Delaware Life Variable Account L

485BPOS 1 d65264d485bpos.htm DELAWARE LIFE VARIABLE ACCOUNT L Delaware Life Variable Account L

As Filed with the Securities and Exchange Commission on May 2, 2016

REGISTRATION NO. 033-19628

811-03563

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM N-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

Post-Effective Amendment No. 41

and

REGISTRATION STATEMENT

UNDER

THE INVESTMENT COMPANY ACT OF 1940

Amendment No. 55

DELAWARE LIFE VARIABLE ACCOUNT L

(Exact Name of Registrant)

DELAWARE LIFE INSURANCE COMPANY

(Name of Depositor)

1601 Trapelo Road, Suite 30

Waltham, Massachusetts 02451

(Address of Depositor’s Principal Executive Offices)

Depositor’s Telephone Number: (844) 448-3519

Michael S. Bloom, Senior Vice President and General Counsel

Delaware Life Insurance Company

1601 Trapelo Road, Suite 30

Waltham, Massachusetts 02451

(Name and Address of Agent for Service)

It is proposed that this filing will become effective (check appropriate box)

x	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)(1) of Rule 485

¨	on (date) pursuant to paragraph (a)(1) of Rule 485.

If appropriate, check the following box:

¨	this post-effective amendment designates a new effective date for a previously filed post-effective amendment.

Title of Securities Being Registered: Flexible Premium Deferred Variable Annuity Contracts.

No filing fee is due because an indefinite amount of securities is deemed to have been registered in reliance on Section 24(f) of the Investment Company Act of 1940.

PART A

COMPASS 3

PROSPECTUS DATED MAY 2, 2016

Delaware Life Insurance Company (the “Company”) and Delaware Life Variable Account L (the “Variable Account”) of the Company identified below offer the individual flexible payment deferred annuity contracts described in this Prospectus (the “Contracts”). The Contracts are no longer for sale.

You may choose among six variable investment options and a fixed investment option. The variable investment options are the sub-accounts of the Variable Account, each of which invests in one of the following investment portfolios or series (the “Funds’) of MFS^® Variable Insurance Trust and MFS^® Variable Insurance Trust II (the “Trusts”), advised by Massachusetts Financial Services Company (“MFS^®”):

MFS^® U.S. Government Money Market Portfolio¹

MFS^® High Yield Portfolio

MFS^® Massachusetts Investors Growth Stock Portfolio

MFS^® Government Securities Portfolio

MFS^® Global Governments Portfolio

MFS^® Total Return Series

¹	Formerly known as MFS^® Money Market Portfolio.

The fixed investment option pays interest at a guaranteed fixed rate.

Please read this Prospectus carefully before investing and keep it for future reference. It contains important information about the Contracts and the Variable Account.

We have filed a Statement of Additional Information dated May 2, 2016 (the “SAI”) with the Securities and Exchange Commission (the “SEC”). The SAI is incorporated by reference in this Prospectus. The table of contents for the SAI is on page 38 of this Prospectus. You may obtain a copy of the SAI without charge by writing to Delaware Life Insurance Company, P.O. Box 758581, Topeka, KS 66675-8581 or by telephoning us at (877) 253-2323. In addition, the SEC has a website (www.sec.gov) that contains this Prospectus, the SAI, materials incorporated by reference, and other information regarding companies that file with the SEC.

The Contracts are not deposits or obligations of, or guaranteed or endorsed by, any bank, and are not federally insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other agency. It is possible to lose money by investing in the Variable Account. An investment in the MFS^® U.S. Government Money Market Portfolio is neither insured nor guaranteed by the U.S. Government. There is no assurance that the MFS^® Money Market Portfolio will be able to maintain a stable net asset value per share. In addition, during extended periods of low interest rates, and partly as a result of asset based separate account charges, the yield on this investment account may possibly become low and possibly negative.

The Securities and Exchange Commission has not approved or disapproved these securities or determined whether this prospectus is accurate or complete. Anyone who tells you otherwise is committing a crime.

If you have any questions about your Contract or need more information, please contact us at:

Delaware Life Insurance Company

P.O. Box 758581

Topeka, KS 66675-8581

Toll Free (877) 253-2323

www.delawarelife.com/contact-us/

Overnight Mailing Service Address:

Delaware Life Insurance Company

Mail Zone 581

5801 S.W. 6^th Avenue

Topeka, KS 66636

TABLE OF CONTENTS


	Page
DEFINITIONS		1
SYNOPSIS		3
EXPENSE SUMMARY		4
EXAMPLE		5
CONDENSED FINANCIAL INFORMATION		6
FINANCIAL STATEMENTS		9
THE COMPANY, THE VARIABLE ACCOUNT, AND THE TRUSTS		9
The Company		9
The Variable Account		9
The Trusts		9
Selection of Funds		10
The Fixed Account		11
PURCHASE PAYMENTS AND CONTRACT VALUES DURING ACCUMULATION PERIOD		11
Purchase Payments		11
Net Investment Factor		12
Transfers		13
Short-Term Trading		14
CASH WITHDRAWALS		15
Section 403(b) Annuities		17
Texas Optional Retirement Program		17
DEATH BENEFIT		17
Payment of Death Benefit		18
Amount of Death Benefit		18
CONTRACT CHARGES		19
Contract Maintenance Charge		19
Mortality and Expense Risk Charge and Distribution Expense Risk Charge		19
Withdrawal Charges		19
Premium Taxes		20
Fund Expenses and Restrictions		21
ANNUITY PROVISIONS		21
Annuity Commencement Date		21
Annuity Options		21
Determination of Annuity Payments		22
Transfer of Variable Annuity Units		23
Annuity Payment Rates		23
OTHER CONTRACT PROVISIONS		23
Owner		23
Death of Owner		23
Voting Rights		24
Periodic Reports		24
Modification		25
Change in Operation of Variable Account		25
Splitting Units		25
TAX CONSIDERATIONS		25
U.S. Federal Income Tax Considerations		26
Puerto Rico Tax Provisions		33
ADMINISTRATION OF THE CONTRACTS		34
Business Disruption and Cyber Security Risks		34
DISTRIBUTION OF THE CONTRACTS		34
AVAILABLE INFORMATION		35
STATE REGULATION		36
LEGAL PROCEEDINGS		36
FINANCIAL STATEMENTS		37
OWNER INQUIRIES		37
Electronic Account Information		37
STATEMENT OF ADDITIONAL INFORMATION - TABLE OF CONTENTS		38
APPENDIX A - THE FIXED ACCOUNT		39
APPENDIX B - WITHDRAWALS AND WITHDRAWAL CHARGES		41

DEFINITIONS

This section provides definitions or brief explanations of the following terms used in this Prospectus. If you come across a term that you do not understand, please refer to this list of definitions for an explanation.

Accumulation Account: An account we establish for the Contract to which we credit Net Purchase Payments in the form of Accumulation Units.

Accumulation Period: The period before the Annuity Commencement Date and during the lifetime of the Annuitant. The Accumulation Period will also terminate when you surrender your Contract.

Accumulation Unit: A unit of measure we use to calculate the value of the Accumulation Account. There are two types of Accumulation Units: Variable Accumulation Units and Fixed Accumulation Units.

Annuitant: The person or persons named in the Contract and on whose life the first annuity payment is to be made. You may name a Co-Annuitant only if both (1) yours is a Non-Qualified Contract and (2) you are not the Annuitant. If you properly name a Co-Annuitant, all Contract provisions based on the death of the Annuitant (such as the death benefit provision) will be based on the date of death of the last surviving Annuitant or Co-Annuitant. Furthermore, if you have properly named a Co-Annuitant, you may choose one of them to become the sole Annuitant on the Annuity Commencement Date, for the purpose of calculating and paying annuity benefits. If you do not make this choice at least 30 days before the Annuity Commencement Date, and both the Annuitant and Co-Annuitant are living on the Annuity Commencement Date, the Co-Annuitant will become the sole Annuitant.

Annuity Commencement Date: The date on which we are to make the first annuity payment. This date may not be later than the first day of the month following the youngest Annuitant’s 95^th birthday.

Annuity Unit: A unit of measure we use to calculate the amount of the second and each subsequent Variable Annuity payment.

Beneficiary: The person who has the right to the death benefit set forth in the Contract.

Business Day: Any day the New York Stock Exchange is open for trading. Also, any day on which we make a determination of the value of a Variable Accumulation Unit. A Business Day generally ends at 4:00 p.m. Eastern Time (or as of an earlier close of regular trading).

Company: Delaware Life Insurance Company (also referred to in this Prospectus as “we,” “us,” and “the Company”).

Contract Years and Contract Anniversaries: The first Contract Year is the period of 12 months plus a part of a month as measured from the date we issue the Contract to the first day of the calendar month that follows the calendar month of issue. All Contract Years and Contract Anniversaries thereafter are 12 month periods based upon the first day of the calendar month that follows the calendar month of issue.

Due Proof of Death: Receipt by the Company of (1) an original certified copy of an official death certificate or an original certified copy of a decree of a court of competent jurisdiction as to the finding of death, and (2) any other information or documentation required by the Company that is necessary to make payment (e.g. taxpayer identification numbers, beneficiary names and addresses, state inheritance tax waivers, etc.).

Fixed Account: The Fixed Account consists of all assets of the Company other than those allocated to a separate account of the Company.

Fixed Annuity: An annuity with payments that do not vary as to dollar amount.

Fund: One of the investment portfolios of the MFS^® Variable Insurance Trust and the MFS^® Variable Insurance Trust II.

Good Order: An instruction that is received by the Company, that is sufficiently complete and clear, along with all forms, information and supporting legal documentation (including any required spousal or joint owner’s consents) so that the Company does not need to exercise any discretion to follow such instruction. All orders to process a withdrawal request, a request to surrender your Contract, a fund transfer request, or a death benefit claim must be in good order.

Net Purchase Payment: The portion of a Purchase Payment which remains after the deduction of any applicable premium tax or similar tax.

Non-Qualified Contract: A Contract used in connection with a retirement plan that does not receive favorable federal income tax treatment under Sections 401, 403, 408, or 408A of the Internal Revenue Code of 1986, as amended (the “Code”). The Contract must be owned by a natural person or agent for a natural person for the Contract to receive favorable income tax treatment as an annuity.

Owner: The person, persons or entity entitled to the ownership rights stated in the Contract and in whose name or names the Contract is issued. In this Prospectus, we refer to the Owner as “you”.

Payee: The recipient of payments under the Contract. The term may include an Annuitant, a Beneficiary who becomes entitled to benefits upon the death of the last surviving Annuitant or any person who is designated as the beneficiary of distributions made as a result of the death of the Owner.

Purchase Payment (Payment): An amount you, or someone on your behalf, pay to us as consideration for the benefits provided by the Contract.

Qualified Contract: A Contract used in connection with a retirement plan that receives favorable federal income tax treatment under Sections 401, 403, 408, or 408A of the Code.

Service Address: P.O. Box 758581, Topeka, KS 66675-8581 or such other address as we may hereafter specify to you by written notice.

Seven Year Anniversary: The seventh Contract Anniversary and each succeeding Contract Anniversary occurring at any seven year interval thereafter, for example, the 14th, 21st and 28th Contract Anniversaries.

Sub-Account: That portion of the Variable Account that invests in shares of a specific Fund.

Valuation Period: The period of time from one determination of Accumulation Unit and Annuity Unit values to the next subsequent determination of these values. Value determinations are made as of the close of the New York Stock Exchange on each day that the Exchange is open for trading.

Variable Annuity: An annuity with payments that vary as to dollar amount in relation to the investment performance of specified Variable Accounts.

You: The Owner of the Contract.

SYNOPSIS

You may allocate Purchase Payments to the Sub-Accounts or to the Fixed Account or both. Purchase Payments must total at least $300 for the first Contract Year and each Purchase Payment must be at least $25. (See “Purchase Payments.”) During the Accumulation Period you may, without charge, transfer amounts among the Sub-Accounts and between the Sub-Accounts and the Fixed Account, subject to certain conditions. (See “Transfers.”)

We do not deduct a sales charge from Purchase Payments; however, if you make a cash withdrawal, we will, with certain exceptions, deduct a withdrawal charge ranging from 6% to 0%. You may withdraw a portion of your Accumulation Account each year before we impose the withdrawal charge, and after we have held a Purchase Payment for seven years you may withdraw it without charge. We do not impose a withdrawal charge upon annuitization or upon the transfers described above. (See “CASH WITHDRAWALS” and “Withdrawal Charges.”)

Special restrictions on withdrawals apply to Qualified Contracts, including Contracts used with Tax-Sheltered Annuities established pursuant to Sections 403(b) and 408A of the Code. In addition, under certain circumstances, withdrawals may result in tax penalties. (See “TAX CONSIDERATIONS.”)

On each Contract Anniversary and on surrender of the Contract for full value, we will deduct a contract maintenance charge of $30. After the Annuity Commencement Date, we deduct this pro rata from each annuity payment we make during the year. (See “Contract Maintenance Charge.”)

We also deduct a mortality and expense risk charge equal to an annual rate of 1.25% of the daily net assets of Sub-Accounts attributable to the Contracts (see “Mortality and Expense Risk Charge” below). In addition, for the first seven Contract Years we deduct a distribution expense risk charge equal to an annual rate of 0.15% of the daily net assets in the Sub-Accounts attributable to the Contracts. We do not deduct the distribution expense risk charge after the seventh Contract Anniversary. (See “Mortality and Expense Risk Charge and Distribution Expense Risk Charge.”)

We also make a deduction from the Sub-Accounts for the investment management fees payable to the investment adviser of the MFS^® Variable Insurance Trust and MFS^® Variable Insurance Trust II (the “Trusts”), Massachusetts Financial Services Company (“MFS^®”). These fees are based on the average daily net assets of each Sub-Account. (See “EXPENSE SUMMARY.”)

We will deduct a charge for premium taxes payable to any governmental entity. (See “Premium Taxes.”)

Annuity payments will begin on the Annuity Commencement Date. You select the Annuity Commencement Date, frequency of payments, and the annuity option. (See “ANNUITY PROVISIONS.”)

If you are not satisfied with the Contract, you may return it to us at our Service Address within ten days after we deliver the Contract to you. When we receive the returned Contract, we will cancel it and refund to you the value of the Contract’s Accumulation Account at the end of the Valuation Period during which we received the returned Contract. However, if applicable state law requires, we will refund the full amount of all Purchase Payments you have made.

EXPENSE SUMMARY

The table below describes the fees and expenses that you will pay when you buy the Contract, surrender the Contract, or transfer Contract Value among Sub-Accounts. State premium taxes may also be deducted.

Owner Transaction Expenses

Deferred Sales Load (as a percentage of Purchase Payments withdrawn¹)


Years Payment in Account
0 - 1		6%
2 - 3		5%
4 - 5		4%
6		3%
7 or more		0%



Maximum Transfer Fee			$15²

Premium Taxes (as a percentage of Account Value or total Purchase Payments):			0% - 3.5%³

The tables below describe the fees and expenses that you will pay periodically while you own the Contract, not including Fund fees and expenses.


Annual Contract Maintenance Charge		$	30

Variable Account Annual Expenses

(as a percentage of average net assets)


Mortality and Expense Risk Charge			1.25%
Distribution Expense Risk Charge			0.15%⁴


Maximum Variable Account Annual Expenses			1.40%

The table below shows the lowest and highest total operating expenses charged by the Funds (for the year ended December 31, 2015) that you may pay periodically during the time that you own the Contract. More detail concerning these fees and expenses is contained in the prospectus for each Fund.


Total Annual Fund Operating Expenses⁵	Lowest		Highest
(expenses that are deducted from Fund assets, including management fees, distribution and/or service (12b-1) fees, and other expenses)		.57%		.85%

¹	A portion of the Accumulation Account value may be withdrawn each year without imposition of any withdrawal charge, and after a Purchase Payment has been held by the Company for seven years, it may be withdrawn free of any withdrawal charge. (See “CASH WITHDRAWALS” and “Withdrawal Charges.”)

²	Currently, we do not impose a fee for transfers. (See “Short-Term Trading.”)

³	The premium tax rate and base vary by your state of residence and the type of Contract you own. We may deduct premium taxes from Contract Value upon full surrender (including surrender for the death benefit) or annuitization. (See “Premium Taxes.”)

⁴	The distribution expense risk charge is imposed only during the first seven Contract Years.

⁵

The Fund expenses shown, which include any acquired fund fees and expenses, were provided to us by the Funds and do not reflect any fee waivers or reimbursements. We have not independently verified such information. Current or future expenses may be greater or less than those shown. For more information about Fund expenses, including a description of any applicable fee waiver or expense reimbursement arrangement, see the prospectuses for the Funds.

EXAMPLE

This “Example” is intended to help you compare the cost of investing in the Contract with the cost of investing in other variable annuity contracts. These costs include withdrawal charges, the annual contract fee, Variable Account annual expenses, and Fund fees and expenses.

The Example assumes:

•

a $10,000 investment in the contract for the time periods indicated;

•

a 5% return each year;

•

the maximum fees and expenses of any of the Funds;

•

an average contract size of $30,000 for the purpose of converting the annual contract fee to a percentage;

•

the maximum Variable Account fees;

•

no premium taxes were deducted, and

•

no transfers were made.

If you surrender your Contract at the end of the applicable time period:


1 year	3 years		5 years	10 years
$778	$	1,183	$1,615	$	2,686

If you annuitize your Contract at the end of the applicable time period:


1 year	3 years		5 years		10 years
$238	$	733	$	1,255	$	2,686

If you do not surrender your Contract, at the end of the applicable time period:


1 year	3 years		5 years		10 years
$238	$	733	$	1,255	$	2,686

Please remember that the Example is an illustration and should not be considered a representation of past or future expenses. Your actual expenses may be higher or lower than those reflected in the Example. Similarly, your annual rate of return may be more or less than the 5% rate assumed in the Example.

CONDENSED FINANCIAL INFORMATION

The following information should be read in conjunction with the financial statements of the Variable Account appearing in the SAI. Note that “Level 2” refers to values after the seventh Contract Anniversary when the 0.15% Distribution Expense Risk Charge is no longer deducted from the Variable Account.


	ACCUMULATION UNIT VALUES*

Sub-Account	Accumulation Unit Value Beginning of Period		Accumulation Unit Value End of Period		Number of Accumulation Units End of Period (000 Omitted)		Year
	$	29.247	$	27.789		0		2015
MFS^® Global Governments Portfolio		29.442		29.247		1		2014
		31.511		29.442		1		2013
		31.751		31.511		1		2012
		30.421		31.751		1		2011
		29.508		30.421		6		2010
		29.059		29.508		7		2009
		26.814		29.059		11		2008
		25.017		26.814		15		2007
		24.209		25.017		18		2006

MFS^® Global Governments Portfolio - Level 2		17.412		16.569		124		2015
		17.502		17.412		137		2014
		18.705		17.502		160		2013
		18.819		18.705		185		2012
		18.003		18.819		213		2011
		17.438		18.003		230		2010
		17.147		17.438		274		2009
		15.798		17.147		306		2008
		14.718		15.798		332		2007
		14.221		14.718		403		2006
		15.580		14.221		468		2005

MFS^® Government Securities Portfolio		34.517		34.201		0		2015
		33.378		34.517		1		2014
		34.747		33.378		1		2013
		34.368		34.747		1		2012
		32.441		34.368		1		2011
		31.409		32.441		3		2010
		30.417		31.409		10		2009
		28.419		30.417		20		2008
		26.924		28.419		28		2007
		26.295		26.924		40		2006
		26.082		26.295		69		2005

MFS^® Government Securities Portfolio - Level 2		20.516		20.358		349		2015
		19.810		20.516		383		2014
		20.591		19.810		434		2013
		20.336		20.591		546		2012
		19.168		20.336		614		2011
		18.530		19.168		667		2010
		17.918		18.530		731		2009
		16.717		17.918		831		2008
		15.814		16.717		889		2007
		15.421		15.814		1,054		2006
		15.274		15.421		1,280		2005


	ACCUMULATION UNIT VALUES*

Sub-Account	Accumulation Unit Value Beginning of Period		Accumulation Unit Value End of Period		Number of Accumulation Units End of Period (000 Omitted)		Year
MFS^® High Yield Portfolio	$	43.396	$	40.991		0		2015
		42.802		43.396		1		2014
		40.781		42.802		1		2013
		35.990		40.781		1		2012
		35.117		35.990		3		2011
		30.972		35.117		6		2010
		21.266		30.972		8		2009
		29.556		21.266		13		2008
		29.459		29.556		21		2007
		27.043		29.459		34		2006

MFS^® High Yield Portfolio - Level 2		23.573		22.300		225		2015
		23.216		23.573		258		2014
		22.087		23.216		322		2013
		19.463		22.087		353		2012
		18.963		19.463		393		2011
		16.700		18.963		428		2010
		11.450		16.700		493		2009
		15.890		11.450		558		2008
		15.814		15.890		579		2007
		14.495		15.814		774		2006

MFS^® Massachusetts Investors Growth Stock Portfolio		65.489		64.510		0		2015
		59.551		65.489		1		2014
		46.309		59.551		4		2013
		40.052		46.309		6		2012
		40.282		40.052		10		2011
		36.129		40.282		20		2010
		26.107		36.129		27		2009
		41.858		26.107		46		2008
		38.235		41.858		73		2007
		36.524		38.235		128		2006

MFS^® Massachusetts Investors Growth Stock Portfolio - Level 2		27.667		27.294		1,359		2015
		25.121		27.667		1,527		2014
		19.506		25.121		1,733		2013
		16.846		19.506		1,957		2012
		16.917		16.846		2,308		2011
		15.151		16.917		2,588		2010
		10.932		15.151		2,945		2009
		17.501		10.932		3,335		2008
		15.963		17.501		3,671		2007
		15.226		15.963		4,378		2006


	ACCUMULATION UNIT VALUES*

Sub-Account	Accumulation Unit Value Beginning of Period		Accumulation Unit Value End of Period		Number of Accumulation Units End of Period (000 Omitted)		Year
MFS^® U.S. Government Money Market Portfolio	$	16.365	$	16.139		0		2015
		16.595		16.365		1		2014
		16.826		16.595		1		2013
		17.063		16.826		2		2012
		17.302		17.063		4		2011
		17.544		17.302		11		2010
		17.790		17.544		18		2009
		17.704		17.790		45		2008
		17.152		17.704		64		2007
		16.638		17.152		131		2006

MFS^® U.S. Government Money Market Portfolio - Level 2		12.451		12.297		548		2015
		12.617		12.451		634		2014
		12.764		12.617		668		2013
		12.925		12.764		795		2012
		13.086		12.925		932		2011
		13.249		13.086		1,106		2010
		13.415		13.249		1,332		2009
		13.330		13.415		1,673		2008
		12.895		13.330		1,871		2007
		12.491		12.895		1,969		2006

MFS^® Total Return Series		11.470		11.270		0		2015
		10.725		11.470		5		2014
		54.788		10.725		5		2013
		49.900		54.788		8		2012
		49.689		49.900		13		2011
		45.750		49.689		23		2010
		39.224		45.750		48		2009
		51.169		39.224		74		2008
		49.947		51.169		107		2007
		45.236		49.947		142		2006

MFS^® Total Return Series - Level 2		11.494		11.310		4,383		2015
		10.719		11.494		4,863		2014
		26.805		10.719		5,438		2013
		24.378		26.805		2,090		2012
		24.238		24.378		2,422		2011
		22.284		24.238		2,757		2010
		19.077		22.284		3,136		2009
		24.850		19.077		3,572		2008
		24.220		24.850		4,116		2007
		21.903		24.220		4,695		2006

*	Accumulation Unit Values are rounded to the nearest tenth of a cent and numbers of accumulation units are rounded to the nearest whole number.

FINANCIAL STATEMENTS

The full financial statements for the Variable Account and Delaware Life Insurance Company are in the Statement of Additional Information.

THE COMPANY, THE VARIABLE ACCOUNT, AND THE TRUSTS

The Company

We are a stock life insurance company incorporated under the laws of Delaware on January 12, 1970. We are licensed to do business in 49 states, the District of Columbia, Puerto Rico and the U.S. Virgin Islands. We have a life insurance company subsidiary that is licensed to do business in New York. Our main administrative office address is 1601 Trapelo Road, Suite 30, Waltham, MA 02451.

The immediate parent company of Delaware Life Insurance Company is Delaware Life Holdings, LLC, a limited liability company organized under the laws of the State of Delaware on December 12, 2012. Delaware Life Holdings, LLC is ultimately controlled by Todd L. Boehly and Mark L. Walter.

The Variable Account

We established the Variable Account as a separate account of the Company on July 21, 1982, pursuant to a resolution of our Board of Directors. The Variable Account meets the definition of a separate account under the federal securities laws and was initially registered with the Securities and Exchange Commission as a management separate account under the Investment Company Act of 1940. Pursuant to a shareholder vote, after the close of business on December 2, 2011, the Variable Account was reorganized, in a tax-free exchange, into a unit investment trust, and all of the assets and liabilities of the management separate account (other than insurance obligations) were transferred to the MFS^® Variable Insurance Trust II.

Under Delaware insurance law and the Contract, the income, gains or losses of the Variable Account are credited to or charged against the assets of the Variable Account without regard to the other income, gains or losses of the Company. These assets are held in relation to the Contracts described in this Prospectus and other variable annuity contracts that provide benefits that vary in accordance with the investment performance of the Variable Account. Although the assets maintained in the Variable Account will not be charged with any liabilities arising out of any other business conducted by the Company, all obligations arising under the Contracts, including the promise to make annuity payments, are general corporate obligations of the Company.

The assets of the Variable Account are divided into Sub-Accounts. Each Sub-Account invests exclusively in shares of one of the Funds of the Trusts, described below. All amounts allocated by you to a Sub-Account will be used to purchase Fund shares at their net asset value. Any and all distributions made by the Fund with respect to the shares held by the Variable Account will be reinvested to purchase additional shares at their net asset value. Deductions from the Variable Account for cash withdrawals, annuity payments, death benefits, Account Fees, contract charges against the assets of the Variable Account for the assumption of mortality and expense risks, distribution expense risk and any applicable taxes will, in effect, be made by redeeming the number of Fund shares at their net asset value equal in total value to the amount to be deducted. The Variable Account will be fully invested in Fund shares at all times.

The Trusts

MFS^® Variable Insurance Trust and MFS^® Variable Insurance Trust II (the “Trusts”) are open-end management investment companies registered under the Investment Company Act of 1940. Massachusetts Financial Services Company (“MFS^®”) serves as the investment adviser to the Trusts.

The Trusts are composed of a number of independent portfolios of securities, each of which has separate investment objectives and policies. Shares of each Trust are issued in a number of investment options (each a “Fund”), each

corresponding to one of the portfolios or series. The Contracts allow investment by the Sub-Accounts in shares of the Funds of the Trusts. Additional portfolios or series may be added to the Trusts which may or may not be available for investment by the Variable Account.

MFS^® Global Governments Portfolio: The Fund’s investment objective is to seek total return with an emphasis on current income, but also considering capital appreciation. The Fund’s objective may be changed without shareholder approval.

MFS^® Government Securities Portfolio: The Fund’s investment objective is to seek total return with an emphasis on current income, but also considering capital appreciation. The Fund’s objective may be changed without shareholder approval.

MFS^® High Yield Portfolio: The Fund’s investment objective is to seek total return with an emphasis on high current income, but also considering capital appreciation. The Fund’s objective may be changed without shareholder approval.

MFS^® Massachusetts Investors Growth Stock Portfolio: The Fund’s investment objective is to seek capital appreciation. The Fund’s objective may be changed without shareholder approval.

MFS^® U.S. Government Money Market Portfolio: The Fund’s investment objective is to seek a high level of current income consistent with preservation of capital and liquidity. The Fund’s objective may be changed without shareholder approval.

MFS^® Total Return Series: The Fund’s investment objective is to seek total return. The Fund’s objective may be changed without shareholder approval.

A more detailed description of the Trusts and their management and of the investment objectives, policies, restrictions, and expenses of the Fund may be found in the current prospectus of each Trust and in the Statement of Additional Information for each Trust, both of which are available at no cost to you on our website, www.delawarelife.com, or by calling us at (877) 253-2323.

The Trusts may also offer their shares to registered separate accounts offering variable annuity and variable life products of other affiliated and unaffiliated insurance companies, as well as to the Variable Account and other separate accounts of the Company. Although we do not anticipate any disadvantages to this arrangement, there is a possibility that a material conflict may arise between the interests of the Variable Account and one or more of the other separate accounts investing in the Trust. A conflict may occur due to differences in tax laws affecting the operations of variable life and variable annuity separate accounts, or some other reason. We and the Trusts’ Boards of Trustees will monitor events for such conflicts, and, in the event of a conflict, we will take steps necessary to remedy the conflict, including withdrawal of the Variable Account from participation in the Series which is involved in the conflict or substitution of shares of other Series or other mutual funds.

Certain Funds may employ hedging strategies to provide for downside protection during sharp downward movements in equity markets. The cost of these hedging strategies could limit the upside participation of the Fund in rising equity markets relative to other Funds. You should consult with your registered representative to determine which combination of investment choices is appropriate for you.

MFS^® also serves as the investment adviser to other mutual funds which have similar investment goals and principal investment policies and risks as the Fund, and which may be managed by a Fund’s portfolio manager(s). While a Fund may have many similarities to these other funds, its investment performance will differ from their investment performance. This is due to a number of differences between a Fund and these similar products, including differences in sales charges, expense ratios and cash flows.

Selection of Funds

The Funds offered through the Contract are selected by the Company. We review the Funds periodically and may remove a Fund or limit its availability to new premiums and/or transfers of Account Value if we determine that a Fund no longer satisfies one or more of the selection criteria, and/or if the Fund has not attracted significant allocations from

Contract Owners. We do not recommend or endorse any particular fund, and we do not provide investment advice. You bear the risk of any decline in your Account Value resulting from the performance of the Funds you have chosen.

We may consider various factors, including, but not limited to, asset class coverage, the alignment of the investment objectives of a Fund with our hedging strategy, the strength of an adviser’s or sub-adviser’s reputation and tenure, brand recognition, performance, and the capability and qualification of each investment firm. Another factor that we may consider is whether the Fund or its service providers (e.g., the investment adviser or sub-advisers) or its affiliates will make payments to us or our affiliates in connection with certain administrative, marketing, and support services, or whether affiliates of the Fund can provide marketing and distribution support for the sale of the Contracts. Accordingly, we may receive compensation from an investment adviser, distributor and/or affiliates(s) of one or more of the Funds based upon an annual percentage of the average assets we hold in the investment options. These amounts, which may vary by adviser, are intended to compensate us for administrative and other services we provide to the Funds and/or affiliate(s) and may be significant. In addition, the Company or the principal underwriter of the Contracts may receive 12b-1 fees (fees which may be levied against the total balance of a mutual fund’s assets and may be used to pay marketing and brokerage expenses of the Fund) deducted from certain Fund assets attributable to the Contract for providing distribution and shareholder support services to some investment options.

The Fixed Account

Purchase Payments may be allocated to the Fixed Account which is made up of all of the general assets of the Company other than those allocated to any separate account. The Company will invest the assets of the Fixed Account in those assets chosen by the Company and allowed by applicable law. The Company guarantees that it will credit interest at a rate of not less than 4% per year, compounded annually, to amounts allocated to the Fixed Account under the Contract. See “APPENDIX A - THE FIXED ACCOUNT” for a more detailed description of the Fixed Account.

PURCHASE PAYMENTS AND CONTRACT VALUES DURING ACCUMULATION PERIOD

Purchase Payments

You must send all Purchase Payments to us at our Service Address. Unless you have surrendered the Contract, you may make Purchase Payments at any time during the life of the Annuitant and before the Annuity Commencement Date (the “Accumulation Period”). Purchase Payments may be made annually, semi-annually, quarterly, monthly, or on any other frequency acceptable to us. The amount of Purchase Payments may vary; however, Purchase Payments must total at least $300 for the first Contract Year, and each Purchase Payment must be at least $25. In addition, unless we agree otherwise, the Company will not accept a Purchase Payment if the value of your Accumulation Account exceeds $1,000,000, or if the Purchase Payment would cause the value of your Accumulation Account to exceed $1,000,000.

An applicant’s completed application forms, together with the initial Purchase Payment, are forwarded to us. Upon acceptance, we issue the Contract to you and credit the initial Purchase Payment to the Contract in the form of Accumulation Units. We will credit the initial Purchase Payment within two business days after we receive your completed application. If your application is incomplete, we may retain the Purchase Payment for up to five business days while we try to complete the application. If we cannot complete the application within five business days, we will notify you of the reason for the delay and will return the Purchase Payment immediately unless you specifically consent to our retaining the Purchase Payment until we can complete the application. No interest will be credited or Accumulation Units purchased until the application is completed. Once the application is completed, we will credit the Purchase Payment within two business days. We will credit all subsequent Purchase Payments using the Accumulation Unit values for the Valuation Period during which we receive the Purchase Payment.

We will establish an Accumulation Account for each Contract. Your Accumulation Account value for any Valuation Period is equal to the variable accumulation value, if any, plus the fixed accumulation value, if any, for that Valuation Period. The variable accumulation value is equal to the sum of the value of all Variable Accumulation Units credited to your Accumulation Account.

Although it is currently not our practice, we may deduct applicable premium taxes or similar taxes from your Purchase Payments. (See “Premium Taxes.”) In that case, we will credit your Net Purchase Payment, which is the Purchase Payment minus the amount of those taxes. We will allocate each Net Purchase Payment to the Fixed Account, the Sub-Accounts or both the Sub-Accounts and the Fixed Account, in accordance with the allocation factors you have specified in the application or as subsequently changed.

When we receive a Purchase Payment, we will credit all of that portion, if any, of the Net Purchase Payment to be allocated to the Sub-Accounts to the Accumulation Account in the form of Variable Accumulation Units. The number of Variable Accumulation Units we credit is determined by dividing the dollar amount allocated to the Sub-Account by the Variable Accumulation Unit value for that Sub-Account for the Valuation Period during which we receive the Purchase Payment.

We determine the value of each Variable Accumulation Unit in a Sub-Account at the close of trading on each day that the New York Stock Exchange is open for trading. We also may determine the value of Variable Accumulation Units of a Sub-Account on days the Exchange is closed, if there is enough trading in securities held by that Sub-Account to materially affect the value of the Variable Accumulation Units. Each day we make a valuation is called a “Business Day.” The period that begins at the time Variable Accumulation Units are valued on a Business Day and ends at that time on the next Business Day is called a Valuation Period. On days other than Business Days, the value of a Variable Accumulation Unit does not change. We calculate the Variable Accumulation Unit value for any Valuation Period as follows: we multiply the Variable Accumulation Unit value for the immediately preceding Valuation Period by the appropriate Net Investment Factor for the subsequent Valuation Period.

If mandated under applicable law, we may be required to reject a Purchase Payment. We may also be required to provide additional information about your account to government regulators. We may also be required to block an Owner’s account and thereby refuse to pay any request for transfers, withdrawals, surrenders, or death benefits, until instructions are received from the appropriate regulator.

Net Investment Factor

The Net Investment Factor is an index applied to measure the investment performance of a Sub-Account from one Valuation Period to the next. The Net Investment Factor may be greater or less than or equal to one; therefore, the value of a Variable Accumulation Unit may increase, decrease or remain the same.

We calculate the net investment factor for each Subaccount for any Valuation Period using the following equation:


Investment Factor	=	[(a) + (b)] - [(c) + (d)]
Investment Factor	=	(a)

where:

(a)

is the value of the Sub-Account’s net assets attributable to the Contracts at the end of the preceding Valuation Period;

(b)

is the investment income and capital gains, realized or unrealized, that are credited to such assets of the Sub-Account during the Valuation Period;

(c)

is the capital losses, realized or unrealized, charged against such assets of the Sub-Account in the Valuation Period plus, with respect to such assets, any amount charged against the Sub-Account or set aside as a reserve to maintain or operate the Sub-Account for the Valuation Period; and

(d)

is the expenses of the Sub-Account attributable to the Contracts incurred during the Valuation Period including the mortality and expense risk charge, the distribution expense risk charge, and the other expenses of the Sub-Account, subject to any applicable expense limitation.

Transfers

During the Accumulation Period, you may transfer all or part of the value of your Accumulation Account to one or more Sub-Accounts or to the Fixed Account, or to any combination of these options. We make these transfers by converting the value of the Accumulation Units you wish to transfer into Variable Accumulation Units of the Sub-Accounts and/or Fixed Accumulation Units of the same aggregate value, as you choose. These transfers are subject to the following conditions:

you may make transfers involving Fixed Accumulation Units only during the 45 day period before and the 45 day period after each Contract Anniversary;

you may not make more than 12 transfers in any Contract Year;

the amount transferred may not be less than $1,000 unless you are transferring your entire balance in the Fixed Account or a Sub-Account; and

we impose additional restrictions on market timers, which are further described under “Short-Term Trading.”

We will make these transfers using the Accumulation Unit values for the Valuation Period during which we receive the request for transfer. Under current tax law a transfer will not result in any tax liability.

Requests for Transfers

You, your authorized registered representative of the broker-dealer of record, or another authorized third party may request transfers in writing or by telephone, using our Service Address and telephone number listed on the cover page of this Prospectus. Registered representatives of broker-dealer firms that have entered into selling agreements with us may, on behalf of their clients, submit transfer requests electronically over the Internet on our website. To use this electronic transfer service, a registered representative must agree to our online terms of use. If you wish to purchase a Contract for which this electronic transfer service is available, you can contact us by telephone at (877) 253-2323 to identify broker-dealers with registered representatives that use this service.

If a written, telephone, or electronic transfer request as described above is received in Good Order before the earlier of (a) 4:00 p.m. Eastern Time on a Business Day, or (b) the close of the New York Stock Exchange on days that the Stock Exchange closes before 4:00 p.m., the transfer will be priced that day. The telephone transfer privilege is available automatically during regular business hours before 4:00 p.m. Eastern Time, and does not require your written election. We have established procedures reasonably designed to confirm that instructions communicated to us by telephone or electronically are genuine. These procedures may require any person requesting a transfer made by telephone or electronically to provide personal identifying information. We will not be liable for following instructions communicated by telephone that we reasonably believe are genuine.

We reserve the right to deny any and all transfer requests made by telephone or electronically and to require that certain transfer requests be submitted in writing. A transfer request may be denied if it is not in Good Order or if it does not comply with the terms of our short-term trading policy or the trading policy of a fund involved in the transfer. If an electronic or a telephone transfer request is denied, we will immediately notify you and your authorized registered representative.

We also reserve the right to suspend, modify, restrict, or terminate the telephone or electronic transfer privilege at any time. Your ability (or the ability of your authorized registered representative or another authorized third party) to request transfers by telephone and/or electronically may also be limited due to circumstances beyond our control, such as during system outages or periods of high volume.

A transfer request will be priced at the Variable Accumulation Unit value next determined at the close of the Business Day if we receive your transfer request, in Good Order, before the earlier of (a) 4:00 p.m. Eastern Time on a Business Day, or (b) the close of the New York Stock Exchange on days that the Stock Exchange closes before 4:00 p.m. Otherwise, your transfer request will be priced on the next Business Day.

No more than one transfer request of Account Values may be made on the same Business Day regardless of whether the request is made by you, your authorized registered representative, or another authorized third party, and regardless of whether the request is submitted in writing, by telephone, or electronically. The Company has established reasonable procedures for handling multiple transfer requests received on the same Business Day, including processing the first transfer request received in Good Order on a Business Day (unless otherwise cancelled in accordance with the cancellation procedures described in the next paragraph).

You, your authorized registered representative, or another authorized third party may cancel a transfer request by contacting us by telephone at (877) 253-2323 before the end of the Business Day during which the transfer request was submitted. We may also permit your authorized registered representative to request cancellation of a transfer request electronically over the Internet, provided we receive the electronic request before the end of the Business Day during which the transfer request was submitted.

Short-Term Trading

The Contracts are not designed for short-term trading. If you wish to employ such strategies, do not purchase a Contract. Transfer limits and other restrictions, described below, are subject to our ability to monitor transfer activity. Some Owners and their third party intermediaries engaging in short-term trading may employ a variety of strategies to avoid detection. Despite our efforts to prevent short-term trading, there is no assurance that we will be able to identify such Owners or intermediaries or curtail their trading. A failure to detect and curtail short-term trading could result in adverse consequences to the Owners. Short-term trading can increase costs for all Owners as a result of excessive portfolio transaction fees. In addition, short-term trading can adversely affect a Fund’s performance. If large amounts of money are suddenly transferred out of a Fund, the Fund’s investment adviser cannot effectively invest in accordance with the Fund’s investment objectives and policies.

The Company has policies and procedures to limit the number and frequency of transfers of Accumulation Account value. The Company also reserves the right to charge a fee for transfers to discourage frequent trading. In no event will the total charge assessed in connection with a transfer, that includes this fee as well as any charge that we may assess on a permitted transfer of Accumulation Account value among Sub-Accounts (see “Transfers” above), exceed the maximum fee per transfer presented in the “EXPENSE SUMMARY” in this Prospectus.

Short-term trading activities whether by the Owner or a third party authorized to initiate transfer requests on behalf of Owner(s) may be subject to other restrictions as well. For example, we reserve the right to take actions against short-term trading which restrict your transfer privileges more narrowly than the policies described under “Transfers,” such as requiring transfer requests to be submitted in writing through regular first-class U.S. mail (e.g., no overnight, priority or courier delivery allowed), and refusing any and all transfer instructions.

If we determine that a third party acting on your behalf is engaging (alone or in combination with transfers effected by you directly) in a pattern of short-term trading, we may refuse to process certain transfers requested by such a third party. We impose additional administrative restrictions on third parties that engage in transfers of Accumulation Account values on behalf of multiple Owners at one time.

Specifically, we limit the form of such large group transfers to fax or mail delivery only, require the third party to provide us with advance notice of any possible large group transfer so that we can have additional staff ready to process the request, and require that the amount transferred out of a Sub-Account for each Owner be equal to 100% of that Owner’s value in the Sub-Account. In the last situation, we will not transfer any of the Sub-Account value. Instead, we will deem the request not in Good Order and immediately notify you.

We will provide you written notification of any restrictions imposed.

We also reserve the right to refuse requests involving transfers to or from the Fixed Account.

We reserve the right to waive short-term trading restrictions, where permitted by law and not adverse to the interests of the relevant underlying Fund, in the following instances:

•

when a new broker of record is designated for the Contract;

•

when the Owner changes;

•

when control of the Contract passes to the designated beneficiary upon the death of the Owner or Annuitant;

•

when necessary in our view to avoid hardship to an Owner;

•

when Funds are dissolved, merged, or substituted.

If short-term trading results as a consequence of waiving the restrictions against short-term trading, it could expose Owners to certain risks. The short-term trading could increase costs for all Owners as a result of excessive portfolio transaction fees. In addition, the short-term trading could adversely affect a Fund’s performance. If large amounts of money are suddenly transferred out of a Fund, the Fund’s investment adviser cannot effectively invest in accordance with the Fund’s investment objectives and policies. We uniformly apply the short-term trading policy and the permitted waivers of that policy to all Contracts. If we did not do so, some Owners could experience a different application of the policy and therefore may be treated unfairly. Too much discretion on our part in allowing the waivers of short-term trading policy could result in an unequal treatment of short-term traders by permitting some short-term traders to engage in short-term trading while prohibiting others from doing the same.

Funds’ Trading Policies. In addition to the restrictions that we impose (as described under “Transfers” and “Short-Term Trading”), most of the Funds have adopted restrictions or other policies about transfers or other purchases and sales of the Fund’s shares. These policies (the “Funds’ Trading Policies”) are intended to protect the Fund from short-term trading or other trading practices that are potentially harmful to the Fund. The Funds’ Trading Policies may be more restrictive in some respects than the restrictions that we otherwise would impose, and the Funds may modify their trading policies from time to time.

We are legally obligated to provide (at the Funds’ request) information about each amount you cause to be deposited into a Fund (including by way of Purchase Payments and transfers under your Contract) or removed from the Fund (including by way of withdrawals and transfers under your Contract). If a Fund identifies you as having violated the Fund’s Trading Policies, we are obligated, if the Fund requests, to restrict or prohibit any further deposits or exchanges by you (or a third party acting on your behalf) in respect of that Fund. Any such restriction or prohibition may remain in place indefinitely.

Accordingly, if you do not comply with any Fund’s Trading Policies, you (or a third party acting on your behalf) may be prohibited from directing any additional amounts into that Fund or directing any transfers or other exchanges involving that Fund. You should review and comply with each Fund’s Trading Policies, which are generally disclosed in the Funds’ current prospectuses.

