** **

**UNITED STATES**

**SECURITIES ANDEXCHANGE COMMISSION**

 

**Washington, D.C. 20549**

 

----

 

**FORM 10-Q**

** **

**Theregistrant 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 reduced disclosureformat.**

 

**x****QUARTERLY REPORT PURSUANT TO SECTION13 OR 15(d)**

**OF**

**THE SECURITIES EXCHANGE ACT OF 1934**

**FOR THE QUARTERLY PERIOD ENDED MARCH31, 2007**

 

**OR**

 

**o****TRANSITION REPORT PURSUANT TO SECTION13 OR 15(d)**

**OF**

**THE SECURITIES EXCHANGE ACT OF 1934**

 

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

##### ** **

**LINCOLN BENEFITLIFE COMPANY**

(Exact name of registrant as specified in itscharter)

 

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

 

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

 

**Indicate by check mark whether the registrant (1) has filed all reportsrequired to be filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months, and (2) has been subject to such filingrequirements for the past 90 days.**

** **

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

 

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

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

** **

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

** **

**Yes**o   Nox

** **

**None of the common equity of the registrant is held by non-affiliates. Therefore,the aggregate market value of common equity held by non-affiliates of theregistrant is zero.**

 

**As of May 7, 2007, the Registrant had 25,000 common shares, $100 parvalue, outstanding, all of which are held by Allstate Life Insurance Company.**

 

##### ** **

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

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

##### **March 31, 2007**

##### ** **

| **PART I.**  | **FINANCIAL INFORMATION**                                                                                 | ** ** |
|--------------|-----------------------------------------------------------------------------------------------------------|------------|
|         |                                                                                                      |       |
| Item 1.      | Financial Statements                                                                                      |       |
|         |                                                                                                      |       |
|         | Condensed Statements of Operations for the Three-Month Periods Ended  March 31, 2007 and 2006 (unaudited) | 1          |
|         |                                                                                                      |       |
|         | Condensed Statements of Financial Position as of March 31, 2007  (unaudited) and December 31, 2006        | 2          |
|         |                                                                                                      |       |
|         | Condensed Statements of Cash Flows for the Three-Month Periods Ended  March 31, 2007 and 2006 (unaudited) | 3          |
|         |                                                                                                      |       |
|         | Notes to Condensed Financial Statements (unaudited)                                                       | 4          |
|         |                                                                                                      |       |
| Item 2.      | Management’s Discussion and Analysis of Financial Condition and  Results of Operation                | 10         |
|         |                                                                                                      |       |
| Item 4.      | Controls and Procedures                                                                                   | 14         |
|         |                                                                                                      |       |
| **PART II.** | **OTHER INFORMATION**                                                                                     | ** ** |
|         |                                                                                                      |       |
| Item 1.      | Legal Proceedings                                                                                         | 15         |
|         |                                                                                                      |       |
| Item 1A.     | Risk Factors                                                                                              | 15         |
|         |                                                                                                      |       |
| Item 6.      | Exhibits                                                                                                  | 15         |
|         |                                                                                                      |       |

** **

----

** **

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

####  

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

####  

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

####  

**CONDENSEDSTATEMENTS OF OPERATIONS**

 
| ** **                                            | ** ** | **Three Months Ended** | ** ** |
|-------------------------------------------------------|------------|------------------------|------------|
| ** **                                            | ** ** | **March 31,**          | ** ** |
| **(in thousands)**                                    | ** ** | **2007**               | ** ** | **2006** | ** ** |
| ** **                                            | ** ** | **(Unaudited)**        | ** ** |
| **Revenues**                                          |       |                   |       |   |   |
| Net  investment income                                |       | $                      | 3,584      |   | $ | 3,389 |   |
|                                                  |       |                   |       |   |   |
| **Income  from operations before income tax expense** |       | 3,584                  |       | 3,389 |   |
| **Income  tax expense**                               |       | 1,252                  |       | 1,183 |   |
| **Net  income**                                       |       | $                      | 2,332      |   | $ | 2,206 |   |

 

See notes to condensed financial statements.

