** **

**UNITED STATES**

**SECURITIESAND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

----

**FORM 10-Q**

 

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

 

**x****QUARTERLYREPORT PURSUANT TO SECTION 13 OR 15(d)**

**OF**

**THESECURITIES EXCHANGE ACT OF 1934**

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

 

**OR**

 

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

**OF**

**THESECURITIES EXCHANGE ACT OF 1934**

 

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

 

**LINCOLNBENEFIT LIFE COMPANY**

(Exactname of registrant as specified in its charter)

 

| **Nebraska**                              | ** ** | **47-0221457**                        |
|-------------------------------------------|------------|---------------------------------------|
| (State  of Incorporation)                 |       | (I.R.S.  Employer Identification No.) |
|                                      |       |                                  |
| **2940 South 84th Street**                |       |                                  |
| **Lincoln, Nebraska**                     |       | **68506**                             |
| (Address  of principal executive offices) |       | (Zip  code)                           |

 

**Registrant’s telephone number,including area code: 800-525-9287**

 

 

** **

**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 1934 during thepreceding 12 months, and (2) has been subject to such filing requirements forthe past 90 days.    **

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

 

**Indicate by check mark whetherthe registrant is a large accelerated filer, an accelerated filer, or anon-accelerated filer. See definition of “accelerated filer and largeaccelerated filer” in Rule 12b-2 of the Exchange Act.**
| ** ** | ** ** | **Large accelerated filer** | ** ** | **Accelerated filer** |       | **Non-accelerated filer** |
|------------|------------|-----------------------------|------------|-----------------------|------------|---------------------------|
| ** ** | ** ** | **o**                       | ** ** | **o**                 | ** ** | **x**                     |

**Indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2 of theExchange Act).**

**Yes**o    No x

 

**As of November 5, 2007, theRegistrant had 25,000 common shares, $100 par value, outstanding, all of whichare held by Allstate Life Insurance Company.**

 

** **

** **

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** **

** **

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

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

#### **September30, 2007**

 

 
| **PART I.**  | **FINANCIAL  INFORMATION**                                                                                                    | **PAGE**   |
|--------------|-------------------------------------------------------------------------------------------------------------------------------|------------|
|         |                                                                                                                          |       |
| Item 1.      | Financial Statements                                                                                                          |       |
|         |                                                                                                                          |       |
|         | Condensed Statements of  Operations for the Three-Month and Nine-Month Periods Ended September 30,  2007 and 2006 (unaudited) |  

3  |
|         |                                                                                                                          |       |
|         | Condensed Statements of  Financial Position as of September 30, 2007 (unaudited) and December 31, 2006                        |  

4  |
|         |                                                                                                                          |       |
|         | Condensed Statements of  Cash Flows for the Nine-Month Periods Ended September 30, 2007 and 2006  (unaudited)                 |  

5  |
|         |                                                                                                                          |       |
|         | Notes to Condensed Financial  Statements (unaudited)                                                                          | 6          |
|         |                                                                                                                          |       |
| Item 2.      | Management’s Discussion  and Analysis of Financial Condition and Results of Operations                                   |  

13 |
|         |                                                                                                                          |       |
| Item 4.      | Controls and Procedures                                                                                                       | 16         |
|         |                                                                                                                          |       |
| **PART II.** | **OTHER  INFORMATION**                                                                                                        |       |
|         |                                                                                                                          |       |
| Item 1.      | Legal Proceedings                                                                                                             | 17         |
|         |                                                                                                                          |       |
| Item 1A.     | Risk Factors                                                                                                                  | 17         |
|         |                                                                                                                          |       |
| Item 5.      | Other Information                                                                                                             | 17         |
|         |                                                                                                                          |       |
| Item 6.      | Exhibits                                                                                                                      | 17         |
|         |                                                                                                                          |       |

** **

** **

**2**

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** **

#### **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)**                            | ** ** | **2007**               | ** ** | **2006**              | ** ** | **2007** | ** ** | **2006** | ** ** |
| ** **                                           | ** ** | **(unaudited)**        | ** ** | **(unaudited)**       | ** ** |
| **Revenues**                                         | ** ** | ** **             | ** ** | ** **            | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net investment income                                |       | $                      | 3,594      |                  | $          | 3,524 |   | $ | 10,727 |   | $ | 10,481 |   |
| Realized capital gains and losses                    |       | —                 |       | (408                  | )          | (405 | ) | (1,255 | ) |
|                                                 |       |                   |       |                  |       |   |   |   |   |
| **Income from operations before income tax expense** |       | 3,594                  |       | 3,116                 |       | 10,322 |   | 9,226 |   |
| Income tax expense                                   |       | 1,256                  |       | 1,089                 |       | 3,606 |   | 3,222 |   |
| **Net income**                                       |       | $                      | 2,338      |                  | $          | 2,027 |   | $ | 6,716 |   | $ | 6,004 |   |

