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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, 2006

                                       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 SECURITIES
EXCHANGE ACT OF 1934: 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, 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, OR A NON-ACCELERATED FILER. SEE DEFINITION OF "ACCELERATED
FILER AND LARGE ACCELERATED FILER" IN RULE 12b-2 OF THE EXCHANGE ACT.

         LARGE ACCELERATED FILER  ACCELERATED FILER  NON-ACCELERATED FILER
                 |_|                    |_|                   |X|

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 13, 2007, 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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                                TABLE OF CONTENTS

<Table>
<Caption>
                                                                                                  PAGE
                                                                                                  ----
<S>                                                                                                <C>
PART I
Item 1.    Business                                                                                  1
Item 1A.   Risk Factors                                                                              2
Item 2.    Properties                                                                                6
Item 3.    Legal Proceedings                                                                         6
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                                                            6
Item 6.    Selected Financial Data *                                                               N/A
Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operation      7
Item 7A.   Quantitative and Qualitative Disclosures about Market Risk                               16
Item 8.    Financial Statements and Supplementary Data                                              17
Item 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure     43
Item 9A.   Controls and Procedures                                                                  43
Item 9B.   Other Information                                                                        43
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                                                   44
PART IV
Item 15.   Exhibits, Financial Statement Schedules                                                  45
           Signatures                                                                               48
           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      49
           Financial Statement Schedules                                                           S-1
</Table>

*    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 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 provides insurance products to more than 17 million households
through a distribution network that utilizes a total of 14,800 exclusive
agencies and exclusive financial specialists in the United States and Canada.
Allstate is the second-largest personal property and casualty insurer in the
United States on the basis of 2005 statutory premiums earned. In addition,
according to A.M. Best, it is the nation's 13th largest issuer of life insurance
business on the basis of 2005 ordinary life insurance in force and 16th largest
on the basis of 2005 statutory admitted assets.

     In this annual report on Form 10-K, we occasionally refer to statutory
financial information that has been prepared in accordance with the National
Association of Insurance Commissioners ("NAIC") Accounting Practices and
Procedure Manual ("Manual"). All domestic U.S. insurance companies are required
to prepare statutory-basis financial statements in accordance with the Manual.
As a result, industry data is available that enables comparisons between
insurance companies, including competitors that are not subject to the
requirement to publish financial statements on the basis of accounting
principles generally accepted in the U.S. ("GAAP"). We frequently use industry
publications containing statutory financial information to assess our
competitive position.

     The Company sells 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. Our principal products are deferred and immediate
fixed annuities, interest-sensitive, traditional and variable life
insurance, and accident and health insurance. We sell products through
multiple intermediary distribution channels, including Allstate exclusive
agencies, independent agents (including master brokerage agencies), and
broker/dealers.

     We compete principally on the basis of the scope of our distribution
systems, the breadth of our product offerings, the recognition of our brands,
our financial strength and ratings, our product features and prices, and the
level of customer service that we provide. In addition, with respect to variable
annuity and 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, 2006, there were
approximately 690 groups of life insurance companies in the United States, most
of which offered one or more similar products. Competitive pressure is growing
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.


                                       1

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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 and adjuster
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 discussion of statutory
financial information, see Note 10 of the Financial Statements. For 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,
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.
Our business operations could also be affected by additional factors that are
not presently known to us or that we currently consider to be immaterial to our
operations.

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 Company, which are ceded to ALIC. Management establishes target returns for
each product based upon these factors and the average amount of capital that the
company must hold to support in-force contracts, satisfy rating agencies and
meet regulatory requirements. We monitor and manage our pricing and overall
sales mix to achieve target returns on a portfolio basis. 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 margins, 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.


                                       2

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CHANGES IN RESERVE ESTIMATES MAY REDUCE PROFITABILITY OF BUSINESS 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 financial condition and 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

     ALIC's ability to manage the investment margin for spread-based products,
such as fixed annuities and institutional products, 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, prepaid
or been sold may be reinvested at lower yields, reducing investment margin.
Lowering interest crediting rates in such an environment can offset decreases in
investment yield on some products. However, these changes could be limited by
market conditions, regulatory 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 surrenders and
withdrawals for these products. 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. For certain
products, principally fixed annuity and interest-sensitive life products, the
earned rate on assets could lag behind rising market yields. ALIC may react to
market conditions by increasing crediting rates, which could narrow spreads.
Unanticipated surrenders could result in deferred policy acquisition costs
("DAC") unlocking or affect the recoverability of DAC and thereby reduce the
profitability of 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 financial position 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 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


                                       3

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business, operating results or financial condition. The ability of banks to
affiliate with insurers may have a material adverse effect on all of our product
lines by substantially increasing the number, size and financial strength of
potential competitors. Furthermore, certain competitors operate using a mutual
insurance company structure and therefore, may have dissimilar profitability and
return targets.

WE ARE SUBJECT TO MARKET RISK AND DECLINES IN CREDIT QUALITY

     We are subject to market risk, the risk that we will incur losses due to
adverse changes in interest rates and equity prices. In addition, we are subject
to potential declines in credit quality, either related to issues specific to
certain industries or to a weakening in the economy in general. For additional
information on market risk, see the "Market Risk" section of Management's
Discussion and Analysis.

     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. An increase in market interest rates could have an
adverse effect on the value of our investment portfolio. A decline in the
quality of our investment portfolio as a result of adverse economic conditions
or otherwise could cause additional realized losses on securities, including
realized losses.

CONCENTRATION OF OUR INVESTMENT PORTFOLIOS IN ANY PARTICULAR SEGMENT OF THE
ECONOMY MAY HAVE ADVERSE EFFECTS

     The concentration of our investment portfolios in any particular industry,
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 position. While we seek to mitigate this risk by having a broadly
diversified portfolio, 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 portfolios to the extent that the
portfolios are concentrated rather than diversified.

WE MAY SUFFER LOSSES FROM LITIGATION

     As is typical for a large company, the Allstate Group is involved in a
substantial amount of litigation, including class action litigation challenging
a range of company practices and coverage provided by our 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. For a description of our current legal proceedings,
see Note 8 of the financial statements.

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

     As an insurance company, 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,
the National Association of Securities Dealers, 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 regulator's or enforcement
authority'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
optional federal chartering of insurance companies. We can


                                       4

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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 reinsurance or purchase new reinsurance protection in amounts that we
consider sufficient and at prices that we 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

     The collectibility of reinsurance recoverables is subject to uncertainty
arising from a number of factors, including 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, additional
disruptions to commerce and reduced economic activity. Some of the assets in our
investment portfolio may be adversely affected by declines in the equity markets
and reduced economic activity caused by the continued threat of terrorism. We
seek to mitigate the potential impact of terrorism on our commercial mortgage
portfolio by limiting geographical concentrations in key metropolitan areas and
by requiring terrorism insurance to the extent that it is commercially
available. Additionally, in the event that a terrorist act occurs, we could be
adversely affected, depending on the nature of the event.

ANY DECREASE IN OUR FINANCIAL STRENGTH RATINGS MAY HAVE AN ADVERSE EFFECT ON OUR
COMPETITIVE POSITION

     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 insurance financial strength ratings of both
AIC, ALIC and the Company are A+, AA and Aa2 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 multiple
level 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 is periodically revised and/or expanded.
Accordingly, we are required to adopt new or revised accounting standards from
time to time issued by recognized authoritative bodies, including the FASB. It
is possible that future changes we are required to adopt could change the
current accounting treatment that we apply to our financial statements and that
such changes could have a material adverse effect on our financial condition or
operating results that we cede to ALIC. For a description of potential changes
in accounting standards that could affect us currently, see Note 2 of the
financial statements.


                                       5

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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.

ITEM 2. PROPERTIES

     We occupy office space in Lincoln, Nebraska that is owned by AIC. Expenses
associated with this facility are allocated to us on a direct basis. We also
lease office space in Lincoln for general operations, file storage and
information technology support.

ITEM 3. LEGAL PROCEEDINGS

     Information 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 The Allstate Corporation. Within the past three years, we have
not sold or repurchased any of our equity securities.

     From January 1, 2005 through March 12, 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.


                                       6

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

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 financial information is
used internally to evaluate performance and 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, stability of long-term
          returns, cash flows and asset duration; and

     -    For financial condition: our financial strength ratings and capital
          positions; and

     -    For product distribution: profitably growing distribution partner
          relationships and Allstate exclusive agencies sales of all products
          and services, which we cede to ALIC under the terms of the reinsurance
          agreements.

APPLICATION OF CRITICAL ACCOUNTING ESTIMATES

     We have identified two accounting policies that require us to make
assumptions and estimates that are significant to the financial statements. It
is reasonably likely that changes in these assumptions and 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 policies
follows. For a more detailed discussion of the effect of these estimates on our
financial statements, and the judgments and estimates related to these
estimates, see the referenced sections of Management's Discussion and Analysis
of Financial Condition and Results of Operation ("MD&A"). For a complete summary
of our significant accounting policies see Note 2 of the financial statements.

INVESTMENT VALUATION The fair value of publicly traded fixed income securities
is based on independent market quotations.

     For investments classified as available for sale, the difference between
fair value and amortized cost for fixed income securities, net of deferred
income taxes, 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 declines in
fair values are deemed other-than-temporary. The assessment of
other-than-temporary impairment of a security's fair value is performed on a
portfolio review as well as a case-by-case basis considering a wide range of
factors. For our portfolio review evaluations, we ascertain whether there are
any approved programs involving the disposition of investments such as changes
in duration, revision to strategic asset allocations and liquidity actions; and
any dispositions anticipated by the portfolio managers. In these instances, we
recognize impairment on securities being considered for these approved planned
actions if the security is in an unrealized loss position. 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
duration 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 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 later
determine that an impairment is other-than-temporary, including 1) general
economic conditions that are worse than previously assumed or that have a
greater adverse effect on a particular issuer than originally estimated; 2)
changes in the facts and circumstances related to a particular issuer's ability
to meet all of its contractual obligations; and 3) changes in facts and
circumstances or new information that we obtained which causes a change in our
ability or intent to hold a security to maturity or until it recovers in value.
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,


                                       7

<Page>

while potentially significant to net income, would not have a significant effect
on shareholder's equity since our portfolio is carried at fair value and as a
result, any related unrealized loss would already be reflected as accumulated
other comprehensive income in shareholder's equity.

