-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, K+vTYIwkQUY42jHA9SppYm2OYKZlKPUBj6rxDjTwidfj/6z+tyAwlKhcGeN/tCMw TZGCeS0mCmJfgaJdvHbIdQ== 0000910739-00-000007.txt : 20000515 0000910739-00-000007.hdr.sgml : 20000515 ACCESSION NUMBER: 0000910739-00-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000512 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LINCOLN BENEFIT LIFE CO CENTRAL INDEX KEY: 0000910739 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 470766853 STATE OF INCORPORATION: NE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-59769 FILM NUMBER: 627755 BUSINESS ADDRESS: STREET 1: P O BOX 80469 STREET 2: 2940 SOUTH 84TH ST CITY: LINCOLN STATE: NE ZIP: 68501 BUSINESS PHONE: 4024794061 MAIL ADDRESS: STREET 1: PO BOX 80469 CITY: LINCOLN STATE: NE ZIP: 68501 10-Q 1 FORM 10-Q FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 The registrant meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this Form with the reduced disclosure format. [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: March 31, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number: 333-59765 333-59769 333-82427 LINCOLN BENEFIT LIFE COMPANY (Exact name of registrant as specified in its charter) Nebraska 470221457 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2940 South 84th Street Lincoln, Nebraska 68506-4142 (Address of principal executive offices)(zip code) 1-800-525-9287 (Registrant's telephone number, including area code) Not Applicable (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes. . ./X/. . No Indicate the number of shares of each of the issuer's classes of common stock as of March 31, 2000; there were 25,000 shares of common capital stock outstanding, par value $100 per share all of which shares are held by Allstate Life Insurance Company. PART I - FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS Statements of Financial Position March 31, 2000(Unaudited) and December 31, 1999.................. 3 Statements of Operations Three Months Ended March 31, 2000 and March 31, 1999 (Unaudited)....................................... 4 Statements of Cash Flows Three Months Ended March 31, 2000 and March 31, 1999 (Unaudited)................................. 5 Notes to Financial Statements.................................... 6 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS....................... 9 Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK*................................................. N/A PART II - OTHER INFORMATION Item 1. LEGAL PROCEEDINGS................................................. 11 Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS*........................ N/A Item 3. DEFAULTS UPON SENIOR SECURITIES*.................................. N/A Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS*.......................................................... N/A Item 5. OTHER INFORMATION................................................. 11 Item 6. EXHIBITS AND REPORTS ON FORM 8-K.................................. 11 SIGNATURE PAGE.............................................................. 12 *Omitted pursuant to General Instruction H(2) of Form 10-Q. 2 LINCOLN BENEFIT LIFE COMPANY STATEMENTS OF FINANCIAL POSITION March 31, December 31, 2000 1999 ---------------- ---------------- ($ in thousands, except par value) (Unaudited) Assets Investments Fixed income securities, at fair value (amortized cost $159,007 and $158,747) $ 157,608 $ 157,218 Short-term 4,001 1,919 ---------- ---------- Total investments 161,609 159,137 Cash 1,277 982 Reinsurance recoverable from Allstate Life Insurance Company 7,807,189 7,539,995 Reinsurance recoverables from non-affiliates 276,982 260,324 Receivable from affiliates, net 8,783 - Other assets 3,208 4,497 Separate Accounts 1,616,052 1,411,996 ---------- ---------- Total assets $9,875,100 $ 9,376,931 ========== =========== Liabilities Reserve for life-contingent contract benefits $ 448,807 $ 419,117 Contractholder funds 7,627,403 7,369,664 Current income taxes payable 3,184 3,404 Deferred income taxes 1,976 745 Payable to affiliates, net - 12,650 Other liabilities and accrued expenses 18,021 1,528 Separate Accounts 1,616,052 1,411,996 ----------- ---------- Total liabilities 9,715,443 9,219,104 ----------- ---------- Commitments and Contingent Liabilities (Note 4) Shareholder's equity Common stock, $100 par value, 30,000 shares authorized, 25,000 issued and outstanding 2,500 2,500 Additional capital paid-in 116,750 116,750 Retained income 41,316 39,571 Accumulated other comprehensive loss: Unrealized net capital losses (909) (994) ------------ ------------ Total accumulated other comprehensive loss (909) (994) ------------ ------------ Total shareholder's equity 159,657 157,827 ------------ ------------ Total liabilities and shareholder's equity $ 9,875,100 $ 9,376,931 ============ ============ See notes to financial statements. 