GLENBROOK LIFE AND ANNUITY COMPANY
MODIFIED SINGLE PREMIUM
VARIABLE LIFE INSURANCE CONTRACTS
3100 SANDERS ROAD
NORTHBROOK, IL 60062
TELEPHONE (800) 776-6978
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This prospectus describes the "AIM Lifetime Plus(SM) Variable Life," a
modified single premium variable life insurance contract (the "Contract")
offered by Glenbrook Life and Annuity Company (the "Company") for prospective
insured persons ages 0-85. The Contract lets the Contract Owner pay a
significant single premium and subject to restrictions, additional premiums.
The Contracts are modified endowment contracts for federal income tax
purposes, except in certain cases described under "Federal Tax Considerations,"
page 20. A LOAN, DISTRIBUTION OR OTHER AMOUNT RECEIVED FROM A MODIFIED ENDOWMENT
CONTRACT DURING THE LIFE OF THE INSURED WILL BE TAXED TO THE EXTENT OF ANY
ACCUMULATED INCOME IN THE CONTRACT. ANY AMOUNTS THAT ARE TAXABLE WITHDRAWALS
WILL BE SUBJECT TO A 10% ADDITIONAL PENALTY TAX, WITH CERTAIN EXCEPTIONS.
The minimum initial premium the Company will accept is $10,000. Premiums
are allocated to Glenbrook Life A I M Variable Life Separate Account A (the
"Variable Account"). The Variable Account invests in shares of the portfolios of
the AIM Variable Insurance Funds, Inc. (the "Fund Series"). The Fund Series
currently has nine funds (the "Funds") available for investment by the Variable
Account: (1) AIM V.I. Capital Appreciation Fund; (2) AIM V.I. Diversified Income
Fund; (3) AIM V.I. Global Utilities Fund; (4) AIM V.I. Government Securities
Fund; (5) AIM V.I. Growth Fund; (6) AIM V.I. Growth and Income Fund; (7) AIM
V.I. International Equity Fund; (8) AIM V.I. Money Market Fund; and (9) AIM V.I.
Value Fund.
There is no guaranteed minimum Account Value for a Contract. The Account
Value of a Contract will vary up or down to reflect the investment experience of
the sub-accounts of the Variable Account (the "Variable Sub-accounts") to which
the Contract Owner has allocated premiums. The Contract Owner bears the entire
investment risk for all amounts so allocated. The Contract continues in effect
while the Cash Surrender Value is sufficient to pay the monthly charges under
the Contract (the "Monthly Deduction Amount").
The Contract provides for an Initial Death Benefit shown on the Contract
Data page. The death benefit (the "Death Benefit") payable under a Contract may
be greater than the Initial Death Benefit but so long as the Contract continues
in effect, if no withdrawals are made, will never be less than the Initial Death
Benefit. The Account Value will, and under certain circumstances the Death
Benefit may, increase or decrease based on the investment experience of the
Variable Sub-accounts to which premiums have been allocated. At the death of the
Insured, the Company will pay a Death Benefit to the beneficiary.
IT MAY NOT BE ADVANTAGEOUS TO PURCHASE VARIABLE LIFE INSURANCE AS A
REPLACEMENT FOR YOUR CURRENT LIFE INSURANCE OR IF YOU ALREADY OWN A VARIABLE
LIFE INSURANCE CONTRACT.
THIS PROSPECTUS IS VALID ONLY IF ACCOMPANIED BY THE CURRENT PROSPECTUS OF
THE FUND SERIES WHICH CONTAINS A FULL DESCRIPTION OF THE FUNDS. BOTH
PROSPECTUSES SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE CONTRACTS DESCRIBED HEREIN ARE NOT DEPOSITS OF, OR GUARANTEED BY, ANY
BANK, NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
The Contracts may not be available in all states.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN
WHICH SUCH OFFERING MAY NOT BE LAWFULLY MADE. NO DEALER OR OTHER PERSON IS
AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS IN CONNECTION
WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN
OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON.
THE DATE OF THIS PROSPECTUS IS SEPTEMBER 2, 1997.
