**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

----

 

**FORM 10-Q**

** **

The registrantmeets the conditions set forth in General Instruction H (1)(a) and (b) of Form10-Q and is therefore filing this Form with the reduced disclosure format.

 

**x****QUARTERLY REPORTPURSUANT TO SECTION 13 OR 15(d)**

**OF**

**THESECURITIES EXCHANGE ACT OF 1934**

**FORTHE QUARTERLY PERIOD ENDED JUNE 30, 2007**

 

**OR**

 

**o****TRANSITION REPORTPURSUANT TO SECTION 13 OR 15(d)**

**OF**

**THESECURITIES EXCHANGE ACT OF 1934**

 

##### **Commission file number: 333-111553**

##### ** **

**LINCOLN BENEFIT LIFE COMPANY**

(Exact name of registrant as specified in itscharter)

 

| **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**

 

**Indicate by check mark whether the registrant (1) has filed all reportsrequired to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934during the preceding 12 months, and (2) has been subject to such filingrequirements for the past 90 days.**

** **

**Yes****x   No****o**

 

**Indicate by check mark whether the registrant is a large acceleratedfiler, an accelerated filer, or a non-accelerated filer. See definition of “acceleratedfiler and large accelerated filer” in Rule 12b-2 of the Exchange Act.**

 
| ** ** | ** ** | **Large accelerated filer** | ** ** | **Accelerated filer** |       | **Non-accelerated filer** |
|------------|------------|-----------------------------|------------|-----------------------|------------|---------------------------|
| ** ** | ** ** | **o**                       | ** ** | **o**                 | ** ** | x                         |

 

**Indicateby check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act).**

** **

**Yes**o    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 theregistrant is zero.**

 

**As of August 6, 2007, the Registrant had 25,000 common shares, $100 parvalue, outstanding, all of which are held by Allstate Life Insurance Company.**

 

 

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##### **LINCOLN BENEFIT LIFE COMPANY**

**INDEX TO QUARTERLY REPORT ON FORM 10-Q**

#### **June 30,2007**

 
| ** **   | ** ** | ** **                                                                                                              | ** ** | **Page**   |
|--------------|------------|-------------------------------------------------------------------------------------------------------------------------|------------|------------|
| **PART I.**  | ** ** | **FINANCIAL INFORMATION**                                                                                               | ** ** | ** ** |
|         |       |                                                                                                                    |       |       |
| Item 1.      |       | Financial Statements                                                                                                    |       |       |
|         |       |                                                                                                                    |       |       |
|         |       | Condensed Statements of Operations for the Three-Month and Six-Month  Periods  Ended June 30, 2007 and 2006 (unaudited) |       | 3          |
|         |       |                                                                                                                    |       |       |
|         |       | Condensed Statements of Financial Position as of June 30, 2007  (unaudited) and  December 31, 2006                      |       | 4          |
|         |       |                                                                                                                    |       |       |
|         |       | Condensed Statements of Cash Flows for the Six-Month Periods Ended  June 30,  2007 and 2006 (unaudited)                 |       | 5          |
|         |       |                                                                                                                    |       |       |
|         |       | Notes to Condensed Financial Statements (unaudited)                                                                     |       | 6          |
|         |       |                                                                                                                    |       |       |
| Item 2.      |       | Management’s Discussion and Analysis of Financial Condition and  Results of Operations                             |       | 13         |
|         |       |                                                                                                                    |       |       |
| Item 4.      |       | Controls and Procedures                                                                                                 |       | 17         |
|         |       |                                                                                                                    |       |       |
| **PART II.** | ** ** | **OTHER INFORMATION**                                                                                                   | ** ** | ** ** |
|         |       |                                                                                                                    |       |       |
| Item 1.      |       | Legal Proceedings                                                                                                       |       | 18         |
|         |       |                                                                                                                    |       |       |
| Item 1A.     |       | Risk Factors                                                                                                            |       | 18         |
|         |       |                                                                                                                    |       |       |
| Item 5.      |       | Other Information                                                                                                       |       | 18         |
|         |       |                                                                                                                    |       |       |
| Item 6.      |       | Exhibits                                                                                                                |       | 18         |

** **

**2**

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** **

#### **PART I. FINANCIAL INFORMATION**

####  

#### **ITEM 1. FINANCIAL STATEMENTS**

####  

#### **LINCOLN BENEFIT LIFE COMPANY**

####  

**CONDENSEDSTATEMENTS OF OPERATIONS**

 
| ** **                                            | ** ** | **Three Months Ended** | ** ** | **Six Months Ended** | ** ** |
|-------------------------------------------------------|------------|----------------------------------|------------|--------------------------------|------------|
| ** **                                            | ** ** | **June 30,**                | ** ** | **June 30,**              | ** ** |
| **(in thousands)**                               | ** ** | **2007**                         | ** ** | **2006**                       | ** ** | **2007** | ** ** | **2006** | ** ** |
| ** **                                            | ** ** | **(unaudited)**                  | ** ** | **(unaudited)**                | ** ** |
| **Revenues**                                          |       |                             |       |                           |       |   |   |   |   |
| Net investment income                                 |       | $                                | 3,549      |                           | $          | 3,568 |   | $ | 7,133 |   | $ | 6,957 |   |
| Realized capital gains and losses                     |       | (405                             | )          | (847                           | )          | (405 | ) | (847 | ) |
|                                                  |       |                             |       |                           |       |   |   |   |   |
| **Income from operations before income tax  expense** |       | 3,144                            |       | 2,721                          |       | 6,728 |   | 6,110 |   |
| Income tax expense                                    |       | 1,098                            |       | 950                            |       | 2,350 |   | 2,133 |   |
| **Net income**                                        |       | $                                | 2,046      |                           | $          | 1,771 |   | $ | 4,378 |   | $ | 3,977 |   |

 

See notes to condensedfinancial statements.

 

3

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**LINCOLN BENEFIT LIFE COMPANY**

 

