<Page>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                   ----------

                                    FORM 10-K

Registrant meets the conditions set forth in General Instruction I (1)(a) and
(b) of Form 10-K and is therefore filing this Form with the reduced disclosure
format.

                /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                                       OF
                       THE SECURITIES EXCHANGE ACT OF 1934
                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002

                                       OR

              / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                                       OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                        COMMISSION FILE NUMBER: 333-66452

                          LINCOLN BENEFIT LIFE COMPANY
             (Exact name of registrant as specified in its charter)

                NEBRASKA                                 47-0221457
        (State of Incorporation)            (I.R.S. Employer Identification No.)

         2940 SOUTH 84th STREET
           LINCOLN, NEBRASKA                               68506
(Address of principal executive offices)                 (zip code)

Registrant's telephone number, including area code: 800-525-9287

Securities registered pursuant to Section 12(b) or 12(g) of the Securities
Exchange Act of 1934: None

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, and (2) has been subject to such filing requirements
for the past 90 days. Yes /X/   No / /

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. /X/

Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Securities Exchange Act of 1934).   Yes / /  No /X/

As of March 15, 2003, the Registrant had 25,000 common shares, $100 par value,
outstanding, all of which are held by Allstate Life Insurance Company.

<Page>

                                TABLE OF CONTENTS

<Table>
<Caption>
                                                                                                  PAGE
                                                                                                  ----
<S>                                                                                                <C>
PART I
Item 1.      Business *                                                                              2
Item 2.      Properties *                                                                            3
Item 3.      Legal Proceedings                                                                       3
Item 4.      Submission of Matters to a Vote of Security Holders **                                N/A
PART II
Item 5.      Market for Registrant's Common Equity and Related Stockholder Matters                   3
Item 6.      Selected Financial Data **                                                            N/A
Item 7.      Management's Discussion and Analysis of Financial Condition and Results of
             Operations                                                                              3

Item 7a.     Quantitative and Qualitative Disclosures about Market Risk                             19
Item 8.      Financial Statements and Supplementary Data                                            19
Item 9.      Change in and Disagreements with Accountants on Accounting and Financial Disclosure    19
PART III
Item 10.     Directors and Executive Officers of the Registrant **                                 N/A
Item 11.     Executive Compensation**                                                              N/A
Item 12.     Security Ownership and Certain Beneficial Owners and Management **                    N/A
Item 13.     Certain Relationships and Related Transactions **                                     N/A
Item 14      Controls and Procedures                                                                19
PART IV
Item 15.     Exhibits, Financial Statement Schedules, and Reports on Form 8-K                       20
             Signatures                                                                             23
             Certifications                                                                         24
             Supplemental Information to be Furnished With Reports Filed Pursuant to
             Section 15(d) of the Securities Exchange Act of 1934 by Registrants Which
             Have Not Registered Securities Pursuant to Section 12 of the Securities
             Exchange Act of 1934                                                                   27
             Index to Financial Statement Schedules                                                 28
</Table>

             *  Item prepared in accordance with General Instruction I(2) of
                Form 10-K
             ** Omitted pursuant to General Instruction I(2) of Form 10-K

<Page>

PART I

ITEM 1. BUSINESS

     Lincoln Benefit Life Company ("Lincoln Benefit" or the "Company") is a
stock life insurance company organized under the laws of the State of Nebraska
in 1938. Lincoln Benefit is a wholly owned subsidiary of Allstate Life Insurance
Company ("ALIC"), a stock life insurance company incorporated under the laws of
the State of Illinois. ALIC is a wholly owned subsidiary of Allstate Insurance
Company ("AIC"), a property-liability insurance company incorporated under the
laws of the State of Illinois. All outstanding capital stock of AIC is owned by
The Allstate Corporation (the "Corporation"), a Delaware company which has
several different classes of securities, including common stock, registered with
the Securities and Exchange Commission ("SEC").

     Lincoln Benefit is authorized to conduct life insurance and annuity
business in the District of Columbia, Guam, U.S. Virgin Islands and all states
except New York.

     Lincoln Benefit, a single segment entity, markets a diversified group of
products to meet customers' lifetime needs in the areas of financial protection
and retirement solutions through independent insurance agents, including master
brokerage agencies; broker/dealers; and exclusive Allstate agencies. These
products include term life insurance; universal life insurance; variable life
insurance; single premium life insurance; fixed annuities, including market
value adjusted annuities and equity-indexed annuities; immediate annuities;
variable annuities and long-term care products. ALFS, Inc. ("ALFS") is the
principal underwriter for certain Lincoln Benefit products, such as variable
annuities, variable life insurance and market value adjusted annuities. ALFS is
a wholly owned subsidiary of ALIC and a registered broker/dealer under the
Securities and Exchange Act of 1934.

     Lincoln Benefit has entered into reinsurance agreements with ALIC and
non-affiliated reinsurers. Under the agreements with ALIC, Lincoln Benefit
reinsures all business to ALIC not reinsured to non-affiliated reinsurers. Under
the agreements, premiums, contract charges, interest credited to contractholder
funds, contract benefits and certain expenses of substantially all general
account contracts are reinsured with ALIC. The obligations of ALIC under the
reinsurance agreements are to the Company. The Company continues to have primary
liability as the direct insurer for risks reinsured.

     Under the Company's reinsurance agreements with ALIC, the Company reinsures
all retained general account liabilities (that have not been ceded to
non-affiliated reinsurers) to ALIC via a 100% coinsurance agreement. Assets
which support these liabilities are owned and managed by ALIC. Separate Accounts
liabilities related to variable annuity and life contracts are ceded to ALIC via
a 100% modified coinsurance agreement whereby assets are maintained in the
Company's legally segregated unitized Separate Accounts. Contract charges
assessed against the Separate Accounts assets and contract benefits are
ceded to ALIC.

     In addition, the Company cedes 90%, 80% or 60% of the mortality risk on
certain life policies, depending upon the issue year and product, to a pool of
eleven non-affiliated reinsurers. Beginning in 1998, the Company cedes mortality
risk on new business in excess of $2 million per life for individual coverage.
For business sold prior to 1998, the Company ceded mortality risk in excess of
$350 thousand per life for individual coverage.

     Lincoln Benefit's and ALIC's general account assets must be invested in
accordance with applicable state laws. These laws govern the nature and quality
of investments that may be made by life insurance companies and the percentage
of their assets that may be committed to any particular type of investment.

     Lincoln Benefit is engaged in a business that is highly competitive because
of the large number of stock and mutual life insurance companies and other
entities competing in the sale of life insurance and annuities. As of December
2001, the last year for which current information is available, there were
approximately 1,225 stock, mutual and other types of insurers in business in the
United States.

     The Company is subject to changing social, economic and regulatory
conditions. State and federal regulatory initiatives have varied and have
included efforts to remove barriers preventing banks from engaging in the
securities and insurance businesses, to change tax laws affecting the taxation
of insurance companies and the tax

                                        2
<Page>

treatment of insurance products which may impact the relative desirability of
various personal investment products, and to expand overall regulation. The
ultimate changes and eventual effects, if any, of these initiatives are
uncertain.

     Lincoln Benefit is the issuer of certain market value adjusted annuities
registered with the SEC. Lincoln Benefit also is the depositor of certain
Separate Accounts that are registered with the SEC as unit investment trusts and
through which it offers variable annuity or variable life insurance contracts
that are registered with the SEC.

ITEM 2. PROPERTIES

     Lincoln Benefit leases office space in Lincoln, Nebraska. The leased spaces
are also used for file storage and information technology support.

ITEM 3. LEGAL PROCEEDINGS

     Incorporated in this Item 3 by reference to the discussion under the
heading "Regulation and legal proceedings" in Note 8 to the Company's financial
statements in Item 8 of this Form 10-K.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     There is no public trading market for the Company's common stock. All of
its outstanding common stock is owned by its parent, ALIC. All of ALIC's
outstanding common stock is owned by AIC. All of the outstanding common stock of
AIC is owned by the Corporation.

     From January 1, 2001 through March 15, 2003, the Company paid no dividends
on its common stock to ALIC.

     Within the past three years, no equity securities were sold by the Company
that were not registered under the Securities Act of 1933.

     For additional information on dividends, including restrictions on the
payment of dividends by the Company, see the "Liquidity" subsection of the
"Capital Resources and Liquidity" section of our "Management's Discussion and
Analysis of Financial Condition and Results of Operations", which items are
incorporated herein by reference.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

     The following discussion highlights significant factors influencing results
of operations and financial position of the Company. It should be read in
conjunction with the financial statements and related notes. To conform with the
2002 presentation, certain prior year amounts have been reclassified.

     The accompanying management's discussion and analysis of financial
condition and results of operations gives effect to the restatement of the
financial statements for the years ended 2001 and 2000 as described in
Note 12 to the Financial Statements.

OVERVIEW

     The Company, a wholly owned subsidiary of ALIC, which is a wholly owned
subsidiary of AIC, a wholly owned subsidiary of the Corporation, markets a
diversified group of products to meet customers' needs in the areas of financial
protection and retirement solutions through independent insurance agents,
including master brokerage agencies; broker/dealers; and exclusive Allstate
agencies. These products include term life insurance; universal life insurance;
variable life insurance; single premium life insurance; fixed annuities,
including market value adjusted annuities and equity-indexed annuities;
immediate annuities; variable annuities and long-term care products.

     Management has identified the Company as a single segment entity.

                                        3
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONT.)

APPLICATION OF CRITICAL ACCOUNTING POLICIES

     The Company has identified two of its accounting policies that, due to
their nature, have required management to make assumptions and estimates that
are significant to the financial statements at December 31, 2002. It is
reasonably likely that changes in these assumptions and estimates could occur
from period to period, and have a material impact on the Company's financial
statements.

     A brief summary of each of these critical accounting policies follows. For
a more complete discussion of the judgments and other factors affecting the
measurement of these policies, see the referenced sections of the Management's
Discussion and Analysis of Financial Condition and Results of Operations
("MD&A"). There is also a complete summary of the Company's significant
accounting policies in Note 2 of the financial statements.

     INVESTMENTS - Fixed income securities include bonds, mortgage-backed and
asset-backed securities. All fixed income securities are carried at fair value
and are classified as available for sale. The fair value of publicly traded
fixed income securities is based on independent market quotations. Periodic
changes in fair values are reported as a component of Accumulated other
comprehensive income on the Statements of Financial Position and are
reclassified to Net income only when supported by the consummation of a
transaction with an unrelated third party, or when declines in fair values are
deemed other than temporary.

     The Company writes down to fair value any fixed income security that is
classified as other than temporarily impaired in the period the security is
deemed to be other than temporarily impaired. The assessment of other than
temporary impairment is performed on a case-by-case basis considering a wide
range of factors. Inherent in the Company's evaluation of a particular security
are assumptions and estimates about the operations of the issuer and its future
earnings potential. Some of the factors considered in evaluating whether a
decline in fair value is other than temporary are:
          - The Company's ability and intent to retain the investment for a
            period of time sufficient to allow for an anticipated recovery in
            value;
          - The recoverability of principal and interest;
          - The duration and extent to which the fair value has been less than
            amortized cost for fixed income securities;
          - The financial condition, near-term and long-term prospects of the
            issuer, including relevant industry conditions and trends, and
            implications of rating agency actions and offering prices; and
          - The specific reasons that a security is in a significant unrealized
            loss position, including market conditions which could affect
            liquidity.

     There are a number of risks and uncertainties inherent in the process of
monitoring impairments and determining if impairment is other than temporary.
These risks and uncertainties include the risks that:
          - The economic outlook is worse than anticipated and has a greater
            adverse impact on a particular issuer than anticipated;
          - The Company's assessment of a particular issuer's ability to meet
            all of its contractual obligations changes based on changes in the
            facts and circumstances related to that issuer; and
          - New information is obtained or facts and circumstances change that
            cause a change in the Company's ability or intent to hold a security
            to maturity or until it recovers in value.

     These risks and uncertainties could result in a charge to earnings in
future periods to the extent that losses are realized. The charge to earnings,
while potentially significant to Net income, would not have a significant impact
on Shareholder's equity since the portfolio is held at fair value and as a
result, the related unrealized gain (loss), net of tax, would already be
reflected as Accumulated other comprehensive income in Shareholder's equity. For
a further discussion of these policies, and quantification of the impact of
these estimates and assumptions, see the Investments, Market Risk and
Forward-looking Statements and Risk Factors sections of the MD&A.

     LIFE INSURANCE RESERVES - Reserves for life-contingent contract benefits,
which relate to traditional life insurance and immediate annuities with life
contingencies, are computed on the basis of long-term actuarial assumptions of
future investment yields, mortality, morbidity, contract terminations and
expenses. These

                                        4
<Page>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONT.)

assumptions, which for traditional life insurance are applied using the net
level premium method, include provisions for adverse deviation and generally
vary by such characteristics as type of coverage, year of issue and contract
duration. Mortality, morbidity and contract termination assumptions are based on
Company and industry experience prevailing at the time of issue. Expense
assumptions include the estimated effects of inflation and expenses to be
incurred beyond the premium paying period. Future investment yield assumptions
are determined at the time of issue based upon prevailing investment yields as
well as forecasted reinvestment yields. For further discussion of these
policies, see the Forward-looking statements and risk factors section of the
MD&A.

RESULTS OF OPERATIONS

<Table>
<Caption>
                                                       FOR THE YEAR ENDED DECEMBER 31,
                                                  ------------------------------------------
  (IN THOUSANDS)                                      2002           2001           2000
                                                  ------------   ------------   ------------
  <S>                                             <C>            <C>            <C>
  Net investment income                           $     11,621   $     12,144   $     12,214
  Realized capital gains and losses                     (4,084)        (1,352)           (95)
  Other expense                                              -              -             20
  Income tax expense                                     2,629          3,768          4,221
                                                  ------------   ------------   ------------
  Net income                                      $      4,908   $      7,024   $      7,878
                                                  ============   ============   ============
</Table>

     The Company has reinsurance agreements whereby premiums, contract charges,
interest credited to contractholder funds, contract benefits and certain
expenses are ceded to ALIC and other non-affiliated reinsurers, and reflected
net of such reinsurance in the Statements of Operations and Comprehensive
Income. 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.

     Net income in 2002 decreased 30.1% to $4.9 million compared to last year
due to an increase in realized capital losses and decreased net investment
income. Net income decreased to $7.0 million in 2001 from $7.9 million in 2000,
due primarily to increased realized capital losses in 2001.

     Pretax net investment income decreased 4.3% to $11.6 million in 2002
from $12.1 million in 2001. The decrease in pretax net investment income is
due to lower investment yields resulting from funds from operations and
reinvestments being invested at current market rates which were lower than
the average portfolio yields. The Company expects to experience lower
investment yields due, in part, to the reinvestment of proceeds from security
prepayments, calls and maturities and the investment of positive cash flows
from operations in securities yielding less than the average portfolio rate.
At December 31, 2002, portfolio balances, excluding assets held in Separate
Accounts and unrealized capital gains and losses on fixed income securities,
were comparable to December 31, 2001. Pretax net investment income in 2001
was comparable to 2000 as the effect of higher portfolio balances was more
than offset by increased investment expenses.

     Realized capital losses were $4.1 million in 2002, compared to $1.4 million
and $95 thousand in 2001 and 2000, respectively. In 2002, gains on sales of
fixed income securities of $239 thousand were more than offset by write-downs on
fixed income securities of $4.3 million. The capital losses in 2001 and 2000
resulted from sales of fixed income securities. Period to period fluctuations in
realized capital gains and losses are the result of timing of sales decisions
reflecting management's decision on positioning the portfolio, assessments of
individual securities, overall market conditions and write-downs when the
Company determines that a decline in the value of a security is other than
temporary.

                                        5
<Page>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONT.)

FINANCIAL POSITION

<Table>
<Caption>
  (IN THOUSANDS)
                                                           2002           2001
                                                       ------------   ------------
  <S>                                                  <C>            <C>
  Fixed income securities(1)                           $    199,406   $    186,709
  Short-term                                                  3,201          6,856
                                                       ------------   ------------
      Total investments                                $    202,607   $    193,565
                                                       ============   ============
  Cash                                                 $    130,249   $     43,796
                                                       ============   ============
  Reinsurance recoverable from ALIC, net               $ 12,178,831   $  9,600,660
                                                       ============   ============
  Reinsurance recoverable from non-affiliates, net     $    583,849   $    458,202
                                                       ============   ============
  Contractholder funds                                 $ 11,658,966   $  9,287,599
                                                       ============   ============
  Reserve for life-contingent contract benefits        $  1,096,970   $    760,264
                                                       ============   ============
  Separate Accounts assets and liabilities             $  1,413,221   $  1,565,708
                                                       ============   ============
</Table>

     (1)  Fixed income securities are carried at fair value. Amortized cost for
these securities was $182.8 million and $179.1 million at December 31, 2002 and
2001, respectively.

