** **

**UNITEDSTATES****SECURITIES AND EXCHANGE COMMISSION**

 

**Washington,D.C. 20549**

** **

----

** **

**FORM 10-Q**

** **

**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.**

 

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

**OF**

**THE SECURITIES EXCHANGE ACT OF 1934**

**FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30,2005**

** **

**OR**

** **

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

**OF**

**THE SECURITIES EXCHANGE ACT OF 1934**

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

##### ** **

**LINCOLNBENEFIT 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’stelephone number, including area code:  **800/525-9287**

 

**Indicate bycheck mark whether the registrant (1) has filed all reports required to befiled by Section 13 or 15(d) of the Securities Exchange Act of 1934during the preceding 12 months (or for such shorter period that the registrantwas required to file such reports), and (2) has been subject to suchfiling requirements for the past 90 days.**

** **
| ** ** | **Yes****ý** | **No****o** |
|------------|-------------------|-------------|

** **

**Indicate by check mark whether the registrantis an accelerated filer (as defined in Rule 12b-2 of the ExchangeAct).  **

 
| ** ** | **Yes****o** | **No****ý** |
|------------|--------------|------------------|

 

**Indicate by check mark whether the registrantis a shell company (as defined in Rule 12b-2 of the Exchange Act).**

 
| ** ** | **Yes****o** | **No****ý** |
|------------|--------------|------------------|

 

**As of October 31, 2005, 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**

#### **September 30,2005**

 
| **PART I.**  | **FINANCIAL INFORMATION**                                                                                                          | **Page**   |
|-------------------|------------------------------------------------------------------------------------------------------------------------------------|------------|
|              |                                                                                                                               |       |
| Item 1.           | Financial Statements                                                                                                               |       |
|              |                                                                                                                               |       |
|              | Condensed Statements of Operations for the  Three-Month and Nine-Month Periods Ended September 30, 2005 and 2004  (unaudited) | 3          |
|              |                                                                                                                               |       |
|              | Condensed Statements of Financial Position  as of September 30, 2005 (unaudited) and December 31, 2004                   | 4          |
|              |                                                                                                                               |       |
|              | Condensed Statements of Cash Flows for the  Nine-Month Periods Ended September 30, 2005 and 2004 (unaudited)                  | 5          |
|              |                                                                                                                               |       |
|              | Notes to Condensed Financial Statements  (unaudited)                                                                               | 6          |
|              |                                                                                                                               |       |
| Item 2.           | Management’s Discussion and Analysis of  Financial Condition and Results of Operations                                        | 11         |
|              |                                                                                                                               |       |
| Item 4.           | Controls and Procedures                                                                                                            | 15         |
|              |                                                                                                                               |       |
| **PART II.** | **OTHER INFORMATION**                                                                                                              | ** ** |
|              |                                                                                                                               |       |
| Item 1.           | Legal Proceedings                                                                                                                  | 16         |
|              |                                                                                                                               |       |
| Item 6.           | Exhibits                                                                                                                           | 16         |

 

2

----

 

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

####  

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

####  

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

####  

**CONDENSEDSTATEMENTS OF OPERATIONS**

 
| ** **                                            | ** ** | **Three Months Ended** | ** ** | **Nine Months Ended**  | ** ** |
|-------------------------------------------------------|------------|------------------------|------------|------------------------|------------|
| ** **                                            | ** ** | **September 30,** | ** ** | **September 30,** | ** ** |
| **(in thousands)**                                    | ** ** | **2005**               | ** ** | **2004**               | ** ** | **2005** | ** ** | **2004** | ** ** |
| ** **                                            | ** ** | **(unaudited)**        | ** ** | **(unaudited)**        | ** ** |
| **Revenues**                                          |       |                   |       |                   |       |   |   |   |   |
| Net investment income                                 |       | $                      | 3,420      |                   | $          | 2,817 |   | $ | 10,210 |   | $ | 8,382 |   |
| Realized capital gains and losses                     |       | —                 |       | 5                      |       | (117 | ) | 5 |   |
|                                                  |       |                   |       |                   |       |   |   |   |   |
| **Income  from operations before income tax expense** |       | 3,420                  |       | 2,822                  |       | 10,093 |   | 8,387 |   |
|                                                  |       |                   |       |                   |       |   |   |   |   |
| Income tax  expense                                   |       | 1,195                  |       | 986                    |       | 3,526 |   | 2,929 |   |
| **Net  income**                                       |       | $                      | 2,225      |                   | $          | 1,836 |   | $ | 6,567 |   | $ | 5,458 |   |

 

See notes to condensed financial statements.

