**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

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**FORM 10-Q**

** **

The registrantmeets the conditions set forth in General Instruction H (1)(a) and (b) ofForm 10-Q and is therefore filing this Form with the reduceddisclosure format.

 

**x****QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)**

**OF**

**THE SECURITIES EXCHANGE ACT OF 1934**

**FOR THE QUARTERLY PERIOD ENDED MARCH 31,2008**

 

**OR**

 

**o****TRANSITION REPORT PURSUANT TO SECTION 13 OR15(d)**

**OF**

**THE SECURITIES EXCHANGE ACT OF 1934**

 

##### **Commissionfile number: 333-111553**

##### ** **

**LINCOLN BENEFIT LIFE COMPANY**

(Exact name of registrant asspecified 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 areacode: 800-525-9287**

 

**Indicate by check mark whether the registrant(1) has filed all reports required to be filed by Section 13 or 15(d) ofthe Securities Exchange Act of 1934 during the preceding 12 months (or for suchshorter period that the registrant was required to file such reports), and (2) hasbeen subject to such filing requirements for the past 90 days.**

** **

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

 

**Indicate by check mark whether the registrant is a large acceleratedfiler, an accelerated filer, a non-accelerated filer, or a smaller reportingcompany. See definitions of “large accelerated filer,” “accelerated filer,” and“smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):**

** **

| **Large accelerated filer****o** | ** ** | **Accelerated filer ****o** | ** ** | **Non-accelerated filer****x**                     | ** ** | **Smaller reporting company ****o** |
|----------------------------------|------------|----------------------------------|------------|----------------------------------------------------|------------|------------------------------------------|
| ** **                       | ** ** | ** **                       | ** ** | **(Do not check if a smaller  reporting company)** | ** ** | ** **                               |

 

**Indicate by check mark whether the registrant is ashell company (as defined in Rule 12b-2 of the Exchange Act).**

**Yes**o    Nox

** **

**As of May 13, 2008, the Registrant had25,000 common shares, $100 par value, outstanding, all of which are held byAllstate Life Insurance Company.**

 

##### ** **

##### ****

#####  

##### **LINCOLNBENEFIT LIFE COMPANY**

**INDEXTO QUARTERLY REPORT ON FORM 10-Q**

##### **March 31,2008**

 
| **PART I.**  | **FINANCIAL INFORMATION**                                                                                      | ** ** |
|-------------------|----------------------------------------------------------------------------------------------------------------|------------|
|              |                                                                                                           |       |
| Item 1.           | Financial Statements                                                                                           |       |
|              |                                                                                                           |       |
|              | Condensed Statements of Operations for the  Three-Month Periods Ended March 31, 2008 and 2007 (unaudited) | 1          |
|              |                                                                                                           |       |
|              | Condensed Statements of Financial Position  as of March 31, 2008 (unaudited) and December 31, 2007   | 2          |
|              |                                                                                                           |       |
|              | Condensed Statements of Cash Flows for the  Three-Month Periods Ended March 31, 2008 and 2007 (unaudited) | 3          |
|              |                                                                                                           |       |
|              | Notes to Condensed Financial Statements  (unaudited)                                                           | 4          |
|              |                                                                                                           |       |
| Item 2.           | Management’s Discussion and Analysis of  Financial Condition and Results of Operations                    | 14         |
|              |                                                                                                           |       |
| Item 4.           | Controls and Procedures                                                                                        | 21         |
|              |                                                                                                           |       |
| **PART II.** | **OTHER INFORMATION**                                                                                          | ** ** |
|              |                                                                                                           |       |
| Item 1.           | Legal Proceedings                                                                                              | 22         |
|              |                                                                                                           |       |
| Item 1A.          | Risk Factors                                                                                                   | 22         |
|              |                                                                                                           |       |
| Item 6.           | Exhibits                                                                                                       | 22         |

** **

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** **

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

####  

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

####  

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

** **

**CONDENSEDSTATEMENTS OF OPERATIONS**

** **
| ** **                                            | ** ** | **Three Months Ended** | ** ** |
|-------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                            | ** ** | **March 31,**               | ** ** |
| **(in thousands)**                               | ** ** | **2008**                         | ** ** | **2007** | ** ** |
| ** **                                            | ** ** | **(Unaudited)**                  | ** ** |
| **Revenues**                                          |       |                             |       |   |   |
| Net investment income                                 |       | $                                | 3,640      |   | $ | 3,584 |   |
| Realized capital gains and losses                     |       | (254                             | )          | — |   |
|                                                  |       |                             |       |   |   |
| **Income from operations before income tax  expense** |       | 3,386                            |       | 3,584 |   |
| Income tax expense                                    |       | 1,161                            |       | 1,252 |   |
| **Net income**                                        |       | $                                | 2,225      |   | $ | 2,332 |   |

 

See notes tocondensed financial statements.

 

1

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**LINCOLN BENEFIT LIFE COMPANY**

 

**CONDENSEDSTATEMENTS OF FINANCIAL POSITION**

 
| ** **                                                                                              | ** ** | **March 31,** | ** ** | **December 31,** | ** ** |
|---------------------------------------------------------------------------------------------------------|------------|--------------------|------------|-----------------------|------------|
| **(in thousands, except par value data)**                                      | ** ** | **2008**           | ** ** | **2007**              | ** ** |
|                                                                                                    |       | **(Unaudited)**    |       |                  |       |
|                                                                                                    |       |               |       |                  |       |
| **Assets**                                                                                              |       |               |       |                  |       |
| Investments                                                                                             |       |               |       |                  |       |
| Fixed income securities, at fair value  (amortized cost $259,953 and $266,792)                          |       | $                  | 270,255    |                  | $          | 273,144 |   |
| Equity securities, at fair value (cost  $5,359)                                                         |       | 4,783              |       | —                |       |
| Short-term                                                                                              |       | 33,014             |       | 28,057                |       |
| Total investments                                                                                       |       | 308,052            |       | 301,201               |       |
|                                                                                                    |       |               |       |                  |       |
| Cash                                                                                                    |       | 10,552             |       | 18,612                |       |
| Reinsurance recoverable from Allstate Life  Insurance Company                                           |       | 18,677,608         |       | 18,777,851            |       |
| Reinsurance recoverable from non-affiliates                                                             |       | 1,457,995          |       | 1,422,931             |       |
| Other assets                                                                                            |       | 104,926            |       | 112,285               |       |
| Separate Accounts                                                                                       |       | 2,752,293          |       | 3,067,127             |       |
| **Total assets**                                                                                        |       | $                  | 23,311,426 |                  | $          | 23,700,007 |   |
|                                                                                                    |       |               |       |                  |       |
| **Liabilities**                                                                                         |       |               |       |                  |       |
| Contractholder funds                                                                                    |       | $                  | 17,711,060 |                  | $          | 17,820,885 |   |
| Reserve for life-contingent contract  benefits                                                          |       | 2,404,426          |       | 2,348,116             |       |
| Unearned premiums                                                                                       |       | 24,858             |       | 25,819                |       |
| Deferred income taxes                                                                                   |       | 3,659              |       | 2,479                 |       |
| Payable to affiliates, net                                                                              |       | 11,302             |       | 21,912                |       |
| Current income taxes payable                                                                            |       | 5,975              |       | 4,815                 |       |
| Other liabilities and accrued expenses                                                                  |       | 103,497            |       | 118,916               |       |
| Separate Accounts                                                                                       |       | 2,752,293          |       | 3,067,127             |       |
| **Total liabilities**                                                                                   |       | 23,017,070         |       | 23,410,069            |       |
|                                                                                                    |       |               |       |                  |       |
| **Commitments and Contingent Liabilities  (Note 4)**                                                    |       |               |       |                  |       |
|                                                                                                    |       |               |       |                  |       |
| **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                                                                                         |       | 105,534            |       | 103,309               |       |
| Accumulated other comprehensive income:                                                                 |       |               |       |                  |       |
| Unrealized net capital gains and losses                                                                 |       | 6,322              |       | 4,129                 |       |
| **Total accumulated other comprehensive  income**                                                       |       | 6,322              |       | 4,129                 |       |
| **Total shareholder’s equity**                                                                     |       | 294,356            |       | 289,938               |       |
| **Total liabilities and shareholder’s equity**                                                     |       | $                  | 23,311,426 |                  | $          | 23,700,007 |   |

 

See notes tocondensed financial statements.

