As filed with the Securities and Exchange Commission on April 25, 2016. |
Registration File No. 333-148419 |
File No. 811-03915 |
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 | [x] | |
PRE-EFFECTIVE AMENDMENT NO. ___ |
[ ] | |
POST-EFFECTIVE AMENDMENT NO. 10 |
[x] | |
and/or | ||
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 | [x] | |
AMENDMENT NO. 28 |
[x] |
CMFG Variable
Life Insurance Account
(Exact name of registrant)
CMFG Life
Insurance Company
(Name of depositor)
5910 Mineral Point Road
Madison,
WI 53705
(Address of depositor’s principal executive offices)
Depositor’s Telephone Number, including Area Code: (319) 352-4090
Ross D. Hansen,
Esq.
CMFG Life Insurance Company
5910 Mineral Point Road
Madison, Wisconsin
53705
(Name and address of agent for service)
Approximate Date of Proposed
Public Offering:
As soon as practicable after the effective date of this registration
statement.
| | | immediately upon filing pursuant to paragraph (b) of Rule 485. | |
|x| | on May 1, 2016 pursuant to paragraph (b) of Rule 485. | |
| | | 60 days after filing pursuant to paragraph (a)(i) of Rule 485. | |
| | | on (date) pursuant to paragraph (a)(i) 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: Units of interest in a Variable Account under individual flexible premium deferred variable annuity contracts.
PROSPECTUS | May 1, 2016 |
MEMBERS® Variable Universal Life A Flexible Premium Variable Universal Life Insurance Policy Issued by CMFG Life Insurance Company |
This Prospectus describes the Policy issued by CMFG Life Insurance Company (“we”, “our” or “us”) and supported by the CMFG Variable Life Insurance Account (“Separate Account”). The Policy is designed as a long-term investment that attempts to provide significant life insurance benefits for the entire life of the Insured. This discussion in this Prospectus is meant for current Owners. We no longer issue new Policies and we no longer issue new riders on any Policy.
This Prospectus provides information that a prospective Owner should know before investing. You should keep this Prospectus for future reference as you consider the Policy in conjunction with other insurance you own.
With this Policy, you can allocate Net Premium and Accumulated Values to:
• | Subaccounts
of the Separate Account, each of which invests in one of the mutual funds listed
on this page; or |
|
• | An Interest
Bearing Account, which credits a specified rate of interest. |
A prospectus for each of the mutual funds in which the Separate Account invests accompanies this Prospectus. Please read these documents before investing and save them for future reference.
The mutual funds available include:
<R>Ultra Series Fund | T. Rowe Price International Series | |
Core Bond Fund |
T. Rowe Price International Stock Portfolio |
|
Diversified Income Fund |
||
Large Cap Value Fund |
||
Large Cap Growth Fund |
||
Mid Cap Fund |
Vanguard® Variable Insurance Fund |
Vanguard Variable Insurance Fund Money Market Portfolio |
An investment in the Separate Account is not a bank or credit union deposit and the Policy is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Investment in the Separate Account involves certain risks including loss of premium (principal).
Please refer to the “Summary of Policy Benefits and Risks” section of this Prospectus that describes certain risks associated with investing in a Policy.
The Securities and Exchange Commission (“SEC”) has not approved or disapproved this Policy or determined that this Prospectus is accurate or complete. Any representation to the contrary is a criminal offense. |
TABLE OF CONTENTS | ||
Page | ||
SUMMARY OF POLICY BENEFITS AND RISKS | 1 | |
Benefits Summary |
1 | |
Risk Summary |
3 | |
Fee Tables |
4 | |
CMFG LIFE INSURANCE COMPANY | 8 | |
THE SEPARATE ACCOUNT AND THE FUNDS | 8 | |
Ultra Series Fund |
9 | |
T. Rowe Price International Series, Inc. |
9 | |
More Information About the Funds |
9 | |
The Interest Bearing Account |
10 | |
THE POLICY | 10 | |
The Policy |
10 | |
Flexibility of Premiums |
10 | |
Allocation of Net Premiums |
11 | |
Lapse |
11 | |
Reinstatement |
11 | |
Premiums to Prevent Lapse |
11 | |
Death Benefit Proceeds |
12 | |
Change of Death Benefit Option |
13 | |
Accelerated Benefit Option |
13 | |
Change of Specified Amount |
14 | |
Policy Values |
14 | |
Transfer of Values |
16 | |
Additional Transfer Limitations |
16 | |
Change of Allocations |
17 | |
Dollar-Cost Averaging |
17 | |
Surrender and Partial Withdrawals |
18 | |
Maturity |
18 | |
Payment of Proceeds/Settlement Options |
18 | |
Suspension of Payments |
19 | |
Policy Loans |
19 | |
Cyber Security |
20 | |
CHARGES AND DEDUCTIONS | 20 | |
Premium Expense Charge |
20 | |
Monthly Deduction |
20 | |
Cost of Insurance |
21 | |
Monthly Policy Fee |
21 | |
Monthly Administrative Fee |
21 | |
Cost of Additional Benefits |
22 | |
Mortality and Expense Risk Charge |
22 | |
Contingent Deferred Sales and Administrative Charges |
22 | |
Partial Withdrawal Fee |
23 | |
Transfer Fee |
23 | |
Federal and State Income Taxes |
23 | |
Duplicate Policy Charge |
23 | |
Change of Specified Amount Charge |
23 | |
Research Fee |
24 | |
Fund Expenses |
24 | |
Additional Information |
24 | |
OTHER POLICY BENEFITS AND PROVISIONS | 24 | |
Issue Date |
24 |
i
Owner, Beneficiary |
24 | |
Right-to-Examine Period |
24 | |
Paid-up Insurance |
25 | |
Transfer of Ownership |
25 | |
Addition, Deletion, or Substitution of Investments |
25 | |
Voting Rights |
26 | |
DISTRIBUTION OF POLICIES | 26 | |
Compensation Arrangements For CBSI and Its Sales Personnel |
26 | |
Compensation Arrangements For Selling Firms and Their Sales Personnel |
27 | |
Source of Compensation |
27 | |
RIDERS AND ENDORSEMENTS | 27 | |
Children’s Insurance |
27 | |
Guaranteed Insurability |
27 | |
Accidental Death Benefit |
27 | |
Automatic Increase |
27 | |
Other Insured |
28 | |
Term Insurance |
28 | |
Disability Waiver of Monthly Deductions |
28 | |
Disability Benefit Waiver of Premium and Monthly Deduction |
28 | |
Executive Benefits Plan Endorsement |
28 | |
FEDERAL INCOME TAX CONSIDERATIONS | 28 | |
Introduction |
28 | |
Tax Status of the Policy |
28 | |
Tax Treatment of Policy Benefits |
29 | |
Special Rules for Pension and Profit-Sharing Plans |
30 | |
Business Uses of the Policy |
31 | |
Medicare Tax on Investment Income |
32 | |
Alternative Minimum Tax |
32 | |
Estate, Gift and Generation-Skipping Transfer Taxes |
32 | |
Possible Tax Law Changes |
32 | |
Our Taxes |
32 | |
LEGAL PROCEEDINGS | 33 | |
FINANCIAL STATEMENTS | 33 | |
GLOSSARY | 34 | |
STATEMENT OF ADDITIONAL INFORMATION | 37 |
ii
SUMMARY OF POLICY BENEFITS AND RISKS |
This summary describes important benefits and risks of the Policy and corresponds to sections in this Prospectus which discuss the topics in more detail, including variations by state. Please refer to the Glossary for definitions of certain terms.
Benefits Summary
General Benefits of the Policy. Like fixed benefit life insurance, the Policy offers a minimum death benefit and provides an Accumulated Value, loan privileges and a value on surrender. However, the Policy differs from a fixed benefit policy because it allows you to allocate your Net Premiums or transfer Accumulated Value to the Subaccounts. The amount and duration of life insurance protection and of Accumulated Value and Cash Value varies with the investment experience of the Accumulated Value you place in the Subaccounts.
Premiums. The Policy requires an initial premium. The amount of your Policy’s Specified Amount determines the amount of your initial premium. After you pay the initial premium, you can pay subsequent premiums at any time while your Policy is In Force. We may refuse any premium payment that is less than $25. We also may refuse any premium or part of a premium which would increase the Face Amount of the Policy by more than the amount of the Premium.
The Policy provides for a planned annual premium. You are not required to pay premiums according to the plan. You can vary the frequency and amount of premiums, and can skip premiums. (If you do skip a premium, you may increase the likelihood that your Policy will Lapse.) We may reject any premiums after the Insured reaches Attained Age 95.
From time to time, we may extend the period for premium and purchase payments and other time-sensitive provisions of a policy or contract for specific geographic areas in response to weather-related incidents, natural disasters and similar events. Policyholders who have experienced such events and would like to know whether a moratorium is in effect should contact us for more information at our Mailing Address.
Minimum Death Benefit Guarantee. If the Target Premium is paid until the later of Attained Age 65 or 10 years from the Issue Date the Policy will not Lapse during those years. The Target Premium will be shown on each Policy. Generally, it is determined by dividing the minimum premium by 0.60 and is stated on the specifications page of the Policy.
No-Lapse Guarantee. If at all times during the first three Policy Years the sum of the premiums received to date, less all partial withdrawals and Indebtedness, is at least equal to the monthly minimum premium multiplied by the number of months (plus one month) the Policy has been In Force, the Policy will not Lapse. The monthly minimum premium is the minimum premium (the minimum annual amount needed each year during the first three Policy Years to keep the no-Lapse guarantee in effect) divided by 12. If any requested increase in Specified Amount is made during the first three Policy Years, the no-Lapse guarantee is voided.
In cases where the no-Lapse guarantee is in effect and there is insufficient Net Cash Value to pay the Monthly Deduction, Accumulated Value from the Deferred Charges Account will be used to pay the Monthly Deduction. Deferred Charges are collected only if the Policy is surrendered during the first nine Policy Years after the Issue Date or the first nine years after an increase in Specified Amount, whichever is applicable. We will waive any Monthly Deduction remaining after the Deferred Charges have been exhausted.
Death Benefit Options. You must choose between two Death Benefit Options under the Policy. Your selection will affect the Face Amount, the Monthly Deduction, and the Cash Value. Under either option, Death Benefit Proceeds are equal to:
• |
the Face Amount on the date of death; plus |
||
• |
any premiums received after the date of death; minus |
||
• |
Policy indebtedness |
||
The Face Amount differs under the two Death Benefit Options: | |||
u |
The Face Amount under Option 1 is the greater of: |
||
O | the Specified Amount; or | ||
O | the Accumulated
Value on the date of death multiplied by the Death Benefit Ratio. |
1
u | The Face Amount under Option 2 is the greater of: | ||
O | the Specified Amount plus the Policy’s Accumulated Value on the date of death; or | ||
O | the Accumulated Value on the date of death multiplied by the Death Benefit Ratio. |
The Death Benefit Ratio is the ratio of Face Amount to Accumulated Value required by the Internal Revenue Code of 1986, as amended (“Code”), for treatment of the Policy as a life insurance policy. The Death Benefit Ratio varies by Attained Age as shown in Appendix B in the Statement of Additional Information (“SAI”). The death benefit factor decreases from year to year as the Attained Age of the Insured increases.
You may select the Specified Amount, which we will normally require be at least $50,000 ($10,000 for Issue Ages 65 and over). You also may increase or decrease the Specified Amount; however, we may require that the Specified Amount after any decrease be at least $50,000 ($10,000 for Issue Ages 65 and over).
Cancellation, Surrender and Partial Withdrawals
Cancellation: Once we issue your Policy, the Right-to-Examine Period begins. You may cancel the Policy during this period and receive a refund. A request to increase the Specified Amount also triggers a Right to Examine Period for the increased amount.
Surrender: At any time while the Insured is alive and the Policy is In Force, you may make a Written Request to our Mailing Address to surrender your Policy for its Net Cash Value. Federal income taxes may apply to surrenders or partial withdrawals. A penalty tax may be applied to distributions (including loans) if the policy is classified as a Modified Endowment Contract and may apply to surrenders.
Partial Withdrawals: You may withdraw part of the net Cash Value using a Written Request, subject to the following rules.
• | Federal income
taxes and a penalty tax may apply to partial withdrawals; |
|
• | A partial
withdrawal reduces the death benefit by at least the amount withdrawn; |
|
• | Unless the
Face Amount derived from the application of the Death Benefit Ratio applies, under
either Death Benefit Option 1 or Death Benefit Option 2, a partial withdrawal will
reduce both the Accumulated Value and the Face Amount by the amount surrendered
but will not affect the Cost of Insurance. Under Death Benefit Option 1, the Specified
Amount is also reduced by the same amount, but the Specified Amount is not changed
by a partial withdrawal under Death Benefit Option 2. If the Face Amount derived
from the application of the Death Benefit Ratio applies, the effect on the monthly
Cost of Insurance and Face Amount is somewhat different. The Face Amount is then
decreased by more than the amount surrendered, and the monthly Cost of Insurance
is less than it would have been without the surrender; and |
|
• | We may deduct
a processing fee for each partial withdrawal. We currently do not deduct this fee. |
Transfers. Each Policy Year, you may make:
• | Accumulated
Value transfers from the Subaccounts to other Subaccounts and to the Interest Bearing
Account at any time; and |
|
• | Accumulated
Value transfers from the Interest Bearing Account only during the 30 day period
beginning on and immediately following the Policy Anniversary. (We currently waive
this restriction.) |
A transfer from the Interest Bearing Account may be limited to 25% of the Interest Bearing Account. We may deduct a charge of $20 per transfer after the fourth transfer in a Policy Year. We currently waive this restriction. Transfer privileges are subject to restriction based on our Frequent Transfers Procedures.
<R>2
Risk Summary
Investment Risk. If you invest your Accumulated Value in one or more Subaccounts, you will be subject to the risk that investment experience will be unfavorable and that your Accumulated Value will decrease. If you allocate Net Premiums or transfer Accumulated Value to the Interest Bearing Account, we credit your Accumulated Value with a declared rate of interest, but you assume the risk that the rate may decrease, although it will never be lower than a guaranteed minimum annual effective rate of 4.0%.
Because we continue to deduct charges from Accumulated Value, if investment results are not sufficiently favorable, or if interest rates are too low, or if you do not make additional premium payments, then your Policy’s Cash Value may fall to zero. In that case, the Policy may Lapse. We do not guarantee any Accumulated Value you place in the Subaccounts. The value of each Subaccount may increase or decrease, depending on the investment experience of the corresponding Fund. You could lose some or all of your money.
However, if investment experience is sufficiently favorable and you have kept the Policy In Force for a substantial time, you may be able to draw upon Accumulated Value, through partial withdrawals and loans.
Inappropriate Frequent Transfers Risk. Frequent, large, or short-term transfers among Subaccounts, such as those associated with “market timing” transactions, can adversely affect the Funds and the returns achieved by Owners. In particular, such transfers may dilute the value of Fund shares, interfere with the efficient management of the Funds, and increase brokerage and administrative costs of the Funds. These costs are borne by all Owners allocating purchase payments to the Subaccounts and other Fund shareholders, not just the Owner making the transfers. In order to try to protect Owners and the Funds from potentially harmful trading activity, we have certain policies and procedures (“Frequent Transfers Procedures”).
Risk of Lapse. Certain circumstances will cause your Policy to enter a grace period during which you must make a sufficient premium payment to keep your Policy In Force:
• | If your Policy’s Accumulated Value on a Monthly Day is too low to cover the Monthly Deduction,
and the minimum death benefit guarantee and the no-Lapse guarantee are not in effect,
then the Policy will enter a 61-day grace period. If the Policy enters the grace
period, we will mail a notice of termination to the Owner. A grace period of 61
days will begin on the date the notice is mailed. |
||
• | Whenever your
Policy enters a grace period if you do not make a sufficient premium payment before
the grace period ends, your Policy will Lapse (terminate without value), and insurance
coverage and other benefits under your Policy will cease. To avoid the Policy Lapsing
at the end of the grace period, the Owner must: (1) pay Net Premium in an amount
sufficient to pay overdue Monthly Deductions plus the anticipated amount of the
next two Monthly Deductions and loan interest due during the grade period, or (2)
if prior to the third Policy Anniversary, and no requested increase in Specified
Amount was made, pay either the above amount or the amount needed to qualify for
the no-Lapse guarantee. In addition to allowing the Policy to remain In Force, payment
of the latter amount will reinstate the no-Lapse guarantee. |
Deferred Sales Charge Risks. Deferred sales charges play a role in determining whether your Policy will Lapse. The deferred sales charges under this Policy are significant, especially in the early Policy Years. It is likely that you will receive no Cash Value if you surrender your Policy in the first few Policy Years. If you do not have the financial ability to keep your Policy In Force at the initial Specified Amount for a substantial period of time or you intend to surrender all or part of the Cash Value during the deferred sales charge period, you may be subject to significant deferred sales charges. This Policy is designed to meet long-term financial goals. This Policy is not suitable as a short-term investment.
Even if you do not surrender your Policy, deferred sales charges may still help determine whether your Policy will Lapse. Cash Value (that is, Accumulated Value minus any Deferred Charges and outstanding Loan Amount) is one measure we use to determine whether your Policy will enter a grace period, and possibly Lapse. A surrender may have adverse tax consequences.
Tax Risks. In order to qualify as a life insurance contract for federal income tax purposes and to receive the tax treatment normally accorded life insurance contracts under federal tax law, a policy must satisfy certain requirements which are set forth in the Code. We anticipate that the Policy will generally be deemed a life insurance contract under federal income tax law, so that the Death Benefit Proceeds paid to the Beneficiary will not be subject to federal income tax. However, due to lack of guidance, there is less certainty in this regard with respect to Policies issued on a substandard basis and it is not clear whether such policies will in all cases satisfy the applicable requirements particularly if you pay the full amount of premiums permitted under the policy.
3
Depending on the total amount of premiums that you pay, your Policy may be treated as a modified endowment contract (“MEC”) under federal income tax laws. If a Policy is treated as a MEC, then partial withdrawals, surrenders and loans under it are taxable as ordinary income to the extent such amounts represent earnings under the Policy. For this purpose, any partial withdrawals, surrenders and loans are considered first a distribution of earnings under the Policy, and when earnings are fully distributed, a distribution of the Owner’s investment in the Policy. In addition, a 10% federal penalty tax may be imposed on partial withdrawals, surrenders and loans taken before you reach age 59½. There may be tax consequences to distributions from Policies that are not MECs. However, the 10% penalty tax will not apply to distributions from Policies that are not MECs. You should consult a qualified tax adviser for assistance in all tax matters involving your Policy.
Partial Withdrawal Risks. The Policy permits you to make a partial withdrawal, as long as the Specified Amount remaining after such withdrawal would not be less than $40,000 ($8,000 for issue ages 65 and over). A partial withdrawal reduces the Accumulated Value and Cash Value, so it increases the risk that the Policy will Lapse. It also increases the likelihood that either the minimum death benefit guarantee or the no-Lapse guarantee will not remain in effect.
A partial withdrawal also may have adverse tax consequences.
A partial withdrawal reduces the death benefit. If you selected the level death benefit (Option 1), then when you make a partial withdrawal, the Specified Amount is reduced by the amount of the withdrawal. If you selected the variable death benefit (Option 2), then when you make a partial withdrawal, the death benefit is reduced because the Accumulated Value is reduced.
Currently there are no limitations on partial withdrawals; however, we may limit the number of partial withdrawals to two per Policy Year.
Loan Risks. A Policy loan, whether or not repaid, affects Accumulated Value over time because we transfer an amount equal to the amount of the loan from the Subaccounts and Interest Bearing Account to the Loan Account as collateral. We then credit a fixed interest rate of at least 4.0% to the loan collateral. As a result, the loan collateral does not participate in the investment results of the Subaccounts nor does it receive current interest rates in excess of 4.0% that we may, from time to time, credit to the Interest Bearing Account. The longer the loan is outstanding, the greater the likely effect of not participating in the Subaccounts or the Interest Bearing Account. Depending on the investment results of the Subaccounts and the interest rate credited to the Interest Bearing Account, the effect could be favorable or unfavorable. We also charge you interest on the amount that you borrow at a rate of 8.0%, compounded annually. A loan may have adverse tax consequences.
Policy Indebtedness reduces the Death Benefit
Proceeds and net Cash Value by the amount of such indebtedness. As with partial
withdrawals, loans reduce the Net Cash Value of your Policy and therefore increase
the likelihood that the Policy will Lapse or that the minimum death benefit guarantee
or the no-Lapse guarantee would not remain in effect.
Fund Risks. A comprehensive
discussion of the risks of each Fund may be found in each Fund’s prospectus.
Please refer to the Fund’s prospectus for more information.
Fee Tables
The following tables
describe the fees and expenses that a Policy Owner will pay when buying, owning,
and surrendering the Policy. The first table describes the fees and expenses that
a Policy Owner will pay at the time that he or she buys the Policy, surrenders the
Policy, or transfers Policy value among the Subaccounts and the Interest Bearing
Account.
Transaction Fees | |||
Charge | When Charge is Deducted | Amount Deducted | |
Maximum Guaranteed Charge | Current Charge | ||
Premium Expense Charge (Taxes) | Upon receipt of each premium payment | 0–3.5% of each premium payment, depending on the Insured’s state of residence | 0–3.5% of each premium payment, depending on the Insured’s state of residence |
Maximum Sales Charge Imposed on Premiums (Load) | Not applicable | None | None |
4
Transaction Fees | |||
Charge | When Charge is Deducted | Amount Deducted | |
Maximum Guaranteed Charge | Current Charge | ||
Surrender Charge (Deferred Sales and Administrative Charge)1 (Minimum and Maximum Charge) | Upon surrender or Lapse during the first 9 Policy Years, or during the first 9 Policy Years following an increase in Specified Amount | $0.87 – $42.31 per $1,000 of Specified Amount during the first Policy Year2 | $0.87 – $42.31 per $1,000 of Specified Amount during the first Policy Year2 |
Charge for a male Insured, Attained Age 38, in the non-smoker rating class | Upon surrender or Lapse during the first 9 Policy Years, or during the first 9 Policy Years following an increase in Specified Amount | $8.95 per $1,000 of Specified Amount | $8.95 per $1,000 of Specified Amount |
Accelerated Death Benefit Option | At the time the Accelerated Death Benefit is paid | $300 | $300 |
Partial Withdrawal Fee | Upon partial withdrawal | The lesser of: $25 per withdrawal, or 2% of the amount withdrawn | The lesser of: $25 per withdrawal, or 2% of the amount withdrawn (currently waived) |
Specified Amount Increase Charge | Upon increase in Specified Amount3 | $50 for each Specified Amount increase after the first in a Policy Year | $50 for each Specified Amount increase after the first in a Policy Year |
Transfer Fee | Upon every transfer other than the first four transfers in a Policy Year | $20 | None |
Executive Benefits Plan Endorsement | Upon exercise during the first 2 Policy Years | $150 | None |
Duplicate Policy Fee | Upon request for a duplicate Policy | $30 | $30 (currently waived) |
Research Fee | Upon request for information that is duplicative of information previously provided to you and that requires extensive research | $50 | $50 |
The next table describes the fees and expenses that a Policy Owner will pay periodically during the time that he or she owns the Policy, not including Fund fees and expenses.
1 | The contingent deferred sales and administrative charge varies based on the Insured’s Attained Age, gender, rating class, Policy Year, and Specified Amount (or increase in Specified Amount). The charge shown in the table may not be typical of the charges you will pay. Your Policy’s specifications page will indicate the charges for your Policy, and more detailed information concerning your charges is available on request from us. Also, before you purchase the Policy, we will provide you personalized illustrations of your future benefits under the Policy based upon the Insured’s Issue Age and rating class, the Death Benefit Option, Specified Amount, planned premium, and riders you select. | ||
2 | The surrender charge decreases annually each year during the first 9 Policy Years or the first 9 years after an increase in Specified Amount. After the 9th year, there is no charge. | ||
3 | We do not assess a Specified Amount increase charge for the first increase in a Policy Year. |
5
Periodic Charges Other Than Portfolio Operating Expenses | |||
Charge | When Charge is Deducted | Annual Amount Deducted | |
Maximum Guaranteed Charge | Current Charge | ||
Policy Fee | On Policy Issue Date and Monthly Days | $724,5 | $724,5 |
Monthly Administrative Fee | On Policy Issue Date and monthly on Monthly Day, during Policy Years 1 – 10 or during the first 10 Policy Years following an increase in Specified Amount | $0.45 per $1,000 of Specified Amount or increase in specified amount5 | $0.45 per $1,000 of Specified Amount or increase in specified amount5 |
Cost of Insurance6 (Minimum and Maximum Charge) | On Policy Issue Date and Monthly Days | $0.68 – $311.27 per $1,000 of Net Amount at Risk5 | $0.48 – $178.37 per $1,000 of Net Amount at Risk5 |
Charge for a male Insured, Attained Age 38 in the non-smoker rating class | On Policy Issue Date and Monthly Days | $2.07 per $1,000 of Net Amount of Risk8 | $2.07 per $1,000 of Net Amount of Risk8 |
Mortality and Expense Risk Charge | Daily | 0.90% of Variable Account Value | 0.90% of Variable Account Value |
Loan Interest Spread | On Policy Anniversary or earlier as applicable7 | 4.00% | 2.00% |
Rider Charges:9 | |||
Accidental Death Benefit Rider (Minimum and Maximum Charge) | On Policy Issue Date and Monthly Days | $0.46 – $1.86 per $1,000 of Accidental Death Benefit8 | $0.46 – $1.86 per $1,000 of Accidental Death Benefit8 |
Charge for a male Insured, Attained Age 33 in the non-smoker rating class. | On Policy Issue Date and Monthly Days | $0.68 per $1,000 of Accidental Death Benefit10 | $0.68 per $1,000 of Accidental Death Benefit10 |
Children’s Insurance Rider | On Policy Issue Date Monthly Days | $9.00 per Unit of coverage10 | $9.00 per Unit of coverage10 |
4 | $36.00 for Issue Ages 0-19. | ||
5 | The annual amount is shown, 1/12th of this amount is deducted on each Monthly Day. | ||
6 | Cost of Insurance varies based on the Insured’s Attained Age, gender, rating class, Policy Year and Net Amount at Risk. The Cost of Insurance shown in the table may not be typical of the charges you will pay. Cost of Insurance rate changes will depend on the Company’s expectations as to future mortality experience. Your Policy’s specifications page will indicate the guaranteed Cost of Insurance charge for your Policy. More detailed information concerning your Cost of Insurance is available on request from us. Also, before you purchase the Policy, we will provide you personalized illustrations of your future benefits under the Policy based upon the Insured’s Issue Age and rating class, the Death Benefit Option, Specified Amount, planned premium, and riders you select. | ||
7 | Loan interest must be paid in arrears on each Policy Anniversary, or, if earlier, on the date of loan repayments, Lapse, surrender, or the Insured’s death. The loan interest spread is the difference between the rate of interest we charge you for a loan and the amount of interest credits to your Loan Account. | ||
8 | The annual amount is shown 1/12th of this amount is deducted on each Monthly Day. We are no longer issuing new Accidental Death Benefit riders. | ||
9 | Charges for the Accidental Death Benefit Rider, Children’s Insurance Rider, Guaranteed Insurability Rider, Other Insured Rider, Term Insurance Rider, Disability Waiver of Monthly Deduction Rider, and Disability Waiver of Monthly Deduction and Premium Rider vary based on the Insured’s Attained Age, gender, and rating class, and may vary based on Policy Year, Specified Amount, and Net Amount at Risk. Charges based on actual age may increase as the Insured ages. The rider charges shown in the table may not be typical of the charges you will pay. Your Policy’s specifications page will indicate the rider charges for your Policy, and more detailed information concerning these rider charges is available on request from us. Also, before you purchase the Policy, we will provide you personalized illustrations of your future benefits under the Policy based upon the Insured’s Issue Age and rating class, the Death Benefit Option, Specified Amount, planned premium, and riders that you select. We are not currently issuing new riders on any Policy. | ||
10 | The annual amount is shown 1/12th of this amount is deducted on each Monthly Day. |
6
Periodic Charges Other Than Portfolio Operating Expenses | |||
Charge | When Charge is Deducted | Annual Amount Deducted | |
Maximum Guaranteed Charge | Current Charge | ||
Guaranteed Insurability Rider (Minimum and Maximum Charge) | On Policy Issue Date and Monthly Days | $0.87 - $2.07 per $1,000 of coverage11 | $0.87 - $2.07 per $1,000 of coverage11 |
Charge for a male Insured, Issue Age 13, in the standard rating class | On Policy Issue Date Monthly Days | $1.18 per $1,000 of coverage11 | $1.18 per $1,000 of coverage11 |
Automatic Increase Rider (Minimum and Maximum Charge) | On Policy Issue Date and Monthly Days | $0.25 – $0.50 per $1,000 of annual increase11 | $0.25 – $0.50 per $1,000 of annual increase11 |
Charge for a male non-smoker issue age 37 | On Policy Issue Date and Monthly Days | $0.50 per $1,000 of annual increase11 | $0.50 per $1,000 of annual increase11 |
Other Insured Rider (Minimum and Maximum Charge) | On Policy Issue Date and Monthly Days | $0.68 – $311.27 per $1,000 of Net Amount at Risk plus $2011 | $0.48 – $178.37 per $1,000 of Net Amount at Risk plus $2011 |
Charge for a female Insured, Attained Age 36, in the non-smoker rating class | On Policy Issue Date and Monthly Days | $1.61 per $1,000 Net Amount at Risk plus $2011 | $1.53 per $1,000 Net Amount at Risk plus $2011 |
Term Insurance Rider (Minimum and Maximum Charge) | On Policy Issue Date and Monthly Days | $0.06 – $83.33 per $1,000 of coverage11 | $0.06 – $83.33 per $1,000 of coverage11 |
Charge for a male Insured, Attained Age 37, in the non-smoker rating class | On Policy Issue Date and Monthly Days | $1.94 per $1,000 of Net Amount at Risk11 | $1.23 per $1,000 of coverage11 |
Disability Waiver of Monthly Deductions Rider (Minimum and Maximum Charge) | On Policy Issue Date and Monthly Days | 2.20% - 24.20% of Monthly Deductions11 | 2.20% - 24.20% of Monthly Deductions11 |
Charge for a male Insured, Attained Age 31, in the non-smoker rating class | On Policy Issue Date and Monthly Days | 4.5% of Monthly Deductions11 | 4.5% of Monthly Deductions11 |
Disability Waiver of Premium and Monthly Deductions Rider (Minimum and Maximum Charge) | On Policy Issue Date and Monthly Days | 2.20% - 24.20% of Monthly Deductions and 2.2% to 12.2% of premium to be waived | 2.20% - 24.20% of Monthly Deductions and 2.2% to 12.2% of premium to be waived |
Charge for a male Insured, Attained Age 33, in the non-smoker rating class | On Policy Issue Date and Monthly Days | 4.5% of Monthly Deductions and 2.25% of premium to be waived | 4.5% of Monthly Deductions and 2.25% of premium to be waived |
11 | The annual amount is shown, 1/12th of this amount is deducted on each Monthly Day. |
7
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
<R>Minimum | Maximum | |
Total Annual Fund Operating Expenses | 0.16% | 1.05% |
In addition, certain Funds may impose a redemption fee of no more than 2% of the amount of Fund shares redeemed. We may be required to implement a Fund’s redemption fee. The redemption fee will be assessed against your Accumulated Value. For more information, please see each Fund’s prospectus.
CMFG LIFE INSURANCE COMPANY |
CUNA Mutual Insurance Society is a mutual life insurance company that was originally organized in Wisconsin in 1935. CUNA Mutual Life Insurance Company merged with CUNA Mutual Insurance Society effective on December 31, 2007. CUNA Mutual Insurance Society reorganized into a stock insurance company incorporated in Iowa within a mutual insurance holding company structure and was renamed CMFG Life Insurance Company on January 31, 2012.
We are one of the world’s largest direct underwriters of credit life and disability insurance, and are a major provider of qualified pension products to credit unions. Further, we offer fixed and variable annuities, individual life insurance, health policies, term and permanent life insurance, and long-term care insurance.
CUNA Brokerage Services, Inc. (“CBSI”) is our indirect wholly owned subsidiary.
<R>THE SEPARATE ACCOUNT AND THE FUNDS |
The Separate Account was established by CUNA Mutual Life Insurance Company on August 16, 1983. CUNA Mutual Life Insurance Company merged with us as of December 31, 2007. Although the assets in the Separate Account are our property, the assets attributable to the Policies are not chargeable with liabilities arising out of any other business that we may conduct. The assets of the Separate Account are available to cover our general liabilities only to the extent that the Separate Account’s assets exceed its liabilities arising under the Policies and any other policies supported by the Separate Account. We may transfer to the General Account any assets of the Separate Account that are in excess of reserves and other contract liabilities. Periodically, the Separate Account makes payments to us for Mortality and Expense Charges.
The Separate Account is divided into Subaccounts. The income, gains and losses, realized or unrealized, from the assets allocated to each Subaccount are credited to or charged against that Subaccount without regard to income, gains or losses from any other Subaccount.
The Separate Account is registered with the SEC as a unit investment trust under the Investment Company Act of 1940, as amended (“1940 Act”). Registration with the SEC does not involve supervision of the management, investment practices, or policies of the Separate Account or of us by the SEC. The Separate Account is also subject to the laws of the State of Iowa which regulate the operations of insurance companies domiciled in Iowa.
We do not guarantee the investment experience of the Separate Account or of any Subaccount. Accumulated Value varies daily with the value of the assets under the Separate Account. The Death Benefit Proceeds may also vary with the value of the assets in the Subaccounts selected by the Owner. To the extent that the Death Benefit Proceeds payable upon the death of the Insured exceed the Accumulated Value, such amounts, like all other benefits payable under a Policy, are our general obligations and payable out of our General Account.
8
From time to time, the Funds may reorganize or merge with other mutual funds. If that occurs, we will process any instructions to allocate to the Subaccount investing in the merged fund post-merger instead to the Subaccount investing in the surviving fund.
<R>Core Bond Fund (Class I). This Fund seeks to generate a high level of current income, consistent with the prudent limitation of investment risk.
Diversified Income Fund (Class I). This Fund seeks a high total return through the combination of income and capital appreciation.
Large Cap Value Fund (Class I). This Fund seeks long-term growth of capital with income as a secondary consideration.
Large Cap Growth Fund (Class I). This Fund seeks long-term capital appreciation.
Mid Cap Fund (Class I). This Fund seeks long-term capital appreciation.
T. Rowe Price International Series, Inc.
T. Rowe Price Associates, Inc. serves as the investment adviser and T. Rowe
Price International Ltd. serves as the investment sub-adviser to the T. Rowe Price
International Stock Portfolio.
T. Rowe Price International Stock Portfolio. This Fund seeks long-term growth of capital through investments primarily in the common stocks of established, non-U.S. companies.
<R>The Vanguard Group, Inc. provides investment
advisory services on an at-cost basis to the Portfolio.
</R>
More Information About the Funds
In addition to the Separate Account, the Funds may sell shares to separate accounts
of other insurance companies to support variable annuity contracts and variable
life insurance policies, or to certain pension and retirement plans qualifying under
Section 401 of the Code.
To reduce service expenses, we intend to send only one copy of the fund’s reports per household regardless of the number of Owners at the household. However, any Owner may obtain additional reports upon Written Request.
Selection of the Funds
We select
the Funds offered through the Policy, review them periodically, and may remove a
Fund or limit its availability to new premiums and/or transfers of Accumulated Value
if we determine the Fund no longer satisfies one or more of our selection criteria
and/or if the Fund has not attracted significant allocations from Owners. We may
consider various factors, including, but not limited to, asset class coverage, the
investment objectives of a Fund, strength of an adviser’s or a sub-adviser’s reputation and tenure, brand recognition, performance, and the capability
and qualification of each investment firm.
9
You should carefully consider the investment objectives, risks, and charges and expenses of the Funds before investing. The Funds’ prospectuses contain this and other information. You can receive a current copy of a prospectus for each of the Funds by contacting us at our Mailing Address.
The Interest Bearing Account
The Interest Bearing Account is part of our General Account. We use General Account
assets to support our insurance and annuity obligations other than those funded
by various separate accounts. The Interest Bearing Account is not subject to the
same laws as the Separate Account and the SEC has not reviewed material in this
prospectus relating to the Interest Bearing Account. However, information relating
to the Interest Bearing Account is subject to federal securities laws relating to
accuracy and completeness of prospectus disclosure. Subject to applicable law, we
have sole discretion over investment of the Interest Bearing Account’s assets.
We bear the full investment risk for all assets contributed to the Interest Bearing
Account. We guarantee that all Accumulated Value allocated to the Interest Bearing
Account is credited interest daily at a net effective interest rate of at least
4%. We will determine any interest rate credited in excess of the guaranteed rate
at our sole discretion. The Interest Bearing Account is not available in New Jersey.
THE POLICY |
The Policy
We no longer issue
new Policies or new riders on any Policy. Please note that certain provisions of
your Policy may be different than the general description in this Prospectus, and
certain riders and options may not be available because of legal restrictions in
your state. Contact us at our Mailing Address or see your Policy for specific variations
since any such variations will be included in your Policy or in riders or endorsements
attached to your Policy.
Flexibility of Premiums
The Policy
provides for a schedule of planned annual premiums determined by you. You are not
required, however, to pay premiums in accordance with the schedule. Premiums are
generally flexible both as to timing and amount. Premiums must be large enough to
keep the Policy In Force. You may pay premiums after the initial premium at any
time while the Policy is In Force.
We will process additional Premium at the Accumulation Unit Value next determined after the request is received in Good Order at our Mailing Address. If we receive your Premium on a Valuation Day at our Mailing Address in Good Order by the close of regular trading on the New York Stock Exchange (usually, 3:00 p.m. Central Time), your Premium will be applied with that day’s Accumulation Unit Value.
If you want the no-Lapse guarantee to be in effect, you must make planned annual premium payments in an amount that, if paid each year for the first three Policy Years, will keep the no-Lapse guarantee in effect. The specifications page of your Policy indicates the minimum premium. If you want the minimum death benefit guarantee to be in effect so that the Policy will not Lapse during the later of the Insured’s Attained Age 65 or 10 years from the Issue Date, you must pay the Target Premium until the later of Attained Age 65 or 10 years from the Issue Date. The Target Premium is generally determined by dividing the minimum premium by 0.60, and is shown on the specifications page of your Policy.
If you do not choose to utilize the no-Lapse guarantee or minimum death benefit guarantee, the initial premium is at least one-twelfth (1/12) of the minimum premium. The minimum premium is the minimum annual amount that, if paid each year for the first three Policy Years, will keep the no-Lapse guarantee in effect for that time. The minimum initial premium for your Policy is shown on the Policy’s data page.
We may refuse any premium payment that is less than $25.
The total of all premiums paid may never exceed the maximum premium limitation determined by the Code for treatment of the Policy as a life insurance policy. If at any time a premium is paid which would result in total premiums exceeding the maximum premium limitation, we will only accept that portion of the premium which would make total premiums equal the maximum. We will return any excess amount and will not accept further premiums until the maximum premium limitation increases.
10
We may refuse any Premium or part of a Premium that would increase the Face Amount by more than the amount of the Net Premium.
Allocation of Net Premiums
You
determine what percentages of the Net Premiums are allocated to each Subaccount
and the Interest Bearing Account. The minimum allocation is 1% of any Net Premium
using whole percentages. If the initial premium is received before we issue the
Policy, it is held in our General Account until the Issue Date. On the first Valuation
Day following the Record Date, the Net Premium plus interest from the Issue Date,
and less Monthly Deductions and amounts held in the Deferred Charges Account are
allocated to the Subaccounts of the Separate Account and the Interest Bearing Account
in the percentages established by the Owner and recorded on the application for
the Policy. These allocations apply to future Net Premiums until the allocations
are changed by the Owner.
Lapse
Unless the no-Lapse Guarantee
or minimum death benefit guarantee is in effect (see “Premiums to Prevent Lapse” below), if your Net Cash Value on any Monthly Day is insufficient to pay the
Monthly Deduction, then we will mail you a written notice informing you that a grace
period has begun under the Policy. The grace period will end 61 days after the date
on which we must receive the payment. If sufficient Net Premium is not paid during
the grace period, the Policy will Lapse without value. The Net Premium required
to terminate the grace period is that which is sufficient to pay overdue Monthly
Deductions plus the anticipated amount of the next two Monthly Deductions and loan
interest due during the grace period. If the Insured dies during the grace period,
unpaid Monthly Deductions and any outstanding loan balance will be deducted from
the Death Benefit Proceeds.
Reinstatement
You may ask to have
a Lapsed Policy reinstated. We will reinstate a Policy based upon the original terms
of the Policy if all of the following conditions are met:
• | The Owner
makes a Written Request to reinstate the Policy within five years after the Lapse. |
|
• | The Insured
meets our insurability requirements. |
|
• | The Owner
pays Net Premiums in an amount sufficient to increase the Net Cash Value to zero
by the end of the grace period plus the anticipated amount of three monthly deductions
and any loan interest due. |
|
• | If Lapse occurs
during the twelve months following the Issue Date or a Specified Amount increase,
you pay an amount equal to the difference between Deferred Charges on the date of
Lapse and Deferred Charges on the date of reinstatement, computed as if the Lapse
had not occurred. |
|
• | You pay the
amount of or reinstate any loan outstanding as of the date of Lapse. |
A reinstatement becomes effective only after we approve it. We will reinstate Accumulated Value to the Deferred Charges Account in an amount equal to the lesser of the Deferred Charges on the date of Lapse or Deferred Charge on the date of reinstatement, computed as if the Policy had not Lapsed. After reinstatement, the Deferred Charges will be handled as if the Lapse had not occurred. Cost of Insurance rates following reinstatement, if approved, will be based upon the risk classification of the reinstated policy.
Premiums to Prevent Lapse
If your
Policy meets the premium requirements of one of the guarantees described below,
your Policy will continue In Force for the duration of the guarantee. The guarantees
described may vary by state.
a. | No-Lapse
Guarantee: If at all times during the first three Policy Years the sum of the
premiums received to date, less all partial withdrawals and Indebtedness, is at
least equal to the monthly minimum premium multiplied by the number of months (plus
one month) the Policy has been In Force, the Policy will not Lapse. The monthly
minimum premium is the minimum premium (the minimum annual amount needed each year
during the first three Policy Years to keep the no-Lapse guarantee in effect) divided
by 12. If any requested increase in Specified Amount is made during the first three
Policy Years, the no-Lapse guarantee is recalculated. |
|
In cases where
the no-Lapse guarantee is in effect and there is insufficient Net Cash Value to
pay the monthly deduction, the Deferred Charges Account will be used to pay the
Monthly Deduction. Deferred Charges are collected only if the Policy is surrendered
during the first nine Policy Years after the Issue Date or the first nine |
11
years after
an increase in Specified Amount, whichever is applicable. We will waive any Monthly
Deduction remaining after the Deferred Charges have been exhausted. |
||
b. | Minimum
Death Benefit Guarantee: The minimum death benefit guarantee provides that we
will pay a minimum amount of death benefit if, at all times, the sum of the premiums
received to date, less all partial withdrawals and Policy loans, is at least equal
to the monthly Target Premium multiplied by the number of months (plus one month)
the Policy has been In Force. The Target Premium is stated on the specifications
page of the Policy and is generally determined by dividing the minimum premium by
0.60. Thus, if the Owner pays a premium at least equal to the Target Premium each
year, the Policy will remain In force and the minimum death benefit will be paid
even if the Net Cash Value is insufficient to pay Monthly Deductions on a Monthly
Day and the Policy would otherwise Lapse. The monthly Target Premium is the Target
Premium divided by twelve. The minimum death benefit guarantee expires at the later
of Attained Age 65 or 10 years from the Issue Date. |
|
The Target
Premium will be increased or decreased, as appropriate, when you request to increase
or decrease the Specified Amount, change the Death Benefit Option, or add or delete
riders. |
||
If the premiums
required to maintain the minimum death benefit guarantee are not paid, the minimum
death benefit guarantee will be lost. We will mail you notice of this loss, after
which you will have 60 days to reinstate the minimum death benefit guarantee by
paying premiums sufficient to raise the total premiums to the required amount. If
the necessary premiums are not paid within the 60 day grace period, the minimum
death benefit guarantee cannot be reinstated. |
||
Where the
minimum death benefit guarantee is in effect and there is insufficient Net Cash
Value to pay the Monthly Deduction, Deferred Charges will be used to pay the monthly
deduction during those first nine Policy Years. During those years, any Monthly
Deduction remaining after amounts in the deferred Charges Account have been exhausted
will be waived. In the 10th Policy Year and beyond, any Monthly Deduction in excess
of the Net Cash Value will be waived. |
Death Benefit Proceeds
Payment of Death Benefit Proceeds. When we receive satisfactory, written proof of the Insured’s death at our Mailing Address, we will pay the Death Benefit Proceeds to the Beneficiary. If no Beneficiary survives the Insured, we will pay the Death Benefit Proceeds to you, the owner, if living, or to your estate. The death benefit is paid when we have received Due Proof of Death and proof (in Good Order) of each beneficiary(ies) interest, which shall include the required documentation and proper instructions from each of the beneficiary(ies).
We will pay Death Benefit Proceeds payable to your estate in one sum. We will pay Death Benefit Proceeds payable to you or to other beneficiaries in one sum unless another settlement option is selected. If the Beneficiary is not a natural person, Death Benefit Proceeds due may only be applied under settlement options we consent to.
We pay interest on single sum Death Benefit Proceeds from the date we receive proof of death (or from the date of the Insured’s death, if required by law), until the date of payment. Interest is paid at an annual rate that we determine.
During the Insured’s lifetime, you may elect a settlement option for the payment of the Death Benefit Proceeds. To make such an election, we must receive (in Good Order) the written consent of all Irrevocable Beneficiaries and assignees. After the Insured’s death, if you did not select a settlement option, any Beneficiary entitled to receive the proceeds in one sum may select a settlement option.
Every state has unclaimed property laws which generally declare life insurance policies to be abandoned after a period of inactivity of 3 to 5 years from the policy’s Maturity Date or date the Death Benefit Proceeds are due and payable. For example, if the payment of Death Benefit Proceeds has been triggered, but, if after a thorough search, we are still unable to locate the Beneficiary, or the Beneficiary does not come forward to claim the Death Benefit Proceeds in a timely manner, the Death Benefit Proceeds will be paid to the abandoned property division or unclaimed property office of the state in which the Beneficiary or the Owner 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 Proceeds if the Beneficiary steps forward to claim the Death Benefit Proceeds with the proper documentation. To prevent such escheatment, it is important that you update your beneficiary designations, including addresses, if and as they change. Such updates should be communicated in writing to our Mailing Address.
12
Death Benefit Options 1 and 2. You may select one of two Death Benefit Options. Your selection will affect the death benefit, the Monthly Deduction, and the Accumulated Value. Under either option, Death Benefit Proceeds are equal to the Face Amount on the date of death, plus any premiums received after the date of death, minus Indebtedness.
However, the Face Amount differs under the two Death Benefit Options. The Face Amount under option 1 is the greater of (a) the Specified Amount, or (b) the Accumulated Value on the date of death multiplied by the Death Benefit Ratio. The Face Amount under option 2 is the greater of (a) the Specified Amount plus the Policy’s Accumulated Value on the date of death, or (b) the Accumulated Value on the date of death multiplied by the Death Benefit Ratio.
The Death Benefit Ratio is the ratio of Face Amount to Accumulated Value required by the Code for treatment of the Policy as a life insurance policy. The Death Benefit Ratio varies by Attained Age as shown in Appendix B of the SAI. The death benefit factor decreases from year to year as the Attained Age of the Insured increases.
Change of Death Benefit Option
You may change the Death Benefit Option at any time by Written Request. Changing
the Death Benefit Option may have tax consequences. A change becomes effective as
of the first Monthly Processing Day after we receive a Written Request requesting
the change, or the first Monthly Processing Day after underwriting is complete if
evidence was requested. The written consent of all assignees and irrevocable beneficiaries
must be obtained prior to the change. We may require evidence of insurability.
If option 1 is changed to option 2, the Specified Amount is reduced by the amount of the Policy value as of the effective date of the change. This change does not alter the amount of the Policy’s death benefit at the time of the change, but does affect how the death benefit is determined from that point on. The death benefit will vary with Policy value from that point on, unless the death benefit derived from application of the death benefit percentage factor applies. We may decline a change from Death Benefit Option 2 if the resulting Specified Amount would be less than $50,000 ($10,000 for Issue Ages 65 and over).
If option 2 is changed to option 1, the Specified Amount is increased by the amount of the Policy value as the effective date of the change. This change does not alter the amount of the Policy’s death benefit at the time of the change, but does affect the determination of the death benefit from that point on. The death benefit as of the date of the change becomes the new Specified Amount and remains at that level, unless the death benefit derived from application of the death benefit percentage factor applies.
Your insurance goals should determine the appropriate Death Benefit Option. If you prefer to have favorable investment results and additional Net Premiums reflected in the form of an increased death benefit, you should choose Death Benefit Option 2. If you are satisfied with the amount of insurance coverage and wish to have favorable investment results and additional Net Premiums reflected to the maximum extent in increasing Cash Value, you should choose Death Benefit Option 1.
A change of Death Benefit Option may also change the Cost of Insurance for the duration of the Policy. Though the Cost of Insurance rate is the same under both options, the Net Amount at Risk varies inversely with Policy value under option 1, but is constant under option 2, unless the death benefit derived from application of the death benefit percentage factor applies.
A change of Death Benefit Option may have tax consequences. You should consult a tax advisor before changing the Death Benefit Option.
Accelerated Benefit Option
If
you elect to receive an accelerated payment of the death benefit and provide us
with satisfactory evidence that the Insured is terminally ill, we will advance up
to 50% of a Policy’s eligible death benefit subject to a $250,000 maximum per
Insured. Terminal illness is a non-correctable medical condition in which the Insured’s life expectancy is no more than twelve months. The eligible death benefit
is the death benefit calculated without including Accumulated Value. We assess an
administrative charge (of no more than $300) for an accelerated payment of the death
benefit and deduct interest on the amount paid. As a result, the Death Benefit Proceeds
payable to the Beneficiary upon the death of the Insured is reduced by an amount
greater than the amount you receive as an accelerated benefit.
In order to be considered eligible, the coverage must:
1) | be In Force
other than as extended term insurance; and |
|
2) | have more
than two years until its maturity or expiration date, from the date written notification
to exercise this benefit is received by us at our Mailing Address. |
13
The accelerated benefit option is not available in all states and may vary by state. The tax consequences of accelerated benefits are uncertain and you should consult a tax advisor before exercising this option.
Change of Specified Amount
A Written
Request is needed to change the Specified Amount. Changing the Specified Amount
is currently allowed at any time. We may discontinue our current practice of allowing
a change in Specified Amount during the first Policy Year. Changing the Specified
Amount may have tax consequences. You should consult a tax advisor before changing
the specified amount. If more than one increase is requested in a Policy Year, we
may charge $50 for each increase after the first. Changes are subject to the following
conditions.
Decreases. We may require that the Specified Amount after any decrease be at least $50,000 ($10,000 for Issue Ages 65 and over). The decrease is effective as of the Monthly Processing Day coincident with or next following the day the request is received by us at our Mailing Address. The effective date of the decrease will be shown on an endorsement to the Policy. For purposes of determining the Cost of Insurance, any decrease is applied to the initial Specified Amount and to increases in the Specified Amount in reverse order in which they became effective. A decrease does not result in reduced Deferred Charges.
Increases. A supplemental application containing evidence of insurability satisfactory to us is required. The increase is effective as of the first Monthly Processing Day after we receive the Written Request requesting the change, or the first Monthly Processing Day after underwriting is complete if evidence was requested. The effective date of the increase will be shown on an endorsement to the Policy. The incontestable and suicide provisions apply to the increase as if a new Policy had been issued for the amount of the increase.
The Net Cash Value of the original Policy, as well as any premiums paid at the time of the increase, and any premiums paid after the increase will be allocated between the original Specified Amount and the increased Specified Amount according to the ratios of their respective guideline annual premiums (as defined under the 1940 Act).
Because the Deferred Charges are a function of Specified Amount, an increase in Specified Amount results in an increase in the applicable Deferred Charge. No additional Deferred Charges will accrue for increases in Specified Amount due to the Automatic Increase Rider or a change from Death Benefit Option 2 to Death Benefit Option 1.
Likewise, because the Administrative Charge is a function of Specified Amount, an increase in Specified Amount results in an increase in the ongoing Administrative Charge. As with the Deferred Charges, an increase resulting from a change in death benefit death option 2 to option 1 does not result in an increase in the Administrative Charge.
We may require for a Specified Amount increase, the payment of additional premiums in an amount equal to the initial premium which would be charged based on Attained Age and rating class for a newly-issued Policy with a Specified Amount equal to the amount of increase.
The rating class assigned to an increase in Specified Amount may result in the use of a Cost of Insurance rate different than the Cost of Insurance rate charged on the original Specified Amount.
Policy Values
Accumulated Value. The Accumulated Value is the sum of the values attributable to the Policy in the Loan Account, Deferred Charges Account, each Subaccount, and the Interest Bearing Account. Accumulated Value is determined as of the end of each Valuation Period. The Loan Account is part of our General Account into which is transferred an amount equal to any Policy loans. The Deferred Charges Account is part of our General Account in which Policy values are held in support of the deferred sales and administrative charges.
Accumulated Value increases whenever:
• | Investment
gains occur in any Subaccount. |
|
• | Interest is
credited to the Policy for amounts held in the Interest Bearing Account. |
|
• | Interest is
credited to the Policy for any loan amounts held in the Loan Account. |
|
• | Additional
Net Premiums are paid. |
|
• | Policy dividends
are paid into the Subaccounts or Interest Bearing Account. |
14
Accumulated Value decreases whenever:
• | Investment
losses occur in any Subaccount. |
|
• | Monthly Deduction
or service fees are paid. |
|
• | A partial
withdrawal is made. |
|
• | Net Cash Value
is reduced by the amount of the transfer charge. |
Accumulated Value is unaffected when:
• | A Policy loan
is either disbursed or repaid. |
|
• | Accumulated
Value is transferred between any Subaccount or Interest Bearing Account and the
Loan Account, between Subaccounts or between the Subaccounts and the Interest Bearing
Account (exclusive of any transfer charge). |
Accumulated Value is determined as of the end of each Valuation Period by adding the value attributable to the Policy in the Loan Account, Deferred Charges Account, each Subaccount, and the Interest Bearing Account.
Accumulated Value in an Interest Bearing Account. As of the end of any Valuation Period, a Policy’s value in the Interest Bearing Account is equal to:
• | aggregate
Net Premium allocated to the Interest Bearing Account; plus |
|
• | Accumulated
Value transferred to the Interest Bearing Account; plus |
|
• | interest credited
to the Interest Bearing Account; minus |
|
• | any partial
withdrawals (including any applicable surrender charges deducted); minus |
|
• | any transfers
of Accumulated Value from the Interest Bearing Account (including any transfer fees);
minus |
|
• | the aggregated
portion of monthly deductions made from the Interest Bearing Account; less |
|
• | the Interest
Bearing Account’s portion of any Increase of Specified Amount Charge. |
Accumulated Value in the Subaccounts. Accumulated Value in a Subaccount reflects the investment experience of that Subaccount and the Accumulated Value in all Subaccounts reflects the weighted investment experience of those Subaccounts.
The Accumulated Value in any Subaccount as of the Policy Issue Date is equal to the amount of the initial Net Premium allocated to that Subaccount. For subsequent Valuation Periods, the Accumulated Value in the Subaccount is equal to that part of any Net Premium allocated to and any Accumulated Value transferred to the Subaccount during the Valuation Period, adjusted by dividends, realized and unrealized net capital gains and losses during the Valuation Period, and decreased by partial withdrawals (including any applicable surrender charges) from the Subaccount during the Valuation Period and by any transfers of Accumulated Value (including any transfer fees) from the Subaccount during the Valuation Period. Net Premiums allocated to a Subaccount and Accumulated Value transferred to a Subaccount are converted into Units. For each such allocation or transfer, the number of Units of a Subaccount credited to a Policy is determined by dividing the dollar amount of the allocation or transfer directed to the Subaccount by the value of the Subaccount’s Unit for the Valuation Period during which the allocation or transfer is made. Therefore, Net Premium allocated to or Accumulated Value transferred to a Subaccount increases the number of the Subaccount’s Units credited to the Policy as of the end of the Valuation Period for which they are credited.
Certain events reduce the number of Units of a Subaccount credited to a Policy. Partial withdrawals or transfers of Accumulated Value from a Subaccount result in the cancellation of an appropriate number of Units of that Subaccount, as do: (1) surrender of the Policy, (2) payment of the Death Benefit Proceeds, and (3) the deduction of that Subaccount’s share of the monthly deduction or any applicable Increase of Specified Amount Charge. Units are redeemed as of the end of the Valuation Period during which the transaction is executed or we receive notice regarding the event.
The value of a Unit for a Subaccount is calculated for each Valuation Period subtracting (2) from (1) and dividing the result by (3) where:
(1) is | (a) the net
assets of the Subaccount as of the end of the Valuation Period; (b) plus or minus
the net charge or credit with respect to any taxes paid or any amount set aside
as a provision for taxes during the Valuation Period. |
15
(2) is | a daily factor
representing the mortality and expense risk charge multiplied by the number of days
in the Valuation Period. |
|
(3) is | the number
of Units outstanding as of the end of the Valuation Period. |
The Unit Value may increase or decrease from one Valuation Period to the next and varies between Subaccounts.
Transfer of Values
You may make
the following transfers of Accumulated Value: (1) between Subaccounts; (2) from
a Subaccount to the Interest Bearing Account; and (3) from the Interest Bearing
Account into the Subaccounts only during the 30 day period beginning on and immediately
following the Policy Anniversary (we are currently waiving this restriction). The
first four transfers in a Policy Year are free. We may charge $20 for the fifth
and each additional transfer in a Policy Year. We currently waive this fee. All
transfer requests received as of the same Valuation Day are treated as one transfer
for the purposes of assessing the transfer fee. A transfer from the Interest Bearing
Account may be limited to 25% of the Interest Bearing Account. We may deduct a charge
of $20 per transfer after the fourth transfer in a Policy Year. We currently waive
this restriction. Transfer privileges are subject to restriction based on our Frequent
Transfers Procedures.
A request to transfer Subaccount Values to other Subaccounts and/or Interest Bearing Account or from Interest Bearing Account to one or more Subaccounts which is received before the close of regular trading on the New York Stock Exchange (usually, 3:00 p.m. Central Time) will take effect as of the day it is received. Transfer requests received after that time are processed as the following Valuation Day.
<R>Additional Transfer Limitations
Frequent, large, or short-term transfers among Subaccounts, such as those associated
with “market timing” transactions, can adversely affect the Funds and
the returns achieved by Owners. In particular, such transfers may dilute the value
of Fund shares, interfere with the efficient management of the Funds, and increase
brokerage and administrative costs of the Funds. These costs are borne by all Owners
allocating purchase payments to the Subaccounts and other Fund shareholders, not
just the Owner making the transfers. In order to try to protect Owners and the Funds
from potentially harmful trading activity, we have adopted Frequent Transfers Procedures.
Detection. We employ various means in an attempt to detect, deter, and prevent inappropriate frequent, large, or short-term transfer activity among the Subaccounts that may adversely affect other Owners or Fund shareholders. We may vary the Frequent Transfers Procedures with respect to the monitoring of potential harmful trading activity from Subaccount to Subaccount, and may be more restrictive with regard to certain Subaccounts than others. However, we will apply the Frequent Transfers Procedures, including any variance in the Frequent Transfers Procedures by Subaccount, uniformly to all Owners. We also coordinate with the Funds to identify potentially inappropriate frequent trading, and will investigate any patterns of trading behavior identified by Funds that may not have been captured through operation of the Frequent Transfers Procedures.
Please note that despite our best efforts, we may not be able to detect nor stop all harmful transfers.
<R>In our sole discretion, we may revise the Frequent Transfers Procedures at any time without prior notice as necessary to (i) better detect and deter frequent, large, or short-term transfers that may adversely affect other Owners or Fund shareholders, (ii) comply with state or federal regulatory requirements, or (iii) impose additional or alternate restrictions on Owners who make inappropriate frequent transfers (such as dollars or percentage limits on transfers). We also may, to the extent permitted by applicable law, implement and administer redemption fees imposed by one or more of the Funds in the future. If required by applicable law, we may deduct redemption fees imposed by the Funds. Further, to the extent permitted by law, we also may defer the transfer privilege at any time that we are unable to purchase or redeem shares of the Funds. You should be aware that we are contractually obligated to prohibit purchases and transfers or redemptions of Fund shares at the Fund’s request.
16
We currently do not impose redemption fees on transfers, or expressly allow a certain number of transfers in a given period, or limit the size of transfers in a given period. Redemption fees, transfer limits, and other procedures or restrictions may be more or less successful than our policies in deterring inappropriate frequent transfers or other disruptive transfers and in preventing or limiting harm from such transfers.
Our ability to detect and deter such transfer activity is limited by our operational and technological systems, as well as by our ability to predict strategies employed by Owners (or those acting on their behalf) to avoid detection. Accordingly, despite our best efforts, we cannot guarantee that the Frequent Transfers Procedures will detect or deter frequent or harmful transfers by such Owners or intermediaries acting on their behalf. We apply the Frequent Transfers Procedures consistently to all Owners without waiver or exception.
Fund Frequent Trading Policies. The Funds have adopted their own policies and procedures with respect to inappropriate frequent purchases and redemptions of their respective shares. The prospectuses for the Funds describe any such policies and procedures. The frequent trading policies and procedures of a Fund may be different, and more or less restrictive, than the frequent trading policies and procedures of other Funds and the policies and procedures we have adopted to discourage inappropriate frequent transfers. Accordingly, Owners and other persons who have material rights under the Contracts should assume that the sole protections they may have against potential harm from frequent transfers are the protections, if any, provided by the Frequent Transfers Procedures. You should read the prospectuses of the Funds for more details on their ability to refuse or restrict purchases or redemptions of their shares.
Omnibus Orders. Owners and other persons with material rights under the Contracts also should be aware that the purchase and redemption orders received by the Funds generally are “omnibus” orders from intermediaries such as retirement plans and separate accounts funding variable insurance contracts. The omnibus orders reflect the aggregation and netting of multiple orders from individual owners of variable insurance contracts and individual retirement plan participants. The omnibus nature of these orders may limit each Fund’s ability to apply its respective frequent trading policies and procedures. In addition, if a Fund believes that an omnibus order we submit may reflect one or more transfer requests from Owners engaged in inappropriate frequent transfers, the Fund may reject the entire omnibus order and thereby delay or prevent us from implementing your request.
You should be aware that we are required to provide to a Fund or its designee, promptly upon request, certain information about the transfer activity of individual Owners and, if requested by the Fund, to restrict or prohibit further purchases or transfers by specific Owners identified by the Fund as violating the frequent trading policies established for that Fund.
<R>A Written Request to change allocation of premiums will be effective for the first premium payment on or following the date the request for change is received by us (in Good Order) at our Mailing Address. A request to change the allocation of withdrawal of Monthly Deductions will be effective on the first Monthly Day on or following the date the request is received by us at our Mailing Address.
Dollar-Cost Averaging
If elected
at the time of the application or at any other time by Written Request, you may
systematically or automatically transfer (on a monthly basis) specified dollar amounts
from the Vanguard Variable Insurance Fund Money Market Subaccount to other Subaccounts.
The fixed dollar amount will purchase more accumulation units of a Subaccount when
their value is lower and fewer units when their value is higher. Over time, the
cost per accumulation unit averages out to be less than if all purchases had been
made at the highest value and greater than if all purchases had been made at the
lowest value. The dollar-cost averaging method of investment reduces the risk of
making purchases only when the price of accumulation units is high. It does not
assure a profit or protect against a loss in declining markets.
The minimum transfer amount for dollar-cost averaging is the equivalent of $100 per month. If less than $100 remains in the Vanguard Variable Insurance Fund Money Market Subaccount, the entire amount will be transferred. The amount transferred to a Subaccount must be at least 1% of the amount transferred and must be stated in whole percentages.
17
Surrender and Partial Withdrawals
You may, by Written Request, make surrenders under your Policy, subject to obtaining
the prior written consent of all assignees or irrevocable Beneficiaries. You may,
by Written Request, make partial withdrawals under your Policy, subject to obtaining
the prior written consent of all assignees or irrevocable Beneficiaries. A surrender
or partial withdrawal of the Policy will take effect as of the day the Written Request
is received, if received before the close of regular trading on the New York Stock
Exchange (usually, 3:00 p.m. Central Time) at our Mailing Address. Any requests
after the close of regular trading on the New York Stock Exchange (usually, 3:00
p.m. Central Time) will be processed as of the next Valuation Day. Payments generally
are made within seven days of the effective date unless a suspension of payments
is in effect. Surrenders and partial withdrawals may have adverse tax consequences.
For information on possible tax effects of surrenders and partial withdrawals, see
Tax Treatment of Policy Benefits.
Policy Surrender. You may surrender the Policy for its Net Cash Value, in which case we may require the return of the Policy. We will determine the Net Cash Value as of the end of the Valuation Period during which the surrender date occurs. The Policy and all insurance terminate upon surrender.
Partial Withdrawals. You may take a portion of your Policy’s Net Cash as a partial withdrawal. A partial withdrawal may have adverse tax consequences. An amount up to the Net Cash Value, less one or two months of insurance charges, may be taken as a partial withdrawal. You may specify the allocation percentages among the Subaccount(s) and Interest Bearing Account from which the partial withdrawal is to be made. We will not deduct any contingent deferred sales or administrative charges in the case of a partial withdrawal, but may apply a service charge against the amount withdrawn equal to the lesser of $25 or 2% of that amount. If no specification is made, we will withdraw the amount from the Subaccounts and Interest Bearing Account in the same percentages as Monthly Deductions are deducted. If there is insufficient Accumulated Value to follow these percentages, the partial withdrawal amount will be withdrawn on a pro rata basis based on the Accumulated Value in the Subaccounts and Interest Bearing Account. The partial withdrawal fee is deducted from amounts withdrawn from the Subaccounts and the Interest Bearing Account on the same pro rata basis, unless otherwise directed by the Owner. We currently waive the partial withdrawal fee.
No partial withdrawal will be allowed if the Specified Amount remaining under the Policy would be less than $40,000 ($8,000 if Issue Age is 65 and over).
Unless the Face Amount derived from the application of the Death Benefit Ratio applies, under either Death Benefit Option, a partial withdrawal will reduce both the Accumulated Value and Face Amount by the amount surrendered but will not affect the Cost of Insurance. Under Death Benefit Option 1, the Specified Amount is also reduced by the same amount. The Specified Amount is not changed by a partial withdrawal under Death Benefit Option 2. If the Face Amount derived from the application of the Death Benefit Ratio applies, the effect on the monthly Cost of Insurance and Face Amount is somewhat different. The Face Amount is then decreased by more than the amount surrendered, and the monthly Cost of Insurance is less than it would have been without the surrender.
Maturity
The Policy matures on
the Policy Anniversary following the Insured’s 95th birthday. Coverage
under the Policy ceases on that date and you will receive maturity proceeds equal
to the Net Cash Value as of that date.
Payment of Proceeds/Settlement Options
There are several options for receiving Death Benefit Proceeds, surrender
proceeds, and maturity proceeds, other than in a lump sum. None of these options
vary based upon the performance of the Separate Account. Proceeds payable to other
than a natural person will be applied only under settlement options agreed to by
us. For more information concerning the options listed below, please contact us
at our Mailing Address. The available settlement options are as follows:
• | Interest Option |
|
• | Installment
Option |
|
• | Life Income
– Guaranteed Period Certain |
|
• | Joint and
Survivor Life |
18
In lieu of one of the above options, the Death Benefit Proceeds may be applied to any other settlement option we make available.
Suspension of Payments
For amounts
allocated to the Separate Account, we may suspend or postpone the right to transfer
among Subaccounts, make a surrender or partial surrender, or take a Policy loan
when:
1. | The New York
Stock Exchange is closed other than for customary weekend and holiday closings. |
|
2. | During periods
when trading on the Exchange is restricted as determined by the SEC. |
|
3. | During any
emergency as determined by the SEC which makes it impractical for the Separate Account
to dispose of its securities
or value its assets. |
|
4. | During any
other period permitted or required by order of the SEC for the protection of investors. |
In addition, pursuant to SEC rules, if the Vanguard Variable Insurance Fund Money Market Subaccount suspends the payment of redemption proceeds in connection with the implementation of liquidity gates by the Fund, we will delay payment of any transfer, partial withdrawal, surrender, loan or death benefit from the Vanguard Variable Insurance Fund Money Market Subaccount until the removal of such liquidity gates.
To the extent values are allocated to the Interest Bearing Account, the payment of full or partial surrender proceeds or loan proceeds may be deferred for up to six (6) months from the date of receipt, in Good Order, of the surrender or loan request, unless state law requires exception to the period of deferment. Death Benefit Proceeds may be deferred for up to 60 days from the date we receive (in Good Order) proof of death. If payment is postponed for more than 29 days, we will pay interest at an effective annual rate of 4.00% for the period of postponement.
If mandated under applicable law, we may be required to reject a premium payment. We may also be required to provide additional information about your account to government regulators. In addition, we may be required to block an Owner’s account and thereby refuse to pay any request for transfers, withdrawals, surrenders, loans or death benefits, until instructions are received from the appropriate regulator.
Policy Loans
General. At any time prior to the Maturity Date while the Insured is still living and the Policy is In Force, you may, by Written Request, borrow money from us using the Cash Value as the security for the loan. The maximum amount that you may borrow is 80% (90% for Virginia residents) of the Cash Value of the Policy as of the date of the loan. You must obtain the written consent of all assignees and Irrevocable Beneficiaries before the loan is made. The Policy will be the sole security for the loan.
The loan date is the date a written loan request containing the necessary signatures is received by us, in Good Order, at our Mailing Address. The loan value will be determined as of the loan date. Payment will be made within seven days of the loan date unless a suspension of payments is in effect.
Interest. We charge interest on amounts that you borrow. The interest rate charged is 8% and is an effective annual rate compounded annually on the Policy Anniversary. This rate is subject to change by us. Interest accrues on a daily basis from the loan date. Interest is due and payable at the end of each Policy Year. If interest is not paid when due, an amount equal to the interest due less interest earned on the Loan Account will be transferred from the Subaccounts and Interest Bearing Account to the Loan Account. The amount of loan interest billed will increase the loan principal and be charged the same rate of interest as the loan.