** **

Seenotes 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)**                                                        | ** ** | **2007**          | ** ** | **2006**         | ** ** |
| ** **                                                                                              | ** ** | **(Unaudited)**   | ** ** | ** **       | ** ** |
|                                                                                                    |       |              |       |             |       |
| **Assets**                                                                                              |       |              |       |             |       |
| Investments                                                                                             |       |              |       |             |       |
| Fixed income securities, at fair value (amortized cost $268,065 and  $268,331)                          |       | $                 | 269,012    |             | $          | 268,058 |   |
| Short-term                                                                                              |       | 13,603            |       | 8,264            |       |
| Total investments                                                                                       |       | 282,615           |       | 276,322          |       |
|                                                                                                    |       |              |       |             |       |
| Cash                                                                                                    |       | 13,240            |       | 23,352           |       |
| Reinsurance recoverable from Allstate Life Insurance Company                                            |       | 18,811,560        |       | 19,131,870       |       |
| Reinsurance recoverable from non-affiliates                                                             |       | 1,373,050         |       | 1,203,864        |       |
| Receivable from affiliates                                                                              |       | 40,277            |       | 24,990           |       |
| Other assets                                                                                            |       | 97,142            |       | 104,971          |       |
| Separate Accounts                                                                                       |       | 3,182,314         |       | 3,097,550        |       |
| **Total assets**                                                                                        |       | $                 | 23,800,198 |             | $          | 23,862,919 |   |
|                                                                                                    |       |              |       |             |       |
| **Liabilities**                                                                                         |       |              |       |             |       |
| Contractholder funds                                                                                    |       | $                 | 17,870,813 |             | $          | 18,195,622 |   |
| Reserve for life-contingent contract benefits                                                           |       | 2,295,652         |       | 2,126,455        |       |
| Current income taxes payable                                                                            |       | 3,611             |       | 4,412            |       |
| Unearned premiums                                                                                       |       | 24,731            |       | 25,935           |       |
| Deferred income taxes                                                                                   |       | 562               |       | 135              |       |
| Other liabilities and accrued expenses                                                                  |       | 138,380           |       | 136,184          |       |
| Separate Accounts                                                                                       |       | 3,182,314         |       | 3,097,550        |       |
| **Total liabilities**                                                                                   |       | 23,516,063        |       | 23,586,293       |       |
|                                                                                                    |       |              |       |             |       |
| **Commitments and Contingent Liabilities (Note 3)**                                                     |       |              |       |             |       |
| ** **                                                                                              | ** ** | ** **        | ** ** | ** **       | ** ** |
| **Shareholder’s equity**                                                                           |       |              |       |             |       |
| Common stock, $100 par value, 30 thousand shares authorized, 25  thousand shares issued and outstanding |       | 2,500             |       | 2,500            |       |
| Additional capital paid-in                                                                              |       | 180,000           |       | 180,000          |       |
| Retained income                                                                                         |       | 101,020           |       | 94,304           |       |
| Accumulated other comprehensive income:                                                                 |       |              |       |             |       |
| Unrealized net capital gains and losses                                                                 |       | 615               |       | (178             | )          |
| **Total accumulated other comprehensive income**                                                        |       | 615               |       | (178             | )          |
| **Total shareholder’s equity**                                                                     |       | 284,135           |       | 276,626          |       |
| **Total liabilities and shareholder’s equity**                                                     |       | $                 | 23,800,198 |             | $          | 23,862,919 |   |
|                                                                                                    |       |              |       |             |       |

 

Seenotes to condensed financial statements.

 

4

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

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

 

 
| ** **                                                                                               | ** ** | **Nine Months Ended  September 30,** | ** ** |
|----------------------------------------------------------------------------------------------------------|------------|--------------------------------------|------------|
| **($ in thousands)**                                                                                | ** ** | **2007**                             | ** ** | **2006** | ** ** |
| ** **                                                                                               | ** ** | **(Unaudited)**                      | ** ** |
|                                                                                                     |       |                                 |       |   |   |
| **Cash flows from operating activities**                                                                 | ** ** | ** **                           | ** ** | ** ** | ** ** |
| Net income                                                                                               |       | $                                    | 6,716      |   | $ | 6,004 |   |
| Adjustments to reconcile net income to net cash (used in) provided by  operating activities:             |       |                                 |       |   |   |
| Amortization and other non-cash items                                                                    |       | (13                                  | )          | 354 |   |
| Realized capital gains and losses                                                                        |       | 405                                  |       | 1,255 |   |
| Changes in:                                                                                              |       |                                 |       |   |   |
| Reserve for life-contingent contract benefits and contractholder  funds, net of reinsurance recoverables |       | (4,488                               | )          | (3,655 | ) |
| Income taxes payable                                                                                     |       | (801                                 | )          | (1,547 | ) |
| Receivable/payable to affiliates, net                                                                    |       | (15,287                              | )          | (21,437 | ) |
| Other operating assets and liabilities                                                                   |       | 8,821                                |       | 24,150 |   |
| Net cash (used in) provided by operating activities                                                      |       | (4,647                               | )          | 5,124 |   |
|                                                                                                     |       |                                 |       |   |   |
| **Cash flows from investing activities**                                                                 | ** ** | ** **                           | ** ** | ** ** | ** ** |
| ** **                                                                                               | ** ** | ** **                           | ** ** | ** ** | ** ** |
| Fixed income securities                                                                                  |       |                                 |       |   |   |
| Proceeds from sales                                                                                      |       | 5,176                                |       | 10,735 |   |
| Investment collections                                                                                   |       | 12,505                               |       | 12,358 |   |
| Investment purchases                                                                                     |       | (17,982                              | )          | (30,884 | ) |
| Change in short-term investments                                                                         |       | (5,164                               | )          | 1,211 |   |
| Net cash used in investing activities                                                                    |       | (5,465                               | )          | (6,580 | ) |
| ** **                                                                                               | ** ** | ** **                           | ** ** | ** ** | ** ** |
| **Net decrease in cash**                                                                                 |       | (10,112                              | )          | (1,456 | ) |
| **Cash at beginning of period**                                                                          |       | 23,352                               |       | 8,349 |   |
| **Cash at end of period**                                                                                |       | $                                    | 13,240     |   | $ | 6,893 |   |

 

Seenotes to condensed financial statements.

 

5

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** **

**LINCOLN BENEFIT LIFE COMPANY**

**NOTES TO CONDENSED FINANCIAL STATEMENTS**

**(unaudited)**

##  

## **1.   Basis of Presentation**

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

The condensed financial statements and notesas of September 30, 2007, and for the three-month and nine-month periods endedSeptember 30, 2007 and 2006 are unaudited. The condensed financial statements reflect all adjustments (consistingonly of normal recurring accruals) which are, in the opinion of management,necessary for the fair presentation of the financial position, results ofoperations and cash 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 year endedDecember 31, 2006.  The results ofoperations for the interim periods should not be considered indicative ofresults to be expected for the full year.

