated uncollectible amounts. Investment real estate owned directly by the Company is carried at cost less accumulated depreciation and allowances for estimated losses. Investments in real estate joint ventures are accounted for using the equity method. Real estate acquired through foreclosure is carried at the lower of fair value less estimated costs to sell or cost. Short-term investments are carried at amortized cost, which approximates fair value. Unrealized investment gains and losses of equity securities and fixed maturity securities, net of related deferred policy acquisition costs (DAC), present value of future profits (PVFP) and tax effects, are accounted for as a direct increase or decrease to the accumulated other comprehensive income component of shareholder's equity. Realized investment gains and losses enter into the determination of net income. Realized investment gains and losses on sales of securities are determined on the specific identification method. Write-offs of investments that decline in value below cost on other than a temporary basis and the change in the allowance for mortgage loans and wholly owned real estate are included with realized investment gains and losses in the Consolidated Statements of Income. The Company records write-offs or allowances for its investments based upon an evaluation of specific problem investments. The Company periodically reviews all invested assets (including marketable bonds, private placements, mortgage loans and real estate investments) to identify investments where the Company has credit concerns. Investments with credit concerns include those the Company has identified as problem investments, which are issues delinquent in a required payment of principal or interest, issues in bankruptcy or foreclosure and restructured or foreclosed assets. The Company also identifies investments as potential problem investments, which are investments where the Company has serious doubts as to the ability of the borrowers to comply with the present loan repayment terms. PROPERTY AND EQUIPMENT Property and equipment are carried at cost, net of accumulated depreciation of $100.5 million and $97.5 million at December 31, 1998 and 1997, respectively. The Company provides for depreciation of property and equipment using straight-line and accelerated methods over the estimated useful lives of the assets. Buildings are generally depreciated over 35 to 50 years. Depreciation expense for the years ending December 31, 1998 and 1997 totaled $6.0 million and $5.3 million, respectively. PARTICIPATION FUND ACCOUNT On January 3, 1989, the Commissioner of Commerce of the State of Minnesota approved a Plan of Conversion and Reorganization (the Plan) which provided, among other things, for the conversion of ReliaStar Life from a combined stock and mutual life insurance company to a stock life insurance company. The Plan provided for the establishment of a Participation Fund Account (PFA) for the benefit of certain participating individual life insurance policies and annuities issued by ReliaStar Life prior to the 81 RELIASTAR LIFE INSURANCE COMPANY AND SUBSIDIARIES (A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 2. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) effective date of the Plan. Under the terms of the PFA, the insurance liabilities and assets with respect to such policies are segregated in the accounting records of ReliaStar Life to assure the continuation of policyholder dividend practices. Assets and liabilities of the PFA are presented in accordance with statutory accounting practices. Earnings derived from the operation of the PFA will inure solely to the benefit of the policies covered by the PFA and no benefit will inure to the Company. Accordingly, results of operations for the PFA are excluded from the Company's Consolidated Statements of Income. In the event that the assets of the PFA are insufficient to provide the contractual benefits guaranteed by the affected policies, ReliaStar Life must provide such contractual benefits from its general assets. SEPARATE ACCOUNTS The Company operates separate accounts. The assets and liabilities of the separate accounts are primarily related to variable annuity, variable life and 401(k) contracts and represents policyholder directed funds that are separately administered. The assets (principally investments) and liabilities (principally to contractholders) of each account are clearly identifiable and distinguishable from other assets and liabilities of the Company. Assets are carried at fair value. Revenues from these separate account contracts consist primarily of charges for mortality risk and expenses, cost of insurance, contract administration and surrender charges. Revenue for these products is recognized when due. PREMIUM REVENUE AND BENEFITS TO POLICYHOLDERS RECOGNITION OF TRADITIONAL LIFE, GROUP AND ANNUITY PREMIUM REVENUE AND BENEFITS TO POLICYHOLDERS -- Traditional life insurance products include those products with fixed and guaranteed premiums and benefits and consist principally of term and whole life insurance policies and certain annuities with life contingencies (immediate annuities). Life insurance premiums and immediate annuity premiums are recognized as premium revenue when due. Group insurance premiums are recognized as premium revenue over the time period to which the premiums relate. Benefits and expenses are associated with earned premiums so as to result in recognition of profits over the life of the contracts. This association is accomplished by means of the provision for liabilities for future policy benefits and the amortization of DAC and PVFP. RECOGNITION OF UNIVERSAL LIFE-TYPE CONTRACT REVENUE AND BENEFITS TO POLICYHOLDERS -- Universal life-type policies are insurance contracts with terms that are not fixed and guaranteed. The terms that may be changed could include one or more of the amounts assessed the policyholder, premiums paid by the policyholder or interest accrued to policyholder balances. Amounts received as deposits to such contracts are not reported as premium revenues. Revenues for universal life-type policies consist of charges assessed against policy account values for deferred policy loading and the cost of insurance and policy administration. Policy benefits and claims that are charged to expense include interest credited to contracts and benefit claims incurred in the period in excess of related policy account balances. RECOGNITION OF INVESTMENT CONTRACT REVENUE AND BENEFITS TO POLICYHOLDERS -- Contracts that do not subject the Company to risks arising from policyholder mortality or morbidity are referred to as investment contracts. Guaranteed Investment Contracts (GICs) and certain deferred annuities are considered investment contracts. Amounts received as deposits for such contracts are not reported as premium revenues. Revenues for investment products consist of investment income and charges assessed against contract account values for policy administration. Contract benefits that are charged to expense include benefit claims incurred in the period in excess of related contract balances, and interest credited to contract balances. 82 RELIASTAR LIFE INSURANCE COMPANY AND SUBSIDIARIES (A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 2. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) POLICY ACQUISITION COSTS Those costs of acquiring new business, which vary with and are primarily related to the production of new business, have been deferred to the extent that such costs are deemed recoverable. Such costs include commissions, certain costs of policy issuance and underwriting and certain variable agency expenses. Costs deferred related to traditional life insurance products are amortized over the premium paying period of the related policies, in proportion to the ratio of annual premium revenues to total anticipated premium revenues. Such anticipated premium revenues are estimated using the same assumptions used for computing liabilities for future policy benefits. Costs deferred related to universal life-type policies and investment contracts are amortized over the lives of the policies, in relation to the present value of estimated gross profits from mortality, investment, surrender and expense margins. PRESENT VALUE OF FUTURE PROFITS The present value of future profits reflects the estimated fair value of acquired insurance business in force and represents the portion of the acquisition cost that was allocated to the value of future cash flows from insurance contracts existing at the date of acquisition. Such value is the present value of the actuarially determined projected net cash flows from the acquired insurance contracts. An analysis of the PVFP asset account is presented below:
YEAR ENDED DECEMBER 31 ------------------------- 1998 1997 ----------- ----------- (IN MILLIONS) Balance, Beginning of Year ................................... $ 480.0 $ 220.2 Acquisition .................................................. (7.3) 323.6 Imputed Interest ............................................. 31.0 25.5 Amortization ................................................. (90.1) (66.0) Impact of Net Unrealized Investment Gains and Losses ......... 8.9 (23.3) -------- -------- Balance, End of Year ......................................... $ 422.5 $ 480.0 ======== ========
Based on current conditions and assumptions as to future events on acquired policies in force, the Company expects that the net amortization of the December 31, 1998 PVFP balance will be between 6% and 9% in each of the years 1999 through 2003. The interest rates used to determine the amount of imputed interest on the unamortized PVFP balance ranged from 5% to 8%. GOODWILL Goodwill is the excess of the amount paid to acquire a company over the fair value of the net assets acquired and is amortized on a straight-line basis over 40 years. The carrying value of goodwill is monitored for indicators of impairment of value. No events or circumstances were identified which warrant consideration of impairment or a revised estimate of useful lives. FUTURE POLICY AND CONTRACT BENEFITS Liabilities for future policy benefits for traditional life insurance contracts are calculated using the net level premium method and assumptions as to investment yields, mortality, withdrawals and dividends. The assumptions are based on projections of past experience and include provisions for possible unfavorable deviation. These assumptions are made at the time the contract is issued or, for purchased contracts, at the date of acquisition. Liabilities for future policy and contract benefits on universal life-type and investment contracts are based on the policy account balance. 83 RELIASTAR LIFE INSURANCE COMPANY AND SUBSIDIARIES (A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 2. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) The liabilities for future policy and contract benefits for group disabled life reserves and long-term disability reserves are based upon interest rate assumptions and morbidity and termination rates from published tables, modified for Company experience. INCOME TAXES The provision for income taxes includes amounts currently payable and deferred income taxes resulting from the cumulative temporary differences in the assets and liabilities determined on a tax return and financial statement basis. The Company files a consolidated tax return with certain of its affiliates. The method by which the total consolidated federal income tax for each entity is allocated to each of the companies is subject to a written agreement approved by the Company's Board of Directors. Allocation is based upon a separate return calculation such that each company in the consolidated return pays the same tax or receives the same refunds it would have paid or received had it consistently filed separate federal income tax returns. Intercompany tax balances are settled within a reasonable time after filing of the consolidated federal income tax returns with the Internal Revenue Service. INTEREST RATE SWAP AGREEMENTS Interest rate swap agreements are used as hedges for asset/liability management of adjustable rate and short-term invested assets. The Company does not enter into any interest rate swap agreements for trading purposes. The interest rate swap transactions involve the exchange of fixed and floating rate interest payments without the exchange of underlying principal amounts and do not contain other optional provisions. The Company utilizes the settlement method of accounting for its interest rate swap agreements whereby the difference between amounts paid and amounts received or accrued on interest rate swap agreements is reflected in net investment income. The characteristics (notional amount, maturity and payment dates) of the interest rate swap agreements are similar to the characteristics of the designated hedged assets. Interest rate swaps are carried at fair value, and changes in fair value are recorded as a direct increase or decrease in the accumulated other comprehensive income component of shareholder's equity. In the event an interest rate swap agreement would cease to qualify for hedge accounting, changes in fair value of the affected swap would be recorded as income or expense. There were no terminations of interest rate swap agreements during 1998 or 1997. EQUITY INDEX CALL OPTIONS Equity index call options are tied to the performance of the S&P 500 Index and are used as hedges for asset/liability management related to equity-indexed annuity products. The Company does not purchase options for trading purposes. The notional amounts and other characteristics of the options correspond to the characteristics of the policyholder obligations related to deposits received for equity-indexed annuities. The change in the fair value of the call options approximates the change in the corresponding equity-indexed annuity account value. The call options are carried at fair value, and changes in fair value are recorded as income or expense, consistent with the hedged item. RECLASSIFICATIONS Certain prior year amounts have been reclassified to conform to current year presentation. NOTE 3. ACQUISITION On July 1, 1997, ReliaStar completed the acquisition of Security-Connecticut Corporation, which was a holding company with two primary subsidiaries: Security-Connecticut of Avon, Connecticut and Lincoln Security Life Insurance Company (Lincoln Security) of Brewster, New York. Concurrent with the acquisition, ReliaStar contributed all of the capital stock of Security-Connecticut and Lincoln Security to ReliaStar Life. 84 RELIASTAR LIFE INSURANCE COMPANY AND SUBSIDIARIES (A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 3. ACQUISITION (CONTINUED) The acquisition was accounted for using the purchase method of accounting. Therefore, the consolidated financial statements include the accounts of Security-Connecticut and Lincoln Security since the date of acquisition. Goodwill of approximately $150 million was recorded. NOTE 4. INVESTMENTS Investment income summarized by type of investment was as follows:
YEAR ENDED DECEMBER 31 ------------------------- 1998 1997 ----------- ----------- (IN MILLIONS) Fixed Maturity Securities ............. $ 866.7 $ 787.9 Equity Securities ..................... 2.1 2.2 Mortgage Loans on Real Estate ......... 181.6 178.9 Real Estate and Leases ................ 21.6 16.1 Policy Loans .......................... 41.8 34.3 Other Invested Assets ................. 12.8 3.6 Short-Term Investments ................ 10.9 6.7 --------- --------- Gross Investment Income .............. 1,137.5 1,029.7 Investment Expenses ................... 27.7 26.0 --------- --------- Net Investment Income ................ $ 1,109.8 $ 1,003.7 ========= =========
Net pretax realized investment gains (losses) were as follows:
YEAR ENDED DECEMBER 31 ------------------ 1998 1997 ------- ------- (IN MILLIONS) Net Gains (Losses) on Sales Fixed Maturity Securities Gross Gains ................... $ 26.3 $ 10.3 Gross Losses .................. (13.2) (6.4) Equity Securities .............. (.6) 5.1 Mortgage Loans ................. (.2) -- Foreclosed Real Estate ......... 2.8 .1 Real Estate .................... 2.1 .6 Other .......................... 15.3 9.8 ------- ------- 32.5 19.5 ------- ------- Provisions for Losses Fixed Maturity Securities ...... (8.4) (3.0) Equity Securities .............. -- (.1) Mortgage Loans ................. -- (2.4) Foreclosed Real Estate ......... (2.2) (1.6) Real Estate .................... (.2) (.7) Other .......................... (4.4) -- ------- ------- (15.2) (7.8) ------- ------- Pretax Realized Investment Gains $ 17.3 $ 11.7 ======= =======
85 RELIASTAR LIFE INSURANCE COMPANY AND SUBSIDIARIES (A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 4. INVESTMENTS (CONTINUED) The amortized cost and fair value of investments in fixed maturity securities by type of investment were as follows:
DECEMBER 31, 1998 ----------------------------------------------------- GROSS UNREALIZED AMORTIZED ----------------------- COST GAINS (LOSSES) FAIR VALUE ------------- ---------- ---------- ------------- (IN MILLIONS) United States Government and Government Agencies and Authorities .................................... $ 103.6 $ 11.5 -- $ 115.1 States, Municipalities and Political Subdivisions ... 49.9 4.1 -- 54.0 Foreign Governments ................................. 88.5 8.9 -- 97.4 Public Utilities .................................... 643.0 56.6 $ (.2) 699.4 Corporate Securities ................................ 7,416.0 378.3 (47.6) 7,746.7 Mortgage-Backed/Structured Finance .................. 2,793.0 99.9 (7.7) 2,885.2 Redeemable Preferred Stock .......................... 12.5 .3 (.7) 12.1 ---------- ------- ------- ---------- Total .............................................. $ 11,106.5 $ 559.6 $ (56.2) $ 11,609.9 ========== ======= ======= ==========
DECEMBER 31, 1997 ---------------------------------------------------- GROSS UNREALIZED AMORTIZED ---------------------- COST GAINS (LOSSES) FAIR VALUE ------------- --------- ---------- ------------- (IN MILLIONS) United States Government and Government Agencies and Authorities .................................... $ 128.8 $ 9.3 $ (.3) $ 137.8 States, Municipalities and Political Subdivisions ... 66.8 4.5 (.3) 71.0 Foreign Governments ................................. 94.8 7.3 (.1) 102.0 Public Utilities .................................... 895.0 61.4 (.9) 955.5 Corporate Securities ................................ 6,911.0 327.2 (14.9) 7,223.3 Mortgage-Backed/Structured Finance .................. 2,554.3 99.8 (2.6) 2,651.5 Redeemable Preferred Stock .......................... 5.2 .4 -- 5.6 ---------- ------- ------- ---------- Total .............................................. $ 10,655.9 $ 509.9 $ (19.1) $ 11,146.7 ========== ======= ======= ==========
The amortized cost and fair value of fixed maturity securities by contractual maturity are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
DECEMBER 31, 1998 DECEMBER 31, 1997 ----------------------------- ----------------------------- AMORTIZED FAIR AMORTIZED FAIR COST VALUE COST VALUE ------------- ------------- ------------- ------------- (IN MILLIONS) Maturing in: One Year or Less .......................... $ 459.5 $ 462.9 $ 199.9 $ 200.9 One to Five Years ......................... 3,554.5 3,709.1 3,651.3 3,789.2 Five to Ten Years ......................... 3,014.9 3,183.2 3,006.4 3,180.7 Ten Years or Later ........................ 1,284.6 1,369.5 1,244.0 1,324.4 Mortgage-Backed/Structured Finance ......... 2,793.0 2,885.2 2,554.3 2,651.5 ---------- ---------- ---------- ---------- Total ..................................... $ 11,106.5 $ 11,609.9 $ 10,655.9 $ 11,146.7 ========== ========== ========== ==========
86 RELIASTAR LIFE INSURANCE COMPANY AND SUBSIDIARIES (A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 4. INVESTMENTS (CONTINUED) The fair values for actively traded marketable bonds are determined based upon the quoted market prices. The fair values for marketable bonds without an active market are obtained through several commercial pricing services which provide the estimated fair values. Fair values of privately placed bonds which are not considered problems are determined using a matrix-based pricing model. The model considers the current level of risk-free interest rates, current corporate spreads, the credit quality of the issuer and cash flow characteristics of the security. Using this data, the model generates estimated market values which the Company considers reflective of the fair value of each privately placed bond. Fair values for privately placed bonds which are considered problems are determined through consideration of factors such as the net worth of borrower, the value of collateral, the capital structure of the borrower, the presence of guarantees and the Company's evaluation of the borrower's ability to compete in their relevant market. At December 31, 1998, the largest industry concentration in the private placement portfolio was consumer products and services, where 18.7% of the portfolio was invested, and the largest industry concentration in the marketable bond portfolio was mortgage-backed/structured finance where 30.8% of the portfolio was invested. At December 31, 1998, the largest geographic concentration of commercial mortgage loans was in the Midwest region of the United States, where approximately 37.4% of the commercial mortgage loan portfolio was invested. At December 31, 1998 and 1997, gross unrealized appreciation of equity securities was $2.2 million and $2.3 million, respectively, and gross unrealized depreciation was $1.2 million and $.5 million, respectively. Invested assets which were nonincome producing (no income received for the 12 months preceding the balance sheet date) were as follows:
DECEMBER 31 --------------------- 1998 1997 --------- --------- (IN MILLIONS) Fixed Maturity Securities ............. $ 3.9 $ 1.5 Mortgage Loans on Real Estate ......... 1.5 1.1 Real Estate and Leases ................ 18.9 21.5 ------ ------ Total ................................ $ 24.3 $ 24.1 ====== ======
Allowances for losses on investments are reflected on the Consolidated Balance Sheets as a reduction of the related assets and were as follows:
DECEMBER 31 ----------------------- 1998 1997 ---------- ---------- (IN MILLIONS) Mortgage Loans ................. $ 10.5 $ 10.5 Foreclosed Real Estate ......... 6.8 9.1 Investment Real Estate ......... 2.2 2.8 Other Invested Assets .......... 6.0 1.7
87 RELIASTAR LIFE INSURANCE COMPANY AND SUBSIDIARIES (A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 4. INVESTMENTS (CONTINUED) At December 31, 1998 and 1997, the total investment in impaired mortgage loans (before allowances for credit losses), the related allowance for credit losses and the average investment related to impaired mortgage loans were as follows:
1998 1997 ---------- ---------- (IN MILLIONS) Impaired Mortgage Loans Total Investment .................... $ 13.0 $ 14.4 Allowance for Credit Losses ......... 10.5 10.5 Average Investment .................. 1.6 1.6
There were no increases or decreases in the allowance for credit losses during 1998. An increase of $2.4 million and a decrease of $3.6 million were recorded in 1997. Interest income recognized on impaired mortgage loans during 1998 and 1997 was $.9 million and $1.3 million, respectively. The Company does not accrue interest income on impaired mortgage loans when the likelihood of collection is doubtful. Cash receipts for interest payments are recognized as income in the period received. Noncash investing activities consisted of $11.3 million of real estate assets acquired through foreclosure during the year ended December 31, 1997. The components of net unrealized investment gains included in the accumulated other comprehensive income component of shareholder's equity are shown below:
DECEMBER 31 ------------------------- 1998 1997 ----------- ----------- (IN MILLIONS) Unrealized Investment Gains ......... $ 529.8 $ 489.0 DAC/PVFP Adjustment ................. (128.6) (138.8) Deferred Income Taxes ............... (140.4) (124.1) -------- -------- Total .............................. $ 260.8 $ 226.1 ======== ========
The change in accumulated other comprehensive income consisted of the following:
YEAR ENDED DECEMBER 31 ------------------------ 1998 1997 ---------- ----------- (IN MILLIONS) Unrealized Investment Gains (Losses) Arising During The Period(1) ..... $ 36.7 $ 119.8 Reclassification Adjustments(2) ....................................... (8.7) (5.8) Change in DAC/PVFP Adjustment(3) ...................................... 6.7 (28.7) ------- -------- Total ................................................................ $ 34.7 $ 85.3 ======= ========
- ------------------ (1) Net of income tax expense (benefit) totaling $17.0 million and $67.9 million for 1998 and 1997, respectively. (2) Net of income tax expense (benefit) totaling $(4.1) million and $(3.3) million for 1998 and 1997, respectively. (3) Net of income tax expense (benefit) totaling $3.5 million and $(16.3) million for 1998 and 1997, respectively. 88 RELIASTAR LIFE INSURANCE COMPANY AND SUBSIDIARIES (A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 5. INCOME TAXES The income tax liability as reflected on the Consolidated Balance Sheets consisted of the following:
DECEMBER 31 ----------------------- 1998 1997 ---------- ---------- (IN MILLIONS) Current Income Taxes .......... $ 18.4 $ 25.3 Deferred Income Taxes ......... 207.0 179.9 ------- ------- Total ........................ $ 225.4 $ 205.2 ======= =======
The provision for income taxes reflected on the Consolidated Statements of Income consisted of the following:
YEAR ENDED DECEMBER 31 ------------------------- 1998 1997 ----------- ----------- (IN MILLIONS) Currently Payable ......... $ 120.9 $ 113.8 Deferred .................. 15.5 8.2 -------- -------- Total .................... $ 136.4 $ 122.0 ======== ========