Funds may differ significantly as to such matters as: (a) the amount, format, and frequency of information that the Funds request from us about transactions that our customers make; and (b) the extent and nature of any limits or restrictions that the Funds request us to impose upon such transactions. As a result of these differences, the costs borne by us and (directly or indirectly) by our customers may be significantly increased. Any such additional costs may outweigh any additional protection that would be provided to our customers, particularly in view of the protections already afforded by the trading restrictions that we impose as described under “Transfers” and under “Short-Term Trading.” Also, if a Fund imposes more strict trading restrictions than are reasonably necessary under the circumstances, you could be deprived of potentially valuable flexibility to make transactions with respect to that Fund. For these and other reasons, we may disagree with the timing or substance of a Fund’s requests for information from us or with any transaction limits or restrictions that the Fund requests us to impose upon our customers. If any such disagreement with respect to a Fund cannot be satisfactorily resolved, the Fund might be restricted or, subject to obtaining any required regulatory approval, replaced as a variable investment option.

CASH WITHDRAWALS

At any time during the Accumulation Period you may withdraw in cash all or any portion of the value of your Accumulation Account. Withdrawals may be subject to a withdrawal charge. (See “Withdrawal Charges.”)

Withdrawals also may have adverse federal income tax consequences, including a 10% penalty tax if taken prior to age 59¹⁄₂. (See “U.S. Federal Income Tax Considerations.”) In addition, if you own a Qualified Contract you should check the terms of your retirement plan for restrictions on withdrawals.

Your withdrawal request will be priced at the end of the Valuation Period during which we receive it. If you request a withdrawal of more than $5,000 we may require a signature guarantee. Your request must specify the amount you wish to withdraw. For a partial withdrawal you may specify the amount you want withdrawn from the Fixed Account and/or each Sub-Account to which your Accumulation Account is allocated. If you do not so specify, we will deduct the total amount you request pro rata based on your allocations at the end of the Valuation Period during which we receive your request.

If you request a full withdrawal, we will pay you the value of your Accumulation Account at the end of the Valuation Period during which we receive your request, minus the contract maintenance charge for the current Contract Year and any applicable withdrawal charge. Note that a full withdrawal results in the surrender of, and the cancellation of all rights and privileges under, your Contract.

When you request a partial withdrawal, you can ask to have any applicable charges deducted either from:

•

the amount of your partial withdrawal request (thereby reducing the amount you are to receive); or

•

your Account Value (thereby reducing your Account Value by the amount of your partial withdrawal request plus any applicable withdrawal charges).

If you make no specification, we will process your withdrawal request using the first option above. Please note: Under either option any applicable taxes will be deducted from the amount you receive.

If you request a partial withdrawal that would result in the value of your Accumulation Account being reduced to an amount less than the contract maintenance charge for the current Contract Year, we will treat it as a request for a full withdrawal. Note that the amount of your withdrawal may be reduced by the amount of any outstanding loan balance and accrued interest thereon. (See “Loans from Fixed Account (Qualified Contracts Only)” in Appendix A.)

We will pay you the applicable amount of any full or partial withdrawal within seven days after we receive your withdrawal request, except in cases where we are permitted to defer payment under the Investment Company Act of 1940 and applicable state insurance law. Currently, we may defer payment of amounts you withdraw only for the following periods:

•

when the New York Stock Exchange is closed except weekends and holidays or when trading on the New York Stock Exchange is restricted;

•

when it is not reasonably practical to dispose of securities held by the Sub-Accounts or to determine the value of the net assets of the Sub-Accounts, because an emergency exists as defined by the SEC;

•

when an SEC order permits us to defer payment for the protection of security holders; or

•

if mandated by applicable law.

If, pursuant to SEC rules, a government money market fund suspends payment of redemption proceeds in connection with a liquidation of the Fund, we will delay payment of any transfer, partial withdrawal, surrender, loan, or death benefit from the corresponding Sub-Account until the Fund is liquidated. We do not pay interest on the amount of any payments we defer.

If mandated under applicable law, we may be required to reject a Purchase Payment and/or block a Contract Owner’s account and thereby refuse to pay any request for transfers, withdrawals, surrenders or death benefits until instructions are received from the appropriate regulators. We may also be required to provide additional information about you or your account to governmental regulators.

Section 403(b) Annuities

The Internal Revenue Code imposes restrictions on cash withdrawals from Contracts used with Section 403(b) Annuities. In order for the Contract to receive tax deferred treatment, the Contract must provide that cash withdrawals of amounts attributable to salary reduction contributions (other than withdrawals of Accumulation Account value as of December 31, 1988 (“Pre-1989 Account Value”) may be made only when you attain age 59¹⁄₂, separate from service with your employer, die or become disabled (within the meaning of Section 72(m)(7) of the Code). These restrictions apply to any growth or interest on or after January 1, 1989 on Pre-1989 Account Value, salary reduction contributions made on or after January 1, 1989, and any growth or interest on such contributions (“Restricted Account Value”).

Withdrawals of Restricted Account Value are also permitted in cases of financial hardship, but only to the extent of contributions; earnings on contributions cannot be withdrawn for hardship reasons. While specific rules defining hardship have not been issued by the Internal Revenue Service, it is expected that to qualify for a hardship distribution, you must have an immediate and heavy bona fide financial need and lack other resources reasonably available to satisfy the need. Hardship withdrawals (as well as certain other premature withdrawals) will be subject to a 10% tax penalty, in addition to any withdrawal charge applicable under the Contract. (See “Tax Sheltered Annuities” under “TAX CONSIDERATIONS.”) Under certain circumstances, the 10% tax penalty will not apply to withdrawals to pay medical expenses.

Under the terms of a particular Section 403(b) plan, you may be entitled to transfer all or a portion of the Accumulation Account value to one or more alternative funding options. You should consult the documents governing your plan and the person who administers such plan for information as to such investment alternatives.

For information on the federal income tax withholding rules that apply to distributions from Qualified Contracts (including Section 403(b) annuities) and on how we administer 403(b) annuity policies. (See “Tax Sheltered Annuities” under “TAX CONSIDERATIONS.”)

Texas Optional Retirement Program

Under the terms of the Optional Retirement Program, if a participant makes the required contribution, the State of Texas will contribute a specified amount to the participant’s retirement account. If a participant does not commence the second year of participation in the plan as a “faculty member” as defined in Title 110B of the State of Texas Statutes, we will return the State’s contribution. If a participant does begin a second year of participation, the employer’s first year contributions will then be applied as a Purchase Payment under the Qualified Contract, as will the employer’s subsequent contributions.

The Attorney General of the State of Texas has ruled that under Title 110B of the State of Texas Statutes, withdrawal benefits of contracts issued under the Optional Retirement Program are available only in the event of a participant’s death, retirement, termination of employment due to total disability, or other termination of employment in a Texas public institution of higher education. A participant will not, therefore, be entitled to exercise the right of withdrawal in order to receive the cash values credited to such participant under the Qualified Contract unless one of the foregoing conditions has been satisfied. The value of such Qualified Contracts may, however, be transferred to other contracts or other carriers during the period of participation in the Program.

DEATH BENEFIT

If the Annuitant dies before the Annuity Commencement Date, we will pay a death benefit to your Beneficiary. If the Annuitant dies on or after the Annuity Commencement Date, we will not pay a death benefit except as may be provided under annuity option B, D, or E if elected. (Under these options, the Beneficiary may choose to receive remaining payments as they become due or in a single lump sum payment of their discounted value).

You select the Beneficiary in your Contract application. You may change your Beneficiary at any time by sending us written notice on our required form, unless you previously made an irrevocable Beneficiary designation. A new

Beneficiary designation is not effective until we record the change. If your designated Beneficiary is not living on the date of death of the Annuitant, we will pay the death benefit in one lump sum to you, or if you are the Annuitant, to your estate. If your designated Beneficiary dies after the date of death of the Annuitant and before an election is made to receive the death benefit in either a cash payment or under one of our annuity options, the estate of the Beneficiary shall be entitled to receive the death benefit in a single lump sum.

During the lifetime of the Annuitant and before the Annuity Commencement Date, you may elect to have the death benefit payable under one or more of our annuity options listed under “Annuity Provisions” in this Prospectus, for the Beneficiary as Payee. If you have not elected a method of settlement of the death benefit that is in effect on the date of death of the Annuitant, the Beneficiary may elect to receive the death benefit in the form of either a cash payment or one or more of our annuity options. If we do not receive an election by the Beneficiary within 60 days after the date we receive Due Proof of Death of the Annuitant and any required release or consent, the Beneficiary will be deemed to have elected a cash payment as of the last day of the 60 day period.

In all cases, no Owner or Beneficiary will be entitled to exercise any rights that would adversely affect the treatment of the Contract as an annuity contract under the Internal Revenue Code. (See “Death of Owner.”)

Payment of Death Benefit

If the death benefit is to be paid in cash to the Beneficiary, we will make payment within seven days of the date the election becomes effective or is deemed to become effective, except as we may be permitted to defer such payment in accordance with the Investment Company Act of 1940 under the circumstances described in this Prospectus under “Cash Withdrawals.” If the death benefit is to be paid in one lump sum to you (or to your estate if you are the Annuitant), we will make payment within seven days of the date we receive Due Proof of Death of the Annuitant, the Owner and/or the Beneficiary, as applicable. If you elect to have the death benefit paid under one or more of our annuity options, the Annuity Commencement Date will be the first day of the second calendar month following the date we receive Due Proof of Death of the Annuitant and the Beneficiary, if any. If your Beneficiary elects to have the death benefit paid under one or more of our annuity options, the Annuity Commencement Date will be the first day of the second calendar month following the effective date or the deemed effective date of the election, and we will maintain your Accumulation Account in effect until the Annuity Commencement Date. Unless otherwise restricted by the terms of your retirement plan or applicable law, you or your Beneficiary, as the case may be, may elect an Annuity Commencement Date later than that specified above, provided that the later date is (a) the first day of a calendar month and (b) not later than the first day of the first month following the 85th birthday of you or your Beneficiary, as applicable. (See “Annuity Commencement Date.”)

Amount of Death Benefit

The death benefit is equal to the greatest of:

the value of your Accumulation Account;

the total Purchase Payments made under the Contract reduced by all withdrawals; and

the value of your Accumulation Account on the Seven Year Anniversary, immediately preceding the death of the Annuitant, adjusted for any Purchase Payments or cash withdrawal payments made and Contract charges assessed after such Seven Year Anniversary.

To determine the amount of the death benefit under (1) above we will use Accumulation Unit values for the Valuation Period during which we receive Due Proof of Death of the Annuitant if you have elected settlement under one or more of the annuity options; if no election by you is in effect, we will use either the values for the Valuation Period during which an election by the Beneficiary becomes or is deemed effective or, if the death benefit is to be paid in one sum to you or your estate, the values for the Valuation Period during which we receive Due Proof of Death of both the Annuitant and the designated Beneficiary.

Note that the amount of your death benefit may be reduced by the amount of any outstanding loan balance and accrued interest thereon. (See “Loans from Fixed Account (Qualified Contracts Only)” in Appendix A.)

CONTRACT CHARGES

We will assess contract charges under the Contracts as follows:

Contract Maintenance Charge

We deduct an annual contract maintenance charge of $30 as partial reimbursement for administrative expenses relating to the issuance and maintenance of the Contract. Prior to the Annuity Commencement Date, we deduct this charge on each Contract Anniversary. We also deduct this charge on surrender of the Contract for full value on a date other than the Contract Anniversary. We deduct the contract maintenance charge in equal amounts from the Fixed Account and each Variable Account in which you have Accumulation Units at the time of the deduction.

On the Annuity Commencement Date we will reduce the value of your Accumulation Account by the proportionate amount of the contract maintenance charge to reflect the time elapsed between the last Contract Anniversary and the day before the Annuity Commencement Date. After the Annuity Commencement Date, we will deduct the contract maintenance charge pro rata from each annuity payment made during the year.

We will not increase the amount of the contract maintenance charge. We reserve the right to reduce the amount of the contract maintenance charge for groups of participants with individual Contracts under an employer’s retirement program in situations in which the size of the group and established administrative efficiencies contribute to a reduction in administrative expenses.

Mortality and Expense Risk Charge and Distribution Expense Risk Charge

We assume the risk that Annuitants may live for a longer period of time than we have estimated in establishing the guaranteed annuity rates incorporated into the Contract and the risk that administrative charges assessed under the Contracts may be insufficient to cover our actual administrative expenses.

For assuming these risks, we make a deduction from each Sub-Accounts with respect to the Contracts at the end of each Valuation Period both during the Accumulation Period and after annuity payments begin at an effective annual rate of 1.25%.

We may change the rate of this deduction annually but it will not exceed 1.25% on an annual basis. If the deduction is insufficient to cover the actual cost of the mortality and expense risk undertaking, we will bear the loss. Conversely, if the deduction proves more than sufficient, the excess would be profit to us and would be available for any proper corporate purpose including, among other things, payment of distribution expenses. If the withdrawal charges and distribution expense risk charges described below prove insufficient to cover expenses associated with the distribution of the Contracts, we will meet the deficiency from our general corporate funds, which may include amounts derived from the mortality and expense risk charges.

We assume the risk that withdrawal charges we assess under the Contracts may be insufficient to compensate us for the costs of distributing the Contracts. For assuming this risk, we make a deduction from the Sub-Accounts with respect to the Contracts at the end of each Valuation Period for the first seven Contract Years (during both the accumulation phase and, if applicable, after annuity payments begin) at an effective annual rate of 0.15% of the assets of the Sub-Accounts attributable to the Contracts. We do not make a deduction for this charge after the seventh Contract Anniversary. If the distribution expense risk charge is insufficient to cover the actual risk assumed, we will bear the loss; however, if the charge is more than sufficient, any excess will be profit to us and would be available for any proper corporate purpose. In no event will the distribution expense risk charge and any withdrawal charges assessed under a Contract exceed 9% of the Purchase Payments.

Withdrawal Charges

We do not deduct a sales charge from Purchase Payments. However, we will impose a withdrawal charge (i.e., a contingent deferred sales charge) on certain amounts you withdraw as reimbursement for certain expenses relating to the distribution of the Contracts, including commissions, costs of preparation of sales literature and other promotional costs and acquisition expenses.

You may withdraw a portion of your Accumulation Account value each year before incurring the withdrawal charge, and after we have held a Purchase Payment for seven years you may withdraw it free of any withdrawal charge. In addition, we do not impose a withdrawal charge upon annuitization or upon the transfer of Accumulation Account values among the Sub-Accounts or between the Sub-Accounts and the Fixed Account.

We do not impose the withdrawal charge with respect to a Contract established for the personal account of an employee of the Company or of any of its affiliates, or of a licensed insurance agent engaged in distributing the Contracts.

All other full or partial withdrawals are subject to a withdrawal charge which will be applied as follows:

(1)

Old Payments, New Payments and accumulated value: In a given Contract Year, “New Payments” are Payments you have made in that Contract Year or in the six previous Contract Years; “Old Payments” are all Purchase Payments made before the previous six Contract years; and the remainder of your Accumulation Account value - that is, the value of your Accumulation Account minus the total of Old and New Payments - is called the “accumulated value.”

(2)

Order of withdrawal: When you make a partial withdrawal or surrender your Contract, we consider the oldest Payment not previously withdrawn to be withdrawn first, then the next oldest, and so forth. Once all Old and New Payments have been withdrawn, additional amounts withdrawn will be attributed to accumulated value.

(3)

Free withdrawal amount: In any Contract Year, you may withdraw the following amount before we impose a withdrawal charge: (a) any Old Payments you have not previously withdrawn, and (b) 10% of any New Payments, whether or not these new Payments have been previously withdrawn.

(4)

Amount subject to withdrawal charge: We will impose the withdrawal charge on the excess, if any, of (a) Old and New Payments being withdrawn over (b) the remaining free withdrawal amount at the time of the withdrawal. We do not impose the withdrawal charge on amounts attributed to accumulated value.

The withdrawal charge percentage varies according to the number of Contract Years the Purchase Payment has been in your Accumulation Account, including the year in which you made the Payment, but not the year you withdraw it. The applicable percentages are as follows:


Number of Contract Years		Withdrawal Charge Percentage
0 - 1		6%
2 - 3		5%
4 - 5		4%
6		3%
7 or more		0%

Aggregate withdrawal charges (including any distribution expense risk charge described above) assessed against a Contract will never exceed 9% of the total amount of Purchase Payments made under the Contract. (See Appendix B for examples of withdrawals and withdrawal charges.)

Premium Taxes

We will make a deduction, when applicable, for premium taxes or similar state or local taxes. The amount of such applicable tax varies by jurisdiction and in many jurisdictions there is no premium tax at all. We believe that such premium taxes or similar taxes currently range from 0% to 3.5%. You should consult a qualified tax professional to find out if you could be subject to a premium tax and the amount of any tax. It is currently our policy to deduct the tax from the amount applied to provide an annuity at the time annuity payments commence. However, we reserve the right to deduct the amount of any applicable tax from your Contract at any time, including at the time you make a Purchase Payment or make a full or partial withdrawal.

Fund Expenses and Restrictions

There are fees and expenses deducted from each Fund. These fees and expenses are described in the Fund prospectuses and related Statements of Additional Information.

Under certain circumstances, the board of directors of a government money market fund would have the discretion to impose a liquidity fee on redemptions from the money market fund and to implement a redemption gate that would temporarily suspend redemptions from the fund. We reserve the right to implement, administer and charge you for any such fee or restriction imposed by the fund.

ANNUITY PROVISIONS

Annuity Commencement Date

We begin making annuity payments under a Contract on the Annuity Commencement Date, which you select in your Contract application. You may change the Annuity Commencement Date from time to time as provided in the Contract. The Annuity Commencement Date must be the first day of a month that falls after the first thirty days following issuance of the Contract and before the first month following the Annuitant’s 95th birthday. Any new Annuity Commencement Date must be at least 30 days after we receive notice of the change.

For Qualified Contracts, there may be other restrictions on your selection of the Annuity Commencement Date imposed by the particular retirement plan or by applicable law. For example, in most situations, current law requires that under a Qualified Contract certain minimum distributions commence no later than April 1 following the year the Annuitant reaches age 70¹⁄₂ (or, for Qualified Contracts other than IRAs, no later than April 1 following the year the Annuitant retires, if later than the year the Annuitant reaches age 70¹⁄₂). The Annuity Commencement Date may also be changed by an election of an annuity option as described under “Death Benefit.” Please refer to the terms of your plan for additional restrictions. In addition, if you borrowed money from your Contract’s Fixed Accumulation Value, then, on your Annuity Commencement Date, the amount of your annuity will be reduced by the amount of any outstanding loan balance plus accrued interest thereon. (See “Loans from Fixed Account (Qualified Contracts Only)” in Appendix A.)

On the Annuity Commencement Date, we will cancel your Accumulation Account and apply its adjusted value to provide an annuity. The adjusted value will be equal to the value of the Accumulation Account for the Valuation Period which ends immediately before the Annuity Commencement Date, reduced by any applicable premium or similar taxes and a proportionate amount of the contract maintenance charge. (See “Contract Maintenance Charge.”) No cash withdrawals will be permitted after the Annuity Commencement Date except as may be available under Annuity Option B, D, or E if elected.

(Under these options, if the Annuitant dies on or after the Annuity Commencement Date, the Beneficiary may choose to receive the remaining payments as they become due or in a single lump sum payment of their discounted value. The discount rate for a Variable Annuity will be the assumed interest rate in effect. (See “Annuity Payment Rates.”) The discount rate for a Fixed Annuity will be based on the interest rate used to determine the amount of each payment.)

Annuity Options

During the lifetime of the Annuitant and prior to the Annuity Commencement Date, you may elect one or more of the annuity options described below or such other settlement option as we may agree to for the Annuitant as Payee, except as restricted by the particular retirement plan or any applicable legislation. These annuity options may also be elected by you or the Beneficiary as provided under “Death Benefit.”

You may not change any election after 30 days before the Annuity Commencement Date, and no change of annuity option is permitted after the Annuity Commencement Date. If no election is in effect on the 30th day before the Annuity Commencement Date, we will deem Annuity Option B, for a Life Annuity with 120 monthly payments certain, to have been elected. If you have properly named a Co-Annuitant, but have not selected the sole Annuitant at

least 30 days before the Annuity Commencement Date, the person you have named as the Co-Annuitant will become the sole Annuitant.

Any election may specify the proportion of the adjusted value of your Accumulation Account to be applied to the Fixed Account and the Sub-Accounts. If the election does not so specify, then the portion of the adjusted value of the Accumulation Account to be applied to the Fixed Account and the Sub-Accounts will be determined on a pro rata basis from the composition of your Accumulation Account on the Annuity Commencement Date.

Annuity Options A, B and C are available to provide either a Fixed Annuity or a Variable Annuity. Annuity Options D and E are available only to provide a Fixed Annuity. Under Option A and Option C it is possible that a Contract Owner will only receive one payment.

Annuity Option A. Life Annuity: We make monthly payments during the lifetime of the Payee. This option offers a higher level of monthly payments than Annuity Options B or C because we do not make further payments after the death of the Payee, and there is no provision for a death benefit payable to a Beneficiary.

Annuity Option B. Life Annuity with 60, 120, 180 or 240 Monthly Payments Certain: We make monthly payments during the lifetime of the Payee and in any event for 60, 120, 180 or 240 months certain as elected. The election of a longer period certain results in smaller monthly payments than would be the case if a shorter period certain were elected.

Annuity Option C. Joint and Survivor Annuity: We make monthly payments during the joint lifetime of the Payee and the designated second person and during the lifetime of the survivor. During the lifetime of the survivor, variable monthly payments, if any, will be determined using the percentage chosen at the time of the election of this option of the number of each type of Annuity Unit credited to the Contract and each fixed monthly payment, if any, will be equal to the same percentage of the fixed monthly payment payable during the joint lifetime of the Payee and the designated second person.

*Annuity Option D. Fixed Payments for a Specified Period Certain: We make fixed monthly payments for a specified period of time (at least five years but not exceeding 30 years), as elected.

*Annuity Option E. Fixed Payments: We will hold the amount applied to provide fixed payments in accordance with this option at interest. We will make fixed payments in such amounts and at such times (at least over a period of five years) as we have agreed upon and will continue until the amount we hold with interest is exhausted. We will credit interest yearly on the amount remaining unpaid at a rate which we shall determine from time to time but which shall not be less than 4% per year compounded annually. We may change the rate so determined at any time; however, the rate may not be reduced more frequently than once during each calendar year.

* The election of this Annuity Option may result in the imposition of a penalty tax.

Determination of Annuity Payments

We will determine the dollar amount of the first Variable Annuity payment in accordance with the annuity payment rates found in the Contract, which are based on an assumed interest rate of 4% per year. We determine all Variable Annuity payments other than the first by means of Annuity Units credited to the Contract. The number of Annuity Units to be credited in respect of a particular Sub-Account is determined by dividing the portion of the first Variable Annuity payment attributable to that Sub-Account by the Annuity Unit value of that Sub-Account for the Valuation Period that ends immediately before the Annuity Commencement Date. The number of Annuity Units of each Sub-Account credited to the Contract then remains fixed unless an exchange of Annuity Units is made as described below. The dollar amount of each Variable Annuity payment after the first may increase, decrease or remain constant depending on the net investment return of the Sub-Accounts.

The Statement of Additional Information contains detailed disclosure regarding the method of determining the amount of each Variable Annuity payment and calculating the value of a Variable Annuity Unit, as well as hypothetical examples of these calculations.

Transfer of Variable Annuity Units

After the Annuity Commencement Date, the Payee may transfer Variable Annuity Units from one Sub-Account to another, up to a maximum of twelve such transfers each Contract Year, subject to the restrictions discussed in this Prospectus under “Transfers.” We calculate the number of new Variable Annuity Units so that the dollar amount of an annuity payment made on the date of the transfer would be unaffected by the fact of the transfer.

The applicability of the Funds’ Trading Policies is the same after the Annuity Commencement Date as it is before the Annuity Commencement Date, and this is discussed in this Prospectus under “Funds’ Trading Policies.”

Annuity Payment Rates

The Contract contains annuity payment rates for each annuity option described above. The rates show, for each $1,000 applied, the dollar amount of (a) the first monthly Variable Annuity payment based on the assumed interest rate of 4%, and (b) the monthly Fixed Annuity payment, when this payment is based on the minimum guaranteed interest rate of 4% per year. The annuity payment rates may vary according to the annuity option elected and the adjusted age of the Payee.

If net investment return of the Sub-Accounts were exactly equal to the assumed interest rate of 4%, the amount of each Variable Annuity payment would remain level. If net investment return is greater than 4%, the amount of each Variable Annuity payment would increase; conversely, if net investment return is less than 4%, the amount of each Variable Annuity payment would decrease.

As a general rule within a particular Annuity Option, annuity payments of a shorter duration result in a higher payment amount than an annuity payment paid over a longer duration. Similarly, annuity payments made on a more frequent basis will result in a smaller payment amount than annuity payments made on a less frequent basis.

OTHER CONTRACT PROVISIONS

Owner

As the Owner, you are entitled to exercise all Contract rights and privileges without the consent of the Beneficiary or any other person. Such rights and privileges may be exercised only during the lifetime of the Annuitant and prior to the Annuity Commencement Date, except as otherwise provided in the Contract. The Owner of a Non-Qualified Contract may change the ownership of the Contract, subject to the provisions of the Contract, although such change may result in the imposition of tax. (See “U.S. Federal Income Tax Considerations.”) Transfer of ownership of a Qualified Contract is governed by the laws and regulations applicable to the retirement or deferred compensation plan for which the Contract was issued. Subject to the foregoing, a Qualified Contract may not be sold, assigned, transferred, discounted or pledged as collateral for a loan or as security for the performance of an obligation or for any other purpose to any person other than the Company.

Subject to the rights of an irrevocably designated Beneficiary, you may change or revoke the designation of a Beneficiary at any time while the Annuitant is living.

Death of Owner

If you are the Owner of a Non-Qualified Contract and you die before the Annuity Commencement Date, the entire value of your Accumulation Account must be distributed either (1) within five years after the date of your death, or (2) over some period not greater than the life or expected life of the “designated beneficiary” as defined below, with

annuity payments beginning within one year after the date of your death. The person named as “successor Owner” shall be considered the designated beneficiary for the purposes of Section 72(s) of the Internal Revenue Code and if no person then living has been so named, then the Annuitant shall automatically be the designated beneficiary for this purpose.

These mandatory distribution requirements will not apply when the Beneficiary is your spouse, if your spouse elects to continue the Contract in his or her own name as Owner. If you were the Annuitant as well as the Owner (unless your spouse is your Beneficiary and elects to continue the Contract) the Death Benefit provision of the Contract controls, subject to the condition that any annuity option elected complies with the Section 72(s) distribution requirements.

If you are both the Owner and Annuitant and you die on or after the Annuity Commencement Date and before the entire accumulation under the Contract has been distributed, the remaining portion of such accumulation, if any, must be distributed at least as rapidly as the method of distribution then in effect.

In all cases, no Owner or Beneficiary shall be entitled to exercise any rights that would adversely affect the treatment of the Contract as an annuity contract under the Code.

Any distributions upon the death of the Owner of a Qualified Contract will be subject to the laws and regulations governing the particular retirement or deferred compensation plan in connection with which the Qualified Contract was issued.

Voting Rights

To the extent required by law, we will vote all shares held in the Variable Account in accordance with instructions we receive from persons with voting interests in the Funds. During the accumulation phase, you will have the right to give voting instructions, except in the case of a Group Contract in which the Owner has reserved this right. During the Income Phase, the Payee (that is, the Annuitant or Beneficiary entitled to receive benefits) is the person having the right to give voting instructions.

Before a vote of the shareholders of a Fund occurs, each person with voting interests in the Fund will receive voting materials from us. We will ask those persons to instruct us on how to vote and to return their respective voting instructions to us in a timely manner. Each such person is permitted to cast votes based on the dollar value of the shares of each Fund that we hold for your Contract in the corresponding Sub-Account. We calculate this value based on the number of Variable Accumulation Units or Variable Annuity Units allocated to your Contract as of the date set by the Fund and the value of each Variable Accumulation Unit or Variable Annuity Unit on that date. We count fractional votes.

We will vote any shares attributable to us and Fund shares for which no timely voting instructions are received in the same proportion as the shares for which we receive instructions from person(s) with voting interests in the Fund. Because of this method of proportional voting, a small number of persons with voting interests in the Fund may determine the outcome of a shareholder vote. If, however, we determine that we are permitted to vote the Fund shares in our own right, then we may do so.

Note: Owners of Qualified Contracts issued on a group basis may be subject to other voting provisions of the particular retirement plan and under the Investment Company Act of 1940. Employees who contribute to retirement plans that are funded by the Contracts may be entitled to instruct the Owners as to how to instruct us to vote the Fund shares attributable to their contributions. Such retirement plans may also provide the additional extent, if any, to which an Owner shall follow voting instructions of persons with rights under those plans. If no voting instructions are received from any such person with respect to a particular Contract, the Owner may instruct us as to how to vote the number of Fund shares for which instructions may be given.

Periodic Reports

During the accumulation phase, we may send the Owner, or such other person having voting rights, at least once during each Contract Year, a statement showing the number, type and value of Accumulation Units credited to the Contract’s

Variable Accumulation Account and the Fixed Account, which statement shall be accurate as of a date not more than two months previous to the date of mailing. These periodic statements contain important information concerning Accumulation Account transactions with respect to a Contract. It is the obligation of the Owner to review each such statement carefully and to report to us, at the address or telephone number provided on the statement, any errors or discrepancies in the information presented therein within 60 days of the date of such statement. Unless we receive notice of any such error or discrepancy from the Owner within such time period, we may not be responsible for correcting the error or discrepancy.

In addition, every person having voting rights will receive such reports or prospectuses concerning the Variable Account and the Funds as may be required by the Investment Company Act of 1940 and the Securities Act of 1933. We will also send such statements reflecting transactions in the Contract’s Accumulation Account and Fixed Account as may be required by applicable laws, rules and regulations. Upon request, we will provide the Owner with information regarding fixed and variable Accumulation Unit values.

If you have enrolled in the electronic delivery service and consented to receive documents electronically, we will send you an email at the address you provided notifying you when we have posted your confirmations, statements, and reports on our website.

Modification

Upon notice to you, or to the Payee during the annuity period, we may modify the Contract, but only if such modification is consistent with federal securities laws and regulations and (i) is necessary to make the Contract or the Variable Account comply with any law or regulation issued by a governmental agency to which we are subject or (ii) is necessary to assure continued qualification of the Contract under the Internal Revenue Code or other federal or state laws relating to retirement annuities or variable annuity contracts or (iii) is necessary to reflect a change in the operation of the Variable Account or (iv) provides additional Variable Account and/or fixed accumulation options. In the event of any such modification, we may supplement this prospectus to reflect such modification.

Change in Operation of Variable Account

At the Company’s election and subject to any necessary vote by persons having the right to vote, the Variable Account may be operated as a management company under the Investment Company Act of 1940 or it may be deregistered under the Investment Company Act of 1940 in the event registration is no longer required. Deregistration of the Variable Account requires an order by the Securities and Exchange Commission. In the event of any change in the operation of the Variable Account pursuant to this provision, we may supplement this prospectus to reflect the change and take such action as may be necessary and appropriate to effect the change.

Splitting Units

We reserve the right to split or combine the value of Variable Accumulation Units, Fixed Accumulation Units, Annuity Units or any of them. In effecting any such change in unit values, strict equity will be preserved and no change will have a material effect on the benefits or other provisions of the Contract. Any changes we make by splitting or combining Variable Accumulation Unit values must comply with federal securities laws and regulations.

TAX CONSIDERATIONS

This section provides general information on the federal income tax consequences of ownership of a Contract and is not intended as tax advice. Actual federal tax consequences will vary depending on, among other things, the type of retirement plan under which your Contract is issued. Also, legislation altering the current tax treatment of annuity contracts could be enacted in the future and could apply retroactively to Contracts that were purchased before the date of enactment. We make no attempt to consider any applicable state or other income tax laws, any state and local estate or inheritance tax, or other tax consequences of ownership or receipt of distributions under a Contract. We also make no guarantee regarding the federal, state, or local tax status of any Contract or any transaction involving any Contract.

You should consult a qualified tax professional for advice before purchasing a Contract or executing any other transaction (such as a rollover, distribution, withdrawal or payment) involving a Contract.

When you invest in an annuity contract, you usually do not pay taxes on your investment gains until you withdraw the money - generally for retirement purposes. If you invest in a variable annuity as part of an individual retirement plan, pension plan or employer-sponsored retirement program, your Contract is called a “Qualified Contract.” If your annuity is independent of any formal retirement or pension plan, it is termed a “Non-Qualified Contract.” The tax rules applicable to Qualified Contracts vary according to the type of retirement plan and the terms and conditions of the plan.

U.S. Federal Income Tax Considerations

The following discussion applies only to those Contracts issued in the United States. For a discussion of tax considerations effecting Contracts issued in Puerto Rico, see “Puerto Rico Tax Considerations.”

Taxation of Non-Qualified Contracts

Deductibility of Purchase Payments. For federal income tax purposes, Purchase Payments made under Non-Qualified Contracts are not deductible. Under certain circumstances, Purchase Payments made under Qualified Contracts may be excludible or deductible from taxable income. Any such amounts will also be excluded from the “investment in the contract” for purposes of determining the taxable portion of any distributions from a Qualified Contract. As a general rule, regardless of whether you own a Qualified or a Non-Qualified Contract, the amount of your tax liability on earnings and distributions will depend upon the specific tax rules applicable to your Contract and your particular circumstances.

Pre-Distribution Taxation of Contracts. Generally, an increase in the value of a Contract will not give rise to a current income tax liability to the Owner of a Contract or to any payee under the Contract until a distribution is received from the Contract. However, certain assignments or pledges of a Contract or loans under a Contract will be treated as distributions to the Owner of the Contract and will accelerate the taxability of any increases in the value of a Contract.

Also, corporate (or other non-natural person) Owners of a Non-Qualified Contract will generally incur a current tax liability on Accumulation Account value increases. There are certain exceptions to this current taxation rule, including: (i) any Contract that is an “immediate annuity”, which the Internal Revenue Code (the “Code”) defines as a single premium contract with an annuity commencement date within one year of the date of purchase which provides for a series of substantially equal periodic payments (to be made not less frequently than annually) during the annuity period, and (ii) any Contract that the non-natural person holds as agent for a natural person (such as where a bank or other entity holds a Contract as trustee under a trust agreement).

You should note that a qualified retirement plan generally provides tax deferral regardless of whether the plan invests in an annuity contract. For that reason, no decision to purchase a Qualified Contract should be based on the assumption that the purchase of a Qualified Contract is necessary to obtain tax deferral under a qualified plan.

Distributions and Withdrawals from Non-Qualified Contracts. The Accumulation Account value of a Non-Qualified Contract will generally include both (i) an amount attributable to Purchase Payments, the return of which will not be taxable, and (ii) an amount attributable to investment earnings, the receipt of which will be taxable at ordinary income rates. The relative portions of any particular distribution that derive from nontaxable Purchase Payments and taxable investment earnings depend upon the nature and the timing of that distribution.

Any withdrawal of less than your entire Accumulation Account value under a Non-Qualified Contract before the Annuity Commencement Date must be treated as a receipt of investment earnings. You may not treat such withdrawals as a nontaxable return of Purchase Payments unless you have first withdrawn the entire amount of the Accumulation Account value that is attributable to investment earnings. For purposes of determining whether you have withdrawn the entire amount of the investment earnings under a Non-Qualified Contract, the Code provides that all Non-Qualified deferred annuity contracts issued by the same company to the same Owner during any one calendar year must be treated as one annuity contract. If you withdraw your entire Accumulation Account value under a Non-Qualified

Contract before the Annuity Commencement Date (a “full surrender”), the taxable portion will equal the amount you receive less the “investment in the contract” (i.e., the total Purchase Payments (excluding amounts that were deductible by, or excluded from the gross income of, the Owner of a Contract), less any Purchase Payments that were amounts previously received which were not includable in income).

Annuity Payments. A Payee who receives annuity payments under a Non-Qualified Contract after the Annuity Commencement Date, will generally be able to treat a portion of each payment as a nontaxable return of Purchase Payments and to treat only the remainder of each such payment as taxable investment earnings. Until the Purchase Payments have been fully recovered in this manner, the nontaxable portion of each payment will be determined by the ratio of (i) the total amount of the Purchase Payments made under the Contract, to (ii) the Payee’s expected return under the Contract. Once the Payee has received nontaxable payments in an amount equal to total Purchase Payments, no further exclusion is allowed and all future distributions will constitute fully taxable ordinary income. If payments are terminated upon the death of the Annuitant or other Payee before the Purchase Payments have been fully recovered, the unrecovered Purchase Payments may be deducted on the final return of the Annuitant or other Payee.

Penalty Tax on Certain Withdrawals. A penalty tax of 10% may also apply to taxable cash withdrawals, including lump-sum payments from Non-Qualified Contracts. This penalty will generally not apply to distributions made after age 59¹⁄₂, to distributions pursuant to the death or disability of the owner, to distributions that are a part of a series of substantially equal periodic payments made not less frequently than annually for life or life expectancy, or to distributions under an immediate annuity (as defined above). Other exceptions may be applicable under certain circumstances and special rules may be applicable in connection with the exceptions enumerated above. Also, additional exceptions apply to distributions from a Qualified Contract. You should consult a qualified tax professional with regard to exceptions from the penalty tax.

Taxation of Death Benefit Proceeds. Death benefits paid upon the death of an Annuitant are not life insurance benefits and will generally be includible in the income of the recipient to the extent they represent investment earnings under the contract. For this purpose, the amount of the investment in the contract is not affected by the Owner’s or Annuitant’s death, i.e., the investment in the contract must still be determined by reference to the Owner’s investment in the Contract. Special mandatory distribution rules also apply after the death of the Owner when the beneficiary is not the surviving spouse of the Owner.

If death benefits are distributed in a lump sum, the taxable amount of those benefits will be determined in the same manner as upon a full surrender of the contract. If death benefits are distributed under an annuity option, the taxable amount of those benefits will be determined in the same manner as annuity payments, as described above.

Transfers, Assignments or Exchanges of a Contract. A transfer or assignment of ownership of a Contract, the designation of an Annuitant other than the Owner, the selection of certain maturity dates, or the exchange of a Contract may result in certain tax consequences to you that are not discussed herein. An Owner contemplating any such transfer, assignment or exchange should consult a qualified tax professional as to the tax consequences.

Withholding. Annuity distributions are generally subject to withholding for the recipient’s federal income tax liability. Recipients can generally elect, however, not to have tax withheld from distributions.

Multiple Contracts. All non-qualified deferred annuity contracts that are issued by us (or our affiliates) to the same owner during any calendar year are treated as one annuity contract for purposes of determining the amount includible in such owner’s income when a taxable distribution occurs.

Partial Annuitization. Under a new tax provision enacted in 2010, if part of an annuity contract’s value is applied to an annuity option that provides payments for one or more lives and for a period of at least ten years, those payments may be taxed as annuity payments instead of withdrawals. None of the payment options under the Contract is intended to qualify for this “partial annuitization” treatment.

Taxation of Qualified Contracts

“Qualified Contracts” are Contracts used with plans that receive tax-deferral treatment pursuant to specific provisions of the Code. Annuity contracts also receive tax-deferral treatment. It is not necessary that you purchase an annuity contract to receive the tax-deferral treatment available through a Qualified Contract. If you purchase this annuity Contract as a Qualified Contract, you do not receive additional tax-deferral. Therefore, if you purchase this annuity Contract as a Qualified Contract, you should do so for reasons other than obtaining tax deferral.

You may use Qualified Contracts with several types of qualified retirement plans. Because tax consequences will vary with the type of qualified retirement plan and the plan’s specific terms and conditions, we provide below only brief, general descriptions of the consequences that follow from using Qualified Contracts in connection with various types of qualified retirement plans. We stress that the rights of any person to any benefits under these plans may be subject to the terms and conditions of the plans themselves, regardless of the terms of the Qualified Contracts that you are using. These terms and conditions may include restrictions on, among other things, ownership, transferability, assignability, contributions and distributions. Adverse tax consequences may result if you do not ensure that contributions, distributions and other transactions with respect to the Contract comply with the law.

Pension and Profit-Sharing Plans. Sections 401(a), 401(k) and 403(a) of the Code permit business employers and certain associations to establish various types of retirement plans for employees. The Code requirements are similar for qualified retirement plans of corporations and those of self-employed individuals. Self-employed persons, as a general rule, may therefore use Qualified Contracts as a funding vehicle for their retirement plans. Adverse tax consequences to the retirement plan, the participant or both may result if the Contract is transferred to any individual as a means to provide benefit payments, unless the plan complies with all the requirements applicable to such benefits prior to transferring the Contract.

Tax-Sheltered Annuities. Section 403(b) of the Code permits public school employees and employees of certain types of charitable, educational and scientific organizations specified in Section 501(c)(3) of the Code to purchase annuity contracts and, subject to certain limitations, exclude the amount of purchase payments from gross income for tax purposes. The Code imposes restrictions on cash withdrawals from Section 403(b) annuities (“TSA”).

Effective October 1, 2008, we stopped issuing any new TSAs, including Texas Optional Retirement Program annuities. We no longer accept any additional Purchase Payments to any previously issued TSAs.

The Internal Revenue Service’s (“IRS”) comprehensive TSA regulations are generally effective January 1, 2009, and these regulations, subsequent IRS guidance, and/or the terms of an employer’s TSA plan impose new restrictions on TSAs, including restrictions on (1) the availability of hardship distributions and loans, (2) TSA exchanges within the same employer’s TSA plan, and (3) TSA transfers to another employer’s TSA plan. You should consult with a qualified tax professional about how the regulations affect you and your TSA.

If TSAs are to receive tax-deferred treatment, cash withdrawals of amounts attributable to salary reduction contributions (other than withdrawals of Accumulation Account value as of December 31, 1988) may be made only when you attain age 59¹⁄₂, have a severance from employment with the employer, die or become disabled (within the meaning of Section 72(m)(7) of the Code). These restrictions apply to (i) any post-1988 salary reduction contributions, (ii) any growth or interest on post-1988 salary reduction contributions, (iii) any growth or interest on pre-1989 salary reduction contributions that occurs on or after January 1, 1989, and (iv) any pre-1989 salary reduction contributions since we do not maintain records that separately account for such contributions. It is permissible, however, to withdraw post-1988 salary reduction contributions (but not the earnings attributable to such contributions) in cases of financial hardship. Financial hardship withdrawals (as well as certain other premature withdrawals) are fully taxable and will be subject to a 10% federal income tax penalty, in addition to any applicable Contract withdrawal charge. Under certain circumstances the 10% federal income tax penalty will not apply if the withdrawal is for medical expenses. A financial hardship withdrawal may not be repaid once it is taken.

The IRS’s TSA regulations provide that TSA financial hardship withdrawals will be subject to the IRS rules applicable to hardship distributions from 401(k) plans. Specifically, if you have not terminated your employment or reached age

59¹⁄₂, you may be able to withdraw a limited amount of monies if you have an immediate and heavy financial need and the withdrawal amount is necessary to satisfy such financial need. An immediate and heavy financial need may arise only from:

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deductible medical expenses incurred by you, your spouse, or your dependents;

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payments of tuition and related educational fees for the next 12 months of post-secondary education for you, your spouse, or your dependents;

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costs related to the purchase of your principal residence (not including mortgage payments);

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payment necessary to prevent eviction from your principal residence or foreclosure of the mortgage on your principal residence;

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payments for burial or funeral expenses for your parent, spouse, children, or dependents; or

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expenses for the repair of damage to your principal residence that would qualify for the federal income tax casualty deduction.

You will be required to represent in writing to us (1) that your specified immediate and heavy financial need cannot reasonably be relieved through insurance or otherwise, by liquidation of your assets, by ending any contributions you are making under your TSA plan, by other distributions and nontaxable loans under any of your qualified plans, or by borrowing from commercial sources and (2) that your requested withdrawal amount complies with applicable law, including the federal tax law limit. And, unless your TSA was issued prior to September 25, 2007 and the only payments you made to such TSA were TSA funds you transferred directly to us from another TSA carrier (a “90-24 Transfer TSA”), your TSA employer also may need to agree in writing to your hardship request.

If your TSA contains a provision that permits loans, you may request a loan but you will be required to represent in writing to us that your requested loan amount complies with applicable law, including the federal tax law limit. And, unless your TSA is a 90-24 Transfer TSA, your TSA employer also may need to agree in writing to your loan request.