 

3

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**LINCOLN BENEFIT LIFE COMPANY**

 

**CONDENSEDSTATEMENTS OF FINANCIAL POSITION**

 
| ** **                                                                                              | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
|---------------------------------------------------------------------------------------------------------|------------|------------------------|------------|-----------------------|------------|
| **(in thousands, except par value  data)**                                                              | ** ** | **2005**               | ** ** | **2004**              | ** ** |
| ** **                                                                                              | ** ** | **(Unaudited)**        | ** ** | ** **            | ** ** |
|                                                                                                    |       |                   |       |                  |       |
| **Assets**                                                                                              |       |                   |       |                  |       |
| Investments                                                                                             |       |                   |       |                  |       |
| Fixed income securities, at fair value  (amortized cost $264,718 and $234,371)                          |       | $                      | 267,944    |                  | $          | 242,799 |   |
| Short-term                                                                                              |       | 2,255                  |       | 30,408                |       |
| Total investments                                                                                       |       | 270,199                |       | 273,207               |       |
|                                                                                                    |       |                   |       |                  |       |
| Cash                                                                                                    |       | 18,272                 |       | 10,532                |       |
| Reinsurance recoverable from Allstate Life  Insurance Company                                           |       | 18,144,274             |       | 17,083,056            |       |
| Reinsurance recoverable from non-affiliates                                                             |       | 962,575                |       | 839,738               |       |
| Receivable from affiliates                                                                              |       | —                 |       | 27,449                |       |
| Current income taxes receivable                                                                         |       | —                 |       | 38                    |       |
| Other assets                                                                                            |       | 80,656                 |       | 83,853                |       |
| Separate Accounts                                                                                       |       | 2,595,013              |       | 2,368,312             |       |
| **Total assets**                                                                                        |       | $                      | 22,070,989 |                  | $          | 20,686,185 |   |
|                                                                                                    |       |                   |       |                  |       |
| **Liabilities**                                                                                         |       |                   |       |                  |       |
| Contractholder funds                                                                                    |       | $                      | 17,266,601 |                  | $          | 16,231,489 |   |
| Reserve for life-contingent contract  benefits                                                          |       | 1,821,962              |       | 1,671,729             |       |
| Current income taxes payable                                                                            |       | 3,526                  |       | —                |       |
| Unearned premiums                                                                                       |       | 25,423                 |       | 23,362                |       |
| Deferred income taxes                                                                                   |       | 1,437                  |       | 3,257                 |       |
| Payable to affiliates, net                                                                              |       | 1,378                  |       | —                |       |
| Other liabilities and accrued expenses                                                                  |       | 87,227                 |       | 122,800               |       |
| Separate Accounts                                                                                       |       | 2,595,013              |       | 2,368,312             |       |
| **Total liabilities**                                                                                   |       | 21,802,567             |       | 20,420,949            |       |
|                                                                                                    |       |                   |       |                  |       |
| **Commitments and Contingent Liabilities  (Note 3)**                                                    |       |                   |       |                  |       |
|                                                                                                    |       |                   |       |                  |       |
| **Shareholder’s equity**                                                                           |       |                   |       |                  |       |
| Common stock, $100 par value, 30 thousand  shares authorized, 25 thousand shares issued and outstanding |       | 2,500                  |       | 2,500                 |       |
| Additional capital paid-in                                                                              |       | 180,000                |       | 180,000               |       |
| Retained income                                                                                         |       | 83,824                 |       | 77,257                |       |
| Accumulated other comprehensive income:                                                                 |       |                   |       |                  |       |
| Unrealized net capital gains and losses                                                                 |       | 2,098                  |       | 5,479                 |       |
| **Total accumulated other comprehensive  income**                                                       |       | 2,098                  |       | 5,479                 |       |
| **Total shareholder’s equity**                                                                     |       | 268,422                |       | 265,236               |       |
| **Total liabilities and shareholder’s equity**                                                     |       | $                      | 22,070,989 |                  | $          | 20,686,185 |   |

 

See notes to condensed financial statements.

 

4

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#### **LINCOLNBENEFIT LIFE COMPANY**

####  

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

 
| ** **                                                                                               | ** ** | **Nine Months Ended  September 30,** | ** ** |
|----------------------------------------------------------------------------------------------------------|------------|-------------------------------------------|------------|
| **(in thousands)**                                                                                       | ** ** | **2005**                                  | ** ** | **2004** | ** ** |
| ** **                                                                                               | ** ** | **(Unaudited)**                           | ** ** |
|                                                                                                     |       |                                      |       |   |   |
| **Cash  flows from operating activities**                                                                |       |                                      |       |   |   |
| ** **                                                                                               |       |                                      |       |   |   |
| Net income                                                                                               |       | $                                         | 6,567      |   | $ | 5,458 |   |
| Adjustments  to reconcile net income to net cash provided by operating activities:                       |       |                                      |       |   |   |
| Amortization and other non-cash items                                                                    |       | 343                                       |       | 215 |   |
| Realized capital gains and losses                                                                        |       | 117                                       |       | (5 | ) |
| Changes in:                                                                                              |       |                                      |       |   |   |
| Reserve for life-contingent contract  benefits and contractholder funds, net of reinsurance recoverables |       | 1,290                                     |       | (7,443 | ) |
| Income taxes payable                                                                                     |       | 3,564                                     |       | (1,120 | ) |
| Receivable/payable to affiliates, net                                                                    |       | 28,827                                    |       | (10,642 | ) |
| Other operating assets and liabilities                                                                   |       | (22,716                                   | )          | 17,873 |   |
| Net cash provided by operating activities                                                                |       | 17,992                                    |       | 4,336 |   |
|                                                                                                     |       |                                      |       |   |   |
| **Cash  flows from investing activities**                                                                |       |                                      |       |   |   |
| ** **                                                                                               |       |                                      |       |   |   |
| Fixed income  securities                                                                                 |       |                                      |       |   |   |
| Proceeds from sales                                                                                      |       | 3,099                                     |       | 1,007 |   |
| Investment collections                                                                                   |       | 16,705                                    |       | 9,791 |   |
| Investment purchases                                                                                     |       | (58,209                                   | )          | (15,590 | ) |
| Change in  short-term investments                                                                        |       | 28,153                                    |       | 197 |   |
| Net cash used in investing activities                                                                    |       | (10,252                                   | )          | (4,595 | ) |
|                                                                                                     |       |                                      |       |   |   |
| **Net  increase (decrease) in cash**                                                                     |       | 7,740                                     |       | (259 | ) |
| **Cash at  beginning of period**                                                                         |       | 10,532                                    |       | 23,456 |   |
| **Cash at  end of period**                                                                               |       | $                                         | 18,272     |   | $ | 23,197 |   |