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TABLE OF CONTENTS
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PAGE
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SUMMARY.................................. 3
SPECIAL TERMS............................ 6
THE COMPANY.............................. 6
THE VARIABLE ACCOUNT..................... 7
General................................ 7
THE FUND SERIES.......................... 7
AIM Variable Insurance Funds, Inc. .... 7
Investment Advisor for the Funds....... 8
THE CONTRACT............................. 8
Application for a Contract............. 8
Premiums............................... 9
Allocation of Premiums................. 9
Accumulation Unit Values............... 10
DEDUCTIONS AND CHARGES................... 10
Monthly Deductions..................... 10
Cost of Insurance Charge............ 10
Tax Expense Charge.................. 11
Administrative Expense Charge....... 11
Other Deductions....................... 11
Mortality and Expense Risk Charge... 11
Annual Maintenance Fee.............. 11
Taxes Charged Against the Variable
Account........................... 11
Charges Against the Funds........... 12
Withdrawal Charge................... 12
Due and Unpaid Premium Tax Charge... 12
CONTRACT BENEFITS AND RIGHTS............. 13
Death Benefit.......................... 13
Accelerated Death Benefit.............. 13
Account Value.......................... 13
Transfer of Account Value.............. 14
Dollar Cost Averaging.................. 14
Automatic Portfolio Rebalancing........ 14
Contract Loans......................... 14
Amount Payable on Surrender of the
Contract............................ 15
Partial Withdrawals.................... 15
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Maturity............................... 15
Lapse and Reinstatement................ 15
Cancellation and Exchange Rights....... 16
Confinement Waiver Benefit............. 16
Suspension of Valuation, Payments and
Transfers........................... 16
Last Survivor Contracts................ 16
OTHER MATTERS............................ 17
Voting Privileges...................... 17
Statements to Contract Owners.......... 17
Limit on Right to Contest.............. 17
Misstatement as to Age and Sex......... 17
Payment Options........................ 17
Beneficiary............................ 18
Assignment............................. 18
Dividends.............................. 18
EXECUTIVE OFFICERS AND DIRECTORS OF THE
COMPANY................................. 18
DISTRIBUTION OF THE CONTRACTS............ 19
SAFEKEEPING OF THE VARIABLE ACCOUNT'S
ASSETS................................. 20
FEDERAL TAX CONSIDERATIONS............... 20
Introduction........................... 20
Taxation of the Company and the
Variable Account.................... 20
Taxation of Contract Benefits.......... 20
Modified Endowment Contracts........... 21
Diversification Requirements........... 21
Ownership Treatment.................... 21
Policy Loan Interest................... 21
ADDITIONAL INFORMATION ABOUT THE
COMPANY................................ 22
LEGAL PROCEEDINGS........................ 22
LEGAL MATTERS............................ 22
REGISTRATION STATEMENT................... 22
EXPERTS.................................. 22
FINANCIAL INFORMATION.................... 22
FINANCIAL STATEMENTS..................... F-1
APPENDIX A............................... A-1
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SUMMARY
NOTE: A glossary of Special Terms used in this Prospectus appears at page
6, immediately following this Summary.
THE CONTRACT
The Contracts are life insurance contracts with death benefits, cash
values, and other traditional life insurance features. The Contracts are
"variable." Unlike the fixed benefits of ordinary whole life insurance, the
Account Value of a Contract will increase or decrease based on the investment
experience of the Variable Sub-accounts to which the Contract Owner has
allocated premiums. The Death Benefit also may increase or decrease under some
circumstances, but so long as the Contract remains in effect, the Death Benefit
will not decrease below the Initial Death Benefit if no withdrawals are made.
The Contracts are credited with units (the "Accumulation Units") to calculate
cash values. The Contract Owner may transfer the Account Value among the
Variable Sub-accounts.
The Contracts can be issued on a single life or "last survivor" basis. For
a discussion of how last survivor Contracts operate differently from single life
Contracts, see "Last Survivor Contracts," page 16.
In some states, the Contracts may be issued in the form of a group
Contract. In those states, certificates will be issued evidencing a purchaser's
rights under the group Contract. In certain states, certificates are issued
under group Contracts issued to the Financial Services Group Insurance Trust, an
Illinois Trust. The terms "Contract" and "Contract Owner," as used in this
prospectus, refer to and include such a certificate and certificate owner,
respectively.
THE VARIABLE ACCOUNT AND THE FUNDS
The Glenbrook Life A I M Variable Life Separate Account A (the "Variable
Account") funds the variable life insurance Contracts offered by this
prospectus. The Variable Account is a unit investment trust registered as such
under the Investment Company Act of 1940. It consists of multiple sub-accounts
(the "Variable Sub-Accounts"), each investing in a corresponding Fund.
Applicants should read the prospectus for the Fund Series in connection
with the purchase of a Contract. The investment objectives of each of the Funds
are briefly summarized below under "the Fund Series," page 7. The Fund Series
has a total of nine Funds available under the Contract. The Funds include: (1)
AIM V.I. Capital Appreciation Fund; (2) AIM V.I. Diversified Income Fund; (3)
AIM V.I. Global Utilities Fund; (4) AIM V.I. Government Securities Fund; (5) AIM
V.I. Growth Fund; (6) AIM V.I. Growth and Income Fund; (7) AIM V.I.