TSAs, like IRAs, are subject to required minimum distributions under the Code. TSAs are unique, however, in that any account balance accruing before January 1, 1987 (the “pre-1987 balance”) needs to comply with only the minimum distribution incidental benefit (MDIB) rule and not also with the minimum distribution rules set forth in Section 401(a)(9) of the Code. This special treatment for any pre-1987 balance is, however, conditioned upon the issuer identifying the pre-1987 balance and maintaining accurate records of changes to the balance. Since we do not maintain such records, your pre-1987 balance, if any, will not be eligible for special distribution treatment.

Under the terms of a particular TSA plan, you may be entitled to transfer or exchange all or a portion of your TSA to one or more alternative funding options within the same or different TSA plan. You should consult the documents governing your TSA plan and your plan administrator for information as to such investment alternatives. If you wish to transfer/exchange your TSA, you will be able to do so only if the issuer of the new TSA certifies to us that the transfer/exchange is permissible under the TSA regulations and the applicable TSA plan. Your TSA employer also may need to agree in writing to your transfer/exchange request.

Individual Retirement Accounts and Annuities. Individual Retirement Accounts and Annuities (“IRAs”), as defined in Section 408 of the Code, permit eligible individuals to make annual contributions of up to the lesser of a specified dollar amount for the year or the amount of compensation includible in the individual’s gross income for the year. The contributions may be deductible in whole or in part, depending on the individual’s income. In addition, certain distributions from some other types of retirement plans may be “rolled over” into an IRA on a tax-deferred basis without regard to these limits. Amounts in the IRA (other than nondeductible contributions) are taxed when distributed from the IRA. A 10% penalty tax generally applies to distributions made before age 59¹⁄₂, unless an exception applies. The Internal Revenue Service imposes special information requirements with respect to IRAs and we will provide purchasers of the Contracts as Individual Retirement Annuities with any necessary information. You will have the right to revoke a Contract issued as an Individual Retirement Annuity under certain circumstances, as described in the section of this Prospectus entitled “Right to Return.” If your Contract is issued in connection with an Individual Retirement Account, we have no information about the Account and you should contact the Account’s trustee or custodian.

Roth Individual Retirement Arrangements. Section 408A of the Code permits certain eligible individuals to contribute to an individual retirement program called a Roth IRA. Unlike contributions to a traditional IRA under Section 408 of the Code, contributions to a Roth IRA are not tax-deductible. Provided certain conditions are satisfied, distributions are generally tax-free. Like traditional IRAs, Roth IRAs are subject to limitations on contribution amounts and the timing of distributions. If you roll over from or convert a traditional IRA Contract into a Roth IRA Contract or your Individual Retirement Account that holds a Contract is converted to a Roth Individual Retirement Account, the fair market value of the Contract is included in taxable income. Under IRS regulations and Revenue Procedure 2006-13, fair market value may exceed the Contract’s account balance. Thus, you should consult with a qualified tax professional prior to any conversion. Distributions from a Roth IRA are generally not taxed, except that once aggregate distributions exceed contributions to the Roth IRA, income tax and a 10% penalty tax may apply to distributions made (1) before age 59¹⁄₂ (subject to certain exceptions) or (2) during the five taxable years starting with the year in which the first contribution is made to any Roth IRA. A 10% penalty tax may apply to amounts attributable to a conversion from an IRA if they are distributed during the five taxable years beginning with the year in which the conversion was made.

The Internal Revenue Service imposes special information requirements with respect to Roth IRAs and we will provide the necessary information for Contracts issued as Roth Individual Retirement Annuities. If your Contract is issued in connection with a Roth Individual Retirement Account, we have no information about the Account and you should contact the Account’s trustee or custodian.

Distributions and Withdrawals from Qualified Contracts. In most cases, all of the distributions you receive from a Qualified Contract will constitute fully taxable ordinary income. Also, a 10% penalty tax will apply to distributions prior to age 59¹⁄₂, except in certain circumstances.

If you receive a distribution for a Qualified Contract used in connection with a qualified pension plan, from a tax-sheltered annuity, a governmental Code Section 457 plan or an IRA and roll over some or all of that distribution to another eligible plan, following the rules set out in the Code and IRS regulations, the portion of such distribution that is rolled over will not be includible in your income. An eligible rollover distribution from a qualified plan, tax-sheltered annuity or governmental Section 457 plan will be subject to 20% mandatory withholding as described below. Because the amount of the cash paid to you as an eligible rollover distribution will be reduced by this withholding, you will not be able to roll over the entire account balance under your Contract, unless you use other funds equal to the tax withholding to complete the rollover. Rollovers of IRA distributions are not subject to the 20% mandatory withholding requirement.

An eligible rollover distribution from a qualified plan, governmental Section 457 plan or tax-sheltered annuity is any distribution of all or any portion of the balance to the credit of an employee, except that the term does not include:

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a distribution which is one of a series of substantially equal periodic payments made annually under a lifetime annuity or for a specified period of ten years or more;

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any required minimum distribution, or

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any hardship distribution.

Only you or your surviving spouse Beneficiary may elect to roll over a distribution to an eligible retirement plan. However, a non-surviving-spouse Beneficiary may be able to directly transfer a distribution to a so-called inherited IRA that will be subject to the IRS distribution rules applicable to beneficiaries.

Withholding. In the case of an eligible rollover distribution (as defined above) from a Qualified Contract (other than from an IRA), we (or the plan administrator) must withhold and remit to the U.S. Government 20% of the distribution, unless the Owner or Payee elects to make a direct rollover of the distribution to another qualified retirement plan that is eligible to receive the rollover; however, a non-surviving-spouse beneficiary may elect a direct rollover only to a so-called inherited IRA. In the case of a distribution from (i) a Non-Qualified Contract, (ii) an IRA, or (iii) a Qualified Contract where the distribution is not an eligible rollover distribution, we will withhold and remit to the U.S. Government a part of the taxable portion of each distribution unless, prior to the distribution, the Owner or Payee provides us his or her taxpayer identification number and instructs us (in the manner prescribed) not to withhold. The

Owner or Payee may credit against his or her federal income tax liability for the year of distribution any amounts that we (or the plan administrator) withhold.

Investment Diversification and Control

The Treasury Department has issued regulations that prescribe investment diversification requirements for the mutual fund series underlying non-qualified variable contracts. All Non-Qualified Contracts must comply with these regulations to qualify as annuities for federal income tax purposes. The owner of a Non-Qualified Contract that does not meet these guidelines will be subject to current taxation on annual increases in value of the Contract. We believe that each Fund available as an investment option under the Contract complies with these regulations.

In certain circumstances, owners of variable annuity contracts have been considered for Federal income tax purposes to be the owners of the assets of the separate account supporting their contracts due to their ability to exercise investment control over those assets. When this is the case, the contract owners have been currently taxed on income and gains attributable to the variable account assets. There is limited guidance in this area, and some features of our Contracts, such as the flexibility of an owner to allocate premium payments and transfer amounts among the investment divisions of the separate account, have not been explicitly addressed in published rulings. While we believe that the Contracts do not give Owners investment control over separate account assets, we reserve the right to modify the Contracts as necessary to prevent an Owner from being treated as the Owner of the separate account assets supporting the Contract. Nevertheless, you should consult with a qualified tax professional on the potential impact of the investor control rules of the IRS as they relate to the investment decisions and activities you may undertake with respect to the Contract. In addition, the IRS and/or the Treasury Department may issue new rulings, interpretations or regulations on this subject in the future. Accordingly, we therefore reserve the right to modify the Contracts as necessary to attempt to prevent you from being considered the owner, for tax purposes, of the underlying assets. We also reserve the right to notify you if we determine that it is no longer practicable to maintain the Contract in a manner that was designed to prevent you from being considered the owner of the assets of the Separate Account. You bear the risk that you may be treated as the owner of Separate Account assets and taxed accordingly.

Tax Treatment of the Company and the Variable Account

As a life insurance company under the Code, we will record and report operations of the Variable Account separately from other operations. The Variable Account will not, however, constitute a regulated investment company or any other type of taxable entity distinct from our other operations. Under present law, we will not incur tax on the income of the Variable Account (consisting primarily of interest, dividends, and net capital gains) if we use this income to increase reserves under Contracts participating in the Variable Account.

Required Minimum Distribution Requirements

If your Contract is a Qualified Contract other than a Roth IRA, it is subject to certain required minimum distribution (RMD) requirements imposed by the Internal Revenue Code and IRS regulations. Under the RMD rules, distributions must begin no later than April 1 of the calendar year following the year in which you attain age 70¹⁄₂ or, for non-IRAs, the date of retirement instead of age 70¹⁄₂ if it is later. The RMD amount for a distribution calendar year is generally calculated by dividing the Contract’s value as of 12/31 of the prior calendar year by the applicable distribution factor set forth in a Uniform Lifetime Table in the IRS regulations.

For Contracts issued in connection with traditional Individual Retirement Accounts, you should contact the Account’s trustee or custodian about RMD requirements since we only provide the trustee or custodian with the Contract’s value (including any actuarial present value of additional benefits discussed below) so that it can be used in the Account’s RMD calculations.

The IRS’s RMD regulations provide that the annual RMD amount is to be calculated based on the Contract’s Account Value as of 12/31 plus “the actuarial present value of any additional benefits” that are provided under your Contract (such as optional death benefits) which is also calculated as of 12/31. When we notify you yearly of the RMD amount, we will inform you if the calculation included the actuarial present value of any additional benefits since such inclusion

would have increased your RMD amount. Because of the above requirements, a death benefit in your Contract could cause your RMD amount to be higher than it would be without such a benefit.

You may take an RMD amount calculated for a particular Individual Retirement Annuity from that Annuity or from another IRA of yours. Similarly, you may take an RMD amount calculated for a particular TSA annuity from that annuity or from another TSA account or TSA annuity of yours. If your Qualified Contract is an asset of a qualified retirement plan, the qualified plan is subject to the RMD requirements and the Contract, as an asset of the qualified plan, may need to be used as a source of funds for the RMDs.

For Qualified Contracts issued other than as Individual Retirement Annuities, (1) we do not calculate your annual RMD amount nor do we notify you of such amount and (2) you should contact the Account’s trustee or custodian about RMD requirements since we only provide the trustee or custodian with the Contract’s value so that it can be used by the trustee or custodian in the Account’s RMD calculations.

Non-Qualified Contracts. We are required to make a determination as to the taxability of any withdrawal you make in order to be able to annually report to the IRS and your information about your withdrawal. Under the Internal Revenue Code, any withdrawal from a Non-Qualified Contract is taxable to the extent the annuity’s cash value (determined without regard to surrender charges) exceeds the investment in the contract. There is no definition of “cash value” in the Code and, for tax reporting purposes, we are currently treating it as the Accumulation Account value of the Contract. However, there can be no assurance that the IRS will agree that this is the correct cash value. You should consult with a qualified tax professional as to the meaning of “cash value.”

Definition of Spouse Under Federal Law

The Contract provides that upon your death, a surviving spouse may have certain continuation rights that he or she may elect to exercise for the Contract’s death benefit. All Contract provisions relating to spousal continuation are available only to a person who meets the definition of “spouse” under federal law. The U.S. Supreme Court has held that same-sex marriages must be permitted under state law and that marriages recognized under state law will be recognized for federal law purposes. Domestic partnerships and civil unions that are not recognized as legal marriages under state law, however, will not be treated as marriages under federal law. Consult a qualified tax professional for more information on this subject.

Federal Estate Taxes

While no attempt is being made to discuss the Federal estate tax implications of the Contract, a purchaser should keep in mind that the value of an annuity contract owned by a decedent and payable to a beneficiary by virtue of an annuity contract owned by a decedent and payable to a beneficiary by virtue of surviving the decedent is included in the decedent’s gross estate. Depending on the terms of the annuity contract, the value of the annuity included in the gross estate may be the value of the lump sum payment payable to the designated beneficiary or the actuarial value of the payments to be received by the beneficiary. Please consult an estate planning adviser for more information.

Generation-skipping Transfer Tax

Under certain circumstances, the Code may impose a “generation-skipping transfer tax” when all or part of an annuity contract is transferred to, or a death benefit is paid to, an individual two or more generations younger than the Owner. Regulations issued under the Code may require us to deduct the tax from your Contract, or from any applicable payment, and pay it directly to the IRS. Please consult a qualified tax professional for more information.

American Taxpayer Relief Act of 2012

The American Taxpayer Relief Act of 2012 (ATRA) permanently extended the laws governing estate taxes, gift taxes and generation skipping transfer taxes that were put in place by the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (TRA 2010), with one notable exception - the top estate tax, gift tax and generation skipping tax rate increases from 35% to 40%.

Medicare Tax

Beginning in 2013, distributions from non-qualified annuity policies will be considered “investment income” for purposes of the newly enacted Medicare tax on investment income. Thus, in certain circumstances, a 3.8% tax may be applied to some or all of the taxable portion of distributions (e.g. earnings) to individuals whose income exceeds certain threshold amounts ($200,000 for filing single, $250,000 for married filing jointly and $125,000 for married filing separately.) Please consult a qualified tax professional for more information.

Annuity Purchases by Residents of Puerto Rico

The Internal Revenue Service has announced that income received by residents of Puerto Rico under life insurance or annuity contracts issued by a Puerto Rico branch of a United States life insurance company is U.S.-source income that is generally subject to United States Federal income tax.

Annuity Purchases by Nonresident Aliens and Foreign Corporations

The discussion above provides general information regarding U.S. federal income tax consequences to annuity purchasers that are U.S. citizens or residents. Purchasers that are not U.S. citizens or residents will generally be subject to U.S. federal withholding tax on taxable distributions from annuity contracts at a 30% rate, unless a lower treaty rate applies. In addition, purchasers may be subject to state and/or municipal taxes and taxes that may be imposed by the purchaser’s country of citizenship or residence. Prospective purchasers are advised to consult with a qualified tax professional regarding U.S. state, and foreign taxation with respect to an annuity contract purchase.

Possible Tax Law Changes

Although the likelihood of legislative changes is uncertain, there is always the possibility that the tax treatment of the Contract could change by legislation or otherwise. Consult a qualified tax professional with respect to legislative developments and their effect on the Contract.

We have the right to modify the Contract in response to legislative changes that could otherwise diminish the favorable tax treatment that annuity contract owners currently receive. We make no guarantee regarding the tax status of any Contract and do not intend the above discussion as tax advice.

Puerto Rico Tax Provisions

The Contract offered by this Prospectus is considered an annuity contract under Section 1022 of the Puerto Rico Internal Revenue Code of 1994, as amended and Section 1031.01 of the 2011 Internal Revenue Code for a New Puerto Rico, as amended (collectively the “Puerto Rico Code”). Under the current provisions of the Puerto Rico Code, no income tax is payable on increases in value of accumulation shares of annuity units credited to a variable annuity contract until payments are made to the annuitant or other payee under such contract.

When payments are made from your Contract in the form of an annuity, the annuitant or other payee will be required to include as gross income the lesser of the amount received during the taxable year or the portion of the amount received equal to 3% of the aggregate premiums or other consideration paid for the annuity. The amount, if any, in excess of the included amount is excluded from gross income as a return of premium. After an amount equal to the aggregate premiums or other consideration paid for the annuity has been excluded from gross income, all of the subsequent annuity payments are considered to be taxable income.

When a payment under a Contract is made in a lump sum, the amount of the payment would be included in the gross income of the Annuitant or other Payee to the extent it exceeds the Annuitant’s aggregate premiums or other consideration paid.

The provisions of the Puerto Rico Code with respect to qualified retirement plans described in this Prospectus vary significantly from those under the Internal Revenue Code. We currently offer the Contract in Puerto Rico in connection with Individual Retirement Arrangements that qualify under the U.S. Internal Revenue Code but do not qualify under

the Puerto Rico Code. See the applicable text of this Prospectus under the heading “Federal Tax Status” dealing with such Arrangements and their RMD requirements. We may make Contracts available for use with other retirement plans that similarly qualify under the U.S. Internal Revenue Code but do not qualify under the Puerto Rico Code.

As a result of IRS Revenue Ruling 2004-75, as amplified by Revenue Ruling 2004-97, we will treat Contract distributions and withdrawals occurring on or after January 1, 2005 as U.S. source income that is subject to U.S. income tax withholding and reporting. Under “TAX CONSIDERATIONS”, see “Pre-Distribution Taxation of Contracts”, “Distributions and Withdrawals from Non-Qualified Contracts”, and “Withholding”. You should consult a qualified tax professional for advice regarding the effect of Revenue Ruling 2004-75 on your U.S. and Puerto Rico income tax situation.

For information regarding the income tax consequences of owning a Contract, you should consult a qualified tax professional.

ADMINISTRATION OF THE CONTRACTS

We have engaged se², llc (“se²”), an affiliate of the Company and a leading third-party provider of contract administration services for many other life insurance companies, to administer the Contracts. Administrative functions performed by se² include maintaining the books and records of the Variable Account and the Sub-Accounts; maintaining records of the name, address, taxpayer identification number, Contract number, Participant Account number and type, the status of each Participant Account and other pertinent information necessary to the administration and operation of the Contract; processing Applications, Purchase Payments, transfers, Death Benefits and full and partial withdrawals; issuing Contracts and Certificates; administering annuity payments; furnishing accounting and valuation services; reconciling and depositing cash receipts; providing confirmations; providing toll-free customer service lines; and furnishing telephonic transfer services. The compensation paid to se² is based on the number of Contracts to which they provide these administrative services.

Business Disruption and Cyber Security Risks

We rely heavily on technology to conduct our variable product business activities. Because our variable product business is highly dependent upon the effective operation of our computer systems and those of our business partners, our business is vulnerable to disruptions from utility outages, and susceptible to operational and information security risks resulting from information systems failure (e.g., hardware, software malfunctions), and cyber-attacks. These risks include, among other things, the theft, misuse, corruption and destruction of data maintained online or digitally, interference with or denial of service, attacks on websites and other operational disruption and unauthorized release of confidential customer information. Such systems failures and cyber-attacks affecting us, any third party administrator, the Funds, intermediaries and other affiliated or third-party service providers may adversely affect us and your Contract value. For instance, systems failures and cyber-attacks may interfere with our processing of Contract transactions, including the processing of orders from our website or with the Funds, impact our ability to calculate unit values, cause the release and possible destruction of confidential customer or business information, impede order processing, subject us and/or our service providers and intermediaries to regulatory fines and financial losses and/or cause reputational damage. Cyber security risks may also impact the issuers of securities in which the Funds invest, which may cause the Funds to lose value. There can be no assurance that we or the Funds or our service providers will avoid losses affecting your Contract due to cyber-attacks or information security breaches in the future.

DISTRIBUTION OF THE CONTRACTS

selling agreements with the Company and the general distributor, Clarendon Insurance Agency, Inc. (“Clarendon”), 1601 Trapelo Road, Suite 30, Waltham, Massachusetts 02451. Clarendon is a wholly-owned subsidiary of the Company, is registered with the SEC under the Securities Exchange Act of 1934 as a broker-dealer and is a member of FINRA.

The Company (or its affiliates, for purposes of this section only, collectively, “the Company”), pays the Selling Broker-Dealers compensation for the promotion and sale of the Contract. The Selling Agents who solicit sales of the Contract typically receive a portion of the compensation paid by the Company to the Selling Broker-Dealers in the form of commissions or other compensation, depending on the agreement between the Selling Broker-Dealer and their Selling Agent. This compensation is not paid directly by the Owner or the separate account. The Company intends to recoup this compensation through fees and charges imposed under the Contract, and from profits on payments received by the Company for providing administrative, marketing, and other support and services to the Variable Account.

The amount and timing of commissions the Company may pay to Selling Broker-Dealers may vary depending on the selling agreement but is not expected to be more than 5.00% of Purchase Payments, and 0.20% annually of the Contract’s Accumulation Account value. The Company may pay or allow other promotional incentives or payments in the form of cash or other compensation to the extent permitted by FINRA rules and other applicable laws and regulations.

The Company also pays compensation to wholesaling broker-dealers in return for wholesaling services such as providing marketing and sales support and product training to the Selling Agents of the Selling Broker-Dealers. These payments may be based on a percentage of Purchase Payments and/or a percentage of Accumulation Account value.

In addition to the compensation described above, the Company may make additional cash payments or reimbursements to Selling Broker-Dealers in recognition of their marketing and distribution, transaction processing and/or administrative services support. These payments are not offered to all Selling Broker-Dealers, and the terms of any particular agreement governing the payments may vary among Selling Broker-Dealers depending on, among other things, the level and type of marketing and distribution support provided. Marketing and distribution support services may include, among other services, placement of the Company’s products on the Selling Broker-Dealers’ preferred or recommended list, access to the Selling Broker-Dealers’ registered representatives for purposes of promoting sales of the Company’s products, assistance in training and education of the Selling Agents, and opportunities for the Company to participate in sales conferences and educational seminars. The payments or reimbursements may be a fixed dollar amount, and/or may be calculated as a percentage of the particular Selling Broker-Dealer’s actual or expected aggregate sales of our variable contracts (including the Contract) or assets held within those contracts (in most cases not to exceed 0.25% of aggregate sales and 0.10% of assets attributable to the Selling-Broker-Dealer.

These payments may provide your Selling Agent with additional incentives to promote the Contracts or otherwise cooperate with the Company’s promotional efforts.

You should ask your Selling Agent for further information about what commissions or other compensation he or she, or the Selling Broker-Dealer for which he or she works, may receive in connection with your purchase of a Contract. During 2013, 2014, and 2015, approximately $221,723, $209,573, and $270,797, respectively, in commissions were paid by Delaware Life Insurance Company on behalf of Clarendon in connection with the distribution of the Contracts described in this prospectus.

AVAILABLE INFORMATION

The Company and the Variable Account have filed with the SEC registration statements under the Securities Act of 1933 relating to the Contracts. For further information regarding the Variable Account, the Company and the Contracts, please refer to the registration statements and their exhibits. In addition, the Company is subject to the informational requirements of the Securities Exchange Act of 1934. We file reports and other information with the SEC to meet these requirements.

You can inspect and copy this information and our registration statements at the SEC’s public reference facilities at the following location: 100 F Street, N.E., Washington, D.C. 20549-0102, telephone (202) 551-8090. The SEC’s public reference room will also provide copies by mail for a fee. You may also find these materials on the SEC’s website (www.sec.gov).

STATE REGULATION

The Company is subject to the laws of the State of Delaware governing life insurance companies and to regulation by the Commissioner of Insurance of Delaware. An annual statement is filed with the Commissioner of Insurance on or before March lst in each year relating to the operations of the Company for the preceding year and its financial condition on December 31st of such year. Its books and records are subject to review or examination by the Commissioner or his agents at any time and a full examination of its operations is conducted at periodic intervals.

The Company is also subject to the insurance laws and regulations of the other states and jurisdictions in which it is licensed to operate. The laws of the State of Delaware and the various jurisdictions establish supervisory agencies with broad administrative powers with respect to licensing to transact business, overseeing trade practices, licensing agents, approving policy forms, establishing reserve requirements, fixing maximum interest rates on life insurance policy loans and minimum rates for accumulation of surrender values, prescribing the form and content of required financial statements and regulating the type and amounts of investments permitted. Each insurance company is required to file detailed annual reports with supervisory agencies in each of the jurisdictions in which it does business and its operations and accounts are subject to examination by such agencies at regular intervals.

In addition, many states regulate affiliated groups of insurers, such as the Company and its affiliates, under insurance holding company legislation. Under such laws, inter-company transfers of assets and dividend payments from insurance subsidiaries may be subject to prior notice or approval, depending on the size of such transfers and payments in relation to the financial positions of the companies involved. Such insurance holding company legislation protects the Company’s ability to pay all guaranteed contract benefits, including any optional living benefits and death benefits. Under insurance guaranty fund laws in most states, insurers doing business therein can be assessed (up to prescribed limits) for policyholder losses incurred by insolvent companies. The amount of any future assessments of the Company under these laws cannot be reasonably estimated. However, most of these laws do provide that an assessment may be excused or deferred if it would threaten an insurer’s own financial strength and many permit the deduction of all or a portion of any such assessment from any future premium or similar taxes payable. A state’s assessment on insurers in connection with the state guaranty fund would not affect the Company’s obligation to pay guaranteed contract benefits. If an assessment were so large as to affect the Company’s own ability to meet its obligations, then the provisions to excuse, defer, or offset such assessment would allow the Company to pay guaranteed contract benefits.

Although the federal government generally does not directly regulate the business of insurance, federal initiatives often have an impact on the business in a variety of ways. Current and proposed federal measures which may significantly affect the insurance business include employee benefit regulation, removal of barriers preventing banks from engaging in the insurance business, tax law changes affecting the taxation of insurance companies, the tax treatment of insurance products and its impact on the relative desirability of various personal investment vehicles.

LEGAL PROCEEDINGS

The Company, like other insurance companies, is involved in lawsuits, including class action lawsuits. Although the outcome of any litigation cannot be predicted with certainty, the Company believes that, at the present time, there are no pending or threatened lawsuits that are reasonably likely to have a material adverse impact on the Variable Account, on the ability of Clarendon Insurance Agency, Inc. to perform under its principal underwriting agreement, or on our ability to meet our obligations under the Contract.

FINANCIAL STATEMENTS

The financial statements of the Company which are included in the SAI should be considered only as bearing on the ability of the Company to meet its obligations with respect to amounts allocated to the Fixed Account and with respect to the death benefit and the Company’s assumption of the mortality and expense risks. They should not be considered as bearing on the investment performance of the Fund shares held in the Sub-Accounts of the Variable Account.

The financial statements of the Variable Account for the year ended December 31, 2015 are also included in the SAI.

OWNER INQUIRIES

You may submit transaction requests or otherwise communicate with us in writing or by telephone. All materials mailed to us, including Purchase Payments, must be sent to our Service Address. For all telephone communications, you must call (877) 253-2323. In addition, the authorized registered representative of the broker-dealer of record may submit transfer requests on your behalf in writing, by telephone, or over the Internet on our website. To use the website, the registered representative must first consent to our online terms of use. (See “Requests for Transfers” under “Transfer Privilege.”)

Unless this Prospectus states differently, we will consider all materials sent to us and all telephone communications to be received on the date we actually receive them, in Good Order, at our Service Address or at (877) 253-2323. However, we will consider all financial transactions, including Purchase Payments, withdrawal requests and transfer instructions, to be received on the next Business Day if we receive them (1) on a day that is not a Business Day or (2) after the close of regular trading on the New York Stock Exchange, which is normally 4:00 p.m., Eastern Time. In some cases, receipt of requests for financial transactions by the broker-dealer of record will be deemed to be constructive receipt by us. This would include only cases where we have a specific agreement with the broker-dealer that provides for this treatment and the broker-dealer electronically forwards to us the request promptly after the end of the Business Day on which it receives the request in Good Order. In such cases, financial transactions received by us in Good Order will be priced that Business Day, provided the broker-dealer received the request before the earlier of (a) 4:00 p.m. Eastern Time on a Business Day, or (b) the close of the New York Stock Exchange on days that the Stock Exchange closes before 4:00 p.m. For information about whether we have this type of arrangement with your broker-dealer, you may call us at the above number.

Certain methods of contacting us, such as by telephone or over the Internet, may be unavailable or delayed. Any computer or telephone system (including yours, ours, and your registered representative’s) can experience delays or outages that may delay or prevent us from processing your request. While we have taken reasonable precautions to allow our systems to accommodate heavy usage, we do not guarantee access or reliability under all circumstances. If you experience delays or an outage, you may submit your request to us in writing to our Service Address.

When we specify that notice to us must be in writing, we reserve the right, at our sole discretion, to accept notice in another form.

Electronic Account Information

During the accumulation phase, you may elect to receive prospectuses, transaction confirmations, reports and other communications in electronic format, instead of receiving paper copies of these documents. To enroll in this optional electronic delivery service Owners must register and log on to our Internet customer website via www.delawarelife.com. First-time users of this website can enroll in this electronic delivery service by selecting “eDeliver Documents” when registering to use the website. If you are already a registered user of this website, you can enroll in the electronic delivery service by logging on to your account and selecting “eDeliver Documents” on the “Update Profile” page. The electronic delivery service is subject to various terms and conditions, including a requirement that you promptly notify us of any change in your e-mail address, in order to avoid any disruption of deliveries to you. You may obtain more information and assistance at the above-mentioned internet location or by writing us at our Service Address or by telephone at (877) 253-2323.

STATEMENT OF ADDITIONAL INFORMATION - TABLE OF CONTENTS


General Information			2
The Company			2
Tax Deferred Accumulation			2
Example of Net Investment Factor Calculation			3
Example of Variable Accumulation Unit Value Calculation			3
Annuity Provisions			3
Determination of Annuity Payments			3
Annuity Unit Value			4
Example of Variable Annuity Unit Value Calculation			4
Example of Variable Annuity Payment Calculation			4
Other Contractual Provisions			5
Owner and Change of Ownership			5
Designation and Change of Beneficiary			6
Distribution of the Contracts			6
Experts			7
Financial Statements			7

APPENDIX A - THE FIXED ACCOUNT

That portion of the Contract relating to the Fixed Account is not registered under the Securities Act of 1933 (“1933 Act”) and the Fixed Account is not registered as an investment company under the Investment Company Act of 1940 (“1940 Act”). Accordingly, neither the Fixed Account nor any interests therein are subject to the provisions or restrictions of the 1933 Act or the 1940 Act, and the disclosure in this Appendix A has not been reviewed by the staff of the Securities and Exchange Commission. However, the following disclosure about the Fixed Account may be subject to certain generally applicable provisions of the federal securities laws regarding the accuracy and completeness of disclosure.

The Fixed Account

The Fixed Account is made up of all of the general assets of the Company other than those allocated to any separate account. Purchase Payments will be allocated to the Fixed Account as elected by the Owner at the time of purchase or as subsequently changed. The Company will invest the assets of the Fixed Account in those assets chosen by the Company and allowed by applicable law. Investment income from such Fixed Account assets will be allocated between the Company and the contracts participating in the Fixed Account in accordance with the terms of such contracts.

Annuity payments made to Annuitants under the Contracts will not be affected by the mortality experience (death rate) of persons receiving such payments or of the general population. The Company assumes this “mortality risk” by virtue of annuity rates incorporated in the Contract which cannot be changed. In addition the Company guarantees that it will not increase charges for maintenance of the Contracts regardless of its actual expenses.

Investment income from the Fixed Account allocated to the Company includes compensation for mortality and expense risks borne by the Company in connection with Fixed Account Contracts. The Company expects to derive a profit from this compensation. The amount of such investment income allocated to the Contracts will vary from year to year in the sole discretion of the Company. However, the Company guarantees that it will credit interest at a rate of not less than 4% per year, compounded annually, to amounts allocated to the Fixed Account under the Contracts. The Company may credit interest at a rate in excess of 4% per year; however, the Company is not obligated to credit any interest in excess of 4% per year. There is no specific formula for the determination of excess interest credits. Such credits, if any, will be determined by the Company based on information as to expected investment yields. Some of the factors that the Company may consider in determining whether to credit interest in excess of 4% to amounts allocated to the Fixed Account and the amount thereof, are general economic trends, rates of return currently available and anticipated on the Company’s investments, regulatory and tax requirements and competitive factors. ANY INTEREST CREDITED TO AMOUNTS ALLOCATED TO THE FIXED ACCOUNT IN EXCESS OF 4% PER YEAR WILL BE DETERMINED IN THE SOLE DISCRETION OF THE COMPANY. THE OWNER ASSUMES THE RISK THAT INTEREST CREDITED TO FIXED ACCOUNT ALLOCATIONS MAY NOT EXCEED THE MINIMUM GUARANTEE OF 4% FOR ANY GIVEN YEAR.

Excess interest, if any, will be credited on the fixed accumulation value. The Company guarantees that, at any time, the fixed accumulation value will not be less than the amount of Purchase Payments allocated to the Fixed Account, plus interest at the rate of 4% per year, compounded annually, plus any additional interest which the Company may, in its discretion, credit to the Fixed Account, less the sum of all administrative or withdrawal charges, any applicable premium taxes and less any amounts surrendered. If the Owner surrenders the Contract, the amount available from the Fixed Account will be reduced by any applicable withdrawal charge. (See “Withdrawal Charges” in the Prospectus.)

If, on any Contract Anniversary, the rate at which the Company credits interest to amounts allocated to the Fixed Account under the Contract is less than 80% of the average discount rate on 52-week United States Treasury Bills for the most recent auction prior to the Contract Anniversary on which the declared interest rate becomes applicable, then, during the 45 day period after the Contract Anniversary, the Owner may elect to receive the value of the Contract’s Accumulation Account without assessment of a withdrawal charge. Such withdrawal may, however, result in adverse tax consequences. (See “U.S. Federal Income Tax Considerations.”)

The Company reserves the right to defer the payment of amounts withdrawn from the Fixed Account for a period not to exceed six months from the date written request for such withdrawal is received by The Company.

Fixed Accumulation Value

(1) Crediting Fixed Accumulation Units

Upon receipt of a Purchase Payment by the Company, all or that portion, if any, of the Net Purchase Payment to be allocated to the Fixed Account in accordance with the allocation factor will be credited to the Accumulation Account in the form of Fixed Accumulation Units. The number of Fixed Accumulation Units to be credited is determined by dividing the dollar amount allocated to the Fixed Account by the Fixed Accumulation Unit value for the Contract for the Valuation Period during which the Purchase Payment is received by the Company.

(2) Fixed Accumulation Unit Value

The Fixed Accumulation Unit value is established at $10.00 for the first Valuation Period of the calendar month in which the Contract is issued, and will increase for each successive Valuation Period as interest is accrued. All Contracts issued in a particular calendar month and at a particular rate of interest, as specified in advance by the Company from time to time, will use the same series of Fixed Accumulation Unit values throughout the first Contract Year.

At the first Contract Anniversary, the Fixed Accumulation Units credited to a Contract’s Accumulation Account will be exchanged for a second type of Fixed Accumulation Unit with an equal aggregate value. The value of this second type of Fixed Accumulation Unit will increase for each Valuation Period during each Contract Year as interest is accrued at a rate which shall have been determined by the Company prior to the first day of each Contract Year.

The Company will credit interest to the Contract’s Fixed Accumulation Account at a rate of not less than 4% per year, compounded annually. Once the rate applicable to a specific Contract is established by the Company, it may not be changed for the balance of the Contract Year. Additional Payments made during the Contract Year will be credited with interest for the balance of the Contract Year at the rate applicable at the beginning of that Contract Year. The Fixed Accumulation Unit value for the Contract for any Valuation Period is the value determined as of the end of such Valuation Period.

(3) Fixed Accumulation Value

The fixed accumulation value of a Contract, if any, for any Valuation Period is equal to the value of the Fixed Accumulation Units credited to the Accumulation Account for such Valuation Period.

Loans From the Fixed Account (Qualified Contracts Only)

Loans will be permitted from the Contract’s Fixed Accumulation Account (to the extent permitted by the retirement plan for which the Contract is purchased) UNDER QUALIFIED CONTRACTS ONLY. The maximum loan amount is the amount determined under the Company’s maximum loan formula for qualified plans. The minimum loan amount is $1,000. Loans will be secured by a security interest in the Contract. Loans are subject to applicable retirement program legislation and their taxation is determined under the federal income tax laws. The amount borrowed will be transferred to a fixed minimum guarantee accumulation account in the Company’s general account where it will accrue interest at a specified rate below the then current loan interest rate. Generally, loans must be repaid within five years.

The amount of the death benefit, the amount payable on a full surrender and the amount applied to provide an annuity on the Annuity Commencement Date will be reduced to reflect any outstanding loan balance (plus accrued interest thereon). Partial withdrawals may be restricted by the maximum loan limitation.

Fixed Annuity Payments

The dollar amount of each fixed annuity payment will be determined in accordance with the annuity payment rates found in the Contract which are based on a minimum guaranteed interest rate of 4% per year, or, if more favorable to the Payee(s), in accordance with the Single Premium Immediate Settlement Rates published by the Company and in use on the Annuity Commencement Date.

APPENDIX B - WITHDRAWALS AND WITHDRAWAL CHARGES

This example assumes that the date of the full surrender or partial withdrawal is during the 9^th Contract Year.


1	2		3		4		5		6
1	$	1,000	$	1,000	$	0		0%	$	0
2	$	1,200	$	1,200	$	0		0%	$	0
3	$	1,400	$	1,280	$	120		3%	$	3.60
4	$	1,600	$	0	$	1,600		4%	$	64.00
5	$	1,800	$	0	$	1,800		4%	$	72.00
6	$	2,000	$	0	$	2,000		5%	$	100.00
7	$	2,000	$	0	$	2,000		5%	$	100.00
8	$	2,000	$	0	$	2,000		6%	$	120.00
9	$	2,000	$	0	$	2,000		6%	$	120.00
	$	15,000	$	3,480	$	11,520			$	579.60

Where:

Column 1 represents the Contract Year in which the Purchase Payment was made.

Column 2 represents the amounts of the Purchase Payments (“Payments”). Each Payment was made on the first day of each Contract Year.

Column 3 represents the amounts that may be withdrawn without the imposition of withdrawal charges, as follows:

(a)

Payments 1 and 2 ($1,000 and $1,200, respectively) have been credited to the Contract for more than seven years.

(b)

Payment 3 ($1,280) represents 10% of Payments that have been credited to the Contract for less than seven years. The 10% amount is applied to the oldest unliquidated Payment, then the next oldest and so forth.

Column 4 represents the amount of each Payment that is subject to a withdrawal charge. It is determined by subtracting the amount in Column 3 from the Payment in Column 2.

Column 5 represents the withdrawal charge percentages imposed on the amounts in Column 4.

Column 6 represents the withdrawal charge imposed on each Payment. It is determined by multiplying the amount in Column 4 by the percentage in Column 5.


For example, the withdrawal charge imposed on Payment 8

=		Payment 8 Column 4 x Payment 8 Column 5

=		$2,000 x 6%

=		$120

For a full surrender, the total of Column 6 ($579.60) represents the total amount of withdrawal charges imposed on Payments in this example.

For a partial withdrawal, the sum of amounts in Column 6, for as many Payments as are liquidated, reflects the withdrawal charges imposed in the case of a partial withdrawal.

For example, the sum of payments 1, 2, 3, 4, and 5 is $7,000. If the full $7,000 were withdrawn, the amount of the withdrawal charges imposed would be the sum of amounts in Column 6 for Payments 1, 2, 3, 4 and 5 which is $139.60.

May 1, 2016

COMPASS 3

This Prospectus sets forth information about the Contract and the Variable Account that a prospective purchaser should know before investing. Additional information about the Contract and the Variable Account has been filed with the SEC in a SAI dated May 2, 2016 which is incorporated herein by reference. The SAI is available upon request and without charge from Delaware Life Insurance Company. To receive a copy, return this request form to the address shown below or telephone (877) 253-2323.


To:		Delaware Life Insurance Company
		P.O. Box 758581
		Topeka, KS 66675-8581

		Please send me a Statement of Additional Information for
		Compass 3 - Delaware Life Variable Account L.



Name

Address

City	State	Zip

Telephone

PART B

May 2, 2016

COMPASS 3

STATEMENT OF ADDITIONAL INFORMATION

TABLE OF CONTENTS


General Information			2
The Company			2
Tax Deferred Accumulation			2
Example of Net Investment Factor Calculation			3
Example of Variable Accumulation Unit Value Calculation			3
Annuity Provisions			3
Determination of Annuity Payments			3
Annuity Unit Value			4
Example of Variable Annuity Unit Value Calculation			4
Example of Variable Annuity Payment Calculation			4
Other Contractual Provisions			5
Owner and Change of Ownership			5
Designation and Change of Beneficiary			6
Distribution of the Contracts			6
Experts			7
Financial Statements			7

This Statement of Additional Information (the “SAI”) sets forth information which may be of interest to prospective purchasers of Compass 3 Combination Fixed/Variable Annuity Contract for personal and qualified retirement plans (the “Contracts”) issued by Delaware Life Insurance Company (the “Company”) in connection Delaware Life Variable Account L (the “Variable Account”). This SAI should be read in conjunction with the Compass 3 Prospectus, dated May 2, 2016 (the “Prospectus”), a copy of which may be obtained without charge from the Company by writing to Delaware Life Insurance Company, P.O. Box 758581, Topeka, KS 66675-8581, or by telephoning (877) 253-2323.

The terms used in this SAI have the same meanings as those used in the Prospectus.

THIS SAI IS NOT A PROSPECTUS AND IS AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE PURCHASERS ONLY IF PRECEDED OR ACCOMPANIED BY A CURRENT PROSPECTUS.

GENERAL INFORMATION

The Company

Delaware Life Holdings, LLC is the Company’s corporate parent. Delaware Life Holdings, LLC is ultimately controlled by Todd L. Boehly and Mark R. Walter. Messrs. Boehly and Walter ultimately control the Company through the following intervening companies: Delaware Life Holdings, LLC, Delaware Life Holdings Parent, LLC, Delaware Life Holdings Parent II, LLC, Delaware Life Equity Investors, LLC, DLICM, LLC, and DLICT, LLC. The nature of the business of Messrs. Boehly and Walter and these intervening companies is investing in companies engaged in the business of life insurance and annuities.

TAX-DEFERRED ACCUMULATION

In general, individuals who own annuity contracts are not taxed on increases in the value of their annuity contracts until some form of distribution is made under the contract. As a result, the annuity contract would benefit from tax deferral during the contract’s accumulation phase; this would have the effect of permitting an investment in an annuity contract to grow more rapidly that a comparable investment under which increases in value are taxed on a current basis.

In reports or other communications to you or in advertising or sales materials, we may also describe the effects of tax-deferred compounding on the Variable Account’s investment returns. We may illustrate these effects in charts or graphs and from time to time may include comparisons of returns under the Contract or in general on a tax-deferred basis, with the returns on a taxable basis. Different tax rates may be assumed. Any such illustrative chart or graph would show accumulations on an initial investment or Purchase Payment, assuming a given amount (including the applicable interest credit), hypothetical gross annual returns compounded annually, and a stated rate of return. The values shown for the taxable investment would not include any deduction for management fees or other expenses, but would assume the annual deduction of federal and state taxes from investment returns. The values shown for the Contract in a chart would reflect the deduction of Contract expenses, such as the mortality and expense risk charge, the 0.15% administrative charge, the 0.15% distribution fee, and the $30 annual Account Fee. In addition, the values shown would assume that the Participant has not surrendered his or her Contract or made any partial surrenders until the end of the period shown. The chart would assume a full surrender at the end of the period shown and the payment of federal and state taxes, at a rate of not more than 33%, on the amount in excess of the Purchase Payments.

In developing illustrative tax deferral charts, we will observe these general principles:

•

The assumed rate of earnings will be realistic.

•

The illustrative chart will accurately depict the effect of all fees and charges or provide a narrative that prominently discloses all fees and charges under the Contract.

•

Charts comparing accumulation values for tax-deferred and non-tax-deferred investments will depict the implications of any surrender.

•

A narrative accompanying the chart will prominently disclose that there may be a 10% tax penalty on a surrender by a Participant who has not reached age 59¹⁄₂ at the time of surrender.

The rates of return illustrated in any chart would be hypothetical and are not an estimate or guaranty of performance. Actual tax returns may vary among Participants.

Example of Net Investment Factor Calculation:

We determine the net investment factor using the following formula:


Investment Factor	=	[(a) + (b)] - [(c) + (d)]
Investment Factor	=	(a)

where:

(a)

is the value of the Sub-Account’s net assets attributable to the Contracts at the end of the preceding Valuation Period;

(b)

is the investment income and capital gains, realized or unrealized, that are credited to such assets of the Sub-Account during the Valuation Period;

(c)

(d)

is the expenses of the Sub-Account attributable to the Contracts incurred during the Valuation Period including the mortality and expense risk charge and the other expenses of the Sub-Account, subject to any applicable expense limitation.

Assume the following facts about a particular Variable Account at the end of the preceding Valuation Period:

(a)

the net assets attributable to the Contracts equal $111,234,567.89;

(b)

the investment income and capital gains credited to such assets equal $434,782.61;

(c)

the capital losses charged against such assets equal $63,778.99; and

(d)

the expenses equal $10,634.77.

The net investment factor is, therefore, determined as follows:


(111,234,567.89 + 434,782.61) - (63,778.99 + 10,634.77)	=	1.00323972
111,234,567.89	=	1.00323972

Example of Variable Accumulation Unit Value Calculations:

We calculate the Variable Accumulation Unit value for any Valuation Period as follows: we multiply the Variable Accumulation Unit value for the immediately preceding Valuation Period by the appropriate Net Investment Factor for the subsequent Valuation Period.