 

2

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#### **LINCOLNBENEFIT LIFE COMPANY**

####  

##### **CONDENSEDSTATEMENTS OF CASH FLOWS**

 
| ** **                                                                                               | ** ** | **Three Months Ended  March 31,** | ** ** |
|----------------------------------------------------------------------------------------------------------|------------|--------------------------------------------------|------------|
| **(in thousands)**                                                                                  | ** ** | **2008**                                         | ** ** | **2007** | ** ** |
| ** **                                                                                               | ** ** | **(Unaudited)**                                  | ** ** |
|                                                                                                     |       |                                             |       |   |   |
| **Cash flows from operating activities**                                                                 |       |                                             |       |   |   |
| Net income                                                                                               |       | $                                                | 2,225      |   | $ | 2,332 |   |
| Adjustments to reconcile net income to net  cash provided by operating activities:                       |       |                                             |       |   |   |
| Amortization and other non-cash items                                                                    |       | 36                                               |       | 68 |   |
| Realized capital gains and losses                                                                        |       | 254                                              |       | — |   |
| Changes in:                                                                                              |       |                                             |       |   |   |
| Reserve for life-contingent contract  benefits and contractholder funds, net of reinsurance recoverables |       | 11,664                                           |       | (9,169 | ) |
| Income taxes                                                                                             |       | 1,159                                            |       | 1,252 |   |
| Receivable/payable to affiliates, net                                                                    |       | (10,610                                          | )          | 34,715 |   |
| Other operating assets and liabilities                                                                   |       | (9,021                                           | )          | (38,013 | ) |
| Net cash used in operating activities                                                                    |       | (4,293                                           | )          | (8,815 | ) |
|                                                                                                     |       |                                             |       |   |   |
| **Cash flows from investing activities**                                                                 |       |                                             |       |   |   |
| Proceeds from sales of equity securities                                                                 |       | 6,431                                            |       | — |   |
| Collections on fixed income securities                                                                   |       | 6,549                                            |       | 4,436 |   |
| Purchases of fixed income securities                                                                     |       | —                                           |       | (8,013 | ) |
| Purchases of equity securities                                                                           |       | (1,900                                           | )          | — |   |
| Change in short-term investments                                                                         |       | (14,847                                          | )          | 227 |   |
| Net cash used in investing activities                                                                    |       | (3,767                                           | )          | (3,350 | ) |
|                                                                                                     |       |                                             |       |   |   |
| **Net decrease in cash**                                                                                 |       | (8,060                                           | )          | (12,165 | ) |
| **Cash at beginning of period**                                                                          |       | 18,612                                           |       | 23,352 |   |
| **Cash at end of period**                                                                                |       | $                                                | 10,552     |   | $ | 11,187 |   |

 

See notes tocondensed financial statements.

 

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**LINCOLNBENEFIT LIFE COMPANY**

**NOTESTO CONDENSED FINANCIAL STATEMENTS**

**(unaudited)**

 

## **1. General**

##  

## **Basis ofPresentation**

##  

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 March 31, 2008, and for thethree-month periods ended March 31, 2008 and 2007, are unaudited. Thecondensed financial statements reflect all adjustments (consisting only ofnormal recurring accruals), which are, in the opinion of management, necessaryfor the fair presentation of the financial position, results of operations andcash flows for the interim periods. These condensed financial statements andnotes should be read in conjunction with the financial statements and notesthereto included in the Company’s Annual Report on Form 10-K for the yearended December 31, 2007. The results of operations for the interim periodsshould not be considered indicative of results to be expected for the fullyear.

 

## **Adopted accounting standards**

##  

***Statement of Position 05-1, Accounting byInsurance Enterprises for Deferred Acquisition Costs in Connection withModifications or Exchanges of Insurance Contracts (“SOP 05-1”)***

** **

InOctober 2005, the American Institute of Certified Pubic Accountants (“AICPA”)issued SOP 05-1. SOP 05-1 provides accounting guidance for deferred policyacquisition costs (“DAC”) associated with internal replacements of insuranceand investment contracts other than those set forth in Statement of FinancialAccounting Standards (“SFAS”) No. 97, “Accounting and Reporting byInsurance Enterprises for Certain Long-Duration Contracts and for RealizedGains and Losses from the Sale of Investments”. SOP 05-1 defines an internalreplacement as a modification in product benefits, features, rights orcoverages that occurs through the exchange of an existing contract for a newcontract, or by amendment, endorsement or rider to an existing contract, or bythe election of a feature or coverage within an existing contract. The Companyadopted the provisions of SOP 05-1 on January 1, 2007 for internalreplacements occurring in fiscal years beginning after December 15, 2006. Theadoption of SOP 05-1 did not have any effect on the results of operations orfinancial position of the Company.

 

*Financial Accounting Standards Board (“FASB”)Interpretation No. 48, Accounting for Uncertainty in Income Taxes – aninterpretation of FASB Statement No. 109 and FASB Staff Position No. FIN48-1, Definition of Settlement in FASB Interpretation No. 48 (“FIN 48”)*

 

The FASB issued the interpretation in July 2006and the staff position in May 2007. FIN 48 clarifies the accounting foruncertainty in income taxes recognized in an entity’s financial statements inaccordance with SFAS 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 were effective for fiscal years beginning after December 15,2006. No cumulative effect of a change in accounting principle or adjustment tothe liability for unrecognized tax benefits was recognized as a result of theadoption of FIN 48. Accordingly, the adoption of FIN 48 did not have an effecton the results of operations or financial position of the Company.

 

*SFAS No. 157, Fair ValueMeasurements (“SFAS No. 157”)*

 

In September 2006, the FASB issued SFAS No. 157,which redefines fair value as the price that would be received to sell an assetor paid to transfer a liability in an orderly transaction between marketparticipants at the measurement date, establishes a framework for measuringfair value in generally accepted accounting principles (“GAAP”), and expandsdisclosures about fair value measurements. SFAS No. 157 establishes athree-level hierarchy for fair value measurements based upon the nature of theinputs to the valuation of an asset or liability. SFAS No. 157 applieswhere other accounting pronouncements require or permit fair value measurements.In February 2008, the FASB issued FASB Staff Position No. 157-2,“Effective Date of FASB Statement No. 157” (“FSP 157-2”), which permitsthe deferral of the effective date of SFAS No. 157 to fiscal yearsbeginning after November 15, 2008 for all non-financial assets andliabilities, except those that are recognized or disclosed at fair

 

4

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valuein the financial statements on a recurring basis. The Company adopted the provisions of SFAS No. 157for financial assets and liabilities recognized or disclosed at fair value on arecurring and non-recurring basis as of January 1, 2008. Consistent withthe provisions of FSP 157-2, the Company decided to defer the adoption of SFAS No. 157for non-financial assets and liabilities measured at fair value on anon-recurring basis until January 1, 2009. The adoption of SFAS No. 157did not have a material effect on the Company’s results of operations orfinancial position (see Note 2).

 

*SFAS No. 159, The Fair ValueOption for Financial Assets and Financial Liabilities – Including an amendmentof FASB Statement No. 115 (“SFAS No. 159”)*

 

In February 2007, the FASB issued SFAS No. 159which provides reporting entities, on an ongoing basis, an option to reportselected financial assets, including investment securities, and financialliabilities, including most insurance contracts, at fair value through earnings.SFAS No. 159 establishes presentation and disclosure requirements designedto facilitate comparisons between companies that choose different measurementalternatives for similar types of financial assets and liabilities. Thestandard also requires additional information to aid financial statement users’understanding of the impacts of a reporting entity’s decision to use fair valueon its earnings and requires entities to display, on the face of the statementof financial position, the fair value of those assets and liabilities for whichthe 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. The Company did not apply the fairvalue option to any existing financial assets or liabilities as of January 1,2008. Consequently, the initial adoption of SFAS No. 159 had no impact onthe Company’s results of operations or financial position.

 

*FASB Staff Position No. FIN 39-1,**Amendment of FASBInterpretation No. 39**(“FSP FIN 39-1”)*

 

In April 2007, the FASB issued FSP FIN 39-1,which amends FASB Interpretation No. 39, “Offsetting of Amounts Related toCertain Contracts”. FSP FIN 39-1 replaces the terms “conditional contracts” and“exchange contracts” with the term “derivative instruments” and requires areporting entity to offset fair value amounts recognized for the right toreclaim cash collateral or the obligation to return cash collateral againstfair value amounts recognized for derivative instruments executed with the samecounterparty under the same master netting arrangement that have been offset inthe statement of financial position. FSP FIN 39-1 is effective for fiscal yearsbeginning after November 15, 2007, with early adoption permitted. Theadoption of FSP FIN 39-1 did not have any impact on the Company’s results ofoperations or financial position.