19
We credit Loan Account with interest at a minimum guaranteed rate of at least 4%. On each Policy Anniversary, interest earned on amounts in the Loan Account since the preceding Policy Anniversary is transferred to the Subaccounts and the Interest Bearing Account. Unless you specify otherwise, such transfers are allocated in the same manner as transfers of collateral to the Loan Account.
Loan Collateral. To secure a Policy loan to you, we withdraw an amount equal to the loan out of the Subaccounts and the Interest Bearing Account and transfer this amount into the Loan Account to be held there until the loan is repaid. You may specify how this transferred Accumulated Value is allocated among the Subaccounts and the Interest Bearing Account If you do not specify the allocation, we make the allocation in the based on the proportion that Monthly Deductions are withdrawn from the Subaccounts and Interest Bearing Account. If you make a specification but there are insufficient values in one or more of the Subaccounts and the Interest Bearing Account for withdrawal as you have specified, we will withdraw the loan amount from all Subaccounts and the Interest Bearing Account on a pro rata basis based on values in the Subaccounts and Interest Bearing Account.
Loan Repayment. Any Indebtedness may be repaid at any time while the Insured is still living and the Policy is In Force prior to the Maturity Date. Loan payments must be clearly marked as loan payments or we will treat them as premiums. As the loan is repaid, the amount repaid will be transferred from the Loan Account to the Subaccounts and the Interest Bearing Account in the same manner as premiums are allocated.
Effect of a Policy Loan. A loan, whether or not repaid, has a permanent effect on the death benefit and Accumulated Values because the investment results of the Subaccounts and current interest rates credited on Interest Bearing Account value do not apply to Accumulated Value in the Loan Account. The larger the loan and longer the loan is outstanding, the greater will be the effect of Accumulated Value being held as collateral in the Loan Account. Depending on the investment results of the Subaccounts or credited interest rates for the Interest Bearing Account while the loan is outstanding, the effect could be favorable or unfavorable. Policy loans also may increase the potential for Lapse if investment results of the Subaccounts to which Cash Value is allocated is unfavorable. If a Policy Lapses with loans outstanding, certain amounts may be subject to income tax. See “Federal Income Tax Considerations,” for a discussion of the tax treatment of Policy loans. In addition, if a Policy is a modified endowment contract (“MEC”), loans may be currently taxable and subject to a 10% federal penalty tax.
Cyber Security
Our variable product
business is highly dependent upon the effective operation of our computer systems
and those of our business partners, so that our business is potentially susceptible
to operational and information security risks resulting from a cyber-attack. These
risks include, among other things, the theft, misuse, corruption and destruction
of data maintained online or digitally, denial of service attacks on websites and
other operational disruption and unauthorized release of confidential customer information.
Cyber-attacks affecting us, CBSI, the underlying Funds, and intermediaries may adversely
affect us and your Cash Value. For instance, cyber-attacks may interfere with our
processing of Policy transactions, including processing orders with the underlying
Funds, impact our ability to calculate Policy values, cause the release and possible
destruction of confidential Owner or business information, impede order processing,
subject us and/or CBSI 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 underlying Funds invest, which may cause the Funds underlying
your Policy to lose value. There can be no assurance that we or the underlying Funds
or CBSI will avoid losses affecting your Policy due to cyber-attacks or information
security breaches in the future.
CHARGES AND DEDUCTIONS |
Premium Expense Charge
We deduct
from premiums for Premium Expense Charges charged by your state of residence. We
determine your state of residence by the mailing address as shown on our records.
The initial percentage of reduction for state charges is shown on the specifications
page of your Policy.
Monthly Deduction
The Monthly
Deduction due on each Monthly Day will be the sum of:
• | the Cost of
Insurance for that month; plus |
|
• | the monthly
Policy fee; plus |
|
• | the monthly
administrative fee; plus |
|
• | the cost of
any additional benefits provided by rider, if any. |
20
The Monthly Deduction is allocated to the subaccounts and interest bearing account values prescribed by the Owner and is collected by liquidating the number of units (or fraction of units) in Subaccounts (and/or withdrawing values from the Interest Bearing Account) in an amount equal to the amount of the Monthly Deduction, except during the second through ninth Policy Years, in which case the amount in the Deferred Charges Account in excess of the Deferred Charges will be first applied to the Monthly Deduction. The excess amount will include interest earned in the account and, when the Monthly Day falls on a Policy Anniversary, the amount released from the Deferred Charges Account.
On any Monthly Day when there is insufficient Net Cash Value to pay the Monthly Deduction and the no-Lapse guarantee or minimum death benefit guarantee is in effect, the Monthly Deduction remaining after the Net Cash Value is exhausted will be made from the Deferred Charges Account. If the Deferred Charges Account balance is insufficient to pay the Monthly Deduction, we will waive any Monthly Deduction remaining after the amount in the Deferred Charges Account has been exhausted.
In the 10th Policy Year and beyond, any Monthly Deduction in excess of the Net Cash Value will be waived by us if the minimum death benefit guarantee is still in effect.
The Owner may specify what percentages of the Monthly Deduction will be withdrawn from each Subaccount and the Interest Bearing Account. Each withdrawal from a Subaccount or the Interest Bearing Account must be at least 1% of the total Monthly Deduction. Only whole percentages are permitted. If a specification is not made, the withdrawals will be made in the same percentages as premiums are currently allocated among the Subaccounts and the Interest Bearing Account.
Cost of Insurance
This charge
compensates us for the expense of underwriting the Face Amount. We determine a Cost
of Insurance (“COI”) rate on each Monthly Day. The COI rate for the Policy
is determined by certain factors including, but not limited to, the Insured’s
Attained Age, gender, smoker status, and rating class. (For factors used in unisex
Policies, see the Section entitled Unisex Policies.) Attained Age means Age on the
most recent Policy Anniversary. COI rate charges depend on our expectations as to
future mortality experience. The monthly COI rate will not exceed the rates shown
in Table I - Guaranteed Maximum Insurance Rates contained in the Policy. However,
we may charge less than these rates. While not guaranteeing to do so, we intend
to charge less than the guaranteed maximum insurance rates after the 10th Policy
Year. The guaranteed maximum insurance rates for each attained age are based on
the 1980 CSO Mortality Tables, Age last birthday.
The COI is determined by multiplying the COI rate by the Net Amount at Risk for a Policy. Under Death Benefit Option 2, the Net Amount at Risk is always the Specified Amount. Under Death Benefit Option 1, the Net Amount at Risk is the Specified Amount less the Accumulated Value. Therefore, under Death Benefit Option 1, all of the factors that affect Accumulated Value affect the Net Amount at Risk. For a Policy where there has been an increase in the Specified Amount, there is a Net Amount at Risk associated with the initial Specified Amount and a Net Amount at Risk associated with the increase. The COI rate applicable to the initial Specified Amount is usually less than that for the increase. Likewise, the Net Amount at Risk for the initial Specified Amount is multiplied by the COI rate for the initial Specified Amount to determine the COI charge for the initial Specified Amount and the Net Amount at Risk for the increase is multiplied by the COI rate for the increase to determine the COI for the increase. To compute the net amounts at risk after an increase for a Policy with an option 1 death benefit, Accumulated Value is first used to offset the initial Specified Amount, and any Accumulated Value in excess of the initial Specified Amount is then used to offset the increase in Specified Amount.
Monthly Policy Fee
The monthly
Policy fee is a fee we charge to compensate us for some of the administrative expenses
associated with the Policy. The fee cannot be increased. It is equal to $3 per month
for Policies with Issue Ages of 0-19 and $6 per month for all other Policies. It
is not based on the Specified Amount.
Monthly Administrative Fee
We
assess an administrative fee of $.45 per thousand dollars of Specified Amount per
year on a monthly basis to reimburse us for some of the administrative expenses
associated with the Policy. On a monthly basis, the administrative fee amounts to
$.0375 per thousand dollars of Specified Amount. The fee is based on the Specified
Amount and cannot be increased unless the Specified Amount is changed. The fee will
not be decreased in the event of a Specified Amount decrease. This fee is charged
only during the first 10 Policy Years of the Policy or, on an increase in Specified
Amount, during the first 10 Policy Years after the increase.
The monthly administrative fee, together with the monthly Policy fee, is designed to equitably distribute the administrative costs among all Policies.
21
Cost of Additional Benefits
The
cost of additional benefits will include charges for any additional insurance benefits
added to the Policy by rider. These charges are for insurance protection, and the
amounts will be specified in the Policy.
Mortality and Expense Risk Charge
We deduct daily a mortality and expense risk charge of .00002466% of the Policy’s Net Asset Value in the Separate Account (and the Policy’s Accumulated
Value in the Interest Bearing Account), which is equal on an annual basis to 0.9%
of the daily value of the net assets of the Separate Account (and the value in the
General Account attributable to the Interest Bearing Account). The mortality risk
assumed is that the Insured may not live as long as expected. The expense risk assumed
by us is that the actual expense to us of administrating the Policy will exceed
what we expected when setting the other charges under the Policy. Please note that
the mortality and expense risk may generate profits. We may use any profits from
this charge to finance other expenses, including expenses incurred in the administration
of the Policies and distribution expenses of the Policies or for any other corporate
purpose.
Contingent Deferred Sales and Administrative
Charges
To reimburse us for sales expenses and Policy issue expenses, including
but not limited to registered representatives’ commissions, advertising, sales
materials, training allowances, and preparation of prospectuses, we deduct contingent
deferred sales and administrative charges from the proceeds in the event of a complete
surrender of the Policy during the first ten years or the first ten years following
an increase in the Specified Amount. A chart showing the percentage of Deferred
Charges remaining at the beginning of Policy Years 2 through 9 (or the same number
of years following an increase in Specified Amount) is shown below. The contingent
deferred sales charge will be used to offset the expenses that were incurred in
the distribution of the Policy, including but not limited to representatives’
commissions, advertising, sales materials, training allowances, and preparation
of prospectuses. In no instance will the charge exceed 30% of the lesser of premiums
paid or the “guideline annual premium.” The “guideline annual premium” is approximately equal to the amount of premium that would be required on
an annual basis to keep the Policy In Force if the Policy had a mandatory fixed
premium schedule assuming (among other things) a 5% net investment return. If you
would like to obtain the guideline annual premium specific to your contract, please
contact us at our Mailing Address.
The Deferred Charges vary by the Age of Insured, gender, and smoking status and are shown on the specifications page of your Policy. For a 35-year-old male nonsmoker, the charges would be $7.71 per $1,000 of the Specified Amount. For a 50-year-old male nonsmoker, the charges would be $15.91 per $1,000 of Specified Amount. For a chart showing how the charges vary, see Appendix A in the SAI.
We use the contingent deferred sales and administrative charge to recover the first-year costs of underwriting and issuing the Policy. They are contingent in that they will not be collected unless the Policy is surrendered during the first nine Policy Years. We will not deduct any Deferred Charges from the proceeds in the event of a partial withdrawal of the Policy. The Deferred Charges generally build up monthly during the first Policy Year in twelve equal increments to the total Deferred Charges. Then the Deferred Charges decrease annually after the first year. The percentage of the Deferred Charges remaining in each Policy Year is:
Beginning
Policy Year |
Percentage
of Deferred Charges Remaining |
2 3 4 5 6 7 8 9 10+ |
95% 90% 85% 75% 65% 50% 35% 20% 0% |
At the time the Policy is issued, the first month’s portion of the Deferred Charges is placed in a non-segregated portion of our General Account, which is referred to as the Deferred Charges Account. This amount will earn interest at a minimum rate of 4% per annum with us crediting additional interest, at our option, from time to time. At the next Monthly Day, taking into account the interest earned, we will transfer from the Separate Account and/or the Interest Bearing Account to the Deferred Charges Account the amount necessary to equal the current Deferred Charges. This withdrawal will be made in the same percentages as premiums are currently allocated among the Subaccounts and the Interest Bearing Account.
22
We will do the same for each month of the first Policy Year. If the Owner has not paid sufficient premium to build up the Deferred Charges to the appropriate level in the first Policy Year, additional amounts will be transferred out of the Separate Account and/or Interest Bearing Account in subsequent years. The transfers will continue until the Deferred Charges equal premiums required in the first year to completely fund the Deferred Charges, and the corresponding deductions had taken place every year, as scheduled.
We will release on the first Monthly Day of the second Policy Year the amount in the Deferred Charges Account in excess of 95% of the first Policy Year Deferred Charges, taking into account the interest earned. This process continues each Policy Year until the 10th Policy Year or until the Policy is surrendered.
The amount in the Deferred Charges Account is included in calculating the Accumulated Value of the Policy. We will withdraw Deferred Charges from the Deferred Charges Account only in the following instances:
• | to pay surrender
charges upon full surrender of the Policy; |
|
• | to release
amounts back to the Separate Account and/or Interest Bearing Account on the second
through ninth Policy Anniversaries; and |
|
• | to pay the
Monthly Deduction when there is insufficient Net Cash Value and the no-Lapse guarantee
or minimum death benefit guarantee is in effect. |
In the latter two situations, allocations will be made in the same percentages as premiums are currently allocated among the Subaccounts and the Interest Bearing Account.
Net Premiums paid following the payment of the Monthly Deduction with Deferred Charges will first be transferred from the Subaccounts and/or Interest Bearing Account to the Deferred Charges Account on the day the premiums are received, to the extent necessary to bring the Deferred Charges Account to the same level as if no Deferred Charges had been used to pay the Monthly Deduction, and if on a Policy Anniversary, the reduction in Deferred Charges had taken place as scheduled. If the premium is paid on a Monthly Day during the first Policy Year, additional amounts will be transferred to the Deferred Charges Account. This process of using Deferred Charges to pay the Monthly Deduction will continue every Monthly Day that: (1) there is insufficient Net Cash Value to pay the Monthly Deduction; and (2) the no-Lapse guarantee or minimum death benefit guarantee are in effect; and (3) the Policy is not beyond the ninth Policy Year.
Partial Withdrawal Fee
If a partial
withdrawal is made, we will not deduct any contingent deferred sales or administrative
charges, but may make a service charge equal to the lesser of $25 or 2% of the amount
surrendered for each partial withdrawal. These fees are currently waived by us.
Transfer Fee
An Owner may transfer
a Policy’s Accumulated Value among one or more of the Subaccounts and the Interest
Bearing Account. Currently, we allow four transfers in each Policy Year without
charge. After four transfers in any given Policy Year, we may deduct $20 per transfer
from the amount transferred. These fees are currently waived by us.
Federal and State Income Taxes
Other than premium expense charge, no charges are currently made against the Separate
Account and/or Interest Bearing Account for federal or state income taxes. In the
event we determine that any such taxes will be imposed, we may make deductions from
the Separate Account and/or Interest Bearing Account to pay such taxes.
Change of Specified Amount Charge
We will assess a $50 charge for each change in Specified Amount after the first
in a Policy Year. This charge compensates us for administrative expenses associated
with underwriting the increase in Specified Amount. We currently intend to waive
certain fees as stated above. We, however, may reinstate the fees and charges in
the future.
23
Research Fee
We may charge you
up to $50 per request when you request information that is duplicative of information
previously provided to you and that requires extensive research.
Fund Expenses
Expense of the Funds,
including fees and charges, are discussed in the Funds’ prospectuses and in
their statements of additional information available by writing to us at our Mailing
Address.
Please note that the Funds and their investment adviser are affiliated with us. In addition, as discussed under “Contingent Deferred Sales and Administrative Charges” above, the Funds pay us for performing certain administrative services.
Additional Information
We sell
the Policies through registered representatives of broker-dealers. These registered
representatives are also appointed and licensed as our insurance agents. We pay
commissions to the broker-dealers for selling the Policies. You do not directly
pay these commissions, we do. We intend to recover commissions, marketing, administrative
and other expenses and the cost of Policy benefits through the fees and charges
imposed under the Policies. See “Distribution of Policies” for more information.
OTHER POLICY BENEFITS AND PROVISIONS |
Issue Date
The Issue Date is the
date used to determine Policy Anniversaries and Monthly Days. If a premium is paid
with the application, the Issue Date will be no earlier than the date the application
is received and no later than the Record Date. Insurance coverage will begin as
of the Issue Date provided the applicant subsequently is deemed to have been insurable.
If a premium is not paid with the application or the application is approved other
than as applied for, the Issue Date will ordinarily be approximately 10 days after
underwriting approval. Insurance coverage will begin on the later of the Issue Date
or the date the premium is received.
Owner, Beneficiary
You are the
person who purchases the Policy and is named in the application. You may not be
the Insured. You may name one or more Beneficiaries in the application. Beneficiaries
may be primary or contingent. If no primary Beneficiary survives the Insured, payment
is made to contingent Beneficiaries. Beneficiaries in the same class will receive
equal payments unless otherwise directed. A Beneficiary must survive the Insured
in order to receive his or her share of the Death Benefit Proceeds. If a Beneficiary
dies before the Insured dies, his or her unpaid share is divided among the Beneficiaries
who survive the Insured. The unpaid share will be divided equally unless you direct
otherwise. If no Beneficiary survives the Insured, the Death Benefit Proceeds will
be paid to you, if living, or to your estate.
You may change the Beneficiary while the Insured is living. The written consent of all Irrevocable Beneficiaries must be obtained before such a change. To make a change, you must provide us with a Written Request satisfactory to us. The request will not be effective until we record it. After the request is recorded, it will take effect as of the date you signed the request. We will not be responsible for any payment or other action taken before the request is recorded. We may require the Policy be returned for endorsement of the Beneficiary change.
Right-to-Examine Period
The Owner
may cancel the Policy before the latest of the following three events:
• | 45 days after
the date of the application; |
|
• | 20 days after
we have personally delivered or have sent the Policy and a Notice of Right of Withdrawal
to the Owner by first class mail; or, |
|
• | 20 days after
the Owner receives the Policy. |
To cancel the Policy, the Owner must mail or deliver a Written Request to cancel (in Good Order) to the representative who sold it or to us at our Mailing Address. Unless prohibited by state law, the refund will include:
• | All charges
for state taxes deducted from premiums; plus |
|
• | Total amount
of Monthly Deductions; plus |
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• | Any other
charges taken from the Accumulated Value; plus |
|
• | The Accumulated
Value on the date we received the Written Request to cancel the Policy in Good Order;
minus |
|
• | Any Policy
Indebtedness. |
If required by state law, the refund amount will be equal to the total of all premiums paid for the policy. We may require that you return the Policy.
Paid-up Insurance
The Policy may
be exchanged, in whole or in part, for a paid-up whole life policy at any time prior
to attained age 86, if the following conditions are met:
A. | The Owner
makes a Written Request for this Policy change; |
|
B. | The Policy
is one we are then issuing for the Insured’s age and premium class; |
|
C. | The Policy
is subject to our normal underwriting rules; |
|
D. | There is compliance
with any other conditions determined by us; and |
|
E. | Any indebtedness
not repaid at the time of the change will be continued as a loan against the paid-up
policy. |
Transfer of Ownership
The Owner
may transfer ownership of the Policy. The written consent of all Irrevocable Beneficiaries
must be obtained prior to such transfer. The Written Request must be in writing
and filed (in Good Order) at our Mailing Address. The transfer will take effect
as of the date the Written Request was signed. We may require that the Policy be
sent in for endorsement to show the transfer of ownership.
We are not responsible for the validity or effect of any transfer of ownership. We will not be responsible for any payment or other action we have taken before having received Written Request for the transfer, in Good Order. A transfer of ownership may have tax consequences. Consult a tax adviser before transferring ownership of the Policy.
Addition, Deletion, or Substitution of
Investments
We may make additions to, deletions from, or substitutions for
the shares of a Fund that are held in the Separate Account or that the Separate
Account may purchase. If the shares of a Fund are no longer available for investment
or if, in our judgment, further investment in any Fund should become inappropriate,
we may redeem the shares, if any, of that Fund and substitute shares of another
Fund. To the extent required by the 1940 Act or other applicable law, we will not
substitute any shares attributable to a Policy’s interest in a Subaccount without
notice and prior approval of the SEC and state insurance authorities.
We also may establish additional Subaccounts of the Separate Account, each of which would invest in shares of a new corresponding Fund having a specified investment objective. We may, in our sole discretion, establish new Subaccounts or eliminate or combine one or more Subaccounts if marketing needs, tax considerations or investment conditions warrant. Any new Subaccounts may be made available to existing Owners on a basis to be determined by us. Some existing subaccounts may be closed to certain classes of Owners. Subject to obtaining any approvals or consents required by applicable law, the assets of one or more Subaccounts may be transferred to any other Subaccount if, in our sole discretion, marketing, tax, or investment conditions warrant.
In the event of any such substitution or change, we (by appropriate endorsement, if necessary) may change the Policy to reflect the substitution or change. Affected Owners will be notified of such a material substitution or change. If you object to the change, you may exchange the Policy for a fixed benefit whole life insurance policy then issued by us. The new Policy will be subject to normal underwriting rules and other conditions determined by us. No evidence of insurability will be necessary. The option to exchange must be exercised within sixty (60) days of notification to you of the investment Policy change. You may also surrender the Policy.
If we consider it to be in the best interest of Owners, and subject to any approvals that may be required under applicable law, the Separate Account may be operated as a management investment company under the 1940 Act, it may be deregistered under the 1940 Act if registration is no longer required, it may be combined with other Company separate accounts, or its assets may be transferred to another separate account of ours. In addition, we may, when permitted by law, restrict or eliminate any voting rights of Owners or other persons who have such rights under the Policies.
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Voting Rights
We will vote Fund
shares held in the Separate Account at regular and special shareholder meetings
of the underlying Funds in accordance with instructions received from persons having
voting interests in the corresponding Subaccounts. We will vote shares for which
we have not received timely instructions and shares attributable to Policies sold
to employee benefit plans not registered pursuant to an exemption from the registration
provisions of the Securities Act of 1933, in the same proportion as we vote shares
for which we have received instructions. This means that a small number of Owners
may control the outcome of the vote. If, however, the 1940 Act or any regulation
thereunder should be amended, or if the present interpretation thereof should change,
or we otherwise determine that we are allowed to vote the shares in our own right,
we may elect to do so.
You have the voting interest under a Policy. The number of votes you have a right to instruct will be calculated separately for each Subaccount. You have the right to instruct one vote for each $1 of Accumulated Value in the Subaccount with fractional votes allocated for amounts less than $1. The number of votes you have available will coincide with the date established by the Fund for determining shareholders eligible to vote at the relevant meeting of the Fund’s shareholders. Voting instructions will be solicited by written communication before such meeting in accordance with procedures established by the Funds. Each Owner having a voting interest in a Subaccount will receive proxy materials and reports relating to any meeting of shareholders of the Fund in which that Subaccount invests.
We may, when required by state insurance regulatory authorities, vote shares of a Fund without regard to voting instructions from Owners, if the instructions would require that the shares be voted so as to cause a change in the sub-classification of a Fund, or investment objectives of a Fund, or to approve or disapprove an investment advisory contract for a Fund. In addition, we may, under certain circumstances, vote shares of a Fund without regard to voting instructions from Owners in favor of changes initiated by Owners in the investment Policy, or the investment adviser or the principal underwriter of a Fund. For example, we may vote against a change if we in good faith determine that the proposed change is contrary to state or federal law or we determine that the change would not be consistent with the investment objectives of a Fund and would result in the purchase of securities for the Separate Account which vary from the general quality and nature of investments and investment techniques used by our other Separate Accounts.
DISTRIBUTION OF THE POLICY |
We no longer issue new Policies. CBSI serves as principal underwriter for the Policy. CBSI is a Wisconsin corporation and its home office is located at 2000 Heritage Way, Waverly, Iowa 50677. CBSI is our indirect, wholly owned subsidiary, and is registered as a broker-dealer with the Securities and Exchange Commission (”SEC”) under the Securities Exchange Act of 1934, as amended, as well as with the securities commissions in the states in which it operates, and is a member of Financial Industry Regulatory Authority, Inc. CBSI services Owners through its registered representatives. CBSI also may enter into selling agreements with other broker-dealers (“selling firms”) and compensate them for their services. Registered representatives of CBSI and of other selling firms are appointed as our insurance agents.
Compensation Arrangements For CBSI and
Its Sales Personnel
We pay commissions to CBSI for the sale of the Policies
by its registered representatives in the amount of: 116.22% of Premiums up to the
Minimum Premium and 8.15% of Excess Premiums above that amount paid in the first
Policy Year; and 5.00% of Premium in Policy Years 2 through 10. For each Premium
paid following an increase in face amount, we pay a commission up to the target
Premium for the increase in each year; the commission is calculated using the commission
rates for the corresponding Policy Year. We pay commissions for substandard risk
and rider Premiums based on our rules at the time of payment. Registered representatives
may be required to return first-year commissions (less the surrender charge) if
a Policy is not continued through the first Policy year. The investment adviser
for, or another affiliate of one or more of the Funds also may, from time to time,
make payments to CBSI for services.
CBSI pays its registered representatives a portion of the commissions received for their sales of Policies. Registered Representatives may also be eligible for various cash benefits, such as insurance benefits, bonuses and financing arrangements, and non-cash compensation items that we may provide jointly with CBSI. Non-cash items include conferences, seminars and trips (including travel, lodging and meals in connection therewith), entertainment, merchandise and other similar items. Sales of the Policies may help registered representatives and/or their managers qualify for such benefits. CBSI’s registered representatives and managers may receive other payments from us for services that do not directly involve the sale of the Policies, including payments made for the recruitment and training of personnel, production of promotional literature and similar services.
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Compensation Arrangements For Selling
Firms and Their Sales Personnel
We pay commissions to selling firms for sales
of the Policies by their registered representatives in the amount of: 105% of Premiums
up to the Minimum Premium and 7.3% of Excess Premiums above that amount paid in
the first Policy Year; and 5.0% of Premium in Policy Years 2 through 10. For each
Premium paid following an increase in face amount, we pay a commission up to the
target Premium for the increase in each year; the commission is calculated using
the commission rates for the corresponding Policy Year. We pay commissions for substandard
risk and rider Premiums based on our rules at the time of payment. Registered representatives
may be required to return first-year commissions (less the surrender charge) if
a Policy is not continued through the first Policy year.
Selling firms pay their registered representatives a portion of the commissions received for their sales of Policies. We and/or CBSI may pay certain selling firms additional amounts for: (1) sales promotions relating to the Policies, including increased access to their registered representatives, (2) costs associated with sales conferences and educational seminars for their registered representatives, and (3) other expenses incurred by them. We and/or CBSI may make bonus payments to certain selling firms based on aggregate sales of our insurance contracts (including the Policies). We may pay certain selling firms an additional bonus after the first Policy Year for sales by their registered representatives, which may be up to the amount of the basic commission for the particular Policy Year. In addition, we may reimburse these selling firms for portions of their Policy sales expenses. These additional payments are not offered to all selling firms, and the terms of any particular agreement governing the payments may vary among selling firms.
A portion of the payments made to selling firms may be passed on to their registered representatives in accordance with their internal compensation programs. These programs also may include other types of cash and non-cash compensation and other benefits. Ask your registered representative for further information about what your registered representative and the selling firm for which he or she works may receive in connection with your purchase of a Policy.
Source of Compensation
Commissions
and other incentives or payments described above are not charged directly to Owners
or to the Separate Account. We recoup commissions and other sales expenses through
fees and charges deducted under the Policy.
RIDERS AND ENDORSEMENTS |
A rider attached to a Policy adds additional insurance and benefits. The rider explains the coverage it offers. A rider is available only in states which have approved the rider. A rider may vary from state to state. Some riders are not available to Policies sold to employee benefit plans. The cost for riders is deducted as a part of the Monthly Deduction. Riders are subject to normal underwriting requirements. We are not currently issuing new riders on any Policy.
Children’s Insurance
The
rider provides level term insurance to children of the Insured up to the earlier
of age 23 of the child or age 65 of the Insured. The death benefit will be payable
to the Beneficiary stated in the rider upon the death of any Insured child. If the
Insured parent dies prior to the termination of this rider, the coverage on each
child becomes paid-up term insurance to Age 23. On the policy anniversary following
each Insured child’s 23rd birthday or at age 65 of the Insured,
if sooner, each child may convert this rider to a new policy without evidence of
insurability.
Guaranteed Insurability
This rider
provides that additional insurance may be purchased on the life of the Insured on
specific future dates at standard rates without evidence of insurability. It is
issued only to standard risks. It may be issued until the Policy Anniversary following
the Insured’s 37th birthday.
Accidental Death Benefit
This
rider provides for the payment of an additional death benefit on the life of the
Insured should death occur due to accidental bodily injury occurring before Age
70. The premium for the accidental death benefit is payable to Age 70.
Automatic Increase
This rider
provides for automatic increases in the Policy’s Specified Amount on each Policy
Anniversary without evidence of insurability. This rider may be issued until the
earlier of the 15th Policy Anniversary or the Policy Anniversary following
the Insured’s 55th birthday. A tax adviser should be consulted to
determine whether the automatic increases provided by this rider could cause the
Owner’s Policy to become a Modified Endowment Contract.
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Other Insured
This rider provides
level term insurance. The “other Insured” could be the Insured or could
be another person within the immediate family of the Insured. The death benefit
expires on the “other Insured’s” 95th birthday or upon
termination of the Policy, whichever comes first. Evidence of insurability is required
for issuance of the rider or to increase the amount of the death benefit. The rider
may be issued until the Policy Anniversary following the Insured’s 65th birthday.
Term Insurance
This rider is available
only on Policies with a face value of at least $250,000. It is available only on
the primary Insured. The rider is convertible to Age 75. The death benefit expires
on the Insured’s 95th birthday or upon termination of the Policy.
Disability Waiver of Monthly Deductions
This rider provides that, during the Insured’s total disability, we
will waive Monthly Deductions for administrative and life insurance costs. The rider
may be issued until the Policy Anniversary following the Insured’s 55th birthday. It may be renewed until the Policy Anniversary following the Insured’s 65th birthday.
Disability Benefit Waiver of Premium
and Monthly Deduction
Like the rider just described, this rider provides
that, during the Insured’s total disability, we will waive the Monthly Deduction
for administrative and life insurance costs. In addition, this rider provides that
we will contribute additional premium. The amount of additional premium we will
contribute will be shown on the specifications page for the rider. The maximum amount
we will contribute is $12,000 on an annual basis. The rider may be issued until
the Policy Anniversary following the Insured’s 55th birthday. It
may be renewed until the Policy Anniversary following the Insured’s 65th birthday at which time the rider terminates.
Executive Benefits Plan Endorsement
This endorsement is available on policies issued in conjunction with certain
types of deferred compensation and/or employee benefits plans. The executive benefits
plan endorsement waives the deferred charges on the policy to which it is attached
subject to the following conditions:
1. | the Policy
is surrendered and the proceeds are used to fund a new policy provided through CMFG
Life Insurance Company or an affiliate; |
|
2. | the Policy
is owned by a business or trust; |
|
3. | the new Policy
is owned by the same entity; |
|
4. | the Insured
under the Policy is a selected manager or a highly compensated employee (as those
terms are defined by Title 1 of the Employee Retirement Income Security Act, as
amended); |
|
5. | the Insured
under the new Policy is also a selected manager or highly compensated employee; |
|
6. | we receive
an application for the new Policy (and have evidence of insurability satisfactory
to us). |
There is no charge for this benefit. However, if you exercise this benefit during the first two Policy Years, we may charge a fee to offset expenses incurred. This fee will not exceed $150. The Executive Benefits Plan Endorsement may not be available in all states.
FEDERAL INCOME TAX CONSIDERATIONS |
Introduction
The following summary
provides a general description of the federal income tax considerations associated
with the Policy and does not purport to be complete or to cover all tax situations.
This discussion is not intended as tax advice. Counsel or other competent tax advisors
should be consulted for more complete information. This discussion is based upon
our understanding of the present federal income tax laws. No representation is made
as to the likelihood of continuation of the present federal income tax laws or as
to how they may be interpreted by the Internal Revenue Service (“IRS”).
Tax Status of the Policy
In order
to qualify as a life insurance contract for federal income tax purposes and to receive
the tax treatment normally accorded life insurance contracts under federal tax law,
a Policy must satisfy certain requirements which are set forth in the Code. Guidance
as to how these requirements should be applied is limited. Nevertheless, we believe
that Policies issued on a standard rating class basis
28
should satisfy the applicable requirements. There is less guidance, however, with respect to Policies issued on a substandard basis, and it is not clear whether such Policies will in all cases satisfy the applicable requirements, particularly if you pay the full amount of premiums permitted under the Policy. If it is subsequently determined that a Policy does not satisfy the applicable requirements, we may take appropriate steps to bring the Policy into compliance with such requirements and we may restrict Policy transactions in order to do so.
In certain circumstances, owners of variable universal life insurance 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. Where this is the case, the contract owners have been currently taxed on income and gains attributable to the separate account assets. While we believe that the Policies do not give you investment control over Separate Account assets, we may modify the Policies as necessary to prevent you from being treated as the Owner of the Separate Account assets supporting the Policy.
In addition, the Code requires that the investments of the Separate Accounts be “adequately diversified” in order for the Policies to be treated as life insurance contracts for federal income tax purposes. It is intended that the Separate Accounts, through the Funds, will satisfy these diversification requirements.
The following discussion assumes that the Policy generally will qualify as a life insurance contract for federal income tax purposes.
Tax Treatment of Policy Benefits
In General. We believe that the death benefit under a Policy should be excludible from the gross income of the Beneficiary.
Generally, you will not be deemed to be in constructive receipt of the Accumulated Value until there is a distribution. When distributions from a Policy occur, or when loans are taken out from or secured by a Policy, the tax consequences depend on whether the Policy is classified as a “Modified Endowment Contract.”
Federal, state and local transfer, estate, inheritance, and other tax consequences of ownership or receipt of Policy proceeds depend on the circumstances of each Owner or Beneficiary. A tax advisor should be consulted on these consequences.
Modified Endowment Contracts. Under the Code, certain life insurance contracts are classified as “Modified Endowment Contracts,” with less favorable income tax treatment than other life insurance contracts. Due to the Policy’s flexibility with respect to premium payments and benefits, each Policy’s circumstances will determine whether the Policy is a MEC. In general, a policy will be classified as a Modified Endowment Contract if the amount of premiums paid into the policy causes the policy to fail the “7-pay test.” A policy will fail the 7-pay test if at any time in the first seven Policy Years, the amount paid into the policy exceeds the sum of the level premiums that would have been paid at that point under a policy that provided for paid-up future benefits after the payment of seven level annual payments. A Policy received in a tax-free exchange for a Modified Endowment contract will also be classified as a Modified Endowment Contract.
If there is a reduction in the benefits under the Policy during the first seven Policy Years, for example, as a result of a partial withdrawal, the 7-pay test will have to be reapplied as if the policy had originally been issued at the reduced face amount. If there is a “material change” in the policy’s benefits or other terms, even after the first seven Policy Years, the policy may have to be retested as if it were a newly issued policy. A material change can occur, for example, when there is an increase in the death benefit which is due to the payment of an unnecessary premium. Unnecessary premiums are premiums paid into the policy which are not needed in order to provide a death benefit equal to the lowest death benefit that was payable in the first seven Policy Years. To prevent your policy from becoming a modified endowment contract, it may be necessary to limit premium payments or to limit reductions in benefits. A current or prospective policy owner should consult with a competent advisor to determine whether a policy transaction will cause the policy to be classified as a Modified Endowment Contract.
Distributions Other Than Death Benefits from Modified Endowment Contracts. Policies classified as Modified Endowment Contracts are subject to the following tax rules:
All distributions other than death benefits from a Modified Endowment Contract, including distributions upon surrender and partial withdrawals, are treated first as distributions of gain taxable as ordinary income and as tax-free recovery of your investment in the Policy only after all gain has been distributed.
Loans taken from or secured by a Policy classified as a Modified Endowment Contract are treated as distributions and taxed in same manner as surrenders and partial withdrawals.
29
A 10% additional income tax is imposed on the amount subject to tax except where the distribution or loan is made when you have attained age 59½ or are disabled, or where the distribution is part of a series of substantially equal periodic payments for your life (or life expectancy) or the joint lives (or joint life expectancies) of you and your Beneficiary or designated Beneficiary.
If a Policy becomes a Modified Endowment Contract, distributions that occur during the Policy Year will be taxed as distributions from a Modified Endowment Contract. In addition, distributions from a Policy within two years before it becomes a Modified Endowment Contract may be taxed in this manner. This means that a distribution made from a Policy that is not a Modified Endowment Contract could later become taxable as a distribution from a Modified Endowment Contract.
Distributions Other Than Death Benefits from Policies that are not Modified Endowment Contracts. Distributions other than death benefits from a Policy that is not classified as a Modified Endowment Contract are generally treated first as a recovery of your investment in the Policy and only after the recovery of all investment in the Policy as taxable income. However, certain distributions which must be made in order to enable the Policy to continue to qualify as a life insurance contract for federal income tax purposes if Policy benefits are reduced during the first 15 Policy Years may be treated in whole or in part as ordinary income subject to tax.
Loans from or secured by a Policy that is not a Modified Endowment Contract are generally not treated as distributions.
Finally, neither distributions from nor loans from or secured by a Policy that is not a Modified Endowment Contract are subject to the 10 percent additional income tax.
Investment in the Policy. Your investment in the Policy is generally the aggregate premium payments. When a distribution is taken from the Policy, your investment in the Policy is reduced by the amount of the distribution that is tax-free.
Policy Loans. In general, interest on a Policy loan will not be deductible. Before taking out a Policy loan, you should consult a tax advisor as to the tax consequences. If a loan from a Policy is outstanding when the Policy is canceled or Lapses, then the amount of the outstanding Indebtedness will be added to the amount treated as a distribution from the Policy and will be taxed accordingly.
Policy Changes, Transfers and Exchanges. Changes to a Policy’s Death Benefit Option or Face Amount, the conversion or exchange of a policy, and transfer or assignment of ownership of a Policy may have adverse tax consequences. You should consult a tax adviser if you are considering any such transaction.
Multiple Policies. All Modified Endowment Contracts that are issued by us (or our affiliates) to the same Owner during any calendar year are treated as one Modified Endowment Contract for purposes of determining the amount includible in your income when a taxable distribution occurs.
Withholding. To the extent that Policy distributions are taxable, they 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.
Life Insurance Purchases by Residents of Puerto Rico. In Rev. Rul. 2004-75, 2004-31 I.R.B. 109, the IRS announced that income received by residents of Puerto Rico under life insurance 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.
Life Insurance Purchases by Nonresident Aliens and Foreign Corporations. The discussion above provides general information regarding U.S. federal income tax consequences to life insurance 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 life insurance policies 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 adviser regarding U.S. state, and foreign taxation with respect to a life insurance policy purchase.
Accelerated Death Benefit Rider. The federal income tax consequences associated with the Accelerated Benefit Option Endorsement are uncertain. You should consult a qualified tax advisor about the consequences of requesting payment under this Endorsement. (See “THE POLICY ACCELERATED DEATH BENEFIT OPTION” for more information.)
Special Rules for Pension and Profit-Sharing
Plans
If a Policy is purchased by a pension or profit-sharing plan, or similar
deferred compensation arrangement, the federal, state and estate tax consequences
could differ. A competent tax advisor should be consulted in connection with such
a purchase.
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The amounts of life insurance that may be purchased on behalf of a participant in a pension or profit-sharing plan are limited. The current cost of insurance for the Net Amount at Risk is treated as a “current fringe benefit” and must be included annually in the plan participant’s gross income. We report this cost (generally referred to as the “P.S. 58” cost) to the participant annually. If the plan participant dies while covered by the plan and the Policy proceeds are paid to the participant’s Beneficiary, then the excess of the death benefit over the Policy value is not taxable. However, the Cash Value will generally be taxable to the extent it exceeds the participant’s cost basis in the Policy. Policies owned under these types of plans may be subject to restrictions under the Employee Retirement Income Security Act of 1974 (“ERISA”). You should consult a qualified advisor regarding ERISA.
Department of Labor (“DOL”) regulations impose requirements for participant loans under retirement plans covered by ERISA. Plan loans must also satisfy tax requirements to be treated as nontaxable. Plan loan requirements and provisions may differ from Policy loan provisions. Failure of plan loans to comply with the requirements and provisions of the DOL regulations and of tax law may result in adverse tax consequences and/or adverse consequences under ERISA. Plan fiduciaries and participants should consult a qualified advisor before requesting a loan under a Policy held in connection with a retirement plan.
Business Uses of the Policy
Businesses
can use the Policy in various arrangements, including nonqualified deferred compensation
or salary continuance plans, split dollar insurance plans, executive bonus plans,
tax exempt and nonexempt welfare benefit plans, retiree medical benefit plans and
others. The tax consequences of such plans may vary depending on the particular
facts and circumstances. If the value of a Policy to you depends in part on its
tax consequences, you should consult a qualified tax advisor. In recent years, moreover,
Congress has adopted new rules relating to life insurance owned by businesses, and
the IRS has issued guidance relating to split dollar insurance plans. Any business
contemplating the purchase of a new insurance policy or a change in an existing
insurance policy should consult a tax advisor.
Non-Individual Owners and Business Beneficiaries of Policies. If a Policy is owned or held by a corporation, trust or other non-natural person, this could jeopardize some (or all) of such entity’s interest deduction under Code Section 264, even where such entity’s indebtedness is in no way connected to the Policy. In addition, under Section 264(f)(5), if a business (other than a sole proprietorship) is directly or indirectly a beneficiary of a Policy, this Policy could be treated as held by the business for purposes of the Section 264(f) entity-holder rules. Therefore, it would be advisable to consult with a qualified tax advisor before any non-natural person is made an owner or holder of a Policy, or before a business (other than a sole proprietorship) is made a beneficiary of a Policy.
Employer-owned Life Insurance Contracts. Pursuant to section 101(j) of the Code, unless certain eligibility, notice and consent requirements are satisfied, the amount excludible as a death benefit payment under an employer-owned life insurance contract will generally be limited to the Premiums paid for such contract (although certain exceptions may apply in specific circumstances). An employer-owned life insurance contract is a life insurance contract owned by an employer that insures an employee of the employer and where the employer is a direct or indirect Beneficiary under such contact. It is the employer’s responsibility to verify the eligibility of the intended Insured under employer-owned life insurance contracts and to provide the notices and obtain the consents required by section 101(j). These requirements generally apply to employer-owned life insurance contracts issued or materially modified after August 17, 2006. A tax adviser should be consulted by anyone considering the purchase or modification of an employer-owned life insurance contract.
Tax Shelter Regulations. Prospective owners that are corporations should consult a tax advisor about the treatment of the Policy under Treasury Regulations applicable to corporate tax shelters.
Split-Dollar Arrangements. The IRS and the Treasury Department have issued guidance that substantially affects split-dollar arrangements. Consult a qualified tax adviser before entering into or paying additional Premiums with respect to such arrangements.
Additionally, the Sarbanes-Oxley Act of 2002 prohibits, with limited exceptions, publicly traded companies, including non-U.S. companies that have securities listed on exchanges in the United States, from extending, directly or through a subsidiary, many types of personal loans to their directors or executive officers. It is possible that this prohibition may be interpreted as applying to split-dollar life insurance policies for directors and executive officers of such companies, since such insurance arguably can be viewed as involving a loan from the employer for at least some purposes.
Although the prohibition on loans is generally effective as of July 30, 2002, there is an exception for loans outstanding as of the date of enactment, so long as there is no material modification to the loan terms and the loan is not renewed after July 30, 2002. Any affected business contemplating the payment of a premium on an existing policy, or the purchase of a new policy, in connection with a split-dollar life insurance arrangement should consult legal counsel.
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Medicare Tax on Investment Income
A 3.8% tax may be applied to some or all of the taxable portion of some distributions
(such as payments under certain settlement options) from life insurance contracts
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 tax advisor for more information.
Alternative Minimum Tax
There
may also be an indirect tax upon the income in the Policy or the proceeds of a Policy
under the federal corporate alternative minimum tax.
Estate, Gift and Generation-Skipping
Transfer Taxes
The transfer of the policy or designation of a beneficiary
may have federal, state, and/or local transfer and inheritance tax consequences,
including the imposition of gift, estate, and generation-skipping transfer taxes.
The transfer of the policy or designation of a beneficiary may have federal, state,
and/or local transfer and inheritance tax consequences, including the imposition
of gift, estate, and generation-skipping transfer taxes. For example, when the Insured
dies, the death benefit proceeds will generally be includable in the Owner’s
estate for purposes of federal estate tax if the Insured owned the Policy. If the
Owner was not the Insured, the fair market value of the Policy would be included
in the Owner’s estate upon the Owner’s death. The Policy would not be
includable in the Insured’s estate if the Insured neither retained incidents
of ownership at death nor had given up ownership within three years before death.
Moreover, under certain circumstances, the Code may impose a “generation skipping transfer tax” when all or part of a life insurance Policy 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 Policy, or from any applicable payment, and pay it directly to the IRS.
Qualified tax advisers should be consulted concerning the estate and gift tax consequences of Policy ownership and distributions under federal, state and local law. The individual situation of each owner or beneficiary will determine the extent, if any, to which federal, state, and local transfer and inheritance taxes may be imposed and how ownership or receipt of policy proceeds will be treated for purposes of federal, state and local estate, inheritance, generation skipping and other taxes. The individual situation of each owner or beneficiary will determine the extent, if any, to which federal, state, and local transfer and inheritance taxes may be imposed and how ownership or receipt of policy proceeds will be treated for purposes of federal, state and local estate, inheritance, generation skipping and other taxes.
<R>The potential application of these taxes underscores the importance of seeking guidance from a qualified adviser to help ensure that your estate plan adequately addresses your needs and those of your beneficiaries under all possible scenarios.
Foreign Tax Credits. We may benefit from any foreign tax credits attributable to taxes paid by certain funds to foreign jurisdictions to the extent permitted under federal tax law.
Possible Tax Law Changes
Although
the likelihood of legislative changes is uncertain, there is always the possibility
that the tax treatment of the Policy could change by legislation or otherwise. Consult
a tax advisor with respect to legislative developments and their effect on the Policy.
Our Taxes
Under current federal
income tax law, we are not taxed on the Separate Account’s operations. Thus,
currently we do not deduct charges from the Separate Account for its federal income
taxes. We may charge the Separate Account for any future federal income taxes that
we may incur.
Under current laws in several states, we may incur state and local taxes (in addition to Premium Taxes). These taxes are not now significant and we are not currently charging for them. If they increase, we may deduct charges for such taxes.
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LEGAL PROCEEDINGS |
We, like other life insurance companies, are often involved in lawsuits, including class action lawsuits. In some class action and other lawsuits involving insurers, substantial damages have been sought and/or material settlement payments have been made. Although the outcome of any litigation cannot be predicted with certainty, we believe that at the present time there are not pending or threatened lawsuits that are reasonably likely to have a material adverse impact on the Separate Account or us or on the ability of the CBSI to perform its contract with the Variable Account, or on our ability to meet our obligations under the Policy.
FINANCIAL STATEMENTS |
Our financial statements and the financial statements of the Separate Account are contained in the SAI. Our financial statements should be distinguished from the Separate Account’s financial statements and you should consider our financial statements only as bearing upon our ability to meet our obligations under the Policies. For a free copy of these financial statements and/or the SAI, please contact us at our Mailing Address.
33
GLOSSARY |
Accumulated Value
The total of
the values attributable to a Policy in all Subaccounts and the Interest Bearing
Account plus the values attributable to it, if any, in the Loan Account and Deferred
Charges Account.
Age
The number of completed years
from the Insured’s date of birth.
Attained Age
Age of the Insured
on the most recent Policy Anniversary.
Beneficiary
Person or entity named
to receive all or part of the Death Benefit Proceeds.
Cost of Insurance or COI
An insurance
charge determined by multiplying the cost of insurance rate by the Net Amount at
Risk.
Cash Value
Accumulated Value minus
Deferred Charges that would be applicable if the Policy were surrendered at that
time, but not less than zero.
CUNA Mutual Group
CMFG Life Insurance
Company, its subsidiaries and affiliates.
Death Benefit Ratio
The ratio
of Face Amount to Accumulated Value required by the Code for treatment of the Policy
as a life insurance Policy. The Death Benefit Ratio varies by the Attained Age.
Death Benefit Option
One of two
options that you may select for computation of the Death Benefit.
Death Benefit Proceeds
Amount
to be paid if the Insured dies while the Policy is In Force.
Deferred Charges
Sometimes referred
to as surrender charges, they are the contingent deferred sales charge plus the
contingent deferred administrative charge.
Deferred Charges Account
A non-segregated
potion of our General Account where Deferred Charges accrued for each Policy are
accumulated during the first Policy Year and the first 12 months after an increase
in Face Amount. Amounts held in the Deferred Charges Account are credited with interest
at a rate of at least 4% compounded annually. The Company may, at its sole discretion,
credit rates in excess of 4%.
Due Proof of Death | ||
Proof of death satisfactory to us. Such proof may consist of the following if acceptable to us: | ||
a) | A certified copy of the death record; | |
b) | A certified copy of a court decree reciting a finding of death; and | |
c) | Any other proof satisfactory to us. | |
Face Amount
Under Death Benefit
Option 1, the Face Amount is the greater of the Specified Amount, or the Accumulated
Value on the date of death multiplied by the Death Benefit Ratio. Under Death Benefit
Option 2, the Face Amount is the greater of the Specified Amount plus the Accumulated
Value on the date of death, or the Accumulated Value on the date of death multiplied
by the Death Benefit Ratio.
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Fund
An investment portfolio of
the Ultra Series Fund or the T. Rowe Price International Series, Inc.
General Account
Our assets other
than those allocated to the Separate Account or another of our separate accounts.
In Force
Condition under which
the Policy is active and the Insured’s life remains insured and sufficient
Net Cash Value exists from premium payment or otherwise to pay the Monthly Deductions
on a Monthly Day.
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 loan request, a request to surrender your Policy, a transfer request, or a death
benefit claim must be in Good Order.
Indebtedness
Policy loans plus
accrued interest on the loans.
Insured
Person whose life is insured
under the Policy.
Issue Age
Age of Insured at the
time the Policy was issued.
Interest Bearing Account
Part
of our General Account to which Net Premiums may be allocated or Accumulated Value
transferred.
Issue Date
The date from which
Policy Anniversaries, Policy Years, and Policy months are determined.
Lapse
Condition when the Insured’s life is no longer insured under the Policy.
Loan Account
A portion of our
General Account into which amounts are transferred from the Separate Account as
collateral for Policy loans. Amounts held in the Loan Account are credited a fixed
rate of interest. The Minimum Guaranteed Interest rate is described in the Policy.
Mailing Address
2000 Heritage
Way, Waverly, IA 50677.
Maturity Date
The maturity date
is the first Policy Anniversary after the Insured’s 95th birthday.
Coverage under the Policy ceases on that date if the Insured is still alive, and
maturity proceeds equal to the Net Cash Value as of that date are paid.
Monthly Day
Same day as the Issue
Date for each month the Policy remains In Force. The Monthly Day is the first day
of the Policy month. If there is no Monthly Day in a calendar month, the Monthly
Day will be the first day of the next calendar month.
Monthly Deduction
The amount we
deduct from the Accumulated Value each month. It includes the Cost of Insurance,
the monthly administrative fee, the monthly Policy fee, and the cost of any additional
benefits under riders.
Net Amount at Risk
As of any Monthly
Day, the Face Amount (discounted for the upcoming month) less Accumulated Value
(after the deduction of the Monthly Deduction).
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Net Asset Value
The total current
value of portfolio securities, cash, receivables, and other assets minus liabilities.
Net Cash Value
The Cash Value
less any Indebtedness. This value is equal to the value attributable to the Policy
in each Subaccount and the Interest Bearing Account and represents the amount an
Owner would receive upon full surrender of the Policy.
Net Premiums
Premiums paid less
any charges for Premium Tax (or tax in lieu of Premium Tax).
Owner (you, your)
The Owner as
named in the application. The Owner may be other than the Insured.
Policy
MEMBERS Variable Universal
Life Policy.
Policy Anniversary
Same day and
month as the Issue Date for each year the Policy remains In Force.
Policy Issue Date
The date as
of which the Policy is issued and coverage takes effect. We measure Policy months,
Policy Years, and Policy Anniversaries from the Policy Issue Date.
Policy Year
A twelve month period
beginning on the Policy Issue Date or on a Policy Anniversary.
Premium Tax
An amount deducted
from premium payments to cover Premium Tax (and tax in lieu of Premium Tax) currently
charged by the Owner’s state of residence (except in Pennsylvania and Texas).
State of residence is determined by the Owner’s mailing address as shown in
our records. The term “in lieu of Premium Tax” means any income and any
franchise tax assessed by a state as a substitute for Premium Tax.
Record Date
The date we record
the Policy on our books as an In Force Policy.
Right-to-Examine Period
The period
when you may cancel the Policy and receive a refund. The length of the period varies
by state and is shown the cover page of your Policy.
Specified Amount
The amount chosen by the Owner which is used to determine the Face Amount.
Target Premium
The Target Premium is shown on the specifications page of
the Policy. It is determined by dividing the minimum premium by 0.60.
Unit
A unit of measurement used to calculate the Accumulated Value in a Subaccount
under a Policy.
Unit Value
The value determined by dividing Net Asset
Value by the number of Subaccount units outstanding at the time of calculation.
Valuation Day
For each Subaccount, each day that the New York Stock Exchange
is open for business except for days that the Subaccount’s corresponding Fund
does not value its shares.
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Valuation Period
The period beginning
at the close of regular trading on the New York Stock Exchange on any Valuation
Day and ending at the close of regular trading on the next succeeding Valuation
Day.
STATEMENT OF ADDITIONAL INFORMATION |
The SAI has been filed with the SEC and is incorporated by reference into this prospectus. The SEC maintains an Internet website (http://www.sec.gov) that contains the SAI and other information about us and the Policy. Information about us and the Policy (including the SAI) may also be reviewed and copied at the SEC’s Public Reference Room in Washington, DC., or may be obtained, upon payment of a duplicating fee, by writing the Public Reference Section of the SEC, 100 F Street N.E., Washington, DC 20549. Additional information on the operation of the Public Reference Room may be obtained by calling the SEC at (202) 551-8090.
Investment Company Act of 1940 Registration File No. 811-03915
37
STATEMENT OF ADDITIONAL INFORMATION
CMFG LIFE
INSURANCE COMPANY
2000 Heritage Way
Waverly, Iowa 50677-9202
(800)
798-5500
CMFG Variable
Life Insurance Account
MEMBERS® Variable Universal Life
Flexible Premium Variable Universal Life Insurance Policy
<R>Form 1933
TABLE OF CONTENTS |
Page | ||
Policy Information | 1 | |
The Policy |
1 | |
Our Right to Contest the Policy |
1 | |
Misstatement of Age or Gender |
1 | |
Suicide Exclusion |
1 | |
Collateral Assignments |
1 | |
Dividends |
2 | |
Additional Information on Underwriting and Charges |
2 | |
Additional Information on Benefits and Settlement Options |
2 | |
Illustrations | 3 | |
Other Information | 3 | |
Registration Statement |
3 | |
Distribution of the Policies |
3 | |
Records |
4 | |
State Regulation |
4 | |
Independent Auditors |
4 | |
Information About Us |
5 | |
The Interest Bearing Account |
5 | |
Additional Information about the Separate Account and the Funds |
5 | |
Financial Statements |
5 | |
Appendix A – First Year Surrender Charges per 1,000 of Specified Amount | A-1 | |
Appendix B – Death Benefit Percentage Factor | B-1 |
i
POLICY INFORMATION |
The Policy
The Policy, application(s),
policy schedule pages, and any riders are the entire contract. Only statements made
in the applications can be used to void the Policy or to deny a claim. We assume
that all statements in an application are made to the best of the knowledge and
belief of the person(s) who made them, and, in the absence of fraud, those statements
are considered representations and not warranties. We rely on those statements when
we issue or change a Policy. As a result of differences in applicable state laws,
certain provisions of the Policy may vary from state to state.
Our Right to Contest the Policy
We have the right to contest the validity of the Policy or to resist a claim under
it on the basis of any material misrepresentation of a fact stated in the application
or any supplemental application. We also have the right to contest the validity
of any increase of Specified Amount or other change to the Policy on the basis of
any material misrepresentation of a fact stated in the application (or supplemental
application) for such increase in coverage or change. In issuing this Policy, we
rely on all statements made by or for the Insured in the application or in a supplemental
application. In the absence of fraud, we consider statements made in the application(s)
to be representations and not warranties.
In the absence of fraud, we cannot bring any legal action to contest the validity of the Policy after it has been In Force during the lifetime of the Insured for two years from the Policy Issue Date, or if reinstated, for two years from the date of reinstatement. Likewise, we cannot contest any increase in coverage effective after the Policy Issue Date, or any reinstatement thereof, after such increase or reinstatement has been In Force for two years from its effective date.
Misstatement of Age or Gender
For a Policy based on male or female cost of insurance rates (as shown in your Policy),
if the Insured’s age or gender has been misstated, an adjustment will be made
to reflect the correct age and gender as follows (unless a different result is required
by state law):
a) | If the misstatement
is discovered at death, the death benefit amount will be adjusted based on what
the cost of insurance rate as of the most recent Monthly Day would have been at
the Insured’s correct age and gender. |
||
b) | If the misstatement
is discovered prior to death, the cost of insurance rate will be adjusted based
on the Insured’s correct age and gender beginning on the next Monthly Day. |
For a Policy based on blended cost of insurance rates (as shown in your Policy), a misstatement of gender will not result in an adjustment. However, if the Insured’s age has been misstated, an adjustment will be made to reflect the correct age as follows (unless a different result is required by state law):
a) | If the misstatement
is discovered at death, the death benefit amount will be adjusted based on what
the cost of insurance rate as of the most recent Monthly Day would have been at
the Insured’s correct age. |
||
b) | If the misstatement
is discovered prior to death, the cost of insurance rate will be adjusted based
on the Insured’s correct age beginning on the next Monthly Day. |
Suicide Exclusion
If the Insured
commits suicide, while sane or insane, within two years of the Issue Date, our liability
is limited to an amount equal to the Accumulated Value less any Loan Amount. We
will pay this amount to the Beneficiary in one sum.
If the Insured commits suicide, while sane or insane, within two years from the effective date of any increase in Specified Amount, our liability with respect to that increase is limited to an amount equal to the cost of insurance attributable to the increase from the effective date of the increase to the date of death.
Collateral Assignments
You may
assign the Policy as collateral security. The written consent of all Irrevocable
Beneficiaries must be obtained before an assignment. The assignment must be in writing
and filed at our Mailing Address. The assignment will then take effect as of the
date the Written Request was signed.
We are not responsible for the validity or effect of any collateral assignment. We will not be responsible for any payment or other action we have taken before receiving the written collateral assignment.
A collateral assignment takes precedence over the interest of a Beneficiary. Any Policy proceeds payable to an assignee will be paid in one sum. Any remaining proceeds will be paid to the designated Beneficiary or Beneficiaries.
1
A collateral assignee is not an Owner. A collateral assignee is a person or entity to whom you give some, but not all ownership rights under the Policy. A collateral assignment is not a transfer of ownership.
Dividends
While the Policy is
In Force, it will share in our divisible surplus. We determine the Policy’s
share annually. It is payable annually on the Policy Anniversary. You may select
to have dividends:
a) | Paid into the Subaccounts and the Interest Bearing Account as Net Premiums; or | ||
b) | Paid to you in cash. |
If no option is selected, the dividends will be paid into Subaccounts and/or Interest Bearing Account as Net Premiums. We currently do not expect to pay dividends during the first 10 Policy Years. For each of Policy years 11-20, we project annual dividends equal to 0.61% of the Accumulated Value at the end of the Policy year, plus $39 per Policy. For each Policy year 21 and after we project annual dividends equal to 1.01% of the Accumulated Value at the end of the Policy year, plus $39 per Policy. For Issue Ages 0 – 19, the projected dividends are the same as those for ages 20 and above, except the per Policy dividend is $3 in years 11 and above, instead of $39. These dividends are not guaranteed.
Additional Information on Underwriting
and Charges
We currently place each Insured into one of three standard rating
classes - preferred, non-tobacco, and tobacco or into a rating class with sub-standard
and flat extra charges. In an otherwise identical Policy, an Insured in the standard
class will have a lower cost of insurance rate than an Insured in a class with sub-standard
and flat extra charges.
• | The preferred
rating class is only available if the Specified Amount equals or exceeds $100,000. |
||
• | Non-tobacco
Insureds will generally incur lower cost of insurance rates than Insureds who are
classified as tobacco in the same rating class. The non-tobacco designation is not
available for Insureds under attained age 21, but shortly before an Insured attains
age 21, we may notify the Insured about possible classification as non-tobacco.
If the Insured does not qualify as non-tobacco or does not respond to the notification,
cost of insurance rates will remain as shown in the Policy. However, if the Insured
does respond to the notification, and qualifies as non-tobacco, the cost of insurance
rates will be changed to reflect the non-tobacco classification. |
||
• | Preferred
Insureds will generally incur lower cost of insurance rates than Insureds who are
classified as non-tobacco. |
||
• | Premium classes
with sub-standard and flat extra charges may be available for those Insured’s
who we find uninsurable under our preferred or standard underwriting guidelines.
These charges may be related to health or to participate in certain hazardous sports,
aviation activities, or other avocations. Generally, we will not issue contracts
with more than 400% extra substandard cost of insurance charges or $15 per $1000 in
flat extra charges. |
Additional Information on Benefits and
Settlement Options
Settlement options other than lump sum payments are, in
our discretion, available for Death Benefit Proceeds, surrender proceeds, and maturity
proceeds, payable to natural persons, subject to certain restrictions on Death Benefit
Proceeds. Proceeds payable to a nonnatural person are available only under settlement
options we agree to. The four available settlement options are as follows:
1) | Interest
Option. The proceeds may be left with us to collect interest during the lifetime
of the payee. We determine the interest rate each year. It is guaranteed to be not
less than the settlement option rate of interest shown on the data page of the Policy.
The payee may choose to receive interest payments either once a year or once a month
(may not be available in all states) unless the amount of interest to be paid monthly
is less than $25 per month, then interest will be paid annually. The payee may withdraw
any remaining proceeds, if this right was given at the time the option was selected. |
||
2) | Installment
Option. The proceeds may be left with us to provide equal monthly installments
for a specified period. No period can be greater than 30 years. The interest we
guarantee to pay is set forth in the Policy. Additional interest, if any, will be
payable as determined by us. (This option may not be available in all states.) The
payee may withdraw the present value of any remaining guaranteed installments, but
only if this right was given at the time the option was selected. |
||
3) | Life Income
- Guaranteed Period Certain. The proceeds may be left with us to provide monthly
installments for as long as the original payee lives. A guaranteed period of 10
or 20 years may be selected. A period of years such that the total installments
during the period will be at least equal to the proceeds applied under the option
may also be selected. Payments will cease when the original payee dies or at the
end of the guaranteed period, whichever is later. If the original payee dies during
the guaranteed period, the remaining guaranteed payments will be paid to the successor
payee. |
2
4) | Joint and
Survivor Life. The proceeds may be left with us to provide monthly installments
for two payees for a guaranteed period of 10 years. After the 10-year period is
over, payments will continue as long as either of the original payees is living.
The monthly installment amount will depend on the Age and sex of both payees at
the date of the first payment. |
Not all settlement options are available. See your Policy for details on which options are available to you.
The minimum amount that can be applied under settlement options 2, 3 and 4 is $2,500 or that amount which will provide an initial monthly installment of at least $25.
Even if the death benefit under the Policy is excludible from income, payments under Settlement options may not be excludible in full. This is because earnings on the death benefit after the Insured’s death are taxable and payments under the settlement options general include such earnings. You should consult a tax adviser as to the tax treatment of payments under the settlement options.
Additional monthly income may be purchased under settlement options 2 and 3. The amount of additional annuity income or payments which can be purchased with new money is 95% of the amount which can be purchased with the net Policy Death Benefit Proceeds under those options. The additional annuity amount may not exceed twice that which the application of proceeds under the selected option would provide. The selection of an additional annuity purchase must be in writing and on file at our Mailing Address. Selection must be within 30 days of settlement under this Policy and is available only if the settlement is on or after the later of the 10th Policy Anniversary or the annuitant’s 55th birthday.
We may, at our option, provide for additional settlement options or cease offering any of the settlement options above.
ILLUSTRATIONS |
We may provide illustrations for death benefit, Accumulated Value, and Cash Value based on hypothetical rates of return that are not guaranteed. The illustrations also assume costs of insurance for a hypothetical person. These illustrations are illustrative only and should not be considered a representation of past or future performance. Your rates of return and insurance charges may be higher or lower than these illustrations. The actual return on your Accumulated Value will depend on factors such as the amounts you allocate to particular Funds, the amounts deducted for the Policy’s monthly charges, the Funds’ expense ratios, and your policy loan and partial withdrawal history.
Before you purchase the Policy and upon request thereafter, we will provide illustrations of future benefits under the Policy based upon the proposed Insured’s issue age and premium class, the Death Benefit Option, Specified Amount, Planned Premiums, and riders requested. We reserve the right to charge a reasonable fee for this service to persons who request more than one policy illustration during a Policy year.
OTHER INFORMATION |
Registration Statement
A Registration
Statement under the Securities Act of 1933, as amended, relating to this offering
has been filed with the Securities and Exchange Commission (“SEC”). Certain
portions of the Registration Statement and amendments have been omitted from this
prospectus pursuant to the rules and regulations of the SEC. Statements contained
in this prospectus concerning the Policy and other legal documents are summaries.
The complete documents and omitted information may be obtained from the SEC’s
principal office in Washington, D.C.
Distribution of the Policies
Information About the Distributor. CUNA Brokerage Services, Inc. (“CBSI”) is responsible for distributing the Policies pursuant to a distribution agreement with us. CBSI serves as principal underwriter for the Policies. CBSI, a Wisconsin corporation organized in 1983 and a direct, wholly owned subsidiary of CUNA Mutual Investment Corporation which in turn is wholly owned by us, is located at 2000 Heritage Way, Waverly, Iowa 50677. CBSI is registered as a broker-dealer with the SEC under the Securities Exchange Act of 1934, as amended, as well as with the securities commissions in the states in which it operates, and is a member of Financial Industry Regulatory Authority, Inc.
Sales Commissions and Other Compensation. We no longer offer new Policies. We intend to recoup commissions and other sales expenses for through fees and charges imposed under the Policy. Commissions paid on the Policy, including other incentives or payments, are not charged directly to the Owners or the Separate Account.
Description of Servicing Network. CBSI services the Policies through its registered representatives. CBSI also may have entered into selling agreements with other broker-dealers and compensates these broker-dealers (“selling firms”) for their services up to the
3
amounts disclosed in the prospectus. Registered representatives of CBSI and selling firms who sell the Policies have been appointed by us as insurance agents.
Compensation Received. CBSI received sales compensation with respect to the Policies in the following amounts during the periods indicated:
<R>Fiscal year | Aggregate
Amount of Commissions Paid to CBSI |
Aggregate
Amount of Commissions Retained by CBSI After Payments to its Registered Persons and Other Broker-Dealers |
2015 | $0 | $0 |
2014 | $1,873 | $71 |
2013 | $1,462 | $544 |
Compensation arrangements for CBSI sales personnel. Because registered representatives of CBSI are also our insurance agents, they may be eligible for various cash benefits, such as insurance benefits, bonuses and financing arrangements, and non-cash compensation programs that we offer. Non-cash items include conferences, seminars and trips (including travel, lodging and meals in connection therewith), entertainment, merchandise and other similar items. Sales of the Policies may help registered representatives qualify for such benefits.
Additional compensation paid to selling firms. We may pay certain selling firms additional amounts for: (1) sales promotions relating to the Policies, (2) costs associated with sales conferences and educational seminars for their registered representatives, and (3) other expenses incurred by them. We may make bonus payments to certain selling firms based on aggregate sales of our insurance contracts (including the Policies). We may pay certain selling firms an additional bonus after the first Policy year for sales by their registered representatives, which may be up to the amount of the basic commission for the particular Policy year. In addition, we may reimburse these selling firms for portions of their Policy sales expenses. These additional payments are not offered to all selling firms, and the terms of any particular agreement governing the payments may vary among selling firms.
Source of revenue for sales compensation. Sales charges deducted from premium payments, as well as proceeds from the contingent deferred sales charge on the Policies are retained by us and used to defray the expenses we incur in paying for distribution-related services under the distribution agreement, such as the payment of commissions.
Records
We will maintain all records
relating to the Separate Account and the Interest Bearing Account at our Mailing
Address or at our executive offices at 5910 Mineral Point Road, Madison, WI 53705.
State Regulation
We are subject
to the laws of Iowa governing insurance companies and to regulation by the Iowa
Insurance Department. An annual statement in a prescribed form is filed with the
Insurance Department each year covering our operations for the preceding year and
our financial condition as of the end of such year. Regulation by the Insurance
Department includes periodic examination to determine our liabilities and reserves
so that the Insurance Department may certify the items are correct. Our books and
accounts are subject to review by the Insurance Department at all times and a full
examination of its operations is conducted periodically by the National Association
of Insurance Commissioners. Such regulation does not, however, involve any supervision
of management or investment practices or policies. In addition, we are subject to
regulation under the insurance laws of other jurisdictions in which we may operate.
Independent Auditors
<R>The consolidated statutory-basis financial statements of CMFG Life Insurance Company and subsidiary (the “Company”) included in this Statement of Additional Information, have been audited by Deloitte & Touche LLP, independent auditors, as stated in their report, dated March 24, 2016, appearing herein. Such report 1) expresses an unmodified opinion on the consolidated statutory-basis financial statements and 2) included an emphasis of matter in relation to the inclusion of the accounts of MEMBERS Life Insurance Company, an indirect wholly-owned subsidiary within the Company’s consolidated statutory basis financial statements as of and for the year ended December 31, 2015 and an emphasis of matter in relation to the CMFG Life Insurance Company’s merger with CMFG Life Vermont Inc. which was previously a wholly owned subsidiary. The merger was accounted for as a non-reciprocal transfer and is reflected in the consolidated statutory basis financial statements as if the merger had occurred on January 1, 2015.