     For a more detailed discussion of the risks relating to changes in
investment values and levels of investment impairment, and the potential causes
of such changes, see Note 4 of the financial statements and the Financial
Position, Market Risk, and Forward-looking Statements and Risk Factors sections
of this document.

RESERVE FOR LIFE-CONTINGENT CONTRACT BENEFITS ESTIMATION Long-term actuarial
assumptions of future investment yields, mortality, morbidity, policy
terminations and expenses are used when establishing the reserve for
life-contingent contract benefits. These assumptions, which for traditional life
insurance are applied using the net level premium method, include provisions for
adverse deviation and generally vary by such characteristics as type of
coverage, year of issue and policy duration. Future investment yield assumptions
are determined at the time the policy is issued based upon prevailing investment
yields as well as estimated reinvestment yields. Mortality, morbidity and policy
termination assumptions are based on our experience and industry experience
prevailing at the time the policies are issued. Expense assumptions include the
estimated effects of inflation and expenses to be incurred beyond the
premium-paying period.

     For further discussion of these policies see Note 6 of the financial
statements and the Forward-looking Statements 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 The Allstate Corporation
(the "Corporation" or "Allstate"). ALIC, along with Lincoln Benefit and its
other wholly owned subsidiaries provide life insurance, retirement and
investment products to individual and institutional customers. Our mission is to
assist financial services professionals in meeting their clients' financial
protection, retirement and investment needs by providing consumer-focused
products delivered with reliable and efficient service.

     We plan to continue offering a suite of products that protects consumers
financially and helps them better prepare for retirement. Our products include
deferred and immediate fixed annuities; and interest-sensitive, traditional and
variable life insurance. These products are sold through several distribution
channels including Allstate exclusive agencies, independent agents (including
master brokerage agencies), and broker/dealers.

NET INCOME

                                    FOR THE YEAR ENDED DECEMBER 31,
                                    -------------------------------
(IN THOUSANDS)                        2006       2005        2004
                                    --------   --------   ---------
Net investment income                $13,948    $13,632    $11,234
Realized capital gains and losses     (1,255)      (174)         5
Income tax expense                     4,433      4,671      3,925
                                     -------    -------    -------
Net income                           $ 8,260    $ 8,787    $ 7,314
                                     =======    =======    =======

     We have reinsurance agreements whereby 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 earned on 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.


                                       8

<Page>

NET INCOME decreased 6.0% in 2006 compared to 2005 and increased 20.1% in 2005
compared to 2004. The decrease in 2006 was due to higher net realized capital
losses, partially offset by higher net investment income and lower income tax
expense. The increase in 2005 was due to higher net investment income, partially
offset by realized capital losses in the current year compared to realized
capital gains in the prior year.

NET INVESTMENT INCOME increased 2.3% in 2006 compared to 2005 and 21.3% in 2005
compared to 2004. The increase in 2006 was primarily due to higher average
invested assets and higher short-term market interest rates. The increase in
2005 was due to higher average invested assets due to a capital contribution
that was received late in 2004 and higher portfolio yields.

NET REALIZED CAPITAL LOSSES were $1.3 million and $174 thousand in 2006 and
2005, respectively. Net realized capital gains of $5 thousand were recognized in
2004. The realized capital gains and losses for 2006, 2005 and 2004 were
attributable to dispositions of fixed income securities. For further discussion
of realized capital gains and losses see the Realized Capital Gains and Losses
section of the MD&A.

FINANCIAL POSITION

(IN THOUSANDS)                                     2006          2005
                                                -----------   -----------
Fixed income securities (1)                     $   268,058   $   267,545
Short-term                                            8,264         3,824
                                                -----------   -----------
   Total investments                            $   276,322   $   271,369
                                                ===========   ===========
Cash                                            $    23,352   $     8,349
Reinsurance recoverable from ALIC                19,131,870    18,350,983
Reinsurance recoverable from non-affiliates       1,203,864     1,019,850
Contractholder funds                             18,195,622    17,462,104
Reserve for life-contingent contract benefits     2,126,455     1,892,194
Separate accounts assets and liabilities          3,097,550     2,718,509

----------
(1)  Fixed income securities are carried at fair value. Amortized cost for these
     securities was $268.3 million and $266.5 million at December 31, 2006 and
     2005, respectively.

     Total investments increased to $276.3 million at December 31, 2006 from
$271.4 million at December 31, 2005, primarily due to positive cash flows from
operating activities, partially offset by unrealized capital losses on fixed
income securities at December 31, 2006 compared to unrealized capital gains at
December 31, 2005.

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, 2006 and
2005.

     Fixed income securities issued by U.S. government agencies and U.S.
government sponsored agencies comprised 44% of the fixed income securities
portfolio and totaled $118.0 million at December 31, 2006, all of which were
rated investment grade.

     Municipal bonds, primarily tax-exempt securities, totaled $533 thousand,
all of which were rated investment grade at December 31, 2006. The municipal
bond portfolio was insured by one bond insurer and accordingly has a Moody's
equivalent rating of Aaa. Corporate bonds totaled $73.4 million, all of which
were rated investment grade at December 31, 2006.

     Mortgage-backed securities ("MBS") totaled $29.2 million, all of which were
investment grade at December 31, 2006. The credit risk associated with MBS is
mitigated due to the fact that 94.7% 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. For the remaining
portion of the portfolio not guaranteed by U.S. government agencies or entities,
all had a Moody's rating of Aaa or a Standard & Poor's rating of AAA, the
highest rating category. The MBS portfolio is subject to interest rate risk
since price volatility and ultimate realized yield are affected by the rate of
prepayment of the underlying mortgages.


                                       9

<Page>

     Commercial Mortgage-backed securities ("CMBS") totaled $32.4 million at
December 31, 2006. CMBS investments primarily represent pools of commercial
mortgages, broadly diversified across property types and geographical area. The
CMBS portfolio is subject to credit risk, but unlike other structured products
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. Credit defaults
can result in credit directed prepayments. All securities in the CMBS portfolio
had a Moody's rating of Aaa or a Standard & Poor's rating of AAA, the highest
rating category, at December 31, 2006.

     Asset-backed securities ("ABS") totaled $14.5 million at December 31, 2006.
Our ABS portfolio is subject to credit and interest rate risk. 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. All securities in the ABS portfolio had a Moody's rating of
Aaa or a Standard & Poor's or Fitch rating of AAA, the highest rating category.
A portion of the ABS portfolio is also subject to interest rate risk since, for
example, price volatility and ultimate realized yield are affected by the rate
of repayment of the underlying assets.

     At December 31, 2006, all securities in the fixed income portfolio were
rated investment grade, which 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 or a rating of AAA, AA, A or BBB from Standard
and Poor'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, 2006.

(IN THOUSANDS)
  NAIC                                      PERCENT OF
RATINGS   MOODY'S EQUIVALENT   FAIR VALUE      TOTAL
-------   ------------------   ----------   ----------
  1       Aaa/Aa/A              $255,657        95.4%
  2       Baa                     12,401         4.6
                                --------       -----
                                $268,058       100.0%
                                ========       =====

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 the securities are not other-than-temporarily
impaired. The unrealized net capital losses on fixed income securities at
December 31, 2006 totaled $273 thousand compared to unrealized net capital gains
of $1.1 million at December 31, 2005. Gross unrealized gains and losses on fixed
income securities by type are provided in the table below.

                                                   GROSS UNREALIZED
                                        AMORTIZED  ----------------    FAIR
(IN THOUSANDS)                            COST      GAINS   LOSSES     VALUE
                                        ---------  ------  --------  --------
AT DECEMBER 31, 2006
Corporate:
   Financial services                    $ 18,791  $  335  $  (212)  $ 18,914
   Capital goods                           19,389      54     (623)    18,820
   Consumer goods                          11,240      34     (374)    10,900
   Banking                                 10,157     160     (164)    10,153
   Transportation                           8,058      30     (285)     7,803
   Utilities                                4,127      --     (196)     3,931
   Basic industry                           2,993      --     (133)     2,860
                                         --------  ------  -------   --------
Total corporate fixed income portfolio     74,755     613   (1,987)    73,381

U.S. government and agencies              116,821   2,609   (1,467)   117,963
Municipal                                     502      31       --       533
Asset-backed securities                    14,195     366      (39)    14,522
Mortgage-backed securities                 29,963      98     (817)    29,244
Commercial mortgage-backed securities      32,095     635     (315)    32,415
                                         --------  ------  -------   --------
   Total fixed income securities         $268,331  $4,352  $(4,625)  $268,058
                                         ========  ======  =======   ========


                                       10

<Page>

     The capital goods, consumer goods, transportation and financial services
sectors had the highest concentration of gross unrealized losses in our
corporate fixed income securities portfolio at December 31, 2006. The gross
unrealized losses in these sectors were primarily interest rate related and
company specific. All securities in an unrealized loss position at December 31,
2006 were included in our portfolio monitoring process wherein it was determined
that the declines in value were not other-than-temporary.

     The following table shows the composition by credit quality of fixed income
securities with gross unrealized losses at December 31, 2006.

(IN THOUSANDS)
 NAIC                       UNREALIZED  PERCENT     FAIR     PERCENT
RATING  MOODY'S EQUIVALENT     LOSS     OF TOTAL    VALUE   OF TOTAL
                            ----------  --------  --------  --------
  1     Aaa/Aa/A             $(4,266)     92.2%   $154,090    95.5%
  2     Baa                     (359)      7.8       7,222     4.5
                             -------     -----    --------   -----
        Total                $(4,625)    100.0%   $161,312   100.0%
                             =======     =====    ========   =====

     At December 31, 2006, all of the gross unrealized losses were related to
investment grade fixed income securities. Unrealized losses on investment grade
securities principally relate to changes in interest rates or changes in
sector-related credit spreads since the securities were acquired.

     The scheduled maturity dates for fixed income securities in an unrealized
loss position at December 31, 2006 are shown below. Actual maturities may differ
from those scheduled as a result of prepayments by the issuers.

<Table>
<Caption>
                                            UNREALIZED   PERCENT    FAIR    PERCENT
(IN THOUSANDS)                                 LOSS     OF TOTAL    VALUE   OF TOTAL
                                            ----------  --------  --------  --------
<S>                                           <C>         <C>     <C>        <C>
Due in one year or less                       $   (29)      0.6%  $  5,486     3.4%
Due after one year through five years            (831)     18.0     46,948    29.1
Due after five years through ten years         (2,462)     53.2     64,350    39.9
Due after ten years                              (447)      9.7     17,680    11.0
Mortgage- and asset- backed securities (1)       (856)     18.5     26,848    16.6
                                              -------     -----   --------   -----
Total                                         $(4,625)    100.0%  $161,312   100.0%
                                              =======     =====   ========   =====
</Table>

----------
(1)  Because of the potential for prepayment, mortgage- and asset-backed
     securities are not categorized based on their contractual maturities.