The Internal Revenue Service has completed its review of the Company's tax return for all years through 1995. Deferred income taxes reflect the impact for financial statement reporting purposes of "temporary differences" between the financial statement carrying amounts and tax bases of assets and liabilities. The "temporary differences" that give rise to the net deferred tax liability relate to the following:
DECEMBER 31 --------------------------- 1998 1997 ------------ ------------ (IN MILLIONS) Future Policy and Contract Benefits .............. $ (303.5) $ (363.6) Investment Write-Offs and Allowances ............. (34.4) (41.4) Pension and Postretirement Benefit Plans ......... (7.8) (6.2) Employee Benefits ................................ (12.9) (12.8) Other ............................................ (118.5) (59.5) -------- -------- Gross Deferred Tax Asset ......................... (477.1) (483.5) -------- -------- Deferred Policy Acquisition Costs ................ 326.6 322.9 Present Value of Future Profits .................. 157.3 142.8 Net Unrealized Investment Gains .................. 119.3 95.6 Property and Equipment ........................... 24.4 22.9 Real Estate Joint Ventures ....................... 15.5 16.5 Other ............................................ 41.0 62.7 -------- -------- Gross Deferred Tax Liability ..................... 684.1 663.4 -------- -------- Net Deferred Tax Liability ...................... $ 207.0 $ 179.9 ======== ========
Federal income tax regulations allowed certain special deductions for 1983 and prior years which are accumulated in a memorandum tax account designated as "policyholders' surplus." Generally, this policyholders' surplus account will become subject to tax at the then current rates only if the accumulated balance exceeds certain maximum limitations or if certain cash distributions are deemed to 89 RELIASTAR LIFE INSURANCE COMPANY AND SUBSIDIARIES (A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 5. INCOME TAXES (CONTINUED) be paid out of the account. At December 31, 1998, ReliaStar Life and its life insurance subsidiaries have accumulated approximately $51.0 million in their separate policyholders' surplus accounts. Deferred taxes have not been provided on this temporary difference. There have been no deferred taxes recorded for the unremitted equity in subsidiaries as the earnings are considered to be permanently invested or will be remitted only when tax effective to do so. The difference between the U.S. federal income tax rate and the consolidated tax provision rate is summarized as follows:
YEAR ENDED DECEMBER 31 ----------------------- 1998 1997 ---------- ---------- Statutory Tax Rate .......... 35.0% 35.0% Other ....................... .5 .3 ---- ---- Effective Tax Rate ......... 35.5% 35.3% ==== ====
Cash paid for federal income taxes was $123.3 million and $89.0 million for the years ended December 31, 1998 and 1997, respectively. NOTE 6. NOTES AND MORTGAGES PAYABLE A summary of notes and mortgages payable is as follows:
DECEMBER 31 ------------------------ 1998 1997 ---------- ----------- (IN MILLIONS) Unaffiliated: Commercial Paper ................................. -- $ 218.5 Bank Borrowings .................................. -- 26.0 Other Indebtedness -- Current Portion ............ $ .2 .1 ------- -------- Short-Term Debt ................................. .2 244.6 Other Indebtedness -- Noncurrent Portion ......... 8.0 8.1 ------- -------- Total Unaffiliated .............................. $ 8.2 $ 252.7 ======= ======== Note Payable to Parent .......................... $ 100.0 $ 100.0 ======= ========
At December 31, 1998 and 1997, other indebtedness is primarily mortgage notes assumed in connection with certain real estate investments with interest rates ranging from 6.2% to 9.6%. The weighted average interest rate on the commercial paper outstanding at December 31, 1997 was 6.18% Principal payments required in each of the next five years and thereafter are as follows:
(IN MILLIONS) - ---------------------------------------------- 1999 -- $ .2 2002 -- $.1 2000 -- $5.8 2003 -- $.1 2001 -- $2.0 2004 and thereafter -- $.0
ReliaStar has loaned $100.0 million to ReliaStar Life under a surplus note. The original note, dated April 1, 1989, was issued in connection with ReliaStar Life's demutualization and was used to offset the surplus reduction related to the cash distribution to the mutual policyholders in the demutualization. This original note was replaced by a successor surplus note (the 1994 Note) dated November 1, 1994. 90 RELIASTAR LIFE INSURANCE COMPANY AND SUBSIDIARIES (A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 6. NOTES AND MORTGAGES PAYABLE (CONTINUED) The 1994 Note provides, subject to the regulatory constraints discussed below, that (i) it is a surplus note which will mature on September 15, 2003 with principal due at maturity, but payable without penalty, in whole or in part before maturity; (ii) interest is at 65/8% payable semi-annually; and (iii) in the event that ReliaStar Life is in default in the payment of any required interest or principal, ReliaStar Life cannot pay cash dividends on its capital stock (all of which is owned directly by ReliaStar). The 1994 Note further provides that there may be no payment of interest or principal without the express approval of the Minnesota Department of Commerce. Interest paid on unaffiliated debt was $.4 million and $13.1 million for the years ended December 31, 1998 and 1997 respectively. NOTE 7. EMPLOYEE BENEFIT PLANS PENSION AND OTHER POSTRETIREMENT BENEFITS The Company has funded and unfunded noncontributory defined benefit retirement plans covering substantially all employees which provide benefits to employees upon retirement (Pension Plans). Effective December 31, 1998, the Company's qualified defined benefit retirement plan was amended to suspend the accrual of additional benefits for future services. Employees will retain all of their accrued benefits as of December 31, 1998, which will be paid monthly at retirement according to the provisions of the plan. Employees meeting certain age and service requirements will receive certain transition benefits until retirement. A curtailment gain was recorded in 1998 to reflect the impact of this plan amendment and employee reductions resulting from the transfer of certain accident and health administrative operations to a third party. The Company provides certain health care and life insurance benefits to retired employees and their eligible dependents (Other Plans). The postretirement health care plan is contributory, with retiree contribution levels adjusted annually; the life insurance plan provides a flat amount of noncontributory coverage and optional contributory coverage. Net periodic expense or benefit for ReliaStar and its subsidiaries for the pension and other plans included the following components:
YEAR ENDED DECEMBER 31 ----------------------- 1998 1997 ----------- --------- (IN MILLIONS) PENSION PLANS Service Cost ............................... $ 3.2 $ 4.9 Interest Cost .............................. 16.7 15.2 Expected Return on Plan Assets ............. (20.9) (17.0) Amortization of Prior Service Cost ......... .8 1.1 Amortization of Transition Asset ........... (.1) (.3) Curtailment Gain ........................... (3.7) -- Actuarial Loss ............................. 1.6 1.8 ------- ------- Net Expense (Benefit) ..................... $ (2.4) $ 5.7 ======= =======
91 RELIASTAR LIFE INSURANCE COMPANY AND SUBSIDIARIES (A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 7. EMPLOYEE BENEFIT PLANS (CONTINUED)
YEAR ENDED DECEMBER 31 ----------------------- 1998 1997 ---------- ---------- (IN MILLIONS) OTHER PLANS Service Cost ............................... $ .5 $ .4 Interest Cost .............................. .7 .7 Amortization of Prior Service Cost ......... (1.5) (1.6) Curtailment Gain ........................... (1.7) -- Actuarial Gain ............................. (.1) (.1) ------ ------ Net Expense (Benefit) ..................... $ (2.1) $ (.6) ====== ======
The funded status of the plans and net amounts recognized in ReliaStar's Consolidated Balance Sheets were as follows:
PENSION PLANS OTHER PLANS ------------------------- ------------------------ DECEMBER 31 DECEMBER 31 1998 1997 1998 1997 ----------- ----------- ---------- ----------- (IN MILLIONS) Benefit Obligation at Beginning of Year ................ $ 237.1 $ 195.8 $ 10.9 $ 9.8 Service Cost ........................................... 3.2 4.9 .5 .4 Interest Cost .......................................... 16.7 15.2 .7 .7 Actuarial (Gain) Loss .................................. 14.9 25.6 (.2) .3 SCC Acquisition ........................................ -- 8.6 -- .6 Benefits Paid .......................................... (15.4) (13.0) (.4) (.9) Plan Amendments ........................................ 2.0 -- -- -- Termination Cost ....................................... 1.0 -- -- -- Curtailment ............................................ (20.8) -- (.7) -- -------- -------- ------- ------- Benefit Obligation at End of Year ...................... 238.7 237.1 10.8 10.9 -------- -------- ------- ------- Fair Value of Plan Assets at Beginning of Year ......... 229.1 184.9 -- -- Actual Return on Plan Assets ........................... 36.6 45.2 -- -- SCC Acquisition ........................................ -- 9.2 -- -- Employer Contributions ................................. 1.4 2.8 .4 .4 Participant Contributions .............................. -- -- .5 .5 Benefits Paid .......................................... (15.4) (13.0) (.9) (.9) -------- -------- ------- ------- Fair Value of Plan Assets at End of Year ............... 251.7 229.1 -- -- -------- -------- ------- ------- Funded Status .......................................... 13.0 (8.0) (10.8) (10.9) Unrecognized Net (Gain) Loss ........................... (2.2) 10.3 (1.8) (1.7) Unrecognized Prior Service Cost ........................ 3.6 8.5 (4.7) (7.2) Unrecognized Transition Asset .......................... -- (.1) -- -- -------- -------- ------- ------- Net Asset (Liability) Recognized ....................... $ 14.4 $ 10.7 $ (17.3) $ (19.8) ======== ======== ======= =======
92 RELIASTAR LIFE INSURANCE COMPANY AND SUBSIDIARIES (A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 7. EMPLOYEE BENEFIT PLANS (CONTINUED) Amounts recognized in ReliaStar's Consolidated Balance Sheets were as follows:
PENSION PLANS OTHER PLANS ----------------------- ------------------------- DECEMBER 31 DECEMBER 31 1998 1997 1998 1997 ---------- ---------- ----------- ----------- (IN MILLIONS) Prepaid Benefit Cost ..................... $ 28.2 $ 22.5 -- -- Accrued Benefit Liability ................ (19.1) (15.7) $ (17.3) $ (19.8) Intangible Asset ......................... 5.3 3.9 -- -- ------- ------- ------- ------- Net Asset (Liability) Recognized ......... $ 14.4 $ 10.7 $ (17.3) $ (19.8) ======= ======= ======= =======
The aggregate projected benefit obligation and aggregate accumulated benefit obligation for the unfunded pension plans were $19.4 million and $19.1 million, respectively, as of December 31, 1998; and $17.2 million and $15.7 million, respectively, as of December 31, 1997. As of December 31, 1998 and 1997, pension plan assets included 1,232,982 shares of ReliaStar common stock with a fair value of $56.9 million and $50.8 million, respectively. The benefit obligations for the pension and other postretirement plans were determined using assumed discount rates of 7.0% and 7.25% as of January 1, 1999 and 1998, respectively. A weighted-average long-term rate of compensation increase of 4.5% was used for the pension benefit obligation. The assumed long-term rate of return on pension plan assets was 10.5% in 1998 and 10.0% in 1997. The assumed health care cost trend rate for 1999 and thereafter used in measuring the postretirement health care benefit obligation was 5.0%. The assumed health care cost trend rate has an effect on the amounts reported. For example, a one-percentage-point increase in the rate would increase the 1998 total service and interest cost by $.1 million and the postretirement health care benefit obligation by $.4 million. A one-percentage-point decrease in the rate would decrease the 1998 total service and interest cost by $.1 million and the postretirement health care benefit obligation by $.4 million. The above amounts are for ReliaStar and its subsidiaries as the Company's portion is not determinable. SUCCESS SHARING PLAN AND ESOP The Success Sharing Plan and ESOP (Success Sharing Plan) was designed to increase employee ownership and reward employees when certain Company performance objectives are met. Essentially all employees are eligible to participate in the Success Sharing Plan. The Success Sharing Plan has both qualified and nonqualified components. The nonqualified component is equal to 25% of the annual award and is paid in cash to employees. The qualified component is equal to 75% of the annual award which is contributed to the ESOP portion of the Success Sharing Plan. Costs charged to expense for the Success Sharing Plan were $6.6 million and $6.5 million in 1998 and 1997, respectively. STOCK BASED COMPENSATION Officers and key employees of the Company participate in stock-based compensation plans of ReliaStar. ReliaStar applies Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations in accounting for its stock-based compensation plans. Accordingly, the Company has recorded no compensation expense for these stock-based compensation plans other than for restricted stock and performance-based awards. Had compensation cost for ReliaStar's stock option plans been determined based upon the fair value at the grant date for awards under these plans consistent with the optional accounting methodology prescribed under SFAS No. 123, ReliaStar's net income would have been reduced by approximately $8.1 million and $4.9 million in 1998 and 1997, respectively. The weighted average fair value of the options granted during 1998 and 1997 is estimated as $11.74 and $9.17, respectively, on the date of grant using the Black-Scholes option-pricing 93 RELIASTAR LIFE INSURANCE COMPANY AND SUBSIDIARIES (A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 7. EMPLOYEE BENEFIT PLANS (CONTINUED) model with the following assumptions: dividend yield 1.6% to 2.0%, volatility factors ranging from .1868 to .2470, risk-free interest rates of 5.3% for 1998 and 6.2% for 1997 and an expected life of 2.7 to 5.8 years. NOTE 8. RELATED PARTY TRANSACTIONS The Company and ReliaStar have entered into agreements whereby ReliaStar and the Company provide certain management, administrative, legal, and other services for each other. The net amounts billed resulted in the Company making payments of $30.7 million and $26.3 million to ReliaStar in 1998 and 1997, respectively. The net costs allocated to the Company under these agreements may not be indicative of costs the Company might incur if these services were not provided by ReliaStar. During 1998 and 1997, the Company paid cash dividends of $88.0 million and $61.8 million, respectively to ReliaStar. NOTE 9. SHAREHOLDER'S EQUITY DIVIDEND RESTRICTIONS ReliaStar Life's ability to pay cash dividends to ReliaStar is restricted by law or subject to approval of the insurance regulatory authorities of the State of Minnesota. These authorities recognize only statutory accounting practices for the ability of an insurer to pay dividends to its shareholders. Under Minnesota insurance law regulating the payment of dividends by ReliaStar Life, any such payment must be an amount deemed prudent by ReliaStar Life's Board of Directors and, unless otherwise approved by the Commissioner of the Minnesota Department of Commerce (the Commissioner), must be paid solely from the adjusted earned surplus of ReliaStar Life. Adjusted earned surplus means the earned surplus as determined in accordance with statutory accounting practices (unassigned funds) less 25% of the amount of such earned surplus which is attributable to unrealized capital gains. Further, without approval of the Commissioner, ReliaStar Life may not pay in any calendar year any dividend which, when combined with other dividends paid within the preceding 12 months, exceeds the greater of (i) 10% of ReliaStar Life's statutory surplus at the prior year-end or (ii) 100% of ReliaStar Life's statutory net gain from operations (not including realized capital gains) for the prior calendar year. For 1999, the amount of dividends which can be paid by ReliaStar Life without Commissioner approval is $156.4 million. STATUTORY SURPLUS AND NET INCOME Net income of ReliaStar Life and its insurance subsidiaries, as determined in accordance with statutory accounting practices, was $153.3 million and $185.4 million for 1998 and 1997, respectively. ReliaStar Life's statutory capital and surplus was $1,063.4 million and $1,031.8 million at December 31, 1998 and 1997, respectively. NOTE 10. REINSURANCE The Company is a member of reinsurance associations established for the purpose of ceding the excess of life insurance over retention limits. In addition, the Life and Health Reinsurance Division of ReliaStar Life assumes and cedes reinsurance on certain life and health risks as its primary business. Premium amounts received for prospective reinsurance that meet conditions for reinsurance accounting are recorded as unearned premium revenue and are amortized into earned premium revenue ratably over the remaining reinsurance contract period. Reinsurance contracts do not relieve the Company from its obligations to policyholders. Failure of reinsurers to honor their obligations could result in losses to the Company; consequently, allowances are established for amounts deemed uncollectible. The amount of the allowance for uncollectible reinsurance receivables was immaterial at December 31, 1998 and 1997. The Company evaluates the financial condition of its reinsurers and monitors concentrations of 94 RELIASTAR LIFE INSURANCE COMPANY AND SUBSIDIARIES (A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 10. REINSURANCE (CONTINUED) credit risk to minimize its exposure to significant losses from reinsurer insolvencies. The Company's retention limit is $500,000 per life for individual coverage and, to the extent that ReliaStar Life reinsures life policies written by Northern and RLNY, the limit is $400,000 per life. For group coverage and reinsurance assumed, the retention is $500,000 per life with per occurrence limitations, subject to certain maximums. As of December 31, 1998, $44.0 billion of life insurance in force was ceded to other companies. The Company has assumed $48.2 billion of life insurance in force as of December 31, 1998 (including $42.6 billion of reinsurance assumed pertaining to Federal Employees' Group Life Insurance and Servicemans' Group Life Insurance). Also included in these amounts are $683.2 million of reinsurance ceded and $5.6 billion of reinsurance assumed by the Life and Health Reinsurance Division of ReliaStar Life. The effect of reinsurance on premiums and recoveries is as follows:
YEAR ENDED DECEMBER 31 ------------------------- 1998 1997 ----------- ----------- (IN MILLIONS) Direct Premiums ................. $ 780.0 $ 675.6 Reinsurance Assumed ............. 498.8 382.6 Reinsurance Ceded ............... (270.9) (173.9) --------- -------- Net Premiums ................... $ 1,007.9 $ 884.3 ========= ======== Reinsurance Recoveries ......... $ 218.7 $ 114.4 ========= ========
NOTE 11. LIABILITY FOR UNPAID ACCIDENT AND HEALTH CLAIMS AND CLAIM ADJUSTMENT EXPENSE The change in the liability for unpaid accident and health claims and claim adjustment expenses is summarized as follows:
1998 1997 ----------- ----------- (IN MILLIONS) Balance at January 1 .................. $ 387.0 $ 383.3 Less Reinsurance Recoverables ......... 120.2 102.6 -------- -------- Net Balance at January 1 .............. 266.8 280.7 Incurred Related to: Current Year ......................... 204.4 178.6 Prior Year ........................... 8.2 (3.0) -------- -------- Total Incurred ........................ 212.6 175.6 Paid Related to: Current Year ......................... 84.2 107.4 Prior Year ........................... 95.8 82.1 -------- -------- Total Paid ............................ 180.0 189.5 Net Balance at December 31 ............ 299.4 266.8 Plus Reinsurance Recoverables ......... 180.9 120.2 -------- -------- Balance at December 31 ............... $ 480.3 $ 387.0 ======== ========
The liability for unpaid accident and health claims and claim adjustment expenses is included in Future Policy and Contract Benefits on the Consolidated Balance Sheets. 95 RELIASTAR LIFE INSURANCE COMPANY AND SUBSIDIARIES (A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 12. COMMITMENTS AND CONTINGENCIES LITIGATION The Company is a defendant in a number of lawsuits arising out of the normal course of the business of the Company, some of which include claims for punitive damages. In the opinion of management, the ultimate resolution of such litigation will not result in any material adverse impact to the financial position of the Company. JOINT GROUP LIFE AND ANNUITY CONTRACTS ReliaStar Life has issued certain participating group annuity and group life insurance contracts jointly with another insurance company. ReliaStar Life has entered into an arrangement with this insurer whereby ReliaStar Life will gradually transfer these liabilities (approximately $192.0 million at December 31, 1998) to the other insurer over a ten-year period which commenced in 1993. The terms of the arrangement specify the interest rate on the liabilities and provide for a transfer of assets and liabilities scheduled in a manner consistent with the expected cash flows of the assets allocated to support the liabilities. A contingent liability exists with respect to the joint obligor's portion of the contractual liabilities attributable to contributions received prior to July 1, 1993 ($626.9 million) in the event the joint obligor is unable to meet its obligations. FINANCIAL INSTRUMENTS The Company is a party to financial instruments with on and off-balance-sheet risk in the normal course of business to reduce its exposure to fluctuations in interest rates. These financial instruments include commitments to extend credit, financial guarantees, futures contracts, interest rate swaps, interest rate caps and equity-indexed call options. Those instruments involve, to varying degrees, elements of credit, interest rate or liquidity risk in excess of the amount recognized in the Consolidated Balance Sheets. The Company's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and financial guarantees written is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments. For interest rate swap and interest rate cap transactions, the contract or notional amounts do not represent exposure to credit loss. For swaps and caps, the Company's exposure to credit loss is limited to those swaps and caps where the Company has an unrealized gain. The Company has no remaining futures contracts as of December 31, 1998. Unless otherwise noted, the Company does not require collateral or other security to support financial instruments with credit risk.
DECEMBER 31 ------------------------- 1998 1997 ----------- ----------- (IN MILLIONS) Contract or Notional Amount ....................................... Financial Instruments Whose Contract Amounts Represent Credit Risk Commitments to Extend Credit ..................................... $ 101.0 $ 156.3 Financial Guarantees ............................................. 28.8 40.0 Financial Instruments Whose Notional or Contract Amounts Exceed the Amount of Credit Risk ............................................ Interest Rate Swap Agreements .................................... 897.5 1,162.5 Interest Rate Cap Agreements ..................................... 510.0 510.0 Equity-Indexed Call Options ...................................... 28.7 2.0