International Equity Fund; (8) AIM V.I. Money Market Fund; and (9) AIM V.I.
Value Fund. The assets of each Fund are held separately from the other Funds and
each has distinct investment objectives and policies which are described in the
accompanying prospectus for the Fund Series.
PREMIUMS
The Contract requires the Contract Owner to pay an initial premium of at
least $10,000. Additional premium payments may be made subject to the following
conditions:
- only one payment is allowed in any Contract Year;
- the minimum payment is $500;
- the attained age of the insured must be less than age 86; and
- absent submission of new evidence of insurability of the insured, the
maximum additional payment permitted in a Contract Year is the "Guaranteed
Additional Payment." The Guaranteed Additional Payment is the lesser of
$5,000 or a percentage of the initial payment (5% for attained ages 40-70,
and 0% for attained ages 20-39 and 71-85).
Additional premium payments may require an increase in the Specified Amount
in order for the Contract to meet the definition of a life insurance contract
under the Internal Revenue Code. Other than for the "Guaranteed Additional
Payment," the Company reserves the right to obtain satisfactory evidence of
insurability before accepting any additional premium payments requiring an
increase in the Specified Amount. The Company reserves the right to reject an
additional premium payment for any reason. Additional premiums may also be paid
at any time and in any amount necessary to avoid termination of the Contract.
DEDUCTIONS AND CHARGES
On each Monthly Activity Date, the Company will deduct a Monthly Deduction
Amount from the Account Value. The Monthly Deduction Amount will be made pro
rata from each Variable Sub-Account to which Account Value is allocated. The
Monthly Deduction Amount includes a cost of insurance charge, a tax expense
charge and an administrative expense charge. The monthly cost of insurance
charge is to cover the Company's anticipated mortality costs. The Company will
deduct monthly from the Account Value a tax expense charge equal to an annual
rate of 0.40% for the first ten Contract Years. This charge compensates the
Company for premium taxes imposed by various states and local jurisdictions and
for federal taxes resulting from the application of Section 848 of the Code. The
charge includes a premium tax deduction of 0.25% of Account Value and a federal
tax deduction of 0.15% of Account Value. The premium tax deduction represents an
average premium tax of 2.5% of premiums over ten years. The Company will deduct
from the Account Value a monthly administrative charge equal to an annual rate
of 0.25%. This charge compensates the Company for administrative expenses
incurred in the administration of the Variable Account and the Contracts. The
Company will also deduct from the
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Variable Account a daily charge equal to an annual rate of 0.90% of average
daily net assets for the mortality risks and expense risks the Company assumes
in relation to the Contracts. If the Cash Surrender Value is not sufficient to
cover a Monthly Deduction Amount due on any Monthly Activity Date, the Contract
may lapse. See "Deductions and Charges -- Monthly Deductions," page 10, and
"Contract Benefits and Rights -- Lapse and Reinstatement," page 15.
An Annual Maintenance Fee of $35 will be deducted on each Contract
Anniversary from all Variable Sub-Accounts to which Account Value is allocated,
in proportion to the amounts so allocated. This fee will be waived if total
premiums paid are $50,000 or more. This fee will help reimburse the Company for
administrative and maintenance costs of the Contracts. See "Deductions and
Charges -- Other Deductions -- Annual Maintenance Fee," page 11.
Applicants should review the prospectus for the Fund Series which
accompanies this prospectus for a description of the charges and expenses borne
by the Funds in connection with their operations. See "Deductions and Charges --
Other Deductions -- Charges Against the Funds," page 12.
Withdrawals in excess of the Free Withdrawal Amount will be subject to a
withdrawal charge as set forth below:
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PERCENTAGE OF
CONTRACT YEAR INITIAL PREMIUM WITHDRAWN
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1..................................................... 7.75%
2..................................................... 7.75%
3..................................................... 7.75%
4..................................................... 7.25%
5..................................................... 6.25%
6..................................................... 5.25%
7..................................................... 4.25%
8..................................................... 3.25%
9..................................................... 2.25%
10+.................................................... 0.00%
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The Withdrawal Charge is imposed to cover a portion of the sales expense
incurred by the Company in distributing the Contracts. This expense includes
agents' commissions, advertising and the printing of prospectuses. See
"Deductions and Charges -- Other Deductions -- Withdrawal Charge," page 12.