4
Information About Us
CUNA Mutual
Insurance Society is a mutual life insurance company that was originally organized
in Wisconsin in 1935. CUNA Mutual Life Insurance Company merged with CUNA Mutual
Insurance Society on December 31, 2007. CUNA Mutual Insurance Society reorganized
into a stock insurance company incorporated in Iowa within a mutual insurance holding
company structure and was renamed CMFG Life Insurance Company on January 31, 2012.
We are one of the world’s largest direct underwriters of credit life and disability insurance, and are a major provider of qualified pension products to credit unions. Further, we offer fixed and variable annuities, individual life insurance, health policies, term and permanent life insurance, and long-term care insurance.
CBSI is our indirect wholly owned subsidiary.
Periodically, rating agencies, review our ratings for financial stability and operating performance. To obtain our current ratings, contact us at the address and telephone number shown on the first page of this SAI.
The Interest Bearing Account
The Interest Bearing Account is not registered with the SEC and the staff of the
SEC has not reviewed the disclosure in this prospectus relating to the Fixed Account.
Additional Information about the Separate
Account and the Funds
The Separate Account was established by CUNA Mutual
Life Insurance Company on August 16, 1983. CUNA Mutual Life Insurance Company merged
with us as of December 31, 2007. The Separate Account is registered under 1940 Act
as a unit investment trust. The Separate Account purchases shares of the Funds in
accordance with separate participation agreements. The agreements contain varying
termination provisions. If a participation agreement terminates, the Separate Account
may not be able to purchase additional shares of the Fund(s) covered by that agreement.
Likewise, in certain circumstances, it is possible that shares of a Fund may not
be available to the Separate Account even if the participation agreement relating
to that Fund has not been terminated. In either event, owners will no longer be
able to allocate purchase payments or transfer Accumulated Value to the Subaccount
investing in that Fund.
Shares of the Funds may be sold to separate accounts of insurance companies that are not affiliated with us or each other, a practice known as “shared funding.” They are also sold to separate accounts to serve as the underlying investment for both variable annuity contracts and variable life insurance contracts, a practice known as “mixed funding.” As a result, there is a possibility that a material conflict may arise between the interests of Owners, whose contract values are allocated to the Separate Account, and of owners of other contracts whose contract values are allocated to one or more other separate accounts investing in any one of the Funds. Shares of some of the Funds may also be sold directly to certain qualified pension and retirement plans qualifying under Section 401 of the Code. As a result, there is a possibility that a material conflict may arise between the interests of Owners or owners of other contracts (including contracts issued by other companies), and such retirement plans or participants in such retirement plans. In the event of any such material conflicts, we will consider what action may be appropriate, including removing the Fund from the Separate Account or replacing the Fund with another Fund. There are certain risks associated with mixed and shared funding and with sale of shares to qualified pension and retirement plans, as disclosed in the Fund’s prospectus and statement of additional information.
Financial Statements
Our financial
statements and those of the Separate Account appear on the following pages. Our
financial statements should be distinguished from the financial statements of the
Separate Account and should be considered only as bearing upon our ability to meet
our obligations under your Policy.
5
APPENDIX A – FIRST YEAR SURRENDER CHARGES PER 1,000 OF SPECIFIED AMOUNT |
ISSUE AGE | MALE COMPOSITE | FEMALE COMPOSITE |
0 | 0.95 | 0.87 |
1 | 1.07 | 0.99 |
2 | 1.19 | 1.11 |
3 | 1.30 | 1.22 |
4 | 1.42 | 1.34 |
5 | 1.54 | 1.46 |
6 | 1.70 | 1.59 |
7 | 1.88 | 1.72 |
8 | 2.06 | 1.85 |
9 | 2.24 | 1.98 |
10 | 2.39 | 2.11 |
11 | 2.51 | 2.23 |
12 | 2.62 | 2.35 |
13 | 2.71 | 2.46 |
14 | 2.80 | 2.57 |
15 | 2.88 | 2.67 |
ISSUE AGE | MALE | FEMALE | ||
NON TOBACCO | TOBACCO | NON TOBACCO | TOBACCO | |
16 | 2.94 | 2.94 | 2.74 | 2.74 |
17 | 2.99 | 2.99 | 2.80 | 2.80 |
18 | 3.03 | 3.03 | 2.85 | 2.85 |
19 | 3.10 | 3.10 | 2.92 | 2.92 |
20 | 3.21 | 3.24 | 3.03 | 3.05 |
21 | 3.37 | 3.49 | 3.18 | 3.28 |
22 | 3.56 | 3.74 | 3.37 | 3.51 |
23 | 3.78 | 4.00 | 3.57 | 3.75 |
24 | 4.03 | 4.25 | 3.79 | 3.98 |
25 | 4.29 | 4.50 | 4.02 | 4.21 |
26 | 4.57 | 4.79 | 4.26 | 4.51 |
27 | 4.88 | 5.11 | 4.51 | 4.85 |
28 | 5.21 | 5.45 | 4.77 | 5.22 |
29 | 5.55 | 5.82 | 5.05 | 5.59 |
30 | 5.89 | 6.18 | 5.33 | 5.95 |
31 | 6.23 | 6.54 | 5.63 | 6.31 |
32 | 6.59 | 6.91 | 5.93 | 6.68 |
33 | 6.95 | 7.30 | 6.25 | 7.04 |
34 | 7.32 | 7.70 | 6.57 | 7.42 |
35 | 7.71 | 8.13 | 6.90 | 7.79 |
Note: Preferred and Standard Policies use the same Surrender Charge.
A-1
ISSUE AGE | MALE | FEMALE | ||
NON TOBACCO | TOBACCO | NON TOBACCO | TOBACCO | |
36 | 8.11 | 8.58 | 7.22 | 8.17 |
37 | 8.53 | 9.05 | 7.55 | 8.55 |
38 | 8.95 | 9.54 | 7.88 | 8.94 |
39 | 9.40 | 10.07 | 8.22 | 9.32 |
40 | 9.87 | 10.62 | 8.58 | 9.70 |
41 | 10.36 | 11.21 | 8.96 | 10.06 |
42 | 10.86 | 11.82 | 9.35 | 10.41 |
43 | 11.39 | 12.46 | 9.76 | 10.76 |
44 | 11.94 | 13.14 | 10.18 | 11.12 |
45 | 12.53 | 13.86 | 10.64 | 11.52 |
46 | 13.14 | 14.61 | 11.10 | 11.92 |
47 | 13.76 | 15.39 | 11.56 | 12.30 |
48 | 14.41 | 16.21 | 12.06 | 12.73 |
49 | 15.12 | 17.08 | 12.62 | 13.25 |
50 | 15.91 | 18.00 | 13.28 | 13.91 |
51 | 16.79 | 19.00 | 14.07 | 14.77 |
52 | 17.74 | 20.07 | 14.98 | 15.79 |
53 | 18.74 | 21.18 | 15.94 | 16.89 |
54 | 19.78 | 22.31 | 16.92 | 18.00 |
55 | 20.83 | 23.43 | 17.86 | 19.04 |
56 | 21.85 | 24.48 | 18.70 | 19.96 |
57 | 22.84 | 25.47 | 19.49 | 20.80 |
58 | 23.88 | 26.50 | 20.30 | 21.65 |
59 | 25.04 | 27.68 | 21.20 | 22.59 |
60 | 26.39 | 29.11 | 22.30 | 23.71 |
61 | 27.01 | 29.87 | 23.08 | 24.53 |
62 | 27.42 | 30.48 | 23.84 | 25.32 |
63 | 27.73 | 31.00 | 24.55 | 26.06 |
64 | 28.04 | 31.50 | 25.20 | 26.71 |
65 | 28.45 | 32.05 | 25.75 | 27.25 |
66 | 28.96 | 32.58 | 26.18 | 27.60 |
67 | 29.50 | 33.05 | 26.49 | 27.78 |
68 | 30.07 | 33.55 | 26.74 | 27.91 |
69 | 30.70 | 34.19 | 27.00 | 28.07 |
70 | 31.39 | 35.07 | 27.31 | 28.39 |
71 | 32.25 | 36.52 | 27.72 | 29.01 |
72 | 33.12 | 37.97 | 28.12 | 29.64 |
73 | 33.98 | 39.41 | 28.53 | 30.26 |
74 | 34.85 | 40.86 | 28.93 | 30.89 |
75 | 35.71 | 42.31 | 29.34 | 31.51 |
Note: Preferred and Standard Policies use the same Surrender Charge.
A-2
APPENDIX B – DEATH BENEFIT PERCENTAGE FACTOR |
The death benefit percentage factor required by the Code for treatment of the Policy as a life insurance policy. |
Attained Age | Death Benefit
Percentage Factor |
|||
0-40 | 2.50 | |||
41 | 2.43 | |||
42 | 2.36 | |||
43 | 2.29 | |||
44 | 2.22 | |||
45 | 2.15 | |||
46 | 2.09 | |||
47 | 2.03 | |||
48 | 1.97 | |||
49 | 1.91 | |||
50 | 1.85 | |||
51 | 1.78 | |||
52 | 1.71 | |||
53 | 1.64 | |||
54 | 1.57 | |||
55 | 1.50 | |||
56 | 1.46 | |||
57 | 1.42 | |||
58 | 1.38 | |||
59 | 1.34 | |||
60 | 1.30 | |||
61 | 1.28 | |||
62 | 1.26 | |||
63 | 1.24 | |||
64 | 1.22 | |||
65 | 1.20 | |||
66 | 1.19 | |||
67 | 1.18 | |||
68 | 1.17 | |||
69 | 1.16 | |||
70 | 1.15 | |||
71 | 1.13 | |||
72 | 1.11 | |||
73 | 1.09 | |||
74 | 1.07 | |||
75-90 | 1.05 | |||
91 | 1.04 | |||
92 | 1.03 | |||
93 | 1.02 | |||
94 | 1.01 | |||
95 | 1.00 | |||
B-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors of
CMFG Life Insurance
Company and
Policy Owners of CMFG Variable Life Insurance
Account:
We have audited the accompanying statement of assets and liabilities for each of the individual subaccounts listed in Appendix A of CMFG Variable Life Insurance Account (the “Account”) as of December 31, 2015, and the related statements of operations, statements of changes in net assets and financial highlights for each of the periods presented in Appendix A. These financial statements are the responsibility of the Account’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Account is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Account’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2015, by correspondence with the fund houses. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of each of the individual subaccounts comprising CMFG Variable Life Insurance Account as of December 31, 2015, and the results of their operations, the changes in their net assets, and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America.
/s/ DELOITTE & TOUCHE LLP
Chicago, Illinois
February 25, 2016
APPENDIX A | |||||||||||
CMFG Variable Life Insurance Account | |||||||||||
Statement of Assets and | Statements of Changes in | ||||||||||
Subaccount | Liabilities | Statement of Operations | Net Assets | Financial Highlights | |||||||
As Of | For the | For Each of the | For Each of the | ||||||||
Templeton Developing Markets VIP Fund, Class 2, Subaccount | December 31, 2015 | Year Ended December 31, 2015 | Two Years Ended December 31, 2015 |
Five Years Ended December 31, 2015 | |||||||
MFS® Strategic Income Portfolio, Initial Class, Subaccount | December 31, 2015 | Year Ended December 31, 2015 | Two Years Ended December 31, 2015 |
Two Years ended December 31, 2015 and For the period from August 16, 2013* - December 31, 2013 |
|||||||
Oppenheimer Global Strategic Income Fund/VA, Non-Service Shares, Subaccount | December 31, 2015 | Year Ended December 31, 2015 | Two Years
Ended December 31, 2015 |
Three Years Ended December 31, 2015 and For the Period from October 26, 2012* – December 31, 2012 |
|||||||
T. Rowe Price International Stock Portfolio, Subaccount | December 31, 2015 | Year Ended December 31, 2015 | Two Years Ended December 31, 2015 |
Five Years Ended December 31, 2015 | |||||||
Ultra Series Aggressive Allocation Fund, Class I, Subaccount | December 31, 2015 | Year Ended December 31, 2015 | Two Years
Ended December 31, 2015 |
Five Years Ended December 31, 2015 | |||||||
Ultra Series Core Bond Fund, Class I, Subaccount | December 31, 2015 | Year Ended December 31, 2015 | Two Years
Ended December 31, 2015 |
Five Years Ended December 31, 2015 | |||||||
Ultra Series Conservative Allocation Fund, Class I, Subaccount | December 31, 2015 | Year Ended December 31, 2015 | Two Years
Ended December 31, 2015 |
Five Years Ended December 31, 2015 | |||||||
Ultra Series Diversified Income Fund, Class I, Subaccount | December 31, 2015 | Year Ended December 31, 2015 | Two Years
Ended December 31, 2015 |
Five Years Ended December 31, 2015 | |||||||
Ultra Series High Income Fund, Class I, Subaccount | December 31, 2015 | Year Ended December 31, 2015 | Two Years
Ended December 31, 2015 |
Five Years Ended December 31, 2015 | |||||||
Ultra Series International Stock Fund, Class I, Subaccount | December 31, 2015 | Year Ended December 31, 2015 | Two Years
Ended December 31, 2015 |
Five Years Ended December 31, 2015 | |||||||
Ultra Series Large Cap Growth Fund, Class I, Subaccount | December 31, 2015 | Year Ended December 31, 2015 | Two Years
Ended December 31, 2015 |
Five Years Ended December 31, 2015 | |||||||
Ultra Series Large Cap Value Fund, Class I, Subaccount | December 31, 2015 | Year Ended December 31, 2015 | Two Years
Ended December 31, 2015 |
Five Years Ended December 31, 2015 | |||||||
Ultra Series Mid Cap Fund, Class I, Subaccount | December 31, 2015 | Year Ended December 31, 2015 | Two Years
Ended December 31, 2015 |
Five Years Ended December 31, 2015 | |||||||
Ultra Series Moderate Allocation Fund, Class I, Subaccount | December 31, 2015 | Year Ended December 31, 2015 | Two Years
Ended December 31, 2015 |
Five Years Ended December 31, 2015 | |||||||
Ultra Series Money Market Fund, Class I, Subaccount | December 31, 2015 | Year Ended December 31, 2015 | Two Years
Ended December 31, 2015 |
Five Years Ended December 31, 2015 | |||||||
Ultra Series Small Cap Fund, Class I, Subaccount | December 31, 2015 | Year Ended December 31, 2015 | Two Years
Ended December 31, 2015 |
Five Years Ended December 31, 2015 | |||||||
*Date represents commencement of operations. |
CMFG Variable Life Insurance Account |
Statement of Assets and Liabilities |
As of December 31, 2015 |
Templeton | MFS® | Oppenheimer | T. Rowe Price | ||||||||||||||
Developing | Strategic | Global Strategic | International | ||||||||||||||
Markets VIP | Income Portfolio, | Income Fund/VA, | Stock | ||||||||||||||
Fund, Class 2, | Initial Class, | Non-Service Shares, | Portfolio, | ||||||||||||||
Subaccount | Subaccount | Subaccount | Subaccount | ||||||||||||||
Assets | |||||||||||||||||
Investments in mutual funds at fair value |
$ | 10,818 | $ | 242,899 | $ | 10,678 | $ | 5,948,140 | |||||||||
Total assets |
10,818 | 242,899 | 10,678 | 5,948,140 | |||||||||||||
Liabilities | - | - | - | - | |||||||||||||
Net assets |
$ | 10,818 | $ | 242,899 | $ | 10,678 | $ | 5,948,140 | |||||||||
Net assets | |||||||||||||||||
Net assets: type 1 |
$ | - | $ | 242,667 | $ | - | $ | 5,819,899 | |||||||||
Net assets: type 2 |
10,818 | 232 | 10,678 | 128,241 | |||||||||||||
Total net assets |
$ | 10,818 | $ | 242,899 | $ | 10,678 | $ | 5,948,140 | |||||||||
Number of shares outstanding | 1,712 | 26,259 | 2,188 | 405,463 | |||||||||||||
Net asset value per share | $ | 6.32 | $ | 9.25 | $ | 4.88 | $ | 14.67 | |||||||||
Cost of mutual fund shares | $ | 12,552 | $ | 263,192 | $ | 12,081 | $ | 5,654,533 | |||||||||
Ultra Series | Ultra Series | Ultra Series | Ultra Series | ||||||||||||||
Aggressive | Core Bond | Conservative | Diversified | ||||||||||||||
Allocation | Fund, | Allocation Fund, | Income | ||||||||||||||
Fund, Class I, | Class I, | Class I, | Fund, Class I, | ||||||||||||||
Subaccount | Subaccount | Subaccount | Subaccount | ||||||||||||||
Assets | |||||||||||||||||
Investments in mutual funds at fair value |
$ | 969,072 | $ | 6,580,065 | $ | 420,959 | $ | 52,559,635 | |||||||||
Total assets |
969,072 | 6,580,065 | 420,959 | 52,559,635 | |||||||||||||
Liabilities | - | - | - | - | |||||||||||||
Net assets |
$ | 969,072 | $ | 6,580,065 | $ | 420,959 | $ | 52,559,635 | |||||||||
Net assets | |||||||||||||||||
Net assets: type 1 |
$ | - | $ | 4,313,401 | $ | - | $ | 45,201,515 | |||||||||
Net assets: type 2 |
969,072 | 2,266,664 | 420,959 | 7,358,120 | |||||||||||||
Total net assets |
$ | 969,072 | $ | 6,580,065 | $ | 420,959 | $ | 52,559,635 | |||||||||
Number of shares outstanding | 109,542 | 671,531 | 44,011 | 2,819,602 | |||||||||||||
Net asset value per share | $ | 8.85 | $ | 9.80 | $ | 9.56 | $ | 18.64 | |||||||||
Cost of mutual fund shares | $ | 1,076,147 | $ | 6,928,112 | $ | 458,145 | $ | 48,944,879 |
See accompanying notes to financial statements |
1 |
CMFG Variable Life Insurance Account |
Statement of Assets and Liabilities (continued) |
As of December 31, 2015 |
Ultra Series | Ultra Series | Ultra Series | Ultra Series | ||||||||||||||
High Income | International | Large Cap | Large Cap | ||||||||||||||
Fund, | Stock Fund, | Growth Fund, | Value Fund, | ||||||||||||||
Class I, | Class I, | Class I, | Class I, | ||||||||||||||
Subaccount | Subaccount | Subaccount | Subaccount | ||||||||||||||
Assets | |||||||||||||||||
Investments in mutual funds at fair value |
$ | 996,340 | $ | 2,470,673 | $ | 37,203,689 | $ | 68,311,619 | |||||||||
Total assets |
996,340 | 2,470,673 | 37,203,689 | 68,311,619 | |||||||||||||
Liabilities | - | - | - | - | |||||||||||||
Net assets |
$ | 996,340 | $ | 2,470,673 | $ | 37,203,689 | $ | 68,311,619 | |||||||||
Net assets | |||||||||||||||||
Net assets: type 1 |
$ | - | $ | - | $ | 29,322,487 | $ | 60,169,033 | |||||||||
Net assets: type 2 |
996,340 | 2,470,673 | 7,881,202 | 8,142,586 | |||||||||||||
Total net assets |
$ | 996,340 | $ | 2,470,673 | $ | 37,203,689 | $ | 68,311,619 | |||||||||
Number of shares outstanding | 123,843 | 243,081 | 1,481,133 | 2,524,469 | |||||||||||||
Net asset value per share | $ | 8.05 | $ | 10.16 | $ | 25.12 | $ | 27.06 | |||||||||
Cost of mutual fund shares | $ | 1,170,371 | $ | 2,700,902 | $ | 32,483,125 | $ | 68,108,177 | |||||||||
Ultra Series | Ultra Series | Ultra Series | Ultra Series | ||||||||||||||
Mid Cap | Moderate | Money Market | Small Cap | ||||||||||||||
Fund, | Allocation | Fund, | Fund, | ||||||||||||||
Class I, | Fund, Class I, | Class I, | Class I, | ||||||||||||||
Subaccount | Subaccount | Subaccount | Subaccount | ||||||||||||||
Assets | |||||||||||||||||
Investments in mutual funds at fair value |
$ | 18,614,041 | $ | 1,847,019 | $ | 1,921,512 | $ | 132,908 | |||||||||
Total assets |
18,614,041 | 1,847,019 | 1,921,512 | 132,908 | |||||||||||||
Liabilities | - | - | - | - | |||||||||||||
Net assets |
$ | 18,614,041 | $ | 1,847,019 | $ | 1,921,512 | $ | 132,908 | |||||||||
Net assets | |||||||||||||||||
Net assets: type 1 |
$ | 9,407,470 | $ | - | $ | 1,066,352 | $ | - | |||||||||
Net assets: type 2 |
9,206,571 | 1,847,019 | 855,160 | 132,908 | |||||||||||||
Total net assets |
$ | 18,614,041 | $ | 1,847,019 | $ | 1,921,512 | $ | 132,908 | |||||||||
Number of shares outstanding | 1,054,739 | 186,263 | 1,921,512 | 20,084 | |||||||||||||
Net asset value per share | $ | 17.65 | $ | 9.92 | $ | 1.00 | $ | 6.62 | |||||||||
Cost of mutual fund shares | $ | 16,391,007 | $ | 1,910,818 | $ | 1,921,512 | $ | 179,848 |
See accompanying notes to financial statements |
2 |
CMFG Variable Life Insurance Account |
Statement of Operations |
For the Year Ended December 31, 2015 |
Templeton | MFS® | Oppenheimer | T. Rowe Price | ||||||||||||||
Developing | Strategic | Global Strategic | International | ||||||||||||||
Markets VIP | Income Portfolio, | Income Fund/VA, | Stock | ||||||||||||||
Fund, Class 2, | Initial Class, | Non-Service Shares, | Portfolio, | ||||||||||||||
Subaccount | Subaccount | Subaccount | Subaccount | ||||||||||||||
Investment income (loss) | |||||||||||||||||
Dividend Income |
$ | 312 | $ | 14,985 | $ | 670 | $ | 59,487 | |||||||||
Mortality and expense charges (note 3) |
(136 | ) | (2,342 | ) | (105 | ) | (59,160 | ) | |||||||||
Net investment income (loss) |
176 | 12,643 | 565 | 327 | |||||||||||||
Realized gain (loss) on sale of fund shares | |||||||||||||||||
Net realized gain (loss) on sale of fund shares |
(153 | ) | (623 | ) | (112 | ) | 90,580 | ||||||||||
Realized gain distributions |
1,985 | - | - | 118,974 | |||||||||||||
Net realized gain (loss) on investments |
1,832 | (623 | ) | (112 | ) | 209,554 | |||||||||||
Net change in unrealized appreciation | |||||||||||||||||
(depreciation) on investments |
(5,241 | ) | (18,890 | ) | (766 | ) | (295,902 | ) | |||||||||
Net increase (decrease) in net assets | |||||||||||||||||
resulting from operations |
$ | (3,233 | ) | $ | (6,870 | ) | $ | (313 | ) | $ | (86,021 | ) | |||||
Ultra Series | Ultra Series | Ultra Series | Ultra Series | ||||||||||||||
Aggressive | Core Bond | Conservative | Diversified | ||||||||||||||
Allocation | Fund, | Allocation Fund, | Income | ||||||||||||||
Fund, Class I, | Class I, | Class I, | Fund, Class I, | ||||||||||||||
Subaccount | Subaccount | Subaccount | Subaccount | ||||||||||||||
Investment income (loss) | |||||||||||||||||
Dividend Income |
$ | 15,830 | $ | 213,192 | $ | 8,366 | $ | 1,354,923 | |||||||||
Mortality and expense charges (note 3) |
(9,768 | ) | (63,632 | ) | (5,832 | ) | (492,306 | ) | |||||||||
Net investment income (loss) |
6,062 | 149,560 | 2,534 | 862,617 | |||||||||||||
Realized gain (loss) on sale of fund shares | |||||||||||||||||
Net realized gain (loss) on sale of fund shares |
4,215 | (12,656 | ) | (7,528 | ) | 741,595 | |||||||||||
Realized gain distributions |
108,825 | - | 16,532 | 3,055,075 | |||||||||||||
Net realized gain (loss) on investments |
113,040 | (12,656 | ) | 9,004 | 3,796,670 | ||||||||||||
Net change in unrealized appreciation | |||||||||||||||||
(depreciation) on investments |
(140,755 | ) | (205,706 | ) | (20,547 | ) | (5,107,563 | ) | |||||||||
Net increase (decrease) in net assets | |||||||||||||||||
resulting from operations |
$ | (21,653 | ) | $ | (68,802 | ) | $ | (9,009 | ) | $ | (448,276 | ) | |||||
See accompanying notes to financial statements |
3 |
CMFG Variable Life Insurance Account |
Statement of Operations (continued) |
For the Year Ended December 31, 2015 |
Ultra Series | Ultra Series | Ultra Series | Ultra Series | |||||||||||||
High Income | International | Large Cap | Large Cap | |||||||||||||
Fund, | Stock Fund, | Growth Fund, | Value Fund, | |||||||||||||
Class I, | Class I, | Class I, | Class I, | |||||||||||||
Subaccount | Subaccount | Subaccount | Subaccount | |||||||||||||
Investment income (loss) | ||||||||||||||||
Dividend Income |
$ | 60,420 | $ | 53,531 | $ | 429,826 | $ | 874,308 | ||||||||
Mortality and expense charges (note 3) |
(9,768 | ) | (24,638 | ) | (343,500 | ) | (647,256 | ) | ||||||||
Net investment income (loss) |
50,652 | 28,893 | 86,326 | 227,052 | ||||||||||||
Realized gain (loss) on sale of fund shares | ||||||||||||||||
Net realized gain (loss) on sale of fund shares |
(7,815 | ) | (3,181 | ) | 650,244 | 1,061,623 | ||||||||||
Realized gain distributions |
- | 4,330 | 3,695,278 | 10,405,875 | ||||||||||||
Net realized gain (loss) on investments |
(7,815 | ) | 1,149 | 4,345,522 | 11,467,498 | |||||||||||
Net change in unrealized appreciation | ||||||||||||||||
(depreciation) on investments |
(76,947 | ) | (140,511 | ) | (3,543,232 | ) | (14,300,578 | ) | ||||||||
Net increase (decrease) in net assets | ||||||||||||||||
resulting from operations |
$ | (34,110 | ) | $ | (110,469 | ) | $ | 888,616 | $ | (2,606,028 | ) | |||||
Ultra Series | Ultra Series | Ultra Series | Ultra Series | |||||||||||||
Mid Cap | Moderate | Money Market | Small Cap | |||||||||||||
Fund, | Allocation | Fund, | Fund, | |||||||||||||
Class I, | Fund, Class I, | Class I, | Class I, | |||||||||||||
Subaccount | Subaccount | Subaccount | Subaccount | |||||||||||||
Investment income (loss) | ||||||||||||||||
Dividend Income |
$ | 13,779 | $ | 32,395 | $ | - | $ | 889 | ||||||||
Mortality and expense charges (note 3) |
(175,676 | ) | (17,918 | ) | (17,503 | ) | (2,172 | ) | ||||||||
Net investment income (loss) |
(161,897 | ) | 14,477 | (17,503 | ) | (1,283 | ) | |||||||||
Realized gain (loss) on sale of fund shares | ||||||||||||||||
Net realized gain (loss) on sale of fund shares |
390,154 | 15,457 | - | (12,481 | ) | |||||||||||
Realized gain distributions |
1,841,560 | 122,211 | - | 30,936 | ||||||||||||
Net realized gain (loss) on investments |
2,231,714 | 137,668 | - | 18,455 | ||||||||||||
Net change in unrealized appreciation | ||||||||||||||||
(depreciation) on investments |
(2,024,597 | ) | (186,742 | ) | - | (19,717 | ) | |||||||||
Net increase (decrease) in net assets | ||||||||||||||||
resulting from operations |
$ | 45,220 | $ | (34,597 | ) | $ | (17,503 | ) | $ | (2,545 | ) | |||||
See accompanying notes to financial statements |
4 |
CMFG Variable Life Insurance Account |
Statements of Changes in Net Assets |
For the Years Ended December 31, |
Templeton Developing | MFS® Strategic | |||||||||||||||
Markets VIP Fund, | Income Portfolio, | |||||||||||||||
Class 2, Subaccount | Initial Class, Subaccount | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Increase (decrease) in net assets from operations | ||||||||||||||||
Net investment income (loss) |
$ | 176 | $ | 108 | $ | 12,643 | $ | 6,388 | ||||||||
Net realized gain (loss) on investments |
1,832 | 958 | (623 | ) | 239 | |||||||||||
Net change in unrealized appreciation |
||||||||||||||||
(depreciation) on investments |
(5,241 | ) | (2,829 | ) | (18,890 | ) | (61 | ) | ||||||||
Net increase (decrease) in net assets |
||||||||||||||||
resulting from operations |
(3,233 | ) | (1,763 | ) | (6,870 | ) | 6,566 | |||||||||
Contract transactions | ||||||||||||||||
Payments received from policy owners |
- | - | - | - | ||||||||||||
Transfers between subaccounts (including |
||||||||||||||||
fixed accounts), net |
(1,624 | ) | (407 | ) | (645 | ) | (423 | ) | ||||||||
Payment for contract benefits and terminations |
(14 | ) | (1,506 | ) | (4,805 | ) | (64 | ) | ||||||||
Contract charges and fees |
(1,093 | ) | (1,405 | ) | (14,098 | ) | (13,431 | ) | ||||||||
Net increase (decrease) in net assets from |
||||||||||||||||
contract transactions |
(2,731 | ) | (3,318 | ) | (19,548 | ) | (13,918 | ) | ||||||||
Total increase (decrease) in net assets |
(5,964 | ) | (5,081 | ) | (26,418 | ) | (7,352 | ) | ||||||||
Net assets | ||||||||||||||||
Beginning of period |
16,782 | 21,863 | 269,317 | 276,669 | ||||||||||||
End of period |
$ | 10,818 | $ | 16,782 | $ | 242,899 | $ | 269,317 | ||||||||
Oppenheimer Global | T. Rowe Price | |||||||||||||||
Strategic Income Fund/VA, | International Stock | |||||||||||||||
Non-Service Shares, Subaccount | Portfolio, Subaccount | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Increase (decrease) in net assets from operations | ||||||||||||||||
Net investment income (loss) |
$ | 565 | $ | 466 | $ | 327 | $ | 9,656 | ||||||||
Net realized gain (loss) on investments |
(112 | ) | (28 | ) | 209,554 | 117,073 | ||||||||||
Net change in unrealized appreciation |
||||||||||||||||
(depreciation) on investments |
(766 | ) | (163 | ) | (295,902 | ) | (265,479 | ) | ||||||||
Net increase (decrease) in net assets |
||||||||||||||||
resulting from operations |
(313 | ) | 275 | (86,021 | ) | (138,750 | ) | |||||||||
Contract transactions | ||||||||||||||||
Payments received from policy owners |
- | - | 399,639 | 400,050 | ||||||||||||
Transfers between subaccounts (including |
||||||||||||||||
fixed accounts), net |
13 | 19 | (95,032 | ) | (15,385 | ) | ||||||||||
Payment for contract benefits and terminations |
(1,737 | ) | (75 | ) | (449,709 | ) | (339,508 | ) | ||||||||
Contract charges and fees |
(731 | ) | (903 | ) | (394,820 | ) | (383,531 | ) | ||||||||
Net increase (decrease) in net assets from |
||||||||||||||||
contract transactions |
(2,455 | ) | (959 | ) | (539,922 | ) | (338,374 | ) | ||||||||
Total increase (decrease) in net assets |
(2,768 | ) | (684 | ) | (625,943 | ) | (477,124 | ) | ||||||||
Net assets | ||||||||||||||||
Beginning of period |
13,446 | 14,130 | 6,574,083 | 7,051,207 | ||||||||||||
End of period |
$ | 10,678 | $ | 13,446 | $ | 5,948,140 | $ | 6,574,083 | ||||||||
See accompanying notes to financial statements |
5 |
CMFG Variable
Life Insurance Account
Statements of Changes in Net Assets (continued)
For the Years Ended December 31,
Ultra Series | Ultra Series | |||||||||||||||
Aggressive Allocation Fund, | Core Bond Fund, | |||||||||||||||
Class I, Subaccount | Class I, Subaccount | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Increase (decrease) in net assets from operations | ||||||||||||||||
Net investment income (loss) |
$ | 6,062 | $ | 11,335 | $ | 149,560 | $ | 167,433 | ||||||||
Net realized gain (loss) on investments |
113,040 | 203,127 | (12,656 | ) | (14,158 | ) | ||||||||||
Net change in unrealized appreciation |
||||||||||||||||
(depreciation) on investments |
(140,755 | ) | (145,507 | ) | (205,706 | ) | 159,344 | |||||||||
Net increase (decrease) in net assets |
||||||||||||||||
resulting from operations |
(21,653 | ) | 68,955 | (68,802 | ) | 312,619 | ||||||||||
Contract transactions | ||||||||||||||||
Payments received from policy owners |
92,481 | 104,152 | 379,300 | 389,846 | ||||||||||||
Transfers between subaccounts (including |
||||||||||||||||
fixed accounts), net |
(37,885 | ) | 8,761 | (255,804 | ) | (421,504 | ) | |||||||||
Payment for contract benefits and terminations |
(96,646 | ) | (113,475 | ) | (417,087 | ) | (367,017 | ) | ||||||||
Contract charges and fees |
(55,718 | ) | (56,076 | ) | (437,387 | ) | (442,499 | ) | ||||||||
Net increase (decrease) in net assets from |
||||||||||||||||
contract transactions |
(97,768 | ) | (56,638 | ) | (730,978 | ) | (841,174 | ) | ||||||||
Total increase (decrease) in net assets |
(119,421 | ) | 12,317 | (799,780 | ) | (528,555 | ) | |||||||||
Net assets | ||||||||||||||||
Beginning of period |
1,088,493 | 1,076,176 | 7,379,845 | 7,908,400 | ||||||||||||
End of period |
$ | 969,072 | $ | 1,088,493 | $ | 6,580,065 | $ | 7,379,845 | ||||||||
Ultra Series | Ultra Series | |||||||||||||||
Conservative Allocation Fund, | Diversified Income Fund, | |||||||||||||||
Class I, Subaccount | Class I, Subaccount | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Increase (decrease) in net assets from operations | ||||||||||||||||
Net investment income (loss) |
$ | 2,534 | $ | 9,206 | $ | 862,617 | $ | 832,194 | ||||||||
Net realized gain (loss) on investments |
9,004 | 60,751 | 3,796,670 | 4,751,401 | ||||||||||||
Net change in unrealized appreciation |
||||||||||||||||
(depreciation) on investments |
(20,547 | ) | (36,149 | ) | (5,107,563 | ) | (2,175,049 | ) | ||||||||
Net increase (decrease) in net assets |
||||||||||||||||
resulting from operations |
(9,009 | ) | 33,808 | (448,276 | ) | 3,408,546 | ||||||||||
Contract transactions | ||||||||||||||||
Payments received from policy owners |
10,938 | 10,204 | 2,933,730 | 3,006,698 | ||||||||||||
Transfers between subaccounts (including |
||||||||||||||||
fixed accounts), net |
668 | 105,752 | 2,863 | (155,008 | ) | |||||||||||
Payment for contract benefits and terminations |
(270,703 | ) | (112,411 | ) | (3,510,534 | ) | (3,425,266 | ) | ||||||||
Contract charges and fees |
(25,712 | ) | (26,767 | ) | (3,542,122 | ) | (3,565,263 | ) | ||||||||
Net increase (decrease) in net assets from |
||||||||||||||||
contract transactions |
(284,809 | ) | (23,222 | ) | (4,116,063 | ) | (4,138,839 | ) | ||||||||
Total increase (decrease) in net assets |
(293,818 | ) | 10,586 | (4,564,339 | ) | (730,293 | ) | |||||||||
Net assets | ||||||||||||||||
Beginning of period |
714,777 | 704,191 | 57,123,974 | 57,854,267 | ||||||||||||
End of period |
$ | 420,959 | $ | 714,777 | $ | 52,559,635 | $ | 57,123,974 | ||||||||
See accompanying notes to financial statements |
6 |
CMFG Variable
Life Insurance Account
Statements of Changes in Net Assets (continued)
For the Years Ended December 31,
Ultra Series | Ultra Series | |||||||||||||||
High Income Fund, | International Stock Fund, | |||||||||||||||
Class I, Subaccount | Class I, Subaccount | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Increase (decrease) in net assets from operations | ||||||||||||||||
Net investment income (loss) |
$ | 50,652 | $ | 59,150 | $ | 28,893 | $ | 78,049 | ||||||||
Net realized gain (loss) on investments |
(7,815 | ) | (2,427 | ) | 1,149 | 263,135 | ||||||||||
Net change in unrealized appreciation |
||||||||||||||||
(depreciation) on investments |
(76,947 | ) | (38,418 | ) | (140,511 | ) | (552,678 | ) | ||||||||
Net increase (decrease) in net assets |
||||||||||||||||
resulting from operations |
(34,110 | ) | 18,305 | (110,469 | ) | (211,494 | ) | |||||||||
Contract transactions | ||||||||||||||||
Payments received from policy owners |
42,681 | 46,508 | 177,555 | 192,864 | ||||||||||||
Transfers between subaccounts (including |
||||||||||||||||
fixed accounts), net |
(1,773 | ) | (182,232 | ) | (7,700 | ) | (30,767 | ) | ||||||||
Payment for contract benefits and terminations |
(59,065 | ) | (105,470 | ) | (137,204 | ) | (243,054 | ) | ||||||||
Contract charges and fees |
(51,174 | ) | (56,931 | ) | (126,023 | ) | (142,951 | ) | ||||||||
Net increase (decrease) in net assets from |
||||||||||||||||
contract transactions |
(69,331 | ) | (298,125 | ) | (93,372 | ) | (223,908 | ) | ||||||||
Total increase (decrease) in net assets |
(103,441 | ) | (279,820 | ) | (203,841 | ) | (435,402 | ) | ||||||||
Net assets | ||||||||||||||||
Beginning of period |
1,099,781 | 1,379,601 | 2,674,514 | 3,109,916 | ||||||||||||
End of period |
$ | 996,340 | $ | 1,099,781 | $ | 2,470,673 | $ | 2,674,514 | ||||||||
Ultra Series | Ultra Series | |||||||||||||||
Large Cap Growth Fund, | Large Cap Value Fund, | |||||||||||||||
Class I, Subaccount | Class I, Subaccount | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Increase (decrease) in net assets from operations | ||||||||||||||||
Net investment income (loss) |
$ | 86,326 | $ | (86,407 | ) | $ | 227,052 | $ | 316,378 | |||||||
Net realized gain (loss) on investments |
4,345,522 | 6,981,485 | 11,467,498 | 12,903,536 | ||||||||||||
Net change in unrealized appreciation |
||||||||||||||||
(depreciation) on investments |
(3,543,232 | ) | (2,965,658 | ) | (14,300,578 | ) | (5,138,570 | ) | ||||||||
Net increase (decrease) in net assets |
||||||||||||||||
resulting from operations |
888,616 | 3,929,420 | (2,606,028 | ) | 8,081,344 | |||||||||||
Contract transactions | ||||||||||||||||
Payments received from policy owners |
1,979,129 | 1,979,955 | 3,909,647 | 4,084,804 | ||||||||||||
Transfers between subaccounts (including |
||||||||||||||||
fixed accounts), net |
(249,489 | ) | (108,476 | ) | (776,341 | ) | (387,174 | ) | ||||||||
Payment for contract benefits and terminations |
(1,800,730 | ) | (2,632,691 | ) | (4,105,621 | ) | (5,078,806 | ) | ||||||||
Contract charges and fees |
(1,927,958 | ) | (1,913,734 | ) | (4,095,863 | ) | (4,266,421 | ) | ||||||||
Net increase (decrease) in net assets from |
||||||||||||||||
contract transactions |
(1,999,048 | ) | (2,674,946 | ) | (5,068,178 | ) | (5,647,597 | ) | ||||||||
Total increase (decrease) in net assets |
(1,110,432 | ) | 1,254,474 | (7,674,206 | ) | 2,433,747 | ||||||||||
Net assets | ||||||||||||||||
Beginning of period |
38,314,121 | 37,059,647 | 75,985,825 | 73,552,078 | ||||||||||||
End of period |
$ | 37,203,689 | $ | 38,314,121 | $ | 68,311,619 | $ | 75,985,825 | ||||||||
See accompanying notes to financial statements |
7 |
CMFG Variable
Life Insurance Account
Statements of Changes in Net Assets (continued)
For the Years
Ended December 31,
Ultra Series | Ultra Series | |||||||||||||||
Mid Cap Fund, | Moderate Allocation Fund, | |||||||||||||||
Class I, Subaccount | Class I, Subaccount | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Increase (decrease) in net assets from operations | ||||||||||||||||
Net investment income (loss) |
$ | (161,897 | ) | $ | (166,155 | ) | $ | 14,477 | $ | 21,177 | ||||||
Net realized gain (loss) on investments |
2,231,714 | 4,646,645 | 137,668 | 290,672 | ||||||||||||
Net change in unrealized appreciation |
||||||||||||||||
(depreciation) on investments |
(2,024,597 | ) | (2,835,226 | ) | (186,742 | ) | (179,527 | ) | ||||||||
Net increase (decrease) in net assets |
||||||||||||||||
resulting from operations |
45,220 | 1,645,264 | (34,597 | ) | 132,322 | |||||||||||
Contract transactions | ||||||||||||||||
Payments received from policy owners |
1,111,714 | 1,157,758 | 127,303 | 151,893 | ||||||||||||
Transfers between subaccounts (including |
||||||||||||||||
fixed accounts), net |
(575,177 | ) | (278,012 | ) | (103,201 | ) | 69,473 | |||||||||
Payment for contract benefits and terminations |
(897,658 | ) | (1,292,392 | ) | (80,382 | ) | (679,486 | ) | ||||||||
Contract charges and fees |
(988,903 | ) | (1,081,894 | ) | (99,012 | ) | (112,769 | ) | ||||||||
Net increase (decrease) in net assets from |
||||||||||||||||
contract transactions |
(1,350,024 | ) | (1,494,540 | ) | (155,292 | ) | (570,889 | ) | ||||||||
Total increase (decrease) in net assets |
(1,304,804 | ) | 150,724 | (189,889 | ) | (438,567 | ) | |||||||||
Net assets | ||||||||||||||||
Beginning of period |
19,918,845 | 19,768,121 | 2,036,908 | 2,475,475 | ||||||||||||
End of period |
$ | 18,614,041 | $ | 19,918,845 | $ | 1,847,019 | $ | 2,036,908 | ||||||||
Ultra Series | Ultra Series | |||||||||||||||
Money Market Fund, | Small Cap Fund, | |||||||||||||||
Class I, Subaccount | Class I, Subaccount | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Increase (decrease) in net assets from operations | ||||||||||||||||
Net investment income (loss) |
$ | (17,503 | ) | $ | (19,075 | ) | $ | (1,283 | ) | $ | (427 | ) | ||||
Net realized gain (loss) on investments |
- | - | 18,455 | 24,676 | ||||||||||||
Net change in unrealized appreciation |
||||||||||||||||
(depreciation) on investments |
- | - | (19,717 | ) | (8,615 | ) | ||||||||||
Net increase (decrease) in net assets |
||||||||||||||||
resulting from operations |
(17,503 | ) | (19,075 | ) | (2,545 | ) | 15,634 | |||||||||
Contract transactions | ||||||||||||||||
Payments received from policy owners |
250,368 | 262,785 | 5,558 | 7,414 | ||||||||||||
Transfers between subaccounts (including |
||||||||||||||||
fixed accounts), net |
166,912 | (87,372 | ) | (114,450 | ) | 10,073 | ||||||||||
Payment for contract benefits and terminations |
(204,631 | ) | (354,706 | ) | (1,133 | ) | (13,977 | ) | ||||||||
Contract charges and fees |
(239,953 | ) | (230,304 | ) | (9,911 | ) | (10,226 | ) | ||||||||
Net increase (decrease) in net assets from |
||||||||||||||||
contract transactions |
(27,304 | ) | (409,597 | ) | (119,936 | ) | (6,716 | ) | ||||||||
Total increase (decrease) in net assets |
(44,807 | ) | (428,672 | ) | (122,481 | ) | 8,918 | |||||||||
Net assets | ||||||||||||||||
Beginning of period |
1,966,319 | 2,394,991 | 255,389 | 246,471 | ||||||||||||
End of period |
$ | 1,921,512 | $ | 1,966,319 | $ | 132,908 | $ | 255,389 | ||||||||
See accompanying notes to financial statements |
8 |
CMFG Variable
Life Insurance Account
Notes to Financial Statements
(1) Organization | |
The CMFG Variable
Life Insurance Account (the “Account”) is a unit investment trust organized
under the laws of the State of Iowa and registered with the Securities and Exchange
Commission (“SEC”) under the Investment Company Act of 1940, as amended.
The Account was established as a separate account of CMFG Life Insurance Company
(the “Company”) to receive and invest net premiums paid by the policy
owners to the Company under two flexible premium variable life insurance policy
types issued by the Company: MEMBERS® Variable Universal Life and UltraVers
ALL-LifeSM (type 1) and MEMBERS® Variable Universal Life
II (type 2) (“contracts”). The Account is divided into a number of subaccounts and the contract owner makes elections from the subaccounts listed below in which to participate: |
Franklin Templeton Variable Insurance Products Trust | Ultra Series Fund | ||||
Templeton Developing Markets VIP Fund (1) |
Aggressive Allocation Fund (1) | ||||
MFS® Variable Insurance Trust II | Core Bond Fund | ||||
MFS® Strategic Income Portfolio |
Conservative Allocation Fund (1) | ||||
Oppenheimer Variable Account Funds | Diversified Income Fund | ||||
Oppenheimer Global Strategic Income Fund/VA (1) |
High Income Fund (1) | ||||
T. Rowe Price International Series, Inc. | International Stock Fund (1) | ||||
T. Rowe Price International Stock Portfolio |
Large Cap Growth Fund | ||||
Large Cap Value Fund | |||||
Mid Cap Fund | |||||
Moderate Allocation Fund (1) | |||||
(1) | This subaccount is only available in the MEMBERS® Variable Universal Life II (type 2) product. | Money Market Fund Small Cap Fund (1) |
The Account
may, in the future, include additional subaccounts. Each subaccount invests exclusively
in shares of an underlying open-end management investment company that is registered
with the SEC. Such registration does not involve supervision of the management or
investment practices or policies of the companies or their funds by the SEC. |
|
The accompanying
financial statements include only the contract owner assets, deposits, investment
activity, and the contract transactions applicable to the variable portions of the
contracts and exclude assets and activity for deposits for fixed dollar benefits,
which are included in the general account of the Company. The net investment income
and the realized and unrealized gains and losses from the assets for each subaccount
are credited to or charged against that subaccount without regard to income, gains
or losses from any other subaccount. |
|
(2) Significant Accounting Policies | |
Basis of Presentation | |
The Account
is an investment company and follows the accounting and reporting guidance in the
Financial Accounting Standards Board (“FASB”) Accounting Standards Codification
Topic 946, Financial Services- Investment Companies. |
|
Use of Estimates | |
The preparation
of financial statements in conformity with accounting principles generally accepted
in the United States of America (“GAAP”) requires management to make certain
estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates. |
9
CMFG Variable Life Insurance Account
Notes to Financial Statements
(2) Significant Accounting Policies (continued) | |
Investment Valuation | |
Investments
are made in shares of a fund and are recorded at fair value, determined by the net
asset value per share of the respective fund. Investment transactions in each fund
are recorded on the trade date. Realized gains and losses on redemptions of the
shares of the fund are determined using the average cost basis. Income from dividends
and gains from realized gain distributions from each fund are recorded on the ex-
dividend date and are reinvested in that fund. The difference between cost and fair
value of investments owned on the day of measurement is recorded as unrealized appreciation
or depreciation of investments. |
|
Federal Income Taxes | |
The operations
of the Account are included in the consolidated federal income tax return of CUNA
Mutual Holding Company (“CMHC”), the Company’s ultimate parent, and
its subsidiaries. The Company is taxed as a life insurance company under the provisions
of the Internal Revenue Code (“IRC”). The Account’s activities are
included in the Company’s taxable income. Under current provisions of the IRC,
the Company does not expect to incur federal income taxes on recorded earnings or
the realized capital gains attributed to the Account to the extent these earnings
are credited to the policies. Accordingly, no charge for income tax is currently
recorded. If such taxes are incurred by the Company in the future, a charge to the
Account may be assessed. |
|
Accounting Standards Updated Pending Adoption | |
In January
2016, the FASB issued Accounting Standard Update (ASU) No. 2016-01, Recognition
and Measurement of Financial Assets and Liabilities (“ASU 2016-01”),
effective in 2018. The new standard will require equity investments to be measured
at fair value with changes in fair value recognized in net income. Other provisions
in ASU 2016-01 were not applicable to the Account. Because the Account currently
records the change in fair value of equity investments in the statement of operations
in accordance with guidance for investment companies, ASU 2016-01 will have no impact
on its financial statements. |
|
(3) Fees and Charges | |
Policy Charges | |
In addition
to charges for premium taxes, which reduce premiums prior to the allocation of net
premiums to the subaccounts of the Account, the following charges may be deducted
by the Company by redeeming an appropriate number of units for each policy and are
included in contract charges and fees in the accompanying Statements of Changes
in Net Assets of the applicable subaccount: |
|
Administrative Fee: The Company has primary responsibility for the administration of the Account
and the policies issued. As reimbursement for these expenses, the Company may assess
each policy a monthly administrative fee which is processed through redemption of
units. This fee on an annual basis is $0.45 per $1,000 of the amount specified in
the policy for the first ten policy years. This fee is not assessed after ten policy
years. |
|
Surrender
Charges: For the type 1 product, the sales and administrative expenses are incurred
when a policy is issued and are deferred (deferred charges) until the policy is
surrendered. Such charges are not collected at all if the policy is held for nine
years, or if the insured dies during the first ten years. In no instance will the
charge exceed 30 percent of the lesser of premiums paid or the guideline annual
premium (as defined under the Investment Company Act of 1940) of the policy. |
|
For the type
2 product, in the event a policy owner surrenders a policy prior to nine years,
the policy owner is assessed a contractual surrender charge to compensate the Company
for certain sales and administrative expenses. Any such surrender charges are included
in contract charges and fees in the accompanying Statements of Changes in Net Assets.
The surrender charges are deducted from the payout in the event of a complete surrender
of the policy during the first nine policy years; there is no surrender charge after
nine policy years. Should there be a change of a specified amount, surrender charges
are deducted from the payout for the first nine years following the change. There
are no surrender charges after nine years following the change to a specified amount. |
10
CMFG Variable Life Insurance Account
Notes to Financial Statements
(3) Fees and Charges (continued) | |
Policy Fee: The Company incurs first-year expenses upon issue of a policy, and assesses
each policy a monthly policy fee in the amount of $6 per month ($3 per month for
issue ages 0-19 for the type 1 product only) to recover these expenses. |
|
Cost of
Insurance and Additional Benefits Provided: The Company is responsible for providing
the insurance benefits provided in the policy. The cost of insurance is determined
each month based upon the applicable cost of insurance rates and the net amount
at risk. The cost of insurance can vary from month to month since the determination
of both the insurance rate and the net amount at risk depends upon a number of variables
such as the death benefit option selected by the policy owner, the benefit amount
specified in the policy, and the cash value, all as described in the Account’s
prospectus. Several riders are available on the contracts that provide additional
benefits, including children’s insurance, guaranteed insurability, accidental
death benefit, other insured term rider, and disability waiver of deductions or
premium which can also impact the cost of insurance. |
|
Account Charges | |
Mortality
and Expense Risk Charge: The Company deducts a daily mortality and expense risk
charge from the assets of the Account to compensate it for assuming certain mortality
and expense risks at an annual rate of 0.90%. These charges are included in mortality
and expense charges in the accompanying Statement of Operations of the applicable
subaccount. |
|
(4) Fair Value | |
Fair value
is defined as the price that would be received to sell an asset or paid to transfer
a liability in an orderly transaction between market participants at the measurement
date. |
|
The fair value
hierarchy that prioritizes the inputs to valuation techniques used to measure fair
value of assets and liabilities into three broad levels. The Account has categorized
its financial instruments, based on the degree of subjectivity inherent in the valuation
technique, as follows: |
• | Level 1: Inputs
are directly observable and represent quoted prices for identical assets or liabilities
in active markets the Account has the ability to access at the measurement date. |
||
• | Level 2: All
significant inputs are observable, either directly or indirectly, other than quoted
prices included in Level 1, for the asset or liability. This includes: (i) quoted
prices for similar assets or liabilities in active markets, (ii) quoted prices for
identical or similar assets or liabilities in markets that are not active and (iii)
inputs other than quoted prices that are observable for the asset or liability,
and (iv) inputs that are derived principally from or corroborated by observable
market data by correlation or other means. |
||
• | Level 3: One
or more significant inputs are unobservable and reflect the Account’s estimates
of the assumptions that market participants would use in pricing the asset or liability,
including assumptions about risk. |
The hierarchy
requires the use of market observable information when available for assessing fair
value. |
11
CMFG Variable Life Insurance Account
Notes to Financial Statements
(4) Fair Value (continued)
The following table summarizes the Account’s assets that are measured at fair value as of December 31, 2015. All of the Account’s assets consist of Level 2 mutual funds that have daily quoted net asset values at which the Account could transact.
December 31, 2015 Assets, at Fair Value | Level 2 | Total | |||||
Templeton Developing Markets VIP Fund, Class 2, Subaccount | $ | 10,818 | $ | 10,818 | |||
MFS® Strategic Income Portfolio, Initial Class, Subaccount | 242,899 | 242,899 | |||||
Oppenheimer Global Strategic Income Fund/VA, Non-Service Shares, Subaccount | 10,678 | 10,678 | |||||
T. Rowe Price International Stock Portfolio, Subaccount | 5,948,140 | 5,948,140 | |||||
Ultra Series Aggressive Allocation Fund, Class I, Subaccount | 969,072 | 969,072 | |||||
Ultra Series Core Bond Fund, Class I, Subaccount | 6,580,065 | 6,580,065 | |||||
Ultra Series Conservative Allocation Fund, Class I, Subaccount | 420,959 | 420,959 | |||||
Ultra Series Diversified Income Fund, Class I, Subaccount | 52,559,635 | 52,559,635 | |||||
Ultra Series High Income Fund, Class I, Subaccount | 996,340 | 996,340 | |||||
Ultra Series International Stock Fund, Class I, Subaccount | 2,470,673 | 2,470,673 | |||||
Ultra Series Large Cap Growth Fund, Class I, Subaccount | 37,203,689 | 37,203,689 | |||||
Ultra Series Large Cap Value Fund, Class I, Subaccount | 68,311,619 | 68,311,619 | |||||
Ultra Series Mid Cap Fund, Class I, Subaccount | 18,614,041 | 18,614,041 | |||||
Ultra Series Moderate Allocation Fund, Class I, Subaccount | 1,847,019 | 1,847,019 | |||||
Ultra Series Money Market Fund, Class I, Subaccount | 1,921,512 | 1,921,512 | |||||
Ultra Series Small Cap Fund, Class I, Subaccount | 132,908 | 132,908 | |||||
Total assets |
$ | 198,240,067 | $ | 198,240,067 | |||
The following table summarizes the Account’s assets that are measured at fair
value as of December 31,2014. All of the Account’s assets consist of Level
2 mutual funds that have daily quoted net asset values at which the Account could
transact. |
|||||||
December 31, 2014 Assets, at Fair Value | Level 2 | Total | |||||
Templeton Developing Markets VIP Fund, Class 2, Subaccount | $ | 16,782 | $ | 16,782 | |||
MFS® Strategic Income Portfolio, Initial Class, Subaccount | 269,317 | 269,317 | |||||
Oppenheimer Global Strategic Income Fund/VA, Non-Service Shares, Subaccount | 13,446 | 13,446 | |||||
T. Rowe Price International Stock Portfolio, Subaccount | 6,574,083 | 6,574,083 | |||||
Ultra Series Aggressive Allocation Fund, Class I, Subaccount | 1,088,493 | 1,088,493 | |||||
Ultra Series Core Bond Fund, Class I, Subaccount | 7,379,845 | 7,379,845 | |||||
Ultra Series Conservative Allocation Fund, Class I, Subaccount | 714,777 | 714,777 | |||||
Ultra Series Diversified Income Fund, Class I, Subaccount | 57,123,974 | 57,123,974 | |||||
Ultra Series High Income Fund, Class I, Subaccount | 1,099,781 | 1,099,781 | |||||
Ultra Series International Stock Fund, Class I, Subaccount | 2,674,514 | 2,674,514 | |||||
Ultra Series Large Cap Growth Fund, Class I, Subaccount | 38,314,121 | 38,314,121 | |||||
Ultra Series Large Cap Value Fund, Class I, Subaccount | 75,985,825 | 75,985,825 | |||||
Ultra Series Mid Cap Fund, Class I, Subaccount | 19,918,845 | 19,918,845 | |||||
Ultra Series Moderate Allocation Fund, Class I, Subaccount | 2,036,908 | 2,036,908 | |||||
Ultra Series Money Market Fund, Class I, Subaccount | 1,966,319 | 1,966,319 | |||||
Ultra Series Small Cap Fund, Class I, Subaccount | 255,389 | 255,389 | |||||
Total assets |
$ | 215,432,419 | $ | 215,432,419 | |||
There were no Level 3 investments in the Account, therefore, Level 3 roll-forward tables have not been provided. There were no transfers between levels during the years ended December 31, 2015 and 2014.
