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                                  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, 2008

                                       OR

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

                       Commission file number: 333-111553

                          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 Act:  None

Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act.
                                 Yes |_| No |X|

Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act.
                                 Yes |_| No |X|

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
                                Yes |X| No |_|

Indicate 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 a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See
the definitions of "large accelerated filer", "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

<Table>
<Caption>
Large accelerated filer    Accelerated filer     Non-accelerated filer     Smaller reporting company
<S>                        <C>                   <C>                       <C>
      |_|                       |_|                     |X|                         |_|

                            (Do not check if a smaller reporting company)
</Table>

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
                                Yes |_| No |X|

None of the common equity of the registrant is held by non-affiliates.
Therefore, the aggregate market value of common equity held by non-affiliates of
the registrant is zero.

AS OF MARCH 18, 2009, THE REGISTRANT HAD 25,000 COMMON SHARES, $100 PAR VALUE,
OUTSTANDING, ALL OF WHICH ARE HELD BY ALLSTATE LIFE INSURANCE COMPANY.

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                          LINCOLN BENEFIT LIFE COMPANY
                       INDEX TO ANNUAL REPORT ON FORM 10-K
                                DECEMBER 31, 2008

                                                                            PAGE

PART I
Item 1.   Business                                                             1
Item 1A.  Risk Factors                                                         2
Item 1B.  Unresolved Staff Comments                                            7
Item 2.   Properties                                                           7
Item 3.   Legal Proceedings                                                    7
Item 4.   Submission of Matters to a Vote of Security Holders *              N/A

PART II
Item 5.   Market for Registrant's Common Equity, Related Stockholder
          Matters and Issuer Purchases of Equity Securities                    7
Item 6.   Selected Financial Data *                                          N/A
Item 7.   Management's Discussion and Analysis of Financial Condition
          and Results of Operations                                            8
Item 7A.  Quantitative and Qualitative Disclosures about Market Risk          23
Item 8.   Financial Statements and Supplementary Data                         24
Item 9.   Changes in and Disagreements With Accountants on Accounting
          and Financial Disclosure                                            52
Item 9A.  Controls and Procedures                                             52
Item 9B.  Other Information                                                   52

PART III
Item 10.  Directors, Executive Officers and Corporate Governance *           N/A
Item 11.  Executive Compensation*                                            N/A
Item 12.  Security Ownership of Certain Beneficial Owners and
          Management and Related Stockholder Matters *                       N/A
Item 13.  Certain Relationships and Related Transactions, and
          Director Independence *                                            N/A
Item 14.  Principal Accounting Fees and Services                              53

PART IV
Item 15.  Exhibits and Financial Statement Schedules                          54
          Signatures                                                          58
          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       59
          Financial Statement Schedules                                      S-1

          * Omitted pursuant to General Instruction I(2) of Form 10-K

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PART I

ITEM 1.  BUSINESS

     Lincoln Benefit Life Company ("Lincoln Benefit", "we", "our" or "us") was
incorporated 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 stock
property-liability insurance company organized under the laws of the State of
Illinois. All of the outstanding capital stock of Allstate Insurance Company is
owned by Allstate Insurance Holdings, LLC, which is wholly owned by The Allstate
Corporation (the "Corporation" or "Allstate"), a publicly owned holding company
incorporated under the laws of the State of Delaware. The Allstate Corporation
is the largest publicly held personal lines insurer in the United States. Widely
known through the "You're In Good Hands With Allstate(R)" slogan, Allstate is
reinventing protection and retirement to help individuals in approximately 17
million households protect what they have today and better prepare for tomorrow.
Customers can access Allstate products and services such as auto insurance and
homeowners insurance through more than 14,000 exclusive Allstate agencies and
financial representatives in the United States and Canada. Allstate is the 2nd
largest personal property and casualty insurer in the United States on the basis
of 2007 statutory direct premiums earned. In addition, according to A.M. Best,
it is the nation's 16th largest issuer of life insurance business on the basis
of 2007 ordinary life insurance in force and 17th largest on the basis of 2007
statutory admitted assets.

     In this annual report on Form 10-K, we occasionally refer to statutory
financial information. All domestic United States insurance companies are
required to prepare statutory-basis financial statements. As a result, industry
data is available that enables comparisons between insurance companies,
including competitors that are not subject to the requirement to prepare
financial statements in conformity with accounting principles generally accepted
in the United States of America ("GAAP"). We frequently use industry
publications containing statutory financial information to assess our
competitive position.

     The Company sells life insurance, retirement and investment products to
individuals in all states except New York, as well as in the District of
Columbia, Guam and the U.S. Virgin Islands. Our principal products are fixed
annuities, including deferred, immediate and indexed; and interest-sensitive,
traditional and variable life insurance. We sell products through multiple
intermediary distribution channels, including Allstate exclusive agencies,
independent agents (including master brokerage agencies), and broker-dealers.

     We compete on a wide variety of factors, including the scope of our
distribution systems, the type of our product offerings, the recognition of our
brands, our financial strength and ratings, our differentiated product features
and prices, and the level of customer service that we provide. In addition, with
respect to variable life insurance products in particular, we compete on the
basis of the variety of fund managers and choices of funds for our separate
accounts and the management and performance of those funds within our separate
accounts.

     The market for life insurance, retirement and investment products continues
to be highly fragmented and competitive. As of December 31, 2008, there were
approximately 500 groups of life insurance companies in the United States, most
of which offered one or more similar products. In addition, because many of
these products include a savings or investment component, our competition
includes domestic and foreign securities firms, investment advisors, mutual
funds, banks, and other financial institutions. Competitive pressure continues
to grow due to several factors, including cross marketing alliances between
unaffiliated businesses, as well as consolidation activity in the financial
services industry.

     We cede the mortality risk on certain life policies, depending upon the
issue year and product, to a pool of twelve non-affiliated reinsurers. Under
agreements with ALIC, all business not reinsured to non-affiliated reinsurers is
ceded to ALIC. Premiums, contract charges, interest credited to contractholder
funds, contract benefits and substantially all expenses are reinsured by ALIC.
Assets that support general account product liabilities are owned and managed by
ALIC. We continue to have primary liability as the direct insurer for risks
reinsured as ALIC's obligations under the reinsurance agreements are to us and
not the contractholder.

     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 our legally segregated separate accounts. Contract
charges assessed against the separate accounts assets and contract benefits are
ceded to ALIC.

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     Lincoln Benefit is subject to extensive regulation, primarily at the state
level. The method, extent and substance of such regulation varies by state but
generally has its source in statutes that establish standards and requirements
for conducting the business of insurance and that delegate regulatory authority
to a state regulatory agency. In general, such regulation is intended for the
protection of those who purchase or use insurance products. These rules have a
substantial effect on our business and relate to a wide variety of matters
including insurance company licensing and examination, agent licensing, price
setting, trade practices, policy forms, accounting methods, the nature and
amount of investments, claims practices, participation in guaranty funds,
reserve adequacy, insurer solvency, transactions with affiliates, the payment of
dividends, and underwriting standards. For a discussion of statutory financial
information, see Note 10 of the Financial Statements. For a discussion of
regulatory contingencies, see Note 8 of the Financial Statements. Notes 8 and 10
are incorporated in this Part I, Item 1 by reference.

     In recent years, the state insurance regulatory framework has come under
increased federal scrutiny. Legislation that would provide for federal
chartering of insurance companies has been proposed. In addition, state
legislators and insurance regulators continue to examine the appropriate nature
and scope of state insurance regulation. We cannot predict whether any specific
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 Lincoln Benefit.

ITEM 1A. RISK FACTORS

     This document contains "forward-looking statements" that anticipate results
based on our 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. We assume no obligation to update any
forward-looking statements as a result of new information or future events or
developments.

     These forward-looking statements do not relate strictly to historical or
current facts and may be identified by their use of words like "plans," "seeks,"
"expects," "will," "should," "anticipates," "estimates," "intends," "believes,"
"likely," "targets" and other words with similar meanings. These statements may
address, among other things, our strategy for growth, product development,
investment results, regulatory approvals, market position, expenses, financial
results, litigation and reserves. We believe 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, we are subject to significant
risks and uncertainties, including those listed below, which apply to us as an
insurer and a provider of other financial services. These risks constitute our
cautionary statements under the Private Securities Litigation Reform Act of 1995
and readers should carefully review such cautionary statements as they identify
certain important factors that could cause actual results to differ materially
from those in the forward-looking statements and historical trends. These
cautionary statements are not exclusive and are in addition to other factors
discussed elsewhere in this document, in our filings with the Securities and
Exchange Commission ("SEC") or in materials incorporated therein by reference.

CHANGES IN UNDERWRITING AND ACTUAL EXPERIENCE COULD MATERIALLY AFFECT
PROFITABILITY OF BUSINESS CEDED TO ALIC

     Our product pricing includes long-term assumptions regarding investment
returns, mortality, morbidity, persistency and operating costs and expenses of
the business, which is ceded to ALIC. Management establishes target returns for
each product based upon these factors and the average amount of capital that the
Company and ALIC must hold to support in-force contracts taking into account
rating agencies and regulatory requirements. We monitor and manage our pricing
and overall sales mix to achieve target new business returns on a portfolio
basis, which could result in the discontinuation of products or distribution
relationships and a decline in sales. Profitability from new business emerges
over a period of years depending on the nature and life of the product and is
subject to variability as actual results may differ from pricing assumptions.

     ALIC's profitability depends on the adequacy of investment spreads, the
management of market and credit risks associated with investments, the
sufficiency of premiums and contract charges to cover mortality and morbidity
benefits, the persistency of policies to ensure recovery of acquisition
expenses, and the management of operating costs and expenses within anticipated
pricing allowances. Legislation and regulation of the insurance marketplace and
products could also affect the profitability of our business ceded to ALIC.

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CHANGES IN RESERVE ESTIMATES MAY ADVERSELY AFFECT OUR OPERATING RESULTS CEDED TO
ALIC

     Reserve for life-contingent contract benefits is computed on the basis of
long-term actuarial assumptions of future investment yields, mortality,
morbidity, policy terminations and expenses. We periodically review the adequacy
of these reserves on an aggregate basis and if future experience differs
significantly from assumptions, adjustments to reserves may be required which
could have a material adverse effect on our operating results ceded to ALIC.

CHANGES IN MARKET INTEREST RATES MAY LEAD TO A SIGNIFICANT DECREASE IN THE SALES
AND PROFITABILITY OF SPREAD-BASED PRODUCTS CEDED TO ALIC

Our ability to manage our spread-based products, such as fixed annuities, is
dependent upon maintaining profitable spreads between investment yields and
interest crediting rates on business ceded to ALIC. When market interest rates
decrease or remain at relatively low levels, proceeds from investments that have
matured or have been prepaid or sold may be reinvested at lower yields, reducing
investment spread. Lowering interest crediting rates in such an environment can
partially offset decreases in investment yield on some products. However, these
changes could be limited by market conditions, regulatory minimum rates or
contractual minimum rate guarantees on many contracts and may not match the
timing or magnitude of changes in asset yields. Decreases in the rates offered
on products could make those products less attractive, leading to lower sales
and/or changes in the level of policy loans, surrenders and withdrawals.
Non-parallel shifts in interest rates, such as increases in short-term rates
without accompanying increases in medium- and long-term rates, can influence
customer demand for fixed annuities, which could impact the level and
profitability of new customer deposits. Increases in market interest rates can
also have negative effects on the business ceded to ALIC, for example by
increasing the attractiveness of other investments to our customers, which can
lead to higher surrenders at a time when fixed income investment asset values
are lower as a result of the increase in interest rates. This could lead to the
sale of fixed income securities at a loss. For certain products, principally
fixed annuity and interest-sensitive life products, the earned rate on assets
could lag behind rising market yields. We may react to market conditions by
increasing crediting rates, which could narrow spreads and reduce profitability
ceded to ALIC.

A LOSS OF KEY PRODUCT DISTRIBUTION RELATIONSHIPS COULD MATERIALLY AFFECT SALES

     Certain products are distributed under agreements with other members of the
financial services industry that are not affiliated with us. Termination of one
or more of these agreements due to, for example, a change in control of one of
these distributors, could have a detrimental effect on sales.

CHANGES IN TAX LAWS MAY DECREASE SALES AND PROFITABILITY OF PRODUCTS CEDED TO
ALIC

     Under current federal and state income tax law, certain products we offer,
primarily life insurance and annuities, receive favorable tax treatment. This
favorable treatment may give certain of our products a competitive advantage
over noninsurance products. Congress from time to time considers legislation
that would reduce or eliminate the favorable policyholder tax treatment
currently applicable to life insurance and annuities. Congress also considers
proposals to reduce the taxation of certain products or investments that may
compete with life insurance and annuities. Legislation that increases the
taxation on insurance products or reduces the taxation on competing products
could lessen the advantage or create a disadvantage for certain of our products
making them less competitive. Such proposals, if adopted, could have a material
adverse effect on ALIC's profitability and financial condition or our ability to
sell such products and could result in the surrender of some existing contracts
and policies. In addition, changes in the federal estate tax laws could
negatively affect the demand for the types of life insurance used in estate
planning.

RISKS RELATING TO INVESTMENTS

WE ARE SUBJECT TO MARKET RISK AND DECLINES IN CREDIT QUALITY WHICH MAY ADVERSELY
IMPACT INVESTMENT INCOME AND CAUSE ADDITIONAL REALIZED LOSSES

     We are subject to the risk that we will incur losses due to adverse changes
in interest rates. In addition, we are subject to potential declines in credit
quality, either related to issues specific to certain industries or to a general
weakening in the economy.

     A decline in market interest rates could have an adverse effect on our
investment income as we invest cash in new investments that may yield less than
the portfolio's average rate. In a declining interest rate environment,
borrowers may prepay or redeem securities more quickly than expected as they
seek to refinance at lower rates. A decline could also lead us to purchase
longer-term or riskier assets in order to obtain adequate investment yields. An
increase in market interest rates could have an adverse effect on the value of
our investment portfolio by decreasing the fair values of the fixed income
securities that comprise a substantial majority of our investment portfolio. A

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decline in the quality of our investment portfolio as a result of adverse
economic conditions could cause additional realized losses on securities.

CONCENTRATION OF OUR INVESTMENT PORTFOLIO IN ANY PARTICULAR SEGMENT OF THE
ECONOMY MAY HAVE ADVERSE EFFECTS ON OUR OPERATING RESULTS AND FINANCIAL
CONDITION

     The concentration of our investment portfolio in any particular industry,
collateral types, group of related industries or geographic sector could have an
adverse effect on our investment portfolios and consequently on our results of
operations and financial condition. Events or developments that have a negative
impact on any particular industry, group of related industries or geographic
region may have a greater adverse effect on the investment portfolio to the
extent that the portfolio is concentrated rather than diversified.

THE DETERMINATION OF THE AMOUNT OF REALIZED CAPITAL LOSSES RECORDED FOR
IMPAIRMENTS OF OUR INVESTMENTS IS HIGHLY SUBJECTIVE AND COULD MATERIALLY IMPACT
OUR OPERATING RESULTS AND FINANCIAL CONDITION

     The determination of the amount of realized capital losses recorded for
impairments vary by investment type and is based upon our periodic evaluation
and assessment of known and inherent risks associated with the respective asset
class. Such evaluations and assessments are revised as conditions change and new
information becomes available. Management updates its evaluations regularly and
reflects changes in realized capital gains and losses from impairments in
operating results as such evaluations are revised. There can be no assurance
that our management has accurately assessed the level of or amounts recorded for
impairments taken in our financial statements. Furthermore, additional
impairments may need to be recorded in the future. Historical trends may not be
indicative of future impairments. For example, the amortized cost of our fixed
income securities is adjusted for impairments in value deemed to be other than
temporary in the period in which the determination is made. The assessment of
whether impairments have occurred is based on management's case-by-case
evaluation of the underlying reasons for the decline in fair value.

THE DETERMINATION OF THE FAIR VALUE OF OUR FIXED INCOME SECURITIES RESULTS IN
UNREALIZED NET CAPITAL GAINS AND LOSSES AND IS HIGHLY SUBJECTIVE AND COULD
MATERIALLY IMPACT OUR OPERATING RESULTS AND FINANCIAL CONDITION

In determining fair value we generally utilize market transaction data for the
same or similar instruments. The degree of management judgment involved in
determining fair values is inversely related to the availability of market
observable information. The fair value of financial assets and financial
liabilities may differ from the amount actually received to sell an asset or the
amount paid to transfer a liability in an orderly transaction between market
participants at the measurement date. Moreover, the use of different valuation
assumptions may have a material effect on the financial assets' and financial
liabilities' fair values. The difference between amortized cost and fair value,
net of deferred income taxes, is reflected as a component of accumulated other
comprehensive income in shareholder's equity. As of December 31, 2008, total
unrealized net capital losses were $341 thousand. Changing market conditions
could materially effect the determination of the fair value of our securities
and unrealized net capital gains and losses could vary significantly.
Determining fair value is highly subjective and could materially impact our
operating results and financial condition.

RISKS RELATING TO THE INSURANCE INDUSTRY

OUR FUTURE RESULTS ARE DEPENDENT IN PART ON OUR ABILITY TO SUCCESSFULLY OPERATE
IN AN INSURANCE INDUSTRY THAT IS HIGHLY COMPETITIVE

     The insurance industry is highly competitive. Our competitors include other
insurers and, because many of our products include a savings or investment
component, securities firms, investment advisers, mutual funds, banks and other
financial institutions. Many of our competitors have well-established national
reputations and market similar products. Because of the competitive nature of
the insurance industry, including competition for producers such as exclusive
and independent agents, there can be no assurance that we will continue to
effectively compete with our industry rivals, or that competitive pressures will
not have a material adverse effect on our business or operating results ceded to
ALIC. Furthermore, certain competitors operate using a mutual insurance company
structure and therefore, may have dissimilar profitability and return targets.
Our ability to successfully operate may also be impaired if we are not effective
in filling critical leadership positions, in developing the talent and skills of
our human resources, in assimilating new executive talent into our organization,
or in deploying human resource talent consistently with our business goals.

DIFFICULT CONDITIONS IN THE ECONOMY GENERALLY COULD ADVERSELY AFFECT OUR
BUSINESS AND OPERATING RESULTS

     Economists now believe the United States economy has entered into a
recessionary period and are projecting significant negative macroeconomic
trends, including widespread job losses, higher unemployment, lower consumer
spending, continued declines in home prices and substantial increases in
delinquencies on consumer debt, including

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defaults on home mortgages. Moreover, recent disruptions in the financial
markets, particularly the reduced availability of credit and tightened lending
requirements, have impacted the ability of borrowers to refinance loans at more
affordable rates. We cannot predict the length and severity of a recession, but
as with most businesses, we believe a longer or more severe recession could have
an adverse effect on our business and results of operations.

     A general economic slowdown could adversely affect us in the form of
consumer behavior and pressure on our investment portfolio. Consumer behavior
could include decreased demand for our products. Holders of some of our life
insurance and annuity products may engage in an elevated level of discretionary
withdrawals of contractholder funds. Our investment portfolio could be adversely
affected as a result of deteriorating financial and business conditions
affecting the issuers of the securities in our investment portfolio.

THERE CAN BE NO ASSURANCE THAT ACTIONS OF THE U.S. FEDERAL GOVERNMENT, FEDERAL
RESERVE AND OTHER GOVERNMENTAL AND REGULATORY BODIES FOR THE PURPOSE OF
STABILIZING THE FINANCIAL MARKETS AND STIMULATING THE ECONOMY WILL ACHIEVE THE
INTENDED EFFECT

     In response to the financial crises affecting the banking system, the
financial markets and the broader economy, the U.S. federal government, the
Federal Reserve and other governmental and regulatory bodies have taken or are
considering taking action to address such conditions including, among other
things, purchasing mortgage-backed and other securities from financial
institutions, investing directly in banks, thrifts and bank and savings and loan
holding companies and increasing federal spending to stimulate the economy.
There can be no assurance as to what impact such actions will have on the
financial markets or on economic conditions. Such continued volatility and
economic deterioration could materially and adversely affect our business,
financial condition and results of operations.

LOSSES FROM LITIGATION MAY BE MATERIAL TO OUR OPERATING RESULTS OR CASH FLOWS
CEDED TO ALIC

     As is typical for a large company, the Corporation and its subsidiaries are
involved in a substantial amount of litigation, including class action
litigation challenging a range of company practices and coverage provided by its
insurance products. In the event of an unfavorable outcome in one or more of
these matters, the ultimate liability may be in excess of amounts currently
reserved and may be material to our operating results or cash flows ceded to
ALIC for a particular quarter or annual period.

WE ARE SUBJECT TO EXTENSIVE REGULATION AND POTENTIAL FURTHER RESTRICTIVE
REGULATION MAY INCREASE OUR OPERATING COSTS AND LIMIT OUR GROWTH

     As an insurance company with separate accounts that are regulated as
investment companies, we are subject to extensive laws and regulations. These
laws and regulations are complex and subject to change. Moreover, they are
administered and enforced by a number of different governmental authorities,
including state insurance regulators, state securities administrators, the SEC,
Financial Industry Regulatory Authority, the U.S. Department of Justice, and
state attorneys general, each of which exercises a degree of interpretive
latitude. Consequently, we are subject to the risk that compliance with any
particular regulator's or enforcement authority's interpretation of a legal
issue may not result in compliance with another's interpretation of the same
issue, particularly when compliance is judged in hindsight. In addition, there
is risk that any particular regulator's or enforcement authority's
interpretation of a legal issue may change over time to our detriment, or that
changes in the overall legal environment may, even absent any particular
regulator's or enforcement authority's interpretation of a legal issue changing,
cause us to change our views regarding the actions we need to take from a legal
risk management perspective, thus necessitating changes to our practices that
may, in some cases, limit our ability to grow and improve the profitability of
our business ceded to ALIC. Furthermore, in some cases, these laws and
regulations are designed to protect or benefit the interests of a specific
constituency rather than a range of constituencies. For example, state insurance
laws and regulations are generally intended to protect or benefit purchasers or
users of insurance products. In many respects, these laws and regulations limit
our ability to grow and improve the profitability of our business ceded to ALIC.

     In recent years, the state insurance regulatory framework has come under
public scrutiny and members of Congress have discussed proposals to provide for
federal chartering of insurance companies. We can make no assurances regarding
the potential impact of state or federal measures that may change the nature or
scope of insurance regulation.