 

See notes to condensed financial statements.

 

5

----

 

**LINCOLN BENEFIT LIFE COMPANY**

**NOTES TO 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 September 30, 2005, and for thethree-month and nine-month periods ended September 30, 2005 and 2004, areunaudited.  The condensed financialstatements reflect all adjustments (consisting only of normal recurringaccruals) which are, in the opinion of management, necessary for the fairpresentation of the financial position, results of operations and cash flowsfor the interim periods.  These condensedfinancial statements and notes should be read in conjunction with the financialstatements and notes thereto included in the Company’s Annual Report on Form 10-Kfor the year ended December 31, 2004. The results of operations for the interim periods should not beconsidered indicative of results to be expected for the full year.

 

**Pending accounting standards**

 

*Financial Accounting Standards Board StaffPosition No. FAS 115-1, “The Meaning of Other-Than-Temporary Impairment and ItsApplication to Certain Investments” (“FSP FAS 115-1”)*

 

In November 2005, the Financial AccountingStandards Board (“FASB”) issued FSP FAS 115-1, which nullifies the guidance inparagraphs 10-18 of EITF Issue 03-1, “The Meaning of Other-Than-TemporaryImpairment and Its Application to Certain Investments” and references existingother than temporary impairment guidance. FSP FAS 115-1 clarifies that an investor should recognize an impairmentloss no later than when the impairment is deemed other-than-temporary, even ifa decision to sell the security has not been made, and also provides guidanceon the subsequent accounting for an impaired debt security. FSP FAS 115-1 iseffective for reporting periods beginning after December 15, 2005. The adoptionof FSP FAS 115-1 is not expected to have a material impact on the Company’sCondensed Statements of Operations or Financial Position.

 

### ***Statementof Financial Accounting Standards No. 154, Accounting Changes and ErrorCorrections (“SFAS No.  154”)***

### * *

In May 2005, the Financial AccountingStandards Board (“FASB’) issued SFAS No. 154, which replaces AccountingPrinciples Board (“APB”) Opinion No. 20, Accounting Changes, and FASBStatement No. 3, Reporting Accounting Changes in Interim FinancialStatements.  SFAS No. 154 requiresretrospective application to prior periods’ financial statements for changes inaccounting principle, unless determination of either the period specificeffects or the cumulative effect of the change is impracticable.  SFAS No. 154 is effective for fiscalyears beginning after December 15, 2005. SFAS No. 154 is not expected to have a material impact on theCompany’s Condensed Statements of Operations or Financial Position. 

 

## **2.     Reinsurance**

##  

The Companyhas entered into reinsurance agreements under which it reinsures all of itsbusiness to ALIC or other non-affiliated reinsurers.  Under the agreements, premiums, contractcharges, interest credited to contractholder funds, contract benefits andcertain expenses are reinsured.  TheCompany continues to have primary liability as the direct insurer for risksreinsured.

 

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 effects ofreinsurance on premiums and contract charges are as follows:

 
| ** **                                         | ** ** | **Three Months Ended** | ** ** | **Nine Months Ended**  | ** ** |
|----------------------------------------------------|------------|------------------------|------------|------------------------|------------|
| ** **                                         | ** ** | **September 30,** | ** ** | **September 30,** | ** ** |
| ** **                                         | ** ** | **2005**               | ** ** | **2004**               | ** ** | **2005** | ** ** | **2004** | ** ** |
| **(in  thousands)**                                |       |                   |       |                   |       |   |   |   |   |
| **Premiums and contract charges**                  |       |                   |       |                   |       |   |   |   |   |
| Direct                                             |       | $                      | 211,928    |                   | $          | 183,494 |   | $ | 613,524 |   | $ | 531,449 |   |
| Assumed-non-affiliate                              |       | 1,614                  |       | 755                    |       | 4,217 |   | 2,450 |   |
| Ceded                                              |       |                   |       |                   |       |   |   |   |   |
| Affiliate                                          |       | (116,993               | )          | (97,214                | )          | (339,448 | ) | (286,491 | ) |
| Non-affiliate                                      |       | (96,549                | )          | (87,035                | )          | (278,293 | ) | (247,408 | ) |
| Premiums and contract charges, net of  reinsurance |       | $                      | —     |                   | $          | — |   | $ | — |   | $ | — |   |

 