 

**Pending accounting standards**

 

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

 

In June 2007, the AICPA issued SOP 07–1 whichprovides guidance for determining whether an entity falls within the scope ofthe Guide and whether investment company accounting should be retained by aparent company upon consolidation of an investment company subsidiary or by anequity-method investor in an investment company. SOP 07–1 was to be effectivefor fiscal years beginning on or after December 15, 2007, however in February 2008,the FASB issued FASB Staff Position No. SOP 07-1-1, “Effective Date of AICPAStatement of Position 07-1”, which amends SOP 07-1 to (1) delayindefinitely the effective date of the SOP and (2) prohibit adoption ofthe SOP for an entity that did not early adopt the SOP before December 15,2007. The Company did not early adopt SOP 07–1. Consequently, the Company isnot permitted to adopt the statement.

 

5

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*SFAS No. 161, Disclosuresabout Derivative Instruments and Hedging Activities – an amendment of FASBStatement No. 133 (“SFAS No. 161”)*

 

In March 2008, the FASB issued SFAS No. 161,which amends and expands the disclosure requirements for derivatives currentlyaccounted for in accordance with SFAS No. 133, “Accounting for DerivativeInstruments and Hedging Activities”.  The new disclosures are designed toenhance the understanding of how and why an entity uses derivative instrumentsand how derivative instruments affect an entity’s financial position, resultsof operations, and cash flows.  The standard requires, on a quarterly basis,quantitative disclosures about the potential cash outflows associated with thetriggering of credit-related contingent features, if any; tabular disclosuresabout the classification and fair value amounts of derivative instrumentsreported in the statement of financial position; disclosure of the location andamount of gains and losses on derivative instruments reported in the statementof operations; and qualitative information about how and why an entity usesderivative instruments and how derivative instruments and related hedged itemsaffect the entity’s financial statements.  SFAS No. 161 is effectivefor fiscal periods beginning after November 15, 2008, and is to be appliedon a prospective basis only.  SFAS No. 161 affects disclosures andtherefore will not impact the Company’s results of operations or financialposition.

 

**2. Fair Value of Financial Assets and FinancialLiabilities**

 

The measurement basis for a significant amount ofthe Company’s financial assets is fair value. Financial instruments measured atfair value on a recurring basis include:

 

*Financial Assets*   Investments including U.S. treasuries, moneymarket funds, corporates, municipals, U.S. government and agencies, commercialmortgage-backed securities (“CMBS”), mortgage-backed securities (“MBS”),asset-backed securities (“ABS”), and separate account assets.

 

*Financial Liabilities*   Derivatives embedded incertain contractholder liabilities.

 

SFAS No. 157 is effective for fiscal yearsbeginning after November 15, 2007. The Company adopted the provisions ofSFAS No. 157 as of January 1, 2008 for its financial assets andfinancial liabilities that are measured at fair value. SFAS No. 157:

 

•                    Defines fair value as the price that would be received to sell an assetor paid to transfer a liability in an orderly transaction between marketparticipants at the measurement date, and establishes a framework for measuringfair value;

 

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

 

•                    Expands disclosures about financial instruments measured at fair value.

 

In determining fair value, the Company principallyuses the market approach which generally utilizes market data for the same orsimilar instruments. To a lesser extent, the Company uses the income approachwhich involves determining fair values from discounted cash flow methodologies.SFAS No. 157 establishes a hierarchy for inputs used in determining fairvalue that maximizes the use of observable inputs and minimizes the use ofunobservable inputs by requiring that observable inputs be used when available.Certain financial assets are not carried at fair value on a recurring basis andthus are only categorized in the fair value hierarchy when held at fair valueon a non-recurring basis.

 

Observable inputs are those used by marketparticipants in valuing financial instruments that are developed based onmarket data obtained from independent sources. In the absence of observableinputs, unobservable inputs reflect the Company’s estimates of the assumptionsmarket participants would use in valuing financial assets and financialliabilities and are developed based on the best information available in thecircumstances.

 

Pursuant to SFAS No. 157, fair value is amarket-based measure, considered from the perspective of a market participantwho owns an asset or owes a liability. Accordingly, when market observable datais not readily available, the Company’s own assumptions are set to reflectthose that market participants would be presumed to use in pricing the asset orliability at the measurement date. The Company uses prices and inputs that arecurrent as of the measurement date, including during periods of marketdisruption. In periods of market disruption, the ability to observe prices andinputs may be reduced for many instruments. This condition could cause aninstrument to be reclassified from Level 1 to Level 2, or from Level 2 to Level3.

 

6

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Financial assets and financial liabilities recordedon the Condensed Statements of Financial Position at fair value are categorizedbased on the reliability of inputs to the valuation techniques as follows:

 

*Level 1**       *Financial assets and financial liabilitieswhose values are based on unadjusted quoted prices for identical assets orliabilities in an active market that the Company can access.

 

*Level 2***       **Financial assets and financial liabilitieswhose values are based on the following:

 

a)  Quoted prices for similar assets orliabilities in active markets;

 

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

 

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

 

*Level 3**       *Financial assets and financial liabilitieswhose values are based on prices or valuation techniques that require inputsthat are both unobservable and significant to the overall fair valuemeasurement. These inputs may reflect the Company’s estimates of theassumptions that market participants would use in valuing the financial assetsand financial liabilities.

 

The availability of observable inputs varies byinstrument. In situations where fair value is based on internally developedpricing models or inputs that are unobservable in the market, the determinationof fair value requires more judgment. The degree of judgment exercised by theCompany in determining fair value is typically greatest for instrumentscategorized in Level 3. In many instances, inputs used to measure fair valuefall into different levels of the fair value hierarchy.  In thoseinstances, for disclosure purposes, the level in the fair value hierarchywithin which the fair value measurement is categorized is determined based onthe lowest level input that is significant to the fair valuemeasurement in its entirety.

 

**Summary of Valuation Techniques for Classes of Financial Assets andFinancial Liabilities**

 

Level 1 Measurements

 

U.S. Treasuries:  Valuation is based on unadjusted quotedprices for identical assets in active markets that the Company can access.

 

Equity Securities; Short-term: Money Market Funds; Separate AccountAssets:  Comprised of actively traded mutual fundsthat have daily quoted net asset values for identical assets that the Companycan access. Net asset values for the actively traded mutual funds in which theseparate account assets are invested are obtained daily from the fund managers.

 

Level 2 Measurements

 

Corporate, including privately placed:  Valuedbased on inputs including quoted prices for identical or similar assets inmarkets that are not active. Privately placed securities of $6.7 million arevalued based on market-observable external ratings from independent third partyrating agencies.

 

Municipal:  Externally rated municipals are valued basedon inputs including quoted prices for identical or similar assets in marketsthat are not active.

 

U.S. Government and Agencies:  Valued based on inputsincluding quoted prices for identical or similar assets in markets that are notactive.

 

CMBS:  Valuation is principally based on inputsincluding quoted prices for identical or similar assets in markets that are notactive.

 

MBS; ABS:  Valued based on inputs including quotedprices for identical or similar assets in markets that are not active. OtherABS are categorized as Level 3. 

 

Derivatives Embedded in Annuity Contracts: Embedded derivatives in annuity contracts are valued based on internalmodels that rely on inputs such as interest rate yield curves and volatilityassumptions that are market observable for substantially the full term of thecontract. The valuation techniques are widely accepted in the  financial services industry and do not includesignificant judgment. Other derivatives embedded in annuity contracts arecategorized in Level 3.

 

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Level 3 Measurements

 

ABS:  Principally valued based on inputs includingquoted prices for identical or similar assets in markets that exhibit lessliquidity relative to those markets supporting Level 2 fair value measurements.Due to the reduced availability of actual market prices or relevant observableinputs as a result of the decrease in liquidity that has been experienced inthe market for these securities, they are categorized as Level 3.

 

Derivatives Embedded in Annuity Contracts: Valued internally using models widely accepted in the financial servicesindustry that determine a single bestestimate of fair value for a block of contractholder liabilities that containcertain embedded derivatives. The model uses stochastically determined cashflows based on the contractual elements of embedded derivatives and otherapplicable market data. These are categorized as Level 3 as a result of the significance of non-marketobservable inputs. Other derivatives embedded in annuity contracts arecategorized in Level 2.

