10-Q 1 lbl3q.txt LINCOLN BENEFIT LIFE 3RD QUARTER FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 The registrant meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this Form with the reduced disclosure format. [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: September 30, 2001 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number: 333-82427 LINCOLN BENEFIT LIFE COMPANY (Exact name of registrant as specified in its charter) Nebraska 470221457 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2940 South 84th Street Lincoln, Nebraska 68506-4142 (Address of principal executive offices)(zip code) 1-800-525-9287 (Registrant's telephone number, including area code) Not Applicable (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /X/ No Indicate the number of shares of each of the issuer's classes of common stock as of November 9, 2001; there were 25,000 shares of common capital stock outstanding, par value $100 per share all of which shares are held by Allstate Life Insurance Company. LINCOLN BENEFIT LIFE COMPANY INDEX TO QUARTERLY REPORT ON FORM 10-Q September 30, 2001

PART 1. FINANCIAL INFORMATION Item 1. Condensed Statements of Operations for the Three Months and Nine Months Ended September 30, 2001 and 2000 (unaudited).................................. 3 Condensed Statements of Financial Position as of September 30, 2001 (unaudited) and December 31, 2000 .................................................... 4 Condensed Statements of Cash Flows for the Nine Month Periods Ended September 30, 2001 and 2000 (unaudited) ............................................. 5 Notes to Condensed Financial Statements (unaudited)........................................ 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ..................................................................... 9 PART II. OTHER INFORMATION Item 1. Legal Proceedings ......................................................................... 7 Item 5. Other Information.......................................................................... 13 Item 6. Exhibits and Reports on Form 8-K........................................................... 13 Signature Page ............................................................................ 14

PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS LINCOLN BENEFIT LIFE COMPANY CONDENSED STATEMENTS OF OPERATIONS

Three Months Ended Nine Months Ended September 30, September 30, ------------------------------------- --------------------------------------- (in thousands) 2001 2000 2001 2000 ---------------- ---------------- ----------------- ------------------ (Unaudited) (Unaudited) Revenues Net investment income $ 3,115 $ 2,932 $ 9,148 $ 8,887 Realized capital gains and losses - - (1,352) - Other income (expense) - (1) - (20) -------------- ------------- --------------- ------------- Income from operations before income tax expense 3,115 2,931 7,796 8,867 Income tax expense 1,088 1,025 2,722 3,102 -------------- ------------- --------------- ------------- Net income $ 2,027 $ 1,906 $ 5,074 $ 5,765 ============== ============= =============== =============

See notes to condensed financial statements. 3 LINCOLN BENEFIT LIFE COMPANY CONDENSED STATEMENTS OF FINANCIAL POSITION

September 30, December 31, 2001 2000 ------------------- ------------------- ------------------- ------------------- (in thousands, except par value data) (Unaudited) Assets Investments Fixed income securities, at fair value (amortized cost $165,391 and $166,893) $ 175,548 $ 170,142 Short-term 20,525 11,243 ------------------ ----------------- Total investments 196,073 181,385 Cash 38,640 76 Reinsurance recoverable from Allstate Life Insurance Company 9,155,419 8,366,927 Reinsurance recoverable from non-affiliates, net 435,176 353,789 Other assets 4,374 2,393 Separate Accounts 1,398,192 1,648,691 ------------------ ----------------- Total assets $ 11,227,874 $ 10,553,261 ================== ================= Liabilities Reserve for life-contingent contract benefits $ 685,999 $ 550,334 Contractholder funds 8,898,368 8,157,502 Current income taxes payable 2,538 2,785 Deferred income taxes 7,148 4,607 Payable to affiliates 2,187 9,210 Other liabilities and accrued expenses 45,117 1,371 Separate Accounts 1,398,192 1,648,691 ------------------ ----------------- Total liabilities 11,039,549 10,374,500 ------------------ ----------------- Commitments and Contingent Liabilities (Note 4) Shareholder's Equity Common stock, $100 par value, 30,000 shares authorized, 25,000 issued and outstanding 2,500 2,500 Additional capital paid-in 126,750 126,750 Retained income 52,473 47,399 Accumulated other comprehensive income: Unrealized net capital gains 6,602 2,112 ----------------- ---------------- Total accumulated other comprehensive income 6,602 2,112 ----------------- ---------------- Total shareholder's equity 188,325 178,761 ----------------- ---------------- Total liabilities and shareholder's equity $ 11,227,874 $ 10,553,261 ================= ================