 

1

----

 

**LINCOLN BENEFIT LIFE COMPANY**

 

**CONDENSEDSTATEMENTS OF FINANCIAL POSITION**

 

 
| ** **                                                                                              | ** ** | **March 31,**   | ** ** | **December 31,** | ** ** |
|---------------------------------------------------------------------------------------------------------|------------|-----------------|------------|------------------|------------|
| **(in thousands, except par value  data)**                                                              | ** ** | **2007**        | ** ** | **2006**         | ** ** |
| ** **                                                                                              | ** ** | **(Unaudited)** | ** ** | ** **       | ** ** |
|                                                                                                    |       |            |       |             |       |
| **Assets**                                                                                              |       |            |       |             |       |
| Investments                                                                                             |       |            |       |             |       |
| Fixed income securities, at fair value  (amortized cost $271,840 and $268,331)                          |       | $               | 272,504    |             | $          | 268,058 |   |
| Short-term                                                                                              |       | 8,037           |       | 8,264            |       |
| Total investments                                                                                       |       | 280,541         |       | 276,322          |       |
|                                                                                                    |       |            |       |             |       |
| Cash                                                                                                    |       | 11,187          |       | 23,352           |       |
| Reinsurance  recoverable from Allstate Life Insurance Company                                           |       | 19,141,366      |       | 19,131,870       |       |
| Reinsurance  recoverable from non-affiliates                                                            |       | 1,246,048       |       | 1,203,864        |       |
| Receivable  from affiliates                                                                             |       | —          |       | 24,990           |       |
| Other assets                                                                                            |       | 95,473          |       | 104,971          |       |
| Separate  Accounts                                                                                      |       | 3,099,663       |       | 3,097,550        |       |
| **Total assets**                                                                                        |       | $               | 23,874,278 |             | $          | 23,862,919 |   |
|                                                                                                    |       |            |       |             |       |
| **Liabilities**                                                                                         |       |            |       |             |       |
| Contractholder  funds                                                                                   |       | $               | 18,195,417 |             | $          | 18,195,622 |   |
| Reserve for  life-contingent contract benefits                                                          |       | 2,169,171       |       | 2,126,455        |       |
| Current  income taxes payable                                                                           |       | 5,664           |       | 4,412            |       |
| Unearned  premiums                                                                                      |       | 25,268          |       | 25,935           |       |
| Deferred  income taxes                                                                                  |       | 463             |       | 135              |       |
| Payable to  affiliates, net                                                                             |       | 9,725           |       | —           |       |
| Other  liabilities and accrued expenses                                                                 |       | 89,340          |       | 136,184          |       |
| Separate  Accounts                                                                                      |       | 3,099,663       |       | 3,097,550        |       |
| **Total liabilities**                                                                                   |       | 23,594,711      |       | 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                                                                                        |       | 96,636          |       | 94,304           |       |
| Accumulated  other comprehensive income:                                                                |       |            |       |             |       |
| Unrealized net capital gains and losses                                                                 |       | 431             |       | (178             | )          |
| **Total accumulated other comprehensive  income**                                                       |       | 431             |       | (178             | )          |
| **Total shareholder’s equity**                                                                     |       | 279,567         |       | 276,626          |       |
| **Total liabilities and shareholder’s equity**                                                     |       | $               | 23,874,278 |             | $          | 23,862,919 |   |

 

See notes to condensed financial statements.

 

2

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#### **LINCOLNBENEFIT LIFE COMPANY**

####  

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

##### ** **

| ** **                                                                         | ** ** | **Three Months Ended  March 31,** | ** ** |
|------------------------------------------------------------------------------------|------------|-----------------------------------|------------|
| **(in thousands)**                                                                 | ** ** | **2007**                          | ** ** | **2006** | ** ** |
| ** **                                                                         | ** ** | **(Unaudited)**                   | ** ** |
|                                                                               |       |                              |       |   |   |
| **Cash  flows from operating activities**                                          | ** ** | ** **                        | ** ** | ** ** | ** ** |
| ** **                                                                         | ** ** | ** **                        | ** ** | ** ** | ** ** |
| Net income                                                                         |       | $                                 | 2,332      |   | $ | 2,206 |   |
| Adjustments  to reconcile net income to net cash provided by operating activities: |       |                              |       |   |   |
| Amortization and other non-cash items                                              |       | 68                                |       | 122 |   |
| Changes in:                                                                        |       |                              |       |   |   |
| Contract benefits and other insurance  reserves, net of reinsurance recoverables   |       | (9,169                            | )          | (2,459 | ) |
| Income taxes payable                                                               |       | 1,252                             |       | 1,183 |   |
| Receivable/payable to affiliates, net                                              |       | 34,715                            |       | (11,455 | ) |
| Other operating assets and liabilities                                             |       | (38,013                           | )          | 13,106 |   |
| Net cash (used in) provided by operating  activities                               |       | (8,815                            | )          | 2,703 |   |
|                                                                               |       |                              |       |   |   |
| **Cash  flows from investing activities**                                          | ** ** | ** **                        | ** ** | ** ** | ** ** |
| ** **                                                                         | ** ** | ** **                        | ** ** | ** ** | ** ** |
| Fixed income  securities                                                           |       |                              |       |   |   |
| Investment collections                                                             |       | 4,436                             |       | 6,123 |   |
| Investment purchases                                                               |       | (8,013                            | )          | (6,157 | ) |
| Change in  short-term investments                                                  |       | 227                               |       | (3,544 | ) |
| Net cash used in investing activities                                              |       | (3,350                            | )          | (3,578 | ) |
| ** **                                                                         | ** ** | ** **                        | ** ** | ** ** | ** ** |
| **Net  decrease in cash**                                                          |       | (12,165                           | )          | (875 | ) |
| **Cash at  beginning of period**                                                   |       | 23,352                            |       | 8,349 |   |
| **Cash at  end of period**                                                         |       | $                                 | 11,187     |   | $ | 7,474 |   |