     Total investments were $202.6 million at December 31, 2002 compared to
$193.6 million at December 31, 2001. The increase was due to increased
unrealized gains on fixed income securities and positive cash flows generated
from operations. At December 31, 2002, unrealized gains on fixed income
securities were $16.6 million compared to $7.6 million at December 31, 2001. The
increase was a result of lower interest rates at December 31, 2002.

     The fair value of publicly traded fixed income securities is based on
independent market quotations. Periodic changes in the fair values are reported
as a component of Accumulated other comprehensive income.

     The following table presents the amortized cost, gross unrealized gains and
losses and fair value for fixed income securities.

<Table>
<Caption>
                                                                     GROSS UNREALIZED
(IN THOUSANDS)                                    AMORTIZED    ---------------------------       FAIR
                                                    COST          GAINS          LOSSES         VALUE
                                                ------------   ------------   ------------   ------------
<S>                                             <C>            <C>          <C>              <C>
AT DECEMBER 31, 2002
U.S. government and agencies                    $     57,672   $      6,730 $            -   $     64,402
Corporate                                             77,697          6,421            (38)        84,080
Municipal                                                504             63              -            567
Asset-backed securities                               14,246          1,350              -         15,596
Mortgage-backed securities                            31,637          2,104              -         33,741
Foreign government                                     1,001             19              -          1,020
                                                ------------   ------------   ------------   ------------
   Total fixed income securities                $    182,757   $     16,687   $        (38)  $    199,406
                                                ============   ============   ============   ============

AT DECEMBER 31, 2001
U.S. government and agencies                    $     39,710   $      1,971   $        (15)  $     41,666
Corporate                                             97,517          4,263           (450)       101,330
Municipal                                              1,504             29             (3)         1,530
Mortgage-backed securities                            39,389          1,731             (4)        41,116
Foreign government                                     1,004             63              -          1,067
                                                ------------   ------------   ------------   ------------
   Total fixed income securities                $    179,124   $      8,057   $       (472)  $    186,709
                                                ============   ============   ============   ============
</Table>

FIXED INCOME SECURITIES

     The Company's fixed income securities include publicly traded corporate
bonds, U.S. government bonds, mortgage-backed securities, asset-backed
securities, foreign government bonds and tax-exempt municipal bonds. All fixed
income securities are carried at fair value and are classified as available for
sale. Periodic changes

                                        6
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONT.)

in fair values are reported as a component of Accumulated other comprehensive
income, net of deferred taxes, and are reclassified to Net income only when
supported by the consummation of a transaction with an unrelated third party, or
when declines in fair values are deemed other than temporary. As of December 31,
2002, approximately 99.7% of the fixed income securities portfolio was invested
in taxable securities.

     At December 31, 2002 and 2001, $33.7 million and $41.1 million,
respectively, of the fixed income securities portfolio was invested in
mortgage-backed securities ("MBS"). The MBS portfolio consists primarily of
securities that were issued by, or have underlying collateral that is guaranteed
by, U.S. government agencies or sponsored entities. Therefore, the MBS portfolio
has relatively low credit risk.

     The MBS portfolio is subject to interest rate risk since the price
volatility and ultimate realized yield are affected by the rate of repayment of
the underlying mortgages. The Company attempts to limit interest rate risk on
these securities by investing a portion of the portfolio in securities that
provide prepayment protection. At December 31, 2002, approximately 19.3% of the
MBS portfolio was invested in planned amortization class bonds.

     At December 31, 2002, 98.3% of the Company's fixed income securities
portfolio was rated investment grade, which is defined by the Company as a
security having a rating from The National Association of Insurance
Commissioners ("NAIC") of 1 or 2, a Moody's rating of Aaa, Aa, A or Baa, or a
comparable Company internal rating.

     The following table summarizes the credit quality of the fixed income
securities portfolio.

(IN THOUSANDS)

<Table>
<Caption>
NAIC                                                                PERCENT OF
RATINGS         MOODY'S EQUIVALENT DESCRIPTION       FAIR VALUE        TOTAL
-----------   ----------------------------------   --------------   ----------
     <S>        <C>                                <C>                <C>
     1          Aaa/Aa/A                           $      181,704      91.1%
     2          Baa                                        14,271       7.2
     3          Ba                                          1,931       1.0
     6          In or near default                          1,500       0.7
                                                   --------------     -----
                                                   $      199,406     100.0%
                                                   ==============     =====
</Table>

     At December 31, 2002, all of the securities with a NAIC rating of 6 and
one security with a NAIC rating of 2 are included in the Company's list of
problem securities. For further discussion of securities categorized as problem,
see page 8.

FIXED INCOME PORTFOLIO MONITORING

     The Company writes down to fair value any fixed income security that is
classified as other than temporarily impaired in the period the security is
deemed to be other than temporarily impaired. Inherent in the Company's
evaluation of a particular security are assumptions and estimates about the
operations of the issuer and its future earnings potential. Some of the factors
considered in evaluating whether a decline in fair value is other than temporary
are:
          - The Company's ability and intent to retain the investment for a
            period of time sufficient to allow for an anticipated recovery in
            value;
          - The recoverability of principal and interest;
          - The duration and extent to which the fair value has been less than
            amortized cost for fixed income securities;
          - The financial condition, near-term and long-term prospects of the
            issuer, including relevant industry conditions and trends, and
            implications of rating agency actions and offering prices; and
          - The specific reasons that a security is in a significant unrealized
            loss position, including market conditions which could affect
            liquidity.

     There are a number of risks and uncertainties inherent in the process of
monitoring impairments and determining if an impairment is other than temporary.
These risks and uncertainties include the risks that:

                                        7
<Page>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONT.)

          - The economic outlook is worse than anticipated and has a greater
            adverse impact on a particular issuer than anticipated;
          - The Company's assessment of a particular issuer's ability to meet
            all of its contractual obligations changes based on changes in the
            facts and circumstances related to that issuer; and
          - New information is obtained or facts and circumstances change that
            cause a change in the Company's ability or intent to hold a security
            to maturity or until it recovers in value.

     These risks and uncertainties could result in a charge to earnings in
future periods to the extent that losses are realized. The charge to earnings,
while potentially significant to Net income, would not have a significant impact
on Shareholder's equity since the portfolio is held at fair value and as a
result, the related unrealized gain (loss), net of tax, would already be
reflected as Accumulated other comprehensive income in Shareholder's equity.

     The Company has an extensive monitoring process to identify fixed income
securities whose carrying value may be other than temporarily impaired. This
process includes a quarterly review of all securities using a screening process
to identify those securities whose fair value compared to amortized cost for
fixed income securities is below established thresholds and time periods, or
which are identified through other monitoring criteria such as ratings
downgrades or payment defaults. Securities with an unrealized loss of greater
than 20% of their amortized cost for fixed income securities for a period of six
months or more, are identified through this process. The securities identified,
in addition to other securities for which the Company may have concern, are
evaluated based on facts and circumstances for inclusion on a watch list.
Securities on the watch list are reviewed in detail to determine whether any
other than temporary impairment exists.

     The Company monitors the quality of its fixed income portfolio, in part, by
categorizing certain investments as problem, restructured or potential problem.
Problem fixed income securities are securities in default with respect to
principal and/or interest and/or securities issued by companies that have gone
into bankruptcy subsequent to the Company's acquisition of the security.
Restructured fixed income securities have modified terms and conditions that
were not at current market rates or terms at the time of the restructuring.
Potential problem fixed income securities are current with respect to
contractual principal and/or interest, but because of other facts and
circumstances, management has serious concerns regarding the borrower's ability
to pay future principal and interest, which causes management to believe these
securities may be classified as problem or restructured in the future.

     The following table summarizes the problem securities at December 31, 2002.

<Table>
<Caption>
(IN THOUSANDS)                                                                PERCENT OF TOTAL
                                                 AMORTIZED                      FIXED INCOME
                                                   COST         FAIR VALUE       PORTFOLIO
                                                ------------   ------------   ----------------
<S>                                             <C>            <C>                       <C>
Problem                                         $      1,785   $      1,785              0.9%
                                                ------------   ------------     ------------
Total net carrying value                        $      1,785   $      1,785              0.9%
                                                ============   ============     ============
Cumulative write-downs recognized               $      4,323
                                                ============
</Table>

     The Company has experienced an increase of $1.8 million of fixed income
securities categorized as problem as of December 31, 2002 compared to December
31, 2001. The Company did not have any fixed income securities categorized as
potential problem or restructured at December 31, 2002. At December 31, 2001,
the Company had no securities categorized as problem, restructured or potential
problem. The increase in problem assets primarily resulted from poor operating
fundamentals as well as liquidity constraints affecting two securities in the
utilities and energy sectors of the market in 2002. The Company expects eventual
recovery in these sectors but evaluated each fixed income security in these
sectors through its watch list process at December 31, 2002 and recorded
write-downs when appropriate. While it is possible for these balances to
increase in the future if economic conditions continue to be unfavorable, the
total amount of securities in these categories is expected to remain a
relatively low percentage of the total fixed income securities portfolio.

     The following table describes the components of pre-tax realized capital
gains and losses.

                                        8
<Page>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONT.)

<Table>
<Caption>
                                                            YEAR ENDED DECEMBER 31,
                                                  --------------------------------------------
(IN THOUSANDS)                                        2002            2001            2000
                                                  ------------    ------------    ------------
<S>                                               <C>             <C>             <C>
Investment write-downs                            $     (4,323)   $          -    $          -
Sales - fixed income securities                            239          (1,352)            (95)
                                                  ------------    ------------    ------------
Total pre-tax realized capital gains and losses   $     (4,084)   $     (1,352)   $        (95)
                                                  ============    ============    ============
</Table>

     The Company recorded losses on fixed income securities of $4.1 million for
the year ended December 31, 2002, which was driven by the fourth quarter
write-down of a major international energy and utility company of $2.7 million.
The write-down was taken when the parent company withdrew financial support from
one of its European subsidiaries, resulting in the subsidiary filing for
Administration in the United Kingdom. The credit profile of the company and
other subsidiaries has since stabilized due to several initiatives taken by
management to improve liquidity. Additionally, in the third quarter a security
issued by a global energy and utility company which had missed coupon payments
due to severely constrained liquidity was written down by $1.6 million. Some
sectors of the utility industry are under severe fundamental and technical
pressure and the Company is monitoring the industry very closely.

SHORT-TERM INVESTMENTS

     The Company's short-term investment portfolio was $3.2 million and $6.9
million at December 31, 2002 and 2001, respectively. The Company invests
available cash balances primarily in taxable short-term securities having a
final maturity date or redemption date of one year or less.

CASH

     At December 31, 2002, the Cash balance was $130.2 million compared to $43.8
million at December 31, 2001. The increase of $86.4 million is primarily a
result of timing differences between when deposits from fixed annuity sales were
received and when those deposits were transferred to ALIC under the Company's
reinsurance agreement. As a result, there was a corresponding increase in
Payable to affiliates.

REINSURANCE RECOVERABLE, CONTRACTHOLDER FUNDS AND RESERVE FOR LIFE-CONTINGENT
CONTRACT BENEFITS

     Under accounting principles generally accepted in the United States of
America ("GAAP"), when reinsurance contracts do not relieve the ceding company
of legal liability to contractholders, the ceding company is required to report
reinsurance recoverables arising from these contracts separately as assets. The
liabilities for the contracts are reported as Contractholder funds, Reserves for
life-contingent contract benefits, or Separate Accounts liabilities depending on
the characteristics of the contracts. The Company reinsures all reserve
liabilities with ALIC or other non-affiliated reinsurers. Reinsurance
recoverable and the related Reserve for life-contingent contract benefits and
Contractholder funds are reported separately in the Statements of Financial
Position, while the assets which support the Separate Accounts liabilities are
reflected as Separate Accounts assets.

     At December 31, 2002, Contractholder funds increased to $11.66 billion from
$9.29 billion at December 31, 2001 as the result of new and additional deposits
from fixed annuities and interest credited to contractholder funds partially
offset by surrenders, withdrawals and benefit payments. Reserves for
life-contingent contract benefits increased $336.7 million to $1.10 billion at
December 31, 2002 resulting from new sales of structured settlement and
immediate annuities and other life-contingent products, partially offset by
benefits paid. Reinsurance recoverable from ALIC and Reinsurance recoverable
from non-affiliates increased correspondingly by $2.58 billion and $125.6
million, respectively, due to the increase in contractholder obligations
discussed above. Under the reinsurance agreements with ALIC and other
non-affiliated reinsurers, all contractholder obligations are reinsured.

     The Company purchases reinsurance after evaluating the financial condition
of the reinsurer, as well as the terms and price of coverage. The Company
reinsures certain of its risks to non-affiliated reinsurers under yearly
renewable term and coinsurance agreements. Yearly renewable term and coinsurance
agreements result in the passing of a portion of the risk to the reinsurers.
Generally, the reinsurer receives a proportionate amount of the premiums less
commissions and is liable for a corresponding proportionate amount of all
benefit payments.

                                        9
<Page>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONT.)

     The Company continuously monitors the credit worthiness of reinsurers. As
of December 31, 2002, all non-affiliated ceded premiums were reinsured under
uncollateralized reinsurance agreements with companies that had a financial
strength rating above investment grade level, as measured by at least one of the
major rating agencies. In certain cases, these ratings refer to the financial
strength of the affiliated group or parent company of the reinsurer.

SEPARATE ACCOUNTS

     Separate Accounts assets and liabilities decreased 9.7% to $1.41 billion at
December 31, 2002 compared to the December 31, 2001 balance. The decrease was
primarily attributable to declines in the fair value of the Separate Accounts
investment portfolios due to equity market conditions, surrenders and
withdrawals and expense charges, partially offset by sales of variable annuity
contracts and transfers from the fixed account contract option to variable
Separate Accounts funds.

     The assets related to variable 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 contractholders and therefore, are not included in the
Company's Statements of Operations and Comprehensive Income. Revenues to the
Company from the Separate Accounts consist of contract charges related to
maintenance and administration, mortality, early surrender and expenses, which
are ceded to ALIC.

     Absent any contract provision wherein the Company guarantees either a
minimum return of account value upon death or annuitization, variable annuity
and variable life insurance contractholders bear the investment risk that the
underlying mutual funds of the Separate Accounts may not meet their stated
investment objectives. The risk and associated cost of these contract
guarantees are ceded to ALIC in accordance with the reinsurance agreements.

MARKET RISK

     Market risk is the risk that the Company will incur losses due to adverse
changes in equity prices or interest rates. The Company's primary market risk
exposure is to changes in interest rates, although the Company also has certain
exposures to changes in equity prices in its product liabilities; this risk is
transferred to ALIC in accordance with the reinsurance agreements.

CORPORATE OVERSIGHT

     The Company administers and oversees the investment risk management
processes primarily through its Board of Directors and the Credit and Risk
Management Committee ("CRMC"). The Board of Directors provides executive
oversight of investment activities. The CRMC is a senior investment management
committee consisting of the Chief Investment Officer, the Investment Risk
Manager, and other investment officers who are responsible for the day-to-day
management of investment risk. The CRMC meets at least monthly to provide
detailed oversight of investment risk, including market risk.

     The Company has investment guidelines that define the overall framework for
managing market and other investment risks, including the accountabilities and
controls over these activities. In addition, the Company has a specific Board of
Directors-approved investment policy delineating the investment limits and
strategies that are appropriate for the Company's liquidity, surplus, product
and regulatory requirements.

     The day-to-day management of market risk within defined tolerance ranges
occurs as portfolio managers buy and sell within their respective markets based
upon the acceptable boundaries established by the investment policy. The Company
has implemented a comprehensive daily measurement process, administered by the
Investment Risk Manager, for monitoring compliance with limits established by
the investment policy.

                                       10
<Page>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONT.)

INTEREST RATE RISK

     Interest rate risk is the risk that the Company will incur economic losses
due to adverse changes in interest rates, as the Company invests substantial
funds in interest-sensitive assets.

     One of the measures used to quantify this exposure is duration. Duration
measures the sensitivity of the fair value of assets to changes in interest
rates. For example, if interest rates increase by 1%, the fair value of an asset
with a duration of 5 is expected to decrease in value by approximately 5%. The
Company's asset duration was approximately 3.9 and 3.8 at December 31, 2002 and
2001, respectively.

     To calculate duration, the Company projects asset cash flows and discounts
them to a net present value basis using a risk-free market rate adjusted for
credit quality, sector attributes, liquidity and other specific risks. Duration
is calculated by revaluing these cash flows at alternative levels of interest
rates, and determining the percentage change in fair value from the base case.
The projections include assumptions (based upon historical market and Company
specific experience) reflecting the impact of changing interest rates on the
prepayment, lapse, leverage and/or option features of instruments, where
applicable. Such assumptions relate primarily to mortgage-backed securities,
collateralized mortgage obligations, and municipal and corporate obligations.