REINSURANCE MAY BE UNAVAILABLE AT CURRENT LEVELS AND PRICES, WHICH MAY LIMIT OUR
ABILITY TO WRITE NEW BUSINESS

     Market conditions beyond our control determine the availability and cost of
the reinsurance we purchase. No assurances can be made that reinsurance will
remain continuously available to us to the same extent and on the same terms and
rates as are currently available. If we were unable to maintain our current
level of nonaffiliated reinsurance or purchase new reinsurance protection in
amounts that we consider sufficient and at prices that we

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consider acceptable, either ALIC would have to accept an increase in exposure
risk, or we would have to reduce our insurance writings, or develop or seek
other alternatives.

REINSURANCE SUBJECTS US TO THE CREDIT RISK OF OUR REINSURERS AND MAY NOT BE
ADEQUATE TO PROTECT US AGAINST LOSSES ARISING FROM CEDED INSURANCE, WHICH COULD
HAVE A MATERIAL ADVERSE EFFECT ON OUR OPERATING RESULTS CEDED TO ALIC

     The collectability of reinsurance recoverables is subject to uncertainty
arising from a number of factors, including changes in market conditions,
whether insured losses meet the qualifying conditions of the reinsurance
contract and whether reinsurers, or their affiliates, have the financial
capacity and willingness to make payments under the terms of a reinsurance
treaty or contract. Our inability to collect a material recovery from a
reinsurer could have a material adverse effect on operating results ceded to
ALIC.

THE CONTINUED THREAT OF TERRORISM AND ONGOING MILITARY ACTIONS MAY ADVERSELY
AFFECT THE LEVEL OF CLAIM LOSSES WE INCUR AND CEDE TO ALIC AND THE VALUE OF OUR
INVESTMENT PORTFOLIO

     The continued threat of terrorism, both within the United States and
abroad, and ongoing military and other actions and heightened security measures
in response to these types of threats, may cause significant volatility and
losses from declines in the equity markets and from interest rate changes in the
United States, Europe and elsewhere, and result in loss of life, disruptions to
commerce and reduced economic activity. Some of the assets in our investment
portfolio may be adversely affected by reduced economic activity caused by the
continued threat of terrorism. Additionally, in the event that terrorist acts
occur, we could be adversely affected, depending on the nature of the event.

A DOWNGRADE IN OUR FINANCIAL STRENGTH RATINGS MAY HAVE AN ADVERSE EFFECT ON OUR
COMPETITIVE POSITION, THE MARKETABILITY OF OUR PRODUCT OFFERINGS, AND OUR
LIQUIDITY, OPERATING RESULTS CEDED TO ALIC AND FINANCIAL CONDITION

     Financial strength ratings are important factors in establishing the
competitive position of insurance companies and generally 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
the outlook on an insurer's ratings due to, for example, a change in an
insurer's statutory capital; a change in a rating agency's determination of the
amount of risk-adjusted capital required to maintain a particular rating; an
increase in the perceived risk of an insurer's investment portfolio; a reduced
confidence in management or a host of other considerations that may or may not
be under the insurer's control. The current insurance financial strength ratings
of ALIC and the Company are A+, AA- and A1 from A.M. Best, Standard & Poor's and
Moody's, respectively. Because all of these ratings are subject to continuous
review, the retention of these ratings cannot be assured. A downgrade in any of
these ratings could have a material adverse effect on our sales, our
competitiveness, the marketability of our product offerings, and our liquidity
and operating results ceded to ALIC.

CHANGES IN ACCOUNTING STANDARDS ISSUED BY THE FINANCIAL ACCOUNTING STANDARDS
BOARD ("FASB") OR OTHER STANDARD-SETTING BODIES MAY ADVERSELY AFFECT OUR
FINANCIAL STATEMENTS

     Our financial statements are subject to the application of generally
accepted accounting principles, which are periodically revised, interpreted
and/or expanded. Accordingly, we are required to adopt new guidance or
interpretations, or could be subject to existing guidance as we enter into new
transactions, which may have a material adverse effect on our results of
operations and financial condition that is either unexpected or has a greater
impact than expected. For a description of changes in accounting standards that
are currently pending and, if known, our estimates of their expected impact, see
Note 2 of the financial statements.

THE CHANGE IN OUR UNRECOGNIZED TAX BENEFIT DURING THE NEXT 12 MONTHS IS SUBJECT
TO UNCERTAINTY

     As required by FASB Interpretation No. 48, "Accounting for Uncertainty in
Income Taxes", which was adopted as of January 1, 2007, we have disclosed our
estimate of net unrecognized tax benefits and the reasonably possible increase
or decrease in its balance during the next 12 months. However, actual results
may differ from our estimate for reasons such as changes in our position on
specific issues, developments with respect to the governments' interpretations
of income tax laws or changes in judgment resulting from new information
obtained in audits or the appeals process.

THE REALIZATION OF DEFERRED TAX ASSETS IS SUBJECT TO UNCERTAINTY

     The realization of our deferred tax assets is based on our assumption that
we will be able to fully utilize the deductions that are ultimately recognized
for tax purposes. However, actual results may differ from our assumptions if
adequate levels of taxable income are not attained.

                                        6
<Page>

THE OCCURRENCE OF EVENTS UNANTICIPATED IN OUR DISASTER RECOVERY SYSTEMS AND
MANAGEMENT CONTINUITY PLANNING COULD IMPAIR OUR ABILITY TO CONDUCT BUSINESS
EFFECTIVELY

     In the event of a disaster such as a natural catastrophe, an industrial
accident, a terrorist attack or war, events unanticipated in our disaster
recovery systems could have an adverse impact on our ability to conduct business
and on our results of operations ceded to ALIC and financial condition,
particularly if those events affect our computer-based data processing,
transmission, storage and retrieval systems. In the event that a significant
number of our managers could be unavailable in the event of a disaster, our
ability to effectively conduct our business could be severely compromised.

CHANGING CLIMATE CONDITIONS MAY ADVERSELY AFFECT OUR FINANCIAL CONDITION,
PROFITABILITY OR CASH FLOWS CEDED TO ALIC

     Allstate recognizes the scientific view that the world is getting warmer.
To the extent that climate change impacts mortality rates and those changes do
not match the long-term mortality assumptions in our product pricing, the
business we cede would be impacted.

ITEM 1B. UNRESOLVED STAFF COMMENTS

     None.

ITEM 2.  PROPERTIES

     We occupy office space in Lincoln, Nebraska and Northbrook, Illinois that
is owned by AIC. Expenses associated with these facilities are allocated to us
on a direct basis.

ITEM 3.  LEGAL PROCEEDINGS

     Information required for Item 3 is incorporated by reference to the
discussion under the heading "Regulation" and under the heading "Legal and
regulatory proceedings and inquiries" in Note 8 of the Financial Statements.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES

     No established public trading market exists for our common stock. All of
our outstanding common stock is owned by our parent, ALIC. All of ALIC's
outstanding common stock is owned by AIC. All of the outstanding common stock of
AIC is owned by Allstate Insurance Holdings, LLC, which is wholly owned by The
Allstate Corporation. Within the past three years, we have not sold or
repurchased any of our equity securities.

     In 2008 and 2007, we paid no dividends on our common stock to ALIC.

     For additional information on dividends, including restrictions on the
payment of dividends, see the discussion under the heading "Dividends" in Note
10 of our financial statements, which is incorporated herein by reference.

                                        7
<Page>

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

OVERVIEW

     The following discussion highlights significant factors influencing the
financial position and results of operations of Lincoln Benefit Life Company
(referred to in this document as "we", "Lincoln Benefit", "our", "us" or the
"Company"). It should be read in conjunction with the financial statements and
related notes found under Part II Item 8 contained herein. We operate as a
single segment entity, based on the manner in which we use financial information
to evaluate business performance and to determine the allocation of resources.

     The most important factors that we monitor to evaluate the financial
condition and performance of our company include:

     -    For operations: premiums and deposits ceded to ALIC, and invested
          assets;

     -    For investments: credit quality/experience, realized capital gains and
          losses, investment income, unrealized capital gains and losses,
          stability of long-term returns, cash flows and asset duration; and

     -    For financial condition: financial strength ratings and capital
          positions.

APPLICATION OF CRITICAL ACCOUNTING ESTIMATES

     The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America ("GAAP") requires
management to adopt accounting policies and make estimates and assumptions that
affect amounts reported in the financial statements. The most critical estimates
include those used in determining:

     -    Fair Value of Financial Assets and Financial Liabilities

     -    Impairment of Fixed Income Securities

     In applying these policies, management makes subjective and complex
judgments that frequently require estimates about matters that are inherently
uncertain. Many of these policies, estimates and related judgments are common in
the insurance and financial services industries; others are specific to our
businesses and operations. It is reasonably likely that changes in these
estimates could occur from period to period and result in a material impact on
our financial statements.

     A brief summary of each of these critical accounting estimates follows. For
a more detailed discussion of the effect of these estimates on our financial
statements, and the judgments and assumptions related to these estimates, see
the referenced sections of this document. For a complete summary of our
significant accounting policies, see Note 2 of the financial statements.

FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES Statement of Financial
Accounting Standards No. 157, FAIR VALUE MEASUREMENTS ("SFAS No. 157"), is
effective for fiscal years beginning after November 15, 2007. We adopted the
provisions of SFAS No. 157 as of January 1, 2008 for financial assets and
financial liabilities that are measured at fair value. SFAS No. 157:

     -   Defines fair value as the price that would be received to sell an asset
         or paid to transfer a liability in an orderly transaction between
         market participants at the measurement date, and establishes a
         framework for measuring fair value;

     -   Establishes a three-level hierarchy for fair value measurements based
         upon the transparency of inputs to the valuation as of the measurement
         date;

     -   Expands disclosures about financial instruments measured at fair value.

     We categorize our financial assets and financial liabilities measured at
fair value based on the observability of inputs to the valuation techniques,
into a three-level fair value hierarchy as follows:

LEVEL 1: Financial assets and financial liabilities whose values are based on
         unadjusted quoted prices for identical assets or liabilities in an
         active market that we can access.

LEVEL 2: Financial assets and financial liabilities whose values are based on
         the following:

         a)   Quoted prices for similar assets or liabilities in active markets;

         b)   Quoted prices for identical or similar assets or liabilities in
              non-active markets; or

         c)   Valuation models whose inputs are observable, directly or
              indirectly, for substantially the full term of the asset or
              liability.

                                        8
<Page>

LEVEL 3: Financial assets and financial liabilities whose values are based on
         prices or valuation techniques that require inputs that are both
         unobservable and significant to the overall fair value measurement.
         These inputs may reflect our estimates of the assumptions that market
         participants would use in valuing the financial assets and financial
         liabilities.

     Observable inputs are those used by market participants in valuing
financial instruments that are developed based on market data obtained from
independent sources. In the absence of sufficient observable inputs,
unobservable inputs reflect our estimates of the assumptions market participants
would use in valuing financial assets and financial liabilities and are
developed based on the best information available in the circumstances. The
degree of management judgment involved in determining fair values is inversely
related to the availability of market observable information.

     To distinguish among the categories, we consider the frequency of completed
transactions. If inputs used to measure a financial instrument fall within
different levels of the fair value hierarchy, the categorization is based on the
lowest level input that is significant to the fair value measurement of the
entire instrument. Certain financial assets are not carried at fair value on a
recurring basis. Accordingly, such investments are only included in the fair
value hierarchy disclosure when the investment is subject to remeasurement at
fair value after initial recognition and the resulting measurement is reflected
in the financial statements.

     We are responsible for the determination of the fair value of financial
assets and financial liabilities and the supporting assumptions and
methodologies. We gain assurance on the overall reasonableness and consistent
application of valuation input assumptions, valuation methodologies, and
compliance with accounting standards for fair value determination through the
execution of various processes and controls designed to ensure that our
financial assets and financial liabilities are appropriately valued. We monitor
fair values received from third parties and those derived internally on an
ongoing basis.

     In certain situations, we employ independent third-party valuation service
providers to gather, analyze, and interpret market information and derive fair
values based upon relevant assumptions and methodologies for individual
instruments. In situations where our valuation service providers are unable to
obtain sufficient market observable information upon which to estimate the fair
value for a particular security, fair value is determined either by requesting
brokers who are knowledgeable about these securities to provide a single quote
or by employing internal valuation models that are widely accepted in the
financial services industry. Changing market conditions are incorporated into
valuation assumptions and reflected in the fair values, which are validated by
calibration and other analytical techniques to available market observable data.

     Valuation service providers typically obtain data about market transactions
and other key valuation model inputs from multiple sources and, through the use
of proprietary algorithms, produce valuation information in the form of a single
fair value for individual securities for which a fair value has been requested
under the terms of our agreements. For certain security types, fair values are
derived from the valuation service providers' proprietary valuation models. The
inputs used by the valuation service providers include, but are not limited to,
market prices from recently completed transactions and transactions of
comparable securities, interest rate yield curves, credit spreads, liquidity
spread, currency rates, and other market-observable information, as applicable.
Credit and liquidity spreads are typically implied from completed transactions
and transactions of comparable securities. Valuation service providers also use
proprietary discounted cash flow models that are widely accepted in the
financial services industry and similar to those used by other market
participants to value the same financial instruments. The valuation models take
into account, among other things, market observable information as of the
measurement date, as described above, as well as the specific attributes of the
security being valued including its term, interest rate, credit rating, industry
sector, and where applicable, collateral quality and other issue or issuer
specific information. Executing valuation models effectively requires seasoned
professional judgment and experience. In cases where market transactions or
other market observable data is limited, the extent to which judgment is applied
varies inversely with the availability of market observable information.

     For certain of our financial assets carried at fair value, where our
valuation service providers cannot provide fair value determinations, we obtain
non-binding price quotes from brokers familiar with the security who, similar to
our valuation service providers, may consider transactions or activity in
similar securities, as applicable, among other information. The brokers
providing price quotes are generally from the brokerage divisions of leading
financial institutions with market making, underwriting and distribution
expertise.

     The fair value of financial assets and financial liabilities, including
certain derivatives embedded in certain contractholder liabilities, where our
valuation service providers or brokers do not provide fair value determinations,
is determined using valuation methods and models widely accepted in the
financial services industry. Internally developed

                                        9
<Page>

valuation models, which include inputs that may not be market observable and as
such involve some degree of judgment, are considered appropriate for each class
of security to which they are applied.

     Our internal pricing methods are primarily based on models using discounted
cash flow methodologies that determine a single best estimate of fair value for
individual financial instruments. In addition, our models use internally
assigned credit ratings as inputs (which are generally consistent with any
external ratings and those we use to report our holdings by credit rating) and
stochastically determined cash flows for certain derivatives embedded in certain
contractholder liabilities, both of which are difficult to independently observe
and verify. Instrument specific inputs used in our internal fair value
determinations include: coupon rate, coupon type, weighted average life, sector
of the issuer, call provisions, and the contractual elements of derivatives
embedded in certain contractholder liabilities. Market related inputs used in
these fair values, which we believe are representative of inputs other market
participants would use to determine the fair value of the same instruments
include: interest rate yield curves, quoted market prices of comparable
securities, credit spreads, estimated liquidity premiums, and other applicable
market data including lapse and anticipated market return estimates for
derivatives embedded in certain contractholder liabilities. Credit spreads are
determined using those published by a commonly used industry specialist for
comparable public securities. A liquidity premium is also added to certain
securities to reflect spreads commonly required for the types of securities
being valued and are calibrated based on actual trades or other market data. As
a result of the significance of non-market observable inputs, including
internally assigned credit ratings and stochastic cash flow estimates as
described above, judgment is required in developing these fair values. The fair
value of these financial assets and financial liabilities may differ from the
amount actually received to sell an asset or the amount paid to transfer a
liability in an orderly transaction between market participants at the
measurement date. Moreover, the use of different valuation assumptions may have
a material effect on the financial assets' and financial liabilities' fair
values.

     Fair value of our investments comprise an aggregation of numerous, single
best estimates for each security in the Statements of Financial Position.
Because of this detailed approach there is no single set of assumptions that
determine our fair value estimates. Moreover, management does not compile a
range of estimates for items reported at fair value because we do not believe
that a range would provide meaningful information. In the last 10 years, our
quarterly net unrealized capital gains and losses have ranged from an $18.3
million net unrealized capital gain at June 30, 2003 to a $6.8 million net
unrealized capital loss at June 30, 2006. The change in net unrealized capital
gains and losses by quarter over the 10 year period has averaged $3.5 million
and has ranged from a $9.9 million decrease to a $6.9 million increase.

      Level 1 and Level 2 measurements represent valuations where all
significant inputs are market observable. Level 3 measurements have one or more
significant inputs that are not market observable and as a result these fair
value determinations have greater potential variability as it relates to their
significant inputs. The Level 3 principal components are asset-back securities
("ABS") and derivatives embedded in certain contractholder liabilities. In
general, the greater the reliance on significant inputs that are not market
observable, the greater potential variability of the fair value determinations.
For broker quoted securities' fair value determinations, which were all
categorized as Level 3, we believe the brokers providing the quotes may consider
market observable transactions or activity in similar securities, as applicable,
and other information as calibration points.

     We believe our most significant exposure to changes in fair value is due to
market risk. Our exposure to changes in market conditions is discussed fully in
the Market Risk section of the MD&A.

     We employ specific control processes to determine the reasonableness of the
fair value of our financial assets and financial liabilities. Our processes are
designed to ensure that the values received or internally estimated are
accurately recorded and that the data inputs and the valuation techniques
utilized are appropriate, consistently applied, and that the assumptions are
reasonable and consistent with the objective of determining fair value. For
example, on a continuing basis, we assess the reasonableness of individual
security values received from those valuation service providers. In addition, we
may validate the reasonableness of fair values by comparing information obtained
from our valuation service providers to other third party valuation sources for
selected financial assets. When fair value determinations are expected to be
more variable, we validate them through reviews by members of management who
have relevant expertise and who are independent of those charged with executing
investment transactions. We do not alter fair values provided by our valuation
providers or brokers.

      The following table identifies investments as of December 31, 2008 by
source of value determination:

                                                INVESTMENTS
                                          ---------------------
($ IN THOUSANDS)                           FAIR        PERCENT
                                           VALUE       TO TOTAL
                                          --------     --------
Fair value based on internal sources      $  1,365        0.4%
Fair value based on external sources       308,666       99.6
                                          --------      -----
Total investments                         $310,031      100.0%
                                          ========      =====

                                       10
<Page>

     For more detailed information on our accounting policy for the fair value
of financial assets and financial liabilities and information on the financial
assets and financial liabilities included in the levels promulgated by SFAS No.
157, see Note 2 to the financial statements.

     IMPAIRMENT OF FIXED INCOME SECURITIES For fixed income securities
classified as available for sale, the difference between fair value and
amortized cost, net of deferred income taxes (as disclosed in Note 4), is
reported as a component of accumulated other comprehensive income on the
Statements of Financial Position and is not reflected in the operating results
of any period until reclassified to net income upon the consummation of a
transaction with an unrelated third party or when the decline in fair value is
deemed other than temporary. The assessment of whether the impairment of a
security's fair value is other than temporary is performed using a portfolio
review as well as a case-by-case review considering a wide range of factors.

     There are a number of assumptions and estimates inherent in evaluating
impairments and determining if they are other than temporary, including: 1) our
ability and intent to hold the investment for a period of time sufficient to
allow for an anticipated recovery in value; 2) the expected recoverability of
principal and interest; 3) the length of time and extent to which the fair value
has been less than amortized cost; 4) the financial condition, near-term and
long-term prospects of the issue or 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
liquidity. Additionally, once assumptions and estimates are made, any number of
changes in facts and circumstances could cause us to subsequently determine that
an impairment is other than temporary, including: 1) general economic conditions
that are worse than previously forecasted or that have a greater adverse effect
on a particular issuer or industry sector than originally estimated; 2) changes
in the facts and circumstances related to a particular issue or issuer's ability
to meet all of its contractual obligations; and 3) changes in facts and
circumstances obtained that causes a change in our ability or intent to hold a
security to maturity or until it recovers in value. Examples of situations which
may change our ability or intent to hold a security to maturity or recovery
include where significant unanticipated new facts and circumstances emerge or
existing facts and circumstances increase in significance and are anticipated to
adversely impact a security's future valuations more than previously expected,
including negative developments that would change the view of long term
investors and their intent to continue to hold the investment, subsequent credit
deterioration of an issuer or holding, subsequent further deterioration in
capital markets (i.e. debt) and of economic conditions, subsequent further
deterioration in the financial services and real estate industries, liquidity
needs, federal income tax situations involving capital gains and capital loss
carrybacks and carryforwards with specific expiration dates, investment risk
mitigation actions, and other new facts and circumstances that would cause a
change in our previous intent to hold a security to recovery or maturity.
Changes in assumptions, facts and circumstances could result in additional
charges 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 effect on shareholder's equity, since our entire portfolio is
designated as available-for-sale and carried at fair value and as a result, any
related net unrealized loss would already be reflected as a component of
accumulated other comprehensive income in shareholder's equity.

     The determination of the amount of impairment is an inherently subjective
process based on periodic evaluation of the factors described above. Such
evaluations and assessments are revised as conditions change and new information
becomes available. We update our evaluations regularly and reflect changes in
impairments in results of operations as such evaluations are revised. The use of
different methodologies and assumptions as to the determination of the fair
value of investments and the timing and amount of impairments may have a
material effect on the amounts presented within the financial statements.

     Fixed income securities subject to other-than-temporary impairment
write-downs continue to earn investment income when future expected payments are
both reasonably estimable and probable, and any discount or premium is
recognized using the effective yield method over the expected life of the
security; otherwise income recognition is discontinued. For a more detailed
discussion of the risks relating to changes in investment values and levels of
investment impairment as well as the potential causes of such changes, see Note
4 of the financial statements and Market Risk and Risk Factors sections of this
document.

OPERATIONS

OVERVIEW AND STRATEGY We are a wholly owned subsidiary of Allstate Life
Insurance Company ("ALIC"), which is a wholly owned subsidiary of Allstate
Insurance Company ("AIC"), a wholly owned subsidiary of Allstate Insurance
Holdings, LLC, which is wholly owned by The Allstate Corporation (the
"Corporation"). Lincoln Benefit provides life insurance, retirement and
investment products to individual customers. Our strategic vision is to reinvent
protection and retirement for the consumer.