During the first nine Contract Years, an additional premium tax charge will
be imposed on full or partial withdrawals. This charge ranges from a maximum of
2.25% in the first Contract Year, decreasing .25% in each of the next nine
Contract Years, with no charge thereafter. See "Deductions and Charges -- Other
Deductions -- Due and Unpaid Premium Tax Charge," page 12.
For a discussion of the tax consequences of a full or a partial withdrawal,
see "Federal Tax Considerations," page 20.
DEATH BENEFIT
At the death of the Insured while the Contract is in force, we will pay the
Death Benefit (less any Indebtedness and certain due and unpaid Monthly
Deduction Amounts) to the beneficiary. The Death Benefit determined on the date
of the Insured's death is the greater of: (1) the Specified Amount; or (2) the
Account Value multiplied by the death benefit ratio as found in the Contract.
See "Contract Benefits and Rights -- Death Benefit," page 13.
ACCOUNT VALUE
The Account Value of the Contract will increase or decrease to reflect: (1)
the investment experience of the Variable Sub-accounts to which Account Value is
allocated; and (2) deductions for the mortality and expense risk charge, the
Monthly Deduction Amount, and the Annual Maintenance Fee. There is no minimum
guaranteed Account Value and the Contract Owner bears the risk of the investment
in the Variable Sub-accounts. See "Contract Benefits and Rights -- Account
Value," page 13.
CONTRACT LOANS
A Contract Owner may obtain one or both of two types of cash loans from the
Company. Both types of loans are secured by the Contract. The maximum amount
available for such loans is 90% of the Contract's Cash Value, less the amount of
all loans existing on the date of the loan request (including loan interest to
the next Contract Anniversary), less any Annual Maintenance Fee due on or before
the next Contract Anniversary, and less any due and unpaid Monthly Deduction
Amounts. See "Contract Benefits and Rights -- Contract Loans," page 14.
LAPSE
Under certain circumstances a Contract may terminate if the Cash Surrender
Value on any Monthly Activity Date is less than the required Monthly Deduction
Amount. The Company will give written notice to the Contract Owner and a 61 day
grace period during
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which additional amounts may be paid to continue the Contract. See "Contract
Benefits and Rights -- Contract Loans," page 14 and "Lapse and Reinstatement,"
page 15.
CANCELLATION AND EXCHANGE RIGHTS
A Contract Owner has a limited right to return the Contract for
cancellation. This right to return exists during the free-look period. The
free-look period is a number of days (which varies by state) as specified in
your Contract. The Contract Owner may return the Contract for cancellation, by
mail or hand delivery, to the agent who sold the Contract, within the free-look
period following delivery of the Contract to the Contract Owner. If the Contract
is returned within the free-look period, the Company will return to the Contract
Owner within 7 days thereafter the premiums paid for the Contract adjusted to
reflect any investment gain or loss resulting from allocation to the Variable
Account prior to the date of cancellation. Certain states may require a return
of premium without such adjustments. In states where the Company is required to
return the premiums paid upon a free-look of the Contract and where the
procedure has been approved by the state, the Company reserves the right to
allocate all premium payments made prior to the expiration of the free-look
period to the money market sub-account of the Variable Account.
Once the Contract is in effect, it may be exchanged during the first 24
months after its issuance for a permanent life insurance contract on the life of
the Insured without submitting proof of insurability. See "Contract Benefits and
Rights -- Cancellation and Exchange Rights," page 16.
TAX CONSEQUENCES
The current Federal tax law generally excludes all death benefit payments
from the gross income of the Contract beneficiary. The Contracts generally will
be treated as modified endowment contracts. This status does not affect the
Contracts' classification as life insurance, nor does it affect the exclusion of
death benefit payments from gross income. However, loans, distributions or other
amounts received under a modified endowment contract are taxed to the extent of
accumulated income in the Contract (generally, the excess of Account Value over
premiums paid) and may be subject to a 10% penalty tax. See "Federal Tax
Considerations," page 20.
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SPECIAL TERMS
As used in this Prospectus, the following terms have the indicated
meanings:
Account Value: The aggregate value under a Contract of the Variable
Sub-Accounts and the Loan Account.
Accumulation Unit: An accounting unit of measure used to calculate the
value of a Variable Sub-Account.
Age: The Insured's age at the Insured's last birthday.
Cash Value: The Account Value less any applicable withdrawal charges and
due and unpaid Premium Tax Charges.
Cash Surrender Value: The Cash Value less all Indebtedness and the Annual
Maintenance Fee, if applicable.
Code: The Internal Revenue Code of 1986, as amended.
Contract Anniversary: The same day and month as the Contract Date for each
subsequent year the Contract remains in force.
Contract Date: The date on or as of which coverage under a Contract becomes
effective and the date from which Contract Anniversaries, Contract Years and
Contract months are determined.