6

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The effects of reinsurance on interestcredited to contractholder funds, contract benefits and certain other expensesare as follows:

 
| ** **                                                                                                   | ** ** | **Three Months Ended** | ** ** | **Nine Months Ended**  | ** ** |
|--------------------------------------------------------------------------------------------------------------|------------|------------------------|------------|------------------------|------------|
| ** **                                                                                                   | ** ** | **September 30,** | ** ** | **September 30,** | ** ** |
| ** **                                                                                                   | ** ** | **2005**               | ** ** | **2004**               | ** ** | **2005** | ** ** | **2004** | ** ** |
| **(in  thousands)**                                                                                          |       |                   |       |                   |       |   |   |   |   |
| **Interest credited to contractholder funds,  contract benefits and certain other expenses**                 |       |                   |       |                   |       |   |   |   |   |
| Direct                                                                                                       |       | $                      | 451,731    |                   | $          | 377,942 |   | $ | 1,488,143 |   | $ | 1,185,589 |   |
| Assumed-non-affiliate                                                                                        |       | 2,050                  |       | 1,177                  |       | 5,168 |   | 3,440 |   |
| Ceded                                                                                                        |       |                   |       |                   |       |   |   |   |   |
| Affiliate                                                                                                    |       | (344,857               | )          | (275,680               | )          | (1,142,824 | ) | (912,340 | ) |
| Non-affiliate                                                                                                |       | (108,924               | )          | (103,439               | )          | (350,487 | ) | (276,689 | ) |
| Interest credited to contractholder funds,  contract benefits and certain other expenses, net of reinsurance |       | $                      | —     |                   | $          | — |   | $ | — |   | $ | — |   |

 

Effective January 1,2004, the Company adopted Statement of Position 03-1, “Accounting and Reportingby Insurance Enterprises for Certain Nontraditional Long-Duration Contracts andfor Separate Accounts” (“SOP 03-1”) and, in connection therewith, recorded acumulative effect of change in accounting principle of $26.9 million, after-tax($41.4 million, pre-tax) that was ceded to ALIC. 

 

## **3.  Guarantees and Contingent Liabilities**

 

## **Guarantees**

 

The Company has issued universal lifeinsurance contracts to third parties who finance the premium payments on theuniversal life insurance contracts through a commercial paper program.  The Company has issued a repayment guaranteeon the outstanding commercial paper balance that is fully collateralized by thecash surrender value of the universal life insurance contracts.  At September 30, 2005, the amount dueunder the commercial paper program was $302 million and the cash surrendervalue of the policies was $307 million. The repayment guarantee expires April 30, 2006. In November of2005, the Company received a request for the partial withdrawal of $248 millionof the policyholder account value. The proceeds from these policies will beapplied to the amount due under the commercial paper program. Thesecontracts are ceded to ALIC under the terms of the reinsurance agreements.  

 

In the normalcourse of business, the Company provides standard indemnifications tocounterparties in contracts in connection with numerous transactions, includingacquisitions and divestitures.  The typesof indemnifications typically provided include indemnifications for breaches ofrepresentations and warranties, taxes and certain other liabilities, such asthird party lawsuits.  Theindemnification clauses are often standard contractual terms and were enteredinto in the normal course of business based on an assessment that the risk ofloss would be remote.  The terms of theindemnifications vary in duration and nature. 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, themaximum amount of the obligation under such indemnifications is notdeterminable.  Historically, the Companyhas not made any material payments pursuant to these obligations. 

 

The aggregateliability balance related to all guarantees was not material as of September 30,2005.

 

## **Regulation**

 

The Company is subject to changing social, economic and regulatoryconditions.  Recent state and federalregulatory initiatives and proceedings have included efforts to imposeadditional regulations regarding agent and broker compensation and otherwiseexpand overall regulation of insurance products

 

7

----

 

and the insurance industry.  The ultimate changes and eventual effects ofthese initiatives on the Company’s business, if any, are uncertain.  

 

**Legal and RegulatoryProceedings 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”sub-section below, please note the following:

 

•                  These mattersraise difficult and complicated factual and legal issues and are subject tomany uncertainties and complexities, including but not limited to, theunderlying facts of each matter; novel legal issues; variations betweenjurisdictions in which matters are being litigated, heard or investigated;differences in applicable laws and judicial interpretations; the length of timebefore many of these matters might be resolved by settlement, throughlitigation or otherwise and, in some cases, the timing of their resolutionsrelative to other similar matters involving other companies; 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 therefore unclear;and the current challenging legal environment faced by large corporations andinsurance companies.  

 

•                  In the lawsuits,plaintiffs seek a variety of remedies including equitable relief in the form ofinjunctive and other remedies and monetary relief in the form of contractualand extra-contractual damages.  In somecases, the monetary damages sought 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 our experience, monetary demands inpleadings bear little relation to the ultimate loss, if any, to the Company. 

 

•                  In connectionwith regulatory examinations and proceedings, government authorities may seekvarious forms of relief, including penalties, restitution, and changes inbusiness practices.  The Company may notbe advised of the nature and extent of relief sought until the final stages ofthe examination or proceeding.