                                       11
<Page>

     We plan to offer a more focused suite of products designed for middle
market consumers to help everyday Americans meet their financial protection
needs and help them better prepare for retirement. Our products include fixed
annuities, including deferred, immediate and indexed; and interest-sensitive,
traditional and variable life insurance. These products are sold through a wide
range of distribution channels including Allstate exclusive agencies, which
include exclusive financial specialists, independent agents (including master
brokerage agencies), and broker-dealers.

NET INCOME

                                              FOR THE YEAR ENDED DECEMBER 31,
                                              -------------------------------
($ IN THOUSANDS)                                 2008       2007      2006
                                               -------    -------    -------
Net investment income                          $13,940    $14,257    $13,948
Realized capital gains and losses                5,952       (417)    (1,255)
Income tax expense                              (6,918)    (4,835)    (4,433)
                                               -------    -------    -------
Net income                                     $12,974    $ 9,005    $ 8,260
                                               =======    =======    =======

     We have reinsurance agreements whereby all premiums, contract charges,
interest credited to contractholder funds, contract benefits and substantially
all expenses are ceded to ALIC and other non-affiliated reinsurers, and are
reflected net of such reinsurance in the Statements of Operations and
Comprehensive Income. Our results of operations include net investment income
and realized capital gains and losses recognized in connection with the assets
that are not transferred under the reinsurance agreements.

     On June 1, 2006, ALIC, its subsidiary Allstate Life Insurance Company of
New York, and The Allstate Corporation completed the disposal of substantially
all of their variable annuity business pursuant to a definitive agreement with
Prudential Financial, Inc. and its subsidiary, The Prudential Insurance Company
of America (collectively "Prudential"). The disposal was effected through a
combination of coinsurance and modified coinsurance reinsurance agreements. The
Company is not a direct participant in this agreement and its reinsurance
agreements with ALIC remain unchanged.

NET INCOME increased 44.1% in 2008 compared to 2007 and 9.0% in 2007 compared to
2006. The increase in 2008 was due to net realized capital gains in 2008
compared to net realized capital losses in 2007, partially offset by higher
income tax expense and lower net investment income. The increase in 2007 was due
to lower net realized capital losses as well as higher net investment income,
partially offset by higher income tax expense.

NET INVESTMENT INCOME decreased 2.2% in 2008 compared to 2007 and increased 2.2%
in 2007 compared to 2006. The decrease in 2008 was primarily due to lower
average fixed income security balances and lower yields on short-term
investments, partially offset by higher average short-term investment balances.
The increase in 2007 was primarily due to higher average short-term investment
balances and, to a lesser extent, higher investment yields on fixed income
securities.

NET REALIZED CAPITAL GAINS of $6.0 million were recognized in 2008 compared to
net realized capital losses of $417 thousand and $1.3 million in 2007 and 2006,
respectively. The realized capital gains and losses in 2008, 2007 and 2006 were
related to dispositions of investments. For further discussion of realized
capital gains and losses see the Realized Capital Gains and Losses section of
the MD&A.

INCOME TAX EXPENSE increased 43.1% in 2008 compared to 2007 and 9.1% in 2007
compared to 2006. These changes were due to the proportional change in the
income on which the income tax expense is determined.

                                       12
<Page>

FINANCIAL POSITION

($ IN THOUSANDS)                                    2008           2007
                                                 -----------    -----------
Fixed income securities (1)                      $   229,328    $   273,144
Short-term (2)                                        80,703         28,057
                                                 -----------    -----------
     Total investments                           $   310,031    $   301,201
                                                 ===========    ===========

Cash                                             $     3,145    $    18,612
Reinsurance recoverable from ALIC                 18,791,710     18,777,851
Reinsurance recoverable from non-affiliates        1,613,685      1,422,931
Contractholder funds                              17,787,376     17,820,885
Reserve for life-contingent contract benefits      2,581,186      2,348,116
Separate accounts assets and liabilities           1,823,163      3,067,127

----------
(1)  Fixed income securities are carried at fair value. Amortized cost basis for
     these securities was $229.7 million and $266.8 million at December 31, 2008
     and 2007, respectively.

(2)  Short-term investments are carried at fair value. Amortized cost basis for
     these securities was $80.7 million and $28.1 million at December 31, 2008
     and 2007, respectively.

     Total investments increased to $310.0 million at December 31, 2008 from
$301.2 million at December 31, 2007 due to purchases of short-term investments
partially offset by negative operating cash flows and net unrealized capital
losses on fixed income securities at December 31, 2008 compared to net
unrealized capital gains at December 31, 2007.

FIXED INCOME SECURITIES See Note 4 of the financial statements for a table
showing the amortized cost, unrealized gains, unrealized losses and fair value
for each type of fixed income security for the years ended December 31, 2008 and
2007.

     The following table shows fixed income securities by type.

<Table>
<Caption>
                                            FAIR VALUE AT                   FAIR VALUE AT
                                             DECEMBER 31,     % TO TOTAL     DECEMBER 31,    % TO TOTAL
($ IN THOUSANDS)                                2008         INVESTMENTS        2007         INVESTMENTS
                                            -------------    -----------    -------------    -----------
<S>                                            <C>              <C>            <C>              <C>
U.S. government and agencies                   $ 78,816         25.4%          $115,820         38.4%
Municipal                                           499          0.2                531          0.2
Corporate                                        75,703         24.4             84,812         28.2
Mortgage-backed securities                       48,351         15.6             27,905          9.3
Commercial mortgage-backed securities            18,960          6.1             32,601         10.8
Asset-backed securities                           6,999          2.3             11,475          3.8
                                               --------         ----           --------         ----
Total fixed income securities                  $229,328         74.0%          $273,144         90.7%
                                               ========         ====           ========         ====
</Table>

     At December 31, 2008, all of the fixed income securities portfolio was
rated investment grade, which is defined as a security having a rating from the
NAIC of 1 or 2; a rating of Aaa, Aa, A or Baa from Moody's, a rating of AAA, AA,
A or BBB from Standard and Poor's ("S&P's"), Fitch or Dominion or a rating of
aaa, aa, a, or bbb from A.M. Best; or a comparable internal rating if an
externally provided rating is not available. The following table summarizes the
credit quality of the fixed income securities portfolio at December 31, 2008.

($ IN THOUSANDS)

  NAIC                            FAIR      PERCENT TO
RATINGS   MOODY'S EQUIVALENT      VALUE       TOTAL
-------   ------------------   ---------    ----------
   1           Aaa/Aa/A         $222,312       96.9%
   2           Baa                 7,016        3.1
                                --------      -----
                                $229,328      100.0%
                                ========      =====

     U.S. GOVERNMENT AND AGENCIES comprised 34.4% of the fixed income securities
portfolio and totaled $78.8 million at December 31, 2008.

     MUNICIPAL BONDS totaled $499 thousand at December 31, 2008, all of which
are tax exempt. The municipal bond portfolio was insured by one bond insurer and
accordingly has a Moody's equivalent rating of Aa.

                                       13
<Page>

     CORPORATE BONDS totaled $75.7 million and reflected 33.0% of the fixed
income securities portfolio at December 31, 2008. As of December 31, 2008,
corporate bonds included privately placed securities totaling $6.5 million from
a single issuer. As of December 31, 2007, the portfolio contained $3.2 million
of privately placed securities from a single issuer.

     MORTGAGE-BACKED SECURITIES ("MBS") totaled $48.4 million and reflected
21.1% of the fixed income securities portfolio at December 31, 2008. The MBS
portfolio is subject to interest rate risk since price volatility and the
ultimate realized yield are affected by the rate of prepayment of the underlying
mortgages. The credit risk associated with MBS is mitigated due to the fact that
97.7% of the portfolio consists of securities that were issued by, or have
underlying collateral that is guaranteed by, U.S. government agencies or U.S.
government sponsored entities.

     COMMERCIAL MORTGAGE-BACKED SECURITIES ("CMBS") totaled $19.0 million and
reflected 8.3% of the fixed income securities portfolio at December 31, 2008.
The CMBS portfolio is subject to credit risk, but unlike other structured
securities, is generally not subject to prepayment risk due to protections
within the underlying commercial mortgages whereby borrowers are effectively
restricted from prepaying their mortgages due to changes in interest rates. All
of the CMBS investments are structured securities collateralized by pools of
commercial mortgages, broadly diversified across property types and geographical
area.

     ASSET-BACKED SECURITIES ("ABS") totaled $7.0 million and reflected 3.1% of
the fixed income securities portfolio at December 31, 2008. Credit risk is
managed by monitoring the performance of the collateral. In addition, many of
the securities in the ABS portfolio are credit enhanced with features such as
over-collateralization, subordinated structures, reserve funds, guarantees
and/or insurance. A portion of the ABS portfolio is also subject to interest
rate risk since ultimate realized yields are affected by the rate of prepayment
of the underlying assets.

SHORT-TERM INVESTMENTS Our short-term investment portfolio was $80.7 million and
$28.1 million at December 31, 2008 and 2007, respectively. We invest available
cash balances primarily in taxable short-term securities having a final maturity
date or redemption date of less than one year.

UNREALIZED GAINS AND LOSSES See Note 4 of the financial statements for further
disclosures regarding unrealized losses on fixed income securities and factors
considered in determining whether securities are other-than-temporarily
impaired. The unrealized net capital losses totaled $341 thousand at December
31, 2008, compared to unrealized net capital gains of $6.4 million at December
31, 2007 as a result of significantly widening credit spreads.

     The following table presents unrealized net capital gains and losses,
pre-tax and after-tax at December 31.

($ IN THOUSANDS)                                         2008          2007
                                                        -------      -------
U.S. government and agencies                            $ 3,442      $ 5,606
Municipal                                                    (3)          30
Corporate                                                (1,489)          14
MBS                                                       1,631         (209)
CMBS                                                     (3,936)         470
ABS                                                          16          441
                                                        -------      -------
Fixed income securities                                    (339)       6,352
Short-term investments                                       (2)          --
                                                        -------      -------
Unrealized net capital gains and losses, pre-tax           (341)       6,352
                                                        -------      -------
Deferred income taxes                                       119       (2,223)
                                                        -------      -------
Unrealized net capital gains and losses, after-tax      $  (222)     $ 4,129
                                                        =======      =======

     The net unrealized loss for the fixed income portfolio of $339 thousand
comprised $6.0 million of gross unrealized gains and $6.3 million of gross
unrealized losses at December 31, 2008. This is compared to a net unrealized
gain for the fixed income portfolio totaling $6.4 million at December 31, 2007,
comprised of $7.7 million of gross unrealized gains and $1.3 million of gross
unrealized losses.

                                       14
<Page>

     Gross unrealized gains and losses on fixed income securities by type and
sector are provided in the table below.

<Table>
<Caption>
                                                                                                AMORTIZED         FAIR
                                                                GROSS UNREALIZED                COST AS A      VALUE AS A
                                           PAR     AMORTIZED    ----------------      FAIR     PERCENTAGE OF  PERCENTAGE OF
($ IN THOUSANDS)                          VALUE      COST        GAINS    LOSSES      VALUE     PAR VALUE       PAR VALUE
                                        --------   ---------    ------   -------    --------   -------------  -------------
<S>                                     <C>         <C>         <C>      <C>        <C>            <C>          <C>
AT DECEMBER 31, 2008

Corporate:
   Consumer goods                       $ 22,000    $ 22,156    $  516   $  (440)   $ 22,232       100.7%       101.1%
   Financial services                     16,000      16,011        67      (391)     15,687       100.1         98.0
   Banking                                13,000      13,106        13      (509)     12,610       100.8         97.0
   Capital goods                           8,000       8,191        --      (185)      8,006       102.4        100.1
   Transportation                          7,302       7,658        --      (275)      7,383       104.9        101.1
   Utilities                               4,000       4,087        --      (167)      3,920       102.2         98.0
   Basic industry                          3,000       2,996         2       (55)      2,943        99.9         98.1
   Technology                              2,000       1,993        --       (70)      1,923        99.7         96.2
   Energy                                  1,000         994         5        --         999        99.4         99.9
                                        --------    --------    ------   -------    --------
Total corporate fixed income portfolio    76,302      77,192       603    (2,092)     75,703       101.2         99.2

U.S. government and agencies              71,920      75,374     3,700      (258)     78,816       104.8        109.6
Municipal                                    500         502        --        (3)        499       100.4         99.8
ABS                                        7,000       6,983        20        (4)      6,999        99.8        100.0
MBS                                       48,221      46,720     1,680       (49)     48,351        96.9        100.3
CMBS                                      23,000      22,896        --    (3,936)     18,960        99.5         82.4
                                        --------    --------    ------   -------    --------
   Total fixed income securities        $226,943    $229,667    $6,003   $(6,342)   $229,328       101.2        101.1
                                        ========    ========    ======   =======    ========
</Table>

     The banking, consumer goods, financial services and transportation sectors
had the highest concentration of gross unrealized losses in our corporate fixed
income securities portfolio at December 31, 2008. The gross unrealized losses in
these sectors were primarily the result of significantly widening credit
spreads. Credit spreads are the additional yield on fixed income securities
above the risk-free rate (typically defined as the yield on U.S. Treasury
securities) that market participants require to compensate them for assuming
credit, liquidity and/or prepayment risks for fixed income securities with
consistent terms. Credit spreads vary with the market's perception of risk and
liquidity in specific issuer or specific sectors. Credit spreads can widen
(increase) or tighten (decrease) and may offset or add to the effects of
risk-free interest rate changes in the valuation of fixed income securities from
period to period.

     All securities in an unrealized loss position at December 31, 2008 were
included in our portfolio monitoring process for determining whether declines in
value are other than temporary.

                                       15
<Page>

     The following table shows the composition by credit quality of fixed income
securities with gross unrealized losses at December 31, 2008.

<Table>
<Caption>
                                                           RATING (1)                    TOTAL
                                             ---------------------------------------   UNREALIZED    FAIR
($ IN THOUSANDS)                               AAA        AA         A        BAA         LOSS       VALUE
                                             -------     -----    --------   -------   ----------   --------
<S>                                          <C>         <C>      <C>         <C>       <C>         <C>
Corporate:
   Consumer goods (cyclical
      and non-cyclical)                      $    --     $ --     $  (409)    $ (31)    $  (440)    $ 10,641
   Financial services                             --      (43)       (348)       --        (391)      10,098
   Banking                                        --      (22)       (372)     (115)       (509)       9,617
   Capital goods                                  --       --        (154)      (31)       (185)       8,006
   Transportation                                 --       --          --      (275)       (275)       6,076
   Utilities                                      --       --        (167)       --        (167)       3,920
   Basic industry                                 --       --         (55)       --         (55)       1,973
   Technology                                     --       --          --       (70)        (70)       1,923
                                             -------     ----     -------     -----     -------     --------
Total corporate fixed income portfolio            --      (65)     (1,505)     (522)     (2,092)      52,254
                                             -------     ----     -------     -----     -------     --------
U.S. government and agencies                    (258)      --          --        --        (258)      30,731
Municipal                                         --       (3)         --        --          (3)         499
ABS                                               (4)      --          --        --          (4)         997
MBS                                              (49)      --          --        --         (49)       1,119
CMBS                                          (3,936)      --          --        --      (3,936)      18,960
                                             -------     ----     -------     -----     -------     --------
Total fixed income securities                $(4,247)    $(68)    $(1,505)    $(522)    $(6,342)    $104,560
                                             =======     ====     =======     =====     =======     ========
Rating % to total unrealized loss               67.0%     1.1%       23.7%      8.2%      100.0%
</Table>

----------
(1)  Moody's equivalent rating will not necessarily tie to ratings distributions
     from the NAIC due to potential timing differences between the various
     rating suppliers and the number of external rating agencies used in the
     determination.

     The scheduled maturity dates for fixed income securities in an unrealized
loss position at December 31, 2008 are shown below. Actual maturities may differ
from those scheduled as a result of prepayments by the issuers.

                                        UNREALIZED   PERCENT   FAIR    PERCENT
($ IN THOUSANDS)                           LOSS     OF TOTAL   VALUE   OF TOTAL
                                        ---------   -------- --------  --------
Due in one year or less                  $   (24)      0.4%  $  5,964    5.7%
Due after one year through five years     (1,666)     26.3     63,843   61.1
Due after five years through ten years      (663)     10.4     13,677   13.1
Due after ten years                       (3,936)     62.1     18,960   18.1
MBS and ABS (1)                              (53)      0.8      2,116    2.0
                                         -------     -----   --------  -----
Total                                    $(6,342)    100.0%  $104,560  100.0%
                                         =======     =====   ========  =====

----------
(1)  Because of the potential for prepayment, MBS and ABS are not categorized
     based on their contractual maturities.

     For fixed income securities, 21.8% of the gross unrealized losses at
December 31, 2008 were from $623 thousand of CMBS with a fair value below 70% of
amortized cost, or 0.3% of our fixed income portfolio, at December 31, 2008. The
percentage of fair value to amortized cost for fixed income securities with
gross unrealized losses at December 31, 2008 are shown in the following table.

                                                                      % TO TOTAL
                                                                         FIXED
                                         PAR    UNREALIZED    FAIR      INCOME
($ IN THOUSANDS)                        VALUE  (LOSS) GAIN    VALUE   SECURITIES
                                      -------- -----------  --------  ----------
GREATER THAN 80% of amortized cost    $107,183   $(4,961)   $103,937     45.3%
LESS THAN 70% of amortized cost          2,000    (1,381)        623      0.3
                                      --------   -------    --------    -----
Gross unrealized losses on fixed
  income securities                    109,183    (6,342)    104,560     45.6
Gross unrealized gains on fixed
  income securities                    117,760     6,003     124,768     54.4
                                      --------   -------    --------    -----
Net unrealized gains and losses
  on fixed income securities          $226,943   $  (339)   $229,328    100.0%
                                      ========   =======    ========    =====

                                       16
<Page>

     We continue to believe that the unrealized losses on these securities are
not predictive of the ultimate performance. The unrealized losses should reverse
over the remaining lives of the securities. As of December 31, 2008, we have the
intent and ability to hold these securities to recovery. Our ability to do so is
substantially enhanced by our liquidity position, which cushions us from the
need to liquidate securities with significant unrealized losses to meet cash
obligations. During 2008, our fixed income securities portfolio provided
approximately $21.2 million in principal and interest cash flows, of which all
have been received in accordance with the contractual terms.

PORTFOLIO MONITORING We have a comprehensive portfolio monitoring process to
identify and evaluate, on a case-by-case basis, fixed income securities whose
carrying value may be other-than-temporarily impaired. The process includes a
quarterly review of all securities using a screening process to identify
situations where the fair value, compared to amortized cost, is below
established thresholds for certain time periods, or which are identified through
other monitoring criteria such as ratings, ratings downgrades or payment
defaults. The securities identified, in addition to other securities for which
we may have a concern, are evaluated based on facts and circumstances for
inclusion on our watch-list. All investments in an unrealized loss position at
December 31, 2008 were included in our portfolio monitoring process for
determining whether declines in value were other than temporary.

     We also conduct a portfolio review to recognize impairment on securities in
an unrealized loss position for which we do not have the intent and ability to
hold until recovery as a result of approved programs involving the disposition
of investments for reasons such as negative developments that would change the
view of long term investors and their intent to continue to hold the investment,
subsequent credit deterioration of an issuer or holding, subsequent further
deterioration of capital markets (i.e. debt) and of economic conditions,
subsequent further deterioration in the financial services and real estate
industries, changes in duration, revisions to strategic asset allocations,
liquidity needs, unanticipated federal income tax situations involving capital
gains and capital loss carrybacks and carryforwards with specific expiration
dates, investment risk mitigation actions, and other new facts and circumstances
that would cause a change in our previous intent to hold a security to recovery
or maturity.

     We also monitor the quality of our fixed income portfolio by categorizing
certain investments as "problem", "restructured" or "potential problem". Problem
fixed income securities are in default with respect to principal or interest
and/or are investments issued by companies that have gone into bankruptcy
subsequent to our acquisition or loan. Restructured fixed income securities have
rates and terms that are not consistent with market rates or terms prevailing 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, we have concerns regarding the borrower's ability
to pay future principal and interest, which causes us to believe these
investments may be classified as problem or restructured in the future.

     As of December 31, 2008 and 2007, we did not have any fixed income
securities categorized as problem, restructured or potential problem.

NET INVESTMENT INCOME The following table presents net investment income for the
years ended December 31.

($ IN THOUSANDS)                      2008       2007       2006
                                    -------    -------    -------
Fixed income securities             $13,302    $13,533    $13,495
Short-term and other investments        992      1,117        762
                                    -------    -------    -------
Investment income, before expense    14,294     14,650     14,257
Investment expense                     (354)      (393)      (309)
                                    -------    -------    -------
Net investment income               $13,940    $14,257    $13,948
                                    =======    =======    =======

NET REALIZED CAPITAL GAINS AND LOSSES The following table presents realized
capital gains and losses and the related tax effect for the years ended December
31.

($ IN THOUSANDS)                                 2008     2007       2006
                                               -------    -----    -------
Realized capital gains and losses, pre-tax     $ 5,952    $(417)   $(1,255)
Income tax (expense) benefit                    (2,083)     146        438
                                               -------    -----    -------
Realized capital gains and losses, after-tax   $ 3,869    $(271)   $  (817)
                                               =======    =====    =======

     Net realized capital gains of $6.0 million in 2008 comprised gross gains of
$8.5 million and gross losses of $2.5 million. Net realized capital losses of
$417 thousand in 2007 comprised gross gains of $68 thousand and gross losses of
$485 thousand.

                                       17
<Page>

     We may sell or change our intent to hold a security until recovery for
impaired fixed income securities that were in an unrealized loss position at the
previous reporting date, or other investments where the fair value has declined
below the amortized cost, in situations where significant unanticipated new
facts and circumstances emerge or existing facts and circumstances increase in
significance and are anticipated to adversely impact a security's future
valuations more than previously expected; including negative developments that
would change the view of long term investors and their intent to continue to
hold the investment, subsequent credit deterioration of an issuer or holding,
subsequent further deterioration in capital markets (i.e. debt) and of economic
conditions, subsequent further deterioration in the financial services and real
estate industries, liquidity needs, unanticipated federal income tax situations
involving capital gains and capital loss carrybacks and carryforwards with
specific expiration dates, investment risk mitigation actions, and other new
facts and circumstances that would cause a change in our previous intent to hold
a security to recovery or maturity.