96 RELIASTAR LIFE INSURANCE COMPANY AND SUBSIDIARIES (A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 12. COMMITMENTS AND CONTINGENCIES (CONTINUED) COMMITMENTS TO EXTEND CREDIT -- Commitments to extend credit are legally binding agreements to lend to a customer. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. They generally may be terminated by the Company in the event of deterioration in the financial condition of the borrower. Since some of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future liquidity requirements. The Company evaluates each customer's creditworthiness on a case-by-case basis. FINANCIAL GUARANTEES -- Financial guarantees are conditional commitments issued by the Company guaranteeing the performance of the borrower to a third party. Those guarantees are primarily issued to support public and private commercial mortgage borrowing arrangements. The credit risk involved is essentially the same as that involved in issuing commercial mortgage loans. ReliaStar Life is a partner in six real estate joint ventures where it has guaranteed the repayment of loans of the partnership. As of December 31, 1998, ReliaStar Life had guaranteed repayment of $28.8 million ($40.0 million at December 31, 1997) of such loans including the portion allocable to the PFA. If any payment were made under these guarantees, ReliaStar Life would be allowed to make a claim for repayment from the joint venture, foreclose on the assets of the joint venture including its real estate investment and, in certain instances, make a claim against the joint venture's general partner. For certain of these partnerships, ReliaStar Life has made capital contributions from time to time to provide the partnerships with sufficient cash to meet its obligations, including operating expenses, tenant improvements and debt service. Capital contributions during 1998 and 1997 were insignificant. Further capital contributions are likely to be required in future periods for certain of the joint ventures with the guarantees. The Company cannot predict the amount of such future contributions. INTEREST RATE SWAP AGREEMENTS -- The Company enters into interest rate swap agreements to manage interest rate exposure. The primary reason for the interest rate swap agreements is to extend the duration of adjustable rate investments. Interest rate swap transactions generally involve the exchange of fixed and floating rate interest payment obligations without the exchange of the underlying principal amounts. Changes in market interest rates impact income from adjustable rate investments and have an opposite (and approximately offsetting) effect on the reported income from the swap portfolio. The risks under interest rate swap agreements are generally similar to those of futures contracts. Notional principal amounts are often used to express the volume of these transactions but do not represent the much smaller amounts potentially subject to credit risk. The amount subject to credit risk is approximately equal to the unrealized gain on the agreements which was $27.3 million at December 31, 1998. INTEREST RATE CAP AGREEMENTS -- The Company has entered into interest rate cap agreements as a hedge against the effects of rising interest rates on the invested assets supporting a portfolio of single premium deferred annuity contracts. Notional principal amounts are often used to express the volume of these transactions but do not represent the much smaller amounts potentially subject to credit risk. The amount subject to credit risk is approximately equal to the unrealized gain on the agreements which was less than $.1 million at December 31, 1998. EQUITY-INDEXED CALL OPTIONS -- The Company holds certain call options indexed to the performance of the S&P 500 Index as part of its asset/liability management strategy for its equity-indexed annuity products. The Company held 25 call options with a notional amount of $28.7 million and an estimated fair value of $9.8 million as of December 31, 1998. FUTURES CONTRACTS -- Futures contracts are contracts for delayed delivery of securities or money market instruments in which the seller agrees to make delivery at a specified future date of a specified instrument, at a specified price or yield. These contracts are entered into to manage interest rate risk as part of the Company's asset and liability management. Risks arise from the movements in securities values and interest rates. 97 RELIASTAR LIFE INSURANCE COMPANY AND SUBSIDIARIES (A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 12. COMMITMENTS AND CONTINGENCIES (CONTINUED) During 1997, the Company closed out of all of its futures contracts and immediately entered into zero coupon interest rate swaps with similar maturities. The remaining deferred gain on the closed futures contracts of approximately $20 million is being amortized into income over the life of the liabilities whose cash flows they supported. LEASES The Company has operating leases for office space and certain computer processing and other equipment. Rental expense for these items was $15.3 million and $16.0 million for 1998 and 1997, respectively. Future minimum aggregate rental commitments at December 31, 1998 for operating leases were as follows:
(IN MILLIONS) - ------------------------------------------------ 1999 -- $8.0 2002 -- $ 4.0 2000 -- $7.0 2003 -- $ 2.8 2001 -- $5.5 2004 and thereafter -- $10.7
NOTE 13. DISCONTINUED OPERATIONS AND OTHER In December 1998, the Company completed the sale of its mortgage banking subsidiary, ReliaStar Mortgage Corporation (RMC), for approximately $19 million in cash. The results of RMC are presented as discontinued operations in the Consolidated Statements of Income. Revenues and income from operations prior to the date RMC was first presented as discontinued operations, and the loss on disposal were as follows:
YEAR ENDED DECEMBER 31 ----------------------- 1998 1997 ---------- ---------- (IN MILLIONS) Revenues ........................ $ 18.9 $ 32.7 Income from Operations(1) ....... .1 3.2 Loss on Disposal(2) ............. (7.3) --
- ------------------ (1) Net of tax expense of $1.8 million 1997. (2) Includes a $2.8 million pretax loss from operations during the phase-out period and is net of a tax benefit of $4.3 million. During December 1998, the Company approved a plan to consolidate its five individual life insurance and annuity service center operations into one new center. This consolidation is expected to be substantially complete by the end of the year 2000 and anticipates the termination of approximately 700 positions at the Company's current service center operations. The transitioning of operations to the new center is scheduled to begin during 1999. Estimated costs related to this plan of approximately $24.8 million (pre-tax) were recorded and are primarily related to employee-related termination costs and non-cancelable lease contracts costs associated with vacated facilities. During 1997, the Company approved a plan to eliminate redundancies and create operational efficiencies through consolidation of certain financial, underwriting and claims functions. The plan was substantially completed by December 31, 1998. The remaining costs accrued as of December 31, 1998 ($3.6 million) are primarily related to remaining unpaid severance benefits and non-cancelable lease contracts costs associated with vacated facilities and are considered adequate for all remaining obligations. Certain initial accrual estimates related to non-cancelable lease contracts were in excess of actual costs. The reversal of the excess accrued costs during 1998 increased net income by approximately $1 million. 98 RELIASTAR LIFE INSURANCE COMPANY AND SUBSIDIARIES (A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 14. FAIR VALUE OF FINANCIAL INSTRUMENTS The following disclosures are made in accordance with the requirements of SFAS No. 107, "Disclosures about Fair Value of Financial Instruments." SFAS No. 107 requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate that value. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates, in many cases, could not be realized in immediate settlement of the instrument. SFAS No. 107 excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company. The fair value estimates presented herein are based on pertinent information available to management as of December 31, 1998 and 1997. Although management is not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since that date; therefore, current estimates of fair value may differ significantly from the amounts presented herein. The following methods and assumptions were used by the Company in estimating its fair value disclosures for financial instruments: FIXED MATURITY SECURITIES -- The estimated fair value disclosures for debt securities satisfy the fair value disclosure requirements of SFAS No. 107 (see Note 4). EQUITY SECURITIES -- Fair value equals carrying value as these securities are carried at quoted market value. MORTGAGE LOANS ON REAL ESTATE -- The fair values for mortgage loans on real estate are estimated using discounted cash flow analyses and rates currently being offered in the marketplace for similar loans to borrowers with similar credit ratings. Loans with similar characteristics are aggregated for purposes of the calculations. CASH, SHORT-TERM INVESTMENTS AND POLICY LOANS -- The carrying amounts for these assets approximate the assets' fair values. OTHER FINANCIAL INSTRUMENTS REPORTED AS ASSETS -- The carrying amounts for these financial instruments (primarily premiums and other accounts receivable and accrued investment income) approximate those assets' fair values. INVESTMENT CONTRACT LIABILITIES -- The fair value for deferred annuities was estimated to be the amount payable on demand at the reporting date, as those investment contracts have no defined maturity and are similar to a deposit liability. The amount payable at the reporting date was calculated as the account balance less applicable surrender charges. The fair value for GICs was estimated using discounted cash flow analyses. The discount rate used was based upon current industry offering rates on GICs of similar durations. The fair values for supplementary contracts without life contingencies and immediate annuities were estimated using discounted cash flow analyses. The discount rate was based upon treasury rates plus a pricing margin. The carrying amounts reported for other investment contracts, which includes participating pension contracts and retirement plan deposits, approximate those liabilities' fair value. CLAIM AND OTHER DEPOSIT FUNDS -- The carrying amounts for claim and other deposit funds approximate the liabilities' fair value. 99 RELIASTAR LIFE INSURANCE COMPANY AND SUBSIDIARIES (A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 14. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED) NOTES AND MORTGAGES PAYABLE -- For debt obligations, discounted cash flow analyses were used. The discount rate was based upon the Company's estimated current incremental borrowing rates. OTHER FINANCIAL INSTRUMENTS REPORTED AS LIABILITIES -- The carrying amounts for other financial instruments (primarily normal payables of a short-term nature) approximate those liabilities' fair values. FINANCIAL GUARANTEES -- The fair values for financial guarantees were estimated using discounted cash flow analyses based upon the expected future net amounts to be expended. The estimated net amounts to be expended were determined based on projected cash flows and a valuation of the underlying collateral. The carrying amounts and estimated fair values of the Company's financial instruments as of December 31, 1998 and 1997 are as follows:
1998 1997 -------------------------------- -------------------------------- CARRYING FAIR CARRYING FAIR AMOUNT VALUE AMOUNT VALUE --------------- --------------- --------------- --------------- (IN MILLIONS) Financial Instruments Recorded as Assets Fixed Maturity Securities ......................... $ 11,609.9 $ 11,609.9 $ 11,146.7 $ 11,146.7 Equity Securities ................................. 49.1 49.1 23.0 23.0 Mortgage Loans on Real Estate Commercial ....................................... 1,726.8 1,841.8 1,594.9 1,679.1 Residential and Other ............................ 428.0 436.7 675.8 687.3 Policy Loans ...................................... 702.3 702.3 663.3 663.3 Cash and Short-Term Investments ................... 113.5 113.5 153.8 153.8 Other Financial Instruments Recorded as Assets .... 460.4 460.4 704.3 704.3 Financial Instruments Recorded as Liabilities Investment Contracts Deferred Annuities .............................. (7,784.5) (7,366.3) (7,753.1) (7,321.6) GICs ............................................ (70.3) (98.2) (62.5) (90.0) Supplementary Contracts and Immediate Annuities ...................................... (414.8) (416.5) (337.1) (330.5) Other Investment Contracts ...................... (396.4) (396.4) (454.9) (454.9) Claim and Other Deposit Funds ..................... (154.4) (154.4) (148.1) (148.1) Notes and Mortgages Payable ....................... (7.6) (8.1) (251.9) (252.4) Other Financial Instruments Recorded as Liabilities (411.8) (411.8) (285.4) (285.4) Off-Balance Sheet Financial Instruments Financial Guarantees .............................. -- (2.1) -- (3.5)
Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company's holdings of a particular financial instrument. Because no market exists for a significant portion of the Company's financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates. Fair value estimates are based on existing on and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates. 100 APPENDIX A THE FIXED ACCOUNT The Fixed Account consists of all of our assets other than those in our separate accounts. We have complete ownership and control of all of the assets of the Fixed Account. Because of exemptions and exclusions contained in the Securities Act of 1933 and the Investment Company Act of 1940, the Fixed Account has not been registered under these acts. Neither the Fixed Account nor any interest in it is subject to the provisions of these acts and as a result the SEC has not reviewed the disclosures in this Prospectus relating to the Fixed Account. However, disclosures relating to the Fixed Account are subject to generally applicable provisions of the federal securities laws relating to the accuracy and completeness of statements made in prospectuses. We guarantee both principal and interest on amounts credited to the Fixed Account. We credit interest at an effective annual rate of at least 3%, independent of the investment experience of the Fixed Account. From time to time, we may guarantee interest at a rate higher than 3%. ANY INTEREST CREDITED TO AMOUNTS ALLOCATED TO THE FIXED ACCOUNT IN EXCESS OF 3% PER YEAR WILL BE DETERMINED AT OUR SOLE DISCRETION. YOU ASSUME THE RISK THAT INTEREST CREDITED TO THE FIXED ACCOUNT MAY NOT EXCEED THE MINIMUM GUARANTEE OF 3% FOR A GIVEN YEAR. We do not use a specific formula for determining excess interest credits. However, we consider the following: o General economic trends, o Rates of return currently available on our investments, o Rates of return anticipated in our investments, regulatory and tax factors, and o Competitive factors. We are not aware of any statutory limitations to the maximum amount of interest we may credit and our Board of Directors has not set any limitations. The Fixed Accumulation Value of the Policy is the sum of the Net Premiums credited to the Fixed Account. It is increased by transfers and Loan Amounts from the Variable Account, and interest credits. It is decreased by Monthly Deductions and partial withdrawals taken from the Fixed Account and transfers to the Variable Account. The Fixed Accumulation Value will be calculated at least monthly on the monthly anniversary date. You may transfer all or part of your Fixed Accumulation Value to the Sub-Accounts of the Variable Account, subject to the following transfer limitations: o The request to transfer must be postmarked no more than 30 days before the Policy Anniversary and no later than 30 days after the Policy Anniversary. Only one transfer is allowed during this period. o The Fixed Accumulation Value after the transfer must be at least equal to the Loan Amount. o No more than 50% of the Fixed Accumulation Value (minus any Loan Amount) may be transferred unless the balance, after the transfer, would be less than $1,000. If the balance would be less than $1,000, the full Fixed Accumulation Value (minus any Loan Amount) may be transferred. o You must transfer at least: -- $500, or -- the total Fixed Accumulation Value (minus any Loan Amount) if less than $500. We make the Monthly Deduction from your Fixed Accumulation Value in proportion to the total Accumulation Value of the Policy. The Surrender Charge described in the Prospectus applies to the total Accumulation Value, which includes the Fixed Accumulation Value. If the Owner surrenders the Policy for its Cash Surrender Value, the Fixed Accumulation Value will be reduced by any applicable Surrender Charge, any Loan Amount and unpaid Monthly Deductions applicable to the Fixed Account. A-1 APPENDIX B CALCULATION OF ACCUMULATION VALUE The Accumulation Value of the Policy is equal to the sum of the Variable Accumulation Value plus the Fixed Accumulation Value. VARIABLE ACCUMULATION VALUE The Variable Accumulation Value is the total of your values in each Sub-Account. The value for each Sub-Account is equal to: 1 multiplied by 2, where: 1 Is your current number of Accumulation Units (described below). 2 Is the current Unit Value (described below). The Variable Accumulation Value will vary from Valuation Date to Valuation Date (described below) reflecting changes in 1 and 2 above. ACCUMULATION UNITS. When transactions are made which affect the Variable Accumulation Value, dollar amounts are converted to Accumulation Units. The number of Accumulation Units for a transaction is found by dividing the dollar amount of the transaction by the current Unit Value. The number of Accumulation Units for a Sub-Account increases when: o Net Premiums are credited to that Sub-Account; or o Transfers from the Fixed Account or other Sub-Accounts are credited to that Sub-Account. The number of Accumulation Units for a Sub-Account decreases when: o You take out a Policy loan from that Sub-Account; o You take a partial withdrawal from that Sub-Account; o We take a portion of the Monthly Deduction from that Sub-Account; or o Transfers are made from that Sub-Account to the Fixed Account or other Sub-Accounts. UNIT VALUE. The Unit Value for a Sub-Account on any Valuation Date is equal to the previous Unit Value times the Net Investment Factor for that Sub-Account (described below) for the Valuation Period (described below) ending on that Valuation Date. The Unit Value was initially set at $10 when the Sub-Account first purchased Fund shares. NET INVESTMENT FACTOR. The Net Investment Factor is a number that reflects charges to the Policy and the investment performance during a Valuation Period of the Fund in which a Sub-Account is invested. If the Net Investment Factor is greater than one, the Unit Value is increased. If the Net Investment Factor is less than one, the Unit Value is decreased. The Net Investment Factor for a Sub-Account is determined by dividing 1 by 2. (1 divided by 2), where: 1 Is the result of: o The net asset value per share of the Fund shares in which the Sub-Account invests, determined at the end of the current Valuation Period; o Plus the per share amount of any dividend or capital gain distributions made on the Fund shares in which the Sub-Account invests during the current Valuation Period; o Plus or minus a per share charge or credit for any taxes reserved which we determine has resulted from the investment operations of the Sub-Account and to be applicable to the Policy. B-1 2 Is the result of: o The net asset value per share of the Fund shares held in the Sub-Account, determined at the end of the last prior Valuation Period; o Plus or minus a per share charge or credit for any taxes reserved for during the last prior Valuation Period which we determine resulted from the investment operations of the Sub-Account and was applicable to the Policy. VALUATION DATE; VALUATION PERIOD. A Valuation Date is each day the New York Stock Exchange is open for trading. A Valuation Period is the period between two successive Valuation Dates, commencing at the close of business of a Valuation Date and ending at the close of business on the next Valuation Date. FIXED ACCUMULATION VALUE The Fixed Accumulation Value on the Policy Date is your Net Premium credited to the Fixed Account on that date minus the Monthly Deduction applicable to the Fixed Accumulation Value for the first Policy Month. After the Policy Date, the Fixed Accumulation Value is calculated as: 1 + 2 + 3 + 4 - 5 - 6, where: 1 Is the Fixed Accumulation Value on the preceding Monthly Anniversary, plus interest from the Monthly Anniversary to the date of the calculation. 2 Is the total of your Net Premiums credited to the Fixed Account since the preceding Monthly Anniversary, plus interest from the date premiums are credited to the date of the calculation. 3 Is the total of your transfers from the Variable Account to the Fixed Account since the preceding Monthly Anniversary, plus interest from the date of transfer to the date of the calculation. 4 Is the total of your Loan Amounts transferred from the Variable Account since the preceding Monthly Anniversary. 5 Is the total of your transfers to the Variable Account from the Fixed Account since the preceding Monthly Anniversary, plus interest from the date of transfer to the date of the calculation. 6 Is the total of your partial withdrawals from the Fixed Account since the preceding Monthly Anniversary, plus interest from the date of withdrawal to the date of the calculation. If the date of the calculation is a Monthly Anniversary, we also reduce the Fixed Accumulation Value by the applicable Monthly Deduction for the Policy Month following the Monthly Anniversary. The minimum interest rate applied in the calculation of the Fixed Accumulation Value is an effective annual rate of 3%. Interest in excess of the minimum rate may be applied in the calculation of your Fixed Accumulation Value in a manner which our Board of Directors determines. B-2 APPENDIX C ILLUSTRATION OF ACCUMULATION VALUES, SURRENDER CHARGES, CASH SURRENDER VALUES, AND DEATH BENEFITS The following tables illustrate how the Accumulation Values, Cash Surrender Values, and Death Benefits of a Policy may change with the investment experience of the Variable Account. The tables show how the Accumulation Values, Cash Surrender Values, and Death Benefits of a Policy issued to a hypothetical Insured (who pays the given Planned Periodic Premiums annually) would vary over time if the investment return of the assets held in the Funds were a uniform, gross, after-tax, annual rate of 0 percent, 6 percent or 12 percent. The tables on pages D-3 through D-11 illustrate a Policy issued to a male Age 40, in a standard Rate Class and qualifying for nonsmoker rates. The Accumulation Values, Cash Surrender Values, and Death Benefits would be lower if the Insured was in a substandard Rate Class or did not qualify for the nonsmoker rates because the cost of insurance would be increased. The Accumulation Values, Cash Surrender Values and Death Benefits would be different from those shown if the gross annual investment returns averaged 0 percent, 6 percent, and 12 percent over a period of years, but fluctuated above and below those averages for individual Policy Years. Within the tables, the second and fifth columns illustrate the Accumulation Value of the Policy over the designated period. The Accumulation Value is the total amount that a Policy provides for investment at any time. The third and sixth columns illustrate the Cash Surrender Value of a Policy over the designated period. The Cash Surrender Value is equal to the Accumulation Value less any Surrender Charges, Loan Amount (assumed to be zero in these illustrations) and unpaid Monthly Deductions (also assumed to be zero). The fourth and seventh columns illustrate the Death Benefit of a Policy over the designated period. The second, third, and fourth columns assume that throughout the life of the Policy, the monthly charge for the cost of insurance, the Monthly Mortality and Expense Charge and the Monthly Administrative Charge are based upon the maximums (i.e., guaranteed) permitted in the policy. The maximum allowable cost of insurance rates are based on the 1980 Commissioners Standard Ordinary Mortality Tables for Nonsmokers and Smokers. The fifth, sixth, and seventh columns assume that the monthly charge for cost of insurance, the Monthly Mortality and Expense Charge, and the Monthly Administrative Charge are based on the current amounts expected to be charged. The Death Benefits also vary between tables depending upon whether the Level Amount Death Benefit Option (Tables at pages C-3 through C-5) or the Variable Amount Death Benefit Option (Tables at pages C-6 through C-8) or the Face Amount Plus Premium Amount Option (Tables at Pages C-9 through C-11) is illustrated. The amounts shown for the Accumulation Values, Cash Surrender Values, and Death Benefits reflect the fact that the net investment return of the Sub-Accounts of the Variable Account is lower than the gross, after-tax return on the assets held in the Funds as a result of the Funds' operating expenses. The values shown take into account the daily total operating expenses paid by the three Funds available through The Alger American Fund, the four portfolios of the Fidelity VIP, the three portfolios of the Fidelity VIP II, the four funds of the Janus Aspen Series, the three funds of the Neuberger Berman Advisors Management Trust, the five funds available through Northstar Galaxy Trust, the four funds of the OCC Accumulation Trust, and the three funds of Putnam Variable Trust, which together are assumed to be at an average annual rate of 0.77% for all years. This figure is derived based on a simple average of the Funds' 1998 operating expenses net of any limitations on such expenses paid by the Funds. Thus, the illustrated gross annual investment rates of return of 0 percent, 6 percent, and 12 percent correspond to approximate net annual rates of return of - -0.77%, 5.23%, and 11.23%, respectively. Without such expense reimbursements, total expenses would be 0.88%. Hypothetical Accumulation Values, Cash Surrender Values and the Death Benefits may be lower without the expense reimbursement. Expense reimbursements are voluntary. While it is currently anticipated that expense reimbursements will continue past the current year, there is no assurance of ongoing reimbursements. The hypothetical values shown in the tables do not reflect any charges for Federal income taxes attributable to the Variable Account because we do not currently make any such charges. However, such charges may be made in the future and, in that event, the gross annual investment return would have to exceed 0 percent, 6 percent, or 12 percent by an amount sufficient to cover the tax charges in order to C-1 produce the Accumulation Values, Cash Surrender Values, and Death Benefits illustrated. (See section entitled "Federal Tax Matters" in the prospectus). The tables illustrate the Policy values that would result based upon the hypothetical rates of return if premiums are paid as indicated, if all Net Premiums are allocated to the Variable Account, and if no Policy loans have been made. The tables are also based on the assumptions that the Policy owner has not requested an increase or decrease in the Face Amount, that no partial withdrawals have been made, that no transfers have been made, and total operating expenses of the Funds continue as anticipated. Actual results will depend on the expenses and performance of the investment choice made by the owner. Upon request, we will provide a comparable illustration based upon the proposed Insured's Age, sex, underwriting classification, the Face Amount and Planned Periodic Premium schedule requested, and any available riders requested. C-2 RELIASTAR LIFE INSURANCE COMPANY FLEXIBLE PREMIUM TO AGE 100 MALE ISSUE AGE: 40 NON-SMOKER $1,200.00 ANNUAL PREMIUM $100,000 FACE AMOUNT LEVEL DEATH BENEFIT OPTION ASSUMED HYPOTHETICAL GROSS ANNUAL INVESTMENT RATE OF RETURN: 0%