 

•                  For the reasonsspecified above, it is not possible at this time to make meaningful estimatesof the amount or range of loss that could result from the matters describedbelow in the “Proceedings” subsection. The Company reviews these matters on an on-going basis and follows theprovisions of Statement of Financial Accounting Standards No. 5, “Accountingfor Contingencies” when making accrual and disclosure decisions.  When assessing reasonably possible andprobable outcomes, the Company bases its decisions on its assessment of theultimate outcome following all appeals. 

 

•                  In the opinionof the Company’s management, while the ultimate liability in some of thematters described below in the “Proceedings” subsection in excess ofamounts currently reserved may be material to the Company’s operating resultsfor any particular period if an unfavorable outcome results, none will have amaterial adverse effect on the financial condition of the Company.

 

8

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**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 more significant of theseproceedings is provided in the following paragraph.  

 

AIC isdefending certain matters relating to its agency program reorganizationannounced in 1999. These matters include a lawsuit filed in December 2001by the U.S. Equal Employment Opportunity Commission (“EEOC”) allegingretaliation under federal civil rights laws, a class action filed in August 2001by former employee agents alleging retaliation and age discrimination under theAge Discrimination in Employment Act, breach of contract and ERISA violations, and a lawsuit filed in October 2004by the EEOC alleging age discrimination with respect to a policy limiting therehire of agents affected by the agency program reorganization.  AIC is also defending a certified classaction filed by former employee agents who terminated their employment prior tothe agency program reorganization.  Theseplaintiffs have asserted breach of contract and ERISA claims and are seekingactual damages including benefits under Allstate employee benefit plans andpayments provided in connection with the reorganization, as well as punitivedamages.  In late March 2004, in thefirst EEOC lawsuit and class action lawsuit, the trial court issued amemorandum and order that, among other things, certified classes of agents,including a mandatory class of agents who had signed a release, for purposes ofeffecting the court’s declaratory judgment that the release is voidable at theoption of the release signer.  The courtalso ordered that an agent who voids the release must return to AIC “any andall benefits received by the [agent] in exchange for signing the release.”  The court also “concluded 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.  The case otherwise remains pending.  A putative nationwide class action hasalso been filed by former employee agents alleging various violations of ERISA, including a worker classificationissue.  These plaintiffs are challengingcertain amendments to the Agents Pension Plan and are seeking to have exclusiveagent independent contractors treated as employees for benefit purposes.  This matter was dismissed with prejudice bythe trial court, was the subject of further proceedings on appeal, and wasreversed and remanded to the trial court in April 2005.  Inthese matters, plaintiffs seek compensatory and punitive damages, and equitablerelief.  AIC has been vigorouslydefending these lawsuits and other matters related to its agency programreorganization.  In addition, AIC hasbeen defending certain matters relating to its life agency program reorganizationannounced in 2000. These matters have been the subject of an investigation bythe EEOC with respect to allegations of age discrimination and retaliation andconciliation discussions between AIC and the EEOC.   The outcome of these disputes is currently uncertain.

 

**Other Matters**

 

TheCorporation and some of its subsidiaries, including the Company, have receivedinterrogatories and demands for information from regulatory and enforcementauthorities relating to various insurance products and practices.  The areas of inquiry include variable annuitymarket timing and late trading.  TheCorporation and some of its subsidiaries, including the Company, have alsoreceived interrogatories and demands for information from authorities seekinginformation relevant to on-going investigations into the possible violation ofantitrust or insurance laws by unnamed parties and, in particular, seekinginformation as to whether any person engaged in activities for the purpose ofprice fixing, market allocation, or bid rigging. The Company believes thatthese inquiries are similar to those made to many financial services companiesas part of industry-wide investigations by various authorities into thepractices, policies and procedures relating to insurance and financial servicesproducts.  The Corporation and itssubsidiaries have responded and will continue to respond to these inquiries. ** **

 

Various otherlegal and regulatory actions are currently pending that involve the Company andspecific aspects of its conduct of business. Like other members of the insurance industry, the Company is the targetof a number of lawsuits and proceedings, some of which involve claims forsubstantial or indeterminate amounts. These actions are based on a variety ofissues and target a range of the Company’s practices. The outcome of thesedisputes is currently unpredictable.  

 

9

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However, atthis time, based on their present status and the existence of the reinsuranceagreements with ALIC related to policy liabilities, it is the opinion ofmanagement that the ultimate liability, if any, in one or more of the actionsdescribed in this “Other Matters” subsection in excess of amountscurrently reserved is not expected to have a material effect on the results ofoperations, liquidity or financial condition of the Company.

 

## **4.   Other Comprehensive Income**

 