CASH At December 31, 2008, our cash balance was $3.1 million compared to $18.6
million at December 31, 2007. Fluctuations in our cash flows generally result
from differences in the timing of reinsurance payments to and from ALIC.

REINSURANCE RECOVERABLE, CONTRACTHOLDER FUNDS AND RESERVE FOR LIFE-CONTINGENT
CONTRACT BENEFITS Under 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, reserve for life-contingent contract benefits, or separate
accounts liabilities depending on the characteristics of the contracts. We
reinsure all reserve liabilities with ALIC or other non-affiliated reinsurers.
Reinsurance recoverables 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, 2008, contractholder funds decreased to $17.79 billion from
$17.82 billion at December 31, 2007 as a result of new and additional deposits
on fixed annuities and interest-sensitive life policies and interest credited to
contractholder funds being more than offset by surrenders, withdrawals, benefit
payments and related contract charges. The reserve for life-contingent contract
benefits increased to $2.58 billion at December 31, 2008 from $2.35 billion as
of December 31, 2007 due primarily to sales of traditional life and other
insurance products, partially offset by benefits paid and policy lapses.
Reinsurance recoverables from ALIC and reinsurance recoverables from
non-affiliates increased by $13.9 million and $190.8 million, respectively.

     We purchase reinsurance after evaluating the financial condition of the
reinsurer, as well as the terms and price of coverage. We reinsure certain of
our risks to non-affiliated reinsurers under yearly renewable term and
coinsurance agreements. Yearly renewable term and coinsurance agreements result
in a passing of the agreed-upon portion of risk to the reinsurer in exchange for
negotiated reinsurance premium payments.

     At December 31, 2008, approximately 97% of reinsurance recoverables due
from non-affiliated companies were reinsured under uncollateralized reinsurance
agreements with companies that had a financial strength rating of A or above, as
measured by S&P. In certain cases, these ratings refer to the financial strength
of the affiliated group or parent company of the reinsurer.

     We continuously monitor the creditworthiness of reinsurers in order to
determine our risk of recoverability on an individual and aggregate basis and a
provision for uncollectible reinsurance is recorded if needed. No amounts have
been deemed unrecoverable in the three years ended December 31, 2008.

                                       18
<Page>

FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES The following table
provides additional details regarding Level 1, 2 and 3 financial assets and
financial liabilities by their classification in the Statement of Financial
Position at December 31, 2008.

<Table>
<Caption>
                                       QUOTED PRICES
                                         IN ACTIVE     SIGNIFICANT
                                        MARKETS FOR      OTHER        SIGNIFICANT
                                         IDENTICAL     OBSERVABLE    UNOBSERVABLE   BALANCE AS OF
                                           ASSETS        INPUTS         INPUTS       DECEMBER 31,
($ IN THOUSANDS)                         (LEVEL 1)      (LEVEL 2)     (LEVEL 3)         2008
                                       -------------   -----------   ------------   -------------
<S>                                     <C>             <C>          <C>             <C>
FINANCIAL ASSETS
   Fixed income securities:
     Corporate                          $       --      $ 67,882     $  1,307        $   69,189
     Corporate privately placed
      securities                                --         6,514           --             6,514
     Municipal                                  --           499           --               499
     U.S. government and agencies           48,085        30,731           --            78,816
     ABS                                        --            --        6,002             6,002
     CMBS                                       --        18,960           --            18,960
     MBS                                        --        48,351           --            48,351
     ABS - Credit card                          --           997           --               997
                                        ----------      --------     --------        ----------
       Total fixed income securities        48,085       173,934        7,309           229,328
   Short-term investments:
     Commercial paper and other                 --        50,046           --            50,054
     Money market funds                     30,657            --           --            30,649
                                        ----------      --------     --------        ----------
       Total short-term investments         30,657        50,046           --            80,703
                                        ----------      --------     --------        ----------
       TOTAL RECURRING BASIS ASSETS         78,742       223,980        7,309           310,031
                                        ----------      --------     --------        ----------
       TOTAL INVESTMENTS                    78,742       223,980        7,309           310,031
                                        ----------      --------     --------        ----------
    Separate account assets              1,823,163            --           --         1,823,163
                                        ----------      --------     --------        ----------
TOTAL FINANCIAL ASSETS                  $1,901,905      $223,980     $  7,309        $2,133,194
                                        ==========      ========     ========        ==========
% of total financial assets                   89.2%         10.5%         0.3%            100.0%

FINANCIAL LIABILITIES
   Contractholder funds:
     Derivatives embedded in annuity
     contracts                          $       --      $(33,466)    $(36,544)       $  (70,010)
                                        ----------      --------     --------        ----------
TOTAL FINANCIAL LIABILITIES             $       --      $(33,466)    $(36,544)       $  (70,010)
                                        ==========      ========     ========        ==========
% of total financial liabilities                --%         47.8%        52.2%            100.0%
</Table>

                                       19
<Page>

     The following table provides a summary of changes in fair value during the
year ended December 31, 2008 of Level 3 financial assets and financial
liabilities held at fair value on a recurring basis at December 31, 2008.

<Table>
<Caption>
                                                                                                                       TOTAL
                                             TOTAL REALIZED AND UNREALIZED                                         GAINS (LOSSES)
                                              GAINS (LOSSES) INCLUDED IN:                                           INCLUDED IN
                                             -----------------------------                                        NET INCOME FOR
                                                                 OCI ON          PURCHASES,                         INSTRUMENTS
                             BALANCE AS OF                    STATEMENT OF   SALES, ISSUANCES    BALANCE AS OF     STILL HELD AT
                               JANUARY 1,                      FINANCIAL     AND SETTLEMENTS,    DECEMBER 31,      DECEMBER 31,
($ IN THOUSANDS)                 2008         NET INCOME(1)     POSITION            NET              2008             2008(2)
                             --------------  ---------------  -------------  -----------------   --------------   ---------------
<S>                             <C>             <C>               <C>              <C>             <C>               <C>
FINANCIAL ASSETS
 Fixed income securities:
   Corporate                    $ 1,500         $     (1)         $  --            $  (192)        $  1,307          $     (2)
   ABS                           10,484              181           (434)            (4,229)           6,002                (1)
                                -------         --------          -----            -------         --------          --------
  TOTAL RECURRING LEVEL 3
    FINANCIAL ASSETS            $11,984         $    180          $(434)           $(4,421)        $  7,309          $     (3)
                                =======         ========          =====            =======         ========          ========
FINANCIAL LIABILITIES
 Contractholder funds:
   Derivatives embedded in
     annuity contracts          $  (256)        $(36,498)         $  --            $   210         $(36,544)         $(36,498)
                                -------         --------          -----            -------         --------          --------
  TOTAL RECURRING LEVEL 3
    FINANCIAL LIABILITIES       $  (256)        $(36,498)         $  --            $   210         $(36,544)         $(36,498)
                                =======         ========          =====            =======         ========          ========
</Table>

----------
(1)  The amount above attributable to fixed income securities is reported in the
     Statements of Operations and Comprehensive Income as follows: $185 thousand
     in realized capital gains and losses, and $(5) thousand in net investment
     income. The amount above attributable to derivatives embedded in annuity
     contracts is reported as a component of contract benefits and is ceded in
     accordance with the Company's reinsurance agreements.

(2)  The amount above attributable to fixed income securities is reported as a
     component of net investment income in the Statements of Operations and
     Comprehensive Income. The amount above attributable to derivatives embedded
     in annuity contracts is reported as a component of contract benefits and is
     ceded in accordance with the Company's reinsurance agreements.

     The following table presents fair value as a percent of par value and
amortized cost for Level 3 investments at December 31, 2008.

                                           FAIR VALUE AS   FAIR VALUE AS A
                                  FAIR     A PERCENTAGE     PERCENTAGE OF
($ IN THOUSANDS)                  VALUE    OF PAR VALUE     AMORTIZED COST
                                  ------   -------------   ---------------
Corporate                         $1,307      100.4%            100.0%
ABS                                6,002      100.0             100.3
                                  ------
 TOTAL LEVEL 3 INVESTMENTS        $7,309      100.1             100.3
                                  ======

MARKET RISK

     Market risk is the risk that we will incur losses due to adverse changes in
interest rates or equity prices. Our primary market risk exposure is to changes
in interest rates, although we also have certain exposures to changes in equity
prices in our equity-indexed annuities and separate accounts liabilities. This
risk is transferred to ALIC in accordance with our reinsurance agreements.

OVERVIEW In formulating and implementing guidelines for investing funds, we seek
to earn returns that enhance our ability to offer competitive rates and prices
to customers while contributing to attractive and stable profits and long-term
capital growth. Accordingly, our investment decisions and objectives are a
function of the underlying risks and our product profiles.

     We manage our exposure to market risk through the use of asset allocation
and duration limits and, as appropriate, through the use of stress tests. We
have asset allocation limits that place restrictions on the total funds that may
be invested within an asset class. We have duration limits on our investment
portfolio, and, as appropriate, on individual components of the portfolio. These
duration limits place restrictions on the amount of interest rate risk that may
be taken. Comprehensive 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
investment policies.

INTEREST RATE RISK is the risk that we will incur a loss due to adverse changes
in interest rates relative to the interest rate characteristics of interest
bearing assets. This risk arises from our investment in interest-sensitive
assets. Interest rate risk includes risks related to changes in U.S. Treasury
yields and other key risk-free reference yields.

                                       20
<Page>

     One of the measures used to quantify interest rate exposure is duration.
Duration measures the price sensitivity of assets to changes in interest rates.
For example, if interest rates increase by 100 basis points, the fair value of
an asset with a duration of 5 is expected to decrease in value by approximately
5%. Our asset duration was approximately 3.0 and 4.1 at December 31, 2008 and
2007, respectively.

     To calculate duration, we project asset cash flows and calculate their net
present value using a risk-free market interest rate adjusted for credit
quality, sector attributes, liquidity and other specific risks. Duration is
calculated by revaluing these cash flows at alternative interest rates and
determining the percentage change in aggregate fair value. The projections
include assumptions (based upon historical market experience and our experience)
that reflect the effect of changing interest rates on the prepayment, lapse,
leverage and/or option features of instruments, where applicable. The proceeding
assumptions relate primarily to mortgage-backed securities, collateralized
mortgage obligations, and municipal and corporate obligations.

     Based upon the information and assumptions used in the duration
calculation, and interest rates in effect at December 31, 2008, we estimate that
a 100 basis point immediate, parallel increase in interest rates ("rate shock")
would decrease the net fair value of the assets by approximately $8.5 million,
compared to $11.1 million at December 31, 2007. The selection of a 100 basis
point immediate parallel change in interest rates should not be construed as our
prediction of future market events, but only as an illustration of the potential
effect of such an event.

     To the extent that conditions differ from the assumptions we used in these
calculations, duration and rate shock measures could be significantly impacted.
Additionally, our calculations assume 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 effect of non-parallel changes in the term structure of interest
rates and/or large changes in interest rates.

CREDIT SPREAD RISK is the risk that we will incur a loss due to adverse changes
in credit spreads ("spreads"). This risk arises from many of our primary
activities, as we invest substantial funds in spread-sensitive fixed income
assets.

     We manage the spread risk in our assets. One of the measures used to
quantify this exposure is spread duration. Spread duration measures the price
sensitivity of the assets to changes in spreads. For example, if spreads
increase 100 basis points, the fair value of an asset exhibiting a spread
duration of 5 is expected to decrease in value by approximately 5%.

     Spread duration is calculated similarly to interest rate duration. At
December 31, 2008, the spread duration of assets was 3.4. Based upon the
information and assumptions we use in this spread duration calculation, and
spreads in effect at December 31, 2008, we estimate that a 100 basis point
immediate, parallel increase in spreads across all asset classes, industry
sectors and credit ratings ("spread shock") would decrease the net fair value of
the assets by approximately $7.2 million, compared to $10.6 million at December
31, 2007. The selection of a 100 basis point immediate parallel change in
spreads should not be construed as our prediction of future market events, but
only as an illustration of the potential effect of such an event.

EQUITY PRICE RISK is the risk that we will incur losses due to adverse changes
in the general levels of the equity markets. At December 31, 2008 and 2007, we
had separate account assets related to variable annuities and variable life
contracts with account values totaling $1.82 billion and $3.07 billion,
respectively. Equity risk exists for contract charges based on separate account
balances and guarantees for death and/or income benefits provided by our
variable products. All variable life and annuity contract charges and fees,
liabilities and benefits, including guarantees for death and/or income are ceded
to ALIC in accordance with the reinsurance agreements, thereby limiting our
equity risk exposure. In 2006, ALIC disposed of substantially all of its
variable annuity business through a reinsurance agreement with Prudential, and
therefore mitigated this aspect of ALIC's risk. The Company was not a direct
participant of this agreement and its reinsurance agreements with ALIC remain
unchanged.

     At December 31, 2008 and 2007 we had approximately $3.79 billion and $3.66
billion, respectively, in equity-indexed annuity liabilities that provide
customers with interest crediting rates based on the performance of the S&P 500.
All contract charges and fees, and liabilities and benefits related to
equity-indexed annuity liabilities are ceded to ALIC in accordance with the
reinsurance agreements, thereby limiting our equity risk exposure.

                                       21
<Page>

CAPITAL RESOURCES AND LIQUIDITY

CAPITAL RESOURCES consist of shareholder's equity. The following table
summarizes our capital resources at December 31.

($ IN THOUSANDS)                           2008          2007         2006
                                         --------      --------     --------
Common stock, additional capital
   paid-in and retained income           $298,783      $285,809     $276,804
Accumulated other comprehensive income       (222)        4,129         (178)
                                         --------      --------     --------
Total shareholder's equity               $298,561      $289,938     $276,626
                                         ========      ========     ========

SHAREHOLDER'S EQUITY increased $8.6 million in 2008 due to net income of $13.0
million partially offset by an unfavorable change in unrealized net capital
gains and losses totaling $4.4 million. Shareholder's equity increased $13.3
million in 2007, due to net income of $9.0 million and a favorable change in
unrealized net capital gains and losses on fixed income securities totaling $4.3
million.

FINANCIAL RATINGS AND STRENGTH We share the insurance financial strength ratings
of our parent, ALIC, as our business is reinsured to ALIC. The following table
summarizes ALIC's financial strength ratings.

RATING AGENCY                          RATING
-------------                          ------
A.M. Best Company, Inc.                A+ ("Superior")
Standard & Poor's Ratings Services     AA- ("Very Strong")
Moody's Investors Service, Inc.        A1 ("Good")

     ALIC's ratings are influenced by many factors including operating and
financial performance, asset quality, liquidity, asset/liability management,
overall portfolio mix, financial leverage (i.e., debt), exposure to risks,
operating leverage, AIC's ratings and other factors.

     On February 2, 2009, A.M. Best affirmed ALIC's A+ financial strength
rating. On January 29, 2009, S&P downgraded ALIC's financial strength rating to
AA- from AA. The outlook for the rating remained negative. In October 2008, the
outlook had been revised to negative from stable. On January 29, 2009, Moody's
downgraded ALIC's financial strength rating to A1 from Aa3. The outlook for the
rating was revised to stable from negative. In October 2008, Moody's downgraded
ALIC's financial strength rating to Aa3 from Aa2.

     State laws specify regulatory actions if an insurer's risk-based capital
("RBC"), a measure of an insurer's solvency, falls below certain levels. The
NAIC has a standard formula for annually assessing RBC. The formula for
calculating RBC for life insurance companies takes into account factors relating
to insurance, business, asset and interest rate risks. At December 31, 2008, our
RBC was within the range that we target.

     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 by insurance regulatory
authorities. The NAIC analyzes financial data provided by insurance companies
using prescribed 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. Our
ratios are within the usual ranges.

LIQUIDITY SOURCES AND USES Our potential sources of funds principally include
the activities as follows.

       -    Receipt of insurance premiums

       -    Contractholder fund deposits

       -    Reinsurance recoveries

       -    Receipts of principal and interest on investments

       -    Sales of investments

       -    Intercompany loans

       -    Capital contributions from parent

                                       22
<Page>

     Our potential uses of funds principally include the activities as follows.

       -   Payment of contract benefits, surrenders and withdrawals

       -   Reinsurance cessions and payments

       -   Operating costs and expenses

       -   Purchase of investments

       -   Repayment of intercompany loans

       -   Tax payments/settlements

       -   Dividends to parent

     CASH FLOWS As reflected in our Statements of Cash Flows, net cash used in
operating activities was $5.9 million in 2008 compared to net cash provided by
operating activities of $14.0 million and $23.0 million in 2007 and 2006,
respectively. Fluctuations in net cash provided by operating activities
primarily occur as a result of changes in net investment income and differences
in the timing of reinsurance payments to and from ALIC.

     Under the terms of reinsurance agreements, all premiums and deposits,
excluding variable annuity and life contract deposits allocated to separate
accounts and those reinsured to non-affiliated reinsurers, are transferred to
ALIC, which maintains the investment portfolios supporting our products.
Payments of contractholder claims, benefits, contract surrenders and withdrawals
and certain operating costs (excluding investment-related expenses), are
reimbursed by ALIC, under the terms of the reinsurance agreements. We continue
to have primary liability as a direct insurer for risks reinsured. Our ability
to meet liquidity demands is dependent on ALIC's and other reinsurers' ability
to meet those obligations under the reinsurance programs.

     Our ability to pay dividends is dependent on business conditions, income,
cash requirements and other relevant factors. The payment of shareholder
dividends without the prior approval of the state insurance regulator is limited
by Nebraska law to formula amounts based on statutory surplus and statutory net
income, as well as the timing and amount of dividends paid in the preceding
twelve months. The maximum amount of dividends that we can distribute during
2009 without prior approval of the Nebraska Department of Insurance is $27.9
million.

CONTRACTUAL OBLIGATIONS

     Due to the reinsurance agreements that we have in place, our contractual
obligations are ceded to ALIC and other non-affiliated reinsurers.

REGULATION AND LEGAL PROCEEDINGS

     We are subject to extensive regulation and we are involved in various legal
and regulatory actions, all of which have an effect on specific aspects of our
business. For a detailed discussion of the legal and regulatory actions in which
we are involved, see Note 8 of the financial statements.

PENDING ACCOUNTING STANDARDS

     There are several pending accounting standards that we have not implemented
either because the standard has not been finalized or the implementation date
has not yet occurred. For a discussion of these pending standards, see Note 2 of
the financial statements.

     The effect of implementing certain accounting standards on our financial
results and financial condition is often based in part on market conditions at
the time of implementation of the standard and other factors we are unable to
determine prior to implementation. For this reason, we are sometimes unable to
estimate the effect of certain pending accounting standards until the relevant
authoritative body finalizes these standards or until we implement them.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Information required for Item 7A is incorporated by reference to the
material under the caption "Market Risk" in Part II, Item 7 of this report.

                                       23
<Page>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                          LINCOLN BENEFIT LIFE COMPANY
                STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

                                                      YEAR ENDED DECEMBER 31,
($ IN THOUSANDS)                                  -----------------------------
                                                   2008       2007       2006
                                                  -------    -------    -------
REVENUES
Net investment income                             $13,940    $14,257    $13,948
Realized capital gains and losses                   5,952       (417)    (1,255)
                                                  -------    -------    -------
INCOME FROM OPERATIONS BEFORE INCOME TAX EXPENSE   19,892     13,840     12,693
Income tax expense                                  6,918      4,835      4,433
                                                  -------    -------    -------
NET INCOME                                         12,974      9,005      8,260
                                                  -------    -------    -------
OTHER COMPREHENSIVE (LOSS) INCOME, AFTER-TAX
Change in unrealized net capital gains and losses  (4,351)     4,307       (885)
                                                  -------    -------    -------

COMPREHENSIVE INCOME                              $ 8,623    $13,312    $ 7,375
                                                  =======    =======    =======

                       See notes to financial statements.

                                       24
<Page>

                          LINCOLN BENEFIT LIFE COMPANY
                        STATEMENTS OF FINANCIAL POSITION

<Table>
<Caption>
($ IN THOUSANDS, EXCEPT PAR VALUE DATA)                                                       DECEMBER 31,
                                                                                      ----------------------------
                                                                                         2008             2007
                                                                                      -----------      -----------
<S>                                                                                   <C>              <C>
ASSETS
Investments
   Fixed income securities, at fair value (amortized cost $229,667 and $266,792)      $   229,328      $   273,144
   Short-term, at fair value (amortized cost $80,705 and $28,057)                          80,703           28,057
                                                                                      -----------      -----------
      Total investments                                                                   310,031          301,201
Cash                                                                                        3,145           18,612
Reinsurance recoverable from Allstate Life Insurance Company                           18,791,710       18,777,851
Reinsurance recoverable from non-affiliates                                             1,613,685        1,422,931
Other assets                                                                              113,637          112,285
Separate accounts                                                                       1,823,163        3,067,127
                                                                                      -----------      -----------
        TOTAL ASSETS                                                                  $22,655,371      $23,700,007
                                                                                      ===========      ===========

LIABILITIES
Contractholder funds                                                                  $17,787,376      $17,820,885
Reserve for life-contingent contract benefits                                           2,581,186        2,348,116
Unearned premiums                                                                          24,169           25,819
Deferred income taxes                                                                          --            2,479
Payable to affiliates, net                                                                 36,029           21,912
Current income taxes payable                                                                7,017            4,815
Other liabilities and accrued expenses                                                     97,870          118,916
Separate accounts                                                                       1,823,163        3,067,127
                                                                                      -----------      -----------
        TOTAL LIABILITIES                                                              22,356,810       23,410,069
                                                                                      -----------      -----------
COMMITMENTS AND CONTINGENT LIABILITIES (NOTE 8)

SHAREHOLDER'S EQUITY
Common stock, $100 par value, 30 thousand shares authorized, 25 thousand shares
   issued and outstanding                                                                   2,500            2,500
Additional capital paid-in                                                                180,000          180,000
Retained income                                                                           116,283          103,309
Accumulated other comprehensive (loss) income:
   Unrealized net capital gains and losses                                                   (222)           4,129
                                                                                      -----------      -----------
        Total accumulated other comprehensive (loss) income                                  (222)           4,129
                                                                                      -----------      -----------
        TOTAL SHAREHOLDER'S EQUITY                                                        298,561          289,938
                                                                                      -----------      -----------
        TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY                                    $22,655,371      $23,700,007
                                                                                      ===========      ===========
</Table>

                       See notes to financial statements.