PORTFOLIO MONITORING We have a comprehensive portfolio monitoring process to
identify and evaluate, on a case by case basis, fixed income securities for
which carrying value may be other-than-temporarily impaired. The process
includes a quarterly review of all securities using a screening process to
identify those securities for which 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 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. As a result of approved programs involving the
disposition of investments such as changes in duration and revisions to
strategic asset allocations, and certain dispositions anticipated by portfolio
managers, we also conduct a portfolio review to recognize impairment losses on
securities in an unrealized loss position for which we do not have the intent
and ability to hold until recovery. All securities in an unrealized loss
position at December 31, 2006 were included in our portfolio monitoring process
for determining which declines in value were not other-than-temporary.

     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 securities in default with respect to principal or
interest and/or securities issued by companies that have gone into bankruptcy
subsequent to our acquisition of the security. 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 securities may be classified as problem or
restructured in the future.

     As of December 31, 2006, we did not have any fixed income securities
categorized as problem, restructured or potential problem.


                                       11

<Page>

Net Realized Capital Gains and Losses The following table presents realized
capital gains and losses on dispositions of fixed income securities on a pretax
and after-tax basis for the years ended December 31.

(IN THOUSANDS)                                   2006     2005   2004
                                               -------   -----   ----
Realized capital gains and losses, pretax      $(1,255)  $(174)   $ 5
Income tax benefit (expense)                       438      60     (2)
                                               -------   -----    ---
Realized capital gains and losses, after-tax   $  (817)  $(114)   $ 3
                                               =======   =====    ===

     We may sell impaired fixed income securities that were in an unrealized
loss position at the previous reporting date in situations where new factors
such as negative developments, subsequent credit deterioration, changing
liquidity needs, and newly identified market opportunities cause a change in our
previous intent to hold a security to recovery or maturity.

SHORT-TERM INVESTMENTS Our short-term investment portfolio was $8.3 million and
$3.8 million at December 31, 2006 and 2005, 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.

CASH At December 31, 2006, our cash balance was $23.4 million compared to $8.3
million at December 31, 2005. Fluctuations in our cash position 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 accounting principles generally accepted in the United
States of America ("GAAP"), when reinsurance contracts do not relieve the ceding
company of legal liability to contractholders, the ceding company is required to
report reinsurance recoverables arising from these contracts separately as
assets. The liabilities for the contracts are reported as contractholder funds,
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, 2006, contractholder funds increased to $18.20 billion from
$17.46 billion at December 31, 2005 as a result of new and additional deposits
from fixed annuities and interest-sensitive life policies and interest credited
to contractholder funds partially offset by surrenders, withdrawals and benefit
payments. The reserve for life-contingent contract benefits increased $234.3
million to $2.13 billion at December 31, 2006 resulting from sales of immediate
annuities with life contingences and other life-contingent products, partially
offset by benefits paid and policy lapses. Reinsurance recoverables from ALIC
and reinsurance recoverable from non-affiliates increased correspondingly by
$780.9 million and $184.0 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, 2006, approximately 96% 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 Standard and Poor's. 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, 2006.


                                       12

<Page>

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 Investment policies define the overall framework for managing market
and other investment risks, including accountability and control over risk
management activities. These investment activities follow policies that have
been approved by our board of directors. These investment policies specify the
investment limits and strategies that are appropriate given our liquidity,
surplus, product profile, and regulatory requirements. Executive oversight of
investment activities is conducted primarily through our board of directors.

     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 the
investment policies.

INTEREST RATE RISK is the risk that we will incur loss due to adverse changes in
interest rates. This risk arises from our investment in interest-sensitive
assets.

     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 4.4 and 4.6 at December 31, 2006 and
2005, 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. Such
assumptions relate primarily to mortgage-backed securities, collateralized
mortgage obligations, and municipal and corporate obligations.

     Based upon the information and assumptions we use in this duration
calculation and interest rates in effect at December 31, 2006, 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 $11.7 million,
compared to $12.3 million at December 31, 2005. 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
impact 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 calculation assumes that the current relationship between
short-term and long-term interest rates (the term structure of interest rates)
will remain constant over time. As a result, these calculations may not fully
capture the effect of non-parallel changes in the term structure of interest
rates and/or large changes in interest rates.

     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, 2006 and
2005, we had separate account assets related to variable annuities and variable
life contracts with account values totaling $3.10 billion and $2.72 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.


                                       13

<Page>

CAPITAL RESOURCES AND LIQUIDITY

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

(IN THOUSANDS)                                   2006       2005       2004
                                               --------   --------   --------
Common stock, additional capital paid-in and
   retained income                             $276,804   $268,544   $259,757
Accumulated other comprehensive income             (178)       707      5,479
                                               --------   --------   --------
Total shareholder's equity                     $276,626   $269,251   $265,236
                                               ========   ========   ========

SHAREHOLDER'S EQUITY increased $7.4 million during the year ended December 31,
2006 when compared to December 31, 2005, due to net income of $8.3 million
partially offset by an unfavorable change in unrealized net capital gains and
losses on fixed income securities totaling $885 thousand. Shareholder's equity
increased $4.0 million during the year ended December 31, 2005 when compared to
December 31, 2004, due to net income of $8.8 million partially offset by a
decrease in unrealized net capital gains on fixed income securities of $4.8
million.

FINANCIAL RATINGS AND STRENGTH We share the insurance financial strength ratings
of our parent, ALIC, because our business is reinsured to ALIC. Our insurance
financial strength was rated Aa2, AA, and A+ by Moody's, Standard & Poor's and
A.M. Best, respectively, at December 31, 2006.

     Our ratings are influenced by many factors including our operating and
financial performance, asset quality, liquidity, asset/liability management,
overall portfolio mix, the amount of financial leverage (i.e., debt), risk
exposures, operating leverage, ALIC's ratings and other factors.

     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, 2006, our
RBC was above levels that would require regulatory actions.

     The NAIC has also developed a set of financial relationships or tests known
as the Insurance Regulatory Information System to assist state regulators in
monitoring the financial condition of insurance companies and identifying
companies that require special attention or actions 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 these ranges.

LIQUIDITY SOURCES AND USES Our potential sources of funds principally include
the following activities:

          -    Receipt of insurance premiums

          -    Contractholder fund deposits

          -    Reinsurance recoveries

          -    Receipts of principal and interest on investments

          -    Sales of investments

          -    Inter-company loans

          -    Capital contributions from parent

Our potential uses of funds principally include the following activities:

          -    Payment of contract benefits, surrenders and withdrawals

          -    Reinsurance cessions and payments

          -    Operating costs and expenses

          -    Purchase of investments

          -    Repayment of inter-company loans

          -    Tax payments/settlements

          -    Dividends to parent


                                       14

<Page>

     As reflected in our Statements of Cash Flows, net cash provided by
operating activities was $23.0 million in 2006. This compares to net cash
provided by operating activities of $11.6 million in 2005 and net cash used in
operating activities of $4.2 million in 2004. Fluctuations in net cash provided
by or used in 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 those relating to variable contracts and those reinsured to
non-affiliated reinsurers, are transferred to ALIC, which maintains the
investment portfolios or reinsurance recoverables supporting our products.
Payments of contractholder claims, benefits (including GMDBs, GMIBs, GMABs and
GMWBs), contract maturities, contract surrenders and withdrawals and certain
operating costs (excluding investment-related expenses), are also or will be
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 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
gain from operations, 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 2007 without prior approval of the Nebraska Department of Insurance is
$27.4 million.

     We have entered into an inter-company loan agreement with the Corporation.
The amount of inter-company loans available to us 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. We had no amounts outstanding under the inter-company loan agreement at
December 31, 2006 or 2005, respectively. The Corporation uses commercial paper
borrowings and bank lines of credit to fund inter-company borrowings.

     Certain remote events and circumstances could constrain the Corporation's
liquidity. Those events and circumstances include, for example, a catastrophe
resulting in extraordinary losses, a downgrade in the Corporation's long-term
debt rating of A1, A+ and a (from Moody's, Standard & Poor's and A.M. Best,
respectively) to non-investment grade status of below Baa3/BBB-/bb, a downgrade
in AIC's financial strength rating from Aa2, AA and A+ (from Moody's, Standard &
Poor's and A.M. Best, respectively) to below Baa/BBB/A-, or a downgrade in
ALIC's or our financial strength ratings from Aa2, AA and A+ (from Moody's,
Standard & Poor's and A.M. Best, respectively) to below Aa3/AA-/A-. The rating
agencies also consider the interdependence of the Corporation's individually
rated entities, therefore, a rating change in one entity could potentially
affect the ratings of other related entities.

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

     As of December 31, 2006, there were pending accounting standards that we
have not implemented either because the standard had not been finalized or the
implementation date had 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.


                                       15

<Page>

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.


                                       16

<Page>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                          LINCOLN BENEFIT LIFE COMPANY
                STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

                                                       YEAR ENDED DECEMBER 31,
                                                    ---------------------------
(IN THOUSANDS)                                        2006      2005      2004
                                                    -------   -------   -------
REVENUES
Net investment income                               $13,948   $13,632   $11,234
Realized capital gains and losses                    (1,255)     (174)        5
                                                    -------   -------   -------
INCOME FROM OPERATIONS BEFORE INCOME TAX EXPENSE     12,693    13,458    11,239
Income tax expense                                    4,433     4,671     3,925
                                                    -------   -------   -------
NET INCOME                                            8,260     8,787     7,314
                                                    -------   -------   -------
OTHER COMPREHENSIVE LOSS, AFTER-TAX
Change in unrealized net capital gains and losses      (885)   (4,772)   (1,786)
                                                    -------   -------   -------
COMPREHENSIVE INCOME                                $ 7,375   $ 4,015   $ 5,528
                                                    =======   =======   =======

                       See notes to financial statements.