 

See notes to condensed financial statements.

##  

3

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** **

**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 March 31, 2007, and for the three-monthperiods ended March 31, 2007 and 2006, are unaudited. 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 condensed financial statements and notes shouldbe read in conjunction with the financial statements and notes thereto includedin the Company’s Annual Report on Form 10-K for the year ended December 31,2006. The results of operations for the interim periods should not be consideredindicative of results to be expected for the full year.

 

### **Adoptedaccounting standards**

### ** **

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

** **

InOctober 2005, the American Institute of Certified Pubic Accountants (“AICPA”)issued SOP 05-1. SOP 05-1 provides accounting guidance for deferred policyacquisition costs associated with internal replacements of insurance andinvestment contracts other than those already described in 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 definesan internal replacement as a modification in product benefits, features, rightsor coverages that occurs through the exchange of an existing contract for a newcontract, or by amendment, endorsement or rider to an existing contract, or bythe election of a feature or coverage within an existing contract. In February2007, the AICPA issued Technical Practice Aids (“TPAs”) that provideinterpretive guidance to be used in applying the SOP. The Company adopted theprovisions of SOP 05-1 on January 1, 2007, for internal replacements occurringin fiscal years beginning after December 15, 2006. The impact resulting fromthe adoption of SOP 05-1 was ceded to ALIC under the terms of the reinsuranceagreements.

 

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

 

In July 2006, the FASB issued FIN 48, which clarifies the accountingfor uncertainty in income taxes recognized in an entity’s financial statementsin accordance with FASB Statement No. 109, “Accounting for Income Taxes”. FIN48 requires an entity to recognize the tax benefit of uncertain tax positionsonly when it is more likely than not, based on the position’s technical merits,that the position would be sustained upon examination by the respective taxingauthorities. The tax benefit is measured as the largest benefit that is morethan fifty-percent likely of being realized upon final settlement with therespective taxing authorities. The Company adopted the provisions of FIN 48,which are effective for fiscal years beginning after December 15, 2006, onJanuary 1, 2007. No cumulative effect of a change in accounting principle oradjustment to the liability for unrecognized tax benefits was recognized as aresult of the adoption of FIN 48. Accordingly, the adoption of FIN 48 did nothave an effect on the results of operations or financial position of theCompany.

 

TheCompany had no liability for net unrecognized tax benefits at January 1, 2007,and does not believe that it is reasonably possible that this balance will significantlychange within the next 12 months.

 

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

 

4

----

 

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

 

In September 2006, the SECissued SAB 108 in order to eliminate the diversity of practice in the processby which misstatements are quantified for purposes of assessing materiality onthe financial statements. SAB 108 is intended to eliminate the potential forthe build up of improper amounts on the balance sheet due to the limitations ofcertain methods of materiality assessment utilized in current practice. SAB 108establishes a single quantification framework wherein the significancemeasurement is based on the effects of the misstatements on each of thefinancial statements as well as the related financial statement disclosures. Ifa company’s existing methods for assessing the materiality of misstatements arenot in compliance with the provisions of SAB 108, the initial application ofthe provisions may be adopted by restating prior period financial statementsunder certain circumstances or otherwise by recording the cumulative effect ofinitially applying the provisions of SAB 108 as adjustments to the carryingvalues of assets and liabilities as of January 1, 2006 with an offsettingadjustment recorded to the opening balance of retained income. The provisionsof SAB 108 must be applied no later than the annual financial statements issuedfor the first fiscal year ending after November 15, 2006. The Company’sadoption of SAB 108 in the fourth quarter of 2006 did not have any effect onits results of operations or financial position.