     Based upon the information and assumptions the Company uses in its duration
calculation and interest rates in effect at December 31, 2002, management
estimates that a 100 basis point immediate, parallel increase in interest rates
("rate shock") would decrease the net fair value of its assets identified above
by approximately $7.8 million versus $7.1 million at December 31, 2001. The
selection of a 100 basis point immediate parallel increase in interest rates
should not be construed as a prediction by the Company's management of future
market events, but only as an illustration of the potential impact of
such an event.

     To the extent that conditions differ from the assumptions used, the
Company's duration and rate shock measures could be significantly impacted.
Additionally, the Company's calculation assumes that the current relationship
between short-term and long-term interest rates (the term structure of interest
rates) will remain constant over time. As a result, these calculations may not
fully capture the impact of non-parallel changes in the term structure of
interest rates and/or large changes in interest rates.

EQUITY PRICE RISK

     Equity price risk is the risk that the Company will incur economic losses
due to adverse changes in a mutual fund or stock index.

     At December 31, 2002 and 2001, the Company had Separate Account assets
totaling $1.41 billion and $1.57 billion, respectively. The Company earns
contract charges as a percentage of account values. In the event of an immediate
decline of 10% in the account values due to equity market declines, the Company
would earn approximately $2.0 million less in annualized fee income at December
31, 2002, which would be ceded to ALIC. This is a decrease from the $2.2 million
amount determined at December 31, 2001.

     Generally at the time of purchase, the contractholders of variable annuity
contracts receive a guaranteed minimum death benefit ("GMDB") and, for certain
contracts, may elect to purchase an enhanced GMDB or guaranteed minimum income
benefit ("GMIB"). The Company charges a fee for these guarantees that is
generally calculated as a percentage of the account value. Both types of
guarantees subject the Company to additional equity risk as the beneficiary or
contractholder may receive a benefit for an amount greater than the account
value under contractually defined circumstances and terms, which would be ceded
to ALIC. GMDBs may be payable upon death, while GMIBs may be payable on or after
the ten-year anniversary of the contract if the contractholder elects to receive
a defined stream of payments ("annuitize"). All variable annuity contract
charges and fees, liabilities and benefits, including the GMDBs and GMIBs are
ceded to ALIC in accordance with the reinsurance agreement, thereby limiting the
Company's equity risk exposure.

                                       11
<Page>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONT.)

CAPITAL RESOURCES AND LIQUIDITY

CAPITAL RESOURCES

     The Company's capital resources consist of Shareholder's equity. The
following table summarizes the Company's capital resources at December 31:

<Table>
<Caption>
(IN THOUSANDS)                                      2002           2001           2000
                                                ------------   ------------   ------------
<S>                                             <C>            <C>            <C>
Common stock, additional capital paid in and
  retained income                               $    191,778   $    186,870   $    179,846
Accumulated other comprehensive income                10,822          4,930          2,112
                                                ------------   ------------   ------------
  Total shareholder's equity                    $    202,600   $    191,800   $    181,958
                                                ============   ============   ============
</Table>

SHAREHOLDER'S EQUITY

     Shareholder's equity increased $10.8 million during the year ended December
31, 2002 when compared to December 31, 2001, due to an increase in Unrealized
net capital gains resulting in other comprehensive income of $5.9 million and
Net income of $4.9 million. Shareholder's equity increased during 2001, as well
as 2000, due to Net income of $7.0 million and $7.9 million, respectively, and
an increase in Unrealized net capital gains of $2.8 million and $3.1 million,
respectively. In December 2000, the Company received a $10 million capital
contribution from ALIC.

FINANCIAL RATINGS AND STRENGTH

     The Company shares the insurance financial strength ratings of its parent,
ALIC, because substantially all business is reinsured to ALIC. The Company's
insurance financial strength was rated Aa2, AA+, and A+(r) by Moody's, Standard
& Poor's and A.M. Best, respectively, at December 31, 2002.

     None of these ratings were changed during 2002. The Company's and ALIC's
insurance financial strength ratings have remained at the same consistently high
levels for the last five years (Aa2 "excellent" by Moody's, AA and AA+ "very
strong" by Standard & Poor's and A+ "superior" by A.M. Best). On a relative
basis, these rating positions have improved in light of the significant volume
of rating downgrades of other companies in the industry during 2002. Since
February 2002, Standard & Poor's rating outlook for ALIC and its rated
subsidiaries and affiliates, including the Company, has been "negative". In
November 2002, Standard & Poor's reaffirmed the AA+ rating of the Company and
ALIC, but left the outlook unchanged. In January 2003, A.M. Best Company newly
assigned a "positive" rating outlook for the Company and ALIC.

     The Company's ratings are influenced by many factors including operating
and financial performance, asset quality, asset/liability management, overall
portfolio mix, the amount of financial leverage (i.e., debt), exposure to

                                       12
<Page>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONT.)

risks, as well as the current level of operating leverage.

     The NAIC has a standard for assessing the solvency of insurance companies,
which is referred to as risk-based capital ("RBC"). The standard is based on a
formula for determining each insurer's RBC and a model law specifying regulatory
actions if an insurer's RBC falls below specified levels. The RBC formula
establishes capital requirements relating to insurance, business, asset and
interest rate risks. At December 31, 2002, RBC for the Company was significantly
above levels that would require regulatory actions.

     The NAIC has also developed a set of financial relationships or tests known
as the Insurance Regulatory Information System to assist state regulators in
monitoring the financial condition of insurance companies and identifying
companies that require special attention or actions from insurance regulatory
authorities. The NAIC analyzes data provided by insurance companies using
prescribed financial data ratios each with defined "usual ranges." Generally,
regulators will begin to monitor an insurance company if its ratios fall outside
the usual ranges for four or more of the ratios. If an insurance company has
insufficient capital, regulators may act to reduce the amount of insurance it
can issue. The Company is currently not under regulatory scrutiny based on these
ratios.

LIQUIDITY

     The principal, potential sources of funds for the Company include the
following activities:

          Premiums and deposits
          Reinsurance recoveries
          Receipts of principal, interest and dividends on investments
          Sales of investments
          Intercompany loans
          Capital contributions from ALIC

     The principal, potential uses of funds for the Company include the
following activities:

          Payment of contract benefits, maturities, surrenders and withdrawals
          Reinsurance cessions and payments
          Operating costs and expenses
          Purchase of investments
          Repayment of intercompany loans
          Dividends to ALIC

     Under the terms of reinsurance agreements, premiums and deposits, excluding
those relating to variable contracts, are transferred primarily to ALIC, which
maintains the investment portfolios supporting the Company's products. Payments
of contractholder claims, benefits (including GMDBs and GMIBs), contract
maturities, contract surrenders and withdrawals and certain operating costs
(excluding investment-related expenses), 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 primarily on ALIC's ability to meet those
obligations under the reinsurance program.

     The ability of the Company to pay dividends is dependent on business
conditions, income, cash requirements of the Company and other relevant factors.
The payment of shareholder dividends by the Company without the prior approval
of the state insurance regulator is limited by Nebraska law to formula amounts
based on statutory surplus and statutory net gain from operations, as well as
the timing and amount of dividends paid in the preceding twelve months. The
maximum amount of dividends that the Company can distribute during 2003 without
prior approval of the Nebraska Department of Insurance is $19.2 million.

     The Company has entered into an intercompany loan agreement with the
Corporation. The amount of funds available to the Company is at the discretion
of the Corporation. The maximum amount of loans the Corporation will have
outstanding to all its eligible subsidiaries at any given point in time is
limited to $1.00 billion. No amounts

                                       13
<Page>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONT.)

were outstanding for the intercompany loan agreement at December 31, 2002 or
2001. The Corporation uses commercial paper borrowings and bank lines of credit
to fund intercompany borrowings.

REGULATIONS AND LEGAL PROCEEDINGS

     The Company is subject to changing social, economic and regulatory
conditions. State and federal regulatory initiatives and proceedings have varied
and have included efforts to remove barriers preventing banks from engaging in
the securities and insurance businesses, to change tax laws affecting the
taxation of insurance companies and the tax treatment of insurance products
which may impact the relative desirability of various personal investment
products, and to expand overall regulation. The ultimate changes and eventual
effects, if any, of these initiatives are uncertain.

     The Company sells its products through a variety of distribution channels
including Allstate agencies. Consequently, the outcome of some legal proceedings
that involve AIC regarding the Allstate agencies may have an impact on the
Company.

     AIC is defending various lawsuits involving worker classification issues.
Examples of these lawsuits include a number of putative class actions
challenging the overtime exemption claimed by AIC under the Fair Labor Standards
Act or state wage and hour laws. These class actions mirror similar lawsuits
filed recently against other carriers in the industry and other employers.
Another example involves the worker classification of staff working in agencies.
In this putative class action, plaintiffs seek damages under the Employee
Retirement Income Security Act ("ERISA") and the Racketeer Influenced and
Corrupt Organizations Act alleging that agency secretaries were terminated as
employees by AIC and rehired by agencies through outside staffing vendors for
the purpose of avoiding the payment of employee benefits. A putative nationwide
class action filed by former employee agents also includes a worker
classification issue; these agents are challenging certain amendments to the
Agents Pension Plan and are seeking to have exclusive agent independent
contractors treated as employees for benefit purposes. AIC has been vigorously
defending these and various other worker classification lawsuits. The outcome of
these disputes is currently uncertain.

     In addition, on August 6, 2002, a petition was filed with the National
Labor Relations Board ("NLRB") by the United Exclusive Allstate Agents, Office
and Professional Employees International Union (the "OPEIU"), seeking
certification as the collective bargaining representative of all Allstate agents
in the United States. On December 2, 2002, the Chicago Regional Director of the
NLRB dismissed the petition, agreeing with AIC's position that the agents are
independent contractors, not employees, and that, consequently, the NLRB lacks
jurisdiction over the issue. The OPEIU has requested that the NLRB in
Washington, D.C. review the dismissal by the Chicago Regional Director. The
request for appeal has not been accepted yet. If it is, AIC will vigorously
oppose the appeal. The outcome is currently uncertain.

     AIC is also defending certain matters relating to its agency program
reorganization announced in 1999. These matters include an investigation by the
U.S. Department of Labor and a lawsuit filed in December 2001 by the U.S. Equal
Employment Opportunity Commission ("EEOC") with respect to allegations of
retaliation under the Age Discrimination in Employment Act, the Americans with
Disabilities Act and Title VII of the Civil Rights Act of 1964. A putative
nationwide class action has also been filed by former employee agents alleging
various violations of ERISA, breach of contract and age discrimination. AIC has
been vigorously defending these lawsuits and other matters related to its agency
program reorganization. In addition, AIC is defending certain matters relating
to its life agency program reorganization announced in 2000. These matters
include an investigation by the EEOC with respect to allegations of age
discrimination and retaliation. AIC is cooperating fully with the agency
investigation and will continue to vigorously defend these and other claims
related to the life agency program reorganization. The outcome of these disputes
is currently uncertain.

     The Company is currently defending a nationwide class action, alleging
among other things, breach of contract and breach of the implied covenant of
good faith and fair dealing as a result of a change in the rate and cap on an
annuity product. The court certified the class and entered summary judgment in
favor of the Company and against the certified class. Plaintiff has filed notice
of appeal. The Company has been vigorously defending the suit. The outcome of
the appeal is currently uncertain.

     Various other legal and regulatory actions are currently pending that
involve the Company and specific aspects of its conduct of business. Like other
members of the insurance industry, the Company is the target of an increasing
number of class action lawsuits and other types of litigation, some of which
involve claims for substantial and/or indeterminate amounts (including punitive
and treble damages) and the outcomes of which are unpredictable. This litigation
is based on a variety of issues including insurance and claim settlement
practices. However, at this time, based on their present status and the
existence of the reinsurance agreement with ALIC, it is the opinion of
management that the ultimate liability, if any, in one or more of these other
actions in excess of amounts currently reserved is not expected to have a
material effect on the results of operations, liquidity or financial position of
the Company.

STATE INSURANCE REGULATION

     State insurance authorities have broad administrative powers with respect
to all aspects of the life insurance business including:

-    Licensing to transact business
-    Licensing agents
-    Admittance of assets to support statutory surplus
-    Approving policy forms
-    Regulating unfair trade and claims practices
-    Establishing reserve requirements and solvency standards
-    Regulating the type, amounts and valuations of investments permitted and
     other matters

     State insurance laws require the Company to file statutory-basis financial
statements with insurance departments in all states in which the Company does
business. The operations of the Company and the accounts are subject to
examination by those departments at any time. The Company prepares
statutory-basis financial statements in accordance with accounting practices and
procedures prescribed or permitted by the State of Nebraska.

     State insurance departments conduct periodic examinations of the books and
records, financial reporting, policy filings and market conduct of insurance
companies domiciled in their states, generally once every three to five years.
Examinations are generally carried out in cooperation with the insurance
departments of other states under guidelines promulgated by the NAIC.

MARKET CONDUCT REGULATION

     State insurance laws and regulations include numerous provisions governing
the marketplace activities of

                                       14
<Page>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONT.)

insurers, including provisions governing the form and content of disclosure to
customers, illustrations, advertising, sales practices and complaint handling.
State regulatory authorities generally enforce these provisions through periodic
market conduct examinations.

FEDERAL REGULATION AND SECURITIES OPERATIONS

     The Company's variable annuity and variable life insurance products
generally are considered securities within the meaning of federal and state
securities laws and are registered under the Securities Act of 1933 and are
subject to regulation by the SEC, the National Association of Securities Dealers
("NASD") and state securities regulations. The Company's Separate Accounts are
registered as investment companies under the Investment Company Act of 1940.

GUARANTY FUNDS

     Under state insurance guaranty fund laws, insurers doing business in a
state can be assessed, up to prescribed limits, for certain obligations of
insolvent insurance companies to contractholders and claimants. Amounts assessed
to each company are typically related to its proportion of business written in a
particular state. The Company's expenses related to these funds are immaterial
and are ceded to ALIC under reinsurance agreements.

PENDING ACCOUNTING STANDARDS

     On July 31, 2002, the American Institute of Certified Public Accountants
issued an exposure draft Statement of Position ("SOP") entitled "Accounting and
Reporting by Insurance Enterprises for Certain Nontraditional Long-Duration
Contracts and for Separate Accounts". The accounting guidance contained in the
proposed SOP applies to several of the Company's products and product features.
The proposed effective date of the SOP is for fiscal years beginning after
December 15, 2003, with earlier adoption encouraged. If adopted early, the
provisions of the SOP must be applied as of the beginning of the fiscal year.
Accordingly, if the SOP were adopted during an interim period of 2003, prior
interim periods would be restated. A provision of the proposed SOP requires the
establishment of a liability in addition to the account balance for contracts
and contract features that provide guaranteed death or other insurance benefits.
The finalized SOP may also require a liability for guaranteed income benefits.
These liabilities are not currently recognized by the Company, and their
establishment may have a material impact on the amounts ceded to and reinsurance
recoverable from ALIC depending on the market conditions at the time of
adoption, but are not expected to have a material impact on the Company's
Statements of Financial Position.

     The Financial Accounting Standards Board ("FASB") has exposed guidance that
addresses the accounting for certain modified coinsurance agreements. The
guidance has been exposed as FASB Interpretation of Statement 133 Implementation
Issue No. B36, "Embedded Derivatives: Bifurcation of a Debt Instrument That
Incorporates Both Interest Rate Risk and Credit Risk Exposures That Are
Unrelated or Only Partially Related to the Creditworthiness of the Issuer of
That Instrument." The proposed guidance requires recognizing an embedded
derivative in certain reinsurance agreements when certain conditions are met.
The initial impact of adopting the proposed guidance would be recorded as a
cumulative adjustment to Net income in the first fiscal quarter beginning after
June 15, 2003. The provisions of the proposed guidance, as currently drafted and
interpreted, would not have a material impact on the Company's reinsurance
balances that would be subject to the proposed guidance. Accordingly, the
potential impact of recognizing embedded derivatives pursuant to the
requirements of the proposed guidance is expected to be immaterial to both the
Company's Statements of Financial Position and Statements of Operations and
Comprehensive Income.

FORWARD-LOOKING STATEMENTS AND RISK FACTORS

     This document contains "forward-looking statements" that anticipate results
based on management's estimates, assumptions and 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. The Company assumes no
obligation to update any forward-looking statements as a result of new
information or future events or developments.

                                       15
<Page>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONT.)

     These 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, the Company's strategy for growth, product development, regulatory
approvals, market position, expenses, financial results and reserves. Management
believes that these statements are based on reasonable estimates, assumptions
and plans. However, if the estimates, assumptions or plans underlying the
forward-looking statements prove inaccurate or if other risks or uncertainties
arise, actual results could differ materially from those communicated in these
forward-looking statements. In addition to the normal risks of business, the
Company is subject to significant risk and uncertainties, including those listed
below which apply to it as an insurance business and a provider of other
financial services.