12
CMFG Variable Life Insurance Account
Notes to Financial Statements
(5) Purchases and Sales of Investments
Year Ended December 31, 2015 | Purchases | Sales | |||||
Templeton Developing Markets VIP Fund, Class 2, Subaccount | $ | 2,297 | $ | 2,867 | |||
MFS® Strategic Income Portfolio, Initial Class, Subaccount | 15,024 | 21,929 | |||||
Oppenheimer Global Strategic Income Fund/VA, Non-Service Shares, Subaccount | 704 | 2,593 | |||||
T. Rowe Price International Stock Portfolio, Subaccount | 298,104 | 718,726 | |||||
Ultra Series Aggressive Allocation Fund, Class I, Subaccount | 190,239 | 173,120 | |||||
Ultra Series Core Bond Fund, Class I, Subaccount | 333,868 | 915,285 | |||||
Ultra Series Conservative Allocation Fund, Class I, Subaccount | 30,362 | 296,105 | |||||
Ultra Series Diversified Income Fund, Class I, Subaccount | 5,043,960 | 5,242,332 | |||||
Ultra Series High Income Fund, Class I, Subaccount | 86,398 | 105,077 | |||||
Ultra Series International Stock Fund, Class I, Subaccount | 183,020 | 243,168 | |||||
Ultra Series Large Cap Growth Fund, Class I, Subaccount | 4,764,252 | 2,981,697 | |||||
Ultra Series Large Cap Value Fund, Class I, Subaccount | 12,132,290 | 6,567,542 | |||||
Ultra Series Mid Cap Fund, Class I, Subaccount | 2,246,600 | 1,916,961 | |||||
Ultra Series Moderate Allocation Fund, Class I, Subaccount | 225,392 | 243,997 | |||||
Ultra Series Money Market Fund, Class I, Subaccount | 328,083 | 372,891 | |||||
Ultra Series Small Cap Fund, Class I, Subaccount | 40,384 | 130,667 | |||||
The cost of purchases and proceeds from sales of investments in the various subaccounts
for the year ended December 31, 2014 are as follows: |
|||||||
Year Ended December 31, 2014 | Purchases | Sales | |||||
Templeton Developing Markets VIP Fund, Class 2, Subaccount | $ | 285 | $ | 3,495 | |||
MFS® Strategic Income Portfolio, Initial Class, Subaccount | 8,958 | 16,487 | |||||
Oppenheimer Global Strategic Income Fund/VA, Non-Service Shares, Subaccount | 640 | 1,133 | |||||
T. Rowe Price International Stock Portfolio, Subaccount | 324,775 | 615,154 | |||||
Ultra Series Aggressive Allocation Fund, Class I, Subaccount | 270,136 | 138,964 | |||||
Ultra Series Core Bond Fund, Class I, Subaccount | 466,793 | 1,140,535 | |||||
Ultra Series Conservative Allocation Fund, Class I, Subaccount | 184,706 | 143,450 | |||||
Ultra Series Diversified Income Fund, Class I, Subaccount | 5,601,723 | 5,230,770 | |||||
Ultra Series High Income Fund, Class I, Subaccount | 94,396 | 333,371 | |||||
Ultra Series International Stock Fund, Class I, Subaccount | 427,914 | 368,687 | |||||
Ultra Series Large Cap Growth Fund, Class I, Subaccount | 6,867,827 | 3,815,050 | |||||
Ultra Series Large Cap Value Fund, Class I, Subaccount | 12,606,520 | 7,083,111 | |||||
Ultra Series Mid Cap Fund, Class I, Subaccount | 4,373,664 | 2,152,406 | |||||
Ultra Series Moderate Allocation Fund, Class I, Subaccount | 371,492 | 739,581 | |||||
Ultra Series Money Market Fund, Class I, Subaccount | 168,976 | 597,647 | |||||
Ultra Series Small Cap Fund, Class I, Subaccount | 45,432 | 25,657 |
13
CMFG Variable Life Insurance Account
Notes to Financial Statement
(6) Changes in Units Outstanding
The changes in units outstanding for years ended December 31, 2015 and 2014 were as follows:
Templeton | MFS® | ||||||||||
Developing | Strategic | ||||||||||
Markets VIP | Income Portfolio, | ||||||||||
Fund, Class 2, | Initial Class, | ||||||||||
Subaccount | Subaccount | ||||||||||
Type 1 ^ | Type 2 | Type 1 | Type 2 | ||||||||
Units outstanding at December 31, 2013 | - | 1,039 | 11,641 | 28 | |||||||
Units issued |
- | - | 2 | - | |||||||
Units redeemed |
- | (161 | ) | (557 | ) | (15 | ) | ||||
Units outstanding at December 31, 2014 | - | 878 | 11,086 | 13 | |||||||
Units issued |
- | - | 4 | - | |||||||
Units redeemed |
- | (167 | ) | (807 | ) | (1 | ) | ||||
Units outstanding at December 31, 2015 | - | 711 | 10,283 | 12 | |||||||
Oppenheimer | T. Rowe Price | ||||||||||
Global Strategic | International | ||||||||||
Income Fund/VA, | Stock | ||||||||||
Non-Service Shares, | Portfolio, | ||||||||||
Subaccount | Subaccount | ||||||||||
Type 1 ^ | Type 2 | Type 1 | Type 2 | ||||||||
Units outstanding at December 31, 2013 | - | 3,220 | 326,841 | 13,381 | |||||||
Units issued |
- | - | 26,916 | - | |||||||
Units redeemed |
- | (217 | ) | (42,477 | ) | (1,130 | ) | ||||
Units outstanding at December 31, 2014 | - | 3,003 | 311,280 | 12,251 | |||||||
Units issued |
- | - | 22,652 | - | |||||||
Units redeemed |
- | (548 | ) | (46,936 | ) | (1,803 | ) | ||||
Units outstanding at December 31, 2015 | - | 2,455 | 286,996 | 10,448 | |||||||
Ultra Series | Ultra Series | ||||||||||
Aggressive | Core Bond | ||||||||||
Allocation | Fund, | ||||||||||
Fund, Class I, | Class I, | ||||||||||
Subaccount | Subaccount | ||||||||||
Type 1 ^ | Type 2 | Type 1 | Type 2 | ||||||||
Units outstanding at December 31, 2013 | - | 99,832 | 105,273 | 180,577 | |||||||
Units issued |
- | 18,176 | 8,038 | 126,651 | |||||||
Units redeemed |
- | (23,104 | ) | (13,107 | ) | (161,698 | ) | ||||
Units outstanding at December 31, 2014 | - | 94,904 | 100,204 | 145,530 | |||||||
Units issued |
- | 11,948 | 5,873 | 122,439 | |||||||
Units redeemed |
- | (20,556 | ) | (15,844 | ) | (136,463 | ) | ||||
Units outstanding at December 31, 2015 | - | 86,296 | 90,233 | 131,506 | |||||||
^ This Subaccount is not available in this product type. |
14
CMFG Variable Life Insurance Account
Notes to Financial Statements
(6) Changes in Units Outstanding (continued)
Ultra Series | Ultra Series | |||||||||||
Conservative | Diversified | |||||||||||
Allocation Fund, | Income | |||||||||||
Class I, | Fund, Class I, | |||||||||||
Subaccount | Subaccount | |||||||||||
Type 1 ^ | Type 2 | Type 1 | Type 2 | |||||||||
Units outstanding at December 31, 2013 | - | 58,886 | 589,637 | 479,514 | ||||||||
Units issued |
- | 11,582 | 36,710 | 122,694 | ||||||||
Units redeemed |
- | (13,577 | ) | (76,550 | ) | (161,791 | ) | |||||
Units outstanding at December 31, 2014 | - | 56,891 | 549,797 | 440,417 | ||||||||
Units issued |
- | 2,500 | 34,473 | 113,696 | ||||||||
Units redeemed |
- | (25,360 | ) | (73,982 | ) | (147,117 | ) | |||||
Units outstanding at December 31, 2015 | - | 34,031 | 510,288 | 406,996 | ||||||||
Ultra Series | Ultra Series | |||||||||||
High Income | International | |||||||||||
Fund, | Stock Fund, | |||||||||||
Class I, | Class I, | |||||||||||
Subaccount | Subaccount | |||||||||||
Type 1 ^ | Type 2 | Type 1 ^ | Type 2 | |||||||||
Units outstanding at December 31, 2013 | - | 70,623 | - | 117,831 | ||||||||
Units issued |
- | 48,069 | - | 101,360 | ||||||||
Units redeemed |
- | (62,813 | ) | - | (109,538 | ) | ||||||
Units outstanding at December 31, 2014 | - | 55,879 | - | 109,653 | ||||||||
Units issued |
- | 47,533 | - | 105,432 | ||||||||
Units redeemed |
- | (51,034 | ) | - | (109,279 | ) | ||||||
Units outstanding at December 31, 2015 | - | 52,378 | - | 105,806 | ||||||||
Ultra Series | Ultra Series | |||||||||||
Large Cap | Large Cap | |||||||||||
Growth Fund, | Value Fund, | |||||||||||
Class I, | Class I, | |||||||||||
Subaccount | Subaccount | |||||||||||
Type 1 | Type 2 | Type 1 | Type 2 | |||||||||
Units outstanding at December 31, 2013 | 653,570 | 569,592 | 549,129 | 644,402 | ||||||||
Units issued |
48,074 | 204,350 | 37,356 | 270,897 | ||||||||
Units redeemed |
(88,309 | ) | (260,562 | ) | (74,219 | ) | (342,876 | ) | ||||
Units outstanding at December 31, 2014 | 613,335 | 513,380 | 512,266 | 572,423 | ||||||||
Units issued |
39,172 | 185,320 | 32,758 | 256,458 | ||||||||
Units redeemed |
(67,865 | ) | (219,955 | ) | (66,790 | ) | (301,508 | ) | ||||
Units outstanding at December 31, 2015 | 584,642 | 478,745 | 478,234 | 527,373 | ||||||||
^ This Subaccount is not available in this product type. |
15
CMFG Variable Life Insurance Account
Notes to Financial Statements
(6) Changes in Units Outstanding (continued)
Ultra Series | Ultra Series | ||||||||||
Mid Cap | Moderate | ||||||||||
Fund, | Allocation | ||||||||||
Class I, | Fund, Class I, | ||||||||||
Subaccount | Subaccount | ||||||||||
Type 1 | Type 2 | Type 1 ^ | Type 2 | ||||||||
Units outstanding at December 31, 2013 | 385,358 | 325,112 | - | 215,461 | |||||||
Units issued |
30,675 | 143,726 | - | 37,718 | |||||||
Units redeemed |
(54,159 | ) | (172,135 | ) | - | (85,975 | ) | ||||
Units outstanding at December 31, 2014 | 361,874 | 296,703 | - | 167,204 | |||||||
Units issued |
23,678 | 134,069 | - | 23,613 | |||||||
Units redeemed |
(44,548 | ) | (156,629 | ) | - | (36,297 | ) | ||||
Units outstanding at December 31, 2015 | 341,004 | 274,143 | - | 154,520 | |||||||
Ultra Series | Ultra Series | ||||||||||
Money Market | Small Cap | ||||||||||
Fund, | Fund, | ||||||||||
Class I, | Class I, | ||||||||||
Subaccount | Subaccount | ||||||||||
Type 1 | Type 2 | Type 1 ^ | Type 2 | ||||||||
Units outstanding at December 31, 2013 | 50,441 | 108,674 | - | 15,346 | |||||||
Units issued |
10,040 | 29,613 | - | 4,774 | |||||||
Units redeemed |
(10,786 | ) | (63,798 | ) | - | (5,202 | ) | ||||
Units outstanding at December 31, 2014 | 49,695 | 74,489 | - | 14,918 | |||||||
Units issued |
16,104 | 32,724 | - | 2,732 | |||||||
Units redeemed |
(18,149 | ) | (30,787 | ) | - | (9,692 | ) | ||||
Units outstanding at December 31, 2015 | 47,650 | 76,426 | - | 7,958 | |||||||
^ This Subaccount is not available in this product type. |
16
CMFG Variable Life Insurance Account
Notes to Financial Statements
Templeton Developing Markets VIP Fund, Class 2, Subaccount | ||||||||||||||||||||||||||||||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||||||||||||||||||||||
Type 1 ^ | Type 2 | Type 1 ^ | Type 2 | Type 1 ^ | Type 2 | Type 1 ^ | Type 2 | Type 1 ^ | Type 2 | |||||||||||||||||||||||||||||||||
Unit value - Beginning of year | - | $ | 19.10 | - | $ | 21.04 | - | $ | 21.44 | - | $ | 19.11 | - | $ | 22.92 | |||||||||||||||||||||||||||
Unit value - End of year | - | $ | 15.22 | - | $ | 19.10 | - | $ | 21.04 | - | $ | 21.44 | - | $ | 19.11 | |||||||||||||||||||||||||||
Net assets at end of year (000’s) | - | $ | 11 | - | $ | 17 | - | $ | 22 | - | $ | 25 | - | $ | 26 | |||||||||||||||||||||||||||
Units outstanding at end of year (000’s) | - | 1 | - | 1 | - | 1 | - | 1 | - | 1 | ||||||||||||||||||||||||||||||||
Total return (1) | - | -20.31% | - | -9.22% | - | -1.87% | - | 12.19% | - | -16.62% | ||||||||||||||||||||||||||||||||
Investment income ratio (2) | - | 2.07% | - | 1.45% | - | 1.97% | - | 1.38% | - | 1.01% | ||||||||||||||||||||||||||||||||
Expense ratio (3) | - | 0.90% | - | 0.90% | - | 0.90% | - | 0.90% | - | 0.90% | ||||||||||||||||||||||||||||||||
MFS® Strategic Income Portfolio, Initial Class, Subaccount | ||||||||||||||||||||||||||||||||||||||||||
2015 | 2014 | 2013 (b) | 2012 | 2011 | ||||||||||||||||||||||||||||||||||||||
Type 1 | Type 2 | Type 1 | Type 2 | Type 1 | Type 2 | Type 1 | Type 2 | Type 1 | Type 2 | |||||||||||||||||||||||||||||||||
Unit value - Beginning of year | $ | 24.27 | $ | 20.45 | $ | 23.72 | $ | 19.98 | $ | - | $ | - | - | - | - | - | ||||||||||||||||||||||||||
Unit value - End of year | $ | 23.60 | $ | 19.84 | $ | 24.27 | $ | 20.45 | $ | 23.72 | $ | 19.98 | - | - | - | - | ||||||||||||||||||||||||||
Net assets at end of year (000’s) | $ | 243 | $ | - | $ | 269 | $ | - | $ | 276 | $ | 1 | - | - | - | - | ||||||||||||||||||||||||||
Units outstanding at end of year (000’s) | 10 | - | 11 | - | 12 | - | - | - | - | - | ||||||||||||||||||||||||||||||||
Total return (1) | -2.76% | -2.98% | 2.32% | 2.35% | 2.33% | 2.41% | - | - | - | - | ||||||||||||||||||||||||||||||||
Investment income ratio (2) | 5.77% | 5.77% | 3.20% | 3.20% | 8.40% | 8.40% | - | - | - | - | ||||||||||||||||||||||||||||||||
Expense ratio (3) | 0.90% | 0.90% | 0.90% | 0.90% | 0.90% | 0.90% | - | - | - | - | ||||||||||||||||||||||||||||||||
Oppenheimer Global Strategic Income Fund/VA, Non-Service Shares, Subaccount | ||||||||||||||||||||||||||||||||||||||||||
2015 | 2014 | 2013 | 2012 (a) | 2011 | ||||||||||||||||||||||||||||||||||||||
Type 1 ^ | Type 2 | Type 1 ^ | Type 2 | Type 1 ^ | Type 2 | Type 1 ^ | Type 2 | Type 1 ^ | Type 2 | |||||||||||||||||||||||||||||||||
Unit value - Beginning of year | - | $ | 4.48 | - | $ | 4.39 | - | $ | 4.45 | - | $ | - | - | - | ||||||||||||||||||||||||||||
Unit value - End of year | - | $ | 4.35 | - | $ | 4.48 | - | $ | 4.39 | - | $ | 4.45 | - | - | ||||||||||||||||||||||||||||
Net assets at end of year (000’s) | - | $ | 11 | - | $ | 13 | - | $ | 14 | - | $ | 42 | - | - | ||||||||||||||||||||||||||||
Units outstanding at end of year (000’s) | - | 2 | - | 3 | - | 3 | - | 9 | - | - | ||||||||||||||||||||||||||||||||
Total return (1) | - | -2.90% | - | 2.05% | - | -1.35% | - | 1.60% | - | - | ||||||||||||||||||||||||||||||||
Investment income ratio (2) | - | 5.73% | - | 4.25% | - | 4.47% | - | 0.00% | - | - | ||||||||||||||||||||||||||||||||
Expense ratio (3) | - | 0.90% | - | 0.90% | - | 0.90% | - | 0.90% | - | - | ||||||||||||||||||||||||||||||||
^ This Subaccount is not available in this product type. | ||||||||||||||||||||||||||||||||||||||||||
T.Rowe Price International Stock Portfolio, Subaccount | ||||||||||||||||||||||||||||||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||||||||||||||||||||||
Type 1 | Type 2 | Type 1 | Type 2 | Type 1 | Type 2 | Type 1 | Type 2 | Type 1 | Type 2 | |||||||||||||||||||||||||||||||||
Unit value - Beginning of year | $ | 20.63 | $ | 12.48 | $ | 21.05 | $ | 12.75 | $ | 18.63 | $ | 11.29 | $ | 15.87 | $ | 9.61 | $ | 18.37 | $ | 11.12 | ||||||||||||||||||||||
Unit value - End of year | $ | 20.28 | $ | 12.27 | $ | 20.63 | $ | 12.48 | $ | 21.05 | $ | 12.75 | $ | 18.63 | $ | 11.29 | $ | 15.87 | $ | 9.61 | ||||||||||||||||||||||
Net assets at end of year (000’s) | $ | 5,820 | $ | 128 | $ | 6,421 | $ | 153 | $ | 6,881 | $ | 171 | $ | 6,674 | $ | 232 | $ | 6,117 | $ | 244 | ||||||||||||||||||||||
Units outstanding at end of year (000’s) | 287 | 10 | 311 | 12 | 327 | 13 | 358 | 21 | 385 | 25 | ||||||||||||||||||||||||||||||||
Total return (1) | -1.70% | -1.68% | -2.00% | -2.12% | 12.99% | 12.93% | 17.39% | 17.48% | -13.61% | -13.58% | ||||||||||||||||||||||||||||||||
Investment income ratio (2) | 0.91% | 0.91% | 1.04% | 1.04% | 0.85% | 0.85% | 1.25% | 1.25% | 1.49% | 1.49% | ||||||||||||||||||||||||||||||||
Expense ratio (3) | 0.90% | 0.90% | 0.90% | 0.90% | 0.90% | 0.90% | 0.90% | 0.90% | 0.90% | 0.90% |
17
CMFG Variable Life Insurance Account
Notes to Financial Statements
Ultra Series Aggressive Allocation Fund, Class I, Subaccount | ||||||||||||||||||||||||||||||||||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||||||||||||||||||||||||||
Type 1 ^ | Type 2 | Type 1 ^ | Type 2 | Type 1 ^ | Type 2 | Type 1 ^ | Type 2 | Type 1 ^ | Type 2 | |||||||||||||||||||||||||||||||||||||
Unit value - Beginning of year | - | $ | 11.47 | - | $ | 10.78 | - | $ | 8.89 | - | $ | 8.06 | - | $ | 8.10 | |||||||||||||||||||||||||||||||
Unit value - End of year | - | $ | 11.23 | - | $ | 11.47 | - | $ | 10.78 | - | $ | 8.89 | - | $ | 8.06 | |||||||||||||||||||||||||||||||
Net assets at end of year (000’s) | - | $ | 969 | - | $ | 1,088 | - | $ | 1,076 | - | $ | 943 | - | $ | 776 | |||||||||||||||||||||||||||||||
Units outstanding at end of year (000’s) | - | 86 | - | 95 | - | 100 | - | 106 | - | 96 | ||||||||||||||||||||||||||||||||||||
Total return (1) | - | -2.09% | - | 6.40% | - | 21.26% | - | 10.30% | - | -0.49% | ||||||||||||||||||||||||||||||||||||
Investment income ratio (2) | - | 1.46% | - | 1.95% | - | 1.20% | - | 2.45% | - | 1.79% | ||||||||||||||||||||||||||||||||||||
Expense ratio (3) | - | 0.90% | - | 0.90% | - | 0.90% | - | 0.90% | - | 0.90% | ||||||||||||||||||||||||||||||||||||
Ultra Series Core Bond Fund, Class I, Subaccount | ||||||||||||||||||||||||||||||||||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||||||||||||||||||||||||||
Type 1 | Type 2 | Type 1 | Type 2 | Type 1 | Type 2 | Type 1 | Type 2 | Type 1 | Type 2 | |||||||||||||||||||||||||||||||||||||
Unit value - Beginning of year | $ | 48.33 | $ | 17.43 | $ | 46.41 | $ | 16.74 | $ | 47.90 | $ | 17.25 | $ | 46.83 | $ | 16.87 | $ | 44.27 | $ | 15.94 | ||||||||||||||||||||||||||
Unit value - End of year | $ | 47.80 | $ | 17.24 | $ | 48.33 | $ | 17.43 | $ | 46.41 | $ | 16.74 | $ | 47.90 | $ | 17.25 | $ | 46.83 | $ | 16.87 | ||||||||||||||||||||||||||
Net assets at end of year (000’s) | $ | 4,313 | $ | 2,267 | $ | 4,843 | $ | 2,536 | $ | 4,886 | $ | 3,022 | $ | 5,338 | $ | 3,696 | $ | 5,517 | $ | 3,894 | ||||||||||||||||||||||||||
Units outstanding at end of year (000’s) | 90 | 132 | 100 | 146 | 105 | 181 | 111 | 214 | 118 | 231 | ||||||||||||||||||||||||||||||||||||
Total return (1) | -1.10% | -1.09% | 4.14% | 4.12% | -3.11% | -2.96% | 2.28% | 2.25% | 5.78% | 5.83% | ||||||||||||||||||||||||||||||||||||
Investment income ratio (2) | 3.02% | 3.02% | 3.10% | 3.10% | 3.14% | 3.14% | 3.21% | 3.21% | 3.66% | 3.66% | ||||||||||||||||||||||||||||||||||||
Expense ratio (3) | 0.90% | 0.90% | 0.90% | 0.90% | 0.90% | 0.90% | 0.90% | 0.90% | 0.90% | 0.90% | ||||||||||||||||||||||||||||||||||||
Ultra Series Conservative Allocation Fund, Class I, Subaccount | ||||||||||||||||||||||||||||||||||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||||||||||||||||||||||||||
Type 1 ^ | Type 2 | Type 1 ^ | Type 2 | Type 1 ^ | Type 2 | Type 1 ^ | Type 2 | Type 1 ^ | Type 2 | |||||||||||||||||||||||||||||||||||||
Unit value - Beginning of year | - | $ | 12.56 | - | $ | 11.96 | - | $ | 11.20 | - | $ | 10.37 | - | $ | 10.14 | |||||||||||||||||||||||||||||||
Unit value - End of year | - | $ | 12.37 | - | $ | 12.56 | - | $ | 11.96 | - | $ | 11.20 | - | $ | 10.37 | |||||||||||||||||||||||||||||||
Net assets at end of year (000’s) | - | $ | 421 | - | $ | 715 | - | $ | 704 | - | $ | 564 | - | $ | 285 | |||||||||||||||||||||||||||||||
Units outstanding at end of year (000’s) | - | 34 | - | 57 | - | 59 | - | 50 | - | 27 | ||||||||||||||||||||||||||||||||||||
Total return (1) | - | -1.51% | - | 5.02% | - | 6.79% | - | 8.00% | - | 2.27% | ||||||||||||||||||||||||||||||||||||
Investment income ratio (2) | - | 1.29% | - | 2.21% | - | 2.76% | - | 4.58% | - | 3.52% | ||||||||||||||||||||||||||||||||||||
Expense ratio (3) | - | 0.90% | - | 0.90% | - | 0.90% | - | 0.90% | - | 0.90% | ||||||||||||||||||||||||||||||||||||
^ This Subaccount is not available in this product type. | ||||||||||||||||||||||||||||||||||||||||||||||
Ultra Series Diversified Income Fund, Class I, Subaccount | ||||||||||||||||||||||||||||||||||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||||||||||||||||||||||||||
Type 1 | Type 2 | Type 1 | Type 2 | Type 1 | Type 2 | Type 1 | Type 2 | Type 1 | Type 2 | |||||||||||||||||||||||||||||||||||||
Unit value - Beginning of year | $ | 89.29 | $ | 18.24 | $ | 84.13 | $ | 17.21 | $ | 73.12 | $ | 14.96 | $ | 68.21 | $ | 13.95 | $ | 63.82 | $ | 13.06 | ||||||||||||||||||||||||||
Unit value - End of year | $ | 88.58 | $ | 18.08 | $ | 89.29 | $ | 18.24 | $ | 84.13 | $ | 17.21 | $ | 73.12 | $ | 14.96 | $ | 68.21 | $ | 13.95 | ||||||||||||||||||||||||||
Net assets at end of year (000’s) | $ | 45,202 | $ | 7,358 | $ | 49,090 | $ | 8,034 | $ | 49,604 | $ | 8,251 | $ | 46,785 | $ | 7,952 | $ | 46,833 | $ | 7,664 | ||||||||||||||||||||||||||
Units outstanding at end of year (000’s) | 510 | 407 | 550 | 440 | 590 | 480 | 640 | 532 | 687 | 549 | ||||||||||||||||||||||||||||||||||||
Total return (1) | -0.80% | -0.88% | 6.13% | 5.98% | 15.06% | 15.04% | 7.20% | 7.24% | 6.88% | 6.81% | ||||||||||||||||||||||||||||||||||||
Investment income ratio (2) | 2.48% | 2.48% | 2.36% | 2.36% | 2.26% | 2.26% | 2.70% | 2.70% | 2.94% | 2.94% | ||||||||||||||||||||||||||||||||||||
Expense ratio (3) | 0.90% | 0.90% | 0.90% | 0.90% | 0.90% | 0.90% | 0.90% | 0.90% | 0.90% | 0.90% |
18
CMFG Variable Life Insurance Account
Notes to Financial Statements
Ultra Series High Income Fund, Class I, Subaccount | ||||||||||||||||||||||||||||||||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||||||||||||||||||||||||
Type 1 ^ | Type 2 | Type 1 ^ | Type 2 | Type 1 ^ | Type 2 | Type 1 ^ | Type 2 | Type 1 ^ | Type 2 | |||||||||||||||||||||||||||||||||||
Unit value - Beginning of year | - | $ | 19.68 | - | $ | 19.53 | - | $ | 18.68 | - | $ | 16.94 | - | $ | 16.28 | |||||||||||||||||||||||||||||
Unit value - End of year | - | $ | 19.02 | - | $ | 19.68 | - | $ | 19.53 | - | $ | 18.68 | - | $ | 16.94 | |||||||||||||||||||||||||||||
Net assets at end of year (000’s) | - | $ | 996 | - | $ | 1,100 | - | $ | 1,380 | - | $ | 1,517 | - | $ | 1,428 | |||||||||||||||||||||||||||||
Units outstanding at end of year (000’s) | - | 52 | - | 56 | - | 71 | - | 81 | - | 84 | ||||||||||||||||||||||||||||||||||
Total return (1) | - | -3.35% | - | 0.77% | - | 4.55% | - | 10.27% | - | 4.05% | ||||||||||||||||||||||||||||||||||
Investment income ratio (2) | - | 5.57% | - | 5.67% | - | 6.39% | - | 8.44% | - | 7.06% | ||||||||||||||||||||||||||||||||||
Expense ratio (3) | - | 0.90% | - | 0.90% | - | 0.90% | - | 0.90% | - | 0.90% | ||||||||||||||||||||||||||||||||||
Ultra Series International Stock Fund, Class I, Subaccount | ||||||||||||||||||||||||||||||||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||||||||||||||||||||||||
Type 1 ^ | Type 2 | Type 1 ^ | Type 2 | Type 1 ^ | Type 2 | Type 1 ^ | Type 2 | Type 1 ^ | Type 2 | |||||||||||||||||||||||||||||||||||
Unit value - Beginning of year | - | $ | 24.39 | - | $ | 26.39 | - | $ | 22.05 | - | $ | 18.34 | - | $ | 20.04 | |||||||||||||||||||||||||||||
Unit value - End of year | - | $ | 23.35 | - | $ | 24.39 | - | $ | 26.39 | - | $ | 22.05 | - | $ | 18.34 | |||||||||||||||||||||||||||||
Net assets at end of year (000’s) | - | $ | 2,471 | - | $ | 2,675 | - | $ | 3,110 | - | $ | 2,896 | - | $ | 2,524 | |||||||||||||||||||||||||||||
Units outstanding at end of year (000’s) | - | 106 | - | 110 | - | 118 | - | 131 | - | 138 | ||||||||||||||||||||||||||||||||||
Total return (1) | - | -4.26% | - | -7.58% | - | 19.68% | - | 20.23% | - | -8.48% | ||||||||||||||||||||||||||||||||||
Investment income ratio (2) | - | 1.96% | - | 3.57% | - | 0.20% | - | 1.70% | - | 1.86% | ||||||||||||||||||||||||||||||||||
Expense ratio (3) | - | 0.90% | - | 0.90% | - | 0.90% | - | 0.90% | - | 0.90% | ||||||||||||||||||||||||||||||||||
Ultra Series Large Cap Growth Fund, Class I, Subaccount | ||||||||||||||||||||||||||||||||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||||||||||||||||||||||||
Type 1 | Type 2 | Type 1 | Type 2 | Type 1 | Type 2 | Type 1 | Type 2 | Type 1 | Type 2 | |||||||||||||||||||||||||||||||||||
Unit value - Beginning of year | $ | 49.00 | $ | 16.09 | $ | 44.09 | $ | 14.47 | $ | 34.10 | $ | 11.19 | $ | 30.96 | $ | 10.15 | $ | 31.61 | $ | 10.37 | ||||||||||||||||||||||||
Unit value - End of year | $ | 50.15 | $ | 16.46 | $ | 49.00 | $ | 16.09 | $ | 44.09 | $ | 14.47 | $ | 34.10 | $ | 11.19 | $ | 30.96 | $ | 10.15 | ||||||||||||||||||||||||
Net assets at end of year (000’s) | $ | 29,322 | $ | 7,881 | $ | 30,054 | $ | 8,260 | $ | 28,816 | $ | 8,243 | $ | 24,135 | $ | 7,025 | $ | 24,040 | $ | 6,868 | ||||||||||||||||||||||||
Units outstanding at end of year (000’s) | 585 | 479 | 613 | 513 | 654 | 570 | 708 | 628 | 777 | 677 | ||||||||||||||||||||||||||||||||||
Total return (1) | 2.35% | 2.30% | 11.14% | 11.20% | 29.30% | 29.31% | 10.14% | 10.25% | -2.06% | -2.12% | ||||||||||||||||||||||||||||||||||
Investment income ratio (2) | 1.13% | 1.13% | 0.67% | 0.67% | 0.63% | 0.63% | 0.77% | 0.77% | 0.24% | 0.24% | ||||||||||||||||||||||||||||||||||
Expense ratio (3) | 0.90% | 0.90% | 0.90% | 0.90% | 0.90% | 0.90% | 0.90% | 0.90% | 0.90% | 0.90% | ||||||||||||||||||||||||||||||||||
^ This Subaccount is not available in this product type. | ||||||||||||||||||||||||||||||||||||||||||||
Ultra Series Large Cap Value Fund, Class I, Subaccount | ||||||||||||||||||||||||||||||||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||||||||||||||||||||||||
Type 1 | Type 2 | Type 1 | Type 2 | Type 1 | Type 2 | Type 1 | Type 2 | Type 1 | Type 2 | |||||||||||||||||||||||||||||||||||
Unit value - Beginning of year | $ | 130.44 | $ | 16.01 | $ | 117.07 | $ | 14.38 | $ | 90.81 | $ | 11.16 | $ | 81.96 | $ | 10.07 | $ | 77.00 | $ | 9.46 | ||||||||||||||||||||||||
Unit value - End of year | $ | 125.82 | $ | 15.44 | $ | 130.44 | $ | 16.01 | $ | 117.07 | $ | 14.38 | $ | 90.81 | $ | 11.16 | $ | 81.96 | $ | 10.07 | ||||||||||||||||||||||||
Net assets at end of year (000’s) | $ | 60,169 | $ | 8,143 | $ | 66,821 | $ | 9,164 | $ | 64,286 | $ | 9,266 | $ | 53,078 | $ | 8,045 | $ | 51,415 | $ | 7,770 | ||||||||||||||||||||||||
Units outstanding at end of year (000’s) | 478 | 527 | 512 | 572 | 549 | 644 | 584 | 721 | 627 | 772 | ||||||||||||||||||||||||||||||||||
Total return (1) | -3.54% | -3.56% | 11.42% | 11.34% | 28.92% | 28.85% | 10.80% | 10.82% | 6.44% | 6.45% | ||||||||||||||||||||||||||||||||||
Investment income ratio (2) | 1.22% | 1.22% | 1.32% | 1.32% | 1.56% | 1.56% | 2.08% | 2.08% | 2.03% | 2.03% | ||||||||||||||||||||||||||||||||||
Expense ratio (3) | 0.90% | 0.90% | 0.90% | 0.90% | 0.90% | 0.90% | 0.90% | 0.90% | 0.90% | 0.90% |
19
CMFG Variable Life Insurance Account
Notes to Financial Statements
Ultra Series Mid Cap Fund, Class I, Subaccount | ||||||||||||||||||||||||||||||||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||||||||||||||||||||||||
Type 1 | Type 2 | Type 1 | Type 2 | Type 1 | Type 2 | Type 1 | Type 2 | Type 1 | Type 2 | |||||||||||||||||||||||||||||||||||
Unit value - Beginning of year | $ | 27.54 | $ | 33.55 | $ | 25.29 | $ | 30.83 | $ | 19.74 | $ | 24.07 | $ | 17.14 | $ | 20.89 | $ | 16.55 | $ | 20.18 | ||||||||||||||||||||||||
Unit value - End of year | $ | 27.59 | $ | 33.58 | $ | 27.54 | $ | 33.55 | $ | 25.29 | $ | 30.83 | $ | 19.74 | $ | 24.07 | $ | 17.14 | $ | 20.89 | ||||||||||||||||||||||||
Net assets at end of year (000’s) | $ | 9,407 | $ | 9,207 | $ | 9,964 | $ | 9,954 | $ | 9,744 | $ | 10,024 | $ | 8,104 | $ | 8,692 | $ | 7,580 | $ | 8,352 | ||||||||||||||||||||||||
Units outstanding at end of year (000’s) | 341 | 274 | 362 | 297 | 385 | 325 | 410 | 361 | 442 | 400 | ||||||||||||||||||||||||||||||||||
Total return (1) | 0.18% | 0.09% | 8.90% | 8.82% | 28.12% | 28.08% | 15.17% | 15.22% | 3.56% | 3.52% | ||||||||||||||||||||||||||||||||||
Investment income ratio (2) | 0.07% | 0.07% | 0.04% | 0.04% | 0.01% | 0.01% | 0.30% | 0.30% | 0.18% | 0.18% | ||||||||||||||||||||||||||||||||||
Expense ratio (3) | 0.90% | 0.90% | 0.90% | 0.90% | 0.90% | 0.90% | 0.90% | 0.90% | 0.90% | 0.90% | ||||||||||||||||||||||||||||||||||
Ultra Series Moderate Allocation Fund, Class I, Subaccount | ||||||||||||||||||||||||||||||||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||||||||||||||||||||||||
Type 1 ^ | Type 2 | Type 1 ^ | Type 2 | Type 1 ^ | Type 2 | Type 1 ^ | Type 2 | Type 1 ^ | Type 2 | |||||||||||||||||||||||||||||||||||
Unit value - Beginning of year | - | $ | 12.18 | - | $ | 11.49 | - | $ | 10.04 | - | $ | 9.16 | - | $ | 9.06 | |||||||||||||||||||||||||||||
Unit value - End of year | - | $ | 11.95 | - | $ | 12.18 | - | $ | 11.49 | - | $ | 10.04 | - | $ | 9.16 | |||||||||||||||||||||||||||||
Net assets at end of year (000’s) | - | $ | 1,847 | - | $ | 2,037 | - | $ | 2,475 | - | $ | 2,374 | - | $ | 2,321 | |||||||||||||||||||||||||||||
Units outstanding at end of year (000’s) | - | 155 | - | 167 | - | 215 | - | 237 | - | 253 | ||||||||||||||||||||||||||||||||||
Total return (1) | - | -1.89% | - | 6.01% | - | 14.44% | - | 9.61% | - | 1.10% | ||||||||||||||||||||||||||||||||||
Investment income ratio (2) | - | 1.63% | - | 1.82% | - | 1.83% | - | 2.98% | - | 2.69% | ||||||||||||||||||||||||||||||||||
Expense ratio (3) | - | 0.90% | - | 0.90% | - | 0.90% | - | 0.90% | - | 0.90% | ||||||||||||||||||||||||||||||||||
Ultra Series Money Market Fund, Class I, Subaccount | ||||||||||||||||||||||||||||||||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||||||||||||||||||||||||
Type 1 | Type 2 | Type 1 | Type 2 | Type 1 | Type 2 | Type 1 | Type 2 | Type 1 | Type 2 | |||||||||||||||||||||||||||||||||||
Unit value - Beginning of year | $ | 22.62 | $ | 11.31 | $ | 22.86 | $ | 11.43 | $ | 23.10 | $ | 11.55 | $ | 23.32 | $ | 11.67 | $ | 23.53 | $ | 11.77 | ||||||||||||||||||||||||
Unit value - End of year | $ | 22.38 | $ | 11.19 | $ | 22.62 | $ | 11.31 | $ | 22.86 | $ | 11.43 | $ | 23.10 | $ | 11.55 | $ | 23.32 | $ | 11.67 | ||||||||||||||||||||||||
Net assets at end of year (000’s) | $ | 1,066 | $ | 855 | $ | 1,124 | $ | 842 | $ | 1,153 | $ | 1,242 | $ | 1,226 | $ | 2,538 | $ | 1,340 | $ | 2,664 | ||||||||||||||||||||||||
Units outstanding at end of year (000’s) | 48 | 76 | 50 | 74 | 50 | 109 | 53 | 220 | 57 | 228 | ||||||||||||||||||||||||||||||||||
Total return (1) | -1.06% | -1.06% | -1.05% | -1.05% | -1.04% | -1.04% | -0.94% | -1.03% | -0.89% | -0.85% | ||||||||||||||||||||||||||||||||||
Investment income ratio (2) | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% | ||||||||||||||||||||||||||||||||||
Expense ratio (3) | 0.90% | 0.90% | 0.90% | 0.90% | 0.90% | 0.90% | 0.90% | 0.90% | 0.90% | 0.90% | ||||||||||||||||||||||||||||||||||
^ This Subaccount is not available in this product type. | ||||||||||||||||||||||||||||||||||||||||||||
Ultra Series Small Cap Fund, Class I, Subaccount | ||||||||||||||||||||||||||||||||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||||||||||||||||||||||||
Type 1 ^ | Type 2 | Type 1 ^ | Type 2 | Type 1 ^ | Type 2 | Type 1 ^ | Type 2 | Type 1 ^ | Type 2 | |||||||||||||||||||||||||||||||||||
Unit value - Beginning of year | - | $ | 17.12 | - | $ | 16.06 | - | $ | 12.21 | - | $ | 10.67 | - | $ | 10.67 | |||||||||||||||||||||||||||||
Unit value - End of year | - | $ | 16.70 | - | $ | 17.12 | - | $ | 16.06 | - | $ | 12.21 | - | $ | 10.67 | |||||||||||||||||||||||||||||
Net assets at end of year (000’s) | - | $ | 133 | - | $ | 255 | - | $ | 246 | - | $ | 187 | - | $ | 291 | |||||||||||||||||||||||||||||
Units outstanding at end of year (000’s) | - | 8 | - | 15 | - | 15 | - | 15 | - | 27 | ||||||||||||||||||||||||||||||||||
Total return (1) | - | -2.45% | - | 6.60% | - | 31.53% | - | 14.43% | - | 0.00% | ||||||||||||||||||||||||||||||||||
Investment income ratio (2) | - | 0.37% | - | 0.73% | - | 0.34% | - | 0.96% | - | 0.51% | ||||||||||||||||||||||||||||||||||
Expense ratio (3) | - | 0.90% | - | 0.90% | - | 0.90% | - | 0.90% | - | 0.90% | ||||||||||||||||||||||||||||||||||
^ This Subaccount is not available in this product type. |
20
CMFG Variable Life Insurance Account
Notes to Financial Statements
(1) | The Total
Return represents the total return for the periods indicated, including changes
in the value of the underlying fund and expenses assessed through the reduction
of unit values. These ratios do not include any expenses assessed through the redemption
of units. The total return is calculated for each period shown and, accordingly,
is not annualized for periods less than one year. |
(2) | The Investment
Income Ratio represents dividends received by the subaccount, excluding capital
gains distributions, divided by the average net assets for the period indicated.
The recognition of investment income is determined by the timing of the declaration
of dividends by the underlying fund in which the subaccount invests. |
(3) | The Expense
Ratio represents the annualized contract expenses of the respective contract of
the Account, consisting of mortality and expense risk charges. The ratios include
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 fund have been excluded. |
(a) | For the period of October 26, 2012 to December 31, 2012. |
(b) | For the period of August 16, 2013 to December 31, 2013. |
21
CMFG Life Insurance Company and Subsidiary |
Consolidated
Statutory Basis Financial Statements for CMFG Life Insurance Company and Subsidiary
as of and for the Year Ended December 31, 2015 and Statutory Basis Financial Statements
for CMFG Life Insurance Company as of December 31, 2014 and for the Two Years Ended
December 31, 2014, Supplemental Schedules as of and for the Year Ended December
31, 2015 and Independent Auditors’ Report |
Table of Contents | ||||
Independent Auditors’ Report | 1 | |||
Consolidated Statutory Basis Statements of Admitted Assets, Liabilities and Capital and Surplus at December 31, 2015 and 2014 | 4 | |||
Consolidated Statutory Basis Statements of Operations for the Years Ended December 31, 2015, 2014 and 2013 | 6 | |||
Consolidated Statutory Basis Statements of Changes in Capital and Surplus for the Years Ended December 31, 2015, 2014 and 2013 | 7 | |||
Consolidated Statutory Basis Statements of Cash Flows for the Years Ended December 31, 2015, 2014 and 2013 | 8 | |||
Notes to the Consolidated Statutory Basis Financial Statements | ||||
Note 1—General |
10 | |||
Note 2—Summary of Significant Accounting Policies |
10 | |||
Note 3—Investments, Bond and Notes |
22 | |||
Note 3—Investments, Investments in Affiliates |
24 | |||
Note 3—Investments, Preferred and Common Stocks |
25 | |||
Note 3—Investments, Real Estate |
26 | |||
Note 3—Investments, Mortgage Loans |
26 | |||
Note 3—Investments, Derivative Financial Instruments |
28 | |||
Note 3—Investments, Limited Partnerships |
32 | |||
Note 3—Investments, Cash, Cash Equivalents, and Short-term Investments |
33 | |||
Note 3—Investments, Net Investment Income |
34 | |||
Note 3—Investments, Net Realized Capital Gains (Losses) |
35 | |||
Note 3—Investments, Other-Than-Temporary Investment Impairments |
35 | |||
Note 3—Investments, Net Unrealized Capital Gains (Losses) |
38 | |||
Note 3—Investments, Investment Credit Risk |
41 | |||
Note 3—Investments, Self-Occupancy Rent |
41 | |||
Note 3—Investments, Assets Designated/Securities on Deposit |
41 | |||
Note 4—Fair Value |
42 | |||
Note 5—Income Tax |
52 | |||
Note 6—Related Party Transactions |
60 | |||
Note 7—Reinsurance |
61 | |||
Note 8—Liability for Claim Reserves |
63 | |||
Note 9—Annuity Reserves and Deposit Liabilities |
64 | |||
Note 10—Statutory Financial Data and Dividend Restrictions |
65 | |||
Note 11—Notes and Interest Payable |
66 | |||
Note 12—Surplus Notes |
67 | |||
Note 13—Commitments and Contingencies |
68 | |||
Note 14—Benefit Plans |
71 | |||
Note 15—Unassigned Surplus |
77 | |||
Note 16—Premiums Deferred and Uncollected |
78 | |||
Note 17—Separate Accounts |
78 | |||
Note 18—Subsequent Events |
80 | |||
Consolidating Statements | 82 | |||
CMFG Life Insurance Company Schedule of Selected Financial Data | 88 | |||
MEMBERS Life Insurance Company Schedule of Selected Financial Data | 92 | |||
CMFG Life Insurance Company Summary Investment Schedule | 96 | |||
MEMBERS Life Insurance Company Summary Investment Schedule | 98 | |||
CMFG Life Insurance Company Supplemental Investment Risks Interrogatories | 100 | |||
MEMBERS Life Insurance Company Supplemental Investment Risks Interrogatories | 106 |
INDEPENDENT AUDITORS’ REPORT
To the Audit Committee and Stockholder of
CMFG Life
Insurance Company
Waverly, Iowa
We have audited the accompanying consolidated statutory basis financial statements of CMFG Life Insurance Company and subsidiary (collectively, the “Company”), which comprise the consolidated statutory basis statements of admitted assets, liabilities, and capital and surplus as of December 31, 2015 and 2014, and the related consolidated statutory basis statements of operations, changes in capital and surplus, and cash flows for the years ended December 31, 2015, 2014, and 2013, and the related notes to the consolidated statutory basis financial statements.
Management’s Responsibility for the Consolidated Statutory Basis Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated statutory basis financial statements in accordance with the accounting practices prescribed or permitted by the Iowa Department of Commerce, Insurance Division. 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.
Auditors’ Responsibility
Our responsibility is to express an opinion
on these consolidated statutory basis 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 consolidated statutory
basis financial statements are free from material misstatement.
An audit involves
performing procedures to obtain audit evidence about the amounts and disclosures
in the consolidated statutory basis financial statements. The procedures selected
depend on the auditor’s judgment, including the assessment of the risks of
material misstatement of the consolidated statutory basis financial statements,
whether due to fraud or error. In making those risk assessments, the auditor considers
internal control relevant to the Company’s preparation and fair presentation
of the consolidated statutory basis 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 consolidated
statutory basis financial statements.
We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our audit opinions.
Basis for Adverse Opinion on Accounting Principles Generally Accepted in the United States of America
As described in Note 2 to the consolidated statutory basis financial statements, the consolidated statutory basis financial statements are prepared by CMFG Life Insurance Company using the accounting practices prescribed or permitted by the Iowa Department of Commerce, Insurance Division, which is a basis of accounting other than accounting principles generally accepted in the United States of America, to meet the requirements of the Iowa Department of Commerce, Insurance Division.
The effects on the consolidated statutory basis financial statements of the variances between the statutory basis of accounting described in Note 2 to the consolidated statutory basis financial statements and accounting principles generally accepted in the United States of America are also described in Note 2 to the consolidated statutory basis financial statements.
Adverse Opinion on Accounting Principles Generally Accepted in the United States of America
In our opinion, because of the significance of the matter described in the Basis for Adverse Opinion on Accounting Principles Generally Accepted in the United States of America paragraph, the consolidated statutory basis 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 CMFG Life Insurance Company and subsidiary as of December 31, 2015 and 2014, or the results of their operations or their cash flows for the years then ended December 31, 2015, 2014, and 2013.
Opinion on Statutory Basis of Accounting
In our opinion, the consolidated statutory basis financial statements referred to above present fairly, in all material respects, the admitted assets, liabilities, and capital and surplus of CMFG Life Insurance Company and subsidiary as of December 31, 2015 and 2014, and the results of their operations and their cash flows for the years ended December 31, 2015, 2014, and 2013 in accordance with the accounting practices prescribed or permitted by the Iowa Department of Commerce, Insurance Division as described in Note 2 to the consolidated statutory basis financial statements.
Emphasis of Matters
As discussed in Note 1, the consolidated statutory basis financial statements include the accounts of CMFG Life Insurance Company (“CMFG Life”) and its indirect wholly-owned subsidiary, MEMBERS Life Insurance Company (“MEMBERS Life”) for the year ended and as of December 31, 2015. Prior periods presented include only the accounts of CMFG Life. MEMBERS Life is a wholly-owned subsidiary of CUNA Mutual Investment Corporation (“CMIC”). CMIC is a wholly-owned subsidiary of CMFG Life. CMFG Life’s investment in CMIC (inclusive of CMIC’s investment in MLIC) is included in the accompanying consolidated statutory basis statements of admitted assets, liabilities and capital and surplus as investments in affiliates in 2014.
Also as discussed in Note 1 to the consolidated statutory basis financial statements, CMFG Life merged with CMFG Life Vermont, Inc. (“CMFG Life VT”), which was previously a wholly-owned subsidiary. The merger was accounted for as a non-reciprocal transfer and is reflected in the consolidated statutory basis financial statements as if the merger had occurred on January 1, 2015. Prior periods presented were not restated and the investment in CMFG Life VT is included in the accompanying consolidated statutory basis statements of admitted assets, liabilities and capital and surplus as an investment in affiliate in 2014.
- 2 -
Our opinion is not modified with respect to these matters.
Report on Supplemental Schedules
Our 2015 audit was conducted for the purpose of forming an opinion on the 2015 consolidated statutory basis financial statements as a whole. The consolidating statements of statutory basis admitted assets, liabilities and capital and surplus as of December 31, 2015 and the consolidating statutory basis statements of operations, changes in capital and surplus, and cash flows (collectively “consolidating information”) for the year then ended are presented for the purpose of additional analysis of the consolidated statutory basis financial statements rather than to present the statutory basis financial statements of admitted assets, liabilities and capital and surplus, operations, changes in capital and surplus, and cash flows of the individual companies and are not a required part of the consolidated statutory basis financial statements. The supplemental schedules of selected financial data, supplemental summary investment schedules, and supplemental schedules of investment risk interrogatories as of and for the year ended December 31, 2015 are presented for purposes of additional analysis and are not a required part of the 2015 consolidated statutory basis financial statements. The consolidating information and schedules are the responsibility of the Company’s management and were derived from and relate directly to the underlying accounting and other records used to prepare the consolidated statutory basis financial statements. Such consolidating information and schedules have been subjected to the auditing procedures applied in our audit of the 2015 consolidated statutory basis financial statements and certain additional procedures, including comparing and reconciling such consolidating information and schedules directly to the underlying accounting and other records used to prepare the consolidated statutory basis financial statements or to the consolidated statutory basis financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, such consolidating information and schedules are fairly stated in all material respects in relation to the 2015 consolidated statutory basis financial statements as a whole.
/s/ DELOITTE & TOUCHE LLP
March 24, 2016
- 3 -
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Consolidated Statutory Basis Statements of Admitted Assets, Liabilities and Capital and Surplus |
December 31, 2015 and 2014 |
($ in 000s) |
Admitted Assets | 2015 | 2014 | ||||||
Cash and invested assets | ||||||||
Bonds and notes |
$ | 7,455,979 | $ | 7,014,990 | ||||
Investments in affiliates |
996,230 | 1,000,800 | ||||||
Common stocks - unaffiliated |
35,191 | 28,812 | ||||||
Preferred stocks - unaffiliated |
16,215 | 14,750 | ||||||
Mortgage loans |
1,518,722 | 1,441,413 | ||||||
Real estate occupied by the Company, at cost less accumulated depreciation |
73,687 | 78,967 | ||||||
Real estate held for production of income, at cost less accumulated depreciation |
7,326 | 10,324 | ||||||
Contract loans |
102,897 | 103,192 | ||||||
Derivatives |
17,419 | 43,353 | ||||||
Other invested assets |
629,877 | 542,753 | ||||||
Receivable for securities sold |
641 | 2,646 | ||||||
Cash, cash equivalents and short-term investments |
75,055 | 80,692 | ||||||
Total cash and invested assets | 10,929,239 | 10,362,692 | ||||||
Premiums in the course of collection |
207,744 | 194,335 | ||||||
Accrued investment income |
85,875 | 85,000 | ||||||
Federal income taxes recoverable |
2,221 | 23,945 | ||||||
Net deferred tax asset |
194,110 | 177,685 | ||||||
Amounts due from reinsurers |
1,913 | 337,210 | ||||||
Electronic data processing equipment - at cost, less accumulated depreciation |
3,593 | 5,601 | ||||||
Receivables from affiliates |
35,080 | 63,285 | ||||||
Other assets |
10,410 | 12,438 | ||||||
Separate account assets |
4,012,697 | 4,227,881 | ||||||
Total admitted assets | $ | 15,482,882 | $ | 15,490,072 | ||||
(continued) |
See accompanying notes to consolidated statutory basis financial statements. | 4 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Consolidated Statutory Basis Statements of Admitted Assets, Liabilities and Capital and Surplus (continued) |
December 31, 2015 and 2014 |
($ in 000s, except per share data) |
Liabilities and Capital and Surplus | 2015 | 2014 | ||||||
Liabilities | ||||||||
Policy reserves |
||||||||
Life insurance and annuity contracts |
$ | 7,049,156 | $ | 6,709,407 | ||||
Accident and health contracts |
799,282 | 780,563 | ||||||
Liability for deposit-type contracts |
363,896 | 389,822 | ||||||
Policy and contract claims |
94,909 | 90,332 | ||||||
Dividends payable to policyholders |
24,752 | 25,702 | ||||||
Advance premium and experience refunds |
88,956 | 84,056 | ||||||
Reinsurance payable |
961 | 371,722 | ||||||
Funds held under reinsurance |
- | 204,218 | ||||||
Interest maintenance reserve |
49,766 | 62,537 | ||||||
Liability for employee retirement plans |
179,866 | 172,750 | ||||||
Amount held for others |
7,610 | 9,792 | ||||||
Payable to affiliates |
44,607 | 4,797 | ||||||
Commissions, expenses, taxes, licenses, and fees accrued |
197,965 | 179,668 | ||||||
Notes and interest payable |
354,437 | 194,700 | ||||||
Asset valuation reserve |
344,349 | 318,732 | ||||||
Derivatives |
7,745 | 23,701 | ||||||
Payable for securities purchased |
7,501 | 2,138 | ||||||
Other liabilities |
32,787 | 35,382 | ||||||
Transfers to separate accounts |
(36,805 | ) | (30,704 | ) | ||||
Separate account liabilities |
4,012,697 | 4,227,881 | ||||||
Total liabilities | 13,624,437 | 13,857,196 | ||||||
Capital and surplus | ||||||||
Capital |
||||||||
Common stock, $1 par value, 7,500,000 shares authorized, issued and outstanding |
7,500 | 7,500 | ||||||
Paid-in capital |
62,837 | 62,837 | ||||||
Surplus notes |
85,000 | 85,000 | ||||||
Unassigned surplus |
1,703,108 | 1,477,539 | ||||||
Total capital and surplus | 1,858,445 | 1,632,876 | ||||||
Total liabilities and capital and surplus | $ | 15,482,882 | $ | 15,490,072 | ||||
See accompanying notes to consolidated statutory basis financial statements. | 5 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Consolidated Statutory Basis Statements of Operations |
Years Ended December 31, 2015, 2014 and 2013 |
($ in 000s) |
2015 | 2014 | 2013 | |||||||||||
Income | |||||||||||||
Premiums and other considerations |
|||||||||||||
Life and annuity contracts |
$ | 2,574,154 | $ | 1,954,035 | $ | 1,404,935 | |||||||
Accident and health contracts |
534,832 | 525,849 | 518,443 | ||||||||||
Supplementary contracts |
38,642 | 32,092 | 46,061 | ||||||||||
Net investment income |
512,999 | 421,349 | 445,095 | ||||||||||
Reinsurance commissions |
1,596 | 38,923 | 49,797 | ||||||||||
Other reinsurance income (expense) |
- | (1,027,445 | ) | (380,301 | ) | ||||||||
Commission and fee income |
63,043 | 70,935 | 69,178 | ||||||||||
Other income |
28,944 | 18,431 | 33,040 | ||||||||||
Total income | 3,754,210 | 2,034,169 | 2,186,248 | ||||||||||
Benefits and expenses | |||||||||||||
Death and annuity benefits |
454,641 | 381,419 | 356,598 | ||||||||||
Disability and accident and health benefits |
200,151 | 213,206 | 221,978 | ||||||||||
Interest on deposit-type contracts |
11,077 | 11,696 | 10,349 | ||||||||||
Other benefits to policyholders and beneficiaries |
2,192 | 2,168 | 1,966 | ||||||||||
Surrender benefits |
1,812,052 | 1,294,858 | 869,056 | ||||||||||
Payments on supplementary contracts with life contingencies, interest and adjustments on policy or deposit-type contract funds, and group conversions |
35,735 | 32,688 | 29,876 | ||||||||||
Increase in policy reserves-life and annuity contracts and accident and health insurance |
357,431 | 29,619 | 197,088 | ||||||||||
General insurance expenses |
710,874 | 672,634 | 640,077 | ||||||||||
Insurance taxes, licenses, fees, and commissions |
84,840 | 64,359 | 54,129 | ||||||||||
Net transfers from separate accounts |
(200,194 | ) | (777,343 | ) | (327,360 | ) | |||||||
Total benefits and expenses | 3,468,799 | 1,925,304 | 2,053,757 | ||||||||||
Income before dividends to policyholders, federal income tax expense and net realized capital gains |
285,411 | 108,865 | 132,491 | ||||||||||
Dividends to policyholders | 24,479 | 22,395 | 25,790 | ||||||||||
Income before federal income tax expense and net realized capital gains | 260,932 | 86,470 | 106,701 | ||||||||||
Federal income tax expense (benefit) | 42,717 | (1,993 | ) | 7,638 | |||||||||
Income before net realized capital gains | 218,215 | 88,463 | 99,063 | ||||||||||
Net realized capital gains, excluding gains transferred to IMR, net of tax expense (benefit) (2015 - $27,446; 2014 - $32,102 and 2013 - $3,256) excluding taxes transferred to IMR (2015 - ($306); 2014 - ($1,073) and 2013 - $2,790) |
39,109 | 18,486 | 2,846 | ||||||||||
Net income | $ | 257,324 | $ | 106,949 | $ | 101,909 | |||||||
See accompanying notes to consolidated statutory basis financial statements. | 6 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Consolidated Statutory Basis Statements of Changes in Capital and Surplus |
Years Ended December 31, 2015, 2014 and 2013 |
($ in 000s) |
2015 | 2014 | 2013 | |||||||||||
Capital and surplus at beginning of year as adjusted | $ | 1,632,876 | $ | 1,553,485 | $ | 1,467,369 | |||||||
Additions (deductions) | |||||||||||||
Cumulative effect of change in accounting principle for |
|||||||||||||
adoption of SSAP No. 102, Accounting for Pensions |
- | - | (4,963 | ) | |||||||||
Capital and surplus at beginning of year as adjusted Additions (deductions) | 1,632,876 | 1,553,485 | 1,462,406 | ||||||||||
Net income |
257,324 | 106,949 | 101,909 | ||||||||||
Change in unrealized capital gains, net of tax (2015 - ($10,863); 2014 - $32,650) |
12,733 | 127,230 | 28,722 | ||||||||||
Change in unrealized foreign exchange capital gain (loss), net of tax (2015 - ($1,502); 2014 - ($1,129)) |
(2,789 | ) | (2,096 | ) | (3,626 | ) | |||||||
Change in net deferred income tax |
1,112 | 15,074 | (11,469 | ) | |||||||||
Change in asset valuation reserve |
(25,612 | ) | (91,177 | ) | (67,961 | ) | |||||||
Change in nonadmitted assets |
(19,067 | ) | (36,675 | ) | 10,220 | ||||||||
Change in surplus of separate accounts |
- | 5,154 | 1,699 | ||||||||||
Change in employee retirement plans, net of tax (2015 - $774; 2014 - ($4,298)) |
1,437 | (7,983 | ) | 11,633 | |||||||||
Change in surplus as a result of reinsurance, net of tax (2014 - ($28,840)) |
- | (53,560 | ) | (13,390 | ) | ||||||||
Change in reserves as a result of change in valuation basis |
- | 2,980 | - | ||||||||||
Other |
431 | - | - | ||||||||||
Paid-in capital, pension obligation transferred to parent |
- | 13,495 | 34,342 | ||||||||||
Stockholder dividends |
- | - | (1,000 | ) | |||||||||
Net additions | 225,569 | 79,391 | 91,079 | ||||||||||
Capital and surplus at end of year | $ | 1,858,445 | $ | 1,632,876 | $ | 1,553,485 | |||||||
See accompanying notes to consolidated statutory basis financial statements. | 7 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Consolidated Statutory Basis Statements of Cash Flows |
Years Ended December 31, 2015, 2014 and 2013 |
($ in 000s) |
2015 | 2014 | 2013 | ||||||||||
Cash from operating activities | ||||||||||||
Premiums and other considerations |
$ | 2,902,180 | $ | 2,438,883 | $ | 2,033,744 | ||||||
Net investment income received |
510,922 | 423,320 | 439,409 | |||||||||
Reinsurance commissions |
6,933 | 38,923 | 49,797 | |||||||||
Other income |
74,992 | (804,003 | ) | (149,969 | ) | |||||||
Policy and contract benefits and dividends paid |
(2,527,287 | ) | (2,033,112 | ) | (1,743,259 | ) | ||||||
Operating expenses paid |
(720,634 | ) | (719,289 | ) | (655,881 | ) | ||||||
Federal income taxes received (paid) |
(48,490 | ) | 2,453 | 9,308 | ||||||||
Net transfers from separate accounts |
194,093 | 787,442 | 332,274 | |||||||||
Net cash provided by operating activities | 392,709 | 134,617 | 315,423 | |||||||||
Cash from investing activities | ||||||||||||
Proceeds from investments sold, matured or repaid |
||||||||||||
Bonds and notes |
689,058 | 715,577 | 898,955 | |||||||||
Stocks |
62,092 | 79,349 | 5,425 | |||||||||
Mortgage loans |
154,722 | 319,185 | 184,383 | |||||||||
Real estate |
6,650 | 475 | 794 | |||||||||
Other invested assets |
64,286 | 256,408 | 183,563 | |||||||||
Net change in receivables from securities sold |
2,005 | 2,591 | - | |||||||||
Miscellaneous proceeds |
46,462 | 49,135 | 29,490 | |||||||||
Total investment proceeds |
1,025,275 | 1,422,720 | 1,302,610 | |||||||||
Cost of investments acquired |
||||||||||||
Bonds and notes |
1,129,039 | 815,107 | 1,074,014 | |||||||||
Stocks |
40,128 | 57,960 | 61,366 | |||||||||
Mortgage loans |
232,055 | 399,161 | 394,037 | |||||||||
Real estate |
5,735 | 9,492 | 6,267 | |||||||||
Other invested assets |
139,529 | 219,939 | 180,819 | |||||||||
Net change in payable from securities purchased |
- | 4,983 | - | |||||||||
Miscellaneous applications |
11,817 | 11,573 | 26,289 | |||||||||
Total investments acquired |
1,558,303 | 1,518,215 | 1,742,792 | |||||||||
Net decrease in contract loans |
(197 | ) | - | - | ||||||||
Net cash used in investing activities | (532,831 | ) | (95,495 | ) | (440,182 | ) | ||||||
Cash from financing and miscellaneous activities | ||||||||||||
Borrowed (repaid) funds, net |
190,723 | 39,766 | 33,903 | |||||||||
Net deposits on deposit-type contracts |
(36,223 | ) | (26,173 | ) | (18,221 | ) | ||||||
Other cash provided (used) |
(20,015 | ) | (82,117 | ) | 37,764 | |||||||
Net cash provided by (used in) financing and miscellaneous activities | 134,485 | (68,524 | ) | 53,446 | ||||||||
(continued) |
See accompanying notes to consolidated statutory basis financial statements. | 8 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Consolidated Statutory Basis Statements of Cash Flows, continued |
Years Ended December 31, 2015, 2014 and 2013 |
($ in 000s) |
2015 | 2014 | 2013 | ||||||||||
Net change in cash, cash equivalents and short-term investments | (5,637 | ) | (29,402 | ) | (71,313 | ) | ||||||
Cash, cash equivalents and short-term investments at the beginning of year | 80,692 | 110,094 | 181,407 | |||||||||
Cash, cash equivalents and short-term investments at the end of year | $ | 75,055 | $ | 80,692 | $ | 110,094 | ||||||
Supplemental disclosure of non-cash transactions | ||||||||||||
Transfer of pension plan sponsorship to parent |
$ | - | $ | 13,495 | $ | 34,342 | ||||||
Interest capitalization |
1,164 | 1,084 | - | |||||||||
Sale of limited partnerships to affiliates |
- | 583,062 | - | |||||||||
Sale of bonds to affiliate for additional ownership of MCA Fund I |
- | 21,713 | - | |||||||||
Transfer of investment in MCA Fund I for equity interest of MCA Holding |
- | 408,976 | - | |||||||||
Receipt of debt securities for exchange of equity interest in MCA Holding |
- | 125,000 | - | |||||||||
See accompanying notes to consolidated statutory basis financial statements. | 9 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Notes to Consolidated Statutory Basis Financial Statements |
($ in 000s) |
Note 1: General
Nature of Business
The accompanying consolidated statutory basis financial statements include the accounts of CMFG Life Insurance Company (“CMFG Life”) and its indirect wholly-owned subsidiary MEMBERS Life Insurance Company (“MEMBERS Life”) (collectively the Company”) as of and for the year ended December 31, 2015. Prior periods presented include only the accounts of CMFG Life. MEMBERS Life is a wholly-owned subsidiary of CUNA Mutual Investment Corporation (“CMIC”). CMIC is a wholly-owned subsidiary of CMFG Life. The investment in MEMBERS Life is included in the accompanying consolidated statutory basis statements of admitted assets, liabilities and capital and surplus as investments in affiliates in 2014. All significant intercompany accounts and transactions have been eliminated in 2015. In 2015, the Company merged with CMFG Life Vermont, Inc. (“CMFG Life VT”) which had previously been wholly-owned. The merger was accounted for as a non-reciprocal transfer and is reflected in the financial statements as if the merger occurred January 1, 2015. Prior periods presented were not restated and the investment in CMFG Life VT is included in the consolidated statutory basis statement of admitted assets as an investment in affiliate in 2014.
CMFG Life is a stock life insurance company organized under the laws of Iowa for the principal purpose of serving the insurance needs of credit unions and their members. Its primary products include group credit life and group credit disability, retirement plan administration, group life and disability products and life, health and annuity policies. The Company’s ultimate parent is CUNA Mutual Holding Company (“CMHC”), a mutual insurance holding company organized under the laws of Iowa. The Company markets its products for credit union members through face-to-face and direct response distribution systems, while group products are sold primarily by salaried representatives. The Company’s subsidiaries and affiliates are engaged in the business of property and casualty insurance, retail investment brokerage, private mortgage insurance and other businesses designed for credit unions and their members. MEMBERS Life is a stock life and health insurance company organized under the laws of Iowa. MEMBERS Life sells single premium deferred annuity contracts to credit union members through face-to-face and direct response distribution channels. It also services existing blocks of individual and group life policies. MEMBERS Life has reinsurance agreements with CMFG Life under which it cedes 100% of its business to CMFG Life. These agreements have been eliminated in the consolidated results.
The Company is authorized to sell life, health and annuity policies in all 50 states and the District of Columbia and most of its revenue and that of its affiliated companies is generated in the United States. It also conducts business in foreign countries through branch offices or subsidiaries. None of these foreign operations and no individual state in the United States represent more than 10% of the Company’s premiums for the year ended December 31, 2015, and 8% of CMFG Life’s premiums for the years ended December 31, 2014 and 2013. The Company’s group and individual annuity premiums represented 60% for the year ended December 31, 2015, and 53% and 43% of CMFG Life’s premium income in 2014 and 2013, respectively. The Company’s credit life and credit disability premiums represented 16% for the year ended December 31, 2015, and 20% and 25% of CMFG Life’s premium income in 2014 and 2013, respectively.
The accompanying consolidated statutory financial statements reflect various transactions and balances with the Company’s affiliates. See Note 6 for a description of the more significant transactions. While the Company believes that these transactions were at reasonable terms, the results of operations of the Company may have differed had these transactions been consummated with unrelated parties.
Note 2: Summary of Significant Accounting Policies
Basis of Presentation
The accompanying consolidated statutory basis financial statements have been prepared in conformity with accounting practices prescribed or permitted by the Iowa Department of Commerce, Insurance Division
10 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Notes to Consolidated Statutory Basis Financial Statements |
($ in 000s) |
(“Insurance Department”), which differ in some respects from accounting principles generally accepted in the United States of America (“GAAP”).
Prescribed statutory accounting practices are practices incorporated directly or by reference in state laws, regulations and general administrative rules and are applicable to all insurance enterprises domiciled in a particular state. The Insurance Department has identified the Accounting Practices and Procedures Manual (“APPM”), as promulgated by the National Association of Insurance Commissioners (“NAIC”), as a source of prescribed statutory accounting practices for insurers domiciled in Iowa. Permitted statutory accounting practices encompass all accounting practices not prescribed by the NAIC and are approved by the insurance department of the insurer’s state of domicile.
Prescribed Statutory Accounting Practice
CMFG Life requested and received written approval from the Insurance Department to use the following prescribed statutory accounting practice, which differs from practices in the APPM: CMFG Life holds debt securities in its separate account for its single premium deferred annuity. Insurance entities are required to report assets allocated to the separate account at fair value. As a result of the prescribed practice, CMFG Life reports debt securities allocated to this separate account for its single premium deferred annuity at lower of amortized cost or fair value. Net income is not affected by this prescribed practice.
A reconciliation of the Company’s capital and surplus as calculated by the accounting practices promulgated in the APPM and prescribed by the Insurance Department is shown below as of December 31:
Capital and Surplus | ||||||||
2015 | 2014 | |||||||
As determined using APPM | $ | 1,861,495 | $ | 1,641,067 | ||||
Prescribed practice | ||||||||
Carrying value of separate account assets |
(3,050 | ) | (8,191 | ) | ||||
Total effect of prescribed practice | (3,050 | ) | (8,191 | ) | ||||
As reported | $ | 1,858,445 | $ | 1,632,876 | ||||
GAAP/Statutory Accounting Differences
The following summary identifies the significant differences between the accounting practices prescribed or permitted by the Insurance Department and GAAP:
Acquisition costs, such as commissions, premium taxes, and other costs relating to acquiring new and renewal business are expensed as incurred, while under GAAP, acquisition expenses directly related to the successful acquisition of new and renewal business are deferred and amortized over the periods benefited.
Investments in bonds and notes are generally carried at amortized cost, while under GAAP, they are carried at either amortized cost or fair value based on their classification according to the Company’s ability and intent to hold or trade the securities.
The change in carrying value of limited partnerships is reported directly in unassigned surplus, while under GAAP the change is reflected in net investment income.
11 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Notes to Consolidated Statutory Basis Financial Statements |
($ in 000s) |
Investments in affiliates are carried based on the Company’s ownership percentage of the affiliate’s net equity. Investments in insurance subsidiaries and those affiliates that derive more than 20% of their revenue from affiliated companies are accounted for based on the net equity of the subsidiary or affiliate determined on a statutory basis. Investments in all others are carried based on the company’s ownership of the net equity of the subsidiary or affiliate determined under GAAP. The financial statements of affiliates must be audited or they are nonadmitted. Equity in the earnings and other equity activity of affiliates is reflected in the consolidated statement of changes in capital and surplus as changes in unrealized capital gains (losses). Under GAAP, majority-owned subsidiaries are consolidated and equity in the earnings of unconsolidated affiliates is reported in the statement of income.
Dividend income from affiliates is recorded in investment income. Under GAAP, dividends reduce the investment in affiliate.
For statutory accounting, after an other-than-temporary impairment of bonds, other than loan-backed securities, is recorded, the fair value of the other-than-temporarily impaired bond becomes its new cost basis. For GAAP, the bond’s new cost basis is the net present value of expected cash flows or its fair value if the Company does not intend to hold the security until it has recovered.
Policy reserves are established based on mortality and interest assumptions prescribed or permitted by state statutes, without consideration for withdrawals, which may differ from reserves established for GAAP using assumptions with respect to mortality, interest, expense, and withdrawals that are based on company experience and expectations.
“Nonadmitted assets” (principally a portion of deferred taxes, prepaid expenses, furniture, equipment, asset for contingent future payments and certain receivables) are excluded from the consolidated statutory basis statements of admitted assets, liabilities and capital and surplus through a direct charge to unassigned surplus. Under GAAP, nonadmitted assets are presented in the balance sheet, net of any valuation allowance.
All leases are classified as operating leases for statutory reporting, whereas, under GAAP, leases that meet certain criteria are designated as capital leases. The leased items are recorded as an asset, subject to depreciation, with a corresponding liability initially equal to the present value of the lease payments.
Under both GAAP and statutory accounting, deferred federal income taxes are provided for unrealized capital gains or losses on investments and the temporary differences between the reporting and tax bases of assets and liabilities; however, there are limits as to the amount of deferred tax assets that may be reported as admitted assets under statutory accounting. Further, the change in deferred taxes is recognized as an adjustment to unassigned surplus under statutory accounting. For GAAP, changes in deferred taxes related to revenue and expense items are recorded in the consolidated statement of comprehensive income.
The asset valuation reserve (“AVR”), a statutory only reserve established by formula for the purpose of stabilizing the surplus of the Company against fluctuations in the fair value of certain invested assets, is recorded as a liability by a direct charge to unassigned surplus for statutory reporting. Such reserve is not recorded under GAAP.
For statutory reporting the interest maintenance reserve (“IMR”) defers recognition of interest-related gains and losses from the disposal of investment securities and amortizes them into income over the remaining contractual maturities of those securities; under GAAP, such gains and losses are recognized in income immediately.
Under both GAAP and statutory accounting employers establish a prepaid asset or liability, as applicable, for the difference between the benefit obligation and the fair value of benefit plan assets. Gains or losses and prior service costs or credits are recognized as a component of comprehensive income for GAAP; on a statutory basis these items are reflected in the Company’s surplus.
12 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Notes to Consolidated Statutory Basis Financial Statements |
($ in 000s) |
Amounts due from reinsurers for their share of ceded reserves are netted against the reserves rather than shown as assets under GAAP.
Certain modified coinsurance agreements had been reported through December 31, 2013 as reinsurance on a statutory basis; because the risk of loss transferred to the reinsurers is deemed insignificant, the deposit method of accounting was used for GAAP. These agreements were terminated in 2014.
Under GAAP, the ineffectiveness of a fair value hedge or cash flow hedge, if any, is recorded as realized capital gains and losses. On a statutory basis, derivatives which follow hedge accounting are reported in a manner consistent with the hedged item. Under GAAP, the change in fair value of a non-hedge derivative is recorded as realized capital gains and losses. On a statutory basis, derivatives used in a hedging transaction which do not meet the criteria for hedge accounting are accounted for at fair value and the changes in fair value are recorded as unrealized gains or unrealized losses.
Embedded derivatives in certain annuity contracts are not bifurcated from the host contract for statutory accounting, whereas under GAAP accounting the embedded derivatives are bifurcated from the host contract and accounted for and reported separately at fair value.
The changes in fair value of derivative investment contracts are recorded in unassigned surplus as a change in unrealized capital gains and losses, while under GAAP they are recorded in the statement of operations unless the contracts meet certain hedge accounting criteria.
Deposits, surrenders, and benefits on certain annuity or deposit administration contracts, including those covered in the separate accounts, are recorded in the consolidated statement of operations, while such deposits and benefits are credited or charged directly to the contract balance under GAAP. As a result, under GAAP, revenues on these types of contracts are only composed of contract charges and fees, which are recognized when assessed against the account balance. Under GAAP, amounts collected are credited directly to policyholder account balances, and the benefits and claims on these contracts that are charged to expense only include benefits incurred in the period in excess of related policyholder account balances.
Single premium deferred annuities are reported as a separate account product for statutory reporting. For GAAP, the related assets and liabilities are reported in the general account because criteria for separate account reporting are not met. The criteria are that funds must be invested at the direction of the contract holder and investment results must be passed through to the contract holder.
The provision for policyholder dividends is based on the board of directors’ determination and declaration of an equitable current dividend plus a provision for such dividend expected to be paid in the following year; under GAAP, dividends are provided for ratably over the premium-paying period in accordance with dividend scales contemplated at the time the policies were issued.
Comprehensive income and its components are not presented in the consolidated statutory basis financial statements, whereas under GAAP, comprehensive income is presented and changes in comprehensive income are reflected in accumulated other comprehensive income, a component of stockholder’s equity.
Surplus notes meeting regulatory requirements are reported as part of statutory capital and surplus, but under GAAP as a liability.
The consolidated statutory basis statements of cash flows are presented in the required statutory format. Under GAAP, the direct method for the statement of cash flows requires a reconciliation of net income to net cash provided by operating activities.
13 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Notes to Consolidated Statutory Basis Financial Statements |
($ in 000s) |
Use of Estimates
The preparation of the consolidated statutory basis financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated statutory basis financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and, in some cases, the difference could be material. Investment valuations, determination of other-than-temporary impairments, deferred tax asset valuation reserves, asset for contingent future payments, reinsurance balances, policy and claim reserves, and pension and postretirement obligations are most affected by the use of estimates and assumptions.
Investments
Investments are valued as prescribed by the NAIC.
Bonds and notes: Bonds and notes with an NAIC designation of 1 through 5 are generally stated at amortized cost. Bonds and notes with an NAIC designation 6 are stated at the lower of amortized cost or fair value. Loan-backed and structured securities may be carried at the lower of amortized cost or fair value if they receive an initial rating of 6 under the multiple-designation methodology. Prepayment assumptions for loan-backed bonds and structured securities are obtained from historical industry prepayment averages, industry survey values or internal estimates to determine the effective yield at purchase. Changes in the anticipated repayments are incorporated when determining statement values. Changes in estimated cash flows from the previous assumptions are accounted for using the prospective method.
Investments in affiliates: Investments in affiliates are accounted for on the equity method using the Company’s ownership percentage and the affiliate’s net equity. Domestic insurance subsidiaries are carried using their statutory net equity. Foreign insurers and those non-insurance affiliates engaged in certain insurance-related activities and whose revenue from affiliated companies is more than 20% of their total revenue apply prescribed adjustments to the GAAP net equity to calculate the statutory equity. The adjustments primarily are to treat certain assets as nonadmitted. Other affiliates are valued using their GAAP equity. The financial statements of the affiliate must be audited or its carrying value is reduced to zero. If net gains by the affiliates are distributed to the Company in the form of dividends, net investment income is recognized in the amount of the dividend and the previously unrealized net gains are reversed.
Certain affiliates are owned by CMIC. The valuation of these affiliates, excluding MEMBERS Life in 2015, is reflected in the Company’s carrying value of CMIC. Changes in carrying amounts are reported directly in unassigned surplus.
Common stocks - unaffiliated: Investments in unaffiliated common stocks are stated at fair value.
Preferred stocks - unaffiliated: Preferred stocks are carried at amortized cost or the lower of amortized cost of NAIC fair value depending on the assigned credit rating and whether the preferred stock has mandatory sinking fund provisions.
Mortgage loans: Mortgage loans are carried at their amortized cost, net of impairments. A mortgage loan is considered impaired when it becomes probable that the Company will be unable to collect the total amounts due. Impairments are recorded in realized capital losses and are determined based upon the carrying value of the recorded investment in the mortgage loan and the estimated fair value of the underlying collateral. The Company establishes a valuation allowance for an impairment when the reporting entity believes it is probable that based on current information and events it will be unable to collect all amounts due according to the contractual terms of the mortgage agreement. For mortgage loans that are deemed impaired, a valuation allowance is established.
Real estate: Real estate occupied by the Company and real estate held for the production of income is carried at cost net of accumulated depreciation. Real estate is depreciated using the straight-line method over the useful
14 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Notes to Consolidated Statutory Basis Financial Statements |
($ in 000s) |
lives of the assets, ranging from five to fifty years. Depreciation expense is included in investment expense. Impaired real estate is written down to estimated fair value with the impairment loss being included in realized capital losses. The cost of real estate held for sale is adjusted for impairment whenever events or changes in circumstances indicate the carrying value of the asset may not be recoverable.
Contract loans: Contract loans are reported at their unpaid principal balances. Valuation allowances are not established for contract loans, as they are fully collateralized by the cash surrender value of the underlying insurance policies. Any unpaid principal or interest on the loan is deducted from the cash surrender value or the death benefit prior to settlement of the insurance policy.
Other invested assets: Other invested assets include limited partnerships, employer-owned life insurance carried at cash surrender value, and intercompany loans carried at unpaid principal balance.
Limited partnerships are recorded in other invested assets and primarily represent interests in affiliates, which invest in unaffiliated limited partnerships and are accounted for under the equity method of accounting with changes in carrying amounts recorded directly to unassigned surplus. Accordingly, the Company’s investments in these limited partnerships are carried at cost plus or minus the Company’s equity in the undistributed earnings or losses as reported by the partnerships. Due to the timing of the availability of financial statements from the partnerships’ general partners, limited partnerships are generally recorded on a three-month lag, as adjusted for contributions and distributions.
Net investment income: Investment income is recognized on an accrual basis and dividends are recorded as earned at the ex-dividend date. Investment income reflects amortization of premiums and accretion of discounts on an effective-yield basis using expected cash flows. Prepayment penalties on mortgage loans are recorded as investment income. Mortgage loan origination fees are included in income in the period received. Realized gains and losses on the sale of investments are determined based upon the specific identification method and are recorded on the trade date. Unrealized capital gains and losses are included in unassigned surplus, net of deferred federal income taxes. Limited partnership income is recorded and classified in accordance with general partner instructions. Generally, interest and dividend distributions from underlying investments in limited partnerships are classified as investment income. Capital gain and loss distributions from underlying investments in limited partnerships are classified as realized gains and losses.
Impairment: A bond is considered to be other-than-temporarily impaired when the fair value is less than the amortized cost basis and its value is not expected to recover through the Company’s holding period. When this occurs, the Company records a realized capital loss equal to the difference between the amortized cost and fair value. The fair value of the other-than-temporarily impaired security becomes its new cost basis. If the bond is a loan-backed or structured security, it is considered to be other-than-temporarily impaired when the amortized cost exceeds the present value of cash flows expected to be collected and its value is not expected to recover through the Company’s holding period. The amount of the other-than-temporary impairment recognized in earnings as a realized loss equals the difference between the investment’s amortized cost basis and its fair value at the balance sheet date. In determining whether an unrealized loss is expected to be other-than-temporary, the Company considers, among other factors, the severity of impairment, financial position of the issuer, recent events affecting the issuer’s business and industry sector, credit ratings, and the ability of the Company to hold the investment until the fair value has recovered.
For investments in subsidiaries and limited partnerships, the Company reviews the financial condition and future profitability of the subsidiary or limited partnership interest to assess whether any excess of the cost basis over the current carrying basis determined using equity-basis accounting is other-than-temporary. If such excess is deemed to be other-than-temporary, the amount is recorded as a realized capital loss. See Note 3 for a more detailed discussion.