**CONDENSEDSTATEMENTS OF FINANCIAL POSITION**

 
| ** **                                                                                              | ** ** | **June 30,** | ** ** | **December 31,** | ** ** |
|---------------------------------------------------------------------------------------------------------|------------|-------------------|------------|-----------------------|------------|
| **($ in thousands, except par value data)**                               | ** ** | **2007**          | ** ** | **2006**              | ** ** |
| ** **                                                                                              | ** ** | **(Unaudited)**   | ** ** | ** **            | ** ** |
|                                                                                                    |       |              |       |                  |       |
| **Assets**                                                                                              |       |              |       |                  |       |
| Investments                                                                                             |       |              |       |                  |       |
| Fixed income securities, at fair value  (amortized cost $259,474 and $268,331)                          |       | $                 | 255,556    |                  | $          | 268,058 |   |
| Short-term                                                                                              |       | 23,087            |       | 8,264                 |       |
| Total investments                                                                                       |       | 278,643           |       | 276,322               |       |
|                                                                                                    |       |              |       |                  |       |
| Cash                                                                                                    |       | 11,954            |       | 23,352                |       |
| Reinsurance recoverable from Allstate Life  Insurance Company                                           |       | 19,117,568        |       | 19,131,870            |       |
| Reinsurance recoverable from non-affiliates                                                             |       | 1,317,960         |       | 1,203,864             |       |
| Receivable from affiliates                                                                              |       | —            |       | 24,990                |       |
| Deferred income taxes                                                                                   |       | 1,140             |       | —                |       |
| Other assets                                                                                            |       | 99,962            |       | 104,971               |       |
| Separate Accounts                                                                                       |       | 3,191,507         |       | 3,097,550             |       |
| **Total assets**                                                                                        |       | $                 | 24,018,734 |                  | $          | 23,862,919 |   |
|                                                                                                    |       |              |       |                  |       |
| **Liabilities**                                                                                         |       |              |       |                  |       |
| Contractholder funds                                                                                    |       | $                 | 18,180,915 |                  | $          | 18,195,622 |   |
| Reserve for life-contingent contract  benefits                                                          |       | 2,231,971         |       | 2,126,455             |       |
| Current income taxes payable                                                                            |       | 6,762             |       | 4,412                 |       |
| Unearned premiums                                                                                       |       | 24,775            |       | 25,935                |       |
| Deferred income taxes                                                                                   |       | —            |       | 135                   |       |
| Payable to affiliates, net                                                                              |       | 5,631             |       | —                |       |
| Other liabilities and accrued expenses                                                                  |       | 98,538            |       | 136,184               |       |
| Separate Accounts                                                                                       |       | 3,191,507         |       | 3,097,550             |       |
| **Total liabilities**                                                                                   |       | 23,740,099        |       | 23,586,293            |       |
|                                                                                                    |       |              |       |                  |       |
| **Commitments and Contingent Liabilities  (Note 3)**                                                    |       |              |       |                  |       |
|                                                                                                    |       |              |       |                  |       |
| **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                                                                                         |       | 98,682            |       | 94,304                |       |
| Accumulated other comprehensive income:                                                                 |       |              |       |                  |       |
| Unrealized net capital gains and losses                                                                 |       | (2,547            | )          | (178                  | )          |
| **Total accumulated other comprehensive  income**                                                       |       | (2,547            | )          | (178                  | )          |
| **Total shareholder’s equity**                                                                     |       | 278,635           |       | 276,626               |       |
| **Total liabilities and shareholder’s equity**                                                     |       | $                 | 24,018,734 |                  | $          | 23,862,919 |   |

 

See notes to condensed financial statements.

 

4

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#### **LINCOLNBENEFIT LIFE COMPANY**

####  

##### **CONDENSED STATEMENTS OF CASH FLOWS**

 
| ** **                                                                                               | ** ** | **Six Months Ended June 30,** | ** ** |
|----------------------------------------------------------------------------------------------------------|------------|---------------------------------------------------|------------|
| **(in thousands)**                                                                                  | ** ** | **2007**                                          | ** ** | **2006** | ** ** |
| ** **                                                                                               | ** ** | **(Unaudited)**                                   | ** ** |
|                                                                                                     |       |                                              |       |   |   |
| **Cash flows from operating activities**                                                                 |       |                                              |       |   |   |
| Net income                                                                                               |       | $                                                 | 4,378      |   | $ | 3,977 |   |
| Adjustments to reconcile net income to net  cash provided by operating activities:                       |       |                                              |       |   |   |
| Amortization and other non-cash items                                                                    |       | 45                                                |       | 247 |   |
| Realized capital gains and losses                                                                        |       | 405                                               |       | 847 |   |
| Changes in:                                                                                              |       |                                              |       |   |   |
| Reserve for life-contingent contract  benefits and contractholder funds, net of reinsurance recoverables |       | (8,985                                            | )          | 3,062 |   |
| Income taxes payable                                                                                     |       | 2,350                                             |       | 2,133 |   |
| Receivable/payable to affiliates, net                                                                    |       | 30,621                                            |       | 19,413 |   |
| Other operating assets and liabilities                                                                   |       | (33,797                                           | )          | 4,495 |   |
| Net cash (used in) provided by operating  activities                                                     |       | (4,983                                            | )          | 34,174 |   |
|                                                                                                     |       |                                              |       |   |   |
| **Cash flows from investing activities**                                                                 |       |                                              |       |   |   |
| ** **                                                                                               |       |                                              |       |   |   |
| Fixed income securities                                                                                  |       |                                              |       |   |   |
| Proceeds from sales                                                                                      |       | 5,176                                             |       | 10,877 |   |
| Investment collections                                                                                   |       | 11,164                                            |       | 6,790 |   |
| Investment purchases                                                                                     |       | (8,013                                            | )          | (20,370 | ) |
| Change in short-term investments                                                                         |       | (14,742                                           | )          | (4,704 | ) |
| Net cash used in investing activities                                                                    |       | (6,415                                            | )          | (7,407 | ) |
|                                                                                                     |       |                                              |       |   |   |
| **Net (decrease) increase in cash**                                                                      |       | (11,398                                           | )          | 26,767 |   |
| **Cash at beginning of period**                                                                          |       | 23,352                                            |       | 8,349 |   |
| **Cash at end of period**                                                                                |       | $                                                 | 11,954     |   | $ | 35,116 |   |

** **

See notes to condensedfinancial statements.

 

5

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**LINCOLNBENEFIT LIFE COMPANY**

**NOTES TOCONDENSED FINANCIAL STATEMENTS**

**(unaudited)**

 

## **1. Basisof Presentation**

##  

Theaccompanying condensed financial statements include the accounts of LincolnBenefit Life Company (the “Company”), a wholly owned subsidiary of AllstateLife Insurance Company (“ALIC”), which is wholly owned by Allstate InsuranceCompany (“AIC”), a wholly owned subsidiary of The Allstate Corporation (the “Corporation”).

 

The condensedfinancial statements and notes as of June 30, 2007, and for the three-month andsix-month periods ended June 30, 2007 and 2006, are unaudited. The condensedfinancial statements reflect all adjustments (consisting only of normalrecurring accruals) which are, in the opinion of management, necessary for thefair presentation of the financial position, results of operations and cashflows for the interim periods. These condensed financial statements and notesshould be read in conjunction with the financial statements and notes theretoincluded in the Company’s Annual Report on Form 10-K for the year endedDecember 31, 2006. The results of operations for the interim periods should notbe considered indicative of results to be expected for the full year.