                                       25
<Page>

                          LINCOLN BENEFIT LIFE COMPANY
                       STATEMENTS OF SHAREHOLDER'S EQUITY

<Table>
<Caption>
                                                              YEAR ENDED DECEMBER 31,
                                                       ------------------------------------
($ IN THOUSANDS)                                         2008          2007          2006
                                                       --------      --------      --------
<S>                                                    <C>           <C>           <C>
COMMON STOCK                                           $  2,500      $  2,500      $  2,500
                                                       --------      --------      --------
ADDITIONAL CAPITAL PAID-IN                              180,000       180,000       180,000
                                                       --------      --------      --------

RETAINED INCOME
Balance, beginning of year                              103,309        94,304        86,044
Net income                                               12,974         9,005         8,260
                                                       --------      --------      --------
Balance, end of year                                    116,283       103,309        94,304
                                                       --------      --------      --------

ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME
Balance, beginning of year                                4,129          (178)          707
Change in unrealized net capital gains and losses        (4,351)        4,307          (885)
                                                       --------      --------      --------
Balance, end of year                                       (222)        4,129          (178)
                                                       --------      --------      --------
TOTAL SHAREHOLDER'S EQUITY                             $298,561      $289,938      $276,626
                                                       ========      ========      ========
</Table>

                       See notes to financial statements.

                                       26
<Page>

                          LINCOLN BENEFIT LIFE COMPANY
                            STATEMENTS OF CASH FLOWS

<Table>
<Caption>
                                                                                    YEAR ENDED DECEMBER 31,
($ IN THOUSANDS)                                                            --------------------------------------
                                                                              2008           2007           2006
                                                                            --------       --------       --------
<S>                                                                         <C>            <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income                                                                  $ 12,974       $  9,005       $  8,260
Adjustments to reconcile net income to net cash (used in) provided by
      operating activities:
          Amortization and other non-cash items                                  143             25            424
          Realized capital gains and losses                                   (5,952)           417          1,255
          Changes in:
             Reserve for life-contingent contract benefits and
              contractholder funds, net of reinsurance recoverables           (5,052)       (18,124)         2,878
             Income taxes                                                      2,065            428           (337)
             Receivable/payable to affiliates, net                            14,117         46,902        (14,596)
             Other operating assets and liabilities                          (24,195)       (24,698)        25,112
                                                                            --------       --------       --------
                Net cash (used in) provided by operating activities           (5,900)        13,955         22,996
                                                                            --------       --------       --------

CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of fixed income securities                               101,584          5,176         20,104
Collections on fixed income securities                                         7,693         13,732         15,244
Purchases of fixed income securities                                         (64,497)       (17,982)       (38,901)
Change in short-term investments                                             (54,347)       (19,621)        (4,440)
                                                                            --------       --------       --------
                Net cash used in investing activities                         (9,567)       (18,695)        (7,993)
                                                                            --------       --------       --------

NET (DECREASE) INCREASE IN CASH                                              (15,467)        (4,740)        15,003
CASH AT BEGINNING OF YEAR                                                     18,612         23,352          8,349
                                                                            --------       --------       --------
CASH AT END OF YEAR                                                         $  3,145       $ 18,612       $ 23,352
                                                                            ========       ========       ========
</Table>

                       See notes to financial statements.

                                       27
<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 (the "Company"), a wholly owned subsidiary of Allstate Life
Insurance Company ("ALIC"), which is wholly owned by Allstate Insurance Company
("AIC"). All of the outstanding common stock of AIC is owned by Allstate
Insurance Holdings, LLC, 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").

     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.

NATURE OF OPERATIONS

     The Company sells life insurance, retirement and investment products to
individual customers. The principal products are fixed annuities, and
interest-sensitive, traditional and variable life insurance.

     The Company is authorized to sell life insurance, retirement and investment
products in all states except New York, as well as in the District of Columbia,
Guam and the U.S. Virgin Islands. For 2008, the top geographic locations for
statutory premiums and annuity considerations were California, Florida, Texas
and Pennsylvania. No other jurisdiction accounted for more than 5% of statutory
premiums and annuity considerations. All statutory premiums and annuity
considerations are ceded under reinsurance agreements. The Company distributes
its products through multiple distribution channels, including Allstate
exclusive agencies, which include exclusive financial specialists, independent
agents (including master brokerage agencies and workplace enrolling agents), and
financial services firms, such as banks and broker-dealers.

     The Company has exposure to market risk as a result of its investment
portfolio. Market risk is the risk that the Company will incur realized and
unrealized net capital losses due to adverse changes in interest rates, credit
spreads and, to a limited extent, equity prices. The Company's primary market
risk exposure is to changes in interest rates, although we also have certain
exposures to changes in equity prices in our equity-indexed annuities and
separate accounts liabilities. This risk is transferred to ALIC in accordance
with our reinsurance agreements. Interest rate risk is the risk that the Company
will incur a loss due to adverse changes in interest rates relative to the
interest rate characteristics of its interest bearing assets. This risk arises
from our investment in interest-sensitive assets. Interest rate risk includes
risks related to changes in U.S. Treasury yields and other key risk-free
reference yields, as well as changes in interest rates resulting from widening
credit spreads and credit exposure.

     The Company monitors economic and regulatory developments that have the
potential to impact its business. The ability of banks to affiliate with
insurers may have a material adverse effect on all of the Company's product
lines by substantially increasing the number, size and financial strength of
potential competitors. The Company currently benefits from agreements with
financial services entities that market and distribute its products; change in
control of these non-affiliated entities could negatively impact the Company's
sales. Furthermore, federal and state laws and regulations affect the taxation
of insurance companies and life insurance and annuity products. Congress and
various state legislatures have considered proposals that, if enacted, could
impose a greater tax burden on the Company or could have an adverse impact on
the tax treatment of some insurance products offered by the Company, including
favorable policyholder tax treatment currently applicable to life insurance and
annuities. Legislation that reduced the federal income tax rates applicable to
certain dividends and capital gains realized by individuals, or other proposals,
if adopted, that reduce the taxation or permit the establishment of certain
products or investments that may compete with life insurance or annuities, could
have an adverse effect on the Company's and ALIC's financial position or ability
to sell such products and could result in the surrender of some existing
contracts and policies. In addition, changes in the federal estate tax laws
could negatively affect the demand for the types of life insurance used in
estate planning.

                                       28
<Page>

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

INVESTMENTS

     Fixed income securities include bonds, asset-backed securities,
mortgage-backed securities and commercial mortgage-backed securities. Fixed
income securities may be sold prior to their contractual maturity, are
designated as available for sale and are carried at fair value. The difference
between amortized cost and fair value, net of deferred income taxes, is
reflected as a component of accumulated other comprehensive income. Cash
received from calls, principal payments and make-whole payments is reflected as
a component of proceeds from sales and cash received from maturities and
pay-downs is reflected as a component of investment collections within the
Statements of Cash Flows.

     Short-term investments, including money market funds, commercial paper and
other short-term investments, are carried at fair value.

     Investment income consists primarily of interest and is recognized on an
accrual basis using the effective yield method. Interest income for asset-backed
securities, mortgage-backed securities and commercial mortgage-backed securities
is determined considering estimated principal repayments obtained from widely
accepted third party data sources and internal estimates, and the effective
yield is recalculated on the retrospective basis. 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 include gains and losses on investment
sales and write-downs in value due to other-than-temporary declines in fair
value. Realized capital gains and losses on investment sales include calls and
prepayments and are determined on a specific identification basis.

     The Company recognizes other-than-temporary impairment losses on fixed
income securities and short-term investments when the decline in fair value is
deemed other than temporary including when the Company cannot assert a positive
intent to hold an impaired security until recovery (see Note 4). Fixed income
securities subject to change in intent write-downs continue to earn investment
income (other than discussed above), and any discount or premium is recognized
using the effective yield method over the expected life of the security.

FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES

     The Company adopted the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 157, "Fair Value Measurements" ("SFAS No. 157"), as of
January 1, 2008 for its financial assets and financial liabilities that are
measured at fair value. SFAS No. 157 defines fair value as the price that would
be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date, and establishes
a framework for measuring fair value. The adoption did not have a material
effect on the Company's determination of fair value.

     In determining fair value, the Company principally uses the market approach
which generally utilizes market transaction data for the same or similar
instruments. To a lesser extent, the Company uses the income approach which
involves determining fair values from discounted cash flow methodologies. SFAS
No. 157 establishes a hierarchy for inputs used in determining fair value that
maximize the use of observable inputs and minimizes the use of unobservable
inputs by requiring that observable inputs be used when available.

     Observable inputs are those used by market participants in valuing
financial instruments that are developed based on market data obtained from
independent sources. In the absence of sufficient observable inputs,
unobservable inputs reflect the Company's estimates of the assumptions market
participants would use in valuing financial assets and financial liabilities and
are developed based on the best information available in the circumstances. The
Company uses prices and inputs that are current as of the measurement date,
including during periods of market disruption. In periods of market disruption,
the ability to observe prices and inputs may be reduced for many instruments.
This condition could cause an instrument to be reclassified from Level 1 to
Level 2, or from Level 2 to Level 3.

                                       29
<Page>

     Financial assets and financial liabilities recorded on the Statements of
Financial Position at fair value as of December 31, 2008 are categorized in the
fair value hierarchy based on the observability of inputs to the valuation
techniques as follows:

LEVEL 1: Financial assets and financial liabilities whose values are based on
         unadjusted quoted prices for identical assets or liabilities in an
         active market that the Company can access.

LEVEL 2: Financial assets and financial liabilities whose values are based on
         the following:

         a) Quoted prices for similar assets or liabilities in active markets;
         b) Quoted prices for identical or similar assets or liabilities in
            non-active markets; or
         c) Valuation models whose inputs are observable, directly or
            indirectly, for substantially the full term of the asset or
            liability.

LEVEL 3: Financial assets and financial liabilities whose values are based on
         prices or valuation techniques that require inputs that are both
         unobservable and significant to the overall fair value measurement.
         These inputs reflect the Company's estimates of the assumptions that
         market participants would use in valuing the financial assets and
         financial liabilities.

     The availability of observable inputs varies by instrument. In situations
where fair value is based on internally developed pricing models or inputs that
are unobservable in the market, the determination of fair value requires more
judgment. The degree of judgment exercised by the Company in determining fair
value is typically greatest for instruments categorized in Level 3. In many
instances, valuation inputs used to measure fair value fall into different
levels of the fair value hierarchy. The category level in the fair value
hierarchy is determined based on the lowest level input that is significant to
the fair value measurement in its entirety.

SUMMARY OF SIGNIFICANT VALUATION TECHNIQUES FOR FINANCIAL ASSETS AND FINANCIAL
LIABILITIES ON A RECURRING BASIS

LEVEL 1 MEASUREMENTS

   - FIXED INCOME  SECURITIES:  U.S.  Treasuries  are in Level 1 and valuation
     is based on unadjusted  quoted prices for identical assets in active
     markets that the Company can access.
   - SHORT-TERM: Comprise primarily actively traded money market funds that have
     daily quoted net asset values for identical assets that the Company can
     access.
   - SEPARATE ACCOUNT ASSETS: Comprise actively traded mutual funds that have
     daily quoted net asset values for identical assets that the Company can
     access. Net asset values for the actively traded mutual funds in which the
     separate account assets are invested are obtained daily from the fund
     managers.

LEVEL 2 MEASUREMENTS

   - FIXED INCOME SECURITIES:

     CORPORATE, INCLUDING PRIVATELY PLACED: Valued based on inputs including
     quoted prices for identical or similar assets in markets that are not
     active. Also includes privately placed securities which have
     market-observable external ratings from independent third party rating
     agencies.

     MUNICIPAL:  Externally  rated  municipals are valued based on inputs
     including  quoted prices for identical or similar assets in markets that
     are not active.

     U.S. GOVERNMENT AND AGENCIES: Valued based on inputs including quoted
     prices for identical or similar assets in markets that are not active.

     COMMERCIAL MORTGAGE-BACKED SECURITIES ("CMBS"): Valuation is principally
     based on inputs including quoted prices for identical or similar assets in
     markets that are not active.

     MORTGAGE-BACKED SECURITIES ("MBS"); ASSET-BACKED SECURITIES ("ABS")-CREDIT
     CARD: Valued based on inputs including quoted prices for identical or
     similar assets in markets that are not active.

   - SHORT-TERM: Commercial paper and other short-term investments are valued
     based on quoted prices for identical or similar assets in markets that are
     not active or amortized cost.

   - CONTRACTHOLDER FUNDS: Derivatives embedded in certain annuity contracts are
     valued based on internal models that rely on inputs such as interest rate
     yield curves and equity index volatility assumptions that are market

                                       30
<Page>

     observable for substantially the full term of the contract. The valuation
     techniques are widely accepted in the financial services industry and do
     not include significant judgment.

LEVEL 3 MEASUREMENTS

   - FIXED INCOME SECURITIES:

     CORPORATE: These securities are categorized as Level 3 as a result of the
     significance of non-market observable inputs. The securities are valued
     based on internal ratings, which are not observable in the market.

     ABS: Principally valued based on inputs including quoted prices for
     identical or similar assets in markets that exhibit less liquidity relative
     to those markets supporting Level 2 fair value measurements. Certain ABS
     are valued based on non-binding broker quotes. Due to the reduced
     availability of actual market prices or relevant observable inputs as a
     result of the decrease in liquidity that has been experienced in the market
     for these securities, all ABS are categorized as Level 3.

     CONTRACTHOLDER FUNDS: Derivatives embedded in annuity contracts are valued
     internally using models widely accepted in the financial services industry
     that determine a single best estimate of fair value for the embedded
     derivatives within a block of contractholder liabilities. The models use
     stochastically determined cash flows based on the contractual elements of
     embedded derivatives and other applicable market data. These are
     categorized as Level 3 as a result of the significance of non-market
     observable inputs.

FAIR VALUE MEASUREMENT PRIOR TO ADOPTION OF SFAS NO. 157

     Prior to the adoption of SFAS No. 157 on January 1, 2008, the fair value of
fixed income securities was based upon observable market quotations, other
market observable data or was derived from such quotations and market observable
data. The fair value of privately placed fixed income securities was generally
based on widely accepted pricing valuation models, which were developed
internally. The valuation models used security specific information such as the
credit rating of the issuer, industry sector of the issuer, maturity, estimated
duration, call provisions, sinking fund requirements, coupon rate, quoted market
prices of comparable securities and estimated liquidity premiums to determine
the overall spread for the specific security.

RECOGNITION OF PREMIUM REVENUES AND CONTRACT CHARGES, AND RELATED BENEFITS AND
INTEREST CREDITED

     The Company has reinsurance agreements whereby all premiums, contract
charges, interest credited to contractholder funds, contract benefits and
substantially all expenses are ceded to ALIC and non-affiliated reinsurers (see
Notes 3 and 7). Amounts reflected in the Statements of Operations and
Comprehensive Income are presented net of reinsurance.

     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 from policyholders. Benefits are reflected in contract benefits and
recognized in relation to premiums, so that profits are recognized over the life
of the policy.

     Immediate annuities with life contingencies provide insurance protection
over a period that extends beyond the period during which premiums are
collected. Premiums from these products are recognized as revenue when received
at the inception of the contract. Benefits and expenses are recognized in
relation to premiums. Profits from these policies come from investment income,
which is recognized over the life of the contract.

     Interest-sensitive life contracts, such as universal life and single
premium life, 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 contract charges
assessed against the contractholder account balance. Premiums from these
contracts are reported as contractholder fund deposits. Contract charges consist
of fees assessed against the contractholder account balance for the cost of
insurance (mortality risk), contract administration and early surrender. These
contract charges are recognized as revenue when assessed 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,
including market value adjusted annuities, equity-indexed annuities and
immediate annuities without life contingencies are considered investment
contracts. Consideration received for such contracts is reported as
contractholder fund deposits. Contract charges for investment contracts consist
of fees

                                       31
<Page>

assessed against the contractholder account balance for maintenance,
administration and surrender of the contract prior to contractually specified
dates, and are recognized when assessed against the contractholder account
balance.

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

     Contract charges for variable life and variable annuity products consist of
fees assessed against the contractholder account values for contract
maintenance, administration, mortality, expense and early surrender. Contract
benefits incurred include guaranteed minimum death, income, withdrawal and
accumulation benefits.

REINSURANCE

     The Company has reinsurance agreements whereby all premiums, contract
charges, interest credited to contractholder funds, contract benefits and
substantially all expenses are ceded to ALIC and non-affiliated reinsurers (see
Notes 3 and 7). Reinsurance recoverables and the related reserve for
life-contingent contract benefits and contractholder funds are reported
separately in the Statements of Financial Position. We continuously monitor the
creditworthiness of reinsurers in order to determine our risk of recoverability
on an individual and aggregate basis and a provision for uncollectible
reinsurance is recorded if needed. No amounts have been deemed unrecoverable in
the three years ended December 31, 2008. The Company continues to have primary
liability as the direct insurer for the risks reinsured.

     Investment income earned on the assets that 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 the terms of the reinsurance agreements.

INCOME TAXES

     The income tax provision is calculated under the liability method. 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 investments and differences in tax bases
of investments. A deferred tax asset valuation allowance is established when
there is uncertainty that such assets would be realized (see Note 9).

RESERVE FOR LIFE-CONTINGENT CONTRACT BENEFITS

     The reserve for life-contingent contract benefits payable under insurance
policies, including traditional life insurance and life-contingent immediate
annuities, is computed on the basis of long-term actuarial assumptions of future
investment yields, mortality, morbidity, policy terminations and expenses (see
Note 6). These assumptions, which for traditional life insurance are applied
using the net level premium method, include provisions for adverse deviation and
generally vary by characteristics such as type of coverage, year of issue and
policy duration.

CONTRACTHOLDER FUNDS

     Contractholder funds represent interest-bearing liabilities arising from
the sale of products, such as interest-sensitive life and fixed annuities, and
variable annuity and life deposits allocated to fixed accounts. Contractholder
funds are comprised primarily of deposits received and interest credited to the
benefit of the contractholder less surrenders and withdrawals, mortality charges
and administrative expenses (see Note 6). Contractholder funds also include
reserves for secondary guarantees on interest-sensitive life insurance and
certain fixed annuity contracts and reserves for certain guarantees on variable
annuity contracts.

SEPARATE ACCOUNTS

     Separate accounts assets are carried at fair value. The assets of the
separate accounts are legally segregated and available only to settle separate
account contract obligations. Separate accounts liabilities represent the
contractholders' claims to the related assets and are carried at an amount equal
to the separate accounts 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. Deposits to and surrenders and withdrawals from the
separate accounts are reflected in separate accounts liabilities and are not
included in cash flows. Revenues to the Company from the separate accounts
consist of contract charges for maintenance, administration, cost of insurance
and surrender of the contract prior to the contractually specified date and are
ceded to ALIC.

                                       32
<Page>

     Absent any contract provision wherein the Company provides a guarantee,
variable annuity and variable life insurance contractholders bear the investment
risk that the separate accounts' funds 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.

ADOPTED ACCOUNTING STANDARDS

SFAS NO. 157, FAIR VALUE MEASUREMENTS ("SFAS NO. 157")

     In September 2006, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 157, which redefines fair value as the price that would be received to
sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date, establishes a framework for
measuring fair value in GAAP, and expands disclosures about fair value
measurements. SFAS No. 157 establishes a three-level hierarchy for fair value
measurements based upon the nature of the inputs to the valuation of an asset or
liability. SFAS No. 157 applies where other accounting pronouncements require or
permit fair value measurements. In February 2008, the FASB issued FASB Staff
Position No. 157-2, "Effective Date of FASB Statement No. 157" ("FSP FAS
157-2"), which permits the deferral of the effective date of SFAS No. 157 to
fiscal years beginning after November 15, 2008 for all non-financial assets and
liabilities, except those that are recognized or disclosed at fair value in the
financial statements on a recurring basis. The Company adopted the provisions of
SFAS No. 157 for financial assets and financial liabilities recognized or
disclosed at fair value on a recurring or non-recurring basis as of January 1,
2008. Consistent with the provisions of FSP FAS 157-2, the Company decided to
defer the adoption of SFAS No. 157 for non-financial assets and liabilities
measured at fair value on a non-recurring basis until January 1, 2009. In
October 2008, the FASB issued FASB Staff Position No. FAS 157-3, "Determining
the Fair Value of a Financial Asset When the Market for That Asset Is Not
Active" ("FSP FAS 157-3"), which clarifies the application of SFAS 157 in a
market that is not active. The Company adopted the provisions of FSP FAS 157-3
as of September 30, 2008. The adoption of SFAS No. 157 and FSP FAS 157-3 did not
have a material effect on the Company's results of operations or financial
position (see Note 5).

SFAS NO. 159, THE FAIR VALUE OPTION FOR FINANCIAL ASSETS AND FINANCIAL
   LIABILITIES - INCLUDING AN AMENDMENT OF FASB STATEMENT NO. 115 ("SFAS NO.
   159")

     In February 2007, the FASB issued SFAS No. 159 which provides reporting
entities, on an ongoing basis, an option to report selected financial assets,
including investment securities, and financial liabilities, including most
insurance contracts, at fair value through earnings. SFAS No. 159 establishes
presentation and disclosure requirements designed to facilitate comparisons
between companies that choose different measurement alternatives for similar
types of financial assets and liabilities. The standard also requires additional
information to aid financial statement users' understanding of the impacts of a
reporting entity's decision to use fair value on its earnings and requires
entities to display, on the face of the statement of financial position, the
fair value of those assets and liabilities for which the reporting entity has
chosen to measure at fair value. SFAS No. 159 was effective as of the beginning
of a reporting entity's first fiscal year beginning after November 15, 2007. The
Company did not apply the fair value option to any existing financial assets or
liabilities as of January 1, 2008 and did not elect to apply the option
prospectively to any financial assets or liabilities acquired during 2008.
Consequently, the adoption of SFAS No. 159 had no impact on the Company's
results of operations or financial position.

