Document/Exhibit Description Pages Size
1: 485BPOS Post-Effective Amendment 100 495K
2: EX-99.26(G)(1) Miscellaneous Exhibit 58 97K
3: EX-99.26(G)(2) Miscellaneous Exhibit 3 9K
4: EX-99.26(G)(3) Miscellaneous Exhibit 5 15K
5: EX-99.26(G)(4) Miscellaneous Exhibit 2 10K
6: EX-99.26(H)(1)(B) Miscellaneous Exhibit 6 28K
7: EX-99.26(H)(2)(B) Miscellaneous Exhibit 5 24K
8: EX-99.26(H)(3) Miscellaneous Exhibit 33 108K
9: EX-99.26(H)(4)(B) Miscellaneous Exhibit 6 27K
10: EX-99.26(K) Miscellaneous Exhibit 1 10K
11: EX-99.26(L) Miscellaneous Exhibit 1 9K
12: EX-99.26(M) Miscellaneous Exhibit 2 13K
13: EX-99.26(N) Miscellaneous Exhibit 1 7K
14: EX-99.26(R) Miscellaneous Exhibit 2 12K
File Number 333-132009
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-6
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
Pre-Effective Amendment Number
___
Post-Effective Amendment Number 1
---
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment Number 1
---
SECURIAN LIFE VARIABLE UNIVERSAL LIFE ACCOUNT
(Exact Name of Registrant)
Securian Life Insurance Company
(Name of Depositor)
400 Robert Street North
Saint Paul, Minnesota 55101
(Address of Depositor's Principal Executive Offices)
(651) 665-3500
(Depositor's Telephone Number, including Area Code)
Dwayne C. Radel, Esq.
Vice President and General Counsel
Securian Life Insurance Company
400 Robert Street North
St. Paul, Minnesota 55101-2098
(Name and Address of Agent for Service)
Copy to:
Stephen E. Roth, Esq.
Sutherland, Asbill & Brennan LLP
1275 Pennsylvania Avenue, NW
Washington, D.C. 20004-2415
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box):
___ immediately upon filing pursuant to paragraph (b) of Rule 485
X on May 1, 2007 pursuant to paragraph (b) of Rule 485
---
___ 60 days after filing pursuant to paragraph (a)(1) of Rule 485
___ on (date) pursuant to paragraph (a)(1) of Rule 485
If appropriate, check the following:
___ this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Title of Securities Being Registered: Group Variable Universal Life Insurance
Contracts and Certificates.
PART A: INFORMATION REQUIRED IN A PROSPECTUS
Item Number Caption in Prospectus
1. Front and Back Cover Pages
2. Risk/Benefit Summary: Benefits and Risks
3. Risk/Benefit Summary: Fee Table
4. General Description of Securian Life Variable Universal Life
Account, Securian Life Insurance Company, Advantus Series Fund,
Inc., Fidelity(R) Variable Insurance Products Funds, Janus Aspen
Series, and W&R Target Funds, Inc.
5. Charges
6. General Description of Contracts
7. Premiums
8. Death Benefits and Contract Values
9. Surrenders, Partial Surrenders, and Partial Withdrawals
10. Loans
11. Lapse and Reinstatement
12. Taxes
13. Legal Proceedings
14. Financial Statements
PART B: INFORMATION REQUIRED IN A STATEMENT OF
ADDITIONAL INFORMATION
Item Number Caption in Statement of Additional Information
15. Cover Page and Table of Contents
16. General Information and History
17. Services
18. Premiums
19. Additional Information About Operation of Contracts and
Registrant
20. Underwriters
21. Additional Information About Charges
22. Lapse and Reinstatement
23. Loans
24. Financial Statements
25. Illustrations
Prospectus
SECURIAN LIFE VARIABLE
UNIVERSAL LIFE ACCOUNT
SECURIAN LIFE INSURANCE COMPANY
Variable Universal Life Insurance Policy
This prospectus describes Variable Universal Life Insurance Policies issued by
Securian Life Insurance Company ("Securian Life", "we", "us" or "our").
The policies are designed for use in group-sponsored insurance programs to
provide life insurance protection to individuals (each an "insured") and the
flexibility to vary premium payments. Certificates are documents, generally held
by individuals ("certificate owner", "owner" or "you"), setting forth or
summarizing the rights of the owners and/or insureds and will be issued under
the group contract. A group contract is the Securian Life Variable Group
Universal Life Insurance Policy issued to an employer, association or
organization that is sponsoring a program of insurance ("group sponsor" or
"contractholder") for eligible participants of the contractholder. The
contractholder is the sponsor of the group-sponsored insurance program.
The certificate owner may allocate net premiums to one or more of the
sub-accounts of a separate account of Securian Life called the Securian Life
Variable Universal Life Account (herein "separate account"). The owner is the
owner of the certificate as designated in the signed application or as
subsequently changed as set forth in the certificate and described in this
prospectus. The value of your investment in the separate account will vary with
the investment experience of the selected sub-accounts of the separate account.
There is no guaranteed minimum value associated with the separate account and
its sub-accounts. Subject to the limitations in the policy and this prospectus,
net premiums may also be allocated to a guaranteed account of Securian Life.
The separate account, through its sub-accounts, invests its assets in shares of
Advantus Series Fund, Inc. (the "Advantus Series Fund"), Fidelity(R) Variable
Insurance Products Funds ("Fidelity(R) VIP"), Janus Aspen Series and W&R Target
Funds, Inc. (collectively the "Funds"). The Funds offer their shares exclusively
to variable insurance products and certain qualified plans and have 20
portfolios which are available for contracts offered under this prospectus (the
"Portfolios"). They are:
ADVANTUS SERIES FUND
- Bond Portfolio
- Index 400 Mid-Cap Portfolio
- Index 500 Portfolio
- International Bond Portfolio
- Money Market Portfolio
- Mortgage Securities Portfolio
- Real Estate Securities Portfolio
FIDELITY(R) VIP
- VIP Contrafund(R) Portfolio: Initial Class Shares
- VIP Equity-Income Portfolio: Initial Class Shares
- VIP High Income Portfolio: Initial Class Shares
JANUS ASPEN SERIES
- Janus Aspen Series Forty Portfolio--Service Shares
- Janus Aspen Series International Growth Portfolio--Service Shares
W&R TARGET FUNDS, INC.
- W&R Balanced Portfolio
- W&R Core Equity Portfolio
- W&R Growth Portfolio
- W&R International Value Portfolio
- W&R Micro Cap Growth Portfolio
- W&R Small Cap Growth Portfolio
- W&R Small Cap Value Portfolio
- W&R Value Portfolio
PLEASE NOTE THAT THE POLICY, CERTIFICATES AND THE PORTFOLIOS:
are not guaranteed to achieve their goals;
are not federally insured;
are not endorsed by any bank or government agency; and
are subject to risks, including loss of the amount invested.
A prospectus for each of the Portfolios available through the separate account
must accompany this prospectus. Please read these documents carefully before
investing and save them for future reference.
The Securities and Exchange Commission has not approved the policy, the
certificates, the guaranteed account or determined that this prospectus is
accurate or complete. Any representation to the contrary is a criminal offense.
THE POLICY AND CERTIFICATES ARE NOT AVAILABLE IN ALL STATES. THIS PROSPECTUS
DOES NOT OFFER THE POLICIES OR CERTIFICATES IN ANY JURISDICTION WHERE THEY
CANNOT BE LAWFULLY SOLD. YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN
THIS PROSPECTUS, SALES MATERIALS WE HAVE APPROVED OR THAT WE HAVE REFERRED YOU
TO. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS
DIFFERENT.
The date of this prospectus and the statement of additional information is May
1, 2007.
Securian Life Insurance Company
400 Robert Street North
St. Paul, Minnesota 55101
(800) 815-7636 [SECURIAN(TM) LOGO]
TABLE OF CONTENTS
[Enlarge/Download Table]
Page
Questions and Answers about the Variable Group Universal Life Insurance Contract 2
Summary of Benefits and Risks 2
Risks of Owning a Variable Universal Life Insurance Certificate 2
Fee Tables 6
General Descriptions 9
Securian Life Insurance Company 9
Securian Life Variable Universal Life Account 9
Additions, Deletions or Substitutions 11
Voting Rights 12
The Guaranteed Account 13
Summary Information 13
Guaranteed Account Value 13
Charges 14
Premium Expense Charges 14
Sales Charge 14
Premium Tax Charge 14
OBRA Expense Charge 14
Account Value Charges 15
Monthly Deduction 15
Withdrawal Charge 16
Transfer Charge 16
Additional Benefits Charges 16
Separate Account Charges 16
Fund Charges 16
Guarantee of Certain Charges 16
Information about the Certificate 17
Applications and Certificate Issue 17
Exchange Privilege 17
Paid-Up Insurance Option 17
Dollar Cost Averaging 18
Free Look 18
Continuation of Group Coverage 18
Conversion Privilege to an Individual Policy 19
General Provisions of the Group Contract 20
Issuance 20
Termination 20
Right to Examine Group Contract 20
Entire Group Contract 20
Ownership of Group Contract and Group Contract Changes 20
Certificate Premiums 21
Premium Limitations 21
Allocation of Net Premiums and Account Value 21
Death Benefit and Account Values 22
Option A - Level Death Benefit 22
Option B - Increasing Death Benefit 22
Change in Face Amount 23
Increases 23
Decreases 23
Changes in Face Amount Due to a Change in Death Benefit Option 23
Payment of Death Benefit Proceeds 23
Account Values 24
Determination of the Guaranteed Account Value 24
Determination of the Separate Account Value 25
Unit Value 25
Net Investment Factor 25
Daily Values 25
i
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Page
Surrenders, Withdrawals and Transfers 26
Transfers 26
Market Timing 27
Guaranteed Account Transfer Restrictions 27
Other Transfer Information 28
Loans 29
Loan Interest 29
Loan Repayments 30
Lapse and Reinstatement 30
Lapse 30
Reinstatement 30
Additional Benefits 31
Accelerated Benefits Rider 31
Waiver of Premium Rider 31
Accidental Death and Dismemberment Rider 31
Child Rider 31
Spouse Rider 31
Policyholder Contribution Rider 31
General Matters Relating to the Certificate 32
Postponement of Payments 32
The Certificate 32
Control of Certificate 32
Maturity 33
Beneficiary 33
Change of Beneficiary 33
Settlement Options 33
Federal Tax Status 34
Introduction 34
Taxation of Securian Life and the Variable Universal Life Account 34
Tax Status of Certificates 34
Owner Control 35
Diversification of Investments 35
Tax Treatment of Policy Benefits 35
Modified Endowment Contracts 36
Multiple Policies 37
Withholding 37
Other Transactions 37
Other Taxes 37
Non-Individual Owners and Business Beneficiaries of Policies 37
Split-Dollar Arrangements 37
Alternative Minimum Tax 38
Economic Growth and Tax Relief Reconciliation Act of 2001 38
Distribution of Certificates 39
Payments Made by Underlying Mutual Funds 39
Other Matters 40
Legal Proceedings 40
Registration Statement 40
Financial Statements 41
Statement of Additional Information 41
ii
QUESTIONS AND ANSWERS ABOUT THE VARIABLE GROUP UNIVERSAL LIFE INSURANCE CONTRACT
SUMMARY OF BENEFITS AND RISKS
All of the benefits and risks summarized below are subject to the terms,
conditions and restrictions of the group-sponsored insurance program, the
certificate and this prospectus.
A variable universal life insurance certificate is an adjustable benefit
life insurance contract that allows accumulation of cash value, while the life
insurance coverage remains in force, and permits flexible payment of premiums.
The cash value of the certificate will fluctuate with the performance of the
sub-accounts of the separate account. The choice of available investment options
("sub-accounts") and the guaranteed account is determined under the
group-sponsored insurance program. Values may be transferred among the available
investment options. An owner may make a withdrawal from his/her certificate,
surrender all or part of his/her certificate or take certificate loans. Each
certificate has a minimum face amount of death benefit coverage. The death
benefit of a certificate may be greater than its face amount, as further
described in this prospectus. If a certificate is in force upon the insured's
death, the death benefit will be paid to the designated beneficiary.
We offer six Riders that provide supplemental benefits under the policy:
the Accelerated Benefits Rider, Waiver of Premium Rider, Accidental Death and
Dismemberment Rider, Child Rider, Spouse Rider and Policyholder Contribution
Rider. There is no charge for the Accelerated Benefits Rider and Policyholder
Contribution Rider. These Riders may not be available in all states or in all
group-sponsored insurance programs.
There are several ways of receiving proceeds under the death benefit of a
certificate, other than in a lump sum. More detailed information concerning
these settlement options is set forth later in this prospectus.
RISKS OF OWNING A VARIABLE UNIVERSAL LIFE INSURANCE CERTIFICATE
The account values of a certificate, to the extent invested in sub-accounts
of the separate account, have no guaranteed minimum account value. Therefore,
the owner bears the risk that adverse investment performance may depreciate the
owner's account value and, in some cases, may increase the cost of insurance.
Additional information concerning investment objectives and policies of the
Portfolios (including a comprehensive discussion of the risks of each Portfolio)
may be found in the current prospectuses for each Fund which accompany this
prospectus. You should carefully review each Fund prospectus before purchasing
the contract.
A universal life insurance certificate is intended for the use of persons
who wish to combine both life insurance and the accumulation of cash values and
is unsuitable as a short-term investment vehicle.
There is a risk that a certificate will lapse. As described in the "Lapse
and Reinstatement" section of this prospectus, lapse will occur only when the
net cash value is insufficient to cover the monthly deduction, and the
subsequent grace period expires without sufficient payment being made. You may
reinstate a lapsed certificate, subject to certain conditions.
Certificate loans may increase the risk of policy lapse, have a negative
effect on a certificate's cash value and reduce a certificate's death benefit.
In some circumstances, experience credits, loans and amounts received from
a withdrawal or surrender of the certificate will be subject to federal income
taxation and an additional 10 percent income tax. For additional information
regarding federal income taxes see the "Federal Tax Status" section of this
prospectus. Withdrawals may also assess a processing charge of 2% of the amount
withdrawn not to exceed $25.
Consistent with the group-sponsored insurance program, the group policy,
the certificate and this prospectus, we reserve the right to limit the size,
number and frequency of transfers, limit the amount of a certificate loan, and
restrict certificate withdrawals and surrenders.
2
WHAT IS A UNIVERSAL LIFE INSURANCE CERTIFICATE?
A universal life insurance certificate is an adjustable benefit life
insurance contract issued pursuant to a group policy. Unlike term life
insurance, universal life insurance coverage allows you to accumulate cash
value, while the life insurance coverage remains in force, and permits flexible
payment of premiums (which means premium payments may be increased or decreased
as allowed for by the certificate and this prospectus).
A universal life certificate of insurance has a stated face amount of
insurance payable in the event of the death of the insured, which is paid for by
the deduction of specified monthly charges from the account values. The face
amount is the minimum amount of death benefit proceeds paid upon the death of
the insured, so long as the certificate remains in force and there are no
outstanding loans. We will also deduct from the face amount any unpaid monthly
deduction. The face amount is shown on the specifications page attached to the
certificate. The insured is the person whose life is covered by life insurance
under a certificate. Unlike term life insurance, universal life insurance
coverage may be adjusted by the owner of the certificate, without the necessity
of issuing a new certificate for that owner. There are limitations to these
adjustments and we may require evidence of insurability before requested
increases take effect.
Universal life insurance coverage is provided without specifying the
frequency and amount of each premium payment (as is the practice for scheduled
premium life insurance certificates). The time and amount of the payment of
premium may be determined by the owner. The life insurance coverage will remain
in force for an insured so long as the certificate's net cash value is
sufficient to cover monthly charges when due. The net cash value is the account
value of a certificate less any outstanding certificate loans and accrued
certificate loan interest charged (plus any accrued loan interest credits) and
less any charges due. It is the amount an owner may obtain through surrender of
the certificate.
Subject to restrictions described herein, an owner may make payments in
excess of that minimum amount required to keep a certificate in force, take full
or partial surrenders of cash values and take out certificate loans. If cash
values are insufficient for the payment of the required monthly charges, then a
premium payment is required or the life insurance coverage provided to the owner
will lapse.
A universal life insurance certificate may be inappropriate for individuals
seeking life insurance protection which is the equivalent of term-type coverage.
Term life insurance coverage is usually for a fixed period of time for a fixed
premium.
WHAT MAKES THE CERTIFICATE "VARIABLE"?
The certificate is termed "variable" because unlike a universal life
certificate which provides for the accumulation of certificate values at fixed
rates determined by the insurance company, variable universal life insurance
certificate values may be invested in variable investment options. The variable
investment options invest in a separate account. The separate account we use for
our group contracts is called the Securian Life Variable Universal Life Account.
The separate account keeps its assets separate from the other assets of Securian
Life. The separate account has sub-accounts, each of which invests in
corresponding Portfolios of a Fund. Thus, the owner's account value, to the
extent invested in the variable investment options (sub-accounts), will vary
with the positive or negative investment experience of the corresponding
Portfolios of the Funds.
The account value of a certificate is the sum of the separate account
value, guaranteed account value and loan account value. The separate account
value is the sum of all current sub-account values into which the owner has made
allocations. The guaranteed account value is the sum of all net premiums and
transfers allocated to the guaranteed account and interest declared thereon and
experience credits, if any, minus amounts transferred to the separate account or
removed in connection with a withdrawal or loan and minus charges assessed
against the guaranteed account value. The loan account value is the portion of
the general account attributable to loans under a certificate together with
accrued interest.
3
IS THERE AN INVESTMENT PERFORMANCE RISK?
Yes. The account value of the certificate, to the extent invested in
sub-accounts of the separate account, has no guaranteed minimum account value.
Therefore, the owner bears the risk that adverse investment performance may
reduce the owner's account value. The owner is also subject to the risk that the
investment performance of the selected sub-accounts may be less favorable than
that of other sub-accounts, and in order to keep the certificate in force the
owner may be required to pay more premiums than originally planned. The
certificate also offers the owner the opportunity to have the account value
increase more rapidly than it would under comparable fixed benefit certificates
by virtue of favorable investment performance. In addition, under some
certificates, the death benefit will also increase and decrease (but not below
the guaranteed amount) with investment experience.
Owners seeking the traditional insurance protections of a guaranteed
account value may allocate net premiums to the certificate's guaranteed account
option which provides for guaranteed accumulation at a fixed rate of interest.
Additional information on this option may be found under "The Guaranteed
Account" and the "Death Benefit and Account Values" sections of this prospectus.
If the owner allocates net premiums or account value to the guaranteed account,
then we credit the owner's account value in the guaranteed account with a
declared rate of interest, but the owner assumes the risk that the rates may
decrease, although it will never be lower than a minimum guaranteed annual rate
of 3 percent.
WHAT VARIABLE INVESTMENT OPTIONS ARE AVAILABLE?
The separate account currently invests in each of the twenty Portfolios
listed below. However, your group sponsor insurance program may limit the
Portfolios, and in turn the sub-accounts, available for investment under your
certificate. As such, you should consult your group sponsor to determine if
restrictions apply to your investment in any of sub-accounts funded by the
Portfolios listed below.
Advantus Series Fund Portfolios include:
Bond Portfolio
Index 400 Mid-Cap Portfolio
Index 500 Portfolio
International Bond Portfolio
Money Market Portfolio
Mortgage Securities Portfolio
Real Estate Securities Portfolio
Fidelity(R) VIP Portfolios include:
Fidelity(R) VIP Contrafund Portfolio: Initial Class Shares
Fidelity(R) VIP Equity-Income Portfolio: Initial Class Shares
Fidelity(R) VIP High Income Portfolio: Initial Class Shares
Janus Aspen Series Portfolios include:
Janus Aspen Series Forty Portfolio -- Service Shares
Janus Aspen Series International Growth Portfolio -- Service Shares
W&R Target Funds Portfolios include:
W&R Target Funds, Inc. -- Balanced Portfolio
W&R Target Funds, Inc. -- Core Equity Portfolio
W&R Target Funds, Inc. -- Growth Portfolio
W&R Target Funds, Inc. -- International Value Portfolio
W&R Target Funds, Inc. -- Micro Cap Growth Portfolio
W&R Target Funds, Inc. -- Small Cap Growth Portfolio
W&R Target Funds, Inc. -- Small Cap Value Portfolio
W&R Target Funds, Inc. -- Value Portfolio
There is no assurance that any Portfolio will meet its objectives.
Additional information concerning investment objectives and policies of the
Portfolios (including a comprehensive discussion of the risks of each Portfolio)
may be found in the current prospectuses for each Fund which accompany this
prospectus. We reserve the right to add, combine or remove eligible Funds and
Portfolios.
HOW CAN NET PREMIUMS BE ALLOCATED?
In the initial signed application for life insurance, the owner may
indicate the
4
desired allocation of net premiums among the guaranteed account and the
available sub-accounts of the separate account, subject to the limitations in
the certificate and this prospectus. All future net premiums will be allocated
in the same proportion until the owner requests a change in the allocation.
Similarly, the owner may request a transfer of amounts between sub-accounts or
between the sub-accounts and the guaranteed account, subject to the limitations
in the certificate and this prospectus.
WHAT DEATH BENEFIT OPTIONS ARE OFFERED UNDER THE CERTIFICATE?
We offer two death benefit options under the certificate. Under "Option A",
a level death benefit, the death benefit is the face amount of the certificate.
Under "Option B", a variable death benefit, the death benefit is the face amount
of the certificate plus the net cash value. So long as a certificate remains in
force and there are no certificate loans, the minimum death benefit under either
option will be at least equal to the current face amount (less any monthly
deduction). The death benefit proceeds will be adjusted by the amount of any
charges due or overpaid and any outstanding certificate loans and certificate
loan interest due determined as of the date of death.
For information on the death benefit option applicable to your certificate
see the "Death Benefit and Account Values" section of this prospectus.
There is a minimum initial face amount for the certificate which is stated
on the specifications page of the certificate. The owner may generally change
the face amount, but evidence of insurability of the insured may be required for
certain face amount increases.
There is a minimum death benefit based on the account value that is
required to preserve the qualification of this certificate as life insurance
under Section 7702 of the Internal Revenue Code (the "Code"). This is further
described under the "Death Benefit and Account Values" section of this
prospectus.
ARE THE BENEFITS UNDER A CERTIFICATE SUBJECT TO FEDERAL INCOME TAX?
We believe that the owner's certificate should qualify as a life insurance
contract for federal income tax purposes. Assuming that a certificate qualifies
as a life insurance contract for federal income tax purposes, the benefits under
certificates described in this prospectus should receive the same tax treatment
under the Code as benefits under traditional fixed benefit life insurance
certificates. Therefore, death proceeds payable under variable life insurance
certificates should be excludable from the beneficiary's gross income for
federal income tax purposes. The owner's net cash value should grow tax-deferred
until such cash value is actually distributed to the owner.
The tax treatment described above relating to distributions is available
only for certificates not described as "modified endowment contracts." For
federal income tax purposes, certificates described as modified endowment
contracts are treated as life insurance only with respect to the tax treatment
of death proceeds and the tax-free inside buildup of yearly account value
increases. However, amounts received by the owner of a modified endowment
contract, such as experience credits, loans and amounts received from a
withdrawal or from a surrender of the certificate will be subject to the same
tax treatment as amounts received under an annuity during the accumulation
period. Annuity tax treatment includes the 10 percent additional income tax
imposed on the portion of any distribution that is included in income, except
where the distribution or loan:
- is made on or after the owner attains age 59 1/2,
- is attributable to the owner becoming disabled, or
- is part of a series of substantially equal periodic payments for the life
of the owner or the joint lives of the owner and beneficiary.
Determining whether a certificate is a modified endowment contract requires
an examination of the premium paid in relation to the death benefit of the
certificate. A certificate would be a modified endowment contract if the total
premiums during the first seven contract years exceed the total sum of the net
level premiums which would be paid under a seven-pay life certificate. A
certificate which is subject to a material change will be treated as a new
certificate on the date that the material change takes
5
effect, to determine whether it is a modified endowment contract. The account
value on the material change date will be taken into account in determining
whether the seven-pay standard is met.
For additional information regarding federal income taxes see the "Federal
Tax Status" section of this prospectus.
DOES THE OWNER HAVE ACCESS TO THE ACCOUNT VALUES?
Yes. The net cash value, subject to the limitations in the certificate and
this prospectus, is available to the owner during the insured's lifetime. The
net cash value may be used:
- to provide retirement income,
- as collateral for a loan,
- to continue some amount of insurance protection without payment of
premiums, or
- to obtain cash by surrendering the certificate in full or in part.
The owner may borrow, as a certificate loan, an amount up to 90 percent of
the owner's account value less any existing loan account value. The loan account
is the portion of the general account attributable to loans under a certificate.
Each alternative for accessing the owner's account value may be subject to
conditions described in the certificate or under the "Death Benefit and Account
Values", "Surrenders, Withdrawals and Transfers" and "Loans" sections of this
prospectus.
In general, the owner may request a surrender of or a withdrawal from the
certificate at any time while the insured is living. A surrender or withdrawal
may have federal income tax consequences. (See "Federal Tax Status".)
Withdrawals may also assess a processing charge of 2% of the amount withdrawn
not to exceed $25.
A withdrawal of the net cash value of the certificate is permitted in any
amount equal to at least the minimum established for certificates under the
group-sponsored insurance program. The minimum will never exceed $500. The
maximum withdrawal is equal to 100% of the net cash value. We reserve the right
to limit the number of withdrawals to one per certificate month, change the
minimum amount for withdrawals, limit the frequency of withdrawals, or restrict
or prohibit withdrawals from the guaranteed account.
WHAT CHARGES ARE ASSOCIATED WITH THE CERTIFICATE?
We assess certain charges against each premium payment and the account
values under each certificate and against the asset value of the separate
account. These charges, which are largely designed to cover our expenses in
providing insurance protection and in distributing and administering the
certificates are described under the "Charges" section of this prospectus. The
specific charges are shown on the specifications page of the certificate. There
are also advisory fees and expenses which are assessed against the asset value
of each of the Portfolios of the Funds. We also reserve the right to charge
against the separate account assets, or make other provisions, for additional
tax liability we may incur with respect to the separate account or the
certificates.
FEE TABLES
The following tables describe the fees and expenses that an owner will pay
when buying, owning and surrendering the certificate. The first table describes
the fees and expenses that the owner will pay at the time that he or she buys
the certificate, surrenders the certificate, or transfers cash value between
available investment options.
TRANSACTION FEES
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CHARGE WHEN CHARGE IS DEDUCTED AMOUNT DEDUCTED
------ -------------------------- -------------------
Maximum Sales Charge Imposed on Premiums From Each Premium Payment* 5% of Premium+
Maximum Premium Tax Charge From Each Premium Payment* 4% of Premium+
Maximum OBRA Expense Charge** From Each Premium Payment* 1.25% of Premium++
Maximum Deferred Sales Charge None N/A
Maximum Withdrawal Fee From Each Withdrawal Lesser of $25 or 2%
of Withdrawal
Amount+
Maximum Transfer Fee Upon Each Transfer+++ $10+++
6
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* The charge may be waived in some group sponsored insurance programs for
premiums received in conjunction with an Internal Revenue Code Section 1035
exchange.
** The OBRA expense charge reflects the cost to Securian Life of amortizing
certain acquisition expenses rather than deducting such expenses on a
current basis. For a further discussion of the OBRA expense charge see the
"OBRA Expense Charge" section of this prospectus.
+ The actual fee may vary depending upon the group-sponsored insurance
program under which the certificate is issued.
++ For certificates considered to be individual under the Omnibus Budget
Reconciliation Act of 1990 ("OBRA") the charge will not exceed 1.25 percent
of each premium payment. If a certificate is considered to be a group
certificate under OBRA, the charge will not exceed 0.35 percent of each
premium payment.
+++ There is currently no transfer fee. A charge, not to exceed $10 per
transfer, may be imposed in the future.
The next table describes the fees and expenses that an owner will pay
periodically during the time that the owner owns the certificate, not including
fund operating expenses. The table also includes rider charges that will apply
if the owner purchases any rider(s) identified below.
PERIODIC CHARGES OTHER THAN FUND OPERATING EXPENSES
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CHARGE WHEN CHARGE IS DEDUCTED AMOUNT DEDUCTED
------ -------------------------------- -------------------------------
COST OF INSURANCE CHARGE
MAXIMUM & MINIMUM
CHARGE On the Certificate Date and Each Maximum: $25.26 Per Month Per
Subsequent Monthly Anniversary $1,000 of Coverage(1)
Minimum: $0.03 Per Month Per
$1,000 of Coverage(1)
CHARGE FOR A 45 YEAR OLD
NON-SMOKING
CERTIFICATEHOLDER On the Certificate Date and Each Representative $0.11 Per Month
Subsequent Monthly Anniversary Per $1,000 of Coverage(1)
MONTHLY ADMINISTRATION CHARGE On the Certificate Date and Each Maximum: $4 Per Month(2)
Subsequent Monthly Anniversary
LOAN INTEREST SPREAD Each Monthly Anniversary 2 percent Per Annum(3)
ACCIDENTAL DEATH AND
DISMEMBERMENT CHARGE On the Certificate Date and Each Maximum: $0.10 Per Month Per
Subsequent Monthly Anniversary $1,000 of Coverage(4)
WAIVER OF PREMIUM CHARGE On the Certificate Date and Each Maximum: 50% of the Cost of
Subsequent Monthly Anniversary Insurance Charge(4)
CHILD RIDER CHARGE On the Certificate Date and Each Maximum: $0.35 Per Month Per
Subsequent Monthly Anniversary $1,000 of Coverage(4)
SPOUSE RIDER CHARGE
MAXIMUM & MINIMUM
CHARGE On the Certificate Date and Each Maximum: $25.26 Per Month Per
Subsequent Monthly Anniversary $1,000 of Coverage(1)(4)
Minimum: $0.03 Per Month Per
$1,000 of Coverage(1)(4)
CHARGE FOR A 45 YEAR OLD
NON-SMOKING
CERTIFICATEHOLDER On the Certificate Date and Each Representative: $0.11 Per Month
Subsequent Monthly Anniversary Per $1,000 of Coverage(1)(4)
----------
(1) The cost of insurance charge will vary depending upon the insured's
attained age, the group sponsored insurance program and rate class. The
charges noted may not be representative of the charges that you would pay.
For information regarding the specific cost of insurance rate that will
apply to your certificate please contact Securian Life at 1-800-815-7636,
during normal business hours of 8:00 a.m. to 4:45 p.m., Central Time.
(2) The monthly administration charge depends on the number of certificate
owners under the group sponsored insurance program, the administrative
services provided, the expected average face amount as well as other
certificate features.
(3) The Loan Interest Spread is the difference between the amount of interest
we charge you for a loan (guaranteed not to exceed 8% annually) and the
amount of interest we credit to the amount of the certificate loan in the
loan account value (guaranteed not to be less than 6% annually). While a
certificate loan is outstanding, loan interest is due and payable in
arrears at the end of each certificate month or for the duration of the
certificate, if shorter. For a complete discussion of loan interest charges
and credits see the "Loan Interest" section of this prospectus.
(4) The availability of additional insurance benefit riders will depend upon
the particular group sponsored insurance program. You should check with
your group sponsor to determine which additional insurance benefit riders
are available under your program. Charges for additional insurance benefit
riders may vary among group sponsored insurance programs.
7
For information concerning compensation paid for the sale of the group
contract and certificates, see the "Distribution of Certificates" section of the
prospectus.
The next table describes the range of total annual Portfolio operating
expenses that an owner will pay while he or she owns the certificate.
Expenses of the Portfolios may be higher or lower in the future. The table
shows the lowest and highest expenses (as a percentage of Portfolio assets)
charged by any of the Funds for its Portfolios for the fiscal year ended
December 31, 2006. More detail concerning a particular Fund and its
Portfolios' fees and expenses is contained in the prospectus for that Fund.
RANGE OF ANNUAL PORTFOLIO OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM PORTFOLIO ASSETS INCLUDING
MANAGEMENT FEES, DISTRIBUTION (12B-1) FEES AND OTHER EXPENSES)*
FEE DESCRIPTION MINIMUM MAXIMUM
--------------- ------- -------
Total Annual Portfolio Operating Expenses 0.49% 1.32%
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* The Range of Total Annual Portfolio Operating Expenses presented in this
table does not reflect any fee waivers or expense reductions. For more
detailed information about the fee and expense charges, fee waivers (if
applicable) and expense reductions (if applicable) for a particular Fund
Portfolio please see that Fund's prospectus.
8
GENERAL DESCRIPTIONS
SECURIAN LIFE INSURANCE COMPANY
Securian Life Insurance Company, 400 Robert Street North, St. Paul,
Minnesota 55101, is a stock life insurance company organized under the laws of
Minnesota. We are licensed to conduct a life insurance business in all states,
except New Hampshire.
SECURIAN LIFE VARIABLE UNIVERSAL LIFE ACCOUNT
The separate account was established on December 1, 2004, by our Board of
Directors in accordance with certain provisions of the Minnesota insurance law.
The separate account is registered as a "unit investment trust" with the
Securities and Exchange Commission under the Investment Company Act of 1940, but
such registration does not signify that the Securities and Exchange Commission
supervises the management, or the investment practices or policies, of the
separate account. The separate account meets the definition of a "separate
account" under the federal securities laws.
We are the legal owner of the assets in the separate account. The
obligations to certificate owners and beneficiaries arising under the group
contracts and certificates are general corporate obligations of Securian Life.
Our general assets back these obligations. The Minnesota law under which the
separate account was established provides that the assets of the separate
account shall not be chargeable with liabilities arising out of any other
business which we may conduct, but shall be held and applied exclusively to the
benefit of the holders of those variable life insurance certificates for which
the separate account was established. The income, gains and losses credited to
or charged against the separate account reflect the account's own investment
experience and are entirely independent of both the investment performance of
our guaranteed account and of any other separate account which we may have
established or may later establish.