 

### **Adoptedaccounting standards**

### ** **

***Statement of Position 05-1, Accounting by InsuranceEnterprises for Deferred Acquisition Costs in Connection with Modifications orExchanges of Insurance Contracts (“SOP 05-1”)***

** **

 In October 2005, the American Institute ofCertified Pubic Accountants (“AICPA”) issued SOP 05-1. SOP 05-1 providesaccounting guidance for deferred policy acquisition costs associated withinternal replacements of insurance and investment contracts other than thoseset forth in SFAS No. 97, “Accounting and Reporting by Insurance Enterprisesfor Certain Long-Duration Contracts and for Realized Gains and Losses from theSale of Investments”. SOP 05-1 defines an internal replacement as a modificationin product benefits, features, rights or coverages that occurs through theexchange of an existing contract for a new contract, or by amendment,endorsement or rider to an existing contract, or by the election of a featureor coverage within an existing contract. In February 2007, the AICPA issuedTechnical Practice Aids (“TPAs”) that provide interpretive guidance to be usedin applying the SOP 05-1. The Company adopted the provisions of SOP 05-1 onJanuary 1, 2007, for internal replacements occurring in fiscal years beginningafter December 15, 2006. The impact resulting from the adoption of SOP 05-1 wasceded to ALIC under the terms of the reinsurance agreements.

 

*Financial Accounting Standards BoardInterpretation No. 48, Accounting for Uncertainty in Income Taxes, (“FIN 48”)*

 

In July 2006, the FASB issued FIN 48, which clarifies the accountingfor uncertainty in income taxes recognized in an entity’s financial statementsin accordance with FASB Statement No. 109, “Accounting for Income Taxes”. FIN 48requires an entity to recognize the tax benefit of uncertain tax positions onlywhen it is more likely than not, based on the position’s technical merits, thatthe position would be sustained upon examination by the respective taxingauthorities. The tax benefit is measured as the largest benefit that is morethan fifty-percent likely of being realized upon final settlement with therespective taxing authorities. On January 1, 2007, the Company adopted theprovisions of FIN 48, which are effective for fiscal years beginning afterDecember 15, 2006. No cumulative effect of a change in accounting principle oradjustment to the liability for unrecognized tax benefits was recognized as aresult of the adoption of FIN 48. Accordingly, the adoption of FIN 48 did nothave an effect on the results of operations or financial position of theCompany.

 

TheCompany had no liability for unrecognized tax benefits at January 1, 2007 orJune 30, 2007, and believes it is reasonably possible that the liabilitybalance will not significantly increase or decrease within the next 12 months.

 

TheInternal Revenue Service (“IRS”) completed its review of the Company’s federalincome tax returns through the 2002 tax year and the statute of limitations hasexpired on those years. The IRS is currently examining the Company’s federalincome tax returns for the 2003 and 2004 tax years.

 

6

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*Securities and Exchange Commission (“SEC”) Staff Accounting BulletinNo. 108, Considering the Effects of Prior Year Misstatements when QuantifyingMisstatements in Current Year Financial Statements (“SAB 108”)*

 

In September 2006, the SECissued SAB 108 to eliminate the diversity of practice in the process by whichmisstatements are quantified for purposes of assessing materiality on thefinancial statements. SAB 108 is intended to eliminate the potential for thebuild up of improper amounts on the balance sheet due to the limitations ofcertain methods of materiality assessment utilized in current practice. SAB 108establishes a single quantification framework wherein the significancemeasurement is based on the effects of the misstatements on each of thefinancial statements as well as the related financial statement disclosures. OnDecember 31, 2006, the Company adopted the provisions of SAB 108 which wereeffective for the first fiscal year ending after November 15, 2006. Theadoption of SAB 108 did not have any effect on its results of operations orfinancial position.

 

*FASB Staff Position No. FAS 115-1, TheMeaning of Other-Than-Temporary Impairment and Its Application to CertainInvestments (“FSP FAS 115-1”)*

 

FSP FAS 115-1nullifies the guidance in paragraphs 10-18 of Emerging Issues Task Force Issue03-1, “The Meaning of Other-Than-Temporary Impairment and Its Application toCertain Investments” and references existing other-than-temporary impairmentguidance. FSP FAS 115-1 clarifies that an investor should recognize animpairment loss no later than when the impairment is deemedother-than-temporary, even if a decision to sell the security has not beenmade, and also provides guidance on the subsequent accounting for incomerecognition on an impaired debt security. The Company adopted FSP FAS 115-1 asof January 1, 2006 on a prospective basis. The effect of adoption did not havea material effect on the results of operations or financial position of theCompany.

 

*SFASNo. 154, Accounting Changes and Error Corrections (“SFAS No. 154”)*

 

SFAS No. 154 replaces Accounting Principles Board (“APB”) Opinion No.20, “Accounting Changes”, and SFAS No. 3, “Reporting Accounting Changes inInterim Financial Statements”. SFAS No. 154 requires retrospective applicationto prior periods’ financial statements for changes in accounting principle,unless determination of either the period specific effects or the cumulativeeffect of the change is impracticable or otherwise promulgated. The Companyadopted SFAS No. 154 on January 1, 2006. The adoption of SFAS No. 154 did nothave any effect on the results of operations or financial position of theCompany.

 

### **Pendingaccounting standards**

### ** **

*SFAS No. 157, Fair Value Measurements (“SFAS No. 157”)*

 

InSeptember 2006, the FASB issued SFAS No. 157 which redefines fair value,establishes a framework for measuring fair value in generally acceptedaccounting principles (“GAAP”), and expands disclosures about fair valuemeasurements. SFAS No. 157 applies where other accounting pronouncementsrequire or permit fair value measurements. Additional disclosures andmodifications to current fair value disclosures will be required upon adoptionof SFAS No. 157. SFAS No. 157 is effective for fiscal years beginning afterNovember 15, 2007. The Company is currently evaluating the effects of adoptionof SFAS No. 157 on its results of operations and financial position.

 

7

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*SFAS No. 159, The Fair Value Option for Financial Assets and FinancialLiabilities (“SFAS No. 159”)*

 

InFebruary 2007, the FASB issued SFAS No. 159 which provides reporting entitiesan option to report selected financial assets, including investment securitiesdesignated as available for sale, and liabilities, including most insurancecontracts, at fair value. SFAS No. 159 establishes presentation and disclosurerequirements designed to facilitate comparisons between companies that choosedifferent measurement attributes for similar types of financial assets andliabilities. The standard also requires additional information to aid financialstatement users’ understanding of the impact of a reporting entity’s decisionto use fair value on its earnings and also requires entities to display on theface of the balance sheet the fair value of those assets and liabilities forwhich the reporting entity has chosen to measure at fair value. SFAS No. 159 iseffective as of the beginning of a reporting entity’s first fiscal yearbeginning after November 15, 2007.  Early adoption is permitted as of thebeginning of the previous fiscal year provided the entity makes that choice inthe first 120 days of that fiscal year and also elects to apply the provisionsof SFAS No. 157. Because application of the standard is optional, any impactsare limited to those financial assets and liabilities to which SFAS No. 159would be applied, which have yet to be determined.