     -  There is uncertainty involved in the availability of reinsurance and
        estimating 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 whether
        the reinsurers, or their affiliates, have the financial capacity and
        willingness to pay.

     -  The Corporation is continuing to examine the potential exposure of its
        operations to acts of terrorism and to evaluate methods of addressing
        this exposure in the best interests of the shareholders,
        contractholders, the lending community and regulators. In the event that
        a terrorist act occurs, the Corporation may be adversely impacted,
        depending on the nature of the event. The Corporation is also evaluating
        the impact of the federal Terrorism Risk Insurance Act of 2002 (the
        "Act") on the nature, availability and affordability of commercial
        insurance coverage for terrorism and the consequent impact on the
        Company's investments portfolio, particularly in sectors such as
        airlines and real estate. The Act established a temporary federal
        program providing for a system of shared public and private compensation
        for certain insured commercial property and casualty losses resulting
        from acts of terrorism, as defined by the Act.

     -  Changes in market interest rates can have adverse effects on the
        Company's investment portfolio and investment income. Increasing market
        interest rates have an adverse impact on the value of the investment
        portfolio, for example, by decreasing the fair values of 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 maturities,
        calls and prepayments of investments into new investments that could
        yield less than the portfolio's average rate.

     -  A declining market could negatively impact the credit quality of the
        Company's investment portfolio as adverse equity markets also affect
        issuers of securities held by the Company. Declines in the quality of
        the portfolio could cause additional realized losses on securities.

     -  Changes in interest rates could also reduce the profitability of the
        Company's spread-based products, particularly interest-sensitive life
        insurance and investment products, as the difference between the amount
        that the Company is required to pay on such products and the rate of
        return earned on the related investments could be reduced. Changes in
        market interest rates 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, leading to lower
        sales and/or changes in the level of surrenders and withdrawals for
        these products. The Company's products generally have the flexibility to
        adjust crediting rates to reflect higher or lower investment returns.
        However, this flexibility is limited by contractual minimum crediting
        rates. Additionally, unanticipated surrenders could cause acceleration
        of amortization of deferred policy acquisition costs ("DAC") or impact
        the recoverability of DAC and thereby increase expenses ceded to ALIC
        and reduce current period profitability of ALIC. ALIC seeks to limit its
        exposure to this risk by regularly monitoring DAC recoverability. In
        addition, the Company offers a diverse group of products, periodically
        reviews and revises crediting rates and provides for surrender charges
        in the event of early withdrawal.

     -  The Company amortizes DAC related to interest-sensitive life insurance,
        variable annuities and investment contracts in proportion to estimated
        future gross profits ("EGP") over the estimated lives of the contracts.
        Periodically, the Company updates the assumptions underlying EGP, which
        include margins from mortality, including guaranteed minimum death
        and income benefits, investment margin, including realized capital
        gains and losses, contract administration, surrender and other
        contract charges, less maintenance expenses, in order to reflect
        actual and expected experience and its potential impact to the

                                       16
<Page>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONT.)

        valuation of DAC. Updates to these assumptions could result in
        adjustment to the cumulative amortization of DAC ceded to ALIC. For
        example, reduced EGP resulting from declines in contract charges
        assessed against declining Separate Accounts' balances resulting from
        poor equity market performance, could result in accelerated amortization
        of DAC. An adjustment, if any, may have a material effect on the results
        of operations ceded to ALIC.

     -  The impact of decreasing Separate Accounts balances resulting from
        volatile equity market conditions, underlying fund performance and the
        performance of distributors could cause contract charges earned by the
        Company and ceded to ALIC to decrease and lead to an increase in
        exposure of the Company to pay GMDBs and GMIBs. Poor fund performance
        could also result in higher partial withdrawals of account value, which,
        for some contracts, do not reduce the GMDB in a proportional amount. In
        addition, it is possible that the assumptions and projections used by
        the Company in establishing prices for the GMDBs and GMIBs, particularly
        assumptions and projections about investment performance, do not
        accurately anticipate the level of costs the Company will ultimately
        incur and cede to ALIC in providing those benefits, resulting in adverse
        mortality margin trends that may have a material effect on ALIC's
        results of operations. These factors may result in accelerated DAC
        amortization ceded to ALIC and require increases in statutory reserves
        which reduce ALIC's statutory capital and surplus.

     -  Conditions in the U.S. and international stock markets can have an
        impact on the Company's variable annuity sales. In general, sales of
        variable annuities increase when the stock markets are rising over an
        extended period of time and decrease when stock markets are falling over
        an extended period of time.

     -  In order to manage interest rate risk, from time to time the Company
        manages the effective duration of assets in the investment portfolio.
        Adjustments made to modify durations may have an impact on the value of
        the investment portfolio and on investment income.

     -  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 be made until well into the future. Reserves are based
        on many assumptions and estimates, including estimated premiums to be
        received over the assumed life of the policy, the timing of the event
        covered by the insurance policy, the amount of contract benefits to be
        paid and the investment returns on the assets purchased with the
        premiums received. The Company periodically reviews and revises its
        estimates. If future experience differs from assumptions, it may have a
        material impact on the results of operations ceded to ALIC.

     -  State and federal laws and regulations affect the taxation of insurance
        companies and life insurance and annuity products. From time to time,
        Congress has considered proposals that, if enacted, could impose a
        greater tax burden on the Company or could have an adverse impact on the
        federal income tax treatment of some insurance products offered by the
        Company, including the favorable policyholder tax treatment currently
        applicable to deferred and immediate annuities, and life insurance,
        including interest-sensitive life insurance. Such proposals have
        included legislation relating to the deferral of taxation on the
        accretion of value within certain annuities and life insurance products.
        Recent proposals to eliminate the double taxation of dividends and to
        permit the establishment of tax-free lifetime savings and retirement
        savings accounts could substantially reduce the tax-advantaged nature of
        many insurance products. If such proposals were to be adopted, they
        could have a material adverse effect on the Company's financial position
        or the Company's ability to sell such products and could result in the
        surrender of some existing contracts and policies. In addition, recent
        changes in the federal estate tax laws have negatively affected the
        demand for the types of life insurance used in estate planning.

     -  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, for
        example, changes in control of any of these entities, could have a
        detrimental effect on the Company's sales. This risk may be exacerbated
        due to the enactment of the Gramm-Leach-Bliley Act of

                                       17
<Page>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONT.)

        1999, which eliminated many federal and state law barriers to
        affiliations among banks, securities firms, insurers and other financial
        service providers.

     -  The Company is affiliated with various entities registered under the
        federal securities laws as broker-dealers, investment advisers and/or
        investment companies. These entities are subject to the regulatory
        jurisdiction of the SEC, the NASD and/or, in some cases, state
        securities administrators. The laws regulating the securities products
        and activities of the Company are complex, numerous and subject to
        change. As with any highly regulated industry, there is some degree of
        risk of regulatory non-compliance; however ALIC has in place various
        legal and compliance personnel, procedures and systems designed to
        reasonably assure compliance with these requirements.

     -  While positive operating cash flows are expected to continue to meet the
        Corporation's liquidity requirements, the Corporation's liquidity could
        be constrained by a catastrophe, or multiple catastrophes, which result
        in extraordinary losses, a downgrade of the Corporation's long-term
        debt rating of A1 and A+ (from Moody's and Standard & Poor's,
        respectively) to non-investment grade status of below Baa3/BBB-, a
        downgrade of AIC's insurance financial strength rating from Aa2, AA and
        A+ (from Moody's, Standard & Poor's and A.M. Best, respectively) to
        below Baa/BBB/B+, or a downgrade in ALIC's or the Company's insurance
        financial strength rating from Aa2, AA+ and A+ (from Moody's, Standard &
        Poor's and A.M. Best, respectively) to below Aa3/AA-/A-. In the event of
        a downgrade of the Corporation's or AIC's rating, ALIC and its
        subsidiaries including the Company, could also experience a similar
        downgrade.

     -  The events of September 11, 2001, and the resulting disruption in the
        financial markets revealed weaknesses in the physical and operational
        infrastructure that underlies the U.S. and worldwide financial systems.
        Those weaknesses did not impair the Company's liquidity in the wake of
        September 11, 2001. However, if an event of similar or greater magnitude
        occurred in the future and if the weaknesses in the physical and
        operational infrastructure of the U.S. and worldwide financial systems
        are not remedied, the Company could encounter significant difficulties
        in transferring funds, buying and selling securities and engaging in
        other financial transactions that support its liquidity.

     -  Insurance financial strength ratings are an important factor in
        establishing the competitive position of insurance companies and,
        generally, may be expected to have an effect on an insurance company's
        business. On an ongoing basis, rating agencies review the financial
        performance and condition of insurers and could downgrade or change a
        company's ratings due to, for example, a decline in the value of a
        company's investment portfolio or increased liabilities for variable
        contracts due to additional GMDB and GMIB exposure resulting from market
        declines. A multiple level downgrade of the Corporation, AIC, ALIC or
        the Company, while not expected, could have a material adverse affect on
        the Company's sales, including the competitiveness of the Company's
        product offerings, its ability to market products, and its financial
        condition and results of operations ceded to ALIC. Also, the rating
        agencies have a variety of policies and practices regarding the
        relationships among ratings of affiliated entities. As such, the ratings
        of the Company or ALIC could be affected by changes in ratings of AIC
        and/or the Corporation.

     -  State insurance regulatory authorities require insurance companies to
        maintain specified levels of statutory capital and surplus. In addition,
        competitive pressures generally require the Company to maintain
        insurance financial strength ratings. These restrictions affect the
        Company's ability to pay shareholder dividends to ALIC and to use its
        capital in other ways.

     -  An exposure draft SOP entitled "Accounting and Reporting by Insurance
        Enterprises for Certain Nontraditional Long-Duration Contracts and for
        Separate Accounts" applies to several of the Company's products and
        product features. A provision requires the establishment of a liability
        in addition to the account balance for contracts and contract features
        that provide guaranteed death or other insurance benefits. The Company
        does not currently hold liabilities for GMDB features covered by the SOP
        or GMIBs. If the SOP is adopted, the Company's establishment of these
        liabilities could have a material impact on the amounts ceded to and
        reinsurance recoverable from ALIC depending on the market conditions at
        the time of adoption.

                                       18
<Page>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONT.)

     -  In recent years the state insurance regulatory framework has come under
        increased federal scrutiny and legislation that would provide for
        optional federal chartering of insurance companies has been introduced
        in Congress. In addition, state legislators and insurance regulators
        continue to examine the appropriate nature and scope of state insurance
        regulation. 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.

     -  The Gramm-Leach-Bliley Act of 1999 permits mergers that combine
        commercial banks, insurers and securities firms under one holding
        company. Until passage of the Gramm-Leach-Bliley Act of 1999, the Glass
        Steagall Act of 1933 had limited the ability of banks to engage in
        securities-related businesses and the Bank Holding Company Act of 1956
        had restricted banks from being affiliated with insurers. With the
        passage of the Gramm-Leach-Bliley Act of 1999, bank holding companies
        may acquire insurers and insurance holding companies may acquire banks.
        In addition, grandfathered unitary thrift holding companies, including
        the Corporation, may engage in activities that are not financial in
        nature. The ability of banks to affiliate with insurers may materially
        adversely affect all of the Company's product lines by substantially
        increasing the number, size and financial strength of potential
        competitors.

     -  Like other members of the insurance industry, the Company is the target
        of an increasing number of class action lawsuits and other types of
        litigation, some of which involve claims for substantial and/or
        indeterminate amounts (including punitive and treble damages) and the
        outcomes of which are unpredictable. GAAP prescribes when the Company
        has a contingent liability and may reserve for particular risks,
        including litigation exposures. Therefore, results ceded to ALIC for a
        given period could be significantly adversely affected when a reserve is
        established for litigation.

     -  The design of any system of controls and procedures, including internal
        controls and disclosure controls and procedures, is based in part upon
        assumptions about the likelihood of future events. Therefore, there can
        be no assurance that any design will succeed in achieving its stated
        goals under all potential future conditions, regardless of how remote.

     -  The impact of The Sarbanes-Oxley Act of 2002 on the business of the
        Company is being evaluated but cannot be completely determined at this
        time.

ITEM 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The pertinent provisions of Management's Discussion and Analysis of
Financial Condition and Results of Operations are herein incorporated by
reference.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     See Index to Financial Statements filed with this Report.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

     No disclosure required by this Item.

PART III

ITEM 14. CONTROLS AND PROCEDURES

     Within the 90 days prior to the date of the filing of this report and under
the supervision and with the participation of the Company's management,
including the principal executive officer and principal financial officer, the
Company evaluated the effectiveness of the design and operation of the Company's
disclosure controls and procedures with respect to its annual reports on Form
10-K, its quarterly reports on Form 10-Q and its current reports on Form 8-K to
be filed with the SEC. Based upon that evaluation, the principal executive

                                       19
<Page>

officer and the principal financial officer concluded that these disclosure
controls and procedures are effective in timely alerting them to material
information relating to the Company required to be included in the Company's
annual reports on Form 10-K, quarterly reports on Form 10-Q and its current
reports on Form 8-K. "Disclosure controls and procedures" are those controls and
procedures that are designed to ensure that information required to be disclosed
by the Company in the reports that it files or submits under the Securities
Exchange Act of 1934 is recorded, processed, summarized and reported, within the
time periods specified in the SEC's rules and forms. They include controls and
procedures designed to ensure that information required to be disclosed by the
Company in reports that it files or submits under that Act is accumulated and
communicated to the Company's management, including the principal executive
officer and principal financial officer, as appropriate to allow timely
decisions regarding required disclosure.

     In addition, there were no significant changes in the Company's internal
controls or in other factors that could significantly affect these internal
controls subsequent to the date of their evaluation.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) Documents Filed as Part of This Report

     1. Financial Statements. The Registrant's financial statements, for the
     years ended December 31, 2002, 2001 and 2000, together with the Independent
     Auditors' Report are set forth on pages F-1 to F-19 of this report.

     2. Financial Statement Schedules. The following are included in Part IV of
     this report:

     Schedule IV - Reinsurance page F-20

     All other schedules have been omitted because they are not applicable or
     not required or because the required information is included in the
     financial statements or notes thereto.

     3. Exhibits. The exhibits required to be filed by Item 601 of Regulation
     S-K are listed under the caption "Exhibits" in Item 15(c).

     (b) Reports On Form 8-K

     No reports on Form 8-K were filed for the quarter ended December 31, 2002.

     (c) Exhibits

<Table>
<Caption>
     Exhibit No.    Description
     -----------    -----------
     <S>            <C>
     3(i)           Amended and Restated Articles of Incorporation of
                    Lincoln Benefit Life Company dated September 26, 2000.
                    Incorporated herein by reference to Exhibit 3(i) to
                    Lincoln Benefit Life Company's Quarterly Report on Form
                    10-Q for quarter ended March 31, 2002.

     3(ii)          Amended and Restated By-Laws of Lincoln Benefit Life
                    Company dated July 23, 1997. Incorporated herein by
                    reference to Exhibit 6(b) to Lincoln Benefit Life
                    Variable Life Account Registration Statement No.
                    333-47717 on Form S-6 filed March 11, 1998.

     10.1           Investment Management Agreement and Amendment to
                    Certain Service and Expense Agreements Among Allstate
                    Investments, LLC and Allstate Insurance Company and The
                    Allstate Corporation and Certain Affiliates effective
                    as of January 1, 2002. Incorporated herein by reference
                    to Exhibit 10.3 to Northbrook Life Insurance Company's
                    Quarterly
</Table>

                                       20
<Page>

<Table>
     <S>            <C>
                    Report on Form 10-Q for quarter ended March 31, 2002.

     10.2           Tax Sharing Agreement dated as of November 12, 1996
                    among The Allstate Corporation and certain affiliates.
                    Incorporated herein by reference to Exhibit 10.4 to
                    Northbrook Life Insurance Company's Quarterly Report on
                    Form 10-Q for the quarter ended March 31, 2002.

     10.3           Cash Management Services Master Agreement between
                    Allstate Insurance Company and Allstate Bank (aka
                    Allstate Federal Savings Bank) dated March 16, 1999.
                    Incorporated herein by reference to Exhibit 10.4 to
                    Lincoln Benefit Life Company's Quarterly Report on Form
                    10-Q for quarter ended March 31, 2002.

     10.4           Amendment No.1 to Cash Management Services Master
                    Agreement effective January 5, 2001. Incorporated
                    herein by reference to Exhibit 10.5 to Lincoln Benefit
                    Life Company's Quarterly Report on Form 10-Q for
                    quarter ended March 31, 2002.

