LINCOLN BENEFIT LIFE COMPANY

INDEX TO QUARTERLY REPORT ON FORM 10-Q

March 31,June 30, 2005

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

LINCOLN BENEFIT LIFE COMPANY

CONDENSED STATEMENTS OF OPERATIONS

See notes to condensed financial statements.

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LINCOLN BENEFIT LIFE COMPANY

CONDENSED STATEMENTS OF FINANCIAL POSITION

See notes to condensed financial statements.

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LINCOLN BENEFIT LIFE COMPANY

CONDENSED STATEMENTS OF CASH FLOWS

See notes to condensed financial statements.

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LINCOLN BENEFIT LIFE COMPANY

NOTES TO CONDENSED FINANCIAL STATEMENTS

(unaudited)

1.   Basis of Presentation

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

The condensed financial statements and notes as of March 31,June 30, 2005, and for the three-month and six-month periods ended March 31,June 30, 2005 and 2004, are unaudited.  The condensed financial statements reflect all adjustments (consisting only of normal recurring accruals) which are, in the opinion of management, necessary for the fair presentation of the financial position, results of operations and cash flows for the interim periods.  These condensed financial statements and notes should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2004.  The results of operations for the interim periods should not be considered indicative of results to be expected for the full year.

Pending accounting standard

Financial Accounting Standards Board Staff Position re. Emerging Issues Task Force Issue 03-1-a, Implementation Guidance for the Application of Paragraph 16 of EITF Issue No. 03-1, “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments” (“FSP EITF Issue 03-1-a”).

In September 2004, the Financial Accounting Standards Board (“FASB”) issued proposed FSP EITF 03-1-a to address the application of paragraph 16 of Emerging Issues Task Force Issue No. 03-1, “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments” (“EITF Issue 03-1”) to debt securities that are impaired because of increases in interest rates, and/or sector spreads.  Thereafter, in connection with its decision to defer the effective date of paragraphs 10–20 of EITF 03-1 through the issuance of FSP EITF 03-1-1, “Effective Date of Paragraphs 10-20 of EITF Issue No. 03-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments” (“FSP EITF Issue 03-1-1”), the FASB requested from its constituents comments on the issues set forth in FSP EITF 03-1-a and the issues that arose during the comment letter process for FSP EITF 03-1-b, “Effective Date of Paragraph 16 of EITF Issue No. 03-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments”.

Due to the uncertainty as to how the outstanding issues will be resolved, the Company is unable to determine the impact of adopting paragraphs 10-20 of EITF 03-1 until final implementation guidance is issued.  Adoption of paragraphs 10-20 of EITF 03-1 may have a material impact on the Company’s Condensed Statements of Operations but is not expected to have a material impact on the Company’s Condensed Statements of Financial Position as fluctuations in fair value are already recorded in accumulated other comprehensive income.

2.   Reinsurance

The Company has entered into reinsurance agreements under which it reinsures all of its business to ALIC or other non-affiliated reinsurers.  Under the agreements, premiums, contract charges, interest credited to contractholder funds, contract benefits and certain expenses are reinsured.  The Company continues to have primary liability as the direct insurer for risks reinsured.

Investment income earned on the assets which support contractholder funds and the reserve for life-contingent contract benefits is not included in the condensed financial statements as those assets are owned and managed by ALIC or third party reinsurers under terms of the reinsurance agreements.

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The effects of reinsurance on premiums and contract charges are as follows:

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The effects of reinsurance on interest credited to contractholder funds, contract benefits and certain other expenses are as follows:

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

3.   Guarantees and Contingent Liabilities

Guarantees

The Company has issued universal life insurance contracts to third parties who finance the premium payments on the universal life insurance contracts through a commercial paper program.  The Company has issued a repayment guarantee on the outstanding commercial paper balance that is fully collateralized by the cash surrender value of the universal life insurance contracts.  At March 31,June 30, 2005, the amount due under the commercial paper program is $301 million and the cash surrender value of the policies is $307$306 million.  The repayment guarantee expires April 30, 2006.  These contracts are ceded to ALIC under the terms of the reinsurance agreements.

In the normal course of business, the Company provides standard indemnifications to counterparties in contracts in connection with numerous transactions, including acquisitions and divestitures.  The types of indemnifications typically provided include indemnifications for breaches of representations and warranties, taxes and certain other liabilities, such as third party lawsuits.  The indemnification clauses are often standard contractual terms and were entered into in the normal course of business based on an assessment that the risk of loss would be remote.  The terms of the indemnifications vary in duration and nature.  In many cases, the maximum obligation is not explicitly stated and the contingencies triggering the obligation to indemnify have not occurred and are not expected to occur.  Consequently, the maximum