Assume the Variable Accumulation Unit value for the immediately preceding Valuation Period had been 14.5645672. Assume that the Net Investment Factor for the subsequent Valuation Period is 1.00323972 as shown in the calculation above. The value for the current Valuation Period would, therefore, be determined as follows:

(14.5645672 x 1.00323972) = 14.6117523

ANNUITY PROVISIONS

Determination of Annuity Payments

On the Annuity Commencement Date, the Contract’s Accumulation Account will be canceled and its adjusted value will be applied to provide a Variable Annuity or a Fixed Annuity or a combination of both. The adjusted value will be equal to the value of the Accumulation Account for the Valuation Period which ends immediately preceding the

Annuity Commencement Date, reduced by any applicable premium or similar taxes and a proportionate amount of the contract maintenance charge to reflect the time elapsed between the last Contract Anniversary and the day before the Annuity Commencement Date.

The dollar amount of the first variable annuity payment will be determined in accordance with the annuity payment rates found in the Contract which are based on an assumed interest rate of 4% per year. All variable annuity payments other than the first are determined by means of Annuity Units credited to the Contract. The number of Annuity Units to be credited in respect of a particular Variable Account is determined by dividing that portion of the first variable annuity payment attributable to that Variable Account by the Annuity Unit value of that Variable Account for the Valuation Period which ends immediately preceding the Annuity Commencement Date. The number of Annuity Units of each particular Variable Account credited to the Contract then remains fixed unless an exchange of Annuity Units is made as described below. The dollar amount of each variable annuity payment after the first may increase, decrease or remain constant, and is equal to the sum of the amounts determined by multiplying the number of Annuity Units of a particular Variable Account credited to the Contract by the Annuity Unit value for the particular Variable Account for the Valuation Period which ends immediately preceding the due date of each subsequent payment.

Annuity Unit Value

The Annuity Unit value for each Variable Account was established at $10.00 for the first Valuation Period of the particular Variable Account. The Annuity Unit value for any subsequent Valuation Period is determined using the following formula:


Annuity Unit Value			=			(A x B) x C

where:

equals the Annuity Unit value for the immediately preceding Valuation Period.

equals the Net Investment Factor for the current Valuation Period.

equals a factor to neutralize the assumed interest rate of 4% per year used to establish the annuity payment rates found in the Contract. (This factor is 0.99989255 for a one day Valuation Period.)

Example of Variable Annuity Unit Value Calculations

Assume the value of an Annuity Unit for the immediately preceding Valuation Period had been 12.3456789. Assume that the Net Investment Factor for the subsequent Valuation Period is 1.00323972 as shown in the calculation above. If the first variable annuity payment is determined by using an annuity payment based on an assumed interest rate of 4% per year, the value of the Annuity Unit for the current Valuation Period would be determined as follows:


(12.3456789 x 1.00323972) x 0.99989255			=				12.3843446

Example of Variable Annuity Payment Calculations

The first Variable Annuity payment is determined by multiplying the Variable Accumulation Unit value for the current Valuation Period (as described under “Example of Variable Accumulation Unit Calculation”) by the annuity payment rate for the age and annuity option elected.

Assume the following facts:

•

the Account value being annuitized is made up of a particular Variable Account of a Contract is credited with 8,765.4321 Variable Accumulation Units;

•

at the end of the Valuation Period immediately preceding the Annuity Commencement Date, the Variable Accumulation Unit value and the Annuity Unit value for that Variable Account are 14.5645672 and 12.3456789, respectively;

•

the annuity payment rate for the age and option elected is $6.78 per $1,000; and

•

on the day prior to the second variable annuity payment date, the Annuity Unit value is 12.3724831.

The first Variable Annuity payment would be determined as follows:


(8,765.4321 x 14.5645672) x 6.78	=	$	865.57
1,000	=	$	865.57

This first Variable Annuity payment of $865.57 represents 70.1112 Variable Annuity Units, which are calculated by dividing the first Variable Annuity Payment by the Variable Annuity Unit value at the end of the Valuation Period immediately preceding the Annuity Commencement Date. In this case, $865.57 divided by 12.3456789. Once established, the number of Annuity Units will not change.

Subsequent Variable Annuity payments are determined by multiplying the number of Variable Annuity Units (calculated for the first Variable Annuity payment) by the Variable Annuity Unit value at the end of the Valuation Period immediately preceding the current annuity payment date. Thus, the second Variable Annuity payment would be determined as follows:


70.1112 x 12.3724831			=			$	867.45

OTHER CONTRACTUAL PROVISIONS

Owner and Change of Ownership

The Contract shall belong to the Owner. All Contract rights and privileges may be exercised by the Owner without the consent of the Beneficiary (other than an irrevocably designated beneficiary) or any other person. Such rights and privileges may be exercised only during the lifetime of the Annuitant and prior to the Annuity Commencement Date, except as otherwise provided in the Contract. In some qualified plans the Owner of the Contract is a Trustee and the Trust authorizes the Annuitant/Participant to exercise certain contract rights and privileges.

Ownership of a Qualified Contract may not be transferred except to: (1) the Annuitant; (2) a trustee or successor trustee of a pension or profit sharing trust which is qualified under Section 401 of the Internal Revenue Code; (3) the employer of the Annuitant provided that the Qualified Contract after transfer is maintained under the terms of a retirement plan qualified under Section 403(a) of the Internal Revenue Code for the benefit of the Annuitant; (4) the trustee of an individual retirement account plan qualified under Section 408 of the Internal Revenue Code for the benefit of the Owner; or (5) as otherwise permitted from time to time by laws and regulations governing the retirement or deferred compensation plans for which a Qualified Contract may be issued. Subject to the foregoing, a Qualified Contract may not be sold, assigned, transferred, discounted or pledged as collateral for a loan or as security for the performance of an obligation or for any other purpose to any person other than the Company.

The Owner of a Non-Qualified Contract may change the ownership of the Contract during the lifetime of the Annuitant and prior to the Annuity Commencement Date, although such change may result in the imposition of tax (see “Federal Tax Status - Taxation of Annuities in General”). A change of ownership will not be binding upon the Company until written notification is received by the Company. Once received by the Company the change will be effective as of the date on which the request for change was signed by the Owner but the change will be without prejudice to the Company on account of any payment made or any action taken by the Company prior to receiving the change. The Company may require that the signature of the Owner be guaranteed by a member firm of the New York, American, Boston, Midwest, Philadelphia or Pacific Stock Exchange, or by a commercial bank (not a savings bank) which is a member of the Federal Deposit Insurance Corporation or, in certain cases, by a member firm of the Financial Industry Regulatory Authority (“FINRA”) which has entered into an appropriate agreement with the Company.

Designation and Change of Beneficiary

The Beneficiary designation contained in the application will remain in effect until changed. The interest of any Beneficiary is subject to the particular Beneficiary surviving the Annuitant.

Subject to the rights of an irrevocably designated Beneficiary, the Owner may change or revoke the designation of a Beneficiary at any time while the Annuitant is living by filing with the Company a written beneficiary designation or revocation in such form as the Company may require. The change or revocation will not be binding upon the Company until it is received by the Company. When it is so received the change or revocation will be effective as of the date on which the Beneficiary designation or revocation was signed by the Owner.

Every state has unclaimed property laws which generally declare annuity contracts to be abandoned after a period of inactivity of three to five years from the contract’s Annuity Commencement Date or date the death benefit is due and payable. For example, if the payment of a death benefit has been triggered, but, if after a thorough search, we are still unable to locate your Beneficiary, or your Beneficiary does not come forward to claim the death benefit in a timely manner, the death benefit will be paid to the abandoned property division or unclaimed property office of the state in which you or your Beneficiary last resided, as shown on our books and records, or to our state of domicile. This “escheatment” is revocable, however, and the state is obligated to pay the death benefit if your Beneficiary steps forward to claim it with the proper documentation. To prevent such escheatment, it is important that you update your Beneficiary designations, including full names and complete addresses, if and as they change.

DISTRIBUTION OF THE CONTRACTS

We offer the Contract on a continuous basis. Contracts are sold by licensed insurance agents (“the Selling Agents”) in those states where the Contract may be lawfully sold. Such Selling Agents will be registered representatives of affiliated or unaffiliated broker-dealer firms (“the Selling Broker-Dealers”) registered under the Securities Exchange Act of 1934 who are members of FINRA and who have entered into selling agreements with the Company and the general distributor, Clarendon Insurance Agency, Inc. (“Clarendon”), 1601 Trapelo Road, Suite 30, Waltham, Massachusetts 02451. Clarendon, a wholly-owned subsidiary of the Company, is registered with the SEC under the Securities Exchange Act of 1934 as a broker-dealer and is a member of FINRA.

The Company (or its affiliate, for purposes of this section only, collectively, “the Company”), pays the Selling Broker-Dealers compensation for the promotion and sale of the Contract. The Selling Agents who solicit sales of the Contract typically receive a portion of the compensation paid by the Company to the Selling Broker-Dealers in the form of commissions or other compensation, depending on the agreement between the Selling Broker-Dealer and their Selling Agent. This compensation is not paid directly by the Contract Owner or the separate account. The Company intends to recoup this compensation through fees and charges imposed under the Contract, and from profits on payments received by the Company for providing administrative, marketing, and other support and services to the Variable Accounts.

The amount and timing of commissions the Company may pay to Selling Broker-Dealers may vary depending on the selling agreement but is not expected to be more than 4.00% for Compass 2 and 5.00% for Compass 3 of Purchase Payments, and 0.20% annually of the Contract’s Account Value. The Company may pay or allow other promotional incentives or payments in the form of cash or other compensation to the extent permitted by FINRA rules and other applicable laws and regulations, and this compensation may be significant in amount.

The Company also pays compensation to wholesaling broker-dealers in return for wholesaling services such as providing marketing and sales support and product training to the Selling Agents of the Selling Broker-Dealers. These payments may be significant in amount and may be based on a percentage of Purchase Payments and/or a percentage of Contract Value.

services, placement of the Company’s products on the Selling Broker-Dealers’ preferred or recommended list, access to the Selling Broker-dealers’ registered representatives for purposes of promoting sales of the Company’s products, assistance in training and education of the Selling Agents, and opportunities for the Company to participate in sales conferences and educational seminars. The payments of reimbursements may be a fixed dollar amount, and/or may be calculated as a percentage of the particular Selling Broker-Dealer’s actual or expected aggregate sales of our variable contracts (including the Contract) or assets held within those contracts. The prospect of receiving, or the receipt of additional compensation as described above may provide Selling Broker-Dealers with an incentive to favor sales of the Contracts over other variable annuity contracts (or other investments) with respect to which the Selling Broker-Dealer does not receive additional compensation, or lower levels of additional compensation. You should take such payment arrangements into account when considering and evaluating any recommendation relating to the Contracts.

As discussed in the preceding paragraphs, the Selling Broker-Dealer may receive numerous forms of payments that, directly or indirectly, provide incentives to, and otherwise facilitate and encourage the offer and sale of the Contracts by Selling Broker-Dealers and their registered representatives. Such payments may be greater or less in connection with the Contracts than in connection with other products offered and sold by the Company or by others. Accordingly, the payments described above may create a potential conflict of interest, as they may influence your Selling Broker-Dealer or registered representative to present a Contract to you instead of (or more favorably than) another product or products that might be preferable to you. Total commissions paid on behalf of Clarendon in connection with the Variable Account during 2013, 2014, and 2015, were approximately $640,874, $606,532, and $619,427, respectively.

EXPERTS

The statutory-basis financial statements of Delaware Life Insurance Company (the “Company”) as of December 31, 2015 and 2014 and for the three years ended December 31, 2015, 2014 and 2013 (which report expresses an unmodified opinion in accordance with accounting practices prescribed or permitted by the Insurance Department of the State of Delaware and includes an emphasis-of-matter paragraph relating to the Company’s quasi-reorganization), included in this Statement of Additional Information have been so included in reliance on the report of PricewaterhouseCoopers LLP, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting. Their office is located at 185 Asylum Street, Suite 2400, Hartford, Connecticut 06103.

The audited financial statements of Delaware Life Variable Account L as of December 31, 2015 and for the year then ended, included in this Statement of Additional Information have been so included in reliance on the report of PricewaterhouseCoopers LLP, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.

FINANCIAL STATEMENTS

The financial statements of the Variable Account and Delaware Life Insurance Company are included herein. The consolidated financial statements of Delaware Life Insurance Company are provided as relevant to its ability to meet its financial obligations under the Contracts and should not be considered as bearing on the investment performance of the assets held in the Variable Account.

Delaware Life

Variable Account L

Financial Statements as of and for the Year Ended December 31, 2015 and

Report of Independent Registered Public Accounting Firm

DELAWARE LIFE VARIABLE ACCOUNT L

(A Separate Account of Delaware Life Insurance Company)

Index

December 31, 2015


	Page(s)

Report of Independent Registered Public Accounting Firm		1

Financial Statements

Statement of Assets and Liabilities		2-3

Statement of Operations		4-5

Statement of Changes in Net Assets		6-8

Notes to the Financial Statements		9-17

Report of Independent Registered Public Accounting Firm

To the Board of Directors of Delaware Life Insurance Company and the Participants of Delaware Life Variable Account L:

In our opinion, the accompanying statement of assets and liabilities and the related statements of operations and of changes in net assets present fairly, in all material respects, the financial position of each of the sub-accounts constituting the Delaware Life Variable Account L of Delaware Life Insurance Company at December 31, 2015, the results of each of their operations for the year then ended, and the changes in each of their net assets for each of the two years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Delaware Life Insurance Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2015 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

May 2, 2016

Hartford, CT

DELAWARE LIFE VARIABLE ACCOUNT L

(A Separate Account of Delaware Life Insurance Company)

STATEMENT OF ASSETS AND LIABILITIES

DECEMBER 31, 2015


	Shares		Cost		Value
Assets:
Investments at fair value:

MFS VIT Total Return Series Initial Class Sub-Account (M07)		3,196,878	$	71,064,783	$	72,249,453
MFS VIT II Global Governments Portfolio I Class Sub-Account (MC4)		307,009		3,402,313		3,020,971
MFS VIT II Government Securities Portfolio I Class Sub-Account (M96)		2,502,069		33,738,629		31,826,314
MFS VIT II High Yield Portfolio I Class Sub-Account (MA6)		5,058,608		29,217,412		27,468,244
MFS VIT II Massachusetts Investors Growth Stock Portfolio I Class Sub-Account (MD6)		7,087,988		89,315,796		116,101,241
MFS VIT II Money Market Portfolio I Class Sub-Account (MD8)		12,338,186		12,338,188		12,338,186

Total investments				239,077,121		263,004,409

Total assets			$	239,077,121	$	263,004,409

Liabilities:
Payable to Contractholders					$	547,815
Payable to Sponsor						305,981

Total liabilities						853,796

Net assets					$	262,150,613

The accompanying notes are an integral part of these financial statements.

- 2 -

DELAWARE LIFE VARIABLE ACCOUNT L

(A Separate Account of Delaware Life Insurance Company)

STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)

DECEMBER 31, 2015


	Total Units		Value Applicable to Owners of Deferred Variable Annuity Contracts		Reserve for Variable Annuities		Total Value
Net Assets:

M07		6,395,179	$	71,701,228	$	577,371	$	72,278,599
MC4		158,746		2,994,928		25,684		3,020,612
M96		845,181		31,135,516		511,005		31,646,521
MA6		621,279		26,899,595		409,000		27,308,595
MD6		2,153,764		113,786,049		1,837,723		115,623,772
MD8		824,403		12,185,922		86,592		12,272,514

Total net assets			$	258,703,238	$	3,447,375	$	262,150,613

The accompanying notes are an integral part of these financial statements.

- 3 -

DELAWARE LIFE VARIABLE ACCOUNT L

(A Separate Account of Delaware Life Insurance Company)

STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2015


	M07 Sub-Account			MC4 Sub-Account			M96 Sub-Account
Income:
Dividend income	$	1,998,976		$	78,441		$	920,893

Expenses:
Mortality and expense risk charges and distribution charges		(960,381	)		(40,420	)		(428,641	)

Net investment income (loss)		1,038,595			38,021			492,252

Net realized and change in unrealized gains (losses):
Net realized gains (losses) on sale of investments		737,130			(48,602	)		(219,600	)
Realized gain distributions		2,843,636			—			—

Net realized gains (losses)		3,580,766			(48,602	)		(219,600	)

Net change in unrealized appreciation (depreciation)		(5,771,271	)		(158,775	)		(527,508	)

Net realized and change in unrealized gains (losses)		(2,190,505	)		(207,377	)		(747,108	)

Increase (decrease) from operations	$	(1,151,910	)	$	(169,356	)	$	(254,856	)

The accompanying notes are an integral part of these financial statements.

- 4 -

DELAWARE LIFE VARIABLE ACCOUNT L

(A Separate Account of Delaware Life Insurance Company)

STATEMENT OF OPERATIONS (CONTINUED)

FOR THE YEAR ENDED DECEMBER 31, 2015


	MA6 Sub-Account			MD6 Sub-Account			MD8 Sub-Account
Income:
Dividend income	$	2,137,112		$	607,100		$	—

Expenses:
Mortality and expense risk charges
Distribution charges		(390,640	)		(1,576,633	)		(160,776	)

Net investment income (loss)		1,746,472			(969,533	)		(160,776	)

Net realized and change in unrealized gains (losses):
Net realized gains (losses) on sale of investments		430,771			5,221,024			—
Realized gain distributions		—			7,129,733			—

Net realized gains (losses)		430,771			12,350,757			—

Net change in unrealized appreciation (depreciation)		(3,732,855	)		(12,936,779	)		(2	)

Net realized and change in unrealized gains (losses)		(3,302,084	)		(586,022	)		(2	)

Increase (decrease) from operations	$	(1,555,612	)	$	(1,555,555	)	$	(160,778	)

The accompanying notes are an integral part of these financial statements.

- 5 -

DELAWARE LIFE VARIABLE ACCOUNT L

(A Separate Account of Delaware Life Insurance Company)

STATEMENT OF CHANGES IN NET ASSETS

FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014


	M07 Sub-Account						MC4 Sub-Account
	December 31, 2015			December 31, 2014			December 31, 2015			December 31, 2014
Operations:
Net investment income (loss)	$	1,038,595		$	523,422			38,021		$	(27,858	)
Net realized gains (losses)		3,580,766			3,089,355			(48,602	)		(40,330	)
Net change in unrealized appreciation (depreciation)		(5,771,271	)		2,188,776			(158,775	)		59,563

Increase (decrease) from operations		(1,151,910	)		5,801,553			(169,356	)		(8,625	)

Contract Owner Transactions:

*Accumulation Activity:*
Purchase payments received		314,852			737,265			1,270			30,778
Transfers between Sub-Accounts (including the Fixed Account), net		(104,885	)		(419,346	)		(88,320	)		(8,798	)
Withdrawals, surrenders, annuitizations and contract charges		(8,490,234	)		(9,921,153	)		(288,523	)		(529,936	)

Net accumulation activity		(8,280,267	)		(9,603,234	)		(375,573	)		(507,956	)

*Annuitization Activity:*
Annuitizations		—			—			—			—
Annuity payments and contract charges		(56,645	)		(100,015	)		22,312			(3,353	)
Transfers between Sub-Accounts, net		—			—			—			—
Adjustments to annuity reserves		(41,271	)		4,749			(24,069	)		(5,878	)

Net annuitization activity		(97,916	)		(95,266	)		(1,757	)		(9,231	)

Net increase (decrease) from contract owner transactions		(8,378,183	)		(9,698,500	)		(377,330	)		(517,187	)

Total increase (decrease) in net assets		(9,530,093	)		(3,896,947	)		(546,686	)		(525,812	)

Net assets at beginning of year		81,808,692			85,705,639			3,567,298			4,093,110

Net assets at end of year	$	72,278,599		$	81,808,692		$	3,020,612		$	3,567,298

The accompanying notes are an integral part of these financial statements.

- 6 -

DELAWARE LIFE VARIABLE ACCOUNT L

(A Separate Account of Delaware Life Insurance Company)

STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013


	M96 Sub-Account						MA6 Sub-Account
	December 31, 2015			December 31, 2014			December 31, 2015			December 31, 2014
Operations:
Net investment income (loss)	$	492,252		$	436,045		$	1,746,472		$	1,408,436
Net realized gains (losses)		(219,600	)		(295,966	)		430,771			916,788
Net change in unrealized appreciation (depreciation)		(527,508	)		1,173,071			(3,732,855	)		(1,679,929	)

Increase (decrease) from operations		(254,856	)		1,313,150			(1,555,612	)		645,295

Contract Owner Transactions:

*Accumulation Activity:*
Purchase payments received		204,115			71,108			136,066			162,064
Transfers between Sub-Accounts (including the Fixed Account), net		(72,111	)		(351,920	)		(159,940	)		(1,837,007	)
Withdrawals, surrenders, annuitizations and contract charges		(3,330,457	)		(3,995,756	)		(2,900,832	)		(4,112,235	)

Net accumulation activity		(3,198,453	)		(4,276,568	)		(2,924,706	)		(5,787,178	)

*Annuitization Activity:*
Annuitizations		—			90,936			—			—
Annuity payments and contract charges		(115,129	)		(170,181	)		(94,806	)		(112,069	)
Transfers between Sub-Accounts, net		—			—			—			—
Adjustments to annuity reserves		(14,014	)		13,498			(67,995	)		42,609

Net annuitization activity		(129,143	)		(65,747	)		(162,801	)		(69,460	)

Net increase (decrease) from contract owner transactions		(3,327,596	)		(4,342,315	)		(3,087,507	)		(5,856,638	)

Total increase (decrease) in net assets		(3,582,452	)		(3,029,165	)		(4,643,119	)		(5,211,343	)

Net assets at beginning of year		35,228,973			38,258,138			31,951,714			37,163,057

Net assets at end of year	$	31,646,521		$	35,228,973		$	27,308,595		$	31,951,714

The accompanying notes are an integral part of these financial statements.

- 7 -

DELAWARE LIFE VARIABLE ACCOUNT L

(A Separate Account of Delaware Life Insurance Company)

STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013


	MD6 Sub-Account						MD8 Sub-Account
	December 31, 2015			December 31, 2014			December 31, 2015			December 31, 2014
Operations:
Net investment income (loss)	$	(969,533	)	$	(938,808	)	$	(160,776	)	$	(186,022	)
Net realized gains (losses)		12,350,757			17,267,994			—			—
Net change in unrealized appreciation (depreciation)		(12,936,779	)		(3,741,352	)		(2	)		—

Increase (decrease) from operations		(1,555,555	)		12,587,834			(160,778	)		(186,022	)

Contract Owner Transactions:

*Accumulation Activity:*
Purchase payments received		505,282			590,768			115,018			52,433
Transfers between Sub-Accounts (including the Fixed Account), net		(768,001	)		(1,431,589	)		(142,364	)		2,007,950
Withdrawals, surrenders, annuitizations and contract charges		(13,364,173	)		(15,889,367	)		(1,912,661	)		(2,619,598	)

Net accumulation activity		(13,626,892	)		(16,730,188	)		(1,940,007	)		(559,215	)

*Annuitization Activity:*
Annuitizations		—			95,089			—			—
Annuity payments and contract charges		(217,677	)		(372,958	)		(19,456	)		(23,773	)
Transfers between Sub-Accounts, net		—			—			—			—
Adjustments to annuity reserves		(320,753	)		72,985			1,723			6,387

Net annuitization activity		(538,430	)		(204,884	)		(17,733	)		(17,386	)

Net increase (decrease) from contract owner transactions		(14,165,322	)		(16,935,072	)		(1,957,740	)		(576,601	)

Total increase (decrease) in net assets		(15,720,877	)		(4,347,238	)		(2,118,518	)		(762,623	)

Net assets at beginning of year		131,344,649			135,691,887			14,391,032			15,153,655

Net assets at end of year	$	115,623,772		$	131,344,649		$	12,272,514		$	14,391,032

The accompanying notes are an integral part of these financial statements.

- 8 -

DELAWARE LIFE VARIABLE ACCOUNT L

(A Separate Account of Delaware Life Insurance Company)

NOTES TO FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2015

1. BUSINESS AND ORGANIZATION

Delaware Life Variable Account L (the “Variable Account”) is a separate account of Delaware Life Insurance Company (the “Sponsor”). The Variable Account was established on July 21, 1982, as a funding vehicle for the variable portion of the Compass 2 and Compass 3 contracts (the “Contracts”) issued by the Sponsor. Until December 2, 2011 the Variable Account was registered with the Securities and Exchange Commission under the Investment Company Act of 1940, as amended, as a management separate account existing in accordance with the regulations of the Delaware Insurance Department. Pursuant to a contract holder vote, after the close of business on December 2, 2011, the Variable Account was reorganized, in a tax-free exchange, into a unit investment trust, and all of the investment-related assets and liabilities of the management separate account (other than insurance obligations) were transferred to the MFS Variable Insurance Trust II.

The assets of the Variable Account are divided into “Sub-Accounts”. Each Sub-Account is invested in shares of a specific mutual fund (collectively the “Funds”), or series thereof, registered under the Investment Company Act of 1940, as amended. The contract owners of the Variable Account direct the deposits into the Sub-Accounts of the Variable Account.

Under applicable insurance law, the assets and liabilities of the Variable Account are clearly identified and distinguished from the Sponsor’s other assets and liabilities. Assets applicable to the Variable Account are not chargeable with liabilities arising out of any other business the Sponsor may conduct.

There were no name changes or mergers related to Sub-Account held by the contract owners of the Variable Account during the current year. There were no Sub-Accounts held by the contract owners of the Variable Account that were closed during the current year.

The commencement date related to Sub-Accounts held by the contract owners of the Variable Account (if commenced within the past five years), is as follows:


Sub-Account		Effective Date
M07		August 16, 2013

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

General

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of financial statements in conformity with GAAP requires the Sponsor’s management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from these estimates.

Investment Valuation and Transactions

Investments made in mutual funds are carried at fair value and are valued at their closing net asset value as determined by the respective mutual fund, which in turn value their investments at fair value, as of December 31, 2015. Transactions are recorded on a trade date basis. Realized gains and losses on sales of investments are determined on the first in, first out basis. Dividend income and realized gain distributions are reinvested in additional fund shares and recognized on the ex-dividend date.

- 9 -

DELAWARE LIFE VARIABLE ACCOUNT L

(A Separate Account of Delaware Life Insurance Company)

NOTES TO FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2015

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Units

The number of units credited is determined by dividing the dollar amount allocated to a Sub-Account by the unit value for that Sub-Account for the period during which the purchase payment was received. The unit value for each Sub-Account is established at $10.00 for the first period of that Sub-Account and is subsequently measured based on the performance of the investments and the contract charges selected by the contract holder, as discussed in Note 5.

The number of units related to contracts in the annuitization phase were not included in the unit balance reported in the Statements of Assets and Liabilities, and financial highlights note of the Variable Account’s financial statements in previous years. 100,548 units which represent the annuity units at October 1, 2015 were added to the 2015 unit balance in the current year financial statements. The change in annuity units after October 1, 2015 is reflected in units issued and redeemed. The additional units by Sub-Accounts are reported in Note 8.

Purchase Payments

Upon issuance of new contracts, the initial purchase payment is credited to the contract in the form of units. All subsequent purchase payments are applied using the unit values for the period during which the purchase payment is received.

Transfers

Transfers between Sub-Accounts requested by contract owners are recorded in the new Sub-Account upon receipt of the

redemption proceeds at the net asset value at the time of receipt. In addition, transfers can be made between the Sub-Accounts and the “Fixed Account”. The Fixed Account is part of the general account of the Sponsor in which purchase payments or contract values may be allocated or transferred.

Withdrawals

At any time during the accumulation phase (the period before the first annuity payment), the contract owner may elect to receive a cash withdrawal payment under the contract. If the contract owner requests a full withdrawal, the contract owner will receive the value of their account at the end of period, less the contract maintenance charge for the current contract year and any applicable withdrawal charge.

If the contract owner requests a partial withdrawal, the contract owner will receive the amount requested less any applicable withdrawal charge and the account value will be reduced by the amount requested. Any requests for partial withdrawals that would result in the value of the contract owner’s account being reduced to an amount less than the contract maintenance charge for the current contract year is treated as a request for a full withdrawal.

Annuitization

On the annuity commencement date, the contract’s accumulation account is canceled and its adjusted value is applied to provide an annuity. The adjusted value will be equal to the value of the accumulation account for the period that ends immediately before the annuity commencement date, reduced by any applicable premium taxes or similar taxes and a proportionate amount of the contract maintenance charge.

Annuity Payments

The amount of the first variable annuity payment is determined in accordance with the annuity payment rates found in the contract, which are based on an assumed interest rate of 4% per year.

The number of units to be credited in respect of a particular Sub-Account is determined by dividing that portion of the first variable annuity payment attributable to that Sub-Account by the annuity unit value of that Sub-Account for the period that ends immediately before the annuity commencement date. The number of units of each Sub-Account credited to the contract then remains fixed, unless an exchange of units is made. The dollar amount of each variable annuity payment after the first may increase, decrease or remain constant, depending on the investment performance of the Sub-Accounts.

- 10 -

DELAWARE LIFE VARIABLE ACCOUNT L

(A Separate Account of Delaware Life Insurance Company)

NOTES TO FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2015

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Contract Loans

Contract holders are permitted to borrow against the cash value of their accounts. The loan proceeds are deducted from the Variable Account and recorded in the Sponsor’s general account as an asset. Contract loan activity is reflected in Transfers between Sub-Accounts, net in the Statement of Changes in Net Assets.

Federal Income Taxes

The operations of the Variable Account are part of the operations of the Sponsor and are not taxed separately. The Sponsor qualifies for the federal income tax treatment granted to life insurance companies under Subchapter L of the Internal Revenue Code (the “Code”). Under existing federal income tax law, investment income and realized gain distributions earned by the Variable Account on contract owner reserves are not taxable, and therefore, no provision has been made for federal income taxes. In the event of a change in applicable tax law, the Sponsor will review this policy and if necessary a provision may be made in future years.

Accounting for Uncertain Tax Provisions

The 2003 through 2015 tax years generally remain subject to examination by U.S. federal and most state tax authorities. Although the Sponsor remains jointly and severally liable for consolidated tax liabilities, the Sponsor is held harmless by its former parent in accordance with a stock purchase agreement executed on August 2, 2013 with the effective date of August 1, 2013. The Sponsor believes that the possibility of a tax liability for the tax years prior to August 1, 2013 is remote. Additionally, management evaluates whether or not there are uncertain tax positions that require financial statement recognition and has determined that no reserves for uncertain tax positions are required as of December 31, 2015.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements and the reported amounts of income and expenses during the period. The most significant estimates are fair value measurements of investments and the calculation of the reserve for variable annuities. Actual results could vary from the amounts derived from management’s estimates.

Subsequent events

Management has evaluated events subsequent to December 31, 2015 noting there are no subsequent events requiring accounting adjustments or disclosure.

New and Adopted Accounting Pronouncements

In June 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2013-08, “Financial Services — Investment Companies (Topic 946): Amendments to the Scope, Measurement, and Disclosure Requirements,” which amends the criteria an entity would need to meet to qualify as an investment company under Accounting Standards Codification (“ASC”) 946. The amendments clarify the characteristics of an investment company and provide comprehensive guidance for assessing whether an entity is an investment company. ASU 2013-08 also requires entities to disclose their status as an investment company and investment companies to measure noncontrolling ownership interests in other investment companies at fair value rather than using the equity method of accounting. The Variable Account adopted ASU 2013-08 on January 1, 2014. The Variable Account is characterized as an investment company under ASU 2013-08. The adoption did not have a significant impact on the Variable Account’s financial statements.

- 11 -

DELAWARE LIFE VARIABLE ACCOUNT L

(A Separate Account of Delaware Life Insurance Company)

NOTES TO FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2015

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Accounting Pronouncements Not Yet Adopted

In May 2015, FASB issued ASU No. 2015-07, “Fair Value Measurement (Topic 820)- Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent),” which is in connection with amendments to reporting entities that elect to measure the fair value of an investment. The amendments in this update remove the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share practical expedient. The amendments also remove the requirement to make certain disclosures for all investments that are eligible to be measured at fair value using the net asset value per share practical expedient. Rather, those disclosures are limited to investments for which the entity has elected to measure the fair value using that practical expedient. The amendments in this update are effective for public business entities for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. For all other entities, the amendments in this update are effective for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. The Variable Account will adopt ASU 2015-07 and expects it to only result in changes to the notes of the financial statements.

In August 2014, FASB issued ASU No. 2014-15, “Presentation of Financial Statements – Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” which is in connection with preparing financial statements for each annual and interim reporting period. An entity’s management should evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued (or within one year after the date that the financial statements are available to be issued when applicable). Management’s evaluation should be based on relevant conditions and events that are known and reasonably knowable at the date that the financial statements are issued (or at the date that the financial statements are available to be issued when applicable). The amendments in ASU 2014-15 are effective for an entity’s annual reporting period in fiscal years that end after December 15, 2016. Earlier application is prohibited. The Variable Account will adopt ASU 2014-15 and does not expect its requirements to have a significant impact on the Variable Account’s financial statements.

3. FAIR VALUE MEASUREMENTS

The Sub-Accounts’ investments are carried at fair value. Fair value is an exit price, representing the amount that would be received from a sale of an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, Topic 820 establishes a three-tier value hierarchy, which prioritizes the inputs used in measuring fair value (i.e., Level 1, 2 and 3). Level 1 inputs are observable inputs that reflect quoted prices for identical assets or liabilities in active markets that the Variable Account has the ability to access at the measurement date. Level 2 inputs are observable inputs, other than quoted prices included in Level 1, for the asset or liability or prices for similar assets and liabilities. Level 3 inputs are unobservable inputs reflecting the reporting entity’s estimates of the assumptions that market participants would use in pricing the asset or liability. Topic 820 requires that a fair value measurement technique include an adjustment for risks inherent in a particular valuation technique (such as a pricing model) and/or the risks inherent in the inputs to the model, if market participants would also include such an adjustment.

The Variable Account has categorized its financial instruments, based on the priority of the inputs to the valuation technique, into the three level hierarchy described above. If the inputs used to measure fair value fall within different levels of the hierarchy, the category level is based on the lowest priority level input that is significant to the fair value measurement of the instrument.

- 12 -

DELAWARE LIFE VARIABLE ACCOUNT L

(A Separate Account of Delaware Life Insurance Company)

NOTES TO FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2015

3. FAIR VALUE MEASUREMENTS (CONTINUED)

The Variable Account uses the Funds’ closing net asset value to determine the fair value of its Sub-Accounts. As of December 31, 2015, the $263 million net assets held in the Variable Account was categorized as Level 1 assets under the Topic 820 hierarchy levels. There were no Level 2 or 3 investments in the Variable Account during the year ended December 31, 2015. There were no transfers between levels during the period.

4. RELATED PARTY TRANSACTIONS

The Sponsor provides administrative services necessary for the operation of the Variable Account. The Sponsor absorbs all organizational expenses including the fees of registering the Variable Account and its contracts for distribution under federal and state securities laws.

5. CONTRACT CHARGES

Mortality and expense risk charges

Charges for mortality and expense risks are based on the value of the Sub-Account and are deducted from the Variable Account at the end of each valuation period to cover the risks assumed by the Sponsor. The deductions are transferred periodically to the Sponsor. As of December 31, 2015, the deduction is at an effective annual rate of 1.25 or 1.30% for Compass 2 based on the Sub-Account and 1.25% for Compass 3. These charges are reflected in the Statement of Operations as a component of “Mortality and expense changes and distribution charges”.

Distribution charges

Additionally, the Sponsor makes a deduction from the Sub-Account for a distribution expense risk charge equal to an effective annual rate of 0.15% of the daily net assets attributable to the Compass 3 contracts. This distribution expense charge is not deducted after the seventh contract anniversary. These charges are reflected in the Statement of Operations as a component of “Mortality and expense changes and distribution charges”.

Administration charges

Each year on the contract anniversary date an account administration fee (‘‘Account Fee’’) is deducted from the contract owner’s account to reimburse the Sponsor for certain administrative expenses equal to $25 for the Compass 2 contracts and $30 for the Compass 3 contracts. This amount is deducted pro-rata from all variable sub-accounts, based on the allocation of the Contract Value. The Account Fee is reported in the Statement of Changes in Net Assets as part of “Withdrawals, surrenders, annuitizations and contract charges” in the Accumulation Activity section or as part of “Annuity payments and contract charges” in the Annuitization Activity section

Surrender charges

The Sponsor does not deduct a sales charge from purchase payments. However, a surrender charge (contingent deferred sales charge) may be deducted to cover certain expenses relating to the sale of the contract if the contract holder requests a full withdrawal prior to reaching the pay-out phase. In no event shall the aggregate surrender charges exceed 6% of the purchase payments made under the contract. The surrender charge is reflected in the Statement of Changes in Net Assets as part of “Withdrawals, surrenders, annuitizations and contract charges”.

Premium Taxes

A deduction, when applicable, is made for premium taxes or similar state or local taxes. It is currently the policy of the Sponsor to deduct the taxes at the annuity commencement date. However, the Sponsor reserves the right to deduct such taxes when incurred.

- 13 -

DELAWARE LIFE VARIABLE ACCOUNT L

(A Separate Account of Delaware Life Insurance Company)

NOTES TO FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2015

6. RESERVE FOR VARIABLE ANNUITIES

Reserve for variable annuities represents the actuarial present value of future contract benefits for those contract holders who are in the payout phase of their contract and who chose the variable payout option. Annuity reserves for contracts with annuity commencement dates prior to January 1, 1987 are calculated using the 1971 Individual Annuitant Mortality Table. Annuity reserves for contracts with annuity commencement dates on or between January 1, 1987 and December 31, 1998 are calculated using the 1983 Individual Annuitant Mortality Table. Annuity reserves for contracts with annuity commencement dates on or after January 1, 1999 are calculated using the Annuity 2000 Table. All annuity reserves are calculated using an assumed interest rate of 4% per year. The Individual Annuitant Mortality Tables utilized are subject to change in conjunction with changes in the tables currently adopted by the National Association of Insurance Commissioners (“NAIC”). The mortality risk is fully borne by the Sponsor and may result in additional amounts being transferred into the variable annuity account by the Sponsor to cover greater longevity of annuities than expected. Required adjustments to the reserves are accomplished by transfers to or from the Sponsor.

7. INVESTMENT PURCHASES AND SALES

The cost of purchases and proceeds from sales of investments for the year ended December 31, 2015 were as follows:


	Purchases		Sales
M07	$	5,251,801	$	9,777,166
MC4		84,855		424,373
M96		1,734,058		4,400,711
MA6		3,872,378		5,048,995
MD6		8,417,686		15,951,411
MD8		2,522,233		4,575,182

8. CHANGES IN UNITS OUTSTANDING

The changes in units outstanding for the year ended December 31, 2015 were as follows:


	10/1/2015 Annuity Units		Units Issued		Units Redeemed		Net Increase (Decrease)
M07		51,682		45,736		605,057		(507,639	)
MC4		1,492		369		14,236		(12,375	)
M96		10,620		167,024		219,539		(41,895	)
MA6		7,424		46,772		95,463		(41,267	)
MD6		24,177		193,800		390,214		(172,237	)
MD8		5,153		148,321		259,307		(105,833	)

- 14 -

DELAWARE LIFE VARIABLE ACCOUNT L

(A Separate Account of Delaware Life Insurance Company)

NOTES TO FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2015

8. CHANGES IN UNITS OUTSTANDING (CONTINUED)

The changes in units outstanding for the year ended December 31, 2014 were as follows:


	Units Issued		Units Redeemed		Net Increase (Decrease)
M07		126,717		993,204		(866,487	)
MC4		12,058		38,440		(26,382	)
M96		224,868		341,588		(116,720	)
MA6		17,447		152,528		(135,081	)
MD6		294,186		622,539		(328,353	)
MD8		222,842		264,203		(41,361	)

9. TAX DIVERSIFICATION REQUIREMENTS

Under the provisions of Section 817(h) of the Code, a variable annuity contract, other than a pension plan contract, is not treated as an annuity contract for federal tax purposes for any period in which the investments of the segregated asset account on which the contract is based are not adequately diversified. The Code provides that the “adequately diversified” requirement may be met if the underlying investments satisfy either a statutory safe harbor test or diversification requirements set forth in regulations issued by the Secretary of Treasury. The Sponsor believes that the Variable Account satisfies the current requirements of the regulations, and it intends that the Variable Account will continue to meet such requirements.

- 15 -

DELAWARE LIFE VARIABLE ACCOUNT L

(A Separate Account of Delaware Life Insurance Company)

10. FINANCIAL HIGHLIGHTS

The summary of units outstanding, unit value (some of which may be rounded), net assets, investment income ratios, expense ratios (excluding expenses of the underlying mutual funds) and the total return, for each of the five years in the period ended December 31, is as follows:


	At December 31,									For the years ended December 31,
	Units		Unit Value⁴					Net Assets		Investment Income Ratio¹			Expense Ratio lowest to highest²						Total Return³
M07
2015		6,395,179	$	11.310	to	$	11.270	$	72,278,599		2.57	%		1.25	%	to	1.40	%		(1.60	%)	to	1.01	%
2014		7,060,492		11.494	to		11.470		81,808,692		1.85			1.25		to	1.40			7.16		to	7.00
2013		7,926,979		10.720	to		10.726		85,705,639		1.77			1.25		to	1.40			7.20		to	7.26

MC4
2015		158,746		28.968	to		27.759		3,020,612		2.40			1.25		to	1.40			(4.85	)	to	(5.09	)
2014		175,035		17.412	to		29.247		3,567,298		0.54			1.25		to	1.40			(0.51	)	to	(0.66	)
2013		201,417		17.502	to		30.601		4,093,110		—			1.25		to	1.40			(6.57	)	to	(6.43	)
2012		232,734		18.705	to		32.703		5,068,807		2.90			1.25		to	1.40			(0.76	)	to	(0.61	)
2011		264,611		18.819	to		32.903		5,780,009		—			1.25		to	1.40			0.61		to	0.62

M96
2015		845,181		20.358	to		34.200		31,646,521		2.72			1.25		to	1.40			(0.77	)	to	(0.92	)
2014		919,467		20.516	to		34.517		35,228,973		2.42			1.25		to	1.40			3.56		to	3.41
2013		1,036,187		19.810	to		48.209		38,258,138		2.17			1.25		to	1.40			(3.94	)	to	(3.80	)
2012		1,250,856		20.591	to		50.136		47,556,513		3.23			1.25		to	1.40			1.10		to	1.26
2011		1,410,927		20.336	to		49.539		53,183,765		—			1.25		to	1.40			0.55		to	0.56

MA6
2015		621,279		22.300	to		44.671		27,308,595		6.94			1.25		to	1.40			(5.40	)	to	2.94
2014		682,957		23.573	to		43.396		31,951,714		5.24			1.25		to	1.40			1.54		to	1.39
2013		818,038		23.216	to		58.771		37,163,057		2.32			1.25		to	1.40			4.96		to	5.11
2012		903,168		22.087	to		55.941		39,271,099		6.73			1.25		to	1.40			13.31		to	13.48
2011		985,614		19.463	to		49.320		37,609,393		—			1.25		to	1.40			1.70		to	1.71

MD6
2015		2,153,764		27.294	to		63.360		115,623,772		0.49			1.25		to	1.40			(1.35	)	to	(3.25	)
2014		2,393,540		27.667	to		65.489		131,344,649		0.54			1.25		to	1.40			10.14		to	9.97
2013		2,721,893		25.121	to		91.118		135,691,887		0.71			1.25		to	1.40			28.59		to	28.78
2012		3,054,135		19.506	to		70.788		117,794,306		0.41			1.25		to	1.40			15.62		to	15.79
2011		3,533,167		16.846	to		61.163		115,853,690		—			1.25		to	1.40			(1.91	)	to	(1.89	)

MD8
2015		824,403		12.297	to		16.141		12,272,514		—			1.25		to	1.40			(1.23	)	to	(1.37	)
2014		950,300		12.451	to		16.365		14,391,032		—			1.25		to	1.40			(1.23	)	to	(1.38	)
2013		991,661		12.607	to		20.438		15,153,655		—			1.25		to	1.40			(1.38	)	to	(1.23	)
2012		1,227,160		12.764	to		20.704		19,281,435		—			1.25		to	1.40			(1.39	)	to	(1.24	)
2011		1,474,122		12.925	to		20.975		23,632,701		—			1.25		to	1.40			(0.11	)	to	(0.10	)

TRS
2013		—		—	to		—		—		3.98			1.25		to	1.40			9.45		to	9.55
2012		2,542,604		26.805	to		56.857		82,861,052		2.57			1.25		to	1.40			9.79		to	9.96
2011		2,943,722		24.378	to		51.708		87,454,794		—			1.25		to	1.40			0.80		to	0.81

- 16 -

DELAWARE LIFE VARIABLE ACCOUNT L

(A Separate Account of Delaware Life Insurance Company)

10. FINANCIAL HIGHLIGHTS (CONTINUED)

Represents the dividends, excluding distributions of capital gains, received by the Sub-Account from the underlying mutual fund, which are net of management fees assessed by the fund manager, divided by the average net assets. The ratio excludes those expenses, such as mortality and expense charges, that result in direct reductions in the unit values. The recognition of investment income by the Sub-Account is affected by the timing of the declaration of dividends by the underlying mutual fund in which the Sub-Accounts invest.