GUARANTEED COSTS CURRENT COSTS ---------------------------------------------- --------------------------------------------- ACCUMULATION CASH SURRENDER DEATH ACCUMULATION CASH SURRENDER DEATH POLICY VALUE VALUE BENEFIT VALUE VALUE BENEFIT YEAR (1) (2) (1) (2) (1) (2) (1) (2) (1) (2) (1) (2) - -------- -------------- ---------------- ---------- -------------- ---------------- --------- 1 482 0 100,000* 645 0 100,000* 2 941 0 100,000* 1,284 0 100,000* 3 1,377 0 100,000* 1,916 366 100,000 4 1,787 459 100,000 2,537 1,208 100,000 5 2,171 1,064 100,000 3,134 2,027 100,000 6 2,525 1,639 100,000 3,708 2,823 100,000 7 2,848 2,184 100,000 4,258 3,594 100,000 8 3,140 2,697 100,000 4,785 4,342 100,000 9 3,397 3,176 100,000 5,285 5,063 100,000 10 3,618 3,618 100,000 5,755 5,755 100,000 11 4,063 4,063 100,000 6,459 6,459 100,000 12 4,461 4,461 100,000 7,121 7,121 100,000 13 4,804 4,804 100,000 7,734 7,734 100,000 14 5,086 5,086 100,000 8,296 8,296 100,000 15 5,301 5,301 100,000 8,810 8,810 100,000 20 5,143 5,143 100,000 10,554 10,554 100,000 AGE 70 0 0 0 7,189 7,189 100,000 **
- -------------------------------------------------------------------------------- (1) Assumes a $1,200.00 premium (which exceeds the Annualized Minimum Monthly Premium) is paid at the beginning of each Policy Year. Values will be different if premiums are paid with a different frequency or in different amounts. (2) Assumes that no policy loans or partial withdrawals have been made. Excessive loans or withdrawals may cause the policy to lapse because of insufficient Cash Surrender Value. * Based on (1) and (2) above, the Death Benefit Guarantee is in effect during the years shown. Therefore, the Policy remains in force even though the Cash Surrender Value is zero. ** Policy terminates prior to age 75. THE HYPOTHETICAL INVESTMENT RESULTS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN, AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY A POLICYHOLDER, AND THE DIFFERENT INVESTMENT RETURNS FOR THE FUNDS. THE ACCUMULATION VALUE, CASH SURRENDER VALUE, AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN ABOVE IF THE ACTUAL INVESTMENT RESULTS APPLICABLE TO THE POLICY AVERAGE 0% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY US OR BY THE FUNDS THAT THESE HYPOTHETICAL RETURNS CAN BE ACHIEVED FOR ANY ONE YEAR, OR SUSTAINED OVER ANY PERIOD OF TIME. C-3 RELIASTAR LIFE INSURANCE COMPANY FLEXIBLE PREMIUM TO AGE 100 MALE ISSUE AGE: 40 NON-SMOKER $1,200.00 ANNUAL PREMIUM $100,000 FACE AMOUNT LEVEL DEATH BENEFIT OPTION ASSUMED HYPOTHETICAL GROSS ANNUAL INVESTMENT RATE OF RETURN: 6%
GUARANTEED COSTS CURRENT COSTS ---------------------------------------------- --------------------------------------------- ACCUMULATION CASH SURRENDER DEATH ACCUMULATION CASH SURRENDER DEATH POLICY VALUE VALUE BENEFIT VALUE VALUE BENEFIT YEAR (1) (2) (1) (2) (1) (2) (1) (2) (1) (2) (1) (2) - -------- -------------- ---------------- ---------- -------------- ---------------- --------- 1 529 0 100,000* 698 0 100,000* 2 1,066 0 100,000* 1,430 0 100,000* 3 1,611 61 100,000 2,199 649 100,000 4 2,160 832 100,000 3,001 1,673 100,000 5 2,714 1,607 100,000 3,825 2,718 100,000 6 3,269 2,383 100,000 4,673 3,788 100,000 7 3,823 3,159 100,000 5,545 4,881 100,000 8 4,376 3,933 100,000 6,442 5,999 100,000 9 4,925 4,704 100,000 7,362 7,141 100,000 10 5,467 5,467 100,000 8,304 8,304 100,000 11 6,272 6,272 100,000 9,540 9,540 100,000 12 7,073 7,073 100,000 10,805 10,805 100,000 13 7,865 7,865 100,000 12,092 12,092 100,000 14 8,640 8,640 100,000 13,401 13,401 100,000 15 9,391 9,391 100,000 14,738 14,738 100,000 20 12,539 12,539 100,000 21,792 21,792 100,000 AGE 70 9,167 9,167 100,000 36,646 36,646 100,000 85 0 0 0 43,221 43,221 100,000 80 0 0 0 47,494 47,494 100,000 85 0 0 0 46,121 46,121 100,000 90 0 0 0 29,220 29,220 100,000 **
- -------------------------------------------------------------------------------- (1) Assumes a $1,200.00 premium (which exceeds the Annualized Minimum Monthly Premium) is paid at the beginning of each Policy Year. Values will be different if premiums are paid with a different frequency or in different amounts. (2) Assumes that no policy loans or partial withdrawals have been made. Excessive loans or withdrawals may cause the policy to lapse because of insufficient Cash Surrender Value. * Based on (1) and (2) above, the Death Benefit Guarantee is in effect during the years shown. Therefore, the Policy remains in force even though the Cash Surrender Value is zero. ** Policy terminates prior to age 95. THE HYPOTHETICAL INVESTMENT RESULTS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN, AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY A POLICYHOLDER, AND THE DIFFERENT INVESTMENT RETURNS FOR THE FUNDS. THE ACCUMULATION VALUE, CASH SURRENDER VALUE, AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN ABOVE IF THE ACTUAL INVESTMENT RESULTS APPLICABLE TO THE POLICY AVERAGE 6% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY US OR BY THE FUNDS THAT THESE HYPOTHETICAL RETURNS CAN BE ACHIEVED FOR ANY ONE YEAR, OR SUSTAINED OVER ANY PERIOD OF TIME. C-4 RELIASTAR LIFE INSURANCE COMPANY FLEXIBLE PREMIUM TO AGE 100 MALE ISSUE AGE: 40 NON-SMOKER $1,200.00 ANNUAL PREMIUM $100,000 FACE AMOUNT LEVEL DEATH BENEFIT OPTION ASSUMED HYPOTHETICAL GROSS ANNUAL INVESTMENT RATE OF RETURN: 12%
GUARANTEED COSTS CURRENT COSTS ------------------------------------------------- ------------------------------------------------- ACCUMULATION CASH SURRENDER DEATH ACCUMULATION CASH SURRENDER DEATH POLICY VALUE VALUE BENEFIT VALUE VALUE BENEFIT YEAR (1) (2) (1) (2) (1) (2) (1) (2) (1) (2) (1) (2) - -------- -------------- ---------------- ------------- -------------- ---------------- ------------- 1 577 0 100,000* 750 0 100,000* 2 1,198 0 100,000* 1,583 0 100,000* 3 1,867 317 100,000 2,507 958 100,000 4 2,586 1,258 100,000 3,528 2,199 100,000 5 3,361 2,254 100,000 4,641 3,534 100,000 6 4,193 3,308 100,000 5,860 4,975 100,000 7 5,088 4,424 100,000 7,194 6,530 100,000 8 6,052 5,609 100,000 8,656 8,213 100,000 9 7,090 6,868 100,000 10,257 10,036 100,000 10 8,207 8,207 100,000 12,011 12,011 100,000 11 9,692 9,692 100,000 14,215 14,215 100,000 12 11,299 11,299 100,000 16,630 16,630 100,000 13 13,034 13,034 100,000 19,275 19,275 100,000 14 14,909 14,909 100,000 22,174 22,174 100,000 15 16,934 16,934 100,000 25,363 25,363 100,000 20 29,894 29,894 100,000 46,968 46,968 100,000 AGE 70 83,093 83,093 100,000 144,355 144,355 167,453 85 140,742 140,742 150,594 245,163 245,163 262,325 80 235,032 235,032 246,784 413,007 413,007 433,658 85 383,594 383,594 402,774 686,804 686,804 721,144 90 610,886 610,886 641,431 1,127,652 1,127,652 1,184,035 95 977,376 977,376 987,150 1,856,239 1,856,239 1,874,802 100 1,621,719 1,621,719 1,621,719 3,112,770 3,112,770 3,112,770
- -------------------------------------------------------------------------------- (1) Assumes a $1,200.00 premium (which exceeds the Annualized Minimum Monthly Premium) is paid at the beginning of each Policy Year. Values will be different if premiums are paid with a different frequency or in different amounts. (2) Assumes that no policy loans or partial withdrawals have been made. Excessive loans or withdrawals may cause the policy to lapse because of insufficient Cash Surrender Value. * Based on (1) and (2) above, the Death Benefit Guarantee is in effect during the years shown. Therefore, the Policy remains in force even though the Cash Surrender Value is zero. THE HYPOTHETICAL INVESTMENT RESULTS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN, AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY A POLICYHOLDER, AND THE DIFFERENT INVESTMENT RETURNS FOR THE FUNDS. THE ACCUMULATION VALUE, CASH SURRENDER VALUE, AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN ABOVE IF THE ACTUAL INVESTMENT RESULTS APPLICABLE TO THE POLICY AVERAGE 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY US OR BY THE FUNDS THAT THESE HYPOTHETICAL RETURNS CAN BE ACHIEVED FOR ANY ONE YEAR, OR SUSTAINED OVER ANY PERIOD OF TIME. C-5 RELIASTAR LIFE INSURANCE COMPANY FLEXIBLE PREMIUM TO AGE 100 MALE ISSUE AGE: 40 NON-SMOKER $1,200.00 ANNUAL PREMIUM $100,000 FACE AMOUNT VARIABLE DEATH BENEFIT OPTION ASSUMED HYPOTHETICAL GROSS ANNUAL INVESTMENT RATE OF RETURN: 0%
GUARANTEED COSTS CURRENT COSTS ---------------------------------------------- --------------------------------------------- ACCUMULATION CASH SURRENDER DEATH ACCUMULATION CASH SURRENDER DEATH POLICY VALUE VALUE BENEFIT VALUE VALUE BENEFIT YEAR (1) (2) (1) (2) (1) (2) (1) (2) (1) (2) (1) (2) - -------- -------------- ---------------- ---------- -------------- ---------------- --------- 1 480 0 100,481* 644 0 100,644* 2 936 0 100,937* 1,281 0 101,281* 3 1,367 0 101,368* 1,910 360 101,911 4 1,771 443 101,772 2,528 1,199 102,528 5 2,147 1,040 102,148 3,120 2,013 103,120 6 2,491 1,606 102,492 3,688 2,803 103,689 7 2,803 2,139 102,803 4,231 3,566 104,231 8 3,080 2,638 103,081 4,747 4,304 104,747 9 3,322 3,100 103,322 5,235 5,013 105,235 10 3,524 3,524 103,524 5,690 5,690 105,691 11 3,949 3,949 103,949 6,376 6,376 106,377 12 4,321 4,321 104,321 7,016 7,016 107,016 13 4,634 4,634 104,634 7,600 7,600 107,601 14 4,881 4,881 104,881 8,128 8,128 108,128 15 5,055 5,055 105,056 8,602 8,602 108,602 20 4,620 4,620 104,621 10,029 10,029 110,029 AGE 70 0 0 0 5,349 5,349 105,349 **
- -------------------------------------------------------------------------------- (1) Assumes a $1,200.00 premium (which exceeds the Annualized Minimum Monthly Premium) is paid at the beginning of each Policy Year. Values will be different if premiums are paid with a different frequency or in different amounts. (2) Assumes that no policy loans or partial withdrawals have been made. Excessive loans or withdrawals may cause the policy to lapse because of insufficient Cash Surrender Value. * Based on(1) and(2) above, the Death Benefit Guarantee is in effect during the years shown. Therefore, the Policy remains in force even though the Cash Surrender Value is zero. ** Policy terminates prior to age 75. THE HYPOTHETICAL INVESTMENT RESULTS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN, AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY A POLICYHOLDER, AND THE DIFFERENT INVESTMENT RETURNS FOR THE FUNDS. THE ACCUMULATION VALUE, CASH SURRENDER VALUE, AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN ABOVE IF THE ACTUAL INVESTMENT RESULTS APPLICABLE TO THE POLICY AVERAGE 0% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY US OR BY THE FUNDS THAT THESE HYPOTHETICAL RETURNS CAN BE ACHIEVED FOR ANY ONE YEAR, OR SUSTAINED OVER ANY PERIOD OF TIME. C-6 RELIASTAR LIFE INSURANCE COMPANY FLEXIBLE PREMIUM TO AGE 100 MALE ISSUE AGE: 40 NON-SMOKER $1,200.00 ANNUAL PREMIUM $100,000 FACE AMOUNT VARIABLE DEATH BENEFIT OPTION ASSUMED HYPOTHETICAL GROSS ANNUAL INVESTMENT RATE OF RETURN: 6%
GUARANTEED COSTS CURRENT COSTS ---------------------------------------------- --------------------------------------------- ACCUMULATION CASH SURRENDER DEATH ACCUMULATION CASH SURRENDER DEATH POLICY VALUE VALUE BENEFIT VALUE VALUE BENEFIT YEAR (1) (2) (1) (2) (1) (2) (1) (2) (1) (2) (1) (2) - -------- -------------- ---------------- ---------- -------------- ---------------- --------- 1 527 0 100,528* 696 0 100,697* 2 1,061 0 101,061* 1,427 0 101,427* 3 1,599 49 101,600 2,192 643 102,193 4 2,141 812 102,141 2,990 1,662 102,991 5 2,684 1,577 102,684 3,808 2,701 103,808 6 3,224 2,339 103,225 4,647 3,762 104,648 7 3,761 3,097 103,761 5,507 4,843 105,508 8 4,292 3,849 104,292 6,389 5,946 106,389 9 4,813 4,592 104,814 7,289 7,068 107,290 10 5,322 5,322 105,322 8,206 8,206 108,206 11 6,086 6,086 106,087 9,410 9,410 109,411 12 6,837 6,838 106,838 10,633 10,633 110,634 13 7,567 7,567 107,568 11,866 11,866 111,867 14 8,267 8,267 108,268 13,107 13,107 113,108 15 8,928 8,928 108,929 14,360 14,360 114,360 20 11,301 11,301 111,301 20,631 20,631 120,632 AGE 70 3,688 3,688 103,689 29,501 29,501 129,502 75 0 0 100,000 27,778 27,778 127,779 80 0 0 100,000 16,377 16,377 116,378 **
- -------------------------------------------------------------------------------- (1) Assumes a $1,200.00 premium (which exceeds the Annualized Minimum Monthly Premium) is paid at the beginning of each Policy Year. Values will be different if premiums are paid with a different frequency or in different amounts. (2) Assumes that no policy loans or partial withdrawals have been made. Excessive loans or withdrawals may cause the policy to lapse because of insufficient Cash Surrender Value. * Based on (1) and (2) above, the Death Benefit Guarantee is in effect during the years shown. Therefore, the Policy remains in force even though the Cash Surrender Value is zero. ** Policy terminates prior to age 85. THE HYPOTHETICAL INVESTMENT RESULTS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN, AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY A POLICYHOLDER, AND THE DIFFERENT INVESTMENT RETURNS FOR THE FUNDS. THE ACCUMULATION VALUE, CASH SURRENDER VALUE, AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN ABOVE IF THE ACTUAL INVESTMENT RESULTS APPLICABLE TO THE POLICY AVERAGE 6% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY US OR BY THE FUNDS THAT THESE HYPOTHETICAL RETURNS CAN BE ACHIEVED FOR ANY ONE YEAR, OR SUSTAINED OVER ANY PERIOD OF TIME. C-7 RELIASTAR LIFE INSURANCE COMPANY FLEXIBLE PREMIUM TO AGE 100 MALE ISSUE AGE: 40 NON-SMOKER $1,200.00 ANNUAL PREMIUM $100,000 FACE AMOUNT VARIABLE DEATH BENEFIT OPTION ASSUMED HYPOTHETICAL GROSS ANNUAL INVESTMENT RATE OF RETURN: 12%
GUARANTEED COSTS CURRENT COSTS ---------------------------------------------- ------------------------------------------------- ACCUMULATION CASH SURRENDER DEATH ACCUMULATION CASH SURRENDER DEATH POLICY VALUE VALUE BENEFIT VALUE VALUE BENEFIT YEAR (1) (2) (1) (2) (1) (2) (1) (2) (1) (2) (1) (2) - -------- -------------- ---------------- ---------- -------------- ---------------- ------------- 1 575 0 100,575* 749 0 100,750* 2 1,192 0 101,192* 1,580 0 101,580* 3 1,853 303 101,854 2,500 950 102,501 4 2,563 1,234 102,563 3,515 2,187 103,515 5 3,323 2,216 103,324 4,620 3,513 104,620 6 4,135 3,250 104,136 5,827 4,941 105,827 7 5,004 4,339 105,004 7,143 6,479 107,144 8 5,932 5,489 105,933 8,581 8,139 108,582 9 6,924 6,703 106,925 10,151 9,930 110,152 10 7,983 7,983 107,984 11,863 11,863 111,863 11 9,393 9,393 109,394 14,010 14,010 114,011 12 10,903 10,903 110,903 16,349 16,349 116,350 13 12,514 12,514 112,515 18,892 18,892 118,892 14 14,230 14,230 114,231 21,656 21,656 121,656 15 16,054 16,054 116,055 24,669 24,669 124,669 20 26,930 26,930 126,930 44,329 44,329 144,330 AGE 70 56,545 56,545 156,546 120,643 120,643 220,643 75 70,696 70,696 170,697 191,093 191,093 291,093 80 73,909 73,909 173,909 298,465 298,465 398,465 85 48,664 48,664 148,665 462,227 462,227 562,228 90 0 0 0 713,328 713,328 813,328 95 0 0 0 1,103,508 1,103,508 1,203,509 100 0 0 0 1,722,279 1,722,279 1,822,279
- -------------------------------------------------------------------------------- (1) Assumes a $1,200.00 premium (which exceeds the Annualized Minimum Monthly Premium) is paid at the beginning of each Policy Year. Values will be different if premiums are paid with a different frequency or in different amounts. (2) Assumes that no policy loans or partial withdrawals have been made. Excessive loans or withdrawals may cause the policy to lapse because of insufficient Cash Surrender Value. * Based on (1) and (2) above, the Death Benefit Guarantee is in effect during the years shown. Therefore, the Policy remains in force even though the Cash Surrender Value is zero. THE HYPOTHETICAL INVESTMENT RESULTS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN, AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY A POLICYHOLDER, AND THE DIFFERENT INVESTMENT RETURNS FOR THE FUNDS. THE ACCUMULATION VALUE, CASH SURRENDER VALUE, AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN ABOVE IF THE ACTUAL INVESTMENT RESULTS APPLICABLE TO THE POLICY AVERAGE 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY US OR BY THE FUNDS THAT THESE HYPOTHETICAL RETURNS CAN BE ACHIEVED FOR ANY ONE YEAR, OR SUSTAINED OVER ANY PERIOD OF TIME. C-8 RELIASTAR LIFE INSURANCE COMPANY FLEXIBLE PREMIUM TO AGE 100 MALE ISSUE AGE: 40 NON-SMOKER $1,200.00 ANNUAL PREMIUM $100,000 FACE AMOUNT FACE AMOUNT PLUS PREMIUM DEATH BENEFIT OPTION ASSUMED HYPOTHETICAL GROSS ANNUAL INVESTMENT RATE OF RETURN: 0%
GUARANTEED COSTS CURRENT COSTS ---------------------------------------------- --------------------------------------------- ACCUMULATION CASH SURRENDER DEATH ACCUMULATION CASH SURRENDER DEATH POLICY VALUE VALUE BENEFIT VALUE VALUE BENEFIT YEAR (1) (2) (1) (2) (1) (2) (1) (2) (1) (2) (1) (2) - -------- -------------- ---------------- ---------- -------------- ---------------- --------- 1 479 0 101,200* 644 0 101,200* 2 933 0 102,400* 1,279 0 102,400* 3 1,358 0 103,600* 1,907 357 103,600 4 1,755 426 104,800 2,522 1,194 104,800 5 2,120 1,013 106,000 3,111 2,004 106,000 6 2,450 1,564 107,200 3,674 2,789 107,200 7 2,743 2,078 108,400 4,210 3,545 108,400 8 2,997 2,554 109,600 4,717 4,274 109,600 9 3,208 2,987 110,800 5,194 4,972 110,800 10 3,374 3,374 112,000 5,635 5,635 112,000 11 3,755 3,755 113,200 6,303 6,303 113,200 12 4,075 4,075 114,400 6,920 6,920 114,400 13 4,325 4,325 115,600 7,477 7,477 115,600 14 4,497 4,497 116,800 7,971 7,971 116,800 15 4,582 4,582 118,000 8,404 8,404 118,000 20 3,346 3,346 124,000 9,462 9,462 124,000 AGE 70 0 0 0 1,536 1,536 136,000 **
- -------------------------------------------------------------------------------- (1) Assumes a $1,200.00 premium (which exceeds the Annualized Minimum Monthly Premium) is paid at the beginning of each Policy Year. Values will be different if premiums are paid with a different frequency or in different amounts. (2) Assumes that no policy loans or partial withdrawals have been made. Excessive loans or withdrawals may cause the policy to lapse because of insufficient Cash Surrender Value. * Based on(1) and(2) above, the Death Benefit Guarantee is in effect during the years shown. Therefore, the Policy remains in force even though the Cash Surrender Value is zero. ** Policy terminates prior to age 75. THE HYPOTHETICAL INVESTMENT RESULTS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN, AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY A POLICYHOLDER, AND THE DIFFERENT INVESTMENT RETURNS FOR THE FUNDS. THE ACCUMULATION VALUE, CASH SURRENDER VALUE, AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN ABOVE IF THE ACTUAL INVESTMENT RESULTS APPLICABLE TO THE POLICY AVERAGE 0% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY US OR BY THE FUNDS THAT THESE HYPOTHETICAL RETURNS CAN BE ACHIEVED FOR ANY ONE YEAR, OR SUSTAINED OVER ANY PERIOD OF TIME. C-9 RELIASTAR LIFE INSURANCE COMPANY FLEXIBLE PREMIUM TO AGE 100 MALE ISSUE AGE: 40 NON-SMOKER $1,200.00 ANNUAL PREMIUM $100,000 FACE AMOUNT FACE AMOUNT PLUS PREMIUM DEATH BENEFIT OPTION ASSUMED HYPOTHETICAL GROSS ANNUAL INVESTMENT RATE OF RETURN: 6%
GUARANTEED COSTS CURRENT COSTS ---------------------------------------------- --------------------------------------------- ACCUMULATION CASH SURRENDER DEATH ACCUMULATION CASH SURRENDER DEATH POLICY VALUE VALUE BENEFIT VALUE VALUE BENEFIT YEAR (1) (2) (1) (2) (1) (2) (1) (2) (1) (2) (1) (2) - -------- -------------- ---------------- ---------- -------------- ---------------- --------- 1 526 0 101,200* 696 0 101,200* 2 1,057 0 102,400* 1,426 0 102,400* 3 1,590 41 103,600 2,190 640 103,600 4 2,125 796 104,800 2,985 1,657 104,800 5 2,657 1,550 106,000 3,799 2,692 106,000 6 3,183 2,298 107,200 4,635 3,749 107,200 7 3,702 3,037 108,400 5,489 4,825 108,400 8 4,209 3,766 109,600 6,363 5,920 109,600 9 4,701 4,479 110,800 7,255 7,033 110,800 10 5,173 5,173 112,000 8,160 8,160 112,000 11 5,893 5,893 113,200 9,351 9,351 113,200 12 6,592 6,592 114,400 10,558 10,558 114,400 13 7,260 7,260 115,600 11,773 11,773 115,600 14 7,886 7,886 116,800 12,993 12,993 116,800 15 8,459 8,459 118,000 14,222 14,222 118,000 20 10,062 10,062 124,000 20,321 20,321 124,000 AGE 70 0 0 0 28,128 28,128 136,000 75 0 0 0 24,121 24,121 142,000 80 0 0 0 4,515 4,515 148,000 **
- -------------------------------------------------------------------------------- (1) Assumes a $1,200.00 premium (which exceeds the Annualized Minimum Monthly Premium) is paid at the beginning of each Policy Year. Values will be different if premiums are paid with a different frequency or in different amounts. (2) Assumes that no policy loans or partial withdrawals have been made. Excessive loans or withdrawals may cause the policy to lapse because of insufficient Cash Surrender Value. * Based on (1) and (2) above, the Death Benefit Guarantee is in effect during the years shown. Therefore, the Policy remains in force even though the Cash Surrender Value is zero. ** Policy terminates prior to age 85. THE HYPOTHETICAL INVESTMENT RESULTS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN, AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY A POLICYHOLDER, AND THE DIFFERENT INVESTMENT RETURNS FOR THE FUNDS. THE ACCUMULATION VALUE, CASH SURRENDER VALUE, AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN ABOVE IF THE ACTUAL INVESTMENT RESULTS APPLICABLE TO THE POLICY AVERAGE 6% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY US OR BY THE FUNDS THAT THESE HYPOTHETICAL RETURNS CAN BE ACHIEVED FOR ANY ONE YEAR, OR SUSTAINED OVER ANY PERIOD OF TIME. C-10 RELIASTAR LIFE INSURANCE COMPANY FLEXIBLE PREMIUM TO AGE 100 MALE ISSUE AGE: 40 NON-SMOKER $1,200.00 ANNUAL PREMIUM $100,000 FACE AMOUNT FACE AMOUNT PLUS PREMIUM DEATH BENEFIT OPTION ASSUMED HYPOTHETICAL GROSS ANNUAL INVESTMENT RATE OF RETURN: 12%
GUARANTEED COSTS CURRENT COSTS ---------------------------------------------- ------------------------------------------------- ACCUMULATION CASH SURRENDER DEATH ACCUMULATION CASH SURRENDER DEATH POLICY VALUE VALUE BENEFIT VALUE VALUE BENEFIT YEAR (1) (2) (1) (2) (1) (2) (1) (2) (1) (2) (1) (2) - -------- -------------- ---------------- ---------- -------------- ---------------- ------------- 1 574 0 101,200* 749 0 101,200* 2 1,188 0 102,400* 1,578 0 102,400* 3 1,845 295 103,600 2,497 948 103,600 4 2,548 1,219 104,800 3,511 2,182 104,800 5 3,298 2,191 106,000 4,613 3,506 106,000 6 4,097 3,211 107,200 5,817 4,931 107,200 7 4,948 4,284 108,400 7,129 6,465 108,400 8 5,856 5,413 109,600 8,564 8,121 109,600 9 6,822 6,600 110,800 10,129 9,908 110,800 10 7,849 7,849 112,000 11,837 11,837 112,000 11 9,223 9,223 113,200 13,983 13,983 113,200 12 10,692 10,692 114,400 16,323 16,323 114,400 13 12,258 12,258 115,600 18,872 18,872 115,600 14 13,924 13,924 116,800 21,651 21,651 116,800 15 15,694 15,694 118,000 24,692 24,692 118,000 20 26,313 26,313 124,000 44,898 44,898 124,000 AGE 70 58,719 58,719 136,000 133,516 133,516 154,879 75 83,559 83,559 142,000 227,290 227,290 243,200 80 123,001 123,001 148,000 383,417 383,417 402,588 85 201,350 201,350 211,418 638,107 638,107 670,013 90 323,803 323,803 340,000 1,048,199 1,048,199 1,100,610 95 521,211 521,211 526,424 1,725,953 1,725,953 1,743,213 100 868,017 868,017 868,018 2,894,795 2,894,795 2,894,795
- -------------------------------------------------------------------------------- (1) Assumes a $1,200.00 premium (which exceeds the Annualized Minimum Monthly Premium) is paid at the beginning of each Policy Year. Values will be different if premiums are paid with a different frequency or in different amounts. (2) Assumes that no policy loans or partial withdrawals have been made. Excessive loans or withdrawals may cause the policy to lapse because of insufficient Cash Surrender Value. * Based on (1) and (2) above, the Death Benefit Guarantee is in effect during the years shown. Therefore, the Policy remains in force even though the Cash Surrender Value is zero. THE HYPOTHETICAL INVESTMENT RESULTS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN, AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY A POLICYHOLDER, AND THE DIFFERENT INVESTMENT RETURNS FOR THE FUNDS. THE ACCUMULATION VALUE, CASH SURRENDER VALUE, AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN ABOVE IF THE ACTUAL INVESTMENT RESULTS APPLICABLE TO THE POLICY AVERAGE 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY US OR BY THE FUNDS THAT THESE HYPOTHETICAL RETURNS CAN BE ACHIEVED FOR ANY ONE YEAR, OR SUSTAINED OVER ANY PERIOD OF TIME. C-11 APPENDIX D MAXIMUM SURRENDER CHARGES PER $1,000 OF FACE AMOUNT
ISSUE ISSUE AGE* MALE FEMALE UNISEX AGE* MALE FEMALE UNISEX - ------- ---------- ---------- ---------- ------ ----------- ----------- ----------- 0 $ 5.35 $ 5.30 $ 5.34 43 $ 24.39 $ 22.02 $ 23.90 1 5.58 5.44 5.55 44 25.25 22.68 24.72 2 5.81 5.58 5.76 45 26.00 23.39 25.60 3 6.04 5.72 5.98 46 27.08 24.12 26.47 4 6.27 5.86 6.19 47 28.06 24.89 27.40 5 6.50 6.00 6.40 48 29.12 25.72 28.41 6 6.73 6.14 6.61 49 30.25 26.61 29.49 7 6.96 6.28 6.82 50 31.48 27.56 30.66 8 7.19 6.42 7.04 51 32.80 28.57 31.91 9 7.42 6.56 7.25 52 34.22 29.66 33.26 10 7.65 6.70 7.46 53 35.75 30.81 34.70 11 7.88 6.84 7.67 54 37.40 32.05 36.26 12 8.11 6.98 7.88 55 38.75 33.37 37.90 13 8.34 7.12 8.10 56 39.84 34.68 39.09 14 8.57 7.26 8.31 57 40.92 36.08 40.28 15 8.80 7.40 8.52 58 42.01 37.62 41.46 16 9.17 7.71 8.88 59 43.09 39.28 42.65 17 9.54 8.02 9.24 60 44.18 41.10 43.84 18 9.91 8.33 9.59 61 45.26 43.08 45.03 19 10.28 8.64 9.95 62 46.35 45.24 46.22 20 10.65 8.95 10.31 63 47.43 47.30 47.40 21 11.02 9.26 10.67 64 48.52 48.90 48.59 22 11.39 9.57 11.03 65 49.60 50.50 49.78 23 11.76 9.88 11.38 66 49.04 50.07 49.25 24 12.13 10.19 11.74 67 48.48 49.64 48.71 25 12.50 10.50 12.10 68 47.92 49.21 48.18 26 13.15 11.05 12.73 69 47.36 48.78 47.64 27 13.80 11.60 13.36 70 46.80 48.35 47.11 28 14.45 12.15 13.99 71 46.24 47.92 46.58 29 15.10 12.70 14.62 72 45.68 47.49 46.04 30 15.75 13.25 15.25 73 45.12 47.06 45.51 31 16.40 13.80 15.88 74 44.56 46.63 44.97 32 17.05 14.35 16.51 75 44.00 46.20 44.44 33 17.70 14.90 17.14 76 43.49 46.12 44.01 34 18.35 15.45 17.77 77 42.97 46.05 43.59 35 19.00 16.00 18.40 78 42.46 45.97 43.16 36 19.70 16.85 19.13 79 41.94 45.89 42.73 37 20.30 17.70 19.86 80 41.43 45.82 42.30 38 20.87 18.55 20.54 81 40.91 45.74 41.88 39 21.48 19.40 21.12 82 40.40 45.66 41.45 40 22.14 20.25 21.75 83 39.88 45.58 41.02 41 22.84 20.81 22.42 84 39.37 45.51 40.59 42 23.59 21.40 23.14 85 38.85 45.43 40.16