 

*SOP 07-1, Clarification of the Scope of theAudit and Accounting Guide Investment Companies (the “Guide”) and Accounting byParent Companies and Equity Method Investors for Investments in InvestmentCompanies–SOP 07-1 (“SOP 07- 1”)*

 

InJune 2007, the AICPA issued SOP 07-1. Upon adoption of the SOP, the Companymust also adopt the provisions of FASB Staff Position No. FIN 46(R)-7, “Applicationof FASB Interpretation No. 46(R) to Investment Companies”, which permanentlyexempts investment companies from applying the provisions of Interpretation46(R) to investments carried at fair value. SOP 07-1 provides guidance fordetermining whether an entity falls within the scope of the Guide and whetherinvestment company accounting should be retained by a parent company uponconsolidation of an investment company or by an equity method investor in aninvestment company. In certain circumstances SOP 07-1 precludes retention ofspecialized accounting for investment companies (i.e. fair value accounting),when similar direct investments exist in the consolidated group and aremeasured on a basis inconsistent with that applied to investment companies. Additionally,SOP 07-1 precludes retention of specialized accounting for investment companiesif the reporting entity does not distinguish through documented policies thenature and type of investments to be held in the investment companies fromthose made in the consolidated group where other accounting guidance is beingapplied. SOP 07-1 is effective for fiscal years beginning on or after December15, 2007. The Company is assessing the current and future implications of thisstandard to the results of operations and financial position.

 

*FASBStaff Position No. 39-1**Amendment of FASB Interpretation No. 39*(“FSP FIN 39-1”)

 

InApril 2007, the FASB issued FSP FIN 39-1, which amends FASB Interpretation No.39, “Offsetting of Amounts Related to Certain Contracts”. FSP FIN 39-1 replacesthe terms “conditional contracts” and “exchange contracts” with the term “derivativeinstruments” and permits a reporting entity to offset fair value amountsrecognized for the right to reclaim cash collateral (a receivable) or theobligation to return cash collateral (a payable) against fair value amountsrecognized for derivative instruments executed with the same counterparty underthe same master netting arrangement that have been offset in the statement offinancial position. FSP FIN 39-1 is effective for fiscal years beginning afterNovember 15, 2007, with early adoption permitted. The effects of applying FSPFIN 39-1 will be recorded as a change in accounting principle throughretrospective application. The adoption of FSP FIN 39-1 is not expected to havea material impact on the Company’s results of operations or financial positionbased on the current level of derivative activity.

 

8

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## **2. Reinsurance**

##  

The Companyhas reinsurance agreements under which it reinsures all of its business to ALICor other non-affiliated reinsurers. Under the agreements, premiums, contractcharges, interest credited to contractholder funds, contract benefits andsubstantially all expenses are reinsured. The Company continues to have primaryliability as the direct insurer for risks reinsured.

 

Investmentincome earned on the assets which support contractholder funds and the reservefor life-contingent contract benefits is not included in the condensedfinancial statements as those assets are owned and managed by ALIC or thirdparty reinsurers under terms of the reinsurance agreements. The timing of thetransfer of funds under the reinsurance agreements may result in fluctuationsin net cash provided by operating activities in the Condensed Statements ofCash Flows.

 

The effects ofreinsurance on premiums and contract charges are as follows:

 
| ** **                                         | ** ** | **Three Months Ended** | ** ** | **Six Months Ended** | ** ** |
|----------------------------------------------------|------------|----------------------------------|------------|--------------------------------|------------|
| ** **                                         | ** ** | **June 30,**                | ** ** | **June 30,**              | ** ** |
| ** **                                         | ** ** | **2007**                         | ** ** | **2006**                       | ** ** | **2007** | ** ** | **2006** | ** ** |
| **(in thousands)**                            | ** ** | ** **                       | ** ** | ** **                     | ** ** | ** ** | ** ** | ** ** | ** ** |
|                                               |       |                             |       |                           |       |   |   |   |   |
| **Premiums and contract charges**                  |       |                             |       |                           |       |   |   |   |   |
| Direct                                             |       | $                                | 254,267    |                           | $          | 233,381 |   | $ | 500,903 |   | $ | 453,545 |   |
| Assumed-non-affiliate                              |       | 2,179                            |       | 2,900                          |       | 4,097 |   | 4,921 |   |
| Ceded                                              |       |                             |       |                           |       |   |   |   |   |
| Affiliate                                          |       | (153,682                         | )          | (140,091                       | )          | (305,116 | ) | (264,971 | ) |
| Non-affiliate                                      |       | (102,764                         | )          | (96,190                        | )          | (199,884 | ) | (193,495 | ) |
| Premiums and contract charges, net of  reinsurance |       | $                                | —     |                           | $          | — |   | $ | — |   | $ | — |   |

 

The effects of reinsurance on interest credited to contractholderfunds, contract benefits and substantially all expenses are as follows:

 
| ** **                                                                                     | ** ** | **Three Months Ended** | ** ** | **Six Months Ended** | ** ** |
|------------------------------------------------------------------------------------------------|------------|----------------------------------|------------|--------------------------------|------------|
| ** **                                                                                     | ** ** | **June 30,**                | ** ** | **June 30,**              | ** ** |
| ** **                                                                                     | ** ** | **2007**                         | ** ** | **2006**                       | ** ** | **2007** | ** ** | **2006** | ** ** |
| **(in thousands)**                                                                        | ** ** | ** **                       | ** ** | ** **                     | ** ** | ** ** | ** ** | ** ** | ** ** |
|                                                                                           |       |                             |       |                           |       |   |   |   |   |
| **Interest credited to contractholder funds,  contract benefits and expenses**                 |       |                             |       |                           |       |   |   |   |   |
| Direct                                                                                         |       | $                                | 553,466    |                           | $          | 419,324 |   | $ | 1,009,069 |   | $ | 899,481 |   |
| Assumed-non-affiliate                                                                          |       | 2,916                            |       | 2,827                          |       | 5,640 |   | 4,877 |   |
| Ceded                                                                                          |       |                             |       |                           |       |   |   |   |   |
| Affiliate                                                                                      |       | (400,948                         | )          | (316,823                       | )          | (750,374 | ) | (676,774 | ) |
| Non-affiliate                                                                                  |       | (155,434                         | )          | (105,328                       | )          | (264,335 | ) | (227,584 | ) |
| Interest credited to contractholder funds,  contract benefits and expenses, net of reinsurance |       | $                                | —     |                           | $          | — |   | $ | — |   | $ | — |   |

 

9

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##  

## **3. Guaranteesand Contingent Liabilities**

##  

## **Guarantees**

##  

In the normalcourse of business, the Company provides standard indemnifications tocounterparties in contracts in connection with numerous transactions, includingacquisitions and divestitures. The types of indemnifications typically providedinclude indemnifications for breaches of representations and warranties, taxesand certain other liabilities, such as third party lawsuits. Theindemnification clauses are often standard contractual terms and are enteredinto in the normal course of business based on an assessment that the risk ofloss would be remote. The terms of the indemnifications vary in duration andnature. In many cases, the maximum obligation is not explicitly stated and thecontingencies triggering the obligation to indemnify have not occurred and arenot expected to occur. Consequently, the maximum amount of the obligation undersuch indemnifications is not determinable. Historically, the Company has notmade any material payments pursuant to these obligations.

 

The aggregateliability balance related to all guarantees was not material as of June 30,2007.