Ratio represents the annualized contract expenses of the Sub-Account, consisting primarily of mortality and expense charges and distribution charges. The ratio includes only those expenses that result in a direct reduction to unit values. Charges made directly to contract owner accounts through the redemption of units and expenses of the underlying mutual fund are excluded.

Ratio represents the total return for the year indicated, including changes in the value of the underlying mutual fund. The total return does not include any expenses assessed through the redemption of units; inclusion of these expenses in the calculation would result in reduction in the total return presented. The total return is calculated for each period indicated or from the effective date through the end of the reporting period. The ranges for the current year total return are based on the groupings that produced the lowest and highest expense ratios.

⁴

These unit values are not a direct calculation of net asset over the number of units allocated to the Sub-Account. The ranges for the current year unit value are based on the groupings that produced the lowest and highest expense ratios. Some unit values may be outside of the range due to timing of the related Sub-Account level’s commencement date.

- 17 -

Delaware Life Insurance Company

(A Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

Independent Auditor’s Report,

Statutory Financial Statements as of

December 31, 2015 and 2014 and for the Years

Ended December 31, 2015, 2014 and 2013

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

TABLE OF CONTENTS


	Page
INDEPENDENT AUDITOR’S REPORT

Statutory Statements of Admitted Assets, Liabilities and Capital Stock and Surplus		1

Statutory Statements of Operations		2

Statutory Statements of Changes in Capital Stock and Surplus		3

Statutory Statements of Cash Flows		4

Notes to the Statutory Financial Statements		5

LOGO

Independent Auditor’s Report

To the Board of Directors of

Delaware Life Insurance Company

We have audited the accompanying statutory financial statements of Delaware Life Insurance Company, which comprise the statutory statements of admitted assets, liabilities and capital stock and surplus as of December 31, 2015 and 2014, and the related statutory statements of operations and changes in capital stock and surplus, and cash flows for the years ended December 31, 2015, 2014 and 2013.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with the accounting practices prescribed or permitted by the Delaware Department of Insurance. Management is also responsible for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on the financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Company’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Basis for Adverse Opinion on U.S. Generally Accepted Accounting Principles

As described in Note 1 to the financial statements, the financial statements are prepared by the Company on the basis of the accounting practices prescribed or permitted by the Delaware Department of Insurance, which is a basis of accounting other than accounting principles generally accepted in the United States of America.

PricewaterhouseCoopers LLP, 185 Asylum Street, Suite 2400, Hartford, CT 06103-3404

T: (860) 241 7000, F: (860) 241 7590, www.pwc.com/us

The effects on the financial statements of the variances between the statutory basis of accounting described in Note 1 and accounting principles generally accepted in the United States of America, although not reasonably determinable, are presumed to be material.

Adverse Opinion on U.S. Generally Accepted Accounting Principles

In our opinion, because of the significance of the matter discussed in the “Basis for Adverse Opinion on U.S. Generally Accepted Accounting Principles” paragraph, the financial statements referred to above do not present fairly, in accordance with accounting principles generally accepted in the United States of America, the financial position of the Company as of December 31, 2015 and 2014, or the results of its operations or its cash flows for the years ended December 31, 2015, 2014 and 2013.

Opinion on Statutory Basis of Accounting

In our opinion, the financial statements referred to above present fairly, in all material respects, the admitted assets, liabilities and capital stock and surplus of the Company as of December 31, 2015 and 2014, and the results of its operations and its cash flows for the years ended December 31, 2015, 2014 and 2013, in accordance with the accounting practices prescribed or permitted by the Delaware Department of Insurance described in Note 1.

Emphasis of Matter

As discussed in Note 15, the Company recorded a restatement of gross paid-in and contributed surplus and unassigned funds under a quasi-reorganization in 2013. Our opinion is not modified with respect to this matter.

LOGO

April 29, 2016

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

STATUTORY STATEMENTS OF ADMITTED ASSETS, LIABILITIES, AND CAPITAL STOCK AND SURPLUS

AS OF DECEMBER 31, 2015 AND 2014 (IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)


	2015		2014
ADMITTED ASSETS
GENERAL ACCOUNT ASSETS
Debt securities	$	5,853,362	$	5,331,560
Preferred stocks		32,634		33,120
Common stocks		550,351		496,736
Mortgage loans on real estate		490,340		671,120
Properties held for sale		—		6,225
Cash, cash equivalents and short-term investments		1,536,423		2,797,104
Contract loans		630,826		623,220
Derivatives		246,437		255,524
Other invested assets		529,509		491,951
Mortgage escrow funds		3,142		6,251
Receivables for securities		8,167		33,531
Investment income due and accrued		84,071		70,786
Amounts recoverable from reinsurers		4,282		15,772
Other amounts receivable under reinsurance contracts		8,777		—
Current federal and foreign income tax recoverable		8,071		15,519
Net deferred tax asset		213,377		207,585
Receivables from parent, subsidiaries and affiliates		1,298		2,049
Cash value of Company Owned Life Insurance		89,431		89,946
Reinsurance deposit asset		1,332,097		176,764
Other assets		24,657		24,446

Total general account assets		11,647,252		11,349,209
SEPARATE ACCOUNT ASSETS		25,229,673		29,350,568

TOTAL ADMITTED ASSETS	$	36,876,925	$	40,699,777


	2015			2014
LIABILITIES, CAPITAL STOCK AND SURPLUS
GENERAL ACCOUNT LIABILITIES
Aggregate reserve for life contracts	$	7,811,011		$	7,274,572
Liability for deposit type contracts		189,353			215,544
Contract claims		45,934			36,076
Other amounts payable on reinsurance		3,232			5,327
Interest maintenance reserve		27,333			11,021
Commissions to agents due or accrued		8,358			8,248
General expenses due or accrued		51,851			58,998
Transfers from Separate Accounts due or accrued (net)		(644,905	)		(705,218	)
Remittances and items not allocated		31,013			7,302
Borrowed money and accrued interest thereon		25,000			210,022
Asset valuation reserve		151,228			154,431
Payable for securities		521,988			1,808,492
Reinsurance in unauthorized and certified companies		—			145
Funds held under reinsurance treaties with unauthorized and certified reinsurers		270,742			260,824
Funds held under coinsurance		1,332,097			176,764
Derivatives		51,090			83,125
Other liabilities		136,037			148,949

Total general account liabilities		10,011,362			9,754,622
SEPARATE ACCOUNT LIABILITIES		25,229,672			29,353,673

Total liabilities		35,241,034			39,108,295
CAPITAL STOCK AND SURPLUS:
Common capital stock, $1,000 par value – 10,000 shares authorized; 6,437 shares issued and outstanding		6,437			6,437

Surplus notes		565,000			565,000
Gross paid in and contributed surplus		653,698			653,698
Unassigned funds		410,756			366,347

Total surplus		1,629,454			1,585,045

Total capital stock and surplus		1,635,891			1,591,482

TOTAL LIABILITIES, CAPITAL STOCK AND SURPLUS	$	36,876,925		$	40,699,777

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

STATUTORY STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013 (IN THOUSANDS)


	2015			2014			2013
INCOME:
Premiums and annuity considerations	$	1,321,183		$	1,783,056		$	1,559,375
Considerations for supplementary contracts with life contingencies		28,768			29,190			23,283
Net investment income		381,623			50,614			(318,661	)
Amortization of interest maintenance reserve		18,777			18,502			19,884
Commissions and expense allowances on reinsurance ceded		2,932			3,676			5,402
Reserve adjustments on reinsurance ceded		—			—			(141	)
Income from fees associated with investment management, administration and contract guarantees from Separate Accounts		467,433			480,820			541,274
Change in cash value of Company Owned Life Insurance		(515	)		(54	)		—
Investment loss on reinsurance deposit asset		46,818			102,960			—
Other income		93,093			106,183			118,236

Total Income		2,360,112			2,574,947			1,948,652
BENEFITS AND EXPENSES:
Death benefits		142,344			153,679			119,471
Annuity benefits		589,120			682,288			714,186
Surrender benefits and withdrawals for life contracts		2,518,026			3,385,457			2,996,819
Interest and adjustments on contract or deposit-type contract funds		6,607			9,688			(26,269	)
Payments on supplementary contracts with life contingencies		31,740			35,769			14,146
Increase in aggregate reserves for life and accident and health contracts		536,439			644,086			(68,412	)

Total Benefits		3,824,276			4,910,967			3,749,941
Commissions on premiums, annuity considerations and deposit-type contract funds (direct business only)		119,118			109,136			105,117
Commissions and expense allowances on reinsurance assumed		123			127			132
General insurance expenses		231,294			216,356			191,813
Insurance taxes, licenses and fees, excluding federal income taxes		4,697			6,025			5,658
Net transfers (from) or to Separate Accounts net of reinsurance		(2,160,670	)		(2,749,140	)		(2,657,842	)
Investment expense (income) on funds withheld		58,979			(225,350	)		23,453
Other deductions		3,990			3,832			44,148

Total Benefits and Expenses		2,081,807			2,271,953			1,462,420
Net income (loss) from operations before federal income tax (benefit) expense and net realized capital gains (losses)		278,305			302,994			486,232
Federal income tax (benefit) expense, excluding tax on capital gains (losses)		(2,729	)		6,861			(84,275	)

Net income (loss) from operations after federal income taxes and before net realized capital gains (losses)		281,034			296,133			570,507
Net realized capital gains (losses) less capital gains tax and transfers to the interest maintenance reserve		67,719			19,628			112,373

NET INCOME	$	348,753		$	315,761		$	682,880

See notes to statutory financial statements.

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

STATUTORY STATEMENTS OF CHANGES IN CAPITAL STOCK AND SURPLUS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013 (IN THOUSANDS)


	2015			2014			2013
CAPITAL STOCK AND SURPLUS, BEGINNING OF YEAR	$	1,591,482		$	1,410,420		$	1,235,854
Net income		348,753			315,761			682,880
Change in net unrealized capital (losses) gains, net of deferred income tax		(5,299	)		424,710			(232,924	)
Change in net unrealized foreign exchange capital (losses) gains		(7,317	)		(1,413	)		(4,954	)
Change in net deferred income tax		(101,139	)		(123,660	)		(202,295	)
Change in non-admitted assets		107,496			151,478			64,940
Change in liability for reinsurance in unauthorized and certified companies		145			(129	)		(2	)
Change in asset valuation reserve		3,203			(85,470	)		(21,820	)
Surplus withdrawn (contributed to) from Separate Accounts during period		552			—			—
Changes in Separate Accounts surplus		3,106			25,443			(29,004	)
Cumulative effect of changes in accounting principles		6,255			—			—
Decrease in surplus paid in		—			—			(82,794	)
Dividends to stockholders		(311,543	)		(185,000	)		—
Stock option excess tax benefit		—			—			539
Investment benefit on funds withheld—unrealized		197			(340,658	)		—
Increase in unassigned surplus—quasi reorganization		—			—			1,851,883
Decrease in gross paid in and contributed surplus—quasi reorganization		—			—			(1,851,883	)

CAPITAL STOCK AND SURPLUS, END OF YEAR	$	1,635,891		$	1,591,482		$	1,410,420

See notes to statutory financial statements.

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

STATUTORY STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013 (IN THOUSANDS)


	2015			2014			2013
CASH FROM OPERATIONS:
Premiums collected net of reinsurance	$	1,349,951		$	1,812,246		$	1,582,658
Net investment income		408,727			322,375			408,807
Federal and foreign income taxes received		4,077			528			73,478
Miscellaneous income		554,167			609,258			671,892

Total receipts		2,316,922			2,744,407			2,736,835
Benefits and loss related payments		3,267,558			4,317,666			3,806,068
Net transfers (from) to Separate Accounts		(2,221,535	)		(2,869,878	)		(2,693,451	)
Commissions, expenses paid and aggregate write-ins for deductions		377,301			343,135			388,367

Total payments		1,423,324			1,790,923			1,500,984

Net cash from operations		893,598			953,484			1,235,851

CASH FROM INVESTMENTS:
Proceeds from investments sold, matured, repaid or received
Debt Securities		2,287,249			2,651,165			4,130,495
Stocks		25,026			8,079			71,461
Mortgage loans		368,687			141,903			172,379
Real Estate		13,275			120,126			148,457
Other Invested Assets		83,147			285,341			139,648
Net (losses) or gains on cash, cash equivalents and short-term investments		(1,558	)		212			108
Miscellaneous proceeds		19,113			1,336,187			394,239

Total investment proceeds		2,794,939			4,543,013			5,056,787
Cost of investments acquired (long-term only):
Debt Securities		(2,827,494	)		(3,170,123	)		(1,409,340	)
Stocks		(74,352	)		(95,569	)		(715	)
Mortgage loans		(165,500	)		(61,600	)		(105,046	)
Real Estate		(173	)		(1,451	)		(16,384	)
Other Invested Assets		(94,474	)		(582,554	)		(218,365	)
Miscellaneous proceeds		(1,276,604	)		(130,491	)		(969,951	)

Total investments acquired		(4,438,597	)		(4,041,788	)		(2,719,801	)
Net (increase) decrease in contract loans and premium notes		(7,342	)		(86,505	)		27,009

Net cash from investments		(1,651,000	)		414,720			2,363,995

CASH FROM FINANCING AND MISCELLANEOUS SOURCES:
Capital and paid in surplus		—			—			(82,796	)
Borrowed funds		(185,022	)		210,023			(100,002	)
Net deposits on deposit-type contracts and other liabilities		(26,191	)		31,062			(943,849	)
Dividends to stockholders		(311,543	)		(185,000	)		—
Other cash provided (used)		19,477			(67,310	)		(1,374,505	)

Net cash from financing and miscellaneous sources		(503,279	)		(11,225	)		(2,501,152	)

Net change in cash, cash equivalents and short-term investments		(1,260,681	)		1,356,979			1,098,694
CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS:
Beginning of year		2,797,104			1,440,125			341,431

End of year	$	1,536,423		$	2,797,104		$	1,440,125

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES


	2015		2014		2013
Exchanges of debt securities	$	39,626	$	192,199	$	82,024
Exchanges of preferred stock		150		—		—
Transfer of mortgages to other invested assets		—		—		11,816
Transfer of mortgages out of other invested assets		—		—		54,474
Transfer of real estate to other invested assets		—		—		11,637
Transfer of other invested assets to real estate		5,222		—		—
Transfer of bonds to common stock		18,012		—		—
Transfer of bonds to other invested assets		23,517		—		—
Distribution of previously wholly-owned subsidiary to former parent		—		—		70,700
Quasi-reorganization		—		—		1,851,883
Premium related to SPWL recapture		—		—		1,331,908

See notes to statutory financial statements.

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2015 AND 2014 AND FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

1.	DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

GENERAL

Delaware Life Insurance Company (the “Company”) formerly known as Sun Life Assurance Company of Canada (U.S.), is a stock life insurance company incorporated under the laws of Delaware. Effective July 21, 2014, following the receipt of all required board of directors, shareholder, and regulatory approvals, the Company’s name changed from Sun Life Assurance Company of Canada (U.S.) to Delaware Life Insurance Company. The Company is a direct wholly-owned subsidiary of Delaware Life Holdings, LLC (the “Parent”), a Delaware limited liability company. Prior to August 2, 2013, the Company was a direct wholly-owned subsidiary of Sun Life of Canada (U.S.) Holdings, Inc. (the “Former Parent”) and an indirect wholly-owned subsidiary of Sun Life Assurance Company of Canada—U.S. Operations Holdings, Inc. (“SLC—U.S. Ops Holdings”). SLC – U.S. Ops Holdings is an indirect wholly-owned subsidiary of Sun Life Financial Inc. (“SLF”), a reporting company under the Securities Exchange Act of 1934. On December 17, 2012, SLF announced the execution of a definitive agreement to sell its domestic U.S. annuity business and certain life insurance businesses to the Parent, including all of the issued and outstanding shares of the Company (the “Sale Transaction”). After receiving all required regulatory approvals, the Sale Transaction closed on August 2, 2013 with an effective date of August 1, 2013. In connection with the Sale Transaction and after receiving necessary regulatory approvals, certain transactions were executed prior to close. (Refer to Note 2 for additional information.)

The Company is authorized to transact business in 49 states, the District of Columbia, Puerto Rico and the U.S. Virgin Islands. While the Company is not authorized to transact business in the State of New York, its wholly-owned subsidiary, Delaware Life Insurance Company of New York (“DLNY”), is authorized to transact business in New York. The business of the Company and its subsidiaries includes the issuance, administration and servicing of a variety of wealth accumulation products, protection products and institutional investment contracts. These products include individual and group fixed and variable annuities, individual and group variable life insurance, individual universal life insurance, funding agreements, and group life, disability, dental and stop loss insurance.

In the normal course of business, the Company and DLNY, reinsure portions of their individual life insurance, annuity, and group insurance exposure with both affiliated and unaffiliated companies using indemnity reinsurance agreements. Effective July 31, 2013, DLNY ceded 100% of its net group life, disability, dental and stop-loss insurance to an affiliate of SLF.

On September 27, 2013, following completion of the Sale Transaction, the Company’s board of directors authorized the Company to issue funding agreements, fixed annuities, variable annuities, single premium life insurance and private placement products on a fixed and variable basis and to utilize its existing Separate Accounts in connection therewith. On November 4, 2013, the Company began writing new annuity business with the launch of a multi-year guaranteed fixed annuity.

BASIS OF PRESENTATION

The accompanying financial statements of the Company are presented on the basis of accounting principles prescribed or permitted by the Delaware Department of Insurance (the “Department”). The Department recognizes only statutory accounting practice prescribed or permitted by the State of Delaware for determining and reporting the financial condition and results of operations of an insurance company, and for determining its solvency under Delaware’s insurance laws. The National Association of Insurance Commissioners’ (“NAIC”) Accounting Practices and Procedures Manual (“NAIC SAP”) has been adopted as a component of prescribed or permitted accounting principles by the State of Delaware.

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2015 AND 2014 AND FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

There is no difference in the Company’s net income (loss) or capital stock and surplus between NAIC SAP and practices prescribed and permitted by the State of Delaware as of and for the years ended December 31, 2015, 2014 and 2013.

Accounting principles and procedures of the NAIC as prescribed or permitted by the Department comprise a comprehensive basis of accounting other than accounting principles generally accepted in the United States of America (“GAAP”). The more significant differences affecting the Company are as follows:

Under statutory accounting principles, financial statements are not consolidated. Investments in domestic life insurance subsidiaries, as defined by Statement of Statutory Accounting Principles (“SSAP”) No. 97— Investments in Subsidiary, Controlled and Affiliated Entities are carried at their audited net statutory equity value. The changes in value are recorded directly to surplus. Non-public, non-insurance subsidiaries and controlled partnerships are carried at their audited GAAP equity value. Dividends paid by subsidiaries to the Company are included in the Company’s net investment income.

Statutory accounting principles do not recognize the following assets or liabilities, which are recognized under GAAP: deferred policy acquisition costs, unearned premium reserve and statutory non-admitted assets. Deferred policy acquisition costs do create a temporary tax difference as disclosed in Note 14. An asset valuation reserve (“AVR”) and interest maintenance reserve (“IMR”) are established under statutory accounting principles but not under GAAP. Methods for calculating real estate investment valuation allowances differ under statutory accounting principles and GAAP. Actuarial assumptions and reserving methods differ under statutory accounting principles and GAAP. There are certain limitations on net deferred tax assets (“DTAs”) under statutory accounting principles. Contracts with a market value adjustment (“MVA”) feature are classified within the Company’s General Account under GAAP, but are classified within the Separate Accounts under statutory accounting principles.

Under GAAP, investments in fixed maturity securities classified as available-for-sale or trading are carried at their aggregate fair value. Changes in unrealized gains and losses are reported net of taxes in a separate component of stockholder’s equity for available-for-sale securities and changes in unrealized gains and losses on trading securities are recorded in net investment income. Fixed maturity securities are generally carried at amortized cost under statutory accounting principles.

All derivatives are used for hedging purposes. The majority of derivatives are carried at fair value on both a GAAP and statutory basis. Unrealized gains and losses on derivatives are recognized in income for GAAP purposes and flow through surplus on a statutory basis. The Company employs hedge accounting on a limited basis.

Life premiums are recognized as income over the premium paying period of the related policies. Annuity considerations are recognized as revenue when received. Expenses incurred in connection with acquiring new insurance business, including acquisition costs such as sales commissions, are charged to operations as incurred.

The reserves for life insurance and annuity contracts are computed in accordance with presently accepted actuarial standards, and are based on actuarial assumptions and methods (including use of published mortality tables and prescribed interest rates) which produce reserves at least as great as those required by law and/or contract provisions.

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2015 AND 2014 AND FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

USE OF ESTIMATES

The preparation of financial statements in conformity with statutory accounting principles prescribed or permitted by the State of Delaware requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities. It also requires disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period. Actual results could differ from those estimates. The most significant estimates are those used in determining the fair value of financial instruments, allowance for loan losses, aggregate reserves for life policies and annuity contracts, deferred income taxes, provision for income taxes, and other-than-temporary-impairments (“OTTI”) of investments.

RECLASSIFICATIONS

Effective January 1, 2014, the Company recorded $51.9 million of reserve reclassifications reducing Aggregate reserve for life contracts and increasing Liabilities for deposit type contracts. This reclassification had no impact on the Company’s net income or surplus.

Certain prior year amounts have been reclassified to conform with the current year financial statement presentation.

SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting policies followed by the Company in preparing the accompanying statutory-basis financial statements:

FINANCIAL INSTRUMENTS

In the normal course of business, the Company enters into transactions involving various types of financial instruments, including cash equivalents, short-term investments, debt and equity securities, mortgage loans and derivatives. These instruments involve credit risk and also may be subject to risk of loss due to interest rate fluctuation. The Company evaluates and monitors each financial instrument individually and, when appropriate, obtains collateral or other security to minimize losses.

CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

Cash, cash equivalents and short-term investments are highly liquid securities. The Company’s cash equivalents primarily include cash, commercial paper and money market investments which have an original term to maturity of less than three months. Short-term investments include debt instruments with a term to maturity exceeding three months, but less than one year following the date of acquisition. Cash equivalents and short-term investments are stated at amortized cost, which approximates fair value.

INVESTMENTS

Debt Securities

Investments in debt securities including bonds, mortgage-backed securities (“MBS”) and asset-backed securities (“ABS”) are stated at amortized cost using the scientific method. Where the NAIC designation of the debt security has fallen to 6 and the fair value has fallen below amortized cost, they are stated at fair value. Adjustments to the value of MBS and ABS securities based on changes in cash flows, including those related to changes in prepayment assumptions, are made retrospectively. As part of this process, the NAIC

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2015 AND 2014 AND FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

appointed a third-party vendor for each security type to develop a revised NAIC designation methodology. The ratings for residential mortgage-backed securities (“RMBS”) and commercial mortgage-backed securities (“CMBS”) are determined by comparing the insurer’s carrying value divided by the remaining par value to price ranges provided by the third-party vendor corresponding to each NAIC designation. Comparisons are initially made to the model based on amortized cost. Where the resulting rating is NAIC 6 per the model, further comparison based on fair value is required, which in some cases, results in a higher final NAIC designation.

The definition of structured securities under SSAP No. 43R, Loan Backed and Structured Securities – Revised (“SSAP No. 43R”), was modified in 2011 to include within the category of ABS certain debt securities that were previously classified by the Company as issuer obligations. The types of securities reclassified under the revised definition included certain equipment trust certificates, guaranteed contracts, secured leases and secured contracts. Certain types of ABS and MBS securities do not follow the revised rating methodology described above, including, but not limited to, equipment trust certificates, credit tenant loans, 5*/6* securities, interest-only securities, and those with Securities Valuation Office (“SVO”) assigned NAIC designations. Interest income on bonds, MBS, and ABS is recognized when earned based upon estimated principal repayments, if applicable. For debt securities subject to prepayment risk, yields are recalculated and asset balances adjusted periodically so that expected return on future cash flows matches the expected return over the life of the investment from acquisition. If the collection of all contractual cash flows is not probable, an OTTI may be indicated. The process of analyzing securities for an OTTI adjustment is further described in Note 3.

Bonds not backed by other loans are stated at amortized cost, net of OTTI, using the scientific method. Where the NAIC designation of the bond has fallen to 6 and the fair value has fallen below amortized cost, they are stated at fair value.

Preferred Stocks, Common Stocks and Other Invested Assets

Preferred stocks with an NAIC designation of 1 through 3 are stated at amortized cost. Those with NAIC designations of 4 through 6 are stated at the lower of amortized cost or fair value. Common stocks are stated at fair value, except for investments in subsidiaries. The latter are carried based on the underlying statutory equity of the subsidiary for insurance subsidiaries and GAAP equity for non-insurance subsidiaries. The Company accounts for its investments in subsidiaries in accordance with SSAP No. 97. The Company has ownership interests in joint ventures and partnerships which are carried at values based on the underlying equity of the investee in accordance with SSAP No. 48, Joint Ventures, Partnerships and Limited Liability Companies (“SSAP No. 48”), and SSAP No. 93, Accounting for Low Income Housing Tax Credit Property Investments (“SSAP No. 93”). Audited financial statements for these investments are received on an annual basis. OTTI on stocks is evaluated under the methodology described in Note 3.

Mortgage Loans on Real Estate

Mortgage loans are stated at unpaid principal balances, net of provisions for estimated losses. Mortgage loans acquired at a premium or discount are carried at amortized cost using the effective interest rate method, net of provisions for estimated losses. Purchases and sales of mortgage loans are recognized or derecognized in the Company’s Statement of Admitted Assets, Liabilities and Capital Stock and Surplus on the loan’s trade date, which is the date that the Company funds the purchase or receives the proceeds from the sale. Transaction costs on mortgage loans are capitalized on initial recognition and are recognized in the Company’s Statement of Operations using the effective interest rate method. Mortgage loans, which primarily include commercial first mortgages, are diversified by property type and geographic area throughout the United States. Mortgage loans are collateralized by the related properties and generally are no more than

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2015 AND 2014 AND FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

75% of the property’s fair value at the time that the original loan was made. The Company regularly assesses the fair value of the collateral.

A mortgage loan is considered impaired when it is probable that the principal or interest is not collectible in accordance with the contractual terms of the loan. When a mortgage loan is classified as impaired, allowances for credit losses are established to adjust the carrying value of the loan to its net recoverable amount.

The allowance for credit losses is estimated using the present value of expected cash flows discounted at the loan’s effective interest rate or the fair value of the collateral, if the loan is collateral dependent. A specific allowance for loan loss is established for an impaired loan if the present value of expected cash flows discounted at the loan’s effective interest rate, or the fair value of the collateral less cost to sell, is less than the recorded amount of the loan. The full extent of impairment in the mortgage portfolio cannot be assessed solely by reviewing loans individually. A general allowance for loan loss is established based on an assessment of past loss experience on groups of loans with similar characteristics and current economic conditions. While management believes that it uses the best information available to establish loan loss allowances, future adjustments may become necessary if economic conditions differ from the assumptions used in calculating them.

Interest income is recognized on impaired mortgage loans when the collection of contractually specified future cash flows is probable, in which case cash receipts are recorded in accordance with the effective interest rate method. Interest income is not recognized on impaired mortgage loans and these mortgage loans are placed in a non-accrual status when the collection of contractually specified future cash flows is not probable, in which case cash receipts are applied in the following order: first against the carrying value of the loan, then against the provision, and then to income. The accrual of interest resumes when the collection of contractually specified future cash flows becomes probable based on certain facts and circumstances.

Changes in allowances for losses are recorded as changes in unrealized gains and losses to surplus. Once the conditions causing impairment improve and future payments are reasonably assured, the mortgages are no longer classified as impaired and the Company resumes accrual of income. However, if the original terms of the contract have been changed resulting in the Company providing an economic concession to the borrower at below market rates, then the mortgage is reclassified as restructured.

If the conditions causing impairment do not improve and future payments remain unassured, the Company typically derecognizes the asset through disposition or foreclosure. Uncollectible collateral-dependent loans are written off through realized losses for any difference between the carrying value and amount received for the underlying property at the time of disposition or foreclosure.

Property Held for Sale

Real estate includes properties held for sale. Properties held for sale are carried at the lower of depreciated cost or fair value, less encumbrances and disposition costs.

Contract Loans

Contract loans are carried at the amount of outstanding principal balance. Contract loans are collateralized by the related insurance policy and do not exceed the net cash surrender value of such policy.

Asset Valuation Reserve and Interest Maintenance Reserve

The AVR is established as a liability based upon a formula prescribed by the NAIC to offset potential credit-related investment losses on all invested assets, with changes in the AVR charged or credited directly to

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2015 AND 2014 AND FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

surplus. The IMR is established as a liability to capture realized gains and losses, net of income tax, on the sale of fixed income investments, principally bonds, mortgage loans and derivatives, resulting from changes in the general level of interest rates, and is amortized into income over the remaining years to expected maturity of the assets sold.

Derivatives

As part of the Company’s overall risk management strategy, the Company uses over the counter (“OTC”) and listed options, exchange-traded futures, currency forwards, currency swaps and swaptions.

Interest rate swaps are mainly employed for duration matching purposes. Interest rate swaps are also used to hedge the guaranteed minimum living benefit in some variable annuity policies.

The Company utilizes interest rate swaps to hedge interest rate risk arising from the variability of cash flows related to certain variable rate funding agreements. These swaps were designated as cash flow hedges. Interest rate swaps that qualified for hedge accounting treatment were recognized in a manner consistent with the hedged item and were carried at amortized cost. At the date of designation, the fair value of the associated interest rate swap which had previously been recorded as an unrealized loss to surplus was fixed with subsequent amortization into income through the related policy’s maturity date. In the event a swap was not proven highly effective, it would be stated at fair value and then changes in fair value would be recorded through unrealized gains/losses within surplus. These series of funding agreements matured in 2013.

The Company utilizes listed put and call options and exchange traded futures on the Standard & Poor’s 500 Composite Stock Price Index (the “S&P 500 Index”) and other indices to hedge against stock market exposure inherent in the mortality and expense risk charges and guaranteed minimum death and living benefit features of the Company’s variable annuities. These options are stated at fair value. Changes in fair value for options are recorded in unrealized gains/losses within surplus. The daily cash variation margin settlements for futures are recorded as a component of net investment income.

Purchased OTC options on Momentum Asset Allocator (“MAA”), Cash Return on Capital Invested (“CROCI”) and certain S&P have been designated as fair value hedges of the index credits of certain fixed index annuity contracts. If proven highly effective, the options are reported at fair value. The changes in the fair value are recorded as a component of net investment income. The change in the option embedded within the policy is also marked to market through income.

The Company also purchases OTC and listed call options and exchange traded futures on the S&P 500 Index and other indices to economically hedge its obligation under certain fixed index annuity contracts. The interest credited on these 1, 3, 5, 7 and 10 year term products are based on the changes in the S&P 500 Index. Options are reported at fair value. Changes in fair value are recorded in unrealized gains/losses within surplus. The daily cash variation margin settlements for futures are recorded as a component of net investment income.

The Company uses currency swaps and currency forwards to hedge against the risk of fluctuations in foreign currency exchange rates. Currency swaps and currency forwards are marked to market. Changes in fair value are recorded as unrealized gains/losses within surplus.

Swaptions are utilized by the Company to hedge exposure to interest rate risk. At the trade date of a swaption, a premium is paid to the counterparty and recorded as an asset. At expiration, swaptions either cash settle for value, settle into an interest rate swap, or expire worthless. Swaptions are marked to market and changes in fair value are recorded in unrealized gains/losses within surplus.

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2015 AND 2014 AND FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

POLICY AND CONTRACT RESERVES

The reserves for life insurance policies and annuity contracts are computed in accordance with presently accepted actuarial standards, and are based on actuarial assumptions and methods (including use of published mortality tables and prescribed interest rates) which produce reserves at least as great as those required by law and/or contract provisions.

Liabilities for unpaid claims consist of the estimated amount payable for claims reported but not yet settled and an estimate of claims incurred but not reported. The amounts reported are based upon historical experience, adjusted for trends and current circumstances. Management believes that the recorded liability is sufficient to provide for the associated claims adjustment expenses. Revisions of these estimates are included in operations in the year such adjustments are determined to be required.

INCOME TAXES

The Company accounts for current and deferred income taxes and recognizes reserves for income tax contingencies in accordance with SSAP No. 101, Income Taxes, A Replacement of SSAP No. 10R and SSAP No. 10 (“SSAP No. 101”). Under the applicable asset and liability method for recording deferred income taxes, deferred taxes are recognized when assets and liabilities have different values for financial statement and tax reporting purposes, using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on DTAs and deferred tax liabilities (“DTLs”) is recognized in the period that includes the enactment date. Valuation allowances on DTAs are estimated based on the Company’s assessment of the reliability of such amounts. Refer to Note 14 of the Company’s financial statements for further discussion of the Company’s income taxes.

INCOME AND EXPENSES

Life insurance premiums are recognized as income over the premium paying period of the related policies. Annuity considerations are recognized as revenue when received. Expenses, such as commissions and other costs applicable to the acquisition of new business, are charged to operations as incurred.

SEPARATE ACCOUNTS

The Company has established insulated Separate Accounts applicable to various classes of contracts providing for variable benefits. Contracts for which funds are invested in insulated variable Separate Accounts include individual and group life and annuity contracts. The assets in these insulated separate accounts are carried at fair value and the investment risk associated with such assets is retained by the contract holder. These variable products provide minimum death benefits and, in certain annuity contracts, minimum accumulation, income or withdrawal benefits. The minimum guaranteed benefit reserves associated with the insulated Separate Accounts are reported in Aggregate Reserves for Life Contracts in the Company’s Statements of Admitted Assets, Liabilities, Capital Stock and Surplus.

The Company has also established non-insulated Separate Accounts for certain annuity contracts that include an MVA feature associated with fixed rates, including for amounts allocated to the fixed portion of certain combination fixed and variable deferred annuity contracts. Assets in the non-insulated Separate Accounts are carried at fair value or on a General Account basis, depending on the annuity contract being supported. The assets of the non-insulated Separate Accounts are not legally insulated and can be used by the Company to satisfy General Account obligations.

Net investment income, capital gains and losses, and changes in invested asset values on the insulated variable Separate Accounts are allocated to policyholders and therefore do not affect the operating results

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2015 AND 2014 AND FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

of the Company. The Company earns Separate Account fees for providing administrative services and bearing the mortality risks related to contracts for which funds are invested in variable Separate Accounts.

The activity of the variable Separate Accounts is not reflected in the Company’s financial statements except for the following:

•

The fees that the Company receives, which are assessed periodically and recognized as revenue when assessed.

•

The activity related to the guaranteed minimum death benefit, guaranteed minimum accumulation benefit and guaranteed minimum withdrawal benefit, which is reflected in the Company’s financial statements.

•

Premiums and withdrawals with offsetting transfers to/from the variable Separate Accounts are reflected in the Statement of Operations.

•

Transfers from the variable Separate Accounts due and accrued, which include accrued expense allowances receivable from the variable Separate Accounts and the aggregate surplus (income) due and accrued from MVA contracts.

•

The dividends-received-deduction (“DRD”), which is included in the Company’s income tax expense, is calculated based upon the variable Separate Accounts’ assets held in connection with variable contracts.

ACCOUNTING PRONOUNCEMENTS

New and Adopted Accounting Pronouncements

Effective January 1, 2015, the NAIC adopted SSAP No. 40R, “Real Estate Investments.” SSAP No. 40R provides guidance for a single real estate property investment that is wholly-owned by a limited liability company under certain conditions. The adoption of SSAP No. 40R had an impact of $6.2 million on the Company which has been recorded in Cumulative effect of changes in accounting principles, in the Statutory Statements of Changes in Capital Stock and Surplus. This amount represents the value of a previously non-admitted other invested asset which became admitted upon adoption of SSAP No. 40R.

Effective December 15, 2014, the NAIC adopted SSAP No. 107, Accounting for the Risk-Sharing Provisions of the Affordable Care Act (“SSAP No. 107”). SSAP No 107 provides guidance related to certain premium stabilization programs. The adoption of SSAP No. 107 did not have a significant impact on the financial statements of the Company.

Effective January 1, 2014, the NAIC adopted SSAP No. 106, Affordable Care Act Assessments (“SSAP No. 106”). SSAP No. 106 relates to fees paid to the federal government by health insurers. The adoption of SSAP No. 106 did not have a significant impact on the financial statements of the Company.

Effective January 1, 2014, the NAIC adopted SSAP No. 105, Working Capital Finance Investments (“SSAP No. 105”). SSAP No. 105 amended SSAP No. 20, Non-admitted Assets, to allow working capital finance investments as admitted assets to the extent they conform to the requirements of this statement. The Company currently does not have any working capital investments.

Effective January 1, 2013, the NAIC adopted SSAP No. 104, Share-Based Payments (“SSAP No. 104”). SSAP No. 104 provides statutory accounting principles for transactions in which an entity exchanges its equity instruments with employees in share-based payment transactions and adopts, with modification, GAAP guidance for stock options and stock purchase plans within Financial Accounting Standards Board (“FASB”)

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2015 AND 2014 AND FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

Accounting Standards Codification Topic 718. The adoption of SSAP No. 104 did not have a significant impact on the financial statements of the Company.

Effective January 1, 2013, the NAIC adopted SSAP No. 103, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities (“SSAP No. 103”). SSAP No. 103 replaced SSAP No. 91R of the same name and established new conditions for when a transferred financial asset is accounted for as a sale, in addition to removing the concept of a qualifying special-purpose entity. The adoption of SSAP No. 103 did not have a significant impact on the financial statements of the Company.

2.	RELATED PARTY TRANSACTIONS

The Company has significant transactions with affiliates, former affiliates and other related parties. Intercompany revenues and expenses recognized under these agreements may not necessarily be indicative of costs that would be incurred if the Company operated on a stand-alone basis and if these transactions were with unrelated parties. Below is a summary of significant transactions with affiliates, former affiliates and other related parties for the reporting period.

Investments in Subsidiaries


(amounts in thousands)
		Carrying Value
		December 31,
Entity Name	Type of Subsidiary	2015		2014
DLNY	Insurance	$	401,810	$	417,563
DL Reinsurance Company	Insurance		30,573		30,000
Clarendon Insurance Agency, Inc.	Non Insurance		1,454		1,454

Total		$	433,837	$	449,017

The equity values of two other non-insurance subsidiaries; DL Information Services Canada, Inc. (“DL Canada”) and DL Information Services Ireland Limited (“DL Ireland”) totaled to $0.5 million and were non-admitted assets as of December 31, 2014. In October 2015, the Company sold its wholly-owned subsidiary, DL Information Services Ireland Limited (“DL Ireland”), for $256 thousand. The non-admitted equity value of DL Canada was $0.7 million at December 31, 2015.

In addition, the Company owns the membership interests of the following limited liability companies:DL Investment DELRE Holdings 2009-1, LLC; IDF IX, LLC; IDF X, LLC; DL Service Holdings, LLC; DL Private Placement Investment Company I, LLC; and DL Investment Holdings 2015-1, LLC. The value of certain limited liability companies without audited financial statements were non-admitted as of December 31, 2015 and as of December 31, 2014.

The Company does not own shares of an upstream intermediate entity or ultimate parent, directly or indirectly, via a downstream subsidiary, controlled, or affiliated entity.

As more fully described in Note 9, the Company is party to reinsurance transactions with affiliates and former affiliates.

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2015 AND 2014 AND FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

Reinsurance Related Agreements

The Company entered into a reinsurance agreement with its subsidiary, DL Reinsurance Company (“DLRC”), under which the Company cedes and DLRC reinsures on a combination modified coinsurance and funds withheld coinsurance basis certain risks associated with the Company’s variable annuity contracts and associated riders (the “VA Treaty”). The VA Treaty transfers certain hedging risks from the Company to DLRC. It does not transfer insurance risks to DLRC. SSAP No. 61R–Life, Deposit-Type and Accident and Health Reinsurance, does not provide specific guidance on reinsurance contracts that do not transfer insurance risk, but transfer only hedging risk. The Department approved the VA Treaty on December 29, 2014 and it was effective December 31, 2014. As a result of the VA Treaty, gains (losses) related to the hedging, previously accounted for as other changes in capital stock and surplus and net investment income (loss), are now accounted for as investment income on reinsurance deposit asset.

The Company also entered into a reinsurance agreement with DLRC under which the Company cedes and DLRC reinsures on an indemnity coinsurance funds withheld basis the quota share of risks associated with various fixed index annuity contracts and associated riders (the “FIA Treaty”). The FIA Treaty transfers certain hedging risks from the Company to DLRC. It does not transfer insurance risks to DLRC. The Department approved the FIA Treaty on June 30, 2015, with an effective date as of January 1, 2015. As a result of the FIA Treaty, gains (losses) related to the hedging, previously accounted for as other changes in capital stock and surplus and net investment income (loss), are now accounted for as investment income on reinsurance deposit asset.

A summary of the impact of these treaties on the Company’s December 31, 2015 and December 31, 2014 Statement of Operations and Statement of Changes in Capital Stock and Surplus is set forth below:


(amounts in thousands)
	Treaty Impacts
Statement of Operations	2015			2014
Investment income on reinsurance deposit asset	$	46,818		$	102,960

Total Revenue		46,818			102,960
Investment expense on funds withheld		47,016			(237,698	)

Total policyholder benefits and expenses		47,016			(237,698	)
Net (loss) gain from operations after dividends and before federal income taxes		(198	)		340,658

Statement of Changes in Capital Stock and Surplus
Investment benefit (expense) on funds withheld—unrealized		198			(340,658	)
Net change in capital stock and surplus from reinsurance treaties		—			—

In addition, the Company recognized a reinsurance deposit accounting asset of $1,332.1 million and $176.8 million at December 31, 2015 and 2014, respectively and a corresponding amount in funds held under reinsurance liability.

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2015 AND 2014 AND FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

On July 31, 2013, the Company consented to a Novation Agreement between its former affiliate, the U.S. Branch of the Sun Life Assurance Company of Canada (the “U.S. Branch”), and an affiliate, Delaware Life Reinsurance (Barbados) Corp. (formerly known as Sun Life Reinsurance (Barbados) No.3 Corp.) (“Barbco”).

Pursuant to the Novation Agreement, Barbco was substituted as reinsurer under a June 12, 2000 reinsurance agreement between the Company and the U.S. Branch, whereby the Company ceded to the U.S. Branch, on a yearly renewable term basis, certain risks under group flexible premium variable universal life policies. The U.S. Branch transferred $241 million of invested assets and accrued interest and $33 million of cash to Barbco to support the assumed liabilities. The Novation Agreement and transfers were effective upon the close of the Sale Transaction.

In December 2012, the Company’s board of directors approved the recapture of 100 percent of the risks under certain single premium whole life (“SPWL”) policies that were reinsured to the U.S. Branch pursuant to a December 31, 2003 reinsurance agreement. The transaction was effective for the first quarter of 2013, and the Company recorded a decrease to surplus of approximately $34.7 million.

The Company has a reinsurance agreement with Barbco, an affiliate, to cede all of the risks associated with certain of the Company’s in-force corporate and bank-owned variable universal life insurance and private placement variable universal life insurance policies on a combination coinsurance and coinsurance with funds-withheld basis. (Refer to Note 9 for more detail.)

Capital Transactions

The Company made capital contributions totaling $30 million to DLRC during the fourth quarter of 2014.

In November 2014, the Company paid a premium of $90 million to purchase life insurance through its single member limited liability company, DL Services Holdings LLC, a wholly owned subsidiary of the Company formed on November 17, 2014.

The Company made a capital contribution of $100 to IDF IX, LLC, a wholly-owned subsidiary of the Company formed on November 18, 2014.