15 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Notes to Consolidated Statutory Basis Financial Statements |
($ in 000s) |
Cash, Cash Equivalents and Short-term Investments
Cash and short-term investments include unrestricted deposits in financial institutions, money market mutual funds, and U.S Treasury bills with maturities at the date of purchase of one year or less. Cash equivalents include U.S. Treasury bills with maturities at the date of purchase of 90 days or less. Short-term investments, other than money market mutual funds, are reported at amortized cost. Money market mutual funds are stated at values obtained from the SVO, which are equivalent to fair value.
Electronic Data Processing Equipment, Software, Furniture and Equipment, Leasehold Improvements
Equipment and computer software are carried at cost net of accumulated depreciation. Depreciation is determined on a straight-line basis over the estimated useful lives of the assets. The useful life of equipment and software is generally three to seven years. The useful life of capitalized internally developed software ranges from three to five years. The following table is a summary of equipment and software. Assets not meeting the definition of admitted assets are nonadmitted.
2015 | 2014 | |||||||
Electronic data processing equipment-admitted | ||||||||
Electronic data processing equipment |
$ | 23,669 | $ | 27,007 | ||||
Accumulated depreciation |
(20,076 | ) | (21,406 | ) | ||||
Net electronic data processing equipment-admitted | 3,594 | 5,601 | ||||||
Equipment, leasehold improvements and software-nonadmitted | ||||||||
Furniture and equipment |
29,952 | 33,405 | ||||||
Leasehold improvements |
1,396 | 1,396 | ||||||
Internally developed software |
91,704 | 71,511 | ||||||
Purchased software |
34,564 | 41,756 | ||||||
Total equipment, leasehold improvements and software-nonadmitted |
157,616 | 148,068 | ||||||
Accumulated depreciation-nonadmitted |
(109,246 | ) | (116,243 | ) | ||||
Net equipment, leasehold improvements and software-nonadmitted | 48,370 | 31,825 | ||||||
Net equipment, leasehold improvements and software | $ | 51,964 | $ | 37,426 | ||||
Depreciation expense totaled $7,965, $6,815 and $7,809 in 2015, 2014 and 2013, respectively. There were no impairments in 2015, 2014 or 2013.
Policy and Claim Reserves and Liability for Deposit-Type Contracts
Credit disability policy reserves are computed primarily using the mean rule and rule of anticipation methods, which reflect statutory requirements and industry standards. Credit life policy reserves are calculated as the higher of a mortality reserve based on the Company’s experience or an unearned premium reserve using the rule of anticipation method, compared on an aggregate basis.
Group life premium waiver reserves are calculated on a seriatim basis using the Krieger table at a 4.0% to 4.5% interest rate for pre-2009 issue dates and the Group Life Term Waiver table at a 4.0% interest rate for post 2008 issue dates. Group long term disability reserves are calculated using the 1987 Commissioners Group Disability Table at a 4.0% to 6.0% interest rate, which varies by issue date. For 2008 and prior accident years, the whole life interest index is used. For 2009 and subsequent accident years, the Single Premium Immediate Annuity interest index less 100 basis points is used.
16 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Notes to Consolidated Statutory Basis Financial Statements |
($ in 000s) |
Traditional life insurance reserves are computed on either the net level reserve basis or the modified reserve basis dependent on product type and issue date. Depending upon the issue year, either the 1941, 1958, 1980 or 2001 Commissioners Standard Ordinary mortality table is used. Interest assumptions range primarily from 2.25% to 6.0%.
The Company waives deduction of deferred fractional premiums upon death of the insured and returns the portion of the final premium beyond the date of death. Surrender values are not promised in excess of legally computed reserves.
Extra premiums are charged for substandard lives, plus the gross premium for a rated age. Mean reserves are determined by computing the regular mean reserve for the plan at the rated age and holding, plus one-half of the extra premium charge for the year.
The Company had $2,433,577, $2,676,613 and $2,768,916 at December 31, 2015, 2014 and 2013, respectively, of insurance in force for which the gross premiums are less than the net premiums according to the standard valuation law set by Iowa regulations. The Company included $15,798 and $16,671 at December 31, 2015 and 2014, respectively, in policy reserves on the consolidated statement of admitted assets, liabilities and capital and surplus for these policies.
Tabular interest, tabular less actual reserves released, tabular cost and tabular interest on funds not involving life contingencies have all been determined by formulas prescribed by the Insurance Department.
Policyholder reserves related to group pension annuity contracts are computed using the Commissioner’s Reserve Valuation Method (“CRVM”) during the contract accumulation period and the present value of future payments for contracts that have annuitized. Current interest rates credited during the contract accumulation period range from 1.0% to 3.0% in 2015 and 1.25% to 4.95% in 2014 and 2013. The future minimum guaranteed interest credited rates during the life of the contracts range from 0.0% to 3.0% in 2015, 2014 and 2013. For contracts that have annuitized, interest rates that are used in determining the present value of future payments range from 3.5% to 7.5% in 2015, 2014 and 2013. Reserves for the group pensions immediate annuities are in excess of the minimum reserve standards as defined in the Standard Valuation Law, NAIC Appendix A-820.
Policyholder reserves related to individual annuity contracts are computed using the Commissioner’s Annuity Reserve Valuation Method (“CARVM”), along with Actuarial Guideline (“AG”) 33 for fixed annuities, AG 35 for equity indexed annuities and AG 43 for variable annuities, during the contract accumulation period and the present value of future payments for contracts that have annuitized. Policyholder reserves related to single premium deferred annuity contracts are computed using CARVM, along with AG 43, 33 and 35 resulting in a reserve floor equal to the cash surrender value 11 days after issue and at subsequent valuation dates; prior to 11 days the reserve is equal to the return of premium. Current interest rates credited during the contract accumulation period range from 1.0% to 5.25% in 2015 and 2014 and 1.0% to 5.35% in 2013. The future minimum guaranteed interest credited rates during the life of the contracts range from 1.0% to 4.5% in 2015, 2014 and 2013. For contracts that have annuitized, interest rates that are used in determining the present value of future payments range from 3.5% to 7.5% in 2015, 2014 and 2013.
Liabilities established for unpaid benefits for life and accident and health insurance contracts represent the estimated amounts required to cover the ultimate cost of settling reported and incurred but unreported losses. Certain claims, usually resulting from a disability, are discounted. These estimates are adjusted in the aggregate for ultimate loss expectations based on historical experience patterns and current economic trends. Any change in the probable ultimate liabilities, which might arise from new information emerging, is reflected in the consolidated statutory basis statements of operations in the period the change is determined to be necessary. Such adjustments could possibly be material.
The Company recognizes a liability for policyholder deposits that are not subject to policyholder mortality or longevity risk at the stated account value. The account value equals the sum of the original deposit plus accumulated interest, less any withdrawals and expense charges. Such deposits primarily represent annuity
17 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Notes to Consolidated Statutory Basis Financial Statements |
($ in 000s) |
contracts without life contingencies and amounts left on deposit with the Company by beneficiaries or policy owners.
The Company carried additional reserves for long term care products based on asset adequacy testing of $40,000 and $65,000 as of December 31, 2015 and 2014, respectively.
The Company anticipates investment income as a factor in its premium deficiency calculation.
Provision for Participating Policyholder Dividends
Policyholder dividends are paid on certain policies, primarily individual life insurance. Dividends are approved by the Board of Directors, based on experience of the participating policies, and recorded on an accrual basis. Dividends are paid on policies representing 54% and 56% of the individual life reserves of $1,667,813 and $1,607,057 as of December 31, 2015 and 2014, respectively.
Revenue Recognition
Credit life and disability coverages are offered on either a single premium or monthly premium basis and revenue is earned in relation to anticipated benefits to policyholders. Term life and whole life insurance premiums are recognized as premium income when due. Annuity deposits are credited to revenue when received. Health insurance premiums and premiums for employee benefit coverages are recognized as income on a monthly pro rata basis over the time period to which the premiums relate. Consideration received on deposit-type contracts, which do not contain any life contingencies, are recorded directly to the related reserve liability.
The Company has entered into retrospective rating agreements for certain group life, credit life and credit disability contracts. Premium for contracts subject to these agreements was $323,927 in 2015, $318,399 in 2014 and $321,233 in 2013, representing 10%, 13% and 17% of net premiums for 2015, 2014 and 2013, respectively. Retrospective premiums are accrued in premium individually for each qualifying policy based on premium and claim experience. Accrued retrospective premium receivables are treated as nonadmitted because they have no fixed due date.
Credit Union Reimbursements
The Company reimburses credit unions for certain expenses that arise due to the production of new and renewal business, primarily credit insurance and life and health products sold by direct mail. These expenses are administrative expenses incurred directly by the credit unions. The Company incurred and expensed $202,128, $189,852 and $226,434 for the years ended December 31, 2015, 2014 and 2013, respectively.
Income Tax
Deferred income taxes are recognized, subject to an admissibility test for deferred tax assets, and represent the future tax consequences attributable to differences between the financial statement carrying amount of assets and liabilities and their respective tax bases. Gross deferred tax assets are reduced by a statutory valuation allowance if it is more likely than not that some portion or all of the deferred tax assets will not be realized. See Note 5 for the components of the admissibility test used to calculate the admitted deferred tax assets. Recorded deferred tax amounts are adjusted to reflect changes in income tax rates and other tax law provisions as they are enacted. The net change in deferred taxes is recorded directly to unassigned surplus.
The Company is subject to tax-related audits. The Company accounts for any federal and foreign tax contingent liabilities in accordance with Statement of Statutory Accounting Principles (“SSAP”) No. 5R, Liabilities, Contingencies and Impairments of Assets as modified by SSAP No. 101, Income Taxes, A Replacement of SSAP No. 10R and SSAP No. 10 and any state and other tax contingent liabilities in accordance with SSAP No. 5R.
18 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Notes to Consolidated Statutory Basis Financial Statements |
($ in 000s) |
Derivative Financial Instruments
The Company uses derivative instruments, such as swaps, options, and futures to manage exposure to various currency and market risks. Most derivatives are recorded at estimated fair value with changes in fair value recorded as unrealized capital gains and losses in unassigned surplus. Swaps used to hedge the interest rate and foreign currency exposure of bonds are recorded at amortized cost.
With the exception of derivatives being used to hedge a net investment in a foreign affiliate or subsidiary, when such derivatives are sold or otherwise disposed of, the Company records a realized capital gain or loss. In cases where derivatives are being used to hedge a net investment in a foreign affiliate or subsidiary, when such derivatives are sold or otherwise disposed of, the Company records the gain or loss as a change in unassigned surplus. The net gains or losses on derivatives used to hedge a net investment in a foreign affiliate or subsidiary remain in surplus as unrealized capital gains and losses until either all of or a substantial portion of the foreign affiliate or subsidiary is sold.
The Company may designate certain derivatives as fair value hedges, cash flow hedges or hedges of net investments. At inception of the hedge, the Company formally documents the hedging relationship, risk management objective and strategy. In addition, the documentation includes a description of the hedging instrument, hedged transaction, nature of the risk being hedged and methodologies for assessing effectiveness and measuring ineffectiveness. Quarterly, the Company performs procedures to assess the effectiveness of the hedging relationship and the change in fair value associated with any ineffectiveness is recorded in net unrealized investment gains and losses.
Reinsurance
Reinsurance premiums, claims and benefits, commission expense reimbursements, and reserves related to reinsured business ceded are accounted for on a basis consistent with the accounting for the underlying direct policies issued and the terms of the reinsurance contracts. Premiums and benefits ceded to other companies have been reported as reductions of premium income and benefits in the accompanying consolidated statutory basis statements of operations. Policy and claim reserves are reported net of unbilled reinsurance recoverables. The Company has evaluated its reinsurance contracts and determined that all significant contracts transfer the underlying economic risk of loss. If the Company determines it is probable that a reinsurance amount will not be collectible, the amounts are designated as doubtful accounts and an allowance is established for the estimated uncollectible amount. The allowance for uncollectible accounts is estimated based on a combination of write-off history, aging analysis, and any specific, known doubtful accounts. Amounts are written off when they are deemed uncollectible.
Separate Accounts
The Company issues variable annuities, variable life insurance policies and single premium deferred annuities, the assets and liabilities of which are legally segregated and reflected in the accompanying consolidated statutory basis statements of admitted assets, liabilities and capital and surplus as assets and liabilities of the separate accounts. Variable annuity and variable life insurance contract holders bear the investment risk that the separate accounts’ funds may not meet their stated investment objectives. Some policies contain contract provisions wherein the Company guarantees either a minimum return or account value upon death, partial withdrawal or at a specified contract anniversary date. The liabilities for these guarantees are included in life insurance and annuity contracts in the consolidated statutory basis statements of admitted assets, liabilities and capital and surplus.
Variable annuity and variable universal life separate account assets are stated at fair value. Debt securities within the single premium deferred annuity separate account assets are stated at amortized cost or fair value. Separate account liabilities are accounted for in a manner similar to other policy reserves. In the event that the asset values of certain contract holder’s accounts are projected to be below the value guaranteed by the Company, a liability is established through a charge to income. Separate account premium deposits, benefit expenses and contract fee income for investment management and policy administration are reflected by the Company in the
19 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Notes to Consolidated Statutory Basis Financial Statements |
($ in 000s) |
accompanying consolidated statutory basis statements of operations. Investment income and realized and unrealized capital gains and losses of the separate account assets, with the exception of assets related to single premium deferred annuities, accrue directly to the contract holders and, therefore, are not included in the Company’s consolidated statutory basis statements of operations.
Variable annuity and variable universal life contract holders are able to invest in investment funds managed for their benefit. Approximately 37% and 42% of the separate account assets are invested in unit investment trusts that are registered with the Securities and Exchange Commission as of December 31, 2015 and 2014, respectively.
The Company invests the single premium deferred annuity premiums for the benefit of the contract holder. The single premium deferred annuities have two risk control accounts, referred to as the Secure and Growth Accounts; the Secure Account has a yearly credited interest rate floor of 0% and the yearly Growth Account floor is -10%. The Secure and Growth Accounts both have credited interest rate caps that vary with issuance. Interest is credited at the end of each contract year during the selected index term based on the allocation between risk control accounts and the performance of an external index during that contract year. At the end of the initial index term only the Secure Account will be available as an option to the policyholder.
Foreign Exchange
The Company’s consolidated statutory basis financial statements are impacted by foreign currency exchange rates related to foreign-based subsidiaries and branch operations and investment holdings denominated in foreign currencies. Revenues and expenses of foreign branch operations are translated into U.S. dollars at a weighted average exchange rate for the period. Gains and losses due to translating such foreign branch operations to U.S. dollars are recorded as unrealized capital gains or losses.
Assets and liabilities are translated at the exchange rate existing on the balance sheet date. Changes in asset and liability values due to fluctuations in foreign currency exchange rates are recorded as unrealized capital gains and losses until the asset is sold or exchanged or the liability is settled. Upon settlement, previously recorded unrealized foreign exchange gains and losses are reversed and the foreign exchange gain or loss for the entire holding period is recorded as a realized gain or loss.
Statutory Valuation Reserves
The IMR is maintained for the purpose of stabilizing the surplus of the Company against gains and losses on sales of investments that are primarily attributable to changing interest rates. The interest-related gains and losses are deferred and amortized into income over the remaining lives of the securities sold. If the IMR is calculated to be a net asset, it is nonadmitted.
The AVR is a formulaic reserve and provides a reserve for fluctuations in the values of invested assets, primarily bonds and notes, common stocks and limited partnerships. Changes in the AVR are charged or credited directly to unassigned surplus.
Commission and Fee Income
The Company acts as an investment advisor and administrator of employee benefit plans. Revenues for advisory services are recognized pro rata, largely based upon contractual rates applied to the market value of the customer’s portfolio. Fees received for employee benefit plan recordkeeping and reporting services are recognized as revenue when the service is performed. Administrative fees paid in advance are deferred and recognized over the period of service.
20 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Notes to Consolidated Statutory Basis Financial Statements |
($ in 000s) |
Benefit Plans
The Company’s employees participate in qualified defined benefit pension plans sponsored by CUNA Mutual Financial Group, Inc. (“CMFG”), the Company’s parent. The sponsorship of these plans was transferred to CMFG in 2013 for non-represented employees and 2014 for represented employees (see Note 14 for additional information on these transfers). Starting in 2014 the Company records an expense for its contribution and the administration of the plan by the parent.
The Company provides life and contributory medical insurance benefits for some retirees. Retirees become eligible to participate based upon age and years of service. Periodic net benefit expense is based on the cost of incremental benefits for employee service during the period, interest on the projected benefit obligation, actual return on plan assets and amortization of actuarial gains and losses and the transition asset.
The Company recognizes costs for its non-qualified defined benefit pension and postretirement benefit plans on an accrual basis as employees perform services to earn the benefits. Net periodic benefit cost is determined using management estimates and actuarial assumptions to derive service cost, interest cost and expected return on plan assets. Net periodic benefit cost also includes the applicable amortization of any prior service cost (credit) arising from changes in prior years’ benefit costs due to plan amendments or initiation of new plans, as well as the applicable amortization of actuarial gains or losses arising from experience different than assumed or changes in actuarial assumptions. To the extent that actuarial gains or losses and prior service costs and credits have not been included in net periodic benefit costs and create a prepaid asset, the asset is nonadmitted.
Calculations of the accrued liability for postretirement medical benefits reflect a reduction for subsidies expected from the federal government pursuant to the Medicare Prescription Drug, Improvement and Modernization Act of 2003. Postretirement medical benefits are generally funded on a pay-as-you-go basis.
21 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Notes to Consolidated Statutory Basis Financial Statements |
($ in 000s) |
Note 3: Investments
Bonds and Notes
The statement value, which generally represents amortized cost, gross unrealized gains and losses, and fair value of investments in bonds and notes at December 31, 2015 and 2014 are as follows:
Statement | Gross Unrealized | |||||||||||||||
December 31, 2015 | Value | Gains | Losses | Fair Value | ||||||||||||
U.S. government | $ | 196,340 | $ | 128 | $ | (5,193 | ) | $ | 191,275 | |||||||
States, territories and possessions | 45,580 | 5,987 | - | 51,567 | ||||||||||||
Political subdivisions of states territories and possessions | 221,506 | 32,204 | (858 | ) | 252,852 | |||||||||||
Special revenue and special assessment obligations | 17,203 | 3,520 | - | 20,723 | ||||||||||||
Industrial and miscellaneous | 5,687,159 | 250,611 | (134,826 | ) | 5,802,944 | |||||||||||
Mortgage-backed securities | ||||||||||||||||
Residential mortgage |
370,039 | 30,244 | (458 | ) | 399,825 | |||||||||||
Commercial mortgage |
433,812 | 22,381 | (926 | ) | 455,267 | |||||||||||
Non-mortgage asset-backed securities | ||||||||||||||||
Collateralized debt obligations |
30,021 | 5,505 | (908 | ) | 34,618 | |||||||||||
Other |
365,316 | 4,076 | (4,625 | ) | 364,767 | |||||||||||
Other - affiliated |
89,003 | - | - | 89,003 | ||||||||||||
Total bonds and notes | $ | 7,455,979 | $ | 354,656 | $ | (147,794 | ) | $ | 7,662,841 | |||||||
22 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Notes to Consolidated Statutory Basis Financial Statements |
($ in 000s) |
Statement | Gross Unrealized | |||||||||||||||
December 31, 2014 | Value | Gains | Losses | Fair Value | ||||||||||||
U.S. government | $ | 20,387 | $ | 412 | $ | - | $ | 20,799 | ||||||||
States, territories and possessions | 45,632 | 7,419 | - | 53,051 | ||||||||||||
Political subdivisions of states | ||||||||||||||||
territories and possessions |
215,589 | 42,269 | (219 | ) | 257,639 | |||||||||||
Special revenue and special | ||||||||||||||||
assessment obligations |
17,472 | 4,937 | (10 | ) | 22,399 | |||||||||||
Industrial and miscellaneous | 5,421,434 | 426,778 | (23,104 | ) | 5,825,108 | |||||||||||
Mortgage-backed securities | ||||||||||||||||
Residential mortgage |
389,428 | 36,985 | (602 | ) | 425,811 | |||||||||||
Commercial mortgage |
403,505 | 24,964 | (1,046 | ) | 427,423 | |||||||||||
Non-mortgage asset-backed securities | ||||||||||||||||
Collateralized debt obligations |
46,816 | 2,376 | (1,265 | ) | 47,927 | |||||||||||
Other |
344,862 | 6,348 | (2,717 | ) | 348,493 | |||||||||||
Other - affiliated |
109,865 | - | - | 109,865 | ||||||||||||
Total bonds and notes | $ | 7,014,990 | $ | 552,488 | $ | (28,963 | ) | $ | 7,538,515 | |||||||
The statement value and fair value of bonds and notes at December 31, 2015, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because certain borrowers have the right to call or prepay obligations with or without call or prepayment penalties. Because of the potential for prepayment on mortgage-backed and non-mortgage, asset-backed securities, such securities have not been displayed in the table below by contractual maturity.
Statement | ||||||||
Value | Fair Value | |||||||
Due in one year or less | $ | 291,002 | $ | 294,350 | ||||
Due after one year through five years | 1,933,768 | 2,032,754 | ||||||
Due after five years through ten years | 1,881,389 | 1,914,798 | ||||||
Due after ten years | 2,061,629 | 2,077,461 | ||||||
Mortgage-backed securities | ||||||||
Residential mortgage-backed securities |
370,039 | 399,825 | ||||||
Commercial mortgage-backed securities |
433,812 | 455,267 | ||||||
Non-mortgage asset-backed securities | ||||||||
Collateralized debt obligations |
30,021 | 34,617 | ||||||
Other |
365,316 | 364,766 | ||||||
Other - affiliated |
89,003 | 89,003 | ||||||
Total bonds and notes | $ | 7,455,979 | $ | 7,662,841 | ||||
23 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Notes to Consolidated Statutory Basis Financial Statements |
($ in 000s) |
Investments in Affiliates
The Company owns common stock in various subsidiaries and affiliates. The most significant of these investments is a 100% equity interest in CMIC, which is primarily a holding company and has a statutory carrying value of $947,994 and $907,817 at December 31, 2015 and 2014, respectively. CMIC’s largest investments include 100% of CUMIS Insurance Society, Inc. (“CUMIS”), an Iowa property and casualty insurer, and 100% of CUMIS Vermont, Inc. (“CUMIS VT”), a Vermont insurer. In addition, CMIC owned 100% of Producers Ag Insurance Group, Inc. (“PAIG”) at December 31, 2014. PAIG owned 100% of Producers Agriculture Insurance Company (“PAIC”), a crop insurer domiciled in Texas. CMIC sold this investment on January 1, 2015 to a third party. CMFG Life’s investment in CMIC included $18,365 related to MEMBERS Life as of and for the year ended December 31, 2014. This investment has been eliminated as of December 31, 2015.
CMG Mortgage Insurance Company (“CMG MI”) was a 50/50 corporate joint venture with PMI Mortgage Insurance Co. (“PMI”) and was formed in 1994 to offer residential mortgage guaranty insurance for loans originated by credit unions. CMG Mortgage Assurance Company (“CMGA”) was an affiliated entity, also having been jointly-owned 50/50 with PMI, which offered insurance policies on second mortgages for loans originated from credit unions in 2001 until 2008, when the existing portfolio was put into runoff. CMGA was also the parent company of CMG Mortgage Reinsurance Company (“CMG Re”), a provider of reinsurance coverage in excess of 25% of the insured loan on policies issued by CMG MI after July 1, 1999.
The Company and PMI both provided services to CMG MI, CMGA and CMG Re in accordance with various service agreements. The Company primarily provided investment management, marketing, and administrative services, and PMI primarily provided underwriting, claims, actuarial, management, information technology and accounting services.
On January 30, 2014, CMFG Life sold all of its 50% ownership interest in CMG MI and CMGA. Upon closure of the sale, CMFG Life received $70,279 in an initial payment, and in addition, an asset for contingent future payments was established in other assets. The asset for contingent future payments is based on the performance of CMG MI over the six-year post-sale period, as defined in the purchase agreement. The asset is nonadmitted and will be reduced as cash payments are received over the earnout period. The Company estimated the fair value of the asset as of January 30, 2014 to be $40,412, based on an estimated discounted cash flow analysis.
The sale resulted in a pre-tax initial loss of $42,060, which was recorded in net realized capital losses in 2014 in the consolidated statutory basis statements of operations. The loss was the result of the release from surplus of a pre-tax $93,682 unrealized loss; the unrealized loss was present since 2009 when CMIC transferred by means of a dividend its ownership in the mortgage insurers to the Company at a carrying value of $145,216.
During 2014, the Company increased the asset for contingent future payments by $590 to reflect the final closing statement adjustment, which resulted in a cash payment of $394 and a decrease to the pre-tax loss of $115, which is recorded in net realized capital losses in 2014. During 2015 and 2014, the Company also increased the asset for contingent future payments by $4,625 and $3,118, respectively, to reflect the unwind of the accretion of the asset for the change in the initial discount; this increase in the assets is recorded in other income in 2015 and 2014. Further, the Company updated the assumptions used in its estimated discounted cash flow analysis at December 31, 2015 and 2014. As a result of updated expectations, the Company increased the asset for contingent future payments, and recorded a pretax gain of $4,137 in 2015 and a decrease to the net realized loss of $8,006 in 2014. In 2015, the Company also received cash of $10,000 for fulfilling the applicable representations and warranties pursuant to the purchase agreement. The balance of the nonadmitted future contingent payments asset is $50,807 and $52,045 as of December 31, 2015 and 2014, respectively.
24 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Notes to Consolidated Statutory Basis Financial Statements |
($ in 000s) |
Significant activity in investments in affiliates for the years ended December 31, 2015 and 2014 was as follows:
2015 | 2014 | |||||||
Capital contributions to subsidiaries - cash | $ | 15,000 | $ | 38,000 | ||||
Dividends paid by subsidiaries - cash | 100,000 | - | ||||||
Preferred and Common Stocks
The cost, gross unrealized gains and losses and fair value of unaffiliated common stocks at December 31 are as follows:
Gross Unrealized | ||||||||||||||||
Common Stocks | Cost | Gains | Losses | Fair Value | ||||||||||||
December 31, 2015 | $ | 33,786 | $ | 1,487 | $ | (82 | ) | $ | 35,191 | |||||||
December 31, 2014 | 27,953 | 1,157 | (298 | ) | 28,812 | |||||||||||
The statement value, gross unrealized gains and losses and fair value of preferred stocks at December 31 are as follows: | ||||||||||||||||
Statement | Gross Unrealized | |||||||||||||||
Preferred Stocks | Value | Gains | Losses | Fair Value | ||||||||||||
December 31, 2015 | $ | 16,215 | $ | 955 | $ | (50 | ) | $ | 17,120 | |||||||
December 31, 2014 | 14,750 | 656 | - | 15,406 | ||||||||||||
25 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Notes to Consolidated Statutory Basis Financial Statements |
($ in 000s) |
Real Estate
Real estate investments consisted of the following at December 31:
2015 | 2014 | |||||||
Real estate occupied by the Company | $ | 186,662 | $ | 183,410 | ||||
Accumulated depreciation | (112,975 | ) | (104,443 | ) | ||||
Net real estate occupied by the Company | $ | 73,687 | $ | 78,967 | ||||
Real estate held for the production of income | $ | 12,485 | $ | 19,430 | ||||
Accumulated depreciation | (5,159 | ) | (9,106 | ) | ||||
Net real estate held for the production of income | $ | 7,326 | $ | 10,324 | ||||
Depreciation expense on investments in real estate, which is netted against rental income and included in net investment income, totaled $1,016, $970 and $825 for the years ended December 31, 2015, 2014 and 2013, respectively. There were $300 of impairments recognized on real estate in 2015. There were no impairments recognized on real estate in 2014 and 2013.
Mortgage Loans
The Company’s mortgage loan portfolio consists mainly of commercial mortgage loans made to borrowers throughout the United States. All outstanding commercial mortgage loans are collateralized by completed properties. At December 31, 2015, the commercial mortgage loan portfolio had an average remaining life of 6.2 years, with all principal due prior to 2040. The Company limits its concentrations of credit risk by diversifying its mortgage loan portfolio so that loans made in any one major metropolitan area are not greater than 20% of the aggregate mortgage loan portfolio balance. No loan to a single borrower represented more than 3.3% of the aggregate mortgage loan portfolio balance.
The following table provides the current and past due amounts of the mortgage loan portfolio at December 31:
2015 | 2014 | |||||||
Current | $ | 1,518,716 | $ | 1,437,193 | ||||
1 - 30 days past due | - | 4,190 | ||||||
Unamortized premium | 6 | 30 | ||||||
Total carrying value | $ | 1,518,722 | $ | 1,441,413 | ||||
The Company has no interest accrued on loans greater than 90 days past due as of December 31, 2015.
26 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Notes to Consolidated Statutory Basis Financial Statements |
($ in 000s) |
The Company’s mortgage loans relate to properties located throughout the United States. The following table identifies states with greater than 5% of the commercial mortgage portfolio at December 31:
2015 | 2014 | ||||||
California | 22.6 | % | 21.0 | % | |||
Wisconsin | 6.8 | 6.4 | |||||
Ohio | 6.7 | 6.4 | |||||
Illinois | 6.3 | 6.4 | |||||
Florida | 5.1 | 5.1 | |||||
New York | 5.0 | 5.1 | |||||
Texas | 5.0 | 5.2 | |||||
Georgia | * | 5.3 | |||||
*Amount was less than 5%.
The types of properties collateralizing the commercial mortgage loans at December 31 are as follows:
2015 | 2014 | |||||||
Retail | 30.5 | % | 28.7 | % | ||||
Multi-family | 23.5 | 25.0 | ||||||
Industrial | 22.3 | 24.9 | ||||||
Office | 19.0 | 16.9 | ||||||
Other | 4.7 | 4.5 | ||||||
Total | 100.0 | % | 100.0 | % | ||||
The Company has no commitments as of December 31, 2015 or 2014 to lend additional funds to mortgagors whose existing mortgage terms have been restructured in a troubled debt restructuring. There were no mortgage loan restructures in 2015 or 2014.
Valuation allowances are maintained at a level that is adequate to absorb estimated probable credit losses of each specific loan. Management performs a periodic evaluation of the adequacy of the allowance for losses based on past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower’s ability to repay (including timing of future payments), the estimated value of the underlying collateral, composition of the loan portfolio, current economic conditions, and other relevant factors. Trends in market vacancy and rental rates are incorporated into the analysis of monitored loans and may contribute to the establishment of (or an increase or decrease in) an allowance for credit losses. In addition, a review of each loan in our commercial mortgage loan portfolio is performed on a quarterly basis to identify emerging risks. A valuation allowance is established or adjusted for specific loans as warranted based on this analysis. The Company’s process for determining past due or delinquency status begins when a payment date is missed. The Company places loans on nonaccrual status when it is probable that income is uncollectible. Income received after a loan is put on nonaccrual status is recognized on a cash basis. As of December 31, 2015 and 2014, there were no mortgage loans in nonaccrual status. Mortgage loans deemed uncollectible are written off against the allowance for losses. The allowance is also adjusted for any subsequent recoveries.
The Company measures and assesses the credit quality of mortgage loans by using loan to value and debt service coverage ratios. The loan to value ratio compares the principal amount of the loan to the fair value of the underlying property collateralizing the loan and is commonly expressed as a percentage. Loan to value ratios
27 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Notes to Consolidated Statutory Basis Financial Statements |
($ in 000s) |
greater than 100% indicate that the principal amount is greater than the collateral value. Therefore, all else being equal, a lower loan to value ratio generally indicates a higher quality loan. The debt service coverage ratio compares a property’s net operating income to its debt service payments. Debt service coverage ratios of less than 1.0 indicate that property operations do not generate enough income to cover its current debt payments. Therefore, a higher debt service coverage ratio generally indicates a higher quality loan. The loan to value and debt service coverage ratios are updated regularly.
There were no impaired loans as of December 31, 2015 or December 31, 2014 As of December 31, 2015 and 2014, the Company did not hold any mortgage loans with interest more than 180 days past due.
Loan to value and debt service coverage ratios are used as credit quality indicators for our mortgage loans, which were as follows at December 31, 2015:
Average | ||||||||
Principal | Debt Service | |||||||
Loan to Value | Amount | Coverage Ratio | ||||||
Less than 65% | $ | 1,185,227 | 2.18 | |||||
65% to 74% | 251,871 | 1.48 | ||||||
75% to 100% | 79,870 | 1.43 | ||||||
Greater than 100% | 1,754 | - | ||||||
$ | 1,518,722 | 2.02 | ||||||
Loan to value and debt service coverage ratios are used as credit quality indicators for our mortgage loans, which were as follows at December 31, 2014: | ||||||||
Average | ||||||||
Principal | Debt Service | |||||||
Loan to Value | Amount | Coverage Ratio | ||||||
Less than 65% | $ | 1,118,602 | 2.05 | |||||
65% to 74% | 260,377 | 1.50 | ||||||
75% to 100% | 62,409 | 1.21 | ||||||
Greater than 100% | 25 | - | ||||||
$ | 1,441,413 | 1.92 | ||||||
Derivative Financial Instruments
Consistent with its risk management strategy, the Company utilizes derivative financial instruments to help maximize risk-adjusted investment returns; reduce interest rate risks of long term assets; manage exposure to various credit, currency and market risks; and manage exposure to various equity and fixed income market sectors. Financial instruments used for such purposes include foreign currency futures, cross currency swaps, interest rate swaps, equity futures and options.
Derivative instruments used in hedging transactions that meet the criteria of a highly effective hedge are considered an effective hedge and valued and reported in a manner that is consistent with the hedged asset or liability. For those derivatives which qualify for hedge accounting, the change in the carrying value or cash flow of the derivative is recorded consistently with how the changes in the carrying value or cash flow of the hedged asset, liability, firm commitment or forecasted transaction are recorded. Derivative instruments used in hedging
28 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Notes to Consolidated Statutory Basis Financial Statements |
($ in 000s) |
transactions that do not meet or no longer meet the criteria of an effective hedge are accounted for at fair value and the changes in the fair value are recorded as unrealized gains or losses.
Foreign Currency Fair Value Hedges: Futures contracts are a commitment to purchase or deliver securities or currency in the future at a predetermined price or yield, and are usually settled in cash. When a futures contract is entered into, a margin account is established with the broker based on the requirements of the futures exchange. The Company utilized short positions in foreign currency futures to manage the fair value foreign currency risk exposure of bonds denominated in foreign currencies. Foreign currency futures designated as hedging the foreign currency risk of foreign currency denominated long-term bonds and common stock are classified as foreign currency fair value hedges. As the futures are hedges of the change in value due to the fluctuation in foreign currency exchange rates of the bonds and stocks being hedged, the futures are valued at fair value and are recorded through unrealized capital gains (losses) while the futures contracts are open. When the futures contracts are closed, gains (losses) are recognized as a component of realized capital gains (losses).
Foreign Currency Cash Flow Hedges: Cross currency swaps represent the Company’s agreement with other parties to exchange, at specified intervals, the difference between functional currency (U.S. Dollar) fixed or floating rate interest amounts and foreign currency fixed or floating rate interest amounts calculated by reference to agreed upon notional principal amounts. Generally, exchanges of functional currency (U.S. Dollar) and foreign currency notional amounts are made at the initiation and maturity of the contract. The Company uses cross currency swaps to eliminate the variability in functional currency equivalent cash flows of foreign currency denominated debt instruments. The cross currency swaps are carried at amortized cost. Interest payments paid/received on the cross currency swaps are recorded in net investment income. When the cross currency swaps are closed, gains (losses) are recognized as a component of realized capital gains (losses). The Company is hedging its exposure to the variability in future cash flows for a maximum of nine years on forecasted transactions excluding those transactions related to the payment of variable interest on existing instruments.
Interest Rate Hedges: The Company uses interest rate swaps to reduce market risks from changes in interest rates. Under interest rate swaps the Company agrees with other parties to exchange, at specified intervals, the difference between fixed-rate and floating-rate interest amounts calculated by reference to an agreed notional principal amount. Generally, no cash is exchanged at the outset of the contract and no principal payments are made by either party. The swap contracts are entered into pursuant to master agreements that normally provide for a single net payment to be made by one counterparty at each due date. The net receipt/payment is recorded as an increase/decrease to investment income.
Certain interest rate swaps have been designated as fair value hedges, and certain interest rate swaps of forecasted transactions have been designated as cash flow hedges. The swap contracts are carried at amortized cost to match the book adjusted carrying value methodology prescribed for the currently held bonds or forecasted bond purchases that they are hedging. Interest payments paid/received on the interest rate swaps are recorded in net investment income.
If a swap contract is closed prior to the swap end date, the gain or loss adjusts the basis of the hedged item and is recognized in income in a manner that is consistent with the hedged item. For bonds currently held, gains (losses) and recognized as a component of realized capital gains (losses). For hedges of forecasted transactions, deferred gains or losses are recognized in unrealized gains or losses.
For interest rate swaps that have been designated as cash flow hedges of forecasted transactions, if a forecasted transaction is determined to no longer be probable, hedge accounting will cease immediately. During 2015 and 2014, there were no cash flow hedges discontinued as a result of no longer being probable that the original forecasted transactions would occur by the end of the originally specified time period or within two months of that date. The maximum length of time over which the Company is hedging the exposure to the variability in future cash flows for forecasted transactions is 39 years.
29 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Notes to Consolidated Statutory Basis Financial Statements |
($ in 000s) |
Interest rate swaps that cannot be designated to specific interest rate risk are not accounted for using hedge accounting. These derivatives are accounted for at fair value with the changes in fair value recorded in surplus as an unrealized gain and loss.
Equity Futures: Equity futures contracts derive their value from the price level of an underlying index. The Company utilized short positions in futures contracts tied to certain indices to hedge changes in the equity-related aspects of the Company’s variable annuity liabilities. The futures are valued at fair value and recorded through unrealized capital gains (losses) while the futures contracts are open. When the futures contracts are closed, gains (losses) are recognized as a component of realized capital gains (losses).
Equity-Indexed and Single Premium Deferred Annuity Options: The Company issues equity-indexed and single premium deferred annuity contracts that guarantee a return of principal to the customer and credit interest based on certain indices, primarily the S&P 500 Index. A portion of the premium from each customer is invested in primarily investment grade bonds. A portion of the premium is used to purchase over-the-counter put and call options to hedge the change in interest credited to the customer as a direct result of the change in the related indices. The options are carried at fair value with changes in fair value recorded in unrealized capital gains (losses). When the options are closed, gains (losses) are recognized as a component of realized capital gains (losses).
Credit Risk: The Company is exposed to credit losses in the event of nonperformance by the counterparties to its swap, option and currency forward agreements. The Company monitors the credit standing of the counterparties and has entered into cash collateral agreements based on the credit rating of the counterparty. The Company anticipates that the counterparties will be able to fully satisfy their obligations under the contracts given their high credit ratings. The futures contracts are traded on a regulated exchange and have low counterparty risk. At December 31, 2015, the Company had exposure, net of collateral, of $6,906 in the event of nonperformance by all counterparties. The largest exposure with any one counterparty was $2,170 at December 31, 2015.
30 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Notes to Consolidated Statutory Basis Financial Statements |
($ in 000s) |
The following table provides a summary of the statement value, notional amount and fair value of derivative financial instruments held at December 31, 2015 and 2014.
Statement | Notional | Fair Value | Fair Value | |||||||||||||
December 31, 2015 | Value | Value | Assets | Liabilities | ||||||||||||
Futures contracts | $ | 146 | $ | 11,427 | $ | 152 | $ | 6 | ||||||||
Cross currency swaps | - | 23,471 | 2,707 | - | ||||||||||||
Interest rate swap assets | - | 130,000 | 3,272 | - | ||||||||||||
Interest rate swap liabilities | (10 | ) | 190,000 | - | 23,617 | |||||||||||
Purchased options contracts | 17,267 | 433,167 | 17,267 | - | ||||||||||||
Written options contracts | (7,729 | ) | 458,193 | - | 7,729 | |||||||||||
Total derivative financial instruments | $ | 9,674 | $ | 1,246,258 | $ | 23,398 | $ | 31,352 | ||||||||
Statement | Notional | Fair Value | Fair Value | |||||||||||||
December 31, 2014 | Value | Value | Assets | Liabilities | ||||||||||||
Futures contracts | $ | 424 | $ | 28,198 | $ | 424 | $ | - | ||||||||
Cross currency swaps | - | 23,471 | 1,156 | 121 | ||||||||||||
Interest rate swap assets | - | 30,000 | 1,012 | - | ||||||||||||
Interest rate swap liabilities | (145 | ) | 335,000 | - | 20,284 | |||||||||||
Purchased options contracts | 42,929 | 471,537 | 42,929 | - | ||||||||||||
Written options contracts | (23,556 | ) | - | - | 23,556 | |||||||||||
Total derivative financial instruments | $ | 19,652 | $ | 888,206 | $ | 45,521 | $ | 43,961 | ||||||||
31 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Notes to Consolidated Statutory Basis Financial Statements |
($ in 000s) |
The following table provides the financial statement classification and impact of derivatives used in qualifying and non-qualifying hedge relationships for the years ended December 31:
2015 | ||||||||||||
Unrealized | ||||||||||||
Realized Capital | Capital Gain | |||||||||||
Gain (Loss) | (Loss) | Total | ||||||||||
Foreign currency risk hedges | $ | 12,892 | $ | (9,883 | ) | $ | 3,009 | |||||
Interest and credit risk hedges | (2,171 | ) | 136 | (2,035 | ) | |||||||
Equity risk hedges | 7,146 | (9,391 | ) | (2,245 | ) | |||||||
Total | $ | 17,867 | $ | (19,138 | ) | $ | (1,271 | ) | ||||
2014 | ||||||||||||
Unrealized | ||||||||||||
Realized Capital | Capital Gain | |||||||||||
Gain (Loss) | (Loss) | Total | ||||||||||
Foreign currency risk hedges | $ | 645 | $ | 3,267 | $ | 3,912 | ||||||
Interest and credit risk hedges | - | (617 | ) | (617 | ) | |||||||
Equity risk hedges | 13,038 | (858 | ) | 12,180 | ||||||||
Total | $ | 13,683 | $ | 1,792 | $ | 15,475 | ||||||
Limited Partnerships
The cost and statement values of the Company’s unaffiliated limited partnerships by type were as follows at December 31:
2015 | 2014 | |||||||||||||||
Cost | Statement Value | Cost | Statement Value | |||||||||||||
Energy | $ | 2,091 | $ | 1,029 | $ | 2,064 | $ | 3,409 | ||||||||
Mezzanine | 4,573 | 5,680 | 2,510 | 833 | ||||||||||||
Private equity | 7,237 | 5,743 | 10,917 | 9,358 | ||||||||||||
Total limited partnerships | $ | 13,901 | $ | 12,452 | $ | 15,491 | $ | 13,600 | ||||||||
The Company made additional investments in unaffiliated limited partnerships in 2015, 2014 and 2013 of $3,141 $206 and $135,361, respectively.
On January 1, 2014, the Company sold its investments in limited partnerships to affiliated entities, MCA Fund I LP (“MCA Fund I”) and MCA Fund II LP (“MCA Fund II”). In exchange, CMFG Life received a 100% equity interest in MCA Fund I and an 80% equity interest in MCA Fund II. On April 1, 2014, the Company purchased an additional 10% equity interest in MCA Fund II for $21,713 in bonds. The Company owns 90% of MCA Fund II at December 31, 2015 and 2014.
32 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Notes to Consolidated Statutory Basis Financial Statements |
($ in 000s) |
On June 25, 2014, CMFG Life transferred its 100% investment in MCA Fund I to MCA Fund I Holding LLC (“MCA Holding”) in exchange for a 100% equity interest in MCA Holding. The exchange was valued at $424,882; which included external limited partnership investments of $408,976 and cash of $15,906. Subsequent to the equity transfer, CMFG Life exchanged $246,361 of its equity in MCA Holding for $55,000 in Class A Notes, $50,000 in Class B Notes, $20,000 in Class C Notes, and $121,361 of cash. These notes are included in bonds and notes in the consolidated statutory basis statements of admitted assets, liabilities and capital and surplus.
The Company made additional investments in MCA Fund I, MCA Fund II and MCA Fund III LP (“MCA Fund III”) in 2015 of $11,763, $90,226 and $61,552, respectively and in 2014 of $26,597, $130,963 and $33,945, respectively. See Note 13 for information regarding the Company’s funding commitments to limited partnerships. The Company’s investment in MCA Holding, MCA Fund II and MCA Fund III at December 31, 2015 was $174,635, $343,327 and $81,257, respectively, and at December 31, 2014 was $189,386, $285,162 and $28,229, respectively.
MCA Fund I, MCA Fund II and MCA Fund III terminate on January 1, 2034, unless extended.
CMFG Life, MCA Fund I, MCA Fund II, and MCA Fund III invest in energy, mezzanine, private equity, and real estate limited partnerships. Energy limited partnerships invest in companies that primarily engage in the exploration, production, transportation and service industries in the oil, natural gas, metals and mining industries. Mezzanine limited partnerships invest in debt or debt like instruments but may also include an equity component. Mezzanine limited partnerships tend to generate steady interest payments. Private equity limited partnerships make direct investments in companies with the intent of improving the financial results over a period of time to allow for positive returns upon a liquidity event. Real estate limited partnerships are private equity funds that primarily invest in commercial, hospitality, office, and multi-family real estate.
Cash, Cash Equivalents and Short-term Investments
The details of cash, cash equivalents and short-term investments as of December 31, are as follows:
2015 | 2014 | |||||||
Bonds: | ||||||||
U.S. government and agencies |
$ | 10,001 | $ | - | ||||
Money market mutual funds | 23,288 | 36,851 | ||||||
Cash | 41,766 | 43,841 | ||||||
Total cash, cash equivalents and short-term investments | $ | 75,055 | $ | 80,692 | ||||
33 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Notes to Consolidated Statutory Basis Financial Statements |
($ in 000s) |
Net Investment Income
Sources of net investment income for the years ended December 31 are summarized as follows:
2015 | 2014 | 2013 | ||||||||||
Bonds and notes | $ | 357,217 | $ | 349,676 | $ | 358,856 | ||||||
Bonds and notes - affiliated | - | 1,598 | - | |||||||||
Preferred stocks - unaffiliated | 2,126 | 953 | 1,994 | |||||||||
Common stocks - unaffiliated | 284 | 274 | 264 | |||||||||
Common stocks - affiliated | 100,000 | - | 4,092 | |||||||||
Mortgage loans | 73,154 | 76,811 | 68,174 | |||||||||
Real estate | 18,746 | 18,228 | 17,582 | |||||||||
Contract loans | 6,959 | 6,789 | 6,769 | |||||||||
Other invested assets | 513 | 8,618 | 31,837 | |||||||||
Cash, cash equivalents and short-term investments | 550 | 453 | 573 | |||||||||
Derivative financial instruments | (236 | ) | (168 | ) | 149 | |||||||
Other | 1,021 | 562 | 221 | |||||||||
Gross investment income | 560,334 | 463,794 | 490,511 | |||||||||
Less investment expenses | 47,335 | 42,445 | 45,416 | |||||||||
Net investment income | $ | 512,999 | $ | 421,349 | $ | 445,095 | ||||||
Investment expenses include interest, salaries, brokerage fees, securities’ custodial fees, and real estate expenses, including depreciation.
Due and accrued investment income over 90 days past due is excluded from the balance sheet as a nonadmitted asset. There was no accrued investment income excluded at December 31, 2015 or 2014 on this basis.
34 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Notes to Consolidated Statutory Basis Financial Statements |
($ in 000s) |
Net Realized Capital Gains
Net realized capital gains for the years ended December 31 are summarized as follows:
2015 | 2014 | 2013 | ||||||||||
Bonds and notes: |
||||||||||||
Gross gains from sales |
$ | 4,767 | $ | 6,693 | $ | 5,356 | ||||||
Gross losses from sales |
(3,379 | ) | (1,378 | ) | (12,347 | ) | ||||||
Other |
(2,248 | ) | (2,601 | ) | 403 | |||||||
Impairment losses |
(2,282 | ) | (639 | ) | (9,368 | ) | ||||||
Preferred stocks-unaffiliated: |
||||||||||||
Impairment losses |
(245 | ) | - | - | ||||||||
Common stocks - unaffiliated: |
||||||||||||
Gross gains from sales |
2,019 | 372 | 199 | |||||||||
Gross losses from sales |
- | - | (46 | ) | ||||||||
Impairment losses |
(298 | ) | - | (2,038 | ) | |||||||
Common stocks - affiliated: |
||||||||||||
Gross gains from sales and merger |
17,001 | - | - | |||||||||
Gross losses from sales |
- | (34,054 | ) | - | ||||||||
Real estate |
2,960 | (1,711 | ) | (407 | ) | |||||||
Mortgage loans: |
||||||||||||
Gross losses from sales |
- | - | (490 | ) | ||||||||
Limited partnerships: |
||||||||||||
Gross gains from sales |
54,957 | 117,120 | 34,835 | |||||||||
Gross losses from sales |
(24,243 | ) | (44,372 | ) | (14,111 | ) | ||||||
Derivative financial instruments |
17,867 | 13,683 | (1,295 | ) | ||||||||
Other |
247 | (532 | ) | 228 | ||||||||
Realized capital gains before taxes and transfer to interest maintenance reserve |
67,123 | 52,581 | 919 | |||||||||
Tax on realized capital gains |
(27,140 | ) | (31,029 | ) | (6,046 | ) | ||||||
Transfer to interest maintenance reserve |
(874 | ) | (3,066 | ) | 7,973 | |||||||
Net realized capital gains |
$ | 39,109 | $ | 18,486 | $ | 2,846 | ||||||
Proceeds from the sale of bonds and notes were $204,839, $256,377 and $359,495 in 2015, 2014 and 2013, respectively. Proceeds from the sale of stocks were $19,336 and $83,617 and $5,012 in 2015, 2014 and 2013, respectively.
Other-Than-Temporary Investment Impairments
Investment securities are reviewed for other-than-temporary impairment (“OTTI”) on an ongoing basis. The Company creates a watchlist of securities based largely on the fair value of an investment security relative to its amortized cost. When the fair value drops below the Company’s amortized cost, the Company monitors the security for OTTI. The determination of OTTI requires significant judgment on the part of the Company and depends on several factors, including, but not limited to:
• | The existence of any plans to sell the investment security. | ||
• | The extent to which fair value is less than statement value. | ||
• | The underlying reason for the decline in fair value (credit concerns, interest rates, etc.). |
35 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Notes to Consolidated Statutory Basis Financial Statements |
($ in 000s) |
• | The financial
condition and near term prospects of the issuer/borrower, including the ability
to meet contractual obligations, relevant industry trends and conditions. |
||
• | For loan-backed
and structured securities and equity securities, the Company’s intent and ability
to retain its investment for a period of time sufficient to allow for an anticipated
recovery in fair value. |
||
• | The Company’s ability to recover all amounts due according to the contractual terms of
the agreements. |
||
• | The Company’s collateral position, in the case of bankruptcy or restructuring. |
A bond is considered to be other-than-temporarily impaired when the fair value is less than the amortized cost basis and its value is not expected to recover through the Company’s holding period. When this occurs, the Company records a realized capital loss equal to the difference between the amortized cost and fair value. The fair value of the other-than-temporarily impaired security becomes its new cost basis. If the bond is a loan-backed or structured security, it is considered to be other-than-temporarily impaired when the amortized cost exceeds the present value of cash flows expected to be collected and its value is not expected to recover through the Company’s holding period. The amount of the other-than-temporary impairment recognized in net income as a realized loss equals the difference between the investment’s amortized cost basis and its expected cash flows. In determining whether an unrealized loss is expected to be other-than-temporary, the Company considers, among other factors, any plans to sell the security, the severity of impairment, financial position of the issuer, recent events affecting the issuer’s business and industry sector, credit ratings, and the ability of the Company to hold the investment until the fair value has recovered above its cost basis.
For certain securitized financial assets with contractual cash flows, the Company is required to periodically update its best estimate of cash flows over the life of the security. If the fair value of a securitized financial asset is less than its cost or amortized cost and there has been a decrease in the present value of the estimated cash flows since the last revised estimate, considering both timing and amount, an OTTI charge equal to the difference between amortized cost and present value of future cash flows is recognized. The Company also considers its intent and ability to retain a temporarily impaired security until recovery. Estimating future cash flows involves judgment and includes both quantitative and qualitative factors. Such determinations incorporate various information and assessments regarding the future performance of the underlying collateral. In addition, projections of expected future cash flows may change based upon new information regarding the performance of the underlying collateral.
For investments in subsidiaries and limited partnerships, the Company reviews the financial condition and future profitability of the subsidiary or limited partnership interest to assess whether any excess of our initial cost basis over the current carrying basis determined using the equity method of accounting is other-than-temporary. If such excess is deemed to be other-than-temporary, the amount is recorded as a realized capital loss.
Management believes it has made an appropriate provision for other-than-temporarily impaired securities owned at December 31, 2015. As a result of the subjective nature of these estimates, however, additional provisions may subsequently be determined to be necessary, as new facts emerge and a greater understanding of economic trends develop. Consistent with the Company’s past practices, additional OTTI will be recorded as appropriate and as determined by the Company’s regular monitoring procedures of additional facts. In light of the variables involved, such additional OTTI could be significant.
36 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Notes to Consolidated Statutory Basis Financial Statements |
($ in 000s) |
The following table identifies the Company’s OTTI by type of investment for the years ended December 31:
2015 | 2014 | 2013 | ||||||||||
Residential mortgage-backed: | ||||||||||||
Alt-A |
$ | - | $ | (1 | ) | $ | (1,670 | ) | ||||
Prime |
- | - | (549 | ) | ||||||||
Sub-prime |
- | (236 | ) | (398 | ) | |||||||
Other |
(70 | ) | (138 | ) | (6 | ) | ||||||
Commercial mortgage-backed | (2 | ) | (146 | ) | (5,484 | ) | ||||||
Collateralized debt obligations | (3 | ) | (118 | ) | (1,261 | ) | ||||||
Industrial and miscellaneous | (2,207 | ) | - | - | ||||||||
Total bonds and notes | (2,282 | ) | (639 | ) | (9,368 | ) | ||||||
Common and preferred stocks | (543 | ) | - | (2,038 | ) | |||||||
Total other than temporary impairment losses | $ | (2,825 | ) | $ | (639 | ) | $ | (11,406 | ) | |||
All other-than-temporary impairments for loan-backed and structured securities were due to present value of cash flows expected to be collected being less than amortized cost.
The Company did not recognize any OTTI on loan-backed and structured securities during 2015, 2014 and 2013 caused by an intent to sell or lack of intent and ability to hold until recovery of the amortized cost basis.
37 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Notes to Consolidated Statutory Basis Financial Statements |
($ in 000s) |
The following tables list each loan-backed security held as of December 31, 2015 for which a credit related OTTI loss was recognized during 2015.
Book Adjusted | ||||||||||||||||
Carrying Value | ||||||||||||||||
Before | Amortized | |||||||||||||||
Current Period | Recognized | Cost After | ||||||||||||||
Other-Than- | Other-Than- | Other-Than- | ||||||||||||||
Temporary | Temporary | Temporary | ||||||||||||||
CUSIP | Impairments | Impairments | Impairments | Fair Value | ||||||||||||
22943EAF0 | $ | 6,771 | $ | (3 | ) | $ | 6,768 | $ | 6,765 | |||||||
62544HAL9 | 2,951 | - | 2,951 | 2,932 | ||||||||||||
004421FZ1 | 32 | (32 | ) | - | 19 | |||||||||||
62544HAL9 | 2,950 | - | 2,950 | 2,850 | ||||||||||||
759950ER5 | 199 | (38 | ) | 161 | 161 | |||||||||||
Total | $ | 12,903 | $ | (73 | ) | $ | 12,830 | $ | 12,727 | |||||||
Net Unrealized Capital Gains
The components of the change in net unrealized capital gains included in unassigned surplus for the years ended December 31 are shown in the table below.
2015 | 2014 | 2013 | ||||||||||
Bonds and notes | $ | 1,447 | $ | 280 | $ | 6,255 | ||||||
Preferred stocks - unaffiliated | 245 | (245 | ) | - | ||||||||
Common stocks - unaffiliated | 538 | 756 | 2,244 | |||||||||
Common stocks - affiliated | 33,103 | 165,726 | 720 | |||||||||
Limited partnerships - unaffiliated | (14,325 | ) | (8,429 | ) | 25,188 | |||||||
Derivative financial instruments | (19,138 | ) | 1,792 | 4,810 | ||||||||
Deferred income taxes | 10,863 | (32,650 | ) | (10,495 | ) | |||||||
Change in unrealized capital gains, net of tax | $ | 12,733 | $ | 127,230 | $ | 28,722 | ||||||
38 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Notes to Consolidated Statutory Basis Financial Statements |
($ in 000s) |
Information regarding the Company’s bonds and notes and stocks with unrealized losses at December 31, 2015 is presented below, segregated between those that have been in a continuous unrealized loss position for less than twelve months and those that have been in a continuous unrealized loss position for twelve or more months.
Months in Unrealized Loss Position | ||||||||||||||||||||||||
Less Than | Twelve | Total | ||||||||||||||||||||||
Twelve Months | Months or Greater | December 31, 2015 | ||||||||||||||||||||||
Unrealized | Unrealized | Unrealized | ||||||||||||||||||||||
Bonds and notes | Fair Value | Loss | Fair Value | Loss | Fair Value | Loss | ||||||||||||||||||
U.S. government and agencies | $ | 187,070 | $ | (5,193 | ) | $ | - | $ | - | $ | 187,070 | $ | (5,193 | ) | ||||||||||
Political subdivisions of states, | ||||||||||||||||||||||||
territories and possessions |
8,925 | (563 | ) | 3,686 | (401 | ) | 12,611 | (964 | ) | |||||||||||||||
Industrial and miscellaneous | 1,489,065 | (101,939 | ) | 134,364 | (32,887 | ) | 1,623,429 | (134,826 | ) | |||||||||||||||
Mortgage-backed | ||||||||||||||||||||||||
Residential mortgage-backed |
33,831 | (234 | ) | 6,620 | (320 | ) | 40,451 | (554 | ) | |||||||||||||||
Commercial mortgage-backed |
66,052 | (595 | ) | 7,685 | (331 | ) | 73,737 | (926 | ) | |||||||||||||||
Non-mortgage asset-backed | ||||||||||||||||||||||||
Collateralized debt obligations |
3,954 | (45 | ) | 18,788 | (1,326 | ) | 22,742 | (1,371 | ) | |||||||||||||||
Other |
79,479 | (502 | ) | 213,405 | (4,123 | ) | 292,884 | (4,625 | ) | |||||||||||||||
Total bonds and notes | 1,868,376 | (109,071 | ) | 384,548 | (39,388 | ) | 2,252,924 | (148,459 | ) | |||||||||||||||
Common stocks and preferred stocks | 3,950 | (50 | ) | 2,163 | (82 | ) | 6,113 | (132 | ) | |||||||||||||||
Total temporarily impaired securities | $ | 1,872,326 | $ | (109,121 | ) | $ | 386,711 | $ | (39,470 | ) | $ | 2,259,037 | $ | (148,591 | ) | |||||||||
At December 31, 2015, the Company owned 516 bonds and notes with a fair value of $2,252,924 in an unrealized investment loss position. There were 98 of the 516 bonds and notes with a fair value of $384,548 in an unrealized loss position for twelve or more months. The aggregate severity of unrealized losses for bonds and notes is approximately 9.3% of amortized cost. The total fair value of bonds and notes with unrealized losses at December 31, 2015 and which are rated “investment grade” based on having an NAIC rating of 1 or 2 is $2,055,273 or 91.2% of the total fair value of all bonds and notes with unrealized losses at December 31, 2015. Total unrealized losses on investment grade bonds and notes were $118,870 at December 31, 2015. Unrealized losses on collateralized debt obligations include two securities rated NAIC 6 with an additional loss of $463 as of December 31, 2015.
At December 31, 2015, the Company had two stocks with a fair value of $6,113 in an unrealized loss position. At December 31, 2015, the Company had one stock with a fair value of $2,163 in an unrealized loss position for more than twelve months. The aggregate severity of unrealized losses for stocks is 3.6% of cost.
39 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Notes to Consolidated Statutory Basis Financial Statements |
($ in 000s) |
Information regarding the CMFG Life’s bonds and notes and stocks with unrealized losses at December 31, 2014 is presented below, segregated between those that have been in a continuous unrealized loss position for less than twelve months and those that have been in a continuous unrealized loss position for twelve or more months.
Months in Unrealized Loss Position | ||||||||||||||||||||||||
Less Than | Twelve | Total | ||||||||||||||||||||||
Twelve Months | Months or Greater | December 31, 2014 | ||||||||||||||||||||||
Unrealized | Unrealized | Unrealized | ||||||||||||||||||||||
Bonds and notes | Fair Value | Loss | Fair Value | Loss | Fair Value | Loss | ||||||||||||||||||
Political subdivisions of states, | ||||||||||||||||||||||||
territories and possessions |
$ | 1,773 | $ | (33 | ) | $ | 2,130 | $ | (186 | ) | $ | 3,903 | $ | (219 | ) | |||||||||
Special revenue and | ||||||||||||||||||||||||
special assessment obligation |
- | - | 241 | (10 | ) | 241 | (10 | ) | ||||||||||||||||
Industrial and miscellaneous | 366,240 | (13,765 | ) | 176,331 | (9,339 | ) | 542,571 | (23,104 | ) | |||||||||||||||
Mortgage-backed | ||||||||||||||||||||||||
Residential mortgage-backed |
12,572 | (549 | ) | 611 | (53 | ) | 13,183 | (602 | ) | |||||||||||||||
Commercial mortgage-backed |
5,753 | (106 | ) | 41,052 | (940 | ) | 46,805 | (1,046 | ) | |||||||||||||||
Non-mortgage asset-backed | ||||||||||||||||||||||||
Collateralized debt obligations |
- | - | 13,759 | (3,376 | ) | 13,759 | (3,376 | ) | ||||||||||||||||
Other |
135,862 | (1,973 | ) | 94,058 | (744 | ) | 229,920 | (2,717 | ) | |||||||||||||||
Total bonds and notes | 522,200 | (16,426 | ) | 328,182 | (14,648 | ) | 850,382 | (31,074 | ) | |||||||||||||||
Common stocks and preferred stocks | - | - | 532 | (543 | ) | 532 | (543 | ) | ||||||||||||||||
Total temporarily impaired securities | $ | 522,200 | $ | (16,426 | ) | $ | 328,714 | $ | (15,191 | ) | $ | 850,914 | $ | (31,617 | ) | |||||||||
At December 31, 2014, CMFG Life owned 228 bonds and notes with a fair value of $850,382 in an unrealized investment loss position. There were 103 of the 228 bonds and notes with a fair value of $328,182 in an unrealized loss position for twelve or more months. The aggregate severity of unrealized losses for bonds and notes is approximately 4.3% of amortized cost. The total fair value of bonds and notes with unrealized losses at December 31, 2014 and which are rated “investment grade” based on having an NAIC rating of 1 or 2 is $729,106 or 85.7% of the total fair value of all bonds and notes with unrealized losses at December 31, 2014. Total unrealized losses on investment grade bonds and notes were $21,437 at December 31, 2014. Unrealized losses on collateralized debt obligations include two securities rated NAIC 6 with an additional loss of $2,111 as of December 31, 2014.
At December 31, 2014, CMFG Life had three stocks with a fair value of $532 in an unrealized loss position. All three stocks had been in an unrealized loss position for more than twelve months. The aggregate severity of unrealized losses for stocks is 50.5% of cost.
40 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Notes to Consolidated Statutory Basis Financial Statements |
($ in 000s) |
Investment Credit Risk
The Company maintains a diversified investment portfolio including issuer, sector and geographic stratification, where applicable, and has established certain exposure limits, diversification standards, and review procedures to mitigate credit risk.
Self-Occupancy Rent
Under statutory accounting practices, the Company is required to include in investment income and general insurance expense an amount representing rental income for occupancy of its own buildings. Investment income includes self-occupancy rental income of $15,699 in 2015, $15,298 in 2014 and $14,904 in 2013.
Assets Designated/Securities on Deposit
Iowa law requires that assets equal to a life insurer’s legal reserve must be designated for the Insurance Department for the protection of all policyholders. The legal reserve is equal to the net present value of all outstanding policies and contracts involving life contingencies. The Company designates assets for the Insurance Department for the protection of all policyholders and for other regulatory jurisdictions who require cash and securities be deposited for the benefit of policyholders. The Company also has securities pledged to the Federal Home Loan Bank (see Note 11), commercial banks in support of letters of credit and as other collateral. The Company also had pledged assets to guarantee an affiliate’s unsecured revolving credit facility agreement (see Note 13).
The statement value of assets designated, on deposit or pledged by designee as of December 31 are as follows:
2015 | 2014 | |||||||
Iowa Insurance Department | $ | 8,653,906 | $ | 8,146,771 | ||||
Other requlatory jurisdictions | 7,026 | 5,542 | ||||||
Federal Home Loan Bank | 423,890 | 214,636 | ||||||
Commercial banks for letters of credit | - | 105,360 | ||||||
Other colateral pledges | 17,067 | 10,517 | ||||||
Guarantee of affiliated unsecured revolving credit facility | - | 113,620 | ||||||
Total assets designated and assets on deposit | $ | 9,101,889 | $ | 8,596,446 | ||||
The statement value of assets designated, on deposit or pledged as of December 31 are as follows:
2015 | 2014 | |||||||
Bonds and notes and short-term investments | $ | 7,473,238 | $ | 7,051,841 | ||||
Mortgage loans | 1,518,722 | 1,441,413 | ||||||
Contract loans | 102,897 | 103,192 | ||||||
Margin account collateral | 7,032 | - | ||||||
Total assets designated and assets on deposit | $ | 9,101,889 | $ | 8,596,446 | ||||
41 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Notes to Consolidated Statutory Basis Financial Statements |
($ in 000s) |
On December 31, 2012, CMFG Life entered into a coinsurance and modified coinsurance agreement with its affiliate, CMFG Life VT, to cede 100% of its variable annuity business. CMFG Life commuted this agreement on November 30, 2015 (see Note 7). CMFG Life was required to manage certain assets according to guidelines contained in the agreement. These assets provided the basis for investment income to be earned and paid to CMFG Life VT. The pool of assets was $241,247 as of December 31, 2014, and was approximately equal to the amount of reserves covered by the agreements. These assets were included in invested assets in the consolidated statutory basis statements of admitted assets, liabilities and capital and surplus. Due to the commutation, CMFG Life is no longer required to designate assets for this agreement.
Note 4: Fair Value
The Company uses fair value measurements to record fair value of certain assets and liabilities and to estimate fair value of financial instruments not recorded at fair value but required to be disclosed at fair value. Certain financial instruments, such as insurance policy liabilities other than investment-type contracts and investments accounted for using the equity method, are excluded from the fair value disclosure requirements. The Company uses fair value measurements obtained using observable inputs or internally determined estimates to estimate fair value.
Valuation Hierarchy
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value of assets and liabilities into three broad levels. The Company has categorized its financial instruments, based on the degree of subjectivity inherent in the valuation technique, as follows:
• | Level 1: Inputs
are directly observable and represent quoted prices for identical assets or liabilities
in active markets the Company has the ability to access at the measurement date. |
||
• | Level 2: All
significant inputs are observable, either directly or indirectly, other than quoted
prices included in Level 1, for the asset or liability. This includes: (i) quoted
prices for similar instruments in active markets, (ii) quoted prices for identical
or similar instruments in markets that are not active, (iii) inputs other than quoted
prices that are observable for the instruments and (iv) inputs that are derived
principally from or corroborated by observable market data by correlation or other
means. |
||
• | Level 3: One
or more significant inputs are unobservable and reflect the Company’s estimates
of the assumptions that market participants would use in pricing the asset or liability,
including assumptions about risk. |
For purposes of determining the fair value of the Company’s assets and liabilities, observable inputs are those inputs used by market participants in valuing financial instruments, which are developed based on market data obtained from independent sources. In the absence of sufficient observable inputs, unobservable inputs, reflecting the Company’s estimates of the assumptions market participants would use in valuing financial assets and liabilities, are developed based on the best information available in the circumstances. The Company uses prices and inputs that are current as of the measurement date. In some instances, valuation inputs used to measure fair value fall into different levels of the fair value hierarchy. The category level in the fair value hierarchy is determined based on the lowest level input that is significant to the fair value measurement in its entirety.
The hierarchy requires the use of market observable information when available for measuring fair value. The availability of observable inputs varies by investment. In situations where the fair value is based on inputs that are unobservable in the market or on inputs from inactive markets, the determination of fair value requires more judgment and is subject to the risk of variability. The degree of judgment exercised by the Company in
42 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Notes to Consolidated Statutory Basis Financial Statements |
($ in 000s) |
determining fair value is typically greatest for investments categorized in Level 3. Transfers in and out of level categorizations are reported as having occurred at the end of the quarter in which the transfer occurred. Therefore, for all transfers into Level 3, all realized gains and losses and all changes in unrealized gains and losses in the fourth quarter are not reflected in the Level 3 rollforward table.
Valuation Process
The Company is responsible for the determination of fair value and the supporting assumptions and methodologies. The Company gains assurance on the overall reasonableness and consistent application of valuation methodologies and inputs and compliance with accounting standards through the execution of various processes and controls designed to provide assurance that assets and liabilities are appropriately valued.
The Company has policies and guidelines that require the establishment of valuation methodologies and consistent application of such methodologies. These policies and guidelines govern the use of inputs and price source hierarchies and provide controls around the valuation processes. These controls include appropriate review and analysis of prices against market activity or indicators of reasonableness, approval of price source changes, price overrides, methodology changes and classification of fair value hierarchy levels. The valuation policies and guidelines are reviewed and updated as appropriate.
For fair values received from third parties or internally estimated, the Company’s processes are designed to provide assurance that the valuation methodologies and inputs are appropriate and consistently applied, the assumptions are reasonable and consistent with the objective of determining fair value, and the fair values are appropriately recorded. The Company performs procedures to understand and assess the methodologies, process and controls of valuation service providers. In addition, the Company may validate the reasonableness of fair values by comparing information obtained from valuation service providers or brokers to other third party valuation sources for selected securities. When using internal valuation models, these models are developed by the Company’s investment group using established methodologies. The models, including key assumptions, are reviewed with various investment sector professionals, accounting, operations, compliance, and risk management professionals. In addition, when fair value estimates involve a high degree of subjectivity, the Company validates them through reviews by members of management who have relevant expertise and who are independent of those charged with executing investment transactions.