FASB INTERPRETATION NO. 48, ACCOUNTING FOR UNCERTAINTY IN INCOME TAXES - AN
   INTERPRETATION OF FASB STATEMENT NO. 109 AND FASB STAFF POSITION NO. FIN
   48-1, DEFINITION OF SETTLEMENT IN FASB INTERPRETATION NO. 48 (COLLECTIVELY
   "FIN 48")

     The FASB issued the interpretation in July 2006 and the related staff
position in May 2007. FIN 48 clarifies the accounting for uncertainty in income
taxes recognized in an entity's financial statements in accordance with SFAS No.
109, "Accounting for Income Taxes". FIN 48 requires an entity to recognize the
tax benefit of uncertain tax positions only when it is more likely than not,
based on the position's technical merits, that the position would be sustained
upon examination by the respective taxing authorities. The tax benefit is
measured as the largest benefit that is more than fifty-percent likely of being
realized upon final settlement with the respective taxing authorities. On
January 1, 2007, the Company adopted the provisions of FIN 48, which were
effective for fiscal years beginning after December 15, 2006. No cumulative
effect of a change in accounting principle or adjustment to the liability for
unrecognized tax benefits was recognized as a result of the adoption of FIN 48.
Accordingly, the adoption of FIN 48 did not have an effect on the results of
operations or financial position of the Company (see Note 9).

                                       33
<Page>

SEC STAFF ACCOUNTING BULLETIN NO. 108, CONSIDERING THE EFFECTS OF PRIOR YEAR
   MISSTATEMENTS WHEN QUANTIFYING MISSTATEMENTS IN CURRENT YEAR FINANCIAL
   STATEMENTS ("SAB 108")

     In September 2006, the SEC issued SAB 108 to eliminate the diversity of
practice in the way misstatements are quantified for purposes of assessing their
materiality in financial statements. SAB 108 was intended to eliminate the
potential build up of improper amounts on the balance sheet due to the
limitations of certain methods of assessing materiality previously utilized by
some reporting entities. SAB 108 established a single quantification framework
wherein the significance determination is based on the effects of the
misstatements on each of the financial statements as well as the related
financial statement disclosures. On December 31, 2006, the Company adopted the
provisions of SAB 108 which were effective for the first fiscal year ending
after November 15, 2006. The adoption of SAB 108 did not have any effect on the
results of operations or financial position of the Company.

FASB STAFF POSITION NO. FAS 115-1/124-1, THE MEANING OF OTHER-THAN-TEMPORARY
   IMPAIRMENT AND ITS APPLICATION TO CERTAIN INVESTMENTS ("FSP FAS 115-1/124-1")

     FSP FAS 115-1/124-1 nullified the guidance in paragraphs 10-18 of Emerging
Issues Task Force Issue 03-1, "The Meaning of Other-Than-Temporary Impairment
and Its Application to Certain Investments" and references existing
other-than-temporary impairment guidance. FSP FAS 115-1/124-1 clarifies that an
investor should recognize an impairment loss no later than when the impairment
is deemed other-than-temporary, even if a decision to sell the security has not
been made, and also provides guidance on the subsequent income recognition for
impaired debt securities. The Company adopted FSP FAS 115-1/124-1 as of January
1, 2006 on a prospective basis. The effects of adoption did not have a material
effect on the results of operations or financial position of the Company.

SFAS NO. 154, ACCOUNTING CHANGES AND ERROR CORRECTIONS - A REPLACEMENT OF APB
   OPINION NO. 20 AND FASB STATEMENT NO. 3 ("SFAS NO. 154")

     SFAS No. 154 replaced Accounting Principles Board ("APB") Opinion No. 20,
"Accounting Changes", and SFAS No. 3, "Reporting Accounting Changes in Interim
Financial Statements". SFAS No. 154 requires retrospective application to prior
periods' financial statements for changes in accounting principle, unless
determination of either the period specific effects or the cumulative effect of
the change is impracticable or otherwise not required. The Company adopted SFAS
No. 154 on January 1, 2006. The adoption of SFAS No. 154 did not have any effect
on the results of operations or financial position of the Company.

PENDING ACCOUNTING STANDARD

SFAS NO. 161, DISCLOSURES ABOUT DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES -
   AN AMENDMENT OF FASB STATEMENT NO. 133 ("SFAS NO. 161")

     In March 2008, the FASB issued SFAS No. 161, which amends and expands the
disclosure requirements for derivatives currently accounted for in accordance
with SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities". The new disclosures are designed to enhance the understanding of
how and why an entity uses derivative instruments and how derivative instruments
affect an entity's financial position, results of operations, and cash flows.
The standard requires, on a quarterly basis, quantitative disclosures about the
potential cash outflows associated with the triggering of credit-related
contingent features, if any; tabular disclosures about the classification and
fair value amounts of derivative instruments reported in the statement of
financial position; disclosure of the location and amount of gains and losses on
derivative instruments reported in the statement of operations; and qualitative
information about how and why an entity uses derivative instruments and how
derivative instruments and related hedged items affect the entity's financial
statements.SFAS No. 161 is effective for fiscal periods beginning after November
15, 2008, and is to be applied on a prospective basis only. SFAS No. 161 affects
disclosures and therefore implementation will not impact the Company's results
of operations or financial position.

3.  RELATED PARTY TRANSACTIONS

BUSINESS OPERATIONS

     The Company uses services performed 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

                                       34
<Page>

level of services provided. Operating expenses, including compensation,
retirement and other benefit programs, allocated to the Company were $227.0
million, $202.2 million and $192.3 million in 2008, 2007 and 2006, 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 the reinsurance
agreements.

BROKER-DEALER SERVICES

     The Company has a service agreement with Allstate Distributors, LLC
("ADLLC"), a broker-dealer affiliate of the Company, whereby ADLLC promotes and
markets the fixed and variable annuities sold by the Company to unaffiliated
financial services firms. In addition, ADLLC acts as the underwriter of variable
annuities sold by the Company. In return for these services, the Company
recorded commission expense of $5.1 million, $3.4 million and $1.1 million for
the years ended December 31, 2008, 2007 and 2006, respectively, that was ceded
to ALIC under the terms of the reinsurance agreements.

     The Company receives distribution services from Allstate Financial
Services, LLC ("AFS"), an affiliated broker-dealer company, for certain variable
annuity and variable life insurance contracts sold by Allstate exclusive
agencies. For these services, the Company incurred $18.4 million, $25.5 million
and $42.7 million of commission and other distribution expenses for the years
ending December 31, 2008, 2007 and 2006, respectively, that were ceded to ALIC
under the terms of the reinsurance agreements.

     The Company has a wholesaling and marketing support agreement with ALFS,
Inc. ("ALFS"), an affiliated broker-dealer company, whereby ALFS underwrites and
promotes the offer, sale and servicing of variable annuities issued by the
Company and sold by AFS. In return for these services, the Company incurred
commission expense of $187 thousand, $334 thousand and $1.5 million for 2008,
2007 and 2006, respectively. This expense was ceded to ALIC under the terms of
the reinsurance agreements.

REINSURANCE

     The following table summarizes amounts that were ceded to ALIC and reported
net in the Statements of Operations and Comprehensive Income under the
reinsurance agreements:

                                                  YEAR ENDED DECEMBER 31,
                                           ------------------------------------
($ IN THOUSANDS)                              2008         2007         2006
                                           ----------   ----------   ----------
Premiums and contract charges              $  691,267   $  623,102   $  546,554
Interest credited to contractholder
   funds, contract benefits and expenses    1,468,505    1,421,831    1,487,799

     Reinsurance recoverables due from ALIC totaled $18.79 billion and $18.78
billion as of December 31, 2008 and 2007, respectively.

INCOME TAXES

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

INTERCOMPANY LOAN AGREEMENT

     The Company has an intercompany loan agreement with the Corporation. The
amount of intercompany loans 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. The Company had no amounts outstanding under the
intercompany loan agreement at December 31, 2008 and 2007. The Corporation uses
commercial paper borrowings, bank lines of credit and repurchase agreements to
fund intercompany borrowings.

                                       35
<Page>

4.  INVESTMENTS

FAIR VALUES

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


                                                    GROSS UNREALIZED
($ IN THOUSANDS)                        AMORTIZED   ----------------     FAIR
                                           COST      GAINS    LOSSES    VALUE
                                        ---------   -------  -------   --------
AT DECEMBER 31, 2008
U.S.government and agencies              $ 75,374   $3,700   $  (258)  $ 78,816
Corporate                                  77,192      603    (2,092)    75,703
Municipal                                     502       --        (3)       499
Mortgage-backed securities                 46,720    1,680       (49)    48,351
Commercial mortgage-backed securities      22,896       --    (3,936)    18,960
Asset-backed securities                     6,983       20        (4)     6,999
                                         --------   ------   -------   --------
  Total fixed income securities          $229,667   $6,003   $(6,342)  $229,328
                                         ========   ======   =======   ========

AT DECEMBER 31, 2007
U.S. government and agencies             $110,214   $5,642   $   (36)  $115,820
Corporate                                  84,798      917      (903)    84,812
Municipal                                     501       30        --        531
Mortgage-backed securities                 28,114       94      (303)    27,905
Commercial mortgage-backed securities      32,131      579      (109)    32,601
Asset-backed securities                    11,034      453       (12)    11,475
                                         --------   ------   -------   --------
  Total fixed income securities          $266,792   $7,715   $(1,363)  $273,144
                                         ========   ======   =======   ========

SCHEDULED MATURITIES

     The scheduled maturities for fixed income securities are as follows at
December 31, 2008:

                                         AMORTIZED     FAIR
($ IN THOUSANDS)                           COST        VALUE
                                         ---------   --------
Due in one year or less                   $ 25,080   $ 25,421
Due after one year through five years       88,898     88,627
Due after five years through ten years      34,519     35,392
Due after ten years                         27,467     24,538
                                          --------   --------
                                           175,964    173,978
Mortgage and asset-backed securities        53,703     55,350
                                          --------   --------
   Total                                  $229,667   $229,328
                                          ========   ========

    Actual maturities may differ from those scheduled as a result of prepayments
by the issuers. Because of the potential for prepayment on mortgage- and
asset-backed securities, they are not categorized by contractual maturity. The
commercial mortgage-backed securities are categorized by contractual maturity
because they generally are not subject to prepayment risk.

NET INVESTMENT INCOME

     Net investment income for the years ended December 31 is as follows:

($ IN THOUSANDS)                         2008       2007       2006
                                        -------    -------    -------
Fixed income securities                 $13,302    $13,533    $13,495
Short-term and other investments            992      1,117        762
                                        -------    -------    -------
   Investment income, before expense     14,294     14,650     14,257
   Investment expense                      (354)      (393)      (309)
                                        -------    -------    -------
   Net investment income                $13,940    $14,257    $13,948
                                        =======    =======    =======

                                       36
<Page>

REALIZED CAPITAL GAINS AND LOSSES, AFTER-TAX

     Realized capital gains and losses for the years ended December 31 are as
follows:

($ IN THOUSANDS)                                 2008       2007      2006
                                               -------     ------   -------
Realized capital gains and losses, pre-tax     $ 5,952     $(417)   $(1,255)
Income tax (expense) benefit                    (2,083)      146        438
                                               -------     -----    -------
Realized capital gains and losses, after-tax   $ 3,869     $(271)   $  (817)
                                               =======     =====    =======

     Gross gains of $8.2 million were realized on sales of fixed income
securities during 2008. Gross losses of $42 thousand, $32 thousand and $1.3
million were realized on sales of fixed income securities during 2008, 2007 and
2006, respectively. There were no gross gains realized on sales of fixed income
securities in 2007 or 2006.

UNREALIZED NET CAPITAL GAINS AND LOSSES

     Unrealized net capital gains and losses included in accumulated other
comprehensive income are as follows:

<Table>
<Caption>
                                                                            GROSS UNREALIZED
                                                                  FAIR      ----------------    UNREALIZED NET
($ IN THOUSANDS)                                                  VALUE     GAINS     LOSSES    GAINS (LOSSES)
                                                                 --------   ------   -------    --------------
<S>                                                              <C>        <C>      <C>            <C>
AT DECEMBER 31, 2008
Fixed income securities                                          $229,328   $6,003   $(6,342)       $(339)
Short-term investments                                             80,703       --        (2)          (2)
                                                                                                    -----
  Unrealized net capital gains and losses, pre-tax                                                   (341)
  Deferred income taxes                                                                               119
                                                                                                    -----
  Unrealized net capital gains and losses, after-tax                                                $(222)
                                                                                                    =====

<Caption>
                                                                            GROSS UNREALIZED
                                                                  FAIR      ----------------    UNREALIZED NET
($ IN THOUSANDS)                                                  VALUE     GAINS     LOSSES    GAINS (LOSSES)
                                                                 --------   ------   -------    --------------
<S>                                                              <C>        <C>      <C>            <C>
AT DECEMBER 31, 2007
Fixed income securities                                          $273,144   $7,715   $(1,363)       $ 6,352
                                                                                                    -------
   Unrealized net capital gains and losses, pre-tax                                                   6,352
   Deferred income taxes                                                                             (2,223)
                                                                                                    -------
   Unrealized net capital gains and losses, after-tax                                               $ 4,129
                                                                                                    =======
</Table>

CHANGE IN UNREALIZED NET CAPITAL GAINS AND LOSSES

     The change in unrealized net capital gains and losses for the years ended
December 31 is as follows:

<Table>
<Caption>
($ IN THOUSANDS)                                           2008      2007     2006
                                                          -------   ------   -------
<S>                                                       <C>       <C>      <C>
 Fixed income securities                                  $(6,691)  $6,625   $(1,361)
 Short-term investments                                        (2)      --        --
                                                          -------   ------   -------
    Unrealized net capital gains and losses, pre-tax       (6,693)   6,625    (1,361)
    Deferred income taxes                                   2,342   (2,318)      476
                                                          -------   ------   -------
    Unrealized net capital gains and losses, after-tax    $(4,351)  $4,307   $  (885)
                                                          =======   ======   =======
</Table>

PORTFOLIO MONITORING

     Inherent in the Company's evaluation of a particular security are
assumptions and estimates about the financial condition of the issue or 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 expected recoverability of
principal and interest; 3) the length of time and extent to which the fair value
has been less than amortized cost; 4) the financial condition, near-term and
long-term prospects of the issue or 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.

                                       37
<Page>

     The following table summarizes the gross unrealized losses and fair value
of fixed income securities by the length of time that individual securities have
been in a continuous unrealized loss position.

<Table>
<Caption>
($ IN THOUSANDS)            LESS THAN 12 MONTHS                12 MONTHS OR MORE
                       --------------------------------   --------------------------------     TOTAL
                        NUMBER       FAIR    UNREALIZED    NUMBER      FAIR     UNREALIZED   UNREALIZED
                       OF ISSUES    VALUE      LOSSES     OF ISSUES    VALUE      LOSSES       LOSSES
                       ---------   -------   ----------   ---------   -------   ----------   ----------
<S>                       <C>      <C>         <C>            <C>     <C>         <C>          <C>
AT DECEMBER 31, 2008
U.S. government and
  agencies                 1       $30,731     $  (258)       --      $    --     $    --      $  (258)
Corporate                 24        47,272      (1,691)        4        4,982        (401)      (2,092)
Municipal                  1           499          (3)       --           --          --           (3)
MBS                        1         1,119         (49)       --           --          --          (49)
CMBS                       9        18,337      (2,555)        1          623      (1,381)      (3,936)
ABS                        1           997          (4)       --           --          --           (4)
                         ---       -------     -------        --      -------     -------      -------
  Total                   37       $98,955     $(4,560)        5      $ 5,605     $(1,782)     $(6,342)
                         ===       =======     =======        ==      =======     =======      =======

AT DECEMBER 31, 2007

U.S. government and
  agencies                 1       $ 4,095     $    (7)        1      $ 2,984     $   (29)     $   (36)
Corporate                  3         6,065         (76)       16       33,087        (827)        (903)
MBS                        1         5,595         (44)        8       15,983        (259)        (303)
CMBS                       1         1,946         (59)        6       13,054         (50)        (109)
ABS                       --            --          --         1          991         (12)         (12)
                         ---       -------     -------        --      -------     -------      -------
  Total                    6       $17,701     $  (186)       32      $66,099     $(1,177)     $(1,363)
                         ===       =======     =======        ==      =======     =======      =======
</Table>

     At December 31, 2008, all unrealized losses are related to fixed income
securities with an unrealized loss position less than 20% of amortized cost, the
degree of which suggests that these securities do not pose a high risk of being
other-than-temporarily impaired. All of the unrealized losses are related to
investment grade fixed income securities. Investment grade is defined as a
security having a rating from the National Association of Insurance
Commissioners ("NAIC") of 1 or 2; a rating of Aaa, Aa, A or Baa from Moody's, a
rating of AAA, AA, A or BBB from Standard & Poor's ("S&P"), Fitch or Dominion,
or a rating of aaa, aa, a or bbb from A.M. Best; or a comparable internal rating
if an externally provided rating is not available. Unrealized losses on
investment grade securities are principally related to rising interest rates or
changes in credit spreads since the securities were acquired.

      Unrealized losses on mortgage-backed, asset-backed and commercial
mortgage-backed holdings were evaluated based on credit ratings, as well as the
performance of the underlying collateral relative to the securities' positions
in the securities' respective capital structure. The unrealized losses on
asset-backed securities that had credit enhancements from bond insurers were
evaluated on the quality of the underlying security. These investments were
determined to have adequate resources to fulfill contractual obligations.

     As of December 31, 2008, the Company had the intent and ability to hold the
fixed income securities with unrealized losses for a period of time sufficient
for them to recover.

OTHER INVESTMENT INFORMATION

     At December 31, 2008, fixed income securities and short-term investments
with a carrying value of $10.6 million were on deposit with regulatory
authorities as required by law.

                                       38
<Page>

5.  FINANCIAL INSTRUMENTS

     In the normal course of business, the Company invests in various financial
assets and incurs various financial liabilities.

     The following table summarizes the Company's financial assets and financial
liabilities measured at fair value on a recurring and non-recurring basis as of
December 31, 2008:

<Table>
<Caption>
                                         QUOTED
                                        PRICES IN
                                         ACTIVE      SIGNIFICANT
                                       MARKETS FOR      OTHER       SIGNIFICANT
                                        IDENTICAL     OBSERVABLE    UNOBSERVABLE   BALANCE AS OF
                                         ASSETS        INPUTS          INPUTS       DECEMBER 31,
($ IN THOUSANDS)                        (LEVEL 1)     (LEVEL 2)       (LEVEL 3)          2008
                                       -----------   -----------   -------------   -------------
<S>                                     <C>            <C>            <C>            <C>
FINANCIAL ASSETS:
Fixed income securities                 $   48,085     $173,934       $  7,309       $  229,328
Short-term investments                      30,657       50,046             --           80,703
                                        ----------     --------       --------       ----------
     TOTAL RECURRING BASIS
       ASSETS                               78,742      223,980          7,309          310,031
                                        ----------     --------       --------       ----------
TOTAL INVESTMENTS                           78,742      223,980          7,309          310,031
                                        ----------     --------       --------       ----------

Separate account assets                  1,823,163           --             --        1,823,163
                                        ----------     --------       --------       ----------

TOTAL FINANCIAL ASSETS                  $1,901,905     $223,980       $  7,309       $2,133,194
                                        ----------     --------       --------       ----------
% of total financial assets                   89.2%        10.5%           0.3%           100.0%

FINANCIAL LIABILITIES:
Contractholder funds:
     Derivatives embedded in
       annuity contracts                $       --     $(33,466)      $(36,544)      $  (70,010)
                                        ----------     --------       --------       ----------
TOTAL FINANCIAL LIABILITIES             $       --     $(33,466)      $(36,544)      $  (70,010)
                                        ==========     ========       ========       ==========
% of total financial liabilities                --%        47.8%          52.2%           100.0%
</Table>

     As required by SFAS No. 157, when the inputs used to measure fair value
fall within different levels of the hierarchy, the level within which the fair
value measurement is categorized is based on the lowest level input that is
significant to the fair value measurement in its entirety. Thus, a Level 3 fair
value measurement may include inputs that are observable (Level 1 or Level 2)
and unobservable (Level 3). Gains and losses for such assets and liabilities
categorized within Level 3 may include changes in fair value that are
attributable to both observable inputs (Level 1 and Level 2) and unobservable
inputs (Level 3).

                                       39
<Page>

     The following table provides a summary of changes in fair value during the
year ended December 31, 2008 of Level 3 financial assets and financial
liabilities held at fair value on a recurring basis at December 31, 2008.

<Table>
<Caption>
                                                                                                                   TOTAL GAINS
                                              TOTAL REALIZED AND UNREALIZED                                         (LOSSES)
                                               GAINS (LOSSES) INCLUDED IN:                                         INCLUDED IN
                                            ----------------------------------                                    NET INCOME FOR
                                                                OCI ON           PURCHASES,                     INSTRUMENTS STILL
                              BALANCE AS OF                  STATEMENT OF    SALES, ISSUANCES  BALANCE AS OF         HELD AT
                                JANUARY 1,      NET            FINANCIAL     AND SETTLEMENTS,   DECEMBER 31,       DECEMBER 31,
($ IN THOUSANDS)                  2008       INCOME(1)         POSITION            NET             2008              2008(2)
                              -------------  ---------       ------------    ----------------  --------------   -----------------
<S>                             <C>          <C>                <C>             <C>            <C>                  <C>
FINANCIAL ASSETS
Fixed income securities         $11,984      $    180           $(434)          $(4,421)       $  7,309                  (3)
                                -------      --------           -----           -------        --------             -------
   TOTAL RECURRING LEVEL 3
     FINANCIAL ASSETS           $11,984      $    180           $(434)          $(4,421)       $  7,309                  (3)
                                =======      ========           =====           =======        ========             =======
FINANCIAL LIABILITIES
   Contractholder funds:
     Derivatives embedded in
      annuity contracts         $  (256)     $(36,498)          $  --           $   210        $(36,544)            (36,498)
                                -------      --------           -----           -------        --------             -------
TOTAL RECURRING LEVEL 3
     FINANCIAL LIABILITIES      $  (256)     $(36,498)          $  --           $   210        $(36,544)            (36,498)
                                =======      ========           =====           =======        ========             =======
</Table>

----------
(1)  The amount above attributable to fixed income securities is reported in the
     Statements of Operations and Comprehensive Income as follows: $185 thousand
     in realized capital gains and losses, and $(5) thousand in net investment
     income. The amount above attributable to derivatives embedded in annuity
     contracts is reported as a component of contract benefits and is ceded in
     accordance with the Company's reinsurance agreements.