- ------------------ * Based on the Insured's age on the Policy Date, or on the Effective Date of any increase in face amount, as appropriate. D-1 APPENDIX E MONTHLY AMOUNT CHARGES PER $1,000 OF FACE AMOUNT*
MALE FEMALE UNISEX ----------------------------- ----------------------------- ---------------------------- ISSUE FACE AMOUNT FACE AMOUNT FACE AMOUNT FACE AMOUNT FACE AMOUNT FACE AMOUNT AGE** BAND 1 BANDS 2-4 BAND 1 BANDS 2-4 BAND 1 BANDS 2-4 - ------- ------------- ------------- ------------- ------------- ------------- ------------ 0 $ 0.045 $ 0.020 $ 0.020 $ 0.006 $ 0.040 $ 0.017 1 0.050 0.020 0.025 0.006 0.045 0.017 2 0.055 0.020 0.029 0.006 0.049 0.017 3 0.060 0.020 0.033 0.006 0.054 0.017 4 0.065 0.020 0.037 0.006 0.059 0.017 5 0.070 0.020 0.041 0.006 0.064 0.017 6 0.075 0.023 0.045 0.008 0.069 0.020 7 0.080 0.026 0.050 0.009 0.074 0.022 8 0.085 0.029 0.054 0.011 0.078 0.025 9 0.090 0.032 0.058 0.012 0.083 0.028 10 0.095 0.035 0.062 0.014 0.088 0.030 11 0.100 0.038 0.066 0.015 0.093 0.033 12 0.105 0.041 0.070 0.017 0.098 0.036 13 0.110 0.044 0.075 0.018 0.103 0.038 14 0.115 0.047 0.079 0.020 0.107 0.041 15 0.120 0.050 0.083 0.021 0.112 0.044 16 0.121 0.052 0.084 0.024 0.114 0.046 17 0.123 0.054 0.085 0.027 0.115 0.049 18 0.124 0.057 0.087 0.030 0.117 0.051 19 0.126 0.059 0.088 0.034 0.118 0.054 20 0.127 0.061 0.089 0.037 0.119 0.056 21 0.129 0.064 0.090 0.040 0.121 0.059 22 0.130 0.066 0.092 0.043 0.122 0.061 23 0.132 0.068 0.093 0.046 0.124 0.064 24 0.133 0.071 0.094 0.049 0.125 0.066 25 0.135 0.073 0.095 0.052 0.127 0.069 26 0.143 0.080 0.102 0.059 0.134 0.076 27 0.151 0.088 0.108 0.065 0.142 0.083 28 0.159 0.095 0.114 0.072 0.150 0.090 29 0.167 0.102 0.120 0.078 0.157 0.097 30 0.175 0.110 0.127 0.085 0.165 0.105 31 0.183 0.117 0.133 0.092 0.173 0.112 32 0.191 0.124 0.139 0.098 0.180 0.119 33 0.199 0.132 0.145 0.105 0.188 0.126 34 0.207 0.139 0.152 0.111 0.196 0.133 35 0.215 0.146 0.158 0.118 0.203 0.141 36 0.228 0.162 0.169 0.128 0.216 0.155 37 0.242 0.177 0.180 0.138 0.229 0.169 38 0.255 0.192 0.190 0.148 0.242 0.183 39 0.269 0.208 0.201 0.159 0.255 0.198 40 0.282 0.223 0.212 0.169 0.268 0.212 41 0.296 0.238 0.223 0.179 0.281 0.226 42 0.309 0.254 0.234 0.189 0.294 0.241
- ------------------ * Rates for Face Amount Band 1 rates apply to the initial Face Amount if less than $100,000, and to any increase in face amount less than $100,000. Rates for Face Amount Bands 2-4 apply to the initial Face Amount if $100,000 or larger, and to any increase in face amount of $100,000 or larger. ** Based on the Insured's age on the Policy Date, or on the Effective Date of any increase in face amount, as appropriate. E-1 APPENDIX E MONTHLY AMOUNT CHARGES PER $1,000 OF FACE AMOUNT*
MALE FEMALE UNISEX ----------------------------- ----------------------------- ---------------------------- ISSUE FACE AMOUNT FACE AMOUNT FACE AMOUNT FACE AMOUNT FACE AMOUNT FACE AMOUNT AGE** BAND 1 BANDS 2-4 BAND 1 BANDS 2-4 BAND 1 BANDS 2-4 - ------- ------------- ------------- ------------- ------------- ------------- ------------ 43 0.323 0.269 0.245 0.199 0.307 0.255 44 0.336 0.284 0.255 0.209 0.320 0.269 45 0.350 0.300 0.266 0.220 0.333 0.284 46 0.375 0.321 0.281 0.236 0.356 0.304 47 0.400 0.343 0.296 0.252 0.380 0.324 48 0.426 0.364 0.311 0.268 0.403 0.345 49 0.451 0.386 0.326 0.284 0.426 0.365 50 0.477 0.407 0.341 0.300 0.450 0.386 51 0.502 0.429 0.356 0.317 0.473 0.406 52 0.527 0.450 0.371 0.333 0.496 0.427 53 0.553 0.472 0.386 0.349 0.520 0.447 54 0.578 0.493 0.401 0.365 0.543 0.467 55 0.604 0.515 0.416 0.381 0.566 0.488 56 0.652 0.556 0.450 0.410 0.611 0.527 57 0.700 0.597 0.483 0.438 0.656 0.565 58 0.747 0.639 0.516 0.467 0.701 0.604 59 0.795 0.680 0.550 0.495 0.746 0.643 60 0.843 0.721 0.583 0.524 0.791 0.682 61 0.891 0.763 0.616 0.552 0.836 0.720 62 0.939 0.804 0.650 0.581 0.881 0.759 63 0.987 0.845 0.683 0.609 0.926 0.798 64 1.035 0.887 0.716 0.638 0.971 0.837 65 1.083 0.928 0.750 0.666 1.016 0.876 66 1.191 1.000 0.816 0.721 1.116 0.944 67 1.300 1.072 0.883 0.775 1.216 1.013 68 1.408 1.144 0.950 0.830 1.316 1.081 69 1.516 1.217 1.016 0.884 1.416 1.150 70 1.625 1.289 1.083 0.939 1.516 1.219 71 1.733 1.361 1.150 0.993 1.616 1.287 72 1.841 1.433 1.216 1.048 1.716 1.356 73 1.950 1.505 1.283 1.102 1.816 1.425 74 2.058 1.577 1.350 1.157 1.916 1.493 75 2.166 1.650 1.416 1.211 2.016 1.562 76 2.283 1.710 1.504 1.257 2.127 1.619 77 2.400 1.770 1.591 1.302 2.238 1.676 78 2.516 1.830 1.679 1.348 2.349 1.733 79 2.633 1.890 1.766 1.393 2.460 1.790 80 2.750 1.950 1.854 1.439 2.570 1.847 81 2.866 2.010 1.941 1.484 2.681 1.904 82 2.983 2.070 2.029 1.530 2.792 1.962 83 3.100 2.130 2.116 1.575 2.903 2.019 84 3.216 2.190 2.204 1.621 3.014 2.076 85 3.333 2.250 2.291 1.666 3.125 2.133
- ------------------ * Rates for Face Amount Band 1 rates apply to the initial Face Amount if less than $100,000, and to any increase in face amount less than $100,000. Rates for Face Amount Bands 2-4 apply to the initial Face Amount if $100,000 or larger, and to any increase in face amount of $100,000 or larger. ** Based on the Insured's age on the Policy Date, or on the Effective Date of any increase in face amount, as appropriate. E-2 UNDERTAKINGS TO FILE REPORTS Subject to the terms and conditions of Section 15(d) of the Securities and Exchange Act of 1934, the undersigned Registrant hereby undertakes to file with the Securities and Exchange Commission such supplementary and periodic information, documents and reports as may be prescribed by any rule or regulation of the Commission heretofore or hereafter duly adopted pursuant to authority conferred in that Section. RULE 484 UNDERTAKING Insofar as indemnification for liability arising under the Securities Act of 1933 (the "Act") may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. "REASONABLENESS" REPRESENTATION PURSUANT TO 26(e)(2)(A) OF THE INVESTMENT COMPANY ACT OF 1940 Depositor represents that the fees and charges deducted under the flexible premium variable life insurance policy, in the aggregate, are reasonable in relation to the services rendered, the expenses expected to be incurred, and the risks assumed by ReliaStar Life Insurance Company. II-1 SIGNATURES As required by the Securities Act of 1933, and the Investment Company Act of 1940, Registrant has caused this Pre-effective Amendment No. 1 to Form S-6 Registration Statement to be signed on its behalf, in the City of Minneapolis and State of Minnesota, on this 2nd day of April, 1999. SELECT*LIFE VARIABLE ACCOUNT (Registrant) By: RELIASTAR LIFE INSURANCE COMPANY (Depositor) By /S/ JOHN G. TURNER ------------------------------------- John G. Turner, Chairman and Chief Executive Officer As required by the Securities Act of 1933, Depositor has caused this Pre-effective Amendment No. 1 to the Registration Statement to be signed on its behalf, in the City of Minneapolis and State of Minnesota, on this 2nd day of April, 1999. RELIASTAR LIFE INSURANCE COMPANY (Depositor) By /S/ JOHN G. TURNER ------------------------------------- John G. Turner, Chairman and Chief Executive Officer As required by the Securities Act of 1933, this Pre-effective Amendment No. 1 to this Registration Statement has been signed on this 2nd day of April, 1999 by the following directors and officers of Depositor in the capacities indicated:
SIGNATURE TITLE --------- ----- /S/ JOHN G. TURNER Chairman and Chief Executive Officer ------------------------------------- John G. Turner /S/ JAMES R. MILLER Senior Vice President, Chief Financial Officer ------------------------------------- and Treasurer James R. Miller
*Richard R. Crowl *Mark S. Jordahl *James R. Miller *Michael J. Dubes *Kenneth U. Kuk *Robert C. Salipante *John H. Flittie *Susan W. A. Mead *John G. Turner *Wayne R. Huneke *William R. Merriam A majority of the Board of Directors Stewart D. Gregg, by signing his name hereto, does hereby sign this document on behalf of each of the above-named directors of ReliaStar Life Insurance Company pursuant to powers of attorney duly executed by such persons. /S/ STEWART D. GREGG ---------------------------------------- Stewart D. Gregg, Attorney-In-Fact II-2 PART II CONTENTS OF REGISTRATION STATEMENT This Registration Statement comprises the following papers and documents: The Facing Sheet. The general form of Prospectus, consisting of 127 pages. Undertakings to file reports. Rule 484 Undertaking. Representation pursuant to Section 26(e)(2)(A). The signatures. Written consents of the following persons: 1. Stewart D. Gregg, Esquire -- Filed as part of EX-99.2. 2. Craig A. Krogstad, FSA, MAAA -- Filed as part of EX-99.C6. 3. Auditor's Consent -- Filed as part of EX-99.C1. The following exhibits: 1. The following exhibits correspond to those required by Paragraph A of the instructions as to exhibits in Form N-8B-2: A. (1) Resolutions of Board of Directors of Northwestern National Life Insurance Company ("NWNL") establishing the Select*Life Variable Account. (Filed as an Exhibit in S-6EL24 on December 23, 1996, Accession Number 0000897899-96-000017, CIK 0000897899 and incorporated herein by reference.) (2) Not applicable. (3) (a) General Distributor Agreement between Washington Square Securities, Inc. and ReliaStar Life. (Filed as part of Select*Life Variable Account S-6EL24 on 12-23-96, Accession Number 0000897899-96-000017, CIK 0000897899 and incorporated herein by reference.) (3) (b) Specimens of Selling Agreements. (Filed as part of Select*Life Variable Account S-6EL24 on 12-23-96, Accession Number 0000897899-96-000017, CIK 0000897899 and incorporated herein by reference.) (4) Not applicable. (5) (a) Form of Policy (Filed in S-6 on December 22, 1998, File No. 333-69431 and incorporated herein and by reference) (5) (b) Accelerated Benefit Rider (Filed in S-6 on December 22, 1998, File No. 333-69431 and incorporated herein and by reference) (5) (c) Children's Insurance Rider (Filed in S-6 on December 22, 1998, File No. 333-69431 and incorporated herein and by reference) (5) (d) Additional Insured Rider (Filed in S-6 on December 22, 1998, File No. 333-69431 and incorporated herein and by reference) (5) (e) Insured's Cost of Living Rider (Filed in S-6 on December 22, 1998, File No. 333-69431 and incorporated herein and by reference) (5) (f) Waiver of Monthly Deduction Rider (Filed in S-6 on December 22, 1998, File No. 333-69431 and incorporated herein and by reference) (5) (g) Accidental Death Benefit Rider (Filed in S-6 on December 22, 1998, File No. 333-69431 and incorporated herein and by reference) (5) (h) Waiver of Specified Premium Rider (Filed in S-6 on December 22, 1998, File No. 333-69431 and incorporated herein and by reference) II-3 (5) (i) Term Insurance Rider (Filed in S-6 on December 22, 1998, File No. 333-69431 and incorporated herein and by reference) (5) (j) Extended Death Benefit Guarantee Rider (Filed in S-6 on December 22, 1998, File No. 333-69431 and incorporated herein and by reference) (6) (a) Amended Articles of Incorporation of ReliaStar Life.* (Filed as part of Select*Life Variable Account S-6EL24 on 12-23-96, Accession Number 0000897899-96-000017, CIK 0000897899 and incorporated herein by reference.) (6) (b) Amended By-Laws of ReliaStar Life.* (Filed as part of Select*Life Variable Account S-6EL24 on 12-23-96, Accession Number 0000897899-96-000017, CIK 0000897899 and incorporated herein by reference.) (7) Not applicable. (8) (a) Participation Agreement with Fidelity's Variable Insurance Products Fund and Fidelity Distributors Corporation and Amendments Nos. 1-8. (Filed as part of Select*Life Variable Account S-6EL24 on 12-23-96, Accession Number 0000897899-96-000017, CIK 0000897899 and incorporated herein by reference.) (8) (b) Form of Amendment No. 10 to Participation Agreement with Fidelity's Variable Insurance Products Fund and Fidelity Distributors Corporation. (8) (c) Participation Agreement with Fidelity's Variable Insurance Products Fund II and Fidelity Distributors Corporation and Amendments Nos. 1-7. (Filed as part of Select*Life Variable Account S-6EL24 on 12-23-96, Accession Number 0000897899-96-000017, CIK 0000897899 and incorporated herein by reference.) (8) (d) Form of Amendment No. 9 to Participation Agreement with Fidelity's Variable Insurance Products Fund II and Fidelity Distributors Corporation. (8) (e) Form of Service Agreement and Contract between ReliaStar Life Insurance Company, WSSI, and Fidelity Investments Institutional Operations Company and Distributors Corporation dated January 1, 1997. (Filed in S-6EL24/A on March 31, 1997, File No. 333-18517, and incorporated herein by reference.) (8) (f) Participation Agreement with Putnam Capital Manager Trust and Putnam Mutual Funds Corp. and Amendments Nos. 1-2. (Filed in S-6EL24 on December 23, 1996, File No. 333-18517, and incorporated herein by reference.) (8) (g) Form of Service Agreement by and between ReliaStar Life Insurance Company and Janus Capital Corporation. (Filed in 485BPOS on August 4, 1997, File No. 2-95392 and incorporated herein and by reference.) (8) (h) Form of Service Agreement by and between ReliaStar Life Insurance Company and Fred Alger Management, Inc. (Filed in 485BPOS on August 4, 1997, File No. 2-95392 and incorporated herein and by reference.) (8) (i) Form of Service Agreement by and between ReliaStar Life Insurance Company and OpCap Advisors. (Filed in 485BPOS on August 4, 1997, File No. 2-95392 and incorporated herein and by reference.) (8) (j) Form of Service Agreement by and between ReliaStar Life Insurance Company and Neuberger Berman Management Incorporated ("NBMI"). (Filed in 485BPOS on August 4, 1997, File No. 2-95392 and incorporated herein and by reference.) (8) (k) Form of Participation Agreement by and among ReliaStar Life Insurance Company, Neuberger Berman Advisers Management Trust, Advisers Managers Trust and Neuberger Berman Management Inc. (Filed in 485BPOS on August 4, 1997, File No. 2-95392 and incorporated herein and by reference.) Form of Amendment No. 1 to Participation Agreement by and among ReliaStar Life Insurance Company, Neuberger Berman Advisers Management Trust, Advisers Managers Trust and Neuberger Berman Management Inc. II-4 (8) (l) Form of Participation Agreement by and between ReliaStar Life Insurance Company and Janus Aspen Series. (Filed in 485BPOS on August 4, 1997, File No. 2-95392 and incorporated herein and by reference.) (8) (m) Form of Participation Agreement by and between ReliaStar Life Insurance Company and Fred Alger Management, Inc., (Filed in 485BPOS on August 4, 1997, File No. 2-95392 and incorporated herein and by reference.) (8) (n) Form of Participation Agreement by and between ReliaStar Life Insurance Company and OpCap Advisors. (Filed in 485BPOS on August 4, 1997, File No. 2-95392 and incorporated herein and by reference.) (9) Not applicable. (10) (a) Policy Application Form. (b) Supplement to Policy Application Form. 2. Opinion and consent of Stewart D. Gregg, Esquire, as to the legality of the Securities being registered. See EX-99.2. 3. Not applicable. 4. Not applicable. EX-99.C1. Auditors' Consent. EX-99.C2. Not applicable. EX-99.C3. Not applicable. EX-99.C4. See EX-99.2. EX-99.C5. Not applicable. EX-99.C6. Actuarial Opinion and Consent. EX-99.D1. Memorandum describing the Company's issuance, transfer and redemption procedures for the Policies and the Company's procedure for conversion to a fixed benefit policy. EX-24. Powers of Attorney. (Filed as an Exhibit to Form S-6 on December 22, 1998, File No. 333-69431 and incorporated herein and by reference) Powers of Attorney. Richard R. Crowl Michael J. Dubes John H. Flittie Wayne R. Huneke Mark S. Jordahl Kenneth U. Kuk Susan W. A. Mead William R. Merriam James R. Miller Robert C. Salipante John G. Turner II-5 EX-99.A8B 2 AMENDMENT NO. 10 TO THE PARTICIPATION AGREEMENT AMENDMENT NO. 10 Amendment to the Participation Agreement among ReliaStar Life Insurance Company (formerly Northwestern National Life Insurance Company (the "Company"), Variable Insurance Products Fund I (the "Fund") and Fidelity Distributors Corporation (the "Underwriter") dated January 1, 1991 (the "Agreement"). WHEREAS each of the parties desire to expand the ability of the Company to develop and market Variable Life Insurance Policies and Variable Annuity Contracts which have separate accounts using the Fund as the investment vehicle for said separate accounts. The Company, Underwriter and Fund hereby agree to amend Schedule A of the Agreement by inserting the following Additional item therein: 7 Flexible Premium Variable Life Insurance Policy 85-484, and the State exceptions and, upon making such insertion, replaces the existing Schedule A in its entirety with the attached new Schedule A. dated March 25, 1999. IN WITNESS WHEREOF, each of the parties has caused this Amendment to be executed in its name and on its behalf by its duly authorized representative as of March 25, 1999. ReliaStar Life Insurance Company By: ------------------------------------ Michael S. Fischer Title: Vice President and Associate General Counsel By: ------------------------------------ John A. Johnson Title: Vice President and Actuary Personal Financial Services Variable Insurance Products Fund I By: ------------------------------------ Name: ---------------------------------- Title: --------------------------------- Fidelity Distributors Corporation By: ------------------------------------ Name: ---------------------------------- Title: -------------------------------- SCHEDULE A CONTRACTS 1. Flexible Premium Individual Deferred Retirement Annuity Contract Form Numbers 81-870 and 81-873. 2. Flexible Premium Variable Life Insurance Policy Contract Form Numbers 83-300, 83-301, 83-302, 83-304, 83-305, 83-306, 83-307 or 83-309. 3. Flexible Premium Variable Life Insurance Policy Contract Form No. 84-795, and the state exceptions. 4. Flexible Premium Individual Deferred Retirement Annuity Contract Form No. 84-420, and the state exceptions. 5. Flexible Premium Individual Deferred Retirement Annuity Contract Form No. 84-420, and the state exceptions. 6. Survivorship Flexible Premium Variable Life Insurance Policy Form No. 85-230 and the state exceptions. 7. Flexible Premium Variable Life Insurance Policy Contract Form No. 85-484 and the state exception. EX-99.A8D 3 AMENDMENT NO. 9 TO THE PARTICIPATION AGREEMENT AMENDMENT NO. 9 Amendment to the Participation Agreement among ReliaStar Life Insurance Company (formerly Northwestern National Life Insurance Company (the "Company"), Variable Insurance Products Fund II (the "Fund") and Fidelity Distributors Corporation (the "Underwriter") dated January 1, 1991 (the "Agreement"). WHEREAS each of the parties desire to expand the ability of the Company to develop and market Variable Life Insurance Policies and Variable Annuity Contracts which have separate accounts using the Fund as the investment vehicle for said separate accounts. The Company, Underwriter and Fund hereby agree to amend Schedule B of the Agreement by inserting the following Additional item therein: 7 Flexible Premium Variable Life Insurance Policy 85-484, and the State exceptions and, upon making such insertion, replaces the existing Schedule B in its entirety with the attached new Schedule B. dated March 25, 1999. IN WITNESS WHEREOF, each of the parties has caused this Amendment to be executed in its name and on its behalf by its duly authorized representative as of March 25, 1999. ReliaStar Life Insurance Company By: ------------------------------------ Michael S. Fischer Title: Vice President and Associate General Counsel By: ------------------------------------ John A. Johnson Title: Vice President and Actuary Personal Financial Services Variable Insurance Products Fund II By: ------------------------------------ Name: ---------------------------------- Title: --------------------------------- Fidelity Distributors Corporation By: ------------------------------------ Name: ---------------------------------- Title: -------------------------------- SCHEDULE B CONTRACTS 1. Flexible Premium Individual Deferred Retirement Annuity Contract Form Numbers 81-870 and 81-873. 2. Flexible Premium Variable Life Insurance Policy Contract Form Numbers 83-300, 83-301, 83-302, 83-304, 83-305, 83-306, 83-307 or 83-309. 3. Flexible Premium Variable Life Insurance Policy Contract Form No. 84-705, and the state exceptions. 4. Flexible Premium Individual Deferred Retirement Annuity Contract Form No. 84-420, and the state exceptions. 5. Flexible Premium Individual Deferred Retirement Annuity Contract Form No. 84-420, and the state exceptions. 6. Survivorship Flexible Premium Variable Life Insurance Policy Form No. 85-230 and the state exceptions. 7. Flexible Premium Variable Life Insurance Policy Contract Form No. 85-484 and the state exception. EX-99.A8.K 4 AMENDMENT NO 1 TO THE FUND PARTICIPATION AGREEMENT EXHIBIT 99.A8.K AMENDMENT NO. 1 TO THE FUND PARTICIPATION AGREEMENT This AMENDMENT NO. 1, dated as of February 1, 1999, among RELIASTAR LIFE INSURANCE COMPANY ("LIFE COMPANY"), and NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST ("TRUST"), ADVISERS MANAGERS TRUST ("MANAGERS TRUST"), and NEUBERGER BERMAN MANAGEMENT INC. ("NB MANAGEMENT"), is made to the Fund Participation Agreement, dated as of August 8, 1997, among LIFE COMPANY, TRUST, MANAGERS TRUST and NB MANAGEMENT (the "Agreement"). Terms defined in the Agreement are used herein as therein defined. WHEREAS, the parties desire to amend Appendices A and B to the Agreement to add one or more Portfolios and Series. NOW, THEREFORE, in consideration of the promises and mutual covenants hereinafter contained, the parties agree as follows: 1. Appendix A of the Agreement is hereby deleted and replaced with new Appendix A attached hereto. 2. Appendix B of the Agreement is hereby deleted and replaced with new Appendix B attached hereto. 3. Except as modified hereby, all other terms and conditions of the Agreement shall remain in full force and effect. 3. This Amendment No. 1 may be executed in two or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same First Amendment. NEUBERGER BERMAN NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST MANAGEMENT INC. By: /s/ By: /s/ -------------------------------- --------------------------------- Name: Name: Title: Title: ADVISERS MANAGERS TRUST RELIASTAR LIFE INSURANCE COMPANY By: /s/ By: /s/ -------------------------------- --------------------------------- Name: Name: Title: Title: APPENDIX A Neuberger Berman Advisers Corresponding Series of Management Trust and its Series (Portfolios) Advisers Managers Trust (Series) - -------------------------------------------- -------------------------------- Balanced Portfolio AMT Balanced Investments Growth Portfolio AMT Growth Investments Guardian Portfolio AMT Guardian Investments International Portfolio AMT International Investments Limited Maturity Bond Portfolio AMT Limited Maturity Bond Investments Liquid Asset Portfolio AMT Liquid Asset Investments Mid-Cap Growth Portfolio AMT Mid-Cap Growth Investments Partners Portfolio AMT Partners Investments Socially Responsive Portfolio AMT Socially Responsive Investments 2 APPENDIX B Separate Accounts Selected Portfolios - ----------------- ------------------- Select Variable Account Partners Portfolio Limited Maturity Bond Portfolio Socially Responsive Portfolio Select Life Variable Account Partners Portfolio Limited Maturity Bond Portfolio Socially Responsive Portfolio 3 EX-99.A10.A 5 LIFE INSURANCE APPLICATION LIFE INSURANCE APPLICATION RELIASTAR RELIASTAR LIFE INSURANCE COMPANY ReliaStar Life Insurance Company (We) TEMPORARY INSURANCE AGREEMENT AND RECEIPT (RECEIPT) PROPOSED PRIMARY INSURED'S NAME (YOU) __________________________________________ Notice: The insurance you applied for is not now in effect. If, at the time all the Conditions in the Receipt have been met, and the Receipt has not ended, we will either: 1) Pay the Temporary Insurance Amount if an Event listed in the Table of Benefits (Table) occurs; or 2) Issue the amount of insurance applied for (limited by the amount listed for that type of insurance in the Table) if we can insure all Proposed Insureds on the basis applied for in the application. A. CONDITIONS 1. At least 10% of the initial annual premium is paid (one monthly premium if the pre-authorized check method of collection is used), on all insurance applied for with this application; or a government allotment, account deduction or other premium payment authorization form is signed and delivered to the agent with the application; or ownership of one or more life insurance policies on the life of any Proposed Insured having cash surrender values on the application date at least equal to the lesser of $1000.00 or the initial minimum annual premium of all insurance applied for with this application has been assigned to us under an Agreement for the Exchange of Insurance Policies under Section 1035 of the Internal Revenue Code. 2. All parts of the application, including medical exams and tests, if required, are completed and no material misstatements are made. 3. No Proposed Insured has: a) In the last 12 months had any known or suspected heart attack, stroke, or cancer, other than of the skin (except melanoma), or been treated by any physician or other practitioner for any of these conditions; b) Within the last 60 days been advised by any physician or other practitioner to have any diagnostic test or surgery not yet performed; or c) In the last 10 years been diagnosed and/or treated by a member of the medical profession for positive HIV (Human Immunodeficiency Virus) or AIDS (Acquired Immunodeficiency Syndrome). 4. An Event or change in insurability, which occurs after all the other Conditions were met, was not the result of an intentional act. B. AMOUNT The Temporary Insurance Amount in this and ALL OTHER RECEIPTS still in effect is the insurance applied for or the amount listed in the Table for that Event, whichever amount is less. No other benefit will be provided if the Temporary Insurance Amount is paid.