     10.5           Service and Expense Agreement among Allstate Insurance
                    Company and The Allstate Corporation and Certain
                    Insurance Subsidiaries dated January 1, 1999.
                    Incorporated herein by reference to Exhibit 10.2 to
                    Northbrook Life Insurance Company's Quarterly Report on
                    Form 10-Q for quarter ended March 31, 2002.

     10.6           Administrative Services Agreement between Allstate Life
                    Insurance Company and Lincoln Benefit Life Company
                    dated October 1, 1996. Incorporated herein by reference
                    to Exhibit 10.1 to Lincoln Benefit Life Company's
                    Quarterly Report on Form 10-Q for quarter ended June
                    30, 2002.

     10.7           Administrative Services Agreement between Allstate Life
                    Insurance Company and Lincoln Benefit Life Company
                    effective February 1, 1998. Incorporated herein by
                    reference to Exhibit 10.2 to Lincoln Benefit Life
                    Company's Quarterly Report on Form 10-Q for quarter
                    ended June 30, 2002.

     10.8           Service Agreement between Lincoln Benefit Life Company
                    and Allstate Financial Services, LLC effective April 1,
                    1998. Incorporated herein by reference to Exhibit 10.3
                    to Lincoln Benefit Life Company's Quarterly Report on
                    Form 10-Q for quarter ended June 30, 2002.

     10.9           Administrative Services Agreement between Allstate Life
                    Insurance Company and Lincoln Benefit Life Company,
                    effective September 1, 1998 and as amended effective
                    June 19, 2000. Incorporated herein by reference to
                    Exhibit 10.4 to Lincoln Benefit Life Company's
                    Quarterly Report on Form 10-Q for quarter ended June
                    30, 2002.

     10.10          Administrative Service Agreement between Lincoln
                    Benefit Life Company and ALFS, Inc., effective December
                    1, 1998. Incorporated herein by reference to Exhibit
                    10.5 to Lincoln Benefit Life Company's Quarterly Report
                    on Form 10-Q for quarter ended June 30, 2002.

     10.11          Principal Underwriting Agreement between Lincoln
                    Benefit Life Company and ALFS, Inc., effective November
                    25, 1998. (Variable Universal Life Account).
                    Incorporated herein by reference to Exhibit 10.6 to
                    Lincoln Benefit Life Company's Quarterly Report on Form
                    10-Q for quarter ended June 30, 2002.

     10.12          Principal Underwriting Agreement between Lincoln
                    Benefit Life Company and ALFS, Inc., effective November
                    25, 1998. (Variable Annuity Account). Incorporated
                    herein by reference to Exhibit 10.7 to Lincoln Benefit
                    Life Company's Quarterly Report on Form 10-Q for
                    quarter ended June 30, 2002.
</Table>

                                       21
<Page>

<Table>
     <S>            <C>
     10.13          Coinsurance Agreement between Allstate Life Insurance
                    Company and Lincoln Benefit Life Company, effective
                    December 31, 2001. Incorporated herein by reference to
                    Exhibit 10.11 to Lincoln Benefit Life Company's
                    Quarterly Report on Form 10-Q for quarter ended June
                    30, 2002.

     10.14          Modified Coinsurance Agreement between Allstate Life
                    Insurance Company and Lincoln Benefit Life Company,
                    effective December 31, 2001. Incorporated herein by
                    reference to Exhibit 10.12 to Lincoln Benefit Life
                    Company's Quarterly Report on Form 10-Q for quarter
                    ended June 30, 2002.

     10.15          Modified Coinsurance Agreement between Allstate Life
                    Insurance Company and Lincoln Benefit Life Company,
                    effective December 31, 2001. Incorporated herein by
                    reference to Exhibit 10.13 to Lincoln Benefit Life
                    Company's Quarterly Report on Form 10-Q for quarter
                    ended June 30, 2002.

     23             Independent Auditors' Consent.
</Table>

                                       22
<Page>

                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.

                                   LINCOLN BENEFIT LIFE COMPANY
                                   (Registrant)

March 24, 2003                     /s/ Samuel H. Pilch
                                   -------------------
                                   By: Samuel H. Pilch
                                   (chief accounting officer and duly authorized
                                   officer of the registrant)

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

<Table>
<Caption>
SIGNATURE                  TITLE                                  DATE
<S>                        <C>                                    <C>
/s/ Casey J. Sylla         Chairman of the Board,                 March 24, 2003
------------------         Chief Executive Officer and
Casey J. Sylla             a Director
                           (Principal Executive Officer)

/s/ Steven E. Shebik       Senior Vice President,                 March 24, 2003
--------------------       Chief Financial Officer and
Steven E. Shebik           a Director
                           (Principal Financial Officer)

/s/ Lawrence W. Dahl       Director                               March 19, 2003
--------------------
Lawrence W. Dahl

/s/ Margaret G. Dyer       Director                               March 19, 2003
--------------------
Margaret G. Dyer

/s/ Marla G. Friedman      Director                               March 19, 2003
---------------------
Marla G. Friedman

/s/ Douglass F. Gaer       Director                               March 19, 2003
--------------------
Douglass F. Gaer

/s/ John C. Lounds         Director                               March 19, 2003
------------------
John C. Lounds

/s/ J. Kevin McCarthy      Director                               March 19, 2003
---------------------
J. Kevin McCarthy

/s/ Michael J. Velotta     Director                               March 19, 2003
----------------------
Michael J. Velotta

/s/ B. Eugene Wraith       Director                               March 19, 2003
--------------------
B. Eugene Wraith
</Table>

                                       23
<Page>

CERTIFICATIONS

I, Casey J. Sylla, certify that:

1. I have reviewed this annual report on Form 10-K of Lincoln Benefit Life
Company;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this annual report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and

c) presented in this annual report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date: March 24, 2003

                                                       /s/ Casey J. Sylla
                                                       ------------------
                                                       Casey J. Sylla
                                                       Chairman of the Board and
                                                       Chief Executive Officer

                                       24
<Page>

I, Steven E. Shebik, certify that:

1. I have reviewed this annual report on Form 10-K of Lincoln Benefit Life
Company;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this annual report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and

c) presented in this annual report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date: March 24, 2003

                                                       /s/ Steven E. Shebik
                                                       --------------------
                                                       Steven E. Shebik
                                                       Senior Vice President and
                                                       Chief Financial Officer

                                       25
<Page>

                                 CERTIFICATIONS
                 PURSUANT TO 18 UNITED STATES CODE SECTION 1350

     Each of the undersigned hereby certifies that to his knowledge the annual
report on Form 10-K for the fiscal year ended December 31, 2002 of Lincoln
Benefit Life Company (the "Company") filed with the Securities and Exchange
Commission fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 and that the information contained in such
report fairly presents, in all material respects, the financial condition and
results of operations of the Company. This certification accompanies this annual
report on Form 10-K pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
and shall not, except to the extent required by such Act, be deemed filed by the
Company for purposes of Section 18 of the Securities Exchange Act of 1934, as
amended.


Date: March 24, 2003

                                                       /s/ Casey J. Sylla
                                                       ------------------
                                                       Casey J. Sylla
                                                       Chairman of the Board and
                                                       Chief Executive Officer

                                                       /s/ Steven E. Shebik
                                                       --------------------
                                                       Steven E. Shebik
                                                       Senior Vice President and
                                                       Chief Financial Officer

                                       26
<Page>

           SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED
        PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
               BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES
          PURSUANT TO SECTION 12 OF THE SECURITIES EXCHANGE ACT OF 1934

     All of the outstanding common stock of the Company is owned by ALIC. The
Company has not provided any of the following items to security holders:

          (1) annual reports to security holders covering the registrant's last
              fiscal year; or
          (2) proxy statements, forms of proxy or other proxy soliciting
              materials.

                                       27
<Page>

                              FINANCIAL STATEMENTS

                                      INDEX

<Table>
<Caption>
Financial Statements                                                                      Page
--------------------                                                                      ----
   <S>                                                                                    <C>
   Independent Auditors' Report                                                           F-1

   Statements of Operations and Comprehensive Income for the Years Ended
     December 31, 2002, 2001 and 2000                                                     F-2

   Statements of Financial Position as of December 31, 2002 and 2001 (as restated)        F-3

   Statements of Shareholder's Equity for the Years Ended December 31, 2002, 2001
     (as restated) and 2000 (as restated)                                                 F-4

   Statements of Cash Flows for the Years Ended December 31, 2002, 2001 and 2000          F-5

   Notes to Financial Statements                                                          F-6

   Schedule IV - Reinsurance for the Years Ended December 31, 2002, 2001 and 2000         F-20
</Table>

                                       28
<Page>

INDEPENDENT AUDITORS' REPORT


TO THE BOARD OF DIRECTORS AND SHAREHOLDER OF
LINCOLN BENEFIT LIFE COMPANY:

We have audited the accompanying Statements of Financial Position of Lincoln
Benefit Life Company (the "Company", an affiliate of The Allstate Corporation)
as of December 31, 2002 and 2001, and the related Statements of Operations and
Comprehensive Income, Shareholder's Equity and Cash Flows for each of the three
years in the period ended December 31, 2002. Our audits also included Schedule
IV - Reinsurance. These financial statements and financial statement schedule
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and financial statement
schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes 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, such financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 2002 and
2001, and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 2002 in conformity with accounting
principles generally accepted in the United States of America. Also, in our
opinion, Schedule IV - Reinsurance, when considered in relation to the basic
financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.

As discussed in Note 12, the accompanying 2001 and 2000 financial statements
have been restated.

/s/ Deloitte & Touche LLP

Chicago, Illinois
February 5, 2003

                                       F-1
<Page>

                          LINCOLN BENEFIT LIFE COMPANY
                STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

<Table>
<Caption>
                                                              YEAR ENDED DECEMBER 31,
                                                     --------------------------------------
(IN THOUSANDS)
                                                        2002          2001          2000
                                                     ----------    ----------    ----------
<S>                                                  <C>           <C>           <C>
REVENUES
Net investment income                                $   11,621    $   12,144    $   12,214
Realized capital gains and losses                        (4,084)       (1,352)          (95)
Other expense                                                 -             -           (20)
                                                     ----------    ----------    ----------

INCOME FROM OPERATIONS BEFORE INCOME TAX EXPENSE          7,537        10,792        12,099
Income tax expense                                        2,629         3,768         4,221
                                                     ----------    ----------    ----------

NET INCOME                                                4,908         7,024         7,878
                                                     ----------    ----------    ----------

OTHER COMPREHENSIVE INCOME, AFTER-TAX
Change in unrealized net capital gains and losses         5,892         2,818         3,106
                                                     ----------    ----------    ----------

COMPREHENSIVE INCOME                                 $   10,800    $    9,842    $   10,984
                                                     ==========    ==========    ==========
</Table>

                       See notes to financial statements.

                                       F-2
<Page>

                          LINCOLN BENEFIT LIFE COMPANY
                        STATEMENTS OF FINANCIAL POSITION

<Table>
<Caption>
(IN THOUSANDS, EXCEPT PAR VALUE DATA)                                                  DECEMBER 31,
                                                                                       ------------   ------------
                                                                                           2002           2001
                                                                                       ------------   ------------
                                                                                                      (AS RESTATED
                                                                                                      SEE NOTE 12)
<S>                                                                                    <C>            <C>
ASSETS
Investments
   Fixed income securities, at fair value (amortized cost $182,757 and $179,124)       $    199,406   $    186,709
   Short-term                                                                                 3,201          6,856
                                                                                       ------------   ------------
      Total investments                                                                     202,607        193,565

Cash                                                                                        130,249         43,796
Reinsurance recoverable from Allstate Life Insurance Company, net                        12,178,831      9,600,660
Reinsurance recoverable from non-affiliates, net                                            583,849        458,202
Current income taxes receivable                                                                 111              -
Other assets                                                                                 42,045         41,511
Separate Accounts                                                                         1,413,221      1,565,708
                                                                                       ------------   ------------
        TOTAL ASSETS                                                                   $ 14,550,913   $ 11,903,442
                                                                                       ============   ============

LIABILITIES
Contractholder funds                                                                   $ 11,658,966   $  9,287,599
Reserve for life-contingent contract benefits                                             1,096,970        760,264
Current income taxes payable                                                                      -          3,645
Deferred income taxes                                                                         4,587          2,990
Payable to affiliates, net                                                                  116,720         19,193
Other liabilities and accrued expenses                                                       57,849         72,243
Separate Accounts                                                                         1,413,221      1,565,708
                                                                                       ------------   ------------
        TOTAL LIABILITIES                                                                14,348,313     11,711,642
                                                                                       ------------   ------------
COMMITMENTS AND CONTINGENT LIABILITIES (NOTE 8)

SHAREHOLDER'S EQUITY
Common stock, $100 par value, 30,000 shares authorized, 25,000 shares issued
      and outstanding                                                                         2,500          2,500
Additional capital paid-in                                                                  126,750        126,750
Retained income                                                                              62,528         57,620
Accumulated other comprehensive income:
   Unrealized net capital gains and losses                                                   10,822          4,930
                                                                                       ------------   ------------
        Total accumulated other comprehensive income                                         10,822          4,930
                                                                                       ------------   ------------
        TOTAL SHAREHOLDER'S EQUITY                                                          202,600        191,800
                                                                                       ------------   ------------
        TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY                                     $ 14,550,913   $ 11,903,442
                                                                                       ============   ============
</Table>

                       See notes to financial statements.

                                       F-3
<Page>

                          LINCOLN BENEFIT LIFE COMPANY
                       STATEMENTS OF SHAREHOLDER'S EQUITY

<Table>
<Caption>
                                                                           YEAR ENDED DECEMBER 31,
                                                                  ----------------------------------------
(IN THOUSANDS)
                                                                     2002          2001           2000
                                                                  ----------   ------------   ------------
<S>                                                               <C>          <C>            <C>
COMMON STOCK                                                      $    2,500   $      2,500   $      2,500
                                                                  ----------   ------------   ------------
ADDITIONAL CAPITAL PAID-IN
Balance, beginning of year                                           126,750        126,750        116,750
Capital contribution                                                       -              -         10,000
                                                                  ----------   ------------   ------------
Balance, end of year                                                 126,750        126,750        126,750
                                                                  ----------   ------------   ------------

RETAINED INCOME
Balance, beginning of year                                            57,620         50,596         39,521
Adjustment of prior year deferred tax liability (see Note 12)              -             -           3,197
                                                                  ----------   ------------   ------------
Balance, beginning of year, as restated (see Note 12)                 57,620         50,596         42,718
Net income                                                             4,908          7,024          7,878
                                                                  ----------   ------------   ------------
Balance, end of year, as restated (see Note 12)                       62,528         57,620         50,596
                                                                  ----------   ------------   ------------

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Balance, beginning of year                                             4,930          2,112           (994)
Change in unrealized net capital gains and losses                      5,892          2,818          3,106
                                                                  ----------   ------------   ------------
Balance, end of year                                                  10,822          4,930          2,112
                                                                  ----------   ------------   ------------

TOTAL SHAREHOLDER'S EQUITY, as restated (see Note 12)             $  202,600   $    191,800   $    181,958
                                                                  ==========   ============   ============
</Table>

                       See notes to financial statements.

                                       F-4
<Page>

                          LINCOLN BENEFIT LIFE COMPANY
                            STATEMENTS OF CASH FLOWS

<Table>
<Caption>
                                                                                     YEAR ENDED DECEMBER 31,
                                                                             --------------------------------------
(IN THOUSANDS)
                                                                                2002          2001          2000
                                                                             ----------    ----------    ----------
<S>                                                                          <C>           <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income                                                                   $    4,908    $    7,024    $    7,878
Adjustments to reconcile net income to net cash provided by operating
     activities:
         Amortization and other non-cash items                                     (204)         (531)         (868)
         Realized capital gains and losses                                        4,084         1,352            95
         Changes in:
            Life-contingent contract benefits and contractholder funds,
              net of reinsurance recoverables                                     4,255           511        (1,342)
            Income taxes                                                         (5,332)          922         1,570
            Payable to affiliates, net                                           97,527       (25,138)       (3,440)
            Other operating assets and liabilities                              (15,031)       68,347         1,897
                                                                             ----------    ----------    ----------
               Net cash provided by operating activities                         90,207        52,487         5,790
                                                                             ----------    ----------    ----------

CASH FLOWS FROM INVESTING ACTIVITIES
Fixed income securities
         Proceeds from sales                                                     16,847        10,922        15,856
         Investment collections                                                  22,010        15,346         7,430
         Investments purchases                                                  (46,266)      (39,422)      (30,979)
Change in short-term investments, net                                             3,655         4,387        (9,003)
                                                                             ----------    ----------    ----------
               Net cash used in investing activities                             (3,754)       (8,767)      (16,696)
                                                                             ----------    ----------    ----------

CASH FLOWS FROM FINANCING ACTIVITIES
Capital contribution                                                                  -             -        10,000
                                                                             ----------    ----------    ----------
               Net cash provided by financing activities                              -             -        10,000
                                                                             ----------    ----------    ----------

NET INCREASE (DECREASE) IN CASH                                                  86,453        43,720          (906)
CASH AT BEGINNING OF YEAR                                                        43,796            76           982
                                                                             ----------    ----------    ----------
CASH AT END OF YEAR                                                          $  130,249    $   43,796    $       76
                                                                             ==========    ==========    ==========
</Table>

                       See notes to financial statements.