See notes to condensed financial statements. 4 LINCOLN BENEFIT LIFE COMPANY CONDENSED STATEMENTS OF CASH FLOWS

Nine Months Ended September 30, ------------------------------------------- (in thousands) 2001 2000 ----------------- ----------------- (Unaudited) Cash flows from operating activities Net income $ 5,074 $ 5,765 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, amortization and other non-cash items (405) (719) Realized capital gains and losses 1,352 - Changes in: Life-contingent contract benefits and contractholder funds 6,652 81 Income taxes payable (124) 1,730 Other operating assets and liabilities 34,741 264 ------- ------ Net cash provided by operating activities 47,290 7,121 ------- ------ Cash flows from investing activities Fixed income securities Proceeds from sales 10,922 13,900 Investment collections 11,737 6,155 Investment purchases (22,103) (19,686) Change in short-term investments, net (9,282) (8,380) ------- ------- Net cash used in investing activities (8,726) (8,011) ------- ------- Net increase (decrease) in cash 38,564 (890) Cash at beginning of period 76 982 ------- ------- Cash at end of period $38,640 $ 92 ======= =======

See notes to condensed financial statements. 5 LINCOLN BENEFIT LIFE COMPANY NOTES TO CONDENSED FINANCIAL STATEMENTS (Unaudited) 1. Basis of Presentation The accompanying condensed financial statements include the accounts of Lincoln Benefit Life Company (the "Company"), a wholly owned subsidiary of Allstate Life Insurance Company ("ALIC"), which is wholly owned by Allstate Insurance Company ("AIC"), a wholly owned subsidiary of The Allstate Corporation (the "Corporation"). The condensed financial statements and notes as of September 30, 2001, and for the three month and nine month periods ended September 30, 2001 and 2000, are unaudited. The condensed financial statements reflect all adjustments (consisting only of normal recurring accruals) which are, in the opinion of management, necessary for the fair presentation of the financial position, results of operations and cash flows for the interim periods. The condensed financial statements and notes should be read in conjunction with the financial statements and notes thereto included in the Lincoln Benefit Life Company Annual Report on Form 10-K for 2000. The results of operations for the interim periods should not be considered indicative of results to be expected for the full year. 6 LINCOLN BENEFIT LIFE COMPANY NOTES TO CONDENSED FINANCIAL STATEMENTS (Unaudited) 2. Reinsurance The Company has reinsurance agreements whereby certain premiums, contract charges, credited interest, policy benefits and certain expenses are ceded to ALIC and other non-affiliated reinsurers and reflected net of such reinsurance in the condensed statements of operations. Reinsurance recoverable and the related reserve for life-contingent contract benefits and contractholder funds are reported separately in the condensed statements of financial position. The Company continues to have primary liability as the direct insurer for risks reinsured. Investment income earned on the assets which support contractholder funds and the reserve for life-contingent contract benefits is not included in the Company's condensed financial statements as those assets are owned and managed under terms of the reinsurance agreements. The following table summarizes amounts ceded to ALIC and non-affiliates under reinsurance agreements. The effects of reinsurance on premiums and contract charges are as follows:

Three months ended Nine months ended September 30, September 30, (in thousands) 2001 2000 2001 2000 ------------- -------------- -------------- ---------------- Premiums and Contract Charges Direct $ 161,918 $ 119,792 $ 402,039 $ 326,242 Assumed - - 1 1 Ceded Affiliate (100,229) (63,338) (242,299) (174,502) Non-affiliate (61,689) (56,454) (159,741) (151,741) ----------- ------------ ------------ ----------- Premiums and contract charges, net of reinsurance $ - $ - $ - $ - =========== ============ ============ =========== The effects of reinsurance on credited interest, policy benefits and other expenses are as follows: Three months ended Nine months ended September 30, September 30, (in thousands) 2001 2000 2001 2000 ------------- ------------- ------------ -------------- Credited Interest, Policy Benefits and Other Expenses Direct $ 259,981 $ 227,658 $ 722,097 $ 652,963 Ceded Affiliate (177,459) (167,426) (521,661) (479,139) Non-affiliate (82,522) (60,231) (200,436) (173,804) ------------ ---------- ------------- ------------ Credited interest, policy benefits and other expenses, net of reinsurance $ - $ 1 $ - $ 20 ============ ========== ============= ============

7 LINCOLN BENEFIT LIFE COMPANY NOTES TO CONDENSED FINANCIAL STATEMENTS (Unaudited) 3. Comprehensive Income The components of other comprehensive income on a pretax and after-tax basis are as follows:

Three months ended September 30, (in thousands) 2001 2000 ------------------------------------ --------------------------------------- After- After- Pretax Tax tax Pretax Tax tax Unrealized capital gains and losses: Unrealized holding gains (losses) arising during the period $ 5,731 $ (2,006) $ 3,725 $ 2,051 $ (718) $ 1,333 Less: reclassification adjustments - - - - - - ----------- --------- ---------- --------- --------- --------- Unrealized net capital gains (losses) 5,731 (2,006) 3,725 2,051 (718) 1,333 ----------- --------- ---------- --------- --------- --------- Other comprehensive income (loss) $ 5,731 $ (2,006) 3,725 $ 2,051 $ (718) 1,333 =========== ========= ========= ========= Net income 2,027 1,906 ---------- --------- Comprehensive income $ 5,752 $ 3,239 ========== ========= Nine months ended September 30, (in thousands) 2001 2000 ------------------------------------ ---------------------------------------- After- After- Pretax Tax tax Pretax Tax tax Unrealized capital gains and losses: Unrealized holding gains (losses) arising during the period $ 5,556 $ (1,945) $ 3,611 $ 2,115 $ (740) $ 1,375 Less: reclassification adjustments (1,352) 473 (879) - - - ---------- -------- --------- --------- -------- ---------- Unrealized net capital gains (losses) 6,908 (2,418) 4,490 2,115 (740) 1,375 ---------- -------- --------- --------- -------- ---------- Other comprehensive income (loss) $ 6,908 $ (2,418) 4,490 $ 2,115 $ (740) 1,375 ========== ======== ========= ======= Net income 5,074 5,765 --------- ---------- Comprehensive income $ 9,564 $ 7,140 ========= ==========