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

 
| ** **                                                   | ** ** | **Three Months Ended September 30,** | ** ** |
|--------------------------------------------------------------|------------|-------------------------------------------|------------|
| **(in thousands)**                                           | ** ** | **2005**                                  | ** ** | **2004** | ** ** |
| ** **                                                   | ** ** | ** **                                | ** ** | ** ** | ** ** | **After-** | ** ** | ** ** | ** ** | ** ** | ** ** | **After-** | ** ** |
| ** **                                                   | ** ** | **Pretax**                                | ** ** | **Tax** | ** ** | **tax** | ** ** | **Pretax** | ** ** | **Tax** | ** ** | **tax** | ** ** |
|                                                         |       |                                      |       |   |   |   |   |   |   |   |   |   |   |
| Unrealized holding (losses) gains arising  during the period |       | $                                         | (5,766     | ) | $ | 2,018 |   | $ | (3,748 | ) | $ | 4,783 |   | $ | (1,674 | ) | $ | 3,109 |   |
| Less: reclassification adjustments                           |       | —                                    |       | — |   | — |   | 5 |   | (2 | ) | 3 |   |
|                                                         |       |                                      |       |   |   |   |   |   |   |   |   |   |   |
| Other comprehensive (loss) income                            |       | $                                         | (5,766     | ) | $ | 2,018 |   | (3,748 | ) | $ | 4,778 |   | $ | (1,672 | ) | 3,106 |   |
|                                                         |       |                                      |       |   |   |   |   |   |   |   |   |   |   |
| Net income                                                   |       |                                      |       |   |   | 2,225 |   |   |   |   |   | 1,836 |   |
| Comprehensive (loss) income                                  |       |                                      |       |   |   | $ | (1,523 | ) |   |   |   |   | $ | 4,942 |   |

 
| ** **                                           | ** ** | **Nine Months Ended September 30,** | ** ** |
|------------------------------------------------------|------------|------------------------------------------|------------|
| **(in thousands)**                                   | ** ** | **2005**                                 | ** ** | **2004** | ** ** |
| ** **                                           | ** ** | ** **                               | ** ** | ** ** | ** ** | **After-** | ** ** | ** ** | ** ** | ** ** | ** ** | **After-** | ** ** |
| ** **                                           | ** ** | **Pretax**                               | ** ** | **Tax** | ** ** | **tax** | ** ** | **Pretax** | ** ** | **Tax** | ** ** | **tax** | ** ** |
|                                                 |       |                                     |       |   |   |   |   |   |   |   |   |   |   |
| Unrealized holding losses arising during  the period |       | $                                        | (5,319     | ) | $ | 1,862 |   | $ | (3,457 | ) | $ | (1,398 | ) | $ | 489 |   | $ | (909 | ) |
| Less: reclassification adjustments                   |       | (117                                     | )          | 41 |   | (76 | ) | 5 |   | (2 | ) | 3 |   |
|                                                 |       |                                     |       |   |   |   |   |   |   |   |   |   |   |
| Other comprehensive loss                             |       | $                                        | (5,202     | ) | $ | 1,821 |   | (3,381 | ) | $ | (1,403 | ) | $ | 491 |   | (912 | ) |
|                                                 |       |                                     |       |   |   |   |   |   |   |   |   |   |   |
| Net income                                           |       |                                     |       |   |   | 6,567 |   |   |   |   |   | 5,458 |   |
| Comprehensive income                                 |       |                                     |       |   |   | $ | 3,186 |   |   |   |   |   | $ | 4,546 |   |

 

10

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**Item2.  MANAGEMENT’S DISCUSSION AND ANALYSISOF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE THREE-MONTH ANDNINE-MONTH PERIODS ENDED SEPTEMBER 30, 2005 AND 2004**

 

## **OVERVIEW**

 

The followingdiscussion highlights significant factors influencing the financial positionand results of operations of Lincoln Benefit Life Company (referred to in thisdocument as “we”, “our”, “us” or the “Company”).  It should be read in conjunction with thecondensed financial statements and notes thereto found under Part I. Item1. contained herein, and with the discussion, analysis, financial statementsand notes thereto in Part I. Item 1. and Part II. Item 7. and Item 8.of the Lincoln Benefit Life Company Annual Report on Form 10-K for2004.  We operate as a single segmententity, based on the manner in which financial information is used internallyto evaluate performance and determine the allocation of resources.

 

## **OPERATIONS**

 
| ** **                         | ** ** | **Three Months Ended** | ** ** | **Nine Months Ended**  | ** ** |
|------------------------------------|------------|------------------------|------------|------------------------|------------|
| ** **                         | ** ** | **September 30,** | ** ** | **September 30,** | ** ** |
| **(in thousands)**                 | ** ** | **2005**               | ** ** | **2004**               | ** ** | **2005** | ** ** | **2004** | ** ** |
|                               |       |                   |       |                   |       |   |   |   |   |
| Net  investment income             |       | $                      | 3,420      |                   | $          | 2,817 |   | $ | 10,210 |   | $ | 8,382 |   |
| Realized  capital gains and losses |       | —                 |       | 5                      |       | (117 | ) | 5 |   |
| Income tax  expense                |       | (1,195                 | )          | (986                   | )          | (3,526 | ) | (2,929 | ) |
| Net income                         |       | $                      | 2,225      |                   | $          | 1,836 |   | $ | 6,567 |   | $ | 5,458 |   |

 

We havereinsurance agreements whereby all premiums, contract charges, interestcredited to contractholder funds, contract benefits and certain expenses areceded to Allstate Life Insurance Company (“ALIC”) and certain non-affiliatedreinsurers, and reflected net of such reinsurance in the Condensed Statementsof Operations.  Our results of operationsinclude net investment income and realized capital gains and losses on ourassets that are not transferred under the reinsurance agreements.

 

**Net income** increased21.2% in the three months ended September 30, 2005 and 20.3% in the firstnine months of 2005 compared to the same periods in 2004. The increases weredue primarily to improved net investment income.    