### ** **

### **Adopted accounting standards**

***Statement ofPosition 05-1, Accounting by Insurance Enterprises for Deferred AcquisitionCosts in Connection with Modifications or Exchanges of Insurance Contracts (“SOP05-1”)***

InOctober 2005, the American Institute of Certified Pubic Accountants (“AICPA”)issued SOP 05-1.   SOP 05-1 providesaccounting guidance for deferred policy acquisition costs associated withinternal replacements of insurance and investment contracts other than thoseset forth in Statement of Financial Accounting Standards (“SFAS”) No. 97, “Accountingand Reporting by Insurance Enterprises for Certain Long-Duration Contracts andfor Realized Gains and Losses from the Sale of Investments”.  SOP 05-1 defines an internal replacement as amodification in product benefits, features, rights or coverages that occurs bythe exchange of an existing contract for a new contract, or by amendment,endorsement or rider to an existing contract, or by the election of a featureor coverage within an existing contract. In February 2007, the AICPA issued Technical Practice Aids (“TPAs”) thatprovide interpretive guidance to be used in applying SOP 05-1.  The Company adopted the provisions of SOP05-1 on January 1, 2007, for internal replacements occurring in fiscal yearsbeginning 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 StandardsBoard (“FASB”) Interpretation No. 48, Accounting for Uncertainty in IncomeTaxes (“FIN 48”)*

InJuly 2006, the FASB issued FIN 48, which clarifies the accounting foruncertainty in income taxes recognized in an entity’s financial statements inaccordance with SFAS No. 109, “Accounting for Income Taxes”.  FIN 48 requires an entity to recognize thetax benefit of uncertain tax positions only when it is more likely than not,based on the position’s technical merits, that the position would be sustainedupon examination by the respective taxing authorities.  The tax benefit is measured as the largestbenefit that is more than fifty-percent likely of being realized upon finalsettlement with the respective taxing authorities.  On January 1, 2007, the Company adopted theprovisions of FIN 48, which were effective for fiscal years beginning afterDecember 15, 2006. No cumulative effect of a change in accounting principle oradjustment to the liability for unrecognized tax benefits was recognized as aresult of the adoption of FIN 48. Accordingly, the adoption of FIN 48 did not have an effect on the resultsof operations or financial position of the Company.

The Company had noliability for unrecognized tax benefits at January 1, 2007 or September 30,2007, and believes it is reasonably possible that the liability balance willnot significantly increase or decrease within the next 12 months.

The Internal RevenueService (“IRS”) has completed its examination of the Company’s federal incometax returns for 2003-2004.  The Company’stax years prior to 2003 have been examined by the IRS and the statute oflimitations has expired on those years.

 

6

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*Securities and Exchange Commission (“SEC”) StaffAccounting Bulletin No. 108, Considering the Effects of Prior YearMisstatements when Quantifying Misstatements in Current Year FinancialStatements (“SAB 108”)*

In September 2006, the SEC issued SAB 108 to eliminatethe diversity of practice in the process by which misstatements are quantifiedfor purposes of assessing their materiality in the financial statements.  SAB 108 is intended to eliminate the potentialfor the build up of improper amounts on the balance sheet due to limitations ofcertain methods of materiality assessment utilized in current practice.  SAB 108 establishes a single quantificationframework wherein the significance determination is based on the effects of themisstatements on each of the financial statements as well as the relatedfinancial statement disclosures.  OnDecember 31, 2006, the Company adopted the provisions of SAB 108 which wereeffective for the first fiscal year ending after November 15, 2006.  The adoption of SAB 108 did not have anyeffect on the results of operations or financial position of the Company.

 

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

FSP FAS 115-1 nullifies the guidance inparagraphs 10-18 of Emerging Issues Task Force Issue 03-1, “The Meaning ofOther-Than-Temporary Impairment and Its Application to Certain Investments” andreferences existing other-than-temporary impairment guidance.  FSP FAS 115-1 clarifies that an investorshould recognize an impairment loss no later than when the impairment is deemedother-than-temporary, even if a decision to sell the security has not beenmade, and also provides guidance on the subsequent income recognition  for impaired debt securities.  The Company adopted FSP FAS 115-1 as ofJanuary 1, 2006 on a prospective basis. The effect of adoption did not have a material effect on the results ofoperations or financial position of the Company.

 

*SFAS No. 154, AccountingChanges and Error Corrections (“SFAS No. 154”)*

SFASNo. 154 replaces Accounting Principles Board (“APB”) Opinion No. 20, “AccountingChanges”, and SFAS 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 or otherwisenot required.  The Company adopted SFASNo. 154 on January 1, 2006.  The adoptionof SFAS No. 154 did not have any effect on the results of operations orfinancial position of the Company.

 

### **Pending accounting standards**

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

In September 2006, the FASB issued SFAS No. 157 whichredefines fair value, establishes a framework for measuring fair value ingenerally accepted accounting principles (“GAAP”), and expands disclosuresabout fair value measurements.  SFAS No.157 applies where other accounting pronouncements require or permit fair valuemeasurements.  Additional disclosures andmodifications to current fair value disclosures will be required upon adoptionof SFAS No. 157.  SFAS No. 157 iseffective for fiscal years beginning after November 15, 2007.  The Company is currently evaluating theeffects of adoption of SFAS No. 157 on its results of operations andfinancial position.

 

7

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

In February 2007, the FASB issued SFAS No. 159 whichprovides reporting entities an option to report selected financial assets,including investment securities designated as available for sale, and financialliabilities, including most insurance contracts, at fair value.  SFAS No. 159 establishes presentation anddisclosure requirements designed to facilitate comparisons between companies thatchoose different measurement alternatives for similar types of financial assetsand liabilities.  The standard alsorequires additional information to aid financial statement users’ understandingof the impacts of a reporting entity’s decision to use fair value on itsearnings and also requires entities to display, on the face of the statement offinancial position, the fair value of those assets and liabilities for whichthe reporting entity has chosen to measure at fair value.  SFAS No. 159 is effective as of the beginningof a reporting entity’s first fiscal year beginning after November 15,2007.  Because application of the standard is optional, any impacts arelimited to those financial assets and liabilities to which SFAS No. 159 wouldbe applied, which have yet to be determined by the Company.