3 LINCOLN BENEFIT LIFE COMPANY STATEMENTS OF OPERATIONS Three Months Ended March 31, ----------------------------------- ($ in thousands) 2000 1999 --------------- --------------- (Unaudited) Revenues Net investment income $ 2,784 $ 2,659 Realized capital gains and losses (3) 1 Other expenses (26) (29) ------- -------- Income from operations before income tax expense 2,755 2,631 Income tax expense 964 930 ------- ------- Net income $ 1,791 $ 1,701 ======= =======
See notes to financial statements. 4 LINCOLN BENEFIT LIFE COMPANY STATEMENTS OF CASH FLOWS Three Months Ended March 31, ------------------------------------ ($ in thousands) 2000 1999 ---------------- ---------------- (Unaudited) Cash flows from operating activities Net income $ 1,791 $ 1,701 Adjustments to reconcile net income to net cash provided by operating activities Depreciation, amortization and other non-cash items (32) 20 Realized capital gains and losses 3 (1) Changes in: Life-contingent contract benefits and contractholder funds 3,578 (1,561) Income taxes payable 965 926 Other operating assets and liabilities (3,727) 642 ------- ------ Net cash provided by operating activities 2,578 1,727 ------- ------ Cash flows from investing activities Fixed income securities Proceeds from sales 8,701 - Investment collections 746 4,986 Investment purchases (9,606) (6,812) Change in short-term investments, net (2,124) (516) --------- -------- Net cash used in investing activities (2,283) (2,342) --------- -------- Net increase (decrease) in cash 295 (615) Cash at the beginning of period 982 1,579 --------- -------- Cash at end of period $ 1,277 $ 964 ========= ========
See notes to financial statements. 5 LINCOLN BENEFIT LIFE COMPANY NOTES TO FINANCIAL STATEMENTS (Unaudited) 1. Basis of Presentation The accompanying financial statements include the accounts of Lincoln Benefit Life Company ("the Company"), a wholly owned subsidiary of Allstate Life Insurance Company ("ALIC"), which is wholly owned by Allstate Insurance Company ("AIC"), a wholly owned subsidiary of The Allstate Corporation (the "Corporation"). These financial statements have been prepared in conformity with generally accepted accounting principles. The financial statements and notes as of March 31, 2000 and for the three month periods ended March 31, 2000 and 1999 are unaudited. The interim financial statements reflect all adjustments (consisting only of normal recurring accruals) which are, in the opinion of management, necessary for the fair presentation of the financial position, results of operations and cash flows for the interim periods. The financial statements and notes should be read in conjunction with the consolidated financial statements and notes thereto included in the Lincoln Benefit Life Company Annual Report on Form 10-K for 1999. The results of operations for the interim periods should not be considered indicative of results to be expected for the full year. On January 25, 2000, the Company paid a dividend of all common shares of AFD, Inc. ("AFDI") stock, a registered broker-dealer, to ALIC. Prior to the dividend, AFDI had been consolidated in the Company's financial statements and related disclosures. In conjunction with the dividend, the Company has restated its prior year financial results to exclude AFDI. To conform with the 2000 presentation, certain amounts in the prior years' financial statements and notes have been reclassified. 2. Reinsurance The Company has reinsurance agreements whereby certain premiums, contract charges, credited interest, policy benefits and expenses are ceded to ALIC and reflected net of such reinsurance in the statements of operations. Reinsurance recoverable and the related reserve for life-contingent contract benefits and contractholder funds are reported separately in the statements of financial position. The Company continues to have primary liability as the direct insurer for risks reinsured. 