                                       F-5
<Page>

                          LINCOLN BENEFIT LIFE COMPANY
                          NOTES TO FINANCIAL STATEMENTS

1.   GENERAL

BASIS OF PRESENTATION

     The accompanying financial statements include the accounts of Lincoln
Benefit Life Company ("Lincoln Benefit" or the "Company"), a wholly owned
subsidiary of Allstate Life Insurance Company ("ALIC"), which is wholly owned by
Allstate Insurance Company ("AIC"), a wholly owned subsidiary of The Allstate
Corporation (the "Corporation"). These financial statements have been prepared
in conformity with accounting principles generally accepted in the United States
of America ("GAAP").

     To conform with the 2002 presentation, certain amounts in the prior years'
financial statements and notes have been reclassified.

NATURE OF OPERATIONS

     Lincoln Benefit, a single segment entity, markets a diversified group of
products to meet customers' lifetime needs in the areas of financial protection
and retirement solutions through independent insurance agents, including master
brokerage agencies; broker/dealers; and exclusive Allstate agencies. These
products include term life insurance; universal life insurance; variable life
insurance; single premium life insurance; fixed annuities, including market
value adjusted annuities and equity-indexed annuities; immediate annuities;
variable annuities and long-term care products. ALFS, Inc. ("ALFS") is the
principal underwriter for certain Lincoln Benefit products, such as variable
annuities, variable life insurance and market value adjusted annuities. ALFS is
a wholly owned subsidiary of ALIC and a registered broker/dealer under the
Securities and Exchange Act of 1934.

     The Company is authorized to sell life insurance and annuity products in
all states except New York, as well as in the District of Columbia, Guam and the
U.S. Virgin Islands. The top geographic locations for premiums and deposits for
the Company were California, Illinois, Pennsylvania, Texas and Florida for the
year ended December 31, 2002. No other jurisdiction accounted for more than 5%
of premiums and deposits. All premiums and deposits are ceded under reinsurance
agreements.

     The Company monitors economic and regulatory developments that have the
potential to impact its business. Federal legislation has allowed banks and
other financial organizations to have greater participation in the securities
and insurance businesses. This legislation may present an increased level of
competition for sales of the Company's products. Furthermore, state and
federal laws and regulations affect the taxation of insurance companies and
life insurance and annuity products. From time to time, Congress has
considered proposals that, if enacted, could impose a greater tax burden on
the Company or could have an adverse impact on the federal income tax
treatment of some insurance products offered by the Company, including
favorable policyholder tax treatment currently applicable to deferred and
immediate annuities, and life insurance, including interest-sensitive life
insurance. Recent proposals to eliminate the double taxation of dividends and
to permit the establishment of tax-free lifetime savings and retirement
savings accounts could substantially reduce the tax-advantaged nature of many
insurance products. If such proposals were to be adopted, they could have a
material adverse effect on the Company's financial position or ability to
sell such products and could result in the surrender of some existing
contracts and policies. In addition, recent changes in the federal estate tax
laws have negatively affected the demand for the types of life insurance used
in estate planning.

     Although the Company currently benefits from agreements with financial
services entities that market and distribute its products, change in control or
other factors affecting these non-affiliated entities with which the Company has
distribution agreements could negatively impact the Company's sales.

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

INVESTMENTS

     Fixed income securities include bonds, asset-backed and mortgage-backed
securities. All fixed income securities are carried at fair value and may be
sold prior to their contractual maturity ("available for sale"). The fair value
of publicly traded fixed income securities is based upon independent market
quotations. The difference between amortized cost and fair value, net of
deferred income taxes, is reflected as a component of Accumulated other
comprehensive income. Short-term investments are carried at cost or amortized
cost, which approximates fair value.

                                       F-6
<Page>

                          LINCOLN BENEFIT LIFE COMPANY
                         NOTES TO FINANCIAL STATEMENTS

     Investment income consists primarily of interest. Interest is recognized on
an accrual basis. Interest income on mortgage-backed and asset-backed securities
is determined using the effective yield method, based on estimated principal
repayments. Accrual of income is suspended for fixed income securities that are
in default or when the receipt of interest payments is in doubt.

     Realized capital gains and losses are determined on a specific
identification basis. They include gains and losses on security dispositions
and write-downs in value due to other than temporary declines in fair value.

     The Company writes down to fair value any fixed income security that is
classified as other than temporarily impaired in the period the security is
deemed to be other than temporarily impaired. Inherent in the Company's
evaluation of a particular security are assumptions and estimates about the
operations of the issuer and its future earnings potential. Some of the factors
considered in evaluating whether a decline in fair value is other than temporary
are: 1) the Company's ability and intent to retain the investment for a period
of time sufficient to allow for an anticipated recovery in value; 2) the
recoverability of principal and interest; 3) the duration and extent to which
the fair value has been less than amortized cost for fixed income securities; 4)
the financial condition, near-term and long-term prospects of the issuer,
including relevant industry conditions and trends, and implications of rating
agency actions and offering prices; and 5) the specific reasons that a security
is in a significant unrealized loss position, including market conditions which
could affect access to liquidity.

RECOGNITION OF INSURANCE REVENUE AND RELATED BENEFITS AND INTEREST CREDITED

     Traditional life insurance products consist principally of products with
fixed and guaranteed premiums and benefits, primarily term and whole life
insurance products. Premiums from these products are recognized as revenue when
due. Benefits are recognized in relation to such revenue so as to result in the
recognition of profits over the life of the contract and are reflected in
contract benefits.

     Immediate annuities with life contingencies, including certain structured
settlement annuities, provide insurance protection over a period that extends
beyond the period during which premiums are collected. Gross premiums in excess
of the net premium on immediate annuities with life contingencies are deferred
and recognized over the contract period. Contract benefits are recognized in
relation to such revenue so as to result in the recognition of profits over the
life of the contract.

     Interest-sensitive life insurance contracts are insurance contracts whose
terms are not fixed and guaranteed. The terms that may be changed include
premiums paid by the contractholder, interest credited to the contractholder
account balance and any amounts assessed against the contractholder account
balance. Premiums from these contracts are reported as deposits to
Contractholder funds. Contract charges consist of fees assessed against the
contractholder account balance for cost of insurance (mortality risk), contract
administration and early surrender. These revenues are recognized when levied
against the contractholder account balance. Contract benefits include life-
contingent benefit payments in excess of the contractholder account balance.

     Contracts that do not subject the Company to significant risk arising from
mortality or morbidity are referred to as investment contracts. Fixed annuities,
market value adjusted annuities, equity-indexed annuities, and immediate
annuities without life contingencies are considered investment contracts.
Deposits received for such contracts are reported as additions to Contractholder
funds. Contract charges for investment contracts consist of fees assessed
against the contractholder account balance for contract administration and early
surrender. These revenues are recognized when levied against the contractholder
account balance.

     Interest credited to contractholder funds represents interest accrued or
paid for interest-sensitive life insurance contracts and investment contracts.
Crediting rates for fixed rate annuities and interest-sensitive life insurance
contracts are adjusted periodically by the Company to reflect current market
conditions subject to

                                       F-7
<Page>

                          LINCOLN BENEFIT LIFE COMPANY
                         NOTES TO FINANCIAL STATEMENTS

contractually guaranteed rates. Crediting rates for indexed annuities and
indexed life products are based on an interest rate index, such as LIBOR or an
equity index, such as the S&P 500.

     Separate Accounts products include variable annuities and variable life
insurance. The assets supporting these products are legally segregated and
available only to settle Separate Accounts contract obligations. Deposits
received are reported as Separate Accounts liabilities. Contract charges for
these products consist of fees assessed against the Separate Accounts account
values for contract maintenance, administration, mortality, expense and early
surrender. Contract benefits incurred include guaranteed minimum death benefits
paid on variable annuity contracts.

REINSURANCE RECOVERABLE

     The Company has reinsurance agreements whereby all premiums, contract
charges, interest credited to contractholder funds, contract benefits and
certain expenses are ceded to ALIC and non-affiliated reinsurers (see Notes 3
and 7). The Company also has reinsurance agreements whereby the Company cedes
90%, 80% or 60% of the mortality risk on certain life policies, depending upon
the issue year and product, to a pool of eleven non-affiliated reinsurers. The
remaining amounts are ceded to ALIC. Beginning in 1998, the Company cedes
mortality risk on new business in excess of $2 million per life for individual
coverage. For business sold prior to 1998, the Company ceded mortality risk in
excess of $350 thousand per life for individual coverage.

     These amounts are reflected net of such reinsurance in the Statements of
Operations and Comprehensive Income. Reinsurance recoverable and the related
Reserve for life-contingent contract benefits and Contractholder funds are
reported separately in the Statements of Financial Position. The Company
continues to have primary liability as the direct insurer for the 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 financial statements as those assets are owned and managed by ALIC
under terms of reinsurance agreements.

INCOME TAXES

     The income tax provision is calculated under the liability method and
presented net of reinsurance. Deferred tax assets and liabilities are recorded
based on the difference between the financial statement and tax bases of assets
and liabilities at the enacted tax rates. The principal assets and liabilities
giving rise to such differences are unrealized capital gains and losses on
certain investments and differences in the tax bases of investments. A deferred
tax asset valuation allowance is established when there is uncertainty that such
assets would be realized.

SEPARATE ACCOUNTS

     The Company issues variable annuities and variable life insurance
contracts, the assets and liabilities of which are legally segregated and
recorded as assets and liabilities of the 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 contractholders and
therefore are not included in the Company's Statements of Operations and
Comprehensive Income. Revenues to the Company from the Separate Accounts consist
of contract charges for maintenance and administration services, mortality,
early surrender and expenses, which are ceded to ALIC.

     Absent any contract provision wherein the Company guarantees either a
minimum return or account value upon death or annuitization, variable annuity
and variable life insurance contractholders bear the investment risk that the
underlying mutual funds of the Separate Accounts may not meet their stated
investment objectives. The risk and associated cost of these contract guarantees
are ceded to ALIC in accordance with the reinsurance agreements.

                                       F-8
<Page>

                          LINCOLN BENEFIT LIFE COMPANY
                         NOTES TO FINANCIAL STATEMENTS

RESERVE FOR LIFE-CONTINGENT CONTRACT BENEFITS

     The Reserve for life-contingent contract benefits, which relates to
traditional life insurance and immediate annuities with life contingencies, is
computed on the basis of long-term actuarial assumptions as to future investment
yields, mortality, morbidity, terminations and expenses. These assumptions,
which for traditional life insurance are applied using the net level premium
method, include provisions for adverse deviation and generally vary by such
characteristics as type of coverage, year of issue and contract duration.
Detailed reserve assumptions and reserve interest rates are outlined in Note 6.

CONTRACTHOLDER FUNDS

     Contractholder funds arise from the issuance of interest-sensitive life
insurance policies and investment contracts. Deposits received are recorded
as interest-bearing liabilities. Contractholder funds are equal to deposits
received and interest credited to the benefit of the contractholder less
surrenders and withdrawals, and contract charges for mortality and
administrative expenses. Detailed information on crediting rates and
surrender and withdrawal provisions on contractholder funds is outlined in
Note 6.

USE OF ESTIMATES

     The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. Actual results could differ
from those estimates.

PENDING ACCOUNTING STANDARDS

     On July 31, 2002, the American Institute of Certified Public Accountants
issued an exposure draft Statement of Position ("SOP") entitled "Accounting and
Reporting by Insurance Enterprises for Certain Nontraditional Long-Duration
Contracts and for Separate Accounts". The accounting guidance contained in the
proposed SOP applies to several of the Company's products and product features.
The proposed effective date of the SOP is for fiscal years beginning after
December 15, 2003, with earlier adoption encouraged. If adopted early, the
provisions of the SOP must be applied as of the beginning of the fiscal year.
Accordingly, if the SOP were adopted during an interim period of 2003, prior
interim periods would be restated. A provision of the proposed SOP requires the
establishment of a liability in addition to the account balance for contracts
and contract features that provide guaranteed death or other insurance benefits.
The finalized SOP may also require a liability for guaranteed income benefits.
These liabilities are not currently recognized by the Company, and their
establishment may have a material impact on the amounts ceded to and reinsurance
recoverable from ALIC depending on the market conditions at the time of
adoption, but are not expected to have a material impact on the Company's
Statements of Financial Position.

     The Financial Accounting Standards Board ("FASB") has exposed guidance that
addresses the accounting for certain modified coinsurance agreements. The
guidance has been exposed as FASB Interpretation of Statement 133 Implementation
Issue No. B36, "Embedded Derivatives: Bifurcation of a Debt Instrument That
Incorporates Both Interest Rate Risk and Credit Risk Exposures That Are
Unrelated or Only Partially Related to the Creditworthiness of the Issuer of
That Instrument." The proposed guidance requires recognizing an embedded
derivative in certain reinsurance agreements when certain conditions are met.
The initial impact of adopting the proposed guidance would be recorded as a
cumulative adjustment to Net income in the first fiscal quarter beginning after
June 15, 2003. The provisions of the proposed guidance, as currently drafted and
interpreted, would not have a material impact on the Company's reinsurance
balances that would be subject to the proposed guidance. Accordingly, the
potential impact of recognizing embedded derivatives pursuant to the
requirements of that the proposed guidance is expected to be immaterial to both
the Company's Statements of Financial Position and Statements of Operations and
Comprehensive Income.

                                       F-9
<Page>

                          LINCOLN BENEFIT LIFE COMPANY
                         NOTES TO FINANCIAL STATEMENTS

3.   RELATED PARTY TRANSACTIONS

REINSURANCE

     The Company has reinsurance agreements whereby all premiums, contract
charges, interest credited to contractholder funds, contract benefits and
certain expenses are ceded to ALIC and other non-affiliated reinsurers, and
reflected net of such reinsurance in the Statements of Operations and
Comprehensive Income. Reinsurance recoverables and the related Reserve for
life-contingent contract benefits and Contractholder funds are reported
separately in the Statements of Financial Position. The Company continues to
have primary liability as the direct insurer for risks reinsured.

     Investment income earned on the assets which support Contractholder funds
and the Reserve for life-contingent contract benefits is not included in the
Company's financial statements as those assets are owned and managed under terms
of the reinsurance agreements. See Note 7 for more information.

     The following table summarizes amounts that were ceded to ALIC under
reinsurance agreements:

<Table>
<Caption>
                                                                             YEAR ENDED DECEMBER 31,
                                                                     --------------------------------------
(IN THOUSANDS)                                                          2002           2001          2000
                                                                     -----------     ---------    ---------
<S>                                                                  <C>             <C>          <C>
Premiums and contract charges                                        $   484,684     $ 330,799    $ 241,361
Interest credited to contractholder funds, contract benefits and
    certain expenses                                                   1,012,038       728,750      630,015
</Table>

STRUCTURED SETTLEMENT OBLIGATIONS

     The Company received premiums of $19.1 million and $1.5 million from AIC in
2002 and 2001, respectively, to assume certain structured settlement obligations
at prices determined based upon interest rates in effect at the time of
purchase. The Company subsequently ceded these premiums to ALIC under the terms
of its reinsurance treaties. The Company did not receive such premiums from AIC
in 2000.

BUSINESS OPERATIONS

     The Company utilizes services provided by its affiliates, AIC, ALIC and
Allstate Investments LLC, and business facilities owned or leased, and operated
by AIC in conducting its business activities. In addition, the Company shares
the services of employees with AIC. The Company reimburses its affiliates for
the operating expenses incurred on behalf of the Company. The Company is charged
for the cost of these operating expenses based on the level of services
provided. Operating expenses, including compensation and retirement and other
benefit programs, allocated to the Company were $67.4 million, $70.0 million and
$35.1 million in 2002, 2001 and 2000, respectively. Of these costs, the Company
retains investment related expenses on the invested assets of the Company. All
other costs are ceded to ALIC under reinsurance agreements.

INCOME TAXES

     The Company is a party to a federal income tax allocation agreement with
the Corporation (Note 9).

DEBT

     The Company has entered into an intercompany loan agreement with the
Corporation. The amount of funds available to the Company at a given point in
time is dependent upon the debt position of the Corporation. There was no
outstanding balance at December 31, 2002 or 2001.