 

*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”)*

 

The Companyadopted Financial Accounting Standards Board (“FASB”) FSP FAS 115-1 as ofJanuary 1, 2006. FSP FAS 115-1 nullifies the guidance in paragraphs 10-18 ofEITF Issue 03-1, “The Meaning of Other-Than-Temporary Impairment and ItsApplication to Certain Investments” and references existingother-than-temporary impairment guidance. FSP FAS 115-1 clarifies that aninvestor should recognize an impairment loss no later than when the impairmentis deemed other-than-temporary, even if a decision to sell the security has notbeen made, and also provides guidance on the subsequent accounting for incomerecognition on an impaired debt security. The adoption of FSP FAS 115-1 wasrequired on a prospective basis and did not have a material effect on theresults of operations or financial position of the Company.

 

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

 

The Company adopted SFAS No. 154 on January 1, 2006. SFAS No. 154replaces Accounting Principles Board (“APB”) Opinion No. 20, “AccountingChanges”, and SFAS No. 3, “Reporting Accounting Changes in Interim FinancialStatements”. SFAS No. 154 requires retrospective application to prior periods’financial statements for changes in accounting principle, unless determinationof either the period specific effects or the cumulative effect of the change isimpracticable or otherwise promulgated. The Company had no accounting changesor error corrections affected by the new standard.

 

**Pendingaccounting standards**

** **

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

 

InSeptember 2006, the FASB issued SFAS No. 157 which redefines fair value,establishes a framework for measuring fair value in generally acceptedaccounting principles (“GAAP”), and expands disclosures about fair valuemeasurements. SFAS No. 157 applies where other accounting pronouncementsrequire or permit fair value measurements. SFAS No. 157 is effective for fiscalyears beginning after November 15, 2007. The effects of adoption will bedetermined by the types of instruments carried at fair value in the Company’sfinancial statements at the time of adoption as well as the methods utilized todetermine their fair values prior to adoption. Based on the Company’s currentuse of fair value measurements, SFAS No. 157 is not expected to have a materialeffect on the results of operations or financial position of theCompany.

 

5

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

 

InFebruary 2007, the FASB issued SFAS No. 159 which provides reporting entitiesan option to report selected financial assets, including investment securitiesdesignated as available for sale, and liabilities, including most insurancecontracts, at fair value. SFAS No. 159 establishes presentation and disclosurerequirements designed to facilitate comparisons between companies that choosedifferent measurement attributes for similar types of assets and liabilities. Thestandard also requires additional information to aid financial statement users’understanding of a reporting entity’s choice to use fair value on its earningsand also requires entities to display on the face of the balance sheet the fairvalue of those assets and liabilities for which the reporting entity has chosento measure at fair value. SFAS No. 159 is effective as of the beginning of areporting entity’s first fiscal year beginning afterNovember 15, 2007.  Early adoption is permitted as of the beginning of theprevious fiscal year provided the entity makes that choice in the first 120days of that fiscal year and also elects to apply the provisions of SFAS No.157. Because application of the standard is optional, any impacts are limitedto those financial assets and liabilities to which SFAS No. 159 would beapplied, which have yet to be determined.

 

**2. Reinsurance**

##  

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

 

Investmentincome earned on the assets which support contractholder funds and the reservefor life-contingent contract benefits is not included in the condensedfinancial statements as those assets are owned and managed by ALIC or thirdparty reinsurers under terms of the reinsurance agreements.

 

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

 
| ** **                                         | ** ** | **Three months ended  March 31,** | ** ** |
|----------------------------------------------------|------------|-----------------------------------|------------|
| ** **                                         | ** ** | **2007**                          | ** ** | **2006** | ** ** |
| **(in thousands)**                                 | ** ** | ** **                        | ** ** | ** ** | ** ** |
| **Premiums  and contract charges**                 | ** ** | ** **                        | ** ** | ** ** | ** ** |
| Direct                                             |       | $                                 | 246,636    |   | $ | 220,164 |   |
| Assumed -  non-affiliate                           |       | 1,918                             |       | 2,021 |   |
| Ceded                                              |       |                              |       |   |   |
| Affiliate                                          |       | (151,434                          | )          | (124,880 | ) |
| Non-affiliate                                      |       | (97,120                           | )          | (97,305 | ) |
| Premiums and contract charges, net of  reinsurance |       | $                                 | —     |   | $ | — |   |

 