                                       17

<Page>

                          LINCOLN BENEFIT LIFE COMPANY
                        STATEMENTS OF FINANCIAL POSITION

<Table>
<Caption>
(IN THOUSANDS, EXCEPT PAR VALUE DATA)                                  DECEMBER 31,
                                                               -------------------------
                                                                   2006          2005
                                                               -----------   -----------
<S>                                                            <C>           <C>
ASSETS
Investments
   Fixed income securities, at fair value (amortized
      cost $268,331 and $266,457)                              $   268,058   $   267,545
   Short-term                                                        8,264         3,824
                                                               -----------   -----------
      TOTAL INVESTMENTS                                            276,322       271,369
Cash                                                                23,352         8,349
Reinsurance recoverable from Allstate Life Insurance Company    19,131,870    18,350,983
Reinsurance recoverable from non-affiliates                      1,203,864     1,019,850
Receivable from affiliates, net                                     24,990        10,394
Other assets                                                       104,971        96,059
Separate accounts                                                3,097,550     2,718,509
                                                               -----------   -----------
      TOTAL ASSETS                                             $23,862,919   $22,475,513
                                                               ===========   ===========
LIABILITIES
Contractholder funds                                           $18,195,622   $17,462,104
Reserve for life-contingent contract benefits                    2,126,455     1,892,194
Unearned premiums                                                   25,935        26,992
Deferred income taxes                                                  135           591
Current income taxes payable                                         4,412         4,769
Other liabilities and accrued expenses                             136,184       101,103
Separate accounts                                                3,097,550     2,718,509
                                                               -----------   -----------
      TOTAL LIABILITIES                                         23,586,293    22,206,262
                                                               -----------   -----------
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                                                     94,304        86,044
Accumulated other comprehensive income:
   Unrealized net capital gains and losses                            (178)          707
                                                               -----------   -----------
      Total accumulated other comprehensive income                    (178)          707
                                                               -----------   -----------
      TOTAL SHAREHOLDER'S EQUITY                                   276,626       269,251
                                                               -----------   -----------
      TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY               $23,862,919   $22,475,513
                                                               ===========   ===========
</Table>

                       See notes to financial statements.


                                       18

<Page>

                          LINCOLN BENEFIT LIFE COMPANY
                       STATEMENTS OF SHAREHOLDER'S EQUITY

                                            YEAR ENDED DECEMBER 31,
                                         ------------------------------
(IN THOUSANDS)                             2006       2005       2004
                                         --------   --------   --------
COMMON STOCK                             $  2,500   $  2,500   $  2,500
                                         --------   --------   --------
ADDITIONAL CAPITAL PAID-IN
Balance, beginning of year                180,000    180,000    130,305
Capital contribution                           --         --     49,695
                                         --------   --------   --------
Balance, end of year                      180,000    180,000    180,000
                                         --------   --------   --------
RETAINED INCOME
Balance, beginning of year                 86,044     77,257     69,943
Net income                                  8,260      8,787      7,314
                                         --------   --------   --------
Balance, end of year                       94,304     86,044     77,257
                                         --------   --------   --------
ACCUMULATED OTHER COMPREHENSIVE INCOME
Balance, beginning of year                    707      5,479      7,265
Change in unrealized net capital gains
   and losses                                (885)    (4,772)    (1,786)
                                         --------   --------   --------
Balance, end of year                         (178)       707      5,479
                                         --------   --------   --------
TOTAL SHAREHOLDER'S EQUITY               $276,626   $269,251   $265,236
                                         ========   ========   ========

                       See notes to financial statements.


                                       19

<Page>

                          LINCOLN BENEFIT LIFE COMPANY
                            STATEMENTS OF CASH FLOWS

<Table>
<Caption>
                                                                            YEAR ENDED DECEMBER 31,
                                                                        ------------------------------
(IN THOUSANDS)                                                            2006       2005       2004
                                                                        --------   --------   --------
<S>                                                                     <C>        <C>        <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income                                                              $  8,260   $  8,787   $  7,314
Adjustments to reconcile net income to net cash provided by operating
   activities:
      Amortization and other non-cash items                                  424        466        293
      Realized capital gains and losses                                    1,255        174         (5)
      Changes in:
         Reserve for life-contingent contract benefits and
            contractholder funds, net of reinsurance recoverables          2,878      3,041    (11,474)
         Income taxes                                                       (337)     4,709      1,438
         Receivable/payable to affiliates, net                           (14,596)    17,055    (50,781)
         Other operating assets and liabilities                           25,112    (22,674)    49,016
                                                                        --------   --------   --------
            Net cash provided by (used in) operating activities           22,996     11,558     (4,199)
                                                                        --------   --------   --------
CASH FLOWS FROM INVESTING ACTIVITIES
FIXED INCOME SECURITIES:
      Proceeds from sales                                                 20,104      5,066      1,007
      Investment collections                                              15,244     22,557     15,667
      Investments purchases                                              (38,901)   (67,948)   (45,793)
Change in short-term investments                                          (4,440)    26,584    (29,301)
                                                                        --------   --------   --------
            Net cash used in investing activities                         (7,993)   (13,741)   (58,420)
                                                                        --------   --------   --------
CASH FLOWS FROM FINANCING ACTIVITIES
Capital contribution                                                          --         --     49,695
                                                                        --------   --------   --------
            Net cash provided by financing activities                         --         --     49,695
                                                                        --------   --------   --------
NET INCREASE (DECREASE) IN CASH                                           15,003     (2,183)   (12,924)
CASH AT BEGINNING OF YEAR                                                  8,349     10,532     23,456
                                                                        --------   --------   --------
CASH AT END OF YEAR                                                     $ 23,352   $  8,349   $ 10,532
                                                                        ========   ========   ========
</Table>

                       See notes to financial statements.


                                       20

<Page>

                          LINCOLN BENEFIT LIFE COMPANY
                          NOTES TO FINANCIAL STATEMENTS

1. GENERAL

BASIS OF PRESENTATION

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

     To conform to the 2006 presentation, certain amounts in the prior years'
financial statements and notes have been reclassified.

     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 deferred and immediate fixed
annuities, interest-sensitive, traditional and variable life insurance, and
accident and health 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 2006, 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 several distribution channels,
including Allstate exclusive agencies, independent agencies (including master
brokerage agencies), and financial services firms, such as banks and
broker-dealers. Although 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.

     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. 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.


                                       21

<Page>

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

INVESTMENTS

     Fixed income securities include bonds, commercial mortgage-backed,
mortgage-backed and asset-backed securities. Fixed income securities may be sold
prior to their contractual maturity ("available for sale") and are carried at
fair value. The fair value of publicly traded fixed income securities is based
upon independent market quotations. The difference between amortized cost and
fair value, net of deferred income taxes, is reflected as a component of
accumulated other comprehensive income. Cash received from calls, principal
payments and make-whole payments is reflected as a component of proceeds from
sales. Cash received from maturities and pay-downs is reflected as a component
of investment collections.

     Short-term investments are carried at cost or amortized cost, which
approximates fair value.

     Investment income consists of interest and is recognized on an accrual
basis. Interest income is determined using the effective yield method,
considering estimated principal repayments when applicable. 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
dispositions, and write-downs in value due to other-than-temporary declines in
fair value. Dispositions include sales, losses recognized in anticipation of
dispositions and other transactions such as calls and prepayments. Realized
capital gains and losses on investment dispositions are determined on a specific
identification basis.

     The Company recognizes other-than-temporary impairment losses on fixed
income securities when the decline in fair value is deemed other-than-temporary
(see Note 4).

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 recognized in relation to such revenue so
as to result in the recognition of profits over the life of the policy and are
reflected in contract benefits.

     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 such revenue such that profits are recognized over the lives of the
contracts.

     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 any amounts 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 cost of insurance
(mortality risk), contract administration and early surrender. These revenues
are recognized 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 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. Certain variable annuity contracts include embedded derivatives that
are separated from the host instrument and accounted for as derivative financial
instruments


                                       22

<Page>

("subject to bifurcation"). The change in the fair value of derivatives embedded
in liabilities and subject to bifurcation is reported in contract benefits or
interest credited to contractholder funds and is ceded to ALIC under the
reinsurance agreements.

     Interest credited to contractholder funds represents interest accrued or
paid for 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, 2006. 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 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 fixed income securities 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.

RESERVE FOR LIFE-CONTINGENT CONTRACT BENEFITS

     The reserve for life-contingent contract benefits, which relates to
traditional life and accident and health insurance and immediate annuities with
life contingencies is computed on the basis of long-term actuarial assumptions
as to 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 such characteristics 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, 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.

SEPARATE ACCOUNTS

     Separate accounts assets and liabilities 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
the fair value of the assets. Investment income and realized capital gains and
losses of the separate accounts accrue directly to the contractholders and
therefore, are not included in the Company's Statements of Operations and
Comprehensive Income. Revenues to the Company from the separate accounts consist
of contract charges for maintenance, administration, cost of insurance and
surrender of the contract prior to the contractually specified date and are
ceded to ALIC.


                                       23

<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

FINANCIAL ACCOUNTING STANDARDS BOARD STAFF POSITION NO. FAS 115-1, "THE MEANING
OF OTHER-THAN-TEMPORARY IMPAIRMENT AND ITS APPLICATION TO CERTAIN INVESTMENTS"
("FSP FAS 115-1")

     The Company adopted Financial Accounting Standards Board ("FASB") FSP FAS
115-1 as of January 1, 2006. FSP FAS 115-1 nullifies the guidance in paragraphs
10-18 of EITF 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 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 accounting for income
recognition on an impaired debt security. The adoption of FSP FAS 115-1 was
required on a prospective basis and did not have a material effect on the
results of operations or financial position of the Company.

STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 154, "ACCOUNTING CHANGES AND
ERROR CORRECTIONS" ("SFAS NO. 154")

     The Company adopted SFAS No. 154 on January 1, 2006. SFAS No. 154 replaces
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 promulgated. The Company had no accounting changes or
error corrections affected by the new standard.

SECURITIES AND EXCHANGE COMMISSION ("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 in order to eliminate the
diversity of practice in the process by which misstatements are quantified for
purposes of assessing materiality on the financial statements. SAB 108 is
intended to eliminate the potential for the build up of improper amounts on the
balance sheet due to the limitations of certain methods of materiality
assessment utilized in current practice. SAB 108 establishes a single
quantification framework wherein the significance measurement is based on the
effects of the misstatements on each of the financial statements as well as the
related financial statement disclosures. If a company's existing methods for
assessing the materiality of misstatements are not in compliance with the
provisions of SAB 108, the initial application of the provisions may be adopted
by restating prior period financial statements under certain circumstances or
otherwise by recording the cumulative effect of initially applying the
provisions of SAB 108 as adjustments to the carrying values of assets and
liabilities as of January 1, 2006 with an offsetting adjustment recorded to the
opening balance of retained earnings. The provisions of SAB 108 must be applied
no later than the annual financial statements issued for the first fiscal year
ending after November 15, 2006. The Company's adoption of SAB 108 in the fourth
quarter of 2006 for the fiscal year then ended did not have any effect on its
results of operations or financial position.