6 LINCOLN BENEFIT LIFE COMPANY NOTES TO FINANCIAL STATEMENTS (Unaudited) Investment income earned on the assets which support contractholder funds and the reserve for life-contingent contract benefits is not included in the Company's financial statements as those assets are owned and managed under terms of the reinsurance agreements. The following amounts were ceded to ALIC under reinsurance agreements. Three Months Ended March 31, ------------------------------------ ($ in thousands) 2000 1999 ---------------- ---------------- Premiums $18,858 $13,383 Contract charges 34,472 31,897 Credited interest, policy benefits, and certain expenses 173,484 167,288 The Company also purchases reinsurance from non-affiliates. The following amounts were ceded to third parties under reinsurance agreements. Three Months Ended March 31, ------------------------------------ ($ in thousands) 2000 1999 ---------------- ---------------- Premiums $45,599 $29,937 Credited interest, policy benefits, and certain expenses 64,397 57,371
7 LINCOLN BENEFIT LIFE COMPANY NOTES TO FINANCIAL STATEMENTS (Unaudited) 3. Comprehensive Income The components of other comprehensive income on a pretax and after-tax basis for the three months ended March 31, are as follows: ($ in thousands) 2000 1999 ---------------------------------- ---------------------------------- After- After- Pretax Tax tax Pretax Tax tax Unrealized capital gains and and losses: ----------------------------------------- Unrealized holding gains (losses) arising during the period $127 $(44) $ 83 $(3,165) $1,108 $(2,057) Less: reclassification adjustments (3) 1 (2) 1 - 1 ------- ------- ------- --------- ------- -------- Unrealized net capital gains (losses) 130 (45) 85 (3,166) 1,108 (2,058) ------- ------ ------- --------- ------- -------- Other comprehensive income (loss) $130 $ (45) 85 $(3,166) $1,108 (2,058) ====== ======= ======== ======= Net income 1,791 1,701 ------ ------- Comprehensive income (loss) $1,876 $ (357) ======= =======
4. Commitments and Contingent Liabilities Regulation and legal proceedings The Company's business is subject to the effects of a changing social, economic and regulatory environment. Public and regulatory initiatives have varied and have included employee benefit regulations, removal of barriers preventing banks from engaging in the securities and insurance business, tax law changes affecting the taxation of insurance companies and tax treatment of insurance products and its impact on the relative desirability of various personal investment vehicles. The ultimate changes and eventual effects, if any, of these initiatives are uncertain. From time to time the Company is involved in pending and threatened litigation in the normal course of its business in which claims for monetary damages are asserted. In the opinion of management, the ultimate liability, if any, arising from such pending or threatened litigation is not expected to have a material effect on the results of operations, liquidity or financial position of the Company. 8 Lincoln Benefit Life Company Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion highlights significant factors influencing results of operations and changes in financial position of Lincoln Benefit Life Company (the "Company"). It should be read in conjunction with the consolidated financial statements and related notes thereto found under items 7 and 8 of Part II of the Lincoln Benefit Life Company Annual Report on Form 10-K for the year ended December 31, 1999. The Company, a wholly owned subsidiary of Allstate Life Insurance Company ("ALIC"), which is a wholly owned subsidiary of Allstate Insurance Company ("AIC"), a wholly owned subsidiary of The Allstate Corporation ("Corporation"), markets a broad line of life insurance and savings products through independent insurance agents and brokers. Life insurance consists of traditional products, including term and whole life, interest-sensitive life, immediate annuities with life contingencies, variable life and indexed life insurance. Savings products include deferred annuities and immediate annuities without life contingencies. Deferred annuities include fixed rate, market value adjusted, indexed and variable annuities. The Company has identified itself as a single segment entity. The assets and liabilities related to variable annuity and variable life contracts are legally segregated and reflected as Separate Accounts. The assets of the Separate Accounts are carried at fair value. Separate Accounts liabilities represent the contractholders' claim to the related assets and are carried at the fair value of the assets. In the event that the asset value of certain contractholder accounts are projected to be below the value guaranteed by the Company, a liability is established through a charge to earnings. Investment income and realized gains and losses