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

 
| ** **                                                                                     | ** ** | **Three months ended  March 31,** | ** ** |
|------------------------------------------------------------------------------------------------|------------|-----------------------------------|------------|
| ** **                                                                                     | ** ** | **2007**                          | ** ** | **2006** | ** ** |
| **(in thousands)**                                                                             | ** ** | ** **                        | ** ** | ** ** | ** ** |
| **Interest  credited to contractholder funds, contract benefits and expenses**                 | ** ** | ** **                        | ** ** | ** ** | ** ** |
| Direct                                                                                         |       | $                                 | 455,603    |   | $ | 480,157 |   |
| Assumed -  non-affiliate                                                                       |       | 2,724                             |       | 2,050 |   |
| Ceded                                                                                          |       |                              |       |   |   |
| Affiliate                                                                                      |       | (349,426                          | )          | (359,951 | ) |
| Non-affiliate                                                                                  |       | (108,901                          | )          | (122,256 | ) |
| Interest credited to contractholder funds,  contract benefits and expenses, net of reinsurance |       | $                                 | —     |   | $ | — |   |

##  

6

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

 

The aggregateliability balance related to all guarantees was not material as of March 31,2007.

 

## **Regulation**

##  

The Company is subject to changing social,economic and regulatory conditions. From time to time regulatory authorities orlegislative bodies seek to impose additional regulations regarding agent andbroker compensation and otherwise expand overall regulation of insuranceproducts and the insurance industry. The ultimate changes and eventual effectsof these initiatives on the Company’s business, if any, are uncertain.

 

**Legal and regulatory proceedings andinquiries**

 

**Background**

 

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

 

•                  These mattersraise difficult and complicated factual and legal issues and are subject tomany uncertainties and complexities, including 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 some cases, the monetary damages soughtinclude punitive damages. Often specific information about the relief sought,such as the amount of damages, is not available because plaintiffs have notrequested specific relief in their pleadings. In our experience, when specificmonetary demands are made in pleadings, they bear little relation to theultimate loss, if any, to the Company.

 

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

 

7

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

 

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

 

**Proceedings**

 

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

 

AICis defending certain matters relating to its agency program reorganizationannounced in 1999. These matters include a lawsuit filed in December 2001by the U.S. Equal Employment Opportunity Commission (“EEOC”) allegingretaliation under federal civil rights laws (the “EEOC I” suit) and a classaction filed in August 2001 by former employee agents alleging retaliation andage discrimination under the Age Discrimination in Employment Act (“ADEA”),breach of contract and ERISA violations (the “Romero I” suit). In March 2004,in the consolidated EEOC I and Romero I litigation, the trial court issued amemorandum and order that, among other things, certified classes of agents,including a mandatory class of agents who had signed a release, for purposes ofeffecting the court’s declaratory judgment that the release is voidable at theoption of the release signer. The court also ordered that an agent who voidsthe release must return to AIC “any and all benefits received by the [agent] inexchange for signing the release.”  Thecourt also stated that, “on the undisputed facts of record, there is no basisfor claims of age discrimination.”  TheEEOC and plaintiffs have asked the court to clarify and/or reconsider itsmemorandum and order and on January 16, 2007, the judge denied their request. OnMarch 21, 2007, the judge entered a memorandum and order tentatively indicatingthat he intends to dismiss most or all of the claims asserted in the consolidatedEEOC I and Romero I litigation. The case otherwise remains pending. The EEOCalso filed another lawsuit in October 2004 alleging age discrimination withrespect to a policy limiting the rehire of agents affected by the agencyprogram reorganization (the “EEOC II” suit). In EEOC II, in October 2006, thecourt granted partial summary judgment to the EEOC. Although the court did notdetermine that AIC was liable for age discrimination under the ADEA, itdetermined that the rehire policy resulted in a disparate impact, reserving fortrial the determination on whether AIC had reasonable factors other than age tosupport the rehire policy. AIC’s petitions for interlocutory review of thetrial court’s summary judgment order were granted. AIC’s interlocutory appealis now pending in the Court of Appeals for the Eighth Circuit. AIC is alsodefending a certified class action filed by former employee agents whoterminated their employment prior to the agency program reorganization. Theseplaintiffs have asserted breach of contract and ERISA claims. A putativenationwide class action has also been filed by former employee agents allegingvarious violations of ERISA, including a worker classification issue. Theseplaintiffs are challenging certain amendments to the Agents Pension Plan andare seeking to have exclusive agent independent contractors treated asemployees for benefit purposes. This matter was dismissed with prejudice by thetrial court, was the subject of further proceedings on appeal, and was reversedand remanded to the trial court in April 2005. On March 21, 2007, trial judgeentered a memorandum and order tentatively indicating that he intends todismiss most or all of the claims asserted in this case. In all of thesevarious matters, plaintiffs seek compensatory and punitive damages, andequitable relief. AIC has been vigorously defending these lawsuits and othermatters related to its agency program reorganization. The outcome of thesedisputes is currently uncertain.