8 LINCOLN BENEFIT LIFE COMPANY NOTES TO CONDENSED FINANCIAL STATEMENTS (Unaudited) 4. Regulation and Legal Proceedings The Company's business is subject to the effects of a changing social, economic and regulatory environment. Recent state and federal regulatory initiatives have varied and have included employee benefit regulations, removal of barriers preventing banks from engaging in the securities and insurance business, tax law changes affecting the taxation of insurance companies, the tax treatment of insurance products and its impact on the relative desirability of various personal investment vehicles, and the overall expansion of regulation. The ultimate changes and eventual effects, if any, of these initiatives are uncertain. In the normal course of its business, the Company is involved from time to time in pending and threatened litigation and regulatory actions in which claims for monetary damages are asserted. Regulatory actions include, but are not limited to, market conduct and compliance issues. At this time, based on the present status of such litigation and regulatory actions, it is in the opinion of management that the ultimate liability, if any, in one or more of these matters in excess of amounts currently reserved is not expected to have a material adverse effect on the results of operations, liquidity or financial position of the Company. 7 ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE THREE MONTH AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 2001 AND 2000 The following discussion highlights significant factors influencing results of operations and changes in financial position of Lincoln Benefit Life Company (the "Company"). It should be read in conjunction with the condensed financial statements and related notes thereto found under Part I Item 1 contained herein and with the discussion, analysis, financial statements and notes thereto in Part I Item 1 and Part II Items 7 and 8 of the Lincoln Benefit Life Company Annual Report on Form 10-K for the year ended December 31, 2000. The Company, a wholly owned subsidiary of Allstate Life Insurance Company ("ALIC"), which is a wholly owned subsidiary of Allstate Insurance Company ("AIC"), a wholly owned subsidiary of The Allstate Corporation (the "Corporation"), markets life insurance and investment products through independent insurance agents and securities firms. Life insurance consists of traditional products, including term and whole life, interest-sensitive life, immediate annuities with life contingencies, variable life and indexed life insurance. Investment products include deferred annuities and immediate annuities without life contingencies. Deferred annuities include fixed rate, market value adjusted, indexed and variable annuities. The Company has identified itself as a single segment entity. The assets and liabilities related to variable annuity and variable life contracts are legally segregated and reflected as Separate Accounts. The assets of the Separate Accounts are carried at fair value. Separate Accounts liabilities represent the contractholders' claims to the related assets and are carried at the fair value of the assets. Investment income and realized capital gains and losses of the Separate Accounts accrue directly to the conractholders and therefore, are not included in the Company's statements of operations. Certain variable annuity contracts have provisions wherein the Company contractually guarantees either a minimum return or account value upon death or annuitization. An actuarial general account reserve is established in the event that the account value of certain contracts is projected to be below the value guaranteed by the Company at the expected date of death or annuitization and is transferred to ALIC under intercompany reinsurance agreements. RESULTS OF OPERATIONS

(in thousands) Three Months Ended Nine Months Ended September 30, September 30, 2001 2000 2001 2000 -------- -------- ---------- ---------- Net investment income $ 3,115 $ 2,932 $ 9,148 $ 8,887 Realized capital gains and losses - - (1,352) - Other expense - 1 - 20 Income tax expense 1,088 1,025 2,722 3,102 -------- -------- ---------- ---------- Net income $ 2,027 $ 1,906 $ 5,074 $ 5,765 ======== ======== ========== ==========