 

The following tablesummarizes the Company’s financial assets and financial liabilities measured atfair value on a recurring and non–recurring basis as of March 31, 2008:

 
| **($ in thousands)**            | ** ** | **Quoted Prices  in Active  Markets for  Identical Assets  (Level 1)** | ** **    | **Significant  Other  Observable  Inputs  (Level 2)** | ** ** | **Significant  Unobservable  Inputs  (Level 3)** | ** ** | **Balance as of  March 31, 2008** | ** ** |
|-------------------------------------------|------------|-------------------------------------------------------------------------------------------------|---------------|------------------------------------------------------------|------------|-------------------------------------------------------|------------|-------------------------------------------------------|------------|
| **Financial Assets**                      |       |                                                                                            |          |                                                       |       |                                                  |       |                                                  |       |
| U.S. Treasuries                           |       | $                                                                                               | 47,453        |                                                       |       |                                                  |       |                                                  | $          | 47,453 |   |
| Equity Securities                         |       | 4,783                                                                                           |          |                                                       |       |                                                  |       | 4,783                                                 |       |
| Short-term: Money Markets Funds           |       | 32,964                                                                                          |          |                                                       |       |                                                  |       | 32,964                                                |       |
| **Total Level 1**                         | ** ** | **85,200**                                                                                      | ** **    | ** **                                                 | ** ** | ** **                                            | ** ** | **85,200**                                            | ** ** |
|                                      |       |                                                                                            |          |                                                       |       |                                                  |       |                                                  |       |
| Corporate                                 |       |                                                                                            |          | $                                                          | 77,930     |                                                  |       |                                                  | 77,930     |   |
| Municipal                                 |       |                                                                                            |          | 534                                                        |       |                                                  |       | 534                                                   |       |
| U.S. Government and Agencies              |       |                                                                                            |          | 71,494                                                     |       |                                                  |       | 71,494                                                |       |
| CMBS                                      |       |                                                                                            |          | 31,663                                                     |       |                                                  |       | 31,663                                                |       |
| MBS                                       |       |                                                                                            |          | 28,212                                                     |       |                                                  |       | 28,212                                                |       |
| ABS                                       |       |                                                                                            |          | 1,002                                                      |       |                                                  |       | 1,002                                                 |       |
| **Total Level 2**                         | ** ** | ** **                                                                                      | ** **    | **210,835**                                                | ** ** | ** **                                            | ** ** | **210,835**                                           | ** ** |
|                                      |       |                                                                                            |          |                                                       |       |                                                  |       |                                                  |       |
| ABS                                       |       |                                                                                            |          |                                                       |       | $                                                     | 10,659     |                                                  | 10,659     |   |
| Other                                     |       |                                                                                            |          |                                                       |       | 1,308                                                 |       | 1,308                                                 |       |
| **Total Level 3**                         | ** ** | ** **                                                                                      | ** **    | ** **                                                 | ** ** | **11,967**                                            | ** ** | **11,967**                                            | ** ** |
| Valued at cost                            |       |                                                                                            |          |                                                       |       |                                                  |       | 50                                                    |       |
| **Total Investments**                     | ** ** | **85,200**                                                                                      | ** **    | **210,835**                                                | ** ** | **11,967**                                            | ** ** | **308,052**                                           | ** ** |
|                                      |       |                                                                                            |          |                                                       |       |                                                  |       |                                                  |       |
| **Separate Account Assets**               |       | 2,752,293                                                                                       |          |                                                       |       |                                                  |       | 2,752,293                                             |       |
|                                      |       |                                                                                            |          |                                                       |       |                                                  |       |                                                  |       |
| **Total Financial Assets**                | ** ** | $                                                                                               | **2,837,493** | ** **                                                 | $          | **210,835**                                           | ** ** | $                                                     | **11,967** | ** ** | $ | **3,060,345** | ** ** |
| **% of Total Financial Assets**           |       | 92.7                                                                                            | %             | 6.9                                                        | %          | 0.4                                                   | %          |                                                  |       |
|                                      |       |                                                                                            |          |                                                       |       |                                                  |       |                                                  |       |
| **Financial Liabilities**                 |       |                                                                                            |          |                                                       |       |                                                  |       |                                                  |       |
| Derivatives embedded in Annuity Contracts |       |                                                                                            |          | $                                                          | (44,629    | )                                                | $          | (1,235                                                | )     | $ | (45,864 | ) |
| **Total Financial Liabilities**           | ** ** | ** **                                                                                      | ** **    | **$**                                                      | (44,629    | )                                                | **$**      | (1,235                                                | )     | $ | (45,864 | ) |
| **% of Total Financial Liabilities**      | ** ** | ** **                                                                                      |          | 97.3                                                       | %          | 2.7                                                   | %          |                                                  |       |

 

8

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The following table providesa summary of changes in fair value of Level 3 assets and liabilities held atfair value on a recurring basis at March 31, 2008. As required by SFAS No. 157,when the inputs used to measure fair value fall within different levels of thehierarchy, the level within which the fair value measurement is categorized isbased on the lowest level input that is significant to the fair valuemeasurement in its entirety. Thus, a Level 3 fair value measurement may includeinputs that are observable (Level 1 or Level 2) and unobservable (Level 3). Gainsand losses for such assets and liabilities categorized within the Level 3 tablemay include changes in fair value that are attributable to both observableinputs (Level 1 and Level 2) and unobservable inputs (Level 3).

 
| **($ in thousands)**            | ** ** | **Beginning  Balance:  January 1, 2008** | ** ** | **Total Realized  Capital Gains  and (Losses)  in Income(1) ** | ** ** | **Total Unrealized  Capital Gains  and (Losses)  in OCI** | ** ** | **Purchases, Sales,  Issuances and  Settlements, net** | ** ** | **Net Transfers In  and/or (out) of  Level 3** | ** ** | **Ending  Balance:  March 31, 2008** | ** ** |
|-------------------------------------------|------------|----------------------------------------------------|------------|-----------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------|------------|-----------------------------------------------------------------------|------------|-------------------------------------------------------------------------|------------|------------------------------------------------|------------|
| **Financial Assets**                      |       |                                               |       |                                                                                    |       |                                                                          |       |                                                                  |       |                                                                    |       |                                           |       |
| ABS                                       |       | $                                                  | 10,484     |                                                                                    | $          | (3                                                                            | )          | $                                                                     | 178        |                                                                    | $          | —                                         |       | $ | — |   | $ | 10,659 |   |
| Other                                     |       | 1,500                                              |       | —                                                                                  |       | —                                                                        |       | (192                                                                  | )          | —                                                                  |       | 1,308                                          |       |
|                                      |       |                                               |       |                                                                                    |       |                                                                          |       |                                                                  |       |                                                                    |       |                                           |       |
| **Total Level 3 Financial Assets**        | ** ** | **$**                                              | **11,984** | ** **                                                                              | **$**      | **(3**                                                                        | **)**      | **$**                                                                 | **178**    | ** **                                                              | **$**      | **(192**                                       | )          | $ | — | ** ** | **$** | **11,967** | ** ** |
|                                      |       |                                               |       |                                                                                    |       |                                                                          |       |                                                                  |       |                                                                    |       |                                           |       |
| **Financial Liabilities**                 |       |                                               |       |                                                                                    |       |                                                                          |       |                                                                  |       |                                                                    |       |                                           |       |
| Derivatives Embedded in Annuity Contracts |       | $                                                  | (256       | )                                                                                       | $          | (979                                                                          | )          | $                                                                     | —     |                                                                    | $          | —                                         |       | $ | — |   | $ | (1,235 | ) |
|                                      |       |                                               |       |                                                                                    |       |                                                                          |       |                                                                  |       |                                                                    |       |                                           |       |
| **Total Level 3 Financial Liabilities**   | ** ** | **$**                                              | (256       | )                                                                                       | **$**      | (979                                                                          | )          | **$**                                                                 | **—** | ** **                                                              | **$**      | **—**                                     | ** ** | **$** | **—** | ** ** | **$** | (1,235 | ) |

 

----

(1)             Realized capitalgains and (losses) in income were attributable to Financial Assets andFinancial Liabilities still held at March 31, 2008. Realized capital gainsand (losses) attributable to ABS are reported in the Condensed Statements ofOperations as net investment income. Realized capital gains and (losses)attributable to derivatives embedded in annuity contracts are reported as acomponent of contract benefits and are ceded in accordance with the Company’sreinsurance agreements.