 

## **Regulation**

##  

TheCompany is subject to changing social, economic and regulatory conditions. Fromtime to time, regulatory authorities or legislative bodies seek to imposeadditional regulations regarding agent and broker compensation and otherwiseexpand overall regulation of insurance products and the insurance industry. Theultimate changes and eventual effects of these initiatives on the Company’sbusiness, if any, are uncertain.

 

**Legal and regulatory proceedings andinquiries**

 

**Background**

 

The Company and certain affiliates areinvolved in a number of lawsuits, regulatory inquiries, and other legalproceedings arising out of various aspects of its business. As background tothe “Proceedings” sub-section below, please note the following:

 

•                  These mattersraise difficult and complicated factual and legal issues and are subject tomany uncertainties and complexities, including the underlying facts of eachmatter; novel legal issues; variations between jurisdictions in which mattersare being litigated, heard or investigated; differences in applicable laws andjudicial interpretations; the length of time before many of these matters mightbe resolved by settlement, through litigation or otherwise and, in some cases,the timing of their resolutions relative to other similar matters involvingother companies; the fact that some of the lawsuits are putative class actionsin which a class has not been certified and in which the purported class maynot be clearly defined; the fact that some of the lawsuits involve multi-stateclass actions in which the applicable law(s) for the claims at issue is indispute and therefore unclear; and the current challenging legal environmentfaced by large corporations and insurance companies.

 

•                  In the lawsuits,plaintiffs seek a variety of remedies including equitable relief in the form ofinjunctive and other remedies and monetary relief in the form of contractualand extra-contractual damages. In some cases, the monetary damages soughtinclude punitive damages. Often specific information about the relief sought,such as the amount of damages, is not available because plaintiffs have notrequested specific relief in their pleadings. In our experience, when specificmonetary demands are made in pleadings, they bear little relation to theultimate loss, if any, to the Company.

 

•                  In connectionwith regulatory examinations and proceedings, government authorities may seekvarious forms of relief, including penalties, restitution and changes inbusiness practices. The Company may not be advised of the nature and extent ofrelief sought until the final stages of the examination or proceeding.

 

10

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•                  For the reasonsspecified above, it is often not possible to make meaningful estimates of theamount or range of loss that could result from the matters described below inthe “Proceedings” subsection. The Company reviews these matters on an on-goingbasis and follows the provisions of SFAS No. 5, “Accounting for Contingencies”when making accrual and disclosure decisions. When assessing reasonablypossible and probable outcomes, the Company bases its decisions on itsassessment of the ultimate outcome following all appeals.

 

•                  Due to thecomplexity and scope of the matters disclosed in the “Proceedings” subsectionbelow and the many uncertainties that exist, the ultimate outcome of thesematters cannot be reasonably predicted. In the event of an unfavorable outcomein one or more of these matters, the ultimate liability may be in excess ofamounts currently reserved and may be material to the Company’s operatingresults or cash flows for a particular quarter or annual period. However, basedon information currently known to it, management believes that the ultimateoutcome of all matters described below as they are resolved over time is notlikely to have a material adverse effect on the financial position of theCompany.

 

**Proceedings**

 

Legal proceedings involving Allstate agencies andAIC may impact the Company, even when the Company is not directly involved,because the Company sells its products through a variety of distributionchannels including Allstate agencies. Consequently, information about the moresignificant of these proceedings is provided in the following paragraph.

 

AICis defending certain matters relating to its agency program reorganizationannounced in 1999. These matters include a lawsuit filed in December 2001by the U.S. Equal Employment Opportunity Commission (“EEOC”) allegingretaliation under federal civil rights laws (the “EEOC I” suit) and a classaction filed in August 2001 by former employee agents alleging retaliation andage 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 amemorandum and order that, among other things, certified classes of agents,including a mandatory class of agents who had signed a release, for purposes ofeffecting the court’s declaratory judgment that the release is voidable at theoption of the release signer. The court also ordered that an agent who voidsthe release must return to AIC “any and all benefits received by the [agent] inexchange for signing the release.”  Thecourt also stated that, “on the undisputed facts of record, there is no basisfor claims of age discrimination.”  TheEEOC and plaintiffs have asked the court to clarify and/or reconsider itsmemorandum and order and on January 16, 2007, the judge denied their request. OnJune 20, 2007, the court granted AIC’s motions for summary judgment. The EEOCalso filed another lawsuit in October 2004 alleging age discrimination withrespect to a policy limiting the rehire of agents affected by the agencyprogram reorganization (the “EEOC II” suit). In EEOC II, in October 2006, thecourt granted partial summary judgment to the EEOC. Although the court did notdetermine that AIC was liable for age discrimination under the ADEA, itdetermined that the rehire policy resulted in a disparate impact, reserving fortrial the determination on whether AIC had reasonable factors other than age tosupport the rehire policy. AIC’s petitions for interlocutory review of thetrial court’s summary judgment order were granted. AIC’s interlocutory appealis now pending in the Court of Appeals for the Eighth Circuit. AIC is alsodefending a certified class action filed by former employee agents whoterminated their employment prior to the agency program reorganization. Theseplaintiffs have asserted breach of contract and ERISA claims. A putativenationwide class action has also been filed by former employee agents allegingvarious violations of ERISA, including a worker classification issue. Theseplaintiffs are challenging certain amendments to the Agents Pension Plan andare seeking to have exclusive agent independent contractors treated asemployees for benefit purposes. This matter was dismissed with prejudice by thetrial court, was the subject of further proceedings on appeal, and was reversedand remanded to the trial court in April 2005. On June 20, 2007, the courtgranted AIC’s motion to dismiss the case. In all of these various matters, plaintiffsseek compensatory and punitive damages, and equitable relief. AIC has beenvigorously defending these lawsuits and other matters related to its agencyprogram reorganization. The outcome of these disputes is currently uncertain.

 

11

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## **Other Matters**

##  

## **Various other legal, governmental, and regulatory actions, includingstate market conduct exams, and other governmental and regulatory inquiries arecurrently pending that involve the Company and specific aspects of its conductof business. Like other members of the insurance industry, the Company is thetarget of a number of lawsuits and proceedings, some of which involve claimsfor substantial or indeterminate amounts. These actions are based on a varietyof issues and target a range of the Company’s practices. The outcome of thesedisputes is currently unpredictable. However, based on information currentlyknown to it and the existence of the reinsurance agreements with ALIC,management believes that the ultimate outcome of all matters described in this “OtherMatters” subsection in excess of amounts currently reserved, as they areresolved over time is not likely to have a material effect on the operatingresults, cash flows or financial condition of the Company.**

 