 

8

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**Other Matters**

** **

The Corporation and some of its subsidiaries,including the Company, have received interrogatories and demands forinformation from regulatory and enforcement authorities relating to variousinsurance products and practices. The Corporation and some of its subsidiaries,including the Company, have also received interrogatories and demands forinformation from authorities seeking information relevant to on-goinginvestigations into the possible violation of antitrust or insurance laws byunnamed parties and, in particular, seeking information as to whether anyperson engaged in activities for the purpose of price fixing, marketallocation, or bid rigging. The Company believes that these inquiries aresimilar to those made to many financial services companies as part ofindustry-wide investigations by various authorities into the practices,policies and procedures relating to insurance and financial services products. TheCorporation and its subsidiaries have responded and will continue to respond tothese inquiries.

 

## **Various other legal and regulatory actions are currentlypending that involve the Company and specific aspects of its conduct ofbusiness. Like other members of the insurance industry, the Company is thetarget of a number of lawsuits and proceedings, some of which involve claimsfor substantial or indeterminate amounts. These actions are based on a varietyof issues and target a range of the Company’s practices. The outcome of thesedisputes is currently unpredictable. However, based on information currentlyknown to it** and the existence ofthe reinsurance agreements with ALIC, management believes that the ultimate outcome of all mattersdescribed in this “Other Matters” subsection in excess of amounts currently reserved,as they are resolved over time is not likely to have a material effect on theoperating results, cash flows or financial condition of the Company.

##  

## **4.     Other Comprehensive Income**

##  

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

 
| ** **                                                              | ** ** | **Three months ended March 31,** | ** ** |
|-------------------------------------------------------------------------|------------|----------------------------------|------------|
| **(in thousands)**                                                      | ** ** | **2007**                         | ** ** | **2006** | ** ** |
| ** **                                                              | ** ** | ** **                       | ** ** | ** ** | ** ** | **After-** | ** ** | ** ** | ** ** | ** ** | ** ** | **After-** | ** ** |
| ** **                                                              | ** ** | **Pretax**                       | ** ** | **Tax** | ** ** | **tax** | ** ** | **Pretax** | ** ** | **Tax** | ** ** | **tax** | ** ** |
| * *                                                                | * *   | * *                         | * *   | * * | * * | * * | * * | * * | * * | * * | * * | * * | * * |
| Unrealized holding gains (losses) arising  during the period            |       | $                                | 937        |   | $ | (328 | ) | $ | 609 |   | $ | (5,377 | ) | $ | 1,882 |   | $ | (3,495 | ) |
| Less: reclassification adjustment of  realized capital gains and losses |       | —                           |       | — |   | — |   | — |   | — |   | — |   |
| Other  comprehensive income (loss)                                      |       | $                                | 937        |   | $ | (328 | ) | 609 |   | $ | (5,377 | ) | $ | 1,882 |   | (3,495 | ) |
|                                                                    |       |                             |       |   |   |   |   |   |   |   |   |   |   |
| Net income                                                              |       |                             |       |   |   | 2,332 |   |   |   |   |   | 2,206 |   |
|                                                                    |       |                             |       |   |   |   |   |   |   |   |   |   |   |
| Comprehensive  income (loss)                                            |       |                             |       |   |   | $ | 2,941 |   |   |   |   |   | $ | (1,289 | ) |

##  

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**Item2.  MANAGEMENT’S DISCUSSION AND ANALYSISOF FINANCIAL CONDITION AND RESULTS OF OPERATION FOR THE THREE-MONTH PERIODSENDED MARCH 31, 2007 AND 2006**

 

## **OVERVIEW**

##  

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

 

## **OPERATIONS**

 

| ** **             | ** ** | **Three months ended** | ** ** |
|------------------------|------------|------------------------|------------|
| ** **             | ** ** | **March 31,**          | ** ** |
| **(in thousands)**     | ** ** | **2007**               | ** ** | **2006** | ** ** |
|                   |       |                   |       |   |   |
| Net  investment income |       | $                      | 3,584      |   | $ | 3,389 |   |
| Income tax  expense    |       | 1,252                  |       | 1,183 |   |
| Net income             |       | $                      | 2,332      |   | $ | 2,206 |   |

 

We havereinsurance agreements whereby all premiums, contract charges, interestcredited to contractholder funds, contract benefits and substantially allexpenses are ceded to Allstate Life Insurance Company (“ALIC”) and certainnon-affiliated reinsurers, and reflected net of such reinsurance in theCondensed Statements of Operations. Our results of operations for the threemonths ended March 31, 2007 and 2006 include net investment income and therelated tax expense.