Transfers Between Levels
There was one transfer totaling $565 into Level 3 from Level 2 during the year ended December 31, 2015. There were no transfers between Level 1 and Level 2 or from Level 3 to Level 2 during the year ended December 31, 2015. There were no transfers between Level 1 and Level 2 during the year ended December 31, 2014. There was one transfer totaling $2,299 into Level 2 from Level 3 and no transfers into Level 3 from Level 2 during the year ended December 31, 2014. The transfers into Level 2 occurred due to a change in the availability of the observable inputs. Transfers into Level 3 related to changes from models using significant inputs that were observable to models using one or more significant inputs that were unobservable. Transfers out of Level 3 related to changes from models using one or more significant inputs that were unobservable to models using significant inputs that were observable.
43 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Notes to Consolidated Statutory Basis Financial Statements |
($ in 000s) |
Fair Value Measurement
The following table summarizes the Company’s assets and liabilities that are measured at fair value as of December 31, 2015.
Assets, at Fair Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Bonds | ||||||||||||||||
Political subdivisons |
$ | - | $ | 1,980 | $ | - | $ | 1,980 | ||||||||
Residential mortgage-backed securities |
- | - | 568 | 568 | ||||||||||||
Collateralized debt obligations |
- | - | 2,930 | 2,930 | ||||||||||||
Total bonds |
- | 1,980 | 3,498 | 5,478 | ||||||||||||
Preferred stocks | - | - | 7,215 | 7,215 | ||||||||||||
Common stocks | 24,000 | - | 11,191 | 35,191 | ||||||||||||
Short-term investments | 23,288 | - | - | 23,288 | ||||||||||||
Derivative assets | ||||||||||||||||
Options |
- | 17,267 | - | 17,267 | ||||||||||||
Futures contracts |
152 | - | - | 152 | ||||||||||||
Total derivative assets |
152 | 17,267 | - | 17,419 | ||||||||||||
Separate account assets | 1,628 | 3,139,750 | - | 3,141,378 | ||||||||||||
Total assets at fair value | $ | 49,068 | $ | 3,158,997 | $ | 21,904 | $ | 3,229,969 | ||||||||
Liabilities, at Fair Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Derivative liabilities | ||||||||||||||||
Options |
$ | - | $ | 7,729 | $ | - | $ | 7,729 | ||||||||
Futures Contracts |
6 | - | - | 6 | ||||||||||||
Swaps |
- | 10 | - | 10 | ||||||||||||
Total liabilities | $ | 6 | $ | 7,739 | $ | - | $ | 7,745 | ||||||||
44 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Notes to Consolidated Statutory Basis Financial Statements |
($ in 000s) |
The following table summarizes CMFG Life’s assets and liabilities that are measured at fair value as of December 31, 2014.
Assets, at Fair Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Bonds | ||||||||||||||||
Residential mortgage-backed securities |
$ | - | $ | - | $ | 3 | $ | 3 | ||||||||
Collateralized debt obligations |
- | - | 1,283 | 1,283 | ||||||||||||
Total bonds |
- | - | 1,286 | 1,286 | ||||||||||||
Preferred stocks | - | - | 5,750 | 5,750 | ||||||||||||
Common stocks | 17,600 | - | 11,212 | 28,812 | ||||||||||||
Short-term investments | 36,851 | - | - | 36,851 | ||||||||||||
Derivative assets | ||||||||||||||||
Options |
- | 42,929 | - | 42,929 | ||||||||||||
Interest rate swaps |
424 | - | - | 424 | ||||||||||||
Total derivative assets |
424 | 42,929 | - | 43,353 | ||||||||||||
Separate account assets | 21,883 | 3,898,341 | - | 3,920,224 | ||||||||||||
Total assets at fair value | $ | 76,758 | $ | 3,941,270 | $ | 18,248 | $ | 4,036,276 | ||||||||
Liabilities, at Fair Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Derivative liabilities | ||||||||||||||||
Options |
$ | - | $ | 23,556 | $ | - | $ | 23,556 | ||||||||
Interest rate swaps |
- | 145 | - | 145 | ||||||||||||
Total liabilities at fair value | $ | - | 23,701 | - | 23,701 | |||||||||||
45 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Notes to Consolidated Statutory Basis Financial Statements |
($ in 000s) |
Changes in Fair Value Measurement
The following table sets forth the changes in assets classified as Level 3 within the fair value hierarchy for the year ended December 31, 2015:
Realized/Unrealized | ||||||||||||||||||||||||||||
Gain (Loss) | ||||||||||||||||||||||||||||
Included in: | ||||||||||||||||||||||||||||
Net | ||||||||||||||||||||||||||||
Balance | Transfers | Transfers | Purchases, | Balance | ||||||||||||||||||||||||
January | in to | out of | Net | Unassigned | (Sales) and | December | ||||||||||||||||||||||
1, 2015 | Level 3 | Level 3 | Income1 | Surplus | (Maturities) | 31, 2015 | ||||||||||||||||||||||
Bonds | ||||||||||||||||||||||||||||
Residential mortgage- |
||||||||||||||||||||||||||||
backed securities |
$ | 3 | $ | 565 | $ | - | $ | - | $ | - | $ | - | $ | 568 | ||||||||||||||
Collateralized |
||||||||||||||||||||||||||||
debt obligations |
1,283 | - | - | - | 1,647 | - | 2,930 | |||||||||||||||||||||
Preferred stocks | 5,750 | - | - | (245 | ) | 245 | 1,465 | 7,215 | ||||||||||||||||||||
Common stocks | 11,212 | - | - | 1,657 | 538 | (2,216 | ) | 11,191 | ||||||||||||||||||||
Total assets | $ | 18,248 | $ | 565 | $ | - | $ | 1,412 | $ | 2,430 | $ | (751 | ) | $ | 21,904 | |||||||||||||
1Included in net income are amortization of premium/discount, impairments, and realized gains and losses.
The following table provides the components of the items included in Level 3 net purchases, sales and maturities for 2015:
Net Purchases, | ||||||||||||||||
(Sales) and | ||||||||||||||||
Purchases | Sales | Maturities | (Maturities) | |||||||||||||
Preferred stocks | $ | 1,465 | $ | - | $ | - | $ | 1,465 | ||||||||
Common stocks | 744 | (2,960 | ) | - | (2,216 | ) | ||||||||||
Total assets | $ | 2,209 | $ | (2,960 | ) | $ | - | $ | (751 | ) | ||||||
46 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Notes to Consolidated Statutory Basis Financial Statements |
($ in 000s) |
The following table sets forth the changes in assets classified as Level 3 within the fair value hierarchy for the year ended December 31, 2014:
Realized/Unrealized | ||||||||||||||||||||||||||||
Gain (Loss) | ||||||||||||||||||||||||||||
Included in: | ||||||||||||||||||||||||||||
Net | ||||||||||||||||||||||||||||
Balance | Transfers | Transfers | Purchases, | Balance | ||||||||||||||||||||||||
January | in to | out of | Net | Unassigned | (Sales) and | December | ||||||||||||||||||||||
1, 2014 | Level 3 | Level 3 | Income1 | Surplus | (Maturities) | 31, 2014 | ||||||||||||||||||||||
Bonds | ||||||||||||||||||||||||||||
Residential mortgage- |
||||||||||||||||||||||||||||
backed securities |
$ | 2,303 | $ | - | $ | 2,299 | $ | - | $ | - | $ | (1 | ) | $ | 3 | |||||||||||||
Collateralized |
||||||||||||||||||||||||||||
debt obligations |
1,045 | - | - | 238 | - | - | 1,283 | |||||||||||||||||||||
Preferred stocks | 5,995 | - | - | (245 | ) | - | - | 5,750 | ||||||||||||||||||||
Common stocks | 10,457 | - | - | 755 | - | - | 11,212 | |||||||||||||||||||||
Total assets | $ | 19,800 | $ | - | $ | 2,299 | $ | 748 | $ | - | $ | (1 | ) | $ | 18,248 | |||||||||||||
1Included in net income are amortization of premium/discount, impairments, and realized gains and losses.
The following table provides the components of the items included in Level 3 net purchases, sales and maturities for 2014:
Net Purchases, | ||||||||||||||||
(Sales) and | ||||||||||||||||
Purchases | Sales | Maturities | (Maturities) | |||||||||||||
Bonds | ||||||||||||||||
Residential mortgage-backes |
$ | - | $ | - | $ | (1 | ) | $ | (1 | ) | ||||||
Total assets | $ | - | $ | - | $ | (1 | ) | $ | (1 | ) | ||||||
Determination of Fair Values
The Company determines the estimated fair value of its investments using primarily the market approach and the income approach. The use of quoted prices and matrix pricing or similar techniques are examples of market approaches, while the use of discounted cash flow methodologies is an example of the income approach. A summary of valuation techniques for classes of financial assets and liabilities by fair value hierarchy level are as follows:
47 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Notes to Consolidated Statutory Basis Financial Statements |
($ in 000s) |
Level 1 Measurements
Common stocks: Consists of the Federal Home Loan Bank common stock as required as a member of the Federal Home Loan Bank of Des Moines. Valuation is based on the published redemption price at which the Company could transact.
Short-term investments: Consists of money market mutual funds. Valuation is based on the closing price as of December 31.
Derivative assets and liabilities: Exchange traded derivatives that are actively traded and are valued based on quoted prices for identical instruments in markets that are active.
Separate account assets: Consists of money market funds; valuation is based on the closing price as of December 31.
Level 2 Measurements
Bonds and notes: Valuation is principally based on observable inputs including quoted prices for similar assets in markets that are active and observable market data, such as the U.S. Treasury curve.
Derivative assets and liabilities: Consists of options; valuation inputs having a significant effect on fair value include market quoted interest rates, market-implied volatility and other observable inputs regularly used by industry participants in the over-the-counter derivatives markets.
Separate account assets: Consists of mutual funds and unit investment trusts in which the contract holder could redeem its investment at net asset value per share at the measurement date with the investee; and bonds and notes where valuation is principally based on observable inputs including quoted prices for similar assets in markets that are active and observable market data.
Level 3 Measurements
Mortgage-backed securities (residential and commercial) and collateralized debt obligations: Valuations are obtained from independent, third-party pricing sources without adjustment. The Company does not have access to the significant unobservable inputs used to price these securities due to the lack of transparency in the process used by third parties to develop prices for these investments. The Company believes however, the types of inputs third parties may use would likely be similar to those used to price securities for which inputs are available to the Company, and therefore may include, but not limited to, loss severity rates, constant repayment rates, constant default rates and counterparty credit spreads.
Preferred and common stocks: Consists of non-public securities primarily acquired in conjunction with investments in limited partnerships. Such investments are initially valued at transaction price and subsequently adjusted using internal appraisals that rely on unadjusted information obtained from general partners of the private equity investments.
Fair Value Measurement of Financial Instruments
Accounting standards require disclosure of fair value information about certain on and off-balance sheet financial instruments for which it is practicable to estimate that value.
48 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Notes to Consolidated Statutory Basis Financial Statements |
($ in 000s) |
The following table summarizes the carrying amounts and fair values of the Company’s financial instruments for which it is practicable to estimate fair value by fair value measurement level at December 31, 2015:
Carrying | |||||||||||||||||||
Amount | Fair Value | Level 1 | Level 2 | Level 3 | |||||||||||||||
Financial instruments recorded as assets: | |||||||||||||||||||
Bonds and notes |
$ | 7,455,979 | $ | 7,662,841 | $ | - | $ | 7,205,053 | $ | 418,203 | |||||||||
Common stocks - unaffiliated |
35,191 | 35,191 | 24,000 | - | 11,191 | ||||||||||||||
Preferred stocks - unaffiliated |
16,215 | 17,120 | - | 9,178 | 7,942 | ||||||||||||||
Mortgage loans |
1,518,722 | 1,579,765 | - | - | 1,579,765 | ||||||||||||||
Cash equivalents and |
|||||||||||||||||||
short-term investments1 |
33,289 | 33,289 | 30,288 | 3,001 | - | ||||||||||||||
Other invested assets |
10,739 | 10,739 | - | - | 10,739 | ||||||||||||||
Derivatives |
17,419 | 23,398 | 152 | 23,246 | - | ||||||||||||||
Separate account assets |
4,012,697 | 4,015,747 | 1,628 | 4,001,685 | 12,434 | ||||||||||||||
Financial instruments recorded as liabilities: |
|||||||||||||||||||
Deposit-type contracts |
363,896 | 382,411 | - | 382,411 | - | ||||||||||||||
Derivatives |
7,745 | 31,352 | 6 | 31,346 | - | ||||||||||||||
Notes and interest payable |
354,437 | 354,563 | - | 354,563 | - | ||||||||||||||
Separate account liabilities |
4,012,697 | 4,015,747 | 1,628 | 4,001,685 | 12,434 | ||||||||||||||
Financial instruments recorded as surplus: |
|||||||||||||||||||
Surplus notes |
85,000 | 104,593 | - | 104,593 | - | ||||||||||||||
1Excludes cash and cash equivalents of $41,766 that is not subject to fair value accounting.
49 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Notes to Consolidated Statutory Basis Financial Statements |
($ in 000s) |
The following table summarizes the carrying amounts and fair values of CMFG Life’s financial instruments for which it is practical to estimate that value by fair value measurement level at December 31, 2014:
Carrying | ||||||||||||||||||||
Amount | Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||||||
Financial instruments recorded as assets: | ||||||||||||||||||||
Bonds and notes |
$ | 7,014,990 | $ | 7,538,515 | $ | - | $ | 7,112,075 | $ | 426,440 | ||||||||||
Common stocks - unaffiliated |
28,812 | 28,812 | 17,600 | - | 11,212 | |||||||||||||||
Preferred stocks - unaffiliated |
14,750 | 15,406 | - | 9,133 | 6,273 | |||||||||||||||
Mortgage loans |
1,441,413 | 1,542,380 | - | - | 1,542,380 | |||||||||||||||
Cash equivalents and |
||||||||||||||||||||
short-term investments1 |
36,851 | 36,851 | 36,851 | - | - | |||||||||||||||
Other invested assets |
13,787 | 13,787 | - | - | 13,787 | |||||||||||||||
Derivatives |
43,353 | 45,521 | 424 | 45,097 | - | |||||||||||||||
Separate account assets |
4,227,881 | 4,227,881 | - | 4,227,881 | ||||||||||||||||
Financial instruments recorded as liabilities: |
||||||||||||||||||||
Deposit-type contracts |
389,823 | 423,050 | - | 423,050 | - | |||||||||||||||
Derivatives |
23,701 | 43,961 | - | 43,961 | - | |||||||||||||||
Notes and interest payable |
194,700 | 194,873 | - | 194,873 | - | |||||||||||||||
Separate account liabilities |
4,227,881 | 4,227,881 | - | 4,227,881 | - | |||||||||||||||
Financial instruments recorded as surplus: |
||||||||||||||||||||
Surplus notes |
85,000 | 105,097 | - | 105,097 | - | |||||||||||||||
1Excludes cash and cash equivalents of $43,841 that is not subject to fair value accounting.
The carrying amounts for cash, accrued investment income, and margin deposits approximate their fair values due to their short-term nature and have been excluded from the fair value tables above.
The following methods and assumptions were used by the Company in estimating its fair value disclosures for financial instruments by fair value hierarchy level:
Level 1 Measurements
Common stocks: Consists of the Federal Home Loan Bank common stock as required as a member of the Federal Home Loan Bank of Des Moines. Valuation is based on the published redemption price at which the Company could transact.
Cash equivalents and short-term investments: Consists of money market mutual funds and valuation is principally based on observable inputs including quoted prices for similar assets in markets that are active and observable market data.
Derivative assets and liabilities: Consists of exchange traded derivatives that are actively traded and are valued based on quoted prices for identical instruments in markets that are active.
50 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Notes to Consolidated
Statutory Basis Financial Statements ($ in 000s) |
Separate account assets: Consists of money market funds; valuation is based on the closing price as of the balance sheet date.
Level 2 Measurements
Bonds and notes: Valuation is principally based on observable inputs including quoted prices for similar assets in markets that are active and observable market data.
Preferred stocks: Consists of privately placed common and preferred stock. Valuation is based on observable market inputs such as risk free rates and market comparables.
Cash equivalents and short-term investments: Consists of U.S. government bonds and valuation is principally based on observable inputs including quoted prices for similar assets in markets that are active and observable market data.
Derivative assets and liabilities: Consists of derivatives such as options and swaps; valuation inputs having a significant effect on fair value include market quoted interest rates, market-implied volatility and other observable inputs regularly used by industry participants in the over-the-counter derivatives market.
Separate account assets and liabilities: Separate account assets are investments in mutual funds and unit investment trusts in which the contract holder could redeem its investment at net asset value per share at the measurement date with the investee; and bonds and notes where valuation is principally based on observable inputs including quoted prices for similar assets in markets that are active and observable market data. Separate account liabilities represent the account value owed to the customer which is equal to the segregated assets carried at fair value, except for separate accounts for single premium deferred annuities which are carried at the lower of amortized cost or fair value.
Deposit-type contracts: The fair value of the Company’s liabilities under deposit-type insurance contracts is based on the account balance less applicable surrender charges and considering applicable market value adjustments, such as a spread equivalent to the cost of funds for insurance companies.
Notes and interest payable and surplus notes: The fair value for notes and interest payable and surplus notes is estimated using discounted cash flow analysis with interest rates currently being offered in the marketplace for similar loans to borrowers with similar credit ratings.
Short-term investments: Consists of U.S. Treasury securities that mature within one year from the date of purchase; valuation is based on observable inputs such as the U.S. Treasury yield curve, market indicated spreads and quoted prices for identical assets in markets that are not active and/or similar assets in markets that are active.
Level 3 Measurements
Bonds and notes: Valuation is principally based on unobservable inputs that are significant including estimated prices for similar assets in markets that may not be active. When available, market indices and observable inputs, along with analytical modeling are used. However, observable inputs on non-distressed asset trades are not frequent.
Common and preferred stocks: Consists of non-public securities primarily acquired in conjunction with investments in limited partnerships. Such investments are initially valued at transaction price and subsequently adjusted when evidence is available to support adjustments. Such evidence includes change in value as a result of public offerings, market comparables, market liquidity, the investees’ financial results, sales restrictions, or other items.
51 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Notes to Consolidated
Statutory Basis Financial Statements ($ in 000s) |
Mortgage loans: The fair value for mortgage loans is estimated using discounted cash flow analyses with interest rates currently being offered in the marketplace for similar loans to borrowers with similar credit ratings. Loans with similar characteristics are aggregated for purposes of the calculations. Fair values for mortgages in default are reported at the estimated fair value of the underlying collateral.
Other invested assets: The fair value of other invested assets, primarily collateral loans, is based upon quoted market prices for similar assets with unobservable inputs. Other invested assets accounted for on the equity method are excluded from fair value disclosures.
Separate account assets and liabilities: Separate account assets are investments held for single premium deferred annuities and are carried at the lower of amortized cost or fair value. Valuations are based on internal models, which include unobservable inputs for similar assets in markets that may not be active.
Not Practicable to Estimate Fair Value
Contract loans: The Company believes it is not practicable to determine the fair value of contract loans since there is no stated maturity and they are often repaid by reductions to benefits.
Note 5: Income Tax
The Company is included in the consolidated federal income tax return of CMHC along with the following affiliates, which are also subsidiaries of CMHC: CUMIS, CUMIS Specialty Insurance Company, Inc., CUMIS Vermont, Inc., CMIC, CUNA Mutual Insurance Agency, Inc., CUMIS Mortgage Reinsurance Company, CUNA Brokerage Services, Inc., International Commons, Inc., MEMBERS Capital Advisors, Inc., CPI Qualified Plan Consultants, Inc., CUNA Mutual Financial Group, Inc., and CUNA Mutual Global Holdings, Inc. The following companies are also included in the consolidated federal income tax return of CMHC and were subsidiaries of CMHC through January 1, 2015: Producers Ag Insurance Group, Inc., Producers Agriculture Insurance Company, Producers Lloyds Insurance Company, Pro Ag Management, Inc., and Crop Hail Management, Inc. The consolidated federal income tax return of CMHC also included CMFG Life VT in 2014 and 2013.
The Company has entered into a tax sharing agreement with CMHC and its subsidiaries. The agreement provides for the allocation of tax expense based on each subsidiary’s contribution to the consolidated federal income tax liability. Pursuant to the agreement, subsidiaries that have incurred losses are reimbursed regardless of the utilization of the loss in the current year.
Current income tax expense consists of the following for the years ended December 31:
2015 | 2014 | 2013 | |||||||||
Federal income tax expense (benefit) on operations | $ | 42,717 | $ | (1,993 | ) | $ | 7,638 | ||||
Federal income tax expense on realized capital gains | 27,446 | 32,102 | 3,256 | ||||||||
Federal income tax expense (benefit) on surplus items | - | (24,594 | ) | (5,791 | ) | ||||||
Federal income tax expense | $ | 70,163 | $ | 5,515 | $ | 5,103 | |||||
52 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Notes to Consolidated
Statutory Basis Financial Statements ($ in 000s) |
The 2015 change in net deferred income tax is comprised of the following:
December 31, | December 31, | |||||||||||
2015 | 2014 | Change | ||||||||||
Adjusted gross deferred tax assets | $ | 320,591 | $ | 308,163 | $ | 12,428 | ||||||
Total deferred tax liabilities | (111,835 | ) | (113,164 | ) | 1,329 | |||||||
Net deferred tax asset (excluding nonadmitted) | $ | 208,756 | $ | 194,999 | 13,757 | |||||||
Tax effect of unrealized capital gains and losses, unrealized foreign exchange capital gains and losses, and changes as a result of other surplus adjustments |
(12,645 | ) | ||||||||||
Change in net deferred income tax | $ | 1,112 | ||||||||||
53 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Notes to Consolidated
Statutory Basis Financial Statements ($ in 000s) |
The 2014 change in net deferred income tax is comprised of the following:
December 31, | December 31, | ||||||||||||
2014 | 2013 | Change | |||||||||||
Adjusted gross deferred tax assets | $ | 308,163 | $ | 290,746 | $ | 17,417 | |||||||
Total deferred tax liabilities | (113,164 | ) | (80,578 | ) | (32,586 | ) | |||||||
Net deferred tax asset (excluding nonadmitted) | $ | 194,999 | $ | 210,168 | (15,169 | ) | |||||||
Tax effect of unrealized capital gains and losses, unrealized foreign exchange capital gains and losses, and changes as a result of other surplus adjustments |
30,243 | ||||||||||||
Change in net deferred income tax | $ | 15,074 | |||||||||||
The 2013 change in net deferred income tax is comprised of the following: | |||||||||||||
December 31, | December 31, | ||||||||||||
2013 | 2012 | Change | |||||||||||
Total deferred tax assets | $ | 290,746 | $ | 311,002 | $ | (20,256 | ) | ||||||
Total deferred tax liabilities | (80,578 | ) | (59,915 | ) | (20,663 | ) | |||||||
Net deferred tax asset | $ | 210,168 | $ | 251,087 | (40,919 | ) | |||||||
Tax effect of unrealized capital gains and losses, unrealized foreign exchange capital gains and losses, and changes as a result of other surplus adjustments |
29,450 | ||||||||||||
Change in net deferred income tax | $ | (11,469 | ) | ||||||||||
54 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Notes to Consolidated
Statutory Basis Financial Statements ($ in 000s) |
Reconciliation to U.S. Tax Rate
The total statutory provision for income taxes for the years ended December 31 differs from the amount computed by applying the U. S. federal corporate income tax rate of 35% to income before federal income taxes plus gross realized capital gains (losses) due to the items listed in the following reconciliation:
2015 | 2014 | 2013 | ||||||||||
Tax expense computed at federal corporate rate | $ | 114,819 | $ | 48,668 | $ | 37,667 | ||||||
Dividends received deductions | (37,938 | ) | (5,496 | ) | (4,532 | ) | ||||||
Meals and entertainment | 970 | 729 | 585 | |||||||||
Foreign tax credit | (298 | ) | (354 | ) | (315 | ) | ||||||
Income tax expense (benefit) related to prior years | 4,968 | (4,087 | ) | (4,694 | ) | |||||||
Nonadmitted assets | (8,313 | ) | (20,733 | ) | 41 | |||||||
Surplus items | - | (24,594 | ) | (5,791 | ) | |||||||
Nontaxable gain on merger | (2,884 | ) | - | - | ||||||||
Nondeductible penalties | 1,509 | 156 | (558 | ) | ||||||||
Interest maintenance reserve amortization | (4,016 | ) | (5,275 | ) | (5,897 | ) | ||||||
Statutory change in reserve valuation basis | - | 1,043 | - | |||||||||
Valuation allowance | (57 | ) | - | - | ||||||||
Other | 291 | 384 | 66 | |||||||||
Total statutory income taxes | $ | 69,051 | $ | (9,559 | ) | $ | 16,572 | |||||
Federal income tax expense | $ | 70,163 | $ | 5,515 | $ | 5,103 | ||||||
Change in net deferred income tax | (1,112 | ) | (15,074 | ) | 11,469 | |||||||
Total statutory income taxes | $ | 69,051 | $ | (9,559 | ) | $ | 16,572 | |||||
55 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Notes to Consolidated
Statutory Basis Financial Statements ($ in 000s) |
Deferred Income Taxes
The components of the net deferred tax asset at December 31 are as follows:
December 31, 2015 | December 31, 2014 | Change | ||||||||||||||||||||||||||||||||||
Ordinary | Capital | Total | Ordinary | Capital | Total | Ordinary | Capital | Total | ||||||||||||||||||||||||||||
Gross deferred tax | ||||||||||||||||||||||||||||||||||||
assets | $ | 303,506 | $ | 17,164 | $ | 320,670 | $ | 292,760 | $ | 15,403 | $ | 308,163 | $ | 10,746 | $ | 1,761 | $ | 12,507 | ||||||||||||||||||
Statutory valuation | ||||||||||||||||||||||||||||||||||||
allowance | ||||||||||||||||||||||||||||||||||||
adjustment | - | (79 | ) | (79 | ) | - | - | - | - | (79 | ) | (79 | ) | |||||||||||||||||||||||
Adjusted gross | ||||||||||||||||||||||||||||||||||||
deferred tax | ||||||||||||||||||||||||||||||||||||
assets | 303,506 | 17,085 | 320,591 | 292,760 | 15,403 | 308,163 | 10,746 | 1,682 | 12,428 | |||||||||||||||||||||||||||
Deferred tax | ||||||||||||||||||||||||||||||||||||
assets nonadmitted | (14,575 | ) | (71 | ) | (14,646 | ) | (17,314 | ) | - | (17,314 | ) | 2,739 | (71 | ) | 2,668 | |||||||||||||||||||||
Admitted deferred | ||||||||||||||||||||||||||||||||||||
tax assets | 288,931 | 17,014 | 305,945 | 275,446 | 15,403 | 290,849 | 13,485 | 1,611 | 15,096 | |||||||||||||||||||||||||||
Deferred tax | ||||||||||||||||||||||||||||||||||||
liabilities | (84,792 | ) | (27,043 | ) | (111,835 | ) | (85,496 | ) | (27,668 | ) | (113,164 | ) | 704 | 625 | 1,329 | |||||||||||||||||||||
Net admitted | ||||||||||||||||||||||||||||||||||||
deferred tax | ||||||||||||||||||||||||||||||||||||
assets | $ | 204,139 | $ | (10,029 | ) | $ | 194,110 | $ | 189,950 | $ | (12,265 | ) | $ | 177,685 | $ | 14,189 | $ | 2,236 | $ | 16,425 | ||||||||||||||||
The nonadmitted deferred tax asset decreased $2,668 in 2015 and $22,563 in 2014. Gross deferred tax assets are reduced by a statutory valuation allowance adjustment if it is more likely than not that some portion or all of the deferred tax assets will not be realized.
56 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Notes to Consolidated
Statutory Basis Financial Statements ($ in 000s) |
The tax effects of temporary differences that give rise to the significant portions of the deferred tax assets and liabilities at December 31 are as follows:
2015 | 2014 | Change | ||||||||||
Ordinary deferred tax assets: | ||||||||||||
Life and accident and health reserves |
$ | 104,386 | $ | 106,367 | $ | (1,981 | ) | |||||
Investments |
17 | 3,344 | (3,327 | ) | ||||||||
Deferred acquisition costs |
52,187 | 48,880 | 3,307 | |||||||||
Unearned revenue |
13,416 | 13,626 | (210 | ) | ||||||||
Receivables - nonadmitted |
49 | - | 49 | |||||||||
Employee benefits |
89,529 | 84,758 | 4,771 | |||||||||
Miscellaneous nonadmitted assets |
16,607 | 13,789 | 2,818 | |||||||||
Policyholder dividends |
12,729 | 13,032 | (303 | ) | ||||||||
Unrealized losses |
6,956 | - | 6,956 | |||||||||
Other |
7,630 | 8,964 | (1,334 | ) | ||||||||
Subtotal ordinary deferred tax assets |
303,506 | 292,760 | 10,746 | |||||||||
Nonadmitted ordinary deferred tax assets |
(14,575 | ) | (17,314 | ) | 2,739 | |||||||
Admitted ordinary deferred tax asset |
288,931 | 275,446 | 13,485 | |||||||||
Capital deferred tax assets: | ||||||||||||
Investments |
151 | - | 151 | |||||||||
Receivable for future contingent payments |
17,013 | 15,403 | 1,610 | |||||||||
Subtotal capital deferred tax assets |
17,164 | 15,403 | 1,761 | |||||||||
Statutory valuation allowance adjustment |
(79 | ) | - | (79 | ) | |||||||
Nonadmitted capital deferred tax assets |
(71 | ) | - | (71 | ) | |||||||
Admitted capital deferred tax asset |
17,014 | 15,403 | 1,611 | |||||||||
Admitted deferred tax assets | 305,945 | 290,849 | 15,096 | |||||||||
Ordinary deferred tax liabilities: | ||||||||||||
Investments |
(551 | ) | - | (551 | ) | |||||||
Deferred and uncollected premiums |
(55,989 | ) | (51,247 | ) | (4,742 | ) | ||||||
Tax method changes |
(8,519 | ) | (9,727 | ) | 1,208 | |||||||
Fixed assets and real estate |
(5,856 | ) | (9,328 | ) | 3,472 | |||||||
Prepaid expenses |
(7,979 | ) | (4,718 | ) | (3,261 | ) | ||||||
Other |
(5,898 | ) | (10,475 | ) | 4,577 | |||||||
Total ordinary deferred tax liabilities |
(84,792 | ) | (85,495 | ) | 703 | |||||||
Capital deferred tax liabilities: | ||||||||||||
Investments |
(22,639 | ) | (19,100 | ) | (3,539 | ) | ||||||
Unrealized gains |
(4,404 | ) | (8,569 | ) | 4,165 | |||||||
Subtotal capital deferred tax liabilities |
(27,043 | ) | (27,669 | ) | 626 | |||||||
Total deferred tax liabilities | (111,835 | ) | (113,164 | ) | 1,329 | |||||||
Net admitted deferred tax asset | $ | 194,110 | $ | 177,685 | $ | 16,425 | ||||||
57 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Notes to Consolidated
Statutory Basis Financial Statements ($ in 000s) |
Deferred Tax Asset Admission Calculation
The components of the deferred tax asset admission calculation at December 31 are as follows:
December 31, 2015 | December 31, 2014 | Change | |||||||||||||||||||||||||||||||||||
Ordinary | Capital | Total | Ordinary | Capital | Total | Ordinary | Capital | Total | |||||||||||||||||||||||||||||
(a) | Federal income taxes | ||||||||||||||||||||||||||||||||||||
paid in prior years | |||||||||||||||||||||||||||||||||||||
recoverable through | |||||||||||||||||||||||||||||||||||||
loss carrybacks | $ | 80,685 | $ | 7,764 | $ | 88,449 | $ | 34,215 | $ | 9,202 | $ | 43,417 | $ | 46,470 | $ | (1,438 | ) | $ | 45,032 | ||||||||||||||||||
(b) | Adjusted gross | ||||||||||||||||||||||||||||||||||||
deferred tax assets | |||||||||||||||||||||||||||||||||||||
expected to be realized | |||||||||||||||||||||||||||||||||||||
after application of the | |||||||||||||||||||||||||||||||||||||
threshold limitation; the | |||||||||||||||||||||||||||||||||||||
lesser of (i) or (ii): | 105,661 | - | 105,661 | 134,268 | - | 134,268 | (28,607 | ) | - | (28,607 | ) | ||||||||||||||||||||||||||
(i) Adjusted gross |
|||||||||||||||||||||||||||||||||||||
deferred tax assets |
|||||||||||||||||||||||||||||||||||||
expected to be |
|||||||||||||||||||||||||||||||||||||
realized following the |
|||||||||||||||||||||||||||||||||||||
balance sheet date |
105,661 | - | 105,661 | 134,268 | - | 134,268 | (28,607 | ) | - | (28,607 | ) | ||||||||||||||||||||||||||
(ii) Adjusted gross |
|||||||||||||||||||||||||||||||||||||
deferred tax assets |
|||||||||||||||||||||||||||||||||||||
allowed per limitation |
|||||||||||||||||||||||||||||||||||||
threshold |
- | - | 252,278 | - | - | 217,439 | - | - | 34,839 | ||||||||||||||||||||||||||||
(c) | Adjusted gross | ||||||||||||||||||||||||||||||||||||
deferred tax assets | |||||||||||||||||||||||||||||||||||||
offset by gross | |||||||||||||||||||||||||||||||||||||
deferred tax liabilities | 102,585 | 9,250 | 111,835 | 106,963 | 6,201 | 113,164 | (4,378 | ) | 3,049 | (1,329 | ) | ||||||||||||||||||||||||||
Admitted deferred tax asset | $ | 288,931 | $ | 17,014 | $ | 305,945 | $ | 275,446 | $ | 15,403 | $ | 290,849 | $ | 13,485 | $ | 1,611 | $ | 15,096 | |||||||||||||||||||
The amounts calculated in (b)(i) and (b)(ii) in the table above are based on the following information:
2015 | 2014 | |||||||
Ratio percentage used to determine recovery period and threshold limitation amount (RBC reporting entity) |
1125% | 1039% | ||||||
Recovery period used in (b)(i) |
3 years | 3 years | ||||||
Percentage of adjusted capital and surplus used in (b)(ii) |
15% | 15% | ||||||
Amount of adjusted capital and surplus used in (b)(ii) |
$ | 1,681,853 | $ | 1,449,592 | ||||
58 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Notes to Consolidated
Statutory Basis Financial Statements ($ in 000s) |
The Company did not use tax planning strategies, including the use of reinsurance, in the calculation of adjusted gross deferred tax assets and net admitted deferred tax assets in 2015 and 2014.
Other Tax Items
As of December 31, 2015, for income tax purposes, the Company did not have any federal capital loss, operating loss, or credit carryforwards.
The Company generally does not provide for U.S. deferred income taxes or foreign withholding taxes on the undistributed earnings of its non-U.S. affiliates and associated companies since the earnings are intended to be reinvested indefinitely. The total amount of undistributed earnings for which such taxes have not been provided is approximately $36,512 and $30,375 as of December 31, 2015 and 2014, respectively. The amount of unrecognized deferred tax liability associated with these earnings is approximately $7,795 and $6,385 as of December 31, 2015 and 2014, respectively.
Income taxes incurred in 2015, 2014 and 2013 of $74,508 and $15,417 and $156, respectively, are available for recoupment in the event of future losses.
The Company did not have any protective tax deposits under Section 6603 of the Internal Revenue Code.
A reconciliation of the beginning and ending amount of tax contingences is as follows:
2015 | 2014 | |||||||
Balance at January 1 | $ | 10,909 | $ | 5,613 | ||||
Additions based on tax positions related to the current year | 485 | 2,179 | ||||||
Additions for prior years’ tax position | 423 | 3,117 | ||||||
Reductions for prior years’ tax position | (1,105 | ) | - | |||||
Reductions for settlements | (500 | ) | - | |||||
Balance at December 31 | $ | 10,212 | $ | 10,909 | ||||
The overall effective income tax rate in future periods will be affected if the balances of the tax contingencies as of December 31, 2015 are revalued. Management does not anticipate a material change to the Company’s tax contingencies position during 2016.
The Company recognizes interest and penalties accrued related to tax contingencies in income tax expense in the consolidated statutory basis statements of operations. During the years ended December 31, 2015, 2014, and 2013 the Company recognized additions of $309, and CMFG Life recognized additions of $712, and $298 in interest and penalties, respectively. The Company had accrued $2,676 and CMFG Life had accrued $2,360 for the payment of interest and penalties at December 31, 2015 and 2014, respectively.
The Company is included in a consolidated U.S. federal income tax return filed by CMHC and files income tax returns in various foreign jurisdictions. The Company is also included in income tax returns filed in various states. The Company is subject to tax audits. These audits may result in additional tax liabilities. For the major jurisdictions where it operates, the Company is generally no longer subject to income tax examinations by tax authorities for years ended before 2008.
59 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Notes to Consolidated
Statutory Basis Financial Statements ($ in 000s) |
Note 6: Related Party Transactions
In the normal course of business, the Company has various lending and other transactions with related entities. In certain circumstances, expenses are shared between the companies. Expenses incurred that are specifically identifiable with a particular company are borne by that company; other expenses are allocated among the companies on the basis of time and usage studies. Amounts due from intercompany activity are generally settled monthly.
Significant amounts due to/from affiliates are shown in the following table:
2015 | 2014 | ||||||
Due to Company: | |||||||
CUMIS Insurance Society, Inc. |
$ | 9,880 | $ | 21,633 | |||
CUNA Mutual Investment Corporation |
951 | 16,459 | |||||
CUNA Mutual Insurance Agency, Inc. |
10,583 | 11,234 | |||||
CUNA Brokerage Services, Inc. |
1,283 | 2,455 | |||||
CPI Qualified Plan Consultants |
2,225 | 1,485 | |||||
TruStage Insurance Agency, LLC |
4,818 | 9,783 | |||||
All other affiliates |
5,340 | 236 | |||||
Total | $ | 35,080 | $ | 63,285 | |||
Due from Company: | |||||||
CUMIS VT |
$ | 42,997 | $ | - | |||
MEMBERS Capital Advisors, Inc. |
1,556 | 856 | |||||
CMFG Life Insurance Company |
- | 1,922 | |||||
MEMBERS Life Insurance Company |
- | 1,695 | |||||
All other affiliates |
54 | 324 | |||||
Total | $ | 44,607 | $ | 4,797 | |||
CMFG Life allocated expenses of $475,775, $446,905 and $262,639 to its subsidiaries in 2015, 2014 and 2013, respectively.
The Company hires MEMBERS Capital Advisors, Inc. (“MCA”) for investment advisory services. MCA, which is 100% owned by CMIC, manages substantially all of the Company’s invested assets in accordance with policies, directives, and guidelines established by the Company. The Company recorded MCA investment management fees totaling $18,940 in 2015 and CMFG Life recorded MCA investment management fees totaling $18,017 and $20,968 for 2014 and 2013, respectively. Subsidiaries of the Company recorded MCA investment management fees of $3,427 and $3,098 and $3,335 in 2015, 2014 and 2013, respectively.
CMFG Life declared and paid $1,000 in stockholder dividends to its parent in 2013. There were no stockholder dividends in 2015 or 2014. CMFG Life made a capital contribution to CMIC of cash of $15,000 in 2015. CMFG Life also received cash dividends of $100,000 from CMIC in 2015. There were no cash dividends in 2014 or 2013.
The Company enters into reinsurance agreements with various related parties. See Note 7 – Reinsurance.
During 2015 and 2014, the Company had notes payable to CUMIS Vermont of up to $50,000. The Company had $42,997 notes payable to CUMIS Vermont outstanding as of December 31, 2015. No notes payable were outstanding as of December 31, 2014.
60 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Notes to Consolidated
Statutory Basis Financial Statements ($ in 000s) |
The Company is party to an unsecured line of credit agreement with CMG Student Lending Services, LLC (“CMG SLS”) whereby the Company advances funds up to $100,000 at the three-month London InterBank Offered Rate (“LIBOR”) plus 100 basis points. CMG SLS is a downstream affiliate of the Company. At December 31, 2015 and 2014, there was an outstanding balance of $10,636 and $13,664 with accrued interest of $1,547 and $1,385, respectively. During 2015, 2014 and 2013, the Company recorded interest income of $163, $196 and $236, respectively.
MEMBERS Life utilizes CUNA Brokerage Services, Inc. (“CBSI”), which is 100% owned by CMIC, to distribute its single premium deferred annuity and recorded a commission for this service of $23,072 in 2015, which is included in insurance taxes, licenses, fees and commissions. CMFG Life utilizes CBSI to distribute annuities and recorded a commission for this service of $3,880, $4,274 and $7,493 in 2015, 2014 and 2013, respectively, which are in insurance taxes, licenses, fees and commissions in 2015 and included in general insurance expenses in 2014 and 2013.
On January 1, 2014 the Company transferred substantially all of its investments in its limited partnerships to MCA Fund I and MCA Fund II and received an interest in each fund. See Note 3, Investments - Limited Partnerships, for additional information on this transaction.
Effective February 5, 2014 and December 31, 2013, the Company transferred the sponsorship of its qualified defined benefit pension plans for represented and non-represented employees, respectively, to CMFG, the Company’s immediate parent. The Company has no ongoing obligation to the plans but may be allocated expense from CMFG for its employees’ participation in the plans.
CMFG Life and CMFG Life VT had been parties to a reinsurance agreement. The agreement was commuted on November 30, 2015 (see Note 7 Reinsurance) and subsequently, CMFG Life VT merged into CMFG Life. The merger was accounted for as a non-reciprocal transfer and inter-company activity in 2015 was reversed and reflected in the financial statements as if the merger occurred January 1, 2015.
Note 7: Reinsurance
The Company enters into ceded reinsurance agreements for the purpose of limiting its exposure to loss on any one single insured, diversifying its risk and limiting its overall financial exposure and to exit certain products. The Company retains the risk of loss in the event that a reinsurer is unable to meet the obligations assumed under the reinsurance agreements. The Company also utilizes reinsurance to meet its overall financial and capital objectives.
The Company had entered into modified coinsurance agreements with unrelated parties that ceded 95% of its in-force reserves of certain life insurance business sold by direct mail not including new business. In 2014, the Company terminated and recaptured these agreements.
Effective January 1, 2013, CMFG Life entered into an agreement with its affiliate, MEMBERS Life, to assume 100% of its single premium deferred annuity product. CMFG Life pays a commission equal to 100% of MEMBERS Life actual expenses incurred for this business. Effective October 31, 2012 CMFG Life entered into an agreement with MEMBERS Life to assume 95% of its life and accident and health closed block of business. CMFG Life pays a commission equal to 95% of MEMBERS Life actual expenses incurred for this block of business. On September 30, 2015, the agreement was amended and MEMBERS Life now cedes 100% of its insurance policies in force to CMFG Life and is reimbursed 100% for expenses incurred in the provision of policyholder and benefit payments services, and insurance taxes and charges going forward. These agreements are eliminated in the 2015 consolidated financial statements.
On December 31, 2012, CMFG Life entered into a coinsurance and modified coinsurance agreement with CMFG Life VT to cede 100% of its variable annuity business. The separate account assets remained in the separate account. The net activity was ceded to CMFG Life VT. As part of the agreement, the Company had been required to manage certain assets according to guidelines contained in the agreement (see Note 3- Investments,
61 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Notes to Consolidated
Statutory Basis Financial Statements ($ in 000s) |
Assets Designated). CMFG Life commuted this agreement on November 30, 2015 and recaptured the ceded reserves associated with the reinsurance agreement as if the commutation occurred January 1, 2015, pursuant to the post-commutation merger of CMFG Life VT into CMFG Life, as described in Note 1. CMFG Life is no longer required to designate certain assets for this agreement. The commutation had no impact on surplus or net income.
The following table shows the effect of reinsurance on premiums, benefits, and surrenders, and increase in policy reserves for 2015, 2014 and 2013.
2015 | 2014 | 2013 | ||||||||||
Premiums earned: | ||||||||||||
Direct |
$ | 2,929,275 | $ | 2,618,770 | $ | 2,363,861 | ||||||
Assumed from affiliates |
566 | 255,344 | 92,785 | |||||||||
Assumed from non-affiliates |
889 | 884 | 913 | |||||||||
Ceded to affiliates |
228,611 | (284,252 | ) | (344,194 | ) | |||||||
Ceded to non-affiliates |
(11,713 | ) | (78,770 | ) | (143,926 | ) | ||||||
Premiums earned, net of reinsurance | $ | 3,147,628 | $ | 2,511,976 | $ | 1,969,439 | ||||||
Benefits and surrender expenses: | ||||||||||||
Direct |
$ | 2,527,146 | $ | 3,256,267 | $ | 2,282,026 | ||||||
Assumed from affiliates |
- | 5,899 | 4,497 | |||||||||
Assumed from non-affiliates |
679 | 397 | 392 | |||||||||
Ceded to affiliates |
13 | (1,267,495 | ) | (699,166 | ) | |||||||
Ceded to non-affiliates |
(11,990 | ) | (59,033 | ) | (97,926 | ) | ||||||
Benefits and surrender expenses, net of reinsurance | $ | 2,515,848 | $ | 1,936,035 | $ | 1,489,823 | ||||||
Increase in policy reserves: | ||||||||||||
Direct |
$ | 136,049 | $ | 34,424 | $ | 209,049 | ||||||
Assumed from affiliates |
- | (1,281 | ) | (942 | ) | |||||||
Ceded to affiliates |
228,597 | 4,828 | (1,286 | ) | ||||||||
Ceded to non-affiliates |
(7,215 | ) | (8,352 | ) | (9,733 | ) | ||||||
Increase in policy reserves, net of reinsurance | $ | 357,431 | $ | 29,619 | $ | 197,088 | ||||||
Policy reserves and claim liabilities are stated net of reinsurance balances ceded of $170,750 in 2015 and $397,813 in 2014.
62 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Notes to Consolidated
Statutory Basis Financial Statements ($ in 000s) |
Note 8: Liability for Claim Reserves
Activity in the liability for accident and health claim reserves, including an allowance for the cost of investigating and settling losses, which is included in the liabilities for policy reserves and policy and contract claims is summarized as follows:
2015 | 2014 | |||||||
Balance as of January 1, net of reinsurance recoverables of $9,445 and $9,390 | $ | 367,531 | $ | 372,018 | ||||
Incurred related to: | ||||||||
Current year |
220,674 | 227,883 | ||||||
Prior years |
(25,637 | ) | (20,457 | ) | ||||
Total incurred |
195,037 | 207,426 | ||||||
Paid related to: | ||||||||
Current year |
70,758 | 74,013 | ||||||
Prior years |
128,067 | 137,900 | ||||||
Total paid |
198,825 | 211,913 | ||||||
Balance as of December 31, net of reinsurance | ||||||||
recoverables of $9,211 and $9,445 |
$ | 363,743 | $ | 367,531 | ||||
For accident and health products, the 2015 and 2014 decreases in prior year incurred losses primarily relate to favorable development on credit disability insurance reserves due to lower losses than expected driven by lower frequency and severity.
63 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Notes to Consolidated
Statutory Basis Financial Statements ($ in 000s) |
Note 9: Annuity Reserves and Deposit Liabilities
The withdrawal characteristics of the Company’s annuity reserves and deposit liabilities at December 31, which are reported as policy reserves on annuity contracts and liability for deposit type contracts are shown in the tables below:
Separate | Separate | ||||||||||||||
General | Account with | Account | % of | ||||||||||||
December 31, 2015 | Accounts | Guarantees | Nonguaranteed | Total | Total | ||||||||||
Subject to discretionary withdrawal - | |||||||||||||||
lump sum: |
|||||||||||||||
With market value adjustment |
$ | 2,396,571 | $ | 872,947 | $ | - | $ | 3,269,518 | 36.8 | % | |||||
At book value less surrender |
|||||||||||||||
charge of 5% or more |
638,748 | - | - | 638,748 | 7.2 | % | |||||||||
At fair value |
- | - | 2,855,958 | 2,855,958 | 32.1 | % | |||||||||
Total with adjustment or | |||||||||||||||
at fair value |
3,035,319 | 872,947 | 2,855,958 | 6,764,224 | 76.1 | % | |||||||||
At book value with minimal or |
|||||||||||||||
no charge adjustment |
1,162,447 | - | - | 1,162,447 | 13.1 | % | |||||||||
Not subject to | |||||||||||||||
discretionary withdrawal |
961,088 | - | 3,118 | 964,206 | 10.8 | % | |||||||||
Gross annuity reserves and | |||||||||||||||
deposit liabilities |
5,158,854 | 872,947 | 2,859,076 | 8,890,877 | 100.0 | % | |||||||||
Reinsurance ceded | - | - | - | - | |||||||||||
Total annuity reserves and | |||||||||||||||
deposit liabilities |
$ | 5,158,854 | $ | 872,947 | $ | 2,859,076 | $ | 8,890,877 | |||||||
64 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Notes to Consolidated
Statutory Basis Financial Statements ($ in 000s) |
Separate | Separate | ||||||||||||||
General | Account with | Account | % of | ||||||||||||
December 31, 2014 | Accounts | Guarantees | Nonguaranteed | Total | Total | ||||||||||
Subject to discretionary withdrawal - | |||||||||||||||
lump sum: |
|||||||||||||||
With market value adjustment |
$ | 2,607,828 | $ | 329,540 | $ | - | $ | 2,937,368 | 32.2 | % | |||||
At book value less surrender |
|||||||||||||||
charge of 5% or more |
445,012 | - | - | 445,012 | 4.9 | % | |||||||||
At fair value |
- | - | 3,630,270 | 3,630,270 | 39.8 | % | |||||||||
Total with adjustment or |
|||||||||||||||
at fair value |
3,052,840 | 329,540 | 3,630,270 | 7,012,650 | 76.9 | % | |||||||||
At book value with minimal or |
|||||||||||||||
no charge adjustment |
1,318,689 | - | - | 1,318,689 | 14.5 | % | |||||||||
Not subject to | |||||||||||||||
discretionary withdrawal |
790,401 | - | 3,313 | 793,714 | 8.7 | % | |||||||||
Gross annuity reserves and | |||||||||||||||
deposit liabilities |
5,161,930 | 329,540 | 3,633,583 | 9,125,053 | 100.0 | % | |||||||||
Reinsurance ceded | 225,429 | - | - | 225,429 | |||||||||||
Total annuity reserves and | |||||||||||||||
deposit liabilities |
$ | 4,936,501 | $ | 329,540 | $ | 3,633,583 | $ | 8,899,624 | |||||||
Note 10: Statutory Financial Data and Dividend Restrictions
Risk based capital requirements promulgated by the NAIC and adopted by the Insurance Department require U.S. life insurers to maintain minimum capitalization levels that are determined based on formulas incorporating asset risk, insurance risk, and business risk. At December 31, 2015 and 2014, CMFG Life’s and MEMBERS Life’s adjusted surplus exceeds the minimum action level requirements.
CMFG Life and its downstream insurance subsidiaries are subject to statutory regulations as to maintenance of policyholders’ surplus and payment of stockholder dividends. Generally, dividends to the parent must be reported to the appropriate state regulatory authority in advance of payment and extraordinary dividends, as defined by statutes, require regulatory approval. CMFG Life could pay $228,339 in stockholder dividends in 2016 without the approval of the Insurance Department. MEMBERS Life could pay $2,111 in stockholder dividends in 2016 without the approval of the Insurance Department. CMFG Life has two indirect wholly-owned insurance subsidiaries that could pay an aggregate of $116,820 in stockholder dividends in 2016 without regulatory approval. CMFG Life owns one indirect captive insurer whereby all dividends require regulatory approval.
65 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Notes to Consolidated
Statutory Basis Financial Statements ($ in 000s) |
Note 11: Notes and Interest Payable
The following table provides the details of the Company’s notes and interest payable at December 31:
2015 | 2014 | ||||||
Line of credit - Federal Home Loan Bank | $ | 350,030 | $ | 190,015 | |||
Loan participation | 4,407 | 4,685 | |||||
Total notes and interest payable | $ | 354,437 | $ | 194,700 | |||
CMFG Life Insurance Company – Line of Credit – Federal Home Loan Bank
The Company has borrowing capacity as a result of contractual arrangements with the Federal Home Loan Bank of Des Moines (“FHLB”) that were entered into in 2007 and evidenced by Advances, Collateral Pledge, and Security Agreements. These agreements provide that the Company is entitled to borrow from the FHLB if the Company purchases FHLB restricted stock and provides securities as collateral for such borrowings. The amount of such permitted borrowings would be 22.5 times the Company’s FHLB stock ownership, with an overall limitation based on 30% of the Company’s statutory assets. Interest on borrowings was calculated daily at floating rates that ranged from 0.23% to 0.46% in 2015, 0.21% to 0.35% in 2014 and 0.20% to 0.35% in 2013. Payments are due on the line of credit at various dates through 2016 with options of renewal available. As of December 31, 2015 and 2014, the Company owned $24,000 and $17,600 of FHLB restricted common stock, respectively. The Company had $423,890 and $214,636 of pledged securities at December 31, 2015 and 2014, respectively. At December 31, 2015 and 2014, the Company had outstanding borrowings of $350,030 and $190,015, respectively.
CUNA Mutual Financial Group, Inc. – Line of Credit – Wells Fargo Bank
In June 2015, CMFG, CMFG Life, CUMIS and certain other affiliates entered into a $250,000 five year unsecured revolving credit facility agreement with Wells Fargo Bank, National Association and other lenders. Under the new facility, the unused fee was assessed at 0.20% at December 31, 2015. Interest amounts are calculated based on certain benchmark interest rates plus a spread that ranges from 1.25% to 1.75% based on CMFG’s debt to capital ratio. CMFG is required to comply with financial covenants including a maximum ratio of total debt to capital and a minimum consolidated net worth. CMFG Life and CUMIS are required to comply with minimum statutory risk-based capital ratios. CMFG, CMFG Life and CUMIS were in compliance with these covenants at December 31, 2015. As of December 31, 2015 there were no outstanding borrowings under the facility. The facility expires in June 2020. CMFG designated up to $50,000 from the line of credit to be used to fund the capital needs of certain subsidiaries in the event that the subsidiaries need additional capital to meet regulatory minimums. These requirements were released in 2015 and accordingly, the entire $250,000 line of credit was available for general corporate purposes.
CUNA Mutual Financial Group, Inc. – Line of Credit – JP Morgan Chase Bank
CMFG Life entered into a $200,000 three year unsecured revolving credit facility agreement with JP Morgan Chase Bank and other lenders in 2010. In June 2012, the facility was renewed with borrowing capacity of $300,000 and reassigned to CMFG Life’s parent company, CMFG. CMFG Life and other subsidiaries were designated as borrowers under the new agreement. CMFG terminated the JP Morgan Chase Bank unsecured revolving credit facility agreement in June 2015. Under the terminated facility, the unused fee was assessed at 0.20% at December 31, 2014 and 2013, and the fee was paid by CMFG. Under the terminated facility, interest amounts were calculated based on certain benchmark interest rates plus a spread that ranges from 1.375% to 1.75% based on CMFG’s debt to capital ratio. CMFG was required to comply with financial covenants including a maximum ratio of total debt to capital and a minimum consolidated net worth. CMFG Life and CUMIS were
66 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Notes to Consolidated
Statutory Basis Financial Statements ($ in 000s) |
required to comply with minimum statutory risk-based capital ratios. CMFG, CMFG Life, and CUMIS were in compliance with these covenants at December 31, 2014. As of December 31, 2014, there were no outstanding borrowings under the JP Morgan Chase facility. CMFG designated up to $95,000 from the line of credit to be used to fund the capital needs of certain subsidiaries in the event that the subsidiaries need additional capital to meet regulatory minimums. Accordingly, $205,000 of the line of credit was available for general corporate purposes.
CMFG Life Insurance Company – Loan Participation
In 2013, the Company sold an interest in a mortgage loan to an unaffiliated entity, which has been accounted for as a secured borrowing. The Company’s ongoing participation with the interest sold includes providing certain management and administrative services, including appointing and delegating the loan servicer.
The interest sold is included in mortgage loans in the consolidated statutory basis statement of admitted assets, liabilities and capital and surplus. The cash flows relate to interest and principal payments received from the borrower on the original mortgage loan, less servicing fees and are paid to the counterparty in accordance with the terms of the underlying agreement. Notwithstanding this accounting treatment, the mortgage loan asset that collateralizes the note payable supplies the cash flow to pay principal and interest to the note holder, and the interest in the mortgage loan sold is not available to general creditors of the Company.
Note 12: Surplus Notes
The 8.5% $85,000 surplus notes, issued in 2010, are due in July 2030. Interest on the notes is payable semi-annually. The surplus notes are unsecured obligations of CMFG Life, ranking subordinate to the claims of policyholders and all other creditors. CMFG Life may not pay any principal, interest or make-whole amounts (fee paid on prepayment of principal) unless it has given notice to and received approval from the applicable insurance regulatory authority. Beginning on July 31, 2020, and continuing annually thereafter until July 2030, scheduled principal payments (in equal annual installments) will be due and payable, subject to the foregoing regulatory approvals. CMFG Life is required to comply with certain financial covenants including maintenance of a minimum statutory risk-based capital ratio and minimum total adjusted statutory capital level. At December 31, 2015, CMFG Life was in compliance with these covenants.
A request for payment of surplus note interest due January 2016 was submitted to the Insurance Department and approval was granted in 2016. Since the approval was in 2016, there is no accrual at December 31, 2015. CMFG Life incurred and paid interest of $7,225 in 2015, 2014 and 2013.
67 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Notes to Consolidated
Statutory Basis Financial Statements ($ in 000s) |
Note 13: Commitments and Contingencies
Investment Commitments
The Company has the following investment commitments outstanding at December 31:
2015 | 2014 | ||||||
Limited partnerships | $ | 529,303 | $ | 485,361 | |||
Investment in affiliated LLC | 42,280 | 57,871 | |||||
Mortgage loans | 40,280 | 23,840 | |||||
Private placements | 7,000 | 14,000 | |||||
Bank loans | 136 | 737 | |||||
Total investment commitments | $ | 618,999 | $ | 581,809 | |||
Limited partnership commitments generally represent commitments to acquire financial interests or instruments. The Company enters into these agreements to allow for additional participation in certain limited partnership investments.
Investment in affiliated LLC commitments generally represents commitments to fund the LLC’s acquisition of financial interests or instruments. The Company enters into these agreements to allow for additional participation in certain limited partnership investments.
Mortgage loan commitments are agreements to fund commercial mortgages after year end for loans approved prior to year end.
Private placement debt commitments are contracts signed prior to year end to purchase debt securities after year end.
Bank loan commitments represent commitments to acquire loans from banks at a specified future date.
Leases
The Company contracts for long term leases for office space, autos and equipment. Certain leases have renewal options and/or fixed rental increases. Renewal options that are reasonably assured of exercise are included in determining the lease term. Any rent abatements or lease incentives, in addition to fixed rental increases, are included in the calculation of rent expense and amortized on a straight-line basis over the defined lease term.
68 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Notes to Consolidated
Statutory Basis Financial Statements ($ in 000s) |
The Company has the following minimum operating lease payments as of December 31, 2015.
Future Minimum | |||
Operating | |||
Lease Payments | |||
2016 | $ | 16,881 | |
2017 | 6,589 | ||
2018 | 4,778 | ||
2019 | 1,357 | ||
Total minimum lease payments | $ | 29,605 | |
Rental expense included in the Company’s operations, excluding rent expense applicable to its own buildings, amounted to $10,487, $9,309 and $9,775 in 2015, 2014 and 2013, respectively.
In December 2013, the Company entered into sale leaseback transactions with an unrelated party to sell and leaseback software. The Company had entered into similar sale leaseback transactions with software and equipment in 2012 and 2011. The lease term for software is for 4 years with annual lease payments of $1,028, $2,429, and $1,904 for the leases beginning in 2013, 2012, and 2011, respectively. The lease term for the equipment is 5 years with annual lease payments of $2,459. At the end of each year of each lease, the Company has the option of purchasing the software and equipment at a predetermined percentage of the original sale price.
Insurance Guaranty Funds
The Company is liable for guaranty fund assessments related to unaffiliated insurance companies that have become insolvent during 2015 and prior years. The Company includes a provision for all known assessments that will be levied as well as an estimate of amounts that it believes will be assessed in the future relating to past insolvencies. The Company has established a liability of $5,254 and CMFG Life established a liability of $5,413 at December 31, 2015 and 2014, respectively, for guaranty fund assessments. The Company also estimates the amount recoverable from future premium tax payments related to these accrued assessments and has established an asset of $4,380 and CMFG Life established an asset of $4,671 as of December 31, 2015 and 2014, respectively. Recoveries of assessments from premium taxes are generally made over a five-year period.
69 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Notes to Consolidated
Statutory Basis Financial Statements ($ in 000s) |
Assets recognized from paid and accrued premium tax offsets and policy surcharges are summarized as follows:
2015 | 2014 | |||||
Creditable guaranty fund assessments paid | $ | 1,968 | $ | 1,427 | ||
Creditable guaranty fund assessments accrued | 4,671 | 3,621 | ||||
Balance as of January 1 | 6,639 | 5,048 | ||||
Decreases: | ||||||
Premium tax offset applied |
538 | 396 | ||||
Accrued Assessments |
291 | - | ||||
Total decreases |
829 | 396 | ||||
Increases: | ||||||
Creditable guaranty fund assessments paid |
349 | 937 | ||||
Accrued assessments |
- | 1,050 | ||||
Total increases |
349 | 1,987 | ||||
Creditable guaranty fund assessments paid |
1,779 | 1,968 | ||||
Creditable guaranty fund assessments accrued |
4,380 | 4,671 | ||||
Balance as of December 31 | $ | 6,159 | $ | 6,639 | ||
Legal Matters
Various legal and regulatory actions, including state market conduct exams and federal tax audits, are currently pending that involve the Company and specific aspects of its conduct of business. Like other members of the insurance industry, the Company is routinely involved in a number of lawsuits and other types of proceedings, some of which may involve claims for substantial or indeterminate amounts. These actions are based on a variety of issues and involve a range of the Company’s practices. The ultimate outcome of these disputes is unpredictable.
These matters in some cases raise difficult and complicated factual and legal issues and are subject to many uncertainties and complexities, including but not limited to, the underlying facts of each matter; novel legal issues; variations between jurisdictions in which matters are being litigated, heard or investigated; differences in applicable laws and judicial interpretations; the length of time before many of these matters might be resolved by settlement, through litigation or otherwise and, in some cases, the timing of their resolutions relative to other similar matters involving other companies. In connection with regulatory examinations and proceedings, government authorities may seek various forms of relief, including penalties, restitution and changes in business practices. The Company may not be advised of the nature and extent of relief sought until the final stages of the examination or proceeding. In the opinion of management, the ultimate liability, if any, resulting from all such pending actions will not materially affect the consolidated statutory basis financial statements of the Company.
70 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Notes to Consolidated
Statutory Basis Financial Statements ($ in 000s) |
Note 14: Benefit Plans
Postretirement Benefit Plans
CMFG Life had noncontributory defined benefit pension plans that covered most full time employees. Retirement benefits were provided using either a traditional or cash balance formula. The traditional formula provided benefits based on compensation and years of service. The cash balance formula utilized notional accounts that credit participants with benefits equal to a percentage of eligible pay as well as earnings credits for each account balance. The cash balance formula applied to employees hired after December 31, 2001 for employees not covered under a collective bargaining agreement (“non-represented employees”) and September 1, 2005 for employees covered under a collective bargaining agreement (“represented employees”). Pursuant to a collective bargaining agreement (“the Agreement”) executed on May 3, 2013 the traditional formula portion of the pension plan for represented employees was frozen as of December 31, 2015. As a result of the Agreement, an $8,683 decrease in accrued pension and postretirement liability was recognized through surplus in 2013 and is shown in the table below. Benefits vested according to plan schedules. The Company’s policy was to fund pension costs as required to meet the minimum funding requirements under the Employee Retirement Income Security Act of 1974.
Effective January 1, 2013, the Company adopted SSAP No. 102, Accounting for Pensions, A Replacement of SSAP No. 89 (“SSAP No. 102”), and SSAP No. 92, Accounting for Postretirement Benefits Other Than Pensions, A Replacement of SSAP No. 14 (“SSAP No. 92”). Under these standards, future obligations due to non-vested participants are required to be included in benefit obligations. These SSAPs also require the Company’s surplus, as reported on the statement of admitted assets, liabilities, and capital and surplus, to fully reflect the net liability related to the plans’ projected benefit obligations, reduced by the fair value of any plan assets, including unrecognized net experience losses and prior service costs. The Company elected to recognize the impact into surplus over a transition period not to exceed ten years as provided under the standards. As of December 31, 2013, $53,774 and $13,729, related to pension and other postretirement benefits, respectively, was recognized in unassigned surplus. Beginning in 2014, the Company’s remaining transition liability related to other postretirement benefits of $11,085, will be recognized in unassigned surplus on a systematic basis, consistent with the transition rules described in the guidance, over a four-year period. In 2015 and 2014, $4,881 and $3,485, respectively, of the transition liability was recognized in unassigned surplus. The remaining transition liability of $2,718 will be recognized over the next two years.
Effective December 31, 2013, the Company transferred the sponsorship of its qualified defined benefit pension plan for non-represented employees to CMFG, the Company’s immediate parent. The Company has no ongoing obligation to the plan but expects to contribute to the annual cost. There were $16,000, $36,300 and $16,000 of expenses recorded in general insurance expenses related to this plan in 2015, 2014 and 2013, respectively, in addition to the net periodic benefit costs.
Effective February 5, 2014, the Company transferred the sponsorship of its qualified defined benefit pension plan for represented employees to CMFG. The Company made a contribution to the plan prior to the transfer and has no ongoing obligation to the plan but expects to contribute to the annual cost. There were $14,000 and $16,450 of expenses recorded in general insurance expenses related to this plan in 2015 and 2014, respectively, in addition to the net periodic benefit costs. The liability and the associated taxes related to the plan were transferred to CMFG on February 1, 2014, resulting in an increase to paid-in capital of $13,495 net of tax of $7,267.
The remaining pension benefit obligation relates to certain employees and directors also eligible for non-qualified defined benefit plans. The Company has postretirement benefit plans that provide certain medical and life insurance benefits to eligible participants and dependents. The cost of postretirement benefits is recognized over the period the employees perform services to earn the benefits. As of January 1, 2016, pursuant to the Agreement above, retirement medical subsidies will be eliminated for all future retirees who do not meet certain age, years of service and/or employment status criteria. As a result of the Agreement, a $1,091 curtailment loss was recognized in general insurance expenses in 2013.
71 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Notes to Consolidated Statutory Basis Financial Statements |
($ in 000s) |
The measurement date for all benefit plans is December 31.
The following tables provide information with respect to the benefit obligations, the fair value of assets, and the funded status of the plans for the years ended at December 31:
Pension Benefits | Other Postretirement Benefits | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Reconciliation of benefit obligation | ||||||||||||||||
Obligations at January 1 | $ | 41,343 | $ | 206,316 | $ | 69,274 | $ | 58,322 | ||||||||
Service cost | 583 | 877 | 1,818 | 1,103 | ||||||||||||
Interest cost | 2,026 | 2,567 | 3,088 | 3,101 | ||||||||||||
Actuarial loss (gain) | (1,795 | ) | 3,811 | (2,542 | ) | 7,923 | ||||||||||
Benefit payments | (2,679 | ) | (2,448 | ) | (1,998 | ) | (1,175 | ) | ||||||||
Transfer pension plan sponsorship to parent | – | (169,780 | ) | – | – | |||||||||||
Other | – | – | 413 | – | ||||||||||||
Total benefit obligation at December 31 | $ | 39,478 | $ | 41,343 | $ | 70,053 | $ | 69,274 | ||||||||
Pension Benefits | Other Postretirement Benefits | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Reconciliation of fair value of plan assets | ||||||||||||||||
Fair value of plan assets at January 1 |
$ | – | $ | 147,768 | $ | 8,420 | $ | 8,219 | ||||||||
Actual return on plan assets |
– | – | (204 | ) | 201 | |||||||||||
Employer contributions |
2,679 | 3,698 | 1,998 | 1,175 | ||||||||||||
Transfer pension plan sponsorship to parent |
– | (149,018 | ) | – | – | |||||||||||
Benefit payments |
(2,679 | ) | (2,448 | ) | (1,998 | ) | (1,175 | ) | ||||||||
Fair value of plan assets at December 31 | $ | – | $ | – | $ | 8,216 | $ | 8,420 | ||||||||
Pension Benefits | Other Postretirement Benefits | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Funded status | ||||||||||||||||
Funded status at December 31 | $ | (39,478 | ) | $ | (41,343 | ) | $ | (61,838 | ) | $ | (60,855 | ) | ||||
Deferred surplus | – | – | 7,600 | 11,085 | ||||||||||||
Recognize deferred surplus | – | – | (4,881 | ) | (3,485 | ) | ||||||||||
Accrued benefit asset (liability) | $ | (39,478 | ) | $ | (41,343 | ) | $ | (59,119 | ) | $ | (53,255 | ) | ||||
72 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Notes to Consolidated Statutory Basis Financial Statements |
($ in 000s) |
The following table provides items not yet recognized as a component of net periodic cost.
Pension Benefits | Other Postretirement Benefits | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Net prior service cost (benefit) | $ | (643 | ) | $ | (841 | ) | $ | 10,527 | $ | 13,636 | ||||||
Net actuarial gain | 10,828 | 13,495 | 722 | 2,493 | ||||||||||||
Balance, December 31, | $ | 10,185 | $ | 12,654 | $ | 11,249 | $ | 16,129 | ||||||||
The estimated net actuarial loss and prior service cost that will be amortized into net periodic benefit cost during 2016 for the non-qualified pension plans are $618 and $198, respectively. The estimated prior service cost that will be amortized for the other postretirement benefit plans is $3,523. There is no anticipated estimated amortization of actuarial loss or unrecognized transition obligation that will be amortized in 2016.
The projected benefit obligation (“PBO”) represents the actuarial net present value of estimated future benefit obligations, including assumptions for future salary increases. The accumulated benefit obligation (“ABO”) is similar to the PBO but without an assumption for future salary increases.