## **4. OtherComprehensive Income**

##  

The componentsof other comprehensive (loss) income on a pretax and after-tax basis are asfollows:

 
| ** **                                                              | ** ** | **Three Months Ended June 30,** | ** ** |
|-------------------------------------------------------------------------|------------|-----------------------------------------------------|------------|
| **(in thousands)**                                                 | ** ** | **2007**                                            | ** ** | **2006** | ** ** |
| ** **                                                              | ** ** | ** **                                          | ** ** | ** ** | ** ** | **After-** | ** ** | ** ** | ** ** | ** ** | ** ** | **After-** | ** ** |
| ** **                                                              | ** ** | **Pretax**                                          | ** ** | **Tax** | ** ** | **tax** | ** ** | **Pretax** | ** ** | **Tax** | ** ** | **tax** | ** ** |
|                                                                    |       |                                                |       |   |   |   |   |   |   |   |   |   |   |
| Unrealized holding losses arising during  the period                    |       | $                                                   | (4,987     | ) | $ | 1,746 |   | $ | (3,241 | ) | $ | (3,306 | ) | $ | 1,157 |   | $ | (2,149 | ) |
| Less: reclassification adjustment of  realized capital gains and losses |       | (405                                                | )          | 142 |   | (263 | ) | (832 | ) | 291 |   | (541 | ) |
| Other comprehensive loss                                                |       | $                                                   | (4,582     | ) | $ | 1,604 |   | (2,978 | ) | $ | (2,474 | ) | $ | 866 |   | (1,608 | ) |
| Net income                                                              |       |                                                |       |   |   | 2,046 |   |   |   |   |   | 1,771 |   |
| Comprehensive (loss) income                                             |       |                                                |       |   |   | $ | (932 | ) |   |   |   |   | $ | 163 |   |

 
| ** **                                                              | ** ** | **Six Months Ended June 30,** | ** ** |
|-------------------------------------------------------------------------|------------|---------------------------------------------------|------------|
| **(in thousands)**                                                 | ** ** | **2007**                                          | ** ** | **2006** | ** ** |
| ** **                                                              | ** ** | ** **                                        | ** ** | ** ** | ** ** | **After-** | ** ** | ** ** | ** ** | ** ** | ** ** | **After-** | ** ** |
| ** **                                                              | ** ** | **Pretax**                                        | ** ** | **Tax** | ** ** | **Tax** | ** ** | **Pretax** | ** ** | **Tax** | ** ** | **Tax** | ** ** |
|                                                                    |       |                                              |       |   |   |   |   |   |   |   |   |   |   |
| Unrealized holding losses arising during  the period                    |       | $                                                 | (4,050     | ) | $ | 1,418 |   | $ | (2,632 | ) | $ | (8,683 | ) | $ | 3,039 |   | $ | (5,644 | ) |
| Less: reclassification adjustment of  realized capital gains and losses |       | (405                                              | )          | 142 |   | (263 | ) | (832 | ) | 291 |   | (541 | ) |
| Other comprehensive loss                                                |       | $                                                 | (3,645     | ) | $ | 1,276 |   | (2,369 | ) | $ | (7,851 | ) | $ | 2,748 |   | (5,103 | ) |
| Net income                                                              |       |                                              |       |   |   | 4,378 |   |   |   |   |   | 3,977 |   |
| Comprehensive income (loss)                                             |       |                                              |       |   |   | $ | 2,009 |   |   |   |   |   | $ | (1,126 | ) |

 

12

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**Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTSOF OPERATIONS FOR THE THREE-MONTH AND SIX-MONTH PERIODS ENDED JUNE 30, 2007 AND2006**

 

## **OVERVIEW**

##  

The followingdiscussion highlights significant factors influencing the financial positionand results of operations of Lincoln Benefit Life Company (referred to in thisdocument as “we”, “our”, “us” or the “Company”). It should be read inconjunction with the condensed financial statements and notes thereto foundunder Part I. Item 1. contained herein, and with the discussion, analysis,financial statements and notes thereto in Part I. Item 1. and Part II. Item 7.and Item 8. of the Lincoln Benefit Life Company Annual Report on Form 10-K for2006. We operate as a single segment entity, consistent with the way in whichwe use financial information to evaluate performance and to determine theallocation of resources.

 

## **OPERATIONS**

 
| ** **                        | ** ** | **Three Months Ended** | ** ** | **Six Months Ended** | ** ** |
|-----------------------------------|------------|----------------------------------|------------|--------------------------------|------------|
| ** **                        | ** ** | **June 30,**                | ** ** | **June 30,**              | ** ** |
| **(in thousands)**           | ** ** | **2007**                         | ** ** | **2006**                       | ** ** | **2007** | ** ** | **2006** | ** ** |
|                              |       |                             |       |                           |       |   |   |   |   |
| Net investment income             |       | $                                | 3,549      |                           | $          | 3,568 |   | $ | 7,133 |   | $ | 6,957 |   |
| Realized capital gains and losses |       | (405                             | )          | (847                           | )          | (405 | ) | (847 | ) |
| Income tax expense                |       | (1,098                           | )          | (950                           | )          | (2,350 | ) | (2,133 | ) |
| Net income                        |       | $                                | 2,046      |                           | $          | 1,771 |   | $ | 4,378 |   | $ | 3,977 |   |

 

We havereinsurance agreements whereby all premiums, contract charges, interestcredited to contractholder funds, contract benefits and substantially allexpenses are ceded to Allstate Life Insurance Company (“ALIC”) and certainnon-affiliated reinsurers, and reflected net of such reinsurance in theCondensed Statements of Operations. Our results of operations include netinvestment income and realized capital gains and losses on our assets that arenot transferred under the reinsurance agreements.

 

On June 1,2006, ALIC, its subsidiary, Allstate Life Insurance Company of New York, andThe Allstate Corporation completed the disposal of substantially all of theirvariable annuity business pursuant to a definitive agreement with PrudentialFinancial, Inc. and its subsidiary, The Prudential Insurance Company ofAmerica (“collectively Prudential”). The disposal was effected through acombination of coinsurance and modified coinsurance reinsurance agreements. The Company is not a direct participant in these agreements and itsreinsurance agreements with ALIC remain unchanged.

 

**Netincome** increased 15.5% in the second quarter and 10.1%in the first six months of 2007 compared to the same periods in 2006. In thesecond quarter of 2007, the decline in net realized capital losses more thanoffset the slight decline in net investment income. In the first six months of2007, increased net income resulted from lower realized capital losses andhigher net investment income.

 

**Netinvestment income** decreased 0.5% in the second quarterof 2007 and increased 2.5% in the first six months of 2007 compared to the sameperiods in the prior year. The slight decline in the second quarter of 2007 wasdriven primarily by decreased average investment balances, partially offset byslightly higher investment yields. The increase in the first six months of 2007was the result of incremental income earned on higher short-term investmentbalances and slightly higher fixed income portfolio yields partially offset byhigher investment expenses and lower average fixed income security balances.

 

**Netrealized capital losses** decreased $442 thousand inboth the second quarter and first six months of 2007 when compared to 2006 dueto lower net losses recognized in conjunction with the dispositions of fixedincome securities.