 

**Net investment income**increased 21.4% in the three months ended September 30, 2005 and 21.8% inthe first nine months of 2005 compared to the same periods of 2004.  The increases in both periods were primarilydue to the effect of higher portfolio balances, partially offset by lowerportfolio yields.  Higher portfoliobalances resulted from a capital contribution from ALIC in 2004 and theinvestment of cash flows from operating activities.  Lower portfolio yields were due to purchases,including reinvestments, of fixed income securities with yields lower than thecurrent portfolio average.

 

**Realized capital losses**of  $117 thousand were recorded for thefirst nine months of 2005, resulting from sales of fixed incomesecurities.  There were no realizedcapital gains or losses recorded in the third quarter of 2005.

 

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**FINANCIAL POSITION**

 
| **(in thousands)**                             | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
|------------------------------------------------|------------|------------------------|------------|-----------------------|------------|
| ** **                                     | ** ** | **2005**               | ** ** | **2004**              | ** ** |
| Fixed income  securities (1)                   |       | $                      | 267,944    |                  | $          | 242,799 |   |
| Short-term                                     |       | 2,255                  |       | 30,408                |       |
| Total investments                              |       | $                      | 270,199    |                  | $          | 273,207 |   |
|                                           |       |                   |       |                  |       |
| Cash                                           |       | $                      | 18,272     |                  | $          | 10,532 |   |
|                                           |       |                   |       |                  |       |
| Reinsurance  recoverable from ALIC             |       | 18,144,274             |       | 17,083,056            |       |
|                                           |       |                   |       |                  |       |
| Reinsurance  recoverable from non-affiliates   |       | 962,575                |       | 839,738               |       |
|                                           |       |                   |       |                  |       |
| Contractholder  funds                          |       | 17,266,601             |       | 16,231,489            |       |
|                                           |       |                   |       |                  |       |
| Reserve for  life-contingent contract benefits |       | 1,821,962              |       | 1,671,729             |       |
|                                           |       |                   |       |                  |       |
| Separate  Accounts assets and liabilities      |       | 2,595,013              |       | 2,368,312             |       |

 

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(1)   Fixed income securities arecarried at fair value.  Amortized costbasis for these securities was $264.7 million and $234.4 million at September 30,2005 and December 31, 2004, respectively.

 

Totalinvestments decreased to $270.2 million at September 30, 2005 from $273.2million at December 31, 2004 due primarily to lower unrealized capitalgains on fixed income securities.

 

At September 30, 2005, 100% of the fixed income securitiesportfolio was 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 S&P, Fitch or Dominion; or a comparable internal rating if anexternally provided rating is not available.

 

The unrealized net capital gains on fixed income securities at September 30,2005 were $3.2 million, a decrease of $5.2 million or 61.7% since December 31,2004.  The net unrealizedgain was comprised of $6.2 million of unrealized gains and $3.0 million ofunrealized losses at September 30, 2005. This is compared to a net unrealized gain for the fixed income portfoliototaling $8.4 million at December 31, 2004, comprised of $9.7 million ofunrealized gains and $1.3 million of unrealized losses.  

 

Of the grossunrealized losses in the fixed income portfolio at September 30, 2005,$1.3 million or 44.7% were in the corporate fixed income portfolio.  The losses were primarily comprised ofsecurities in the capital goods, consumer goods and utilities sectors.  The gross unrealized losses in these sectorswere primarily interest rate related.  Weexpect eventual recovery of these securities. Every security was included in our portfolio monitoring process.

 

Our portfoliomonitoring process identifies and evaluates fixed income securities whosecarrying value may be other than temporarily impaired.  The process includes a quarterly review ofall securities using a screening process to identify those securities whose fairvalue compared to amortized cost for fixed income securities is belowestablished thresholds for certain time periods, or which are identifiedthrough other monitoring criteria such as ratings downgrades or paymentdefaults.  We also recognize impairmenton securities in an unrealized loss position for which we do not have theintent and ability to hold until recovery.

 

We also monitor the quality of our fixed income portfolioby categorizing certain investments as “problem”, “restructured” or “potentialproblem.”  Problem fixed incomesecurities are securities in default with respect to principal or interestand/or securities issued by companies that have gone into bankruptcy subsequentto our acquisition of the security. Restructured fixed income securities have rates and terms that are notconsistent with market rates or terms prevailing at the time of therestructuring.  Potential problem fixedincome securities are current with respect to contractual principal and/orinterest, but because of other facts and circumstances, we have concernsregarding the borrower’s ability to pay future principal and interest, whichcauses us to believe these securities may be classified as problem orrestructured in the future.

 

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As of September 30,2005 and December 31, 2004, we had no securities categorized as  “problem”, “restructured” or “potentialproblem.”

 

While we mayclassify securities as “problem”, “restructured” or “potential problem” in thefuture, particularly if economic conditions are unfavorable, management expectsthat the total amount of securities in these categories would be low relativeto the total fixed income securities portfolio.