The separate account is divided into sub-accounts, each of which currently
invests in one of the twenty Fund Portfolios shown on the cover page of this
prospectus. Your group sponsor insurance program, however, may limit the
Portfolios, and in turn the sub-accounts, available for investment under your
certificate. As such, you should consult your group sponsor to determine if
restrictions apply to your investment in any of sub-accounts funded by the
Portfolios.
The separate account currently invests in the Portfolios of Advantus Series
Fund, Fidelity(R) VIP, Janus Aspen Series and W&R Target Funds, Inc. The Fund
Portfolio prospectuses accompany this prospectus. For additional copies please
call us at 1-800-815-7636. You should read each prospectus carefully before
investing in the certificate.
The assets of each Portfolio are separate from the others and each has
different investment objectives and policies. Therefore, each Portfolio operates
as a separate investment fund and the investment performance of one has no
effect on the investment performance of the other Portfolios.
All dividends and capital gains distributions from each Portfolio are
automatically reinvested in shares of that Portfolio at net asset value.
9
BELOW IS A LIST OF THE PORTFOLIOS AND THEIR ADVISER OR SUB-ADVISER.
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FUND/PORTFOLIO INVESTMENT ADVISER INVESTMENT SUB-ADVISER
-------------- --------------------------------- -----------------------------------------------------
ADVANTUS SERIES FUND:
Bond Portfolio Advantus Capital Management, Inc.
Index 400 Mid-Cap Portfolio Advantus Capital Management, Inc.
Index 500 Portfolio Advantus Capital Management, Inc.
International Bond Portfolio Advantus Capital Management, Inc. Augustus Asset Managers Limited
Money Market Portfolio Advantus Capital Management, Inc.
Mortgage Securities Portfolio Advantus Capital Management, Inc.
Real Estate Securities Portfolio Advantus Capital Management, Inc.
FIDELITY(R) VIP:
Contrafund(R) Portfolio:
Initial Class Shares Fidelity Management & Research FMR Co., Inc., Fidelity Management & Research (U.K.)
(Seeks long-term capital Company Inc., Fidelity Research & Analysis Company, Fidelity
appreciation.) Investments Japan Limited, Fidelity International
Investment Advisors, Fidelity International
Investment Advisors (U.K.) Limited
Equity-Income Portfolio:
Initial Class Shares Fidelity Management & Research FMR Co., Inc., Fidelity Management & Research (U.K.)
(Seeks reasonable income. The fund Company Inc., Fidelity Research & Analysis Company, Fidelity
will also consider the potential for Investments Japan Limited, Fidelity International
capital appreciation. The fund's goal Investment Advisors, Fidelity International
is to achieve a yield which exceeds Investment Advisors (U.K.) Limited
the composite yield on the securities
comprising the Standard & Poor's
500(SM) Index (S&P 500(R)).)
High Income Portfolio:
Initial Class Shares Fidelity Management & Research FMR Co., Inc., Fidelity Management& Research (U.K.)
(Seeks a high level of current Company Inc., Fidelity Research & Analysis Company, Fidelity
income, while also considering growth Investments Japan Limited, Fidelity International
of capital.) Investment Advisors, Fidelity International
Investment Advisors (U.K.) Limited
JANUS ASPEN SERIES:
Forty Portfolio--
Service Shares Janus Capital Management LLC
(Seeks long-term growth of capital.)
International Growth
Portfolio--Service Shares Janus Capital Management LLC
(Seeks long-term growth of capital.)
10
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FUND/PORTFOLIO INVESTMENT ADVISER INVESTMENT SUB-ADVISER
-------------- --------------------------------- -----------------------------------------------------
W&R TARGET FUNDS, INC.:
W&R Balanced Portfolio Waddell & Reed Investment
(Seeks, as a primary objective, to Management Company
provide current income to the extent
that, in the opinion of Waddell &
Reed Investment Management Company,
the Fund's investment manager; market
and economic conditions permit. As a
secondary objective, the Portfolio
seeks long-term appreciation of
capital.)
W&R Core Equity Portfolio Waddell & Reed Investment
(Seeks capital growth and income.) Management Company
W&R Growth Portfolio Waddell & Reed Investment
(Seeks capital growth, with current Management Company
income as a secondary objective.)
W&R International Value Portfolio Waddell & Reed Investment Templeton Investment Counsel, LLC
Management Company
W&R Micro Cap Growth Portfolio Waddell & Reed Investment Wall Street Associates
Management Company
W&R Small Cap Growth Portfolio Waddell & Reed Investment
Management Company
W&R Small Cap Value Portfolio Waddell & Reed Investment BlackRock Capital Management, Inc.
Management Company
W&R Value Portfolio Waddell & Reed Investment
(Seeks long-term capital Management Company
appreciation.)
ADDITIONS, DELETIONS OR SUBSTITUTIONS
We reserve the right to add, combine or remove any sub-accounts of the
Variable Universal Life Account when permitted by law. Each additional
sub-account will purchase shares in a new portfolio or mutual fund. New
sub-accounts may be established when, in our sole discretion, marketing, tax,
investment or other conditions warrant such action. We will use similar
considerations should there be a determination to eliminate one or more of the
sub-accounts of the separate account. Any new investment option will be made
available to existing owners on whatever basis we may determine.
We retain the right, subject to any applicable law, to make substitutions
with respect to the investments of the sub-accounts of the separate account. If
investment in a Portfolio of the Funds should no longer be possible or if we
determine it becomes inappropriate for certificates of this class, we may
substitute another mutual fund or portfolio for a sub-account. Substitution may
be made with respect to existing account values and future premium payments. A
substitution may be made only with any necessary approval of the Securities and
Exchange Commission.
We reserve the right to transfer assets of the separate account as
determined by us to be associated with the certificates to another separate
account. A transfer of this kind may require the approval of state regulatory
authorities and of the Securities and Exchange Commission.
We also reserve the right, when permitted by law, to restrict or eliminate
any voting right of owners or other persons who have voting rights as to the
separate account, and to combine the separate account with one or more other
separate accounts, and to de-register the separate account under the Investment
Company Act of 1940.
The Funds serve as the underlying investment medium for amounts invested in
life insurance company separate accounts
11
funding both variable life insurance policies and variable annuity contracts, as
the investment medium for such policies and contracts issued by Securian Life
and other affiliated and unaffiliated life insurance companies, and as the
investment medium for certain participating qualified plans to fund plan
benefits. It is possible that there may be circumstances where it is
disadvantageous for either: (i) the owners of variable life insurance policies
and variable annuity contracts to invest in one of the Funds at the same time,
or (ii) the owners of such policies and contracts issued by different life
insurance companies to invest in one of the Funds at the same time or (iii)
participating qualified plans to invest in shares of one of the Funds at the
same time as one or more life insurance companies. Neither the Funds nor
Securian Life currently foresees any disadvantage, but if one of the Funds
determines that there is any such disadvantage due to a material conflict of
interest between such policy owners and contract owners, or between different
life insurance companies, or between participating qualified plans and one or
more life insurance companies, or for any other reason, one of the Funds' Board
of Directors will notify the life insurance companies and participating
qualified plans of such conflict of interest or other applicable event. In that
event, the life insurance companies or participating qualified plans may be
required to sell the applicable Funds' shares with respect to certain groups of
policy owners or contract owners, or certain participants in participating
qualified plans, in order to resolve any conflict. The life insurance companies
and participating qualified plans will bear the entire cost of resolving any
material conflict of interest.
VOTING RIGHTS
We will vote the shares of the Funds held in the various sub-accounts of
the Variable Universal Life Account at regular and special shareholder meetings
of the Funds in accordance with the owner's instructions. If, however, the
Investment Company Act of 1940, as amended, or any regulation thereunder should
change and we determine that it is permissible to vote the shares of the Funds
in our own right, we may elect to do so. The number of votes as to which the
owner has the right to instruct will be determined by dividing his or her
sub-account value by the net asset value per share of the corresponding
Portfolio of the Funds. The sub-account value is the number of units of a
sub-account credited to a certificate multiplied by the current unit value for
that sub-account. Fractional shares will be counted. The number of votes as to
which the owner has the right to instruct will be determined as of the date
coincident with the date established by the Funds for determining shareholders
eligible to vote at the meeting of the Funds. Voting instructions will be
solicited in writing prior to the meeting in accordance with procedures
established by the Funds. We will vote shares of the Funds held by the separate
account as to which no instructions are received in proportion to the voting
instructions which are received from certificate owners with respect to all
certificates participating in the separate account. Each owner having a voting
interest will receive proxy material, reports and other material relating to the
Funds.
We may, when required by state insurance regulatory authorities, disregard
voting instructions if the instructions require that shares be voted so as to
cause a change in sub-classification or investment policies of the Funds or
approve or disapprove an investment advisory contract of the Funds. In addition,
we may disregard voting instructions in favor of changes in the investment
policies or the investment adviser of one or more of the Funds if we reasonably
disapprove of such changes. A change would be disapproved only if the proposed
change is contrary to state law or disapproved by state regulatory authorities
on a determination that the change would be detrimental to the interests of
certificate owners or if we determine that the change would be inconsistent with
the investment objectives of the Funds or would result in the purchase of
securities for the Funds which vary from the general quality and nature of
investments and investment techniques utilized by other separate accounts
created by us or any of our affiliates which have similar investment objectives.
In the event that we disregard voting instructions, a summary of that action and
the reason for such action will be included in the owner's next semi-annual
report.
12
THE GUARANTEED ACCOUNT
The guaranteed account is part of our general account. The owner may
allocate net premiums and may transfer net cash values of the certificate,
subject to the limitations in the certificate and this prospectus, to our
guaranteed account.
Because of exemptive and exclusionary provisions, interests in Securian
Life's guaranteed account have not been registered under the Securities Act of
1933, and the guaranteed account has not been registered as an investment
company under the Investment Company Act of 1940. Therefore, neither the
guaranteed account nor any interest therein is subject to the provisions of
these Acts, and Securian Life has been advised that the staff of the SEC does
not review disclosures relating to it. Disclosures regarding the guaranteed
account may, however, be subject to certain generally applicable provisions of
the federal securities laws relating to the accuracy and completeness of
statements made in prospectuses.
This prospectus describes a Variable Universal Life Insurance group
contract and certificate and is generally intended to serve as a disclosure
document only for the aspects of the group contract and certificate relating to
the sub-accounts of the separate account. For more information about the
guaranteed account, please see the certificate and the summary information
provided immediately below.
SUMMARY INFORMATION
Securian Life's general account consists of all assets owned by Securian
Life other than those in the separate account and any other separate accounts
which we may establish. The guaranteed account is that portion of the general
assets of Securian Life, exclusive of loans, which is attributable to the group
contract and certificate described herein and others of their class. The
description is for accounting purposes only and does not represent a division of
the general account assets for the specific benefit of group contracts and
certificates of this class. Allocations to the guaranteed account become part of
the general assets of Securian Life and are used to support insurance and
annuity obligations and are subject to the claims of our creditors. Subject to
applicable law, we have sole discretion over the investment of assets of the
guaranteed account. Owners do not share in the actual investment experience of
the assets in the guaranteed account.
A portion or all the net premiums may be allocated or transferred to
accumulate at a fixed rate of interest in the guaranteed account, though we
reserve the right to restrict the allocation of premium into the guaranteed
account. Transfers from the guaranteed account to the sub-accounts of the
separate account are subject to certain limitations with respect to timing and
amount. These restrictions are described under the "Transfers" section of this
prospectus. Amounts allocated or transferred to the guaranteed account are
guaranteed by us as to principal and a minimum rate of interest.
GUARANTEED ACCOUNT VALUE Securian Life bears the full investment risk for
amounts allocated to the guaranteed account and guarantees that interest
credited to each owner's account value in the guaranteed account will not be
less than the minimum guaranteed annual rate without regard to the actual
investment experience of the guaranteed account. The minimum guaranteed annual
rate is 3 percent. We may, at our sole discretion, credit a higher rate of
interest ("excess interest") although we are not obligated to do so. Any
interest credited on the certificate's account value in the guaranteed account
in excess of the guaranteed minimum rate per year will be determined at our sole
discretion. The owner assumes the risk that interest credited may not exceed the
guaranteed minimum rate.
Even if excess interest is credited to the guaranteed account value, no
excess interest will be credited to the loan account value.
13
CHARGES
Premium expense and account value charges will be deducted in connection
with the certificates and paid to us, to compensate us for providing the
insurance benefits set forth in the certificates, administering the
certificates, incurring expenses in distributing the certificates and assuming
certain risks in connection with the certificates. These charges will vary based
on the group-sponsored insurance program under which the certificate is issued.
We will determine the charges pursuant to our established actuarial procedures,
and in doing so we will not discriminate unreasonably or unfairly against any
person or class of persons. The charges for certificates under a group-sponsored
insurance program are shown on the specifications page of the certificate.
There are also advisory fees and expenses which are assessed against the
asset value of each of the Portfolios of the Funds.
PREMIUM EXPENSE CHARGES
The premium expense charges described below will be deducted from each
premium payment we receive. The remaining amount, or net premium, will be
allocated to the guaranteed account and/or sub-accounts of the separate account,
as directed by the owner, and become part of the certificate's net cash value.
SALES CHARGE We may deduct a sales charge from each premium paid under the
certificate. Sales charges vary based on the group-sponsored insurance program
under which the certificate is issued. The charge will never exceed 5 percent of
each premium paid. The sales charge will be determined based on a variety of
factors, including enrollment procedures, the size and type of the group, the
total amount of premium payments to be received, any prior existing relationship
with the group sponsor, the level of commissions paid to agents and brokers and
their affiliated broker-dealers, and other circumstances of which we are not
presently aware. We may waive the sales charge for premiums received as a result
of Internal Revenue Code section 1035 exchanges from another contract or
certificate. In addition, we may waive the sales charge for premiums paid by
designated payors under a group-sponsored insurance program (for example,
insureds versus the group sponsor).
The amount of the sales charge in any certificate year may not be
specifically related to sales expenses for that year. To the extent that sales
expenses are not recovered from the sales charge, we will recover them from our
other assets or surplus, which may include profits from the cost of insurance
charge or administration charge.
PREMIUM TAX CHARGE We will deduct a percentage of premium charge, not to
exceed 4 percent of each premium received, for premium taxes. Premium tax
charges vary based on the group-sponsored insurance program under which the
certificate is issued. This charge is to compensate us for our payment of
premium taxes that are imposed by state and local jurisdictions, and such other
charges or expenses as we may incur with respect to the certificates, including
guaranty fund assessments. This charge will be between 0 percent and 4 percent
of each premium payment. We may waive the premium tax charge for premiums
received as a result of Internal Revenue Code section 1035 exchanges from
another contract or certificate.
OBRA EXPENSE CHARGE Due to a 1990 federal tax law change under the Omnibus
Budget Reconciliation Act of 1990 ("OBRA"), as amended, insurance companies are
generally required to capitalize and amortize certain acquisition expenses
rather than currently deducting such expenses. Due to this capitalization and
amortization, the corporate income tax burden on insurance companies has been
affected. For certificates deemed to be group certificates for purposes of OBRA,
we make a charge against each premium payment to compensate us for corporate
taxes. The charge will not exceed 0.35 percent of premium. Under certificates
deemed to be
14
individual contracts under OBRA, we make a charge of up to 1.25 percent of each
premium payment. We may waive the OBRA expense charge for premiums received as a
result of Internal Revenue Code section 1035 exchanges from another contract or
certificate.
ACCOUNT VALUE CHARGES
The account value charges described below will be deducted from the net
cash value. If the net cash value is insufficient to cover the account value
charges, the certificate will lapse unless sufficient payment is received within
the grace period.
MONTHLY DEDUCTION The charges deducted as part of the monthly deduction vary
based on the group-sponsored insurance program under which the certificate is
issued. As of the certificate date and each subsequent monthly anniversary, we
will deduct an amount from the net cash value of the owner's certificate to
cover certain charges and expenses incurred in connection with the certificate.
The monthly deduction will be the sum of the following applicable items: (1) an
administration charge; (2) a cost of insurance charge; and (3) the cost of any
additional insurance benefits provided by rider. The monthly anniversary is the
first day of each calendar month on, or following, the issue date. The monthly
deduction will be deducted from the guaranteed account value and the separate
account value in the same proportion that those values bear to the net cash
value and, as to the separate account, from each sub-account in the proportion
that the sub-account value in such sub-account bears to the separate account
value of the certificate.
We may deduct an ADMINISTRATION CHARGE from the net cash value of the
certificate each month. The administration charge will never exceed $4 per
month. This charge is to compensate us for expenses incurred in the
administration of the certificates. These expenses include the costs of
processing enrollments, determining insurability, and establishing and
maintaining certificate records. Differences in the administration charge
applicable to specific group-sponsored insurance programs will be determined
based on expected differences in the administrative costs for the certificates
or in the amount of revenues that we expect to derive from the charge. Such
differences may result, for example, from the number of eligible members in the
group, the type and scope of administrative support provided by the group
sponsor, face amount and account value, and the features to be included in
certificates under the group-sponsored insurance program. An eligible member is
a member of the group seeking insurance who meets the requirements stated on the
specifications page of the group contract. This charge is not designed to
produce a profit.
The monthly COST OF INSURANCE will be calculated by multiplying the
applicable cost of insurance rate based on the insured's attained age and rate
class by the net amount at risk for each certificate month. The attained age is
the issue age of the insured plus the number of completed certificate years. The
net amount at risk for a certificate month is the difference between the death
benefit and the account value. The net amount at risk may be affected by changes
in the face amount of the certificate or by changes in the account value.
Account value, to the extent invested in sub-accounts of the separate account,
will vary depending upon the investment performance of the sub-accounts.
Cost of insurance rates for each group-sponsored insurance program are
determined based on a variety of factors related to group mortality including
gender mix, average amount of insurance, age distribution, occupations,
industry, geographic location, participation, level of medical underwriting
required, degree of stability in the charges sought by the group sponsor, prior
mortality experience of the group, number of actual or anticipated owners
electing the continuation option, and other factors which may affect expected
mortality experience. In addition, cost of insurance rates may be intended to
cover expenses to the extent they are not covered by the other certificate
charges. Changes in the current cost of insurance rates may be made based on any
factor which affects the actual or expected mortality or expenses of the group.
15
Changes to the cost of insurance rates are generally effective at the
beginning of each certificate year, although changes may be made at other times
if warranted due to a change in the underlying characteristics of the group,
changes in benefits included in certificates under the group contract,
experience of the group, changes in the expense structure, or a combination of
these factors.
Any changes in the current cost of insurance rates will apply to all
persons of the same attained age and rate class under the group-sponsored
insurance program. We and the group contractholder will agree to the number of
classes and characteristics of each rate class. The classes may vary by tobacco
users and non-tobacco users, active and retired status, owners of coverage
continued under the continuation provision and other owners, and/or any other
nondiscriminatory classes agreed to by the group sponsor.
The current cost of insurance rates will not be greater than the guaranteed
cost of insurance rates set forth in the certificate. These guaranteed rates are
based on 1980 Commissioners Standard Ordinary 75% male age at last birthday
Mortality Tables.
Some group contracts will be issued using tobacco distinct cost of
insurance rates. As a result, an otherwise healthy non-smoker who is part of a
uni-tobacco group, may pay higher cost of insurance rates than if he/she was
part of a group contract issued on a tobacco distinct basis.
WITHDRAWAL CHARGE For certificates under some group-sponsored insurance
programs, a transaction charge will be assessed against the net cash value for
each withdrawal to cover the administrative costs incurred in processing the
withdrawal. The charge will not exceed the lesser of $25 or 2 percent of the
amount withdrawn. This charge will be assessed in the same manner as the monthly
deduction.
TRANSFER CHARGE There is currently no charge assessed on transfers of net cash
value between the guaranteed account and the separate account or among the
sub-accounts of the separate account. A charge, not to exceed $10 per transfer,
may be imposed in the future.
ADDITIONAL BENEFITS CHARGES Additional benefits may be included with the
certificate by rider, subject to the limitations of the group policy and this
prospectus. Some of these additional benefits will have charged associated with
them. For a complete discussion of additional benefits see the "Additional
Benefits" section of this prospectus.
SEPARATE ACCOUNT CHARGES
We reserve the right to deduct a charge against the separate account
assets, or make other provisions for, any additional tax liability we may incur
with respect to the separate account, the group contract or the certificates, to
the extent that those liabilities exceed the amounts recovered through the
deduction from premiums for premium taxes and OBRA related expenses. No such
charge or provision is made at the present time. However, no charges shall be
assessed other than those described in the fee tables herein.
FUND CHARGES
Shares of the Funds are purchased for the separate account at their net
asset value, which reflects advisory fees and portfolio expense fees which are
assessed against the net asset value of each of the Portfolios of the Funds.
Advisory fees and portfolio expense fees of the Fund are described in each
Fund's prospectus.
GUARANTEE OF CERTAIN CHARGES
We will not increase the following charges: (1) the maximum sales charge;
(2) the maximum premium tax charge; (3) the OBRA expense charge (unless there is
a change in the law regarding the federal income tax treatment of deferred
acquisition costs); (4) the maximum cost of insurance charge; (5) the maximum
administration charge; (6) the maximum withdrawal transaction charge; and (7)
the maximum transfer charge.
16
INFORMATION ABOUT THE CERTIFICATE
APPLICATIONS AND CERTIFICATE ISSUE
We will generally issue a group contract to a group, as defined and
permitted by state law. For example, a group contract may be issued to an
employer, whose employees and/or their spouses may become insured thereunder so
long as the person is within a class of members eligible to be included in the
group contract. The class(es) of members eligible to be insured under the group
contract are set forth in that group contract's specifications page. The group
contract will be issued upon receipt of a signed application for the group
contract signed by a duly authorized officer of the group wishing to enter into
a group contract and the acceptance of that signed application by a duly
authorized officer of Securian Life at its home office. Individuals wishing to
purchase a certificate insuring an eligible member under a group-sponsored
insurance program must complete the appropriate application for life insurance
and submit it to our home office. If the application is approved, we will issue
a certificate. The issuance of a group contract and its associated forms is
always subject to the approval of those documents by state insurance regulatory
authorities for use.
Individuals who satisfy the eligibility requirements under a particular
group contract may be required to submit to an underwriting procedure which
requires satisfactory responses to certain health questions in the application
and to provide, in some cases, medical information. Acceptance of an application
is subject to our underwriting rules, and we reserve the right to reject an
application for any reason.
A certificate will not take effect until the owner signs the appropriate
application for insurance, the initial premium has been paid prior to the
insured's death, the insured is eligible, and we approve the completed signed
application. The date on which the last event occurs shall be the effective date
of coverage ("issue date").
EXCHANGE PRIVILEGE
Within the first 18 certificate months of coverage, an owner may transfer
all sub-account values under his or her certificate to the guaranteed account,
without transfer or other restrictions, provided the group contract is in force
and the required premiums are fully paid.
If there is a material change to the investment policy of the separate
account, an owner may transfer all sub-account values under his or her
certificate to the guaranteed account without transfer or other restrictions
provided the group contract is in force and the required premiums are fully
paid.
PAID-UP INSURANCE OPTION
Once per certificate year, an owner can apply his or her cash surrender
value to purchase guaranteed fixed paid-up insurance under the group contract.
If the owner applies his or her cash surrender value to purchase guaranteed
fixed paid-up insurance under the group contract, we will terminate the owner's
insurance provided under his or her original certificate and issue a new
certificate specifications page showing the guaranteed fixed paid-up insurance.
Insurance on any dependents insured by rider will terminate and such insurance
can be converted to a policy of individual life insurance according to the
conversion provisions of the rider.
The death benefit provided by the guaranteed fixed paid-up coverage will be
determined as follows:
- We will calculate the net cash value of the certificate on the date of the
change. This will be the initial cash value of the guaranteed fixed paid-up
coverage.
- The amount of the paid-up death benefit will be determined by multiplying
the net cash value by a paid-up insurance factor. The minimum paid-up
insurance factors are shown in the group contract.
- The minimum cash value of the paid-up death benefit is determined by
dividing the paid-up death benefit by the applicable paid-up insurance
factor as shown in the group contract.
The net amount at risk provided by the guaranteed fixed paid-up coverage
may not exceed the net amount at risk immediately prior to the exercise of this
paid-up option. We reserve the right to return any excess net cash value and/or
reduce the death benefit in order to achieve this.
Paid-up insurance terminates at age 95.
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In no event will we be liable under the original and the guaranteed fixed
paid-up coverages.
A detailed statement of the method of computation of cash surrender values
and other nonforfeiture benefits is on file with the Superintendent of Insurance
for the State of New York.
DOLLAR COST AVERAGING
We currently offer a dollar cost averaging option enabling the owner to
preauthorize automatic monthly or quarterly transfers from the Money Market
Sub-Account to any of the other sub-accounts. There is no charge for this
option. The transfers will occur on monthly anniversaries. Dollar cost averaging
is a systematic method of investing in which securities are purchased at regular
intervals in fixed dollar amounts so that the cost of the securities is averaged
over time and possibly over various market values. Since the value of the units
will vary over time, the amounts allocated to a sub-account will result in the
crediting of a greater number of units when the unit value is low and a lesser
number of units when the unit value is high. Dollar cost averaging does not
guarantee profits, nor does it assure that a certificate will not have losses.
To elect dollar cost averaging the owner must have at least $3,000 in the
Money Market Sub-Account. The automatic transfer amount from the Money Market
Sub-Account must be at least $250. The minimum amount that may be transferred to
any one of the other sub-accounts is $50. We reserve the right to discontinue,
modify or suspend the dollar cost averaging program at any time.
A dollar cost averaging request form is available to the owner upon
request. On the form the owner will designate the specific dollar amount to be
transferred, the sub-accounts to which the transfer is to be made, the desired
frequency of the transfer and the total number of transfers to be made. If at
any time while the dollar cost averaging option is in effect, the amount in the
Money Market Sub-Account is insufficient to cover the amount designated to be
transferred the current election in effect will terminate.
An owner may instruct us at any time to terminate the dollar cost averaging
election by giving us a request in writing or through any other method made
available by us under the group-sponsored insurance program. The amount from
which transfers were being made will remain in the Money Market Sub-Account
unless a transfer request is made. Transfers made pursuant to the dollar cost
averaging option will not be subject to any transfer charges, in the event such
charges are imposed.
FREE LOOK
It is important to us that the owner is satisfied with the certificate
after it is issued. If the owner is not satisfied with it, the owner may return
the certificate to us within 10 days after the owner receives it. If the
certificate is returned, the owner will receive within seven days of the date we
receive the notice of cancellation a full refund of the premiums paid.
A request for an increase in face amount also may be canceled. The request
for cancellation must be made within the 10 days, or that period required by
applicable state law, after the owner receives the new certificate
specifications page for the increase.
Upon cancellation of an increase, the owner may request that we refund the
amount of the additional charges deducted in connection with the increase. This
will equal the amount by which the monthly deductions since the increase went
into effect exceeded the monthly deductions which would have been made without
the increase. If no request is made, we will increase the certificate's account
value by the amount of these additional charges. This amount will be allocated
among the sub-accounts of the separate account and guaranteed account in the
same manner as it was deducted.
CONTINUATION OF GROUP COVERAGE
If the insured's eligibility under the group contract ends, the current
group coverage may continue unless:
- the certificate is no longer in force; or
- the group contract has terminated, although we may allow continuation for
certificates under some group-sponsored insurance programs if there is no
successor plan (see below).
If either of these limitations apply, the owner may still elect to continue
the current group coverage, but only for a period not to exceed one year. At the
end of this continuation period, he or she may convert such insurance to an
individual certificate of permanent insurance with Securian Life.
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Such conversion shall be subject to the rest of the Conversion Privilege section
in the certificate and this prospectus.
Successor plan shall mean another insurer's insurance policy(ies) with a
cash accumulation feature or an annuity contract(s) that replaces the insurance
provided under the group contract.
The face amount of insurance will not change unless the owner requests a
change. We reserve the right to alter all charges not to exceed the maximums.
These charges may be higher than those applicable to certificates under the
group contract that have not been continued under this provision.
Termination of the group contract by the contractholder or us will not
terminate the insurance then in force under the terms of the continuation
provision. The group contract will be deemed to remain in force solely for the
purpose of continuing such insurance, but without further obligation of the
contractholder.
CONVERSION PRIVILEGE TO AN INDIVIDUAL POLICY
If the group contract is terminated or if the insured's insurance under the
group contract ends due to the termination of his or her employment or
membership in the class or classes eligible for coverage under the group
certificate or his or her insurance is reduced on or after the attainment of age
sixty in any increment or series of increments totaling twenty percent or more
of the amount of insurance in force under the certificate prior to the first
reduction at age sixty, the owner shall be entitled to convert such insurance to
a policy of permanent individual life insurance within thirty one days of such
termination or reduction, without providing evidence of insurability, subject to
the following:
- the owner's written application to convert to an individual certificate and
the first premium for the individual policy must be received in our home
office within 31 days of the date the insurance terminates under the group
contract; and
- the owner may convert all or part of the amount of insurance under the
group contract at the time of termination or, if insurance is reduced due
to age, the amount of insurance equal to the amount which was reduced. The
owner may convert said amounts to any policy of permanent individual life
insurance then customarily issued by us. The individual policy will not
include any additional benefits, including, but not limited to disability
benefits, accidental death or dismemberment benefits or accelerated
benefits. The premium charge for this insurance will be based upon the
insured's age as of his or her nearest birthday, the plan of insurance, and
the class of risk to which the insured belongs on the date of conversion;
and
- if the insured should die within 31 days of the date that insurance
terminated under the group contract, the full amount of insurance that
could have been converted under the certificate will be paid.
If an insured has received accelerated payment of the full amount of his or
her death benefit, any child dependent insured under such insured's certificate
will be allowed to convert any such insurance to a policy of individual life
insurance with Securian Life.
If an owner is eligible to convert the insurance, the owner may elect to
continue such insurance under the group policy prior to converting to an
individual policy by paying premiums directly to us. The owner may continue such
group life insurance for a period of up to one year at which time he or she may
convert such insurance to an individual policy of permanent insurance. Such
conversion shall be subject to the rest of this conversion privilege section.
Except for insurance that is eligible for conversion as a result of a reduction
due to the age of the insured, insurance may be continued beyond one year
according to the terms of the continuation of group coverage section. The cost
of insurance and administration fee for this continued coverage may be higher.
The owner will be notified of his or her right to continue or convert the
group life insurance provided by his or her certificate. If notification is made
within 15 days before or after the event that results in termination or
reduction of the group life coverage, the owner will have 31 days from the date
the insurance terminates to elect continuation or conversion. If the notice is
given more than 15 days but less than 90 days after the event, the time allowed
for the exercise of the continuation or conversion privilege shall be extended
to 45 days after such notice is sent. If notice is not given within 90 days,
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the time allowed for the exercise of the continuation or conversion privilege
expires 90 days after the terminating event. Such notice shall be mailed to the
owner at the owner's last known address.
The continuation or conversion privilege is not available if the owner's
coverage under this group policy terminates due to the owner's failure to make,
when due, required premium contributions.
GENERAL PROVISIONS OF THE GROUP CONTRACT
ISSUANCE The group contract will be issued upon receipt of an application for
group insurance signed by a duly authorized officer of the group sponsor and
acceptance by a duly authorized officer of Securian Life at our home office.
TERMINATION The contractholder may terminate a group contract by giving us 31
days prior written notice of the intent to terminate. In addition, we may
terminate a group contract or any of its provisions on 61 days' notice. We may
elect to limit the situations in which we may exercise our right to terminate
the group contract to situations such as the non-payment of premiums or where,
during any twelve month period, the aggregate specified face amount for all
certificates under the group contract or the number of certificates under a
group contract decreases by certain amounts or below the minimum permissible
levels we establish for the group contract. No individual may become insured
under the group contract after the effective date of a notice of termination.
However, if the group contract terminates, certificates may be converted to
individual coverage as described under the "Conversion Privilege to an
Individual Policy" section of this prospectus.
Upon termination of a group contract, we reserve the right to complete the
distribution of account values attributable to the guaranteed account over a
period of time determined by us, but not more than six months. This delayed
distribution does not in any way continue or extend any insurance that has
otherwise terminated due to termination of a group contract.
Termination of the group contract by the contractholder or us will not
terminate the insurance then in force under the terms of the continuation
provision. The group contract will be deemed to remain in force solely for the
purpose of continuing such insurance, but without further obligation of the
contractholder.
RIGHT TO EXAMINE GROUP CONTRACT The contractholder may terminate the group
contract within 10 days, or that period required by law, after receiving it. To
cancel the group contract, the contractholder should mail or deliver the group
contract to us.
ENTIRE GROUP CONTRACT The group contract, the attached copy of the
contractholder's signed application and any additional agreements constitute the
entire contract between the contractholder and us. All statements made by the
contractholder, any owner or any insured will be deemed representations and not
warranties. A misstatement will not be used in any contest or to reduce claim
under the group contract, unless it is in writing. A copy of the signed
application containing such misstatement must have been given to the
contractholder or to the insured or to his or her beneficiary, if any.