 

13

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**FINANCIALPOSITION**

** **
| ** **                                     | ** ** | **June 30,** | ** ** | **December 31,** | ** ** |
|------------------------------------------------|------------|-------------------|------------|-----------------------|------------|
| **(in thousands)**                        | ** ** | **2007**          | ** ** | **2006**              | ** ** |
| Fixed income securities (1)                    |       | $                 | 255,556    |                  | $          | 268,058 |   |
| Short-term                                     |       | 23,087            |       | 8,264                 |       |
| Total investments                              |       | $                 | 278,643    |                  | $          | 276,322 |   |
|                                           |       |              |       |                  |       |
| Cash                                           |       | $                 | 11,954     |                  | $          | 23,352 |   |
| Reinsurance recoverable from ALIC              |       | 19,117,568        |       | 19,131,870            |       |
| Reinsurance recoverable from non-affiliates    |       | 1,317,960         |       | 1,203,864             |       |
| Contractholder funds                           |       | 18,180,915        |       | 18,195,622            |       |
| Reserve for life-contingent contract  benefits |       | 2,231,971         |       | 2,126,455             |       |
| Separate Accounts assets and liabilities       |       | 3,191,507         |       | 3,097,550             |       |

 

----

| (1) |   | Fixed income  securities are carried at fair value. Amortized cost basis for these  securities was $259.5 million and $268.3 million at June 30, 2007 and  December 31, 2006, respectively. |
|-----|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

Totalinvestments increased to $278.6 million at June 30, 2007 from $276.3 million atDecember 31, 2006 due to purchases of short-term investments partially offsetby negative cash flows from operating activities in the first six months of2007 and higher unrealized capital losses on fixed income securities.

 

At June 30, 2007, all securities in the fixed income securitiesportfolio were rated investment grade, which is defined as a security having arating from the National Association of Insurance Commissioners (“NAIC”) of 1or 2; a rating of Aaa, Aa, A or Baa from Moody’s or a rating of AAA, AA, A orBBB from Standard and Poor’s, Fitch or Dominion or a rating of aaa, aa, a orbbb from A.M. Best; or a comparable internal rating if an externally providedrating is not available.

 

The unrealized net capital losses on fixed income securities at June30, 2007 were $3.9 million, compared to unrealized net capital losses of $273thousand at December 31, 2006. The net unrealized losses werecomprised of $6.6 million of unrealized losses and $2.7 million of unrealizedgains at June 30, 2007. The unrealized losses at December 31, 2006 werecomprised of $4.6 million of unrealized losses and $4.3 million of unrealizedgains.

 

Of the grossunrealized losses at June 30, 2007, $2.4 million or 36.5% were related tosecurities in our corporate fixed income securities portfolio and are believedto be a result of a rising interest rate environment or company specific issues.These losses were primarily comprised of losses in the capital goods, consumergoods, and transportation sectors. Of the remaining $4.2 million of unrealizedlosses, $2.2 million or 53.3% were related to securities in our U.S. governmentand government agencies portfolio and are believed to be interest rate related.

 

Our portfolio monitoringprocess identifies and evaluates, on a case-by-case basis, fixed incomesecurities whose carrying value may be other-than-temporarily impaired. Theprocess includes a quarterly review of all securities using a screening processto identify those securities whose fair value compared to amortized cost isbelow established thresholds for certain time periods, or which are identifiedthrough other monitoring criteria such as ratings downgrades or paymentdefaults. The securities identified, and other securities for which we may havea concern, are evaluated based on facts and circumstances for inclusion on ourwatch-list. We also conduct a portfolio review to recognize impairment onsecurities in an unrealized loss position for which we do not have the intentand ability to hold until recovery as a result of approved programs involvingthe disposition of investments such as changes in duration, revisions tostrategic asset allocations and liquidity actions, as well as certaindispositions anticipated by portfolio managers. All securities in an unrealizedloss position at June 30, 2007 were included in our portfolio monitoringprocess for determining which declines in value were not other-than-temporary.

 

14

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We also monitor the quality of our fixed incomeportfolio by categorizing certain investments as “problem”, “restructured” or “potentialproblem.”  Problem fixed incomesecurities are securities in default with respect to principal or interestand/or securities issued by companies that have gone into bankruptcy subsequentto our acquisition of the security. Restructured fixed income securities haverates and terms that are not consistent with market rates or terms prevailingat the time of the restructuring. Potential problem fixed income securities arecurrent with respect to contractual principal and/or interest, but because ofother facts and circumstances, we have concerns regarding the borrower’sability to pay future principal and interest, which causes us to believe thesesecurities may be classified as problem or restructured in the future.

 

As of June 30,2007 and December 31, 2006, we had no securities categorized as “problem”, “restructured”or “potential problem”.

 

**NetRealized Capital Gains and Losses** The following tablepresents the components of realized capital gains and losses and the relatedtax effect.

 
| ** **                                        | ** ** | **Three Months Ended** | ** ** | **Six Months Ended** | ** ** |
|---------------------------------------------------|------------|----------------------------------|------------|--------------------------------|------------|
| ** **                                        | ** ** | **June 30,**                | ** ** | **June 30,**              | ** ** |
| **(in thousands)**                           | ** ** | **2007**                         | ** ** | **2006**                       | ** ** | **2007** | ** ** | **2006** | ** ** |
|                                              |       |                             |       |                           |       |   |   |   |   |
| Dispositions                                      |       | $                                | (405       | )                              | $          | (847 | ) | $ | (405 | ) | $ | (847 | ) |
| Realized capital gains and losses, pretax         |       | (405                             | )          | (847                           | )          | (405 | ) | (847 | ) |
| Income tax benefit                                |       | 142                              |       | 296                            |       | 142 |   | 296 |   |
| **Realized capital gains and losses,  after-tax** |       | $                                | (263       | )                              | $          | (551 | ) | $ | (263 | ) | $ | (551 | ) |

 

Dispositionsin the above table may include sales, losses recognized in anticipation ofdispositions and other transactions such as calls and prepayments. We may sellimpaired fixed income securities that were in an unrealized loss position atthe previous reporting date in situations where new factors such as negativedevelopments, subsequent credit deterioration, changing liquidity needs, andnewly identified market opportunities cause a change in our previous intent tohold a security until recovery or maturity.

 

## **Reinsurancerecoverable, Contractholder funds and Reserve for life-contingent contractbenefits**

##  

Contractholderfunds decreased $14.7 million to $18.18 billion at June 30, 2007, from $18.20billion at December 31, 2006 as a result of surrenders, withdrawals and benefitpayments, partially offset by new and additional deposits on fixed annuitiesand interest-sensitive life products. The reserve for life-contingent contractbenefits increased $105.5 million to $2.23 billion at June 30, 2007 from $2.13billion at December 31, 2006 due to sales of immediate annuities with lifecontingencies and other life-contingent products, partially offset by benefitspaid and policy lapses. Reinsurance recoverable from ALIC decreased by $14.3million and reinsurance recoverable from non-affiliates increased by $114.1million.