                                       24

<Page>

SOP 03-1, "ACCOUNTING AND REPORTING BY INSURANCE ENTERPRISES FOR CERTAIN
NONTRADITIONAL LONG-DURATION CONTRACTS AND FOR SEPARATE ACCOUNTS" ("SOP 03-1")

     On January 1, 2004, the Company adopted SOP 03-1. The major provisions of
the SOP affecting the Company at the time of adoption are listed below.

     -    Establishment of reserves primarily related to death benefit and
          income benefit guarantees provided under variable annuity contracts,
          all of which are ceded to ALIC;

     -    Deferral of sales inducements that meet certain criteria, and
          amortization using the same method used for deferred policy
          acquisition costs ("DAC"), all of which are ceded to ALIC.

     The cumulative effect of the change in accounting principle from
implementing SOP 03-1 was a loss of $26.9 million, after-tax, ($41.4 million,
pre-tax) that was ceded to ALIC under the terms of the reinsurance agreements.
It was comprised of an increase in contractholder funds of $30 million, pre-tax,
and reserves for life-contingent contract benefits of $11.4 million, pre-tax.

AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS ("AICPA") TECHNICAL PRACTICE
AID ("TPA") RE SOP 03-1

     In September 2004, the staff of the AICPA, aided by industry experts,
issued a set of technical questions and answers on financial accounting and
reporting issues related to SOP 03-1. The TPAs address a number of issues
related to SOP 03-1 including when it was necessary to establish a liability in
addition to the account balance for certain contracts such as single premium and
universal life that meet the definition of an insurance contract and have
amounts assessed against the contractholder in a manner that is expected to
result in profits in earlier years and losses in subsequent years from the
insurance benefit function. The impact of adopting the provisions of the TPAs
was ceded to ALIC under the terms of the reinsurance agreements.

PENDING ACCOUNTING STANDARDS

STATEMENT OF POSITION 05-1, ACCOUNTING BY INSURANCE ENTERPRISES FOR DEFERRED
ACQUISITION COSTS IN CONNECTION WITH MODIFICATIONS OR EXCHANGES OF INSURANCE
CONTRACTS ("SOP 05-1")

     In October 2005, the AICPA issued SOP 05-1. SOP 05-1 provides accounting
guidance for deferred policy acquisition costs on internal replacements of
insurance and investment contracts other than those specifically described in
SFAS No. 97, "Accounting and Reporting by Insurance Enterprises for Certain
Long-Duration Contracts and for Realized Gains and Losses from the Sale of
Investments". SOP 05-1 defines an internal replacement as a modification in
product benefits, features, rights or coverages that occurs by the exchange of a
contract for a new contract, or by amendment, endorsement or rider to a
contract, or by the election of a feature or coverage within a contract. In
February 2007, the AICPA issued a set of eleven TPAs that provide interpretive
guidance to be utilized, if applicable, at the date of adoption. The provisions
of SOP 05-1 are effective for internal replacements occurring in fiscal years
beginning after December 15, 2006. Any impact resulting from the adoption of SOP
05-1 on the Company's results of operations will be ceded to ALIC under the
terms of the reinsurance agreements.

FINANCIAL ACCOUNTING STANDARDS BOARD INTERPRETATION NO. 48, "ACCOUNTING FOR
UNCERTAINTY IN INCOME TAXES", ("FIN 48")

     In July 2006, the FASB issued FIN 48, which clarifies the accounting for
uncertainty in income taxes recognized in an entity's financial statements in
accordance with FASB Statement 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. FIN 48 is effective for fiscal years beginning
after December 15, 2006. The adoption of FIN 48 will not have a material effect
on the results of operations or financial position of the Company.


                                       25

<Page>

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

     In September 2006, the FASB issued SFAS No. 157 which redefines fair value,
establishes a framework for measuring fair value in generally accepted
accounting principles ("GAAP"), and expands disclosures about fair value
measurements. SFAS No. 157 applies where other accounting pronouncements require
or permit fair value measurements. SFAS No. 157 is effective for fiscal years
beginning after November 15, 2007. The effects of adoption will be determined by
the types of instruments carried at fair value in the Company's financial
statements at the time of adoption as well as the method utilized to determine
their fair values prior to adoption. Based on the Company's current use of fair
value measurements, SFAS No. 157 is not expected to have a material effect on
the results of operations or financial position of the Company.

SFAS NO. 159, "THE FAIR VALUE OPTION FOR FINANCIAL ASSETS AND FINANCIAL
LIABILITIES" ("SFAS NO. 159")

     In February 2007, the FASB issued SFAS No. 159 which provides reporting
entities an option to report selected financial assets, including investment
securities designated as available for sale, and liabilities, including most
insurance contracts, at fair value. SFAS No. 159 establishes presentation and
disclosure requirements designed to facilitate comparisons between companies
that choose different measurement attributes for similar types of assets and
liabilities. The standard also requires additional information to aid financial
statement users' understanding of a reporting entity's choice to use fair value
on its earnings and also requires entities to display on the face of the balance
sheet the fair value of those assets and liabilities for which the reporting
entity has chosen to measure at fair value. SFAS No. 159 is effective as of the
beginning of a reporting entity's first fiscal year beginning after November 15,
2007. Early adoption is permitted as of the beginning of the previous fiscal
year provided the entity makes that choice in the first 120 days of that fiscal
year and also elects to apply the provisions of SFAS No. 157. Because
application of the standard is optional, any impacts are limited to those
financial assets and liabilities to which SFAS No. 159 would be applied, which
has yet to be determined, as is any decision concerning the early adoption of
the standard.

3. RELATED PARTY TRANSACTIONS

BUSINESS OPERATIONS

     The Company uses services provided by its affiliates, AIC, ALIC and
Allstate Investments LLC, and business facilities owned or leased and operated
by AIC in conducting its business activities. In addition, the Company shares
the services of employees with AIC. The Company reimburses its affiliates for
the operating expenses incurred on behalf of the Company. The Company is charged
for the cost of these operating expenses based on the level of services
provided. Operating expenses, including compensation and retirement and other
benefit programs, allocated to the Company were $192.3 million, $158.7 million
and $161.4 million in 2006, 2005 and 2004, 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 $1.1 million, $659 thousand and $447 thousand for
the years ended December 31, 2006, 2005 and 2004, respectively, that was ceded
to ALIC under the terms of the reinsurance agreements.

     The Company receives underwriting and 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. The Company incurred $42.7 million, $44.6 million and $41.7
million of commission and other distribution expenses for the years ended
December 31, 2006, 2005 and 2004, respectively, that were ceded to ALIC under
the terms of the reinsurance agreements.

     In 2006, the Company entered 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

                                       26

<Page>

issued by the Company and sold by AFS. In return for these services, the Company
recorded commission expense of $1.5 million for 2006. 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 under the reinsurance agreements:

<Table>
<Caption>
                                                      YEAR ENDED DECEMBER 31,
                                              ------------------------------------
(IN THOUSANDS)                                   2006         2005         2004
                                              ----------   ----------   ----------
<S>                                           <C>          <C>          <C>
Premiums and contract charges                 $  546,554   $  461,496   $  405,748
Interest credited to contractholder  funds,
   contract benefits and expenses              1,487,799    1,483,707    1,354,508
</Table>

    Reinsurance recoverables due from ALIC totaled $19.13 billion and $18.35
billion as of December 31, 2006 and 2005, respectively.

STRUCTURED SETTLEMENT OBLIGATIONS

     The Company received premiums of $301 thousand from AIC in 2004, to assume
certain structured settlement obligations at prices determined based upon
interest rates in effect at the time of purchase. The Company subsequently ceded
these premiums to ALIC under the terms of its reinsurance agreements. The
Company did not receive any structured settlement premiums from AIC in 2006 or
2005.

CAPITAL CONTRIBUTION

     During the fourth quarter of 2004, ALIC made a cash capital contribution of
$49.7 million. This transaction was reflected in additional capital paid-in on
the Statements of Financial Position.

INCOME TAXES

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

DEBT

     The Company has entered into an intercompany loan agreement with the
Corporation. The amount of funds available to the Company is at the discretion
of the Corporation. The maximum amount of loans the Corporation will have
outstanding under the intercompany loan agreement 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 agreement at December 31, 2006 and 2005.
The Corporation uses commercial paper borrowings, bank lines of credit and
repurchase agreements to fund intercompany borrowings.


                                       27

<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
                                        AMORTIZED   -----------------     FAIR
(IN THOUSANDS)                            COST       GAINS    LOSSES      VALUE
                                        ---------   ------   --------   --------
AT DECEMBER 31, 2006
U.S. government and agencies             $116,821   $2,609   $(1,467)   $117,963
Corporate                                  74,755      613    (1,987)     73,381
Municipal                                     502       31        --         533
Mortgage-backed securities                 29,963       98      (817)     29,244
Commercial mortgage-backed securities      32,095      635      (315)     32,415
Asset-backed securities                    14,195      366       (39)     14,522
                                         --------   ------   -------    --------
   Total fixed income securities         $268,331   $4,352   $(4,625)   $268,058
                                         ========   ======   =======    ========
AT DECEMBER 31, 2005
U.S. government and agencies             $ 99,197   $3,333   $(1,139)   $101,391
Corporate                                  91,424    1,133    (1,746)     90,811
Municipal                                     503       41        --         544
Mortgage-backed securities                 32,362      209      (606)     31,965
Commercial mortgage-backed securities      27,851       69      (704)     27,216
Asset-backed securities                    15,120      546       (48)     15,618
                                         --------   ------   -------    --------
   Total fixed income securities         $266,457   $5,331   $(4,243)   $267,545
                                         ========   ======   =======    ========

SCHEDULED MATURITIES

     The scheduled maturities for fixed income securities are as follows at
December 31, 2006:

                                         AMORTIZED     FAIR
(IN THOUSANDS)                             COST        VALUE
                                         ---------   --------
Due in one year or less                   $  8,543   $  8,515
Due after one year through five years       88,818     88,680
Due after five years through ten years      87,213     86,056
Due after ten years                         39,599     41,041
                                          --------   --------
                                           224,173    224,292
Mortgage and asset-backed securities        44,158     43,766
                                          --------   --------
   Total                                  $268,331   $268,058
                                          ========   ========