                                      F-10
<Page>

                          LINCOLN BENEFIT LIFE COMPANY
                         NOTES TO FINANCIAL STATEMENTS

4.   INVESTMENTS

FAIR VALUES

     The amortized cost, gross unrealized gains and losses, and fair value for
fixed income securities are as follows:

<Table>
<Caption>
                                                        GROSS UNREALIZED
(IN THOUSANDS)                          AMORTIZED    ----------------------       FAIR
                                          COST          GAINS       LOSSES        VALUE
                                       -----------   ----------   ---------    -----------
<S>                                    <C>           <C>          <C>          <C>
AT DECEMBER 31, 2002
U.S. government and agencies           $    57,672   $    6,730   $       -    $    64,402
Corporate                                   77,697        6,421         (38)        84,080
Municipal                                      504           63           -            567
Asset-backed securities                     14,246        1,350           -         15,596
Mortgage-backed securities                  31,637        2,104           -         33,741
Foreign government                           1,001           19           -          1,020
                                       -----------   ----------   ---------    -----------
   Total fixed income securities       $   182,757   $   16,687   $     (38)   $   199,406
                                       ===========   ==========   =========    ===========

AT DECEMBER 31, 2001
U.S. government and agencies           $    39,710   $    1,971   $     (15)   $    41,666
Corporate                                   97,517        4,263        (450)       101,330
Municipal                                    1,504           29          (3)         1,530
Mortgage-backed securities                  39,389        1,731          (4)        41,116
Foreign government                           1,004           63           -          1,067
                                       -----------   ----------   ---------    -----------
   Total fixed income securities       $   179,124   $    8,057   $    (472)   $   186,709
                                       ===========   ==========   =========    ===========
</Table>

SCHEDULED MATURITIES

     The scheduled maturities for fixed income securities are as follows at
December 31, 2002:

<Table>
<Caption>
                                                                   AMORTIZED        FAIR
(IN THOUSANDS)                                                       COST          VALUE
                                                                  -----------   ----------
<S>                                                               <C>           <C>
Due in one year or less                                           $    15,915   $   16,297
Due after one year through five years                                  55,727       60,616
Due after five years through ten years                                 52,262       56,960
Due after ten years                                                    12,970       16,196
                                                                  -----------   ----------
                                                                      136,874      150,069
Mortgage and asset-backed securities                                   45,883       49,337
                                                                  -----------   ----------
    Total                                                         $   182,757   $  199,406
                                                                  ===========   ==========
</Table>

     Actual maturities may differ from those scheduled as a result of
prepayments by the issuers. Because of the potential for prepayment, mortgage
and asset-backed securities have not been reflected based on their contractual
maturities.

NET INVESTMENT INCOME

<Table>
<Caption>
(IN THOUSANDS)                                   YEAR ENDED DECEMBER 31,
                                         -------------------------------------
                                            2002          2001         2000
                                         ----------    ----------    ---------
<S>                                      <C>           <C>           <C>
Fixed income securities                  $   11,665    $   11,959    $  11,517
Short-term investments                          273           598          830
                                         ----------    ----------    ---------
   Investment income, before expense         11,938        12,557       12,347
   Investment expense                           317           413          133
                                         ----------    ----------    ---------
   Net investment income                 $   11,621    $   12,144    $  12,214
                                         ==========    ==========    =========
</Table>

                                      F-11
<Page>

                          LINCOLN BENEFIT LIFE COMPANY
                         NOTES TO FINANCIAL STATEMENTS

REALIZED CAPITAL GAINS AND LOSSES, AFTER TAX

     Realized capital gains and losses by security type, for the year ended
December 31, are as follows:

<Table>
<Caption>
(IN THOUSANDS)                                       2002          2001        2000
                                                  ----------    ----------   ----------
<S>                                               <C>           <C>          <C>
Fixed income securities                           $   (4,084)   $   (1,352)  $      (95)
Income taxes                                           1,429           473           33
                                                  ----------    ----------   ----------
Realized capital gains and losses, after tax      $   (2,655)   $     (879)  $      (62)
                                                  ==========    ==========   ==========
</Table>

     Realized capital gains and losses by transaction type, for the year ended
December 31, are as follows:

<Table>
<Caption>
(IN THOUSANDS)                                       2002          2001         2000
                                                  ----------    ----------   ----------
<S>                                               <C>           <C>          <C>
Write-downs in value                              $   (4,323)   $        -   $        -
Sales - fixed income securities                          239        (1,352)         (95)
                                                  ----------    ----------   ----------
    Realized capital gains and losses                 (4,084)       (1,352)         (95)
    Income taxes                                       1,429           473           33
                                                  ----------    ----------   ----------
    Realized capital gains and losses, after-tax  $   (2,655)   $     (879)  $      (62)
                                                  ==========    ==========   ==========
</Table>

     Excluding calls and prepayments, gross gains of $471 thousand and $123
thousand were realized during 2002 and 2001, respectively. There were no gross
gains in 2000. Gross losses of $232 thousand, $1.5 million and $95 thousand were
realized on sales of fixed income securities during 2002, 2001 and 2000,
respectively.

UNREALIZED NET CAPITAL GAINS AND LOSSES

     Unrealized net capital gains and losses on fixed income securities included
in Accumulated other comprehensive income at December 31, 2002 are as follows:

<Table>
<Caption>
                                                            GROSS UNREALIZED
(IN THOUSANDS)                                FAIR       ----------------------     UNREALIZED
                                              VALUE        GAINS       LOSSES        NET GAINS
                                            ----------   ---------    ---------     -----------
<S>                                         <C>          <C>          <C>           <C>
Fixed income securities                     $  199,406   $  16,687    $     (38)    $    16,649
                                            ==========   =========    =========
Deferred income taxes                                                                    (5,827)
                                                                                    -----------
Unrealized net capital gains and losses                                             $    10,822
                                                                                    ===========
</Table>

CHANGE IN UNREALIZED NET CAPITAL GAINS AND LOSSES

<Table>
<Caption>
(IN THOUSANDS)                                                 YEAR ENDED DECEMBER 31,
                                                         ----------------------------------
                                                            2002         2001        2000
                                                         ----------   ----------   --------
<S>                                                      <C>          <C>          <C>
Fixed income securities                                 $    9,064   $    4,336   $  4,778
Deferred income taxes                                       (3,172)      (1,518)    (1,672)
                                                        -----------  -----------  ---------
Increase in unrealized net capital gains and losses     $    5,892   $    2,818   $  3,106
                                                        ===========  ===========  =========
</Table>

SECURITIES ON DEPOSIT

     At December 31, 2002, fixed income securities with a carrying value of $9.8
million were on deposit with regulatory authorities as required by law.

                                      F-12
<Page>

                          LINCOLN BENEFIT LIFE COMPANY
                         NOTES TO FINANCIAL STATEMENTS

5.   FINANCIAL INSTRUMENTS

     In the normal course of business, the Company invests in various financial
assets and incurs various financial liabilities. The fair value estimates of
financial instruments presented below are not necessarily indicative of the
amounts the Company might pay or receive in actual market transactions.
Potential taxes and other transaction costs have not been considered in
estimating fair value. The disclosures that follow do not reflect the fair value
of the Company as a whole since a number of the Company's significant assets
(including Reinsurance recoverables, net) and liabilities (including Reserve for
life-contingent contract benefits and Deferred income taxes) are not considered
financial instruments and are not carried at fair value. Other assets and
liabilities considered financial instruments, such as Accrued investment income
and Cash, are generally of a short-term nature. Their carrying values are deemed
to approximate fair value.

FINANCIAL ASSETS

     The carrying value and fair value of financial assets at December 31, are
as follows:

<Table>
<Caption>
(IN THOUSANDS)                              2002                            2001
                                ----------------------------    -----------------------------
                                 CARRYING           FAIR          CARRYING           FAIR
                                   VALUE            VALUE          VALUE            VALUE
                                ------------    ------------    ------------     ------------
<S>                             <C>             <C>             <C>              <C>
Fixed income securities         $    199,406    $    199,406    $   186,709      $    186,709
Short-term investments                 3,201           3,201          6,856             6,856
Separate Accounts                  1,413,221       1,413,221      1,565,708         1,565,708
</Table>

     Fair values of publicly traded fixed income securities are based upon
quoted market prices or dealer quotes. Short-term investments are highly liquid
investments with maturities of less than one year whose carrying values are
deemed to approximate fair value. Separate Accounts assets are carried in the
Statements of Financial Position at fair value based on quoted market prices.

FINANCIAL LIABILITIES

     The carrying value and fair value of financial liabilities at December 31,
are as follows:

<Table>
<Caption>
(IN THOUSANDS)                                               2002                        2001
                                                  -------------------------   -------------------------
                                                   CARRYING        FAIR        CARRYING        FAIR
                                                     VALUE         VALUE         VALUE         VALUE
                                                  -----------   -----------   -----------   -----------
<S>                                               <C>           <C>           <C>           <C>
Contractholder funds on investment contracts      $ 9,702,733   $ 9,445,862   $ 7,407,377   $ 7,446,451
Separate Accounts                                   1,413,221     1,413,221     1,565,708     1,565,708
</Table>

     Contractholder funds include interest-sensitive life insurance contracts
and investment contracts. Interest-sensitive life insurance contracts and
certain other contractholder liabilities are not considered financial
instruments subject to fair value disclosure requirements. The fair value of
investment contracts is based on the terms of the underlying contracts. Fixed
annuities are valued at the account balance less surrender charges and
immediate annuities without life contingencies are valued at the present value
of future benefits at current interest rates. Market value adjusted annuities'
fair value is estimated to be the market adjusted surrender value. Equity
indexed annuity contracts' fair value approximates carrying value since the
embedded equity options are carried at market value in the financial statements.
Separate Accounts liabilities are carried at the fair value of the underlying
assets.

                                      F-13
<Page>

                          LINCOLN BENEFIT LIFE COMPANY
                         NOTES TO FINANCIAL STATEMENTS

OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS

     There were no off-balance-sheet financial instruments at December 31, 2002
or 2001.

6.   RESERVE FOR LIFE-CONTINGENT CONTRACT BENEFITS AND CONTRACTHOLDER FUNDS

     At December 31, the Reserve for life-contingent contract benefits consists
of the following:

<Table>
<Caption>
(IN THOUSANDS)                                        2002           2001
                                                  ------------   -----------
<S>                                               <C>            <C>
Immediate annuities:
   Structured settlement annuities                $    384,419   $   162,412
   Other immediate annuities                            32,872        35,757
Traditional life                                       569,500       503,992
Other                                                  110,179        58,103
                                                  ------------   -----------
   Total Reserve for life-contingent contract
     benefits                                     $  1,096,970   $   760,264
                                                  ============   ===========
</Table>

     The following table highlights the key assumptions generally utilized in
calculating the Reserve for life-contingent contract benefits:

<Table>
<Caption>
             PRODUCT                          MORTALITY                   INTEREST RATE               ESTIMATION METHOD
-----------------------------------   ---------------------------   --------------------------    --------------------------
<S>                                   <C>                           <C>                           <C>
Structured settlement annuities       U.S. population with          Interest rate                 Present value of
                                      projected calendar year       assumptions range from        contractually specified
                                      improvements; age setbacks    5.5% - 7.6%                   future benefits
                                      for impaired lives grading
                                      to standard

Other immediate annuities             1983 group annuity            Interest rate                 Present value of
                                      mortality table               assumptions range from        expected future benefits
                                                                    4.7% - 8.8%                   based on historical
                                                                                                  experience

Traditional life                      Actual company experience     Interest rate                 Net level premium
                                      plus loading                  assumptions range from        reserve method using the
                                                                    4.0% - 8.0%                   Company's withdrawal
                                                                                                  experience rates
</Table>

     At December 31, Contractholder funds consists of the following:

<Table>
<Caption>
(IN THOUSANDS)                                 2002            2001
                                           -------------   ------------
<S>                                        <C>             <C>
Interest-sensitive life                    $   2,014,313   $  1,876,260
Investment contracts:
     Immediate annuities                         286,722        245,468
     Fixed annuities                           9,357,931      7,165,871
                                           -------------   ------------
     Total Contractholder funds            $  11,658,966   $  9,287,599
                                           =============   ============
</Table>

                                      F-14
<Page>

                          LINCOLN BENEFIT LIFE COMPANY
                         NOTES TO FINANCIAL STATEMENTS

     The following table highlights the key contract provisions relating to
Contractholder funds:

<Table>
<Caption>
                  PRODUCT                             INTEREST RATE               WITHDRAWAL/SURRENDER CHARGES
--------------------------------------------   ----------------------------    -----------------------------------
<S>                                            <C>                             <C>
Interest-sensitive life                        Interest rates credited         Either a percentage of account
                                               range from 2.0% - 6.4%          balance or dollar amount grading
                                                                               off generally over 20 years

Investment contracts                           Interest rates credited         Either a declining or a level
                                               range from 2.8% to 7.2%         percentage charge generally over
                                               for immediate annuities         nine years or less
                                               and 0.0% - 10.7% for fixed
                                               annuities including equity-
                                               indexed annuities
</Table>

     Contractholder fund activity for the year ended December 31, was as
follows:

<Table>
<Caption>
(IN THOUSANDS)                                        2002                2001
                                                  -------------      -------------
<S>                                               <C>                <C>
Balance, beginning of year                        $   9,287,599      $   8,157,502
Deposits                                              2,868,550          1,748,413
Surrenders and withdrawals                             (659,293)          (715,195)
Death benefits                                         (169,876)          (184,724)
Interest credited to contractholder funds               524,477            417,992
Transfers (to) from Separate Accounts                   (61,537)           (55,271)
Contract charges                                       (114,906)          (101,133)
Other                                                   (16,048)            20,015
                                                  -------------      -------------
Balance, end of year                              $  11,658,966      $   9,287,599
                                                  =============      =============
</Table>

7.   REINSURANCE

     The Company has entered into reinsurance agreements under which it
reinsures all of its business to ALIC or other non-affiliated reinsurers. Under
the agreements, premiums, contract charges, interest credited to contractholder
funds, contract benefits and certain expenses are reinsured. The Company
purchases reinsurance to limit aggregate and single losses on large risks. The
Company continues to have primary liability as the direct insurer for risks
reinsured. Estimating amounts of reinsurance recoverable is impacted by many of
the uncertainties involved in the establishment of loss reserves. The Company
cedes a portion of the mortality risk on certain life policies with a pool
of reinsurers.

     Amounts recoverable from reinsurers are estimated based upon assumptions
consistent with those used in establishing the liabilities related to the
underlying reinsured contracts. Except for ALIC, no single reinsurer had a
material obligation to the Company.

     The effects of reinsurance on premiums and contract charges for the years
ended December 31, are as follows:

<Table>
<Caption>
(IN THOUSANDS)                                            2002         2001          2000
                                                       ----------   ----------   -----------
<S>                                                    <C>          <C>          <C>
PREMIUMS AND CONTRACT CHARGES
Direct                                                 $  689,970   $  572,949   $   470,337
Assumed                                                         2            4             2
Ceded:
   Affiliate                                             (484,684)    (330,799)     (241,361)
   Non-affiliate                                         (205,288)    (242,154)     (228,978)
                                                       ----------   ----------   -----------
Premiums and contract charges, net of reinsurance      $        -   $        -   $         -
                                                       ==========   ==========   ===========
</Table>

                                      F-15
<Page>

                          LINCOLN BENEFIT LIFE COMPANY
                         NOTES TO FINANCIAL STATEMENTS

     The effects of reinsurance on interest credited to contractholder funds,
contract benefits and other expenses for the years ended December 31, are as
follows:

<Table>
<Caption>
(IN THOUSANDS)                                                   2002            2001         2000
                                                             -------------   -----------   ----------
<S>                                                          <C>             <C>           <C>
INTEREST CREDITED TO CONTRACTHOLDER FUNDS, CONTRACT
BENEFITS AND OTHER EXPENSES
Direct                                                       $   1,343,929   $ 1,007,684   $  885,081
Ceded:
   Affiliate                                                   (1,012,038)      (728,750)    (630,015)
   Non-affiliate                                                 (331,891)      (278,934)    (255,046)
                                                             -------------   -----------   ----------
Interest credited to contractholder funds, contract
   benefits and other expenses, net of reinsurance           $           -   $         -   $       20
                                                             =============   ===========   ==========
</Table>

8.   COMMITMENTS AND CONTINGENT LIABILITIES

GUARANTEES

     The Company has issued universal life insurance contracts to third
parties who finance the premium payments on the universal life insurance
contracts through a commercial paper program. The Company has issued a
repayment guarantee on the outstanding commercial paper balance which is
fully collateralized by the cash surrender value of the universal life
insurance contracts. At December 31, 2002, the amount due under the
commercial paper program is $300 million and the cash surrender value of the
policies is $306 million. The repayment guarantee expires March 31, 2003 but
may be extended at the Company's option. These contracts are ceded to AUC
under the terms of the reinsurance agreements.