Contract Owner: The person having rights to benefits under the Contract
during the lifetime of the Insured; the Contract Owner may or may not be the
Insured.
Contract Years: Annual periods computed from the Contract Date.
Death Benefit: The greater of (1) the Specified Amount or (2) the Account
Value on the date of death multiplied by the death benefit ratio as specified in
the Contract.
Free Withdrawal Amount: The amount of a surrender or partial withdrawal
that is not subject to a Withdrawal Charge. This amount in any Contract Year is
10% of total premiums paid.
Initial Death Benefit: The Initial Death Benefit under a Contract is shown
on the Contract Data page.
Indebtedness: All Contract loans, if any, and accrued loan interest.
Insured: The person whose life is insured under a Contract.
Loan Account: An account in the Company's General Account, established for
any amounts transferred from the Variable Sub-Accounts for requested loans. The
Loan Account credits a fixed rate of interest that is not based on and is
different from the investment experience of the Variable Account.
Monthly Activity Date: The day of each month on which the Monthly Deduction
Amount is deducted from the Account Value of the Contract. Monthly Activity
Dates occur on the same day of the month as the Contract Date. If there is no
date equal to the Monthly Activity Date in a particular month, the Monthly
Activity Date will be the last day of that month.
Monthly Deduction Amount: A deduction on each Monthly Activity Date for the
cost of insurance charge, the tax expense charge and the administrative expense
charge.
Specified Amount: The minimum death benefit under a Contract, equal to the
Initial Death Benefit on the Contract Date. Thereafter it may change in
accordance with the terms of the partial withdrawal and the subsequent premium
provisions of the Contract.
Valuation Day: Every day the New York Stock Exchange is open for trading.
The value of the Variable Account is determined at the close of regular trading
on the New York Stock Exchange (currently 4:00 p.m. Eastern Time) on each
valuation day.
Valuation Period: The period between the close of regular trading on the
New York Stock Exchange on successive Valuation Days.
Variable Account: Glenbrook Life AIM Variable Life Separate Account A, an
account established by the Company to separate the assets funding the Contracts
from other assets of the Company.
Variable Sub-Account: The subdivisions of the Variable Account used to
allocate a Contract Owner's Account Value, less Indebtedness, among the
Sub-accounts investing in the Funds.
THE COMPANY
The Company is the issuer of the Contract. The Company is a stock life
insurance company organized under the laws of Illinois in 1992. The Company was
originally organized under the laws of Indiana in 1965. From 1965 to 1983, the
Company was known as "United Standard Life Assurance Company" and from 1983 to
1992, the Company was known as "William Penn Life Assurance Company of America."
The Company is licensed to operate in the District of Columbia and all states
except New York. The Company intends to market the Contract in those
jurisdictions in which it is licensed to operate. The Company's home office is
located at 3100 Sanders Road, Northbrook, Illinois 60062.
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The Company is a wholly owned subsidiary of Allstate Life Insurance Company
("Allstate Life"), a stock life insurance company incorporated under the laws of
Illinois. Allstate Life is a wholly owned subsidiary of Allstate Insurance
Company ("Allstate"), a stock property-liability insurance company incorporated
under the laws of Illinois. All of the outstanding capital stock of Allstate is
owned by The Allstate Corporation (the "Corporation").
THE VARIABLE ACCOUNT
GENERAL
Glenbrook Life A I M Variable Life Separate Account A (the "Variable
Account") is a separate account of the Company established on January 15, 1996
pursuant to the insurance laws of Illinois. The Variable Account is organized as
a unit investment trust and registered as such with the Securities and Exchange
Commission (the "Commission") under the Investment Company Act of 1940 (the
"1940 Act"). The Variable Account meets the definition of a "separate account"
under the federal securities laws. Under Illinois law, the assets of the
Variable Account are held exclusively for the benefit of Contract Owners and
persons entitled to payments under the Contracts. The assets of the Variable
Account are not chargeable with liabilities arising out of any other business
which the Company may conduct.
THE FUND SERIES
The Variable Account will invest in shares of the AIM Variable Insurance
Funds, Inc. (the "Fund Series"). The Fund Series is registered with the
Commission as an open-end, series, management investment company. Registration
of the Fund Series does not involve supervision of its management, investment
practices or policies by the Commission. The Fund Series has nine portfolios
(the "Funds" or, each, a "Fund"). The Funds are designed to provide investment
vehicles for variable insurance contracts of various insurance companies, in
addition to the Variable Account.