The ABO for pension plans was $36,898 and $39,033 at December 31, 2015 and 2014, respectively.
73 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Notes to Consolidated Statutory Basis Financial Statements |
($ in 000s) |
The following table provides information with respect to the components of the net periodic benefit cost.
Pension Benefits | Other Postretirement Benefits | ||||||||||||||||||||||||
2015 | 2014 | 2013 | 2015 | 2014 | 2013 | ||||||||||||||||||||
Service cost | $ | 583 | $ | 877 | $ | 11,514 | $ | 1,818 | $ | 1,103 | $ | 1,408 | |||||||||||||
Interest cost | 2,026 | 2,567 | 34,514 | 3,088 | 3,101 | 2,777 | |||||||||||||||||||
Expected return on plan assets | – | (855 | ) | (45,209 | ) | (567 | ) | (563 | ) | (610) | |||||||||||||||
Amortization of prior service cost | (198 | ) | (197 | ) | (890 | ) | 3,523 | 3,485 | 3,591 | ||||||||||||||||
Amortization of net unrecognized | |||||||||||||||||||||||||
transition obligation |
– | – | 101 | – | – | 93 | |||||||||||||||||||
Amortization of net unrecognized | |||||||||||||||||||||||||
(gain) loss |
848 | 654 | 23,247 | – | – | 1,091 | |||||||||||||||||||
Net periodic benefit cost | $ | 3,259 | $ | 3,046 | $ | 23,277 | $ | 7,862 | $ | 7,126 | $ | 8,350 | |||||||||||||
The actuarial assumptions used to develop pension and other postretirement benefit obligations for the years ended December 31 were as follows:
Pension Benefits | Other Postretirement Benefits | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Weighted average assumptions | ||||||||||||||||
at December 31 for benefit cost: |
||||||||||||||||
Discount rate | 4.5 | % | 5.2 | % | 4.5 | % | 5.4 | % | ||||||||
Rate of compensation increase | 4.8 | % | 4.8 | % | 3.4 | % | 3.9 | % | ||||||||
Expected long-term rate | ||||||||||||||||
of return on plan assets |
– | – | 6.7 | % | 6.9 | % | ||||||||||
Weighted average assumptions | ||||||||||||||||
at December 31 for obligation: |
||||||||||||||||
Discount rate | 4.8 | % | 4.5 | % | 4.9 | % | 4.5 | % | ||||||||
For measurement purposes, a 7.5% annual rate of increase in the per capita cost of covered health care benefits was assumed, decreasing gradually to 4.3% for 2071 and thereafter.
Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. A 1% increase (or decrease) in the assumed health care cost trend rate for each year would increase (or decrease) the accumulated other postretirement benefit obligation as of December 31, 2015 by $4,281 (or $4,033) and the annual net periodic other postretirement benefit cost for the year then ended by $233 (or $222).
In determining the discount rate for the year ended December 31, 2015 and 2014, the Company used a hypothetical bond portfolio of actual AA rated securities matching the expected monthly benefits. In determining the expected long term rate of return on plan assets, the Company used the current investment allocation applied to a long term historical indexed rate of return for these asset classes.
74 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Notes to Consolidated Statutory Basis Financial Statements |
($ in 000s) |
Estimated Future Benefit Payments
Expected future benefit payments for the years ended December 31 are as follows:
Other |
Other | Other | ||||||||||||||
Benefits | Benefits | Benefits | ||||||||||||||
Pension | Before | Medicare | After | |||||||||||||
Benefits | Subsidy | Subsidy | Subsidy | |||||||||||||
Estimated future benefit payments: | ||||||||||||||||
2016 |
$ | 2,594 | $ | 2,451 | $ | (45 | ) | $ | 2,406 | |||||||
2017 |
2,649 | 2,957 | (62 | ) | 2,895 | |||||||||||
2018 |
2,595 | 3,470 | (72 | ) | 3,398 | |||||||||||
2019 |
2,601 | 3,962 | (90 | ) | 3,872 | |||||||||||
2020 |
2,629 | 4,493 | (109 | ) | 4,384 | |||||||||||
2020-2024 |
13,377 | 24,693 | (869 | ) | 23,824 | |||||||||||
The Company anticipates remitting $30,000 in 2016 to CMFG for CMFG’s contribution to the pension plans it sponsors for which the Company’s employees participate. Such remittance will be recorded as expense upon payment. For other postretirement benefits, the employer contribution will be equivalent to the estimated 2016 benefits.
Postretirement Benefit Plan Assets
The Company maintains investments in mutual funds that invest in domestic large-cap and investment grade corporate bond mutual funds. The Company limits its concentrations of risk by diversifying its plan assets through investment in funds rather than individual holdings. The Company maintains a diversified investment portfolio including issuer, sector and geographic stratification, where applicable, and has established certain exposure limits, diversification standards, and review procedures to mitigate risk. The Company invests its postretirement benefit plans assets with the goal of meeting its short and long term obligations.
75 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Notes to Consolidated Statutory Basis Financial Statements |
($ in 000s) |
CMFG Life’s postretirement benefit plan asset allocation at December 31, 2015 and 2014 by asset category, as a percentage of plan assets, and the target allocation, are shown below:
2016 Target | ||||||||||||
Asset Category | 2015 | 2014 | Allocation | |||||||||
Mutual funds with debt securities | 98.8 | % | 98.9 | % | 100.0 | % | ||||||
Cash equivalents | 1.2 | 1.1 | – | |||||||||
Total | 100.0 | % | 100.0 | % | 100.0 | % | ||||||
The fair value of the Company’s postretirement benefit plan assets by asset category at December 31, 2015 are presented in the following table.
Plan Assets, at Fair Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Cash equivalents | $ | 99 | $ | – | $ | – | $ | 99 | ||||||||
Mutual funds with debt securities | 8,117 | – | – | 8,117 | ||||||||||||
Total plan assets at fair value |
$ | 8,216 | $ | – | $ | – | $ | 8,216 | ||||||||
The fair value of the Company’s postretirement benefit plan assets by asset category at December 31, 2014 are presented in the following table.
Plan Assets, at Fair Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Cash equivalents | $ | 93 | $ | – | $ | – | $ | 93 | ||||||||
Mutual funds with debt securities | 8,327 | – | – | 8,327 | ||||||||||||
Total plan assets at fair value |
$ | 8,420 | $ | – | $ | – | $ | 8,420 | ||||||||
A summary of valuation techniques for classes of pension plan assets by fair value hierarchy level are as follows:
Mutual funds with debt securities: Consists of actively traded mutual funds that have daily quoted net asset values at which the Company could transact.
76 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Notes to Consolidated Statutory Basis Financial Statements |
($ in 000s) |
Other Postemployment Benefits
The Company has a plan to provide severance pay and continuation of certain life and health benefits during the severance period to qualifying inactive or former employees. The Company also provides certain life and health benefits to employees in disability status. The liability for these other postemployment benefits was $9,594 and $7,803 at December 31, 2015 and 2014, respectively. Such costs are recognized during an employee’s service years if certain requirements are met. The amount charged to expense was $6,540, $4,138 and $1,948 in 2015, 2014 and 2013, respectively.
Defined Contribution Plans
The Company sponsors defined contribution thrift and savings plans for certain full-time and part-time employees of participating employers who meet certain eligibility requirements. Participants defer a portion of their compensation up to statutory maximums; the Company matches part of the deferrals and this match is vested according to plan schedules. Company contributions for these plans were $16,669, $13,585 and $13,009 for the years ended December 31, 2015, 2014 and 2013, respectively.
Deferred Compensation Plans
The Company also has a variety of deferred compensation plans for key executives and directors. The accrued liability for these plans was $71,675 and $70,349 as of December 31, 2015 and 2014, respectively, and is included in the liability for employee retirement plans in the accompanying consolidated statutory basis statement of admitted assets, liabilities and capital and surplus.
Note 15: Unassigned Surplus
Unassigned surplus at December 31 considers the accumulated balances for the following items:
2015 | 2014 | |||||||
Nonadmitted assets: | ||||||||
Net deferred tax asset |
$ | (14,646 | ) | $ | (17,314 | ) | ||
Electronic data processing equipment and software |
(45,966 | ) | (28,732 | ) | ||||
Furniture and equipment |
(2,044 | ) | (2,608 | ) | ||||
Prepaid expenses |
(36,203 | ) | (25,273 | ) | ||||
Contingent receivable |
(50,807 | ) | (52,045 | ) | ||||
Other |
(15,404 | ) | (15,111 | ) | ||||
Total nonadmitted assets | $ | (165,070 | ) | $ | (141,083 | ) | ||
77 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Notes to Consolidated Statutory Basis Financial Statements |
($ in 000s) |
Note 16: Premiums Deferred and Uncollected
Deferred and uncollected life insurance premiums as of December 31 are shown in the following table:
2015 | 2014 | |||||||||||||||
Net of | Net of | |||||||||||||||
Gross | Loading | Gross | Loading | |||||||||||||
Ordinary new business | $ | 36,065 | $ | 14,486 | $ | 35,114 | $ | 11,408 | ||||||||
Ordinary renewal | 90,226 | 75,079 | 63,812 | 56,587 | ||||||||||||
Credit life | 16,534 | 16,534 | 16,132 | 16,131 | ||||||||||||
Group life | 81,823 | 73,564 | 90,373 | 83,463 | ||||||||||||
Accident and health | 28,480 | 28,891 | 27,251 | 27,251 | ||||||||||||
Nonadmitted receivables | (810 | ) | (810 | ) | (505 | ) | (505 | ) | ||||||||
Total | $ | 252,318 | $ | 207,744 | $ | 232,177 | $ | 194,335 | ||||||||
Gross premium represents the amount of premium charged to the policyholders. The amounts net of loading exclude the portion of the gross premium attributable to expenses and certain pricing assumptions.
Note 17: Separate Accounts
Separate accounts held by the Company represent funds that are invested to support its obligations under variable annuity and single premium deferred annuity contracts and variable universal life policies. The assets of the separate accounts are carried at fair value, with the exception of the assets for the single premium deferred annuity contracts, which are carried at the lower of amortized cost or fair value. See Note 2, Summary of Significant Accounting Policies – Prescribed Statutory Accounting Practice for additional information regarding the Company’s prescribed practice.
The general account of the Company has a maximum guarantee of separate account variable annuity liabilities of $77,540 and $38,828 as of December 31, 2015 and 2014, respectively. The general account paid $371, $371 and $232 in 2015, 2014 and 2013, respectively, towards variable annuity guarantees. The separate account paid risk charges to the general account related to these guarantees of $6,004, $6,143 and $6,008 in 2015, 2014 and 2013, respectively.
78 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Notes to Consolidated Statutory Basis Financial Statements |
($ in 000s) |
Information relating to the Company’s separate account business as of December 31 is set forth in the tables below:
2015 |
2014 | |||||||||||||||
Indexed | Indexed | |||||||||||||||
with | Non- | with | Non- | |||||||||||||
Guarantees | Guaranteed | Guarantees | Guaranteed | |||||||||||||
Reserves with assets held: | ||||||||||||||||
At fair value |
$ | 10,133 | $ | 3,057,150 | $ | 21,883 | $ | 3,848,799 | ||||||||
At amortized cost |
862,814 | – | 307,657 | – | ||||||||||||
Total | $ | 872,947 | $ | 3,057,150 | $ | 329,540 | $ | 3,848,799 | ||||||||
Reserves with assets subject to | ||||||||||||||||
discretionary withdrawal: |
||||||||||||||||
At fair value |
$ | 10,133 | $ | 3,054,032 | $ | 21,883 | $ | 3,845,486 | ||||||||
With fair value adjustment |
862,814 | – | 307,657 | – | ||||||||||||
At book value without fair value adjustment and |
||||||||||||||||
with current surrender charge less than 5% |
– | – | – | – | ||||||||||||
Not subject to discretionary withdrawal | – | 3,118 | – | 3,313 | ||||||||||||
Total | $ | 872,947 | $ | 3,057,150 | $ | 329,540 | $ | 3,848,799 | ||||||||
The fair value of separate account assets held at amortized cost was $684,132 and $306,769 at December 31, 2015 and 2014, respectively. The unrealized gain (loss) on the assets held was ($4,274) and $ 8,190 at December 31, 2015 and 2014, respectively.
79 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Notes to Consolidated Statutory Basis Financial Statements |
($ in 000s) |
The following table shows the premiums and deposits (withdrawals) for contracts recorded in the separate accounts for the years ended December 31:
2015 | 2014 | |||||||||||||||
Indexed with | Non- | Indexed with | Non- | |||||||||||||
Guarantees | Guaranteed | Guarantees | Guaranteed | |||||||||||||
Non-guaranteed premiums, considerations and | ||||||||||||||||
deposits received for separate account policies |
$ | 595,566 | $ | 216,050 | $ | 252,046 | $ | 292,970 | ||||||||
Total | $ | 595,566 | $ | 216,050 | $ | 252,046 | $ | 292,970 | ||||||||
Details of the net transfers to (from) separate accounts are shown in the table below for the years ended:
2015 | 2014 | |||||||||||||||
Indexed with | Non- | Indexed with | Non- | |||||||||||||
Guarantees | Guaranteed | Guarantees | Guaranteed | |||||||||||||
Transfers to separate accounts | $ | 595,566 | $ | 215,782 | $ | 252,046 | $ | 293,262 | ||||||||
Transfers from separate accounts | (7,704 | ) | (1,003,779 | ) | (1,369 | ) | (1,321,295 | ) | ||||||||
Valuation adjustment | - | (59 | ) | - | 13 | |||||||||||
Net transfers to (from) separate accounts | $ | 587,862 | $ | (788,056 | ) | $ | 250,677 | $ | (1,028,020 | ) | ||||||
Note 18: Subsequent Events
The
Company evaluated subsequent events from December 31, 2015 through March 24, 2016,
the date the consolidated statutory basis financial statements were available for
issuance. During this period, there were no significant subsequent events that require
adjustment to or disclosure in the accompanying financial statements.
80 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Supplemental Schedules |
December 31, 2015 |
Supplemental Schedules
81 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Consolidating Statement of Statutory Basis Admitted Assets, Liabilities and Capital and Surplus |
December 31, 2015 |
(000s omitted) |
MEMBERS | ||||||||||||||||
Admitted Assets | CMFG Life | Life | Eliminations | Consolidated | ||||||||||||
Cash and invested assets: | ||||||||||||||||
Bonds and notes |
$ | 7,443,281 | $ | 12,698 | $ | – | $ | 7,455,979 | ||||||||
Investments in affiliates |
1,017,341 | – | (21,111 | )A | 996,230 | |||||||||||
Common stocks - unaffiliated |
35,191 | – | – | 35,191 | ||||||||||||
Preferred stocks |
16,215 | – | – | 16,215 | ||||||||||||
Mortgage loans |
1,518,722 | – | – | 1,518,722 | ||||||||||||
Real estate occupied by the Company, |
||||||||||||||||
at cost less accumulated depreciation |
73,687 | – | – | 73,687 | ||||||||||||
Real estate held for production of income, |
||||||||||||||||
at cost less accumulated depreciation |
7,326 | – | – | 7,326 | ||||||||||||
Contract loans |
102,897 | – | – | 102,897 | ||||||||||||
Derivatives |
17,419 | – | – | 17,419 | ||||||||||||
Other invested assets |
629,877 | – | – | 629,877 | ||||||||||||
Receivable for securities sold |
641 | – | – | 641 | ||||||||||||
Cash, cash equivalents |
||||||||||||||||
and short-term investments |
57,963 | 17,092 | – | 75,055 | ||||||||||||
Total cash and invested assets | 10,920,560 | 29,790 | (21,111 | ) | 10,929,239 | |||||||||||
Premiums in the course of collection | 207,723 | 21 | – | 207,744 | ||||||||||||
Accrued investment income | 85,741 | 134 | – | 85,875 | ||||||||||||
Federal income taxes recoverable | 1,693 | 528 | – | 2,221 | ||||||||||||
Net deferred tax asset | 193,913 | 197 | – | 194,110 | ||||||||||||
Amounts due from reinsurers | 4,564 | 5,942 | (8,593 | )C | 1,913 | |||||||||||
Electronic data processing equipment - | ||||||||||||||||
at cost, less accumulated depreciation |
3,593 | – | – | 3,593 | ||||||||||||
Receivables from affiliates | 35,032 | 807 | (759 | )B | 35,080 | |||||||||||
Other assets | 10,404 | 6 | – | 10,410 | ||||||||||||
Separate account assets | 4,012,697 | – | – | 4,012,697 | ||||||||||||
Total admitted assets | $ | 15,475,920 | $ | 37,425 | $ | (30,463 | ) | $ | 15,482,882 | |||||||
A. | To eliminate CMFG Life’s indirect investment in MEMBERS Life. | ||
B. | To consolidate and eliminate affiliated receivables and payables. | ||
C. | To eliminate affiliated intercompany reinsurance agreements. |
82 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Consolidating Statement of Statutory Basis Admitted Assets, Liabilities and Capital and Surplus, continued |
December 31, 2015 |
(000s omitted) |
MEMBERS | ||||||||||||||||
Liabilities and Capital and Surplus | CMFG Life | Life | Eliminations | Consolidated | ||||||||||||
Liabilities: | ||||||||||||||||
Policy reserves | ||||||||||||||||
Life insurance and annuity contracts |
$ | 7,049,156 | $ | – | $ | (1 | ) C | $ | 7,049,155 | |||||||
Accident and health contracts |
799,282 | – | – | 799,282 | ||||||||||||
Liability for deposit-type contracts | 363,896 | – | – | 363,896 | ||||||||||||
Policy and contract claims | 95,239 | – | (329 | ) | 94,910 | |||||||||||
Dividends payable to policyholders | 24,752 | – | – | 24,752 | ||||||||||||
Advance premium and experience refunds | 88,956 | – | – | 88,956 | ||||||||||||
Reinsurance payable | 1,469 | 2,650 | (3,158 | ) C | 961 | |||||||||||
Interest maintenance reserve | 49,766 | – | – | 49,766 | ||||||||||||
Liability for employee retirement plans | 179,866 | – | – | 179,866 | ||||||||||||
Amount held for others | 12,643 | 72 | (5,105 | ) C | 7,610 | |||||||||||
Payable to affiliates | 42,885 | 2,481 | (759 | ) B | 44,607 | |||||||||||
Commissions, expenses, taxes, | ||||||||||||||||
licenses, and fees accrued |
197,577 | 388 | – | 197,965 | ||||||||||||
Notes and interest payable | 354,437 | – | – | 354,437 | ||||||||||||
Asset valuation reserve | 344,345 | 4 | – | 344,349 | ||||||||||||
Derivatives | 7,745 | – | – | 7,745 | ||||||||||||
Payable for securities purchased | 7,501 | – | – | 7,501 | ||||||||||||
Other liabilities | 22,068 | 10,719 | – | 32,787 | ||||||||||||
Transfers to separate accounts | (36,805 | ) | – | – | (36,805 | ) | ||||||||||
Separate account liabilities | 4,012,697 | – | – | 4,012,697 | ||||||||||||
Total liabilities | 13,617,475 | 16,314 | (9,352 | ) | 13,624,437 | |||||||||||
Capital and surplus: | ||||||||||||||||
Capital | ||||||||||||||||
Common stock |
7,500 | 5,000 | (5,000 | ) A | 7,500 | |||||||||||
Paid-in capital |
62,837 | 10,500 | (10,500 | ) A | 62,837 | |||||||||||
Surplus notes | 85,000 | – | – | 85,000 | ||||||||||||
Unassigned surplus | 1,703,108 | 5,611 | (5,611 | ) A | 1,703,108 | |||||||||||
Total capital and surplus | 1,858,445 | 21,111 | (21,111 | ) | 1,858,445 | |||||||||||
Total liabilities and capital and surplus | $ | 15,475,920 | $ | 37,425 | $ | (30,463 | ) | $ | 15,482,882 | |||||||
A. | To eliminate CMFG Life’s indirect investment in MEMBERS Life. | ||
B. | To consolidate and eliminate affiliated receivables and payables. | ||
C. | To eliminate affiliated intercompany reinsurance agreements. |
83 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Consolidating Statement of Statutory Basis Statement of Operations |
Year Ended December 31, 2015 |
(000s omitted) |
MEMBERS | ||||||||||||||||
Statement of Operations | CMFG Life | Life | Eliminations | Consolidated | ||||||||||||
Income | ||||||||||||||||
Premiums and other considerations | ||||||||||||||||
Life and annuity contracts |
$ | 2,575,361 | $ | (1,207 | ) | $ | – | $ | 2,574,154 | |||||||
Accident and health contracts |
534,833 | (1 | ) | – | 534,832 | |||||||||||
Supplementary contracts |
38,642 | – | – | 38,642 | ||||||||||||
Net investment income | 512,682 | 317 | – | 512,999 | ||||||||||||
Reinsurance commissions | 1,596 | 36,831 | (36,831 | )C | 1,596 | |||||||||||
Commission and fee income | 63,042 | 1 | – | 63,043 | ||||||||||||
Other income | 25,214 | 3,730 | – | 28,944 | ||||||||||||
Total income | 3,751,370 | 39,671 | (36,831 | ) | 3,754,210 | |||||||||||
Benefits and expenses | ||||||||||||||||
Death and annuity benefits | 454,577 | 64 | – | 454,641 | ||||||||||||
Disability and accident and health benefits | 200,152 | (1 | ) | – | 200,151 | |||||||||||
Interest on deposit-type contracts | 11,078 | (1 | ) | – | 11,077 | |||||||||||
Other benefits to policyholders and beneficiaries | 2,192 | – | – | 2,192 | ||||||||||||
Surrender benefits | 1,812,030 | 22 | – | 1,812,052 | ||||||||||||
Payments on supplementary contracts | ||||||||||||||||
with life contingencies, interest and |
||||||||||||||||
policy or deposit-type contract |
||||||||||||||||
funds, and group conversions |
35,735 | – | – | 35,735 | ||||||||||||
Increase in policy reserves-life and annuity contracts | ||||||||||||||||
and accident and health insurance |
358,767 | (1,336 | ) | – | 357,431 | |||||||||||
General insurance expenses | 701,006 | 9,868 | – | 710,874 | ||||||||||||
Insurance taxes, licenses, fees, and commissions | 93,136 | 28,535 | (36,831 | )C | 84,840 | |||||||||||
Net transfers to (from) separate accounts | (200,194 | ) | – | – | (200,194 | ) | ||||||||||
Total benefits and expenses | 3,468,479 | 37,151 | (36,831 | ) | 3,468,799 | |||||||||||
Income before dividends to policyholders, federal | ||||||||||||||||
income tax expense and net realized capital ga |
282,891 | 2,520 | – | 285,411 | ||||||||||||
Dividends to policyholders | 24,479 | – | – | 24,479 | ||||||||||||
Income before federal income tax expense | ||||||||||||||||
and net realized capital gains |
258,412 | 2,520 | – | 260,932 | ||||||||||||
Federal income tax expense | 41,201 | 1,516 | – | 42,717 | ||||||||||||
Income before net realized capital gains | ||||||||||||||||
Net realized capital gains, excluding gains transferred | 217,211 | 1,004 | – | 218,215 | ||||||||||||
to IMR, net of tax expense (benefit) |
39,001 | 108 | – | 39,109 | ||||||||||||
Net income | $ | 256,212 | $ | 1,112 | $ | – | $ | 257,324 | ||||||||
C. | To eliminate affiliated intercompany reinsurance agreements. |
84 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Consolidating Statement of Statutory Basis Changes in Capital and Surplus |
Year Ended December 31, 2015 |
(000s omitted) |
MEMBERS | ||||||||||||||||
Capital and Surplus | CMFG Life | Life | Eliminations | Consolidated | ||||||||||||
Balance at the beginning of year | $ | 1,632,876 | $ | 18,365 | $ | (18,365 | ) | $ | 1,632,876 | |||||||
Additions (deductions): | ||||||||||||||||
Net income |
256,212 | 1,112 | – | 257,324 | ||||||||||||
Change in unrealized capital gains, net of tax |
15,479 | – | (2,746 | ) A | 12,733 | |||||||||||
Change in unrealized foreign exchange |
||||||||||||||||
capital gain (loss), |
(2,789 | ) | – | – | (2,789 | ) | ||||||||||
Change in asset valuation reserve |
1,030 | 1 | – | 1,031 | ||||||||||||
Change in net deferred income tax |
(25,613 | ) | 82 | – | (25,531 | ) | ||||||||||
Change in nonadmitted assets |
(20,618 | ) | 1,551 | – | (19,067 | ) | ||||||||||
Miscellaneous expense |
431 | – | – | 431 | ||||||||||||
Change in pension liablity, net of tax |
1,437 | – | – | 1,437 | ||||||||||||
Net additions | 225,569 | 2,746 | (2,746 | ) | 225,569 | |||||||||||
Balance at the end of the year | $ | 1,858,445 | $ | 21,111 | $ | (21,111 | ) | $ | 1,858,445 | |||||||
A. | To eliminate CMFG Life’s indirect investment in MEMBERS Life. |
85 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Consolidating Statement of Statutory Basis Statement of Cash Flows |
Year Ended December 31, 2015 |
(000s omitted) |
MEMBERS | ||||||||||||||||
CMFG Life | Life | Eliminations | Consolidated | |||||||||||||
Cash from operating activities | ||||||||||||||||
Premiums and other considerations |
$ | 2,903,345 | $ | 203 | $ | (1,368 | ) C | $ | 2,902,180 | |||||||
Net investment income received |
510,597 | 325 | – | 510,922 | ||||||||||||
Reinsurance commissions |
1,596 | 42,168 | (36,831 | ) C | 6,933 | |||||||||||
Other income |
74,992 | – | – | 74,992 | ||||||||||||
Policy and contract benefits and dividends paid |
(2,525,873 | ) | (3,289 | ) | 1,875 | C | (2,527,287 | ) | ||||||||
Operating expenses paid |
(720,477 | ) | (36,988 | ) | 36,831 | C | (720,634 | ) | ||||||||
Federal income taxes received (paid) |
(48,321 | ) | (169 | ) | – | (48,490 | ) | |||||||||
Net transfers (to) from separate accounts |
194,093 | – | – | 194,093 | ||||||||||||
Net cash provided by operating activities | 389,952 | 2,250 | 507 | 392,709 | ||||||||||||
Cash from investing activities | ||||||||||||||||
Proceeds from investments sold, matured or repaid |
||||||||||||||||
Bonds and notes |
680,085 | 8,973 | – | 689,058 | ||||||||||||
Stocks |
62,092 | – | – | 62,092 | ||||||||||||
Mortgage loans |
154,722 | – | – | 154,722 | ||||||||||||
Real estate |
6,650 | – | – | 6,650 | ||||||||||||
Other invested assets |
64,286 | – | – | 64,286 | ||||||||||||
Net change in receivables from securities sold |
2,005 | – | – | 2,005 | ||||||||||||
Miscellaneous proceeds |
40,846 | 15 | – | 40,861 | ||||||||||||
Total investment proceeds |
1,010,686 | 8,988 | – | 1,019,674 | ||||||||||||
Cost of investments acquired |
||||||||||||||||
Bonds and notes |
1,120,279 | 8,760 | – | 1,129,039 | ||||||||||||
Stocks |
40,128 | – | – | 40,128 | ||||||||||||
Mortgage loans |
232,055 | – | – | 232,055 | ||||||||||||
Real estate |
5,735 | – | – | 5,735 | ||||||||||||
Other invested assets |
139,529 | – | – | 139,529 | ||||||||||||
Miscellaneous applications |
11,817 | – | – | 11,817 | ||||||||||||
Total investments acquired |
1,549,543 | 8,760 | – | 1,558,303 | ||||||||||||
Net decrease in contract loans |
– | (197 | ) | – | (197 | ) | ||||||||||
Net cash provided by (used in) investing activities | (538,857 | ) | 425 | – | (538,432 | ) | ||||||||||
(continued) |
86 |
CMFG LIFE INSURANCE COMPANY and SUBSIDIARY |
Consolidating Statement of Statutory Basis Statement of Cash Flows, continued |
Year Ended December 31, 2015 |
(000s omitted) |
MEMBERS | ||||||||||||||||
CMFG Life | Life | Eliminations | Consolidated | |||||||||||||
Cash from financing and miscellaneous activities | ||||||||||||||||
Borrowed (repaid) funds, net |
190,723 | – | – | 190,723 | ||||||||||||
Net deposits on deposit-type contracts |
(36,223 | ) | – | – | (36,223 | ) | ||||||||||
Other cash provided (used) |
(28,324 | ) | 8,816 | (507 | ) | (20,015 | ) | |||||||||
Net cash provided by (used in) financing | ||||||||||||||||
and miscellaneous activities |
126,176 | 8,816 | (507 | ) | 134,485 | |||||||||||
Net change in cash, cash equivalents and | ||||||||||||||||
short-term investments |
(22,729 | ) | 11,491 | – | (11,238 | ) | ||||||||||
Cash, cash equivalents and short-term | ||||||||||||||||
investments at the beginning of year - CMFG Life |
80,692 | – | – | 80,692 | ||||||||||||
Cash, cash equivalents and short-term investments | ||||||||||||||||
at the beginning of year - MEMBERS Life |
– | 5,601 | – | 5,601 | ||||||||||||
Cash, cash equivalents and short-term | ||||||||||||||||
investments at the end of year |
$ | 57,963 | $ | 17,092 | $ | – | $ | 75,055 | ||||||||
C. | To eliminate affiliated intercompany reinsurance agreements. |
87 |
CMFG LIFE INSURANCE COMPANY |
Schedule of Selected Financial Data |
As of and for the Year Ended December 31, 2015 |
(000s omitted) |
Investment income earned: | ||||
Government bonds |
$ | 2,170 | ||
Bonds exempt from U.S. tax |
– | |||
Other bonds (unaffiliated) |
351,081 | |||
Bonds of affiliates |
3,577 | |||
Preferred stocks (unaffiliated) |
2,126 | |||
Preferred stocks of affiliates |
– | |||
Common stocks (unaffiliated) |
284 | |||
Common stocks of affiliates |
100,000 | |||
Mortgage loans |
73,154 | |||
Real estate |
18,746 | |||
Premium notes, contract loans and liens |
6,954 | |||
Cash |
540 | |||
Cash equivalents |
– | |||
Short-term investments |
10 | |||
Other invested assets |
513 | |||
Derivative financial instruments |
(236 | ) | ||
Aggregate write-in for investment income |
1,021 | |||
Gross investment income |
$ | 559,940 | ||
Real estate owned - book value less encumbrances (excluding home office) | $ | 7,326 | ||
Mortgage loans - book value: | ||||
Farm mortgages |
$ | – | ||
Residential mortgages |
22 | |||
Commercial mortgages |
1,518,700 | |||
Total mortgage loans |
$ | 1,518,722 | ||
Mortgage loans by standing - book value: | ||||
Good standing |
$ | 1,518,722 | ||
Good standing with restructured terms |
– | |||
Interest overdue more than three months, not in foreclosure |
– | |||
Foreclosure in process |
– | |||
Other long-term assets-statement value | 622,846 | |||
Collateral loans | – | |||
Bonds and stocks of parents, subsidiaries and affiliates - book value | ||||
Bonds |
89,003 | |||
Preferred stocks |
– | |||
Common stocks |
1,017,341 |
88 |
CMFG LIFE INSURANCE COMPANY |
Schedule of Selected Financial Data, continued |
As of and for the Year Ended December 31, 2015 |
(000s omitted) |
Bonds and short-term investments by class and maturity: | ||||
Bonds by maturity - statement value |
||||
Due within one year or less |
$ | 527,243 | ||
Over 1 year through 5 years |
2,623,289 | |||
Over 5 years through 10 years |
2,213,157 | |||
Over 10 years through 20 years |
835,777 | |||
Over 20 years |
1,261,024 | |||
Total by maturity |
$ | 7,460,490 | ||
Bonds by class - statement value |
||||
Class 1 |
4,331,055 | |||
Class 2 |
2,687,658 | |||
Class 3 |
320,689 | |||
Class 4 |
60,420 | |||
Class 5 |
46,577 | |||
Class 6 |
14,091 | |||
Total by class |
$ | 7,460,490 | ||
Total bonds publicly traded |
$ | 4,427,741 | ||
Total bonds privately placed |
3,032,749 | |||
Preferred stocks - statement value | 16,215 | |||
Common stocks - market value | 35,191 | |||
Short-term investments - book value | 17,209 | |||
Options, caps & floors - statement value | 17,267 | |||
Options, caps & floors written and in force - statement value (excluding liabilities) | – | |||
Collar, swap & forward agreements open - statement value | – | |||
Futures contracts open - current value (excluding liabilities) | 152 | |||
Cash | 40,754 | |||
Cash equivalents | – |
89 |
CMFG LIFE INSURANCE COMPANY |
Schedule of Selected Financial Data, continued |
As of and for the Year Ended December 31, 2015 |
(000s omitted) |
Life insurance in force: | ||||
Industrial |
$ | – | ||
Ordinary |
22,519,591 | |||
Credit life |
22,262,298 | |||
Group life |
12,465,083 | |||
Amount of accidental death insurance in force under ordinary policies | 1,167,608 | |||
Life insurance policies with disability provisions in force: | ||||
Industrial |
– | |||
Ordinary |
2,495,172 | |||
Credit life |
208,394 | |||
Group life |
364 | |||
Supplementary contracts in force: | ||||
Ordinary - not involving life contingencies |
||||
Amount on deposit |
139,915 | |||
Income payable |
10,400 | |||
Ordinary - involving life contingencies |
||||
Income payable |
30,750 | |||
Group - not involving life contingencies |
||||
Amount of deposit |
– | |||
Income payable |
– | |||
Group - involving life contingencies |
||||
Income payable |
– | |||
Annuities: | ||||
Ordinary |
||||
Immediate - amount of income payable |
23,115 | |||
Deferred - fully paid - account balance |
2,515,579 | |||
Deferred - not fully paid - account balance |
1,686,499 | |||
Group |
||||
Immediate - amount of income payable |
30,675 | |||
Fully paid account payable |
– | |||
Not fully paid - account balance |
3,544,161 | |||
Accident and health insurance - premium in force | ||||
Ordinary |
56,233 | |||
Group |
200,401 | |||
Credit |
371,761 | |||
Deposit funds and dividends accumulations: | ||||
Deposit funds - account balance |
41,041 | |||
Dividend accumulations - account balance |
159,825 |
90 |
CMFG LIFE INSURANCE COMPANY |
Schedule of Selected Financial Data, continued |
As of and for the Year Ended December 31, 2015 |
(000s omitted) |
Claim payments 2015 | ||||
Group accident and health - year ended December 31 |
||||
2015 |
$ | 26,300 | ||
2014 |
12,959 | |||
2013 |
1,435 | |||
2012 |
850 | |||
2011 |
533 | |||
Prior |
4,036 | |||
Other accident and health | ||||
2015 |
1,197 | |||
2014 |
1,556 | |||
2013 |
1,653 | |||
2012 |
856 | |||
2011 |
499 | |||
Prior |
1,123 | |||
Other coverages that use developmental methods to calculate claims reserves | ||||
2015 |
41,631 | |||
2014 |
42,391 | |||
2013 |
22,763 | |||
2012 |
15,105 | |||
2011 |
8,784 | |||
Prior |
15,154 |
91 |
MEMBERS LIFE INSURANCE COMPANY |
Schedule of Selected Financial Data |
As of and for the Year Ended December 31, 2015 |
(000s omitted) |
Investment income earned: | ||||
Government bonds |
$ | 269 | ||
Other bonds (unaffiliated) |
120 | |||
Bonds of affiliates |
– | |||
Preferred stocks (unaffiliated) |
– | |||
Preferred stocks of affiliates |
– | |||
Common stocks (unaffiliated) |
– | |||
Common stocks of affiliates |
– | |||
Mortgage loans |
– | |||
Real estate |
– | |||
Premium notes, contract loans and liens |
5 | |||
Collateral loans |
– | |||
Cash |
– | |||
Cash equivalents |
– | |||
Short-term investments |
– | |||
Other invested assets |
– | |||
Derivative financial instruments |
– | |||
Aggregate write-in for investment income |
– | |||
Gross investment income |
$ | 394 | ||
Real estate owned - book value less encumbrances | $ | – | ||
Mortgage loans - book value: | ||||
Farm mortgages |
– | |||
Residential mortgages |
– | |||
Commercial mortgages |
– | |||
Total mortgage loans |
$ | – | ||
Mortgage loans by standing - book value: | ||||
Good standing |
– | |||
Good standing with restructured terms |
– | |||
Interest overdue more than three months, not in foreclosure |
– | |||
Foreclosure in process |
– | |||
Other long-term assets-statement value | – | |||
Collateral loans | – | |||
Bonds and stocks of parents, subsidiaries and affiliates - book value: | ||||
Bonds |
– | |||
Preferred stocks |
– | |||
Common stocks |
– |
92 |
MEMBERS LIFE INSURANCE COMPANY |
Schedule of Selected Financial Data, continued |
As of and for the Year Ended December 31, 2015 |
(000s omitted) |
Bonds and short-term investments by class and maturity: | ||||
Bonds by maturity - statement value |
||||
Due within one year or less |
$ | 17,795 | ||
Over 1 year through 5 years |
1,338 | |||
Over 5 years through 10 years |
508 | |||
Over 10 years through 20 years |
375 | |||
Over 20 years |
8,762 | |||
Total by maturity |
$ | 28,778 | ||
Bonds by class - statement value |
||||
Class 1 |
$ | 28,778 | ||
Class 2 |
- | |||
Class 3 |
- | |||
Class 4 |
- | |||
Class 5 |
- | |||
Class 6 |
- | |||
Total by class |
$ | 28,778 | ||
Total bonds publicly traded |
$ | 28,778 | ||
Total bonds privately placed |
- | |||
Preferred stocks - statement value | - | |||
Common stocks - market value | - | |||
Short-term investments - book value | 16,080 | |||
Options, caps & floors - statement value | - | |||
Options, caps & floors written and in force - statement value | - | |||
Collar, swap & forward agreements open - statement value | - | |||
Futures contracts open - current value | - | |||
Cash | 1,012 | |||
Cash equivalents | - |
93 |
MEMBERS LIFE INSURANCE COMPANY |
Schedule of Selected Financial Data, continued |
As of and for the Year Ended December 31, 2015 |
(000s omitted) |
Life insurance in force: | |||
Industrial |
$ | - | |
Ordinary |
- | ||
Credit life |
- | ||
Group life |
- | ||
Amount of accidental death insurance in force under ordinary policies | - | ||
Life insurance policies with disability provisions in force: | |||
Industrial |
- | ||
Ordinary |
- | ||
Credit life |
- | ||
Group life |
- | ||
Supplementary contracts in force: | |||
Ordinary - not involving life contingencies |
|||
Amount in deposit |
- | ||
Income payable |
- | ||
Ordinary - involving life contingencies |
|||
Income payable |
- | ||
Group - not involving life contingencies |
|||
Amount of deposit |
- | ||
Income payable |
- | ||
Group - involving life contingencies |
|||
Income payable |
- | ||
Annuities: | |||
Ordinary |
|||
Immediate - amount of income payable |
- | ||
Deferred - fully paid - account balance |
- | ||
Deferred - not fully paid - account balance |
- | ||
Group |
|||
Immediate - amount of income payable |
- | ||
Fully paid account payable |
- | ||
Not fully paid - account balance |
- | ||
Accident and health insurance - premium in force | |||
Ordinary |
- | ||
Group |
- | ||
Credit |
- | ||
Deposit funds and dividends accumulations: | |||
Deposit funds - account balance |
- | ||
Dividend accumulations - account balance |
- |
94 |
MEMBERS LIFE INSURANCE COMPANY |
Schedule of Selected Financial Data, continued |
As of and for the Year Ended December 31, 2015 |
(000s omitted) |
Claim payments 2015 | |||
Group accident and health - year ended December 31 |
|||
2015 |
|||
2014 |
$ | - | |
2013 |
- | ||
2012 |
- | ||
2011 |
- | ||
Prior |
- | ||
Other accident and health | |||
2015 |
- | ||
2014 |
- | ||
2013 |
- | ||
2012 |
- | ||
2011 |
- | ||
Prior |
- | ||
Other coverages that use developmental methods to calculate claims reserves |
|||
2015 |
- | ||
2014 |
- | ||
2013 |
- | ||
2012 |
- | ||
2011 |
- | ||
Prior |
- |
95 |
CMFG LIFE INSURANCE COMPANY |
Summary Investment Schedule |
December 31, 2015 |
(000s omitted) |
Gross | Admitted Assets Reported | |||||||||
Investment | in the Annual Statement | |||||||||
Investment Categories | Holdings | Amount | Percentage | |||||||
Bonds: | ||||||||||
U.S. treasury securities |
$ | 186,007 | $ | 186,007 | 1.7 | % | ||||
U.S. government agency and corporate obligations (excluding mortgage-backed securities): |
||||||||||
Issued by U.S. government agencies |
||||||||||
Issued by U.S. government sponsored agencies |
- | - | 0.0 | % | ||||||
Non-U.S. government (including Canada, excluding mortgage-backed securities) |
- | - | 0.0 | % | ||||||
Securities issued by states, territories and possessions and political subdivisions in the U.S.: |
||||||||||
States, territories and possessions general obligations |
45,580 | 45,580 | 0.4 | % | ||||||
Political subdivisions of states, territories and possessions and political subdivisions general obligations |
221,506 | 221,506 | 2.0 | % | ||||||
Revenue and assessment obligations |
17,203 | 17,203 | 0.2 | % | ||||||
Industrial development and similar obligations |
- | - | 0.0 | % | ||||||
Mortgage-backed securities (includes residential and commercial MBS): |
||||||||||
Pass-through securities: |
||||||||||
Issued or guaranteed by GNMA |
15,939 | 15,939 | 0.1 | % | ||||||
Issued or guaranteed by FNMA and FHLMC |
168,382 | 168,382 | 1.5 | % | ||||||
Privately issued |
2,922 | 2,922 | 0.0 | % | ||||||
CMO’s and REMIC’s: |
||||||||||
Issued by FNMA and FHLMC |
324,611 | 324,611 | 3.0 | % | ||||||
Privately issued and collateralized by MBS issued or guaranteed by GNMA, FNMA or FHLMC |
171,145 | 171,145 | 1.6 | % | ||||||
Privately issued |
122,363 | 122,363 | 1.1 | % | ||||||
Other debt and other fixed income securities (excluding short term): | ||||||||||
Unaffiliated domestic securities (includes credit tenant loans rated by the SVO) |
4,573,610 | 4,573,610 | 41.9 | % | ||||||
Unaffiliated foreign securities |
1,505,010 | 1,505,010 | 13.8 | % | ||||||
Affiliated securities |
89,003 | 89,003 | 0.8 | % |
96 |
CMFG LIFE INSURANCE COMPANY |
Summary Investment Schedule, continued |
December 31, 2015 |
(000s omitted) |
Gross | Admitted Assets Reported | |||||||||
Investment | in the Annual Statement | |||||||||
Investment Categories | Categories | Amount | Percentage | |||||||
Equity interests: | ||||||||||
Investment in mutual funds |
$ | - | $ | - | 0.0 | % | ||||
Preferred stocks: |
||||||||||
Affiliated |
- | - | 0.0 | % | ||||||
Unaffiliated |
16,215 | 16,215 | 0.1 | % | ||||||
Publicly traded equity securities (excluding preferred stocks): |
||||||||||
Affiliated |
- | - | 0.0 | % | ||||||
Unaffiliated |
- | - | 0.0 | % | ||||||
Other equity securities: |
||||||||||
Affiliated |
1,017,341 | 1,017,341 | 9.3 | % | ||||||
Unaffiliated |
35,191 | 35,191 | 0.3 | % | ||||||
Other equity interests including tangible personal property |
||||||||||
under lease: |
||||||||||
Affiliated |
- | - | 0.0 | % | ||||||
Unaffiliated |
- | - | 0.0 | % | ||||||
Mortgage loans: | ||||||||||
Construction and land development |
- | - | 0.0 | % | ||||||
Agricultural |
- | - | 0.0 | % | ||||||
Single family residential properties |
21 | 21 | 0.0 | % | ||||||
Multifamily residential properties |
- | - | 0.0 | % | ||||||
Commercial loans |
1,518,701 | 1,518,701 | 13.9 | % | ||||||
Real estate investments: | ||||||||||
Property occupied by company |
73,687 | 73,687 | 0.7 | % | ||||||
Property held for production of income (includes $7,326 of property acquired in satisfaction of debt) |
7,326 | 7,326 | 0.1 | % | ||||||
Property held for sale (including $ - property acquired in satisfaction of debt) |
- | - | 0.0 | % | ||||||
Contract loans | 102,897 | 102,897 | 0.9 | % | ||||||
Derivatives | 17,419 | 17,419 | 0.2 | % | ||||||
Receivables for securities | 641 | 641 | 0.0 | % | ||||||
Cash and short-term investments | 57,963 | 57,963 | 0.5 | % | ||||||
Other invested assets | 629,877 | 629,877 | 5.9 | % | ||||||
Total cash and invested assets | $ | 10,920,560 | $ | 10,920,560 | 100.0 | % | ||||
97 |
MEMBERS LIFE INSURANCE COMPANY |
Summary Investment Schedule |
December 31, 2015 |
(000s omitted) |
Gross | Admitted Assets Reported | |||||||||
Investment | in the Annual Statement | |||||||||
Investment Categories | Holdings | Amount | Percentage | |||||||
Bonds: | ||||||||||
U.S. treasury securities |
$ | 10,333 | $ | 10,333 | 34.7 | % | ||||
U.S. government agency and corporate obligations (excluding mortgage-backed securities) |
||||||||||
Issued by U.S. government agencies |
- | - | 0.0 | % | ||||||
Issued by U.S. government sponsored agencies |
- | - | 0.0 | % | ||||||
Foreign government (including Canada, excluding |
||||||||||
mortgage-backed securities |
- | - | 0.0 | % | ||||||
Securities issued by states, territories and possessions and political subdivisions in the U.S.: |
||||||||||
States, territories and possessions general obligations |
- | - | 0.0 | % | ||||||
Political subdivisions of states, territories and possessions and political subdivisions general obligations |
- | - | 0.0 | % | ||||||
Revenue and assessment obligations |
- | - | 0.0 | % | ||||||
Industrial development and similar obligations |
- | - | 0.0 | % | ||||||
Mortgage-backed securities (includes residential and commercial MBS): |
||||||||||
Pass-through securities: |
||||||||||
Guaranteed by GNMA |
941 | 941 | 3.2 | % | ||||||
Issued by FNMA and FHLMC |
1,424 | 1,424 | 4.8 | % | ||||||
All other |
- | - | 0.0 | % | ||||||
CMO’s and REMIC’s: |
||||||||||
Issued or guaranteed by GNMA, FNMA, FHLMC or VA |
- | - | 0.0 | % | ||||||
Issued by non-U.S.. Government issuers and collateralized by mortgage-backed securities issued or guaranteed by GNMA, FNMA, FHLMC or VA |
- | - | 0.0 | % | ||||||
All other |
- | - | 0.0 | % | ||||||
Other debt and other fixed income securities (excluding short term): |
||||||||||
Unaffiliated domestic securities (includes credit tenant loans rated by the SVO) |
- | - | 0.0 | % | ||||||
Unaffiliated foreign securities |
- | - | 0.0 | % | ||||||
Affiliated securities |
- | - | 0.0 | % | ||||||
Equity interests: | ||||||||||
Investment in mutual funds |
- | - | 0.0 | % | ||||||
Preferred stocks: |
||||||||||
Publicly traded equity securities (excluding preferred stocks): |
||||||||||
Affiliated |
- | - | 0.0 | % | ||||||
Unaffiliated |
- | - | 0.0 | % |
98 |
MEMBERS LIFE INSURANCE COMPANY |
Summary Investment Schedule, continued |
December 31, 2015 |
(000s omitted) |
Gross | Admitted Assets Reported | |||||||||
Investment | in the Annual Statement | |||||||||
Investment Categories | Holdings | Amount | Percentage | |||||||
Other equity securities: | ||||||||||
Affiliated |
$ | - | $ | - | 0.0 | % | ||||
Unaffiliated |
- | - | 0.0 | % | ||||||
Other equity interests including tangible personal property under lease: | ||||||||||
Affiliated |
- | - | 0.0 | % | ||||||
Unaffiliated |
- | - | 0.0 | % | ||||||
Mortgage loans: | ||||||||||
Construction and land development |
- | - | 0.0 | % | ||||||
Agricultural |
- | - | 0.0 | % | ||||||
Single family residential properties |
- | - | 0.0 | % | ||||||
Multifamily residential properties |
- | - | 0.0 | % | ||||||
Commercial loans |
- | - | 0.0 | % | ||||||
Real estate investments | - | - | 0.0 | % | ||||||
Contract loans | - | - | 0.0 | % | ||||||
Receivables for securities sold | - | - | 0.0 | % | ||||||
Cash and short-term investments | 17,092 | 17,092 | 57.3 | % | ||||||
Other invested assets | - | - | 0.0 | % | ||||||
Total invested assets | $ | 29,790 | $ | 29,790 | 100.0 | % | ||||
99 |
CMFG LIFE INSURANCE COMPANY |
Supplemental Investment Risks Interrogatories |
December 31, 2015 |
(000s omitted) |
1. Reporting entity’s total admitted assets, excluding separate account assets. | $ | 11,463,223 | |
2. Ten largest exposures to a single issuer/borrower/investment. |
1 | 2 | 3 | 4 | ||||||||||||
Percentage of Total | |||||||||||||||
Issuer | Description of Exposure | Amount | Admitted Assets | ||||||||||||
2.01 | CUNA Mutual Investment Corporation | Equity | $ | 969,106 | 8.454 | % | |||||||||
2.02 | MCA Fund II LP | Equity | 343,327 | 2.995 | % | ||||||||||
2.03 | MCA Fund I Holding LLC | Bond/Equity | 263,638 | 2.300 | % | ||||||||||
2.04 | MCA Fund III LP | Equity | 81,257 | 0.709 | % | ||||||||||
2.05 | CUNA Mutual Caribbean Hldg Ltd. | Equity | 30,116 | 0.263 | % | ||||||||||
2.06 | Reliance Industries Limited | Bond | 28,046 | 0.245 | % | ||||||||||
2.07 | Shell International Fin | Bond | 25,493 | 0.222 | % | ||||||||||
2.08 | Air Lease Corp | Bond | 24,500 | 0.214 | % | ||||||||||
2.09 | Federal Home Loan Bank Des Moines | Equity | 24,000 | 0.209 | % | ||||||||||
2.10 | FED Ex Ground Facility - NJ | Mortgage Loan | 23,180 | 0.202 | % |
3. Amounts and percentages of the reporting entity’s total admitted assets held in bonds and preferred stocks by NAIC rating. | |||||||||
Bonds | 1 | 2 | |||||||
3.01 | NAIC-1 | $ | 4,331,055 | 37.782 | % | ||||
3.02 | NAIC-2 | 2,687,658 | 23.446 | % | |||||
3.03 | NAIC-3 | 320,689 | 2.798 | % | |||||
3.04 | NAIC-4 | 60,420 | 0.527 | % | |||||
3.05 | NAIC-5 | 46,577 | 0.406 | % | |||||
3.06 | NAIC-6 | 14,091 | 0.123 | % | |||||
Preferred Stocks | 3 | 4 | |||||||
3.07 | P/RP-1 | $ | - | 0.000 | % | ||||
3.08 | P/RP-2 | 9,000 | 0.079 | % | |||||
3.09 | P/RP-3 | - | 0.000 | % | |||||
3.10 | P/RP-4 | - | 0.000 | % | |||||
3.11 | P/RP-5 | 2,965 | 0.026 | % | |||||
3.12 | P/RP-6 | 4,250 | 0.037 | % |
4. Assets held in foreign investments: | |||||||||||
4.01 | Are assets held in foreign investments less than 2.5% of the reporting entity’s total admitted assets? | Yes [ ] No [ X ] | |||||||||
If response to 4.01 above is yes, responses are not provided for interrogatories 5-10. | |||||||||||
4.02 | Total admitted assets held in foreign investments | $ | 1,507,091 | 13.147 | % | ||||||
4.03 | Foreign-currency-denominated investments | 21,025 | 0.183 | % | |||||||
4.04 | Insurance liabilities denominated in that same foreign currency | - | 0.000 | % |
100 |
CMFG LIFE INSURANCE COMPANY |
Supplemental Investment Risks Interrogatories, continued |
December 31, 2015 |
(000s omitted) |
5. | Aggregate foreign investment exposure categorized by NAIC sovereign rating: | ||||||||||
1 | 2 | ||||||||||
5.01 | Countries rated NAIC-1 | $ | 1,298,318 | 11.326 | % | ||||||
5.02 | Countries rated NAIC-2 | 159,082 | 1.388 | % | |||||||
5.03 | Countries rated NAIC-3 or below | 49,691 | 0.433 | % | |||||||
6. | Two largest foreign investment exposures by country, categorized by the country’s NAIC sovereign rating: | ||||||||||
1 | 2 | ||||||||||
Countries rated NAIC-1: | |||||||||||
6.01 | Country 1: United Kingdom | $ | 365,893 | 3.192 | % | ||||||
6.02 | Country 2: Cayman Islands | 271,396 | 2.368 | % | |||||||
Countries rated NAIC-2: | |||||||||||
6.03 | Country 1: Mexico | $ | 53,268 | 0.465 | % | ||||||
6.04 | Country 2: India | 33,141 | 0.289 | % | |||||||
Countries rated NAIC-3 or below: | |||||||||||
6.05 | Country 1: Kyrgyzstan | $ | 13,088 | 0.114 | % | ||||||
6.06 | Country 2: Puerto Rico | 7,000 | 0.061 | % | |||||||
1 | 2 | ||||||||||
7. | Aggregate unhedged foreign currency exposure: | $ | 17,990 | 0.157 | % | ||||||
8. | Aggregate unhedged foreign currency exposure categorized by NAIC sovereign rating: | ||||||||||
1 | 2 | ||||||||||
8.01 | Countries rated NAIC-1 | $ | 1,307 | 0.011 | % | ||||||
8.02 | Countries rated NAIC-2 | 2,184 | 0.019 | % | |||||||
8.03 | Countries rated NAIC-3 or below | 14,499 | 0.126 | % | |||||||
9. | Two largest unhedged foreign currency exposures by country, categorized by the country’s NAIC sovereign rating: | ||||||||||
Countries rated NAIC-1: | 1 | 2 | |||||||||
9.01 | Country 1: Netherlands | $ | 1,307 | 0.011 | % | ||||||
9.02 | Country 2: | - | 0.000 | % | |||||||
Countries rated NAIC-2: | |||||||||||
9.03 | Country 1: Trinidad | $ | 2,184 | 0.019 | % | ||||||
9.04 | Country 2: | - | 0.000 | % | |||||||
Countries rated NAIC-3 or below: | |||||||||||
9.05 | Country 1: Jamaica | $ | 9,700 | 0.085 | % | ||||||
9.06 | Country 2: St. Vincent | 1,244 | 0.011 | % |
101 |
CMFG LIFE INSURANCE COMPANY |
Supplemental Investment Risks Interrogatories, continued |
December 31, 2015 |
(000s omitted) |
10. | Ten largest non-sovereign (i.e. non-governmental) foreign issues: | ||||||||||||
1 | 2 | ||||||||||||
Issuer | NAIC Rating | 3 | 4 | ||||||||||
10.01 | CUNA Mutual Caribbean Holdings, Limited | Equity | $ | 30,116 | 0.263 | % | |||||||
10.02 | Reliance Industries Limited | 2 | 28,046 | 0.245 | % | ||||||||
10.03 | Shell International Finance | 1 | 25,943 | 0.226 | % | ||||||||
10.04 | StatOil ASA-SPON | 1 | 20,556 | 0.179 | % | ||||||||
10.05 | Rabobank Nederland | 1 | 20,200 | 0.176 | % | ||||||||
10.06 | Vitol Finance Limited | 2 | 20,000 | 0.174 | % | ||||||||
10.07 | Trafigura Beheer B.V | 2 | 20,000 | 0.174 | % | ||||||||
10.08 | Triton Container International | 2 | 18,000 | 0.157 | % | ||||||||
10.09 | Siemens Financieringsmat | 1 | 16,587 | 0.145 | % | ||||||||
10.10 | Nassau Airport Development | 2,3 | 15,900 | 0.139 | % |
11. | Amounts and percentages of the reporting entity’s total admitted assets held in Canadian investments and unhedged Canadian currency exposure: | ||||||
11.01 | Are assets held in Canadian investments less than 2.5% of the reporting entity’s total admitted assets? | Yes [ X ] No [ ] | |||||
If response to 11.01 is yes, detail is not provided for the remainder of Interrogatory 11. | |||||||
12. | Report aggregate amounts and percentages of the reporting entity’s total admitted assets held in investments with contractual sales restrictions. | ||||||
12.01 | Are assets held in investments with contractual sales restrictions less than 2.5% of the reporting entity’s total admitted assets? | Yes [ X ] No [ ] | |||||
If response to 12.01 is yes, responses are not provided for the remainder of Interrogatory 12. |
102 |
CMFG LIFE INSURANCE COMPANY |
Supplemental Investment Risks Interrogatories, continued |
December 31, 2015 |
(000s omitted) |
13. | Amounts and percentages of admitted assets held in the ten largest equity interests: | |||||
13.01 | Are assets held in equity interest less than 2.5% of the reporting entity’s total admitted assets? | Yes [ ] No [ X ] | ||||
If response to 13.01 above is yes, responses are not provided for the remainder of Interrogatory 13. |
1 | 2 | 3 | |||||||
Name of Issuer | |||||||||
13.02 | CUNA Mutual Investment Corporation | $ | 969,106 | 8.454 | % | ||||
13.03 | MCA Fund II LP | 343,327 | 2.995 | % | |||||
13.04 | MCA Fund I Holding LLC | 174,635 | 1.523 | % | |||||
13.05 | MCA Fund III LP | 81,257 | 0.709 | % | |||||
13.06 | CUNA Mutual Caribbean Holdings, Limited | 30,116 | 0.263 | % | |||||
13.07 | Federal Home Loan Bank Des Moines | 24,000 | 0.209 | % | |||||
13.08 | CUNA Mutual International Holdings, Limited | 11,640 | 0.102 | % | |||||
13.09 | Preferred Freezer Holdings Inc. | 5,288 | 0.046 | % | |||||
13.10 | FPL Group Cap Trust I | 5,000 | 0.044 | % | |||||
13.11 | T&L Services LLC | 4,548 | 0.040 | % |
14. | Amounts and percentages of the reporting entity’s total admitted assets held in nonaffiliated, privately placed equities: | |||||
14.01 | Are assets held in nonaffiliated, privately placed equities less than 2.5% of the reporting entity’s total admitted assets? | Yes [X ] No [ ] | ||||
If response to 14.01 above is yes, responses are not provided for the remainder of Interrogatory 14. | ||||||
15. | Amounts and percentages of the reporting entity’s total admitted assets held in general partnership interests: | |||||
15.01 | Are assets held in general partnership interests less than 2.5% of the reporting entity’s total admitted assets? | Yes [ X ] No [ ] | ||||
If response to 15.01 above is yes, responses are not provided for the remainder of Interrogatory 15. |
103 |
CMFG LIFE INSURANCE COMPANY |
Supplemental Investment Risks Interrogatories, continued |
December 31, 2015 |
(000s omitted) |
16. | Amounts and percentages of the reporting entity’s total admitted assets held in mortgage loans: | ||||
16.01 | Are mortgage loans reported in Schedule B less than 2.5% of the reporting entity’s total admitted assets? | Yes [ ] No [ X ] | |||
If response to 16.01 above is yes, responses are not provided for the remainder of Interrogatory 16 and Interrogatory 17. |
1 |
2 | 3 | |||||||
Type (Residential, Commercial, Agricultural) | |||||||||
16.02 | Fedex Ground Facility - NJ, Commercial | $ | 23,180 | 0.202 | % | ||||
16.03 | Welsh-Rooker, Commercial | 18,743 | 0.163 | % | |||||
16.04 | Gateway Commerce Center #1, Commercial | 15,900 | 0.139 | % | |||||
16.05 | Knoxville FBI Office, Commercial | 15,093 | 0.132 | % | |||||
16.06 | Addison Point Apartments, Commercial | 13,208 | 0.115 | % | |||||
16.07 | Seasons of Layton, Commercial | 13,199 | 0.115 | % | |||||
16.08 | Welsh-Hartman, Commercial | 13,168 | 0.115 | % | |||||
16.09 | Salt River II, Commercial | 12,458 | 0.109 | % | |||||
16.10 | Occidental Mall | 11,976 | 0.104 | % | |||||
16.11 | Granite Tower, Commercial | 11,500 | 0.100 | % | |||||
Amount and percentage of the reporting entity’s total admitted assets held in the following categories of mortgage loans: | |||||||||
Loans | |||||||||
16.12 | Construction loans | $ | - | 0.000 | % | ||||
16.13 | Mortgage loans over 90 days past due | - | 0.000 | % | |||||
16.14 | Mortgage loans in the process of foreclosure | - | 0.000 | % | |||||
16.15 | Mortgage loans foreclosed | - | 0.000 | % | |||||
16.16 | Restructured mortgage loans | - | 0.000 | % |
17. | Aggregate mortgage loans having the following loan-to-value ratios as determined from the most current appraisal as of the annual statement date: | ||||||||||||||||||||||||||
Residential | Commercial | Agricultural | |||||||||||||||||||||||||
Loan-to-Value | 1 | 2 | 3 | 4 | 5 | 6 | |||||||||||||||||||||
17.01 | above 95% | $ | 22 | 0.000 | % | $ | 4,977 | 0.043 | % | $ | - | 0.000 | % | ||||||||||||||
17.02 | 91% to 95% | - | 0.000 | % | 1,167 | 0.010 | % | - | 0.000 | % | |||||||||||||||||
17.03 | 81% to 90% | - | 0.000 | % | 24,936 | 0.217 | % | - | 0.000 | % | |||||||||||||||||
17.04 | 71% to 80% | - | 0.000 | % | 133,999 | 1.168 | % | - | 0.000 | % | |||||||||||||||||
17.05 | below 70% | - | 0.000 | % | 1,353,622 | 11.801 | % | - | 0.000 | % | |||||||||||||||||
18. | Amounts and percentages of the reporting entity’s total admitted assets held in each of the five largest investments in real estate: | ||||||||||||||||||||||||||
18.01 | Are assets held in real estate reported less than 2.5% of the reporting entity’s total admitted assets? | ||||||||||||||||||||||||||
Yes [ X ] No [ ] | |||||||||||||||||||||||||||
If response to 18.01 above is yes, responses are not provided for the remainder of Interrogatory 18. |
104 |
CMFG LIFE INSURANCE COMPANY |
Supplemental Investment Risks Interrogatories, continued |
December 31, 2015 |
(000s omitted) |
19. | Report aggregate amounts and percentages of the reporting entity’s total admitted assets held in investments held in mezzanine real estate loans. | |||||
19.01 | Are assets held in investments held in mezzanine real estate loans less than 2.5% | |||||
2.5% of the reporting entity’s admitted assets? | Yes [ X ] No [ ] | |||||
If response to 19.01 is yes, responses are not provided for the remainder of Interrogatory 19. |
20. | Amounts and percentages of the reporting entity’s total admitted assets subject to the following types of agreements: | |||||||||||||||||||||||||
At Year-End | At End of Each Quarter | |||||||||||||||||||||||||
1st Qtr | 2nd Qtr | 3rd Qtr | ||||||||||||||||||||||||
1 | 2 | 3 | 4 | 5 | ||||||||||||||||||||||
20.01 | Securities lending agreements (do not include assets | |||||||||||||||||||||||||
held as collateral for such transactions) | $ | - | 0.000 | % | $ | - | $ | - | $ | - | ||||||||||||||||
20.02 | Repurchase agreements | - | 0.000 | % | - | - | - | |||||||||||||||||||
20.03 | Reverse repurchase agreements | - | 0.000 | % | - | - | - | |||||||||||||||||||
20.04 | Dollar repurchase agreements | - | 0.000 | % | - | - | - | |||||||||||||||||||
20.05 | Dollar reverse repurchase agreements | - | 0.000 | % | - | - | - | |||||||||||||||||||
21. | Amounts and percentages of the reporting entity’s total admitted assets for warrants not attached to other financial instruments, options, caps and floors: | |||||||||||||||||||||||||
Owned | Written | |||||||||||||||||||||||||
1 | 2 | 3 | 4 | |||||||||||||||||||||||
21.01 | Hedging | $ | - | 0.000 | % | $ | - | 0.000 | % | |||||||||||||||||
21.02 | Income generation | - | 0.000 | % | - | 0.000 | % | |||||||||||||||||||
21.03 | Other | - | 0.000 | % | - | 0.000 | % | |||||||||||||||||||
22. | Amounts and percentages of the reporting entity’s total admitted assets of potential exposure for collars, swaps, and forwards: | |||||||||||||||||||||||||
At Year-End | At End of Each Quarter | |||||||||||||||||||||||||
1st Qtr | 2nd Qtr | 3rd Qtr | ||||||||||||||||||||||||
1 | 2 | 3 | 4 | 5 | ||||||||||||||||||||||
22.01 | Hedging | $ | 7,182 | 0.000 | % | $ | 6,186 | $ | 6,563 | $ | 6,490 | |||||||||||||||
22.02 | Income generation | - | 0.000 | % | - | - | - | |||||||||||||||||||
22.03 | Replications | - | 0.000 | % | - | - | - | |||||||||||||||||||
22.04 | Other | - | 0.000 | % | - | - | - | |||||||||||||||||||
23. | Amounts and percentages of the reporting entity’s total admitted assets of potential exposure for futures contracts: | |||||||||||||||||||||||||
At Year-End | At End of Each Quarter | |||||||||||||||||||||||||
1st Qtr | 2nd Qtr | 3rd Qtr | ||||||||||||||||||||||||
1 | 2 | 3 | 4 | 5 | ||||||||||||||||||||||
23.01 | Hedging | $ | 263 | 0.000 | % | $ | 607 | $ | 639 | $ | 299 | |||||||||||||||
23.02 | Income generation | - | 0.000 | % | - | - | - | |||||||||||||||||||
23.03 | Replications | - | 0.000 | % | - | - | - | |||||||||||||||||||
23.04 | Other | - | 0.000 | % | - | - | - |
105 |
MEMBERS LIFE INSURANCE COMPANY |
Supplemental Investment Risks Interrogatories |
December 31, 2015 |
(000s omitted) |
1. | Reporting entity’s total admitted assets. | $ | 37,425 | ||
2. | Ten largest exposures to a single issuer/borrower/investment. |
1 | 2 | 3 | 4 | |||||||||||||
Percentage of Total | ||||||||||||||||
Issuer | Description of Exposure | Amount | Admitted Assets | |||||||||||||
2.01 | FHLMC - 30 YR PT POOL A91900 | Bond | $ | 654 | 1.747% | |||||||||||
2.02 | FHLMC - 30 YR PT POOL P50295 | Bond | 307 | 0.820% | ||||||||||||
2.03 | FHLMC - 30 YR PT POOL P50426 | Bond | 227 | 0.607% | ||||||||||||
2.04 | FNMA - 30 YR PT POOL 911575 | Bond | 161 | 0.430% | ||||||||||||
2.05 | FNMA - 30 YR PT POOL 254311 | Bond | 34 | 0.091% | ||||||||||||
2.06 | FNMA - 30 YR PT POOL 564478 | Bond | 15 | 0.040% | ||||||||||||
2.07 | FNMA - 30 YR PT POOL 253546 | Bond | 11 | 0.029% | ||||||||||||
2.08 | FNMA - 20 YR PT POOL 253596 | Bond | 9 | 0.024% | ||||||||||||
2.09 | FHLMC - 15 YR PT POOL E89739 | Bond | 6 | 0.016% | ||||||||||||
2.10 | FHLMC - 30 YR PT POOL C01005 | Bond | 2 | 0.005% |
3. | Amounts and percentages of the reporting entity’s total admitted assets held in bonds and preferred stocks by NAIC rating. | ||||||||||
Bonds | 1 | 2 | |||||||||
3.01 | NAIC-1 | $ | 28,778 | 76.895 | % | ||||||
3.02 | NAIC-2 | - | 0.000 | % | |||||||
3.03 | NAIC-3 | - | 0.000 | % | |||||||
3.04 | NAIC-4 | - | 0.000 | % | |||||||
3.05 | NAIC-5 | - | 0.000 | % | |||||||
3.06 | NAIC-6 | - | 0.000 | % | |||||||
Preferred Stocks | 3 | 4 | |||||||||
3.07 | P/RP-1 | $ | - | 0.000 | % | ||||||
3.08 | P/RP-2 | - | 0.000 | % | |||||||
3.09 | P/RP-3 | - | 0.000 | % | |||||||
3.10 | P/RP-4 | - | 0.000 | % | |||||||
3.11 | P/RP-5 | - | 0.000 | % | |||||||
3.12 | P/RP-6 | - | 0.000 | % | |||||||
Questions 4-23 are not applicable. |
106 |
PART C
OTHER INFORMATION
Item 26. | Exhibits |
(a) |
Board of Directors Resolutions. |
|
(1) | Resolution of the board of directors of CUNA Mutual Insurance Society establishing CUNA Mutual
Variable Life Insurance Account (“Registrant”). Incorporated herein by
reference to post-effective amendment number 4 on Form N-4 (File No. 333-148426)
filed with the Commission November 24, 2008. |
|
(2) | Certified
resolution of the board of directors of CUNA Mutual Insurance Society approving
the merger between CUNA Mutual Insurance Society and CUNA Mutual Insurance Society.
Incorporated herein by reference to initial registration statement on Form N-6 (File
No. 333-148419) filed with the Commission on January 2, 2008. |
|
(3) | Certified
resolution of the board of directors of CMFG Life Insurance Company approving the
name change between CMFG Life Insurance Company and CUNA Mutual Insurance Society.
Incorporated by reference to post-effective amendment number 16 (File No. 333-148426)
filed with the Commission on April 27, 2012. |
|
(b) |
Custodian
Agreements. Not applicable. |
|
(c) |
Underwriting
Contracts. |
|
(1) | Amended and
Restated Distribution Agreement Between CUNA Mutual Insurance Society and CUNA Brokerage
Services, Inc. for Variable Universal Life Contracts effective January 1, 2008.