OWNERSHIP OF GROUP CONTRACT AND GROUP CONTRACT CHANGES The contractholder owns
the group contract. THE GROUP CONTRACT MAY BE CHANGED OR AMENDED BY AGREEMENT
BETWEEN US AND THE CONTRACTHOLDER WITHOUT THE CONSENT OF ANY PERSON CLAIMING
RIGHTS OR BENEFITS UNDER THE GROUP CONTRACT. ANY SUCH CHANGES MADE, THAT ARE NOT
MATERIAL TO THE INFORMATION PRESENTED IN THIS REGISTRATION STATEMENT, MAY BE
MADE WITHOUT NOTICE TO OR CONSENT OF THE CERTIFICATE OWNERS. However, signed
acceptance by owners or insureds is required for any amendment made after the
effective date of this group contract which reduces or eliminates coverages for
such owners or insureds and for which the owner or insured is making all
required premium contributions. Unless the contractholder owns all of the
certificates issued under the group contract, the contractholder does not have
any ownership interest in the certificates issued under the group contract. The
rights and benefits under the certificates of the owners, insureds and
beneficiaries are as set forth in this prospectus and in the certificates.
Certificate owners have no rights or obligations under the group contract other
than those described in the group contract.
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CERTIFICATE PREMIUMS
A premium must be paid to put a certificate in force, and may be remitted
to us by the group contractholder on behalf of the owner. The initial premium
for a certificate must cover the premium expense charges and the first month's
deductions. Premiums paid after the initial premium may be in any amount. A
premium must be paid when there is insufficient net cash value to pay the
monthly deduction necessary to keep the certificate in force.
When the certificate is established, the certificate's specifications page
may show premium payments scheduled and the amounts of those payments. However,
under the certificate, the owner may elect to omit making those premium
payments. Failure to pay one or more premium payments will not cause the
certificate to lapse until such time as the net cash value is insufficient to
cover the next monthly deduction. Therefore, unlike traditional insurance
certificates, a certificate does not obligate the owner to pay premiums in
accordance with a rigid and inflexible premium schedule.
Failure of a group contractholder to remit the authorized premium payments
may cause the group contract to terminate. Nonetheless, provided that there is
sufficient net cash value to prevent the certificate from lapsing, the owner's
insurance can be converted to an individual policy of life insurance in the
event of such termination. (See "Conversion Privilege to an Individual Policy".)
The owner's insurance can continue if the insured's eligibility under the
group-sponsored insurance program terminates because the insured is no longer a
part of the group or otherwise fails to satisfy the eligibility requirements set
forth in the specifications page to the group contract or certificate. (See
"Continuation of Group Coverage".)
PREMIUM LIMITATIONS
After the payment of the initial premium, and subject to the limitations
described in this prospectus, premiums may be paid at any time in any amount
while the insurance is in force under the certificate. Since the certificate
permits flexible premium payments, it may become a modified endowment contract.
(See "Federal Tax Status".) When we receive the signed application, our systems
will test the owner's elected premium schedule to determine, if it is paid as
scheduled and if there is no change made to the certificate, whether it will
result in the certificate being classified as a modified endowment contract for
federal income tax purposes. Our systems will continue to test the certificate
with each premium payment to determine whether the certificate has attained this
tax status. If we determine that the certificate has attained the status of a
modified endowment contract, we will mail the owner a notice. The owner will be
given a limited amount of time, subject to the restrictions under the Code, to
request that the certificate maintain the modified endowment contract status. If
the owner does not request to have this tax status maintained, the excess
premium amounts paid that caused this tax status will be returned with interest
at the end of the certificate year to avoid the certificate being classified as
a modified endowment contract. The owner may request an immediate refund if it
is desired earlier.
ALLOCATION OF NET PREMIUMS AND ACCOUNT VALUE
Net premiums, which are premiums after the deduction of the charges
assessed against premiums, are allocated to the guaranteed account and/or
sub-accounts of the separate account which, in turn, invest in shares of the
Funds. Net premiums are valued as of the end of the valuation period in which
they are received. For further information on unit values see the "Unit Values"
section of this prospectus.
The owner makes the selection of the sub-accounts and/or the guaranteed
account on the signed application for the certificate. The owner may change the
allocation instructions for future premiums by giving us a request in writing or
through any other method made available by us under the group-sponsored
insurance program. The allocation to the guaranteed account or to any
sub-account of the separate account must be at least 10 percent of the net
premium.
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Where the contractholder owns all the certificates and in certain other
circumstances (for example, for split-dollar insurance programs), we will delay
the allocation of net premiums to sub-accounts or the guaranteed account for a
period of 10 days after certificate issue to reduce market risk during this
"free look" period. Net premiums will be allocated to the Money Market
Sub-Account until the end of the period. We reserve the right to similarly delay
the allocation of net premiums to sub-accounts for other group-sponsored
insurance programs for a period of 10 days after certificate issue or
certificate change. This right will be exercised by us only when we believe
economic conditions make it necessary to reduce market risk during the "free
look" period. If we exercise this right, net premiums will be allocated to the
Money Market Sub-Account until the end of the period.
We reserve the right to restrict the allocation of net premiums to the
guaranteed account for certificates under some group-sponsored insurance
programs. For these certificates, the maximum allocation of net premiums to the
guaranteed account will range from 10 percent to 50 percent.
If mandated by applicable law, we may be required to reject a premium
payment until instructions are received from appropriate regulators. We also may
be required to provide additional information about you and your account to
government regulators.
DEATH BENEFIT AND ACCOUNT VALUES
If the certificate is in force at the time of the insured's death, upon
receipt of due proof of death, we will pay the death benefit proceeds of the
certificate based on the death benefit option elected for the certificate.
There is a level death benefit ("Option A") and a variable death benefit
("Option B"). The death benefit under either option will never be less than the
current face amount of the certificate (less any unpaid monthly deductions) as
long as the certificate remains in force and there are no loans. The face amount
elected must be at least the minimum stated on the specifications page of the
certificate.
OPTION A--LEVEL DEATH BENEFIT
The amount of the death benefit for Option A is:
- the greater of the face amount of insurance on the date of death or the
minimum death benefit on the date of death; plus
- any premium received after the date of death; minus
- any unpaid monthly deductions due through the month in which death occurs,
and any loan principal and accrued loan interest charges.
OPTION B--INCREASING DEATH BENEFIT
The amount of the death benefit for Option B is:
- the greater of the face amount of insurance on the date of death plus the
account value as of the date of death, or the minimum death benefit on the
date of death; plus
- any premium received after the date of death; plus
- any accrued loan interest credits; minus
- any unpaid monthly deductions due through the month in which death occurs,
and any loan principal and accrued loan interest charges.
The death benefit option for all certificates will initially be the death
benefit option selected by the group sponsor. For certificates under some
group-sponsored insurance programs, we will allow the owner to request a change
in the death benefit option once, during the lifetime of the insured. For
certificates where we do not allow the owner to request a change in the death
benefit option, the death benefit option will remain unchanged from the group
sponsor's initial selection. The current death benefit option will be shown on
the specifications page of the certificate. Changing the death benefit option
may have
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federal income tax consequences. You should consult a tax adviser before
changing the death benefit option.
If an owner elects to change the death benefit option from Option A to
Option B, the face amount under Option B will be equal to the face amount under
Option A less the certificate account value on the effective date of the change.
If an owner elects to change the death benefit option from Option B to
Option A, the face amount under Option A will be equal to the face amount under
Option B plus the certificate account value on the effective date of the change.
The minimum death benefit is an amount determined by us that is required to
preserve the qualification of the certificate as a life insurance policy as
defined by Section 7702 of the Internal Revenue Code. The minimum death benefit
is a percentage of the account value. The percentage depends on the test used in
determining the qualification of life insurance.
At issue, the group sponsor may choose between two tests that may be used
to determine if a certificate qualifies as life insurance as defined by Section
7702 of the Code. Once a test is selected for a certificate, it shall remain
unchanged for that certificate. The two tests are the Guideline Premium/Cash
Value Corridor Test and the Cash Value Accumulation Test. The test selected will
determine how the death benefit is calculated in the event the account value or
the premiums paid exceed certain limits established under Section 7702.
CHANGE IN FACE AMOUNT
Subject to certain limitations set forth below, an owner may increase or
decrease the face amount of a certificate. A written request must be sent
directly to us for a change in the face amount. The face amount may also change
due to a change in death benefit option. (See "Death Benefit and Account
Values".) A change in the face amount will affect the net amount at risk which
affects the cost of insurance charge. (See "Charges".) In addition, a change in
the face amount of a certificate may result in a material change in the
certificate that may cause it to become a modified endowment contract or may
have other adverse federal income tax consequences. More information on this
subject and possible federal income tax consequences of this result is provided
under the "Federal Tax Status" section. You should consult a tax adviser before
changing the face amount of a certificate.
INCREASES If an increase in the current face amount is applied for, we reserve
the right to require evidence of insurability from the insured. The increase
will become effective on the monthly anniversary on or following approval of the
change or on any other date mutually agreed upon between the owner and us.
Although an increase need not necessarily be accompanied by an additional
premium (unless it is required to meet the next monthly deduction), the net cash
value in effect immediately after the increase must be sufficient to cover the
next monthly deduction.
With respect to premiums allocated to an increase, the owner will have the
same "free look," conversion, and refund rights with respect to an increase as
with the initial purchase of the owner's certificate. (See "Free Look".)
DECREASES Any decrease in the face amount will become effective on the monthly
anniversary on or following our receipt of the written request. However, the
amount of insurance on any insured may not be reduced to less than the minimum
face amount indicated on the specifications page which is attached to the
owner's certificate. Generally, this amount will be at least $10,000. If,
following a decrease in face amount, the certificate would not comply with the
maximum premium limitations required by federal tax law (see "Federal Tax
Status"), the decrease may be limited or the account value may be returned to
the owner (at the owner's election), to the extent necessary to meet these
requirements.
CHANGES IN FACE AMOUNT DUE TO A CHANGE IN DEATH BENEFIT OPTION Changes in the
face amount of insurance due to a change in death benefit option are effective
on the monthly certificate anniversary on or following our receipt of the
written request or on any other date mutually agreed upon between the owner and
us.
PAYMENT OF DEATH BENEFIT PROCEEDS
The amount payable as death proceeds upon the insured's death will be
determined according to the death benefit option elected for the certificate.
The death benefit
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proceeds will also include any amounts payable under any riders.
If a rider permitting the accelerated payment of death benefit proceeds has
been added to the certificate, the death benefit may be paid in a single lump
sum prior to the death of the insured and may be less than otherwise would be
paid upon the death of the insured. (See "Additional Benefits".)
Death benefit proceeds will ordinarily be paid within seven days after we
receive all information required for such payment, including due proof of the
insured's death. Payment may, however, be postponed in certain circumstances.
Interest will be paid on the death benefit from the date of the insured's death
until the date of payment. Interest will also be paid on any charges taken under
the certificate since the date of death, from the date the charge was taken
until the date of payment. Interest will be at an annual rate determined by us,
but never less than the minimum guaranteed rate, compounded annually, or the
minimum rate required by state law, whichever is greater. The minimum guaranteed
annual rate is 3 percent.
Death benefit proceeds will be paid to the surviving beneficiary specified
on the signed application or as subsequently changed. The owner may arrange for
death benefit proceeds to be paid in a single lump sum or under one of the
optional methods of settlement described below.
When no election for an optional method of settlement is in force at the
death of the insured, the beneficiary may select one or more of the optional
methods of settlement at any time before death benefit proceeds are paid. (See
"Settlement Options".)
An election or change of method of settlement must be in writing. A change
in beneficiary revokes any previous settlement election.
ACCOUNT VALUES
The certificate provides the owner certain account value benefits. Subject
to certain limitations, the owner may obtain access to the net cash value
portion of the account value of the certificate. The owner may borrow against
the certificate's loan value and may surrender the certificate in whole or in
part. The owner may also transfer the net cash value between the guaranteed
account and the sub-accounts of the separate account or among the sub-accounts
of the separate account.
We will send the owner a report each year advising the owner of the
certificate's account value, the face amount and the death benefit as of the
date of the report. It will also summarize certificate transactions during the
year, including premiums paid and their allocation, certificate charges, loan
activity and the net cash value. It will be as of a date within two months of
its mailing. We will also, upon the owner's request, send the owner an
additional statement of past transactions at any time for a $15 fee, which will
be deducted from the portion of account value that the owner specifies.
Also, upon request made to us at our home office, we will provide
information on the account value of a certificate to the owner. Such requests
may be in writing, by telephone, by facsimile transmission or any other method
made available by us under the group-sponsored insurance program. More
information on the procedures to make requests by telephone call or other
electronic means is provided under the "Transfers" section of this prospectus.
DETERMINATION OF THE GUARANTEED ACCOUNT VALUE The guaranteed account value is
the sum of all net premium payments allocated to the guaranteed account. This
amount will be increased by any interest, experience credits (see "General
Matters Relating to the Certificate" for a detailed discussion), loan
repayments, loan interest credits and transfers into the guaranteed account.
This amount will be reduced by any certificate loans, loan interest charged,
partial surrenders, transfers into the sub-accounts of the separate account and
charges assessed against the owner's guaranteed account value. Interest is
credited on the guaranteed account value of the certificate at a rate of not
less than the minimum guaranteed annual rate, compounded annually. The minimum
guaranteed annual rate is 3 percent. We guarantee the minimum rate for the life
of the certificate without regard to the actual experience of the guaranteed
account. As conditions permit, we may credit additional amounts of interest to
the guaranteed account value. The owner's guaranteed account value is guaranteed
by us. It cannot be reduced by any investment experience of the separate
account.
Upon termination of a group contract, we reserve the right to complete the
distribution of account values attributable to the guaranteed account over a
period of time determined by us, but not more than
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six months. This delayed distribution does not in any way continue or extend any
insurance that has otherwise terminated due to termination of a group contract.
DETERMINATION OF THE SEPARATE ACCOUNT VALUE The certificate's separate account
value is determined separately. The separate account value is not guaranteed.
The determination of the separate account value is made by multiplying the
current number of sub-account units credited to a certificate by the current
sub-account unit value for each sub-account in which the owner is invested. A
unit is an accounting device used to measure a certificate's interest in a
sub-account. The number of units credited with respect to each net premium
payment is determined by dividing the portion of the net premium payment
allocated to each sub-account by the then current unit value for that
sub-account. The number of units so credited is determined as of the end of the
valuation period during which we receive the owner's premium at our home office.
Once determined, the number of units credited to the owner's certificate
will not be affected by changes in the unit value. However, the number of units
will be increased by the allocation of subsequent periodic or lump sum net
premiums, experience credits and transfers to that sub-account. The number of
additional units credited is determined by dividing the net premiums, experience
credits, loan interest credits and transfers to that sub-account by the then
current unit value for that sub-account. The number of units of each sub-account
credited to the owner's certificate will be decreased by certificate charges to
the sub-account, loans and loan interest charges, transfers from that
sub-account and withdrawals from that sub-account. The reduction in the number
of units credited is determined by dividing the deductions to that sub-account,
loans and loan interest charges, transfers from that sub-account and withdrawals
from that sub-account by the then current unit value for that sub-account. The
number of sub-account units will decrease to zero on a certificate surrender.
UNIT VALUE The unit value of a sub-account will be determined on each valuation
date. A valuation date is each date on which a Fund Portfolio is valued. A
valuation period is the period between successive valuation dates measured from
the time of one determination to the next. The amount of any increase or
decrease will depend on the net investment experience of that sub-account. The
value of a unit for each sub-account was originally set at $1.00 on the first
valuation date. For any subsequent valuation date, its value is equal to its
value on the preceding valuation date multiplied by the net investment factor
for that sub-account for the valuation period ending on the subsequent valuation
date.
NET INVESTMENT FACTOR The net investment factor for a valuation period is the
gross investment rate for such valuation period. The gross investment rate is
equal to:
- the net asset value per share of a Fund share held in the sub-account of
the separate account determined at the end of the current valuation period;
plus
- the per share amount of any dividend or capital gains distribution by that
Fund if the "ex-dividend" date occurs during the current valuation period;
with the sum divided by
- the net asset value per share of that Fund held in the sub-account
determined at the end of the preceding valuation period.
We reserve the right to deduct a charge against the separate account
assets, or make other provisions for, any additional tax liability we may incur
with respect to the separate account or the certificates, to the extent that
those liabilities exceed the amounts recovered through the deduction from
premiums for premium taxes and federal taxes. Any such charges will be subject
to the maximums described in this prospectus.
DAILY VALUES We determine the value of the units in each sub-account on each day
on which the Portfolios of the Funds are valued. The net asset value of the
Funds' shares is computed once daily, and, in the case of the Money Market
Portfolio, after the declaration of the daily dividend, as of the primary
closing time for business on the New York Stock Exchange (as of the date hereof
the primary close of trading is 4:00 p.m. Eastern Time, but this time may be
changed) on each day, Monday through Friday, except (i) days on which changes in
the value of a Funds' portfolio securities will not materially affect the
current net asset value of such Funds' shares, (ii) days during which no shares
of a Fund are tendered for redemption and no order to purchase or sell such
Funds' shares is received by such Fund and (iii) customary national business
holidays on which the New York Stock Exchange is closed for trading.
25
SURRENDERS, WITHDRAWALS AND TRANSFERS
The owner may request a surrender of or a withdrawal from the certificate
at any time while the insured is living. To make a surrender or withdrawal, the
owner must send us a written request at our home office. The owner will be paid
a net cash value, computed as of the end of the valuation period during which we
receive the request at our home office. Surrender and withdrawal requests
received before the New York Stock Exchange closes for regular trading receive
same-day pricing. If we receive a surrender or withdrawal request after the New
York Stock Exchange closes (usually 3:00 p.m. Central Time) for regular trading,
we will process the order using the unit values for the sub-accounts determined
at the close of the next regular trading session of the New York Stock Exchange.
In the case of a surrender, the payment can be in cash or, at the option of the
owner, can be applied on a settlement option. A surrender or withdrawal may have
federal income tax consequences. (See "Federal Tax Status".)
A withdrawal of the net cash value of the certificate is permitted in any
amount equal to at least the minimum established for certificates under the
group contract. The minimum will never exceed $500. The maximum withdrawal is
equal to 100% of the net cash value. We reserve the right to limit the number of
withdrawals to one per certificate month, change the minimum amount for
withdrawals, limit the frequency of withdrawals, or restrict or prohibit
withdrawals from the guaranteed account. A withdrawal will cause a decrease in
the face amount equal to the amount withdrawn if the current death benefit
option for the certificate is Option A (level death benefit). A withdrawal has
no effect on the face amount if the current death benefit option for the
certificate is Option B (variable death benefit). However, since the account
value is reduced by the amount of the withdrawal, the death benefit is reduced
by the same amount, as the account value represents a portion of the death
benefit proceeds.
On a withdrawal, the owner may designate the sub-accounts of the separate
account from which a withdrawal is to be taken or whether it is to be taken in
whole or in part from the guaranteed account. Otherwise, withdrawals will be
deducted from the guaranteed account value and separate account value in the
same proportion that those values bear to the net cash value and, as to the
separate account value, from each sub-account in the proportion that the
sub-account value of each such sub-account bears to the separate account value.
We reserve the right to restrict or prohibit withdrawals from the guaranteed
account. We will tell the owner, on request, what amounts are available for a
withdrawal under the certificate.
A transaction charge will be deducted from the net cash value in connection
with a withdrawal for certificates under some group contracts. The amount of the
charge will never exceed the lesser of $25 or 2 percent of the amount withdrawn.
The charge will be allocated to the guaranteed account value and the separate
account value in the same proportion as those values bear to the net cash value
and, as to the separate account value, from each sub-account in the same
proportion that the sub-account value of each such sub-account bears to the
separate account value.
TRANSFERS
The certificate allows for transfers of the net cash value among the
available sub-accounts of the separate account, and from the guaranteed account
to the sub-accounts. Transfers of the net cash value from the sub-accounts to
the guaranteed account are available for certificates that allow for premium
allocations to the guaranteed account. Transfers may be made in writing, by
telephone or through any other method made available by us under the
group-sponsored insurance program.
There are restrictions to such transfers. The amount to be transferred to
or from a sub-account of the separate account or the guaranteed account must be
at least $250. If the balance in the guaranteed account or in the sub-account
from which the transfer is to be made is less than $250, the entire account
value attributable to that sub-account or the guaranteed account must be
transferred. If a transfer would reduce the account value in the sub-account
from which the transfer is to be made to less than $250, we reserve the
26
right to include that remaining amount in the sub-account with the amount
transferred. We also reserve the right to limit the number of transfers to one
per certificate month.
MARKET TIMING This contract is not designed to be used as a vehicle for frequent
trading (i.e., transfers) in response to short-term fluctuations in the
securities markets, often referred to generally as "market timing." Market
timing activity and frequent trading in your contract can disrupt the efficient
management of the underlying portfolios and their investment strategies, dilute
the value of portfolio shares held by long-term shareholders, and increase
portfolio expenses (including brokerage or other trading costs) for all
portfolio shareholders, including long-term contract owners invested in affected
portfolios who do not generate such expenses. It is the policy of Securian Life
to discourage market timing and frequent transfer activity, and, when Securian
Life becomes aware of such activity, to take steps to attempt to minimize the
effect of frequent trading activity in affected portfolios. You should not
purchase this contract if you intend to engage in market timing or frequent
transfer activity.
We have developed policies and procedures to detect and deter market timing
and other frequent transfers, and we will not knowingly accommodate or create
exceptions for contract owners engaging in such activity. We employ various
means to attempt to detect and deter market timing or other abusive transfers.
However, our monitoring may be unable to detect all harmful trading nor can we
ensure that the underlying portfolios will not suffer disruptions or increased
expenses attributable to market timing or abusive transfers resulting from other
insurance carriers which invest in the same portfolios. In addition, because
market timing can only be detected after it has occurred to some extent, our
policies to stop market timing activity do not go into effect until after we
have identified such activity.
We reserve the right to restrict the frequency of--or otherwise modify,
condition or terminate--any transfer method(s). Your transfer privilege is also
subject to modification if we determine, in our sole discretion, that the
exercise of the transfer privilege by one or more contract owners is or would be
to the disadvantage of other contract owners. Any new restriction that we would
impose will apply to your contract without regard to when you purchased it. We
also reserve the right to implement and administer restrictions and charge you
for any fees, including redemption fees, that may be imposed by an underlying
portfolio attributable to transfers in your contract. You should read the
Portfolio prospectuses for more details. The following factors will be
considered in determining whether to implement and administer any restrictions
and in assessing any fees:
- the dollar amount of the transfer(s);
- whether the transfers are part of a pattern of transfers that appear
designed to take advantage of market inefficiencies;
- whether an underlying portfolio has requested that we look into identified
unusual or frequent activity in a portfolio;
- the number of transfers in the previous calendar quarter;
- whether the transfers during a quarter constitute more than two "round
trips" in a particular portfolio. A round trip is a purchase into a
portfolio and a subsequent redemption out of the portfolio, without regard
to order.
In the event your transfer activity is identified as disruptive or
otherwise constitutes a pattern of market timing, you will be notified in
writing that your transfer privileges will be restricted in the future if the
activity continues. Upon detection of any further prohibited activity, you will
be notified in writing that your transfer privileges are limited to transfer
requests delivered via regular U.S. mail only. No fax, voice, internet, courier
or express delivery requests will be accepted. The limitations for the transfer
privileges in your contract will be permanent.
None of these limitations apply to transfers under systematic transfer
programs such as Dollar Cost Averaging.
GUARANTEED ACCOUNT TRANSFER RESTRICTIONS There are additional restrictions to
transfers involving the guaranteed account. For group-sponsored insurance
programs where the certificates do not allow for premium allocations to the
guaranteed account, the owner may not transfer amounts into the guaranteed
account.
The following restrictions apply to group-sponsored insurance programs
where the guaranteed account is available for premium allocations, to
group-sponsored insurance programs where the contractholder owns all the
policies and in certain other circumstances (for example, for split-dollar
insurance programs). The maximum amount of net cash value to be transferred out
of the guaranteed account to the sub-accounts of the separate account may be
limited to 20
27
percent (or $250 if greater) of the guaranteed account value. Transfers to or
from the guaranteed account may be limited to one such transfer per certificate
year. We may further restrict transfers from the guaranteed account by requiring
that the request is received by us or postmarked in the 30-day period before or
after the last day of the certificate anniversary. The certificate anniversary
is the same day and month in each succeeding year as the certificate date, or
the same day and month in each succeeding year as the date agreed to between the
contractholder and us. The certificate anniversary is shown on the
specifications page attached to the certificate. The certificate date is the
first day of the calendar month on, or following, the issue date. This is the
date from which certificate years and certificate months are measured. A
certificate month is equal to a calendar month. A certificate year is a period
of one year measured from the certificate date and from each successive
certificate anniversary. Requests for transfers which meet these conditions
would be effective after we approve and record them at our home office.
OTHER TRANSFER INFORMATION For transfers out of the separate account or among
the sub-accounts of the separate account, we will credit and cancel units based
on the sub-account unit values as of the end of the valuation period during
which the owner's request is received at our home office. Transfer requests
received before the New York Stock Exchange closes for regular trading receive
same-day pricing. If we receive a transfer request after the New York Stock
Exchange closes (usually 3:00 p.m. Central Time) for regular trading, we will
process the order using the unit values for the sub-accounts determined at the
close of the next regular trading session of the New York Stock Exchange.
Transfers from the guaranteed account will be dollar amounts deducted at the end
of the day on which the transfer request is approved at our home office.
A transfer is subject to a transaction charge. Currently, no such charge is
imposed on a transfer, but a charge, up to a maximum of $10, may be imposed in
the future.
The owner's instructions for transfer may be made in writing or the owner,
or a person authorized by the owner, may make such changes by telephone. To do
so, the owner may call us at 1-800-815-7636 during our normal business hours of
8:00 a.m. to 4:45 p.m., Central Time. Owners may also submit their requests for
transfer, surrender or other transactions to us by facsimile (FAX) transmission.
Our FAX number is 1-651-665-1542.
We may make other electronic transfer capabilities available to certificate
owners under some group-sponsored insurance programs. We will employ reasonable
procedures to satisfy ourselves that instructions received from certificate
owners are genuine and, to the extent that we do not, we may be liable for any
losses due to unauthorized or fraudulent instructions. We require certificate
owners to identify themselves in electronic transactions through certificate
numbers or such other information as we may deem to be reasonable. We record
electronic transfer instructions and we provide the certificate owners with a
written confirmation of the electronic transfers.
Transfers made pursuant to a telephone call or other electronic means are
subject to the same conditions and procedures as would apply to written transfer
requests. During periods of marked economic or market changes, owners may
experience difficulty in implementing a telephone or other electronic transfer
due to a heavy volume of network usage. In such a circumstance, owners should
consider submitting a written transfer request while continuing to attempt an
electronic redemption. For more information on electronic transfers, contact us.
Although we currently intend to continue to permit transfers in the
foreseeable future, the certificate provides that we may modify the transfer
privilege by changing the minimum amount transferable, by altering the frequency
of transfers, by imposing a transfer charge, by prohibiting transfers, or in
such other manner as we may determine at our discretion. For more information on
transactions related to your policy, you may contact us at 1-800-815-7636.
28
LOANS
The owner may borrow from us using only the certificate as the security for
the loan. The owner may borrow up to an amount equal to (a) less (b), where (a)
is 90 percent of the owner's account value and (b) is any outstanding
certificate loans plus accrued loan interest charges. A loan taken from or
secured by a certificate may have federal income tax consequences. (See "Federal
Tax Status".) The maximum loan amount is determined as of the date we receive
the owner's request for a loan.
Any loan paid to the owner in cash must be in an amount of at least $100.
We will charge interest on the loan in arrears. At the owner's request, we will
send the owner a loan request form for his or her signature. The owner may also
obtain a loan by telephone during our normal business hours of 8:00 a.m. to 4:45
p.m., Central Time. Should the owner make a request by telephone call or other
electronic means, he or she will be asked for personal identification and
certificate number. More information on the procedures to make requests by
telephone call or other electronic means is provided under the "Transfers"
section of this prospectus.
When the owner takes a loan, we will reduce the net cash value by the
amount borrowed. This determination will be made as of the end of the valuation
period during which the loan request is received at our home office. Unless the
owner directs us otherwise, the loan will be taken from the guaranteed account
value and separate account value in the same proportion that those values bear
to the net cash value and, as to the separate account value, from each
sub-account in the proportion that the sub-account value of each such
sub-account bears to the owner's separate account value. The number of units to
be canceled will be based upon the value of the units as of the end of the
valuation period during which we receive the owner's loan request at our home
office. The amount borrowed continues to be part of the account value, as the
amount borrowed becomes part of the loan account value where it will accrue loan
interest credits and will be held in our general account. A loan has no
immediate effect on the owner's account value since at the time of the loan the
account value is the sum of the guaranteed account value, separate account value
and the loan account value. However, a certificate loan may have long term
impact on the account value as the amount borrowed no longer participates in the
investment experience of a sub-account. When a loan is to come from the
guaranteed account value, we have the right to postpone a loan payment for up to
six months.
If a certificate enters a grace period and if the net cash value is
insufficient to cover the monthly deduction and the loan repayment, the owner
will have to make a loan repayment to keep the certificate in force. We will
give the owner notice of our intent to terminate the certificate and the loan
repayment required to keep it in force. The time for repayment will be within 31
days after our mailing of the notice. There could be adverse tax consequences if
the certificate lapses or is surrendered when a loan is outstanding.
Outstanding loans and accrued interest will reduce surrender value and
death benefits payable.
LOAN INTEREST
The interest rate charged on a certificate loan will be 8 percent per year.
Interest charged will be based on a daily rate which if compounded for the
number of calendar days in the year will equal 8 percent annually, and
compounded for the number of days since loan interest charges were last updated.
The outstanding loan balance will increase as the interest charged on the
certificate loan accrues. The net cash value will decrease as the outstanding
loan balance increases. Loan interest charges are due at the end of the
certificate month. If the owner does not pay in cash the interest accrued at the
end of the certificate month, this unpaid interest will be added to the
outstanding loan balance. The new loan will be subject to the same rate of
interest as the loan in effect.
Interest is also credited to the amount of the certificate loan in the loan
account value. Interest credits on a certificate loan shall be at a rate which
is not less than 6 percent per year. Interest credited will be based on a
29
daily rate, which if compounded for the number of calendar days in the year will
be at least 6 percent annually, and compounded for the number of days since loan
interest charges were last updated.
Loan interest charges and loan interest credits are allocated monthly, at
loan repayment, at certificate surrender and at death. Loan interest charges and
loan interest credits are allocated to a certificate's guaranteed account value
and separate account value in the same proportion that those values bear to the
net cash value and, as to the separate account value, to each sub-account in the
proportion that the sub-account value of each such sub-account bears to the
separate account value.
LOAN REPAYMENTS
If the certificate is in force, the loan can be repaid in part or in full
at any time before the insured's death. The loan may also be repaid within 60
days after the date of the insured's death, if we have not paid any of the
benefits under the certificate. Any loan repayment must be at least $100 unless
the balance due is less than $100. We currently accept loan repayment checks at
our home office.
Loan repayments are allocated to the guaranteed account. The owner may
reallocate amounts in the guaranteed account among the sub-accounts of the
separate accounts, subject to the limitations in this prospectus and the
certificate on such transfers. For a discussion of the transfer restrictions
applicable to the guaranteed account please see the "Transfers" section of this
prospectus. Loan repayments reduce the owner's outstanding loan balance by the
amount of the loan repayment. Loan repayments will be applied first to interest
accrued since the end of the prior certificate month. Any remaining portion of
the repayment will then reduce the loan. The net cash value will increase by the
amount of the loan repayment.
A loan, whether or not it is repaid, will have a permanent effect on the
account value and the death benefit because the investment results of the
sub-accounts will apply only to the amount remaining in the sub-accounts. The
effect could be either positive or negative. If net investment results of the
sub-accounts are greater than the rate credited on the loan, the account value
will not increase as rapidly as it would have if no loan had been made. If
investment results of the sub-accounts are less than the rate credited on the
loan, the account value will be greater than if no loan had been made.
LAPSE AND REINSTATEMENT
LAPSE
Unlike traditional life insurance certificates, the failure to make a
premium payment following the payment of the premium which puts the certificate
into force will not itself cause a certificate to lapse. Lapse will occur only
when the net cash value is insufficient to cover the monthly deduction, and the
subsequent grace period expires without sufficient payment being made.
The grace period is 61 days. The grace period will start on the day we mail
the owner a notice that the certificate will lapse if the premium amount
specified in the notice is not paid by the end of the grace period. We will mail
this notice on any certificate's monthly anniversary when the net cash value is
insufficient to pay for the monthly deduction for the insured. The notice will
specify the amount of premium required to keep the certificate in force and the
date the premium is due. If we do not receive the required amount within the
grace period, the certificate will lapse and terminate without account value.
Upon lapse, any outstanding loans and accrued interest is extinguished and any
collateral in the loan account returned to us. If you die during the grace
period an otherwise valid claim will not be denied on the grounds that coverage
has lapsed. We reserve the right to deduct any outstanding premium due from the
death benefit. The death benefit amount under the death benefit option in
effect, at the time of the insured's death, will be paid if death occurs during
the grace period.
REINSTATEMENT
A lapsed certificate may be reinstated, any time within three years from
the date of
30
lapse, provided the insured is living and subject to the limitations described
below. Reinstatement is made by payment of an amount that, after the deduction
of premium expense charges, is large enough to cover all monthly deductions
which have accrued on the certificate up to the effective date of reinstatement,
plus the monthly deductions for the two months following the effective date of
reinstatement. If any loans and loan interest charges are not repaid, this
indebtedness will be reinstated along with the insurance. No evidence of the
insured's insurability will be required during the first 31 days following
lapse, but will be required from the 32nd day to three years from the date of
lapse.
The account value amount on the date of reinstatement will be equal to the
amount of any loans and loan interest charges reinstated, increased by the net
premiums paid at the time of reinstatement.
The effective date of reinstatement will be the date we approve the signed
application for reinstatement. There will be a full monthly deduction for the
certificate month that includes that date.