 

*SOP 07-1, Clarification of theScope of the Audit and Accounting Guide Investment Companies (“the Guide”) andAccounting by Parent Companies and Equity Method Investors for Investments inInvestment Companies (“SOP 07- 1”)*

In June 2007, the AICPA issued SOP 07-1.  Upon adoption of the SOP, the Company mustalso adopt the provisions of FASB Staff Position No. FIN 46(R)-7, “Applicationof FASB Interpretation No. 46(R) to Investment Companies”, which permanentlyexempts investment companies from applying the provisions of Interpretation46(R) to investments carried at fair value. SOP 07-1 provides guidance for determining whether an entity fallswithin the scope of the Guide and whether investment company accounting shouldbe retained by a parent company upon consolidation of an investment companysubsidiary or by an equity method investor in an investment company.  In certain circumstances SOP 07-1 precludesretention of specialized accounting for investment companies (i.e. fair valueaccounting), when similar direct investments exist in the consolidated groupand are measured on a basis inconsistent with that applied to investmentcompanies.  Additionally, SOP 07-1precludes retention of specialized accounting for investment companies if thereporting entity does not distinguish, through documented policies, the natureand type of investments to be held in the investment companies from those madein the consolidated group where other accounting guidance is being applied.  SOP 07-1 was to be effective for fiscal yearsbeginning on or after December 15, 2007, however the FASB voted in October 2007to delay the effective date.  A revisedeffective date for SOP 07-1 is not yet available.  The Company is assessing the current andfuture implications of this standard on its results of operations and financialposition.

 

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

 

In April 2007, the FASBissued FSP FIN 39-1, which amends FASB Interpretation No. 39, “Offsetting of AmountsRelated to Certain Contracts”.  FSP FIN39-1 replaces the terms “conditional contracts” and “exchange contracts” withthe term “derivative instruments” and requires a reporting entity to offsetfair value amounts recognized for the right to reclaim cash collateral or theobligation to return cash collateral against fair value amounts recognized forderivative instruments executed with the same counterparty under the samemaster netting arrangement that have been offset in the statement of financialposition.  FSP FIN 39-1 is effective forfiscal years beginning after November 15, 2007, with early adoptionpermitted.  The effects of applying FSPFIN 39-1 will be recorded as a change in accounting principle throughretrospective application.  The adoptionof FSP FIN 39-1 is not expected to have a material impact on the Company’sresults of operations or financial position based on the current level ofderivative activity.

 

8

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## **2.**              Reinsurance

 

The Company has reinsurance agreements underwhich it reinsures all of its business to ALIC or other non-affiliatedreinsurers.  Under the agreements,premiums, contract charges, interest credited to contractholder funds, contractbenefits and substantially all expenses are reinsured.  The Company continues to have primaryliability as the direct insurer for risks reinsured.

 

Investment income earned on the assets whichsupport contractholder funds and the reserve for life-contingent contractbenefits is not included in the condensed financial statements as those assetsare owned and managed by ALIC or third party reinsurers under terms of thereinsurance agreements.  The timing ofthe transfer of funds under the reinsurance agreements may result influctuations in net cash provided by operating activities in the CondensedStatements of Cash Flows.

 

The effects of reinsurance on premiums andcontract charges are as follows:

 
| ** **                                        | ** ** | **Three Months Ended** | ** ** | **Nine Months Ended** | ** ** |
|---------------------------------------------------|------------|------------------------|------------|-----------------------|------------|
| ** **                                        | ** ** | **September 30,**      | ** ** | **September 30,**     | ** ** |
| ** **                                        | ** ** | **2007**               | ** ** | **2006**              | ** ** | **2007** | ** ** | **2006** | ** ** |
| **(in thousands)**                                | ** ** | ** **             | ** ** | ** **            | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Premiums and contract charges**                 | ** ** | ** **             | ** ** | ** **            | ** ** | ** ** | ** ** | ** ** | ** ** |
| Direct                                            |       | $                      | 260,836    |                  | $          | 237,789 |   | $ | 761,739 |   | $ | 691,334 |   |
| Assumed-non-affiliate                             |       | 2,394                  |       | 1,133                 |       | 6,491 |   | 6,054 |   |
| Ceded                                             |       |                   |       |                  |       |   |   |   |   |
| Affiliate                                         |       | (154,294               | )          | (136,098              | )          | (459,410 | ) | (401,069 | ) |
| Non-affiliate                                     |       | (108,936               | )          | (102,824              | )          | (308,820 | ) | (296,319 | ) |
| Premiums and contract charges, net of reinsurance |       | $                      | —     |                  | $          | — |   | $ | — |   | $ | — |   |

 

Theeffects of reinsurance on interest credited to contractholder funds, contractbenefits and substantially all expenses are as follows:

 
| ** **                                                                                     | ** ** | **Three Months Ended** | ** ** | **Nine Months Ended** | ** ** |
|------------------------------------------------------------------------------------------------|------------|------------------------|------------|-----------------------|------------|
| ** **                                                                                     | ** ** | **September 30,**      | ** ** | **September 30,**     | ** ** |
| ** **                                                                                     | ** ** | **2007**               | ** ** | **2006**              | ** ** | **2007** | ** ** | **2006** | ** ** |
| **(in thousands)**                                                                             | ** ** | ** **             | ** ** | ** **            | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Interest credited to contractholder funds,  contract benefits and expenses**                 | ** ** | ** **             | ** ** | ** **            | ** ** | ** ** | ** ** | ** ** | ** ** |
| Direct                                                                                         |       | $                      | 512,083    |                  | $          | 521,165 |   | $ | 1,521,152 |   | $ | 1,420,646 |   |
| Assumed-non-affiliate                                                                          |       | 2,430                  |       | 1,829                 |       | 8,070 |   | 6,706 |   |
| Ceded                                                                                          |       |                   |       |                  |       |   |   |   |   |
| Affiliate                                                                                      |       | (367,732               | )          | (392,321              | )          | (1,118,106 | ) | (1,069,095 | ) |
| Non-affiliate                                                                                  |       | (146,781               | )          | (130,673              | )          | (411,116 | ) | (358,257 | ) |
| Interest credited to contractholder funds, contract benefits and  expenses, net of reinsurance |       | $                      | —     |                  | $          | — |   | $ | — |   | $ | — |   |

##  

 

9

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

## **Guarantees**

In the normalcourse of business, the Company provides standard indemnifications tocounterparties in contracts in connection with numerous transactions, includingacquisitions and divestitures.  The 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 are 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 September30, 2007.