Incorporated herein by reference to initial registration statement on Form N-6 (File
No. 333-148419) filed with the Commission on January 2, 2008. |
|
(2) | Amended and
Restated Servicing Agreement related to the Distribution Agreement between CUNA
Mutual Insurance Society and CUNA Brokerage Services, Inc. for Variable Universal
Life Contracts effective January 1, 2008. Incorporated herein by reference to initial
registration statement on Form N-6 (File No. 333-148419) filed with the Commission
on January 2, 2008. |
|
(3) | Form of Selling
and Services Agreement. Incorporated herein by reference to post-effective amendment
number 7 on Form N-4 (File No. 333-148426) filed with the Commission on April 27,
2009. |
|
(4) | Amended and
Restated Distribution and Servicing Agreement for Variable Universal Life Contracts
between CMFG Life Insurance Company and CUNA Brokerage Services, Inc. for Variable
Universal Life contracts effective January 1, 2015. Incorporated herein by reference
to post-effective amendment number 9 to the Form N-6 registration statement (File
No. 33-19719) filed with the Commission on April 24, 2015. |
|
(d) |
Contracts. |
|
(1)(A) | Standard VUL
Contract Form 5202. Incorporated herein by reference to post-effective amendment
number 14 to the Form S-6 registration statement (File No. 33-19718) filed with
the Commission on April 18, 1996. |
(B) | Accelerated
Benefit Option Endorsement, Form 1668. Incorporated herein by |
reference to post-effective
amendment number 14 to the Form S-6 registration statement (File No. 33-19718) filed
with the Commission on April 18, 1996. |
||
(C) | Accidental
Death Benefit Rider, Form 3601. Incorporated herein by reference to post-effective
amendment number 14 to the Form S-6 registration statement (File No. 33-19718) filed
with the Commission on April 18, 1996. |
|
(D) | Guaranteed
Insurability Rider, Form 3652. Incorporated herein by reference to post-effective
amendment number 14 to the Form S-6 registration statement (File No. 33-19718) filed
with the Commission on April 18, 1996. |
|
(E) | Waiver of
Monthly Deduction, Form 3955. Incorporated herein by reference to post-effective
amendment number 14 to the Form S-6 registration statement (File No. 33-19718) filed
with the Commission on April 18, 1996. |
|
(F) | Other Insured
Rider, Form 3956. Incorporated herein by reference to post-effective amendment number
14 to the Form S-6 registration statement (File No. 33-19718) filed with the Commission
on April 18, 1996. |
|
(G) | Automatic
Increase Rider, Form 3957 1085. Incorporated herein by reference to post-effective
amendment number 14 to the Form S-6 registration statement (File No. 33-19718) filed
with the Commission on April 18, 1996. |
|
(H) | Child Rider,
Form 6005. Incorporated herein by reference to post-effective amendment number 14
to the Form S-6 registration statement (File No. 33-19718) filed with the Commission
on April 18, 1996. |
|
(I) | Juvenile Rider,
Form 6012. Incorporated herein by reference to post-effective amendment number 14
to the Form S-6 registration statement (File No. 33-19718) filed with the Commission
on April 18, 1996. |
|
(J) | Level Term
Rider (Sex-Distinct), Form 6017. Incorporated herein by reference to post-effective
amendment number 14 to the Form S-6 registration statement (File No. 33-19718) filed
with the Commission on April 18, 1996. |
|
(K) | Waiver of
Premium and Monthly Deduction Disability Benefit Rider, Form 6029 0994. Incorporated
herein by reference to post-effective amendment number 14 to the Form S-6 registration
statement (File No. 33-19718) filed with the Commission on April 18, 1996. |
|
(L) | Executive
Benefit Plan Endorsement, Form EBP. Incorporated herein by reference to post-effective
amendment number 18 to the Form S-6 registration statement (File No. 33-19718) filed
with the Commission on February 24, 1999. |
|
(2)(A) | Unisex Version
Form 5203. Incorporated herein by reference to post-effective amendment number 14
to the Form S-6 registration statement (File No. 33-19718) filed with the Commission
on April 18, 1996. |
|
(B) | Level Term
Rider (Unisex), Form 6018. Incorporated herein by reference to post-effective amendment
number 14 to the Form S-6 registration statement (File No. 33-19718) filed with
the Commission on April 18, 1996. |
(C) | 403(B) Endorsement,
Form 1608(VUL) 0994 Incorporated herein by reference to |
post-effective amendment
number17 to the Form S-6 registration statement (File No. 33-19718) filed with the
Commission on April 17, 1998. |
||
(3) | State Variation
List. Incorporated herein by reference to post-effective amendment number 18 to
the Form S-6 registration statement (File No. 33-19718) filed with the Commission
on February 24, 1999. |
|
(4) | CUNA Mutual
Life Insurance Company and CUNA Mutual Insurance Society Merger Endorsement dated
December 31, 2007. Incorporated herein by reference to initial registration statement
on Form N-6 (File No. 333-148419) filed with the Commission on January 2, 2008. |
|
(e) |
Applications. | |
(1) | Application.
Incorporated herein by reference to post-effective amendment number 14 to the Form
S-6 registration statement (File No. 33-19718) filed with the Commission on April
18, 1996. |
|
(f) |
Depositor’s Certificate of Incorporation and By-Laws. | |
(1) | Amended and
Restated Articles of Incorporation of CUNA Mutual Insurance Society. Incorporated
herein by reference to initial registration statement on Form N-6 (File No. 333-148419)
filed with the Commission on January 2, 2008. |
|
(2) | Amended and
Restated Bylaws of CUNA Mutual Insurance Society. Incorporated herein by reference
to initial registration statement on Form N-6 (File No. 333-148419) filed with the
Commission on January 2, 2008. |
|
(3) | Amended and
Restated Articles of Incorporation of CMFG Life Insurance Company. Incorporated
by reference to post-effective amendment number 16 (File No. 333-148426) filed with
the Commission on April 27, 2012. |
|
(4) | Amended and
Restated Bylaws of CMFG Life Insurance Company. Incorporated by reference to post-effective
amendment number 16 (File No. 333-148426) filed with the Commission on April 27,
2012. |
|
(g) |
Reinsurance Contracts. | |
(1)(A) | YRT Reinsurance
Agreement between Swiss Re (f/k/a Connecticut General Life Insurance Company) and
CUNA Mutual Insurance Society (f/k/a CUNA Mutual Life Insurance Company), effective
August 1, 1983. Incorporated herein by reference to post-effective amendment no.
4 on Form N-6 (File No. 333-148419) filed with the Commission on August 24, 2010. |
|
(B) | Amendment
No. 1 to YRT Reinsurance Agreement between Swiss Re and CUNA Mutual Insurance Society
(f/k/a CUNA Mutual Life Insurance Company), effective December 28, 1984. Incorporated
herein by reference to post-effective amendment no. 4 on Form N-6 (File No. 333-148419)
filed with the Commission on August 24, 2010. |
|
(C) | Amendment
No. 2 to YRT Reinsurance Agreement between Swiss Re (f/k/a Connecticut General Life
Insurance Company) and CUNA Mutual Insurance Society (f/k/a CUNA Mutual Life Insurance
Company), effective May 1, 1985. Incorporated herein by reference to post-effective
amendment no. 4 on Form N-6 (File No. 333-148419) filed with the Commission on August
24, 2010. |
(D) | Amendment
No. 3 to YRT Reinsurance Agreement between Swiss Re and CUNA Mutual Insurance Society
(f/k/a CUNA Mutual Life Insurance Company), effective July 1, 1986. Incorporated
herein by reference to post-effective amendment no. 4 on Form N-6 (File No. 333-148419)
filed with the Commission on August 24, 2010. |
|
(E) | Amendment
No. 4 to YRT Reinsurance Agreement between Swiss Re and CUNA Mutual Insurance Society
(f/k/a CUNA Mutual Life Insurance Company), effective August 1, 1988. Incorporated
herein by reference to post-effective amendment no. 4 on Form N-6 (File No. 333-148419)
filed with the Commission on August 24, 2010. |
|
(F) | Amendment
No. 5 to YRT Reinsurance Agreement between Swiss Re and CUNA Mutual Insurance Society
(f/k/a CUNA Mutual Life Insurance Company), effective January 1, 1989. Incorporated
herein by reference to post-effective amendment no. 4 on Form N-6 (File No. 333-148419)
filed with the Commission on August 24, 2010. |
|
(G) | Amendment
No. 6 to YRT Reinsurance Agreement between Swiss Re and CUNA Mutual Insurance Society
(f/k/a CUNA Mutual Life Insurance Company), effective July 1, 1990. Incorporated
herein by reference to post-effective amendment no. 4 on Form N-6 (File No. 333-148419)
filed with the Commission on August 24, 2010. |
|
(H) | Amendment
No. 7 to YRT Reinsurance Agreement between Swiss Re and CUNA Mutual Insurance Society
(f/k/a CUNA Mutual Life Insurance Company), effective October 1, 1992. Incorporated
herein by reference to post-effective amendment no. 4 on Form N-6 (File No. 333-148419)
filed with the Commission on August 24, 2010. |
|
(I) | DAC Tax Amendment
between Swiss Re and CUNA Mutual Insurance Society (f/k/a CUNA Mutual Life Insurance
Company), effective August 30, 1993. Incorporated herein by reference to post-effective
amendment no. 4 on Form N-6 (File No. 333-148419) filed with the Commission on August
24, 2010. |
|
(J) | Amendment
No. 8 to YRT Reinsurance Agreement between Swiss Re and CUNA Mutual Insurance Society
(f/k/a CUNA Mutual Life Insurance Company), effective December 31, 1996. Incorporated
herein by reference to post-effective amendment no. 4 on Form N-6 (File No. 333-148419)
filed with the Commission on August 24, 2010. |
|
(K) | Amendment
No. 9 to YRT Reinsurance Agreement between Swiss Re and CUNA Mutual Insurance Society
(f/k/a CUNA Mutual Life Insurance Company), effective January 1, 1999. Incorporated
herein by reference to post-effective amendment no. 4 on Form N-6 (File No. 333-148419)
filed with the Commission on August 24, 2010. |
|
(L) | Amendment
No. 10 to YRT Reinsurance Agreement between Swiss Re and CUNA Mutual Insurance Society
(f/k/a CUNA Mutual Life Insurance Company), effective July 1, 2001. Incorporated
herein by reference to post-effective amendment no. 4 on Form N-6 (File No. 333-148419)
filed with the Commission on August 24, 2010. |
(2)(A) | Facultative
YRT Self-Administered Reinsurance Agreement between Frankona America Life Reassurance
Company and CUNA Mutual Insurance Society (f/k/a Century Life of America), effective
January 1, 1992. Incorporated herein by reference |
to Form N-6 post-effective amendment
no. 24 (File No. 33-19718 filed with the Commission on April 28, 2003. |
||
(B) | Amendment
No. 1 to Facultative YRT Self-Administered Reinsurance Agreement between Scottish
Re Life Corporation (f/k/a Frankona America Life Reassurance Company) and CUNA Mutual
Insurance Society (f/k/a Century Life of America), effective October 1, 1992. Incorporated
herein by reference to initial registration statement on Form N-6 (File No. 333-148420)
filed with the Commission on January 2, 2008. |
|
(C) | Amendment
No. 2 to Facultative YRT Self-Administered Reinsurance Agreement between Scottish
Re Life Corporation (f/k/a Frankona America Life Reassurance Company) and CUNA Mutual
Insurance Society (f/k/a Century Life of America), effective January 1, 1993. Incorporated
herein by reference to post-effective amendment no. 4 on Form N-6 (File No. 333-148419)
filed with the Commission on August 24, 2010. |
|
(D) | Amendment
No. 3 to Facultative YRT Self-Administered Reinsurance Agreement between Scottish
Re Life Corporation (f/k/a Frankona America Life Reassurance Company) and CUNA Mutual
Insurance Society (f/k/a Century Life of America), effective December 28, 1995.
Incorporated herein by reference to post-effective amendment no. 4 on Form N-6 (File
No. 333-148419) filed with the Commission on August 24, 2010. |
|
(E) | Amendment
No. 4 to Facultative YRT Self-Administered Reinsurance Agreement between Scottish
Re Life Corporation (f/k/a Frankona America Life Reassurance Company) and CUNA Mutual
Insurance Society (f/k/a Century Life of America), effective December 31, 1996.
Incorporated herein by reference to post-effective amendment no. 4 on Form N-6 (File
No. 333-148419) filed with the Commission on August 24, 2010. |
|
(F) | Amendment
No. 5 to Facultative YRT Self-Administered Reinsurance Agreement between Scottish
Re Life Corporation (f/k/a Frankona America Life Reassurance Company) and CUNA Mutual
Insurance Society (f/k/a Century Life of America), effective January 1, 1999. Incorporated
herein by reference to post-effective amendment no. 4 on Form N-6 (File No. 333-148419)
filed with the Commission on August 24, 2010. |
|
(G) | Amendment
No. 6 to Facultative YRT Self-Administered Reinsurance Agreement between Scottish
Re Life Corporation (f/k/a Frankona America Life Reassurance Company) and CUNA Mutual
Insurance Society (f/k/a Century Life of America), effective January 1, 2000. Incorporated
herein by reference to post-effective amendment no. 4 on Form N-6 (File No. 333-148419)
filed with the Commission on August 24, 2010. |
(H) | Amendment
No. 7 to Facultative YRT Self-Administered Reinsurance Agreement between Scottish
Re Life Corporation (f/k/a Frankona America Life Reassurance Company) and CUNA Mutual
Insurance Society (f/k/a Century Life of America), effective November 1, 1999. Incorporated
herein by reference to post-effective amendment no. 4 on Form N-6 (File No. 333-148419)
filed with the Commission on August 24, 2010. |
|
(I) | Amendment
No. 7 to Facultative YRT Self-Administered Reinsurance Agreement |
between Scottish
Re Life Corporation (f/k/a Frankona America Life Reassurance Company) and CUNA Mutual
Insurance Society (f/k/a CUNA Mutual Life Insurance Company), effective December
31, 2007. Incorporated herein by reference to post-effective amendment no. 4 on
Form N-6 (File No. 333-148419) filed with the Commission on August 24, 2010. |
||
(3)(A) | Reinsurance
Agreement between General Reassurance Corporation, Financial Centre and CUNA Mutual
Insurance Society (f/k/a Century Life of America), effective January 22, 1986. Incorporated
herein by reference to Form N-6 post-effective amendment no. 24 (File No. 33-19718)
filed with the Commission on April 28, 2003. |
|
(B) | Amendment
to Facultative Reinsurance Agreement between Swiss Re Life & Health of America,
Inc. (f/k/a General Reassurance Corporation, Financial Centre) and CUNA Mutual Insurance
Society (f/k/a Century Life of America), effective January 22, 1986. Incorporated
herein by reference to post-effective amendment no. 4 on Form N-6 (File No. 333-148419)
filed with the Commission on August 24, 2010. |
|
(C) | Amendment
to Facultative Reinsurance Agreement between Swiss Re Life & Health of America,
Inc. (f/k/a General Reassurance Corporation, Financial Centre) and CUNA Mutual Insurance
Society (f/k/a Century Life of America), effective January 22, 1986. Incorporated
herein by reference to post-effective amendment no. 4 on Form N-6 (File No. 333-148419)
filed with the Commission on August 24, 2010. |
|
(D) | Amendment
to Facultative Reinsurance Agreement between Swiss Re Life & Health of America,
Inc. (f/k/a General Reassurance Corporation, Financial Centre) and CUNA Mutual Insurance
Society (f/k/a Century Life of America), effective August 1, 1988. Incorporated
herein by reference to post-effective amendment no. 4 on Form N-6 (File No. 333-148419)
filed with the Commission on August 24, 2010. |
|
(E) | Amendment
to Facultative Reinsurance Agreement between Swiss Re Life & Health of America,
Inc. (f/k/a General Reassurance Corporation, Financial Centre) and CUNA Mutual Insurance
Society (f/k/a Century Life of America), effective July 1, 1990. Incorporated herein
by reference to post-effective amendment no. 4 on Form N-6 (File No. 333-148419)
filed with the Commission on August 24, 2010. |
|
(F) | Amendment
to Facultative Reinsurance Agreement between Swiss Re Life & Health of America,
Inc. (f/k/a General Reassurance Corporation, Financial Centre) and CUNA Mutual Insurance
Society (f/k/a Century Life of America), effective September 1, 1990. Incorporated
herein by reference to post-effective amendment no. 4 on Form N-6 (File No. 333-148419)
filed with the Commission on August 24, 2010. |
(G) | Amendment
to Facultative Reinsurance Agreement between Swiss Re Life & Health of America,
Inc. (f/k/a General Reassurance Corporation, Financial Centre) and CUNA Mutual Insurance
Society (f/k/a Century Life of America), effective July 1, 1991. Incorporated herein
by reference to post-effective amendment no. 4 on Form N-6 (File No. 333-148419)
filed with the Commission on August 24, 2010. |
|
(H) | Amendment
to Facultative Reinsurance Agreement between Swiss Re Life & Health of America,
Inc. (f/k/a General Reassurance Corporation, Financial Centre) |
and CUNA Mutual Insurance Society (f/k/a Century Life of America), effective October 1, 1992. Incorporated
herein by reference to post-effective amendment no. 4 on Form N-6 (File No. 333-148419)
filed with the Commission on August 24, 2010. |
||
(I) | Special DAC
Tax Amendment to the Reinsurance Agreement between Swiss Re Life & Health of
America, Inc. (f/k/a General Reassurance Corporation, Financial Centre) and CUNA
Mutual Insurance Society (f/k/a Century Life of America), effective January 1, 1993.
Incorporated herein by reference to post-effective amendment no. 4 on Form N-6 (File
No. 333-148419) filed with the Commission on August 24, 2010. |
|
(J) | Amendment
to Facultative Reinsurance Agreement between Swiss Re Life & Health of America,
Inc. (f/k/a General Reassurance Corporation, Financial Centre) and CUNA Mutual Insurance
Society (f/k/a Century Life of America), effective October 26, 1994. Incorporated
herein by reference to post-effective amendment no. 4 on Form N-6 (File No. 333-148419)
filed with the Commission on August 24, 2010. |
|
(K) | Amendment
to Facultative Reinsurance Agreement between Swiss Re Life & Health of America,
Inc. (f/k/a General Reassurance Corporation, Financial Centre) and CUNA Mutual Insurance
Society (f/k/a Century Life of America), effective October 1, 1995. Incorporated
herein by reference to post-effective amendment no. 4 on Form N-6 (File No. 333-148419)
filed with the Commission on August 24, 2010. |
|
(L) | Amendment
to Facultative Reinsurance Agreement between Swiss Re Life & Health of America,
Inc. (f/k/a General Reassurance Corporation, Financial Centre) and CUNA Mutual Insurance
Society (f/k/a Century Life of America), effective December 31, 1996. Incorporated
herein by reference to post-effective amendment no. 4 on Form N-6 (File No. 333-148419)
filed with the Commission on August 24, 2010. |
|
(M) | Amendment
to Facultative Reinsurance Agreement between Swiss Re Life & Health of America,
Inc. (f/k/a General Reassurance Corporation, Financial Centre) and CUNA Mutual Insurance
Society (f/k/a Century Life of America), effective January 1, 2000. Incorporated
herein by reference to post-effective amendment no. 4 on Form N-6 (File No. 333-148419)
filed with the Commission on August 24, 2010. |
|
(N) | Amendment
to Facultative Reinsurance Agreement between Swiss Re Life & Health of America,
Inc. (f/k/a General Reassurance Corporation, Financial Centre) and CUNA Mutual Insurance
Society (f/k/a Century Life of America), effective July 1, 2001. Incorporated herein
by reference to post-effective amendment no. 4 on Form N-6 (File No. 333-148419)
filed with the Commission on August 24, 2010. |
|
(O) | Amendment
to Facultative Reinsurance Agreement between Swiss Re Life & Health of America,
Inc. (f/k/a General Reassurance Corporation, Financial Centre) and CUNA Mutual Insurance
Society (f/k/a Century Life of America), effective December 31, 2007. Incorporated
herein by reference to initial registration statement on Form N-6 (File No. 333-148420)
filed with the Commission on January 2, 2008. |
(4)(A) | Reinsurance
Agreement between the Lincoln National Life Insurance Company and CUNA Mutual Insurance
Society (f/k/a Lutheran Mutual Life Insurance Company), effective September 1, 1983.
Incorporated herein by reference to Form N-6 post-effective amendment no. 24 (File
No. 33-19718) filed with the Commission on April 28, 2003. |
|
(B) | Amendment
No. 1 to Reinsurance Agreement between Swiss Re Life & Health of America, Inc.
(f/k/a The Lincoln National Life Insurance Company) and CUNA Mutual Insurance Society
(f/k/a Lutheran Mutual Life Insurance Company), effective May 1, 1984. Incorporated
herein by reference to post-effective amendment no. 4 on Form N-6 (File No. 333-148419)
filed with the Commission on August 24, 2010. |
|
(C) | Amendment
No. 2 to Reinsurance Agreement between Swiss Re Life & Health of America, Inc.
(f/k/a The Lincoln National Life Insurance Company) and CUNA Mutual Insurance Society
(f/k/a Lutheran Mutual Life Insurance Company), effective March 1, 1984. Incorporated
herein by reference to post-effective amendment no. 4 on Form N-6 (File No. 333-148419)
filed with the Commission on August 24, 2010. |
|
(D) | Amendment
No. 3 to Reinsurance Agreement between Swiss Re Life & Health of America, Inc.
(f/k/a The Lincoln National Life Insurance Company) and CUNA Mutual Insurance Society
(f/k/a Lutheran Mutual Life Insurance Company), effective December 28, 1984. Incorporated
herein by reference to post-effective amendment no. 4 on Form N-6 (File No. 333-148419)
filed with the Commission on August 24, 2010. |
|
(E) | Amendment
No. 4 to Reinsurance Agreement between Swiss Re Life & Health of America, Inc.
(f/k/a The Lincoln National Life Insurance Company) and CUNA Mutual Insurance Society
(f/k/a Lutheran Mutual Life Insurance Company), effective January 1, 1986. Incorporated
herein by reference to post-effective amendment no. 4 on Form N-6 (File No. 333-148419)
filed with the Commission on August 24, 2010. |
|
(F) | Amendment
No. 5 to Reinsurance Agreement between Swiss Re Life & Health of America, Inc.
(f/k/a The Lincoln National Life Insurance Company) and CUNA Mutual Insurance Society
(f/k/a Lutheran Mutual Life Insurance Company), effective February 1, 1986. Incorporated
herein by reference to post-effective amendment no. 4 on Form N-6 (File No. 333-148419)
filed with the Commission on August 24, 2010. |
(G) | Amendment
No. 6 to Reinsurance Agreement between Swiss Re Life & Health of America, Inc.
(f/k/a The Lincoln National Life Insurance Company) and CUNA Mutual Insurance Society
(f/k/a Lutheran Mutual Life Insurance Company), effective April 1, 1986. Incorporated
herein by reference to post-effective amendment no. 4 on Form N-6 (File No. 333-148419)
filed with the Commission on August 24, 2010. |
|
(H) | Amendment
No. 7 to Reinsurance Agreement between Swiss Re Life & Health of America, Inc.
(f/k/a The Lincoln National Life Insurance Company) and CUNA Mutual Insurance Society
(f/k/a Lutheran Mutual Life Insurance Company), effective January 1, 1986. Incorporated
herein by reference to post-effective amendment no. 4 on Form N-6 (File No. 333-148419)
filed with the Commission on August 24, 2010. |
(I) | Amendment
No. 8 to Reinsurance Agreement between Swiss Re Life & Health of America, Inc.
(f/k/a The Lincoln National Life Insurance Company) and CUNA Mutual Insurance Society
(f/k/a Lutheran Mutual Life Insurance Company), effective February 1, 1986. Incorporated
herein by reference to post-effective amendment no. 4 on Form N-6 (File No. 333-148419)
filed with the Commission on August 24, 2010. |
|
(J) | Amendment
No. 9 to Reinsurance Agreement between Swiss Re Life & Health of America, Inc.
(f/k/a The Lincoln National Life Insurance Company) and CUNA Mutual Insurance Society
(f/k/a Lutheran Mutual Life Insurance Company), effective July 15, 1986. Incorporated
herein by reference to post-effective amendment no. 4 on Form N-6 (File No. 333-148419)
filed with the Commission on August 24, 2010. |
|
(K) | Amendment
No. 10 to Reinsurance Agreement between Swiss Re Life & Health of America,
Inc. (f/k/a The Lincoln National Life Insurance Company) and CUNA Mutual Insurance
Society (f/k/a Lutheran Mutual Life Insurance Company), effective February 1, 1986.
Incorporated herein by reference to post-effective amendment no. 4 on Form N-6 (File
No. 333-148419) filed with the Commission on August 24, 2010. |
|
(L) | Amendment
No. 11 to Reinsurance Agreement between Swiss Re Life & Health of America,
Inc. (f/k/a The Lincoln National Life Insurance Company) and CUNA Mutual Insurance
Society (f/k/a Lutheran Mutual Life Insurance Company), effective November 1, 1986.
Incorporated herein by reference to post-effective amendment no. 4 on Form N-6 (File
No. 333-148419) filed with the Commission on August 24, 2010. |
|
(M) | Amendment
No. 12 to Reinsurance Agreement between Swiss Re Life & Health of America,
Inc. (f/k/a The Lincoln National Life Insurance Company) and CUNA Mutual Insurance
Society (f/k/a Lutheran Mutual Life Insurance Company), effective of March 1, 1987.
Incorporated herein by reference to post-effective amendment no. 4 on Form N-6 (File
No. 333-148419) filed with the Commission on August 24, 2010. |
(N) | Amendment
No. 13 to Reinsurance Agreement between Swiss Re Life & Health of America,
Inc. (f/k/a The Lincoln National Life Insurance Company) and CUNA Mutual Insurance
Society (f/k/a Lutheran Mutual Life Insurance Company), effective August 1, 1988.
Incorporated herein by reference to post-effective amendment no. 4 on Form N-6 (File
No. 333-148419) filed with the Commission on August 24, 2010. |
|
(O) | Amendment
No. 14 to Reinsurance Agreement between Swiss Re Life & Health of America,
Inc. (f/k/a The Lincoln National Life Insurance Company) and CUNA Mutual Insurance
Society (f/k/a Lutheran Mutual Life Insurance Company), effective March 1, 1989.
Incorporated herein by reference to post-effective amendment no. 4 on Form N-6 (File
No. 333-148419) filed with the Commission on August 24, 2010. |
|
(P) | Amendment
No. 15 to Reinsurance Agreement between Swiss Re Life & Health of America,
Inc. (f/k/a The Lincoln National Life Insurance Company) and CUNA |
Mutual Insurance
Society (f/k/a Lutheran Mutual Life Insurance Company), effective July 1, 1990.
Incorporated herein by reference to post-effective amendment no. 4 on Form N-6 (File
No. 333-148419) filed with the Commission on August 24, 2010. |
||
(Q) | Amendment
No. 16 to Reinsurance Agreement between Swiss Re Life & Health of America,
Inc. (f/k/a The Lincoln National Life Insurance Company) and CUNA Mutual Insurance
Society (f/k/a Lutheran Mutual Life Insurance Company), effective July 1, 1990.
Incorporated herein by reference to post-effective amendment no. 4 on Form N-6 (File
No. 333-148419) filed with the Commission on August 24, 2010. |
|
(R) | Amendment
No. 17 to Reinsurance Agreement between Swiss Re Life & Health of America,
Inc. (f/k/a The Lincoln National Life Insurance Company) and CUNA Mutual Insurance
Society (f/k/a Lutheran Mutual Life Insurance Company), effective July 1, 1991.
Incorporated herein by reference to post-effective amendment no. 4 on Form N-6 (File
No. 333-148419) filed with the Commission on August 24, 2010. |
|
(S) | Amendment
No. 18 to Reinsurance Agreement between Swiss Re Life & Health of America,
Inc. (f/k/a The Lincoln National Life Insurance Company) and CUNA Mutual Insurance
Society (f/k/a Lutheran Mutual Life Insurance Company), effective October 1, 1992.
Incorporated herein by reference to post-effective amendment no. 4 on Form N-6 (File
No. 333-148419) filed with the Commission on August 24, 2010. |
|
(T) | Amendment
No. 19 to Reinsurance Agreement between Swiss Re Life & Health of America,
Inc. (f/k/a The Lincoln National Life Insurance Company) and CUNA Mutual Insurance
Society (f/k/a Lutheran Mutual Life Insurance Company), effective June 29, 1993.
Incorporated herein by reference to post-effective amendment no. 4 on Form N-6 (File
No. 333-148419) filed with the Commission on August 24, 2010. |
|
(U) | Amendment
No. 20 to Reinsurance Agreement between Swiss Re Life & Health of America,
Inc. (f/k/a The Lincoln National Life Insurance Company) and CUNA Mutual Insurance
Society (f/k/a Lutheran Mutual Life Insurance Company), effective September 1, 1983.
Incorporated herein by reference to post-effective amendment no. 4 on Form N-6 (File
No. 333-148419) filed with the Commission on August 24, 2010. |
(V) | Amendment
to Reinsurance Agreement between Swiss Re Life & Health of America, Inc. (f/k/a
The Lincoln National Life Insurance Company) and CUNA Mutual Insurance Society (f/k/a
Lutheran Mutual Life Insurance Company), effective December 31, 1986. Incorporated
herein by reference to post-effective amendment no. 4 on Form N-6 (File No. 333-148419)
filed with the Commission on August 24, 2010. |
|
(W) | Amendment
No. 21 to Reinsurance Agreement between Swiss Re Life & Health of America,
Inc. (f/k/a The Lincoln National Life Insurance Company) and CUNA Mutual Insurance
Society (f/k/a Lutheran Mutual Life Insurance Company), effective January 1, 1999.
Incorporated herein by reference to post-effective amendment no. 4 on Form N-6 (File
No. 333-148419) filed with the Commission on August 24, 2010. |
(X) | Amendment
No. 22 to Reinsurance Agreement between Swiss Re Life & Health of America,
Inc. (f/k/a The Lincoln National Life Insurance Company) and CUNA Mutual Insurance
Society (f/k/a Lutheran Mutual Life Insurance Company), effective November 1, 1999.
Incorporated herein by reference to post-effective amendment no. 4 on Form N-6 (File
No. 333-148419) filed with the Commission on August 24, 2010. |
|
(Y) | Amendment
No. 23 to Reinsurance Agreement between Swiss Re Life & Health of America,
Inc. (f/k/a The Lincoln National Life Insurance Company) and CUNA Mutual Insurance
Society (f/k/a Lutheran Mutual Life Insurance Company), effective January 1, 2000.
Incorporated herein by reference to post-effective amendment no. 4 on Form N-6 (File
No. 333-148419) filed with the Commission on August 24, 2010. |
|
(Z) | Amendment
No. 24 to Reinsurance Agreement between Swiss Re Life & Health of America,
Inc. (f/k/a The Lincoln National Life Insurance Company) and CUNA Mutual Insurance
Society (f/k/a Lutheran Mutual Life Insurance Company), effective July 1, 2001.
Incorporated herein by reference to post-effective amendment no. 4 on Form N-6 (File
No. 333-148419) filed with the Commission on August 24, 2010. |
|
(Z)(1) | Amended Reinsurance
Agreement between Swiss Re Life & Health America, Inc. (f/k/a The Lincoln National
Life Insurance Company of Fort Wayne, Indiana) effective December 31, 2007. Incorporated
herein by reference to initial registration statement on Form N-6 (File No. 333-148420)
filed with the Commission on January 2, 2008. |
|
(5)(A) | Facultative
Agreement between General American Life Insurance Company and CUNA Mutual Insurance
Society (f/k/a Century Life of America), effective September 1, 1991. Incorporated
herein by reference to Form N-6 post-effective amendment no. 24 (File No. 33-19718)
filed with the Commission on April 28, 2003 |
|
(B) | DAC Tax Amendment
between General American Life Insurance Company and CUNA Mutual Insurance Society
(f/k/a Century Life of America), effective September 1, 1991. Incorporated herein
by reference to post-effective amendment no. 4 on Form N-6 (File No. 333-148419)
filed with the Commission on August 24, 2010. |
(C) | Amendment
No. 1 to Facultative Agreement between RGA Reinsurance Company (f/k/a General American
Life Insurance Company) and CUNA Mutual Insurance Society (f/k/a CUNA Mutual Life
Insurance Company), effective October 1, 1992. Incorporated herein by reference
to post-effective amendment no. 4 on Form N-6 (File No. 333-148419) filed with the
Commission on August 24, 2010. |
|
(D) | Amendment
No. 2 to Facultative Agreement between RGA Reinsurance Company (f/k/a General American
Life Insurance Company) and CUNA Mutual Life Insurance Company effective September
1, 1991. Incorporated herein by reference to post-effective amendment no. 4 on Form
N-6 (File No. 333-148419) filed with the Commission on August 24, 2010. |
|
(E) | Amendment
No. 3 to Facultative Agreement between RGA Reinsurance Company (f/k/a General American
Life Insurance Company) and CUNA Mutual Insurance |
Society (f/k/a CUNA Mutual Life
Insurance Company), effective August 1, 1993. Incorporated herein by reference to
post-effective amendment no. 4 on Form N-6 (File No. 333-148419) filed with the
Commission on August 24, 2010. |
||
(F) | Amendment
No. 4 to Facultative Agreement between RGA Reinsurance Company (f/k/a General American
Life Insurance Company) and CUNA Mutual Insurance Society (f/k/a CUNA Mutual Life
Insurance Company), effective December 31, 1996. Incorporated herein by reference
to post-effective amendment no. 4 on Form N-6 (File No. 333-148419) filed with the
Commission on August 24, 2010. |
|
(G) | Amendment
No. 5 to Facultative Agreement between RGA Reinsurance Company (f/k/a General American
Life Insurance Company) and CUNA Mutual Life Insurance Company effective January
1, 1999. Incorporated herein by reference to post-effective amendment no. 4 on Form
N-6 (File No. 333-148419) filed with the Commission on August 24, 2010. |
|
(H) | Amendment
No. 6 to Facultative Agreement between RGA Reinsurance Company (f/k/a General American
Life Insurance Company) and CUNA Mutual Insurance Society (f/k/a CUNA Mutual Life
Insurance Company), effective July 1, 2001. Incorporated herein by reference to
post-effective amendment no. 4 on Form N-6 (File No. 333-148419) filed with the
Commission on August 24, 2010. |
|
(I) | Amendment
No. 7 to Facultative Agreement between RGA Reinsurance Company (f/k/a General American
Life Insurance Company) and CUNA Mutual Insurance Society (f/k/a CUNA Mutual Life
Insurance Company), effective January 1, 2000. Incorporated herein by reference
to post-effective amendment no. 4 on Form N-6 (File No. 333-148419) filed with the
Commission on August 24, 2010. |
|
(J) | Amendment
No. 8 to Facultative Agreement between RGA Reinsurance Company (f/k/a General American
Life Insurance Company) and CUNA Mutual Insurance Society (f/k/a CUNA Mutual Life
Insurance Company), effective January 1, 2002. Incorporated herein by reference
to post-effective amendment no. 4 on Form N-6 (File No. 333-148419) filed with the
Commission on August 24, 2010. |
(K) | Amendment
No. 9 to Facultative Agreement between RGA Reinsurance Company (f/k/a General American
Life Insurance Company) and CUNA Mutual Insurance Society (f/k/a CUNA Mutual Life
Insurance Company), effective January 1, 2003. Incorporated herein by reference
to post-effective amendment no. 4 on Form N-6 (File No. 333-148419) filed with the
Commission on August 24, 2010. |
|
(L) | Amended Facultative
Agreement between RGA Reinsurance Company (f/k/a General American Life Insurance
Company) and CUNA Mutual Insurance Society (f/k/a CUNA Mutual Life Insurance Company),
effective December 31, 2007. Incorporated herein by reference to initial registration
statement on Form N-6 (File No. 333-148420) filed with the Commission on January
2, 2008 |
|
(6)(A) | Automatic
and Facultative Coinsurance Reinsurance Agreement between RGA Reinsurance Company
and CUNA Mutual Life Insurance Company, effective September 1, 2003. Incorporated
herein by reference to post-effective amendment no. 4 on Form N-6 (File No. 333-148419)
filed with the Commission on August 24, 2010. |
|
(7)(A) | Coinsurance
Agreement between Security Life of Denver Insurance Company and CUNA Mutual Insurance
Society (f/k/a CUNA Mutual Life Insurance Company), |
effective September 1, 2003.
Incorporated herein by reference to post-effective amendment no. 4 on Form N-6 (File
No. 333-148419) filed with the Commission on August 24, 2010. |
||
(8)(A) | Reinsurance
Agreement between The Lincoln National Life Insurance Company, Swiss Re Life &
Health America Inc. and CUNA Mutual Insurance Society (f/k/a CUNA Mutual Life Insurance
Company), effective November 30, 2005. Incorporated herein by reference to post-effective
amendment no. 4 on Form N-6 (File No. 333-148419) filed with the Commission on August
24, 2010. |
|
(9)(A) | Life, Disability
and Accidental Death Automatic Reinsurance Agreement No. 1258-04, between Transamerica
Occidental Life Insurance Company of Los Angeles, California and CUNA Mutual Insurance
Society (f/k/a Century Life of America), effective February 1, 1986. Incorporated
herein by reference to Form N-6 post-effective amendment no. 24 (File No. 33-19718)
filed with the Commission on April 28, 2003. |
|
(B) | Amendment
to Life, Disability and Accidental Death Automatic Reinsurance Agreement No. 1258-04,
between Transamerica Occidental Life Insurance Company of Los Angeles, California
and CUNA Mutual Insurance Society (f/k/a Century Life of America), effective December
31, 2007. Incorporated herein by reference to initial registration statement on
Form N-6 (File No. 333-148420) filed with the Commission on January 2, 2008. |
|
(C) | Letter Agreement
between Transamerica Occidental Life Insurance Company and CUNA Mutual Insurance
Society (f/k/a Century Life of America), effective October 15, 2008. Incorporated
herein by reference to post-effective amendment no. 4 on Form N-6 (File No. 333-148419)
filed with the Commission on August 24, 2010. |
|
(10)(A) | Life, Disability
and Accidental Death Facultative YRT Reinsurance Agreement between Occidental Life
Insurance Company of California and CUNA Mutual Insurance Society (f/k/a Lutheran
Mutual Life Insurance Company), effective January 1, 1981. Incorporated herein by
reference to post-effective amendment no. 4 on Form N-6 (File No. 333-148419) filed
with the Commission on August 24, 2010. |
(B) | Amendment
1 to Life, Disability and Accidental Death Facultative YRT Reinsurance Agreement
between Occidental Life Insurance Company of California and CUNA Mutual Insurance
Society (f/k/a Lutheran Mutual Life Insurance Company), effective November 2, 1981.
Incorporated herein by reference to post-effective amendment no. 4 on Form N-6 (File
No. 333-148419) filed with the Commission on August 24, 2010. |
|
(C) | Letter Agreement
between Transamerica Occidental Life Insurance Company and CUNA Mutual Insurance
Society (f/k/a Century Life of America), effective October 15, 2008. Incorporated
herein by reference to post-effective amendment no. 4 on Form N-6 (File No. 333-148419)
filed with the Commission on August 24, 2010. |
|
(11)(A) | Coinsurance
Agreement between Transamerica Occidental Life Insurance Company and CUNA Mutual
Insurance Society (f/k/a Lutheran Mutual Life Insurance Company), effective May
1, 2000. Incorporated herein by reference to post-effective amendment no. 4 on Form
N-6 (File No. 333-148419) filed with the Commission on August 24, 2010. |
(B) | Amendment
1 to Coinsurance Agreement between Transamerica Occidental Life Insurance Company
and CUNA Mutual Insurance Society (f/k/a Lutheran Mutual Life Insurance Company),
effective May 1, 2000. Incorporated herein by reference to post-effective amendment
no. 4 on Form N-6 (File No. 333-148419) filed with the Commission on August 24,
2010. |
|
(C) | Letter Agreement
between Transamerica Occidental Life Insurance Company and CUNA Mutual Insurance
Society (f/k/a Century Life of America), effective October 15, 2008. Incorporated
herein by reference to post-effective amendment no. 4 on Form N-6 (File No. 333-148419)
filed with the Commission on August 24, 2010. |
|
(h) |
Participation Agreements. | |
(1)(A) | Participation
Agreement between T. Rowe Price International Series, Inc. and CUNA Mutual Life
Insurance Company dated April 22, 1994. Incorporated herein by reference to Form
S-6 pre-effective amendment no. 1 (File No. 333-81499) filed with the Commission
on October 6, 1999. |
|
(B) | Amendment
to Participation Agreement among T. Rowe Price International Series, Inc. and CUNA
Mutual Life Insurance Company dated November 1994. Incorporated herein by reference
to Form S-6 pre-effective amendment no. 1 (File No. 333-81499) filed with the Commission
on October 6, 1999. |
|
(C) | Amendment
to Participation Agreement among T. Rowe Price International Series, Inc., T. Rowe
Price Investment Services, Inc., and CUNA Mutual Life Insurance Company dated September
22, 1999. Incorporated herein by reference to Form S-6 post-effective amendment
no. 2 (File No. 333-81499) filed with the Commission on April 27, 2000. |
|
(D) | Amendment
to Participation Agreement between T. Rowe Price International Series, Inc. and
CUNA Mutual Life Insurance Company dated October 1, 2002. Incorporated herein by
reference to post-effective amendment number 14 to Form N-4 registration statement
(File No. 333-73738) filed with the Commission on April 25, 2003. |
|
(E) | Amendment
to Participation Agreement Among T. Rowe Price International Series, Inc., T. Rowe
Price Investment Services, Inc., and CUNA Mutual Insurance Society effective December
31, 2007. Incorporated herein by reference to initial registration statement on
Form N-6 (File No. 333-148419) filed with the Commission on January 2, 2008. |
|
(2)(A) | Participation
Agreement between MFS Variable Insurance Trust and CUNA Mutual Life Insurance Company
dated April 29, 1994. Incorporated herein by reference to Form S-6 pre-effective
amendment no. 1 (File No. 333-81499) filed with the Commission on October 6, 1999. |
|
(B) | Amendment
to Participation Agreement dated November 1994. Incorporated herein by reference
to Form S-6 pre-effective amendment no. 1 (File No. 333-81499) filed with the Commission
on October 6, 1999. |
|
(C) | Amendment
to Participation Agreement effective May 1, 1996. Incorporated |
herein by reference
to Form S-6 pre-effective amendment no. 1 (File No. 333-81499) filed with the Commission
on October 6, 1999. |
||
(D) | Third Amendment
to Participation Agreement between MFS Variable Insurance Trust, CUNA Mutual Life
Insurance Company and Massachusetts Financial Services Company dated September 23,
1999. Incorporated herein by reference to Form S-6 post-effective amendment no.
2 (File No. 333-81499) filed with the Commission on April 27, 2000. |
|
(E) | Amendment
to Participation Agreement between MFS Variable Insurance Trust, CUNA Mutual Life
Insurance Company and Massachusetts Financial Services Company dated October 1,
2002. Incorporated herein by reference to post-effective amendment number 14
to Form N-4 registration statement (File No. 333-73738) filed with the Commission
on April 25, 2003 |
|
(F) | Amendment
to Participation Agreement among MFS Variable Insurance Trust, Massachusetts Financial
Services Company and CUNA Mutual Insurance Society effective December 31, 2007.
Incorporated herein by reference to initial registration statement on Form N-6 (File
No. 333-148419) filed with the Commission on January 2, 2008. |
|
(G) | Amendment
No. 6 to Participation Agreement between MFS Variable Insurance Trust, Massachusetts
Financial Services Company and CUNA Mutual Insurance Society, effective July 1,
2010. Incorporated herein by reference to post-effective amendment number 4 to Form
N-4 registration statement (File No. 333-148421) filed with the Commission on April
27, 2011. |
|
(H) | Amendment
No. 7 to Participation Agreement between MFS Variable Insurance Trust, Massachusetts
Financial Services Company and CUNA Mutual Insurance Society, effective January
1, 2012. Incorporated by reference to post-effective amendment number 55 (File No.
333-148421) filed with the Commission on April 27, 2012. |
|
(3)(A) | Participation
Agreement between Oppenheimer Variable Account Funds, OppenheimerFunds, Inc. and
CUNA Mutual Life Insurance Company dated February 20, 1997. Incorporated herein
by reference to Form S-6 pre-effective amendment no. 1 (File No. 333-81499) filed
with the Commission on October 6, 1999. |
|
(B) | Amendment
No. 1 between Oppenheimer Variable Account Funds, OppenheimerFunds, Inc. and CUNA
Mutual Life Insurance Company effective September 21, 1999. Incorporated herein
by reference to post-effective amendment number 1 on Form N-4 (File No. 333-148422)
filed with the Commission on April 25, 2008. |
|
(C) | Amendment
No. 2 to Participation Agreement Among OppenheimerFunds, Inc., Oppenheimer Variable
Account Funds and CUNA Mutual Life Insurance Company dated October 1, 2002. Incorporated
herein by reference to post-effective amendment number 14 to Form N-4 registration
statement (File No. 333-73738) filed with the Commission on April 25, 2003. |
|
(D) | Amendment
No. 3 to the Participation Agreement between Oppenheimer Variable Account Funds,
OppenheimerFunds, Inc., Panorama Series Fund, Inc. and CUNA Mutual Life Insurance
Company, effective July 31, 2005. Incorporated by |
reference to post-effective amendment
number 1 on Form N-4 (File No. 333-148422) filed with the Commission on April 25,
2008. |
||
(E) | Fourth Amendment
to Participation Agreement among Oppenheimer Variable Account Funds, OppenheimerFunds,
Inc., and CUNA Mutual Insurance Society effective December 31, 2007. Incorporated
herein by reference to initial registration statement on Form N-6 (File No. 333-148419)
filed with the Commission on January 2, 2008. |
|
(F) | Fifth Amendment
to the Participation Agreement between Oppenheimer Variable Account Funds, OppenheimerFunds,
Inc. and CUNA Mutual Insurance Society effective May 1, 2008. Incorporated by reference
to post-effective amendment number 1 to Form N-4 registration statement (File No.
333-148421) filed with the Commission on April 25, 2008. |
|
(G) | Sixth Amendment
to the Participation Agreement between OppenheimerFunds, Inc., Oppenheimer Variable
Account Funds, Panorama Series Fund, Inc. and CUNA Mutual Insurance Society effective
July 8, 2008. Incorporated by reference to post-effective amendment number 1 to
Form N-4 post-effective amendment number 4 (File No. 333-148426) filed with the
Commission on November 24, 2008. |
|
(H) | Amendment
7 to the Participation Agreement between OppenheimerFunds, Inc., Oppenheimer Variable
Account Funds, Panorama Series Fund, Inc. and CUNA Mutual Insurance Society effective
February 3, 2009. Incorporated by reference to post-effective amendment number 16
(File No. 333-148426) filed with the Commission on April 27, 2012. |
|
(I) | Amendment
8 to the Participation Agreement between OppenheimerFunds, Inc., Oppenheimer Variable
Account Funds, Panorama Series Fund, Inc. and CUNA Mutual Insurance Society effective
January 1, 2012. Incorporated by reference to post-effective amendment number 16
(File No. 333-148426) filed with the Commission on April 27, 2012. |
(J) | Amendment
9 to the Participation Agreement between OppenheimerFunds, Inc., Oppenheimer Variable
Account Funds, Panorama Series Fund, Inc. and CMFG Life Insurance Company effective
June 20, 2012. Incorporated by reference to post-effective amendment number 17 (File
No. 333-148426) filed with the Commission on April 26, 2013. |
|
(4)(A) | Amended and
Restated Participation Agreement between Franklin Templeton Variable Insurance Products
Trust, Franklin Templeton Distributors, Inc., CUNA Mutual Life Insurance Company
and CUNA Brokerage Services, Inc. dated May 1, 2004. Incorporated by reference to
post-effective amendment number 1 on Form N-4 (File No. 333-148422) filed with the
Commission on April 25, 2008. |
|
(B) | Amendment
to Participation Agreement between Franklin Templeton Variable Insurance Products
Trust, Franklin Templeton Distributors, Inc., CUNA Mutual Life Insurance Company
and CUNA Brokerage Services, Inc., dated May 3, 2004. Incorporated by reference
to post- effective amendment number 1 on Form N-4 (File No. 333-148422) filed with
the Commission on April 25, 2008. |
|
(C) | Amendment
to Participation Agreement between Franklin Templeton Variable |
Insurance Products
Trust, Franklin Templeton Distributors, Inc., CUNA Mutual Life Insurance Company
and CUNA Brokerage Services, Inc., dated June 5, 2007. Incorporated by reference
to post-effective amendment No. 1 on Form N-4 (File No. 333-148422) filed with the
Commission on April 25, 2008. |
||
(D) | Amendment
No. 3 to Amended and Restated Participation Agreement between Franklin Templeton
Variable Insurance Products Trust, Franklin Templeton Distributors, Inc., CUNA Mutual
Insurance Society and CUNA Brokerage Services, Inc. effective December 31, 2007.
Incorporated herein by reference to initial registration statement on Form N-6 (File
No. 333-148419) filed with the Commission on January 2, 2008. |
|
(E) | Amendment
No. 4 to Amended and Restated Participation Agreement between Franklin Templeton
Variable Insurance Products Trust, Franklin Templeton Distributors, Inc., CUNA Mutual
Insurance Society and CUNA Brokerage Services, Inc. dated May 1, 2008. Incorporated
herein by reference to post-effective amendment number 1 to Form N-4 registration
statement (File No. 333-148421) filed with the Commission on April 25, 2008. |
|
(F) | Amendment
No. 5 to Amended and Restated Participation Agreement between Franklin Templeton
Variable Insurance Products Trust, Franklin Templeton Distributors, Inc., CUNA Mutual
Insurance Society and CUNA Brokerage Services, Inc. dated December 10, 2010. Incorporated
herein by reference to post-effective amendment number 4 to Form N-4 registration
statement (File No. 333-148421) filed with the Commission on April 27, 2011. |
|
(G) | Amendment
No. 6 to Amended and Restated Participation Agreement between Franklin Templeton
Variable Insurance Products Trust, Franklin Templeton Distributors, Inc., CMFG Life
Insurance Company and CUNA Brokerage Services, Inc. dated January 31, 2012. Incorporated
herein by reference to post-effective amendment number 17 (File No. 333-148426)
filed with the Commission on April 26, 2013. |
|
(H) | Amendment
No. 7 to Amended and Restated Participation Agreement between Franklin Templeton
Variable Insurance Products Trust, Franklin Templeton Distributors, Inc., CMFG Life
Insurance Company and CUNA Brokerage Services, Inc. dated January 15, 2013. Incorporated
herein by reference to post-effective amendment number 17 (File No. 333-148426)
filed with the Commission on April 26, 2013. |
|
(5)(A) | Amended and
Restated Fund Participation Agreement between Ultra Series Fund, Mosaic Funds Distributor,
LLC and CUNA Mutual Insurance Society dated June 30, 2009. Incorporated herein by
reference to post-effective amendment number 9 (File No. 333-148426) filed with
the Commission on July 10, 2009. |
|
(B) | Amendment
to Amended and Restated Fund Participation Agreement between Ultra Series Fund,
Mosaic Funds Distributor, LLC and CUNA Mutual Insurance Society dated September
8, 2009. Incorporated herein by reference to post-effective amendment number 11 (File No. 333-148426) filed with the Commission on October 16, 2009. |
|
(C) | Amendment
No. 2 to Amended and Restated Fund Participation Agreement between Ultra Series
Fund, Mosaic Funds Distributor, LLC and CUNA Mutual |
Insurance Society dated December
4, 2009. Incorporated herein by reference to post-effective amendment number 12
(File No. 333-148426) filed with the Commission on February 4, 2010. |
||
(D) | Amendment
No. 3 to Amended and Restated Fund Participation Agreement between Ultra Series
Fund, Mosaic Funds Distributor, LLC and CUNA Mutual Insurance Society dated November
20, 2010. Incorporated herein by reference to post-effective amendment number 15
to Form N-4 registration statement (File No. 333-148426) filed with the Commission
on April 27, 2011. |
|
(6)(A) | Fund Participation
Agreement between Vanguard Variable Insurance Fund, The Vanguard Group, Inc. and
Vanguard Marketing Corporation and CUNA Mutual Insurance Society, dated October
1, 2002. Incorporated herein by reference to post-effective amendment number 20
(File No. 333-148426) filed with the Commission on April 25, 2016. |
|
(B) | Amendment
No. 1 to Participation Agreement between The Vanguard Group, Inc., Vanguard Variable
Insurance Fund, Vanguard Marketing Corporation and CUNA Mutual Insurance Society,
dated August 31, 2005. Incorporated herein by reference to post-effective amendment
number 20 (File No. 333-148426) filed with the Commission on April 25, 2016. |
|
(C) | Amendment
No. 2 to Participation Agreement between The Vanguard Group, Inc., Vanguard Variable
Insurance Fund, Vanguard Marketing Corporation and CUNA Mutual Insurance Society,
dated October 16, 2006. Incorporated herein by reference to post-effective amendment
number 20 (File No. 333-148426) filed with the Commission on April 25, 2016. |
(D) | Amendment
No. 3 to Participation Agreement between The Vanguard Group, Inc., Vanguard Variable
Insurance Fund, Vanguard Marketing Corporation and CUNA Mutual Insurance Society,
dated October 1, 2008. Incorporated herein by reference to post-effective amendment
number 20 (File No. 333-148426) filed with the Commission on April 25, 2016. |
|
(E) | Amendment
No. 4 to Participation Agreement between The Vanguard Group, Inc., Vanguard Variable
Insurance Fund, Vanguard Marketing Corporation and CUNA Mutual Insurance Society,
dated June 12, 2012. Incorporated herein by reference to post-effective amendment
number 20 (File No. 333-148426) filed with the Commission on April 25, 2016. |
|
(F) | Amendment
No. 5 to Participation Agreement between The Vanguard Group, Inc., Vanguard Variable
Insurance Fund, Vanguard Marketing Corporation and CUNA Mutual Insurance Society,
dated October 16, 2015. Incorporated herein by reference to post-effective amendment
number 20 (File No. 333-148426) filed with the Commission on April 25, 2016. |
|
(i) |
Administrative Contracts. | |
(1)(A) | Administrative
Services Agreement between Franklin Templeton Services, LLC and CUNA Mutual Insurance
Society dated March 31, 2008. Incorporated herein by reference to post-effective
amendment number 7 (File No. 333-148426) filed with the Commission on April 27,
2009. |
|
(B) | Amendment
No. 1 to Administrative Services Agreement between Franklin |
Templeton Services,
LLC and CUNA Mutual Insurance Society dated September 10, 2008. Incorporated herein
by reference to post-effective amendment number 7 (File No. 333-148426) filed with
the Commission on April 27, 2009. |
||
(2) | Administrative
Services Letter between MFS Investment Management and CUNA Mutual Insurance Society
effective October 1, 2008. Incorporated herein by reference to post-effective amendment
number 2 (File No. 333-148420) filed with the Commission on April 27, 2009. |
|
(3)(A) | Letter Agreement
between CUNA Mutual Life Insurance Company and T. Rowe Price Associates, Inc. dated
September 16, 2002. Incorporated herein by reference to post-effective amendment
number 2 (File No. 333-148420) filed with the Commission on April 27, 2009. |
(B) | Supplement
for Personal Services between CUNA Mutual Insurance Society and T. Rowe Price Investment
Services, Inc. date July 31, 2008. Incorporated herein by reference to post-effective
amendment number 2 (File No. 333-148420) filed with the Commission on April 27,
2009. |
|
(4) | Services Letter
Agreement between CUNA Mutual Insurance Society and Mosaic Funds Distributor, LLC
dated June 30, 2009. Incorporated herein by reference to post-effective amendment
number 9 (File No. 333-148426) filed with the Commission on July 10, 2009. |
|
(j) |
Other Material Contracts. | |
(1)(A) | Rule 22c-2
Shareholder Information Agreement between T. Rowe Price Services, Inc. and CUNA
Mutual Life Insurance Company dated October 16, 2006. Incorporated herein by reference
to Form N-6 post-effective amendment no. 29 (File No. 033-19718) filed with the
Commission on April 27, 2007. |
|
(B) | Amendment
to Rule 22c-2 Shareholder Information Agreement between T. Rowe Price Investment
Services, Inc., and CUNA Mutual Insurance Society effective December 31, 2007. Incorporated
herein by reference to initial registration statement on Form N-6 (File No. 333-148419)
filed with the Commission on January 2, 2008. |
|
(2)(A) | Rule 22c-2
Shareholder Information Agreement between MFS Fund Distributors, Inc. and CUNA Mutual
Life Insurance Company dated October 16, 2006. Incorporated herein by reference
to Form N-6 post-effective amendment no. 29 (File No. 033-19718) filed with the
Commission on April 27, 2007. |
|
(B) | Amendment
to Rule 22c-2 Shareholder Information Agreement between MFS Fund Distributors, Inc.
and CUNA Mutual Insurance Society effective January 1, 2008. Incorporated herein
by reference to initial registration statement on Form N-6 (File No. 333-148419)
filed with the Commission on January 2, 2008. |
|
(3) | Rule 22c-2
Shareholder Information Agreement between Ultra Series Fund and CUNA Mutual Insurance
Society effective October 16, 2006. Incorporated herein by reference to initial
registration statement on Form N-6 (File No. 333-148419) filed with the Commission
on January 2, 2008. |
|
(4)(A) | Shareholder
Information Agreement between OppenheimerFunds Services, OppenheimerFunds Distributor,
Inc. and CUNA Brokerage Services, Inc. effective September 25, 2006. Incorporated
herein by reference to post-effective amendment number 7 (File No. 333-148426) filed
with the Commission on April 27, 2009. |
|
(B) | Shareholder
Information Agreement between OppenheimerFunds Services, OppenheimerFunds Distributor,
Inc. and CUNA Mutual Insurance Society, effective January 31, 2012. Incorporated
by reference to post-effective amendment number 16 (File No. 333-148426) filed with
the Commission on April 27, 2012. |
(5) | Rule 22c-2
Shareholder Information Agreement between Franklin Templeton Distributors, Inc.
and CUNA Mutual Life Insurance Company dated April 16, 2007. Incorporated herein
by reference to Form N-4 post-effective amendment no. 4 (File No. 333-148426) filed
with the Commission on November 24, 2008. |
|
(k) |
Legal Opinion. | |
(1) | Opinion of
Counsel from Pamela M. Krill, Esquire. Incorporated herein by reference to post-effective
amendment number 1 to Form N-6 registration statement (File No. 333-148419) filed
with the Commission on April 25, 2008. |
|
(l) |
Actuarial Opinion. Not applicable. | |
(m) |
Calculations. Not applicable | |
(n) |
Other Opinions. Not applicable. | |
(o) |
Omitted
Financial Statements. No financial statements are omitted from Item 24. |
|
(p) |
Initial Capital Agreements. Not applicable. | |
(q) |
Redeemability Exemption. | |
(1) | Issuance,
Transfer and Redemption Procedures (Form 5202) Issued by CUNA Mutual Insurance Society
dated October, 2012. Incorporated herein by reference to post-effective amendment
number 8 on Form N-6 (File No. 333-148419) filed with the Commission April 25, 2014. |
|
(r) |
Deloitte & Touche LLP Consent. Filed herewith. | |
(s) |
Powers of Attorney. | |
(1) | Powers of
Attorney. Signed pursuant to Power of Attorney dated April 25, 2016. Incorporated
by reference to post-effective amendment number 20 (File No. 333-148426) filed with
the Commission on April 25, 2016. |
|
A. | Power Attorney (Michael F. Anderson). | |
B. | Power Attorney (David G. Brown). | |
C. | Power Attorney (Thomas J. Merfeld). | |
D. | Power Attorney (Steven R. Suleski). | |
E. | Power Attorney (Robert N. Trunzo). |
Item 27. | Directors and Officers of CMFG Life Insurance Company |
Name and Principal Business Address | Positions and Offices with Depositor | |
Michael F.
Anderson 5910 Mineral Point Road Madison, WI 53705 |
Director and Chief Legal Officer | |
David G. Brown
5910 Mineral Point Road Madison, WI 53705 |
Director,
Executive Vice President and Chief Investment Officer |
|
Thomas J.
Merfled 5910 Mineral Point Road Madison, WI 53705 |
Director,
Treasurer, Executive Vice President and Chief Financial Officer |
|
Faye A. Patzner
5910 Mineral Point Road Madison, WI 53705 |
Executive
Vice President and Chief Administrative Officer |
|
James M. Power
5910 Mineral Point Road Madison, WI 53705 |
Executive Vice President and Commercial | |
Steven R.
Suleski 5910 Mineral Point Road Madison, WI 53705 |
Director,
Secretary and Chief Governance and Compliance Officer |
|
Robert N.
Trunzo 5910 Mineral Point Road Madison, WI 53705 |
Director,
President and Chief Executive Officer |
Item 28. | Persons Controlled by or Under Common Control With the Depositor or Registrant. |
The registrant is a segregated asset account of CMFG Life Insurance Company and is therefore owned and controlled by CMFG Life Insurance Company. CMFG Life Insurance Company is a stock life insurance company. CMFG Life is duly authorized and licensed to do a life and health insurance business in forty-nine other states, the District of Columbia, and in foreign countries. Various companies and other entities are controlled by CMFG Life Insurance Company and may be considered to be under common control with the registrant or CMFG Life Insurance Company. Such other companies and entities, together with the identity of their controlling persons (where applicable), are set forth on the following organization charts.
CUNA Mutual Holding Company
Organizational Chart As Of February 28, 2016
CUNA Mutual Holding Company is a mutual insurance holding company, and as such is controlled by its policy owners. CUNA Mutual Holding Company was formed under the Plan of Reorganization of CMFG Life Insurance Company. CUNA Mutual Holding Company, either directly or indirectly, is the controlling company of the following wholly-owned subsidiaries:
CUNA Mutual Financial Group, Inc.
State of domiciled: Iowa
CUNA Mutual Global Holdings, Inc. | |
State of domicile: Iowa | |
CMFG Ventures, LLC | |
State of domicile: Iowa | |
CMFG Life Insurance Company | |
State of domicile: Iowa |
CMFG Life Insurance Company, either directly or indirectly, is the controlling company of the following wholly-owned subsidiaries, all of which are included in the CMFG Life Insurance Company’s consolidated financial statements:
1. | CUNA Mutual Investment Corporation owns the following: | |
State of domicile: Wisconsin |
a. | CUMIS Insurance Society, Inc. owns the following: | ||
State of domicile: Iowa |
(1) | CUMIS Specialty Insurance Company, Inc. | ||
State of domicile: Iowa | |||
(2) | CUMIS Mortgage Reinsurance Company | ||
State of domicile: Wisconsin |
b. | CUNA Brokerage Services, Inc. | ||
State of domicile: Wisconsin | |||
c. | CUMIS Vermont, Inc. | ||
State of domicile: Vermont |
d. | MEMBERS Life Insurance Company | ||
State of domicile: Iowa | |||
e. | International Commons, Inc. | ||
State of domicile: Wisconsin | |||
f. | CUNA Mutual Insurance Agency, Inc. | ||
State of domicile: Wisconsin | |||
g. | MEMBERS Capital Advisors, Inc. | ||
State of domicile: Iowa |
(1) | MCA Fund I GP LLC | ||
State of domicile: Delaware | |||
(2) | MCA Fund II GP LLC | ||
State of domicile: Delaware | |||
(3) | MCA Fund III GP LLC | ||
State of domicile: Delaware |
h. | CMG Student Lending Services, LLC | ||
State of domicile: Delaware | |||
i. | CPI Qualified Plan Consultants, Inc. | ||
State of domicile: Delaware | |||
j. | Springboard Auto.com, Inc. | ||
State of domicile: Delaware |
2. | CUNA Mutual Caribbean Holdings Ltd. owns the following: | |
Country of domicile: Trinidad and Tobago |
a. | CUNA Caribbean Insurance Society Limited owns the following: | ||
Country of domicile: Trinidad and Tobago |
(1) | CUNA Caribbean Insurance Services Limited | ||
Country of domicile: Trinidad and Tobago |
3. | CUNA Mutual Group Holdings Europe, Ltd. owns the following: | |
County of domicile: Ireland |
a. | CUNA Mutual (Europe) II, Limited | ||
Country of domicile: Ireland | |||
b. | CUNA Mutual Insurance (Europe) Limited | ||
(was CUNA Mutual General Risk Services (Ireland) Limited) | |||
Country of domicile: Ireland | |||
c. | CUNA Mutual International Finance, Ltd. | ||
Country of domicile: Cayman Islands |
d. | CUNA Mutual International Holdings, Ltd. Owns the following: | ||
Country of domicile: Cayman Islands | |||
e. | CUNA Caribbean Holdings St. Lucia, Ltd Owns the following: | ||
County of domicile: St. Lucia |
(1). | CUNA Caribbean Insurance Jamaica Limited | ||
County of domicile: Jamaica |
4. | CMFG Life Vermont, Inc. | |
State of domicile : Vermont | ||
5. | 6834 Hollywood Boulevard, LLC | |
State of domicile: Delaware | ||
6. | TruStage Insurance Agency, LLC | |
State of domicile: Iowa | ||
7. | CUNA Mutual Management Services, LLC | |
State of domicile: Iowa | ||
8. | MCA Fund I Holding LLC | |
State of domicile: Delaware |
(1) | MCA Fund I LP | ||
State of domicile: Delaware |
9. | MCA Fund II LLP | |
State of domicile: Delaware | ||
10. | MCA Fund III LLP | |
State of domicile: Delaware |
Item 29. | Indemnification |
Section 8
of the Amended and Restated Bylaws of CMFG Life Insurance Company and Article V
of CMFG Life Insurance Company Amended and Restated Articles of Incorporation together
provide for indemnification of officers or directors of CMFG Life Insurance Company
against claims and liabilities the officers or directors become subject to by reason
of having served as officer or director of CMFG Life Insurance Company or any subsidiary
or affiliate company. Such indemnification covers liability for all actions alleged
to have been taken, omitted, or neglected by such person in the line of duty as
director or officer, except liability arising out of the officers’ or directors’ willful misconduct. |
|
Insofar as
indemnification for liability arising under the Securities Act of 1933 (the “1933
Act”) may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the 1933 Act and
will be governed by the final adjudication of such issue. |
Item 30. | Principal Underwriter |
(a) | CUNA Brokerage
Services, Inc. is the principal underwriter for the Registrant as well as for the
CMFG Variable Annuity Account. |
|
(b) | Officers and
Directors of CUNA Brokerage Services, Inc. |
Name
and Principal Business Address |
Positions and Office with Underwriter | |
Michelle N. Niemec* | Treasurer | |
Timothy Halevan** | Vice President and Chief Compliance Officer | |
Ross D. Hansen* | Vice President and Associate General Counsel | |
Steven R. Suleski* | Secretary and Director | |
Angie K. Campbell* | Assistant Secretary | |
M. Jeffrey Bosco* | Director | |
Michael F. Anderson | Director | |
Michael T. Defnet* | Director | |
Jason A. Pisarik* | Director |
*The principal business address of these
persons is: 5910 Mineral Point Road, Madison, Wisconsin 53705.
**The principal
business address of these persons is: 2000 Heritage Way, Waverly, Iowa 50677.
(c) CUNA Brokerage Services, Inc. is the only principal underwriter. The services provided by CUNA Brokerage Services, Inc. are set forth in the Amended and Restated Distribution Agreement and Amended and Restated Servicing Agreement filed as exhibits to this registration statement.
(1) Name of Principal Underwriter |
(2) Net Underwriting Discounts and Commissions |
(3) Compensation on Redemption |
(4) Brokerage Commissions |
(5) Compensation |
||||
CUNA Brokerage Services, Inc. | $0* | 0 | $0 | $0 | ||||
*Information as of December 31, 2015. |
Item 31. | Location of Accounts and Records |
All of the accounts, books, records or other documents required to be kept by Section 31(a) of the Investment Company Act of 1940 and rules thereunder, are maintained by CMFG Life Insurance Company at 2000 Heritage Way, Waverly, Iowa 50677 or at MEMBERS Capital Advisors, Inc. or CMFG Life Insurance Company, both at 5910 Mineral Point Road, Madison, Wisconsin 53705; and se2, 5801 SW Sixth Ave, Topeka, Kansas 66636-0001.
Item 32. | Management Services |
All management contracts are discussed in Part A or Part B.
Item 33. | Fee Representation |
CMFG 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 CMFG Life Insurance Company.
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant certifies that it meets the requirements of Securities Act Rule 485(b) for effectiveness of this Registration Statement and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Madison, and State of Wisconsin as of 25 day of April, 2016.
CMFG Variable Life Insurance Account (Registrant) | |||
By: | /s/ Robert N. Trunzo | ||
Robert N.
Trunzo President and Chief Executive Officer, CMFG Life Insurance Company |
|||
CMFG Life Insurance Company (Depositor) | |||
By: | /s/ Robert N. Trunzo | ||
Robert N.
Trunzo President and Chief Executive Officer |
Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities as of the dates indicated.
SIGNATURE AND TITLE | DATE | |||
By: | /s/ Brian J. Borakove | April 25, 2016 | ||
Brian J. Borakove
VP – Corporate Controller |
||||
By: | /s/ Thomas J. Merfeld | April 25, 2016 | ||
Thomas J.
Merfeld Director, Treasurer, Executive Vice President and Chief Financial Officer |
||||
By: | /s/ Robert N. Trunzo | April 25, 2016 | ||
Robert N.
Trunzo Director, President and Chief Executive Officer |
By: | * | April 25, 2016 | ||
Michael F.
Anderson Director |
||||
By: | * | April 25, 2016 | ||
David G. Brown
Director |
||||
By: | * | April 25, 2016 | ||
Thomas J.
Merfeld Director and Treasurer |
||||
By: | * | April 25, 2016 | ||
Steven R.
Suleski Director and Secretary |
||||
By: | * | April 25, 2016 | ||
Robert N.
Trunzo Director, President and Chief Executive Officer |
*Signed pursuant to Power of Attorney dated April 25, 2016, filed electronically with post-effective amendment number 20 (File No. 333-148426) filed with the Commission on April 25, 2016.
By: | /s/ Ross D. Hansen | ||
Ross D. Hansen
Associate General Counsel |
Exhibit Index
(r) | Deloitte & Touche LLP Consent. |