ADDITIONAL BENEFITS
Subject to certain requirements, one or more of the following additional
insurance benefits may be added to the certificate by rider. However, some group
contracts may not offer each of the additional benefits described below. The
descriptions below are intended to be general and the group contract, any
riders, if applicable and the certificate, should be consulted. New benefit
riders which are subsequently developed may also be offered under some
group-sponsored insurance programs, and the terms of the riders will be
identified in the certificate. The cost of any additional insurance benefits
will be deducted as part of the monthly deduction.
ACCELERATED BENEFITS RIDER Provides for the accelerated payment of all or a
portion of the death benefit proceeds if the insured is terminally ill, subject
to the minimums and maximums specified in the rider. Eligibility requirements
and conditions for payment of accelerated benefits are also described in the
rider. The amount of accelerated benefit payable is calculated by multiplying
the death benefit by an accelerated benefit factor defined in the rider.
Accelerated benefits will be paid to the owner unless the owner validly assigns
them otherwise. The receipt of benefits under the rider may have tax
consequences and the owner should seek assistance from a qualified tax adviser.
There is no charge for this rider.
WAIVER OF PREMIUM RIDER Provides for the waiver of the monthly deduction while
the insured is totally disabled (as defined in the rider), subject to certain
limitations described in the rider. The insured must have become disabled before
the age specified in the rider.
ACCIDENTAL DEATH AND DISMEMBERMENT RIDER Provides additional insurance if the
insured dies or becomes dismembered as a result of an accidental bodily injury,
as defined in the rider. Under the terms of the rider, the additional benefits
provided in the certificate will be paid upon receipt of proof by us that the
death or dismemberment resulted directly from accidental injury and
independently of all other causes. The death or dismemberment must occur within
the timeframes specified in the rider.
CHILD RIDER Provides for term insurance on the insured's children, as specified
in the rider. To be eligible for the insurance, a child must be of eligible age
as indicated in the rider and be dependent upon the insured for financial
support. Under terms of the rider, the death benefit will be payable to the
owner of the certificate to which the rider is attached.
SPOUSE RIDER Provides for term insurance on the insured's spouse and children,
as specified in the rider. To be eligible for the insurance, spouse and children
must meet the eligibility requirements indicated in the rider. Under terms of
the rider, the death benefit will be payable to the owner of the certificate to
which the rider is attached.
POLICYHOLDER CONTRIBUTION RIDER Allows the contractholder to pay for all or a
portion of the monthly charges under the certificate without affecting the
account value which may accumulate due to employee-paid net premiums. The
portion of the net premium paid by the contractholder will be allocated to the
guaranteed account. On the same day such premium is allocated, the charges the
contractholder intends to cover will be deducted from the guaranteed account
value. There is no charge for this rider.
31
GENERAL MATTERS RELATING TO THE CERTIFICATE
POSTPONEMENT OF PAYMENTS Normally, we will pay any certificate proceeds within
seven days after our receipt of all the documents required for such a payment.
However, we reserve the right to defer certificate payments, including loans,
for up to six months from the date of the owner's request, if such payments are
based upon certificate values which do not depend on the investment performance
of the separate account. In that case, if we postpone a payment other than a
loan payment for more than 31 days, we will pay the owner interest. The minimum
guaranteed annual rate is the greater of 3 percent, or the minimum rate required
by state law for the period beyond that time that payment is postponed.
If we have not mailed or delivered the loan amount requested by the owner,
up to a maximum of the loan value of his or her certificate, within 10 days of
receipt of the loan request in our home office, we will pay interest on the loan
amount. Interest will be at an annual rate determined by us, but never less than
3 percent. Interest is calculated starting on the date the loan request is
received in our home office and will be due starting on the tenth day following
receipt of the loan request in our home office unless the amount of interest is
less than $25.00, in which case, no interest is payable. For payments based on
certificate values which do depend on the investment performance of the separate
account, we may defer payment only: (a) for any period during which the New York
Stock Exchange is closed for trading (except for normal holiday closing); or (b)
when the Securities and Exchange Commission has determined that a state of
emergency exists which may make such payment impractical.
Payment of a surrender or withdrawal will be made as soon as possible, but
not later than seven days after our receipt of the owner's written request for
surrender or withdrawal. However, if any portion of the net cash value to be
surrendered is attributable to a premium payment made by non-guaranteed funds
such as a personal check, we will delay mailing that portion of the surrender
proceeds until we have reasonable assurance that the payment has cleared and
that good payment has been collected. The amount the owner receives on surrender
may be more or less than the total premiums paid under the certificate.
If mandated by applicable law, we may be required to block an owner's
account and thereby refuse to pay any request for transfer, withdrawal,
surrender, loan or death benefit proceeds until instructions are received from
the appropriate regulator. We also may be required to provide additional
information about you and your account to government regulators.
THE CERTIFICATE The certificate, the attached signed application, endorsements,
any signed application for an increase in face amount and any signed application
for reinstatement constitute the entire contract between the owner and us. All
statements made by the owner or insured in the signed application are considered
representations and not warranties. No statement made by the insured will be
used to contest his or her coverage unless a copy of the signed statement is or
has been furnished to the insured or to the insured's beneficiary. The
beneficiary is the person(s) named in a signed application for insurance or by
later designation to receive certificate proceeds in the event of the insured's
death. A beneficiary may be changed as set forth in the certificate and this
prospectus. Any change to the certificate must be approved in writing by the
President, a Vice President, Secretary or an Assistant Secretary of Securian
Life. No agent has the authority to alter or modify any of the terms, conditions
or agreements of the certificate or to waive any of its provisions.
CONTROL OF CERTIFICATE The insured will be considered the owner of the
certificate unless another person is shown as the owner in the signed
application. Ownership may be changed, however, by assigning the certificate as
described below. The owner is entitled to all rights provided by the
certificate, prior to its maturity date. After the maturity date, the owner
cannot change the payee nor the mode of payment, unless otherwise provided in
the certificate. Any person whose rights of ownership depend upon some future
event will not possess any present rights of ownership. If there is more than
one owner at a given time, all must exercise the rights of ownership. If the
owner should die, and the owner is not the
32
insured, the owner's interest will go to his or her estate unless otherwise
provided.
MATURITY A certificate of insurance under the group contract matures in an
amount equal to the certificate's net cash value upon the insured's 95th
birthday.
BENEFICIARY The owner may name one or more beneficiaries on the signed
application to receive the death benefit. The owner may choose to name a
beneficiary that the owner cannot change without the beneficiary's consent. This
is called an irrevocable beneficiary. If the owner has not named an irrevocable
beneficiary, the owner has reserved the right to change the beneficiary by
filing a subsequent written request with us. In that event, we will pay the
death benefit to the beneficiary named in the most recent change of beneficiary
request as provided for in the certificate.
If a beneficiary dies before the insured, that beneficiary's interest in
the certificate ends with that beneficiary's death. Only those beneficiaries who
survive the insured will be eligible to share in the proceeds. If no beneficiary
survives the insured we will pay the proceeds according to the following order
of priority identified in the group contract.
CHANGE OF BENEFICIARY If the owner has reserved the right to change the
beneficiary, the owner can file a written request with us to change the
beneficiary. If the owner has named an irrevocable beneficiary, the written
consent of the irrevocable beneficiary will be required. The owner's written
request will not be effective until it is recorded in our home office records.
After it has been so recorded, it will take effect as of the date the owner
signed the request.
However, if the insured dies before the request has been so recorded, the
request will not be effective as to those proceeds we have paid before the
owner's request was so recorded.
SETTLEMENT OPTIONS The death benefit proceeds of a certificate will be payable
if we receive due proof of the insured's death while it is in force. The
proceeds will be paid in a single sum unless a settlement option has been
selected.
We will pay interest on the death benefit of single sum death proceeds from
the date of the insured's death until the date of payment. The minimum
guaranteed annual rate is 3 percent, or the minimum rate required by state law
for the period beyond that time that payment is postponed.
The proceeds of a certificate may be paid in other than a single sum and
the owner may, during the lifetime of the insured, request that we pay the
proceeds under one of the certificate's settlement options. We may also use any
other method of payment acceptable to both the owner and us. Unless the owner
elects otherwise, a beneficiary may select a settlement option after the
insured's death. A settlement option may be selected only if the payments are to
be made to a natural person in that person's own right.
Each settlement option is payable in fixed amounts as described below. A
person electing a settlement option will be asked to sign an agreement covering
the election which will state the terms and conditions of the payments. The
payments do not vary with the investment performance of the separate account.
- INTEREST PAYMENTS This option will provide payment of interest on the
proceeds at such times and for a period that is agreeable to the person
electing the settlement option and us. Withdrawal of proceeds may be made
in amounts of at least $500. At the end of the period, any remaining
proceeds will be paid in either a single sum or under any other method we
approve.
- FIXED PERIOD ANNUITY This is an annuity payable in monthly installments for
a specified number of years, from one to twenty years. The amount of
guaranteed payments for each $1,000 of proceeds applied would be shown on
the settlement option agreement.
- LIFE ANNUITY This is an annuity payable monthly during the lifetime of the
person who is to receive the income and terminating with the last monthly
payment immediately preceding that person's death. We may require proof of
the age of the annuitant. The amount of guaranteed payments for each $1,000
of proceeds applied would be shown in the settlement option agreement. It
would be possible under this option for the annuitant to receive only one
annuity payment if he or she died prior to the due date of the second
annuity payment,
33
two if he or she died before the due date of the third annuity payment,
etc.
- PAYMENTS OF A SPECIFIED AMOUNT This is an annuity payable in a specified
amount until the proceeds and interest are fully paid.
The minimum amount of interest we will pay under any settlement option will
never be less than the minimum guaranteed annual rate, compounded annually, or
the minimum rate required by state law, whichever is greater. The minimum
guaranteed annual rate is 3 percent.
FEDERAL TAX STATUS
INTRODUCTION
This discussion of federal income taxes is general in nature and is not
intended as tax advice. Each person concerned should consult a tax adviser. This
discussion is based on our understanding of federal income tax laws as they are
currently interpreted. No representation is made regarding the likelihood of
continuation of current income tax laws or the current interpretations of the
Internal Revenue Service ("IRS"). We have not attempted to consider any
applicable state or other tax laws.
TAXATION OF SECURIAN LIFE AND THE VARIABLE UNIVERSAL LIFE ACCOUNT
We are taxed as a "life insurance company" under the Internal Revenue Code.
The operations of the separate account form a part of, and are taxed with, our
other business activities. Currently, no federal income tax is payable by us on
income dividends received by the separate account or on capital gains arising
from the separate account's activities. The separate account is not taxed as a
"regulated investment company" under the Code and it does not anticipate any
change in that tax status.
At the present time, we make no charge to the separate account or from
premium payments for any federal, state or local taxes (other than state premium
taxes and federal taxes under OBRA) that we incur that may be attributable to
such account or to the policies. We, however, reserve the right in the future to
make a charge for any such tax or other economic burden resulting from the
application of the tax laws that we determine to be properly attributable to the
separate account or the policies.
In calculating our corporation income tax liability, we derive certain
corporate income tax benefits associated with the investment of company assets,
including separate account assets that are treated as company assets under
applicable income tax law. These benefits, which reduce our overall corporate
income tax liability may include dividends received deductions and foreign tax
credits which can be material. We do not pass these benefits through to the
separate accounts, principally because: (i) the majority of the benefits results
from the dividends received deduction, which involves no reduction in the dollar
amount of dividends that the separate account receives; and (ii) under
applicable income tax law, for the purposes of both the dividends received
deductions and the foreign tax credits, contract owners are not the owners of
the assets generating those benefits.
TAX STATUS OF CERTIFICATES
Under Section 7702 of the Code, life insurance contracts such as the
certificates will be treated as life insurance for federal tax purposes if
certain tests are met. There is limited guidance on how these tests are to be
applied.
However, the IRS has issued proposed regulations that would specify what
will be considered reasonable mortality charges under Section 7702. In light of
these proposed regulations and the other available guidance on the application
of the tests under Section 7702, we believe that a certificate issued in respect
of a standard risk should meet the statutory definition of a life insurance
contract under Section 7702. With respect to a certificate issued on a
substandard basis (i.e., a premium class involving higher than standard
mortality risk), there is insufficient guidance to determine if such a
certificate would satisfy the Section 7702 definition of a life insurance
contract. If it is subsequently determined that a certificate does not satisfy
Section 7702, we may take whatever steps are appropriate
34
and necessary to attempt to cause such a certificate to comply with Section
7702.
OWNER CONTROL
In certain circumstances, owners of variable life insurance contracts may
be 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
control over those assets. Where this is the case, the contract owners will be
currently taxed on income and gains attributable to the separate account assets.
In Revenue Ruling 2003-91, the IRS described the circumstances under which the
owner of a variable contract will not possess sufficient control over the assets
underlying the contract to be treated as the owner of those assets for federal
income tax purposes. Under the contracts in Revenue Ruling 2003-91, there was no
arrangement, plan, contract or agreement between the policy owner and the
insurance company regarding the availability of a particular investment option
and other than the policy owner's right to allocate premiums and transfer funds
among the available sub-accounts, all investment decisions concerning the
sub-accounts were made by the insurance company or an adviser in its sole and
absolute discretion.
The Internal Revenue Service has further amplified and clarified its
position in Revenue Ruling 2003-91 by issuing new regulations in 2005 and
additional Revenue Rulings. We believe that the regulations and additional
rulings are meant to clarify the IRS position in Revenue Ruling 2003-91 and that
the ownership rights of a certificate owner under the policy will not result in
any certificate owner being treated as the owner of the assets of the Variable
Universal Life Account. However, we do not know whether the IRS will issue
additional guidance that will place restrictions on such ownership rights.
Therefore, we reserve the right to modify the policy or certificate as necessary
to attempt to prevent a certificate owner from being considered the owner of a
pro rata share of the assets of the Variable Universal Life Account.
DIVERSIFICATION OF INVESTMENTS
In addition, the Code requires that the investments of the Variable
Universal Life Account be "adequately diversified" in order to treat the
certificate as a life insurance contract for federal income tax purposes. We
intend that the Variable Universal Life Account, through the Funds and the
Portfolios, will satisfy these diversification requirements.
The following discussion assumes that the certificate will qualify as a
life insurance contract for federal income tax purposes.
TAX TREATMENT OF POLICY BENEFITS
On the death of the insured, the death benefit provided by a certificate
will be excludable from the gross income of the beneficiary under Section 101(a)
of the Code. The owner is not currently taxed on any part of the inside build-up
of cash value until the owner actually receives cash from the certificate.
However, taxability may also be affected by the individual's contributions to
the certificate and prior certificate activity. We also believe that certificate
loans will be treated as indebtedness and will not be currently taxable as
income to the certificate owner so long as your certificate is not a modified
endowment contract as described below. However, the tax consequences associated
with loans are less clear where the spread between the interest rate charged on
the loan and the interest rate credited under the certificate is very small. A
tax adviser should be consulted about such loans. Whether a modified endowment
contract or not, the interest paid on certificate loans will generally not be
tax deductible. An owner should consult a competent tax adviser before deducting
any loan interest. In addition, default of any loan under the certificate may
result in taxable income and/or tax penalties.
There may also be adverse tax consequences when a certificate with a
certificate loan is lapsed or surrendered. If you receive an accelerated
benefit, that benefit may be taxable and you should seek assistance from a tax
adviser.
A complete surrender or partial surrender may have tax consequences. On
surrender, an owner will generally not be taxed on values received except to the
extent that they exceed the gross premiums paid under the certificate, reduced
by any previously received excludable amounts ('investment in the certificate").
An exception to this general rule occurs in the case of a partial surrender, a
decrease in the face amount, or any other change that reduces benefits under the
certificate in the first 15 years after the certificate is issued and
35
that results in a cash distribution to the owner in order for the certificate to
continue to comply with the Section 7702 definitional limits. In that case, such
distribution may be taxed in whole or in part as ordinary income (to the extent
of any gain in the certificate) under rules prescribed in Section 7702. Finally,
upon a complete surrender or lapse of a certificate or when benefits are paid at
a certificate's maturity date, if the amount received plus the amount of any
certificate loan exceeds the total investment in the certificate, the excess
will generally be treated as ordinary income, subject to tax.
MODIFIED ENDOWMENT CONTRACTS
It should be noted, however, that the tax treatment described above is not
available for certificates characterized as a modified endowment contract. In
general, certificates with high premium in relation to the death benefit may be
considered modified endowment contracts. The Code requires that cumulative
premiums paid on a life insurance certificate during the first seven contract
years cannot exceed the sum of the net level premiums which would be paid under
a seven-pay life certificate. If those cumulative premiums exceed the seven-pay
life premiums, the certificate is a modified endowment contract.
Modified endowment contracts are treated as life insurance contracts with
respect to the tax treatment of death proceeds and to the extent that the inside
build-up of account value is not taxed on a yearly basis. However, any amounts
received by the owner, such as loans and amounts received from partial or total
surrender of the contract are subject to the same tax treatment as distributions
under an annuity (i.e., such distributions are generally treated as taxable
income to the extent that the account value immediately before the distribution
exceeds the investment in the certificate). This tax treatment includes a 10
percent additional income tax which is imposed on the portion of any
distribution that is included in income, except where the distribution or loan
is made on or after the owner attains age 59 1/2, or is attributable to the
certificate owner becoming disabled, or is part of a series of substantially
equal periodic payments for the life of the certificate owner or the joint lives
of the certificate owner and beneficiary.
The modified endowment contract rules apply to all contracts entered into
on or after June 21, 1988 that fail to meet the 7-pay test described above and
to a certificate that is received in exchange for a modified endowment contract.
It should be noted, in addition, that a certificate which is subject to a
"material change" shall be treated as newly entered into on the date on which
such material change takes effect.
Appropriate adjustments shall be made in determining whether such a
certificate meets the seven-pay test by taking into account the previously
existing cash surrender value. 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 a certificate
which are not needed in order to provide a death benefit equal to the lowest
death benefit that was payable in the first seven certificate years. If there is
a reduction in the benefits under the certificate during the first seven
certificate years at any time, for example, as a result of a partial withdrawal,
the 7-pay test will have to be reapplied as if the certificate had originally
been issued at the reduced face amount.
To prevent your certificate from becoming a modified endowment contract, it
may be necessary to limit premium payments or to limit reductions in benefits.
In rare circumstances, if we receive and allocate your premium before its
due date, your certificate will become a modified endowment contract. To prevent
your certificate from becoming a modified endowment contract, we will hold your
premium in a non-interest bearing account until its due date, at which time we
will allocate your premium to the guaranteed account or sub-accounts of the
Variable Universal Life Account.
If a certificate becomes a modified endowment contract, distributions that
occur during the certificate year it becomes a modified endowment contract and
any subsequent certificate year will be taxed as distributions from a modified
endowment contract. Distributions from a certificate within two years before it
becomes a modified endowment contract will also be taxed in this manner. This
means that a distribution made from a certificate that is not a modified
endowment contract could
36
later become taxable as a distribution from a modified endowment contract.
Due to the certificate's flexibility, classification of a certificate as a
modified endowment contract will depend upon the circumstances of each
certificate. Accordingly, a prospective certificate owner should contact a tax
adviser before purchasing a certificate to determine the circumstances under
which the certificate would be a modified endowment contract. An owner should
also contact a tax adviser before paying any lump sum premiums or making any
other change to, including an exchange of, a certificate to determine whether
that premium or change would cause the certificate (or the new certificate in
the case of an exchange) to be treated as a modified endowment contract.
MULTIPLE POLICIES
All modified endowment contracts issued by us (or an affiliated company) to
the same owner during any calendar year will be treated as one modified
endowment contract for purposes of determining the amount includable in gross
income under Section 72(e) of the Code. Additional rules may be promulgated
under this provision to prevent avoidance of its effects through serial
contracts or otherwise. A life insurance certificate received in exchange for a
modified endowment contract will also be treated as a modified endowment
contract.
WITHHOLDING
To the extent that certificate distributions are taxable, they are
generally subject to income tax withholding. Recipients can generally elect
however, not to have tax withheld from distributions.
OTHER TRANSACTIONS
The certificate may be used in various arrangements, including
non-qualified deferred compensation or salary continuance plans, split dollar
insurance plans, executive bonus plans, retiree medical benefit plans and
others. The tax consequences of such plans may vary depending on the particular
facts and circumstances of each individual arrangement. Therefore, if you are
contemplating the use of a certificate in any arrangement the value of which
depends in part on its tax consequences, you should be sure to consult a tax
adviser regarding the tax attributes of the particular arrangement. Moreover, in
recent years, Congress has adopted new rules relating to corporate owned life
insurance. The Pension Protection Act of 2006 added a new section to the Code
that denies the tax-free treatment of death benefits payable under an
employer-owned life insurance contract unless certain notice and consent
requirements are met and either (1) certain rules relating to the insured
employee's status are satisfied or (2) certain rules relating to the payment of
the "amount received under the contract" to, or for the benefit of, certain
beneficiaries or successors of the insured employee are satisfied. The new rules
apply to life insurance contracts owned by corporations (including S
corporations), individual sole proprietors, estates and trusts and partnerships
that are engaged in a trade or business. Any business contemplating the purchase
of a policy on the life of an employee should consult with its legal and tax
advisors regarding the applicability of the new legislation to the proposed
purchase.
OTHER TAXES
Federal estate and state and local estate, inheritance, and other tax
consequences of ownership or receipt of certificate proceeds depend upon the
circumstances of each certificate owner or beneficiary.
NON-INDIVIDUAL OWNERS AND BUSINESS BENEFICIARIES OF POLICIES If a certificate 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
certificate. In addition, under Section 264(f)(5), if a business (other than a
sole proprietorship) is directly or indirectly a beneficiary of a certificate,
this certificate 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 adviser before any non-natural person is made an owner or
holder of a certificate, or before a business (other than a sole proprietorship)
is made a beneficiary of a certificate.
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
37
paying additional premiums with respect to such arrangements.
Additionally, the Sarbanes-Oxley Act of 2002 (the "Act") 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 that date, 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 certificate, or the purchase of a new certificate, in
connection with a split-dollar life insurance arrangement should consult legal
counsel.
ALTERNATIVE MINIMUM TAX
There may also be an indirect tax upon the income in a certificate or the
proceeds of a certificate under the federal corporate alternative minimum tax,
if the owner is subject to that tax.
For example, when the insured dies, the death proceeds win generally be
includable in the certificate owner's estate for purposes of federal estate tax
if the insured owned the certificate. If the certificate owner was not the
insured, the fair market value of the certificate would be included in the
certificate owner's estate upon the owner's death. The certificate 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 certificate is
transferred to, or a death benefit is paid to, an individual two or more
generations younger than the certificate owner. Regulations issued under the
Code may require us to deduct the tax from your certificate, or from any
applicable payment, and pay it directly to the IRS. A competent tax adviser
should be consulted for further information.
ECONOMIC GROWTH AND TAX RELIEF RECONCILIATION ACT OF 2001 The Economic Growth
and Tax Relief Reconciliation Act of 2001 ("EGTRRA") repeals the federal estate
tax and replaces it with a carryover basis income tax regime effective for
estates of decedents dying after December 31, 2009. EGTRRA also repeals the
generation skipping transfer tax, but not the gift tax, for transfers made after
December 31, 2009. EGTRRA contains a sunset provision, which essentially returns
the federal estate, gift and generation-skipping transfer taxes to their
pre-EGTRRA form, beginning in 2011. Congress may or may not enact permanent
repeal between now and then.
During the period prior to 2010, EGTRRA provides for periodic decreases in
the maximum estate tax rate coupled with periodic increases in the estate tax
exemption. For 2007, the maximum estate tax rate is 45% and the estate tax
exemption is $2,000,000.
The complexity of the new tax law, along with uncertainty as to how it
might be modified in coming years, underscores the importance of seeking
guidance from a qualified adviser to help ensure that your estate plan
adequately addresses your needs and that of your beneficiaries under all
possible scenarios.
It should be understood that the foregoing description of the federal
income tax, gift and estate tax consequences under the policies is not
exhaustive and that special rules are provided with respect to situations not
discussed. Statutory changes in the Code, with varying effective dates, and
regulations adopted thereunder may also alter the tax consequences of specific
factual situations. Due to the complexity of the applicable laws, any person
contemplating the purchase of a variable life insurance certificate or
exercising elections under such a certificate may want to consult a tax adviser.
38
DISTRIBUTION OF CERTIFICATES
The group contract and certificates will be sold by state licensed life
insurance producers who are also registered representatives of Securian
Financial Services, Inc. ("Securian Financial") or of other broker-dealers who
have entered into selling agreements with Securian Financial ("Selling Firms").
Securian Financial, whose address is 400 Robert Street North, St. Paul,
Minnesota 55101-2098, is a registered broker-dealer under the Securities
Exchange Act of 1934 and a member of the National Association of Securities
Dealers, Inc. Securian Financial was incorporated in 1984 under the laws of the
State of Minnesota and acts as principal underwriter for the policies. Securian
Financial is a wholly-owned subsidiary of Securian Financial Group, Inc., which
is a second-tier subsidiary of a mutual insurance holding company called
Minnesota Mutual Companies, Inc.
The amount of commission received by an individual registered
representative in connection with the sale of a group contract or certificate is
determined by his or her broker-dealer. In the case of a group contract or
certificate sold by registered representatives of Securian Financial,
commissions are paid, if at all, directly to such registered representatives by
Securian Life as agent for Securian Financial. Compensation based on such sales
may also be paid to general agents of Securian Life who are also Securian
Financial registered representatives. In the case of a group contract or
certificate sold by a registered representative of a Selling Firm, commissions
are paid directly to the Selling Firms. The commissions and compensation
described in this section, and the payments to broker-dealers described below,
do not result in charges against the group contract or certificates that are in
addition to the charges described elsewhere in this prospectus.
Commissions to any registered representatives, whether such registered
representatives are registered with Selling Firms or Securian Financial on the
sale of certificates will be premium-based, asset-based or a fixed amount.
Commissions under a group-sponsored insurance program will not exceed the
equivalent of 50 percent of the portion of all premiums paid in the initial year
to cover the cost of insurance, 7 percent of all premiums paid in the initial
year in excess of the amount to cover the cost of insurance, and 7 percent of
all premiums paid after the initial year. In addition to commission payments to
registered representatives of Securian Financial Services, Securian Life or its
affiliates may also make certain retirement and other benefit plans (including
deferred compensation, group health and life insurance and liability insurance
programs) available to its employees or full-time life insurance agents.
The commission schedule for a group-sponsored insurance program will be
determined based on a variety of factors, including enrollment procedures, the
size and type of the group, the total amount of premium payments to be received,
any prior existing relationship with the group sponsor, the sophistication of
the group sponsor, and other circumstances of which we are not presently aware.
All of the compensation described here, and other compensation or benefits
provided by Securian Life or our affiliates, may be more or less than the
overall compensation on similar or other products. The amount and/or structure
of the compensation may influence your registered representative, broker-dealer
or selling institution to present the policies described in this prospectus over
other investment alternatives. However, the differences in compensation may also
reflect differences in sales effort or ongoing customer services expected of the
registered representative or the broker-dealer.
PAYMENTS MADE BY UNDERLYING MUTUAL FUNDS
Securian Life pays the costs of selling the group contract and
certificates, some of which are described in more detail elsewhere in this
prospectus, which benefits the underlying mutual funds by providing increased
distribution of the shares of such funds. The underlying mutual funds, or their
investment advisers or principal underwriters, may pay Securian Life (or
Securian Life affiliates) a fee for the purpose
39
of reimbursing Securian Life for the costs of certain distribution or
operational services that Securian Life provides and that benefit the funds.
Payments from an underlying fund that relate to distribution services are made
pursuant to the fund's 12b-1 plan, under which the payments are deducted from
the fund's assets and described in the fee table included in the fund's
prospectus. 12b-1 payments from underlying funds range in amount from 0% to
0.25% of fund assets held in the Separate Account.
In addition, payments may be made pursuant to service/administration
agreements between Securian Life (or Securian Life affiliates) and the
underlying mutual fund's investment adviser (or its affiliates), in which case
payments are typically made from assets of that firm and not from the assets of
the fund. These payments, which are sometimes known as revenue sharing, are in
addition to the 12b-1 fees and those other fees and expenses incurred by a fund
and disclosed in its prospectus fee table. Service and administrative payments
are paid to Securian Life or its affiliates for such things as Securian Life's
aggregation of all certificate owner purchase, redemption, and transfer requests
within the Sub-Accounts of the Separate Account each business day and the
submission of one net purchase/redemption request to each underlying mutual
fund. When the Separate Account aggregates such transactions through the
Separate Account's omnibus account with an underlying mutual fund, the fund
avoids the expenses associated with processing individual transactions. Because
funds selected for inclusion in the group contract may also benefit from
expanded marketing opportunities as a result of such inclusion, a fund's
investment adviser (or its affiliates) may have an incentive to make such
payments regardless of other benefits the fund may derive from services
performed by Securian Life. Service and administrative payments received by
Securian Life or its affiliates range in amount from 0% to 0.35% of fund assets
held in the Separate Account.
Securian Life took into consideration anticipated payments from underlying
mutual funds and their investment advisers (or the advisers' affiliates) when it
determined the charges that are assessed under the group contract and
certificates. Without these payments, certain group contract and certificate
charges would likely be higher than they are currently. All of the underlying
mutual funds offered in the group contract and certificates currently pay 12b-1
fees to Securian Life, and some but not all of such funds' investment advisers
(or the advisers' affiliates) currently pay service or administrative fees to
Securian Life.
Securian Life considers profitability when determining the charges in these
group contract and certificates. In early contract years, Securian Life does not
anticipate earning a profit, since that is a time when administrative and
distribution expenses are typically higher. Securian Life does, however,
anticipate earning a profit in later contract years. In general, Securian Life's
profit will be greater the longer a certificate is held and the greater a
certificate's investment return.
OTHER MATTERS
LEGAL PROCEEDINGS
Securian Life, like other life insurance companies, is ordinarily involved
in litigation. Although the outcome of any litigation cannot be predicted with
certainty, we believe that, as of the date of this prospectus, there are no
pending or threatened lawsuits that will have a materially adverse impact on:
the separate account; Securian Financial to perform its underwriting contract
with the separate account; or the ability of Securian Life to meet its
obligations under the Policy.
REGISTRATION STATEMENT
We have filed a Registration Statement under the Securities Act of 1933, as
40
amended, with the Securities and Exchange Commission with respect to the group
contracts and certificates offered hereby. This prospectus does not contain all
the information set forth in the registration statement and amendments thereto
and the exhibits filed as a part thereof, to all of which reference is hereby
made for further information concerning the separate account, Securian Life, and
the certificates. Statements contained in this prospectus as to the contents of
certificates and other legal instruments are summaries, and reference is made to
such instruments as filed.
FINANCIAL STATEMENTS
The complete financial statements of Securian Life can be found in the
Statement of Additional Information. The Statement of Additional Information
is available from us at your request.
To request a Statement of Additional Information call us at 1-800-815-7636
or write to us at: Securian Life Insurance Company at 400 Robert Street North,
St. Paul, Minnesota 55101.
STATEMENT OF ADDITIONAL INFORMATION
A Statement of Additional Information, with the same date, containing
further information about Securian Life Variable Universal Life Account, the
group contract and the certificates is available without charge from us at your
request. It has been filed with the SEC and is incorporated by reference into
this prospectus. In addition, you may order a personalized illustration of death
benefits, cash surrender values, and cash values, without charge, from us. To
request a free copy of the Statement of Additional Information, a personalized
illustration or any information about your certificate call us at 1-800-815-7636
or write to us at: Securian Life Insurance Company at 400 Robert Street North,
St. Paul, Minnesota 55101.
Information about Securian Life Variable Universal Life Account (including
the Statement of Additional Information) can be reviewed and copied at the
Securities and Exchange Commission's Public Reference Room in Washington, DC
(information on the operation of the Public Reference Room may be obtained by
calling the SEC at 1-202-551-8090) or at the SEC's website, http://www.sec.gov.
Copies of this information may be obtained, upon payment of a duplicating fee,
by writing the Public Reference Section of the Commission, 100 F Street, NE,
Washington, DC 20549-0102. You can also call the SEC at 1-202-551-8090.
The table of contents for the Statement of Additional Information is as
follows:
General Information and History
Premiums
Additional Information About Operation of Contracts and Registrant
Underwriters
Illustrations
Financial Statements
Investment Company Act No. 811-21859
41
SECURIAN LIFE VARIABLE UNIVERSAL LIFE ACCOUNT
(Exact Name of Registrant)
Securian Life Insurance Company
(Name of Depositor)
400 Robert Street North
Saint Paul, Minnesota 55101
(Address of Depositor's Principal Executive Offices)
651-665-3500
(Depositor's Telephone Number, including Area Code)
Dwayne C. Radel, Esq.
Securian Life Insurance Company
400 Robert Street North
Saint Paul, Minnesota 55101
(Name and Address of Agent for Service)
STATEMENT OF ADDITIONAL INFORMATION
THE DATE OF THIS DOCUMENT IS: May 1, 2007
THE DATE OF THE PROSPECTUS IS: May 1, 2007
This Statement of Additional Information is not a prospectus. Much of the
information contained in this Statement of Additional Information expands upon
subjects discussed in the prospectus. Therefore, this Statement should be read
in conjunction with the current prospectus, which may be obtained by calling
Securian Life Insurance Company at 1-800-815-7636, or writing to Securian
Life at 400 Robert Street North, Saint Paul, Minnesota 55101. Defined terms as
used in the prospectus, group contract and certificates are incorporated into
this Statement of Additional Information by reference.