 

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

 

**Netincome** increased $126 thousand to $2.3 million in thefirst quarter of 2007 from $2.2 million in the same period in the prior yeardue to higher net investment income, partially offset by higher income taxexpense.

 

**Netinvestment income** increased 5.8% in the first quarterof 2007 compared to the same period in 2006 due mostly to higher averageportfolio balances in the first quarter of 2007 compared to same period in theprior year.

 

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**FINANCIALPOSITION**

** **

| **(in thousands)**                             | ** ** | **March 31,** | ** ** | **December 31,** | ** ** |
|------------------------------------------------|------------|---------------|------------|------------------|------------|
| ** **                                     | ** ** | **2007**      | ** ** | **2006**         | ** ** |
| Fixed income  securities (1)                   |       | $             | 272,504    |             | $          | 268,058 |   |
| Short-term                                     |       | 8,037         |       | 8,264            |       |
| Total investments                              |       | $             | 280,541    |             | $          | 276,322 |   |
|                                           |       |          |       |             |       |
| Cash                                           |       | $             | 11,187     |             | $          | 23,352 |   |
|                                           |       |          |       |             |       |
| Reinsurance  recoverable from ALIC             |       | 19,141,366    |       | 19,131,870       |       |
|                                           |       |          |       |             |       |
| Reinsurance  recoverable from non-affiliates   |       | 1,246,048     |       | 1,203,864        |       |
|                                           |       |          |       |             |       |
| Contractholder  funds                          |       | 18,195,417    |       | 18,195,622       |       |
|                                           |       |          |       |             |       |
| Reserve for  life-contingent contract benefits |       | 2,169,171     |       | 2,126,455        |       |
|                                           |       |          |       |             |       |
| Separate  Accounts assets and liabilities      |       | 3,099,663     |       | 3,097,550        |       |

 

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(1)          Fixed income securities are carried at fairvalue. Amortized cost basis for these securities was $271.8 million and $268.3million at March 31, 2007 and December 31, 2006, respectively.

 

Totalinvestments increased to $280.5 million in the first quarter of 2007 as aresult of the investment of operating cash flows and net unrealized capitalgains on fixed income securities at March 31, 2007 compared to net unrealizedcapital losses at December 31, 2006.

 

At March 31, 2007, all securities in the fixed income securitiesportfolio were rated investment grade, which is defined as a security having arating from the National Association of Insurance Commissioners (“NAIC”) of 1or 2; a rating of Aaa, Aa, A or Baa from Moody’s or a rating of AAA, AA, A orBBB from Standards and Poor’s (“S&P”), Fitch or Dominion or a rating ofaaa, a or bbb from A.M. Best; or a comparable internal rating if an externallyprovided rating is not available.

 

The unrealized net capital gains on fixed income securities at March31, 2007 were $664 thousand, compared to unrealized net capital losses of $273thousand at December 31, 2006. The net unrealized gains werecomprised of $4.5 million of unrealized gains and $3.8 million of unrealizedlosses at March 31, 2007. The net unrealized losses at December 31, 2006 werecomprised of $4.6 million of unrealized losses and $4.3 million of unrealizedgains.

 

Of the grossunrealized losses at March 31, 2007, $1.8 million or 46.3% were related tosecurities in our corporate fixed income securities portfolio and are believedto be primarily related to company specific issues or rising interest rates.These losses were primarily comprised of losses on securities in the capitalgoods, consumer goods and transportation sectors. Of the remaining $2.0 millionof unrealized losses, $1.1 million or 54.4% were related to securities in ourU.S. government and government agencies portfolio and are believed to beinterest rate related.

 

Our portfolio monitoring process identifies and evaluates, on acase-by-case basis, fixed income securities whose carrying value may beother-than-temporarily impaired. The process includes a quarterly review of allsecurities using a screening process to identify those securities whose fairvalue compared to amortized cost is below established thresholds for certaintime periods, or which are identified through other monitoring criteria such asratings downgrades or payment defaults. The securities identified, in additionto other securities for which we may have a concern, are evaluated based onfacts and circumstances for inclusion on our watch-list. As a result ofapproved programs involving the disposition of investments such as changes induration and revisions to strategic asset allocations, and certain dispositionsanticipated by portfolio managers, we also conduct a portfolio review torecognize impairment on securities in an unrealized loss position for which wedo not have the intent and ability to hold until recovery. Allsecurities in an unrealized loss position at March 31, 2007 were included inour portfolio monitoring process wherein it was determined that the declines invalue were not other-than-temporary.

 

11

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

 

As of March31, 2007 and December 31, 2006, we had no securities categorized as “problem”, “restructured”or “potential problem.”