of the Separate Accounts accrue directly to the contractholders and therefore, are not included in the Company's statements of operations. On January 25, 2000, the Company paid a dividend of all common shares of AFD, Inc. ("AFDI") stock, a registered broker-dealer, to ALIC. Prior to the dividend, AFDI had been consolidated in the Company's financial statements and related disclosures. In conjunction with the dividend, the Company has restated its prior year financial results to exclude AFDI. Results of Operations ($ in thousands) Three Months Ended March 31, 2000 1999 ------------- ------------- Net investment income $ 2,784 $ 2,659 ============= ============= Realized capital gains and losses, after-tax $ (2) $ 1 ============= ============= Net income $ 1,791 $ 1,701 ============= ============= Total investments $ 161,609 $ 161,968 ============= =============
The Company has reinsurance agreements under which contract and policy related transactions are transferred, primarily to ALIC. The Company also has reinsurance agreements with third parties. The Company's results of operations include primarily net investment income and realized capital gains and losses earned on the assets of the Company that are not transferred under the reinsurance agreements. Certain non-investment related expenses which are not transferred under reinsurance agreements are presented in other expenses. Net income for the first quarter of 2000 increased 5.3% to $1.8 million. Pretax net investment income for the three month period ended March 31, 2000 increased 4.7% to $2.8 million primarily attributable to higher investment balances. Investments at March 31, 2000, excluding Separate Accounts and unrealized gains and losses on fixed income securities, grew 4.5% from the same period last year. 9 Financial Position ($ in thousands) March 31, December 31, 2000 1999 -------------- -------------- Fixed income securities (1) $ 157,608 $ 157,218 Short-term investments 4,001 1,919 -------------- -------------- Total investments $ 161,609 $ 159,137 ============== ============== Reinsurance recoverable from ALIC $ 7,807,189 $ 7,539,995 ============== ============== Separate Accounts assets and liabilities $ 1,616,052 $ 1,411,996 ============== ============== Contractholder funds $ 7,627,403 $ 7,369,664 ============== ==============
(1)Fixed income securities are carried at fair value. Amortized cost for these securities was $159,007 and $158,747 at March 31, 2000 and December 31, 1999, respectively. Total investments were $161.6 million at March 31, 2000 compared to $159.1 million at December 31, 1999. The increase was due primarily to positive cash flows generated from operations. At March 31, 2000, unrealized net capital losses on fixed income securities were $1.4 million compared to $1.5 million at December 31, 1999. At March 31, 1999, all of the Company's fixed income securities portfolio is rated investment grade, with a National Association of Insurance Commissioners ("NAIC") rating of 1 or 2, a Moody's rating of Aaa, Aa, A or Baa, or a comparable Company internal rating. During the three months ended March 31, 2000, contractholder funds increased $257.7 million and amounts recoverable from ALIC under reinsurance agreements increased $267.2 million. The increases resulted primarily from sales of market value adjusted annuity contracts and interest credited to contractholders partially offset by fixed annuity surrenders and withdrawals. Reinsurance recoverable from ALIC relates to contract benefit obligations ceded to ALIC. Separate Account assets and liabilities increased 14.5% to $1.62 billion at March 31, 2000. The increases were primarily attributable to sales of variable annuity contracts and the favorable investment performance of the Separate Account investment portfolios, partially offset by surrenders and withdrawals. Liquidity and Capital Resources Under the terms of reinsurance agreements, premiums and deposits, excluding those relating to Separate Accounts, are transferred primarily to ALIC, which maintains the investment portfolios supporting the Company's products. Payments of policyholder claims, benefits, contract maturities, contract surrenders and withdrawals and certain operating costs are also reimbursed primarily by ALIC, under the terms of the reinsurance agreements. The Company continues to have primary liability as a direct insurer for risks reinsured. The Company's ability to meet liquidity demands is dependent on ALIC's ability to meet those demands. ALIC's claims-paying ability was rated