It is possible that in the future it may be disadvantageous for variable
life insurance separate accounts and variable annuity separate accounts to
invest in a Fund simultaneously. Although neither the Company nor the Fund
Series currently foresees any such disadvantages either to variable life
insurance or variable annuity contract owners, the Fund Series' Board of
Directors will monitor events in order to identify any material conflicts
between variable life and variable annuity contract owners and to determine what
action, if any, should be taken in response thereto. If the Board of Directors
were to conclude that separate funds should be established for variable life and
variable annuity separate accounts, the Company would bear the attendant
expenses.
All investment income of and other distributions to each Variable
Sub-Account arising from the corresponding Fund are reinvested in shares of that
Fund at net asset value. The income and both realized and unrealized gains or
losses on the assets of each Variable Sub-Account are therefore separate and are
credited to or charged against the Variable Sub-Account without regard to the
income, gains or losses of any other Variable Sub-Account or from any other
business of the Company. The Company will purchase shares in the Funds in
connection with premiums allocated to the corresponding Variable Sub-Account in
accordance with Contract Owners' directions and will redeem shares in the Funds
to meet Contract obligations or make adjustments in reserves, if any. The Fund
Series is required to redeem Fund shares at net asset value and to make payment
of such redemptions within seven days.
The Company reserves the right, subject to compliance with the law as then
in effect, to make additions to, deletions from, or substitutions for the Fund
shares underlying the Variable Sub-Accounts. If shares of any of the Funds
should no longer be available for investment, or if, in the judgment of the
Company's management, further investment in shares of any Fund should become
inappropriate in view of the purposes of the Contracts, the Company may
substitute shares of another Fund for shares already purchased, or to be
purchased in the future, under the Contracts. No substitution of securities will
take place without notice to Contract Owners and without prior approval of the
Commission to the extent required under the 1940 Act. The Company reserves the
right to establish additional Variable Sub-accounts of the Variable Account,
each of which would invest in shares of another Fund or in the portfolios of
other investment companies. Subject to Contract Owner approval, the Company also
reserves the right to end the registration under the 1940 Act of the Variable
Account or any other separate accounts of which the Company is the depositor or
to operate the Variable Account as a management investment company under the
1940 Act.
Each Fund is subject to certain investment restrictions and policies which
may not be changed without the approval of a majority of the shareholders of
that Fund. See the accompanying prospectus for the Fund Series for further
information on these policies and restrictions.
AIM VARIABLE INSURANCE FUNDS, INC.
AIM Variable Insurance Funds, Inc., the Fund Series, offers nine Funds for
use with this Contract: (1) AIM V.I. Capital Appreciation Fund; (2) AIM V.I.
Diversified Income Fund; (3) AIM V.I. Global Utilities Fund; (4) AIM V.I.
Government Securities Fund; (5) AIM V.I. Growth Fund; (6) AIM V.I. Growth and
Income Fund; (7) AIM V.I. International Equity Fund; (8) AIM V.I. Money Market
Fund; and (9) AIM V.I. Value Fund. Each Fund has different investment objectives
and policies and operates as a separate investment fund. The following is a
brief description of the investment objectives and programs of the Funds. For a
more complete description, please see the prospectus of the Fund Series
accompanying this prospectus.
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AIM V.I. CAPITAL APPRECIATION FUND ("CAPITAL APPRECIATION FUND") is a
diversified fund which seeks capital appreciation through investments in common
stocks, with emphasis on medium-sized and smaller emerging growth companies.
AIM V.I. DIVERSIFIED INCOME FUND ("DIVERSIFIED INCOME FUND") is a
diversified fund which seeks a high level of current income primarily by
investing in a diversified portfolio of foreign and U.S. government and
corporate debt securities, including lower rated high yield debt securities
(commonly known as "junk bonds"). The risks of investing in junk bonds are
described in the accompanying prospectus for the Fund Series, which should be
read carefully before investing.
AIM V.I. GLOBAL UTILITIES FUND ("GLOBAL UTILITIES FUND") is a
nondiversified fund which seeks a high level of current income, and as a
secondary objective, capital appreciation, by investing primarily in common and
preferred stocks of public utility companies (either domestic or foreign).
AIM V.I. GOVERNMENT SECURITIES FUND ("GOVERNMENT FUND") is a diversified
fund which seeks a high level of current income consistent with reasonable
concern for safety of principal by investing in debt securities issued,
guaranteed or otherwise backed by the U.S. Government.
AIM V.I. GROWTH FUND ("GROWTH FUND") is a diversified fund which seeks
growth of capital through investments primarily in common stocks of leading U.S.
companies considered by the investment advisor to have strong earnings momentum.