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by former employee agents who terminated their employment prior to the agency program reorganization.  These plaintiffs have asserted breach of contract and ERISA claims under ERISA, and are seeking actual damages including benefits under Allstate employee benefit plans and payments provided in connection with the reorganization.reorganization, as well as punitive damages.  In late March 2004, in the first EEOC lawsuit and class action lawsuit, the trial court issued a memorandum and order that, among other things, certified classes of agents, including a mandatory class of agents who had signed a release, for purposes of effecting the court’s declaratory judgment that the release is voidable at the option of the release signer.  The court also ordered that an agent who voids the release must return to AIC “any and all benefits received by the [agent] in exchange for signing the release.”  The court also “concluded that, on the undisputed facts of record, there is no basis for claims of age discrimination.”  The EEOC and plaintiffs have asked the court to clarify and/or reconsider its memorandum and order.  The case otherwise remains pending.  A putative nationwide class action has also been filed by former employee agents alleging various violations of ERISA.ERISA, including a worker classification issue.  These plaintiffs are challenging certain amendments to the Agents Pension Plan and are seeking to have exclusive agent independent contractors treated as employees for benefit purposes.  This matter was dismissed with prejudice by the trial court, was the subject of further proceedings on appeal, and has been reversed and remanded to the trial court in April 2005.  In these matters, plaintiffs seek compensatory and punitive damages, and equitable relief.  AIC has been vigorously defending these lawsuits and other matters related to its agency program reorganization.  In addition, AIC has been defending certain matters relating to its life agency program reorganization announced in 2000.  These matters have been the subject of an investigation by the EEOC with respect to allegations of age discrimination and retaliation and conciliation discussions between AllstateAIC and the EEOC.  The outcome of these disputes is currently uncertain.

Other Matters

The Corporation and some of its subsidiaries, including the Company, have received interrogatories and demands for information from regulatory and enforcement authorities relating to various insurance products and practices.  The areas of inquiry include variable annuity market timing and late trading.  The Corporation and some of its subsidiaries, including the Company, have also received interrogatories and demands for information from authorities seeking information relevant to on-going investigations into the possible violation of antitrust or insurance laws by unnamed parties and, in particular, seeking information as to whether any person engaged in activities for the purpose of price fixing, market allocation, or bid rigging. The Company believes that these inquiries are similar to those made to many financial services companies as part of industry-wide investigations by various authorities into the practices, policies and procedures relating to insurance and financial services products.  The Corporation and its subsidiaries have responded and will continue to respond to these inquiries.

Various other legal and regulatory actions are currently pending that involve the Company and specific aspects of its conduct of business.  Like other members of the insurance industry, the Company is the target of a number of lawsuits and proceedings, some of which involve claims for substantial or indeterminate

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amounts. These actions are based on a variety of issues and target a range of the company’sCompany’s practices. The outcome of these disputes is currently unpredictable.

However, at this time, based on their present status and the existence of the reinsurance agreements with ALIC related to policy liabilities, it is the opinion of management that the ultimate liability, if any, in one or more of the actions described in this “Other Matters” subsection in excess of amounts currently reserved is not expected to have a material effect on the results of operations, liquidity or financial condition of the Company.

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4.   Other Comprehensive Income

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

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FINANCIAL POSITION

(1) Fixed income securities are carried at fair value.  Amortized cost basis for these securities was $257.9$258.8 million and $234.4 million at March 31,June 30, 2005 and December 31, 2004, respectively.

Total investments decreased to $270.2of $272.4 million at March 31,June 30, 2005 were slightly down from $273.2 million at December 31, 2004 primarily due to decreased net unrealized gains on fixed income securities, partially offset by positiveas cash flowsinflows from operating activities.activities were yet to be invested at June 30, 2005.

At March 31,June 30, 2005, all securities in100% of the fixed income securities portfolio werewas rated investment grade, which is defined as a security having a rating from the National Association of Insurance Commissioners (“NAIC”) of 1 or 2;2, a Moody’s equivalent rating of Aaa, Aa, A or Baa from Moody’s or aBaa; an S&P equivalent rating of AAA, AA, A or BBB from S&P, Fitch or Dominion;BBB; or a comparable internal rating ifwhen an externally providedexternal rating is not available.

The unrealized net capital gains on fixed income securities at March 31,June 30, 2005 were $3.0$9.0 million, a decreasean increase of $5.5 million$564 thousand or 64.7%6.7% since December 31, 2004.  The net unrealized gain was comprised of $6.8$9.8 million of unrealized gains and $3.8 million$841 thousand of unrealized losses at March 31,June 30, 2005.  This is compared to a net unrealized gain for the fixed income portfolio totaling $8.4 million at December 31, 2004, comprised of $9.7 million of unrealized gains and $1.3 million of unrealized losses.  Of the gross unrealized losses in the fixed income portfolio, 46.0%56.2% were concentrated in the corporate fixed income portfolio.  The losses were primarily comprised of securities in the consumer goods, capital goods, transportation and utilitiesfinancial services sectors.  The gross unrealized losses in these sectors were primarily interest rate related.  While we expect eventual recovery of these securities and the related sectors, we included every security in our portfolio monitoring process.

Our portfolio monitoring process identifies and evaluates fixed income securities whose carrying value may be other than temporarily impaired.  The process includes a quarterly review of all securities using a screening process to identify those securities whose fair value compared to amortized cost for fixed income securities is below established thresholds for certain time periods, or which are identified through other monitoring criteria such as ratings downgrades or payment defaults.  We also recognize impairment on securities in an unrealized loss position for which we do not have the intent and ability to hold until recovery.

We also monitor the quality of our fixed income portfolio by categorizing certain investments as “problem”, “restructured” or “potential problem.”  Problem fixed income securities are securities in default with respect to principal or interest and/or securities issued by companies that have gone into bankruptcy subsequent to our acquisition of the security.  Restructured fixed income securities have rates and terms that are not consistent with market rates or terms prevailing at the time of the restructuring.  Potential problem fixed income securities are current with respect to contractual principal and/or interest, but because of other facts and circumstances, we have serious concerns regarding the borrower’s ability to pay future principal and interest, which causes us to believe these securities may be classified as problem or restructured in the future.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

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E-1