The Company has reinsurance agreements under which contract and policy related transactions are transferred to ALIC. The Company also has reinsurance agreements with third parties. The Company's results of operations include net investment income and realized capital gains and losses earned on the assets of the Company that are not transferred under the reinsurance agreements. Certain non-investment related expenses which are not transferred under reinsurance agreements are presented in other expenses. 9 ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE THREE MONTH AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 2001 AND 2000 Net income for the third quarter of 2001 increased 6.4% to $2.0 million compared to the same period in 2000, due to an increase in net investment income. Net income for the nine months of 2001 decreased 12.0% to $5.1 million compared to the same period in 2000, due to an increase in realized capital losses. Net investment income increased 6.2% to $3.1 million for the third quarter of 2001 and 2.9% to $9.1 million for the first nine months of 2001 primarily attributable to higher investment balances at amortized cost partially offset by increased investment expenses compared to the same periods in 2000. Realized capital losses, after-tax, were $879 thousand for the first nine months of 2001 and zero for the third quarter. There were no realized capital gains and losses for the same periods last year. Period to period fluctuations in realized capital gains and losses are largely the result of timing of sales, reflecting management's decision on positioning the portfolio, as well as valuation assessments of individual securities and overall market conditions. FINANCIAL POSITION (in thousands) September 30, 2001 ------------------- Fixed income securities (1) $ 175,548 Short-term 20,525 ------------------ Total investments $ 196,073 ================== Reinsurance recoverable from ALIC, net $ 9,155,419 ================== Separate Accounts assets and liabilities $ 1,398,192 ================== Contractholder funds $ 8,898,368 ================== (1) Fixed income securities are carried at fair value. Amortized cost for these securities was $165,391 at September 30, 2001. Total investments were $196.1 million at September 30, 2001 compared to $181.4 million at December 31, 2000. The increase was due to positive cash flows generated from operations and an increase in unrealized net capital gains during the first nine months of 2001. Unrealized net capital gains on fixed income securities were $10.2 million and $3.2 million at September 30, 2001 and December 31, 2000, respectively. Investments at September 30, 2001, excluding Separate Accounts and unrealized gains and losses on fixed income securities, grew 4.4% from December 31, 2000. At September 30, 2001, substantially all of the Company's fixed income securities portfolio is rated investment grade, which is defined by the Company as a security having a National Association of Insurance Commissioners ("NAIC") rating of 1 or 2, a Moody's rating of Aaa, Aa, A or Baa, or a comparable Company internal rating. The ratings of securities in the Comapny's portfolio are influenced by many factors, including the impact of economic environment on individual securities. A fluctuation in these ratings could materially impact the results of operations, liquidity or financial position of the Company. The Company closely monitors its fixed income securities portfolios for rating changes or other declines in value that are other than temporary. Fixed income securities are placed on non-accrual status when they are in default or when the timing or receipt of principal or interest payments are in doubt. Write downs of fixed income securities are recorded when the decline in value is considered to be other than temporary. During the nine months ended September 30, 2001, Contractholder funds increased $740.9 million as compared to December 31, 2000 balances. The increase resulted primarily from sales of market value adjusted annuity contracts and interest credited on market value adjusted annuity and fixed annuity contracts, partially offset by fixed annuity surrenders and withdrawals. As the Company's interest-sensitive life policies and annuity contracts in-force grow and age, the dollar amount of surrenders and withdrawals will likely increase. While the overall amount of surrenders may increase in the future, a significant increase in the level of surrenders relative to total contractholder account balances is not anticipated. The increase in Reinsurance recoverable from ALIC of $788.5 million results from contract benefit obligations ceded to ALIC. 10 ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE THREE MONTH AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 2001 AND 2000 Separate Account assets and liabilities decreased 15.2% to $1.40 billion at September 30, 2001 as compared to the December 31, 2000 balance. The decreases were primarily attributable to unrealized losses in the Separate Accounts investment portfolios resulting from stock market volatility as well as surrenders and withdrawals, partially offset by sales of variable annuity contracts. LIQUIDITY AND CAPITAL RESOURCES Under the terms of reinsurance agreements, certain premiums and deposits, excluding those relating to Separate Accounts, are transferred to ALIC, which maintains the investment portfolios supporting the Company's products. Payments of policyholder claims, benefits, contract maturities, contract surrenders and withdrawals and certain operating costs are also reimbursed primarily by ALIC, under the terms of the reinsurance agreements. The Company continues to have primary liability as a direct insurer for