 

## **3. 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  March 31,** | ** ** |
|----------------------------------------------------|------------|--------------------------------------------------|------------|
| **(in thousands)**                            | ** ** | **2008**                                         | ** ** | **2007** | ** ** |
| **Premiums and contract charges**                  |       |                                             |       |   |   |
| Direct                                             |       | $                                                | 265,791    |   | $ | 246,636 |   |
| Assumed - non-affiliate                            |       | 1,932                                            |       | 1,918 |   |
| Ceded                                              |       |                                             |       |   |   |
| Affiliate                                          |       | (156,797                                         | )          | (151,434 | ) |
| Non-affiliate                                      |       | (110,926                                         | )          | (97,120 | ) |
| Premiums and contract charges, net of  reinsurance |       | $                                                | —     |   | $ | — |   |

 

9

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The effects of reinsurance on interestcredited to contractholder funds, contract benefits and expenses are asfollows:

 
| ** **                                                                                     | ** ** | **Three months ended  March 31,** | ** ** |
|------------------------------------------------------------------------------------------------|------------|--------------------------------------------------|------------|
| **(in thousands)**                                                                        | ** ** | **2008**                                         | ** ** | **2007** | ** ** |
| **Interest credited to contractholder funds,  contract benefits and expenses**                 |       |                                             |       |   |   |
| Direct                                                                                         |       | $                                                | 358,797    |   | $ | 455,603 |   |
| Assumed - non-affiliate                                                                        |       | 1,906                                            |       | 2,724 |   |
| Ceded                                                                                          |       |                                             |       |   |   |
| Affiliate                                                                                      |       | (222,706                                         | )          | (349,426 | ) |
| Non-affiliate                                                                                  |       | (137,997                                         | )          | (108,901 | ) |
| Interest credited to contractholder funds,  contract benefits and expenses, net of reinsurance |       | $                                                | —     |   | $ | — |   |

##  

## **4. Guaranteesand Contingent Liabilities**

##  

## **Guarantees**

##  

In the normalcourse of business, the Company provides standard indemnifications tocontractual counterparties 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 March 31,2008.

 

## **Regulation**

##  

The Company issubject to changing social, economic and regulatory conditions. From time totime regulatory authorities or legislative bodies seek to impose additionalregulations regarding agent and broker compensation and otherwise expandoverall regulation of insurance products and the insurance industry. Theultimate changes and eventual effects of these initiatives on the Company’sbusiness, if any, are uncertain.

 

**Legaland Regulatory Proceedings and Inquiries**

 

***Background***

 

The Companyand certain affiliates are involved in a number of lawsuits, regulatoryinquiries, and other legal proceedings arising out of various aspects of itsbusiness. As background to the “Proceedings” subsection below, please note thefollowing:

 

•                   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; the fact that someof the lawsuits are putative class actions in which a class has not beencertified and in which the purported class may not be clearly defined; the factthat some of the lawsuits involve multi-state class actions in which theapplicable law(s) for the claims at issue is in dispute and thereforeunclear; and the current challenging legal environment faced by largecorporations and insurance companies.

 

10

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•                   The outcome onthese matters may also be affected by decisions, verdicts, and settlements, andthe timing of such decisions, verdicts, and settlements, in other individualand class action lawsuits that involve the Company, other insurers, or otherentities and by other legal, governmental, and regulatory actions that involvethe Company, other insurers, or other entities.

 

•                   In thelawsuits, plaintiffs seek a variety of remedies including equitable relief inthe form of injunctive and other remedies and monetary relief in the form ofcontractual and extra-contractual damages. In some cases, the monetary damagessought include punitive damages. Often specific information about the reliefsought, such as the amount of damages, is not available because plaintiffs havenot requested specific relief in their pleadings. In Allstate’s experience,when specific monetary demands are made in pleadings, they bear little relationto the ultimate loss, if any, to the Company.

 

•                   In connection withregulatory 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.

 

•                   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 ongoingbasis and follows the provisions of SFAS No. 5, “Accounting forContingencies” when making accrual and disclosure decisions. When assessingreasonably possible and probable outcomes, the Company bases its decisions onits assessment 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 quarterly or annual period. However,based on information currently known to it, management believes that theultimate outcome of all matters described below as they are resolved over timeis not likely 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.

 

AIC is defending certain matters relating toits agency program reorganization announced in 1999. These matters are invarious stages of development.

 

•                   These mattersinclude a lawsuit filed in 2001 by the U.S. Equal Employment OpportunityCommission (“EEOC”) alleging retaliation under federal civil rights laws (the “EEOC I” suit) and a class action filedin 2001 by former employee agents alleging retaliation and age discriminationunder the Age Discrimination in Employment Act (“ADEA”), breach of contract and ERISA violations (the “RomeroI” suit). In 2004, in the consolidated EEOC I and Romero I litigation, thetrial court issued a memorandum and order that, among other things, certifiedclasses of agents, including a mandatory class of agents who had signed arelease, for purposes of effecting the court’s declaratory judgment that therelease is voidable at the option of the release signer. The court also orderedthat an agent who voids the release must return to AIC “any and all benefitsreceived by the [agent] in exchange for signing the release.”  The court also stated that, “on theundisputed facts of record, there is no basis for claims of age discrimination.”  The EEOC and plaintiffs have asked the courtto clarify and/or reconsider its memorandum and order and in January 2007,the judge denied their request. In June 2007, the court granted AIC’smotions for summary judgment. Following plaintiffs’ filing of a notice ofappeal, the Third Circuit issued an order in December 2007 stating thatthe notice of appeal was not taken from a final order within the meaning of thefederal law and thus not appealable at this time. In March 2008, the ThirdCircuit decided that the appeal should not summarily be dismissed and that thequestion of whether the matter is appealable at this time will be addressed bythe Court along with the merits of the appeal.

 

11

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•                   The EEOC also filed another lawsuit in 2004alleging age discrimination with respect to a policy limiting the rehire ofagents affected by the agency program reorganization (the “EEOC II” suit). InEEOC II, in 2006, the court granted partial summary judgment to the EEOC. Althoughthe court did not determine that AIC was liable for age discrimination underthe ADEA, it determined that the rehire policy resulted in a disparate impact,reserving for trial the determination on whether AIC had reasonable factorsother than age to support the rehire policy. AIC’s interlocutory appeal of thetrial court’s summary judgment order is now pending in the United States Courtof Appeals for the Eighth Circuit.

 

•                   AIC is also defending a certified classaction filed by former employee agents who terminated their employment prior tothe agency program reorganization. Plaintiffs allege that they wereconstructively discharged so that Allstate could avoid paying ERISA and otherbenefits offered under the reorganization. They claim that the constructivedischarge resulted from the implementation of agency standards, includingmandatory office hours and a requirement to have licensed staff availableduring business hours. The court approved the form of class notice which wassent to approximately 1,800 potential class members in November 2007. Fifteenindividuals opted out. AIC’s motions for judgment on the pleadings werepartially granted and AIC’s motion for summary judgment remains pending.

 

•                   A putativenationwide class action has also been filed by former employee agents allegingvarious violations of ERISA, includinga worker classification issue. These plaintiffs are challenging certainamendments to the Agents Pension Plan and are seeking to have exclusive agentindependent contractors treated as employees for benefit purposes. This matterwas dismissed with prejudice by the trial court, was the subject of furtherproceedings on appeal, and was reversed and remanded to the trial court in 2005.In June 2007, the courtgranted AIC’s motion to dismiss the case. Following plaintiffs’ filing of anotice of appeal, the Third Circuit issued an order in December 2007stating that the notice of appeal was not taken from a final order within themeaning of the federal law and thus not appealable at this time. In March 2008,the Third Circuit decided that the appeal should not summarily be dismissed andthat the question of whether the matter is appealable at this time will beaddressed by the Court along with the merits of the appeal.

 

In all of these variousmatters, plaintiffs seek compensatory and punitive damages, and equitablerelief. AIC has been vigorously defending these lawsuits and othermatters related to its agency program reorganization.

 

## **Other Matters**

##  

## **Various otherlegal, governmental, and regulatory actions, including state market conductexams, and other governmental and regulatory inquiries are currently pendingthat involve the Company and specific aspects of its conduct of business. Likeother members of the insurance industry, the Company is the target of a numberof lawsuits and proceedings, some of which involve claims for substantial orindeterminate amounts. These actions are based on a variety of issues andtarget a range of the Company’s practices. The outcome of these disputes iscurrently unpredictable. However, based on information currently known to itand the existence of the reinsurance agreements with ALIC, management believesthat the ultimate outcome of all matters described in this “Other Matters”subsection in excess of amounts currently reserved, as they are resolved overtime is not likely to have a material effect on the operating results, cashflows or financial position of the Company.**

##  

12

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## **5. Other Comprehensive Income**