 

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

##  

Contractholderfunds increased slightly in the first quarter of 2007 as new and additionaldeposits on fixed annuities and interest-sensitive life products, and interestcredited to contractholder funds were almost entirely offset by surrenders,withdrawals and benefit payments. The reserve for life-contingent contractbenefits increased $42.7 million to $2.17 billion at March 31, 2007 resultingfrom sales of immediate annuities with life contingencies and otherlife-contingent products, partially offset by benefits paid and policy lapses. Reinsurancerecoverable from ALIC and reinsurance recoverable from non-affiliates increasedcorrespondingly by $9.5 million and $42.2 million, respectively.

 

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

 

12

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**CAPITAL RESOURCESAND LIQUIDITY**

##  

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

 
| **(in thousands)**                                            | ** ** | **March 31,  2007** | ** ** | **December 31, 2006** | ** ** |
|---------------------------------------------------------------|------------|---------------------|------------|-----------------------|------------|
| Common  stock, additional capital paid-in and retained income |       | $                   | 279,136    |                  | $          | 276,804 |   |
| Accumulated  other comprehensive income (loss)                |       | 431                 |       | (178                  | )          |
| Total shareholder’s equity                               |       | $                   | 279,567    |                  | $          | 276,626 |   |

 

*Shareholder’s equity*increased in the first quarter of 2007 due to net income and net unrealizedcapital gains on fixed income securities at March 31, 2007 compared to netunrealized losses at December 31, 2006.

 

**FinancialRatings and Strength** We share the insurance financialstrength ratings of our parent, ALIC, as our business is reinsured to ALIC. ALIC’sratings are influenced by many factors including operating and financialperformance, asset quality, liquidity, asset/liability management, overallportfolio mix, financial leverage (i.e., debt), exposure to risks, the currentlevel of operating leverage, AIC’s ratings and other factors. There have beenno changes to ALIC’s insurance financial strength ratings since December 31,2006.

 

As describedin Note 1 to the Condensed Financial Statements, in accordance with FinancialAccounting Standards Board Interpretation No.48, “Accounting for Uncertainty inIncome Taxes” (“FIN 48”), the Company had no liability for unrecognized taxbenefits at January 1, 2007, and does not believe that it is reasonablepossible that this balance will significantly change within the next 12 months.

 

13

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

##  

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

 

*Changes in Internal Control over Financial Reporting.*Duringthe fiscal quarter ended March 31, 2007, 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.

 

**Item 1A. Risk Factors**

 

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

 

Theseforward-looking statements do not relate strictly to historical or currentfacts and may be identified by their use of words like “plans,” “seeks,” “expects,”“will,” “should,” “anticipates,” “estimates,” “intends,” “believes,” “likely,” “targets”and other words with similar meanings. These statements may address, amongother things, our strategy for growth, product development, regulatoryapprovals, market position, expenses, financial results, litigation andreserves. We believe that these statements are based on reasonable estimates,assumptions and plans. However, if the estimates, assumptions or plansunderlying the forward-looking statements prove inaccurate or if other risks oruncertainties arise, actual results could differ materially from thosecommunicated in these forward-looking statements. Risk factors which couldcause actual results to differ materially from those suggested by suchforward-looking statements include but are not limited to those discussed oridentified in this document, in our public filings with the Securities andExchange Commission, and those incorporated by reference in Part I, Item 1A ofLincoln Benefit Life Company Annual Report on Form 10-K for 2006.

 

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

 

Asrequired by Financial Accounting Standards Board Interpretation No. 48, “Accountingfor Uncertainty in Income Taxes” (“FIN 48”), which was adopted as of January 1,2007, we have disclosed that the Company had no liability for unrecognized taxbenefits at January 1, 2007 and does not believe that it is reasonablypossible that this balance will significantly change within the next12 months. We believe that this estimate has been appropriatelyestablished based on available facts and information, however, actual resultsmay differ from our estimate for reasons such as changes in our position onspecific issues, developments with respect to the governments’ interpretationsof income tax laws or changes in judgment resulting from new informationobtained in audits or the appeals process.

 

**Item 6. Exhibits**

##  

(a)  Exhibits

 

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

 

15

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## **SIGNATURE**

##  

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

 
|        |   | Lincoln Benefit Life Company |
|-------------|--------|------------------------------|
|        |   |                         |
|        |   | (Registrant)                 |
|        |   |                         |
| May 7, 2007 |   |                         |
|        |   |                         |
|        |   | By                           | /s/ Samuel H. Pilch |   |
|        |   |                         |
|        |   | Samuel H. Pilch              |
|        |   | (Controller)                 |

 

16

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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

----