## **Regulation**

The Company is subject to changing social, economicand 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.  The ultimate changes and eventual effects ofthese initiatives on the Company’s business, if any, are uncertain.

**Legal and regulatory proceedings and inquiries**

**Background**

The Company and certainaffiliates are involved in a number of lawsuits, regulatory inquiries, andother legal proceedings arising out of various aspects of its business.  As background to the “Proceedings” subsectionbelow, please note the following:

•                  These matters raisedifficult and complicated factual and legal issues and are subject to manyuncertainties and complexities, including the underlying facts of each matter;novel legal issues; variations between jurisdictions in which matters are beinglitigated, heard or investigated; differences in applicable laws and judicialinterpretations; the length of time before many of these matters might beresolved by settlement, through litigation or otherwise and, in some cases, thetiming of their resolutions relative to other similar matters involving othercompanies; the fact that some of the lawsuits are putative class actions inwhich a class has not been certified and in which the purported class may notbe clearly defined; the fact that some of the lawsuits involve multi-stateclass actions in which the applicable law(s) for the claims at issue is indispute and therefore unclear; and the current challenging legal environmentfaced by large corporations and insurance companies.

•                  The outcome on these mattersmay also be affected by decisions, verdicts, and settlements, and the timing ofsuch decisions, verdicts, and settlements, in other individual and class actionlawsuits that involve the Company, other insurers, or other entities and by otherlegal, governmental, and regulatory actions that involve the Company, otherinsurers, or other entities.

•                  In the lawsuits, plaintiffsseek a variety of remedies including equitable relief in the form of injunctiveand other remedies and monetary relief in the form of contractual andextra-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, when specific monetarydemands are made in pleadings, they bear little relation to the ultimate loss,if any, to the Company.

 

10

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•                  In connection withregulatory 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 reasons specifiedabove, it is often not possible to make meaningful estimates of the amount orrange of loss that could result from the matters described below in the “Proceedings”subsection.  The Company reviews thesematters on an ongoing basis and follows the provisions of SFAS 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.

•                  Due to the complexity andscope of the matters disclosed in the “Proceedings” subsection below and themany uncertainties that exist, the ultimate outcome of these matters cannot bereasonably predicted.  In the event of anunfavorable outcome in one or more of these matters, the ultimate liability maybe in excess of amounts currently reserved and may be material to the Company’soperating results or cash flows for a particular quarterly or annualperiod.  However, based on informationcurrently known to it, management believes that the ultimate outcome of allmatters described below as they are resolved over time is not likely to have amaterial adverse effect on the financial position of the Company.

**Proceedings**

Legal proceedings involving Allstate agencies and AICmay impact the Company, even when the Company is not directly involved, becausethe Company sells its products through a variety of distribution channelsincluding Allstate agencies. Consequently, information about the moresignificant of these proceedings is provided in the following paragraph.

 

AIC is defending certainmatters relating to its agency program reorganization announced in 1999.  These matters are in various stages ofdevelopment.

 

•                  These matters include alawsuit filed in 2001 by the U.S. Equal Employment Opportunity Commission (“EEOC”)alleging retaliation under federal civil rights laws (the “EEOC I” suit) and a class action 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 “Romero I” suit).   In 2004, in theconsolidated EEOC I and Romero I litigation, the trial court issued amemorandum and order that, among other things, certified classes of agents,including a mandatory class of agents who had signed a release, for purposes ofeffecting the court’s declaratory judgment that the release is voidable at theoption of the release signer.  The 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 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, thejudge denied their request.  In June2007, the court granted AIC’s motions for summary judgment.

 

•                  The EEOC also filed another lawsuit in 2004 allegingage discrimination with respect to a policy limiting the rehire of agentsaffected by the agency program reorganization (the “EEOC II” suit).  In EEOC II, in 2006, the court grantedpartial summary judgment to the EEOC. Although the court did not determine that AIC was liable for agediscrimination under the ADEA, it determined that the rehire policy resulted ina disparate impact, reserving for trial the determination on whether AIC hadreasonable factors other than age to support the rehire policy.   AIC’s interlocutory appeal of the trialcourt’s summary judgment order is now pending in the United States Court ofAppeals for the Eighth Circuit.

 

•                  AIC is also defending a certified class action filedby former employee agents who terminated their employment prior to the agencyprogram reorganization.  These plaintiffshave asserted breach of contract and ERISA claims.  The court approved the form of class noticein October 2007 and set a December 2007 deadline for filing dispositivemotions.

 

11

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•                  A putative nationwide classaction has also been filed by former employee agents alleging variousviolations of ERISA,including a worker classification issue. These plaintiffs are challenging certain amendments to the AgentsPension Plan and are seeking to have exclusive agent independent contractorstreated as employees for benefit purposes. This matter was dismissed with prejudice by the trial court, was thesubject of further proceedings on appeal, and was reversed and remanded to thetrial court in 2005.  In June 2007, the court granted AIC’s motionto dismiss the case.

 

Inall of these various matters, plaintiffs seek compensatory and punitive damages,and equitable relief.  AIC hasbeen vigorously defending these lawsuits and other matters related to itsagency program reorganization.