(2)  The amount above attributable to fixed income securities is reported as a
     component of net investment income in the Statements of Operations and
     Comprehensive Income. The amount above attributable to derivatives embedded
     in annuity contracts is reported as a component of contract benefits and is
     ceded in accordance with the Company's reinsurance agreements.

     Presented below are the fair value estimates of financial instruments
including those reported at fair value and discussed above and those reported
using other methods for which a description of the method to determine fair
value appears below the following tables.

FINANCIAL ASSETS

($ IN THOUSANDS)                 DECEMBER 31, 2008         DECEMBER 31, 2007
                               ----------------------  ------------------------
                               CARRYING      FAIR       CARRYING        FAIR
                                 VALUE       VALUE        VALUE         VALUE
                               ----------  ----------  -----------  -----------
Fixed income securities (1)    $  229,328  $  229,328  $  273,144    $  273,144
Short-term investments (1)         80,703      80,703      28,057        28,057
Separate accounts (1)           1,823,163   1,823,163   3,067,127     3,067,127

----------
(1)  Carried at fair value in the Statements of Financial Position.

FINANCIAL LIABILITIES

     The carrying value and fair value of contractholder funds on investment
contracts were $14.08 billion and $12.67 billion, respectively, as of December
31, 2008 and were $14.52 billion and $13.83 billion, respectively, as of
December 31, 2007. As of December 31, 2008 and 2007, contractholder funds on
investment contracts exclude contractholder funds related to interest-sensitive
life insurance, variable annuities and variable life insurance totaling $3.71
billion and $3.30 billion, respectively.

     Beginning in 2008, the fair value of contractholder funds on investment
contracts is based on the terms of the underlying contracts utilizing prevailing
market rates for similar contracts adjusted for credit risk. Deferred annuities
included in contractholder funds are valued using discounted cash flow models
which incorporate market value margins, which are based on the cost of holding
economic capital, and the Company's own credit risk. Immediate annuities without
life contingencies are valued at the present value of future benefits using
market implied interest rates which include the Company's own credit risk. In
2007, the fair value of investment contracts was based on the terms of the
underlying contracts. Fixed annuities were valued at the account balance less
surrender charges. Immediate annuities without life contingencies were valued at
the present value of future benefits using current interest rates. Market value
adjusted annuities' fair value was estimated to be the market adjusted surrender
value. Equity-indexed annuity contracts' fair value approximated the carrying
value since the embedded equity options are carried at fair value.

                                       40
<Page>

DERIVATIVE FINANCIAL INSTRUMENTS

         Derivative financial instruments include embedded derivative financial
instruments. Derivatives that are embedded in certain variable annuity contracts
and equity-indexed annuity contracts are required to be separated from the host
instrument and accounted for as derivative financial instruments ("subject to
bifurcation"). Embedded derivative financial instruments are accounted for on a
fair value basis. The fair value valuation techniques are described in Note 2.
Embedded derivative financial instruments subject to bifurcation are reflected
as a component of contractholder funds in the Statements of Financial Position.
Changes in the fair value of embedded derivative financial instruments are ceded
to ALIC. Reinsurance agreements that cede the value of embedded derivative
financial instruments are reflected as a component of reinsurance recoverables
in the Statements of Financial Position.

    The following table summarizes the notional amount, fair value and carrying
value of the Company's embedded derivative financial instruments.

<Table>
<Caption>
                                                                    CARRYING VALUE
($ IN THOUSANDS)                       NOTIONAL      FAIR      -----------------------
                                        AMOUNT       VALUE      ASSETS   (LIABILITIES)
                                      ----------    --------   --------  -------------
<S>                                   <C>           <C>           <C>      <C>
AT DECEMBER 31, 2008
--------------------
Equity-indexed life and annuity
     product contracts                $3,827,332    $(33,466)     $--      $(33,466)
Guaranteed accumulation benefits         218,234     (31,020)      --       (31,020)
Guaranteed withdrawal benefits            36,605      (5,524)      --        (5,524)

<Caption>
                                                                    CARRYING VALUE
($ IN THOUSANDS)                       NOTIONAL      FAIR      -----------------------
                                        AMOUNT       VALUE      ASSETS    (LIABILITIES)
                                      ----------   ---------   --------   -------------
<S>                                   <C>          <C>           <C>       <C>
AT DECEMBER 31, 2007
--------------------
Equity-indexed life and annuity
     product contracts                $3,611,546   $(102,858)     $--       $(102,858)
Guaranteed accumulation benefits         331,597        (306)      --            (306)
Guaranteed withdrawal benefits            61,994          50       --              50
Other embedded derivative
 financial instruments                     3,775          (5)      --              (5)
</Table>

OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS

     There were no off-balance-sheet financial instruments at December 31, 2008
or 2007.

                                       41
<Page>

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)                                                2008           2007
                                                             ----------    -----------
<S>                                                          <C>            <C>
Traditional life                                             $1,169,049     $1,045,153
Immediate annuities                                             700,935        709,195
Other                                                           711,202        593,768
                                                             ----------     ----------
   Total reserve for life-contingent contract benefits       $2,581,186     $2,348,116
                                                             ==========     ==========
</Table>

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

<Table>
<Caption>
           PRODUCT                          MORTALITY                    INTEREST RATE                  ESTIMATION METHOD
-------------------------------  --------------------------------  ---------------------------   --------------------------------
<S>                              <C>                               <C>                           <C>
Traditional life insurance       Actual company experience plus    Interest rate assumptions     Net level premium reserve
                                 loading                           range from 4.0% to 8.0%       method using the Company's
                                                                                                 withdrawal experience rates

Immediate annuities              1983 individual annuity           Interest rate assumptions     Present value of expected
                                 mortality table; Annuity 2000     range from 3.9% to 7.5%       future benefits based on
                                 mortality table with internal                                   historical experience
                                 modifications
Other:
   Variable annuity              100% of Annuity 2000              Interest rate assumptions     Projected benefit ratio
    guaranteed minimum death     mortality table                   range from 5.3% to 5.9%       applied to cumulative assessments
     benefits
                                                                                                 Unearned premium; additional
   Accident and health           Actual company experience plus                                  contract reserves for
                                 loading                                                         traditional life
</Table>

     At December 31, contractholder funds consists of the following:

($ IN THOUSANDS)                           2008           2007
                                       -----------    -----------
Interest-sensitive life                $ 3,572,143    $ 3,217,074
Investment contracts:
     Fixed annuities                    13,681,421     14,089,197
     Immediate annuities                   421,969        457,683
     Other                                 111,843         56,931
                                       -----------    -----------
        Total contractholder funds     $17,787,376    $17,820,885
                                       ===========    ===========

                                       42
<Page>

     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 insurance        Interest rates credited range         Either a percentage of account
                                         from 3.5% to 6.0%                     balance or dollar amount grading
                                                                               off generally over 20 years

Fixed and immediate annuities            Interest rates credited range from    Either a declining or a level
                                         0% to 16.0% for fixed annuities and   percentage charge generally over
                                         1.3% to 8.8% for immediate            nine years or less. Additionally,
                                         annuities                             approximately 25.1% of fixed
                                                                               annuities are subject to market
                                                                               value adjustment for discretionary
                                                                               withdrawals.

Other investment contracts:
   Variable guaranteed minimum income,   Interest rates used in establishing   Withdrawal and surrender charges
    accumulation and withdrawal          reserves range from 1.8% to 10.3%     are based on the terms of the
    benefits and secondary guarantees                                          related interest-sensitive life or
    on interest-sensitive life                                                 fixed annuity contract.
    insurance and fixed annuities
</Table>

     Contractholder funds activity for the years ended December 31 is as
follows:

($ IN THOUSANDS)                            2008           2007
                                         -----------    -----------
Balance, beginning of year               $17,820,885    $18,195,622
Deposits                                   2,148,361      1,966,374
Interest credited                            528,493        762,956
Benefits                                    (552,047)      (572,506)
Surrenders and partial withdrawals        (1,855,296)    (2,236,168)
Net transfers from separate accounts          18,595          2,834
Contract charges                            (367,880)      (303,528)
Other adjustments                             46,265          5,301
                                         -----------    -----------
Balance, end of year                     $17,787,376    $17,820,885
                                         ===========    ===========

                                       43
<Page>

     The table below presents information regarding the Company's variable
annuity contracts with guarantees. The Company's variable annuity contracts may
offer more than one type of guarantee in each contract; therefore, the sum of
amounts listed exceeds the total account balances of variable annuity contracts'
separate accounts with guarantees.

<Table>
<Caption>
                                                                                        DECEMBER 31,
                                                                                   ---------------------
($ IN MILLIONS)                                                                       2008       2007
                                                                                   ---------   ---------
<S>                                                                                <C>         <C>
IN THE EVENT OF DEATH
   Separate account value                                                          $ 1,327.3   $ 2,220.4
   Net amount at risk (1)                                                          $   455.0   $    86.2
   Average attained age of contractholders                                          56 years    60 years

AT ANNUITIZATION
   Separate account value                                                          $   233.4   $   390.5
   Net amount at risk (2)                                                          $   139.8   $     1.0
   Weighted average waiting period until annuitization options available             4 years     3 years

FOR CUMULATIVE PERIODIC WITHDRAWALS
   Separate account value                                                          $    36.6   $    61.9
   Net amount at risk (3)                                                          $     5.0   $      --

ACCUMULATION AT SPECIFIED DATES
   Separate account value                                                          $   218.0   $   331.5
   Net amount at risk (4)                                                          $    52.9   $      --
   Weighted average waiting period until guarantee date                             10 years    13 years
</Table>

----------
(1)  Defined as the estimated current guaranteed minimum death benefit in excess
     of the current account balance at the balance sheet date.

(2)  Defined as the estimated present value of the guaranteed minimum annuity
     payments in excess of the current account balance.

(3)  Defined as the estimated current guaranteed minimum withdrawal balance
     (initial deposit) in excess of the current account balance at the balance
     sheet date.

(4)  Defined as the estimated present value of the guaranteed minimum
     accumulation balance in excess of the current account balance.

     As of December 31, 2008, reserves for variable annuity contracts and
secondary guarantee liabilities related to death, income, accumulation and
withdrawal benefits were $48.4 million, $32.3 million, $31.0 million and $5.5
million, respectively. As of December 31, 2007, reserves for variable annuity
contracts and secondary guarantee liabilities related to death, income,
accumulation and withdrawal benefits were $40.1 million, $27.5 million, $306
thousand and $(50) thousand, respectively.

7.  REINSURANCE

     The Company has 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 substantially all expenses are reinsured. The Company purchases
reinsurance to limit aggregate and single losses on large risks. The Company
cedes a portion of the mortality risk on certain life policies with a pool of
twelve non-affiliated reinsurers. The Company continues to have primary
liability as the direct insurer for risks reinsured.

     Amounts recoverable from reinsurers are estimated based upon assumptions
consistent with those used in establishing the liabilities related to the
underlying reinsured contracts. At December 31, 2008, 92.1% of the total
reinsurance recoverables were related to ALIC and 7.9% were related to
non-affiliated reinsurers. At December 31, 2008 and 2007, approximately 97% and
96%, respectively, of the Company's non-affiliated reinsurance recoverables are
due from companies rated A or better by S&P.

                                       44
<Page>

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

<Table>
<Caption>
($ IN THOUSANDS)                                         2008          2007         2006
                                                       ----------   ----------    ---------
<S>                                                    <C>          <C>           <C>
PREMIUMS AND CONTRACT CHARGES
Direct                                                 $1,138,747   $1,038,671    $ 944,823
Assumed                                                     8,576        9,132       10,238
Ceded:
   Affiliate                                             (691,267)    (623,102)    (546,554)
   Non-affiliate                                         (456,056)    (424,701)    (408,507)
                                                       ----------   ----------    ---------
Premiums and contract charges, net of reinsurance      $       --   $       --    $      --
                                                       ==========   ==========    =========
</Table>

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

<Table>
<Caption>
($ IN THOUSANDS)                                         2008          2007        2006
                                                      -----------  -----------  -----------
<S>                                                   <C>          <C>          <C>
INTEREST CREDITED TO CONTRACTHOLDER FUNDS, CONTRACT
   BENEFITS AND EXPENSES
Direct                                                $ 2,065,299  $ 1,964,326  $ 1,972,975
Assumed                                                     8,922       10,473        9,762
Ceded:
   Affiliate                                           (1,468,505)  (1,421,831)  (1,487,799)
   Non-affiliate                                         (605,716)    (552,968)    (494,938)
                                                      -----------  -----------  -----------
Interest credited to contractholder funds, contract
   benefits and expenses, net of reinsurance          $        --  $        --  $        --
                                                      ===========  ===========  ===========
</Table>

8.  COMMITMENTS, GUARANTEES AND CONTINGENT LIABILITIES

GUARANTEES

     In the normal course of business, the Company provides standard
indemnifications to contractual counterparties in connection with numerous
transactions, including acquisitions and divestitures. The types of
indemnifications typically provided include indemnifications for breaches of
representations and warranties, taxes and certain other liabilities, such as
third party lawsuits. The indemnification clauses are often standard contractual
terms and are entered into in the normal course of business based on an
assessment that the risk of loss would be remote. The terms of the
indemnifications vary in duration and nature. In many cases, the maximum
obligation is not explicitly stated and the contingencies triggering the
obligation to indemnify have not occurred and are not expected to occur.
Consequently, the maximum amount of the obligation under such indemnifications
is not determinable. Historically, the Company has not made any material
payments pursuant to these obligations.

     The aggregate liability balance related to all guarantees was not material
as of December 31, 2008.

REGULATION

    The Company is subject to changing social, economic and regulatory
conditions. From time to time, regulatory authorities or legislative bodies seek
to impose additional regulations regarding agent and broker compensation and
otherwise expand overall regulation of insurance products and the insurance
industry. The ultimate changes and eventual effects of these initiatives on the
Company's business, if any, are uncertain.

                                       45
<Page>

LEGAL AND REGULATORY PROCEEDINGS AND INQUIRIES

BACKGROUND

     The Company and certain affiliates are involved in a number of lawsuits,
regulatory inquiries, and other legal proceedings arising out of various aspects
of its business. As background to the "Proceedings" subsection below, please
note the following:

     -    These matters raise difficult and complicated factual and legal issues
          and are subject to many uncertainties and complexities, including the
          underlying facts of each matter; novel legal issues; variations
          between jurisdictions in which matters are being litigated, heard or
          investigated; differences in applicable laws and judicial
          interpretations; the length of time before many of these matters might
          be resolved by settlement, through litigation or otherwise; the fact
          that some of the lawsuits are putative class actions in which a class
          has not been certified and in which the purported class may not be
          clearly defined; the fact that some of the lawsuits involve
          multi-state class actions in which the applicable law(s) for the
          claims at issue is in dispute and therefore unclear; and the current
          challenging legal environment faced by large corporations and
          insurance companies.

     -    The outcome on these matters may also be affected by decisions,
          verdicts, and settlements, and the timing of such decisions, verdicts,
          and settlements, in other individual and class action lawsuits that
          involve the Company, other insurers, or other entities and by other
          legal, governmental, and regulatory actions that involve the Company,
          other insurers, or other entities.

     -    In the lawsuits, plaintiffs seek a variety of remedies including
          equitable relief in the form of injunctive and other remedies and
          monetary relief in the form of contractual and extra-contractual
          damages. In some cases, the monetary damages sought include punitive
          damages. Often specific information about the relief sought, such as
          the amount of damages, is not available because plaintiffs have not
          requested specific relief in their pleadings. In the Company's
          experience, when specific monetary demands are made in pleadings, they
          bear little relation to the ultimate loss, if any, to the Company.

     -    In connection with regulatory examinations and proceedings, government
          authorities may seek various forms of relief, including penalties,
          restitution and changes in business practices. The Company may not be
          advised of the nature and extent of relief sought until the final
          stages of the examination or proceeding.

     -    For the reasons specified above, it is often not possible to make
          meaningful estimates of the amount or range of loss that could result
          from the matters described below in the "Proceedings" subsection. The
          Company reviews these matters on an ongoing basis and follows the
          provisions of SFAS No. 5, "Accounting for Contingencies", when making
          accrual and disclosure decisions. When assessing reasonably possible
          and probable outcomes, the Company bases its decisions on its
          assessment of the ultimate outcome following all appeals.

     -    Due to the complexity and scope of the matters disclosed in the
          "Proceedings" subsection below and the many uncertainties that exist,
          the ultimate outcome of these matters cannot be reasonably predicted.
          In the event of an unfavorable outcome in one or more of these
          matters, the ultimate liability may be in excess of amounts currently
          reserved and may be material to the Company's operating results or
          cash flows for a particular quarterly or annual period. However, based
          on information currently known to it, management believes that the
          ultimate outcome of all matters described below as they are resolved
          over time is not likely to have a material adverse effect on the
          financial position of the Company.

PROCEEDINGS

     Legal proceedings involving Allstate agencies and AIC may impact the
Company, even when the Company is not directly involved, because the Company
sells its products through a variety of distribution channels including Allstate
agencies. Consequently, information about the more significant of these
proceedings is provided in the following paragraph.

     AIC is defending certain matters relating to its agency program
reorganization announced in 1999. These matters are in various stages of
development.

-    These matters include a lawsuit filed in 2001 by the U.S. Equal Employment
     Opportunity Commission ("EEOC") alleging retaliation under federal civil
     rights laws (the "EEOC I" suit) and a class action filed in 2001 by former
     employee agents alleging retaliation and age discrimination under the Age
     Discrimination in

                                       46
<Page>

     Employment Act ("ADEA"), breach of contract and ERISA violations (the
     "Romero I" suit). In 2004, in the consolidated EEOC I and Romero I
     litigation, the trial court issued a memorandum and order that, among other
     things, certified classes of agents, including a mandatory class of agents
     who had signed a release, for purposes of effecting the court's declaratory
     judgment that the release is voidable at the option of the release signer.
     The court also ordered that an agent who voids the release must return to
     AIC "any and all benefits received by the [agent] in exchange for signing
     the release." The court also stated that, "on the undisputed facts of
     record, there is no basis for claims of age discrimination." The EEOC and
     plaintiffs have asked the court to clarify and/or reconsider its memorandum
     and order and in January 2007, the judge denied their request. In June
     2007, the court granted AIC's motions for summary judgment. Following
     plaintiffs' filing of a notice of appeal, the Third Circuit issued an order
     in December 2007 stating that the notice of appeal was not taken from a
     final order within the meaning of the federal law and thus not appealable
     at this time. In March 2008, the Third Circuit decided that the appeal
     should not summarily be dismissed and that the question of whether the
     matter is appealable at this time will be addressed by the Court along with
     the merits of the appeal.

-    The EEOC also filed another lawsuit in 2004 alleging age discrimination
     with respect to a policy limiting the rehire of agents affected by the
     agency program reorganization (the "EEOC II" suit). In EEOC II, in 2006,
     the court granted partial summary judgment to the EEOC. Although the court
     did not determine that AIC was liable for age discrimination under the
     ADEA, it determined that the rehire policy resulted in a disparate impact,
     reserving for trial the determination on whether AIC had reasonable factors
     other than age to support the rehire policy. AIC's interlocutory appeal
     from the partial summary judgment was granted. In June 2008, the Eighth
     Circuit Court of Appeals affirmed summary judgment in the EEOC's favor. In
     September 2008, the Court of Appeals granted AIC's petition for rehearing
     EN BANC and vacated its earlier decision affirming the trial court's grant
     of summary judgment in favor of the EEOC. The Court of Appeals then
     dismissed the appeal, determining that it lacked jurisdiction to consider
     the appeal at this stage in the litigation.

-    AIC is also defending a certified class action filed by former employee
     agents who terminated their employment prior to the agency program
     reorganization. Plaintiffs allege that they were constructively discharged
     so that AIC could avoid paying ERISA and other benefits offered under the
     reorganization. They claim that the constructive discharge resulted from
     the implementation of agency standards, including mandatory office hours
     and a requirement to have licensed staff available during business hours.
     The court approved the form of class notice which was sent to approximately
     1,800 potential class members in November 2007. Fifteen individuals opted
     out. AIC's motions for judgment on the pleadings were partially granted. In
     May 2008, the court granted summary judgment in AIC's favor on all class
     claims. Plaintiffs moved for reconsideration and in the alternative to
     decertify the class. AIC opposed this motion and filed a motion for summary
     judgment with respect to the remaining non-class claim. In August 2008, the
     court denied plaintiffs' motion to reconsider and to decertify the class.
     In February 2009, plaintiffs moved to dismiss the sole remaining claim with
     prejudice which the court promptly granted ending this litigation in the
     trial court.

-    A putative nationwide class action has also been filed by former employee
     agents alleging various violations of ERISA, including a worker
     classification issue. These plaintiffs are challenging certain amendments
     to the Agents Pension Plan and are seeking to have exclusive agent
     independent contractors treated as employees for benefit purposes. This
     matter was dismissed with prejudice by the trial court, was the subject of
     further proceedings on appeal, and was reversed and remanded to the trial
     court in 2005. In June 2007, the court granted AIC's motion to dismiss the
     case. Following plaintiffs' filing of a notice of appeal, the Third Circuit
     issued an order in December 2007 stating that the notice of appeal was not
     taken from a final order within the meaning of the federal law and thus not
     appealable at this time. In March 2008, the Third Circuit decided that the
     appeal should not summarily be dismissed and that the question of whether
     the matter is appealable at this time will be addressed by the Court along
     with the merits of the appeal.

     In all of these various matters, plaintiffs seek compensatory and punitive
damages, and equitable relief. AIC has been vigorously defending these lawsuits
and other matters related to its agency program reorganization.

OTHER MATTERS
-------------

     Various other legal, governmental, and regulatory actions, including state
market conduct exams, and other governmental and regulatory inquiries 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 a number of lawsuits and proceedings, some of which involve claims for
substantial or indeterminate amounts. These actions are based on a variety of
issues and target a range of the Company's practices. The outcome of these
disputes is currently unpredictable. However, based on information currently
known to it and the existence of the reinsurance

                                       47
<Page>

agreements with ALIC, management believes that the ultimate outcome of all
matters described in this "Other Matters" subsection, in excess of amounts
currently reserved, as they are resolved over time is not likely to have a
material effect on the operating results, cash flows or financial position of
the Company.