 

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

 
| ** **                                        | ** ** | **Three Months Ended** | ** ** | **Nine Months Ended**  | ** ** |
|---------------------------------------------------|------------|------------------------|------------|------------------------|------------|
| ** **                                        | ** ** | **September 30,** | ** ** | **September 30,** | ** ** |
| **(in thousands)**                                | ** ** | **2005**               | ** ** | **2004**               | ** ** | **2005** | ** ** | **2004** | ** ** |
|                                              |       |                   |       |                   |       |   |   |   |   |
| Dispositions                                      |       | $                      | —     |                   | $          | 5 |   | $ | (117 | ) | $ | 5 |   |
| Realized  capital gains and losses, pretax        |       | —                 |       | 5                      |       | (117 | ) | 5 |   |
| Income tax  (expense) benefit                     |       | —                 |       | (2                     | )          | 41 |   | (2 | ) |
| **Realized  capital gains and losses, after-tax** |       | $                      | —     |                   | $          | 3 |   | $ | (76 | ) | $ | 3 |   |

 

Dispositions in the above table include salesand other transactions such as calls and prepayments.  We may sell securities during the period inwhich fair value has declined below amortized cost.  In certain situations new factors such asnegative developments, subsequent credit deterioration, relative valueopportunities, market liquidity concerns and portfolio reallocations cansubsequently change our previous intent to continue holding a security.  

 

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

 

Contractholderfunds increased $1.04 billion to $17.27 billion at September 30, 2005,from $16.23 billion at December 31, 2004 as a result of deposits fromfixed annuities and interest-sensitive life policies, and interest credited tocontractholder funds, partially offset by surrenders, withdrawals, benefitpayments and contract charges.  Thereserve for life-contingent contract benefits increased $150.2 million to $1.82billion at September 30, 2005 resulting from sales of traditional lifeproducts and immediate annuities with life contingencies.  Correspondingly, reinsurance recoverable fromALIC and reinsurance recoverable from non-affiliates increased by $1.06 billionand $122.8 million, respectively, during the first nine months of 2005 sinceall contractholder obligations are reinsured. 

 

We purchasereinsurance after evaluating the financial condition of the reinsurer, as wellas the terms and price of coverage.  Wereinsure certain of our risks to non-affiliated reinsurers under yearlyrenewable term and coinsurance agreements. Yearly renewable term and coinsurance agreements result in passing theagreed-upon portion of risk to the reinsurers in exchange for negotiatedreinsurance premium payments.    

 

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## **CAPITALRESOURCES AND LIQUIDITY**

 

**CapitalResources**consist of shareholder’s equity.  The following table summarizes our capitalresources:

 
| **(in thousands)**                                            | ** ** | **September 30,  2005** | ** ** | **December 31,  2004** | ** ** |
|---------------------------------------------------------------|------------|------------------------------|------------|-----------------------------|------------|
| Common  stock, additional capital paid-in and retained income |       | $                            | 266,324    |                        | $          | 259,757 |   |
| Accumulated  other comprehensive income                       |       | 2,098                        |       | 5,479                       |       |
| Total shareholder’s equity                               |       | $                            | 268,422    |                        | $          | 265,236 |   |

 

*Shareholder’s equity*increased for the first nine months of 2005 when compared to December 31,2004 due to net income, partially offset by lower net unrealized capitalgains.   

 

**FinancialRatings and Strength** We share the insurance financial strength ratings of our parent, ALIC,as our business is reinsured to ALIC. ALIC’s ratings are influenced by many factors including operating and financialperformance, asset quality, liquidity, asset/liability management, overallportfolio mix, financial leverage (i.e., debt), risk exposures, operatingleverage, Allstate Insurance Company’s (“AIC”) ratings and other factors.  There have been no changes in ALIC’sinsurance financial strength ratings since December 31, 2004.  

 

In connection with developments at AIC, in October 2005,Standard & Poor’s affirmed the AA insurance financial strength ratingsof ALIC and its rated affiliates, with a revised rating outlook of ‘Negative’(from ‘Stable’).  Also in October 2005,Moody’s affirmed the Aa2 insurance financial strength ratings of ALIC and itsrated affiliates.  Furthermore, inNovember 2005, A.M. Best affirmed the A+ insurance financial strengthratings of ALIC and its rated affiliates.

 

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

 

*Evaluation of Disclosure Controls and Procedures.  *We maintaindisclosure controls and procedures as defined in Rule 15d-15(e) under theSecurities Exchange Act of 1934.  Underthe supervision 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, the principal executive officer and theprincipal financial officer concluded that our disclosure controls and proceduresare effective in providing reasonable assurance that material informationrequired to be disclosed in our reports filed with or submitted to theSecurities and Exchange Commission under the Securities Exchange Act is madeknown to management, including the principal executive officer and the principalfinancial officer, as appropriate to allow timely decisions regarding requireddisclosure.

 

*Changes in Internal Control over Financial Reporting. *During the fiscalquarter ended September 30, 2005, there were no changes in our internalcontrol 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**

 

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

 

## **Item6.  Exhibits**

##  

(a) Exhibits

 

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

 

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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)                                                              |
|                   |                                                                      |
| November 7,  2005 |                                                                      |
|                   |                                                                      |
|                   | By                                                                        | /s/ Samuel H. Pilch |   |
|                   |                                                                      |
|                   | Samuel H. Pilch                                                           |
|                   | Controller                                                                |
|                   | (chief accounting officer and duly authorized  officer of the registrant) |

 

17

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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

----