## **Other Matters**

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

 

## **4.   Other Comprehensive Income**

The components of other comprehensive income(loss) on a pretax and after-tax basis are as follows:

 
| ** **                                                              | ** ** | **Three Months Ended September 30,** | ** ** |
|-------------------------------------------------------------------------|------------|--------------------------------------|------------|
| **(in thousands)**                                                      | ** ** | **2007**                             | ** ** | **2006** | ** ** |
| ** **                                                              | ** ** | ** **                           | ** ** | ** ** | ** ** | **After-** | ** ** | ** ** | ** ** | ** ** | ** ** | **After-** | ** ** |
| ** **                                                              | ** ** | **Pretax**                           | ** ** | **Tax** | ** ** | **tax** | ** ** | **Pretax** | ** ** | **Tax** | ** ** | **tax** | ** ** |
| * *                                                                | * *   | * *                             | * *   | * * | * * | * * | * * | * * | * * | * * | * * | * * | * * |
| Unrealized holding gains arising during the period                      |       | $                                    | 4,865      |   | $ | (1,703 | ) | $ | 3,162 |   | $ | 6,450 |   | $ | (2,257 | ) | $ | 4,193 |   |
| Less: reclassification adjustment of realized capital gains and  losses |       | —                               |       | — |   | — |   | (408 | ) | 143 |   | (265 | ) |
| Other comprehensive income                                              |       | $                                    | 4,865      |   | $ | (1,703 | ) | 3,162 |   | $ | 6,858 |   | $ | (2,400 | ) | 4,458 |   |
| Net income                                                              |       |                                 |       |   |   | 2,338 |   |   |   |   |   | 2,027 |   |
| Comprehensive income                                                    |       |                                 |       |   |   | $ | 5,500 |   |   |   |   |   | $ | 6,485 |   |

 
| ** **                                                              | ** ** | **Nine Months Ended September 30,** | ** ** |
|-------------------------------------------------------------------------|------------|-------------------------------------|------------|
| **(in thousands)**                                                      | ** ** | **2007**                            | ** ** | **2006** | ** ** |
| ** **                                                              | ** ** | ** **                          | ** ** | ** ** | ** ** | **After-** | ** ** | ** ** | ** ** | ** ** | ** ** | **After-** | ** ** |
| ** **                                                              | ** ** | **Pretax**                          | ** ** | **Tax** | ** ** | **Tax** | ** ** | **Pretax** | ** ** | **Tax** | ** ** | **Tax** | ** ** |
| * *                                                                | * *   | * *                            | * *   | * * | * * | * * | * * | * * | * * | * * | * * | * * | * * |
| Unrealized holding gains (losses) arising during the period             |       | $                                   | 815        |   | $ | (285 | ) | $ | 530 |   | $ | (2,233 | ) | $ | 782 |   | $ | (1,451 | ) |
| Less: reclassification adjustment of realized capital gains and  losses |       | (405                                | )          | 142 |   | (263 | ) | (1,240 | ) | 434 |   | (806 | ) |
| Other comprehensive income (loss)                                       |       | $                                   | 1,220      |   | $ | (427 | ) | 793 |   | $ | (993 | ) | $ | 348 |   | (645 | ) |
| Net income                                                              |       |                                |       |   |   | 6,716 |   |   |   |   |   | 6,004 |   |
| Comprehensive income                                                    |       |                                |       |   |   | $ | 7,509 |   |   |   |   |   | $ | 5,359 |   |

 

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** **

**Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTSOF OPERATIONS FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30,2007 AND 2006**

##  

## **OVERVIEW**

The following discussion highlightssignificant factors influencing the financial position and results ofoperations of Lincoln Benefit Life Company (referred to in this document as “we”,“our”, “us” or the “Company”).  It shouldbe read in conjunction with the condensed financial statements and notesthereto found under Part I. Item 1. contained herein, and with the discussion,analysis, financial statements and notes thereto in Part I. Item 1. and PartII. Item 7. and Item 8. of the Lincoln Benefit Life Company Annual Report onForm 10-K for 2006.  We operate as asingle segment entity, based on the manner in which we use financialinformation to evaluate business performance and to determine the allocation ofresources.

 

## **OPERATIONS**

 
| ** **                        | ** ** | **Three Months Ended** | ** ** | **Nine Months Ended** | ** ** |
|-----------------------------------|------------|------------------------|------------|-----------------------|------------|
| ** **                        | ** ** | **September 30,**      | ** ** | **September 30,**     | ** ** |
| **(in thousands)**                | ** ** | **2007**               | ** ** | **2006**              | ** ** | **2007** | ** ** | **2006** | ** ** |
|                              |       |                   |       |                  |       |   |   |   |   |
| Net investment income             |       | $                      | 3,594      |                  | $          | 3,524 |   | $ | 10,727 |   | $ | 10,481 |   |
| Realized capital gains and losses |       | —                 |       | (408                  | )          | (405 | ) | (1,255 | ) |
| Income tax expense                |       | (1,256                 | )          | (1,089                | )          | (3,606 | ) | (3,222 | ) |
| Net income                        |       | $                      | 2,338      |                  | $          | 2,027 |   | $ | 6,716 |   | $ | 6,004 |   |

 

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.  Ourresults of operations include net investment income and realized capital gainsand losses on our assets that are not transferred under the reinsuranceagreements.

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

**Net income** increased15.3% and 11.9% in the third quarter and the first nine months of 2007,respectively, compared to the same periods in 2006.  The increases in both periods were due tolower net realized capital losses and higher net investment income.

**Net investment income**increased 2.0% and 2.3% in the third quarter and first nine months of 2007,respectively, compared to the same periods of 2006 due primarily to higher investedasset balances.

**Net realized capital losses**decreased $408 thousand and $850 thousand in the third quarter and first ninemonths of 2007, respectively, when compared to the same periods in 2006 due tolower losses on dispositions of fixed income securities.