Table of Contents
General Information and History
Premiums
Additional Information About Operation of Contracts and Registrant
Underwriters
Illustrations
Financial Statements
GENERAL INFORMATION AND HISTORY
We are a wholly-owned subsidiary of Securian Financial Group, Inc., a Delaware
corporation and a sister company to Minnesota Life Insurance Company,
("Minnesota Life") incorporated in and having its principal office at 400 Robert
Street North, Saint Paul, Minnesota 55101. Minnesota Life was formerly known as
The Minnesota Mutual Life Insurance Company ("Minnesota Mutual"), a mutual life
insurance company organized in 1880 under the laws of Minnesota. Effective
October 1, 1998, Minnesota Mutual reorganized by forming a mutual insurance
holding company named "Minnesota Mutual Companies, Inc." Minnesota Mutual
continued its corporate existence following conversion to a Minnesota stock life
insurance company named "Minnesota Life Insurance Company." All of the shares of
the voting stock of Securian Life are owned by a second tier intermediate stock
holding company named "Securian Financial Group, Inc.", which in turn is a
wholly-owned subsidiary of a first tier intermediate stock holding company named
"Securian Holding Company", which in turn is a wholly-owned subsidiary of the
ultimate parent, Minnesota Mutual Companies, Inc. We are licensed to conduct a
life insurance business in all states.
The Securian Life Variable Universal Life Account was established on December 1,
2004, by our Board of Directors in accordance with certain provisions of the
Minnesota law. The separate account is registered as a "unit investment
trust" with the Securities and Exchange Commission under the Investment Company
Act of 1940, but such registration does not signify that the Securities and
Exchange Commission supervises the management, or the investment practices or
policies, of the separate account. The separate account meets the definition of
a "separate account" under the federal securities laws.
We are the legal owner of the assets in the separate account. The obligations to
certificate owners and beneficiaries arising under the certificates are general
corporate obligations of Securian Life and thus our general assets back the
certificates. The Minnesota law under which the separate account was established
provides that the assets of the separate account shall not be chargeable with
liabilities arising out of any other business which we may conduct, but shall be
held and applied exclusively to the benefit of the holders of those variable
life insurance certificates for which the separate account was established. The
investment performance of the separate account is entirely independent of both
the investment performance of our guaranteed account and of any other separate
account which we may have established or may later establish.
The separate account has 20 sub-accounts. Each sub-account invests in shares of
a corresponding Portfolio of the Funds. Not all of the Portfolios of the Funds
may be available for investment by the separate account.
The separate account currently invests in the Advantus Series Fund, Inc.,
Fidelity(R) Variable Insurance Products Funds, Janus Aspen Series and W&R
Target Funds, Inc.
PREMIUMS
Premiums for the certificates will not be the same for all owners. Charges will
vary based on the group-sponsored insurance program under which the certificate
is issued. We will determine charges pursuant to our established actuarial
procedures, and in doing so we will not discriminate unreasonably or unfairly
against any person or class of persons. The charges (other than cost of
insurance rates) for certificates under a group-sponsored insurance program are
shown on the specifications page of the certificate.
A premium must be paid to put a certificate in force, and may be remitted to us
by the group contractholder on behalf of the owner. Generally, premium payments
for certificates under group-sponsored insurance programs are regularly deducted
by an employer from the certificate owner's paycheck. If an owner's insurance is
continued following loss of the insured's eligibility under the group-sponsored
insurance program (requirements for continuation are described in the
certificate and prospectus), we will accept direct premium payments from the
owner by check or electronic funds transfer from a checking or savings account.
If an owner in such a situation elects to remit premiums by check, we will send
a premium notice for the premium due to the owner's address on record. If an
owner elects to remit premiums by electronic funds transfer, we will deduct the
premium due from the checking or savings account monthly on the date specified
by the owner.
The initial premium for a certificate must cover the premium expense charges and
the first month's deductions. Premiums paid after the initial premium may be in
any amount. A premium must be paid when there is insufficient
net cash value to pay the monthly deduction necessary to keep the certificate in
force. In this situation, we will send the owner a notice that a premium payment
is required.
When the certificate is issued, the certificate's specifications page may show
premium payments scheduled and the amounts of those payments. However, the owner
may elect to skip or omit making those premium payments. The certificate does
not obligate the owner to pay premiums in accordance with a premium schedule.
ADDITIONAL INFORMATION ABOUT OPERATION OF CONTRACTS AND REGISTRANT
Securian Life provides accounting oversight, financial reporting, legal and
other administrative services. Prior to April 1, 2003, Securian Life provided
additional accounting and administrative services which are now performed by
State Street Bank and Trust Company. However, Securian Life continues to oversee
State Street's performance of these services.
CERTIFICATE CHANGES We reserve the right to limit the number of certificate
changes to one per certificate year and to restrict such changes in the first
certificate year. For this purpose, changes include increases or decreases in
face amount. No change will be permitted that would result in the death
benefit under a certificate being included in gross income due to not
satisfying the requirements of Section 7702 of the Internal Revenue Code or
any applicable successor provision.
CONFORMITY WITH STATUTES If any provision in a certificate is in conflict
with the laws of the state governing the certificate, the provision will be
deemed to be amended to conform to such laws.
CLAIMS OF CREDITORS Except as provided by law, neither the certificate nor
any payment thereunder will be subject to the claims of creditors or to any
legal process.
INCONTESTABILITY After a certificate has been in force during the insured's
lifetime for two years from the certificate date, we cannot contest the
insurance for any loss that is incurred more than two years after the
certificate date, unless the net cash value has dropped below the amount
necessary to pay the insured's cost of insurance on the insured's life.
However, if there has been an increase in the amount of insurance for which
we required evidence of insurability, then, to the extent of the increase,
any loss which occurs within two years of the effective date of the increase
will be contestable. We may elect to waive our right to contest the insurance
for any loss that is incurred within two years after the certificate issue
date where the certificate replaces existing coverage.
ASSIGNMENT The certificate may be assigned. However, we will not be bound
by any assignment unless it is in writing and filed at our home office in
St. Paul, Minnesota. We assume no responsibility for the validity or effect of
any assignment of the certificate or of any interest in it. Any claim made
by an assignee will be subject to proof of the assignee's interest and the
extent of the assignment. A valid assignment will take precedence over any
claim of a beneficiary.
SUICIDE If the insured dies by suicide within two years of the original
certificate date, our liability will be limited to an amount equal to the
premiums paid for the certificate. If there has been a face amount increase
for which we required evidence of insurability, and if the insured dies by
suicide within two years from the effective date of the increase, our
liability with respect to the increase will be limited to an amount equal to
the cost of insurance charge attributable to that increase.
MISSTATEMENT OF AGE If the age of the insured has been misstated, the death
benefit and account value will be adjusted. The adjustment will be the
difference between two amounts accumulated with interest. These two amounts
are:
- the monthly cost of insurance charges that were paid; and
- the monthly cost of insurance charges that should have been paid based on
the insured's correct age.
The interest rates used are the rates that were used in accumulating
guaranteed account values for that time period.
EXPERIENCE CREDITS Each year we will determine if this class of
certificates and this certificate will receive an experience credit.
Experience credits, if received, may be added to the owner's account value
or, if the owner elects, they may be paid in cash. Experience credits will
vary based on the terms, claims experience and cost of insurance for the
group-sponsored insurance program under which the group contract is issued.
We will determine experience credits pursuant to our established actuarial
procedures. We do not expect any experience credits will be declared.
An experience credit applied to the account value will be allocated to the
guaranteed account or to the sub-accounts of the separate account in
accordance with the owner's current instructions for the allocation of net
premiums. In the absence of such instructions, experience credits will be
allocated to the guaranteed account value and separate account value in the
same proportion that those account values bear to the net cash value and, as
to the account value in the separate account, to each sub-account in the
proportion that the sub-account value bears to the separate account value.
REPORTS Each year we will send the owner a report. At a minimum, the report
will include the account value, the face amount, and the death benefit as of
the date of the report, the premiums paid during the year, loan activity and
the certificate value. The report will be sent to the owner without cost. The
report will be as of a date within two months of its mailing.
The Cash Value Accumulation Test requires that the death benefit be greater
than the account value times a specified percentage. The Guideline
Premium/Cash Value Corridor Test limits the amount of premiums which may be
paid in addition to requiring that the death benefit be greater than the
account value times a specified percentage. Each certificate will be tested
when premiums are paid, at the end of each month and at death for compliance
to the test chosen for that certificate. Under either test, if the death
benefit is not greater than the applicable percentage of the account value,
or for the Guideline Premium/Cash Value Corridor Test, the premiums paid
exceed the limit for the current death benefit, we will increase the face
amount or return premium with interest to maintain compliance with IRC
Section 7702.
For the Cash Value Accumulation Test, the applicable percentage by which to
multiply the account value to determine the minimum death benefit requirement
varies by the age and underwriting class of the insured. The following table
contains illustrative applicable percentages for this test for the
non-tobacco underwriting class:
[Download Table]
Attained Applicable
Age Percentage
--- ----------
35 433%
45 311
55 227
65 172
75 138
For the Guideline Premium/Cash Value Corridor Test, the applicable percentage
by which to multiply the account value to determine the minimum death benefit
requirement varies only by the age of the insured. The following table
contains the applicable percentages for the account value portion of this
test:
[Download Table]
Attained Applicable Attained Applicable Attained Applicable
Age Percentage Age Percentage Age Percentage
--- ---------- --- ---------- --- ----------
40 & below 250% 54 157% 68 117%
41 243 55 150 69 116
42 236 56 146 70 115
43 229 57 142 71 113
44 222 58 138 72 111
45 215 59 134 73 109
46 209 60 130 74 107
47 203 61 128 75-90 105
48 197 62 126 91 104
49 191 63 124 92 103
50 185 64 122 93 102
51 178 65 120 94 101
52 171 66 119 95 100
53 164 67 118
The premium limit under the Guideline Premium/Cash Value Corridor Test varies
by the amount of the death benefit, the certificate year, age and
underwriting class of the insured as well as the charges under the
certificate. You may call us at 1-800-815-7636, during our normal business
hours of 8:00 a.m. to 4:45 p.m., Central Time, if you would like us to
calculate the maximum premium you may pay under your certificate for this
test. If you pay up to the maximum premium amount your certificate may become
a modified endowment contract. (See "Federal Tax Status".)
UNDERWRITERS
The group contracts and certificates are a continuous offering and will be sold
by state licensed life insurance producers who are also registered
representatives of Securian Financial Services, Inc. ("Securian Financial") or
of other broker-dealers who have entered into selling agreements with Securian
Financial. Securian Financial acts as principal underwriter for the policies.
Securian Financial is a wholly-owned subsidiary of Securian Financial Group,
Inc., which is a second-tier subsidiary of a mutual insurance holding company
called Minnesota Mutual Companies, Inc.
Securian Financial, whose address is 400 Robert Street North, St. Paul,
Minnesota 55101-2098, is a registered broker-dealer under the Securities
Exchange Act of 1934 and a member of the National Association of Securities
Dealers, Inc. Securian Financial was incorporated in 1984 under the laws of the
State of Minnesota. The contracts and certificates are sold in the states where
their sale is lawful. The insurance underwriting and the determination of a
proposed insured's risk classification and whether to accept or reject an
application for a certificate is done in accordance with our rules and
standards.
Commissions to registered representatives on the sale of certificates will be
premium-based, asset-based or a fixed amount. Commissions under a
group-sponsored insurance program will not exceed the equivalent of 50 percent
of the portion of all premiums paid in the initial year to cover the cost of
insurance, 7 percent of all premiums paid in the initial year in excess of the
amount to cover the cost of insurance, and 7 percent of all premiums paid after
the initial year.
The commission schedule for a group-sponsored insurance program will be
determined based on a variety of factors, including enrollment procedures, the
size and type of the group, the total amount of premium payments to be received,
any prior existing relationship with the group sponsor, the sophistication of
the group sponsor, and other circumstances of which we are not presently aware.
No underwriting commissions have been paid to or retained by Securian Financial
Services, Inc.
Securian Financial may also receive amounts from the Funds for services provided
under a 12b-1 plan of distribution. For providing these distribution services,
Securian Financial may receive a fee of 0.25 percent of the average daily net
assets of those Portfolios of the Funds which have a 12b-1 fee.
The group contracts will be offered and sold pursuant to our underwriting
procedures, in accordance with state insurance laws. Individuals who satisfy the
eligibility requirements under a particular group contract may be required to
submit to an underwriting procedure which requires satisfaction of underwriting
requirements.
When we receive a completed application or request for an increase in face
amount we may require medical evidence of insurability to determine whether the
applicant is insurable. If so, we will follow certain insurance underwriting
(risk evaluation) procedures. This process may involve such verification
procedures as medical examinations and may require that further information be
provided by the proposed insured before a determination can be made. We may also
issue certificates that do not require medical evidence of insurability.
Schedules for evidence of insurability requirements may be determined for each
group-sponsored insurance program and are based on a variety of factors related
to the group. In determining these schedules we will not discriminate
unreasonably or unfairly against any person or class of persons.
ILLUSTRATIONS
To illustrate the operation of the certificate under various assumptions, we
have prepared several tables along with additional explanatory text, that may be
of assistance.
The following tables illustrate how the account value and death benefit of a
certificate change with the investment experience of the sub-accounts of the
separate account. The tables show how the account values and death benefit of a
certificate issued to an insured of a given age and at a given premium would
vary over time if the investment return on the assets held in each sub-account
of the separate account were a uniform, gross, after-tax rate of 0 percent, 6
percent or 12 percent. The account values and death benefits would be different
from those shown if the gross annual investment rates of return averaged 0
percent, 6 percent and 12 percent over a period of years, but fluctuated above
and below those averages for individual certificate years.
The tables illustrate both a certificate issued to an insured, age 45 and to
an insured, age 55, in a group-sponsored program. This assumes a $4.00
monthly administration charge, a 3 percent sales charge, a 2 percent premium
tax charge, and a 0.25 percent federal tax charge. Cost of insurance charges
used in the tables are either the guaranteed maximums or assumed levels as
described in the following paragraph. If a particular certificate has
different administration, sales, tax, or cost of insurance charges, the
account values and death benefits would vary from those shown in the tables.
The account values and death benefits would also vary if premiums were paid
in other amounts or at other than annual intervals, or account values were
allocated differently among individual sub-accounts with varying rates of
return. The illustrations of death benefits also vary between tables
depending upon whether the level or variable type death benefits are
illustrated.
The account value column in the tables with the heading "Using Maximum Cost
of Insurance Charges" shows the accumulated value of premiums paid reflecting
deduction of the charges described above and monthly charges for the cost of
insurance based on the guaranteed maximum rate and a maximum sales charge of
5%. The account value column in the tables with the heading "Using Assumed
Cost of Insurance Charges" shows the accumulated value of premiums paid
reflecting deduction of the charges described above and monthly charges for
the cost of insurance at an assumed level which is substantially less than
the guaranteed rate. The assumed cost of insurance charges are detailed on
the illustrations. Actual cost of insurance charges for a certificate depend
on a variety of factors as described in "Account Value Charges" section of
the prospectus.
The amounts shown for the hypothetical account value and death benefit as of
each certificate year reflect the fact that the net investment return on the
assets held in the sub-accounts is lower than the gross, after-tax return.
This is because the expenses of the Fund assessed against the net assets of
the Variable Universal Life Account are deducted from the gross return. The
investment expenses illustrated represent an average of the investment
advisory fee charged for all Funds covered under the prospectus. The
investment advisory fee for each Portfolio for the last fiscal year is shown
in the Fund's prospectus. In addition to the deduction for the investment
advisory fee, the illustrations also reflect a deduction for Portfolio costs
and expenses for the last fiscal year, as shown in the Fund's prospectus. The
average annual expense number used in the illustrations (0.91 percent) does
not include waivers, reductions, and reimbursements as detailed in the
footnotes to the expense table and the prospectus of the Funds. We do not
expect any changes to the voluntary absorption of expenses policy in the
current year. Therefore, gross annual rates of return of 0 percent, 6 percent
and 12 percent correspond to approximate net annual rates of return of -0.91
percent, 5.04 percent and 10.99 percent.
The tables reflect the fact that no charges for federal, state or local
income taxes are currently made against the Variable Universal Life Account.
If such a charge is made in the future, it will take a higher gross rate of
return to produce after-tax returns of 0 percent, 6 percent and 12 percent
than it does now to produce the account values and death benefits
illustrated. Additionally, the hypothetical values shown in the tables assume
that the policy for which values are illustrated is not deemed an individual
policy under the Omnibus Budget Reconciliation Act of 1990 ("OBRA") and
therefore the values do not reflect the additional premium expense charge to
cover Securian Life's increased OBRA related expenses in that situation (as
described in "OBRA Expense Charge").
The tables illustrate the certificate values that would result based upon the
investment rates of return if the premiums are paid on a monthly basis, and
if no certificate loans have been made. The tables are also based on the
assumptions that no withdrawals have been made, that no transfer charges were
incurred, that no optional riders have been requested and that no allocations
have been made to the guaranteed account. The certificate values in the
tables also may reflect an increase in the face amount of insurance to the
minimum amount necessary to maintain the certificate's qualification as life
insurance under Section 7702 of the Code.
Upon request, we will provide an illustration based on a proposed insured's age,
face amount of insurance, premium amount and frequency of payment, and using the
charges for the group-sponsored insurance program under which the individual
would be insured. To request a personalized illustration or any information
about your certificate call us at 1-800-815-7636 or write to us at: Securian
Life Insurance Company, 400 Robert Street North, Saint Paul, Minnesota 55101.
DEATH BENEFIT OPTION A
ISSUE AGE 45
UNISEX
UNITOBACCO
FACE AMOUNT OF INSURANCE - $100,000
ANNUAL PREMIUM - $1,800
(MONTHLY PREMIUM - $150)(1)
USING CURRENT COST OF INSURANCE CHARGES*
[Enlarge/Download Table]
-ASSUMING HYPOTHETICAL INVESTMENT RETURNS OF -
0% GROSS(2) 6% GROSS(2) 12% GROSS(2)
(-0.91% NET)(3) (5.04% NET)(3) (10.99% NET)(3)
END OF ATT ANNUAL ACCOUNT DEATH ACCOUNT DEATH ACCOUNT DEATH
POL YR AGE PREMIUM VALUE(4) BENEFIT VALUE(4) BENEFIT VALUE(4) BENEFIT
------ --- ------- -------- ------- -------- ------- --------- ---------
1 46 1,800 1,460 100,000 1,507 100,000 1,553 100,000
2 47 1,800 2,897 100,000 3,080 100,000 3,267 100,000
3 48 1,800 4,302 100,000 4,713 100,000 5,150 100,000
4 49 1,800 5,685 100,000 6,420 100,000 7,231 100,000
5 50 1,800 7,060 100,000 8,218 100,000 9,548 100,000
6 51 1,800 8,403 100,000 10,088 100,000 12,102 100,000
7 52 1,800 9,705 100,000 12,025 100,000 14,911 100,000
8 53 1,800 10,977 100,000 14,044 100,000 18,017 100,000
9 54 1,800 12,200 100,000 16,130 100,000 21,434 100,000
10 55 1,800 13,375 100,000 18,288 100,000 25,202 100,000
15 60 1,800 18,250 100,000 30,081 100,000 50,771 100,000
20 65 1,800 21,218 100,000 43,965 100,000 94,170 113,004
25 70 1,800 21,880 100,000 61,080 100,000 167,044 192,101
30 75 1,800 15,302 100,000 82,135 100,000 287,163 301,521
35 80 1,800 0 100,000 111,466 117,039 486,516 510,844
40 85 1,800 0 100,000 147,951 155,348 807,497 847,872
45 90 1,800 0 100,000 190,437 199,959 1,312,573 1,378,201
50 95 1,800 0 100,000 244,174 246,616 2,141,314 2,162,727
(1) A premium payment of $150 is assumed to be paid monthly at the beginning of
each certificate month.
(2) Assumes that no certificate loans have been made, no withdrawals have
been made, that no transfer charges were incurred and that no optional riders
have been requested.
(3) The amounts shown for the hypothetical account value and death benefit as of
each certificate year reflect the fact that the net investment return on the
assets held in the sub-accounts is lower than the gross, after-tax return. This
is because expenses of the Fund are assessed against the net assets of the
Variable Universal Life Account and deducted from the gross return.
(4) Account value in the illustrations and based upon all of the assumptions
made is equal to the certificate surrender value.
*This illustration uses assumed cost of insurance charges for a group-sponsored
program. The actual cost of insurance charges of a certificate depend on a
variety of factors as described in the prospectus. The initial assumed monthly
cost of insurance (COI) rate per $1,000 of insurance, for an attained age of 45,
used for the purposes of this illustration is $0.160. The cost of insurance
charge will increase as the insured ages.
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN
ABOVE ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST
OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL GROSS RATES OF RETURN MAY BE
MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS,
INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A CERTIFICATE OWNER, THE
FREQUENCY OF PREMIUM PAYMENTS CHOSEN BY A CERTIFICATE OWNER, AND THE
INVESTMENT EXPERIENCE OF THE CERTIFICATE'S SUB-ACCOUNTS. THE DEATH BENEFIT,
ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A CERTIFICATE WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL RATES OF RETURN AVERAGED 0%, 6%,
AND 12% OVER A PERIOD OF YEARS, BUT VARIED ABOVE OR BELOW THAT AVERAGE DURING
THE PERIOD. THEY WOULD ALSO BE DIFFERENT IF ANY CERTIFICATE LOAN WERE MADE
DURING THE PERIOD. NO REPRESENTATIONS CAN BE MADE BY SECURIAN LIFE OR THE
FUNDS THAT THOSE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
DEATH BENEFIT OPTION A
ISSUE AGE 55
UNISEX
UNITOBACCO
FACE AMOUNT OF INSURANCE - $100,000
ANNUAL PREMIUM - $3,000
(MONTHLY PREMIUM - $250)(1)
USING CURRENT COST OF INSURANCE CHARGES*
[Enlarge/Download Table]
-ASSUMING HYPOTHETICAL INVESTMENT RETURNS OF -
0% GROSS(2) 6% GROSS(2) 12% GROSS(2)
(-0.91% NET)(3) (5.04% NET)(3) (10.99% NET)(3)
END OF ATT ANNUAL ACCOUNT DEATH ACCOUNT DEATH ACCOUNT DEATH
POL YR AGE PREMIUM VALUE(4) BENEFIT VALUE(4) BENEFIT VALUE(4) BENEFIT
------ --- ------- -------- ------- -------- ------- --------- ---------
1 56 3,000 2,309 100,000 2,383 100,000 2,456 100,000
2 57 3,000 4,527 100,000 4,816 100,000 5,110 100,000
3 58 3,000 6,670 100,000 7,315 100,000 8,001 100,000
4 59 3,000 8,730 100,000 9,878 100,000 11,148 100,000
5 60 3,000 10,710 100,000 12,513 100,000 14,589 100,000
6 61 3,000 12,603 100,000 15,218 100,000 18,354 100,000
7 62 3,000 14,414 100,000 18,003 100,000 22,488 100,000
8 63 3,000 16,134 100,000 20,867 100,000 27,036 100,000
9 64 3,000 17,778 100,000 23,832 100,000 32,068 100,000
10 65 3,000 19,329 100,000 26,891 100,000 37,636 100,000
15 70 3,000 25,733 100,000 44,089 100,000 76,841 100,000
20 75 3,000 25,820 100,000 63,471 100,000 145,170 152,428
25 80 3,000 12,513 100,000 87,879 100,000 258,791 271,731
30 85 3,000 0 100,000 124,496 130,721 442,048 464,151
35 90 3,000 0 100,000 168,124 176,530 730,850 767,392
40 95 3,000 0 100,000 223,174 225,406 1,204,700 1,216,747
(1) A premium payment of $250 is assumed to be paid monthly at the beginning of
each certificate month.
(2) Assumes that no certificate loans have been made, no withdrawals have
been made, that no transfer charges were incurred and that no optional riders
have been requested.
(3) The amounts shown for the hypothetical account value and death benefit as of
each certificate year reflect the fact that the net investment return on the
assets held in the sub-accounts is lower than the gross, after-tax return. This
is because expenses of the Fund are assessed against the net assets of the
Variable Universal Life Account and deducted from the gross return.
(4) Account value in the illustrations and based upon all of the assumptions
made is equal to the certificate surrender value.
*This illustration uses assumed cost of insurance charges for a group-sponsored
program. The actual cost of insurance charges of a certificate depend on a
variety of factors as described in the prospectus. The initial assumed monthly
cost of insurance (COI) rate per $1,000 of insurance, for an attained age of 55,
used for the purposes of this illustration is $0.400. The cost of insurance
charge will increase as the insured ages.
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN
ABOVE ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST
OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL GROSS RATES OF RETURN MAY BE
MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS,
INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A CERTIFICATE OWNER, THE
FREQUENCY OF PREMIUM PAYMENTS CHOSEN BY A CERTIFICATE OWNER, AND THE
INVESTMENT EXPERIENCE OF THE CERTIFICATE'S SUB-ACCOUNTS. THE DEATH BENEFIT,
ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A CERTIFICATE WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL RATES OF RETURN AVERAGED 0%, 6%,
AND 12% OVER A PERIOD OF YEARS, BUT VARIED ABOVE OR BELOW THAT AVERAGE DURING
THE PERIOD. THEY WOULD ALSO BE DIFFERENT IF ANY CERTIFICATE LOAN WERE MADE
DURING THE PERIOD. NO REPRESENTATIONS CAN BE MADE BY SECURIAN LIFE OR THE
FUNDS THAT THOSE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
DEATH BENEFIT OPTION A
ISSUE AGE 45
UNISEX
UNITOBACCO
FACE AMOUNT OF INSURANCE - $100,000
ANNUAL PREMIUM - $1,800
(MONTHLY PREMIUM - $150)(1)
USING MAXIMUM COST OF INSURANCE CHARGES
[Enlarge/Download Table]
-ASSUMING HYPOTHETICAL INVESTMENT RETURNS OF -
0% GROSS(2) 6% GROSS(2) 12% GROSS(2)
(-0.91% NET)(3) (5.04% NET)(3) (10.99% NET)(3)
END OF ATT ANNUAL ACCOUNT DEATH ACCOUNT DEATH ACCOUNT DEATH
POL YR AGE PREMIUM VALUE(4) BENEFIT VALUE(4) BENEFIT VALUE(4) BENEFIT
------ --- ------- -------- ------- -------- ------- --------- ---------
1 46 1,800 1,171 100,000 1,209 100,000 1,246 100,000
2 47 1,800 2,302 100,000 2,449 100,000 2,598 100,000
3 48 1,800 3,393 100,000 3,720 100,000 4,068 100,000
4 49 1,800 4,441 100,000 5,024 100,000 5,668 100,000
5 50 1,800 5,444 100,000 6,358 100,000 7,410 100,000
6 51 1,800 6,397 100,000 7,721 100,000 9,307 100,000
7 52 1,800 7,296 100,000 9,108 100,000 11,373 100,000
8 53 1,800 8,135 100,000 10,518 100,000 13,623 100,000
9 54 1,800 8,907 100,000 11,944 100,000 16,075 100,000
10 55 1,800 9,608 100,000 13,385 100,000 18,751 100,000
15 60 1,800 11,935 100,000 20,780 100,000 36,620 100,000
20 65 1,800 11,550 100,000 28,112 100,000 66,490 100,000
25 70 1,800 6,414 100,000 34,230 100,000 118,924 136,763
30 75 1,800 0 100,000 36,993 100,000 206,186 216,496
35 80 1,800 0 100,000 30,204 100,000 351,682 369,266
40 85 1,800 0 100,000 0 100,000 586,474 615,798
45 90 1,800 0 100,000 0 100,000 956,028 1,003,829
50 95 1,800 0 100,000 0 100,000 1,562,396 1,578,020
(1) A premium payment of $150 is assumed to be paid monthly at the beginning of
each certificate month.
(2) Assumes that no certificate loans have been made, no withdrawals have
been made, that no transfer charges were incurred and that no optional riders
have been requested.
(3) The amounts shown for the hypothetical account value and death benefit as of
each certificate year reflect the fact that the net investment return on the
assets held in the sub-accounts is lower than the gross, after-tax return. This
is because expenses of the Fund are assessed against the net assets of the
Variable Universal Life Account and deducted from the gross return.
(4) Account value in the illustrations and based upon all of the assumptions
made is equal to the certificate surrender value.
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN
ABOVE ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST
OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL GROSS RATES OF RETURN MAY BE
MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS,
INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A CERTIFICATE OWNER, THE
FREQUENCY OF PREMIUM PAYMENTS CHOSEN BY A CERTIFICATE OWNER, AND THE
INVESTMENT EXPERIENCE OF THE CERTIFICATE'S SUB-ACCOUNTS. THE DEATH BENEFIT,
ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A CERTIFICATE WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL RATES OF RETURN AVERAGED 0%, 6%,
AND 12% OVER A PERIOD OF YEARS, BUT VARIED ABOVE OR BELOW THAT AVERAGE DURING
THE PERIOD. THEY WOULD ALSO BE DIFFERENT IF ANY CERTIFICATE LOAN WERE MADE
DURING THE PERIOD. NO REPRESENTATIONS CAN BE MADE BY SECURIAN LIFE OR THE
FUNDS THAT THOSE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
DEATH BENEFIT OPTION A
ISSUE AGE 55
UNISEX
UNITOBACCO
FACE AMOUNT OF INSURANCE - $100,000
ANNUAL PREMIUM - $3,000
(MONTHLY PREMIUM - $250)(1)
USING MAXIMUM COST OF INSURANCE CHARGES
[Enlarge/Download Table]
-ASSUMING HYPOTHETICAL INVESTMENT RETURNS OF -
0% GROSS(2) 6% GROSS(2) 12% GROSS(2)
(-0.91% NET)(3) (5.04% NET)(3) (10.99% NET)(3)
END OF ATT ANNUAL ACCOUNT DEATH ACCOUNT DEATH ACCOUNT DEATH
POL YR AGE PREMIUM VALUE(4) BENEFIT VALUE(4) BENEFIT VALUE(4) BENEFIT
------ --- ------- -------- ------- -------- ------- -------- -------
1 56 3,000 1,731 100,000 1,787 100,000 1,842 100,000
2 57 3,000 3,379 100,000 3,596 100,000 3,817 100,000
3 58 3,000 4,944 100,000 5,428 100,000 5,942 100,000
4 59 3,000 6,423 100,000 7,282 100,000 8,233 100,000
5 60 3,000 7,808 100,000 9,154 100,000 10,706 100,000
6 61 3,000 9,093 100,000 11,039 100,000 13,379 100,000
7 62 3,000 10,265 100,000 12,929 100,000 16,271 100,000
8 63 3,000 11,309 100,000 14,809 100,000 19,398 100,000
9 64 3,000 12,207 100,000 16,667 100,000 22,784 100,000
10 65 3,000 12,946 100,000 18,494 100,000 26,462 100,000
15 70 3,000 13,824 100,000 26,914 100,000 51,134 100,000
20 75 3,000 7,247 100,000 32,497 100,000 95,663 100,446
25 80 3,000 0 100,000 29,756 100,000 176,174 184,983
30 85 3,000 0 100,000 3,026 100,000 306,375 321,694
35 90 3,000 0 100,000 0 100,000 511,740 537,327
40 95 3,000 0 100,000 0 100,000 848,683 857,170
(1) A premium payment of $250 is assumed to be paid monthly at the beginning of
each certificate month.
(2) Assumes that no certificate loans have been made, no withdrawals have
been made, that no transfer charges were incurred and that no optional riders
have been requested.
(3) The amounts shown for the hypothetical account value and death benefit as of
each certificate year reflect the fact that the net investment return on the
assets held in the sub-accounts is lower than the gross, after-tax return. This
is because expenses of the Fund are assessed against the net assets of the
Variable Universal Life Account and deducted from the gross return.
(4) Account value in the illustrations and based upon all of the assumptions
made is equal to the certificate surrender value.
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN
ABOVE ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST
OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL GROSS RATES OF RETURN MAY BE
MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS,
INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A CERTIFICATE OWNER, THE
FREQUENCY OF PREMIUM PAYMENTS CHOSEN BY A CERTIFICATE OWNER, AND THE
INVESTMENT EXPERIENCE OF THE CERTIFICATE'S SUB-ACCOUNTS. THE DEATH BENEFIT,
ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A CERTIFICATE WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL RATES OF RETURN AVERAGED 0%, 6%,
AND 12% OVER A PERIOD OF YEARS, BUT VARIED ABOVE OR BELOW THAT AVERAGE DURING
THE PERIOD. THEY WOULD ALSO BE DIFFERENT IF ANY CERTIFICATE LOAN WERE MADE
DURING THE PERIOD. NO REPRESENTATIONS CAN BE MADE BY SECURIAN LIFE OR THE
FUNDS THAT THOSE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
DEATH BENEFIT OPTION B
ISSUE AGE 45
UNISEX
UNITOBACCO
FACE AMOUNT OF INSURANCE - $50,000
ANNUAL PREMIUM - $1,800
(MONTHLY PREMIUM - $150)(1)
USING CURRENT COST OF INSURANCE CHARGES*
[Enlarge/Download Table]
-ASSUMING HYPOTHETICAL INVESTMENT RETURNS OF -
0% GROSS(2) 6% GROSS(2) 12% GROSS(2)
(-0.91% NET)(3) (5.04% NET)(3) (10.99% NET)(3)
END OF ATT ANNUAL ACCOUNT DEATH ACCOUNT DEATH ACCOUNT DEATH
POL YR AGE PREMIUM VALUE(4) BENEFIT VALUE(4) BENEFIT VALUE(4) BENEFIT
------ --- ------- -------- ------- -------- ------- --------- ---------
1 46 1,800 1,554 51,554 1,604 51,604 1,653 51,653
2 47 1,800 3,087 53,087 3,282 53,282 3,481 53,481
3 48 1,800 4,595 54,595 5,033 55,033 5,497 55,497
4 49 1,800 6,084 56,084 6,866 56,866 7,729 57,729
5 50 1,800 7,558 57,558 8,791 58,791 10,205 60,205
6 51 1,800 9,008 59,008 10,801 60,801 12,941 62,941
7 52 1,800 10,426 60,426 12,893 62,893 15,958 65,958
8 53 1,800 11,820 61,820 15,079 65,079 19,295 69,295
9 54 1,800 13,177 63,177 17,350 67,350 22,972 72,972
10 55 1,800 14,498 64,498 19,711 69,711 27,028 77,028
15 60 1,800 20,382 70,382 32,822 82,822 54,381 104,381
20 65 1,800 24,872 74,872 48,277 98,277 98,932 148,932
25 70 1,800 27,713 77,713 66,368 116,368 172,031 222,031
30 75 1,800 26,109 76,109 84,629 134,629 289,632 339,632
35 80 1,800 16,938 66,938 99,131 149,131 477,435 527,435
40 85 1,800 0 50,000 104,938 154,938 779,033 829,033
45 90 1,800 0 50,000 95,167 145,167 1,263,992 1,327,192
50 95 1,800 0 50,000 59,250 109,250 2,048,700 2,098,700
(1) A premium payment of $150 is assumed to be paid monthly at the beginning of
each certificate month.