The Company did not receive any capital contributions from the Parent or Former Parent during the years ended December 31, 2015, 2014, and 2013. In March 2014, the Company paid an ordinary dividend of $185.0 million to the Parent. In March 2015, the Company paid an ordinary dividend of $200 million to the Parent. In September 2015, the Company paid an ordinary dividend of $75 million to the Parent and received an ordinary dividend of $36.5 million from its wholly-owned subsidiary, DLNY. In November 2015, the Company paid a dividend of $36.5 million to the Parent, of which $21.1 million was ordinary and $15.4 million extraordinary. No dividends were paid during the year ended December 31, 2013.

Other Invested Assets

The Company also owned the membership interest of DL Investment DELRE Holdings 2009-1, LLC (the “LLC”), which was dissolved in 2015. The real estate asset originally held in the LLC was disposed of during 2015 (refer to Notes 1 and 5). During 2013, mortgages with a value of $11.8 million were transferred by the Company to the LLC, and $54.5 million of mortgages were transferred from the LLC. During 2013, the LLC also distributed capital of $19.4 million to the Company. There are no remaining assets as of December 31, 2015.

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2015 AND 2014 AND FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

Debt and Surplus Note Transactions

In June 2015, Delaware Life Insurance and Annuity Company (Bermuda) Ltd (“DLIAC”), an affiliate, issued a floating rate revolving credit note payable to the Company, pursuant to which DLIAC can borrow up to $40 million from the Company. The interest on any outstanding principal amount is based on LIBOR plus 1.15%. The interest is accrued monthly and payable on the last day of the fiscal quarter. The note will mature on June 30, 2017. There was no outstanding balance at December 31, 2015.

Surplus notes previously issued by the Company to Sun Life Financial (U.S.) Finance, Inc. (“SLF Finance”), a former affiliate, were transferred as part of the Sale Transaction.

As of December 31, 2015 and 2014, the Company had $565.0 million of surplus notes outstanding. During 2013, the Company entered into an agreement with Deutsche Bank Trust Company Americas (“DBTCA”), whereby the surplus notes were taken into custody by the bank on behalf of the holders of the surplus notes (the “Noteholders”). DBTCA collects all surplus note payments and distributes such funds to the Noteholders. The DBTCA agreement allows the Noteholders to transfer any part of the surplus notes they hold, subject to the consent of the Company and with proper notice given to DBTCA. As of December 31, 2015, the Noteholders were as follows:

•

EquiTrust Life Insurance Company

•

Guggenheim Life and Annuity Company

•

Heritage Life Insurance Company

•

Midland National Life Insurance Company

•

North American Company for Life and Health Insurance

•

Paragon Life Insurance Company of Indiana

•

Security Benefit Life Insurance Company

The details of outstanding surplus notes at December 31, 2015 and 2014 were as follows (amounts in thousands):


												Interest Paid
										Principal/		Year Ended
								Face		Carrying		December 31,
Issue Date	Type		Rate			Maturity		Amount		Value		2015 and 2014
12/15/1995		Surplus		6.150	%		12/15/2027	$	150,000	$	150,000	$	9,225
12/15/1995		Surplus		7.626	%		12/15/2032		150,000		150,000		11,439
12/15/1995		Surplus		6.150	%		12/15/2027		7,500		7,500		461
12/15/1995		Surplus		7.626	%		12/15/2032		7,500		7,500		572
12/22/1997		Surplus		8.625	%		11/6/2027		250,000		250,000		21,563

								$	565,000	$	565,000	$	43,260

The surplus notes and accrued interest thereon, shall be subordinate to payments due to policyholders, claimants and beneficiaries; as well as all other classes of creditors other than surplus note holders. After payment in full of certain obligations set forth Section 5918 of the Delaware Insurance Code, and prior to any payment to a common shareholder in respect of such shareholder’s ownership interest in the Company, the holder of a surplus note shall be entitled to receive payment in full of all amounts. The Company has no

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2015 AND 2014 AND FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

preferred stockholders. Any redemption of a surplus note is subject to the prior written consent of the Delaware Commissioner of Insurance.

The Company expensed $43.3 million for interest on surplus notes for years ended December 31, 2015, 2014 and 2013, respectively. Total interest paid through December 31, 2015 was approximately $819.6 million. There have been no principal payments since original issuance of the notes.

Each accrual and payment of interest on the surplus notes may be made only with the prior approval of the Delaware Commissioner of Insurance and only to the extent that the Company has sufficient surplus earnings to make such payment. The Company received approval for all surplus note payments and the related accrual in the amount of $4.3 million at December 31, 2015 and 2014.

Institutional Investments Contracts

On September 12, 2006, the Company issued two floating rate funding agreements totaling $900.0 million to a former affiliate, Sun Life Financial Global Funding III, L.L.C. (“LLC III”), which matured on October 6, 2013. Total interest credited for these two funding agreements was $3.0 million for the year ended December 31, 2013. On September 19, 2006, the Company also issued a $100.0 million floating rate demand note payable to LLC III which matured during October 2013. For interest on this demand note, the Company expensed $0.5 million for the year ended December 31, 2013.

Prior to the Sale Transaction, the Company entered into an interest rate swap agreement with LLC III with an aggregate notional amount of $900.0 million that effectively converted the floating rate payment obligations under the funding agreements to fixed rate obligations.

As part of the Sale Transaction, the Company transferred bonds and cash with a value of $1,024 million to an escrow account, which was used to settle the Company’s obligations related to (1) the two floating rate funding agreements totaling $900 million issued to LLC III due in October, 2013, (2) the interest rate swap agreement with LLC III that effectively converted the floating rate payment obligations under the funding agreements to fixed rate obligations, and (3) the $100 million floating rate demand note issued to LLC III due in October 2013. The Former Parent agreed to pay any shortage of funds in the escrow account to settle the funding agreements, the interest rate swap, and the demand note. Any excess funds in the escrow account after settlement of the funding agreements, interest rate swap, and the demand note, were paid to the Former Parent.

The account values related to these funding agreements issued to LLC III were reported in the Company’s Statutory Statements of Admitted Assets, Liabilities and Capital Stock and Surplus as a component of liability for deposit-type contracts.

Administrative Services Agreements and Other

The Company is party to various related party agreements. Certain agreements with former affiliates were amended or terminated upon the close of the Sale Transaction.

For periods prior to August 1, 2013

From January 1, 2012 to July 31, 2013, the Company participated in a pension plan and other retirement plans sponsored by a former affiliate, Sun Life Financial (U.S.) Services Company, Inc. (“Sun Life Services”). Expenses under these plans were allocated to participating companies pursuant to inter-company agreements. The allocated expenses to the Company from Sun Life Services were $3.0 million for the period ended July 31, 2013.

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2015 AND 2014 AND FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

Pursuant to an administrative services agreement between the Company and Sun Life Services. Sun Life Services agreed to provide human resource services (e.g., recruiting and maintaining appropriately trained and qualified personnel and equipment necessary for the performance of actuarial, financial, legal, administrative, and other operational support functions) to the Company, and the Company agreed to reimburse Sun Life Services for the cost of such services, plus an arms-length based profit margin to be agreed upon by the parties. Total expenses under this agreement were $38.7 million for the period ended July 31, 2013. This agreement terminated in connection with the Sale Transaction.

The Company had an administrative services agreement with Sun Life Assurance Company of Canada (“SLOC”), a former affiliate, under which the Company provided various administrative services to SLOC upon request. Pursuant to this agreement, the Company allocated amounts of $48.7 million for the period ended July 31, 2013. This agreement terminated in connection with the Sale Transaction.

The Company had an administrative services agreement with SLOC, which provided that SLOC would furnish, as requested, certain services and facilities to the Company on a cost-reimbursement basis. Expenses under this agreement amounted to approximately $12.2 million for the period ended July 31, 2013. This agreement terminated in connection with the Sale Transaction.

The Company had an administrative services agreement with Sun Life Information Services Canada, Inc. (“SLISC”), a former affiliate, under which SLISC provided administrative and support services to the Company in connection with the Company’s insurance and annuity business. Expenses under this agreement amounted to approximately $10.6 million for the period ended July 31, 2013. This agreement terminated in connection with the Sale Transaction.

The Company had service agreements with Sun Life Information Services Ireland Limited (“SLISIL”), a former affiliate, under which SLISIL provided various insurance related and information systems services to the Company. Expenses under these agreements amounted to approximately $14.1 million for the period ended July 31, 2013. These agreements terminated in connection with the Sale Transaction.

The Company had an administrative services agreement with SLC—U.S. Ops Holdings, a former affiliate, under which the Company provided administrative and investor services with respect to certain open-end management investment companies for which a former affiliate, Massachusetts Financial Services Company (“MFS”), served as the investment adviser, and which were offered to certain of the Company’s Separate Accounts established in connection with variable annuity contracts issued by the Company. Amounts recognized under this agreement amounted to approximately $11.4 million for the period ended July 31, 2013. This agreement terminated in connection with the Sale Transaction.

For periods after August 1, 2013

The Company sponsors the Delaware Life Insurance Company 401(k) Savings Plan (the “401(k) Plan”), which qualifies under Section 401(k) of the Internal Revenue Code and includes a retirement investment account feature (the “RIA”) that qualifies under Section 401(a) of the Internal Revenue Code. Income and expenses under the 401(k) Plan and the RIA are allocated to participating companies pursuant to inter-company agreements. The expenses incurred by the Company under the 401(k) Plan and the RIA were $2.8 million and $3.2 million, respectively, for the periods ended December 31, 2015 and December 31, 2014 and $1.3 million for the period August 2, 2013 to December 31, 2013, of which $0.3 million, $0.4 million and $0.1 million, respectively, were allocated to the Company’s subsidiary, DLNY.

The Company has a management services agreement with its subsidiary, DLNY, whereby the Company furnishes certain investment, actuarial and administrative services to DLNY on a cost-reimbursement basis.

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2015 AND 2014 AND FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

The Company allocated amounts related to this agreement of $13.0 million, $14.8 million, and $12.1 million for the years ended December 31, 2015, 2014 and 2013, respectively.

The Company had an administrative services agreement with a former affiliate, Sun Capital Advisers LLC (“SCA”), an investment adviser, under which the Company provided administrative services with respect to certain open-end investment management companies for which SCA served as the investment adviser, and which were offered to certain of the Company’s Separate Accounts established in connection with variable contracts issued by the Company. Amounts recognized under this agreement amounted to approximately $0.0 million, $0.0 million, and $4.1 million for the years ended December 31, 2015, 2014 and 2013, respectively. The Company incurred $0.6 million, $1.6 million and $8.5 million in investment management fees to SCA under a separate investment services agreement for the years ended December 31, 2015, 2014 and 2013, respectively.

The Company previously leased office space to its former affiliate, SLOC, under a lease agreement with a term originally expiring on December 31, 2014. This lease was revised on January 1, 2013 in conjunction with the sale of the property to a former affiliate, the U.S. Branch.

In connection with the Company’s change in control on August 2, 2013, the Company’s controlling persons agreed that the Company would comply with the filing and other requirements contained in Section 5005(a) of the Delaware Insurance Code with respect to any transaction subject to Section 5005(a)(2) between (a) the Company, on the one hand, and (b) (I) Guggenheim Capital, LLC or a subsidiary thereof, or (II) Sammons Enterprises, Inc. or a subsidiary thereof, on the other hand. The following are agreements that the Company filed pursuant to the terms of this undertaking:

An investment management agreement between the Company and Guggenheim Partners Investment Management, LLC (“GPIM”), whereby GPIM provides investment management services for certain of the Company’s investments. Expenses incurred under this agreement amounted to approximately $9.9 million, $10.9 million and $6.7 million for the years ended December 31, 2015, 2014, and 2013 respectively.

An investment services agreement between the Company and GPIM, whereby GPIM provides services to the Company with respect to certain general account assets that GPIM does not manage for the Company under other agreements. Expenses incurred under this agreement amounted to approximately $1.6 million, $1.2 million and $0.0 million for the years ended December 31, 2015, 2014 and 2013, respectively.

A services agreement between the Company and Guggenheim Commercial Real Estate Finance, LLC (“GCREF”), whereby GCREF provides mortgage loan sourcing, origination and administration services to the Company. There were $132 thousand, $34 thousand and $0 thousand in expenses incurred related to this agreement for the years ended December 31, 2015, 2014 and 2013 respectively.

A services agreement between the Company and Guggenheim Insurance Services, LLC (“GIS”), whereby GIS provides certain personnel, facilities, systems and equipment in conjunction with the provision of accounting and general services, insurance services and other advisory services to the Company. Expenses incurred under this agreement amounted to approximately $49.5 million, $47.3 million, and $25.5 million for the years ended December 31, 2015, 2014, and 2013 respectively.

A Master Agency Agreement between the Company and Dunbarre Insurance Agency, LLC (“Dunbarre”), together with a related Commission Payment Facility Agreement and an Assignment and Assumption Agreement under which the Company authorizes Dunbarre to recruit producers to solicit and sell life insurance and annuity contracts and to accept assignment of previously recruited producers. Expenses under this agreement amounted to approximately $18.9 million in 2015. The Company did not incur expenses related to this agreement in 2014 and 2013.

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2015 AND 2014 AND FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

A Master Agency Agreement between the Company and Divinshire Insurance Agency, LLC (“Divinshire”), together with a related Commission Payment Facility Agreement and an Assignment and Assumption Agreement under which the Company authorizes Divinshire to recruit producers to solicit and sell life insurance and annuity contracts and to accept assignment of previously recruited producers. The master agency agreement was entered into during 2015 and no expenses were incurred.

A services agreement between the Company and se², llc (“se²”), under which se² provides annuity and life insurance policy servicing and third-party administrator services to the Company. Expenses incurred under this agreement amounted to approximately $8.9 million, $3.6 million, and $0.1 million for the years ended December 31, 2015, 2014, and 2013 respectively. In addition, the Company incurred $31.4 million, $18.9 million, and $2.0 million of conversion costs related to this agreement for the years ended December 31, 2015, 2014, and 2013, respectively.

A selling agreement among the Company, GIS, and South Blacktree, LLC related to the sale of certain private placement variable universal life insurance policies and funding agreements issued by the Company as identified in the selling agreement.

The Company has an administrative services agreement dated January 1, 2002 with DLIAC, pursuant to which the Company performs various administrative services on behalf of DLIAC. Amounts allocated under this agreement amounted to approximately $0.3 million, $0.5 million and $0.2 million for the years ended December 31, 2015, 2014 and 2013, respectively.

The Company has an administrative services agreement dated December 1, 2008 with its wholly owned subsidiary, Clarendon Insurance Agency, Inc. (“Clarendon”), pursuant to which the Company provides services and facilities in connection with Clarendon’s business of supporting the wholesale distribution of the Company’s variable insurance and annuity products. The Company also has a principal underwriter’s agreement dated April 1, 2002 with Clarendon, a subsidiary, pursuant to which Clarendon serves as principal underwriter and distributor for all variable insurance and annuity products issued by the Company. There are equal and offsetting amounts incurred under these two agreements.

The Company has an administrative and tax services agreement dated January 1, 2010 with Barbco pursuant to which the Company provides administrative and tax services to Barbco on a cost-reimbursement basis. Amounts allocated under this agreement amounted to approximately $0.6 million, $35 thousand and $0.0 million for the years ended December 31, 2015, 2014 and 2013, respectively.

The Company has an assignment and assumption agreement with the Parent, pursuant to which the Parent assigned to the Company all of the Parent’s right, title and interest in and to, and the Company assumed the obligations of the Parent under, a purchaser transition services agreement dated as August 2, 2013 between the Parent and SLC—U.S. Ops Holdings.

The Company has an administrative services agreement with its subsidiary, DL Canada, pursuant to which DL Canada provides administrative and support services to the Company and its U.S. affiliates. Expenses incurred under this agreement amounted to $5.1 million and $8.2 million for the years ended December 31, 2015, and 2014, respectively and $2.9 million for the period August 2, 2013 through December 31, 2013.

The Company has an administrative services agreement dated December 22, 2014 with DLRC, pursuant to which the Company furnishes certain investment, actuarial, and administrative services to DLRC.

The Company had $1.3 million and $2.0 million due from affiliates, $0.3 million and $1.3 million due to affiliates and $13.4 million and $13.1 million, included in general expenses due or accrued to other related parties as

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2015 AND 2014 AND FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

of December 31, 2015 and 2014, respectively, under the terms of various management and services contracts which provide for cash settlements on a quarterly or more frequent basis.

During 2015, the Company purchased several short-term investments from four affiliates, Armstrong STF IV, LLC, Marcy STF I, LLC, Redfield STF II, LLC and Wright STF III, LLC, totaling $784 million. The Company also sold a portion of these investments back to these affiliates, totaling $461 million, resulting in a pre-tax gain of $0.2 million. The Company recorded $21.7 million of investment income related to affiliated short-term investments in 2015 and the average yield was 7.23%. As of December 31, 2015, the Company held $458 million of affiliated short-term investments.

During 2014, the Company purchased several short-term investments from four affiliates, Armstrong STF IV, LLC, Marcy STF I, LLC, Redfield STF II, LLC and Wright STF III, LLC, totaling $344 million. The Company also sold a portion of these investments back to these affiliates, totaling $209 million, resulting in a pre-tax gain of $0.1 million. The Company recorded $3.9 million of investment income related to these short-term investments in 2014 and the average yield was 7.02%. As at December 31, 2014, the Company held $135 million of affiliated short-term investments.

In 2014, the Company’s wholly-owned subsidiary, DL Service Holdings, LLC, purchased corporate-owned life insurance (“COLI”) with a cash value of $89.9 million as of December 31, 2014 on the lives of key executives of the Company from Equitrust Life Insurance Company (“ELIC”), a related party. At December 31, 2015 the cash value of COLI was $89.4 million which includes policy loans incurred from ELIC totaling $68.4 million and $38.6 million during 2015 and 2014 respectively.

In 2014, the Company issued private placement variable universal life policies to ELIC through a single member LLC with a total value of $177.1 million and outstanding policy loans of $115.3 million and recognized premium income of $177.3 million. During 2015 the Company recognized additional premium income of $25.0 million. Outstanding policy loans totaled $148.1 million, including capitalized interest at December 31, 2015. The net cash value of the policies were $211.2 million and $177.4 million at December 31, 2015 and 2014, respectively.

At December 31, 2015 and 2014, the Company had investments in parties related to or managed by Guggenheim Capital, LLC or Sammons Enterprises, Inc. as follows:


	December 31
(In Thousands)	2015		2014
Debt securities	$	911,485	$	945,239
Common stocks		67,849		29,270
Short-term investments		—		69,203
Other invested assets		48,000		101,460

Total	$	1,027,334	$	1,145,172

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2015 AND 2014 AND FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

Other Sale Transaction Related Transactions

During 2013, the Company executed the following transactions in conjunction with the Sale Transaction:

The Company sold its home office real estate property and three other properties (collectively, the “Property”) to the U.S. Branch, for a total sale price of $88.0 million. The Property was recorded as Properties held for sale as of December 31, 2012. The sale price was equal to the fair market value of the Property, including personal property, fixtures, and equipment installed in or attached to the Property. The sale of the Property resulted in a gain of $32.3 million.

Two of the Company’s real estate subsidiaries, 7101 France Avenue, LLC and 7101 France Avenue Manager, LLC, were dissolved. The conduit loan secured by the real estate owned by 7101 France Avenue, LLC was paid and the real estate was conveyed to the Company. The real estate was subsequently sold to the U.S. Branch, at a fair market value totaling $16.5 million resulting in a pre-tax gain of $4.9 million. In addition, another of the Company’s real estate subsidiaries, Sun MetroNorth, LLC, was sold to the U.S. Branch at a fair market value totaling $4.9 million, resulting in a loss of $1.5 million.

Four additional real estate properties were also sold to the U.S. Branch, a former affiliate, totaling $44.5 million and resulting in a gain of $6.8 million, including one property from the Company’s Separate Accounts for a fair market value of $0.6 million and a loss of $0.3 million.

The Company sold several mortgage loans to a former affiliate, SLOC, including its U.S. Branch, totaling $28.0 million, resulting in a gain of $0.7 million. This amount included $7.0 million in mortgage loans from the Company’s Separate Accounts. The Company also purchased mortgage loans from the U.S. Branch and other former and existing affiliates totaling $34.6 million.

On July 30, 2013, the Company sold a portfolio of externally-managed RMBS and CMBS to a former affiliate, SLOC, at a fair market value, totaling $821 million (including $283 million purchased by the U.S. Branch). Realized gains of approximately $108 million were recognized upon the sale of these securities.

The Company, as successor to Keyport Life Insurance Company (“Keyport”), which merged with and into the Company on December 31, 2003, unconditionally guaranteed the full and punctual payment when due of any obligations of its previously wholly-owned subsidiary, Independence Life and Annuity Company (“ILAC”), arising out of or in connection with any insurance or annuity contract (“Contract”) issued by ILAC on or after June 25, 1998. No Contracts were issued by ILAC after June 25, 1998. In conjunction with the Sale Transaction and the Company’s distribution of ILAC to the Former Parent, this guaranty was terminated in 2013.

The Company, as successor to Keyport, unconditionally guarantees the full and punctual payment when due of any obligations of the former Keyport Benefit Life Insurance Company (“KBL”) arising out of or in connection with any Contract issued by KBL on or after June 25, 1998 and before December 31, 2002, the date that KBL merged with and into the Company’s wholly-owned subsidiary, DLNY. The purpose of this guaranty was to enhance the financial strength of KBL. The liability of the Company under the guaranty is unlimited to any specific sum. The guaranty will not exceed contractual obligations to the policyholders of the Contracts. The cash surrender value of the Contracts at December 31, 2015 was approximately $272.5 million. At December 31, 2015 and 2014, there was no liability accrued for this guaranty.

The Company guarantees on a subordinated basis all amounts payable by DLNY to holders of certain deferred combination fixed and variable annuity contracts (“MVA Contracts”) issued by DLNY which include the option to earn a guaranteed fixed return for specified periods (“Guarantee Period”). The Company unconditionally and irrevocably guarantees the full and punctual payment when due of all amounts payable by DLNY from a

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2015 AND 2014 AND FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

Guarantee Period to any holder. The guaranty is subject to no preconditions other than the failure by DLNY to pay when due any Guarantee Period interests. DLNY registered such Guarantee Period interests under the Securities Act of 1933 with the U.S. Securities and Exchange Commission (the “SEC”). Under the SEC’s rules, implementation of the guaranty permitted DLNY to stop filing periodic reports with the SEC pursuant to the Securities Exchange Act of 1934, and the purpose of the guaranty was to achieve that result. The Company’s guaranty in this regard guarantees the payment of amounts payable by DLNY from a Guarantee Period but does not guaranty any other obligations of DLNY under the MVA Contracts.

The obligations under the foregoing guaranty are unsecured obligations of the Company and subordinate in right of payment to the prior payment in full of all other obligations of the Company, except for guarantees which by their terms are designated as ranking equally in right of payment with or subordinate to this guaranty. The liability of the Company under the guaranty is unlimited to any specific sum. The guaranty will not exceed contractual obligations to the holders of the MVA Contracts. The total account value of the MVA Contracts was approximately $9.3 million and $9.8 million at December 31, 2015 and 2014 respectively. There is no liability accrued for this guaranty.

The Company guaranteed the full and timely payment of the obligations of Sun Life Financial Distributors, Inc. (“SLFD”), as tenant under a commercial office lease dated April 13, 2007. Prior to December 31, 2011, SLFD provided written notice to the landlord of its intention to terminate the lease effective January 14, 2013 and paid $3.5 million in surrender considerations. The maximum potential amount of future payments (undiscounted) that the Company could have been required to make under the guaranty was $0. This guaranty terminated with the termination of the office lease.

The Company recorded tax benefits (expenses) from stock options of approximately $0.5 million for the year ended December 31, 2013. Employees of the Company’s former affiliates were participants in a restricted share unit (“RSU”) plan with the Company’s former indirect parent, SLF.

The Company had an RSU plan, pursuant to which participants were granted units that were equivalent to one common share of SLF stock and had a fair value of a common share of SLF stock on the date of grant. RSUs earned dividend equivalents in the form of additional RSUs at the same rate as the dividends on common shares of SLF stock. The redemption value, upon vesting, was the fair value of an equal number of common shares of SLF stock. The Company incurred expenses of $13 thousand, $1.6 million, and $7.0 million relating to RSUs for the years ended December 31, 2015, 2014 and 2013, respectively.

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2015 AND 2014 AND FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

3.	DEBT SECURITIES AND PREFERRED STOCKS

The statement value and fair value of the Company’s debt securities and preferred stocks were as follows:


	December 31, 2015
			Gross		Gross
	Statement		Unrealized		Unrealized			Estimated
(In Thousands)	Value		Gains		Losses			Fair Value
Debt Securities:
Foreign Government	$	—	$	—	$	—		$	—
U.S. Governments		225,249		518		(1,034	)		224,733
All Other Governments		20,059		1,378		(18	)		21,419
U.S. States, Territories and Possessions (Direct and Guaranteed)		8,805		185		(188	)		8,802
U.S. Special Revenue and Special Assessment Obligations and all Non-Guaranteed Obligations of Agencies and Authorities of Governments and Their Political Subdivisions		213,464		5,949		(2,171	)		217,242
Industrial and Miscellaneous (Unaffiliated)		5,352,038		66,553		(162,162	)		5,256,429
Hybrid Securities		33,747		760		(6,535	)		27,972

Total debt securities	$	5,853,362	$	75,343	$	(172,108	)	$	5,756,597

Preferred Stocks	$	32,634	$	424	$	(997	)	$	32,061


	December 31, 2014
			Gross		Gross
	Statement		Unrealized		Unrealized			Estimated
(In Thousands)	Value		Gains		Losses			Fair Value
Debt Securities:
Foreign Government	$	—	$	—	$	—		$	—
U.S. Governments		267,085		3,191		(564	)		269,712
All Other Governments		7,915		335		—			8,250
U.S. States, Territories and Possessions (Direct and Guaranteed)		936		115		—			1,051
U.S. Special Revenue and Special Assessment Obligations and all Non-Guaranteed Obligations of Agencies and Authorities of Governments and Their Political Subdivisions		238,855		8,839		(1,034	)		246,660
Industrial and Miscellaneous (Unaffiliated)		4,723,043		147,402		(28,089	)		4,842,356
Hybrid Securities		93,726		7,151		(2,504	)		98,373

Total Debt Securities	$	5,331,560	$	167,033	$	(32,191	)	$	5,466,402

Preferred Stocks	$	33,120	$	273	$	(743	)	$	32,650

The statement value and estimated fair value by maturity periods for debt securities, other than ABS and MBS are shown below. Actual maturities may differ from contractual maturities on ABS and MBS because

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2015 AND 2014 AND FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

borrowers may have the right to call or prepay obligations with or without call or prepayment penalties; accordingly, the contractual maturities for those securities are not shown.


	December 31, 2015
	Statement		Estimated
(In Thousands)	Value		Fair Value
Due in one year or less	$	64,183	$	64,337
Due after one year through five years		817,503		819,377
Due after five years through ten years		1,087,720		1,075,160
Due after ten years		1,252,095		1,205,609

Total before asset and mortgage-backed securities		3,221,501		3,164,483
Asset and mortgage-backed securities		2,631,861		2,592,114

Total	$	5,853,362	$	5,756,597

Proceeds from sales and maturities of investments in debt securities and preferred stock during 2015, 2014 and 2013, were $2.4 billion, $2.7 billion and $4.1 billion, including non-cash transactions of $41.5 million, $192.2 million and $82.0 million, respectively; gross gains were $45.6 million, $69.1 million and $264.3 million respectively; and gross losses were $10.3 million, $8.6 million and $23.4 million, respectively.

Debt securities included above with a statement value of approximately $4.1 million, $4.1 million and $4.2 million for the years ended December 31, 2015, 2014 and 2013, respectively were on deposit with governmental authorities as required by law.

Investment grade debt securities were 94.1%, 91.0% and 96.3% of the Company’s total debt securities as of December 31, 2015, 2014 and 2013, respectively.

The fair value of publicly-traded debt securities is determined using three primary pricing methods: third-party pricing services, non-binding broker quotes and pricing models. Prices are first sought from third- party pricing services with the remaining unpriced securities priced using one of the other two methods. For privately-placed fixed maturity securities, fair values are estimated using model prices or broker quotes. A portion of privately-placed fixed maturity securities (typically SEC Rule 144A securities) are priced using market prices.

Structured securities, such as ABS, RMBS and CMBS, are priced using third-party pricing services, a fair value model, or independent broker quotations. Typical inputs used by these three pricing methods include, but are not limited to, reported trades, benchmark yields, issuer spreads, bids and/or estimated cash flows and prepayment speeds. In addition, estimates of expected future prepayments are factors in determining the price of ABS, RMBS and CMBS. These estimates are based on the underlying collateral and structure of the security, as well as prepayment speeds previously experienced in the market at interest rate levels projected for the underlying collateral. Actual prepayment experience may vary from these estimates. Exposure to any single issuer is less than 10% of net admitted assets.

The fair value of the Company’s preferred stocks is first based on quoted market prices. Similar to fixed-maturity securities, the Company uses pricing services and broker quotes to price preferred stocks for which the quoted market price is not available.

Other-than-temporary-impairment

The Company recognizes and measures OTTI for loan-backed and structured securities (“LBSS”) in accordance with SSAP No. 43R. In accordance with SSAP No. 43R, if the fair value of a LBSS is less than

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2015 AND 2014 AND FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

its amortized cost basis at the Statutory Statements of Admitted Assets, Liabilities and Capital Stock and Surplus date, the Company assesses whether the impairment is an OTTI. When an OTTI has occurred, the amount of OTTI recognized in earnings is the difference between the amortized cost basic of the security and the present value of its expected future cash flows, discounted at the effective interest rate implicit in the security.

If the Company intends to sell the LBSS, or if it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis, an OTTI is considered to have occurred. The amount of the OTTI recognized in earnings is the difference between the amortized cost basis and the fair value of the security.

If the Company does not intend to sell the LBSS, or if it is not more likely than not that it will be required to sell the security before recovery of its amortized cost basis, the Company performs cash-flow based testing to determine if the present value of its expected future cash flows discounted at the effective interest rate implicit in the security is less than its amortized cost basis.

Estimating future cash flows is a quantitative and qualitative process that incorporates information received from third parties, along with assumptions and judgments about the future performance of the underlying collateral. Losses incurred on the respective portfolios are based on loss models using assumptions about key systematic risks, such as unemployment rates and housing prices, and loan specific information, such as delinquency rates and loan-to-value ratios.

OTTI was recognized during 2013 on LBSS that the Company had intent to sell in conjunction with the Sale Transaction, as defined in Note 1. OTTI was recognized during 2013 for preferred hybrid securities. There were no credit impairments recorded in 2015 and 2014 on LBSS held as of December 31, 2015 and 2014 pursuant to SSAP No. 43R.

If the fair value of a debt security, other than those subject to SSAP No. 43R, is less than its amortized cost basis at the Statement of Admitted Assets, Liabilities and Capital Stock and Surplus date, the Company assesses whether the impairment is an OTTI. When an OTTI has occurred, the amount of OTTI recognized in earnings is the difference between the amortized cost basis of the security and its fair value.

If the Company intends to sell the debt security, or if it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis, an OTTI is considered to have occurred. If the Company does not intend to sell the debt security, or if it is not more likely than not that it will be required to sell the security before recovery of its amortized cost basis, the Company employs a portfolio monitoring process to identify securities that are OTTI.

The Company has a credit committee composed of investment and finance professionals which meets at least quarterly to review individual issues or issuers that may be of concern.In determining whether a security is OTTI, the credit committee considers the factors described below. The process involves a quarterly screening of all securities where fair value is less than the amortized cost basis. Discrete credit events, such as a ratings downgrade, are also used to identify securities that may be OTTI. The securities identified are then evaluated based on issuer-specific facts and circumstances, such as the issuer’s ability to meet current and future interest and principal payments, an evaluation of the issuer’s financial position and its near-term recovery prospects, difficulties being experienced by an issuer’s parent or affiliate, and management’s assessment of the outlook for the issuer’s sector. In making these evaluations, the credit committee exercises considerable judgment. Based on the credit committee’s evaluation, issues or issuers are considered for inclusion on one of the Company’s following credit lists:

“Monitor List”—A security is undergoing a heightened level of monitoring either individually or because its industry, sector, geographic location or political operating environment has been under stress.

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2015 AND 2014 AND FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

“Watch List”—There is a preponderance of likelihood that either interest or principal will not be received according to the committee’s expectations and may result in impairment or write-offs.

“Impaired List” – The Credit Committee has concluded that the Company has the intent to sell the security, it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis, or the amortized cost basis of the security is not expected to be recovered due to expected delays or shortfalls in the contractually specified cash flows. For these investments, the amount of OTTI recognized in the Company’s Statement of Operations is the difference between the amortized cost basis of the security and its fair value or discounted cash flows.

Should it be determined that a security is OTTI, the Company records a loss through an appropriate adjustment in carrying value. For the years ended December 31, 2015, 2014 and 2013, the Company incurred write-downs of debt securities totaling $1.4 million, $0.0 million and $38.6 million, respectively, including those subject to SSAP No. 43R and those which the Company had the intent to sell in connection with the Sale Transaction defined in Note 1. Of these amounts, no OTTI was related to sub-prime loans.

There are inherent risks and uncertainties in management’s evaluation of securities for OTTI. These risks and uncertainties include factors both external and internal to the Company, such as general economic conditions, an issuer’s financial condition or near-term recovery prospects, market interest rates, unforeseen events which affect one or more issuers or industry sectors, and portfolio management parameters, including asset mix, interest rate risk, portfolio diversification, duration matching, and greater than expected liquidity needs. All of these factors could impact management’s evaluation of securities for OTTI.

The gross unrealized losses and fair value of investments, which have been deemed temporarily impaired, aggregated by investment category, number of securities and length of time that the securities have been in an unrealized loss position at December 31, 2015 were as follows:


(in Thousands except # of securities)
	Less than 12 months							12 months or more							Total
			Fair		Unrealized					Fair		Unrealized					Fair		Unrealized
	#		Value		Losses			#		Value		Losses			#		Value		Losses
Debt Securities:
U.S. Governments		9	$	167,294	$	(661	)		1	$	49,734	$	(373	)		10	$	217,028	$	(1,034	)
All Other Governments		4		3,038		(18	)		—		—		—			4		3,038		(18	)
U.S. States, Territories and Possessions (Direct and Guaranteed)		3		4,325		(188	)		—		—		—			3		4,325		(188	)
U.S. Special Revenue and Special Assessment Obligations and all Non-Guaranteed Obligations of Agencies and Authorities of Governments and Their Political Subdivisions		43		80,212		(1,644	)		15		10,372		(527	)		58		90,584		(2,171	)
Industrial and Miscellaneous (Unaffiliated)		1,124		2,890,637		(143,174	)		61		225,126		(18,988	)		1,185		3,115,763		(162,162	)
Hybrid Securities		4		10,076		(2,709	)		2		10,650		(3,826	)		6		20,726		(6,535	)

Total debt securities		1,187	$	3,155,582	$	(148,394	)		79	$	295,882	$	(23,714	)		1,266	$	3,451,464	$	(172,108	)

Preferred Stocks		2	$	10,725	$	(289	)		1	$	15,412	$	(708	)		3	$	26,137	$	(997	)

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2015 AND 2014 AND FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013


(in Thousands except # of securities)
	Less than 12 months							12 months or more							Total
			Fair		Unrealized					Fair		Unrealized					Fair		Unrealized
	#		Value		Losses			#		Value		Losses			#		Value		Losses
Debt Securities:
U.S. Governments		—	$	—	$	—			1	$	49,602	$	(564	)		1	$	49,602	$	(564	)
U.S. States, Territories and Possessions (Direct and Guaranteed)		—		—		—			—		—		—			—		—		—
U.S. Special Revenue and Special Assessment Obligations and all Non-Guaranteed Obligations of Agencies and Authorities of Governments and Their Political Subdivisions		10		3,351		(10	)		14		23,309		(1,024	)		24		26,660		(1,034	)
Industrial and Miscellaneous (Unaffiliated)		251		1,979,021		(18,792	)		40		234,617		(9,297	)		291		2,213,638		(28,089	)
Hybrid Securities		2		18,705		(477	)		3		18,434		(2,027	)		5		37,139		(2,504	)

Total Debt Securities		263	$	2,001,077	$	(19,279	)		58	$	325,962	$	(12,912	)		321	$	2,327,039	$	(32,191	)

Preferred Stocks		2	$	8,779	$	(71	)		1	$	15,448	$	(672	)		3	$	24,227	$	(743	)

As summarized in the table below, the Company had indirect exposure to sub-prime loans with a book adjusted carrying value of $2.5 million as of December 31, 2015. This amount represented approximately three-tenths of a percent of the Company’s total invested assets. In terms of managing and mitigating sub-prime mortgage risk, the Company’s overall exposure to these investments was minimal, as shown below (in thousands):


			Book/Adjusted
			Carrying Value
			(excluding
Type	Actual Cost		interest)		Fair Value
Residential mortgage backed securities	$	4,371	$	2,483	$	2,485
Collateralized debt obligations		—		—		—

	$	4,371	$	2,483	$	2,485

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2015 AND 2014 AND FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

As summarized in the table below, the Company had indirect exposure to sub-prime loans with a book adjusted carrying value of $3.2 million as of December 31, 2014. This amount represented approximately two-tenths of a percent of the Company’s total invested assets. The Company’s overall exposure to sub-prime mortgage risk was minimal, as shown below (in thousands):


			Book/Adjusted
			Carrying Value
			(excluding
Type	Actual Cost		interest)		Fair Value
Residential mortgage backed securities	$	3,113	$	3,154	$	3,234
Collateralized debt obligations		—		—		—

	$	3,113	$	3,154	$	3,234

4.	MORTGAGE LOANS

The Company invests in commercial first mortgage loans throughout the United States. Investments are diversified by property type and geographic area. The Company monitors the condition of the mortgage loans in its portfolio. In those cases, where mortgages have been restructured, appropriate allowances for losses have been made. In those cases, where, in management’s judgment, the mortgage loans’ values are impaired, appropriate losses are recorded.

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2015 AND 2014 AND FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

The following table shows the geographical distribution of the statement value of the Company’s mortgage loan portfolio as of December 31, 2015 and 2014 (in thousands):


	2015			2014
Alabama	$	3,850		$	8,022
Alaska		—			4,925
Arizona		9,807			11,782
California		22,566			66,065
Colorado		18,994			48,381
District of Columbia		61,401			11,658
Florida		3,274			74,456
Georgia		2,564			18,366
Idaho		1,636			1,693
Illinois		1,227			32,610
Indiana		—			1,563
Kansas		1,451			1,541
Kentucky		3,608			7,531
Louisiana		8,636			9,202
Maryland		1,376			9,488
Massachusetts		1,945			4,743
Michigan		7,821			8,101
Minnesota		21,349			22,590
Missouri		9,381			20,222
Mississippi		2,901			3,003
Montana		—			1,400
Nebraska		945			979
New Jersey		6,574			6,913
New Mexico		4,857			5,072
New York		141,387			86,679
North Carolina		11,668			19,042
North Dakota		—			—
Ohio		16,070			28,584
Oklahoma		—			—
Oregon		9,981			12,709
Pennsylvania		8,633			20,914
Rhode Island		321			405
South Carolina		18,653			22,393
Tennessee		1,533			9,186
Texas		26,580			72,912
Utah		8,557			12,236
Virginia		52,602			2,998
Washington		2,776			6,821
West Virginia		3,218			3,447
Wisconsin		4,158			4,448
General allowance for loan loss		(11,960	)		(11,960	)

Total Mortgage Loans on Real Estate	$	490,340		$	671,120

The Company had no outstanding mortgage loan commitments on real estate as of December 31, 2015 and 2014.

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2015 AND 2014 AND FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

The Company originated 3 mortgage loans with a total cost of $165.5 million during the year ended December 31, 2015 with rates ranging from 5.24% to 6.25%, and the Company originated six mortgage loans with a total cost of $61.6 million during the year ended December 31, 2014 with rates ranging from 4.95% to 5.65% and the Company originated one mortgage loan with a total cost of $15.9 million during the year ended December 31, 2013 with a rate of 4.54%. During the years ended December 31, 2015, 2014 and 2013, the Company did not reduce interest rates on any outstanding mortgage loans. Mortgage loans are collateralized by the related properties and generally are no more than 75% of the property’s value at the time the original loan is made.

A loan is considered impaired when it is probable that the principal or interest is not collectible in accordance with the contractual terms of the loan. The allowance for credit losses is estimated using the present value of expected cash flows discounted at the loan’s effective interest rate or the fair value of the collateral, if the loan is collateral dependent. A specific allowance for loan loss is established for an impaired loan if the present value of expected cash flows discounted at the loan’s effective interest rate, or the fair value of the loan collateral, less cost to sell, is less than the recorded amount of the loan. The specific allowance for loan loss was $0.0 million and $3.5 million at December 31, 2015 and 2014, respectively. A general allowance for loan loss is established based on an assessment of past loss experience on groups of loans with similar characteristics and current economic conditions. The general allowance for loan loss was $12.0 million at December 31, 2015 and 2014. While management believes that it uses the best information available to establish the allowances, future adjustments may become necessary if economic conditions differ from the assumptions used in calculating them. At December 31, 2015 and 2014, the Company individually and collectively evaluated loans with a gross carrying value of $502.3 million and $686.5 million, respectively.

As of December 31, 2015, the Company held no restructured loans and as of December 31, 2014 the Company held 14 restructured loans with a gross book value of $35.0 million. Should the Company hold any troubled debt, the Company may modify the terms of a loan by adjusting the interest rate, extending the maturity date, or both.

Delinquency status is determined based upon the occurrence of a missed contract payment. One loan with carrying value of $1.7 million was past due for a period greater than 90 days at December 31, 2015 and was a non-admitted asset at December 31, 2015. There were no loans past due greater than 90 days at December 31, 2014.

The Company accrues interest income on impaired loans to the extent it is deemed collectible. Otherwise, receipts on non-performing loans are not recognized as interest income until the loan is no longer impaired, is sold, or is otherwise made whole. Any cash collected during the period where the loan is impaired is applied to lower its carrying value.