9. INCOME TAXES

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

    The Internal Revenue Service is currently examining the Allstate Group's
2005 and 2006 federal income tax returns. The statute of limitations has expired
on years prior to 2005. Any adjustments that may result from IRS examinations of
tax returns are not expected to have a material effect on the results of
operations, cash flows or financial position of the Company.

    The Company had no liability for unrecognized tax benefits at December 31,
2008 or 2007 or January 1, 2007, and believes it is reasonably possible that the
liability balance will not significantly increase within the next twelve months.
No amounts have been accrued for interest or penalties.

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

($ IN THOUSANDS)                             2008     2007
                                             -----   -------
DEFERRED ASSETS
Unrealized net capital losses                $ 119   $    --
Other assets                                    20        --
                                             -----   -------
       Total deferred assets                   139        --
                                             -----   -------
DEFERRED LIABILITIES
Unrealized net capital gains                    --    (2,223)
Difference in tax bases of investments        (139)     (254)
Other liabilities                               --        (2)
                                             -----   -------
       Total deferred liabilities             (139)   (2,479)
                                             -----   -------
              Net deferred liabilities       $  --   $(2,479)
                                             =====   =======

     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 years ended December 31 are as
follows:

($ IN THOUSANDS)                   2008     2007     2006
                                  ------   ------   ------
Current                           $7,054   $4,810   $4,412
Deferred                            (136)      25       21
                                  ------   ------   ------
     Total income tax expense     $6,918   $4,835   $4,433
                                  ======   ======   ======

     The Company paid income taxes of $4.9 million, $4.4 million and $4.8
million in 2008, 2007 and 2006, respectively.

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

                                    2008    2007    2006
                                    ----    ----    ----
Statutory federal income tax rate   35.0%   35.0%   35.0%
Other                               (0.2)   (0.1)   (0.1)
                                    ----    ----    ----
Effective income tax rate           34.8%   34.9%   34.9%
                                    ====    ====    ====

                                       48
<Page>

10.  STATUTORY FINANCIAL INFORMATION

     The Company prepares its statutory-basis financial statements in conformity
with accounting practices prescribed or permitted by the State of
Nebraska. The State of Nebraska requires insurance companies to
prepare statutory-basis financial statements in conformity with the NAIC
Accounting Practices and Procedures Manual, subject to any deviations prescribed
or permitted by the State of Nebraska insurance commissioner.
Prescribed statutory accounting practices include a variety of publications of
the NAIC, as well as state laws, regulations and general administrative rules.
Permitted statutory accounting practices encompass all accounting practices not
so prescribed.

     Statutory accounting practices differ from GAAP primarily since they
require charging policy acquisition and certain sales inducement costs to
expense as incurred, establishing life insurance reserves based on different
actuarial assumptions, and valuing certain investments and establishing deferred
taxes on a different basis.

     Statutory net income for 2008, 2007, and 2006 was $7.8 million, $9.1
million and $9.1 million, respectively. Statutory capital and surplus was $278.8
million and $282.9 million as of December 31, 2008 and 2007, respectively.

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 payment of shareholder dividends by the Company without the prior approval
of the state insurance regulator is limited to formula amounts based on net
income and capital and surplus, determined in conformity with statutory
accounting practices, 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 2009 without prior approval of the Nebraska Department of
Insurance is $27.9 million. In the twelve-month period beginning January 1,
2008, the Company did not pay any dividends.

                                       49
<Page>

11.  OTHER COMPREHENSIVE (LOSS) INCOME

     The components of other comprehensive (loss) income on a pre-tax and
after-tax basis for the years ended December 31 are as follows:

<Table>
<Caption>
($ IN THOUSANDS)                                                                     2008
                                                                      -----------------------------------
                                                                                                  After-
                                                                      Pre-tax         Tax          tax
                                                                      -------       -------       -------
   <S>                                                                <C>           <C>           <C>
   Unrealized net holding losses arising during the period            $(3,078)      $ 1,077       $(2,001)
   Less: reclassification adjustment of realized capital gains
     and losses                                                         3,615        (1,265)        2,350
                                                                      -------       -------       -------
   Unrealized net capital gains and losses                             (6,693)        2,342        (4,351)
                                                                      -------       -------       -------
   Other comprehensive loss                                           $(6,693)      $ 2,342       $(4,351)
                                                                      =======       =======       =======

<Caption>
                                                                                     2007
                                                                      -----------------------------------
                                                                                                   After-
                                                                      Pre-tax         Tax           tax
                                                                      -------       -------        ------
   <S>                                                                 <C>          <C>            <C>
   Unrealized net holding gains arising during the period              $6,211       $(2,173)       $4,038
   Less: reclassification adjustment of realized capital gains
     and losses                                                          (414)          145          (269)
                                                                       ------       -------        ------
   Unrealized net capital gains and losses                              6,625        (2,318)        4,307
                                                                       ------       -------        ------
   Other comprehensive income                                          $6,625       $(2,318)       $4,307
                                                                       ======       =======        ======

<Caption>
                                                                                     2006
                                                                      -----------------------------------
                                                                                                   After-
                                                                      Pre-tax         Tax           tax
                                                                      -------       -------       -------
<S>                                                                   <C>              <C>        <C>
   Unrealized net holding losses arising during the period            $(2,601)         $910       $(1,691)
   Less: reclassification adjustment of realized capital gains
     and losses                                                        (1,240)          434          (806)
                                                                      -------          ----       -------
   Unrealized net capital gains and losses                             (1,361)          476          (885)
                                                                      -------          ----       -------
   Other comprehensive loss                                           $(1,361)         $476       $  (885)
                                                                      =======          ====       =======
</Table>

                                       50
<Page>

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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, 2008 and 2007, 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, 2008. Our audits also included the
financial statement schedules listed in the Index at Item 15. These financial
statements and financial statement schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion on the
financial statements and financial statement schedules based on our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. 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 Lincoln Benefit Life Company as of December
31, 2008 and 2007, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 2008, in conformity with
accounting principles generally accepted in the United States of America. Also,
in our opinion, such financial statement schedules, when considered in relation
to the basic financial statements taken as a whole, present fairly in all
material respects the information set forth therein.


/s/ Deloitte & Touche LLP

Chicago, Illinois
March 17, 2009

                                       51
<Page>

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

None.

ITEM 9A.  CONTROLS AND PROCEDURES

     EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. We maintain disclosure
controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934. Under the supervision and with the
participation of our management, including our principal executive officer and
principal financial officer, we conducted an evaluation of the effectiveness of
our disclosure controls and procedures as of the end of the period covered by
this report. Based upon this evaluation, the principal executive officer and the
principal financial officer concluded that our disclosure controls and
procedures are effective in providing reasonable assurance that material
information required to be disclosed in our reports filed with or submitted to
the Securities and Exchange Commission under the Securities Exchange Act is
recorded, processed, summarized and reported within the time periods specified
by the Securities Exchange Act and made known to management, including the
principal executive officer and the principal financial officer, as appropriate
to allow timely decisions regarding required disclosure.

     MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING.
Management is responsible for establishing and maintaining adequate internal
control over financial reporting as defined in Rule 13a-15(f) under the
Securities Exchange Act of 1934.

     Under the supervision and with the participation of our management,
including our principal executive officer and principal financial officer, we
conducted an evaluation of the effectiveness of our internal control over
financial reporting as of December 31, 2008 based on the criteria related to
internal control over financial reporting described in "Internal Control -
Integrated Framework" issued by the Committee of Sponsoring Organizations of the
Treadway Commission. Based on our evaluation, management concluded that our
internal control over financial reporting was effective as of December 31, 2008.

     This annual report does not include an attestation report of the Company's
registered public accounting firm regarding internal control over financial
reporting. Management's report was not subject to attestation by the Company's
registered public accounting firm pursuant to temporary rules of the Securities
and Exchange Commission that permit the Company to provide only management's
report in this annual report.

     CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING. During the fiscal
quarter ended December 31, 2008, there have been no changes in our internal
control over financial reporting that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.

ITEM 9B. OTHER INFORMATION

None.

                                       52
<Page>

PART III

ITEM 14.  PRINCIPAL ACCOUNTING FEES AND SERVICES

(1), (2), (3) AND (4) DISCLOSURE OF FEES -

     The following fees have been, or are anticipated to be billed by Deloitte &
Touche LLP, the member firms of Deloitte & Touche Tohmatsu, and their respective
affiliates, for professional services rendered to us for the fiscal years ending
December 31, 2008 and 2007.

                              2008      2007(c)
                            --------   --------
Audit fees (a)              $220,257   $221,784
All other fees (b)                --     30,580
                            --------   --------
TOTAL FEES                  $220,257   $252,364
                            ========   ========

(a)  Fees for audits of annual financial statements including financial
     statements, reviews of quarterly financial statements, statutory audits,
     attest services, comfort letters, consents and review of documents filed
     with the Securities and Exchange Commission. These fees are ceded to ALIC
     under the Company's reinsurance agreements.

(b)  All other fees relate to coordination of work for departments of insurance
     exams.

(c)  Total fees for 2007 have been adjusted to add an additional $5,207 of audit
     fees not charged until 2008 and to reclassify certain fees.

(5)(i) AND (ii) AUDIT COMMITTEE'S PRE-APPROVAL POLICIES AND PROCEDURES -

     The Audit Committee of The Allstate Corporation has established
pre-approval policies and procedures for itself and its consolidated
subsidiaries, including Lincoln Benefit. Those policies and procedures are
incorporated into this Item 14 (5) by reference to Exhibit 99 - The Allstate
Corporation Policy Regarding Pre-Approval of Independent Registered Public
Accountant's Services (the "Pre-Approval Policy"). In addition, in 2005 the
Audit Committee of Allstate Life adopted the Pre-Approval Policy, as it may be
amended from time to time by the Audit Committee or the Board of Directors of
the Corporation, as its own policy, provided that the Designated Member referred
to in such policy need not be independent because the New York Stock Exchange
corporate governance standards do not apply to Allstate Life. The Board of
Directors of Lincoln Benefit has delegated to the Audit Committee of ALIC the
authority to approve services to be provided by Lincoln Benefit's independent
auditor. All of the services provided by Deloitte & Touche LLP to Lincoln
Benefit in 2008 and 2007 were approved by The Allstate Corporation and Allstate
Life Audit Committees.

                                       53
<Page>

PART IV

ITEM 15. (A) (1) EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

     The following financial statements, notes thereto and related information
of Lincoln Benefit Life Company are included in Item 8.

     Statements of Operations and Comprehensive Income
     Statements of Financial Position
     Statements of Shareholder's Equity
     Statements of Cash Flows
     Notes to Financial Statements
     Report of Independent Registered Public Accounting Firm

ITEM 15. (A) (2)

     The following additional financial statement schedules are furnished
     herewith pursuant to the requirements of Form 10-K.

<Table>
<Caption>
     Lincoln Benefit Life Company                                                       Page
     ----------------------------                                                       ----
     <S>                                                                                <C>
     Schedules required to be filed under provisions of Regulation S-X Article 7:

     Schedule I - Summary of Investments - Other Than Investments in Related Parties    S-1
     Schedule IV - Reinsurance                                                          S-2
</Table>

     All other schedules are omitted because they are not applicable, or not
     required, or because the required information is included in the Financial
     Statements or notes thereto.

ITEM 15. (A) (3)

     The following is a list of the exhibits filed as part of this Form 10-K.
     The SEC file number for the exhibits incorporated by reference is
     333-111553 except as otherwise noted.

Exhibit No.                                              Description
-----------                                              -----------

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 effective
          March 10, 2006. Incorporated herein by reference to Exhibit 3.2 to
          Lincoln Benefit Life Company's Quarterly Report on Form 10-Q for the
          quarter ended March 31, 2006.

10.1      Form of Investment Management Agreement among Allstate Investments,
          LLC, Allstate Insurance Company, The Allstate Corporation and certain
          affiliates effective January 1, 2007. Incorporated herein by reference
          to Exhibit 10.12 to Allstate Life Insurance Company's Annual Report on
          Form 10-K for 2007. (SEC File No. 000-31248)

10.2      Form of Tax Sharing Agreement among The Allstate Corporation and
          certain affiliates dated as of November 12, 1996. Incorporated herein
          by reference to Exhibit 10.24 to Allstate Life Insurance Company's
          Annual Report on Form 10-K for 2007. (SEC File No. 000-31248)

                                       54
<Page>

10.3      Supplemental Intercompany Tax Sharing Agreement between Allstate Life
          Insurance Company and Lincoln Benefit Life Company effective December
          21, 2000.

10.4      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.

10.5      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.

10.6      Amendment No. 2 entered into November 8, 2002 to the Cash Management
          Services Master Agreement between Allstate Insurance Company, Allstate
          Bank and Allstate Motor Club, Inc. dated March 16, 1999. Incorporated
          herein by reference to Exhibit 10.19 to Allstate Life Insurance
          Company's Annual Report on Form 10-K filed for 2007. (SEC File No.
          000-31248)

10.7      Premium Depository Service Supplement dated as of September 30, 2005
          to Cash Management Services Master Agreement between Allstate
          Insurance Company, Allstate Bank, Allstate Motor Club, Inc. and
          certain other parties. Incorporated herein by reference to Exhibit
          10.20 to Allstate Life Insurance Company's Annual Report on Form 10-K
          filed for 2007. (SEC File No. 000-31248)

10.8      Variable Annuity Service Supplement dated November 10, 2005 to Cash
          Management Services Agreement between Allstate Bank, Allstate Life
          Insurance Company of New York and certain other parties. Incorporated
          herein by reference to Exhibit 10.21 to Allstate Life Insurance
          Company's Annual Report on Form 10-K filed for 2007. (SEC File No.
          000-31248)

10.9      Sweep Agreement Service Supplement dated as of October 11, 2006 to
          Cash Management Services Master Agreement between Allstate Life
          Insurance Company, Allstate Bank, Allstate Motor Club, Inc. and
          certain other companies. Incorporated herein by reference to Exhibit
          10.22 to Allstate Life Insurance Company's Annual Report on Form 10-K
          filed for 2007. (SEC File No. 000-31248)

10.10     Form of Amended and Restated Service and Expense Agreement between
          Allstate Insurance Company, The Allstate Corporation and certain
          affiliates effective January 1, 2004. Incorporated herein by reference
          to Exhibit 10.1 to Allstate Life Insurance Company's Annual Report on
          Form 10-K for 2007. (SEC File No. 000-31248)

10.11     Administrative Services Agreement between Lincoln Benefit Life Company
          and Allstate Life Insurance Company effective June 1, 2006.
          Incorporated herein by reference to Exhibit 10.1 to Lincoln Benefit
          Life Company's Quarterly Report on Form 10-Q for the quarter ended
          June 30, 2006.

10.12     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.

10.13     Amended and Restated Principal Underwriting Agreement between Lincoln
          Benefit Life Company and ALFS, Inc. effective June 1, 2006.
          Incorporated herein by reference to Exhibit 10.1 to Lincoln Benefit
          Life Company's Current Report on Form 8-K filed December 20, 2007.

                                       55
<Page>

10.14     Selling Agreement between Lincoln Benefit Life Company, ALFS, Inc.
          (f/k/a Allstate Financial Services, Inc.) and Allstate Financial
          Services, LLC (f/k/a LSA Securities, Inc.) effective August 2, 1999.
          Incorporated herein by reference to Exhibit 10.8 to Allstate Life
          Insurance Company's Annual Report on Form 10-K for 2003. (SEC File No.
          000-31248)

10.15     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.

10.16     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.

10.17     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.

10.18     Intercompany Loan Agreement among The Allstate Corporation, Allstate
          Life Insurance Company, Lincoln Benefit Life Company and other certain
          subsidiaries of The Allstate Corporation dated February 1, 1996.
          Incorporated herein by reference to Exhibit 10.24 of Allstate Life
          Insurance Company's Annual Report on Form 10-K for 2006. (SEC File No.
          000-31248)

10.19     Form of Service Agreement between Lincoln Benefit Life Company and
          Allstate Assignment Company effective June 25, 2001. Incorporated
          herein by reference to Exhibit 10.22 of Lincoln Benefit Life Company's
          Annual Report on Form 10-K for 2007.

10.20     First Amendment to Service Agreement between Lincoln Benefit Life
          Company and Allstate Assignment Company effective December 1, 2007.
          Incorporated herein by reference to Exhibit 10.23 of Lincoln Benefit
          Life Company's Annual Report on Form 10-K for 2007.

10.21     Agreement for the Settlement of State and Local Tax Credits among
          Allstate Insurance Company and certain affiliates effective January 1,
          2007. Incorporated herein by reference to Exhibit 10.1 to Lincoln
          Benefit Life Company's Current Report on Form 8-K filed February 21,
          2008.

10.22     Administrative Services Agreement between ALFS, Inc., Allstate Life
          Insurance Company, Lincoln Benefit Life Company and Charter National
          Life Insurance Company effective January 1, 2000.

23        Consent of Independent Registered Public Accounting Firm

31.1      Rule 15d-14(a) Certification of Principal Executive Officer

31.2      Rule 15d-14(a) Certification of Principal Financial Officer

32        Section 1350 Certifications

99        The Allstate Corporation Policy Regarding Pre-Approval of Independent
          Registered Public Accountant's Services effective February 23, 2009.
          Incorporated herein by reference to Exhibit 99 to Allstate Life
          Insurance Company's Annual Report on Form 10-K for 2008. (SEC File No.
          000-31248)

                                       56
<Page>

ITEM 15. (b)

The exhibits are listed in Item 15. (a) (3) above.

ITEM 15. (c)

The financial statement schedules are listed in Item 15. (a) (2) above.

                                       57
<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 18, 2009               /s/ SAMUEL H. PILCH
                                      -------------------
                                      Samuel H. Pilch
                                      (Controller)


     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 capacity and on the dates indicated.

SIGNATURE                                   TITLE                     DATE
----------------------------- ----------------------------------- --------------

/s/ FREDERICK F. CRIPE        Chairman, Chief Executive           March 18, 2009
----------------------------- Officer and a Director
Frederick F. Cripe            (Principal Executive Officer)

/s/ JOHN C. PINTOZZI          Senior Vice President, Chief        March 18, 2009
----------------------------- Financial Officer and a Director
John C. Pintozzi              (Principal Financial Officer)

/s/ LAWRENCE W. DAHL          President, Chief Operating          March 18, 2009
----------------------------- Officer and a Director
Lawrence W. Dahl

                              Director                            March 18, 2009
-----------------------------
Matthew S. Easley

/s/ SUSAN L. LEES             Director                            March 18, 2009
-----------------------------
Susan L. Lees

/s/ JOHN C. LOUNDS            Director                            March 18, 2009
-----------------------------
John C. Lounds

                                       58
<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 Allstate
Life Insurance Company. 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.

                                       59
<Page>

                          LINCOLN BENEFIT LIFE COMPANY
  SCHEDULE I - SUMMARY OF INVESTMENTS OTHER THAN INVESTMENTS IN RELATED PARTIES
                                DECEMBER 31, 2008

<Table>
<Caption>
($ IN THOUSANDS)                                                                                 AMOUNTS AT
                                                                                                   WHICH
                                                                                                  SHOWN ON
                                                                                                  BALANCE
                                                                           COST     FAIR VALUE     SHEET
                                                                         --------   ----------  ------------
<S>                                                                      <C>         <C>           <C>
TYPE OF INVESTMENT
Fixed maturities:
   Bonds:
      United States government, government agencies                      $ 75,374    $ 78,816      $ 78,816
        and authorities
      States, municipalities and political subdivisions                       502         499           499
      Public utilities                                                      4,087       3,920         3,920
      All other corporate bonds                                            73,105      71,783        71,783
   Mortgage-backed securities                                              46,720      48,351        48,351
   Asset-backed securities                                                  6,983       6,999         6,999
   Commercial mortgage-backed securities                                   22,896      18,960        18,960
                                                                         --------    --------      --------
      Total fixed maturities                                              229,667     229,328       229,328
                                                                         --------    --------      --------

Short-term investments                                                     80,705      80,703        80,703
                                                                         --------    --------      --------
      Total investments                                                  $310,372    $310,031      $310,031
                                                                         ========    ========      ========
</Table>

                                       S-1
<Page>

                          LINCOLN BENEFIT LIFE COMPANY
                            SCHEDULE IV--REINSURANCE

<Table>
<Caption>
($ IN THOUSANDS)                                                                                     PERCENTAGE
                                                                                                     OF AMOUNT
                                       GROSS                                             NET          ASSUMED
YEAR ENDED DECEMBER 31, 2008           AMOUNT         CEDED (1)         ASSUMED         AMOUNT         TO NET
                                     ------------    ------------     ----------      ----------     ----------
<S>                                  <C>             <C>              <C>             <C>                <C>
Life insurance in force              $337,177,898    $344,250,029     $7,072,131      $      --          --
                                     ============    ============     ==========      =========
Premiums and contract charges:
          Life and annuities         $  1,017,339    $  1,025,915     $    8,576      $      --          --
          Accident and health             121,408         121,408             --             --          --
                                     ------------    ------------     ----------      ---------
                                     $  1,138,747    $  1,147,323     $    8,576      $      --          --
                                     ============    ============     ==========      =========

YEAR ENDED DECEMBER 31, 2007

Life insurance in force              $315,111,039    $322,635,416     $7,524,377      $      --          --
                                     ============    ============     ==========      =========

Premiums and contract charges:
         Life and annuities          $    922,355    $    931,487     $    9,132      $      --          --
         Accident and health              116,316         116,316             --             --          --
                                     ------------    ------------     ----------      ---------
                                     $  1,038,671    $  1,047,803     $    9,132      $      --          --
                                     ============    ============     ==========      =========

YEAR ENDED DECEMBER 31, 2006

Life insurance in force              $283,305,442    $290,974,479     $7,669,037      $      --          --
                                     ============    ============     ==========      =========

Premiums and contract charges:
         Life and annuities          $    822,872    $    833,110     $   10,238      $      --          --
         Accident and health              121,951         121,951             --             --          --
                                     ------------    ------------     ----------      ---------
                                     $    944,823    $    955,061     $   10,238      $      --          --
                                     ============    ============     ==========      =========
</Table>

(1)  No reinsurance or coinsurance income was netted against premiums ceded in
     2008, 2007 and 2006.

                                       S-2