(2) Assumes that no certificate loans have been made, no withdrawals have
been made, that no transfer charges were incurred and that no optional riders
have been requested.
(3) The amounts shown for the hypothetical account value and death benefit as of
each certificate year reflect the fact that the net investment return on the
assets held in the sub-accounts is lower than the gross, after-tax return. This
is because expenses of the Fund are assessed against the net assets of the
Variable Universal Life Account and deducted from the gross return.
(4) Account value in the illustrations and based upon all of the assumptions
made is equal to the certificate surrender value.
*This illustration uses assumed cost of insurance charges for a group-sponsored
program. The actual cost of insurance charges of a certificate depend on a
variety of factors as described in the prospectus. The initial assumed monthly
cost of insurance (COI) rate per $1,000 of insurance, for an attained age of 45,
used for the purposes of this illustration is $0.160. The cost of insurance
charge will increase as the insured ages.
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN
ABOVE ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST
OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL GROSS RATES OF RETURN MAY BE
MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS,
INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A CERTIFICATE OWNER, THE
FREQUENCY OF PREMIUM PAYMENTS CHOSEN BY A CERTIFICATE OWNER, AND THE
INVESTMENT EXPERIENCE OF THE CERTIFICATE'S SUB-ACCOUNTS. THE DEATH BENEFIT,
ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A CERTIFICATE WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL RATES OF RETURN AVERAGED 0%, 6%,
AND 12% OVER A PERIOD OF YEARS, BUT VARIED ABOVE OR BELOW THAT AVERAGE DURING
THE PERIOD. THEY WOULD ALSO BE DIFFERENT IF ANY CERTIFICATE LOAN WERE MADE
DURING THE PERIOD. NO REPRESENTATIONS CAN BE MADE BY SECURIAN LIFE OR THE
FUNDS THAT THOSE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
DEATH BENEFIT OPTION B
ISSUE AGE 55
UNISEX
UNITOBACCO
FACE AMOUNT OF INSURANCE - $50,000
ANNUAL PREMIUM - $3,000
(MONTHLY PREMIUM - $250)(1)
USING CURRENT COST OF INSURANCE CHARGES*
[Enlarge/Download Table]
-ASSUMING HYPOTHETICAL INVESTMENT RETURNS OF -
0% GROSS(2) 6% GROSS(2) 12% GROSS(2)
(-0.91% NET)(3) (5.04% NET)(3) (10.99% NET)(3)
END OF ATT ANNUAL ACCOUNT DEATH ACCOUNT DEATH ACCOUNT DEATH
POL YR AGE PREMIUM VALUE(4) BENEFIT VALUE(4) BENEFIT VALUE(4) BENEFIT
------ --- ------- -------- ------- -------- ------- -------- ---------
1 56 3,000 2,542 52,542 2,624 52,624 2,704 52,704
2 57 3,000 5,019 55,019 5,336 55,336 5,661 55,661
3 58 3,000 7,438 57,438 8,149 58,149 8,904 58,904
4 59 3,000 9,793 59,793 11,060 61,060 12,459 62,459
5 60 3,000 12,085 62,085 14,075 64,075 16,360 66,360
6 61 3,000 14,308 64,308 17,192 67,192 20,639 70,639
7 62 3,000 16,464 66,464 20,417 70,417 25,338 75,338
8 63 3,000 18,546 68,546 23,749 73,749 30,495 80,495
9 64 3,000 20,562 70,562 27,200 77,200 36,168 86,168
10 65 3,000 22,499 72,499 30,763 80,763 42,401 92,401
15 70 3,000 31,001 81,001 50,431 100,431 84,327 134,327
20 75 3,000 34,806 84,806 70,708 120,708 149,434 199,434
25 80 3,000 30,805 80,805 87,788 137,788 248,839 298,839
30 85 3,000 15,927 65,927 96,891 146,891 401,576 451,576
35 90 3,000 0 50,000 91,336 141,336 638,959 688,959
40 95 3,000 0 50,000 60,809 110,809 1,011,802 1,061,802
(1) A premium payment of $250 is assumed to be paid monthly at the beginning of
each certificate month.
(2) Assumes that no certificate loans have been made, no withdrawals have
been made, that no transfer charges were incurred and that no optional riders
have been requested.
(3) The amounts shown for the hypothetical account value and death benefit as of
each certificate year reflect the fact that the net investment return on the
assets held in the sub-accounts is lower than the gross, after-tax return. This
is because expenses of the Fund are assessed against the net assets of the
Variable Universal Life Account and deducted from the gross return.
(4) Account value in the illustrations and based upon all of the assumptions
made is equal to the certificate surrender value.
*This illustration uses assumed cost of insurance charges for a group-sponsored
program. The actual cost of insurance charges of a certificate depend on a
variety of factors as described in the prospectus. The initial assumed monthly
cost of insurance (COI) rate per $1,000 of insurance, for an attained age of 55,
used for the purposes of this illustration is $0.400. The cost of insurance
charge will increase as the insured ages.
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN
ABOVE ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST
OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL GROSS RATES OF RETURN MAY BE
MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS,
INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A CERTIFICATE OWNER, THE
FREQUENCY OF PREMIUM PAYMENTS CHOSEN BY A CERTIFICATE OWNER, AND THE
INVESTMENT EXPERIENCE OF THE CERTIFICATE'S SUB-ACCOUNTS. THE DEATH BENEFIT,
ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A CERTIFICATE WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL RATES OF RETURN AVERAGED 0%, 6%,
AND 12% OVER A PERIOD OF YEARS, BUT VARIED ABOVE OR BELOW THAT AVERAGE DURING
THE PERIOD. THEY WOULD ALSO BE DIFFERENT IF ANY CERTIFICATE LOAN WERE MADE
DURING THE PERIOD. NO REPRESENTATIONS CAN BE MADE BY SECURIAN LIFE OR THE
FUNDS THAT THOSE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
DEATH BENEFIT OPTION B
ISSUE AGE 45
UNISEX
UNITOBACCO
FACE AMOUNT OF INSURANCE - $50,000
ANNUAL PREMIUM - $1,800
(MONTHLY PREMIUM - $150)(1)
USING MAXIMUM COST OF INSURANCE CHARGES
[Enlarge/Download Table]
-ASSUMING HYPOTHETICAL INVESTMENT RETURNS OF -
0% GROSS(2) 6% GROSS(2) 12% GROSS(2)
(-0.91% NET)(3) (5.04% NET)(3) (10.99% NET)(3)
END OF ATT ANNUAL ACCOUNT DEATH ACCOUNT DEATH ACCOUNT DEATH
POL YR AGE PREMIUM VALUE(4) BENEFIT VALUE(4) BENEFIT VALUE(4) BENEFIT
------ --- ------- -------- ------- -------- ------- --------- ---------
1 46 1,800 1,391 51,391 1,436 51,436 1,479 51,479
2 47 1,800 2,752 52,752 2,926 52,926 3,103 53,103
3 48 1,800 4,082 54,082 4,471 54,471 4,885 54,885
4 49 1,800 5,380 55,380 6,075 56,075 6,842 56,842
5 50 1,800 6,644 56,644 7,737 57,737 8,991 58,991
6 51 1,800 7,873 57,873 9,457 59,457 11,350 61,350
7 52 1,800 9,062 59,062 11,234 61,234 13,938 63,938
8 53 1,800 10,210 60,210 13,070 63,070 16,777 66,777
9 54 1,800 11,311 61,311 14,961 64,961 19,890 69,890
10 55 1,800 12,363 62,363 16,907 66,907 23,303 73,303
15 60 1,800 16,831 66,831 27,483 77,483 46,080 96,080
20 65 1,800 19,586 69,586 39,269 89,269 82,444 132,444
25 70 1,800 19,727 69,727 51,469 101,469 140,377 190,377
30 75 1,800 15,907 65,907 62,537 112,537 232,745 282,745
35 80 1,800 5,679 55,679 69,106 119,106 379,558 429,558
40 85 1,800 0 50,000 66,340 116,340 613,973 663,973
45 90 1,800 0 50,000 45,607 95,607 988,898 1,038,898
50 95 1,800 0 50,000 0 50,000 1,592,815 1,642,815
(1) A premium payment of $150 is assumed to be paid monthly at the beginning of
each certificate month.
(2) Assumes that no certificate loans have been made, no withdrawals have
been made, that no transfer charges were incurred and that no optional riders
have been requested.
(3) The amounts shown for the hypothetical account value and death benefit as of
each certificate year reflect the fact that the net investment return on the
assets held in the sub-accounts is lower than the gross, after-tax return. This
is because expenses of the Fund are assessed against the net assets of the
Variable Universal Life Account and deducted from the gross return.
(4) Account value in the illustrations and based upon all of the assumptions
made is equal to the certificate surrender value.
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN
ABOVE ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST
OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL GROSS RATES OF RETURN MAY BE
MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS,
INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A CERTIFICATE OWNER, THE
FREQUENCY OF PREMIUM PAYMENTS CHOSEN BY A CERTIFICATE OWNER, AND THE
INVESTMENT EXPERIENCE OF THE CERTIFICATE'S SUB-ACCOUNTS. THE DEATH BENEFIT,
ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A CERTIFICATE WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL RATES OF RETURN AVERAGED 0%, 6%,
AND 12% OVER A PERIOD OF YEARS, BUT VARIED ABOVE OR BELOW THAT AVERAGE DURING
THE PERIOD. THEY WOULD ALSO BE DIFFERENT IF ANY CERTIFICATE LOAN WERE MADE
DURING THE PERIOD. NO REPRESENTATIONS CAN BE MADE BY SECURIAN LIFE OR THE
FUNDS THAT THOSE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
DEATH BENEFIT OPTION B
ISSUE AGE 55
UNISEX
UNITOBACCO
FACE AMOUNT OF INSURANCE - $50,000
ANNUAL PREMIUM - $3,000
(MONTHLY PREMIUM - $250)(1)
USING MAXIMUM COST OF INSURANCE CHARGES
[Enlarge/Download Table]
-ASSUMING HYPOTHETICAL INVESTMENT RETURNS OF -
0% GROSS(2) 6% GROSS(2) 12% GROSS(2)
(-0.91% NET)(3) (5.04% NET)(3) (10.99% NET)(3)
END OF ATT ANNUAL ACCOUNT DEATH ACCOUNT DEATH ACCOUNT DEATH
POL YR AGE PREMIUM VALUE(4) BENEFIT VALUE(4) BENEFIT VALUE(4) BENEFIT
------ --- ------- -------- ------- -------- ------- ------- -------
1 56 3,000 2,221 52,221 2,293 52,293 2,363 52,363
2 57 3,000 4,379 54,379 4,657 54,657 4,940 54,940
3 58 3,000 6,473 56,473 7,093 57,093 7,752 57,752
4 59 3,000 8,500 58,500 9,604 59,604 10,822 60,822
5 60 3,000 10,456 60,456 12,186 62,186 14,174 64,174
6 61 3,000 12,336 62,336 14,838 64,838 17,831 67,831
7 62 3,000 14,133 64,133 17,556 67,556 21,821 71,821
8 63 3,000 15,838 65,838 20,333 70,333 26,168 76,168
9 64 3,000 17,440 67,440 23,159 73,159 30,899 80,899
10 65 3,000 18,932 68,932 26,030 76,030 36,049 86,049
15 70 3,000 24,541 74,541 40,862 90,862 69,585 119,585
20 75 3,000 25,945 75,945 55,296 105,296 120,868 170,868
25 80 3,000 20,709 70,709 66,168 116,168 198,495 248,495
30 85 3,000 5,988 55,988 68,905 118,905 316,403 366,403
35 90 3,000 0 50,000 55,208 105,208 495,133 545,133
40 95 3,000 0 50,000 14,272 64,272 769,207 819,207
(1) A premium payment of $250 is assumed to be paid monthly at the beginning of
each certificate month.
(2) Assumes that no certificate loans have been made, no withdrawals have
been made, that no transfer charges were incurred and that no optional riders
have been requested.
(3) The amounts shown for the hypothetical account value and death benefit as of
each certificate year reflect the fact that the net investment return on the
assets held in the sub-accounts is lower than the gross, after-tax return. This
is because expenses of the Fund are assessed against the net assets of the
Variable Universal Life Account and deducted from the gross return.
(4) Account value in the illustrations and based upon all of the assumptions
made is equal to the certificate surrender value.
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN
ABOVE ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST
OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL GROSS RATES OF RETURN MAY BE
MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS,
INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A CERTIFICATE OWNER, THE
FREQUENCY OF PREMIUM PAYMENTS CHOSEN BY A CERTIFICATE OWNER, AND THE
INVESTMENT EXPERIENCE OF THE CERTIFICATE'S SUB-ACCOUNTS. THE DEATH BENEFIT,
ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A CERTIFICATE WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL RATES OF RETURN AVERAGED 0%, 6%,
AND 12% OVER A PERIOD OF YEARS, BUT VARIED ABOVE OR BELOW THAT AVERAGE DURING
THE PERIOD. THEY WOULD ALSO BE DIFFERENT IF ANY CERTIFICATE LOAN WERE MADE
DURING THE PERIOD. NO REPRESENTATIONS CAN BE MADE BY SECURIAN LIFE OR THE
FUNDS THAT THOSE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
FINANCIAL STATEMENTS
The financial statements and supplementary schedules of Securian Life
Insurance Company included herein have been audited by our independent
registered public accounting firm, KPMG LLP, 4200 Wells Fargo Center, 90
South Seventh Street, Minneapolis, Minnesota 55402, whose report thereon
appear elsewhere herein, and has been so included in reliance upon the report
of KPMG LLP and upon the authority of said firm as experts in accounting and
auditing.
SECURIAN LIFE INSURANCE COMPANY
FINANCIAL STATEMENTS
AND SUPPLEMENTARY SCHEDULES
DECEMBER 31, 2006, 2005 AND 2004
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholder
Securian Life Insurance Company:
We have audited the accompanying balance sheets of Securian Life Insurance
Company (the Company) as of December 31, 2006 and 2005, and the related
statements of operations, changes in stockholder's equity and cash flows for
each of the years in the three-year period ended December 31, 2006. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Securian Life Insurance Company
as of December 31, 2006 and 2005, and the results of its operations and its cash
flows for each of the years in the three-year period ended December 31, 2006, in
conformity with U.S. generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplementary information included in
the accompanying schedules is presented for purposes of additional analysis and
is not a required part of the basic financial statements. Such information has
been subjected to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, is fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
/s/ KPMG LLP
March 30, 2007
SECURIAN LIFE INSURANCE COMPANY
BALANCE SHEETS
DECEMBER 31, 2006 AND 2005
[Enlarge/Download Table]
2006 2005
------------ ------------
ASSETS
Fixed maturity securities: available-for-sale,
at fair value (amortized cost $116,030,682 and $13,695,026) $116,094,361 $ 13,794,497
Policy loans 68,758 56,331
------------ ------------
Total investments 116,163,119 13,850,828
Cash and cash equivalents 4,040,651 102,261,372
Deferred policy acquisition costs 497,737 168,204
Accrued investment income 1,397,001 193,074
Premiums and fees receivable 673,048 93,678
Income tax asset:
Current 64,378 --
Securities in transit 48,016 10,188
Reinsurance recoverables 38,354 20,946
Other assets 361,507 483,998
------------ ------------
Total assets $123,283,811 $117,082,288
============ ============
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Policy and contract account balances $ 1,429,747 $ 1,121,527
Future policy and contract benefits 196,662 174,633
Pending policy and contract claims 1,951,887 851,389
Other policyholder funds 772,151 331,214
Policyholder dividends payable 41,020 41,049
Unearned premiums and fees 46,031 83,095
Reinsurance payables 94,257 --
General insurance expenses and taxes 625,969 263,629
Income tax liability:
Current -- 24,454
Deferred 271,790 13,191
Payable to affiliates 220,183 20,151
Other liabilities 256,102 162,770
------------ ------------
Total liabilities 5,905,799 3,087,102
------------ ------------
Stockholder's equity:
Common stock, $1 par value, 5,000,000 shares authorized,
2,500,000 issued and outstanding 2,500,000 2,500,000
Additional paid in capital 104,600,406 104,200,406
Accumulated other comprehensive income 46,687 72,956
Retained earnings 10,230,919 7,221,824
------------ ------------
Total stockholder's equity 117,378,012 113,995,186
------------ ------------
Total liabilities and stockholder's equity $123,283,811 $117,082,288
============ ============
See accompanying notes to financial statements.
SECURIAN LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2006, 2005, AND 2004
[Enlarge/Download Table]
2006 2005 2004
----------- ---------- ----------
Revenues:
Premiums $20,830,085 $6,569,870 $ 219,097
Policy and contract fees 419,533 99,813 86,896
Net investment income 5,816,217 655,665 646,850
Net realized investment gains (losses) (169,854) (2,988) 11,440
Other income 7,768 -- --
----------- ---------- ----------
Total revenues 26,903,749 7,322,360 964,283
----------- ---------- ----------
Benefits and expenses:
Policyholder benefits 16,522,267 5,664,226 333,948
Interest credited to policies and contracts 53,374 54,035 51,875
Increase (decrease) in policy reserves 94,960 (6,280) (3,440)
General operating expenses 2,887,675 701,884 1,082,176
Commissions 3,050,435 858,656 33,464
Administrative and sponsorship fees 1,021 -- --
Amortization of deferred policy acquisition costs 75,524 35,497 19,229
Capitalization of deferred policy acquisition costs (410,883) (18,703) (20,182)
----------- ---------- ----------
Total benefits and expenses 22,274,373 7,289,315 1,497,070
----------- ---------- ----------
Income (loss) from operations before income taxes 4,629,376 33,045 (532,787)
----------- ---------- ----------
Income tax expense (benefit):
Current 1,347,541 (19,469) (211,128)
Deferred 272,740 31,036 29,040
----------- ---------- ----------
Total income tax expense (benefit) 1,620,281 11,567 (182,088)
----------- ---------- ----------
Net income (loss) $ 3,009,095 $ 21,478 $ (350,699)
=========== ========== ==========
See accompanying notes to financial statements.
SECURIAN LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
YEARS ENDED DECEMBER 31, 2006, 2005, AND 2004
[Enlarge/Download Table]
ACCUMULATED
ADDITIONAL OTHER TOTAL
COMMON PAID IN COMPREHENSIVE RETAINED STOCKHOLDER'S
STOCK CAPITAL INCOME EARNINGS EQUITY
---------- ------------ ------------- ----------- -------------
2004:
Balance, beginning of year $2,500,000 $ 3,800,406 $ 488,143 $ 7,551,045 $ 14,339,594
Comprehensive income:
Net loss -- -- -- (350,699) (350,699)
Other comprehensive loss -- -- (195,326) -- (195,326)
------------
Total comprehensive loss (546,025)
---------- ------------ --------- ----------- ------------
Balance, end of year $2,500,000 $ 3,800,406 $ 292,817 $ 7,200,346 $ 13,793,569
========== ============ ========= =========== ============
2005:
Balance, beginning of year $2,500,000 $ 3,800,406 $ 292,817 $ 7,200,346 $ 13,793,569
Comprehensive income:
Net income -- -- -- 21,478 21,478
Other comprehensive loss -- -- (219,861) -- (219,861)
------------
Total comprehensive loss (198,383)
Contributions to additional paid in capital -- 100,400,000 -- -- 100,400,000
---------- ------------ --------- ----------- ------------
Balance, end of year $2,500,000 $104,200,406 $ 72,956 $ 7,221,824 $113,995,186
========== ============ ========= =========== ============
2006:
Balance, beginning of year $2,500,000 $104,200,406 $ 72,956 $ 7,221,824 $113,995,186
Comprehensive income:
Net income -- -- -- 3,009,095 3,009,095
Other comprehensive loss -- -- (26,269) -- (26,269)
------------
Total comprehensive income 2,982,826
Contributions to additional paid in capital -- 400,000 -- -- 400,000
---------- ------------ --------- ----------- ------------
Balance, end of year $2,500,000 $104,600,406 $ 46,687 $10,230,919 $117,378,012
========== ============ ========= =========== ============
See accompanying notes to financial statements.
SECURIAN LIFE INSURANCE COMPANY
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2006, 2005, AND 2004
[Enlarge/Download Table]
2006 2005 2004
------------- ------------ -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 3,009,095 $ 21,478 $ (350,699)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Interest credited to annuity and insurance contracts 43,928 43,022 42,000
Fees deducted from policy and contract balances (615,648) (194,801) (185,255)
Change in future policy and contract benefits 22,029 (9,673) (11,373)
Change in pending policy and contract claims 1,100,498 799,745 49,770
Change in other policyholder funds 440,937 309,070 21,090
Amortization of deferred policy acquisition cost 75,524 35,497 19,229
Capitalization of policy acquisition costs (410,883) (18,703) (20,182)
Change in premiums and fees receivable (615,225) (53,173) (2,383)
Deferred tax provision 272,740 31,036 29,040
Change in federal income tax recoverables (payables) - current (88,832) 265,552 (221,895)
Change in accrued general insurance expenses and taxes 362,340 (499,055) 762,201
Net realized investment (gains) losses 169,854 2,988 (11,440)
Change in accrued investment income (1,203,927) 12,755 19,756
Premium amortization and discount accretion (174,344) 48,722 86,425
Change in other assets 122,491 (483,182) (18)
Change in payable to affiliates 200,032 (69,564) 77,891
Change in other liabilities 93,332 5,313 162,609
Change in reinsurance recoverables 76,849 6,201 8,012
Other, net (30) 1,035 (242)
------------- ------------ -----------
Net cash provided by operating activities 2,880,760 254,263 474,536
------------- ------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from fixed maturity securities sold 8,246,187 208,147 401,397
Proceeds from fixed maturity securities matured or repaid 5,712,230 2,181,766 1,513,560
Cost of fixed maturity securities acquired (116,287,056) (2,299,122) (2,784,279)
Change in securities in transit (37,828) 39,187 (38,562)
Change in policy loans (12,427) (1,794) 110,767
Other, net (2,526) -- --
------------- ------------ -----------
Net cash provided by (used in) investing activities (102,381,420) 128,184 (797,117)
------------- ------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Deposits credited to annuity and insurance contracts 960,775 267,778 279,375
Withdrawals from annuity and insurance contracts (80,836) (138,103) (91,647)
Capital contribution from parent 400,000 100,400,000 --
------------- ------------ -----------
Net cash provided by financing activities 1,279,939 100,529,675 187,728
------------- ------------ -----------
Net (decrease) increase in cash and cash equivalents (98,220,721) 100,912,122 (134,853)
Cash and cash equivalents, beginning of year 102,261,372 1,349,250 1,484,103
------------- ------------ -----------
Cash and cash equivalents, end of year $ 4,040,651 $102,261,372 $ 1,349,250
============= ============ ===========
See accompanying notes to financial statements.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2006, 2005 AND 2004
(1) NATURE OF OPERATIONS
ORGANIZATION AND DESCRIPTION OF BUSINESS
Securian Life Insurance Company (the Company) is organized under the laws
of the State of Minnesota as a stock life company and is licensed as a life
and health insurer.
On December 30, 2005, ownership of the Company was transferred from
Securian Financial Group, Inc. to Minnesota Life Insurance Company
(Minnesota Life) in the form of a capital contribution. Minnesota Life is a
wholly-owned life insurance company of Securian Financial Group, Inc.
Securian Financial Group, Inc. is an intermediate stock holding company
held by a mutual holding company, Minnesota Mutual Companies, Inc., which
was created in 1998.
The Company received a capital contribution in the form of cash from its
parent company, Minnesota Life, in the amount of $100,400,000 on December
30, 2005. The capital contribution was required as part of a filing by the
Company to be authorized to sell business in the state of New York. On
January 3, 2006, a subsequent capital contribution in the form of cash was
made in the amount of $400,000 related to the same filing requirement. The
Company offers traditional products including accident and health, group
dental, and group life, as well as nontraditional products, including group
universal and variable life and deferred annuities in states where the
Company is authorized to do business.
The Company's strategy is to be successful in carefully selected niche
markets in the United States while focusing on the retention of existing
business and the maintenance of profitability. The Company has divided its
businesses into strategic business units, which focus on various markets:
Individual Financial Security, Group Dental Insurance, Group Insurance, and
Retirement. Individual Financial Security services a closed block of
individual life products and Retirement services a closed block of
individual annuities and supplemental contracts. Revenues, including net
realized investment gains and losses, for these strategic business units
for the years ended December 31 were as follows:
2006 2005 2004
----------- ---------- --------
Individual Financial Security $ 161,889 $ 168,682 $261,139
Group Dental Insurance 26,299,965 7,139,685 649,420
Group Insurance 409,212 -- --
Retirement 32,683 13,993 53,724
----------- ---------- --------
Total $26,903,749 $7,322,360 $964,283
=========== ========== ========
6
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying financial statements have been prepared in accordance with
U.S. generally accepted accounting principles (GAAP). The preparation of
financial statements in conformity with GAAP requires management to make
certain estimates and assumptions that affect reported assets and
liabilities, including reporting or disclosure of contingent assets and
liabilities as of the balance sheet date and the reported amounts of
revenues and expenses during the reporting period. Future events, including
changes in mortality, morbidity, interest rates and asset valuations, could
cause actual results to differ from the estimates used in the financial
statements, and such changes in estimates are recorded in the statements of
operations in the period in which they are made.
The most significant estimates include those used in determining the
balance and amortization of deferred policy acquisition costs for
traditional and nontraditional insurance products, policyholder
liabilities, valuation of impairment losses on investments, and income
taxes. Although some variability is inherent in these estimates, the
recorded amounts reflect management's best estimates based on facts and
circumstances as of the balance sheet date. Management believes the amounts
provided are appropriate.
INSURANCE REVENUES AND EXPENSES
Premiums on traditional life products, which include term insurance, are
credited to revenue when due. For accident and health, group dental, and
group life products, premiums are credited to revenue over the contract
period as earned. To the extent that this revenue is unearned, it is
reported as part of unearned premiums and fees on the balance sheets.
Benefits and expenses are recognized in relation to premiums over the
contract period via a provision for future policy benefits and the
amortization of deferred policy acquisition costs.
Nontraditional life products include individual adjustable and group
universal life insurance. Revenue from nontraditional life products and
deferred annuities is comprised of policy and contract fees charged for the
cost of insurance, policy administration and surrenders and is assessed on
a daily or monthly basis and recognized as revenue when assessed and
earned. Expenses include both the portion of claims not covered by and the
interest credited to the related policy and contract account balances.
Deferred policy acquisition costs are amortized relative to estimated gross
profits or margins.
Any premiums on both traditional and nontraditional products due as of the
date of the financial statements that are not yet paid are included in
premiums and fees receivable on the balance sheets.
Certain nontraditional life products, specifically individual adjustable
life insurance policies, require payment of fees in advance for services
that will be rendered over the estimated lives of the policies. These
payments are established as unearned revenue reserves upon receipt and are
included in unearned premiums and fees on the balance sheets. These
unearned revenue reserves are amortized to operations over the estimated
lives of these policies and contracts in relation to the emergence of
estimated gross profit margins.
VALUATION OF INVESTMENTS AND NET INVESTMENT INCOME
Fixed maturity securities, which may be sold prior to maturity, are
classified as available-for-sale and are carried at fair value. Premiums
and discounts are amortized or accreted over the estimated lives of the
securities based on the interest yield method. The Company recognizes the
excess of all cash flows attributed to its beneficial interest in
asset-backed securities, including all interest only strips and
asset-backed securities not of high credit quality, estimated at the
acquisition/transaction date over the initial investment as interest income
over the life of the Company's beneficial interest using the effective
yield method.
(Continued)
7
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
VALUATION OF INVESTMENTS AND NET INVESTMENT INCOME (CONTINUED)
The Company uses book value as cost for applying the retrospective
adjustment method to loan-backed and fixed maturity securities purchased.
Prepayment assumptions for single class and multi-class mortgage-backed
securities were obtained from broker/dealer survey values or internal
estimates.
Available-for-sale securities are stated at fair value, with the unrealized
gains and losses, net of adjustments to deferred policy acquisition costs,
reserves and deferred federal income tax, reported as a separate component
of accumulated other comprehensive income in stockholder's equity. The
adjustment to deferred policy acquisition costs represents the change in
amortization of deferred policy acquisition costs that would have been
required as a charge or credit to operations had such unrealized amounts
been realized. The adjustment to reserves represents the increase in policy
reserves from using a discount rate that would have been required if such
unrealized gains had been realized and the proceeds reinvested at then
current market interest rates, which were lower than the current effective
portfolio rate.
Fair values of fixed maturity securities are based on quoted market prices
where available. For fixed maturity securities not based on quoted market
prices, generally private placement securities and securities that do not
trade regularly, an internally developed pricing model using a commercial
software application is most often used. The internally developed pricing
model is developed by obtaining spreads versus the U.S. Treasury yield for
corporate securities with varying weighted average lives and bond ratings.
The weighted average life and bond rating of a particular fixed maturity
security to be priced are important inputs into the model and are used to
determine a corresponding spread that is added to the U.S. Treasury yield
to create an estimated market yield for that security. The estimated market
yield, liquidity premium, any adjustments for known credit risk, and other
relevant factors are then used to estimate the fair value of the particular
fixed maturity security. For securities for which quoted market prices are
not available and the internally developed pricing model is not suitable
for estimating fair values, qualified company representatives determine the
fair value using discounted cash flows and pricing information obtained
from the administrator from whom cash flows are distributed for these
certain structured securities. As of December 31, 2006, 100% of the fair
values of fixed maturity securities were obtained from quoted market
prices.
The Company recognizes interest income as earned, net of related investment
expenses.
For mortgage-backed securities, the Company recognizes income using a
constant effective yield method based on prepayment assumptions obtained
from an outside service provider or upon analyst review of the underlying
collateral and the estimated economic life of the securities. When
estimated prepayments differ from the anticipated prepayments, the
effective yield is recalculated to reflect actual prepayments to date and
anticipated future payments. Any resulting adjustment is included in net
investment income. All other investment income is recorded using the
interest method without anticipating the impact of prepayments.
Policy loans are carried at the unpaid principal balance.
Cash and cash equivalents are carried at cost, which approximates fair
value. The Company considers all money market funds and commercial paper
with original maturity dates of less than three months to be cash
equivalents. The Company places its cash and cash equivalents with high
quality financial institutions and, at times, these balances may be in
excess of the Federal Deposit Insurance Corporation (FDIC) insurance limit.
(Continued)
8
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
REALIZED AND UNREALIZED GAINS AND LOSSES
Realized and unrealized gains and losses are determined on the specific
identification method. The Company regularly reviews each investment in its
various asset classes to evaluate the necessity of recording impairment
losses for other-than-temporary declines in the fair value of the
investments. When the Company determines that an invested asset is
other-then-temporarily impaired, the invested asset is written down to fair
value and the amount of the impairment is included in realized gains and
losses on the statements of operations. The fair value then becomes the new
cost basis of the investment and any subsequent recoveries in fair value
are recognized at disposition.
Under the Company's accounting policy for debt securities that can be
contractually prepaid or otherwise settled in a way that may limit the
Company's ability to fully recover cost, an impairment is deemed to be
other-than-temporary unless the Company has both the ability and intent to
hold the investment for a reasonable period of time. The Company estimates
cash flows over the life of purchased beneficial interests in securitized
financial assets. If the Company estimates that the fair value of its
beneficial interests is not greater than or equal to its carrying value
based on current information and events, and if there has been an adverse
change in estimated cash flows since the last revised estimate, considering
both timing and amount, then the Company recognizes an other-than-temporary
impairment and writes down the purchased beneficial interest to fair value.
For other debt securities, an other-than-temporary charge is taken when the
Company does not have the ability and intent to hold the security until the
forecasted recovery or if it is no longer probable that the Company will
recover all amounts due under the contractual terms of the security. Many
criteria are considered during this process including but not limited to,
the length of time and the extent to which the current fair value has been
below the amortized cost of the security, specific credit issues such as
collateral, financial prospects related to the issuer, the Company's intent
to hold or dispose of the security, and current economic conditions.
The Company may, from time to time, sell invested assets subsequent to the
balance sheet date that were considered temporarily impaired at the balance
sheet date for several reasons. The rationale for the change in the
Company's ability and intent generally focuses on changes in the economic
facts and circumstances related to the invested asset subsequent to the
balance sheet date, significant unforeseen changes in the Company's
liquidity needs, or changes in tax laws or the regulatory environment.