     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)                             2006      2005      2004
                                         -------   -------   -------
Fixed income securities                  $13,495   $13,190   $11,297
Short-term investments                       762       689       185
                                         -------   -------   -------
   Investment income, before expense      14,257    13,879    11,482
   Investment expense                        309       247       248
                                         -------   -------   -------
   Net investment income                 $13,948   $13,632   $11,234
                                         =======   =======   =======


                                       28

<Page>

REALIZED CAPITAL GAINS AND LOSSES, AFTER-TAX

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

(IN THOUSANDS)                                   2006     2005   2004
                                               -------   -----   ----
Fixed income securities                        $(1,255)  $(174)   $ 5
Income tax benefit (expense)                       438      60     (2)
                                               -------   -----    ---
Realized capital gains and losses, after-tax   $  (817)  $(114)   $ 3
                                               =======   =====    ===

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

(IN THOUSANDS)                                      2006     2005   2004
                                                  -------   -----   ----
Dispositions                                      $(1,255)  $(174)   $ 5
                                                  -------   -----    ---
   Realized capital gains and losses               (1,255)   (174)     5
   Income tax benefit (expense)                       438      60     (2)
                                                  -------   -----    ---
   Realized capital gains and losses, after-tax   $  (817)  $(114)   $ 3
                                                  =======   =====    ===

     Gross gains of $1 thousand and $5 thousand were realized on fixed income
securities during 2006 and 2005, respectively. Gross losses of $1.3 million and
$174 thousand were realized on sales of fixed income securities during 2006 and
2005, respectively.

UNREALIZED NET CAPITAL GAINS AND LOSSES

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

<Table>
<Caption>
                                                     GROSS UNREALIZED
                                             FAIR    ----------------   UNREALIZED
(IN THOUSANDS)                              VALUE     GAINS    LOSSES    NET GAINS
                                          --------   ------   -------   ----------
<S>                                       <C>        <C>      <C>          <C>
AT DECEMBER 31, 2006
Fixed income securities                   $268,058   $4,352   $(4,625)     $(273)
Deferred income taxes                                                         95
                                                                           -----
Unrealized net capital gains and losses                                    $(178)
                                                                           =====
</Table>

<Table>
<Caption>
                                                     GROSS UNREALIZED
                                             FAIR    ----------------   UNREALIZED
(IN THOUSANDS)                              VALUE     GAINS    LOSSES    NET GAINS
                                          --------   ------   -------   ----------
<S>                                       <C>        <C>      <C>         <C>
AT DECEMBER 31, 2005
Fixed income securities                   $267,545   $5,331   $(4,243)    $1,088
Deferred income taxes                                                       (381)
                                                                          ------
Unrealized net capital gains and losses                                   $  707
                                                                          ======
</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)                                          2006      2005     2004
                                                      -------   -------   -------
<S>                                                   <C>       <C>       <C>
Fixed income securities                               $(1,361)  $(7,340)  $(2,748)
Deferred income taxes                                     476     2,568       962
                                                      -------   -------   -------
Decrease in unrealized net capital gains and losses   $  (885)  $(4,772)  $(1,786)
                                                      =======   =======   =======
</Table>

PORTFOLIO MONITORING

     Inherent in the Company's evaluation of a particular security are
assumptions and estimates about the operations of the issuer and its future
earnings potential. Some of the factors considered in evaluating


                                       29

<Page>

whether a decline in fair value is other-than-temporary are: 1) the Company's
ability and intent to retain the investment for a period of time sufficient to
allow for an anticipated recovery in value; 2) the recoverability of principal
and interest; 3) the duration and extent to which the fair value has been less
than amortized cost; 4) the financial condition, near-term and long-term
prospects of the issuer, including relevant industry conditions and trends, and
implications of rating agency actions and offering prices; and 5) the specific
reasons that a security is in a significant unrealized loss position, including
market conditions which could affect access to liquidity.

     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>

                                             LESS THAN 12 MONTHS              12 MONTHS OR MORE
                                      ------------------------------   ------------------------------     TOTAL
                                     NUMBER OF    FAIR     UNREALIZED  NUMBER OF  FAIR     UNREALIZED   UNREALIZED
($ IN THOUSANDS)                      ISSUES     VALUE      LOSSES     ISSUES     VALUE      LOSSES       LOSSES
                                      ------   --------   ----------   ------   --------   ----------   ----------
<S>                                      <C>   <C>         <C>            <C>   <C>         <C>          <C>
AT DECEMBER 31, 2006
Fixed income securities
   U.S. Government andagencies            4    $ 26,597    $  (153)       10    $ 44,123    $(1,314)     $(1,467)
   Corporate                              2       1,985        (18)       24      46,462     (1,969)      (1,987)
   Mortgage-backed securities             1           1         --        10      25,880       (817)        (817)
   Commercial mortgage-backed
      securities                          1       2,483         (9)        6      12,813       (306)        (315)
   Asset-backed securities               --          --         --         1         968        (39)         (39)
                                        ---    --------    -------       ---    --------    -------      -------
      Total                               8    $ 31,066    $  (180)       51    $130,246    $(4,445)     $(4,625)
                                        ===    ========    =======       ===    ========    =======      =======
Investment grade fixed income
   securities                             8    $ 31,066    $  (180)       51    $130,246    $(4,445)     $(4,625)
Below investment grade fixed
   income securities                     --          --         --        --          --         --           --
                                        ---    --------    -------       ---    --------    -------      -------
      Total fixed income securities       8    $ 31,066    $  (180)       51    $130,246    $(4,445)     $(4,625)
                                        ===    ========    =======       ===    ========    =======      =======
AT DECEMBER 31, 2005
Fixed income securities
   U.S. Government and agencies           9    $ 46,404    $  (625)        3    $ 11,682    $  (514)     $(1,139)
   Corporate                             18      46,255     (1,059)        8      10,301       (687)      (1,746)
   Mortgage-backed securities             7      24,100       (507)        3       2,970        (99)        (606)
   Commercial mortgage-backed
      securities                          8      16,503       (296)        2       5,669       (408)        (704)
   Asset-backed securities               --          --         --         1         961        (48)         (48)
                                        ---    --------    -------       ---    --------    -------      -------
      Total                              42    $133,262    $(2,487)       17    $ 31,583    $(1,756)     $(4,243)
                                        ===    ========    =======       ===    ========    =======      =======
Investment grade fixed income
   securities                            42    $133,262    $(2,487)       17    $ 31,583    $(1,756)     $(4,243)
Below investment grade fixed
   income securities                     --          --         --        --          --         --           --
                                        ---    --------    -------       ---    --------    -------      -------
      Total fixed income securities      42    $133,262    $(2,487)       17    $ 31,583    $(1,756)     $(4,243)
                                        ===    ========    =======       ===    ========    =======      =======
</Table>

     At December 31, 2006, all unrealized losses 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 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 or
a rating of AAA, AA, A or BBB from Standard & Poor's, Fitch or Dominion; or
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.

     As of December 31, 2006, 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, 2006, fixed income securities and short-term investments
with a carrying value of $9.5 million were on deposit with regulatory
authorities as required by law.

5. FINANCIAL INSTRUMENTS

     In the normal course of business, the Company invests in various financial
assets and incurs various financial liabilities. The fair value estimates of
financial instruments presented below are not necessarily


                                       30

<Page>

indicative of the amounts the Company might pay or receive in actual market
transactions. Potential taxes and other transaction costs have not been
considered in estimating fair value. The disclosures that follow do not reflect
the fair value of the Company as a whole since reinsurance recoverables, net,
reserve for life-contingent contract benefits and deferred income taxes are not
included in accordance with SFAS No. 107. Other assets and liabilities
considered financial instruments, such as accrued investment income and cash,
are generally of a short-term nature. Their carrying values are deemed to
approximate fair value.

FINANCIAL ASSETS

(IN THOUSANDS)                DECEMBER 31, 2006        DECEMBER 31, 2005
                          -----------------------   -----------------------
                           CARRYING        FAIR      CARRYING       FAIR
                             VALUE        VALUE        VALUE       VALUE
                          ----------   ----------   ----------   ----------
Fixed income securities   $  268,058   $  268,331   $  267,545   $  267,545
Short-term investments         8,264        8,264        3,824        3,824
Separate accounts          3,097,550    3,097,550    2,718,509    2,718,509

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

FINANCIAL LIABILITIES

<Table>
<Caption>
(IN THOUSANDS)                                     DECEMBER 31, 2006            DECEMBER 31, 2005
                                               -------------------------   -------------------------
                                                 CARRYING        FAIR        CARRYING        FAIR
                                                  VALUE         VALUE         VALUE         VALUE
                                               -----------   -----------   -----------   -----------
<S>                                            <C>           <C>           <C>           <C>
Contractholder funds on investment contracts   $15,334,580   $14,498,948   $14,931,738   $14,122,657
Separate accounts                                3,097,550     3,097,550     2,718,509     2,718,509
</Table>

     Contractholder funds include interest-sensitive life insurance contracts
and investment contracts. Interest-sensitive life insurance contracts are not
considered financial instruments subject to fair value disclosure requirements
under the provisions of SFAS No. 107. The fair value of investment contracts is
based on the terms of the underlying contracts. Fixed annuities are valued at
the account balance less surrender charges. Immediate annuities without life
contingencies are valued at the present value of future benefits using current
interest rates. Market value adjusted annuities' fair value is estimated to be
the market adjusted surrender value. Equity-indexed annuity contracts' fair
value approximates carrying value since the embedded equity options are carried
at fair value in the financial statements. Separate accounts liabilities are
carried at the fair value of the underlying assets.

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. 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.