##  

The componentsof other comprehensive income on a pretax and after-tax basis are as follows:

 
| ** **                                                              | ** ** | **Three months ended March 31,** | ** ** |
|-------------------------------------------------------------------------|------------|------------------------------------------------------|------------|
| ** **                                                              | ** ** | **2008**                                             | ** ** | **2007** | ** ** |
| ** **                                                              | ** ** | ** **                                           | ** ** | ** ** | ** ** | **After-** | ** ** | ** ** | ** ** | ** ** | ** ** | **After-** | ** ** |
| **(in thousands)**                                                 | ** ** | **Pretax**                                           | ** ** | **Tax** | ** ** | **tax** | ** ** | **Pretax** | ** ** | **Tax** | ** ** | **tax** | ** ** |
|                                                                    |       |                                                 |       |   |   |   |   |   |   |   |   |   |   |
| Unrealized holding gains arising during the  period                     |       | $                                                    | 3,120      |   | $ | (1,092 | ) | $ | 2,028 |   | $ | 937 |   | $ | (328 | ) | $ | 609 |   |
| Less: reclassification adjustment of  realized capital gains and losses |       | (254                                                 | )          | 89 |   | (165 | ) | — |   | — |   | — |   |
| Unrealized net capital gains and losses                                 |       | 3,374                                                |       | (1,181 | ) | 2,193 |   | 937 |   | (328 | ) | 609 |   |
| Other comprehensive income                                              |       | $                                                    | 3,374      |   | $ | (1,181 | ) | 2,193 |   | $ | 937 |   | $ | (328 | ) | 609 |   |
|                                                                    |       |                                                 |       |   |   |   |   |   |   |   |   |   |   |
| Net income                                                              |       |                                                 |       |   |   | 2,225 |   |   |   |   |   | 2,332 |   |
|                                                                    |       |                                                 |       |   |   |   |   |   |   |   |   |   |   |
| Comprehensive income                                                    |       |                                                 |       |   |   | $ | 4,418 |   |   |   |   |   | $ | 2,941 |   |

 

13

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**Item 2. MANAGEMENT’SDISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORTHE THREE-MONTH PERIODS ENDED MARCH 31, 2008 AND 2007**

 

## **OVERVIEW**

##  

The followingdiscussion highlights significant factors influencing the financial position andresults 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-Kfor 2007. We operate as a single segment entity based on the manner in which weuse financial information to evaluate performance and to determine theallocation of resources.

 

**APPLICATIONOF CRITICAL ACCOUNTING ESTIMATES**

 

Thepreparation of financial statements in conformity with accounting principlesgenerally accepted in the United States of America (“GAAP”) requires managementto adopt accounting policies and make estimates and assumptions that affectamounts reported in the financial statements.

 

In applying policies, management makes subjective andcomplex judgments that frequently require estimates about matters that areinherently uncertain. Many of these policies, estimates and related judgmentsare common in the insurance and financial services industries; others arespecific to our businesses and operations. It is reasonably likely that changesin these estimates could occur from period to period and result in a materialimpact on our financial statements.

 

Our critical accounting estimate for the fair value offinancial assets and financial liabilities follows. For a description ofcritical accounting estimates not discussed below, see the Application ofCritical Accounting Estimates section of the MD&A found under Part II.Item 7. of the Lincoln Benefit Life Company Annual Report on Form 10-K for2007.

 

**Fair Value of Financial Assets and FinancialLiabilities**Financial AccountingStandards Board****(“FASB”) Statement No. 157, *Fair Value Measurements* (“SFAS No. 157”) is effectivefor fiscal years beginning after November 15, 2007. We adopted theprovisions of SFAS No. 157 as of January 1, 2008 for financial assetsand financial liabilities that are measured at fair value.

 

SFAS No. 157:

 

•                  Defines fair value as the price that would be received to sell an assetor paid to transfer a liability in an orderly transaction between marketparticipants at the measurement date, and establishes a framework for measuringfair value;

 

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

 

•                  Expands disclosures about financial instruments measured at fair value.

 

We categorize our financial assets and financialliabilities measured at fair value based on the priority of the inputs to thevaluation technique, into a three-level fair value hierarchy. The fair valuehierarchy gives the highest priority to quoted prices in active markets foridentical assets or liabilities which we can access (Level 1); the secondhighest priority for similar assets or liabilities in active markets, quotedprices for identical or similar assets or liabilities in non-active markets, orvaluation models whose inputs are observable (Level 2); and the lowest priorityto unobservable inputs (Level 3). If inputs used to measure a financialinstrument fall within different levels of the fair value hierarchy, thecategorization is based on the lowest level input that is significant to thefair value measurement of the entire instrument. Certain financial assets arenot carried at fair value on a recurring basis and thus are only categorized inthe fair value hierarchy when held at fair value on a non-recurring basis.

 

Theavailability of market observable information is the principal factor indetermining the level that financial instruments are assigned in the three-levelhierarchy. Observable inputs are those used by market participants in valuingfinancial instruments that are developed based on market data obtained fromindependent sources. In the absence of observable inputs, unobservable inputsreflect our estimates of the assumptions market participants would use invaluing financial assets and financial liabilities and are developed based onthe best information available in the circumstances. The degree of managementjudgment involved in determining fair values is inversely related to theavailability of market observable information.

 

14

----

 

Financialassets and financial liabilities recorded on the Condensed Statements ofFinancial Position at fair value are categorized based on the reliability ofinputs to the valuation techniques as follows:

 

*Level 1:***    **Financial assets and financialliabilities whose values are based on unadjusted quoted prices for identicalassets or liabilities in an active market that we can access.

 

*Level 2:*****Financialassets and financial liabilities whose values are based on the following:

 

a)             Quoted prices for similar assets orliabilities in active markets;

 

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

 

c)             Valuation models whose inputs areobservable, directly or indirectly, for substantially the full term of theasset or liability

 

*Level 3:****    ***Financialassets and financial liabilities whose values are based on prices or valuationtechniques that require inputs that are both unobservable and significant tothe overall fair value measurement. These inputs may reflect our estimates ofthe assumptions that market participants would use in valuing the financialassets and financial liabilities.

 

We utilizea combination of third party valuation service providers, brokers, and internalvaluation models to determine fair value. We gain assurance on theoverall reasonableness and consistent application of input assumptions,valuation methodologies, and compliance with accounting standards for fairvalue determination through the execution of various processes and controlsdesigned to ensure that our financial assets and financial liabilities areappropriately valued and our ongoing monitoring of the fair values received orderived internally.

 

We are responsible for the determination of the valueof the financial assets and financial liabilities carried at fair value and thesupporting assumptions and methodologies. In certain situations, we employindependent third-party valuation service providers to gather, analyze, andinterpret market information and derive fair values based upon relevantassumptions and methodologies for individual instruments. In situations whereour valuation service providers are unable to obtain sufficient marketobservable information upon which to estimate the fair value for a particularsecurity, fair value is determined either by requesting brokers who areknowledgeable about these securities to provide a quote or by employinginternal valuation models that are widely accepted in the financial servicesindustry. Changing market conditions in the first quarter of 2008 wereincorporated into valuation assumptions and reflected in the fair values, whichwere validated by calibration and other analytical techniques to availablemarket observable data.

 

Valuation service providers typically obtain dataabout market transactions and other key valuation model inputs from multiplesources and, through the use of proprietary algorithms, produce valuationinformation in the form of a single fair value for individual securities forwhich a fair value has been requested under the terms of our agreements. Forcertain equity securities, valuation service providers provide marketquotations for completed transactions on the measurement date. For othersecurity types, fair values are derived from the valuation service providers’proprietary valuation models. The inputs used by the valuation serviceproviders include, but are not limited to, market prices from recentlycompleted transactions and transactions of comparable securities, interest rateyield curves, credit spreads, currency rates, and other market-observableinformation, as applicable. Valuation service providers also use proprietary discountedcash flow models that are widely accepted in the financial services industryand similar to those used by other market participants to value the samefinancial instruments. The valuation models take into account, among otherthings, market observable information as of the measurement date, as describedabove, as well as the specific attributes of the security being valuedincluding its term, interest rate, credit rating, industry sector, and whereapplicable, collateral quality and other issue or issuer specific information. Executingvaluation models effectively requires seasoned professional judgment andexperience. In cases where market transactions or other market observable datais limited, the extent to which judgment is applied varies inversely with theavailability of market observable information.

 

Forcertain of our financial assets carried at fair value, where our valuationservice providers cannot provide fair value determinations, we obtainnon-binding price quotes from brokers familiar with the security who, similarto our valuation service providers, may consider transactions or activity insimilar securities, as applicable, among other information. The brokersproviding price quotes are generally from the brokerage divisions of leadingfinancial institutions with market making, underwriting and distributionexpertise.

 

15

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The fair value offinancial assets and financial liabilities, including certain derivativesembedded in certain contractholder liabilities, where our valuationservice providers or brokers do not provide fair value determinations, is determined using valuation methodsand models widely accepted in the financial services industry. Internallydeveloped valuation models, which include inputs that may not be marketobservable and as such involve some degree of judgment, are consideredappropriate for each class of security to which they are applied.