risks reinsured. The Company's ability to meet liquidity demands is dependent on ALIC's ability to meet those demands. ALIC's claims-paying ability was rated Aa2, AA+, and A+ by Moody's, Standard & Poor's and A.M. Best, respectively, at September 30, 2001. The primary sources for the remainder of the Company's funds are collection of principal and interest from the investment portfolio and capital contributions from ALIC. The primary uses for the remainder of the Company's funds are to purchase investments, pay costs associated with the maintenance of the Company's investment portfolio and to pay shareholder dividends. At September 30, 2001 the Moody's, Standard and Poor's and A.M. Best claims-paying ratings for the Company were Aa2, AA+ and A+, respectively. FORWARD-LOOKING STATEMENTS This document contains "forward-looking statements" that anticipate results based on management's plans that are subject to uncertainty. These statements are made subject to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements do not relate strictly to historical or current facts and may be identified by their use of words like "plans," "expects," "will," "anticipates," "estimates," "intends," "believes," "likely" and other words with similar meanings. These statements may address, among other things, our strategy for growth, product development, regulatory approvals, market position, expenses, financial results and reserves. Forward-looking statements are based on management's current expectations of future events. We cannot guarantee that any forward-looking statement will be accurate. However, we believe that our forward-looking statements are based on reasonable, current expectations and assumptions. We assume no obligation to update any forward-looking statements as a result of new information or future events or developments. If the expectations or assumptions underlying our forward-looking statements prove inaccurate or if risks or uncertainties arise, actual results could differ materially from those communicated in our forward-looking statements. In addition to the normal risks of business, the Company is subject to significant risk factors, including those listed below which apply to it as an insurance business. o There is uncertainty involved in estimating the availability of reinsurance and the collectibility of reinsurance recoverables. This uncertainty arises from a number of factors, including whether losses meet the qualifying conditions of the reinsurance contracts and if reinsurers have the financial capacity and willingness to pay. o In the wake of the September 11 attack on the World Trade Center in New York City and the Pentagon in Washington D.C., and the plane crash in Pennsylvania, insurers are evaluating the possibility of excluding acts of terrorism from certain types of insurance policies. In the event that insurance coverage for terrorism becomes unavailable or very expensive, there could be significant adverse impacts on some portion of the Company's investment portfolio, particularly in sectors such as airlines and real estate. For example, commercial mortgages or certain debt obligations might be adversely affected due to the inability to obtain coverage to restore the related real estate, or other property, thereby creating the potential for increased default risk. 11 ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE THREE MONTH AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 2001 AND 2000 o Changes in market interest rates can have adverse effects on the Company's investment portfolio, investment income, product sales and results of operations. Increasing market interest rates have an adverse impact on the value of the investment portfolio by decreasing unrealized capital gains on fixed income securities. Declining market interest rates could have an adverse impact on the Company's investment income as the Company reinvests proceeds from positive cash flows from operations and from maturing and called investments into new investments that could be yielding less than the portfolio's average rate. Changes in market rates of interest as compared to rates offered on some of the Company's products could make those products less attractive if competitive investment margins are not maintained. This could lead to lower sales and/or changes in the level of surrenders on these products. The Company seeks to limit its exposure in this area by offering a diverse group of products, periodically reviewing and revising crediting rates and providing surrender charges in the event of early withdrawal. o The impact of decreasing Separate Accounts balances as a result of fluctuating market conditions could cause contract charges ceded by the Company to decrease. o In order to manage interest rate risk, from time to time the effective duration of the assets of the investment portfolio is adjusted. Those adjustments may have an impact on the value of the investment portfolio and on investment income. o Management believes the reserves for life-contingent contract benefits are adequate to cover ultimate policy benefits, despite the underlying risks and uncertainties associated with their determination when payments will not occur until well into the future. The Company periodically reviews and revises its estimates. If future experience differs from assumptions, it may have a material impact on results of operations. o Deferred annuities and interest-sensitive life insurance products receive favorable policyholder taxation under current tax laws and regulations. Any legislative or regulatory changes that adversely alter this treatment are likely to negatively affect the demand for these products. Additionally, the demand for life insurance products