REGULATION AND LEGAL PROCEEDINGS

     The Company is subject to changing social, economic and regulatory
conditions. State and federal regulatory initiatives and proceedings have varied
and have included efforts to remove barriers preventing banks from engaging in
the securities and insurance businesses, to change tax laws affecting the
taxation of insurance companies and the tax treatment of insurance products
which may impact the relative desirability of various personal investment
products, and to expand overall regulation. The ultimate changes and eventual
effects, if any, of these initiatives are uncertain.

         The Company sells its products through a variety of distribution
channels including Allstate agencies. Consequently, the outcome of some legal
proceedings that involve AIC regarding the Allstate agencies may have an impact
on the Company.

         AIC is defending various lawsuits involving worker classification
issues. Examples of these lawsuits include a number of putative class actions
challenging the overtime exemption claimed by AIC under the Fair Labor Standards
Act or state wage and hour laws. These class actions mirror similar lawsuits
filed recently against other carriers in the industry and other employers.
Another example involves the worker classification of staff working in agencies.
In this putative class action, plaintiffs seek damages under the Employee
Retirement Income Security Act ("ERISA") and the Racketeer Influenced and
Corrupt Organizations Act alleging that agency secretaries were terminated as
employees by AIC and rehired by agencies through outside staffing vendors for
the purpose of avoiding the payment of employee benefits. A putative nationwide
class action filed by former employee agents also includes a worker
classification issue; these agents are challenging certain amendments to the
Agents Pension Plan and are seeking to have exclusive agent independent
contractors treated as employees for benefit purposes. AIC has been vigorously
defending these and various other worker classification lawsuits. The outcome of
these disputes is currently uncertain.

         In addition, on August 6, 2002, a petition was filed with the National
Labor Relations Board ("NLRB") by the United Exclusive Allstate Agents, Office
and Professional Employees International Union (the "OPEIU"), seeking
certification as the collective bargaining representative of all Allstate agents
in the United States. On December 2, 2002, the Chicago Regional Director of the
NLRB dismissed the petition, agreeing with AIC's position that the agents are
independent contractors, not employees, and that, consequently, the NLRB lacks
jurisdiction over the issue. The OPEIU has requested that the NLRB in
Washington, D.C. review the dismissal by the Chicago Regional Director. The
request for appeal has not been accepted yet. If it is, AIC will vigorously
oppose the appeal. The outcome is currently uncertain.

         AIC is also defending certain matters relating to its agency program
reorganization announced in 1999. These matters include an investigation by the
U.S. Department of Labor and a lawsuit filed in December 2001 by the U.S. Equal
Employment Opportunity Commission ("EEOC") with respect to allegations of
retaliation under the Age Discrimination in Employment Act, the Americans with
Disabilities Act and Title VII of the Civil Rights Act of 1964. A putative
nationwide class action has also been filed by former employee agents alleging
various violations of ERISA, breach of contract and age discrimination. AIC has
been vigorously defending these lawsuits and other matters related to its agency
program reorganization. In addition, AIC is defending certain matters relating
to its life agency program reorganization announced in 2000. These matters
include an investigation by the EEOC with respect to allegations of age
discrimination and retaliation. AIC is cooperating fully with the agency
investigation and will continue to vigorously defend these and other claims
related to the life agency program reorganization. The outcome of these disputes
is currently uncertain.

     The Company is currently defending a nationwide class action, alleging
among other things, breach of contract and breach of the implied covenant of
good faith and fair dealing as a result of a change in the rate and cap on an
annuity product. The court certified the class and entered summary judgment in
favor of the Company and against the certified class. Plaintiff has filed notice
of appeal. The Company has been vigorously defending the suit. The outcome of
the appeal is currently uncertain.

     Various other legal and regulatory actions are currently pending that
involve the Company and specific aspects of its conduct of business. Like other
members of the insurance industry, the Company is the target of an increasing
number of class action lawsuits and other types of litigation , some of which
involve claims for substantial and/or indeterminate amounts (including punitive
and treble damages) and the outcomes of which are unpredictable. This litigation
is based on a variety of issues including insurance and claim settlement
practices. However, at this time, based on their present status and the
existence of the reinsurance agreement with ALIC, it is the opinion of
management that the ultimate liability, if any, in one or more of these other
actions in excess of amounts currently reserved is not expected to have a
material effect on the results of operations, liquidity or financial position of
the Company.

GUARANTY FUNDS

     Under state insurance guaranty fund laws, insurers doing business in a
state can be assessed, up to prescribed limits, for certain obligations of
insolvent insurance companies to contractholders and claimants. Amounts assessed
to each company are typically related to its proportion of business written in a
particular state. The Company's expenses related to these funds are immaterial
and are ceded to ALIC under reinsurance agreements.

9.   INCOME TAXES

     The Company joins the Corporation and its other eligible domestic
subsidiaries (the "Allstate Group") in the filing of a consolidated federal
income tax return and is party to a federal income tax allocation agreement (the
"Allstate Tax Sharing Agreement"). Under the Allstate Tax Sharing Agreement, the
Company pays to or receives from the Corporation the amount, if any, by which
the Allstate Group's federal income tax liability is affected by virtue of
inclusion of the Company in the consolidated federal

                                      F-16
<Page>

                          LINCOLN BENEFIT LIFE COMPANY
                         NOTES TO FINANCIAL STATEMENTS

income tax return. The Company has also entered into a supplemental tax sharing
agreement with respect to reinsurance ceded to ALIC to allocate the tax benefits
and detriments related to such reinsurance. Effectively, these agreements result
in the Company's annual income tax provision being computed as if the Company
filed a separate return, as adjusted for the reinsurance ceded to ALIC.

     Prior to July 1, 1995, the Corporation was a subsidiary of Sears Roebuck &
Co. ("Sears") and, with its eligible domestic subsidiaries, was included in the
Sears consolidated federal income tax return and federal income tax allocation
agreement. On January 27, 1995, to reflect the separation of the Corporation
from Sears, the Corporation and Sears entered into a new tax sharing agreement,
which governs their respective rights and obligations with respect to federal
income taxes for all periods during which the Corporation was a subsidiary of
Sears, including the treatment of audits of tax returns for such periods.

     The Internal Revenue Service ("IRS") has completed its review of the
Allstate Group's federal income tax returns through the 1996 tax year. Any
adjustments that may result from IRS examinations of tax returns are not
expected to have a material impact on the financial position, liquidity or
result of operations of the Company.

     The components of the deferred income tax assets and liabilities at
December 31, are as follows:

<Table>
<Caption>
(IN THOUSANDS)                                  2002        2001
                                            ----------   ---------
<S>                                         <C>          <C>
DEFERRED ASSETS
Difference in tax bases of investments      $    1,195   $       -
Other assets                                        55          55
                                            ----------   ---------
     Total deferred assets                       1,250          55

DEFERRED LIABILITIES
Unrealized net capital gains                    (5,827)     (2,655)
Difference in tax bases of investments               -        (380)
Other liabilities                                  (10)        (10)
                                            ----------   ---------
     Total deferred liabilities                 (5,837)     (3,045)
                                            ----------   ---------
        Net deferred liabilities            $   (4,587)  $  (2,990)
                                            ==========   =========
</Table>

     Although realization is not assured, management believes it is more likely
than not that the deferred tax assets will be realized based on the assumption
that certain levels of income will be achieved.

     The components of income tax expense for the year ended December 31, are as
follows:

<Table>
<Caption>
(IN THOUSANDS)                                 2002         2001       2000
                                            ----------   ---------   ---------
<S>                                         <C>          <C>         <C>
Current                                     $    4,204   $   3,706   $   2,032
Deferred                                        (1,575)         62       2,189
                                            ----------   ---------   ---------
     Total income tax expense               $    2,629   $   3,768   $   4,221
                                            ==========   =========   =========
</Table>

     The Company paid income taxes of $8.0 million, $2.8 million and $2.7
million in 2002, 2001 and 2000, respectively.

     A reconciliation of the statutory federal income tax rate to the effective
income tax rate on income from operations for the year ended December 31, is as
follows:

<Table>
<Caption>
                                              2002          2001       2000
                                            ----------   ---------   ---------
<S>                                               <C>         <C>         <C>
Statutory federal income tax rate                 35.0 %      35.0 %      35.0 %
Tax exempt income                                 (0.1)       (0.1)       (0.1)
                                            ----------   ---------   ---------
Effective income tax rate                         34.9 %      34.9 %      34.9 %
                                            ==========   =========   =========
</Table>

                                      F-17
<Page>

                          LINCOLN BENEFIT LIFE COMPANY
                         NOTES TO FINANCIAL STATEMENTS

     Prior to January 1, 1984, the Company was entitled to exclude certain
amounts from taxable income and accumulate such amounts in a "policyholder
surplus" account. The balance in this account at December 31, 2002,
approximately $340 thousand, will result in federal income taxes payable of $119
thousand if distributed by the Company. No provision for taxes has been made as
the Company has no plan to distribute amounts from this account. No further
additions to the account have been permitted since 1983.

10.  STATUTORY FINANCIAL INFORMATION

     The following table reconciles Net income for the year ended December 31,
and Shareholder's equity at December 31, as reported herein in conformity with
GAAP with total statutory net income and capital and surplus of the Company,
determined in accordance with statutory accounting practices prescribed or
permitted by insurance regulatory authorities:

<Table>
<Caption>
                                                           NET INCOME                 SHAREHOLDER'S EQUITY
                                               ----------------------------------    ----------------------
(IN THOUSANDS)                                    2002         2001        2000        2002         2001
                                               ---------    ---------   ---------    ---------    ---------
<S>                                            <C>          <C>         <C>          <C>          <C>
Balance per GAAP                               $   4,908    $   7,024   $   7,878    $ 202,600    $ 191,800
Unrealized gain on fixed income securities             -            -           -      (16,649)      (7,585)
Deferred income taxes                             (1,576)          18       1,370        6,695        5,209
Reserves and non-admitted assets                    (315)         245         446       (2,368)     (16,188)
Other                                                 10          156        (417)       4,600       13,101
                                               ---------    ---------   ---------    ---------    ---------
Balance per statutory accounting practices     $   3,027    $   7,443   $   9,277    $ 194,878    $ 186,337
                                               =========    =========   =========    =========    =========
</Table>

     The Company prepares its statutory-basis financial statements in accordance
with accounting practices prescribed or permitted by the State of Nebraska.
Effective January 1, 2001, the State of Nebraska required insurance companies
domiciled in its state to prepare statutory-basis financial statements in
accordance with the National Association of Insurance Commissioner ("NAIC")
Accounting Practices and Procedures Manual ("Codification") subject to any
deviations prescribed or permitted by the State of Nebraska insurance
commissioner.

     Accounting changes adopted to conform to the provisions of Codification are
reported as changes in accounting principles. The cumulative effect of changes
in accounting principles is reported as an adjustment to unassigned funds
(surplus) in the period of the change in accounting principle. The cumulative
effect is the difference between the amount of capital and surplus at the
beginning of the year and the amount of capital and surplus that would have been
reported at that date if the new accounting principles had been applied
retroactively for all prior periods. The Company reported an increase to surplus
of $2.0 million effective January 1, 2001 as a result of recognizing a net
deferred tax asset.

DIVIDENDS

     The ability of the Company to pay dividends is dependent on business
conditions, income, cash requirements of the Company and other relevant factors.
The amount of dividends that can be paid to the shareholder, without approval by
the state insurance regulator is limited by specific surplus and net income
criteria as provided in the dividend restriction provision of the Nebraska
Insurance Holding Company System laws. The maximum amount of dividends that the
Company can distribute during 2003 without prior approval of the Nebraska
Department of Insurance is $19.2 million.

RISK-BASED CAPITAL

     The NAIC has a standard for assessing the solvency of insurance companies,
which is referred to as risk-based capital ("RBC"). The requirement consists of
a formula for determining each insurer's RBC and a model law specifying
regulatory actions if an insurer's RBC falls below specified levels. At December
31, 2002, RBC for the Company was significantly above levels that would require
regulatory action.

                                      F-18
<Page>

                          LINCOLN BENEFIT LIFE COMPANY
                         NOTES TO FINANCIAL STATEMENTS

11.  OTHER COMPREHENSIVE INCOME

     The components of Other comprehensive income on a pretax and after-tax
basis for the year ended December 31, are as follows:

(IN THOUSANDS)

UNREALIZED CAPITAL GAINS AND LOSSES:

<Table>
<Caption>
                                                                       2002
                                                         --------------------------------
                                                                                  After-
                                                          Pretax       Tax         tax
                                                         --------    --------    --------
<S>                                                      <C>         <C>         <C>
Unrealized holding gains arising during the period       $  4,980    $ (1,743)   $  3,237
Less: reclassification adjustments                         (4,084)      1,429      (2,655)
                                                         --------    --------    --------
Unrealized net capital gains                                9,064      (3,172)      5,892
                                                         --------    --------    --------
Other comprehensive income                               $  9,064    $ (3,172)   $  5,892
                                                         ========    ========    ========

<Caption>
                                                                       2001
                                                         --------------------------------
                                                                                  After-
                                                          Pretax       Tax         tax
                                                         --------    --------    --------
<S>                                                      <C>         <C>         <C>
Unrealized holding gains arising during the period       $  2,984    $ (1,045)   $  1,939
Less: reclassification adjustments                         (1,352)        473        (879)
                                                         --------    --------    --------
Unrealized net capital gains                                4,336      (1,518)      2,818
                                                         --------    --------    --------
Other comprehensive income                               $  4,336    $ (1,518)   $  2,818
                                                         ========    ========    ========

<Caption>
                                                                       2000
                                                         --------------------------------
                                                                                  After-
                                                          Pretax       Tax         tax
                                                         --------    --------    --------
<S>                                                      <C>         <C>         <C>
Unrealized holding gains arising during the period       $  4,683    $ (1,639)   $  3,044
Less: reclassification adjustments                            (95)         33         (62)
                                                         --------    --------    --------
Unrealized net capital gains                                4,778      (1,672)      3,106
                                                         --------    --------    --------
Other comprehensive income                               $  4,778    $ (1,672)   $  3,106
                                                         ========    ========    ========
</Table>

12.  RESTATEMENT OF FINANCIAL STATEMENTS

     Subsequent to the issuance of the Company's financial statements for the
year ended December 31, 2001, management of the Company determined that its
deferred tax liability was not appropriately recorded.

     The Company completed a validation of its deferred tax accounts in the
fourth quarter of 2002 and identified an overstatement of its deferred tax
liability of $3.2 million related to periods prior to 1999, primarily
related to the difference in the tax bases of net assets previously
transferred to ALIC.

     The effect of the restatement was to decrease Deferred income taxes and
increase beginning Retained income as of January 1, 2000. Such restatement
resulted in changes in Deferred income taxes and Retained income as of
December 31, 2001 and 2000.

                                      F-19
<Page>

                          LINCOLN BENEFIT LIFE COMPANY
                            SCHEDULE IV--REINSURANCE

(IN THOUSANDS)

<Table>
<Caption>
                                                   GROSS                               NET
YEAR ENDED DECEMBER 31, 2002                      AMOUNT            CEDED            AMOUNT
------------------------------------------    --------------    --------------    -------------
<S>                                           <C>               <C>               <C>
Life insurance in force                       $  160,133,109    $  160,133,109    $           -
                                              ==============    ==============    =============

Premiums and contract charges:
    Life and annuities                        $      629,423    $      629,423    $           -
    Accident and health                               60,549            60,549                -
                                              --------------    --------------    -------------
                                              $      689,972    $      689,972    $           -
                                              ==============    ==============    =============

<Caption>
                                                   GROSS                               NET
YEAR ENDED DECEMBER 31, 2001                      AMOUNT            CEDED            AMOUNT
------------------------------------------    --------------    --------------    -------------
<S>                                           <C>               <C>               <C>
Life insurance in force                       $  138,566,651    $  138,566,651    $           -
                                              ==============    ==============    =============

Premiums and contract charges:
    Life and annuities                        $      532,235    $      532,235    $           -
    Accident and health                               40,718            40,718                -
                                              --------------    --------------    -------------
                                              $      572,953    $      572,953    $           -
                                              ==============    ==============    =============

<Caption>
                                                   GROSS                               NET
YEAR ENDED DECEMBER 31, 2000                      AMOUNT            CEDED            AMOUNT
------------------------------------------    --------------    --------------    -------------
<S>                                           <C>               <C>               <C>
Life insurance in force                       $  120,555,954    $  120,555,954    $           -
                                              ==============    ==============    =============

Premiums and contract charges:
    Life and annuities                        $      447,683    $      447,683    $           -
    Accident and health                               22,656            22,656                -
                                              --------------    --------------    -------------
                                              $      470,339    $      470,339    $           -
                                              ==============    ==============    =============

</Table>

                                      F-20