AIM V.I. GROWTH AND INCOME FUND ("GROWTH & INCOME FUND") is a diversified
fund which seeks growth of capital, with current income as a secondary
objective, by investing primarily in dividend paying common stocks which have
prospects for both growth of capital and dividend income.
AIM V.I. INTERNATIONAL EQUITY FUND ("INTERNATIONAL FUND") is a diversified
fund which seeks long-term growth of capital by investing in international
equity securities, the issuers of which are considered by the investment advisor
to have strong earnings momentum.
AIM V.I. MONEY MARKET FUND ("MONEY MARKET FUND") is a diversified fund
which seeks as high a level of current income as is consistent with the
preservation of capital and liquidity by investing in a diversified portfolio of
money market instruments.
AIM V.I. VALUE FUND ("VALUE FUND") is a diversified fund which seeks
long-term growth of capital by investing primarily in equity securities judged
by the investment advisor to be undervalued relative to the current or projected
earnings of the companies issuing the securities, or relative to current market
values of assets owned by the companies issuing the securities or relative to
the equity markets generally. Income is a secondary objective.
An investment in the AIM VI Money Market Fund is neither insured nor
guaranteed by the U.S. Government. There can be no assurance that the AIM VI
Money Market Fund will be able to maintain a stable net asset value of $1.00 per
share.
All dividends and capital gains distributions from the Funds are
automatically reinvested in shares of the distributing Fund at their net asset
value.
There is no assurance that the Funds will attain their respective stated
objectives. Additional information concerning the investment objectives and
policies of the Funds can be found in the current prospectus for the Fund Series
accompanying this prospectus.
You will find more complete information about the Funds, including the
risks associated with each Fund, in the accompanying prospectus. You should read
the prospectus for the Fund Series in conjunction with this prospectus.
THE FUND SERIES PROSPECTUS SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS
MADE CONCERNING THE ALLOCATION OF PURCHASE PAYMENTS TO A PARTICULAR VARIABLE
SUB-ACCOUNT.
INVESTMENT ADVISOR FOR THE FUNDS
AIM Advisors, Inc., ("AIM") serves as the investment advisor to each Fund.
AIM was organized in 1976, and, together with its domestic subsidiaries, manages
or advises 48 investment company portfolios (including the Funds). AIM is a
wholly owned subsidiary of AIM Management Group Inc., an indirect subsidiary of
AMVESCO plc, (formerly INVESCO plc). AIM manages each Fund's assets pursuant to
a master investment advisory agreement dated February 28, 1997. As of March 18,
1997, total assets advised or managed by AIM and its domestic subsidiaries were
approximately $68 billion.
THE CONTRACT
APPLICATION FOR A CONTRACT
Individuals wishing to purchase a Contract must submit an application to
the Company. A Contract will be issued only on the lives of Insureds ages 0-85
who supply evidence of insurability satisfactory to the Company. Acceptance is
subject to the Company's underwriting rules and the Company reserves the right
to reject an application for any lawful reason. If a Contract is not issued, the
premium will be returned to the individual. No change in the terms or conditions
of a Contract will be made without the consent of the Contract Owner.
8
<PAGE>
Once the Company has received the initial premium and underwriting has been
approved, the Contract will be issued on the date the Company has received the
final requirement for issue. In the case of simplified underwriting, the
Contract will be issued or coverage denied within 3 business days of receipt of
premium. The Insured will be covered under the Contract, however, as of the
Contract Date. Since the Contract Date will generally be the date the Company
receives the initial premium, coverage under a Contract may begin before the
Contract is actually issued. In addition to determining when coverage begins,
the Contract Date determines Monthly Activity Dates, Contract months, and
Contract Years.
If the initial premium is over the limits established from time to time by
the Company (currently $1,000,000), the initial payment will not be accepted
with the application. In other cases, where the Company receives the initial
payment with the application, we will provide fixed conditional insurance during
underwriting according to the terms of a conditional receipt. The fixed
conditional insurance will be the insurance applied for, up to a maximum that
varies by age.
PREMIUMS
The Contract is designed to permit an initial premium payment and, subject
to certain conditions, additional premium payments. The initial premium payment
purchases a Death Benefit initially equal to the Contract's Specified Amount.
The minimum initial payment is $10,000.