 

Our internal pricing methods are primarily based onmodels using discounted cash flow methodologies that determine a single bestestimate of fair value for individual financial instruments. In addition, ourmodels use stochastically determined cash flows for certain derivativesembedded in certain contractholder liabilities, both of which are difficult toindependently observe and verify. The use of different valuation assumptionsmay have a material effect on the financial assets’ and financial liabilities’fair values.

 

Fair value of our investments comprise an aggregationof numerous, single best estimates for each security in the CondensedStatements of Financial Position. Because of this detailed approach there is nosingle set of assumptions that determine our fair value estimates. Moreovermanagement does not compile a range of estimates for items reported at fairvalue because we do not believe that a range would provide meaningfulinformation. Level 1 and Level 2 measurements represent valuations where allsignificant inputs are market observable. Level 3 measurements have one or moresignificant inputs that are not market observable and as a result these fairvalue determinations have greater potential variability as it relates to theirsignificant inputs. The Level 3 principal component is asset-back securities (“ABS”).In general, the greater the reliance on significant inputs that are not marketobservable, the greater potential variability of the reflected fair valuedeterminations. For broker quoted securities’ fair value determinations, webelieve the brokers providing the quotes may consider market observabletransactions or activity in similar securities, as applicable, and otherinformation as calibration points. We believe our most significant exposure tochange in fair value is due to market risk. Our exposure to changes in marketconditions is discussed fully in the Market Risk section of the MD&Aincluded in our 2007 Form 10-K.

 

We employ specific control processes to determine thereasonableness of the fair values of our financial assets and financialliabilities. Our processes are designed to ensure that the values received orinternally estimated are accurately recorded and that the data inputs and thevaluation techniques utilized are appropriate, consistently applied, and thatthe assumptions are reasonable and consistent with the objective of determiningfair value. For example, on a continuing basis, we assess the reasonableness ofindividual security values received from valuation service providers thatexceed certain thresholds as compared to previous values received from thosevaluation service providers. In addition, we may validate the reasonableness offair values by comparing information obtained from our valuation serviceproviders to other third party valuation sources for selected financial assets.When fair value determinations are expected to be more variable, we validatethem through reviews by members of management who have relevant expertise andwho are independent of those charged with executing investing transactions.

 

16

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The following tableidentifies investments as of March 31, 2008 by source of valuedetermination:

 
| ** **                                                   | ** ** | **Investments**     | ** ** |
|--------------------------------------------------------------|------------|---------------------|------------|
| **(in thousands)**                                      | ** ** | **Carrying  Value** | ** ** | **Percent  to total** | ** ** |
| Fair value based on internal sources                         |       | $                   | 1,308      |   | 0.4 | % |
| Fair value based on external sources                         |       | 306,694             |       | 99.6 |   |
| Total fixed income, equity and certain short-term securities |       | 308,002             |       | 100.0 |   |
| Short-term investments, valued at cost                       |       | 50                  |       | — |   |
| Total                                                        |       | $                   | 308,052    |   | 100.0 | % |

 

Formore detailed information on our accounting policy for the fair value offinancial assets and financial liabilities and information on the financialassets and financial liabilities included in the Levels promulgated by SFAS No. 157,see Note 2 to the Condensed Financial Statements.

 

Thefollowing table presents fair value as a percent of amortized cost for Level 3investments at March 31, 2008.

 
| **(in thousands)**       | ** ** | **Fair value** | ** ** | **Fair value as a  % of  Amortized cost** | ** ** |
|-------------------------------|------------|---------------------|------------|--------------------------------------------------------------------|------------|
| ABS                           |       | $                   | 10,659     |                                                               | 106.3      | % |
| Other                         |       | 1,308               |       | 100.0                                                              |       |
| **Total Level 3 investments** |       | $                   | 11,967     |                                                               | 105.6      |   |

 

Thefollowing tables summarize Level 1, 2 and 3 financial assets and financialliabilities by their classification in the Condensed  Statement of Financial Position at March 31,2008.

 
| **(in thousands)**         | ** ** | **Level 1** | ** ** | **Level 2** | ** ** | **Level 3** | ** ** | **Valued at cost** | ** ** | **Balance as of  March 31,  2008** | ** ** |
|---------------------------------|------------|------------------|------------|------------------|------------|------------------|------------|------------------------------|------------|---------------------------------------------------|------------|
| **Financial Assets**            |       |             |       |             |       |             |       |                         |       |                                              |       |
| Fixed income securities         |       | $                | 47,453     |             | $          | 210,835          |       | $                            | 11,967     |                                              |       |   | $ | 270,255 |   |
| Equity securities               |       | 4,783            |       |             |       |             |       |                         |       | 4,783                                             |       |
| Short-term                      |       | 32,964           |       |             |       |             |       | $                            | 50         |                                              | 33,014     |   |
| **Total Investments**           |       | 85,200           |       | 210,835          |       | 11,967           |       | 50                           |       | 308,052                                           |       |
| Separate account assets         |       | 2,752,293        |       |             |       |             |       |                         |       | 2,752,293                                         |       |
| **Total Financial Assets**      |       | $                | 2,837,493  |             | $          | 210,835          |       | $                            | 11,967     |                                              | $          | 50 |   | $ | 3,060,345 |   |
|                            |       |             |       |             |       |             |       |                         |       |                                              |       |
| **Financial Liabilities**       |       |             |       |             |       |             |       |                         |       |                                              |       |
| Contractholder funds            |       |             |       | $                | (44,629    | )           | $          | (1,235                       | )     |                                              |       | $ | (45,864 | ) |
| **Total Financial Liabilities** |       | $                | —     |             | $          | (44,629          | )     | $                            | (1,235     | )                                            | $          | — |   | $ | (45,864 | ) |

 

There were no transfers of assets and liabilitiesfrom, or into, Level 3 during the quarter ended March 31, 2008. For a further discussion of the impact of unrealized net capital gainsand losses on our results of operations and a discussion of the fluctuations infair value during the quarter ended March 31, 2008, see the FinancialPosition section of MD&A.

 

17

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## **OPERATIONS**

##  

| ** **                        | ** ** | **Three months ended** | ** ** |
|-----------------------------------|------------|----------------------------------|------------|
| ** **                        | ** ** | **March 31,**               | ** ** |
| **(in thousands)**           | ** ** | **2008**                         | ** ** | **2007** | ** ** |
| Net investment income             |       | $                                | 3,640      |   | $ | 3,584 |   |
| Realized capital gains and losses |       | (254                             | )          | — |   |
| Income tax expense                |       | 1,161                            |       | 1,252 |   |
| Net income                        |       | $                                | 2,225      |   | $ | 2,332 |   |

 

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.

 

**Net income** decreased$107 thousand or 4.6% in the first quarter of 2008 compared to the same periodin the prior year due to realized capital losses, partially offset by highernet investment income.

 

**Net investment income**increased $56 thousand or 1.6% in the first quarter of 2008 compared to thesame period in 2007 due primarily to income on equity securities.

 

**Net realized capital losses** of $254 thousandwere recognized in the first quarter of 2008 in anticipation of dispositions offixed income securities.

 

**FINANCIAL POSITION**

** **
| ** **                                    | ** ** | **March 31,** | ** ** | **December 31,** | ** ** |
|-----------------------------------------------|------------|--------------------|------------|-----------------------|------------|
| **(in thousands)**                       | ** ** | **2008**           | ** ** | **2007**              | ** ** |
| Fixed income securities (1)                   |       | $                  | 270,255    |                  | $          | 273,144 |   |
| Equity securities (2)                         |       | 4,783              |       | —                |       |
| Short-term                                    |       | 33,014             |       | 28,057                |       |
| Total investments                             |       | $                  | 308,052    |                  | $          | 301,201 |   |
|                                          |       |               |       |                  |       |
| Cash                                          |       | $                  | 10,552     |                  | $          | 18,612 |   |
| Reinsurance recoverable from ALIC             |       | 18,677,608         |       | 18,777,851            |       |
| Reinsurance recoverable from non-affiliates   |       | 1,457,995          |       | 1,422,931             |       |
| Contractholder funds                          |       | 17,711,060         |       | 17,820,885            |       |
| Reserve for life-contingent contract benefits |       | 2,404,426          |       | 2,348,116             |       |
| Separate Accounts assets and liabilities      |       | 2,752,293          |       | 3,067,127             |       |
| Total shareholder’s equity               |       | 294,356            |       | 289,938               |       |

 

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(1)         Fixed income securities are carried at fair value. Amortized cost basisfor these securities was $260.0 million and $266.8 million at March 31,2008 and December 31, 2007, respectively.