TABLE OF BENEFITS - EVENT TYPE OF INSURANCE AMOUNT (INCLUDING ADB) 1. Death (natural or accidental) of Any combination of Life, AIR & TIR $500,000 per life Proposed Primary or Additional Insured 2. Death of both Proposed Primary Any combination of Survivorship Life $500,000 total and Joint Insureds and Survivorship Term Insurance 3. Death of the Proposed Insured Child Children's Insurance Rider-CIR $10,000 per child 4. Death of the Proposed Recognized Applicant Waiver on Recognized Applicant-RA Waiver of Premium until the Proposed Insured Child reaches age 25
C. BENEFICIARY If Event 1 or 2 occurs, we will pay the Temporary Insurance Amount to the beneficiary listed in the application, if living, otherwise to the Proposed Owner or Recognized Applicant. If Event 3 occurs, we will pay the Temporary Insurance Amount to the Proposed Primary Insured. If the Temporary Insurance Amount is not sufficient to pay the designated share to each beneficiary, each share will be reduced pro rata until the total amount of all shares equals the Temporary Insurance Amount. D. PREMIUMS 1. We will first apply premiums to all policies which become effective as a result of the application. 2. We will refund the premiums if all these conditions are met: a) No claim is paid under this Receipt; b) No coverage becomes effective under the policy applied for; and c) No coverage becomes effective under a policy we offer other than the policy applied for at the time of the application. 3. We will keep part of the premium equal to the premium for the kind, amount, and period of coverage (but not less than one month) given under this Receipt if a benefit is paid under the Receipt. Any remaining premium will be refunded. 4. Cash surrender values of life insurance policies assigned to us under an Agreement for the Exchange of Insurance Policies under Section 1035 of the Internal Revenue Code will not be considered premiums for purposes of this Receipt until the cash surrender value is received by us at our Home Office and the Temporary Insurance provided under this Receipt has not ended in accordance with E. E. TERMINATION The Temporary Insurance under this Receipt will end at the earliest of: 1. The date our Home Office approves the application as applied for; 2. The date the Proposed Owner or Recognized Applicant is offered: a) A policy other than that applied for; b) A notice that the Temporary Insurance has ended; or c) A notice rejecting the application; 3. The date an Event listed in the Table occurs; or 4. The date 180 days after the date of this Receipt. No agent can change this Receipt. This Receipt is not effective if given for a check or draft that is not honored. All premium checks must be made payable to ReliaStar Life Insurance Company. Do not make check payable to the agent or leave the payee blank. AGENT'S STATEMENT: I received $___________ with the application bearing the same date as this Receipt. Date Agent Agent's Adddress - ---------- ---------------------------- ------------------------------------ 45675a Rev. 6/98 LIFE INSURANCE APPLICATION RELIASTAR RELIASTAR LIFE INSURANCE COMPANY This application consists of sections A, B, C, D, E, F, J, L and O in all cases and sections G, H, I, K, M, N, the medical exam and supplements when required by the underwriting rules of the Company. - -------------------------------------------------------------------------------- SECTION A. PROPOSED PRIMARY INSURED INFORMATION - -------------------------------------------------------------------------------- 1. First Name MI Last Name 2. Social Security Number - - ------------------------ ---- ------------------ ------------------------- 3. Date of Birth 4. Sex 5. Birth State 6. Country / / [ ] Male [ ] Female -------------- ------------------- ------------------ ------------------ 7. Home Phone Number 8. Business Phone Number 9. Driver's License Number State ( ) ( ) ----------------- ------------------------ -------------------------- ----- 10. Residence Street Address City State Zip Code ------------------------------ --------------- ---------- -------------- 11. Address for Premium Notice if City State Zip Code other than Residence ------------------------------ --------------- ---------- -------------- 12. Annual Income 13. Occupation $ ------------------------ ------------------------------------------------ 14. Have you used tobacco in any form in the last 730 days (2 years)? [ ] yes [ ] no If yes, Type Daily Amount ------------------------ ---------------------------------------- 15. Height 16. Weight 17. Weight Change in Last Year ----------- ------------ ----------- 18. Do you have a personal physician or clinic? [ ] yes [ ] no 19. Name, Address and Telephone Number of Personal Physician/Clinic ---------------------------------------------------------------------------- 20. Date Last Consulted 21. Reason for and Results of Consultation / / ------------------------- ----------------------------------------------- - -------------------------------------------------------------------------------- SECTION B. PROPOSED OWNER INFORMATION - -------------------------------------------------------------------------------- Complete if the Owner is other than the Proposed Primary Insured. If the Proposed Primary Insured is a minor, always specify the Owner. 1. First Name or Name of Trust MI Last Name 2. Date of Trust --------------------------- ---- ----------------------- ----------------- 3. Date of Birth 4. Social Security Number or Tax ID Number / / -------------- ------------------------------------------------------------ 5. Residence Street Address City State Zip Code ------------------------------ --------------- ---------- --------------- 6. Relationship to Proposed Primary Insured [ ] Spouse [ ] Child [ ] Parent [ ] Other (specify) - -------------------------------------------------------------------------------- SECTION C. CONTINGENT OWNER INFORMATION - -------------------------------------------------------------------------------- 1. First Name or Name of Trust MI Last Name 2. Date of Trust ---------------------------- ---- ------------------- -------------------- 3. Date of Birth 4. Social Security Number or Tax ID Number / / -------------- ------------------------------------------------------------ 45675a Page 1 Rev. 6/98 LIFE INSURANCE APPLICATION RELIASTAR RELIASTAR LIFE INSURANCE COMPANY - -------------------------------------------------------------------------------- SECTION D. BASE POLICY INFORMATION - -------------------------------------------------------------------------------- MUST ATTACH A COPY OF THE ILLUSTRATION SIGNED BY THE APPLICANT. 1. BASE FACE AMOUNT (Not Including Term Riders) 2. PRODUCT NAME $ -------------------------------------------- ------------------------------- 3. PRODUCT TYPE [ ] Fixed [ ] Variable - (Owner must receive a current prospectus, and section N must be completed if applying for a variable universal life insurance policy.) 4. DEATH BENEFIT OPTION: [ ] Level [ ] Increasing/Variable 5. RATE CLASS QUOTED: [ ] Preferred No-Tobacco [ ] No-Tobacco [ ] Preferred Tobacco [ ] Tobacco [ ] Preferred Nonsmoker [ ] Nonsmoker [ ] Standard [ ] Other -------- - -------------------------------------------------------------------------------- SECTION E. RIDER INFORMATION FOR ALL PRODUCTS - -------------------------------------------------------------------------------- CHECK APPROPRIATE BOX AND/OR ENTER AMOUNTS.
RIDERS: [ ] Accelerated Benefit Rider [ ] Children's Insurance Rider.................[$ ] [ ] Waiver of Monthly Deduction Rider [ ] Extension of Rate Guarantee Rider [ ] Waiver of Specified Premium Rider [ ] Survivorship Term Rider....................[$ ] (Specify Monthly Premium).........[$ ] [ ] Four Year Term Rider (Survivorship Life)...[$ ] [ ] Additional Insured Rider (on Primary Insured)..............[$ ] [ ] Future Purchase Option Rider...............[$ ] [ ] Additional Insured Rider [ ] Other _______________________________......[$ ] (on Additional Insured)...........[$ ] [ ] Other _______________________________......[$ ] [ ] Accidental Death Benefit Rider ...[$ ]
- -------------------------------------------------------------------------------- SECTION F. BENEFICIARY INFORMATION OF PROPOSED PRIMARY AND JOINT INSUREDS - -------------------------------------------------------------------------------- UNLESS OTHERWISE STATED, THE BENEFICIARY DESIGNATION IS REVOCABLE AND BENEFICIARIES OF LIKE CLASS SHALL SHARE EQUALLY WITH RIGHT OF SURVIVORSHIP. 1. PRIMARY BENEFICIARY OF PROPOSED PRIMARY AND JOINT INSUREDS ----------------------------------------------------------------------------- Provide name, address, date of birth, social security number, and relationship to Proposed Insured. If Trust, provide name and date of trust agreement. If Corporation, provide state of incorporation. ----------------------------------------------------------------------------- 2. CONTINGENT BENEFICIARY OF PROPOSED PRIMARY AND JOINT INSUREDS ----------------------------------------------------------------------------- Provide name, address, date of birth, social security number, and relationship to Proposed Insured. If Trust, provide name and date of trust agreement. If Corporation, provide state of incorporation. ----------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECTION G. BENEFICIARY INFORMATION OF PROPOSED ADDITIONAL INSURED - -------------------------------------------------------------------------------- UNLESS OTHERWISE STATED, THE BENEFICIARY DESIGNATION IS REVOCABLE AND BENEFICIARIES OF LIKE CLASS SHALL SHARE EQUALLY WITH RIGHT OF SURVIVORSHIP. 1. PRIMARY BENEFICIARY OF PROPOSED ADDITIONAL INSURED ----------------------------------------------------------------------------- Provide name, address, date of birth, social security number, and relationship to Proposed Additional Insured. If Trust, provide name and date of trust agreement. If Corporation, provide state of incorporation. ----------------------------------------------------------------------------- 45675a Page 2 Rev. 6/98 LIFE INSURANCE APPLICATION RELIASTAR RELIASTAR LIFE INSURANCE COMPANY - -------------------------------------------------------------------------------- SECTION H. PROPOSED ADDITIONAL INSURED OR JOINT INSURED INFORMATION - -------------------------------------------------------------------------------- 1. First Name MI Last Name 2. Social Security Number - - ------------------------ ---- ------------------ ------------------------- 3. Date of Birth 4. Sex 5. Birth State 6. Country / / [ ] Male [ ] Female -------------- ------------------- ------------------ ------------------ 7. Home Phone Number 8. Business Phone Number 9. Driver's License Number State ( ) ( ) ----------------- ------------------------ -------------------------- ----- 10. Residence Street Address City State Zip Code ------------------------------ --------------- ---------- -------------- 12. Annual Income 13. Occupation $ ------------------------ ------------------------------------------------ 14. Have you used tobacco in any form in the last 730 days (2 years)? [ ] yes [ ] no If yes, Type Daily Amount ------------------------ ---------------------------------------- 15. Height 16. Weight 17. Weight Change in Last Year ----------- ------------ ----------- 18. Do you have a personal physician or clinic? [ ] yes [ ] no 19. Name, Address and Telephone Number of Personal Physician/Clinic ---------------------------------------------------------------------------- 20. Date Last Consulted 21. Reason for and Results of Consultation / / ------------------------- ----------------------------------------------- - -------------------------------------------------------------------------------- SECTION I. PROPOSED CHILDREN'S INSURANCE RIDER INFORMATION - -------------------------------------------------------------------------------- PROPOSED INSUREDS
- --------------------- ------ ------------ ----- ---------- --------- ------------------ -------------- ---------- Relationship Amt. of life Proposed Insured's to proposed insurance Date of full name Sex Birthdate Age Height Weight primary insured in force last issue - --------------------- ------ ------------ ----- ---------- --------- ------------------ -------------- ---------- - --------------------- ------ ------------ ----- ---------- --------- ------------------ -------------- ---------- - --------------------- ------ ------------ ----- ---------- --------- ------------------ -------------- ---------- - --------------------- ------ ------------ ----- ---------- --------- ------------------ -------------- ---------- - --------------------- ------ ------------ ----- ---------- --------- ------------------ -------------- ---------- - --------------------- ------ ------------ ----- ---------- --------- ------------------ -------------- ----------
- --------------------- ------------------------------------------------------ ------------ ----------------------- Proposed Date last Insured's name Name, address and phone number of regular physician consulted Reason - --------------------- ------------------------------------------------------ ------------ ----------------------- - --------------------- ------------------------------------------------------ ------------ ----------------------- - --------------------- ------------------------------------------------------ ------------ ----------------------- - --------------------- ------------------------------------------------------ ------------ ----------------------- - --------------------- ------------------------------------------------------ ------------ ----------------------- - --------------------- ------------------------------------------------------ ------------ -----------------------
45675a Page 3 Rev. 6/98 LIFE INSURANCE APPLICATION RELIASTAR RELIASTAR LIFE INSURANCE COMPANY - -------------------------------------------------------------------------------- SECTION J. GENERAL INFORMATION - -------------------------------------------------------------------------------- COMPLETE THE FOLLOWING ON ALL PROPOSED INSUREDS, INCLUDING CHILDREN TO BE COVERED UNDER THE CHILDREN'S INSURANCE RIDER. 1. Life Insurance In Force (If none, check none.) [ ] none
------------------------ -------------------- -------------- -------------- --------------- -------- Personal Business Accidental Date Proposed Insured's Name Company Life Benefit Life Benefit Death Benefit Issued ------------------------ -------------------- -------------- -------------- --------------- -------- ------------------------ -------------------- -------------- -------------- --------------- -------- ------------------------ -------------------- -------------- -------------- --------------- -------- ------------------------ -------------------- -------------- -------------- --------------- -------- ------------------------ -------------------- -------------- -------------- --------------- --------
2. Does any Proposed Insured have any existing life or annuity coverage to be replaced, lapsed, surrendered, or borrowed against? (If yes, please list company, policy number, and amount.).......................... [ ] yes [ ] no
------------------------ -------------------- -------------------------- --------------------------- Proposed Insured's Name Company Policy Number Amount ------------------------ -------------------- -------------------------- --------------------------- ------------------------ -------------------- -------------------------- --------------------------- ------------------------ -------------------- -------------------------- ---------------------------
3. a. Does any Proposed Insured have any other application pending for life insurance?................................................. [ ] yes [ ] no b. If yes, will all applications now pending for life insurance be accepted and placed in force?....................................... [ ] yes [ ] no c. List company(ies) and amount(s) applied for.
------------------------------- ---------------------------------- --------------------------------- Proposed Insured's Name Company Amount Applied For ------------------------------- ---------------------------------- --------------------------------- ------------------------------- ---------------------------------- --------------------------------- ------------------------------- ---------------------------------- ---------------------------------
4. Has any Proposed Insured in the last 12 months had any known or suspected heart attack, stroke, or cancer, other than of the skin (except melanoma), or been treated by any physician or other practitioner for any of these conditions?................................................... [ ] yes [ ] no 5. Has any Proposed Insured in the last 60 days been advised by any physician or other practitioner to have any diagnostic test or surgery not yet performed?.................................................... [ ] yes [ ] no 6. Has any Proposed Insured in the last 10 years been diagnosed and/or treated by a member of the medical profession for positive HIV (Human Immunodeficiency Virus) or AIDS (Acquired Immunodeficiency Syndrome)?.................................................... [ ] yes [ ] no 7. Has any Proposed Insured in the last five years had any motor vehicle accidents, alcohol or drug related convictions while operating a motor vehicle, or other moving violations?.......................... [ ] yes [ ] no 8. Details for yes answers to questions 4-7. ----------------------------- --------------- ------------------------------- Proposed Insured's Name Question # Details ----------------------------- --------------- ------------------------------- ----------------------------- --------------- ------------------------------- ----------------------------- --------------- ------------------------------- 9. Has any Proposed Insured in the last five years made or does any Proposed Insured anticipate making flights in an aircraft other than as a passenger on a scheduled airline?.......................................... [ ] yes [ ] no (If yes, complete the Aviation Questionnaire (Section K.1.), which will become part of this application.) 10. Is any Proposed Insured in the Reserves, National Guard, on active duty in the military, or enrolled in a college military program?..... [ ] yes [ ] no (If yes, complete the Military Questionnaire (Section K.2.), which will become part of this application.) 11. Has any Proposed Insured in the last three years engaged in or does any Proposed Insured plan to engage in any of the following activities? (If yes, give details in the Avocation and Sports Questionnaire (Section K.3.), which will become part of this application.) a. Scuba diving ............... [ ] yes [ ] no e. Rodeo ..................... [ ] yes [ ] no b. Sky diving or parachuting .. [ ] yes [ ] no f. Motorized vehicle racing .. [ ] yes [ ] no c. Hang-gliding ............... [ ] yes [ ] no g. Ultra-light flying ........ [ ] yes [ ] no d. Mountain climbing .......... [ ] yes [ ] no
45675a Page 4 Rev. 6/98 LIFE INSURANCE APPLICATION RELIASTAR RELIASTAR LIFE INSURANCE COMPANY - -------------------------------------------------------------------------------- SECTION K. QUESTIONNAIRES - -------------------------------------------------------------------------------- COMPLETE 1, 2, AND 3 BELOW FOR ANY PROPOSED INSURED IF QUESTIONS 9, 10, OR 11 OF SECTION J WAS ANSWERED YES. 1. Aviation Questionnaire COMPLETE IF QUESTION 9 OF SECTION J WAS ANSWERED YES. a. Name of Proposed Insured -------------------------------------------------------------------------- b. Are you or do you intend to be a pilot or crew member of any military or civilian aircraft?......................................... [ ] yes [ ] no c. Type of License d. Total Number of Solo e. Type of Aircraft/Type of Hours Flying (crop dusting, instruction, test, etc.) ---------------- -------------------- -------------------------- f.
------------------- --------------------- ---------------- --------------- ---------------- -------------- Type of Last 12 months 1-2 years ago Anticipated Lifetime Total aviation activity Date of last flight (hours flown) (hours flown) Next 12 months (hours flown) ------------------- --------------------- ---------------- --------------- ---------------- -------------- ------------------- --------------------- ---------------- --------------- ---------------- -------------- Pilot ------------------- --------------------- ---------------- --------------- ---------------- -------------- Other (specify) ------------------- --------------------- ---------------- --------------- ---------------- --------------
g. If you do not qualify for full coverage at standard rates, do you desire: 1. Full coverage with extra premium if available?.......... [ ] yes [ ] no 2. Restricted aviation coverage without extra premium if available?.............................................. [ ] yes [ ] no 2. MILITARY QUESTIONNAIRE COMPLETE IF QUESTION 10 OF SECTION J WAS ANSWERED YES. -------------------------- ----------- ----------------- ----------------- a. Name of Proposed Insured Rank Pay Grade Branch of Service -------------------------- ----------- ----------------- ----------------- -------------------------- ----------- ----------------- ----------------- b. Describe your duties -------------------------------------------------------------------------- c. Have you been alerted for or assigned to overseas duty? (If yes, give details in "e" below.)..................................... [ ] yes [ ] no d. Are you a member of a Reserve, National Guard, or ROTC unit? (If yes, give details in "e" below.)..................................... [ ] yes [ ] no e. Details -------------------------------------------------------------------------- 3. AVOCATION AND SPORTS QUESTIONNAIRE GIVE FULL DETAILS FOR EACH PROPOSED INSURED, INCLUDING FREQUENCY OF PARTICIPATION, AND FUTURE PLANS FOR ALL YES ANSWERS TO QUESTION 11 OF SECTION J. FOR EXAMPLE, FOR MOUNTAIN CLIMBING, SPECIFY ROCK OR TRAIL CLIMBING. a. Name of Proposed Insured -------------------------------------------------------------------------- b. Full Details -------------------------------------------------------------------------- -------------------------------------------------------------------------- c. Scuba Diving 1. Average Depth 2. Maximum Depth 3. Number of Dives ----------------- ---------------- --------------- ------------- -------------- Last 12 Months 1-2 Years Ago Next 12 Months --------------- ------------- -------------- ----------------- ---------------- --------------- ------------- --------------
45675a Page 5 Rev. 6/98 LIFE INSURANCE APPLICATION RELIASTAR RELIASTAR LIFE INSURANCE COMPANY - -------------------------------------------------------------------------------- SECTION L. DECLARATIONS OF THE PROPOSED INSUREDS - -------------------------------------------------------------------------------- COMPLETE THE FOLLOWING ON ALL PROPOSED INSUREDS, INCLUDING CHILDREN TO BE COVERED UNDER THE CHILDREN'S INSURANCE RIDER. (Give details under L.12. for any questions answered yes.)
PROPOSED OTHER PROPOSED PRIMARY INSUREDS (ADDITIONAL, INSURED JOINT, OR CHILDREN) -------------- --------------------- 1. Has the Proposed Insured ever had any disease or injury of the following organs or any sickness listed below in the last 10 years? a. Paralysis, epilepsy, convulsions, fainting, brain, nervous system, nervous or mental disorder .............................................. [ ] yes [ ] no [ ] yes [ ] no b. High blood pressure, stroke, or circulatory problems, chest pain, heart disease, irregular heart rate, palpitations, heart murmur, or rheumatic fever ................................................................... [ ] yes [ ] no [ ] yes [ ] no c. Cancer or tumor ......................................................... [ ] yes [ ] no [ ] yes [ ] no d. Shortness of breath, lungs, bronchitis, asthma, tuberculosis, or pneumonia ............................................................... [ ] yes [ ] no [ ] yes [ ] no e. Large or small intestine, chronic diarrhea, rectum, hernia, kidney, bladder, prostate, liver, gallbladder, jaundice, stomach, ulcers, indigestion or thyroid .................................................. [ ] yes [ ] no [ ] yes [ ] no f. Blood, pus, or protein in urine, diabetes or sugar in urine ............. [ ] yes [ ] no [ ] yes [ ] no g. Sexually transmitted disease ............................................ [ ] yes [ ] no [ ] yes [ ] no h. Anemia or other blood disorder .......................................... [ ] yes [ ] no [ ] yes [ ] no i. Arthritis, neuritis, bone, joint, muscle or skin disorder ............... [ ] yes [ ] no [ ] yes [ ] no 2. Has the Proposed Insured experienced any symptoms for which they have not yet consulted a health care provider? ....................................... [ ] yes [ ] no [ ] yes [ ] no 3. Is the Proposed Insured presently taking any medication, including any non-prescription medication? ................................................ [ ] yes [ ] no [ ] yes [ ] no 4. Is the Proposed Insured presently under the care of a member of the medical profession for any condition? ............................................... [ ] yes [ ] no [ ] yes [ ] no 5. Has the Proposed Insured had any operation(s) in the last 10 years? ......... [ ] yes [ ] no [ ] yes [ ] no 6. Has the Proposed Insured been advised to have any operation(s) not yet performed in the last 10 years? ............................................. [ ] yes [ ] no [ ] yes [ ] no 7. Has the Proposed Insured had an electrocardiogram, x-ray, or other diagnostic test in the last five years? ..................................... [ ] yes [ ] no [ ] yes [ ] no 8. Has the Proposed Insured sought help or treatment for an alcoholic habit ? .. [ ] yes [ ] no [ ] yes [ ] no 9. Is the Proposed Insured currently using, or has the Proposed Insured ever received treatment or counseling for the use of, marijuana, cocaine, amphetamines, barbiturates, hallucinogenic agents, opium derivatives, or other drugs of abuse? ....................................................... [ ] yes [ ] no [ ] yes [ ] no 10. Has the Proposed Insured in the last 10 years been confined for observation, care, or treatment in a hospital or other health care facility? ............. [ ] yes [ ] no [ ] yes [ ] no 11. Has the Proposed Insured in the last five years consulted any health care providers not already identified for any reason including routine physical examination? ................................................................ [ ] yes [ ] no [ ] yes [ ] no
45675a Page 6 Rev. 6/98 LIFE INSURANCE APPLICATION RELIASTAR RELIASTAR LIFE INSURANCE COMPANY - -------------------------------------------------------------------------------- SECTION L. DECLARATIONS OF THE PROPOSED INSUREDS (CONTINUED) - -------------------------------------------------------------------------------- 12. Complete the following for yes answers to questions 1-11.