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2015 AND 2014 AND FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

Other information is as follows:

Age Analysis of Mortgage Loans:


				Residential						Commercial
(In Thousands)	Farm			Insured			All Other			Insured			All Other			Mezzanine			Total
December 31, 2015
Recorded Investment (All)
Current	$	—		$	—		$	—		$	—		$	499,911		$	—		$	499,911
30—59 Days Past Due		—			—			—			—			232			—			232
60—89 Days Past Due		—			—			—			—			2,157			—			2,157
90—179 Days Past Due		—			—			—			—			—			—			—
180 + Days Past Due		—			—			—			—			—			—			—
Accruing Interest 90-179 Days Past Due
Recorded Investment	$	—		$	—		$	—		$	—		$	—		$	—		$	—
Interest Accrued		—			—			—			—			—			—			—
Accruing Interest 180+ Days Past Due
Recorded Investment	$	—		$	—		$	—		$	—		$	—		$	—		$	—
Interest Accrued		—			—			—			—			—			—			—
Interest Reduced
Recorded Investment	$	—		$	—		$	—		$	—		$	—		$	—		$	—
Number of Loans		—			—			—			—			—			—			—
Percent Reduced		0	%		0	%		0	%		0	%		0	%		0	%		0	%
December 31, 2014
Recorded Investment
Current	$	—		$	—		$	—		$	—		$	682,418		$	—		$	682,418
30—59 Days Past Due		—			—			—			—			4,117			—			4,117
60—89 Days Past Due		—			—			—			—			—			—			—
90—179 Days Past Due		—			—			—			—			—			—			—
180 + Days Past Due		—			—			—			—			—			—			—
Accruing Interest 90-179 Days Past Due
Recorded Investment	$	—		$	—		$	—		$	—		$	—		$	—		$	—
Interest Accrued		—			—			—			—			—			—			—
Accruing Interest 180+ Days Past Due
Recorded Investment	$	—		$	—		$	—		$	—		$	—		$	—		$	—
Interest Accrued		—			—			—			—			—			—			—
Interest Reduced
Recorded Investment	$	—		$	—		$	—		$	—		$	—		$	—		$	—
Number of Loans		—			—			—			—			—			—			—
Percent Reduced		0	%		0	%		0	%		0	%		0	%		0	%		0	%

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2015 AND 2014 AND FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

Investment in Impaired Loans With or Without Allowance for Credit Losses:


			Residential				Commercial
(In Thousands)	Farm		Insured		All Other		Insured		All Other		Mezzanine		Total
December 31, 2015
With Allowance for Credit Losses	$	—	$	—	$	—	$	—	$	—	$	—	$	—
No Allowance for Credit Losses		—		—		—		—		—		—		—
December 31, 2014
With Allowance for Credit Losses	$	—	$	—	$	—	$	—	$	15,671	$	—	$	15,671
No Allowance for Credit Losses		—		—		—		—		35,002		—		35,002

Investment in Impaired Loans—Average Recorded Investment, Interest Income Recognized, Recorded Investments on Nonaccrual Status and Amount of Interest Income Recognized Using a Cash-Basis Method of Accounting:


			Residential				Commercial
(In Thousands)	Farm		Insured		All Other		Insured		All Other		Mezzanine		Total
December 31, 2015
Average Recorded Investment	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Interest Income Recognized		—		—		—		—		—		—		—
Recorded Investments on Nonaccrual Status		—		—		—		—		—		—		—
Amount of Interest Income Recognized Using a Cash- Basis Method of Accounting		—		—		—		—		—		—		—
December 31, 2014
Average Recorded Investment	$	—	$	—	$	—	$	—	$	2,303	$	—	$	2,303
Interest Income Recognized		—		—		—		—		2,468		—		2,468
Recorded Investments on Nonaccrual Status		—		—		—		—		15,671		—		15,671
Amount of Interest Income Recognized Using a Cash- Basis Method of Accounting		—		—		—		—		—		—		—

Allowance for Credit Losses:


(In Thousands)	2015			2014			2013
Balance at beginning of period	$	15,415		$	15,727		$	15,701
Additions charged to operations		—			1,108			1,851
Direct write-downs charged against the allowances		—			—			(96	)
Recoveries of amounts previously charged off		(3,455	)		(1,420	)		(1,729	)

Balance at end of period	$	11,960		$	15,415		$	15,727

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2015 AND 2014 AND FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

The credit quality indicator for the Company’s mortgage loans is an internal risk-rated measure based on the borrowers’ ability to pay and the value of the underlying collateral. The internal risk rating is related to an increasing likelihood of loss, with a low quality rating representing the category in which a loss is first expected. The following table shows the recorded investment of the Company’s mortgage loans, net of allowances for credit losses, disaggregated by credit quality indicator as of December 31, 2015 and 2014:


(In Thousands) Internal Risk Rating	2015			2014
AAA	$	—		$	—
AA		127,201			26,385
A		117,797			43,541
BBB		44,837			99,276
BB and Lower		212,465			466,660
Impaired		—			50,673

Total	$	502,300		$	686,535

Total allowance for loan loss		(11,960	)		(15,415	)

Total mortgage loans on real estate	$	490,340		$	671,120

The following table provides an aging of past due commercial mortgage loans as of December 31, 2015 and 2014, based on the recorded investment net of allowances for credit losses.


(In Thousands)	2015			2014
Current	$	499,911		$	682,418
30-59 Days Past Due		232			4,117
60-89 Days Past Due		2,157			—
Greater Than 90 Days—Accruing		—			—
Greater Than 90 Days—Not Accruing		—			—

Total Past Due	$	2,389		$	4,117

Total allowance for loan loss		(11,960	)		(15,415	)

Total mortgage loans on real estate	$	490,340		$	671,120

5.	REAL ESTATE

The Company held no real estate property at the end of December 31, 2015. The Company sold its remaining two real estate properties during the statement period. The sale resulted in a net realized gain of $1.7 million. The Company sold nine properties throughout the year ended December 31, 2014 that resulted in net realized gains of $32.0 million. This amount is shown in the Company’s Statement of Operations as part of net realized capital gains and losses.

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2015 AND 2014 AND FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

The Company sold five properties during 2013 that resulted in net realized gains of $44.3 million. This amount is shown in the Company’s Statement of Operations as part of net realized capital gains and losses. All five properties were disposed of to a former related party in conjunction with the Sale Transaction defined in Note 1.

The Company recognized impairment losses of $11.3 million related to five properties that were deemed “held for sale” and subsequently sold during 2014. The impairment loss is the difference between estimated fair value less costs to sell. This amount is shown in the Company’s Statement of Operations as part of net realized capital gains and losses.

6.	INVESTMENT GAINS AND LOSSES

Realized capital gains and losses on debt securities, preferred stock, mortgages and interest rate swaps which relate to changes in levels of interest rates are charged or credited to the IMR, net of tax, and amortized into income over the remaining contractual life of the security sold. Realized gains and losses from the remaining investments are reported, net of tax, in the Statement of Operations but are not included in the computation of net gain from operations.

Changes in unrealized gains and losses from investments are reported as a component of Capital Stock and Surplus, net of deferred income taxes.


	Years Ended December 31,
(In Thousands)	2015			2014			2013
Realized gains (losses):
Debt securities	$	35,808		$	60,537		$	202,265
Preferred stocks		141			79			—
Common stocks		(209	)		—			761
Common stocks of affiliates		278			—			50,283
Mortgage loans		17,486			—			246
Real estate		1,678			21,273			44,289
Cash, cash equivalents and short-term investments		265			212			108
Other invested assets		(1,864	)		(2	)		(1,965	)
Other hedging investments		(143	)		(62,216	)		—
Derivative instruments		56,014			51,430			(185,784	)

Subtotal		109,454			71,313			110,203
Capital gains tax expense (benefit)		6,100			(3,669	)		28,847

Net realized gains (losses)		103,354			74,982			81,356
(Gains) losses transferred to IMR (net of taxes)		(35,635	)		(55,354	)		31,017

Total	$	67,719		$	19,628		$	112,373

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2015 AND 2014 AND FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013


	Years Ended December 31,
(In Thousands)	2015			2014		2013
Changes in net unrealized capital (losses)gains, net of deferred income tax:
Debt securities	$	(267	)	$	2,659	$	(2,692	)
Common stocks of non-affiliates		759			—		—
Common stocks of affiliates		(15,020	)		18,189		7,614
Mortgage loans		2,246			203		(17	)
Derivative instruments		14,374			392,514		(237,782	)
Other hedging investments		(9,597	)		9,597		—
Other invested assets		2,206			1,548		(47	)

Total	$	(5,299	)	$	424,710	$	(232,924	)

The deferred tax netted in unrealized capital gains (losses) above, except for common stock of affiliates and other affiliated invested assets, was ($4.9) million, ($26.6) million and ($129.5) million at December 31, 2015, 2014 and 2013, respectively.

7.	NET INVESTMENT INCOME

Net investment income consisted of:


	Years Ended December 31,
(In Thousands)	2015			2014			2013
Debt securities (unaffiliated)	$	259,795		$	197,595		$	260,539
Debt securities (affiliated)		1,246			—			—
Preferred stocks (unaffliated)		1,992			1,813			1,342
Common stocks (unaffiliated)		11,212			—			13
Common stocks (affiliated)		37,047			—			—
Mortgage loans		41,268			50,062			48,116
Real estate		1,664			8,822			19,232
Contract loans		26,230			22,837			23,299
Cash, cash equivalents and short-term investments		48,296			62,575			14,023
Derivative instruments		(11,850	)		(225,328	)		(616,216	)
Other invested assets		35,822			22,160			9,854
Other investment income		—			—			3,141

Gross investment income (loss)		452,722			140,536			(236,657	)

Interest expense on surplus notes		43,260			43,260			43,260
Investment expenses and other interest expense on borrowed money		27,839			46,662			38,744

Net investment income (loss)	$	381,623		$	50,614		$	(318,661	)

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2015 AND 2014 AND FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

The Company’s policy is to exclude investment income due and accrued with amounts that are over 90 days past due or where the collection of interest is uncertain. The total amount of investment income due and accrued excluded from surplus for the years ended December 31, 2015 and 2014 was $309.5 thousand and $10.3 thousand, respectively.

8.	DERIVATIVES

The Company uses derivatives for hedging or replication purposes only. Interest rate swaps are mainly employed for hedging guaranteed minimum living benefits for certain variable annuity contracts and for duration matching purposes.

Options and swaptions are used to hedge equity exposure embedded in the Company’s fixed and variable annuity products. Futures are used to hedge equity exposure included in fixed indexed annuities, as well as the guaranteed minimum death and living benefit features of the Company’s variable annuities. Currency forwards and swaps are used to hedge changes in foreign currency exchange (“FX”) rates.

Interest swaps, options, swaptions, and currency swaps, are reported at fair value with the unrealized gain or loss reported as an adjustment to surplus. All futures are marked to market and settled on a daily basis with the gain or loss reported as a component of net investment income (loss).

Beginning in July 2015 the Company began hedging its new Fixed Index Annuity product with OTC options on the CROCI, sector III and MAA indices. The equity exposure embedded in the annuity contract is hedged using these options. These options have been designated as fair value hedges. The mark to market on the options is recorded as a component of net investment income and the offsetting change in liability is recorded through income.

Market risk is the risk of loss due to market price changes of the derivative instrument or the underlying security or index. To mitigate this risk, the Company matches the market sensitivity of the hedge with the market sensitivity of the underlying asset or liability being hedged.

Credit risk is the counterparty credit risk or risk of loss as a result of default or a decline in market value stemming from a credit downgrade of the counterparty to the derivative transaction. The Company minimizes this risk by entering into derivatives only with counterparties that meet certain criteria, by utilizing standardized agreements, and by limiting counterparty concentrations.

All derivative transactions are covered under standardized contractual agreements with counterparties, all of which include credit-related contingent features. Certain counterparty relationships also may include supplementary agreements with tailored terms, such as additional triggers for early terminations, acceptable practices related to cross-transaction netting, and minimum thresholds for determining collateral.

Credit-related triggers include failure to pay or deliver on an obligation past certain grace periods, bankruptcy or the downgrade of credit ratings to below a stipulated level. These triggers apply to both the Company and its counterparty.

At December 31, 2015 and 2014, the Company pledged $175.5 million and $151.3 million, respectively, in U.S. Treasury securities and corporate bonds as collateral to counterparties. At December 31, 2015 and 2014, counterparties pledged to the Company $128.6 million and $123.6 million, respectively, in collateral comprised of cash and U.S. Treasury securities and corporate bonds.

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2015 AND 2014 AND FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

Derivatives are carried in accordance with SSAP No. 86. The Company’s underlying notional or principal amounts associated with open derivatives positions were as follows (in thousands):


	Outstanding at
	December 31, 2015
	(per SSAP No. 86)
	Notional		Fair Value/
	Principal		Statement			Amortized		Unrealized
	Amounts		Value			Cost		Gain (Loss)
Interest rate swaps	$	2,410,000	$	47,101		$	—	$	47,101
Currency swaps		73,099		5,013			—		5,013
TBA’s		5,565		5,750			5,755		(5	)
FX Forwards		—		—			—		—
Payor swaptions		800,000		3,720			7,890		(4,170	)
Receiver swaptions		75,000		1,341			2,126		(785	)
Equity index options		1,898,914		111,472			28,056		83,416

Total	$	5,262,578	$	174,397		$	43,827	$	130,570


	Outstanding at
	December 31, 2014
	(per SSAP No. 86)
	Notional		Fair Value/
	Principal		Statement			Amortized		Unrealized
	Amounts		Value			Cost		Gain (Loss)
Interest rate swaps	$	2,669,000	$	32,515		$	—	$	32,515
Currency swaps		94,502		(843	)		—		(843	)
FX Forwards		563		3			—		3
Payor swaptions		3,040,000		5,578			11,911		(6,333	)
Receiver swaptions		75,000		1,254			2,126		(872	)
Equity index options		7,771,702		115,216			31,266		83,950

Total	$	13,650,767	$	153,723		$	45,303	$	108,420

At December 31, 2015 and 2014, open futures contracts had a notional value of $4,324.4 million and $3,111.0 million and a fair value of $20.9 million and $19.8 million, respectively. These amounts do not include the component of variation margin that has already been cash settled.

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2015 AND 2014 AND FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

9.	REINSURANCE

Reinsurance ceded contracts do not relieve the Company from its obligations to policyholders. The Company remains liable to its policyholders for the portion reinsured to the extent that any reinsurer does not meet the obligations assumed under the reinsurance agreement. To minimize its exposure to significant losses from reinsurer insolvencies, the Company regularly evaluates the financial condition of its reinsurers and monitors concentrations of credit risk. Management believes that any liability arising from this contingency is unlikely.

The Company manages a closed block of SPWL insurance policies, a retirement-oriented tax-advantaged life insurance product. The Company discontinued sales of SPWLs in response to certain tax law changes in the 1980s. The Company had SPWL policyholder balances of $1.2 billion and $1.3 billion as of December 31, 2015 and 2014, respectively. On December 31, 2003, this entire block of business was reinsured on a funds withheld basis to SLOC. As discussed in Note 2, in connection with the Sale Transaction, the Company recaptured 100% of the risks reinsured pursuant to this agreement. The recapture occurred during the first quarter of 2013.

The Company has a reinsurance agreement with Barbco, an affiliate, to cede all of the risks associated with certain in-force corporate and bank-owned variable universal life and private placement variable universal life policies on a combination coinsurance and coinsurance with funds-withheld basis. This agreement also provides for the ceding of new business written after the effective date.

Effective January 1, 2010, the Company and Barbco amended the agreement to include coverage of certain corporate and bank-owned variable universal life and private placement variable universal life insurance policies sold between December 31, 2009 and March 31, 2010, inclusive. Reinsurance coverage continued for all policies sold prior to April 1, 2010. However, policies sold on or after April 1, 2010 have not been reinsured. This amendment also enabled the Company to discontinue reinsuring a portion of the covered business that was previously reinsured on a modified coinsurance basis, effective April 1, 2010. The discontinuance of the business reinsured on a modified coinsurance basis did not have a material impact on the Company’s financial statements.

On July 31, 2013, the Company consented to a novation agreement between the U.S. Branch, a former affiliate, and Barbco. Pursuant to the novation agreement, Barbco was substituted as reinsurer under a June 12, 2000 reinsurance agreement between the Company and the U.S. Branch, whereby the Company ceded to the U.S. Branch, on a yearly renewable term basis, certain risks under its group flexible premium variable universal life policies. Refer to Note 2 for further details.

The Company has agreements with several unrelated companies, which provide for reinsurance of portions of the net amount at risk under certain of the Company’s individual variable universal life, individual universal life, individual private placement variable universal life, and corporate and bank-owned life insurance policies. These amounts are reinsured on either a monthly renewable, yearly renewable term, or modified coinsurance basis.

The Company has agreements with unrelated companies that provide for reinsurance of guaranteed minimum death benefits under certain of its variable annuity contracts. These amounts are reinsured on a monthly renewable term basis.

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2015 AND 2014 AND FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

The effects of reinsurance were as follows:


	Years Ended December 31,
(In Thousands)	2015			2014			2013
Premiums and annuity considerations:
Direct	$	1,369,407		$	1,848,605		$	238,879
Recaptured amount from former affilate—SPWL		—			—			1,331,908
Ceded—Affiliated (former affiliate effective August, 2013)		—			—			(18,449	)
Ceded—Affiliated		(33,974	)		(51,827	)		20,104
Ceded—Non-affiliated		(14,250	)		(13,722	)		(13,067	)

Net premiums and annuity considerations	$	1,321,183		$	1,783,056		$	1,559,375

Insurance and other individual policy benefits and claims:
Direct	$	804,664		$	915,197		$	938,717
Assumed—Non-affiliated		4,621			6,978			9,254
Recaptured amount from former affilate—SPWL		—			—			(27,904	)
Ceded—Affiliated (former affiliate effective August, 2013)		—			—			(19,825	)
Ceded—Affiliated		(29,383	)		(41,766	)		(22,462	)
Ceded—Non-affiliated		(16,698	)		(8,673	)		(29,977	)

Net policy benefits and claims	$	763,204		$	871,736		$	847,803

10.

RESERVES FOR LIFE CONTRACTS AND DEPOSIT TYPE CONTRACTS

The reserves for life insurance and annuity contracts are computed in accordance with presently accepted actuarial standards, and are based on actuarial assumptions and methods (including use of published mortality tables and prescribed interest rates and methodologies) which produce reserves at least as great as those required by law and contract provisions.

Deduction of deferred fractional premiums upon death of the insured and return of any portion of the final premium for the period beyond the date of death are not applicable to the business of the Company. Surrender values are not promised in excess of reserves legally computed.

For policies with annual extra premiums, additional reserves are held equal to one-half the extra premium. Extra premiums on single premium policies are amortized over ten years. Policies issued with premiums corresponding to ages higher than the true ages are valued at the rated-up ages. Policies issued subject to a lien are valued as if the full amount were payable without any deduction. For interest sensitive policies, substandard risks are reflected in the cost of insurance charges.

As of December 31, 2015 and 2014, the Company had $15.5 million and $15.0 million, respectively, of insurance in force (direct and assumed), for which gross premiums were less than the net premiums according to the standard of valuation required by the State of Delaware. Reserves (direct and assumed) to cover the above insurance totaled of $3.3 million and $2.6 million as of December 31, 2015 and 2014, respectively.

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2015 AND 2014 AND FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

The Tabular Interest has been determined by formula as described in the NAIC instructions, except for some business which is determined from basic policy data for reserving. The Tabular less Actual Reserve Released has been determined by formula as described in the NAIC instructions. The Tabular Cost has been determined by formula as described in the NAIC instructions, except for universal life products which use cost of insurance and some business which uses basic policy data for reserving. The Tabular Interest on funds not involving life contingencies was determined from the interest credited to the deposits, except for certain guaranteed interest contracts which are determined by formula as described in the NAIC instructions. Other than normal updates of reserves, the only significant reserve changes as of December 31, 2015 and 2014 were the changes in additional reserves held due to asset adequacy analysis testing. Direct asset adequacy reserves were $236.4 million at December 31, 2015 and 2014.

11.

WITHDRAWAL CHARACTERISTICS OF ANNUITY RESERVES AND DEPOSIT LIABILITIES

The withdrawal characteristics of General Account and Separate Account annuity reserves and deposits were as follows:

December 31, 2015


(In Thousands)	General Account		Separate Account with Guarantees		Separate Account Nonguaranteed		Total 12/31/2015		% of Total
Subject to discretionary withdrawal:
With fair value adjustment	$	2,500,107	$	769,505	$	—	$	3,269,612		15.39	%
At book value less current surrender charge of 5% or more		1,101,664		—		—		1,101,664		5.19	%
At fair value		—		—		14,397,807		14,397,807		67.77	%

Total with adjustment or at fair value	$	3,601,771	$	769,505	$	14,397,807	$	18,769,083		88.35	%
At book value without adjustment (minimal or no charge or adjustment)		1,707,249		—		—		1,707,249		8.04	%
Not subject to discretionary withdrawal		746,407		—		20,837		767,244		3.61	%

Total (Gross: Direct and Assumed)		6,055,427		769,505		14,418,644		21,243,576		100.00	%
Reinsurance ceded		29,210		—		—		29,210

Total (net)	$	6,026,217	$	769,505	$	14,418,644	$	21,214,366

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2015 AND 2014 AND FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

December 31, 2014


(In Thousands)	General Account		Separate Account with Guarantees		Separate Account Nonguaranteed		Total 12/31/2014		% of Total
Subject to discretionary withdrawal:
With fair value adjustment	$	1,387,312	$	902,532	$	—	$	2,289,844		9.89	%
At book value less current surrender charge of 5% or more		1,372,834		—		—		1,372,834		5.93	%
At fair value		—		—		16,792,405		16,792,405		72.56	%

Total with adjustment or at fair value	$	2,760,146	$	902,532	$	16,792,405	$	20,455,083		88.38	%
At book value without adjustment (minimal or no charge or adjustment)	$	1,881,167	$	—	$	—	$	1,881,167		8.13	%
Not subject to discretionary withdrawal		784,941		—		22,481		807,422		3.49	%

Total (Gross: Direct +Assumed)		5,426,254		902,532		16,814,886		23,143,672		100.00	%
Reinsurance ceded		28,288		—		—		28,288

Total (net)	$	5,397,966	$	902,532	$	16,814,886	$	23,115,384

12.

SEPARATE ACCOUNTS

The Company has established insulated Separate Accounts applicable to various classes of contracts providing for variable benefits. Contracts for which funds are invested in insulated variable Separate Accounts include individual and group life and annuity contracts. The assets (securities) in these insulated accounts are carried at fair value and the investment risk associated with such assets is retained by the contract holder. These variable products provide minimum death benefits and, in certain annuity contracts, minimum accumulation or withdrawal benefits. The minimum guaranteed benefit reserves associated with the insulated Separate Accounts are reported in Aggregate reserve for the life contracts in the Company’s Statement of Admitted Assets, Liabilities and Capital Stock and Surplus.

The Company has also established non-insulated Separate Accounts for certain contracts that include an MVA feature associated with fixed rates, including for amounts allocated to the fixed portion of certain combination fixed and variable deferred annuity contracts. The assets in the variable deferred annuity separate account are carried at fair value. For some MVA contracts, the assets in the fixed deferred annuity separate account are carried on a General Account basis. The assets of the non-insulated Separate Account are not legally insulated and can be used by the Company to satisfy claims resulting from the General Account.

The Company earns Separate Account fees for providing administrative services and bearing the mortality risks related to variable contracts. Net investment income, capital gains and losses, and changes in mutual fund asset values in variable Separate Accounts are allocated to policyholders and therefore are not reflected in the Company’s Statement of Operations for the General Account.

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2015 AND 2014 AND FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

For the current reporting year, the Company reported assets and liabilities from the following products in a Separate Account:

•

Variable Life

•

Variable Annuity

•

MVA Annuity

A majority of the variable Separate Account assets are legally insulated from the Company’s General Account, whereas the non-insulated Separate Account assets are not legally insulated. The legal insulation of the Separate Account assets prevents such assets from being generally available to satisfy claims resulting from the General Account. The Separate Account classification of legally insulated, vs. not legally insulated, is supported by Section 2932 of the Delaware Insurance Code.

As of December 31, 2015 and 2014, the Company’s Separate Account statement included legally insulated assets of $24,042.0 million and $28,051.0 million, respectively.

The assets legally insulated and non-legally insulated from the General Account as of December 31, 2015 were attributed to the following products:


Product (In thousands)	Legally Insulated Assets		Non - Legally Insulated Assets
Variable Life	$	9,373,590	$	—
Variable Annuity		14,668,410		—
MVA Annuity		—		1,187,673

Total	$	24,042,000	$	1,187,673

Separate Account liabilities are determined in accordance with prescribed actuarial methodologies, which approximate the fair value of the related assets less applicable surrender charges. The resulting surplus is recorded in the Statement of Operations for the General Account as a component of Net transfers from (to) Separate Accounts. The variable Separate Accounts are non-guaranteed Separate Accounts, wherein the policyholder assumes substantially all the investment risks and rewards. MVA Separate Accounts are guaranteed Separate Accounts, wherein the Company contractually guarantees either a minimum return or account value to the policyholder. In accordance with the guarantees provided, if the investment proceeds are insufficient to cover the rate of return guaranteed for the product, the policyholder proceeds will be remitted by the General Account.

The Company had $21,883.7 million and $24,229.3 million of non-guaranteed Separate Account reserves and $769.5 million and $902.5 million of guaranteed Separate Account reserves as of December 31, 2015 and 2014, respectively.

As of December 31, 2015 and 2014, the General Account of the Company had a maximum guarantee for Separate Account liabilities of $17,247.9 million and $18,173.1 million, respectively.

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2015 AND 2014 AND FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

To compensate the General Account for the risk associated with Separate Account guarantees, risk charges of $206.8 million, $194.2 million and $238.7 million were received by the General Account from the Separate Accounts during the years ended December 31, 2015, 2014 and 2013, respectively.

For the years ended December 31, 2015, 2014 and 2013, the Company’s General Account paid $81.0 million, $81.6 million and $115.6 million for Separate Account guarantees, respectively.

The Company does not engage in securities lending transactions within its Separate Account.

An analysis of the Separate Account reserves as of December 31, 2015 is as follows:


(In Thousands)	Nonindexed Guarantee Less than/ equal to 4%		Nonguaranteed Separate Accounts		Total
Premiums, considerations or deposits for year ended 12/31/2015	$	14,225	$	205,027	$	219,252
Reserves at 12/31/2015
For accounts with assets at:
Fair value		240,838		21,883,718		22,124,556
Amortized cost		528,667		—		528,667

Total reserves	$	769,505	$	21,883,718	$	22,653,223

By withdrawal characteristics:
With fair value adjustment	$	769,505	$	—	$	769,505
At fair value		—		21,862,881		21,862,881

Subtotal		769,505		21,862,881		22,632,386
Not subject to discretionary withdrawal		—		20,837		20,837

Total	$	769,505	$	21,883,718	$	22,653,223

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2015 AND 2014 AND FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

An analysis of the Separate Account reserves as of December 31, 2014 is as follows:


(In Thousands)	Nonindexed Guarantee Less than/ equal to 4%		Nonguaranteed Separate Accounts		Total
Premiums, considerations or deposits for year ended 12/31/2014	$	21,539	$	367,484	$	389,023
Reserves at 12/31/2014
For accounts with assets at:
Fair value		287,192		24,229,310		24,516,502
Amortized cost		615,340		—		615,340

Total reserves	$	902,532	$	24,229,310	$	25,131,842

By withdrawal characteristics:
With fair value adjustment	$	902,532	$	—	$	902,532
At fair value		—		24,206,829		24,206,829

Subtotal		902,532		24,206,829		25,109,361
Not subject to discretionary withdrawal		—		22,481		22,481

Total	$	902,532	$	24,229,310	$	25,131,842

Below is the reconciliation of Net Transfers (from) to Separate Accounts in the Statement of Operations of the Company:


	Years Ended December 31,
(In Thousands)	2015			2014			2013
Transfers to Separate Accounts	$	219,252		$	389,023		$	287,870
Transfers (from) Separate Accounts		(2,379,922	)		(3,138,163	)		(2,945,712	)

Net Transfers (from) to Separate Accounts in the Statement of Operations	$	(2,160,670	)	$	(2,749,140	)	$	(2,657,842	)

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2015 AND 2014 AND FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

13.

FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value, the Company uses various methods including market, income and cost approaches. The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs.

The Company has categorized its financial instruments into a three-level hierarchy based on the priority of the inputs to the valuation technique. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure fair value fall within different levels of the hierarchy, the category level is based on the lowest priority level input that is significant to the fair value measurement of the instrument.

Financial assets and liabilities recorded at fair value in the Company’s Statutory Statements of Admitted Assets, Liabilities and Capital Stock and Surplus are categorized as follows:

Level 1

•

Unadjusted quoted prices for identical assets or liabilities in an active market.

The types of assets and liabilities utilizing Level 1 valuations include U.S. Treasury and agency securities, investments in publicly-traded mutual funds with quoted market prices, and exchange traded derivatives.

Level 2

•

Quoted prices in markets that are not active or significant inputs that are observable either directly or indirectly.

Level 2 inputs include the following:

•

Quoted prices for similar assets or liabilities in active markets,

•

Quoted prices for identical or similar assets or liabilities in non-active markets,

•

Inputs other than quoted market prices that are observable, and

•

Inputs that are derived principally from or corroborated by observable market data through correlation or other means.

The types of assets and liabilities utilizing Level 2 valuations generally include U.S. Government securities not backed by the full faith and credit of the U.S. government, municipal bonds, structured notes, certain ABS (including collateralized debt obligations, RMBS and CMBS), certain corporate debt, certain private equity investments and certain derivatives.

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2015 AND 2014 AND FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

Level 3

Prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. They reflect management’s opinions regarding the assumptions a market participant would use in pricing the asset or liability. Generally, the types of assets and liabilities utilizing Level 3 valuations are certain ABS, RMBS and CMBS, certain corporate debt, certain private equity investments, certain mutual fund holdings, and certain derivatives.

There were no significant changes made in valuation techniques during 2015 or 2014.

The Company’s assets and liabilities by classification measured at fair value as of December 31, 2015 were as follows:


(In Thousands) Description for each class of asset or liability	Level 1			Level 2			Level 3		Total
Assets at fair value:
Common stock—Unaffiliated (a)
Industrial and miscellaneous	$	—		$	—		$	116,514	$	116,514
Debt securities—Unaffiliated (b)
Asset-backed securities		—			—			1,093		1,093
Residential mortgage-backed		—			—			—		—
Commercial mortgage-backed		—			—			—		—
Industrial and miscellaneous		—			32			—		32
Derivative assets (d)
Interest rate contracts		30,169			65,042			2,647		97,858
Equity contracts		18,557			122,030			—		140,587
Foreign exchange contracts		2,978			5,014			—		7,992
Separate Accounts assets (c)		16,696,658			5,899,526			743,469		23,339,653

Total assets at fair value	$	16,748,362		$	6,091,644		$	863,723	$	23,703,729

Liabilities at fair value:
Separate Accounts (c)	$	—		$	(38,321	)	$	—	$	(38,321	)
Derivative liabilities (d)
Interest rate contracts		(4,375	)		(35,581	)		—		(39,956	)
Equity contracts		(10,577	)		—			—		(10,577	)
Foreign exchange contracts		(557	)		—			—		(557	)

Total liabilities at fair value	$	(15,509	)	$	(73,902	)	$	—	$	(89,411	)

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2015 AND 2014 AND FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

The Company’s assets and liabilities by classification measured at fair value as of December 31, 2014 were as follows:


(In Thousands) Description for each class of asset or liability	Level 1			Level 2			Level 3		Total
Assets at fair value:
Common stock-Unaffiliated (a)
Industrial and miscellaneous	$	—		$	—		$	47,719	$	47,719
Debt securities-Unaffiliated (b)
Asset-backed securities		—			—			1,471		1,471
Residential mortgage-backed		—			—			—		—
Commercial mortgage-backed		—			—			—		—
Industrial and miscellaneous		—			—			—		—
Derivative assets (d)
Interest rate contracts		—			83,826			—		83,826
Equity contracts		35,320			134,875			—		170,195
Foreign exchange contracts		1,311			193			—		1,504
Separate Accounts assets (c)		20,551,924			5,787,446			605,705		26,945,075

Total assets at fair value	$	20,588,555		$	6,006,340		$	654,895	$	27,249,790

Liabilities at fair value:
Separate Accounts (c)	$	—		$	(38,603	)	$	—	$	(38,603	)
Derivative liabilities (d)
Interest rate contracts		—			(44,478	)		—		(44,478	)
Equity contracts		(37,382	)		—			—		(37,382	)
Foreign exchange contracts		(231	)		(1,033	)		—		(1,264	)

Total liabilities at fair value	$	(37,613	)	$	(84,114	)	$	—	$	(121,727	)

(a)	Common stocks are carried at fair value.

(b)	Debt securities with NAIC designations of 6 are carried at the lower of amortized cost or fair value. Where fair value is less than amortized cost, amounts are included in the table above.

(c)

Separate Account invested assets are typically carried at fair value. In instances where market risk is guaranteed by the Company, debt securities and preferred stocks are carried at amortized cost based on their respective NAIC designation. Separate Account assets also include $1,202 million and $1,633 million of investment income and receivables due at December 31, 2015 and 2014, respectively. Separate Account liabilities include derivative liabilities carried at fair value.

(d)	The derivatives included in the leveling descriptions are carried at fair value.

None of the Company’s assets measured at fair value transferred between Levels 1 and 2 during the years ended December 31, 2015 and December 31, 2014.

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2015 AND 2014 AND FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

The following table is a reconciliation of the beginning and ending balances for assets and liabilities which were categorized as Level 3 for the year ended December 31, 2015:


											Total gains
								Total gains			and
	Beginning				Transfers)			and (losses			(losses)													Ending
	Balance at		Transfers		Out of			included in			included in													Balance at
(In Thousands)	01/01/2015		Into Level 3		Level 3			Net Income			Surplus			Purchases		Issuances		Sales			Settlements			12/31/2015
Assets:
Common stock Unaffiliated	$	47,719	$	17,647	$	—		$	24		$	759		$	69,122	$	—	$	(18,640	)	$	(117	)	$	116,514
Debt securities-Unaffiliated
Asset-backed securities		1,471		—		—			—			(378	)		—		—		—			—			1,093
Residential mortgage-backed securities		—		—		—			—			—			—		—		—			—			—
Commercial mortgage-backed securities		—		—		—			—			—			—		—		—			—			—
Industrial and miscellaneous		—		—		—			—			—			—		—		—			—			—
Derivative assets		—		16,262		(13,557	)		(58	)		—			—		—		—			—			2,647
Separate Accounts assets		605,705		92,739		(34,555	)		2,304			(3,678	)		278,754		—		(164,521	)		(33,279	)		743,469

Total assets	$	654,895	$	126,648	$	(48,112	)	$	2,270		$	(3,297	)	$	347,876	$	—	$	(183,161	)	$	(33,396	)	$	863,723

The following table is a reconciliation of the beginning and ending balances for assets and liabilities which were categorized as Level 3 for the year ended December 31, 2014:


											Total gains
								Total gains			and
	Beginning				Transfers			and (losses)			(losses)													Ending
	Balance at		Transfers		Out of			included in			included in													Balance at
(In Thousands)	01/01/2014		Into Level 3		Level 3			Net Income			Surplus			Purchases		Issuances		Sales			Settlements			12/31/2014
Assets:
Common stock Unaffiliated	$	—	$	—	$	—		$	(909	)	$	—		$	50,420	$	—	$	(2,730	)	$	938		$	47,719
Debt securities—Unaffiliated
Asset-backed securities		1,637		—		—			—			(77	)		—		—		—			(89	)		1,471
Residential mortgage-backed securities		—		—		—			—			—			—		—		—			—			—
Commercial mortgage-backed securities		9,751		—		(9,751	)		—			—			—		—		—			—			—
Industrial and miscellaneous		—		—		—			—			—			—		—		—			—			—
Derivative assets		17,909		1,713		(19,622	)		—			—			—		—		—			—			—
Separate Accounts assets		585,422		14,348		(12,076	)		2,979			24,887			104,779		1,450		(57,787	)		(58,297	)		605,705

Total assets	$	614,719	$	16,061	$	(41,449	)	$	2,070		$	24,810		$	155,199	$	1,450	$	(60,517	)	$	(57,448	)	$	654,895

The Company transfers assets into or out of Level 3 at fair value as of the beginning of the reporting period. Transfers made were the result of changes in the level of observability of inputs used to price the assets or changes in NAIC designations.

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2015 AND 2014 AND FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

The table below presents the balances of Level 3 assets measured at fair value with their corresponding pricing sources as of December 31, 2015:


	Valuation Techniques	Significant Unobservable Inputs	Fair Value		Range		Weighted Average
(In Thousands)
Debt securities-Unaffiliated
Asset-backed securities	Matrix Pricing	Spreads	$	1,093	$	26	$	26
Common Stock	Matrix Pricing	Spreads		114,781		1-192		25
	Matrix Pricing	Quoted Prices		1,733		58		58
Separate Accounts assets	Matrix Pricing	Spreads		16,845		29-109		96
	Matrix Pricing	Quoted Prices		125,820		60-115		100
	Amortized Cost	None		252		50		50

Total assets			$	260,524

The table below presents the balances of Level 3 assets measured at fair value with their corresponding pricing sources as of December 31, 2014:

Valuation
Techniques

Significant
Unobservable Inputs

Fair Value

Range

Weighted
Average

(In Thousands)

Debt securities—Unaffiliated

Asset-backed securities

Held at Cost

N/A

1,471

N/A

Separate Accounts assets

Matrix Pricing

Spreads

80,497

N/A

Market Pricing

Quoted Prices

57,718

91-113

Total assets

139,686

There were no significant changes made in valuation techniques during 2015 and 2014.

Derivative values in the above tables are presented on a gross basis.

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2015 AND 2014 AND FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

Aggregate Fair Value of all Financial Instruments

The following table presents the carrying amounts and estimated fair values of the Company’s financial instruments as of December 31, 2015:


(In Thousands) Type of Financial Instrument	Aggregate Fair Value			Statement Value			Level 1			Level 2			Level 3			Not Practicable (Carrying Value)
Cash, cash equivalents and short-term investments	$	1,536,423		$	1,536,423		$	678,448		$	857,975		$	—		$	—
Debt securities		5,756,624			5,853,362			217,169			2,682,365			2,857,090			—
Preferred stocks		32,061			32,634			—			32,061			—			—
Common stocks		116,514			116,514			—			—			116,514			—
Mortgages loans on real estate		497,360			490,340			—			—			497,360			—
Derivatives – options and swaptions		127,089			127,089			—			124,442			2,647			—
Derivatives – swaps and forwards		97,810			97,810			30,167			67,643			—			—
Derivatives—futures		21,538			21,538			21,538			—			—			—
Contract loans		669,276			630,826			—			—			669,276			—
Other invested assets		533,221			529,509			—			8,720			524,501			—
Separate account assets		24,027,637			24,026,930			16,717,221			6,343,844			966,572			—
Contractholder deposit funds and other policyholder liabilities		(199,186	)		(189,353	)		—			—			(199,186	)		—
Derivatives – options and swaptions		(10,557	)		(10,557	)		(10,557	)		—			—			—
Derivatives – swaps and forwards		(39,945	)		(39,945	)		(4,365	)		(35,580	)		—			—
Derivatives—futures		(588	)		(588	)		(588	)		—			—			—
Societe Generale		(25,000	)		(25,000	)		(25,000	)		—			—			—
Separate account liabilities		(67,698	)		(67,698	)		—			(38,321	)		(29,377	)		—

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2015 AND 2014 AND FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

The following table presents the carrying amounts and estimated fair value of the Company’s financial instruments as of December 31, 2014:


(In Thousands)	Aggregate			Statement												Not Practicable
Type of Financial Instrument	Fair Value			Value			Level 1			Level 2			Level 3			(Carrying Value)
Cash, cash equivalents and short-term investments	$	2,797,104		$	2,797,104		$	2,203,305		$	593,799		$	—		$	—
Debt securities		5,466,402			5,331,560			233,315			2,338,203			2,894,884			—
Preferred stocks		32,650			33,120			—			31,561			1,089			—
Common stocks		47,719			47,719			—			—			47,719			—
Mortgages loans on real estate		709,620			671,120			—			—			709,620			—
Derivatives – options and swaptions		157,623			157,623			15,916			141,707			—			—
Derivatives – swaps and forwards		77,187			77,187			—			77,187			—			—
Derivatives—futures		20,714			20,714			20,714			—			—			—
Contract loans		654,111			623,220			—			—			654,111			—
Other invested assets		408,013			406,249			—			9,220			398,793			—
Separate account assets		27,741,024			27,711,741			20,585,989			6,256,718			898,317			—
Contractholder deposit funds and other policyholder liabilities		(225,938	)		(215,544	)		—			—			(225,938	)		—
Derivatives – options and swaptions		(35,577	)		(35,577	)		(35,577	)		—			—			—
Derivatives – swaps and forwards		(45,511	)		(45,511	)		—			(45,511	)		—			—
Derivatives—futures		(2,037	)		(2,037	)		(2,037	)		—			—			—
FHLB Loan		(210,000	)		(210,022	)		—			(210,000	)		—
Separate account liabilities		(73,283	)		(73,283	)		—			(38,603	)		(34,680	)		—

The methods and assumptions that the Company uses in determining the estimated fair value of its financial instruments are summarized below:

Cash, cash equivalents and short-term investments – The carrying value for cash, cash equivalents and short-term investments approximates fair value due to the short-term nature and liquidity of the balances.

Debt securities – The Company determines the fair value of its publicly-traded fixed maturity securities using three primary pricing methods: third-party pricing services, non-binding broker quotes and pricing models. Prices are first sought from third-party pricing services with the remaining unpriced securities priced using one of the other two methods. Third-party pricing services derive the security prices through recently reported trades for identical or similar securities with adjustments for trading volumes and market observable information through the reporting date. In the event that there are no recent market trades, pricing services and brokers may use pricing models to develop a security price based on future expected cash flows discounted at an estimated market rate using collateral performance and vintages. The Company generally does not adjust quotes or prices obtained from brokers or pricing services.

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2015 AND 2014 AND FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

the price of ABS, RMBS and CMBS. These estimates are based on the underlying collateral and structure of the security, as well as prepayment speeds previously experienced in the market at interest rate levels projected for the underlying collateral. Actual prepayment experience may vary from these estimates.

For privately-placed fixed maturity securities, fair values are estimated using model prices or broker quotes. A portion of privately-placed fixed maturity securities (typically SEC Rule 144A securities) are priced using market prices. Also, a small subset of privately-placed fixed maturity securities are priced using matrix applications which take into account credit spreads for a variety of public and private securities of similar credit risk, maturity, prepayment and liquidity characteristics.

The Company’s ability to liquidate positions in privately-placed fixed securities and mortgages could be impacted to a significant degree by the lack of an actively-traded market. Although the Company believes that its estimates reasonably reflect the fair value of those instruments, its key assumptions about risk-free interest rates, risk premiums, performance of underlying collateral (if any), and other factors may not reflect those of an active market.

Equity securities – The fair value of the Company’s equity securities not accounted for under the equity method is first based on quoted market prices. Similar to fixed maturity securities, the Company uses pricing services and broker quotes to price equity securities for which a quoted market price is not available.

Mortgage loans on real estate – The fair value of mortgage loans is estimated by discounting future cash flows using current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.

Derivatives – The fair values of swaps are based on current settlement values, dealer quotes and market prices. Fair values for options and futures are also based on dealer quotes and market prices.

Contract loans – The fair value of policy loans is determined by estimating future policy loan cash flows and discounting the cash flows at a current market interest rate.

Other invested assets – Other invested assets (excluding investments accounted for under the equity method) include low income housing tax credits (“LIHTCs”), surplus debentures, collateral loans and equipment lease trusts. The fair value of LIHTCs and equipment leases approximate their carrying values. The fair values of surplus debentures are obtained from third party pricing services, and collateral loans which are carried at amortized cost using pricing methods similar to private placements.

Separate Accounts – The estimated fair value of Separate Account assets and liabilities is determined using the same methodology described in Note 12. The difference between Separate Account assets and liabilities reflected in the chart above and the total recognized in the Statement of Admitted Assets, Liabilities and Capital and Surplus represents amounts that are considered non-financial instruments.

Contract holder deposit funds – The fair values of the Company’s General Account liabilities under investment-type contracts (insurance and annuity contracts that do not involve mortality or morbidity risks) is estimated using discounted cash flow analyses or surrender values. Those contracts that are deemed to have short-term guarantees have a carrying amount equal to their estimated fair value.

Debt – The fair value of debt is based on future cash flows discounted at the stated interest rate, considering all appropriate terms of the related agreements. Where the issuer of a note has the ability to call the note at par, the fair value is equal to par value.

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2015 AND 2014 AND FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

14.

FEDERAL INCOME TAXES

The application of SSAP No. 101 requires a company to evaluate the recoverability of DTAs and, if necessary, to establish a valuation allowance to reduce the DTA to an amount which is more likely than not to be realized. Considerable judgment is required in determining whether a valuation allowance is necessary and, if so, the amount of such valuation allowance. Although the realization is not assured, management believes it is more likely than not that DTAs will be realized. Therefore, the Company has not recorded a valuation allowance as of December 31, 2015 and December 31, 2014.