 

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**FINANCIAL POSITION**

** **
| ** **                                    | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
|-----------------------------------------------|------------|-------------------|------------|------------------|------------|
| **(in thousands)**                            | ** ** | **2007**          | ** ** | **2006**         | ** ** |
| Fixed income securities (1)                   |       | $                 | 269,012    |             | $          | 268,058 |   |
| Short-term                                    |       | 13,603            |       | 8,264            |       |
| Total investments                             |       | $                 | 282,615    |             | $          | 276,322 |   |
|                                          |       |              |       |             |       |
| Cash                                          |       | $                 | 13,240     |             | $          | 23,352 |   |
| Reinsurance recoverable from ALIC             |       | 18,811,560        |       | 19,131,870       |       |
| Reinsurance recoverable from non-affiliates   |       | 1,373,050         |       | 1,203,864        |       |
| Contractholder funds                          |       | 17,870,813        |       | 18,195,622       |       |
| Reserve for life-contingent contract benefits |       | 2,295,652         |       | 2,126,455        |       |
| Separate Accounts assets and liabilities      |       | 3,182,314         |       | 3,097,550        |       |

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(1)   Fixedincome securities are carried at fair value. Amortized cost basis for these securities was $268.1 million and $268.3million at September 30, 2007 and December 31, 2006, respectively.

 

Total investments increased to $282.6 millionat September 30, 2007 from $276.3 million at December 31, 2006 due to purchasesof short-term investments and, to a lesser extent, net unrealized capital gainson fixed income securities as of September 30, 2007 compared to net unrealizedcapital losses as of December 31, 2006, partially offset by negative cash flowsfrom operating activities in the first nine months of 2007.

 

At September 30, 2007, allsecurities in the fixed income portfolio were rated investment grade, which isdefined as a security having a rating from the National Association ofInsurance Commissioners (“NAIC”) of 1 or 2; a rating of Aaa, Aa, A or Baa fromMoody’s or a rating of AAA, AA, A or BBB from Standards and Poor’s (“S&P”),Fitch or Dominion; or a rating of aaa, aa, a or bbb from A.M. Best; or acomparable internal rating if an externally provided rating is not available.

 

The unrealized net capital gainson fixed income securities at September 30, 2007 were $947 thousand, comparedto unrealized net capital losses of $273 thousand at December 31, 2006.  The net unrealized gains werecomprised of $4.5 million of unrealized gains and $3.6 million of unrealizedlosses at September 30, 2007.  Theunrealized losses at December 31, 2006 were comprised of $4.6 million ofunrealized losses and $4.3 million of unrealized gains.

 

Of the gross unrealized losses at September30, 2007, $1.9 million or 53.1% were related to securities in our corporatefixed income securities portfolio and are believed to be primarily interestrate related.  These losses wereprimarily comprised of losses in the consumer goods, capital goods,transportation and utilities sectors.  Ofthe remaining $1.7 million of unrealized losses, $806 thousand or 48.0% wererelated to mortgage-backed securities and $505 thousand or 30.1% were relatedto securities in our U.S. government and government agencies portfolio. Theunrealized losses related to mortgage-backed securities are believed to be theresult of liquidity declines in the financial markets and the unrealized lossesrelated to our U.S. government and government agencies portfolio are believedto be interest rate related.

 

Our portfoliomonitoring process identifies and evaluates, on a case-by-case basis, fixedincome securities whose carrying value may be other-than-temporarilyimpaired.  The process includes aquarterly review of all securities using a screening process to identify thosesecurities whose fair value compared to amortized cost is below establishedthresholds for certain time periods, or which are identified through othermonitoring criteria such as ratings downgrades or payment defaults.  The securities identified, and othersecurities for which we may have a concern, are evaluated based on facts andcircumstances for inclusion on our watch-list. We also conduct a portfolio review to recognize impairment on securitiesin an unrealized loss position for which we do not have the intent and abilityto hold until recovery as a result of approved programs involving thedisposition of investments such as changes in duration, revisions to strategicasset allocations and liquidity actions, as well as certain dispositionsanticipated by portfolio managers.  Allsecurities in an unrealized loss position at September 30, 2007 were includedin our portfolio monitoring process for determining which declines in valuewere not other-than-temporary.

 

We also monitorthe quality of our fixed income portfolio by categorizing certain investmentsas “problem”, “restructured” or “potential problem.”  Problem fixed income securities aresecurities in default with respect to principal or interest and/or securitiesissued by companies that have gone into bankruptcy subsequent to ouracquisition 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

 

 

14

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concerns regarding theborrower’s ability to pay future principal and interest, which causes us tobelieve these securities may be classified as problem or restructured in thefuture.

 

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

 

**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)**                               | ** ** | **2007**               | ** ** | **2006**              | ** ** | **2007** | ** ** | **2006** | ** ** |
|                                             |       |                   |       |                  |       |   |   |   |   |
| Dispositions                                     |       | $                      | —     |                  | $          | (408 | ) | $ | (405 | ) | $ | (1,255 | ) |
| Realized capital gains and losses, pretax        |       | —                 |       | (408                  | )          | (405 | ) | (1,255 | ) |
| Income tax benefit                               |       | —                 |       | 143                   |       | 142 |   | 439 |   |
| **Realized capital gains and losses, after-tax** |       | $                      | —     |                  | $          | (265 | ) | $ | (263 | ) | $ | (816 | ) |

Dispositions in the above table may include sales, losses recognized inanticipation of dispositions and other transactions such as calls andprepayments.  We may sell impaired fixedincome securities that were in an unrealized loss position at the previousreporting date in situations where new factors such as negative developments,subsequent credit deterioration, changing liquidity needs, and newly identifiedmarket opportunities cause a change in our previous intent to hold a securityuntil recovery or maturity.

 

## **Reinsurance recoverable,Contractholder funds and Reserve for life-contingent contract benefits**

Contractholder funds decreased $324.8 millionto $17.87 billion at September 30, 2007, from $18.20 billion at December 31,2006 as a result of new and additional deposits on fixed annuities andinterest-sensitive life products and interest credited to contractholder funds being more than offset by surrenders,withdrawals and benefit payments.  Thereserve for life-contingent contract benefits increased $169.2 million to $2.30billion at September 30, 2007 resulting from sales of immediate annuities withlife contingencies and other life-contingent products, partially offset bybenefits paid and policy lapses. Reinsurance recoverable from ALIC decreased $320.3 million and reinsurancerecoverable from non-affiliates increased $169.2 million in accordance with thechanges in contractholder funds and the reserve for life-contingent contractbenefits.