Aa2, AA+, and A+ by Moody's, Standard & Poor's and A.M. Best, respectively, at March 31, 2000. The primary sources for the remainder of the Company's funds are collection of principal and interest from the investment portfolio and capital contributions from ALIC. The primary uses for the remainder of the Company's funds are to purchase investments and pay costs associated with the maintenance of the Company's investment portfolio. At March 31, 2000, the Moody's and Standard and Poor's claims-paying ratings for the Company were Aa2 and AA+, respectively. Forward-Looking Statements The statements contained in this Management's Discussion and Analysis that are not historical information are forward-looking statements that are based on management's estimates, assumptions and projections. The Private Securities Litigation Reform Act of 1995 provides a safe harbor under The Securities Act of 1933 and The Securities Exchange Act of 1934 for forward-looking statements. 10 PART II - OTHER INFORMATION Item 1. LEGAL PROCEEDINGS The Company and its Board of Directors know of no material legal proceedings pending to which the Company is a party or which would materially affect the Company. The Company is involved in pending and threatened litigation in the normal course of its business in which claims for monetary damages are asserted. Management, after consultation with legal counsel, does not anticipate the ultimate liability arising from such pending or threatened litigation to have a material effect on the financial condition of the Company. Item 5. OTHER INFORMATION Not applicable. Item 6. EXHIBITS AND REPORTS ON FORM 8-k (a) Exhibits required by Item 601 of Regulation S-K (2) None (3) (i) Articles of Incorporation* (ii) By-laws* (4) Lincoln Benefit Life Company Flexible Premium Deferred Annuity Contract and Application** (10) Reinsurance Agreement between Lincoln Benefit Life Company and Allstate Life Insurance Company* (11) None (15) None (18) None (19) None (22) None (23) (a) Consent of Independent Public Accountants*** (b) Consent of Attorneys*** (24) None (27) Financial Data Schedule (99) None (b) Reports on 8-K No reports on Form 8-K were filed during the second quarter of 1998. *Incorporated herein by reference to the Registration Statement on Form N-4 for Lincoln Benefit Life Variable Annuity Account (File No. 333-50545, 811-07924) filed April 21, 1998. **Incorporated herein by reference to the Registration Statement on Form N-4 for Lincoln Benefit Life Variable Annuity Account (File No. 333-50545, 811-07924) filed April 21, 1998. Incorporated herein by reference to the Registration Statement on Form N-4 for Lincoln Benefit Life Variable Annuity Account (File No. 333-50737, 811-07924) filed April 22, 1998. Incorporated by reference to the Registration Statement on Form N-4 for Lincoln Benefit Life Variable Annuity Account (File No. 333-82427, 811-07924) filed July 8, 1999. ***Incorporated herein by reference to the Post-effective Amendment #2 to Registration Statement on Form S-3 for Lincoln Benefit life Company (File No. 333-59765) filed April 28, 2000. Incorporated herein by reference to the Post-effective Amendment #2 to Registration Statement on Form S-3 for Lincoln Benefit Life Company (File No. 333-59769) filed April 28, 2000. Incorporated herein by reference to Post-effective Amendment No. 1 to the Registration Statement on Form S-3 for Lincoln Benefit Life Company (File No. 333-88045) filed April 5, 2000. 11 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registration has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized, on the 12th day of May, 2000. LINCOLN BENEFIT LIFE COMPANY (Registrant) /s/B. Eugene Wraith - ----------------------- PRESIDENT, CHIEF OPERATING B. EUGENE WRAITH OFFICER AND DIRECTOR (PRINCIPAL EXECUTIVE OFFICER) /S/ Marvin P. Ehly - ----------------------- SENIOR VICE PRESIDENT MARVIN P. EHLY TREASURER, CONTROLLER AND DIRECTOR (PRINCIPAL FINANCIAL OFFICER) (PRINCIPAL ACCOUNTING OFFICER) 12 EX-27 2 FDS --
7 THIS SCHEUDLE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM STATEMENTS OF FINANCIAL POSITION AT MARCH 31, 2000; STATEMENTS OF OPERATIONS THREE MONTHS ENDED MARCH 31, 2000; AND STATEMENTS OF CASH FLOWS THREE MONTHS ENDED MARCH 31, 2000. 0000910739 Lincoln Benefit Life 1,000 U.S. Dollars 3-MOS DEC-31-2000 JAN-01-2000 MAR-31-2000 1 157,608 0 0 0 0 0 161,609 1,277 8,084,171 0 9,875,100 448,807 0 0 7,627,403 0 0 0 2,500 157,157 9,875,100 0 2,784 (3) 0 0 0 26 2,755 964 1,791 0 0 0 1,791 0 0 0 0 0 0 0 0 0
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