                                       31

<Page>

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

<Table>
<Caption>
                                                               CARRYING     CARRYING
                                       NOTIONAL       FAIR       VALUE        VALUE
(IN THOUSANDS)                          AMOUNT       VALUE      ASSETS    (LIABILITIES)
                                      ----------   ---------   --------   -------------
<S>                                   <C>          <C>           <C>       <C>
AT DECEMBER 31, 2006
Equity-indexed and forward starting
   options in life and annuity
   product contracts                  $3,016,132   $(167,707)     $--      $(167,707)
Guaranteed accumulation benefits         340,157       1,381       --          1,381
Guaranteed withdrawal benefits            62,736          43       --             43
Other embedded derivative financial
   instruments                             3,775          (5)      --             (5)
</Table>

<Table>
<Caption>
                                                               CARRYING     CARRYING
(IN THOUSANDS)                         NOTIONAL       FAIR      VALUE         VALUE
                                        AMOUNT       VALUE      ASSETS    (LIABILITIES)
                                      ----------   ---------   --------   -------------
<S>                                   <C>          <C>           <C>        <C>
AT DECEMBER 31, 2005
Equity-indexed and forward starting
   options in life and annuity
   product contracts                  $2,356,357   $(105,754)    $ --       $(105,754)
Guaranteed accumulation benefits         242,234         288       --             288
Guaranteed withdrawal benefits            26,390         (14)      --             (14)
Other embedded derivative
   financial instruments                   3,775          (5)      --              (5)
</Table>

     The notional amounts specified in the contracts are used to calculate the
exchange of contractual payments under the agreements, and are not
representative of the potential for gain or loss on these agreements.

     Fair value, which is equal to the carrying value, is based on widely
accepted pricing and valuation models, which use independent third party data as
inputs.

     Market risk is the risk that the Company will incur losses due to adverse
changes in market rates and prices. Market risk exists for all of the derivative
financial instruments the Company currently holds, as these instruments may
become less valuable due to adverse changes in market conditions.

OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS

     There were no off-balance-sheet financial instruments at December 31, 2006
or 2005.


                                       32

<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:

(IN THOUSANDS)                                              2006         2005
                                                         ----------   ----------
Immediate annuities                                      $  722,539   $  723,691
Traditional life                                            932,866      821,341
Other                                                       471,050      347,162
                                                         ----------    ---------
   Total reserve for life-contingent contract benefits   $2,126,455   $1,892,194
                                                         ==========   ==========

     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>
Immediate annuities           1983 individual annuity     Interest rate            Present value of
                              mortality table             assumptions range from   expected future
                              1983-a annuity mortality    3.0% to 8.8%             benefits based on
                              table                                                historical experience
                              Annuity 2000 mortality
                              table

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

Other:
   Variable annuity           90% of 1994 group annuity   Interest rate            Projected benefit
   guaranteed minimum death   mortality table with        assumptions range from   ratio applied to
   benefits                   internal modifications      6.5% to 7.0%             cumulative assessments

   Accident & health          Actual company experience                            Unearned premium;
                              plus loading                                         additional contract
                                                                                   reserves for
                                                                                   traditional life
</Table>

     At December 31, contractholder funds consists of the following:

(IN THOUSANDS)                         2006          2005
                                   -----------   -----------
Interest-sensitive life            $ 2,841,433   $ 2,516,464
Investment contracts:
   Immediate annuities                 480,602       459,893
   Fixed annuities                  14,822,531    14,435,800
   Other                                51,056        49,947
                                   -----------   -----------
      Total contractholder funds   $18,195,622   $17,462,104
                                   ===========   ===========


                                       33

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

Fixed annuities                         Interest rates credited        Either a declining or a level
                                        range from 2.2% to 8.8% for    percentage charge generally over
                                        immediate annuities and 0.0%   nine years or less. Additionally,
                                        to 9.0% for fixed annuities    approximately 35.3% of fixed
                                                                       annuities are subject to market
                                                                       value adjustment for discretionary
                                                                       withdrawals.

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

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

(IN THOUSANDS)                           2006          2005
                                     -----------   -----------
Balance, beginning of year           $17,462,104   $16,231,489
Deposits                               2,668,782     2,822,820
Interest credited                        865,479       779,071
Benefits                                (512,353)     (443,444)
Surrenders and partial withdrawals    (1,962,149)   (1,665,497)
Net transfers to separate accounts       (58,681)      (70,542)
Contract charges                        (255,710)     (206,363)
Other adjustments                        (11,850)       14,570
                                     -----------   -----------
Balance, end of year                 $18,195,622   $17,462,104
                                     ===========   ===========


                                       34

<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)                                                             2006        2005
                                                                          ---------  ---------
<S>                                                                       <C>        <C>
IN THE EVENT OF DEATH
   Separate account value                                                 $ 2,333.2  $ 2,084.2
   Net amount at risk (1)                                                 $   108.5  $   148.1
   Average attained age of contractholders                                 59 years   59 years

AT ANNUITIZATION
   Separate account value                                                 $   388.4  $   372.3
   Net amount at risk (2)                                                 $     0.6  $     0.7
   Weighted average waiting period until annuitization options available    3 years    4 years

FOR CUMULATIVE PERIODIC WITHDRAWALS
   Separate account value                                                 $    61.8  $    23.2
   Net amount at risk (3)                                                 $      --  $      --

ACCUMULATION AT SPECIFIED DATES
   Separate account value                                                 $   337.3  $   229.6
   Net amount at risk (4)                                                 $      --  $      --
   Weighted average waiting period until guarantee date                    13 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, 2006, reserves for variable annuity contracts and
secondary guarantee liabilities related to death benefits, income benefits,
accumulation and withdrawal benefits were $28 million, $33 million, $(1) million
and $(43) thousand, respectively. As of December 31, 2005, reserves for variable
annuity contracts and secondary guarantee liabilities related to death benefits,
income benefits, accumulation and withdrawal benefits were $21 million, $36
million, $(288) thousand and $14 thousand, respectively.

7.  REINSURANCE

     The Company has entered into reinsurance agreements under which it
reinsures all of its business to ALIC or other non-affiliated reinsurers. Under
the agreements, premiums, contract charges, interest credited to contractholder
funds, contract benefits and 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, 2006, 94.1% of the total
reinsurance recoverables were related to ALIC and 5.9% were related to
non-affiliated reinsurers. At December 31, 2006 and 2005, approximately 96% and
99%, respectively, of the Company's non-affiliated reinsurance recoverables are
due from companies rated A- or better by Standard & Poor's.


                                       35

<Page>

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

<Table>
<Caption>
(IN THOUSANDS)                                        2006       2005      2004
                                                   ---------  ---------  ---------
<S>                                                <C>        <C>        <C>
PREMIUMS AND CONTRACT CHARGES
Direct                                             $ 944,823  $ 840,691  $ 742,557
Assumed                                               10,238      6,572      3,785
Ceded:
   Affiliate                                        (546,554)  (461,496)  (405,748)
   Non-affiliate                                    (408,507)  (385,767)  (340,594)
                                                   ---------  ---------  ---------
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)                                           2006        2005          2004
                                                     -----------  -----------  -----------
<S>                                                  <C>          <C>          <C>
INTEREST CREDITED TO CONTRACTHOLDER FUNDS, CONTRACT
   BENEFITS AND EXPENSES
Direct                                               $ 1,972,975  $ 1,959,229  $ 1,735,510
Assumed                                                    9,762        7,658        4,972
Ceded:
   Affiliate                                          (1,487,799)  (1,483,707)  (1,354,508)
   Non-affiliate                                        (494,938)    (483,180)    (385,974)
                                                     -----------  -----------  -----------
Interest credited to contractholder funds, contract
   benefits and expenses, net of reinsurance         $        --  $        --  $        --
                                                     ===========  ===========  ===========
</Table>

8. COMMITMENTS, GUARANTEES AND CONTINGENT LIABILITIES

LEASES

     The Company leases certain office equipment. Total rent expense for all
leases was $198 thousand, $469 thousand and $681 thousand in 2006, 2005 and
2004, respectively, and was ceded to ALIC under the terms of the reinsurance
agreements.

     Minimum rental commitments under operating leases with an initial or
remaining term of more than one year as of December 31, 2006 are as follows:

                                      OPERATING
(IN THOUSANDS)                         LEASES
                                      ---------
2007                                    $57
2008                                      4
Thereafter                               --
                                        ---
                                        $61
                                        ===
GUARANTEES

     In the normal course of business, the Company provides standard
indemnifications to counterparties in contracts in connection with numerous
transactions, including acquisitions and divestures. The types of
indemnifications typically provided include indemnifications for breach of
representations and warranties, taxes and certain other liabilities, such as
third party lawsuits. The indemnification clauses are often standard contractual
terms and were 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, ceded to ALIC,
was not material as of December 31, 2006.


                                       36

<Page>

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.

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" sub-section below, please
note the following:

     _    These matters raise difficult and complicated factual and legal issues
          and are subject to many uncertainties and complexities, including but
          not limited to, 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 and, in some cases, the timing of their resolutions relative
          to other similar matters involving other companies; 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.

     -    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 our 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 on-going 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 quarter 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.


                                       37

<Page>

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 several 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 include a lawsuit filed in
December 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 August 2001 by former employee agents alleging retaliation
and age discrimination under the Age Discrimination in Employment Act ("ADEA"),
breach of contract and ERISA violations (the "Romero I" suit). In March 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 on January 16, 2007, the judge denied their request.
The case otherwise remains pending. The EEOC also filed another lawsuit in
October 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 October 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 filed a
motion for interlocutory appeal from the partial summary judgment, which was
granted by the trial court on January 4, 2007. AIC has filed a petition for
immediate review of two controlling issues of law to the Court of Appeals for
the Eighth Circuit and that petition is currently pending. AIC is also defending
a certified class action filed by former employee agents who terminated their
employment prior to the agency program reorganization. These plaintiffs have
asserted breach of contract and ERISA claims. 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 April 2005. 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. The
outcome of these disputes is currently uncertain.

OTHER MATTERS

     The Corporation and some of its subsidiaries, including the Company, have
received interrogatories and demands for information from regulatory and
enforcement authorities relating to various insurance products and practices.
The areas of inquiry include variable annuity market timing and late trading.
The Corporation and some of its subsidiaries, including the Company, have also
received interrogatories and demands for information from authorities seeking
information relevant to on-going investigations into the possible violation of
antitrust or insurance laws by unnamed parties and, in particular, seeking
information as to whether any person engaged in activities for the purpose of
price fixing, market allocation, or bid rigging. The Company believes that these
inquiries are similar to those made to many financial services companies as part
of industry-wide investigations by various authorities into the practices,
policies and procedures relating to insurance and financial services products.
Moreover, the Corporation has not received any communication from authorities
related to the variable annuity market timing and late trading inquiries since
November 2005. The Corporation and its subsidiaries have responded and will
continue to respond to these inquiries.