 

We purchasereinsurance after evaluating the financial condition of the reinsurer, as wellas the terms and price of coverage. We reinsure certain of our risks tonon-affiliated reinsurers under yearly renewable term and coinsuranceagreements. Yearly renewable term and coinsurance agreements result in thepassing of the agreed-upon portion of risk to the reinsurers in exchange fornegotiated reinsurance premium payments.

 

15

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## **CAPITALRESOURCES AND LIQUIDITY**

##  

**CapitalResources**consist of shareholder’s equity. Thefollowing table summarizes our capital resources:

 
| **(in thousands)**                                       | ** ** | **June 30, 2007** | ** ** | **December 31, 2006** | ** ** |
|---------------------------------------------------------------|------------|-----------------------------|------------|---------------------------------|------------|
| Common stock, additional capital paid-in  and retained income |       | $                           | 281,182    |                            | $          | 276,804 |   |
| Accumulated other comprehensive income                        |       | (2,547                      | )          | (178                            | )          |
| Total shareholder’s equity                               |       | $                           | 278,635    |                            | $          | 276,626 |   |

 

*Shareholder’s equity*increased in the first six months of 2007, due to net income partially offsetby higher net unrealized capital losses on fixed income securities.

 

**FinancialRatings and Strength** We share the insurance financial strength ratings of our parent, ALIC,as our business is reinsured to ALIC. ALIC’s ratings are influenced by manyfactors including operating and financial performance, asset quality,liquidity, asset/liability management, overall portfolio mix, financial leverage(i.e., debt), exposure to risks, the current level of operating leverage,Allstate Insurance Company’s (“AIC”) ratings and other factors. There have beenno changes to ALIC’s insurance financial strength ratings since December 31,2006.

 

As describedin Note 1 to the Condensed Financial Statements, in accordance with FinancialAccounting Standards Board Interpretation No.48, “Accounting for Uncertainty inIncome Taxes” (“FIN 48”), the Company had no liability for unrecognized taxbenefits at January 1 or June 30, 2007. We believe it is reasonably possiblethat the liability balance will not significantly increase or decrease withinthe next 12 months.

 

16

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## **Item 4.    Controls and Procedures**

##  

*Evaluation of Disclosure Controls and Procedures.*Wemaintain disclosure controls and procedures as defined in Rule 13a-15(e) and15(d)-15(e) under the Securities Exchange Act of 1934. Under the supervisionand with the participation of our management, including our principal executiveofficer and principal financial officer, we conducted an evaluation of theeffectiveness of our disclosure controls and procedures as of the end of theperiod covered by this report. Based upon this evaluation, the principalexecutive officer and the principal financial officer concluded that ourdisclosure controls and procedures are effective in providing reasonableassurance that material information required to be disclosed in our reportsfiled with or submitted to the Securities and Exchange Commission under theSecurities Exchange Act is made known to management, including the principalexecutive officer and the principal financial officer, as appropriate to allowtimely decisions regarding required disclosure.

 

*Changes in Internal Control over Financial Reporting.*Duringthe fiscal quarter ended June 30, 2007, there have been no changes in ourinternal control over financial reporting that have materially affected, or arereasonably likely to materially affect, our internal control over financialreporting.

 

17

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## **PART II. OTHER INFORMATION**

##  

## **Item 1. Legal Proceedings**

##  

Informationrequired for this Part II, Item 1, is incorporated by reference to thediscussion under the heading “Regulation” and under the heading “Legal andregulatory proceedings and inquires” in Note 3 of the Company’s CondensedFinancial Statements in Part I, Item 1, of this Form 10-Q.

 

**Item 1A. Risk Factors**

 

Thisdocument contains “forward-looking statements” that anticipate results based onour estimates, assumptions and plans that are subject to uncertainty. Thesestatements are made subject to the safe-harbor provisions of the PrivateSecurities Litigation Reform Act of 1995. We assume no obligation to update anyforward-looking statements as a result of new information or future events ordevelopments.

 

Theseforward-looking statements do not relate strictly to historical or currentfacts 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, amongother things, our strategy for growth, product development, regulatoryapprovals, market position, expenses, financial results, litigation andreserves. We believe that these statements are based on reasonable estimates,assumptions and plans. However, if the estimates, assumptions or plansunderlying the forward-looking statements prove inaccurate or if other risks oruncertainties arise, actual results could differ materially from thosecommunicated in these forward-looking statements. Risk factors which couldcause actual results to differ materially from those suggested by suchforward-looking statements include but are not limited to those discussed oridentified in this document (including the risk described below), in our publicfilings with the Securities and Exchange Commission, and those incorporated byreference in Part I, Item 1A of Lincoln Benefit Life Company Annual Report onForm 10-K for 2006.

 

**Thechange in our unrecognized tax benefit during the next 12 months is subject touncertainty.**

 

Asrequired by Financial Accounting Standards Board Interpretation No. 48, “Accountingfor Uncertainty in Income Taxes” (“FIN 48”), which was adopted as of January 1,2007, we have disclosed our estimate of net unrecognized tax benefits and thereasonably possible change in its balance during the next 12 months. We believethat this estimate has been appropriately established based on available factsand information, however, actual results may differ from our estimate forreasons such as changes in our position on specific issues, developments withrespect to the governments’ interpretations of income tax laws or changes injudgment resulting from new information obtained in audits or the appealsprocess.

 

**Item 5.Other Information.**

** **

On July 23, 2007, the Registrant entered into the Investment ManagementAgreement among Allstate Investments, LLC and Allstate Insurance Company andThe Allstate Corporation and Certain Affiliates effective as of January 1,2007. Pursuant to the agreement, Allstate Investments, LLC provides investmentmanagement services to the Registrant. The Registrant and Allstate Investments,LLC are wholly-owned subsidiaries of The Allstate Corporation. A conformed copyof the agreement, attached hereto as Exhibit 10.1, is incorporated herein byreference.

 

## **Item 6. Exhibits**

##  

## **(a) Exhibits**

 

An Exhibit Index has been filed as part of this report on page E-1.

 

18

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## **SIGNATURE**

##  

Pursuant tothe requirements of the Securities Exchange Act of 1934, the Registrant hasduly caused this report to be signed on its behalf by the undersigned thereuntoduly authorized.

 
|            | Lincoln  Benefit Life Company                                              |
|-----------------|----------------------------------------------------------------------------|
|            |                                                                       |
|            |  (Registrant)                                                         |
|            |                                                                       |
| August 6,  2007 |                                                                       |
|            |                                                                       |
|            | By                                                                         | /s/ Samuel  H. Pilch |   |
|            |                                                                       |
|            | Samuel H.  Pilch                                                           |
|            | (chief  accounting officer and duly authorized  officer of the registrant) |

 

19

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| **Exhibit No.** | ** ** | **Description**                                                                                                                                                                       |
|----------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                 |       |                                                                                                                                                                                  |
| 10.1                 |       | Investment Management Agreement among Allstate Investments, LLC and  Allstate Insurance Company and The Allstate Corporation and Certain  Affiliates effective as of January 1, 2007. |
|                 |       |                                                                                                                                                                                  |
| 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                                                                                                                                                           |

 

E-1

----