The Company did not record any other-than-temporary impairments in 2006,
2005, and 2004.
RISKS
The following is a description of the most significant risks facing the
Company:
CREDIT RISK:
Credit risk is the risk that issuers of securities or other parties,
including reinsurers, default on their contractual obligations. The Company
attempts to minimize the adverse impact of this risk by monitoring
portfolio diversification by asset class, creditor and industry and by
complying with investment limitations governed by state insurance laws and
regulations as applicable. The Company actively monitors and manages
exposures, determines whether securities are impaired and takes charges in
the period such assessments are made. Following below is discussion
regarding particular asset class concentration of credit risk:
(Continued)
9
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RISKS (CONTINUED)
CONCENTRATION OF CREDIT RISK:
CASH AND CASH EQUIVALENTS:
Certain financial instruments, consisting primarily of cash and cash
equivalents, potentially subject the Company to concentration of
credit risk. The Company places its cash and cash equivalents with
high quality financial institutions and limits the amount of credit
exposure with any one institution.
FINANCIAL INSTRUMENTS:
Concentration of credit risk with respect to fixed maturity securities
is limited because of the diverse geographic base and industries of
the underlying issuers. This diversity is an integral component of the
portfolio management process.
INTEREST RATE RISK:
Interest rate risk is the risk that interest rates will change and cause a
decrease in the value of an insurer's investments relative to the value of
its liabilities. The Company attempts to minimize the adverse impact of
this risk by maintaining a diversified portfolio of investments and
monitoring cash flow patterns in order to approximately match the expected
maturity of its liabilities, by employing disciplined new product
development procedures and by offering a wide range of products and by
operating throughout the United States.
LEGAL/REGULATORY RISK:
Legal or regulatory risk is the risk that changes in the legal or
regulatory environment in which an insurer operates will result in
increased competition, reduced demand for a company's products, or
additional unanticipated expenses in the pricing of a company's products.
The Company attempts to minimize the adverse impact of this risk by
offering various products and by operating throughout the United States.
The Company specifically monitors its risk toward any one particular
product or particular jurisdictions. The Company employs compliance
practices that identify and assist in minimizing the adverse impact of this
risk.
RATINGS RISK:
Ratings risk is the risk that rating agencies change their outlook or
rating of the Company, where such change or changes in the Company's
underlying business or a combination of both could negatively impact the
Company. The Company employs a strategic planning process, disciplined new
product procedures, monitors its risk based capital and other capital
ratios for adequacy and maintains regular communications with the rating
agencies in its efforts to minimize the adverse impact of this risk.
REINSURANCE RISK:
Reinsurance risk is the risk that reinsurance companies, where a company
has ceded a portion of its underwriting risk, may default on their
obligation. The Company has entered into certain reinsurance contracts to
cede a portion of its life business. These contracts are generally
immaterial to the Company's results of operations. The Company monitors the
ratings of reinsurance companies it chooses to cede risk to and follows up
on any outstanding balances with reinsurance companies.
(Continued)
10
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
DEFERRED POLICY ACQUISITION COSTS
The costs of acquiring new and renewal business, which vary with and are
primarily related to the production of new and renewal business, are
generally deferred to the extent recoverable from future premiums or
expected gross profits. Deferrable costs include commissions, underwriting
expenses and certain other selling and issue costs. Deferred policy
acquisition costs (DAC) are subject to loss recognition testing at least
annually.
For traditional life, accident and health, group dental, and group life
product, DAC are amortized with interest over the premium paying period in
proportion to the ratio of annual premium revenues to ultimate anticipated
premium revenues. The ultimate premium revenues are estimated based upon
the same assumptions used to calculate the future policy benefits.
For nontraditional life products and deferred annuities, DAC are amortized
with interest over the expected lives of the contracts in relation to the
present value of estimated gross profits from investment, mortality and
expense, and lapse margins. The Company reviews actuarial assumptions used
to project estimated gross profits, such as mortality, persistency,
expenses, and investment returns, periodically throughout the year. These
assumptions reflect the Company's best estimate of future experience.
Changes in actuarial assumptions can have a significant impact on the
amount of DAC reported for nontraditional life and the related amortization
patterns. In the event actual experience differs from assumptions or
assumptions are revised to reflect management's best estimate, the Company
records an increase or decrease in DAC amortization expense, which could be
significant.
Any resulting impact to financial results from a change in actuarial
assumption is included in amortization of deferred policy acquisition costs
in the statements of operations. DAC are adjusted to reflect the impact of
unrealized gains and losses on fixed maturity securities available-for-sale
as disclosed in note 9. The adjustment represents the changes in
amortization that would have been recorded had such unrealized amounts been
realized.
REINSURANCE
Insurance liabilities are reported before the effects of ceded reinsurance.
Reinsurance recoverables represent amounts due from reinsurers for paid and
unpaid benefits, expense reimbursements, prepaid premiums and future policy
benefits. Amounts recoverable from reinsurers are estimated in a manner
consistent with the claim liability associated with the reinsured business.
Reinsurance premiums ceded and recoveries on benefits and claims incurred
are deducted from the respective income and expense accounts.
(Continued)
11
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
POLICYHOLDER LIABILITIES
Policy and contract account balances represent the net accumulation of
funds associated with nontraditional life products and deferred annuities.
Additions to the account balances include premiums, deposits and interest
credited by the Company. Decreases in the account balances include
surrenders, withdrawals, benefit payments and charges assessed for the cost
of insurance, policy administration and surrenders.
Future policy and contract benefits are comprised of reserves for
traditional life and group life products. The reserves were calculated
based on industry mortality experience and assumptions regarding investment
yields.
Pending policy and contract claims primarily represent amounts estimated
for claims incurred but not reported and claims that have been reported but
not settled on group life, accident and health, and group dental products.
Such liabilities are estimated based upon the Company's historical
experience and other actuarial assumptions that consider current
developments and anticipated trends.
Other policyholder funds are comprised of dividend accumulations and
supplementary contracts without life contingencies.
PARTICIPATING BUSINESS
Dividends on participating policies and other discretionary payments are
declared by the Board of Directors based upon actuarial determinations that
take into consideration current mortality, interest earnings, expense
factors, and federal income taxes. Dividends are recognized as expenses
consistent with the recognition of premiums. At December 31, 2006 and 2005,
the total participating business in force was $15,865,000 and $16,908,000,
respectively. As a percentage of total life insurance in force,
participating business in force represents 1% and 78% at December 31, 2006
and 2005, respectively.
INCOME TAXES
The Company files a life/non-life consolidated federal income tax return
with Minnesota Mutual Companies, Inc., the Company's ultimate parent. The
Company utilizes a consolidated approach to the allocation of current
taxes, whereby, the tax benefits resulting from any losses by the Company,
which would be realized by Minnesota Mutual Companies, Inc. on a
consolidated return, go to the benefit of the Company. Intercompany tax
balances are settled annually when the tax return is filed with the
Internal Revenue Service (IRS).
The Company provides for federal income taxes based on amounts the Company
believes it ultimately will owe. Inherent in the provision for federal
income taxes are estimates regarding the deductibility of certain items and
the realization of certain tax credits. In the event the ultimate
deductibility of certain items or the realization of certain tax credits
differs from estimates, the Company may be required to significantly change
the provision for federal income taxes recorded in the financial
statements. Any such change could significantly affect the amounts reported
in the statements of operations. Management has used best estimates to
establish reserves based on current facts and circumstances regarding tax
exposure items where the ultimate deductibility is open to interpretation.
Management evaluates the appropriateness of such reserves based on any new
developments specific to their fact patterns. Information considered
includes results of completed tax examinations, Technical Advice
Memorandums and other rulings issued by the IRS or the tax courts.
(Continued)
12
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES (CONTINUED)
The Company utilizes the asset and liability method of accounting for
income tax. Under this method, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss and tax
credit carryforwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled.
Under this method, the effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date. Valuation allowances are established when it is determined
that it is more likely than not that the deferred tax asset will not be
fully realized. Current income taxes are charged to operations based upon
amounts estimated to be payable as a result of taxable operations for the
current year.
NEW PRONOUNCEMENTS
In September 2006, the Financial Accounting Standards Board (FASB) released
Statement of Financial Accounting Standards No. 157 (FAS 157), FAIR VALUE
MEASUREMENTS. FAS 157 establishes an authoritative definition of fair
value, sets out a framework for measuring fair value, and requires
additional disclosures regarding fair value measurements. The application
of FAS 157 is required for fiscal years beginning after November 15, 2007.
The Company is currently evaluating the effect of this statement on its
results of operations and financial position.
In September 2006, the U.S. Securities and Exchange Commission (SEC) issued
Staff Accounting Bulletin (SAB) No. 108 (SAB 108), CONSIDERING THE EFFECTS
OF PRIOR YEAR MISSTATEMENTS WHEN QUANTIFYING MISSTATEMENTS IN CURRENT YEAR
FINANCIAL STATEMENTS. SAB 108 addresses quantifying the financial statement
effects of misstatements, specifically, how the effects of prior year
uncorrected errors must be considered in quantifying misstatements in the
current year financial statements. SAB 108 does not change the SEC staff's
previous positions in SAB No. 99, MATERIALITY, regarding qualitative
considerations in assessing the materiality of misstatements. SAB 108 is
effective for fiscal years ending after November 15, 2006. Any material
errors in existence at the beginning of the fiscal year ending after
November 15, 2006, may be corrected through a one-time cumulative effect
adjustment to beginning of year retained earnings. There was no material
impact to the Company's results of operations or financial position due to
the adoption of SAB 108 in 2006.
In June 2006, the FASB issued Interpretation No. 48, ACCOUNTING FOR
UNCERTAINTY IN INCOME TAXES - AN INTERPRETATION OF FASB STATEMENT NO. 109,
ACCOUNTING FOR INCOME TAXES (FIN 48). FIN 48 clarifies the accounting for
uncertainty in income taxes recognized in an enterprise's financial
statements in accordance with FASB Statement No. 109, ACCOUNTING FOR INCOME
TAXES. FIN 48 prescribes a recognition threshold and measurement attribute
for the financial statement recognition and measurement of a tax position
taken or expected to be taken in a tax return. FIN 48 also provides
guidance on derecognition, classification, interest and penalties,
disclosure and transition. The application of FIN 48 is required for fiscal
years beginning after December 15, 2006. The Company expects no material
impact to its results of operations or financial position due to the
adoption of FIN 48 in 2007.
In November 2005, the FASB issued FASB Staff Position (FSP) FAS 115-1 and
124-1, THE MEANING OF OTHER-THAN-TEMPORARY IMPAIRMENT AND ITS APPLICATION
TO CERTAIN INVESTMENTS, which addresses the determination as to when an
investment is considered impaired, whether that impairment is
other-than-temporary, and the measurement of an impairment loss. This staff
position also includes accounting considerations subsequent to the
recognition of an other-than-temporary impairment and requires certain
disclosures regarding unrealized losses that have not been recognized as
other-than-temporary impairments. The Company's other-than-temporary policy
was not impacted by the adoption of this staff position as the Company's
policy was already consistent with the resulting guidance.
(Continued)
13
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
NEW PRONOUNCEMENTS (CONTINUED)
In September 2005, the American Institute of Certified Public Accountants
Accounting Standards Executive Committee issued Statement of Position 05-1
(SOP 05-1), ACCOUNTING BY INSURANCE ENTERPRISES FOR DEFERRED ACQUISITION
COSTS IN CONNECTION WITH MODIFICATIONS OR EXCHANGES OF INSURANCE CONTRACTS.
This statement provides guidance on accounting for DAC on internal
replacements and investment contracts other than those specifically
described by FASB Statement No. 97, ACCOUNTING AND REPORTING BY INSURANCE
ENTERPRISES FOR CERTAIN LONG-DURATION CONTRACTS AND FOR REALIZED GAINS AND
LOSSES FROM THE SALE OF INVESTMENTS. This statement is effective for
internal replacements occurring in fiscal years beginning after December
15, 2006. The Company will adopt SOP 05-1 on January 1, 2007. The Company
expects no material impact to its results of operations or financial
position due to the adoption of SOP 05-1.
In May 2005, the FASB issued Statement of Financial Accounting Standards
No. 154 (FAS 154), ACCOUNTING CHANGES AND ERROR CORRECTIONS, A REPLACEMENT
OF APB OPINION NO. 20 AND FASB STATEMENT NO. 3. This document establishes
retrospective application for a change in accounting principle, if
practicable, unless specifically addressed in transition guidance within an
accounting pronouncement. The document also provides guidance for
determining whether retroactive treatment is impracticable. In addition the
document addresses reporting of a correction of an error and restating
previously issued financial statements. FAS 154 was effective for
accounting changes and corrections of errors made in fiscal years beginning
after December 15, 2005. The adoption of FAS 154 on January 1, 2006, did
not have a material impact on the results of operations or financial
position of the Company.
In December 2004, the FASB issued Statement of Financial Accounting
Standards No. 153 (FAS 153), EXCHANGE OF NONMONETARY ASSETS, AN AMENDMENT
OF APB OPINION NO. 29 (APB 29), which eliminates the exception in APB 29
for nonmonetary exchanges of similar productive assets and replaces it with
a general exception for exchanges of nonmonetary assets that do not have
commercial substance. This guidance is effective for nonmonetary asset
exchanges occurring in fiscal periods beginning after June 15, 2005. The
adoption of FAS 153 on January 1, 2006, did not have a material impact on
the results of operations or financial position of the Company.
In March 2004, the Emerging Issues Task Force (EITF) reached consensus on
further guidance concerning the identification of and accounting for
other-than-temporary impairments and disclosures for cost method
investments, as required by EITF Issue No. 03-1, THE MEANING OF
OTHER-THAN-TEMPORARY IMPAIRMENT AND ITS APPLICATION TO CERTAIN INVESTMENTS
(EITF 03-1), which was issued on October 23, 2003. The Company revised its
method of calculating the impairment of securities based on this additional
guidance. Other-than-temporary impairments reduce the value of the
investment to fair value.
In September 2004, the FASB exposed for comment FSP EITF Issue 03-1-a,
which was intended to provide guidance related to the application of
paragraph 16 of EITF 03-1, and proposed FSP EITF Issue 03-1-b, which
proposed a delay in the effective date of EITF 03-1 for debt securities
that are impaired because of interest rate and/or sector spread increases.
Based on comments received on these proposals, on September 30, 2004 the
FASB issued FSP EITF 03-1-1, EFFECTIVE DATE OF PARAGRAPHS 10-20 OF EITF
ISSUE NO. 03-1, which delayed the effectiveness of the related paragraphs
in EITF 03-1, with the exception of certain disclosure requirements.
(Continued)
14
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
NEW PRONOUNCEMENTS (CONTINUED)
In June 2004, the FASB issued FSP 97-1, SITUATIONS IN WHICH PARAGRAPHS
17(b) AND 20 OF FASB STATEMENT NO. 97, ACCOUNTING AND REPORTING BY
INSURANCE ENTERPRISES FOR CERTAIN LONG-DURATION CONTRACTS AND FOR REALIZED
GAINS AND LOSSES FROM THE SALE OF INVESTMENTS (FAS 97), PERMIT OR REQUIRE
ACCRUAL OF AN UNEARNED REVENUE LIABILITY (FSP FAS 97-1), to clarify the
guidance related to unearned revenue reserves (URR). The primary purpose of
FSP FAS 97-1 is to address the practice question of whether SOP 03-1
restricts the application of the URR guidance in FAS 97 to situations in
which profits are expected to be followed by losses. Although SOP 03-1
requires URR in certain situations where profits are followed by losses, it
does not restrict the calculation of URR to only those situations. The
adoption of FSP FAS 97-1 in 2004 had no material impact to the results of
operations or financial position of the Company.
Effective January 1, 2004, the Company adopted SOP 03-1. This statement
provides guidance on the classification, valuation and accounting for
nontraditional long-duration contract liabilities, the accounting for
contracts with guaranteed minimum death benefits (GMDB), the accounting for
sales inducements, and separate account presentation and valuation. SOP
03-1 requires companies to evaluate the significance of certain guarantees
in products such as GMDB to determine whether a contract should be
accounted for as an investment or insurance contract. The adoption of SOP
03-1 had no impact to the results of operations or financial position of
the Company.
(3) INVESTMENTS
Net investment income for the years ended December 31 was as follows:
2006 2005 2004
---------- -------- --------
Fixed maturity securities $5,260,381 $654,871 $663,222
Policy loans 4,798 4,296 9,394
Cash equivalents 815,162 37,018 12,971
---------- -------- --------
Gross investment income 6,080,341 696,185 685,587
Investment expense 264,124 40,520 38,737
---------- -------- --------
Total $5,816,217 $655,665 $646,850
========== ======== ========
Net realized investment gains (losses) for the years ended December 31 were
as follows:
2006 2005 2004
--------- ------- -------
Fixed maturity securities $(169,854) $(2,988) $11,440
--------- ------- -------
Total $(169,854) $(2,988) $11,440
========= ======= =======
Gross realized gains (losses) on the sales of fixed maturity securities for
the years ended December 31 were as follows:
2006 2005 2004
--------- ------- -------
Gross realized gains $ -- $ 5,511 $11,514
Gross realized losses (169,854) (8,499) (74)
(Continued)
15
(3) INVESTMENTS (CONTINUED)
Net accumulated unrealized gains (losses) included in stockholder's equity
at December 31 were as follows:
2006 2005
--------- ---------
Gross unrealized gains $ 587,297 $ 261,103
Gross unrealized losses (523,618) (161,632)
Adjustment to deferred policy acquisition costs 10,275 16,103
Adjustment to unearned policy and contract fees (2,125) (3,334)
--------- ---------
71,829 112,240
Deferred federal income taxes (25,142) (39,284)
--------- ---------
Net accumulated unrealized gains $ 46,687 $ 72,956
========= =========
The amortized cost and fair value of investments in fixed maturity
securities by type of investment were as follows:
[Enlarge/Download Table]
GROSS UNREALIZED
AMORTIZED ------------------- FAIR
DECEMBER 31, 2006 COST GAINS LOSSES VALUE
------------------------------------- ------------ -------- -------- ------------
U.S. government $ 5,290,014 $121,413 $ 82,825 $ 5,328,602
Agencies not backed by the full faith
and credit of the U.S. government 2,930,646 11,279 -- 2,941,925
Corporate securities 73,498,247 415,058 217,380 73,695,925
Asset-backed securities 5,560,776 -- 44,240 5,516,536
Mortgage-backed securities 28,750,999 39,547 179,173 28,611,373
------------ -------- -------- ------------
Total $116,030,682 $587,297 $523,618 $116,094,361
============ ======== ======== ============
[Download Table]
GROSS UNREALIZED
AMORTIZED ------------------- FAIR
DECEMBER 31, 2005 COST GAINS LOSSES VALUE
------------------------------------- ----------- -------- -------- -----------
U.S. government $ 4,802,036 $106,699 $ 66,466 $ 4,842,269
Agencies not backed by the full faith
and credit of the U.S. government 2,765,717 -- 43,998 2,721,719
Corporate securities 6,127,273 154,404 51,168 6,230,509
----------- -------- -------- -----------
Total $13,695,026 $261,103 $161,632 $13,794,497
=========== ======== ======== ===========
The amortized cost and estimated fair value of fixed maturity securities at
December 31, 2006, by contractual maturity, are shown below. Expected
maturities will differ from contractual maturities because borrowers may
have the right to call or prepay obligations with or without call or
prepayment penalties.
AMORTIZED FAIR
COST VALUE
------------ ------------
Due in one year or less $ 4,769,943 $ 4,765,665
Due after one year through five years 39,232,401 39,214,897
Due after five years through ten years 41,090,812 41,202,524
Due after ten years 2,186,527 2,299,902
Mortgage-backed securities 28,750,999 28,611,373
------------ ------------
Total $116,030,682 $116,094,361
============ ============
(Continued)
16
(3) INVESTMENTS (CONTINUED)
The Company had certain investments with a reported fair value lower than
the cost of the investment as follows:
UNREALIZED
DECEMBER 31, 2006 FAIR VALUE COST LOSSES
------------------------------------ ----------- ----------- ----------
U.S. government securities
Less than 12 months $ 3,146,485 $ 3,229,310 $ 82,825
Greater than 12 months -- -- --
Corporate securities
Less than 12 months 37,342,680 37,560,060 217,380
Greater than 12 months -- -- --
Mortgage and asset-backed securities
Less than 12 months 24,732,190 24,955,603 223,413
Greater than 12 months -- -- --
UNREALIZED
DECEMBER 31, 2005 FAIR VALUE COST LOSSES
------------------------------------- ---------- ---------- ----------
U.S. government securities
Less than 12 months $2,638,042 $2,672,463 $34,421
Greater than 12 months 1,385,415 1,417,460 32,045
Agencies not backed by the full faith
and credit of the U.S. government
Less than 12 months 2,721,719 2,765,717 43,998
Greater than 12 months -- -- --
Corporate securities
Less than 12 months 2,305,144 2,350,432 45,288
Greater than 12 months 243,996 249,876 5,880
Unrealized losses on fixed maturity securities are generally interest
related rather than credit related and management has the ability and the
intent to hold until recovery of amortized cost.
At December 31, 2006 and 2005, fixed maturity securities with a carrying
value of $4,897,204 and $4,449,651 respectively, were on deposit with
various regulatory authorities as required by law.
(4) INCOME TAXES
Income tax expense (benefit) varies from the amount computed by applying
the federal income tax rate of 35% to income (loss) from operations before
taxes. The significant components of this difference were as follows:
[Download Table]
2006 2005 2004
---------- ------- ---------
Computed tax expense (benefit) $1,620,282 $11,566 $(186,476)
Difference between computed and actual tax expense
(benefit):
Provision to return adjustment -- -- 4,388
Expense adjustments and other (1) 1 --
---------- ------- ---------
Total tax expense (benefit) $1,620,281 $11,567 $(182,088)
========== ======= =========
(Continued)
17
(4) INCOME TAXES (CONTINUED)
The tax effects of temporary differences that give rise to the Company's
net deferred federal tax liability were as follows:
2006 2005
-------- --------
Deferred tax assets:
Policyholder dividends $ 14,357 $ 14,367
Policyholder reserves 3,524 4,488
Tax deferred policy acquisition costs 59,553 73,211
Ceding commission 110,756 --
Other 1,043 199
-------- --------
Gross deferred tax assets 189,233 92,265
-------- --------
Deferred tax liabilities:
Deferred policy acquisition costs 160,216 44,293
Premiums 186,307 9,749
Basis difference on investments 89,695 14,226
Net unrealized capital gains 22,288 34,815
Other 2,517 2,373
-------- --------
Gross deferred tax liabilities 461,023 105,456
-------- --------
Net deferred tax liability $271,790 $ 13,191
======== ========
A valuation allowance for deferred tax assets was not considered necessary
as of December 31, 2006 and 2005 because the Company believes that it is
more likely than not that the deferred tax assets will be realized through
future reversals of existing taxable temporary differences and future
taxable income.
Income taxes paid (received) for the years ended December 31, 2006, 2005,
and 2004, were $1,436,373 $(285,021) and $10,767, respectively.
In December 2006, the IRS completed their audit of the consolidated federal
income tax return for Minnesota Mutual Companies, Inc. and subsidiaries for
the years 2003 and 2004. There were no proposed adjustments affecting the
Company. The consolidated tax returns for 2005 and later are expected to be
under examination by the IRS beginning in late 2007. The Company believes
that its applicable share of any additional taxes refunded or assessed as a
result of the examination will not have a material effect on its financial
position.
(Continued)
18
(5) LIABILITY FOR UNPAID ACCIDENT AND HEALTH CLAIMS, RESERVE FOR LOSSES, AND
CLAIM ADJUSTMENT EXPENSES
The liability for unpaid accident and health claims, reserve for losses and
claim adjustment expenses is included in future policy and contract
benefits, pending policy and contract claims, on the balance sheets.
Activity in the liability for unpaid accident and health claims, reserve
for losses and claim adjustment expenses is summarized as follows:
2006 2005 2004
----------- ---------- --------
Balance at January 1 $ 850,000 $ 50,000 $ --
Less: reinsurance recoverable -- -- --
----------- ---------- --------
Net balance at January 1 850,000 50,000 --
----------- ---------- --------
Incurred related to:
Current year 16,116,609 5,665,294 162,482
Prior years (117,995) (10,617) --
----------- ---------- --------
Total incurred 15,998,614 5,654,677 162,482
----------- ---------- --------
Paid related to:
Current year 14,664,809 4,815,294 112,482
Prior years 732,005 39,383 --
----------- ---------- --------
Total paid 15,396,814 4,854,677 112,482
Net balance at December 31 1,451,800 850,000 50,000
Plus: reinsurance recoverable -- -- --
----------- ---------- --------
Balance at December 31 $ 1,451,800 $ 850,000 $ 50,000
=========== ========== ========
As a result of changes in estimates of claims incurred in prior years, the
accident and health claims, reserve for losses and claim adjustment
expenses incurred decreased by $(117,995) in 2006, decreased by $(10,617)
in 2005, and did not change in 2004. These changes in estimates are the
result of normal reserve development inherent in the uncertainty of
establishing the liability for unpaid accident and health claims, reserve
for losses and claim and loss adjustment expenses.
(6) REINSURANCE
In the normal course of business, the Company seeks to limit its exposure
to loss on any single insured and to recover a portion of benefits paid by
ceding reinsurance to other insurance companies. To the extent that a
reinsurer is unable to meet its obligation under the reinsurance agreement,
the Company remains liable. The Company evaluates the financial condition
of its reinsurers and monitors concentrations of credit risk to minimize
its exposure to significant losses from reinsurer insolvencies. Allowances
are established for amounts deemed to be uncollectible.
The Company's financial statements reflect the effects of ceded reinsurance
transactions. Ceded reinsurance involves transferring certain insurance
risks, along with the related written and earned premiums, the Company has
underwritten to other insurance companies who agree to share these risks.
The primary purpose of ceded reinsurance is to protect the Company from
potential losses in excess of the amount it is prepared to accept.
Reinsurance is accounted for over the lives of the underlying reinsured
policies using assumptions consistent with those used to account for the
underlying policies.
(Continued)
19
(6) REINSURANCE (CONTINUED)
The effect of reinsurance on premiums for the years ended December 31 was
as follows:
2006 2005 2004
----------- ---------- --------
Direct premiums $20,953,509 $6,590,054 $239,055
Reinsurance ceded (123,424) (20,184) (19,958)
----------- ---------- --------
Net premiums $20,830,085 $6,569,870 $219,097
=========== ========== ========
Reinsurance recoveries on ceded reinsurance contracts included in
policyholder benefits on the statements of operations were $0 for the years
ending 2006, 2005 and 2004.
The Company entered into an agreement with Patriot Mutual Insurance Company
on November 1, 2006 to acquire a block of small employer group dental
business. These group employers are located in Maine, New Hampshire, and
Vermont. The business was assumed by the Company through a bulk
(assumption) reinsurance agreement. The Company paid a ceding commission of
$320,000 in exchange for the liability transfer. The entire ceding
commission was capitalized and is included in deferred policy acquisition
costs on the balance sheets. In 2006, the Company recorded amortization on
the capitalized ceding commission of $17,778.
Also as part of this acquisition, the Company entered into an
administrative services contract for a small block of accident and health
plans. The Company recorded the administrative activity on its balance
sheets and recognized administrative fees of $7,753 as other income for
2006 on its statements of operations.
(7) FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value of the Company's financial instruments has been
determined using available market information as of December 31, 2006 and
2005. Although management is not aware of any factors that would
significantly affect the estimated fair value, such amounts have not been
comprehensively revalued since those dates. Therefore, estimates of fair
value subsequent to the valuation dates may differ significantly from the
amounts presented herein. Considerable judgment is required to interpret
market data to develop the estimates of fair value. The use of different
market assumptions and/or estimation methodologies may have a material
effect on the estimated fair value amounts.
Refer to note 2 for additional fair value disclosures concerning fixed
maturity securities. The carrying amounts for policy loans, cash, and cash
equivalents approximate the assets' fair values.
The fair values of deferred annuities which have guaranteed interest rates
and surrender charges are estimated to be the amount payable on demand as
of December 31, 2006 and 2005 as those investment contracts have no defined
maturity, are similar to a deposit liability and are based on the current
interest rate environment relative to the guaranteed interest rates. The
amount payable on demand equates to the account balance less applicable
surrender charges. Contracts without guaranteed interest rates and
surrender charges have fair values equal to their accumulation values plus
applicable market value adjustments.
The fair values of supplementary contracts without life contingencies are
calculated using discounted cash flows, based on interest rates currently
offered for similar products with maturities consistent with those
remaining for the contracts being valued.
(Continued)
20
(7) FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The carrying amounts and fair values of the Company's financial
instruments, which were classified as assets as of December 31, were as
follows:
[Download Table]
2006 2005
--------------------------- ---------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
------------ ------------ ------------ ------------
Fixed maturity securities $116,094,361 $116,094,361 $ 13,794,497 $ 13,794,497
Policy loans 68,758 68,758 56,331 56,331
Cash and cash equivalents 4,040,651 4,040,651 102,261,372 102,261,372
------------ ------------ ------------ ------------
Total financial assets $120,203,770 $120,203,770 $116,112,200 $116,112,200
============ ============ ============ ============
The carrying amounts and fair values of the Company's financial
instruments, which were classified as liabilities as of December 31, were
as follows:
2006 2005
------------------- -------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- -------- -------- --------
Deferred annuities $ 72,724 $ 72,724 $103,173 $103,173
Supplementary contracts without
life contingencies 71,168 71,168 68,438 68,438
-------- -------- -------- --------
Total financial liabilities $143,892 $143,892 $171,611 $171,611
======== ======== ======== ========
(8) RELATED PARTY TRANSACTIONS
The Company has an agreement with Minnesota Life, where Minnesota Life
processes premiums and claims on behalf of the Company. These amounts are
settled quarterly on a net basis. The Company also has agreements with
Minnesota Life and Securian Financial Group, Inc. for expenses including
charges for occupancy costs, data processing, compensation and benefits,
advertising and promotion, and other administrative expenses, which
Minnesota Life and Securian Financial Group Inc. incur on behalf of the
Company. As of December 31, 2006, the Company reported $33,495 as amounts
due to Securian Financial Group, Inc., and $186,689 as net amounts due to
Minnesota Life. As of December 31, 2005, the Company reported $530 as net
amounts due to Minnesota Life, and $19,621 as amounts due to its affiliate
Securian Financial Group, Inc. The amount of expenses incurred by the
Company related to these agreements for the years ended December 31, 2006,
2005, and 2004 were $726,658, 259,592, and $225,194 respectively.
The Company contracts with its affiliate, Advantus Capital Management,
Inc., for advisory services performed in managing the Company's general
account asset portfolios. Amounts paid under this advisory agreement were
$258,632 and $36,477 in 2006 and 2005, respectively.
Securian Financial Group, Inc. has provided guarantees to certain states to
provide additional capital contributions to the Company to maintain capital
and surplus amounts at the greater of financial admission requirements and
risk-based capital requirements.
(Continued)
21
(9) OTHER COMPREHENSIVE INCOME (LOSS)
Comprehensive income (loss) is defined as any change in stockholder's
equity originating from non-owner transactions. The Company has identified
those changes as being comprised of net income (loss) and unrealized
appreciation (depreciation) on securities and related adjustments.
The components of comprehensive income (loss), other than net income
(loss), are illustrated below:
[Enlarge/Download Table]
2006 2005 2004
--------- --------- ---------
Other comprehensive loss before tax:
Unrealized losses on securities $(205,646) $(382,617) $(316,199)
Reclassification adjustment for
(gains) losses included in net income 169,854 2,988 (11,440)
Adjustment to deferred policy acquisition costs (5,828) 52,192 34,224
Adjustment to unearned policy and contract fees 1,209 (10,807) (7,087)
--------- --------- ---------
(40,411) (338,244) (300,502)
Income tax expense related to items of
other comprehensive loss 14,142 118,383 105,176
--------- --------- ---------
Other comprehensive loss net of tax $ (26,269) $(219,861) $(195,326)
========= ========= =========
(10) STOCK DIVIDENDS AND CAPITAL CONTRIBUTIONS
Dividend payments by the Company to its parent cannot exceed the greater of
10% of statutory capital and surplus or the statutory net gain from
operations for the preceding year-end, as well as the timing and amount of
dividends paid in the preceding 12 months, without prior approval from the
Minnesota Department of Commerce. Based on these limitations and 2006
statutory results, the maximum amount available for the payment of
dividends during 2007 by the Company without prior regulatory approval is
$11,643,475 after January 1, 2007.
Other than noted above, there are no restrictions placed on the Company's
surplus, including for whom the surplus is being held.
The Company received a $100,400,000 capital contribution in the form of
cash from Minnesota Life on December 30, 2005. The capital contribution was
required as part of a filing for the Company to be authorized to sell
business in the state of New York. On January 3, 2006, a $400,000 capital
contribution was made related to the same filing requirement.
(11) COMMITMENTS AND CONTINGENCIES
The Company is involved in various pending or threatened legal proceedings
arising out of the normal course of business. In the opinion of management,
the ultimate resolution of such litigation will likely not have a material
adverse effect on operations or the financial position of the Company.
The Company is contingently liable under state regulatory requirements for
possible assessments pertaining to future insolvencies and impairments of
unaffiliated insurance companies. The Company records a liability for
future guaranty fund assessments based upon known insolvencies, according
to data received from the National Organization of Life and Health
Insurance Guaranty Association. At December 31, 2006 and 2005 the amount
was immaterial to the financial statements. An asset is recorded for the
amount of guaranty fund assessments paid, which can be recovered through
future premium tax credits. This asset was $986 as of December 31, 2006 and
2005, respectively. These assets are being amortized over a five-year
period.