                                       38

<Page>

     Various other legal and regulatory actions are currently pending that
involve the Company and specific aspects of its conduct of business. Like other
members of the insurance industry, the Company is the target of 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 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 eligible domestic
subsidiaries (the "Allstate Group") in the filing of a consolidated federal
income tax return and is party to a federal income tax allocation agreement (the
"Allstate Tax Sharing Agreement"). Under the Allstate Tax Sharing Agreement, the
Company pays to or receives from the Corporation the amount, if any, by which
the Allstate Group's federal income tax liability is affected by virtue of
inclusion of the Company in the consolidated federal income tax return. The
Company has also entered into a supplemental tax sharing agreement with respect
to reinsurance ceded to ALIC to allocate the tax benefits and 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 ("IRS") has completed its review of the
Corporations's federal income tax returns through the 2002 tax year and the
statute of limiations has expired for these years. Any adjustments that may
result from IRS examinations of tax returns are not expected to have a material
impact on the results of operations, cash flows or financial position of the
Company.

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

(IN THOUSANDS)                            2006    2005
                                         -----   -----
DEFERRED ASSETS
Unrealized net capital losses            $  95   $  --

DEFERRED LIABILITIES
Unrealized net capital gains                --    (381)
Difference in tax bases of investments    (229)   (208)
Other liabilities                           (1)     (2)
                                         -----   -----
   Total deferred liabilities             (230)   (591)
                                         -----   -----
      Net deferred liabilities           $(135)  $(591)
                                         =====   =====

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

(IN THOUSANDS)                 2006     2005     2004
                              ------   ------   ------
Current                       $4,412   $4,769   $3,877
Deferred                          21      (98)      48
                              ------   ------   ------
   Total income tax expense   $4,433   $4,671   $3,925
                              ======   ======   ======

     The Company paid income taxes of $4.8 million and $2.5 million in 2006 and
2004, respectively, and received an income tax refund of $38 thousand in 2005.

     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:

                                    2006   2005   2004
                                    ----   ----   ----
Statutory federal income tax rate   35.0%  35.0%  35.0%
Other                               (0.1)  (0.3)  (0.1)
                                    ----   ----   ----
Effective income tax rate           34.9%  34.7%  34.9%
                                    ====   ====   ====


                                       39

<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 primarily differ from GAAP 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 investments and establishing deferred taxes on a
different basis.

     Statutory net income for 2006, 2005, and 2004 was $9.1 million, $8.8
million and $7.4 million, respectively. Statutory capital and surplus was $274.4
million and $267.5 million as of December 31, 2006 and 2005, 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 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 2007 without prior approval of the Nebraska Department of Insurance is
$27.4 million. In the twelve-month period beginning January 1, 2006 the Company
did not pay any dividends.


                                       40

<Page>

11. Other Comprehensive Income

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

                                                              2006
                                                     ------------------------
                                                                       AFTER-
(IN THOUSANDS)                                        PRETAX    TAX     TAX
                                                     -------  ------  -------
Unrealized holding losses arising during the period  $(2,601) $  910  $(1,691)
Less: reclassification adjustments                    (1,240)    434     (806)
                                                     -------  ------  --------
Unrealized net capital gains and losses               (1,361)    476     (885)
                                                     -------  ------  -------
Other comprehensive loss                             $(1,361) $  476  $  (885)
                                                     =======  ======  =======

                                                              2005
                                                     ------------------------
                                                                       AFTER-
                                                      PRETAX    TAX     TAX
                                                     -------  ------  -------
Unrealized holding losses arising during the period  $(7,514) $2,628  $(4,886)
Less: reclassification adjustments                      (174)     60     (114)
                                                     -------  ------  -------
Unrealized net capital gains and losses               (7,340)  2,568   (4,772)
                                                     -------  ------  -------
Other comprehensive loss                             $(7,340) $2,568  $(4,772)
                                                     =======  ======  =======

                                                               2004
                                                     ------------------------
                                                                       AFTER-
                                                      PRETAX    TAX     TAX
                                                     -------  ------  -------
Unrealized holding losses arising during the period  $(2,743) $  960  $(1,783)
Less: reclassification adjustments                         5      (2)       3
                                                     -------  ------  -------
Unrealized net capital gains and losses               (2,748)    962   (1,786)
                                                     -------  ------  -------
Other comprehensive loss                             $(2,748) $  962  $(1,786)
                                                     =======  ======  =======


                                       41

<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, 2006 and 2005, 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, 2006. 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, 2006 and 2005, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 2006, 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 9, 2007


                                       42

<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.

     CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING. During the fiscal
quarter ended December 31, 2006, 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


                                       43

<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, 2006 and 2005.

                                      2006       2005
                                    --------   --------
     Audit fees (a)                 $216,500   $213,706
                                    --------   --------
     TOTAL FEES                     $216,500   $213,706
                                    ========   ========

(a)  Fees for audits of annual financial statements including financial
     statements for the separate accounts, 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.

(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(ii) - The Allstate
Corporation Policy Regarding Pre-Approval of Independent Auditors' 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 2006 and 2005
were pre-approved by The Allstate Corporation and Allstate Life Audit
Committees.


                                       44

<Page>

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a)  (1) The following financial statements, notes thereto and related
     information of Lincoln Benefit 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

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

     LINCOLN BENEFIT LIFE COMPANY                                      PAGE
     ----------------------------                                      ----
     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

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

     (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
     333-59765 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       Investment Management Agreement and Amendment to Certain
                    Service and Expense Agreements Among Allstate Investments,
                    LLC and Allstate Insurance Company and The Allstate
                    Corporation and Certain Affiliates effective as of January
                    1, 2002. Incorporated herein by reference to Exhibit 10.28
                    to Allstate Life Insurance Company's Form 10 filed on April
                    24, 2002. (SEC File No. 000-31248)

         10.2       Tax Sharing Agreement dated as of November 12, 1996 among
                    The Allstate Corporation and certain affiliates.
                    Incorporated herein by reference to Exhibit 10.36 to
                    Allstate Life Insurance Company's Form 10 filed on April 24,
                    2002. (SEC File No. 000-31248)

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


                                       45

<Page>

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

         10.5       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 Report on Form 10-Q for quarter ended
                    March 31, 2005.

         10.6       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.

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

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

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

         10.10      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.

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

         10.12      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)

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

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


                                       46

<Page>

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

         10.16      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.

         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 Auditor's Services effective November 10, 2003.
                    Incorporated herein by reference to Exhibit 99(ii) to
                    Lincoln Benefit Life Company's Annual Report on Form 10-K
                    for 2004.

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

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


                                       47

<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 13, 2007                          /s/ Samuel H. Pilch
                                        ----------------------------------------
                                        By: 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 capacities and on the dates indicated.

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


/s/ Casey J. Sylla                  Chairman of the Board,Chief   March 13, 2007
---------------------------------   Executive Officer and a
Casey J. Sylla                      Director
                                    (Principal Executive
                                    Officer)


/s/ John C. Pintozzi                Vice President, Chief         March 13, 2007
---------------------------------   Financial Officer and a
John C. Pintozzi                    Director
                                    (Principal Financial
                                    Officer)


/s/ Lawrence W. Dahl                Director                      March 12, 2007
---------------------------------
Lawrence W. Dahl


                                    Director                      March 12, 2007
---------------------------------
John C. Lounds


/s/ Kevin R. Slawin                 Director                      March 12, 2007
---------------------------------
Kevin R. Slawin


/s/ Michael J. Velotta              Director                      March 12, 2007
---------------------------------
Michael J. Velotta


/s/ Douglas B. Welch                Director                      March 12, 2007
---------------------------------
Douglas B. Welch


                                       48

<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.


                                       49

<Page>

                          LINCOLN BENEFIT LIFE COMPANY
  SCHEDULE I - SUMMARY OF INVESTMENTS OTHER THAN INVESTMENTS IN RELATED PARTIES
                                DECEMBER 31, 2006
<Table>
<Caption>
                                                                                           AMOUNTS AT
                                                                                           WHICH SHOWN
                                                                                           ON BALANCE
(IN THOUSANDS)                                                         COST    FAIR VALUE     SHEET
                                                                     --------  ----------  -----------
<S>                                                                  <C>        <C>          <C>
TYPE OF INVESTMENT
Fixed maturities:
   Bonds:
      United States government, government agencies and authorities  $116,821   $117,963     $117,963
      States, municipalities and political subdivisions                   502        533          533
      Public utilities                                                  4,127      3,931        3,931
      All other corporate bonds                                        70,628     69,450       69,450
   Mortgage-backed securities                                          29,963     29,244       29,244
   Asset-backed securities                                             14,195     14,522       14,522
   Commercial mortgage-backed securities                               32,095     32,415       32,415
                                                                     --------   --------     --------
      Total fixed maturities                                          268,331   $268,058      268,058
                                                                     ========   ========     ========
Short-term investments                                                  8,264                   8,264
                                                                     --------                --------
      Total investments                                              $276,595                $276,322
                                                                     ========                ========
</Table>


                                      S-1

<Page>

                          LINCOLN BENEFIT LIFE COMPANY
                            SCHEDULE IV--REINSURANCE

(IN THOUSANDS)
                                   GROSS                      NET
YEAR ENDED DECEMBER 31, 2006       AMOUNT         CEDED     AMOUNT
------------------------------  ------------  ------------  ------
Life insurance in force         $290,974,479  $290,974,479    $--
                                ===========   ============    ===
Premiums and contract charges:
   Life and annuities           $    833,110  $    833,110    $--
   Accident and health               121,951       121,951     --
                                ------------  ------------    ---
                                $    955,061  $    955,061    $--
                                ============  ============    ===

                                   GROSS                      NET
YEAR ENDED DECEMBER 31, 2005       AMOUNT         CEDED      AMOUNT
------------------------------  ------------  ------------  -------
Life insurance in force         $250,002,951  $250,002,951    $--
                                ============  ============    ===
Premiums and contract charges:
   Life and annuities           $    735,892  $    735,892    $--
   Accident and health               111,371       111,371     --
                                ------------  ------------    ---
                                $    847,263  $    847,263    $--
                                ============  ============    ===

                                   GROSS                      NET
YEAR ENDED DECEMBER 31, 2004       AMOUNT         CEDED      AMOUNT
------------------------------  ------------  ------------  -------
Life insurance in force         $211,262,503  $211,262,503    $--
                                ============  ============    ===
Premiums and contract charges:
   Life and annuities           $    649,996  $    649,996    $--
   Accident and health                96,346        96,346     --
                                ------------  ------------    ---
                                $    746,342  $    746,342    $--
                                ============  ============    ===


                                      S-2