which are used to address a customer's estate planning needs may be impacted to the extent any legislative changes to the current estate tax laws occur. o The Company distributes some of its products under agreements with other members of the financial services industry that are not affiliated with the Company. Termination of one or more of these agreements due to changes in control or other factors of any of these entities could have a detrimental effect on the Company's sales. This risk may be exacerbated by the enactment of the Gramm-Leach-Bliley Act of 1999, which eliminates many federal and state law barriers to affiliations among banks, securities firms, insurers and other financial service providers. o Financial strength ratings have become an increasingly important factor in establishing the competitive position of insurance companies and, generally, may be expected to have an effect on an insurance company's sales. On an ongoing basis, rating agencies review the financial performance and condition of insurers. A downgrade, while not expected, could have a material adverse effect on the Company's or ALIC's business, financial condition and results of operations. o State insurance regulatory authorities require insurance companies to maintain specified levels of statutory capital and surplus. In addition, competitive pressures require the Company to maintain financial strength ratings. These restrictions affect the Company's ability to pay shareholder dividends or use its capital in other ways. o A number of enacted and pending legislative measures may lead to increased consolidation and increased competition in the financial services industry. o At the federal level, these measures include the recently enacted Gramm-Leach-Bliley Act of 1999, which eliminated many federal and state law barriers to affiliations among banks, securities firms, insurers and other financial service providers. o At the state level, these measures include legislation to permit mutual insurance companies to convert to a hybrid structure known as a mutual holding company, thereby allowing insurance companies owned by their policyholders to become stock insurance companies owned (through one or more intermediate holding companies) partially by their policyholders and partially by stockholders. Also, several large mutual life insurers have used or are expected to use existing state laws and regulations governing the conversion of mutual insurance companies into stock insurance companies (demutualization). o In addition, state insurance regulators are reexamining the regulatory framework that currently governs the United States insurance business. They are engaged in an effort to determine the proper role of the state insurance regulation in the United States financial services industry following the enactment of the Graham-Leach-Bliley Act. The Company cannot predict whether any state or federal measures will be adopted to change the nature or scope of the regulation of the insurance business or what effect any such measures would have on the Company. 12 PART II - OTHER INFORMATION Item 1. LEGAL PROCEEDINGS The discussion "Regulation and Legal Proceedings" in Part I, Item 1, Note 4 of this Form 10-Q is incorporated herein by reference. Item 5. OTHER INFORMATION Not applicable. Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits required by Item 601 of Regulation S-K (2) None (3) (i) Articles of Incorporation* (ii) By-laws* (4) Lincoln Benefit Life Company Flexible Premium Deferred Annuity Contract and Application** (10) Reinsurance Agreement between Lincoln Benefit Life Company and Allstate Life Insurance Company* (11) None (15) None (18) None (19) None (22) None (23) (a) Consent of Independent Public Accountants*** (b) Consent of Attorneys*** (24) None (99) None (b) Reports on 8-K No reports on Form 8-K were filed during the third quarter of 2001. *Incorporated herein by reference to the Registration Statement on Form N-4 for Lincoln Benefit Life Variable Annuity Account (File No. 333-50545, 811-07924) filed April 21, 1998. **Incorporated herein by reference to the Registration Statement on Form N-4 for Lincoln Benefit Life Variable Annuity Account (File No. 333-50545, 811-07924) filed April 21, 1998. Incorporated herein by reference to the Registration Statement on Form N-4 for Lincoln Benefit Life Variable Annuity Account (File No. 333-50737, 811-07924) filed April 22, 1998. Incorporated by reference to the Registration Statement on Form N-4 for Lincoln Benefit Life Variable Annuity Account (File No. 333-82427, 811-07924) filed July 8, 1999. ***Incorporated herein by reference to the Post-effective Amendment #2 to Registration Statement on Form S-3 for Lincoln Benefit life Company (File No. 333-59765) filed April 28, 2000. Incorporated herein by reference to the Post-effective Amendment #2 to Registration Statement on Form S-3 for Lincoln Benefit Life Company (File No. 333-59769) filed April 28, 2000. Incorporated herein by reference to Post-effective Amendment No. 1 to the Registration Statement on Form S-3 for Lincoln Benefit Life Company (File No. 333-88045) filed April 5, 2000. 13 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registration has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized, on the 14th day of November, 2001. LINCOLN BENEFIT LIFE COMPANY (Registrant) /s/ B. Eugene Wraith ----------------------- PRESIDENT, CHIEF OPERATING B. EUGENE WRAITH OFFICER AND DIRECTOR (PRINCIPAL EXECUTIVE OFFICER) /s/ Robert L. Vance ------------------------------ Vice President & Assistant Treasurer Robert L. Vance (Principal Financial Officer) ----------------------------- Controller Samuel H. Pilch (Chief Accounting Officer) (Principal Accounting Officer)