(2)         Equity securities are carried at fair value. Cost basis for thesesecurities was $5.4 million at March 31, 2008.

 

Totalinvestments increased to $308.1 million at March 31, 2008 from $301.2 millionat December 31, 2007 due to purchases of short-term investments.

 

At March 31, 2008, 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 Standards and Poor’s (“S&P”), Fitch or Dominion or a rating ofaaa, a or bbb from A.M. Best; or a comparable internal rating if anexternally provided rating is not available.

 

18

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*Unrealized net capital gains* totaled $9.7 million as of March 31,2008, compared to unrealized capital gains of $6.4 million at December 31,2007. The unrealized net capital gains as of March 31, 2008 include netgains on fixed income securities of $10.3 million and net losses on equitysecurities of $576 thousand. The unrealized net capital gains as of December 31,2007 were entirely related to fixed income securities.

 

The netunrealized capital gains on fixed income securities of $10.3 million as of March 31,2008 were comprised of $11.7 million of unrealized gains and $1.4 million ofunrealized losses. The net unrealized capital gains on fixed income securitiesof $6.4 million at December 31, 2007 were comprised of $7.7 million ofunrealized gains and $1.3 million of unrealized losses.

 

Of the grossunrealized losses in the fixed income portfolio at March 31, 2008, $512thousand or 36.3% were related to securities in our corporate fixed incomesecurities portfolio and are believed to be company specific and interest raterelated. These losses were primarily comprised of losses on securities in thebanking, transportation, capital goods and financial services sectors. Of theremaining $897 thousand of unrealized losses, $862 thousand or 96.1% wererelated to commercial mortgage-backed securities and are believed to be theresult of liquidity declines in the financial markets.

 

The netunrealized capital losses on equity securities of $576 thousand as of March 31,2008 were comprised of $2 thousand of unrealized gains and $578 thousand ofunrealized losses. The losses were exclusive to the financial services sectorand were company specific.

 

We have a comprehensive portfolio monitoring processto identify and evaluate, on a case-by-case basis, fixed income and equitysecurities whose carrying value may be other-than-temporarily impaired. Theprocess includes a quarterly review of all securities using a screening processto identify situations where the fair value, compared to amortized cost forfixed income securities, and cost for equity securities is below establishedthresholds for certain time periods, or which are identified through othermonitoring criteria such as ratings downgrades or payment defaults. Thesecurities identified, in addition to other securities for which we may have aconcern, 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 for reasons such as changes in duration,revisions to strategic asset allocations and liquidity actions, as well ascertain dispositions anticipated by portfolio managers. All investments in an unrealized lossposition at March 31, 2008 were included in our portfolio monitoringprocess for determining whether declines in value were other-than-temporary.

 

We also monitor the quality of our fixed incomeportfolio by categorizing certain investments as “problem”, “restructured” or “potentialproblem.”  Problem fixed incomesecurities are in default with respect to principal or interest and/orsecurities issued by companies that have gone into bankruptcy subsequent to ouracquisition of the security. Restructured fixed income securities have ratesand terms that are not consistent with market rates or terms prevailing at thetime 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’s abilityto pay future principal and interest, which causes us to believe thesesecurities may be classified as problem or restructured in the future.

 

As of March 31,2008 and December 31, 2007, we had no securities categorized as “problem”,“restructured” or “potential problem.”

 

**Net Investment Income**  The following table presents net investmentincome for the three months ended March 31.

 
| **(in thousands)**           | ** ** | **2008** | ** ** | **2007** | ** ** |
|-----------------------------------|------------|----------|------------|----------|------------|
|                              |       |     |       |     |       |
| Fixed income securities           |       | $        | 3,352      |     | $          | 3,349 |   |
| Equity securities                 |       | 96       |       | —   |       |
| Short-term                        |       | 279      |       | 320      |       |
| Investment income, before expense |       | 3,727    |       | 3,669    |       |
| Investment expense                |       | 87       |       | 85       |       |
| Net investment income             |       | $        | 3,640      |     | $          | 3,584 |   |

 

19

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**NetRealized Capital Gains and Losses** The following tablepresents realized capital gains and losses and the related tax effect.

 
| ** **                                       | ** ** | **Three Months Ended** | ** ** |
|--------------------------------------------------|------------|----------------------------------|------------|
| ** **                                       | ** ** | **March 31,**               | ** ** |
| **(in thousands)**                          | ** ** | **2008**                         | ** ** | **2007** | ** ** |
|                                             |       |                             |       |   |   |
| Realized capital gains and losses, pretax        |       | $                                | (254       | ) | $ | — |   |
| Income tax benefit                               |       | 89                               |       | — |   |
| **Realized capital gains and losses, after-tax** |       | $                                | (165       | ) | $ | — |   |

 

Realizedcapital gains and losses for the first quarter of 2008 in the above tableinclude losses recognized in anticipation of dispositions of fixed incomesecurities. We may sell impaired fixed income or equity securities that were inan unrealized loss position at the previous reporting date, or otherinvestments where the fair value has declined below the carrying value, insituations where new factors such as negative developments, subsequent creditdeterioration, liquidity needs, and newly identified market opportunities causea change in our previous intent to hold a security to recovery or maturity.

 

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

##  

Contractholderfunds decreased $109.8 million to $17.71 billion at March 31, 2008 from$17.82 billion at December 31, 2007 as a result of new and additionaldeposits on fixed annuities and interest-sensitive life products, and interestcredited to contractholder funds being more than offset by surrenders,withdrawals and benefit payments. The reserve for life-contingent contractbenefits increased $56.3 million to $2.40 billion at March 31, 2008 from$2.35 billion at December 31, 2007 resulting from sales of immediate annuitieswith life contingencies and other life-contingent products, partially offset bybenefits paid and policy lapses. Reinsurance recoverable from ALIC decreased by$100.2 million and reinsurance recoverable from non-affiliates increased by$35.1 million.

 

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 reinsurer in exchange fornegotiated reinsurance premium payments.

 

## **CAPITALRESOURCES AND LIQUIDITY**

##  

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

 
| **(in thousands)**                                      | ** ** | **March 31,  2008** | ** ** | **December 31,  2007** | ** ** |
|--------------------------------------------------------------|------------|--------------------------|------------|-----------------------------|------------|
|                                                         |       |                     |       |                        |       |
| Common stock, additional capital paid-in and retained income |       | $                        | 288,034    |                        | $          | 285,809 |   |
| Accumulated other comprehensive income                       |       | 6,322                    |       | 4,129                       |       |
| Total shareholder’s equity                              |       | $                        | 294,356    |                        | $          | 289,938 |   |

 

*Shareholder’s equity*increased in the first quarter of 2008 due to net income and higher netunrealized capital gains on fixed income securities at March 31, 2008compared to December 31, 2007.

 

**FinancialRatings and Strength** We share the insurance financialstrength ratings of our parent, ALIC, as our business is reinsured to ALIC. ALIC’sratings are influenced by many factors including operating and financialperformance, asset quality, liquidity, asset/liability management, overallportfolio mix, financial leverage (i.e., debt), exposure to risks, the currentlevel of operating leverage, AIC’s ratings and other factors. There have beenno changes to ALIC’s insurance financial strength ratings since December 31,2007.

 

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##  

## **Item 4.**           Controls andProcedures

##  

*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 thesupervision and with the participation of our management, including ourprincipal executive officer and principal financial officer, we conducted anevaluation of the effectiveness of our disclosure controls and procedures as ofthe end of the period covered by this report. Based upon this evaluation, theprincipal executive officer and the principal financial officer concluded thatour disclosure 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 March 31, 2008, 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.

 

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## **PART II. OTHER INFORMATION**

##  

## **Item 1. Legal Proceedings**

##  

Information required for this Part II, Item 1, is incorporated byreference to the discussion under the heading “Regulation” and under theheading “Legal and regulatory proceedings and inquires” in Note 4 of theCondensed Financial 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, in our public filings with the Securities andExchange Commission, and those incorporated by reference in Part I, Item1A of Lincoln Benefit Life Company Annual Report on Form 10-K for 2007.

 

## **Item 6. Exhibits**

##  

**(a) Exhibits**

 

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

 

22

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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)                                                         |
|               |                                                                 |
| May 13,  2008 |                                                                 |
|               | By /s/ Samuel H. Pilch                                               |
|               | Samuel H. Pilch                                                      |
|               | (Controller)                                                         |
|               | (chief accounting officer and duly authorized officer of Registrant) |

 

23

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| **Exhibit No.** | ** ** | **Description** |
|----------------------|------------|-----------------|
|                 |       |            |
| 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

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