- -------------------------- ------------ -------------------------------------- ------------------------------- Question Names & Addresses of Number Diagnosis, Date of Each Occurrence, Members of the Medical Proposed Insured's Name or Letter Duration, Current Status Profession & Medical Facilities - -------------------------- ------------ -------------------------------------- ------------------------------- - -------------------------- ------------ -------------------------------------- ------------------------------- - -------------------------- ------------ -------------------------------------- ------------------------------- - -------------------------- ------------ -------------------------------------- ------------------------------- - -------------------------- ------------ -------------------------------------- ------------------------------- - -------------------------- ------------ -------------------------------------- -------------------------------
13. Family Record ---------------------------------------------------------------------------- Proposed Insured's Name ---------------------------------------------------------------------------- Living/Health Age Deceased/Cause of Death Age ----------------------- ------- ------------------------ ------- Father ----------- ----------------------- ------- ------------------------ ------- Mother ----------- ----------------------- ------- ------------------------ ------- Sibling(s) ----------- ----------------------- ------- ------------------------ ------- ---------------------------------------------------------------------------- Proposed Additional Insured's or Joint Insured's Name ---------------------------------------------------------------------------- Living/Health Age Deceased/Cause of Death Age ----------------------- ------- ------------------------ ------- Father ----------- ----------------------- ------- ------------------------ ------- Mother ---------------------------------------------------------------------------- Sibling(s) ---------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECTION M. BUSINESS FINANCIAL INFORMATION - -------------------------------------------------------------------------------- COMPLETE FOR ALL BUSINESS COVERAGE. 1. a. Name of Business ________________________ b. Date Established ___________ c. State of Incorporation ________ d. Type of Business (Include a description of the number of employees, nature of the business, i.e. products or services rendered.) ____________________ e. Type of Organization: [ ] Sole Proprietorship [ ] Partnership [ ] Corporation f. Purpose of Insurance: [ ] Buy/Sell [ ] Stock Repurchase [ ] Retirement Planning [ ] Deferred Compensation [ ] Debt Protection: Amount of loan $____________ Line of credit amount $_____________ [ ] Key Person (Explain if amount exceeds ten times earned income.) ------------------------------------------------ g. Business Finances (Attach copies of most recent audited financial statements.) Net Worth $___________ Net Income $___________ Gross Sales $____________ h. List all Partners, Officers, or Persons Owning 10% or more of this Business
----------------- ----------------- -------------- -------------------- ------------------ Percentage Active in Business Amount of Business Name Title of Ownership (yes or no) Coverage In Force ----------------- ----------------- -------------- -------------------- ------------------ ----------------- ----------------- -------------- -------------------- ------------------ ----------------- ----------------- -------------- -------------------- ------------------ ----------------- ----------------- -------------- -------------------- ------------------
i. Is other insurance being applied for concurrently on Proposed Insured or other officers?............................................ [ ] yes [ ] no If yes, complete the following: ------------------------------ ---------------- -------------------------- Insurance Company Name Amount Officer ------------------------------ ---------------- -------------------------- ------------------------------ ---------------- -------------------------- ------------------------------ ---------------- -------------------------- 45675a Page 7 Rev. 6/98 LIFE INSURANCE APPLICATION RELIASTAR RELIASTAR LIFE INSURANCE COMPANY - -------------------------------------------------------------------------------- SECTION N. SUITABILITY - -------------------------------------------------------------------------------- THIS SECTION MUST BE COMPLETED ON THE PROPOSED OWNER ONLY IF APPLYING FOR A VARIABLE UNIVERSAL LIFE INSURANCE POLICY. A SUPPLEMENT ALSO MUST BE COMPLETED TO CHOOSE PREMIUM PAYMENT ALLOCATION. IMPORTANT NOTICE: The Death Benefit and the Cash Surrender Value under the Variable Account may increase or decrease with the investment performance of the mutual funds. Regardless of the investment performance, the Death Benefit will never be less than the Face Amount as long as there are no unpaid monthly deductions or policy loans. There is no guaranteed Cash Surrender Value for amounts in the Variable Account. Upon request, we will furnish you with a comparison of benefits of the policy applied for and a fixed life insurance policy. 1. Did the Proposed Owner(s) receive a Prospectus describing the policy, investment divisions, and important features?................. [ ] yes [ ] no 2. If yes, which Prospectus was delivered? a. [ ] N700.176 & 46623 b. [ ] N700.181 & 46623 c. [ ] 46203 & 46623 Date of Prospectus _____/_____ Date of Prospectus _____/_____ Date of Prospectus _____/_____ month year month year month year d. [ ] 47161 e. [ ] 46816 Date of Prospectus _____/_____ Date of Prospectus _____/_____ month year month year f. [ ] Other - Form number __________ Date of Prospectus _____ /_____ month year
3 a. Does the Proposed Owner(s) consent to delivery of prospectuses, prospectus supplements, statements of additional information, transactional confirmation and periodic statements in one or more of the following forms? (CHECK ALL THAT APPLY.) [ ] 3.5" Floppy Disk [ ] CD rom [ ] Internet Website [ ] E-Mail, and my e-mail address is _____________________________________. This consent is valid until revoked by the Proposed Owner(s) in writing. The Proposed Owner(s) understands that ReliaStar Life may choose to discontinue delivery of the above types at any time and may choose to deliver a paper version. b. Does the Proposed Owner(s) consent to eliminate duplicate mailings of identical documents to the same household if they have more than one ReliaStar Life policy? [ ] yes [ ] no 4. Does the Proposed Owner(s) understand that if premiums are allocated to the Variable Account the Death Benefit may, under certain conditions, increase or decrease depending on the investment performance of the Variable Account?...................................................... [ ] yes [ ] no 5. Does the Proposed Owner(s) understand the Cash Surrender Value will increase or decrease reflecting the investment performance of the Variable Account?...................................................... [ ] yes [ ] no 6. Does the Proposed Owner(s) think that this policy will meet his or her insurance needs and financial objectives? .................... [ ] yes [ ] no 7. a. Savings $__________________ b. Current Value of Securities $_____________ c. Equity in Home $___________ d. Assets $___________________________________ e. Debts $____________________ f. No. & Ages of Dependents __________________ 45675a Page 8 Rev. 6/98 LIFE INSURANCE APPLICATION RELIASTAR RELIASTAR LIFE INSURANCE COMPANY - -------------------------------------------------------------------------------- SECTION O. AGREEMENT AND SIGNATURE - -------------------------------------------------------------------------------- BY SIGNING THIS APPLICATION, ALL WHO SIGN BELOW AGREE TO ALL OF THE FOLLOWING TERMS AND CONDITIONS: 1. When no premiums are paid with this application, no benefits will be provided on the basis of this application until all of the following conditions are met: a. A policy is delivered to the Applicant/Proposed Owner; b. There has not been a change in the insurability of any Proposed Insured after the date this application is signed and before a policy is delivered to the Applicant/Proposed Owner; and c. The first premium is paid during the lifetime of all Proposed Insureds. 2. When premiums are paid, or government allotment, account deduction, 1035 Exchange Form or other premium payment authorization form is completed with this application, I acknowledge receipt of the Temporary Insurance Agreement and Receipt (Receipt). I have read, understand, and accept the terms of this Receipt. Premiums of $ ________________ (enter amount or "none") have been paid with this application. 3. The responses in Sections A, B, C, D, E, F, G, H, I, J, K, L, M, N, and O of this application and in any supplements and amendments thereto are: a. Complete and true to the best of my knowledge or belief; and b. To be considered the basis for any insurance issued. 4. Knowledge of any Proposed Insured is knowledge of the Proposed Owner. 5a. If I am applying for a variable universal life insurance policy, then I agree to arbitrate, under the rules and procedures of the National Association of Securities Dealers, Inc., any dispute, claim, demand, or controversy arising out of such policy including without limitation, the sale thereof, and involving one or more of the following persons: ReliaStar Life Insurance Company (ReliaStar Life), its affiliated broker dealers, including Washington Square Securities, Inc. (WSSI), representatives thereof, and any unaffiliated broker dealer and representatives thereof. Any arbitration awarded or rendered against any party may be entered as judgment in any court of competent jurisdiction. b. I authorize the following to communicate by telephone/fax to ReliaStar Life on my behalf in accordance with my instructions described in paragraph c below which I could give myself under the under the terms of the Authorization: [ ] yes [ ] no _________________________, the PROPOSED INSURED (if Proposed Insured and Proposed Owner are different); and/or [ ] yes [ ] no _________________________, the REGISTERED REPRESENTATIVE servicing the policy. I understand that I am responsible for promptly reviewing all confirmation notices. I agree to report in writing to Washington Square Securities, Inc., P.O. Box 20, Minneapolis, Minnesota 55440 within five days of my receipt of confirmation, any erroneous or unauthorized transaction. c. I authorize ReliaStar Life to act upon my telephone/fax instructions 1) to transfer Policy Values among the available Sub-accounts of the SelectHLife Variable Account and the Fixed Account, and 2) to change the allocation for future payments. I authorize ReliaStar Life to use my Social Security Number or Tax Identification Number as my personal identification code. I understand that ReliaStar Life must be given my Personal Identification Code whenever telephone/fax instructions are made. I hereby acknowledge that all telephone instructions given pursuant to this Authorization are subject to the conditions set forth in the SelectHLife Variable Account Prospectus for the proposed policy and that ReliaStar Life and/or WSSI will not be liable for any loss, liability, cost, or expense when ReliaStar Life and/or WSSI act in accordance with the telephone/fax transfer instructions which are received, and if by telephone, are recorded on voice recording equipment. ReliaStar Life will employ reasonable procedures to confirm that instructions communicated by telephone/fax are genuine. If ReliaStar Life does not employ such procedures, ReliaStar Life may be liable for any losses due to unauthorized or fraudulent instructions. - --------------------------------------------------------------------- ---------- Signed at (City) State - --------------------------------------------------------------------- ---------- Signature of Proposed Primary Insured if age 10 or older Date - --------------------------------------------------------------------- ---------- Signature of Proposed Owner (IF OTHER THAN PROPOSED PRIMARY INSURED) Date - --------------------------------------------------------------------- ---------- Signature of Proposed Additional or Joint Insured Date - --------------------------------------------------------------------- ---------- Signature of Parent or Guardian if other than Proposed Owner and Date Proposed Primary Insured is a Minor - --------------------------------------------------------------------- ---------- Signature of Agent Date - ------------------------------- --------------------- -------------------------- Agent's Name (PLEASE PRINT) Agent's ID Number Agent's License Number - ------------------------------- --------------------- -------------------------- 45675a Page 9 Rev. 6/98 LIFE INSURANCE APPLICATION RELIASTAR RELIASTAR LIFE INSURANCE COMPANY P.O. Box 20, Minneapolis, Minnesota 55440 AUTHORIZATION AND ACKNOWLEDGMENT For underwriting and claim purposes, I give my permission to any physician or other medical practitioner, hospital, clinic, insurance or reinsuring company, Medical Information Bureau, Inc. (MIB), any consumer reporting agency, or any other organization to give ReliaStar Life Insurance Company (ReliaStar Life) or its authorized representative (including any consumer reporting agency) acting on its behalf ALL INFORMATION on my behalf (except as limited below). This includes but may not be limited to: (a) findings on medical care, psychiatric or psychological care or examination, or surgery, as they apply to me or any of my children who are to be insured; and (b) any non-medical information as it applies to me or any of my children who are to be insured. I give my permission to ReliaStar Life to get consumer or investigative consumer reports about these same persons. I give my permission to ReliaStar Life and other insurance companies affiliated with ReliaStar Life to get any and all medical record information for the purposes described in this form. I know that my medical records, including any alcohol or drug abuse information, may be protected by Federal Regulations - 42 CFR Part 2. I may revoke this permission as it applies to any information protected by 42 CFR Part 2 at any time, but not to the extent action has been taken in reliance on it. I specifically consent to the re-disclosure of medical record information as set forth in this form. In connection with any application for life insurance, or other insurance transaction that I may have with ReliaStar Life or any of its affiliated insurance companies, I understand that a report of some or all of the information obtained by this authorization may be communicated between ReliaStar Life and its affiliates, and may be sent to MIB, reinsurers, employees, or contractors who process transactions regarding any insurance coverage I may have applied for or have with ReliaStar Life or its affiliated companies. I understand that I may request that this information not be communicated to companies affiliated with ReliaStar Life. I understand that my further written consent will be required before any information described above is given, sold, transferred, or, in any way, relayed to another party not before specified. My further consent must be provided on a form that states the new use of the information or why another party needs it. With regard to any investigative consumer report on me, please contact me at home or work between the hours of _______ and _______. My telephone number is (______)____________________. I know that I have a right to get a copy of this form. A photocopy of this form will be as valid as the original. This form will be valid for two years from the date shown below. I acknowledge that I have been given ReliaStar Life's: Notice Regarding Consumer Reports; Notice Regarding MIB; and Notice Regarding Information Practices. Signature of Proposed Primary Insured if age 10 or older Date - --------------------------------------------------------------- ---------------- / / - --------------------------------------------------------------- ---------------- Signature of Proposed Additional or Joint Insured Date - --------------------------------------------------------------- ---------------- / / - --------------------------------------------------------------- ---------------- Signature of Parent or Guardian if other than Proposed Owner Date and Proposed Primary Insured is a Minor - --------------------------------------------------------------- ---------------- / / - --------------------------------------------------------------- ---------------- 45675a Rev. 6/98 LIFE INSURANCE APPLICATION RELIASTAR RELIASTAR LIFE INSURANCE COMPANY REQUEST AND AUTHORIZATION AGREEMENT FOR PRE-ARRANGED PAYMENTS OR ELECTRONIC BANK DEBIT PLAN FOR PAYMENT OF PREMIUMS ReliaStar Life Insurance Company is hereby requested and authorized to draw checks or initiate bank debits to be charged against the account described in the Authorization below. Please X one of the boxes below: Policy number Proposed Insured's name Monthly deduction --------------- ------------------------ ----------------- [ ] Start new Month-O-Matic Plan $ --------------- ------------------------ ----------------- [ ] Add to existing Month-O-Matic $ Plan No. ________________ --------------- ------------------------ ----------------- $ [ ] Change existing bank name --------------- ------------------------ ----------------- or account no. $ --------------- ------------------------ -----------------
I request the day of withdrawals or debits to my account to be on or about the __________ of each month. (Any day from the 1st through the 28th of the month may be selected.) BANK ACCOUNT INFORMATION AND TYPE (PLEASE CHECK ONE BOX, EITHER CHECKING OR SAVINGS) - -------------------------------------------------------------------------------- [ ] Checking [ ] Savings STAPLE VOIDED CHECK HERE Savings Account Number ___________________ - - NOT DEPOSIT SLIP - Savings Account Routing Transit Number (9 digits) _________________________ Name of Bank or Credit Union __________________________ Street ________________________________________________ City _________________ State __________ Zip ___________ - -------------------------------------------------------------------------------- TERMS OF THE MONTH-O-MATIC(R) PLAN Each debit shall be: (1) in an amount sufficient to pay a proper proportion of the annual premium at the Company's Month-O-Matic premium rate; (2) notice of premium due and no further notice of premium shall be given; (3) a receipt for the amount stated thereon if and when the Company receives actual payment at its Home Office. If a debit is not honored by the bank upon presentation for payment by the Company, such action by the bank shall be notice of nonpayment of premium. The Month-O-Matic Plan for premium payment may be terminated by the Policyowner or by the Bank Depositor by written notice filed with the Company at its Home Office and may be terminated by the bank in which the account is maintained. The Company also may terminate without notice if any debit is not honored upon presentation, otherwise upon 30 days written notice to the Policyowner. In the event the Plan is terminated for any cause, any unpaid premiums, and premiums which have due dates that occur on or after the date of termination, shall be paid directly to the Company at the premium rate and on the premium due date which would have been applicable to each policy if it had not been placed under the Month-O-Matic Plan for premium payment. The Company may, at its discretion from time to time, effect payments by use of pre-arranged payments (debit) or an electronic bank debit system. AUTHORIZATION AGREEMENT FOR PRE-ARRANGED PAYMENTS (DEBITS) I (we) authorize ReliaStar Life Insurance Company (Company) to make variable charges to my (our) checking or savings account identified above, and authorize the financial institution named above to withdraw funds from (debit) such account and pay to Company's order accordingly. This authorization will remain in effect until the financial institution has received and has had reasonable time to act on a written request from me (us) to terminate this agreement. I (we) understand that I (we) can stop payment of any debit by notifying the financial institution at least three days before the withdrawal is made. I (we) can have the amount of an erroneous charge immediately credited to the account up to 15 days following issuance of my (our) bank statement or 45 days after posting, whichever occurs first. I have read and understand the above statement. - ---------------------------------- --------------------------------- ----------- Signature of Bank Account Owner Social Security/Tax I.D. Number Date signed - ---------------------------------- --------------------------------- ----------- Applicant signature Social Security/Tax I.D. Number Date signed - ---------------------------------- --------------------------------- ----------- 45675a Rev. 6/98 AGENT'S REPORT RELIASTAR RELIASTAR LIFE INSURANCE COMPANY - -------------------------------------------------------------------------------- SECTION 1. AGENT IDENTIFICATION - -------------------------------------------------------------------------------- TO BE COMPLETED BY THE AGENT. FOR QUESTIONS ABOUT THIS APPLICATION OR UNDERWRITING REQUIREMENTS, CALL 1-800-333-6965. - ---------------------- --------------- ------------ --------------- ------------ Hierarchy Hierarchy Agent Name Agent ID # % Split Pointer ID Pointer Name - ---------------------- --------------- ------------ --------------- ------------ - ---------------------- --------------- ------------ --------------- ------------ - ---------------------- --------------- ------------ --------------- ------------ - ------------------------------------------ ------------------------------------------ SECTION 2. SECTION 4. 3. If this application is on a PREMIUM INFORMATION COMPLIANCE INFORMATION juvenile, please indicate the amount - ------------------------------------------ ------------------------------------------ of life insurance in force on each parent or sibling. [ ] COD 1. Did you obtain the Proposed [ ] 1035 Exchange Insured's Declarations in this Father..... $________________________ [ ] Attained Age Exchange application in person and record [ ] Home Office Credit them in the presence of the Proposed Mother..... $________________________ Insured? (IF YOU DID NOT, THE INITIAL SETTLEMENT NON-MEDICAL PRIVILEGE IS NOT Siblings... $________________________ AVAILABLE.) Initial Single Deposit: $______________ [ ] Yes [ ] No 4. What type of insurance is being applied for on the Proposed Insured? Annualized Planned Periodic Premium 2. Have you delivered the Notice Payment: $__________________ Regarding Consumer Reports, the [ ] Personal [ ] Business Notice Regarding MIB Inc., and the Requested Modal Payment: $_____________ Notice Regarding Information 5. What is the purpose of the type of Practices to the Proposed Insured(s) insurance indicated above? Cash Collected: $_________________ or Proposed Owner? [ ] Basic Life Needs [ ] Estate Planning Age used in calculating premium _______ [ ] Yes [ ] No [ ] Education Funding [ ] Retirement Planning $_________ Cash Received by Home Office 3. To the best of your knowledge and [ ] Pension [ ] Debt Protection (TO BE COMPLETED BY HOME OFFICE.) belief, will any existing life or Maximization annuity coverage be replaced, [ ] Key Person [ ] Executive Bonus MODE OF PAYMENT lapsed, surrendered, or borrowed [ ] Deferred Compensation [ ] Annually against? (IF YES, PLEASE LIST [ ] Buy/Sell Stock Redemption [ ] Semi-Annually COMPANY, POLICY NUMBER, AND AMOUNT [ ] Quarterly ON A SEPARATE SHEET OF PAPER.) 6. a. Did you use a fact finder or [ ] Monthly (COMPLETE MONTH-O-MATIC FORM.) [ ] Yes [ ] No needs analysis tool in connection [ ] Military Allotment (COMPLETE with this sale? SECTION 3.) 4. If settlement was accepted, was the [ ] Yes [ ] No [ ] Payroll Deduction/List Bill (ENTER Temporary Insurance Agreement and b. If yes, which one(s)? SPECIAL COLLECT NUMBER IF PLAN ALREADY Receipt completed and delivered to EXISTS.) the Proposed Insured or Proposed ____________________________________ ______________________________________ Owner? [ ] Other ________________________________ [ ] Yes [ ] No ------------------------------------------ SECTION 6. REMARKS - ------------------------------------------ 5. If the application was for a ------------------------------------------ SECTION 3. GOVERNMENT/ variable universal life insurance MILITARY ALLOTMENT policy, was a new account __________________________________________ - ------------------------------------------ information form completed? [ ] Yes [ ] No __________________________________________ Payor's Name ___________________________ ------------------------------------------ ------------------------------------------ Social Security Number _________________ SECTION 5. SECTION 7. AGENT'S INSURED INFORMATION SIGNATURE SECTION Payor's Branch _________________________ ------------------------------------------ ------------------------------------------ Agent's Signature Amount of Allotment ____________________ 1. How long have you known the Proposed Insured?____________________ __________________________________________ Date first allotment should begin ______ Date Are you related? .......[ ] Yes [ ] No [ ] New Allotment [ ] Increased Allotment __________________________________________ If yes, how? ________________________ Phone Number RUSL Term Exchange [ ] Yes [ ] No 2. How much insurance does the spouse __________________________________________ own payable to the Proposed Insured Fax Number or other dependents? $_______________ __________________________________________ E-mail Address __________________________________________
45675a Rev. 6/98 LIFE INSURANCE APPLICATION RELIASTAR RELIASTAR LIFE INSURANCE COMPANY P.O. Box 20, Minneapolis, Minnesota 55440 CONSUMER PRIVACY NOTICE NOTICE REGARDING CONSUMER REPORTS Insurance companies commonly ask an outside source to verify and add to the information given in an application. The agency that makes the report will be one that is discreet and impartial. If you wish, we will send you the name, address, and phone number of any agency we ask to prepare a consumer report about you. You can ask that the agency interview you if you so state on the authorization form. The agency will then try to get in touch with you. Consumer reports are used to help us decide if you are eligible for the insurance you have applied for. The report deals with your: mode of living; character; general reputation; and such personal items as your health, job, and finances. It may include information on the following: your marital status, past and present employment record, job duties, driving record, avocation, health history, use of alcohol and drugs, and hazardous sports activities. The agency may get information in these ways: from public records, and by contacting you, members of your family, business associates and employers, financial sources, friends, or others you know. This information will not be used to determine your sexual orientation. If the report affects your application as requested, we will notify you and provide you with the name and address of the reporting firm. We use the report only to be sure that each application is evaluated on a fair basis. We will not reveal any of the information we obtain to your friends or associates. We may reveal the information we obtain to other companies or entities affiliated with ReliaStar Life. You may request that this information not be communicated to other companies affiliated with ReliaStar Life. The information may be kept by the consumer reporting agency; it may also later be given to others who have a legitimate need for these reports. It will be given only to the extent permitted by these laws: the Federal Fair Credit Reporting Act as amended by the Consumer Credit Reporting Reform Act of 1996; your state's Fair Credit Reporting Act, if any; or your state's Insurance Information and Privacy Protection Act, if any. The agency will give you a copy of the report if you ask for one and give proper identification. NOTICE REGARDING MIB (MEDICAL INFORMATION BUREAU, INC.) We or our reinsurers may make brief reports to MIB. The reports will include the factors that affect the insurability of any person for whom coverage is being requested. MIB is a nonprofit organization of life insurance companies. It operates an information exchange for its members. If you apply to some other member company for life or health coverage, or send in a claim for benefits, MIB may supply that company with any information in its file. If you ask, MIB will arrange to disclose to you the information it has in your file. If you question the accuracy of the information in MIB's file, you may contact MIB. Ask them to correct it as provided in the Federal Fair Credit Reporting Act. The address of the MIB's information office is: Post Office Box 105, Essex Station, Boston, Massachusetts 02112. MIB's phone number is (617) 426-3660. We or our reinsurers may also release information in our files. We may release it to other life insurance companies to whom you may apply for life or health insurance or to whom a claim for benefits may be submitted. NOTICE REGARDING INFORMATION PRACTICES To issue an insurance policy, we need to obtain information about you and any other persons proposed for insurance. Some of that information will come from you. Some will come from other sources. That information and any information collected by us later may, in certain circumstances, be disclosed to third parties without your specific permission. You have a right to access and correct the information collected about you. This right does not extend to information that relates to a claim or civil or criminal proceeding. If you wish to have a more detailed explanation of our information practices, please write to us at: Box 20, Minneapolis, Minnesota 55440. 45675a Rev. 6/98 EX-99.A10.B 6 SUPPLEMENT TO LIFE INSURANCE APPLICATION EXHIBIT 99.A10.B RELIASTAR SUPPLEMENT TO RELIASTAR LIFE INSURANCE COMPANY LIFE INSURANCE APPLICATION P.O. Box 20, Minneapolis, Minnesota 55440 1. DEATH BENEFIT QUALIFICATION TEST: [ ] Guideline Premium Test [ ] Cash Value Accumulation Test* 2. DEATH BENEFIT OPTION: [ ] Level [ ] Variable [ ] Face Amount Plus Premium* *not available with all products 3. ALLOCATION OF PREMIUM PAYMENTS: ALLOCATION MUST BE IN WHOLE PERCENTAGE POINTS TOTALING 100%. a. [ %] Fixed Account (SFA) JANUS ASPEN SERIES OCC ACCUMULATION TRUST l. [ %] Aggressive Growth x. [ %] Equity THE ALGER AMERICAN FUND Portfolio (JAG) Portfolio (OEP) b. [ %] Alger American Growth m. [ %] Growth y. [ %] Global Equity Portfolio (AGR) Portfolio (JGP) Portfolio (OGE) c. [ %] Alger American Mid Cap n. [ %] International Growth z. [ %] Managed Growth Portfolio (AMG) Portfolio (JIG) Portfolio (OMP) d. [ %] Alger American Small o. [ %] Worldwide Growth aa. [ %] Small Cap Capitalization Portfolio (ASC) Portfolio (JWG) Portfolio (OSC) FIDELITY VARIABLE INSURANCE NEUBERGER BERMAN ADVISERS PUTNAM VARIABLE TRUST PRODUCTS FUNDS MANAGEMENT TRUST bb. [ %] Putnam VT Growth & e. [ %] VIP Equity Income p. [ %] Limited Maturity Bond Income Fund (PGI) Portfolio (FEI) Portfolio (NLM) cc. [ %] Putnam VT New f. [ %] VIP Growth q. [ %] Partners Opportunities Fund (PNO) Portfolio (FGP) Portfolio (NPP) dd. [ %] Putnam VT Voyager g. [ %] VIP High Income r. [ %] Socially Responsive Fund (PVY) Portfolio (FHI) Portfolio (NSR) OTHER INVESTMENT COMPANIES/FUNDS h. [ %] VIP Money Market NORTHSTAR GALAXY TRUST Portfolio (FMM) SPECIFY BOTH THE INVESTMENT COMPANY s. [ %] Growth & Value AND FUND NAMES. FIDELITY VARIABLE INSURANCE Portfolio (NGF) PRODUCTS FUNDS II ee. [ %] ________________________ t. [ %] High Yield Bond i. [ %] VIP II Contrafund Portfolio (NHY) ff. [ %] ________________________ Portfolio (FCF) u. [ %] Emerging Growth gg. [ %] ________________________ j. [ %] VIP II Index 500 Portfolio (NIG) Portfolio (FIN) hh. [ %] ________________________ v. [ %] International Value k. [ %] VIP II Investment Grade Portfolio (NIV) Bond Portfolio (FIG) w. [ %] Research Enhanced Index Portfolio (WMS)