(Continued)
22
(11) COMMITMENTS AND CONTINGENCIES (CONTINUED)
In the normal course of business, the Company seeks to limit its exposure
to loss on any single insured and to recover a portion of benefits paid by
ceding reinsurance to other insurance companies. To the extent that a
reinsurer is unable to meet its obligations under the reinsurance
agreement, the Company remains liable. The Company evaluates the financial
condition of its reinsurers and monitors concentrations of credit risk to
minimize its exposure to significant losses from reinsurer insolvencies.
Allowances are established for amounts deemed uncollectible.
(12) STATUTORY FINANCIAL DATA
The Company, is domiciled in the state of Minnesota, prepares statutory
financial statements in accordance with the accounting practices prescribed
or permitted by the insurance departments of the state of domicile.
Prescribed statutory accounting practices are those practices that are
incorporated directly or by reference in state laws, regulations and
general administrative rules applicable to all insurance enterprises
domiciled in a particular state. Permitted statutory account practices
include practices not prescribed by the domiciliary state, but allowed by
the domiciliary state regulatory authority. The Company's insurance
operations have no material statutory accounting practices that differ from
those of the state of domicile or the National Association of Insurance
Commissioners accounting practices. See note 10 for discussion of statutory
dividend limitations.
On a statutory accounting basis, the Company reported net income of
$3,044,172 in 2006, net income of $118,400 in 2005, and net loss of
$(266,997) in 2004. Statutory surplus was $116,434,754 and $113,151,756 as
of December 31, 2006 and 2005, respectively.
(13) SUBSEQUENT EVENT
Minnesota Life has signed a letter of intent to sell Northstar Life
Insurance Company (Northstar) to an unaffiliated
insurance company. Prior to the transaction date, the majority of the
product liabilities of Northstar, which includes group life, credit life,
group disability, and credit disability, will be transferred to the Company
through an assumption reinsurance transaction. Any policies or contracts
remaining in Northstar as of the sale date will be 100% coinsured to the
Company. Subject to regulatory approval, the sale of Northstar is expected
to close in June 2007.
23
SECURIAN LIFE INSURANCE COMPANY
SCHEDULE I - SUMMARY OF INVESTMENTS - OTHER THAN INVESTMENTS IN RELATED PARTIES
DECEMBER 31, 2006
[Enlarge/Download Table]
AS SHOWN
FAIR ON THE
TYPE OF INVESTMENT COST (2) VALUE BALANCE SHEET (1)
------------ ------------ -----------------
Fixed maturity securities:
U.S. government $ 5,290,014 $ 5,328,602 $ 5,328,602
Agencies not backed by the full faith and
credit of the U.S. government 2,930,646 2,941,925 2,941,925
Corporate securities 73,498,247 73,695,925 73,695,925
Asset-backed securities 5,560,776 5,516,536 5,516,536
Mortgage-backed securities 28,750,999 28,611,373 28,611,373
------------ ------------ ------------
Total fixed maturity securities 116,030,682 116,094,361 116,094,361
Policy loans 68,758 68,758 68,758
------------ ------------ ------------
Total investments $116,099,440 $116,163,119 $116,163,119
============ ============ ============
(1) Fair value for fixed maturity securities classified as available-for-sale.
(2) Original cost reduced by repayments and adjusted for amortization of
premiums or accrual of discounts for fixed maturity securities.
See accompanying report of independent registered public accounting firm.
SECURIAN LIFE INSURANCE COMPANY
SCHEDULE III - SUPPLEMENTARY INSURANCE INFORMATION
[Enlarge/Download Table]
AS OF DECEMBER 31,
----------------------------------------------------------
FUTURE POLICY
DEFERRED BENEFITS OTHER POLICY
POLICY LOSSES, CLAIMS CLAIMS AND
ACQUISITION AND SETTLEMENT UNEARNED BENEFITS
SEGMENT COSTS EXPENSES (1) PREMIUMS (2) PAYABLE
---------------------- ----------- -------------- ------------ ------------
2006:
Life insurance $195,514 $1,478,479 $ 4,379 $ 500,087
Accident and
health insurance 302,223 -- 1,674 1,451,800
Annuity -- 147,930 -- --
-------- ---------- ------- ----------
$497,737 $1,626,409 $ 6,053 $1,951,887
======== ========== ======= ==========
2005:
Life insurance $168,204 $1,066,234 $41,652 $ 1,389
Accident and
health insurance -- -- 41,443 850,000
Annuity -- 229,926 -- --
-------- ---------- ------- ----------
$168,204 $1,296,160 $83,095 $ 851,389
======== ========== ======= ==========
2004:
Life insurance $132,806 $ 991,377 $35,168 $ 1,644
Accident and
health insurance -- -- -- 50,000
Annuity -- 336,561 -- --
-------- ---------- ------- ----------
$132,806 $1,327,938 $35,168 $ 51,644
======== ========== ======= ==========
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------------------------------------------------------
AMORTIZATION
BENEFITS, OF DEFERRED
NET CLAIMS, LOSSES POLICY OTHER
PREMIUM INVESTMENT AND SETTLEMENT ACQUISITION OPERATING PREMIUMS
SEGMENT REVENUE (3) INCOME EXPENSES (5) COSTS EXPENSES WRITTEN (4)
---------------------- ----------- ---------- -------------- ------------ ---------- ----------
2006:
Life insurance $ 511,601 $ 61,142 $ 643,176 $57,746 $ 304,482 $--
Accident and
health insurance 20,718,201 5,741,827 15,998,614 17,778 5,631,863 --
Annuity 19,816 13,248 28,810 -- 2,786 --
----------- ---------- ----------- ------- ---------- ---
$21,249,618 $5,816,217 $16,670,600 $75,524 $5,939,131 $--
=========== ========== =========== ======= ========== ===
2005:
Life insurance $ 106,941 $ 53,733 $ 45,650 $35,497 $ 79,557 $--
Accident and
health insurance 6,562,742 589,772 5,654,676 -- 1,479,844 --
Annuity -- 12,160 11,655 -- 1,139 --
----------- ---------- ----------- ------- ---------- ---
$ 6,669,683 $ 655,665 $ 5,711,981 $35,497 $1,560,540 $--
=========== ========== =========== ======= ========== ===
2004:
Life insurance $ 95,073 $ 165,311 $ 204,238 $19,229 $ 100,133 $--
Accident and
health insurance 208,369 430,573 162,482 -- 1,014,785 --
Annuity 2,551 50,966 15,663 -- 722 --
----------- ---------- ----------- ------- ---------- ---
$ 305,993 $ 646,850 $ 382,383 $19,229 $1,115,640 $--
=========== ========== =========== ======= ========== ===
(1) Includes policy and contract account balances
(2) Includes unearned policy and contract fees
(3) Includes policy and contract fees
(4) Applies only to property and liability insurance
(5) Includes reserve transfers
See accompanying report of independent registered public accounting firm.
SECURIAN LIFE INSURANCE COMPANY
SCHEDULE IV - REINSURANCE
YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004
[Enlarge/Download Table]
PERCENTAGE
CEDED TO ASSUMED FROM OF AMOUNT
GROSS OTHER OTHER NET ASSUMED
AMOUNT COMPANIES COMPANIES AMOUNT TO NET
-------------- ------------- ------------ -------------- ----------
2006: Life insurance in force $1,544,941,000 $424,701,000 $-- $1,120,240,000 0.0%
============== ============ === ==============
Premiums:
Life insurance $ 215,492 $ 123,424 $-- $ 92,068 0.0%
Accident and health insurance 20,718,201 -- -- 20,718,201 0.0%
Annuity 19,816 -- -- 19,816 0.0%
-------------- ------------ --- --------------
Total premiums $ 20,953,509 $ 123,424 $-- $ 20,830,085 0.0%
============== ============ === ==============
2005: Life insurance in force $ 21,789,000 $ 4,157,000 $-- $ 17,632,000 0.0%
============== ============ === ==============
Premiums:
Life insurance $ 27,312 $ 20,184 $-- $ 7,128 0.0%
Accident and health insurance 6,562,742 -- -- 6,562,742 0.0%
Annuity -- -- -- -- 0.0%
-------------- ------------ --- --------------
Total premiums $ 6,590,054 $ 20,184 $-- $ 6,569,870 0.0%
============== ============ === ==============
2004: Life insurance in force $ 24,663,000 $ 6,200,000 $-- $ 18,463,000 0.0%
============== ============ === ==============
Premiums:
Life insurance $ 28,209 $ 19,958 $-- $ 8,251 0.0%
Accident and health insurance 208,369 -- -- 208,369 0.0%
Annuity 2,477 -- -- 2,477 0.0%
-------------- ------------ --- --------------
Total premiums $ 239,055 $ 19,958 $-- $ 219,097 0.0%
============== ============ === ==============
See accompanying report of independent registered public accounting firm.
PART C: OTHER INFORMATION
Item Number Caption in Other Information
26. Exhibits
27. Directors and Officers of the Depositor
28. Persons Controlled by or Under Common Control with the Depositor
or the Registrant
29. Indemnification
30. Principal Underwriters
31. Location of Accounts and Records
32. Management Services
33. Fee Representation
PART C: OTHER INFORMATION
ITEM 26. EXHIBITS
The exhibits to this Registration Statement are listed in the Exhibit Index
hereto and are incorporated herein by reference.
ITEM 27. DIRECTORS AND OFFICERS OF THE DEPOSITOR
[Download Table]
NAME AND PRINCIPAL POSITION AND OFFICES
BUSINESS ADDRESS WITH SECURIAN LIFE
------------------ --------------------
Brian C. Anderson Second Vice President
400 Robert Street North
St. Paul, MN 55101
Alfrieda B. Baldwin Director, Assistant Secretary and Counsel
400 Robert Street North
St. Paul, MN 55101
Leslie J. Chapman Vice President
400 Robert Street North
St. Paul, MN 55101
Jenean C. Cordon Vice President
400 Robert Street North
St. Paul, MN 55101
Susan L. Ebertz Vice President - Group Insurance Services
400 Robert Street North
St. Paul, MN 55101
George C. Fremder, Jr. Second Vice President
400 Robert Street North
St. Paul, MN 55101
Thomas A. Gustafson Second Vice President
400 Robert Street North
St. Paul, MN 55101
Mark B. Hier Second Vice President
400 Robert Street North
St. Paul, MN 55101
James E. Johnson Director and Executive Vice President
400 Robert Street North
St. Paul, MN 55101
David J. LePlavy Second Vice President and Controller
400 Robert Street North
St. Paul, MN 55101
Richard L. Manke Vice President
400 Robert Street North
St. Paul, MN 55101
Jean Delaney Nelson Senior Vice President
400 Robert Street North
St. Paul, MN 55101
Maria H. O'Phelan Second Vice President
400 Robert Street North
St. Paul, MN 55101
Robert M. Olafson Director and Senior Vice President
400 Robert Street North
St. Paul, MN 55101
H. Geoffrey Peterson Second Vice President
400 Robert Street North
St. Paul, MN 55101
Dennis E. Prohofsky Secretary
400 Robert Street North
St. Paul, MN 55101
Dwayne C. Radel Director, Vice President and General Counsel
400 Robert Street North
St. Paul, MN 55101
Robert L. Senkler Chairman of the Board, Chief Executive Officer
400 Robert Street North and President
St. Paul, MN 55101
Bruce P. Shay Senior Vice President
400 Robert Street North
St. Paul, MN 55101
Gregory S. Strong Director, Senior Vice President and Treasurer
400 Robert Street North
St. Paul, MN 55101
Nancy R. Swanson Second Vice President
400 Robert Street North
St. Paul, MN 55101
Randy F. Wallake Executive Vice President
400 Robert Street North
St. Paul, MN 55101
Warren J. Zaccaro Director, Executive Vice President and
400 Robert Street North Chief Financial Officer
St. Paul, MN 55101
ITEM 28. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH MINNESOTA LIFE
INSURANCE COMPANY OR MINNESOTA LIFE VARIABLE UNIVERSAL LIFE ACCOUNT
Wholly-owned subsidiary of Minnesota Mutual Companies, Inc.:
Securian Holding Company (Delaware)
Wholly-owned subsidiaries of Securian Holding Company:
Securian Financial Group, Inc. (Delaware)
Capitol City Property Management, Inc.
Robert Street Property Management, Inc.
Wholly-owned subsidiaries of Securian Financial Group, Inc.:
Minnesota Life Insurance Company
Securian Financial Network, Inc.
Securian Ventures, Inc.
Advantus Capital Management, Inc.
Securian Financial Services, Inc.
Securian Casualty Company
I.A. Systems, Inc. (New York)
CNL Financial Corporation (Georgia)
Wholly-owned subsidiaries of Minnesota Life Insurance Company:
Northstar Life Insurance Company (New York)
Personal Finance Company LLC (Delaware)
Allied Solutions, LLC (Indiana)
Enterprise Holding Corporation
Securian Life Insurance Company
Wholly-owned subsidiaries of Enterprise Holding Corporation:
Financial Ink Corporation
Oakleaf Service Corporation
Concepts in Marketing Research Corporation
Lafayette Litho, Inc.
MIMLIC Funding, Inc.
MCM Funding 1997-1, Inc.
MCM Funding 1998-1, Inc.
Wholly-owned subsidiaries of Securian Financial Network, Inc.:
Securian Financial Network, Inc. (Alabama)
Securian Financial Network, Inc. (Nevada)
Securian Financial Network, Inc. (Oklahoma)
Securian Financial Network Insurance Agency, Inc. (Massachusetts)
Wholly-owned subsidiaries of CNL Financial Corporation:
Cherokee National Life Insurance Company (Georgia)
CNL/Insurance America, Inc. (Georgia)
CNL/Resource Marketing Corporation (Georgia)
Commodore National Reinsurance Company, Ltd.
Majority-owned subsidiary of Securian Financial Group, Inc.:
Securian Trust Company, N.A.
Open-end registered investment company offering shares solely to separate
accounts of Minnesota Life Insurance Company:
Advantus Series Fund, Inc.
Fifty percent-owned subsidiary of Enterprise Holding Corporation:
CRI Securities, LLC
Unless indicated otherwise parenthetically, each of the above corporations is a
Minnesota corporation.
ITEM 29. INDEMNIFICATION
The State of Minnesota has an indemnification statute (Minnesota Statutes
300.083), as amended, effective January 1, 1984, which requires indemnification
of individuals only under the circumstances described by the statute. Expenses
incurred in the defense of any action, including attorneys' fees, may be
advanced to the individual after written request by the board of directors upon
receiving an undertaking from the individual to repay any amount advanced unless
it is ultimately determined that he or she is entitled to be indemnified by the
corporation as authorized by the statute and after a determination that the
facts then known to those making the determination would not preclude
indemnification.
Indemnification is required for persons made a part to a proceeding by reason of
their official capacity so long as they acted in good faith, received no
improper personal benefit and have not been indemnified by another organization.
In the case of a criminal proceeding, they must also have had no reasonable
cause to believe the conduct was unlawful. In respect to other acts arising out
of official capacity: (1) where the person is acting directly for the
corporation there must be a reasonable belief by the person that his or her
conduct was in the best interests of the corporation or, (2) where the person is
serving another organization or plan at the request of the corporation, the
person must have reasonably believed that his or her conduct was not opposed to
the best interests of the corporation. In the case of persons not directors,
officers or policy-making employees, determination of eligibility for
indemnification may be made by a board-appointed committee of which a director
is a member. For other employees, directors and officers, the determination of
eligibility is made by the Board or a committee of the Board, special legal
counsel, the shareholder of the corporation or pursuant to a judicial
proceeding.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of
Minnesota Life Insurance Company and Minnesota Life Variable Universal Life
Account pursuant to the foregoing provisions, or otherwise, Minnesota Life
Insurance Company and Minnesota Life Variable Universal Life Account have 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 Minnesota Life Insurance Company and
Minnesota Life Variable Universal Life Account of expenses incurred or paid by a
director, officer or controlling person of Minnesota
Life Insurance Company and Minnesota Life Variable Universal Life Account in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer of controlling person in connection with the securities being
registered, Minnesota Life Insurance Company and Minnesota Life Variable Life
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
ITEM 30. PRINCIPAL UNDERWRITERS
(a) Securian Financial Services, Inc. currently acts as a principal
underwriter for the following investment companies:
Variable Fund D
Variable Annuity Account
Minnesota Life Variable Life Account
Minnesota Life Variable Universal Life Account
Securian Life Variable Universal Life Account
(b) Directors and officers of Securian Financial Services, Inc.:
[Download Table]
POSITIONS AND
NAME AND PRINCIPAL OFFICES
BUSINESS ADDRESS WITH UNDERWRITER
------------------ ----------------
George I. Connolly President, Chief Executive
Securian Financial Services, Inc. Officer and Director
400 Robert Street North
St. Paul, Minnesota 55101
Lynda S. Czarnetzki Vice President - Financial Management
Securian Financial Services, Inc. and Treasurer
400 Robert Street North
St. Paul, Minnesota 55101
Richard A. Diehl Vice President and Chief
Securian Financial Services, Inc. Investment Officer
400 Robert Street North
St. Paul, Minnesota 55101
Dwayne C. Radel Director
Minnesota Life
Insurance Company
400 Robert Street North
St. Paul, Minnesota 55101
Loyall E. Wilson Vice President, Chief
Securian Financial Services, Inc. Compliance Officer and
400 Robert Street North Secretary
St. Paul, Minnesota 55101
Scott C. Thorson Vice President - Operations
Securian Financial Services, Inc.
400 Robert Street North
St. Paul, Minnesota 55101
[Download Table]
Warren J. Zaccaro Director
Minnesota Life
Insurance Company
400 Robert Street North
St. Paul, Minnesota 55101
Kimberly K. Carpenter Assistant Secretary
Securian Financial Services, Inc.
400 Robert Street North
St. Paul, Minnesota 55101
Allen L. Peterson Assistant Secretary
Securian Financial Services, Inc.
400 Robert Street North
St. Paul, Minnesota 55101
Matthew N. Fries Assistant Secretary
Securian Financial Services, Inc.
400 Robert Street North
St. Paul, Minnesota 55101
(c) All commissions and other compensation received by each
principal underwriter, directly or indirectly, from the Registrant during the
Registrant's last fiscal year:
[Download Table]
NAME OF NET UNDERWRITING COMPENSATION ON
PRINCIPAL DISCOUNTS AND REDEMPTION OR BROKERAGE OTHER
UNDERWRITER COMMISSIONS ANNUITIZATION COMMISSIONS COMPENSATION
----------- ---------------- --------------- ----------- ------------
Securian Financial,
Services Inc. -0- -- -- --
ITEM 31. LOCATION OF ACCOUNTS AND RECORDS
The accounts, books and other documents required to be maintained by Section
31(a) of the 1940 Act and the Rules promulgated thereunder are in the physical
possession of Securian Life Insurance Company, St. Paul, Minnesota 55101.
ITEM 32. MANAGEMENT SERVICES
None.
ITEM 33. FEE REPRESENTATION
Securian Life Insurance Company hereby represents that, as to the variable
life insurance group contracts and certificates which are the subject of this
Registration Statement, File No. 333-132009, the fees and charges deducted
under the Policy, in the aggregate, are reasonable in relation to the
services rendered, the expenses expected to be incurred and the risks assumed
by Securian Life Insurance Company.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant, Securian Life Variable Universal Life
Account, certifies that it meets all of the requirements for effectiveness of
this Registration Statement pursuant to Rule 485(b) under the Securities Act
of 1933 and has duly caused this Post-Effective Amendment to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Saint Paul, and State of Minnesota, on the 20th
day of April, 2007.
SECURIAN LIFE VARIABLE UNIVERSAL LIFE ACCOUNT
(Registrant)
By: SECURIAN LIFE INSURANCE COMPANY
(Depositor)
By /s/ Robert L. Senkler
-------------------------------------------
Robert L. Senkler
Chairman of the Board,
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in their capacities
with the Depositor and on the date indicated.
[Download Table]
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Robert L. Senkler
-------------------------------- President, Chairman and April 20, 2007
Robert L. Senkler Chief Executive Officer
* Director
--------------------------------
Alfrieda B. Baldwin
* Director
--------------------------------
James E. Johnson
* Director
--------------------------------
Robert M. Olafson
[Download Table]
SIGNATURE TITLE DATE
--------- ----- ----
* Director
--------------------------------
Dwayne C. Radel
* Director
--------------------------------
Gregory S. Strong
*
-------------------------------- Director
Warren J. Zaccaro
/s/ Warren J. Zaccaro
-------------------------------- Executive Vice President April 20, 2007
Warren J. Zaccaro and Chief Financial Officer
(chief financial officer)
/s/ Warren J. Zaccaro
-------------------------------- Executive Vice President April 20, 2007
Warren J. Zaccaro and Chief Financial Officer
(chief accounting officer)
/s/ Gregory S. Strong
-------------------------------- Senior Vice President April 20, 2007
Gregory S. Strong and Treasurer
(treasurer)
/s/ Dwayne C. Radel
-------------------------------- Attorney-in-Fact April 20, 2007
Dwayne C. Radel
* Pursuant to power of attorney dated April 9, 2007, filed as Exhibit 26(r) to
this Registration Statement.
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT
-------------- ----------------------
26(a) Resolution of the Board of Directors of the Securian Life
Insurance Company dated December 1, 2004, previously filed on
February 23, 2006 as Exhibit 26(a) to the Registrant's Form
N-6, File Number 333-132009, Initial Registration Statement, is
hereby incorporated by reference.
26(b) Not Applicable.
26(c)(1) Distribution Agreement, previously filed on August 15, 2006 as
Exhibit 26(c)(1) to the Registrant's Form N-6, File Number
333-132009, Pre-Effective Amendment Number 1, is hereby
incorporated by reference.
26(c)(2) Agent Sales Agreement, previously filed on August 15, 2006 as
Exhibit 26(c)(2) to the Registrant's Form N-6, File Number
333-132009, Pre-Effective Amendment Number 1, is hereby
incorporated by reference.
26(c)(3) Sales Commission Schedule, previously filed on August 15, 2006
as Exhibit 26(c)(3) to the Registrant's Form N-6, File Number
333-132009, Pre-Effective Amendment Number 1, is hereby
incorporated by reference.
26(d)(1) Group Variable Universal Life Policy, form 04-30704, previously
filed on February 23, 2006 as Exhibit 26(d)(1) to the
Registrant's Form N-6, File Number 333-132009, Initial
Registration Statement, is hereby incorporated by reference.
26(d)(2) Group Variable Universal Life Employee Certificate Of
Insurance, form 04-30705, previously filed on February 23, 2006
as Exhibit 26(d)(2) to the Registrant's Form N-6, File Number
333-132009, Initial Registration Statement, is hereby
incorporated by reference.
26(d)(3) Group Variable Universal Life Spouse Certificate Of Insurance,
form 04-30706, previously filed on February 23, 2006 as Exhibit
26(d)(3) to the Registrant's Form N-6, File Number 333-132009,
Initial Registration Statement, is hereby incorporated by
reference.
26(d)(4) Policy Rider - Spouse Coverage, form 04-30707, previously filed
on February 23, 2006 as Exhibit 26(d)(4) to the Registrant's
Form N-6, File Number 333-132009, Initial Registration
Statement, is hereby incorporated by reference.
26(d)(5) Policy Rider - Accelerated Benefits, form 04-30708, previously
filed on February 23, 2006 as Exhibit 26(d)(5) to the
Registrant's Form N-6, File Number 333-132009, Initial
Registration Statement, is hereby incorporated by reference.
26(d)(6) Accelerated Benefits, Certificate Supplement, form 04-30709,
previously filed on February 23, 2006 as Exhibit 26(d)(6) to
the Registrant's Form N-6, File Number 333-132009, Initial
Registration Statement, is hereby incorporated by reference.
26(d)(7) Policy Rider - Children's Term Life Benefit, form 04-30710,
previously filed on February 23, 2006 as Exhibit 26(d)(7) to
the Registrant's Form N-6, File Number 333-132009, Initial
Registration Statement, is hereby incorporated by reference.
26(d)(8) Children's Term Life Benefit, Certificate Supplement, form
04-30711, previously filed on February 23, 2006 as Exhibit
26(d)(8) to the Registrant's Form N-6, File Number 333-132009,
Initial Registration Statement, is hereby incorporated by
reference.
26(d)(9) Waiver of Premium Policy Rider, form 04-30714, previously filed
on February 23, 2006 as Exhibit 26(d)(9) to the Registrant's
Form N-6, File Number 333-132009, Initial Registration
Statement, is hereby incorporated by reference.
26(d)(10) Waiver of Premium Certificate Supplement, form 04-30715,
previously filed on February 23, 2006 as Exhibit 26(d)(10) to
the Registrant's Form N-6, File Number 333-132009, Initial
Registration Statement, is hereby incorporated by reference.
26(d)(11) Policyholder Contribution Rider, form 04-30716, previously
filed on February 23, 2006 as Exhibit 26(d)(11) to the
Registrant's Form N-6, File Number 333-132009, Initial
Registration Statement, is hereby incorporated by reference.
26(d)(12) Policyholder Contribution Certificate Supplement, form
04-30717, previously filed on February 23, 2006 as Exhibit
26(d)(12) to the Registrant's Form N-6, File Number 333-132009,
Initial Registration Statement, is hereby incorporated by
reference.
26(d)(13) Spouse and Child Term Life Insurance Policy Rider, form
04-30718, previously filed on February 23, 2006 as Exhibit
26(d)(13) to the Registrant's Form N-6, File Number 333-132009,
Initial Registration Statement, is hereby incorporated by
reference.
26(d)(14) Spouse and Child Term Life Insurance Certificate Supplement,
form 04-30719, previously filed on February 23, 2006 as Exhibit
26(d)(14) to the Registrant's Form N-6, File Number 333-132009,
Initial Registration Statement, is hereby incorporated by
reference.
26(e)(1) Group Variable Universal Life Policy Application, form
04-30720, previously filed on February 23, 2006 as Exhibit
26(e)(1) to the Registrant's Form N-6, File Number 333-132009,
Initial Registration Statement, is hereby incorporated by
reference.
26(e)(2) Group Variable Universal Life Policy, Employee Enrollment, form
04-30722, previously filed on February 23, 2006 as Exhibit
26(e)(2) to the Registrant's Form N-6, File Number 333-132009,
Initial Registration Statement, is hereby incorporated by
reference.
26(e)(3) Group Variable Universal Life Policy, Spouse Enrollment, form
04-30723, previously filed on February 23, 2006 as Exhibit
26(e)(3) to the Registrant's Form N-6, File Number 333-132009,
Initial Registration Statement, is hereby incorporated by
reference.
26(e)(4) Group Variable Universal Life Policy, Evidence of Insurability,
form 04-30721, previously filed on February 23, 2006 as Exhibit
26(e)(4) to the Registrant's Form N-6, File Number 333-132009,
Initial Registration Statement, is hereby incorporated by
reference.
26(f)(1)(a) Charter of the Depositor, previously filed on February 23, 2006
as Exhibit 26(f)(1)(a) to the Registrant's Form N-6, File
Number 333-132009, Initial Registration Statement, is hereby
incorporated by reference.
26(f)(1)(b) Certificate of Amendment of Articles of Incorporation dated
February 15, 1988, previously filed on February 23, 2006 as
Exhibit 26(f)(1)(b) to the Registrant's Form N-6, File Number
333-132009, Initial Registration Statement, is hereby
incorporated by reference.
26(f)(1)(c) Certificate of Amendment of Articles of Incorporation dated
January 19, 1993, previously filed on February 23, 2006 as
Exhibit 26(f)(1)(c) to the Registrant's Form N-6, File Number
333-132009, Initial Registration Statement, is hereby
incorporated by reference.
26(f)(1)(d) Certificate of Amendment of Articles of Incorporation dated
September 29, 1993, previously filed on February 23, 2006 as
Exhibit 26(f)(1)(d) to the Registrant's Form N-6, File Number
333-132009, Initial Registration Statement, is hereby
incorporated by reference.
26(f)(1)(e) Certificate of Amendment of Articles of Incorporation dated
November 21, 2002, previously filed on February 23, 2006 as
Exhibit 26(f)(1)(e) to the Registrant's Form N-6, File Number
333-132009, Initial Registration Statement, is hereby
incorporated by reference.
26(f)(1)(f) Certificate of Amendment of Articles of Incorporation dated
February 17, 2004, previously filed on February 23, 2006 as
Exhibit 26(f)(1)(f) to the Registrant's Form N-6, File Number
333-132009, Initial Registration Statement, is hereby
incorporated by reference.
26(f)(2) Bylaws of the Depositor, previously filed on February 23, 2006
as Exhibit 26(f)(2) to the Registrant's Form N-6, File Number
333-132009, Initial Registration Statement, is hereby
incorporated by reference.
26(g)(1) Automatic Reinsurance Agreement between Northstar Life
Insurance Company and Swiss Re Life & Health America Inc.
26(g)(2) Amendment No. 1 to Automatic Reinsurance Agreement between
Northstar Life Insurance Company and Swiss Re Life & Health
America Inc.
26(g)(3) Amendment No. 2 to Automatic Reinsurance Agreement between
Northstar Life Insurance Company and Swiss Re Life & Health
America Inc.
26(g)(4) Amendment No. 3 to Automatic Reinsurance Agreement between
Northstar Life Insurance Company, Securian Life Insurance
Company and Swiss Re Life & Health America Inc.
26(h)(1)(a) Participation Agreement among Advantus Series Fund, Inc.,
Advantus Capital Management, Inc. and Securian Life Insurance
Company, previously filed on August 15, 2006 as Exhibit
26(h)(1) to the Registrant's Form N-6, File Number 333-132009,
Pre-Effective Amendment Number 1, is hereby incorporated by
reference.
26(h)(1)(b) Shareholder Information Agreement between Advantus Series
Fund, Inc., and Securian Life Insurance Company.
26(h)(2)(a) Fund Participation Agreement between Janus Aspen Series, Janus
Distributors, Inc. and Securian Life Insurance Company,
previously filed on August 15, 2006 as Exhibit 26(h)(2) to the
Registrant's Form N-6, File Number 333-132009, Pre-Effective
Amendment Number 1, is hereby incorporated by reference.
26(h)(2)(b) Rule 22c-2 Shareholder Information Agreement between Janus
Capital Management, LLC, Janus Services LLC, Janus
Distributors LLC, and Janus Aspen Series and Securian Life
Insurance Company.
26(h)(3) Participation Agreement among Variable Insurance Products Fund,
Fidelity Distributors Corporation and Securian Life Insurance
Company.
26(h)(4)(a) Target Funds Participation Agreement between Securian Life
Insurance Company and Waddell & Reed, Inc. , previously filed
on August 15, 2006 as Exhibit 26(h)(4) to the Registrant's Form
N-6, File Number 333-132009, Pre-Effective Amendment Number 1,
is hereby incorporated by reference.
26(h)(4)(b) Shareholder Information Agreement among Ivy Funds
Distributor, Inc, Waddell & Reed, Inc. and Securian Life
Insurance Company.
26(h)(5) Fund Shareholder Services Agreement between Securian Life
Insurance Company and Securian Financial Services, Inc. ,
previously filed on August 15, 2006 as Exhibit 26(h)(5) to the
Registrant's Form N-6, File Number 333-132009, Pre-Effective
Amendment Number 1, is hereby incorporated by reference.
26(i) Administrative Services Agreement between Securian Life
Insurance Company and Securian Financial Group, Inc. ,
previously filed on August 15, 2006 as Exhibit 26(i) to the
Registrant's Form N-6, File Number 333-132009, Pre-Effective
Amendment Number 1, is hereby incorporated by reference.
26(i)(1)(a) Investment Accounting Agreement between Securian Life Insurance
Company and State Street Bank and Trust Company, previously
filed on August 15, 2006 as Exhibit 26(i)(1)(a) to the
Registrant's Form N-6, File Number 333-132009, Pre-Effective
Amendment Number 1, is hereby incorporated by reference.
26(i)(1)(b) First Amendment to Investment Accounting Agreement between
Securian Life Insurance Company and State Street Bank and Trust
Company, previously filed on August 15, 2006 as Exhibit
26(i)(1)(b) to the Registrant's Form N-6, File Number
333-132009, Pre-Effective Amendment Number 1, is hereby
incorporated by reference.
26(i)(2)(a) Administration Agreement between Securian Life Insurance
Company and State Street Bank and Trust Company, previously
filed on August 15, 2006 as Exhibit 26(i)(2)(a) to the
Registrant's Form N-6, File Number 333-132009, Pre-Effective
Amendment Number 1, is hereby incorporated by reference.
26(i)(2)(b) First Amendment to Administration Agreement between Securian
Life Insurance Company and State Street Bank and Trust Company,
previously filed on August 15, 2006 as Exhibit 26(i)(2)(b) to
the Registrant's Form N-6, File Number 333-132009,
Pre-Effective Amendment Number 1, is hereby incorporated by
reference.
26(j) Not Applicable.
26(k) Opinion and consent of Ted Schmelzle, Esq.
26(l) Actuarial opinion of Brian C. Anderson, FSA.
26(m) Calculation.
26(n) Consent of KPMG LLP.
26(o) Not Applicable.
26(p) Not Applicable.
26(q) Redeemability exemption, previously filed on August 15, 2006 as
Exhibit 26(q) to the Registrant's Form N-6, File Number
333-132009, Pre-Effective Amendment Number 1, is hereby
incorporated by reference.
26(r) Securian Life Insurance Company - Power of Attorney to Sign
Registration Statements.
Dates Referenced Herein and Documents Incorporated by Reference
4 Subsequent Filings that Reference this Filing
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