 

We purchase reinsurance after evaluating thefinancial condition of the reinsurer, as well as the terms and price ofcoverage.  We reinsure certain of ourrisks to non-affiliated reinsurers under yearly renewable term and coinsuranceagreements.  Yearly renewable term andcoinsurance agreements result in the passing of the agreed-upon portion of riskto the reinsurers in exchange for negotiated reinsurance premium payments.

##  

## **CAPITAL RESOURCES AND LIQUIDITY**

**CapitalResources**consist of shareholder’s equity.  The following table summarizes our capitalresources:
| **(in thousands)**                                           | ** ** | **September 30, 2007** | ** ** | **December 31, 2006** | ** ** |
|--------------------------------------------------------------|------------|-----------------------------|------------|----------------------------|------------|
| Common stock, additional capital paid-in and retained income |       | $                           | 283,520    |                       | $          | 276,804 |   |
| Accumulated other comprehensive income (loss)                |       | 615                         |       | (178                       | )          |
| Total shareholder’s equity                              |       | $                           | 284,135    |                       | $          | 276,626 |   |

 

*Shareholder’s equity*increased in the first nine months of 2007 due to net income and net unrealizedcapital gains as of September 30, 2007 compared to net unrealized capitallosses as of December 31, 2006.

**Financial Ratings and Strength**  We share the insurance financial strengthratings of our parent, ALIC, as our business is reinsured to ALIC.  ALIC’s ratings are influenced by many factorsincluding operating and financial performance, asset quality, liquidity,asset/liability management, overall portfolio mix, financial leverage (i.e.,debt), exposure to risks, the current level of operating leverage, AllstateInsurance Company’s (“AIC”) ratings and other factors.  There have been no changes to ALIC’sinsurance financial strength ratings since December 31, 2006.

 

As described in Note 1 to the Condensed Financial Statements, inaccordance with Financial Accounting Standards Board Interpretation No.48, “Accountingfor Uncertainty in Income Taxes” (“FIN 48”), the Company had no liability forunrecognized tax benefits at January 1 or September 30, 2007.  We believe it is reasonably possible that theliability balance will not significantly increase or decrease within the next12 months.

 

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## **Item4.    Controlsand Procedures**

*Evaluation of Disclosure Controls andProcedures. *Wemaintain disclosure controls and procedures as defined in Rule 13a-15(e) and15(d)-15(e) under the Securities Exchange Act of 1934.  Under the supervision and with theparticipation of our management, including our principal executive officer andprincipal financial officer, we conducted an evaluation of the effectiveness ofour disclosure controls and procedures as of the end of the period covered bythis report.  Based upon this evaluation,the principal executive officer and the principal financial officer concludedthat our disclosure controls and procedures are effective in providingreasonable assurance that material information required to be disclosed in ourreports filed with or submitted to the Securities and Exchange Commission underthe Securities Exchange Act is made known to management, including theprincipal executive officer and the principal financial officer, as appropriateto allow timely decisions regarding required disclosure.

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

 

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##  

## **PARTII.  OTHER INFORMATION**

## **Item1.  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 3 of theCompany’s Condensed Financial Statements in Part I, Item 1 of this Form 10-Q.

 

**Item 1A. Risk Factors**

 

This document contains “forward-looking statements”that anticipate results based on our estimates, assumptions and plans that aresubject to uncertainty. These statements are made subject to the safe-harborprovisions of the Private Securities Litigation Reform Act of 1995. We assumeno obligation to update any forward-looking statements as a result of newinformation or future events or developments.

 

These forward-looking statements do not relatestrictly to historical or current facts and may be identified by their use ofwords like “plans,” “seeks,” “expects,” “will,” “should,” “anticipates,” “estimates,”“intends,” “believes,” “likely,” “targets” and other words with similarmeanings. These statements may address, among other things, our strategy forgrowth, product development, regulatory approvals, market position, expenses,financial results, litigation and reserves. We believe that these statementsare based on reasonable estimates, assumptions and plans. However, if theestimates, assumptions or plans underlying the forward-looking statements proveinaccurate or if other risks or uncertainties arise, actual results coulddiffer materially from those communicated in these forward-looking statements.Risk factors which could cause actual results to differ materially from thosesuggested by such forward-looking statements include but are not limited tothose discussed or identified in this document (including the risk describedbelow), in our public filings with the Securities and Exchange Commission, andthose incorporated by reference in Part I, Item 1A of Lincoln Benefit LifeCompany Annual Report on Form 10-K for 2006.

##  

**The change in our unrecognized tax benefit duringthe next 12 months is subject to uncertainty.**

 

As required by FinancialAccounting Standards Board Interpretation No. 48, “Accounting for Uncertaintyin Income Taxes” (“FIN 48”), which was adopted as of January 1, 2007, we havedisclosed our estimate of net unrecognized tax benefits and the reasonablypossible change in its balance during the next 12 months.  We believe that this estimate has beenappropriately established based on available facts and information, however,actual results may differ from our estimate for reasons such as changes in ourposition on specific issues, developments with respect to the governments’interpretations of income tax laws or changes in judgment resulting from newinformation obtained in audits or the appeals process.

##  

**Item 5.Other Information**

 

On July 23, 2007, theRegistrant entered into the Investment Management Agreement among AllstateInvestments, LLC and Allstate Insurance Company and The Allstate Corporationand Certain Affiliates effective as of January 1, 2007. Pursuant to theagreement, Allstate Investments, LLC provides investment management services tothe Registrant. The Registrant and Allstate Investments, LLC are wholly-ownedsubsidiaries of The Allstate Corporation. A conformed copy of the agreement,attached as Exhibit 10.1 to the Registrant’s Form 10-Q for the quarter endedJune 30, 2007, is incorporated herein by reference.

##  

## **Item 6.  Exhibits**

(a)  Exhibits

An Exhibit Index has beenfiled as part of 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 5,2007
| By                                                                    | /s/ Samuel H. Pilch |   |
|-----------------------------------------------------------------------|---------------------|--------|
| Samuel H. Pilch                                                       |
| (chief accounting officer and  duly authorized officer of Registrant) |

 

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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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