We will allocate all future payments as shown above. You may change this allocation by giving us written notice. We reserve the right to limit your participation to a total of seventeen Sub-Account funds over the lifetime of your Policy. Upon participation in the seventeenth Sub-Account fund, you would be able to allocate premiums to and transfer within the seventeen Sub-Account funds already used and which are still available, but could not participate in any other Sub-Account funds. I understand and agree that this supplement is part of my application for a life insurance and will be considered part of my Policy with ReliaStar Life Insurance Company. Date Signature of Agent Signature of Proposed Contract Owner - ---------- ---------------------------- ------------------------------------ 47554 12-98 RELIASTAR LIFE INSURANCE APPLICATION ================================================================================ INSTRUCTIONS TO AGENTS Temporary Insurance Agreement and Receipt 1. Give to the applicant only if at least 10% of the initial annual premium (one monthly premium if a preauthorized method of collection is used) is taken with the application, or if a government allotment, account deduction, or other premium payment authorization form is completed with the application. 2. Except as provided in the Receipt, you do not have authority to bind coverage. 3. You do not have authority to vary the terms of the Receipt. The check or money order is to be made payable to ReliaStar Life Insurance Company (ReliaStar Life). Settlement may not be accepted, nor may the Receipt be given, if: 1. The amount of this application (including ADB) exceeds $500,000; 2. The amount of this application (including ADB) plus all previously issued or applied for coverage with ReliaStar Life exceeds $1,000,000; or 3. Either question 4, 5, or 6 of Section J is answered yes. You must detach the notices regarding consumer reports, MIB, and information practices and give them to the applicant. RELIASTAR RELIASTAR LIFE INSURANCE COMPANY P.O. Box 20, Minneapolis, Minnesota 55440 45675a Rev. 6/98 EX-99.2 7 ATTORNEY OPINION AND CONSENT Stewart D. Gregg Counsel Phone (612) 372-5512 Fax (612) 342-7531 EX-99.2 ATTORNEY OPINION AND CONSENT April 2, 1999 ReliaStar Life Insurance Company 20 Washington Avenue South Minneapolis, MN 55440 Madam/Sir: In connection with the proposed registration under the Securities Act of 1933, as amended, of flexible premium variable life insurance policies (the "Policies") and interests in Select*Life Variable Account (the "Variable Account"), I have examined documents relating to the establishment of the Variable Account by the Board of Directors of ReliaStar Life Insurance Company (the "Company") as a separate account for assets applicable to variable contracts, pursuant to Minnesota Statutes Sections 61A.13 to 61A. 21, as amended, and the Registration Statement, on Pre-effective Amendment No 1 to Form S-6, File No. 333-69431 (the "Registration Statement") and I have examined such other documents and have reviewed such matters as I deemed necessary for this opinion, and I advise you that in my opinion: 1. The Variable Account is a separate account of the Company duly created and validly existing pursuant to the laws of the State of Minnesota. 2. The Policies, when issued in accordance with the Prospectus constituting a part of the Registration Statement and upon compliance with applicable local law, will be legal and binding obligations of the Company in accordance with their respective terms. 3. The portion of the assets held in the Variable Account equal to reserves and other contract liabilities with respect to the Variable Accounts are not chargeable with liabilities arising out of any other business the Company may conduct. I consent to the filing of this opinion as an exhibit to the Registration Statement and to the use of my name under the heading "Legal Matters" in the Prospectus constituting a part of the Registration Statement and to the references to me wherever appearing therein. Very truly yours, Stewart D. Gregg Counsel EX-99.C.1 8 INDEPENDENT AUDITORS' CONSENT EX.99.C.l INDEPENDENT AUDITORS' CONSENT Board of Directors and Contract Holders Select*Life Variable Account We consent to the use in this Post-Effective Amendment No. 1 to Registration Statement on Form S-6 (File No. 333-69431) of Select*Life Variable Account filed under the Securities Act of 1933 of our report dated February 16, 1999 on the audit of the financial statements of Select*Life Variable Account as of December 31, 1998 and for each of the three years in the period then ended, on the audit of the consolidated financial statements of ReliaStar Life Insurance Company and subsidiaries as of and for the years ended December 31, 1997 and 1996, appearing in the Prospectus, which is a part of such Registration Statement, and to the reference to us under the heading "Experts" in such Prospectus. Deloitte & Touche Minneapolis, MN March 31, 1999 EX-99.C.6 9 ACTUARIAL OPINION AND CONSENT EX-99.C.6 ACTUARIAL OPINION AND CONSENT April 2, 1999 ReliaStar Life Insurance Company 20 Washington Avenue South Minneapolis, MN 554400 Madam/Sir: This opinion is furnished in connection with the registration by ReliaStar Life Insurance Company of a flexible premium variable life insurance policy (the "Contract") under the Securities Act of 1933, as amended. The Contract is described in the Prospectus constituting a part of Pre-Effective Amendment No. 1 to the Registration Form S-6, File No. 333-69431. The form of Contract was reviewed by me, and I am familiar with the Registration Statement and Exhibits thereto. In my opinion: The illustrations of Accumulation Values, Surrender Charges, Cash Surrender Values, and Death Benefits, included in the section entitled, "Illustration of Accumulation Values, Surrender Charges, Cash Surrender Values, and Death Benefits" in Appendix D of the Prospectus constituting part of the Registration Statement, based on the assumptions stated in the illustrations, are consistent with the provisions of the Contract. The rate structure of the Contract has not been designed so as to make the relationship between premiums and benefits, as shown in the illustrations, appear more favorable to a prospective purchaser of a Contract for a male Insured Age 40 nonsmoker in a standard Rate Class, than to prospective purchasers of the Contract for other ages, sexes, or Rate Classes. In any state where charges cannot be based upon the insured's sex, the rate structure of the Contract has not been designed so as to make the relationship between premium and benefits, as shown in the illustrations, appear more favorable to a prospective purchaser of the Contract for an Insured who is Age 40 than to prospective purchasers of the Contract for other ages. I hereby consent to the use of this opinion as an exhibit to the Registration Statement and to the reference to my name under the heading "Experts" in the Prospectus constituting a part of the Registration Statement. Sincerely, /s/ Craig A. Krogstad - ---------------------------- Craig A. Krogstad, FSA, MAAA Actuary EX-99.D.1 10 FLEXIBLE PREMIUM VARIABLE LIFE POLICY RELIASTAR LIFE INSURANCE COMPANY EXHIBIT EX-99.D.1 PROCEDURES FOR PURCHASE, REDEMPTION, TRANSFER, AND CONVERSION FLEXIBLE PREMIUM VARIABLE LIFE POLICY POLICY FORM 85-484 (MAY VARY BY STATE) MARCH 1999 This document sets forth the administrative procedures that will be followed by ReliaStar Life Insurance Company ("ReliaStar Life") in connection with the issuance of its Flexible Premium Variable Life Insurance Policy (the "Policy") described in the Registration Statement, the transfer of the Policy's assets, the redemption by Policy owners of their interest in the Policies and conversion to fixed benefit insurance. Unless otherwise defined herein, all capitalized terms used below have the meanings ascribed to them in the Prospectus for the Policy contained in this Registration Statement. "PUBLIC OFFERING PRICE": PURCHASE AND RELATED TRANSACTIONS The following is a summary of the principal Policy provisions and administrative procedures which constitute either direct or indirect purchase transactions. The insurance aspects of the Policy cause procedures to differ in certain significant respects from purchase procedures of mutual funds or contractual plans. PREMIUM SCHEDULES AND UNDERWRITING STANDARDS Premiums for the Policy will not be the same for all Policy owners. There is no insurance until the initial premium is paid and all underwriting requirements completed. The initial premium must be equal to or greater than three Minimum Monthly Premiums (see "Payment and Allocation of Premiums Minimum Initial Premium") unless the Policy owner authorizes premiums to be paid by bank account monthly deduction or government allotment. In those cases, ReliaStar Life will accept one Minimum Monthly Premium. The Policy has a Death Benefit Guarantee if the Policy owner chooses to pay premiums sufficient to maintain the Death Benefit Guarantee set forth in the Policy. If the Death Benefit Guarantee is in effect during the Death Benefit Guarantee Period as specified in the Policy, ReliaStar Life will then guarantee that the Policy will remain in force during such period, even if the Policy's Cash Surrender Value is not sufficient to pay the Monthly Deduction due. After the initial premium, the Policy owner will determine a planned periodic premium schedule that provides for a level premium payable at a fixed interval. Payment of premium according to this schedule is not, however, mandatory and failure to do so will not of itself cause the Policy to lapse. Instead, Policy owners may determine the amount and timing of subsequent premiums subject to the following restrictions: 1. In most cases, payment of a cumulative premium sufficient to maintain the Death Benefit Guarantee will be required to keep the Policy in force during the early months of the Death Benefit Guarantee Period. 2. ReliaStar Life may choose not to accept a premium less than $25.00. 3. ReliaStar Life may require proof that the Insured is still insurable if any premium would increase the difference between the Death Benefit Guarantee and the Accumulation Value. 4. ReliaStar Life will return to the Policy owner any premium paid that would exceed the current maximum premium payments allowed for life insurance under federal law. The Policy will stay in force as long as the Cash Surrender Value is sufficient to pay the Monthly Deduction (the charges imposed in connection with the Policy). The amount of premium, if any, required to keep the Policy in force depends on the Cash Surrender Value which in turn depends on such factors as the investment experience, the amount of any outstanding loans, and the Surrender Charge. The Monthly Deduction varies with the cost of insurance charge and the Mortality and Expense Risk Charge. The cost of insurance charge is based on the principal of pooling and distribution of mortality risks, which assumes that each Policy owner pays a premium commensurate with the mortality risks which are actuarially determined based on issue age, Policy Year, premium rate class, and in most instances, sex. The same rate applies to all Insureds in a given actuarial category. The rate is based on ReliaStar Life's expectations as to future mortality experience and other cost factors. The Mortality and Expense Risk Charge depends on the amount of the Variable Accumulation Value. The Policy will be sold according to established underwriting standards and state insurance laws. State insurance laws prohibit unfair discrimination among Policy owners but recognize that premiums must be based on factors such as age, health, occupation, avocations, and in most states, the sex of the Insureds. APPLICATION AND INITIAL PREMIUM PROCESSING ReliaStar Life will follow certain insurance underwriting procedures to determine whether the proposed Insured is insurable. Underwriting evaluates risks from the information on the application, verification procedures such as medical examinations, and additional information furnished by the applicant on request. ReliaStar Life will not issue the Policy until the underwriting procedure has been completed. If the minimum initial premium is submitted with the application, insurance coverage will begin on the Issue Date. After underwriting approval, the Issue Date will ordinarily be the later of the date of the application or the date of any required medical examination undertaken according to ReliaStar Life's underwriting requirements. When, however, underwriting approval has not occurred within 45 days of the receipt of the application (or with M-O-M or government allotment billing methods), the Issue Date will be the date of underwriting approval. If a premium is not paid with the application, insurance coverage will begin on the later of the Issue Date or the date the premium is received. The Policy Date is generally the same date as the Issue Date. It is used in determining Policy Years, Policy Months, Monthly Anniversaries and Policy Anniversaries. It is also the date as of which the insurance age of the proposed Insureds is determined. A Policy Date may be any other date mutually agreed to by ReliaStar Life, the Policy owner, and state statutes. ReliaStar Life will credit net Premiums (gross premiums less the Premium Expense Charge) from the Policy to the Select*Life Variable Account ("Variable Account") or to the Fixed Account on the later of the following dates: 1. The Valuation Date(1) following the date of underwriting approval; 2. The Valuation Date on or next following the Policy Date; or 3. The Valuation Date on or next following the date ReliaStar Life receives at least the required minimum initial premium payment. ALLOCATION OF PREMIUMS The initial Net Premium and any other Net Premium received prior to the Initial Premium Transfer Date(2) are allocated to the Fidelity VIP Money Market Sub-account. On the Initial Premium Transfer Date, the value in this is re-allocated based on the allocation to the Fixed Account and the Sub-accounts of the Variable Account chosen by the Policy owner on the application for the Policy. Any Net Premiums received on or after the Initial Premium Transfer date are allocated directly according to this allocation. The Policy owner may change the allocation at any time by notifying ReliaStar Life in writing. The Policy owner may allocate 100% of Net Premiums to any Sub-account or the Policy owner may divide in whole percentages the Net Premium and allocate such amounts among more than one Sub-Account. ReliaStar Life reserves the right to adjust the allocation of Net Premiums to eliminate fractional percentages. PREMIUM PROCESSING Whenever a premium payment is received, ReliaStar Life will subtract 5.00% of the premium as a Premium Expense Charge. The Net Premium is credited to the Variable and/or Fixed Account on the Valuation Date on or next following the date ReliaStar Life receives the premium payment in accordance with the Policy owner's current premium allocation. REINSTATEMENT A lapsed Policy and most riders may be reinstated anytime within five years after lapse as long as the Policy has not been surrendered for its Cash Surrender Value. To reinstate the Policy and any riders, the Policy owner must submit evidence of insurability satisfactory to ReliaStar Life for the insured. The Policy owner must pay a premium sufficient to keep the Policy and any riders in force for at least two months following the date of reinstatement. The Death Benefit Guarantee provision cannot be reinstated after the fifth policy year. LOAN REPAYMENTS The interest rate charged on Policy loans will be an annual rate of 4.76190%, payable in advance. After the tenth Policy Year, ReliaStar Life will charge interest not to exceed an annual rate of 3.38164%, payable in advance, on that portion of the loan amount that is not in excess of (a) the Accumulation Value less (b) the total of all premiums paid less all partial withdrawals. Any excess of this amount will be charged interest at the annual rate of 4.76190%. A Policy loan may be repaid anytime while the Insured is living. Unless the Policy owner specifies that a payment is a loan repayment, ReliaStar Life generally considers any payments it receives as premium payments and not loan repayments. However, ReliaStar Life reserves the right, at its discretion, to apply any payment it receives as a loan repayment. Loan repayments are credited to the Fixed Account and the Variable Account in the form of Net Premiums without a Premium Expense Charge. ReliaStar Life credits repayments according to the current premium allocation. Repayments are credited at the end of the Valuation Period during which the payment was received. CORRECTION OF MISSTATEMENT OF AGE OR SEX If the Insured's age or sex is misstated, ReliaStar Life adjusts the Death Benefit to be the amount that the most recent cost of insurance would purchase using the correct cost of insurance rate for the correct age and sex. "REDEMPTION PROCEDURES": SURRENDER AND RELATED TRANSACTIONS The following is a summary of the principal Policy provisions and administrative procedures which constitute redemptions under the Policy. These procedures differ in certain significant respects from redemption procedures of mutual funds or contractual plans. CASH SURRENDER VALUE At any time before the earlier of the death of the Insured, the Policy owner may totally surrender the Policy by sending ReliaStar Life a written request. The amount available for surrender is the Accumulation Value of the Policy reduced by any Loan amount, unpaid Monthly Deductions, and during the first 10 Policy Years and the first 10 years following a requested increase in Face Amount, this amount is also reduced by a Surrender Charge. The Surrender Charge is determined separately for the Face Amount and any subsequent increase in Face Amount. The Surrender Charge is based on several factors such as the Face Amount and the Policy Year. The Surrender Charge is shown in the Policy. The total amount available at surrender is called the Cash Surrender Value. The Cash Surrender Value is calculated at the end of the Valuation Period(3) during which ReliaStar Life receives the Policy owner's surrender request. The Policy owner may, however, elect to receive all or part of the Cash Surrender Value under one of the settlement options described in the Policy. All fixed benefit settlement options are subject to the restrictions and limitations set forth in the Policy. PARTIAL WITHDRAWALS The Policy owner may also withdraw part of the Policy's Cash Surrender Value by sending ReliaStar Life a written request. Only one partial withdrawal is allowed in any Policy Year. The amount of any partial withdrawal must be at least $500.00 but may not be more than 20% of the Cash Surrender Value. ReliaStar Life currently makes a $10.00 charge for each partial withdrawal. ReliaStar Life makes partial withdrawals from the Fixed Accumulation Value and the Variable Accumulation Value on a proportionate basis. For the purpose of determining the proportions, the outstanding loan amount is subtracted from the Fixed Accumulation Value. ReliaStar Life will generally pay the partial withdrawal within seven days of receipt of the written request. DEATH BENEFIT As long as the Policy is in force, ReliaStar Life will generally pay the proceeds of the Policy to the named beneficiary in accordance with the designated Death Benefit Option within seven days after the receipt of due proof of the Insured's death. Payment of proceeds may, however, be postponed under certain circumstances(3). The amount of the Death Benefit is determined on the Valuation Date on or next following the date of Insured's death. The proceeds payable will be reduced by any Loan Amount and any unpaid Monthly Deduction. These proceeds will be increased by any additional insurance provided by rider and by the refund of any unearned Policy loan interest. The amount of the Death Benefit to Age 100 is guaranteed not to be less than the current Face Amount of the Policy as long as the Policy is in force (unless Death Benefit Option C is in effect and total partial withdrawals made exceed total premiums paid). The Death Benefit may, however, exceed the current Face Amount. The amount by which the Death Benefit exceeds the Face Amount depends upon the Death Benefit Option in effect and the Accumulation Value of the Policy. Under Option A (Level Amount Option), the Death Benefit to Age 100 is the greater of the Face Amount or the applicable percentage of Accumulation. Under Option B (Variable Amount Option), the Death Benefit will always vary with the Accumulation Value since the Death Benefit is the greater of the Face Amount plus the Accumulation Value of the Policy, or the applicable percentage of the Accumulation. Under Option C (Face Plus Premium Amount Option), the Death Benefit is the greater of the Face Amount plus total Premiums paid net of total partial withdrawals, or the applicable percentage of the Accumulation Value. After age 100 and while the Policy is in force, the Death Benefit is the AccumulationValue. LOANS After the first Policy Year, the Policy owner may use the Policy as security to take out a loan (except that in Indiana loans may be made during the first Policy Year). The maximum amount that the Policy owner may borrow at any time 90% of the Policy's Cash Value (the Accumulation Value less any Surrender Charge). As required by state law, higher percentages of Cash Value may be borrowed by Policy owners in Texas (100%). Each Policy loan must be at least $500.00 except in Connecticut where the loan must be at least $200.00. The Loan Value will be determined on the Valuation Date following the date the request was received. The portion of the loan allocated to the Sub-accounts of the Variable Account will normally be paid within seven days after receipt of the written request. Postponement of loans may take place under certain circumstances.(4) The amounts held as security for the Policy loan are segregated within the Fixed Accumulation Value of the Policy but will be credited with interest on a basis different from other amounts in the Fixed Account. The total of all outstanding loans is called the Loan Amount. All amounts held in the Fixed Account as security for Policy loans will be credited with interest at an effective annual rate currently equal to 3.00%. No additional interest will be credited to these amounts. The interest charged on Policy loans will be an annual rate of 4.76190%, payable in advance. After the tenth Policy Year, ReliaStar Life will charge interest at an annual rate not to exceed 3.38164%, payable in advance, on that portion of the Loan Amount that is not in excess of (a) the Accumulation Value less (b) the total of all premiums paid less all partial withdrawals. Any excess of this amount will be charged interest at the annual rate of 4.76190%. Amounts held as security for a Policy loan will come from the Fixed Account and Sub-accounts of the Variable Accounts in the same proportion that the Policy's Fixed Accumulation Value less any Loan Amount and the Policy's Variable Accumulation Value in each Sub-account, bear to the Policy's total Accumulation Value less any Loan Amount. The portion of the Policy loan allocated to each Sub-account will be transferred from the Sub-account to the Fixed Account thereby reducing the value held in the Sub-account. The Loan Amount is deducted from the total premium paid for purposes of calculating whether the Policy owner has paid premiums sufficient to maintain the Death Benefit Guarantee. The Loan Amount is deducted from the proceeds when ReliaStar Life pays a death claim. Loans have priority over the claims of an assignee or any other person. A Policy loan may be repaid in whole or in part at any time while the Insured is living. POLICY LAPSE If the Death Benefit Guarantee is not in effect, the Policy will lapse at the end of a 61-day grace period if, as of that Monthly Anniversary, the Loan Amount is greater than the Policy's Accumulation Value reduced by the applicable Surrender Charge; or the Cash Surrender Value is not sufficient to pay the Monthly Deduction due. The grace period begins on the date ReliaStar Life notifies the Policy owner and any collateral assignees of record of the required premium. The Policy owner will then have 61 days from the date the notice is mailed, to make the required payment to keep the Policy in force. If the payment is not received within the 61-day period, the Policy will lapse. If the Insured dies during this 61-day period, the Loan Amount and any unpaid Monthly Deduction will be deducted from the proceeds payable. TRANSFERS The Variable Account currently has seven series Funds with twenty-eight portfolios available for investment by the Sub-accounts. Each Sub-account invests in shares, at net asset value, of a specified portfolio of the four series Funds. A Policy owner may transfer Accumulation Value between the Fixed Account and the Sub-accounts of the Variable Account or among the Sub-accounts of the Variable Account by written request (or by telephone or fax if a telephone/fax authorization form has been completed, is in effect and an I.D. number has been assigned), subject to any conditions the Funds whose share are involved may impose. ReliaStar Life currently allows twenty-four transfers in a Policy Year but reserves the right to limit the policyowner to twelve per year. ReliaStar Life considers all transfers received in the same request and made on the same initial Valuation Date as one transfer. Transfers are made on the Valuation Date on or next following the date the request is received. To transfer all or part of the Variable Accumulation Value from a Sub-account, Accumulation Units are redeemed and their value is reinvested in other Sub-accounts or in the Fixed Account as directed by the Policy owner. A Policy owner may transfer all or part of the Fixed Accumulation Value to the Sub-accounts of the Variable Account, subject to the following limitations: 1. The request to transfer must be postmarked no more than 30 days before or after the Policy Anniversary in any year, and only one transfer is permitted during this period; 2. The Fixed Accumulation Value after the transfer must be at least equal to the Loan Amount; 3. No more than 50% of the Fixed Accumulation Value, less any Loan Amount, may be transferred unless the balance, after the transfer, would be less than $1,000.00, in which event the full Fixed Accumulation Value, less any Loan Amount, may be transferred; and 4. The Policy owner must transfer at least the lesser of $500.00 or the total Fixed Accumulation Value, less any Loan Amount. While ReliaStar Life does not currently impose a transfer charge, it reserves the right to make a charge not to exceed $25.00 per transfer. Transfers resulting from loans and exercising Conversion Rights under the Policy are not subject to any transfer charges and do not count against the number of transfers. CONVERSION At any time during the first two Policy Years or the first two years following a requested increase in Face Amount, the Policy owner can request a transfer from the Variable Account to the Fixed Account and indicate that he or she is exercising the Conversion Rights under the Policy. Such transfer will not be subject to the transfer charge and will not count against the limit on the number of transfers. At the time of the transfer, there is no effect on the Policy's Death Benefit, Face Amount, net amount at risk, Rate Class, or issue age. To the extent that the Accumulation Value is held in the Fixed Account, the benefits of the Policy do not vary with the investment performance of the Variable Account. (1) Valuation Date - Each day on which the New York Stock Exchange is open for business except for a day that a Sub-Account's corresponding Fund does not value its shares. The New York Stock Exchange is currently closed on weekends and on the following holidays: New Year's Day; Presidents' Day; Good Friday; Memorial Day; July Fourth; Labor Day; Thanksgiving Day; and Christmas Day. (2) Initial Premium Transfer Date - For states with a 10 day free look requirement, this is 15 days after the later of the mail date or the date we receive from the final requirements to put the policy inforce. This period is appropriately adjusted for states with a longer free look period requirement. (3) Valuation Period - The period between two successive Valuation Dates, commencing at the close of business of a Valuation Date and ending at the close of business of the next Valuation Date. (4) Payments from the Variable Account for death benefits, cash surrender, partial withdrawal, or policy loans will normally be paid within seven days of receipt of the written request and receipt of the policy form, if required. ReliaStar Life may delay making payment when it is not able to determine the Variable Accumulation Value because the New York Stock Exchange is closed for trading; or the Securities and Exchange Commission determines that a state of emergency exists. ReliaStar Life has the right to delay such payments from the Fixed Account for up to six months from the date it receives the request, subject to any state requirements. If payment is delayed for 30 days or more, ReliaStar Life pays interest at an effective annual rate of 3 1/2% from the date of the Insured's death, surrender, partial withdrawal, or policy loan request to the date of payment. -----END PRIVACY-ENHANCED MESSAGE-----