The components of the DTAs/DTLs as of December 31, 2015 and December 31, 2014 were as follows:


(In Thousands)	December 31, 2015						December 31, 2014						Change
Description	Ordinary		Capital		Total		Ordinary		Capital		Total		Ordinary			Capital		Total
Gross Deferred Tax Assets	$	368,714	$	—	$	368,714	$	465,109	$	—	$	465,109	$	(96,395	)	$	—	$	(96,395	)
Statutory Valuation Allowance Adjustments		—		—		—		—		—		—		—			—		—

Adjusted Gross Deferred Tax Assets		368,714		—		368,714		465,109		—		465,109		(96,395	)		—		(96,395	)
Deferred Tax Assets Nonadmitted		64,719		—		64,719		176,583		—		176,583		(111,864	)		—		(111,864	)

Subtotal Net Admitted Deferred Tax Assets		303,995		—		303,995		288,526		—		288,526		15,469			—		15,469
Deferred Tax Liabilities		90,618		—		90,618		80,941		—		80,941		9,677			—		9,677

Net Admitted Deferred Tax Assets / (Net Deferred Tax Liabilities)	$	213,377	$	—	$	213,377	$	207,585	$	—	$	207,585	$	5,792		$	—	$	5,792

The following table provides component amounts of the Company’s calculation by tax character of paragraphs 11.a, 11.b.i, 11.b.ii and 11.c of SSAP No. 101:


(In Thousands)	December 31, 2015						December 31, 2014						Change
Description	Ordinary		Capital		Total		Ordinary		Capital		Total		Ordinary		Capital		Total
Admission Calculation Components SSAP No. 101
(a) Admitted pursuant to 11.a.	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
(b) Admitted pursuant to 11.b. (lesser of 11.b.i. or 11.b.ii.)		213,377		—		213,377		207,585		—		207,585		5,792		—		5,792
(c) 11.b.i		—		—		228,470		—		—		222,477		—		—		5,993
(d) 11.b.ii		—		—		213,377		—		—		207,585		—		—		5,792
(e) Admitted pursuant to 11.c.		90,618		—		90,618		80,941		—		80,941		9,677		—		9,677

(f) Total admitted under 11.a.—11.c.		303,995		—		303,995		288,526		—		288,526		15,469		—		15,469
(g) Deferred tax liabilitiess		90,618		—		90,618		80,941		—		80,941		9,677		—		9,677

Net admitted deferred tax assets /deferred tax liabilities	$	213,377	$	—	$	213,377	$	207,585	$	—	$	207,585	$	5,792	$	—	$	5,792

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2015 AND 2014 AND FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013


	2015			2014
Ratio Percentage Used To Determine Recovery Period And Threshold Limitation Amount		1286	%		1021	%
Amount Of Adjusted Capital And Surplus Used To Determine Recovery Period And Threshold Limitation Above	$	1,422,514,602		$	1,383,898,004

The following table provides the impact of tax planning strategies on adjusted gross and net admitted DTAs, as used in the Company’s SSAP No. 101 calculation.


	December 31, 2015						December 31, 2014						Change
(In Thousands)
Description	Ordinary			Capital			Ordinary			Capital			Ordinary			Capital
Impact of Tax Planning Strategies
Determination of Adjusted Gross Deferred Tax Assets and Net Admitted Deferred Tax Assets, by Tax Character as a Percentage.
Adjusted Gross Deferred Tax Assets	$	368,714		$	—		$	465,109		$	—		$	(96,395	)	$	—
Percentage of Adjusted Gross Deferred Tax Assets by Tax Character Attributable to the Impact of Tax Planning Strategies		4.00	%		0.00	%		0.00	%		0.00	%		4.00	%		0.00	%
Net Admitted Adjusted Gross Deferred Tax Assets	$	303,995		$	—		$	288,526		$	—		$	15,469		$	—
Percentage of Net Admitted Adjusted
Gross Deferred Tax Assets by Tax Character Because of the Impact of Tax Planning Strategies		6.00	%		0.00	%		0.00	%		0.00	%		6.00	%		0.00	%

The Company’s tax planning strategies included the use of reinsurance.

The Company has no temporary difference for which a DTL has not been established.

The following tables provide the Company’s significant components of income taxes incurred and the changes in DTAs and DTLs.


(In Thousands)	December 31, 2015			December 31, 2014			December 31, 2013
Current Income Tax
Federal tax benefit from operations	$	(2,729	)	$	6,861		$	(84,275	)
Federal income tax on net capital gains		6,099			(3,669	)		28,847
Federal tax (benefit) expense on stock options		—			—			(539	)

Current income tax expense (benefit)	$	3,370		$	3,192		$	(55,967	)

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2015 AND 2014 AND FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

The main components of DTAs and DTLs as of December 31, 2015 and 2014 were as follows:


(In Thousands)	December 31, 2015		December 31, 2014		Change
Deferred Tax Assets:
Ordinary
Policyholder reserves	$	242,840	$	255,322	$	(12,482	)
Investments		40,433		68,253		(27,820	)
Deferred acquisition costs		14,715		15,202		(487	)
Net operating loss carry-forward		29,529		82,000		(52,471	)
Other (including items <5% of total ordinary tax assets)		41,197		44,332		(3,135	)

Total ordinary Deferred Tax Assets	$	368,714	$	465,109	$	(96,395	)
Statutory valuation allowance adjustment	$	—	$	—	$	—
Nonadmitted		64,719		176,583		(111,864	)

Admitted ordinary Deferred Tax Assets	$	303,995	$	288,526	$	15,469
Capital:
Investments		—		—		—
Net capital loss carry-forward		—		—		—

Subtotal	$	—	$	—	$	—
Statutory valuation allowance adjustment	$	—	$	—	$	—
Nonadmitted		—		—		—

Admitted capital Deferred Tax Assets	$	—	$	—	$	—

Admitted Deferred Tax Assets	$	303,995	$	288,526	$	15,469

Deferred Tax Liabilities:
Ordinary
Investments	$	17,154	$	13,240	$	3,914
Policyholder reserves		73,464		67,701		5,763
Other (including items <5% of total ordinary tax liabilities)		—		—		—

Subtotal	$	90,618	$	80,941	$	9,677
Capital:
Investments		—		—		—

Subtotal	$	—	$	—	$	—

Deferred Tax Liabilities	$	90,618	$	80,941	$	9,677

Net admitted Deferred Tax Assets / Deferred Tax Liabilities	$	213,377	$	207,585	$	5,792

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2015 AND 2014 AND FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

The change in net deferred income taxes was comprised of the following:


(In Thousands) Description	December 31, 2015		December 31, 2014		Change
Total Deferred Tax Assets	$	368,714	$	465,109	$	(96,395	)
Total Deferred Tax Liabilities		90,618		80,941		9,677

Net Deferred Tax Assets / Deferred Tax Liabilities	$	278,096	$	384,168	$	(106,072	)
Statutory valuation allowance		—		—		—

Net Deferred Tax Assets / Deferred Tax Liabilities	$	278,096	$	384,168	$	(106,072	)
Tax effect of unrealized (gains)/losses						(4,932	)

Change in net deferred income tax					$	(101,140	)

The provision for federal income taxes incurred for the current year is different from that which would be obtained by applying the statutory federal income tax rate to income before income taxes. The significant items causing this difference at December 31, 2015, 2014 and 2013 were as follows:


(In Thousands)	December 31, 2015								December 31, 2014								December 31, 2013
Description	Amount		Tax Effect @ 35%			Effective Tax Rate			Amount		Tax Effect @ 35%			Effective Tax Rate			Amount		Tax Effect @ 35%			Effective Tax Rate
Net income before taxes	$	278,305	$	97,407			25.1	%	$	302,994	$	106,048			28.3	%	$	486,232	$	170,182			28.5	%
Pre-tax capital gains—Pre IMR		109,454		38,309			9.9	%		71,313		24,960			6.7	%		110,202		38,571			6.5	%
Dividends received deduction				(23,864	)		-6.2	%				(11,550	)		-3.1	%				(14,000	)		-2.3	%
Tax credits				(2,594	)		-0.7	%				(932	)		-0.2	%				(4,752	)		-0.8	%
Non-deductible expenses				99			0.1	%				119			0.0	%				496			0.1	%
Change in tax contingency reserves				—			0.0	%				—			0.0	%				(2,271	)		-0.4	%
Reversal of IMR				(5,939	)		-1.5	%				(1,928	)		-0.5	%				(20,514	)		-3.4	%
Change in non-admitted assets				1,283			0.3	%				2,520			0.7	%				(2,259	)		-0.4	%
Prior year adjustments				(301	)		-0.1	%				(4,839	)		-1.3	%				(572	)		-0.1	%
Retained deferred tax asset				—			0.0	%				5,133			1.4	%				347,765			58.2	%
Change in statutory valuation allowance				—			0.0	%				—			0.0	%				(379,797	)		-63.7	%
Other				110			0.1	%				7,321			2.0	%				13,479			2.3	%

Total statutory income taxes			$	104,510			27.0	%			$	126,852			34.0	%			$	146,328			24.5	%

Federal income taxes incurred			$	3,370			0.9	%			$	3,192			0.9	%			$	(55,967	)		-9.4	%
Change in net deferred income taxes				101,140			26.1	%				123,660			33.1	%				202,295			33.9	%

Total statutory income taxes			$	104,510			27.0	%			$	126,852			34.0	%			$	146,328			24.5	%

At December 31, 2015, the Company had $84.4 million of net operating loss carry forward which will begin to expire, if not utilized, by 2028. At December 31, 2015, the Company had no capital loss carry forward. At December 31, 2015, the Company had $17.9 million of foreign tax credit carry forward, which will begin to expire, if not utilized, by 2019. At December 31, 2015, the Company had $10.3 million of LIHTC carry forward, which will begin to expire, if not utilized, by 2030. At December 31, 2015, the Company had no minimum tax credit carry forward.

At December 31, 2015, the Company has no income taxes incurred in the current or preceding years that will be available for recoupment in the event of future net losses.

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2015 AND 2014 AND FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

The Company has no deposits admitted under Section 6603 of the Internal Revenue code.

Tax years prior to 2003 are closed to examination and audit adjustments under the applicable statute of limitations. The Company is subject to ongoing examinations for subsequent tax years as a member of the Former Parent’s consolidated federal income tax returns. On October 7, 2014, an opening conference for appeals was held for tax years 2007, 2008 and 2009 for the former consolidated return. The 2003 through 2006 tax years for the consolidated return are still in the appeals process with the Internal Revenue Service (the “IRS”). The 2010 through 2013 tax years are currently being examined by the IRS. The opening conference was held on June 17, 2014. Although the Company remains jointly and severally liable for consolidated tax liabilities, the Company is held harmless in accordance with the Sale Transaction agreement and believes that the possibility of a tax liability for the pre-sale tax years is remote. Additionally, the Company does not believe it has any uncertain tax positions for its federal income tax return that would be material to its financial condition, results of income, or cash flows. Therefore, the Company did not record a liability for unrecognized tax benefits (“UTBs”) as of December 31, 2015 and 2014. As of December 31, 2015 there were no positions for which management believes it is reasonably possible that the total amounts of tax contingencies will significantly increase within 12 months of the reporting date.

The Company recognizes interest accrued related to UTBs in income tax expense. The Company had no accrued interest balance as of December 31, 2015 and December 31, 2014. The Company recognized no gross interest benefit related to UTBs during the years ended December 31, 2015, 2014, and 2013. The Company has not accrued any penalties related to UTBs.

The Company will file a consolidated federal income tax return for the December 31, 2015 tax year with its wholly owned subsidiary, DLNY, and will continue to do so in future tax years under Internal Revenue Code Section 1504(c)(1). A formal tax allocation agreement has been implemented and allocation is based upon separate return calculations with current credit (benefit) given for losses and tax attributes that are utilized by the consolidated group. Intercompany tax balances are settled on a quarterly basis and a final true up is made after the filing of the federal income tax return, as prescribed by the terms of the agreement.

15.

CAPITAL STOCK AND SURPLUS AND DIVIDEND RESTRICTIONS

The Company is authorized to issue 10,000 shares of common stock with a par value of $1,000 per share; 6,437 shares of common stock are issued and outstanding. The Company is not authorized to issue preferred stock.

The Company’s ability to pay dividends is subject to certain statutory restrictions. The State of Delaware has enacted laws governing the payment of dividends to stockholders by domestic insurers. Pursuant to Delaware’s statute, the maximum amount of dividends and other distributions that a domestic insurer may pay in any twelve-month period without the prior approval of the Delaware Commissioner of Insurance is limited to the greater of: (i) 10% of its statutory surplus as of the preceding December 31; or (ii) the Company’s statutory net gain from operations for the preceding calendar year. Any dividends to be paid by an insurer, whether or not in excess of the aforementioned threshold, from a source other than statutory surplus would also require the prior approval of the Commissioner. In connection with the change in control of the Company on August 2, 2013, any portion of a dividend which would cause the Company’s total adjusted capital as of the most recent calendar quarter end to fall below 300% of Company Action Level NAIC Risk-Based Capital as of such calendar quarter end, after taking into account the payment of such dividend, requires the prior approval of the Department.

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2015 AND 2014 AND FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

In March 2014, the Company paid an ordinary dividend of $185.0 million to the Parent. In March 2015, the Company paid an ordinary dividend of $200 million to the Parent. In September 2015, the Company paid an ordinary dividend of $75 million to the Parent and received an ordinary dividend of $36.5 million from its wholly-owned subsidiary, DLNY. In November 2015, the Company paid a dividend of $36.5 million to the Parent, of which $21.1 million was ordinary and $15.4 million extraordinary. Per the limitation described above, the Company was not permitted to pay dividends in 2014 without prior approval from the Delaware Commissioner of Insurance. No dividends were paid during 2013.

Effective July 21, 2014, following the receipt of all required board of directors, shareholder, and regulatory approvals, the Company’s name changed from Sun Life Assurance Company of Canada (U.S.) to Delaware Life Insurance Company.

The Company recorded a restatement of gross paid-in and contributed surplus and unassigned funds under a quasi-reorganization pursuant to SSAP No. 72, Surplus and Quasi-reorganizations. The restatement was recorded as of June 30, 2013 and did not change the Company’s total surplus. The quasi-reorganization was approved by the Department.

The impact of the quasi-reorganization was as follows:


(In Thousands)
	Change in Year Surplus		Change in Gross Paid-in
	(Unassigned Funds)		and Contributed Surplus
2013	$	1,851,883	$	(1,851,883	)

Reset of surplus effective June 30, 2013. Unassigned surplus adjusted for the net impact of OTTI recorded on hybrid securities totaling $12.6 million.

16.

RISK-BASED CAPITAL

Life and health insurance companies are subject to certain Risk-Based Capital (“RBC”) requirements as specified by the NAIC. The RBC requirements provide a method for measuring the minimum acceptable amount of adjusted capital that a life insurer should have, as determined under statutory accounting principles, taking into account the risk characteristics of its investments and products. The Company met the minimum RBC requirements at December 31, 2015 and 2014.

17.

COMMITMENTS AND CONTINGENT LIABILITIES

Contingent commitments

The Company had commitments for future private placement findings and limited partnership investments of $390.1 million and $25.0 million as of December 31, 2015 and 2014, respectively.

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2015 AND 2014 AND FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

Regulatory and industry developments

Under insurance guaranty fund laws in each state, the District of Columbia and Puerto Rico, insurers licensed to do business can be assessed by state insurance guaranty associations for certain obligations of insolvent insurance companies to policyholders and claimants. Most of these laws do provide, however, that an assessment may be excused or deferred if it would threaten an insurer’s solvency and further provide annual limits on such assessments. Part of the assessments paid by the Company pursuant to these laws may be used as credits for a portion of the associated premium taxes.

Various insolvencies reported by the National Organization of Life and Health Insurance Guaranty Associations, will result in retrospective premium-based guaranty fund assessments against the Company. Based on the best information available, the Company has recorded an accrued liability of $3.5 million for guaranty fund assessments as of December 31, 2015 and 2014. The Company does not know the period over which the guaranty fund assessments are expected to be paid.

The Company has not established any asset for premium tax credits or policy surcharges as their recoveries are not estimable.

Litigation, Income Taxes and Other Matters

In Revenue Ruling 2007-61, issued on September 25, 2007, the IRS announced its intention to issue regulations with respect to certain computational aspects of the dividend received deduction (the “DRD”) on separate account assets held in connection with variable annuity contracts. Revenue Ruling 2007-61 suspended Revenue Ruling 2007-54, issued on August 16, 2007, that purported to change accepted industry and IRS interpretations of the statutes governing computational questions impacting the DRD. On May 30, 2010, the IRS issued an Industry Director Directive which makes it clear that IRS interpretations prior to Revenue Ruling 2007-54 should be followed until new regulations are issued.

On February 4, 2014, the IRS issued Rev. Rul. 2014-7, 2014-9 I.R.B. 539, which stated that Rev. Rul. 2007-54 is thereby modified and superseded, and that Rev. Rul. 2007-61 is obsoleted. Accordingly, the required interest holding, which was used in calculation of the company’s share of DRD, is no longer a published position of the IRS and is viewed as effectively being revoked. Priority Guidance Plans released subsequent to the publication of Rev. Rul. 2014-7 do not include a project concerning the determination of the company’s share under section 812. For now, the issue has been resolved by the LB&I Industry Director’s Directive, Examination of Dividends Received Deduction on Separate Accounts of Life Insurance Companies, LMSB-4-0510-015 (May 20, 2010), which permits calculating required interest at another appropriate rate using a modified version of the formula, set forth in Treas. Reg. § 801-8(e). For the years ended December 31, 2015 and 2014, the Company’s financial statements reflect benefits of $10.6 million and $8.9 million, respectively, related to the separate account DRD.

The Company is not aware of any contingent liabilities arising from litigation or other matters that could have a material effect upon the financial condition, results of operations or cash flows of the Company.

Indemnities

In the normal course of its business, the Company has entered into agreements that include indemnities in favor of third parties, such as contracts with advisors and consultants, outsourcing agreements, underwriting and agency agreements, information technology agreements, distribution agreements, and service agreements. The Company has also agreed to indemnify its directors, officers and employees in accordance with the Company’s by-laws. The Company believes any potential liability under these agreements is neither probable nor estimable. Therefore, the Company has not recorded any associated liability.

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2015 AND 2014 AND FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

Under the Sale Transaction Agreement, the acquired companies, including the Company and DLNY, and their respective affiliates are indemnified from and against (i) breach of customary representations, warranties and covenants of SLF set forth in the Sale Transaction Agreement and (ii) other specified matters, including losses arising from pending or threatened litigation as of the closing of the Sale Transaction (August 2, 2013), certain excluded assets that were transferred from the acquired companies to SLF’s affiliates at or prior to closing of the Sale Transaction, including the group insurance business previously conducted by DLNY, certain environmental liabilities and certain liabilities arising under unclaimed property laws.

Pledged or Restricted Assets

The following assets were restricted at December 31, 2015 and reported in the current financial statements:

•

Posted collateral under repurchase agreements which were reported as bonds and preferred stocks.

•

Cash collateral posted under reverse repurchase agreement which were reported as cash equivalents.

•

Certain FHLB capital stock.

•

Certain bonds were on deposit with governmental authorities as required by law.

•

Certain cash deposits were held in a mortgage escrow account (see “Other restricted assets” below).

•

Derivative cash collateral received was reported as cash equivalents (see “Assets pledged as collateral not captured in other categories” below).

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2015 AND 2014 AND FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

The following are restricted assets (including pledged assets):


Gross Restricted
(In Thousands)																		Percentage
Restricted Asset Category	Total General Account (G/A)		G/A Supporting S/A Activity		Current Year Total Separate Account S/A Assets Restricted		S/A Assets Supporting G/A Activity		Total		Total From Prior Year		Increase/ (Decrease)			Total Current Year Admitted Restricted		Gross Restricted Total Assets			Admitted Restricted to Total Admitted
Subject to contractual obligation for which liability is not shown	$	—	$	—	$	—	$	—	$	—	$	—	$	—		$	—		0	%		0	%
Collateral held under security lending agreements		—		—		—		—		—		—		—			—		0	%		0	%
Subject to repurchase agreements		440,852		—		—		—		440,852		547,642		(106,790	)		440,852		1.19	%		1.19	%
Subject to reverse repurchase agreements		271,730		—		—		—		271,730		332,969		(61,239	)		271,730		0.73	%		0.74	%
Subject to dollar repurchase agreements		—		—		—		—		—		—		—			—		0	%		0.00	%
Subject to dollar reverse repurchase agreements		—		—		—		—		—		—		—			—		0	%		0	%
Placed under option contracts		—		—		—		—		—		—		—			—		0	%		0	%
Letter stock or securities restricted as to sale		—		—		—		—		—		—		—			—		0	%		0	%
FHLB capital stock		5,981		—		—		—		5,981		10,500		(4,519	)		5,981		0.02	%		0.02	%
On deposit with states		4,050		—		—		—		4,050		4,051		(1	)		4,050		0.01	%		0.01	%
On deposit with other regulatory bodies		—		—		—		—		—		—		—			—		0	%		0	%
Pledged as collateral to FHLB (including securities and CML)		607,594		—		—		—		607,594		269,387		338,207			607,594		1.64	%		1.64	%
Pledged as collateral not captured (including assets backing funding agreements)		141,002		—		—		—		141,002		103,987		37,015			141,002		0.38	%		0.38	%
Other restricted assets		349,705		—		—		—		349,705		1,415,320		(1,065,615	)		349,705		0.94	%		0.94	%

Total restricted assets	$	1,820,914	$	—	$	—	$	—	$	1,820,914	$	2,683,856	$	(862,942	)	$	1,820,914		4.91	%		4.92	%

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2015 AND 2014 AND FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

The following are assets pledged as collateral in other categories (contracts that share similar characteristics, such as reinsurance and derivatives, are reported in the aggregate):


Gross Restricted
(In Thousands)	Current Year																	Percentage
Description of Assets	Total General Account (G/A)		G/A Supporting S/A Activity		Total Separate Account (S/A) Restricted Assets		S/A Assets Supporting G/A Activity		Total		Total From Prior Year		Increase/ (Decrease)			Total Current Year Admitted Restricted		Gross Restricted Total Assets			Admitted Restricted to Total Admitted Assets
Bond collateral to Societe Generale	$	37,610	$	37,610	$	—	$	—	$	37,610	$	—	$	37,610		$	37,610		0.10	%		0.10	%
Derivative collateral		103,392		103,392		—		—		103,392		103,987		(595	)		103,392		0.28	%		0.28	%

Total	$	141,002	$	141,002	$	—	$	—	$	141,002	$	103,987	$	37,015		$	141,002		0.38	%		0.38	%

The following are other restricted assets pledged as collateral in other categories (contracts that share similar characteristics, such as reinsurance and derivatives, are reported in the aggregate):


Gross Restricted
(In Thousands)	Current Year																	Percentage
Description of Assets	Total General Account (G/A)		G/A Supporting S/A Activity		Total Separate Account (S/A) Restricted Assets		S/A Assets Supporting G/A Activity		Total		Total From Prior Year		Increase/ (Decrease)			Total Current Year Admitted Restricted		Gross Restricted Total Assets			Admitted Restricted to Total Admitted Assets
Mortgage escrow	$	3,142	$	—	$	—	$	—	$	3,142	$	6,251	$	(3,109	)	$	3,142		0.01	%		0.01	%
Restricted Cash -from policy holders		57,070		—		—		—		57,070		—		57,070			57,070		0.15	%		0.15	%
Restricted Cash -Collateral from unsettled trades		289,493		—		—		—		289,493		1,409,069		(1,119,576	)		289,493		0.78	%		0.78	%

Total	$	349,705	$	—	$	—	$	—	$	349,705	$	1,415,320	$	(1,065,615	)	$	349,705		0.94	%		0.94	%

Collateral for unsettled trades includes cash received from sales of S&P 500 Index exchange traded funds which funds were not yet purchased. A liability for the future purchase of the funds is included as payable for securities.

Lease Commitments

Effective August 1, 2013, the Company entered into a lease agreement for its former Massachusetts office. Rental expenses for 2015, 2014 and 2013 were $2.1 million, $2.1 million and $0.9 million, respectively.

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2015 AND 2014 AND FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

From January 1, 2013 to July 31, 2013, the Company leased equipment under non-cancelable operating lease agreements. Rental expenses, including allocated amounts, for 2013 were approximately $2.5 million.

Effective January 22, 2014, the Company entered into a lease agreement for its Indiana office. Rental expenses for 2015 and 2014 were $0.2 million and $0.1 million, respectively.

Effective September 24, 2014, the Company entered into a lease agreement for its new Massachusetts office. Rental expense for 2015 was $0.9 million. No rental expense was incurred for 2014.

a. At January 1, 2016, minimum aggregate rental commitments were as follows:


Year Ending December 31	(In Thousands) Operating Leases
1. 2016		1,357
2. 2017		1,362
3. 2018		1,366
4. 2019		1,371
5. 2020		1,375

6. Aggregate total all future years	$	2,862

18.

DEBT

On April 1, 2014, the Company entered into a $500.0 million revolving credit facility (the “Facility”) with Bank of America Merrill Lynch. Borrowings under the Facility were for general corporate purposes. Borrowings bear interest at LIBOR + 125 basis points, with a commitment fee of 30 basis points for any unused portion of the Facility, and the Facility had a 180 day tenor. The Facility was secured by certain securities held in an account established for this purpose, and borrowings were limited to a specified percentage of the value of the securities in this account. The total interest paid under the Facility in 2014 was approximately $1.1 million. This facility was terminated on December 22, 2014.

On December 12, 2014, the Company entered into a $350.0 million revolving credit facility (the “Replacement Facility”) with Societe Generale. Borrowings under the Replacement Facility may be used for general corporate purposes. Borrowings bear interest at LIBOR + 115 basis points, with a commitment fee of 48 basis points for any unused portion of the Replacement Facility, and the Replacement Facility has a 270 days rolling margin commitment. The Replacement Facility is secured by certain securities held in an account established for this purpose, and borrowings are limited to a specified percentage of the value of the securities in this account. The total commitment fees paid in 2015 and 2014 were approximately $1.7 million and $90 thousand respectively and the total interest paid under the Replacement Facility in 2015 and 2014 was approximately $27 thousand and $90 thousand, respectively. At December 31, 2015, there was $25 million outstanding under the Replacement Facility.

The Company is a member of the Federal Home Loan Bank of Indianapolis (the “FHLB”). Through its membership, the Company has conducted business activity (borrowings) with the FHLB. It is part of the Company’s strategy to utilize these funds for back-up liquidity. The Company determined that its estimated maximum borrowing capacity available at December 31, 2015 as $132.9 million. The Company calculated this amount in accordance with its current FHLB capital stock. At December 31, 2015 there were no amounts outstanding.

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2015 AND 2014 AND FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

FHLB Capital Stock

a. Aggregate Totals


1 Year Ended 2015 (In Thousands)	1 Total 2+3		2 General Account		3 Separate Accounts
(a) Membership Stock – Class A	$	—	$	—	$	—
(b) Membership Stock – Class B		2,640		2,640		—
(c) Activity Stock		—		—		—
(d) Excess Stock		3,341		3,341		—
(e) Aggregate Total (a+b+c+d)		5,981		5,981		—
(f) Actual or estimated Borrowing Capacity as Determined by the Insurer		132,916		XXX		XXX
2 Year Ended 2014 (In Thousands)
(a) Membership Stock – Class A	$	—	$	—	$	—
(b) Membership Stock – Class B		641		641		—
(c) Activity Stock		8,809		8,809		—
(d) Excess Stock		1,050		1,050		—
(e) Aggregate Total (a+b+c+d)		10,500		10,500		—
(f) Actual or estimated Borrowing Capacity as Determined by the Insurer		233,333		XXX		XXX

b. Membership Stock (Class A and B) Eligible for Redemption


(In Thousands)
Membership stock	Current Year Total		Not Eligible for Redemption		Less Than 6 Months		6 months to Less Than 1 Year		1 to Less Than 3 Years		3 to 5 Years
Class A		—		—		—		—		—		—
Class B	$	5,981	$	5,981		—		—		—		—

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2015 AND 2014 AND FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

Collateral Pledged to FHLB

a. Amount Pledged as of Reporting Date


	1		2		3
(in thousands)	Fair Value		Carrying Value		Aggregate Total Borrowing
1. Current Year Total General and Separate Accounts Total Collateral Pledged (Lines 2+3)	$	616,227	$	607,594	$	396,439
2. Current Year General Account Total Collateral Pledged		526,738		518,917		329,983
3. Current Year Separate Accounts Total Collateral Pledged		89,489		88,677		66,456

4. Prior Year-end Total General and Separate Accounts Total Collateral Pledged	$	276,982	$	269,387	$	229,589

b. Maximum Amount Pledged During Reporting Period


	1		2		3
(in thousands)	Fair Value		Carrying Value		Aggregate Total Borrowing
1. Current Year Total General and Separate Accounts Maximum Collateral Pledged (Lines 2+3)	$	616,227	$	607,594	$	396,439
2. Current Year General Account Maximum Collateral Pledged		526,738		518,917		329,983
3. Current Year Separate Accounts Maximum Collateral Pledged		89,489		88,677		66,456

4. Prior Year-end Total General and Separate Accounts Maximum Collateral Pledged	$	276,982	$	269,387	$	229,589

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2015 AND 2014 AND FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

Borrowing from FHLB

a. Amount as of Reporting Date


	1		2		3		4
	Total		General		Separate		Funding Agreements
1 Current Year (In Thousands)	2+3		Account		Accounts		reserves Established
(a) Debt	$	—	$	—	$	—		XXX
(b) Funding Agreements		—		—		—		XXX
(c) Other		—		—		—
(d) Aggregate Total	$	—	$	—	$	—

`	1		2		3		4
	Total		General		Separate		Funding Agreements
1 Prior Year (In Thousands)	2+3		Account		Accounts		reserves Established
(a) Debt	$	210,000	$	210,000	$	—		XXX
(b) Funding Agreements		—		—		—		XXX
(c) Other		—		—		—
(d) Aggregate Total	$	210,000	$	210,000	$	—

b. Maximum Amount during Reporting Period (Current Year)


	1		2		3
(In Thousands)	Total		General		Separate
	2+3		Account		Accounts
(1) Debt	$	210,000	$	210,000	$	—
(2) Funding Agreements		—		—		—
(3) Other		—		—		—
(4) Aggregate Total	$	210,000	$	210,000	$	—

c. FHLB – Prepayment Obligations


		Does the Company have prepayment Obligations under the following arrangements (YES/NO)
(1) Debt		YES
(2) Funding Agreements		NO
(3) Other		NO

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2015 AND 2014 AND FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

19.

SUBSEQUENT EVENTS

On March 28, 2016, the Company paid a $200 million dividend, of which $169.5 million was ordinary and $30.5 million was extraordinary, to the Parent. The Company is not aware of any other events that occurred subsequent December 31, 2015 that would have had a material effect on the financial statements. The Company has evaluated events that occurred from January 1, 2016 to April 29, 2016, the date the financial statements were available to be issued.

PART C

OTHER INFORMATION

Item 24. FINANCIAL STATEMENTS AND EXHIBITS

(a)

The following Financial Statements are included in the Registration Statement:

Condensed Financial Information - Accumulation Unit Values (Part A)

Financial Statements of the Depositor (Part B)

Independent Auditors’ Reports;

Statutory-Basis Statements of Admitted Assets, Liabilities, and Capital Stock and Surplus as of December 31, 2015 and 2014;

Statutory-Basis Statements of Operations for the Years Ended December 31, 2015, 2014 and 2013;

Statutory-Basis Statements of Changes in Capital Stock and Surplus for the Years Ended December 31, 2015, 2014 and 2013;

Statutory-Basis Statements of Cash Flows for the Years Ended December 31, 2015, 2014 and 2013; and

Notes to Statutory-Basis Financial Statements.

Financial Statements of the Registrant (Part B)

Report of Independent Registered Public Accounting Firm;

Statements of Assets and Liabilities, December 31, 2015;

Statements of Operations, Year Ended December 31, 2015;

Statements of Changes in Net Assets, Years Ended December 31, 2015 and 2014; and

Notes to Financial Statements.

(b)

The following Exhibits are incorporated in the Registration Statement by reference unless otherwise indicated:


(1)		Resolution of Board of Directors of the Depositor dated August 11, 2011, authorizing the establishment of Delaware Life Variable Account L and the reorganization of the Registrant from a managed separate account to a unit investment trust (Incorporated herein by reference to the Registration Statement on Form N-4, File No. 002-79141, filed on September 13, 2011);

(2)		Not Applicable;

(3)(a)(i)		Principal Underwriter’s Agreement by and between Sun Life Assurance Company of Canada (U.S.) and Clarendon Insurance Agency, Inc. (Incorporated herein by reference to Post-Effective Amendment No. 16 to the Registration Statement of Delaware Life Variable Account F on Form N-4, File No. 333-83364, filed on or about April 27, 2009);

(3)(a)(ii)		Amendment No. 1 to Principal Underwriter’s Agreement by and between Sun Life Assurance Company of Canada (U.S.) and Clarendon Insurance Agency, Inc. (Incorporated herein by reference to Post-Effective Amendment No. 16 to the Registration Statement of Delaware Life Variable Account F on Form N-4 (File No. 333-83364) filed on or about April 27, 2009);

(3)(a)(iii)		Amendment No. 2 to Principal Underwriter’s Agreement by and between Sun Life Assurance Company of Canada (U.S.) and Clarendon Insurance Agency, Inc. (Incorporated herein by reference to Post-Effective Amendment No. 12 to the Registration Statement of Delaware Life Variable Account I on Form N-6, File No. 333-100829, filed on April 30, 2009);

(3)(a)(iv)		Amendment No. 3 to Principal Underwriter’s Agreement by and between Sun Life Assurance Company of Canada (U.S.) and Clarendon Insurance Agency, Inc. (Incorporated herein by reference to Post-Effective Amendment No. 12 to the Registration Statement of Delaware Life Variable Account I on Form N-6, File No. 333-100829, filed on April 30, 2009);

(3)(b)(i)		Sales Operations and General Agent Agreement (Incorporated herein by reference to Pre-Effective Amendment No. 1 to the Registration Statement of Delaware Life Variable Account F on Form N-4, File No. 333-37907, filed on January 16, 1998);

(3)(b)(ii)		Broker-Dealer Supervisory and Service Agreement (Incorporated herein by reference to Pre-Effective


		Amendment No. 1 to the Registration Statement of Delaware Life Variable Account F on Form N-4, File No. 333-37907, filed on January 16, 1998); and

(3)(c)(iii)		General Agent Agreement (Incorporated herein by reference to Pre-Effective Amendment No. 1 to the Registration Statement of Delaware Life Variable Account F on Form N-4, File No. 333-37907, filed on January 16, 1998);

(4)		Individual Flexible Payment Deferred Annuity Contract (Compass 3 Variable Annuity Contract) (Incorporated herein by reference to Post-Effective Amendment No. 23 to the Registration Statement on Form N-3, File No. 002-79141, filed on March 6, 1998);

(5)		Application used with the annuity contract filed as Exhibit 4 (Incorporated herein by reference to Post-Effective Amendment No. 23 to the Registration Statement on Form N-3, File No. 002-79141, filed on March 6, 1998);

(6)(a)		Certificate of Incorporation of the Depositor (Incorporated herein by reference to Post-Effective Amendment No. 51 to the Registration Statement Delaware Life Variable Account F on Form N-4, File No. 333-83516, filed on August 11, 2014);

(6)(b)		By-Laws of the Depositor (Incorporated herein by reference to Post-Effective Amendment No. 51 to the Registration Statement Delaware Life Variable Account F on Form N-4, File No. 333-83516, filed on August 11, 2014);

(7)		Not Applicable;

(8)		Participation Agreement, dated December 10, 2012, by and among MFS Variable Insurance Trusts I, II and III, Sun Life Assurance Company of Canada (U.S.), Sun Life Insurance and Annuity Company of New York, and Massachusetts Financial Services Company. (Incorporated herein by reference to Post-Effective Amendment No. 24 to the Registration Statement of Sun Life of Canada (U.S.) Variable Account G on Form N-6, File No. 333-65048, filed on December 10, 2012);

(9)		Opinion of Counsel as to the legality of the securities being registered and Consent to its use;*

(10)(a)		Consent of Independent Registered Public Accounting Firm;*

(10)(b)		Representation of Counsel pursuant to Rule 485(b);*

(11)		Not Applicable;

(12)		Not Applicable;

(13)		Schedule for Computation of Performance Quotations (Incorporated herein by reference to Post-Effective Amendment No. 10 to the Registration Statement of Delaware Life Variable Account F of the Registrant on Form N-4, File No. 033-41628, filed on April 29, 1998);

(14)(a)		Powers of Attorney;*

(14)(b)		Resolution of the Board of Directors of the depositor dated April 27, 2016 authorizing the use of powers of attorney for Officer signatures (Incorporated herein by reference to Post-Effective Amendment No. 53 to the Registration Statement Delaware Life Variable Account F on Form N-4, File No. 333-83516, filed on May 2, 2016);

(15)		Organizational Chart (Incorporated by reference to Post-Effective Amendment No. 53 to the Registration Statement of Delaware Life Variable Account F on Form N-4, File No. 333-83516, filed on May 2, 2016);

(16)		Master Services Agreement by and between Sun Life Assurance Company of Canada (U.S.) and se², Inc., dated December 1, 2013 (Incorporated herein by reference to Post-Effective Amendment No. 15 to the Registration Statement on Form N-6, File No. 333-143354, filed on April 29, 2015).

*	Filed herewith.

Item 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR


Name and Principal Business Address		Positions and Offices With Depositor

Dennis A. Cullen 811 Turnberry Lane Northbrook, IL 60062		Director

David E. Sams, Jr. Delaware Life Insurance Company 1601 Trapelo Road, Suite 30 Waltham, MA 02451		Chief Executive Officer and Director

Daniel J. Towriss Delaware Life Insurance Company 1601 Trapelo Road, Suite 30 Waltham, MA 02451		President, Chief Risk Officer and Director

Michael S. Bloom Delaware Life Insurance Company 1601 Trapelo Road, Suite 30 Waltham, MA 02451		Senior Vice President and General Counsel and Secretary

Keith A. Dall Delaware Life Insurance Company 1601 Trapelo Road, Suite 30 Waltham, MA 02451		Executive Vice President, Chief Actuary

Andrew F. Kenney Delaware Life Insurance Company 1601 Trapelo Road, Suite 30 Waltham, MA 02451		Chief Investment Officer

Michael K. Moran Delaware Life Insurance Company 1601 Trapelo Road, Suite 30 Waltham, MA 02451		Senior Vice President and Chief Accounting Officer and Treasurer

James D. Purvis Delaware Life Insurance Company 1601 Trapelo Road, Suite 30 Waltham, MA 02451		Chief Operating Officer

Robert S. Sabatino Delaware Life Insurance Company 1601 Trapelo Road, Suite 30 Waltham, MA 02451		Senior Vice President, Information Technology and Operations

Michelle B. Wilcon Delaware Life Insurance Company 1601 Trapelo Road, Suite 30 Waltham, MA 02451		Senior Vice President, Human Resources

Item 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR REGISTRANT

No person is directly or indirectly controlled by the Registrant. The Registrant is a separate account of the Depositor, Delaware Life Insurance Company of Canada (U.S.), which is a wholly-owned subsidiary of Delaware Life Holdings, LLC.

The organization chart of the Depositor and Registrant is incorporated by reference to Post-Effective Amendment No. 53 to the Registration Statement on Form N-4, File No. 333-83516, filed May 2, 2016.

None of the companies listed in such Exhibit 15 is a subsidiary of the Registrant, therefore the only financial statements being filed are those of Delaware Life Insurance Company.

Item 27. NUMBER OF CONTRACT OWNERS

As of March 9, 2016 there were 3,927 qualified and 1,237 non-qualified contract owners.

Item 28. INDEMNIFICATION

Pursuant to Section 145 of the Delaware Corporation Law, Article 8 of the By-laws of Delaware Life Insurance Company (a copy of which was filed as Exhibit (6)(b) to Post-Effective Amendment No. 51 to the Registration Statement on Form N-4, File No. 333-83516, on August 11, 2014 ), provides for the indemnification of directors, officers and employees of Delaware Life Insurance Company. Insofar as indemnification for liability arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of Delaware Life Insurance Company pursuant to the certificate of incorporation, by-laws, or otherwise, Delaware Life Insurance Company 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 Delaware Life Insurance Company of expenses incurred or paid by a director, officer, controlling person of Delaware Life Insurance Company 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, Delaware Life Insurance Company will submit to a court of appropriate jurisdiction the question whether such indemnification by them is against public policy as expressed in the Act, unless in the opinion of their counsel the matter has been settled by controlling precedent, and will be governed by the final adjudication of such issue.

Item 29. PRINCIPAL UNDERWRITERS

(a) Clarendon Insurance Agency, Inc., a wholly-owned subsidiary of Delaware Life Insurance Company, acts as general distributor for the Registrant, Delaware Life Variable Accounts C, D, E, F, G, I, and K; Keyport Variable Account A; KMA Variable Account; Keyport Variable Account I; KBL Variable Account A; KBL Variable Annuity Account; and Delaware Life NY Variable Accounts A, B, C, D, J, and N.


(b)	Name and Principal Business Address*	Position and Offices with Underwriter
	Thomas G. Seitz	President and Director
	Michael K. Moran	Financial Operations Principal and Treasurer and Director
	Michael S. Bloom	Secretary and Director
	Kathleen T. Baron	Chief Anti-Money Laundering Compliance Officer
	Kenneth N. Crowley	Assistant Vice President and Senior Counsel
	Lakshmi S. Krishnan	Tax Officer
	Maura A. Murphy	Assistant Vice President and Senior Counsel
	Maryellen Percuoco	Clerk and Assistant Secretary

*	The principal business address of all directors and officers of the principal underwriter is, 1601 Trapelo Road, Suite 30, Waltham, Massachusetts 02451.

Item 30. LOCATION OF ACCOUNTS AND RECORDS

Accounts, books and other documents required to be maintained by Section 31(a) of the Investment Company Act of 1940 and the Rules promulgated thereunder are maintained by Delaware Life Insurance Company, in whole or in part, at its executive office at 1601 Trapelo Road, Suite 30, Waltham, Massachusetts 02451, at the offices of Clarendon Insurance Agency, Inc. at 1601 Trapelo Road, Suite 30, Waltham, Massachusetts 02451, or at the offices of se², Inc. at 5801 SW 6th Avenue, Topeka, Kansas 66606-0001.

Item 31. MANAGEMENT SERVICES

Not Applicable.

Item 32. UNDERTAKINGS

The Registrant hereby undertakes:

(a)

To file a post-effective amendment to this Registration Statement as frequently as is necessary to ensure that the audited financial statements in the Registration Statement are never more than 16 months old for so long as payments under the variable annuity Contracts may be accepted;

(b)

To include either (1) as part of any application to purchase a Contract offered by the prospectus, a space that an Applicant can check to request a Statement of Additional Information, or (2) a post card or similar written communication affixed to or included in the prospectus that the Applicant can remove to send for a Statement of Additional Information;

(c)

To deliver any Statement of Additional Information and any financial statements required to be made available under SEC Form N-4 promptly upon written or oral request.

(d)

Representation with respect to Section 26(f)(2)(A) of the Investment Company Act of 1940: Delaware Life Insurance Company represents that the fees and charges deducted under the Contracts, in the aggregate, are reasonable in relation to the services rendered, the expenses expected to be incurred, and the risks assumed by the insurance company. The Registrant is relying on the no-action letter issued by the Division of Investment Management of the Securities and Exchange Commission to American Council of Life Insurance, Ref. No. IP-6-88, dated November 28, 1988, the requirements for which have been complied with by the Registrant.

SIGNATURES

As required by the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant certifies that it meets all of the requirements of Securities Act Rule 485(b) for effectiveness of this Post-Effective Amendment to the Registration Statement and has caused this Post-Effective Amendment to the Registration Statement to be signed on its behalf, in the City of Waltham, and Commonwealth of Massachusetts on this 2nd day of May, 2016.


DELAWARE LIFE VARIABLE ACCOUNT L
(Registrant)

DELAWARE LIFE INSURANCE COMPANY
(Depositor)

By:		/s/ Daniel J. Towriss*
		Daniel J. Towriss
		President


*By:		/s/ Kenneth N. Crowley
		Kenneth N. Crowley
		Assistant Vice President and Senior Counsel

As required by the Securities Act of 1933, this Post-Effective Amendment to the Registration Statement has been signed below by the following persons in the capacities with the Depositor, Delaware Life Insurance Company, and on the dates indicated.


SIGNATURE		TITLE	DATE

/s/ David E. Sams, Jr.*		Chief Executive Officer and Director (Principal Executive Officer)	May 2, 2016
David E. Sams, Jr.

/s/ Michael K. Moran*		Senior Vice President and Chief Accounting Officer and Treasurer (Principal Financial Officer and Principal Accounting Officer)	May 2, 2016
Michael K. Moran



*By:	/s/ Kenneth N. Crowley	Attorney-in-Fact for: Dennis A. Cullen, Director Daniel J. Towriss, Director	May 2, 2016
	Kenneth N. Crowley

Kenneth N. Crowley has signed this document on the indicated date on behalf of the above Directors for the Depositor pursuant to powers or attorney duly executed by such persons and a resolution of the Board of Directors authorizing use of powers of attorney for Officer signatures. Resolution of the Board of Directors is incorporated herein by reference to Post-Effective Amendment No. 53 to the Registration Statement of Delaware Life Variable Account F on Form N-4, File No. 333-83516, filed May 2, 2016). Powers of attorney are included herein as Exhibit 14(a).

Exhibits


(9)		Opinion of Counsel as to the legality of the securities being registered and Consent to its use

(10)(a)		Consent of Independent Registered Public Accounting Firm

(10)(b)		Representation of Counsel pursuant to Rule 485(b)

(14)(a)		Powers of Attorney