Under current underwriting rules, which are subject to change, proposed
Insureds are eligible for simplified underwriting without a medical examination
if their application responses and initial premium payment meet simplified
underwriting standards. Customary underwriting standards will apply to all other
proposed Insureds. The maximum initial premium currently permitted on a
simplified underwriting basis varies with the issue age of the insured according
to the following table:
<TABLE>
<CAPTION>
SIMPLIFIED UNDERWRITING
ISSUE AGE MAXIMUM INITIAL PREMIUM
--------- -----------------------
<S> <C>
0-34........................................................ Not available
35-44....................................................... $ 15,000
45-54....................................................... $ 30,000
55-64....................................................... $ 50,000
65-80....................................................... $100,000
Over age 80................................................. Not available
</TABLE>
Additional premium payments may be made at any time, subject to the
following conditions:
- only one additional premium payment may be made in any Contract Year;
- each additional premium payment must be at least $500;
- attained age of the Insured must be less than age 86; and
- absent submission of new evidence of insurability of the insured, the
maximum additional payment permitted in a Contract Year is the "Guaranteed
Additional Payment." The Guaranteed Additional Payment is the lesser of
$5,000 or a percentage of the initial payment (5% for attained ages 40-70,
and 0% for attained ages 20-39 and 71-85).
Additional premium payments may require an increase in the Specified Amount
in order for the Contract to remain within the definition of a life insurance
contract under Section 7702 of the Code. Other than for the "Guaranteed
Additional Payment," the Company reserves the right to obtain satisfactory
evidence of insurability upon any additional premium payments requiring an
increase in the Specified Amount. However, we reserve the right to reject any
additional premium payment for any reason.
Unless you request otherwise in writing, any additional premium payment
received while a Contract loan exists will be applied first as a repayment of
Indebtedness, and second, as an additional premium payment, subject to the
conditions described above.
Additional premiums may be paid at any time and in any amount necessary to
avoid termination of the Contract without evidence of insurability.
ALLOCATION OF PREMIUMS
Upon completion of underwriting, the Company will either issue a Contract,
or deny coverage and return all premiums. If a Contract is issued, the initial
premium payment, plus an amount equal to the interest that would have been
earned had the initial premium been invested in the AIM V.I. Money Market
Sub-Account since the date of receipt of the premium, will be allocated on the
date the Contract is issued according to the initial premium allocation
instructions specified by you on the application. In the future, the Company may
allocate the initial premium (and the interest that would have been earned had
the initial premium been invested in the AIM V.I. Money Market Sub-Account since
its receipt) to the AIM VI Money Market Sub-Account during the free look period
in those states where state law requires premiums to be returned upon exercise
of the free-look right.
9
<PAGE>
ACCUMULATION UNIT VALUES
The Accumulation Unit Value for each Variable Sub-Account will vary to
reflect the investment experience of the corresponding Fund and will be
determined on each Valuation Day by multiplying the Accumulation Unit Value of
the particular Variable Sub-Account on the preceding Valuation Day by a "Net
Investment Factor" for that Sub-Account for the Valuation Period then ended. The
Net Investment Factor for each Variable Sub-Account is determined by first
dividing (A) the net asset value per share of the corresponding Fund at the end
of the current Valuation Period (plus the per share dividends or capital gains
by that Fund if the ex-dividend date occurs in the Valuation Period then ended),
by (B) the net asset value per share of the corresponding Fund at the end of the
immediately preceding Valuation Period; and then subtracting from the result an
amount equal to the daily deductions for mortality and expense risk charges
imposed during the Valuation Period. Applicants should refer to the prospectus
for the Fund Series which accompanies this prospectus for a description of how
the assets of the Fund Series are valued since such determination has a direct
bearing on the Accumulation Unit Value of the corresponding Variable Sub-Account
and therefore the Account Value. See "Contract Benefits and Rights -- Account
Value," page 13.
All valuations in connection with a Contract, e.g., with respect to
determining Account Value and Cash Surrender Value and in connection with
Contract loans, or calculation of Death Benefits, or with respect to determining
the number of Accumulation Units to be credited to a Contract with each premium,
other than the initial premium and additional premiums requiring underwriting,
will be made on the date the request or payment is received in good order by the
Company at its Home Office if such date is a Valuation Day; otherwise such
determination will be made on the next succeeding date which is a Valuation Day.
Specialized Uses of the Contract: Because the Contract provides for an
accumulation of Cash Value as well as a death benefit, the Contract can be used
for various individual and business financial planning purposes. Purchasing the
Contract in part for such purposes entails certain risks. For example, if the
investment performance of the Variable Sub-Accounts to which Account Value is
allocated is less than expected or if sufficient premiums are not paid, the
Contract may lapse or may not accumulate sufficient Account Value to fund the
purpose for which the Contract was purchased. Withdrawals and Contract loans may
significantly affect current and future Account Value, Cash Surrender Value, or
Death Benefit proceeds. Depending upon Variable Sub-Account investment
performance and the amount of a Contract loan, the loan may cause a Contract to
lapse. The Contract is designed to provide benefits on a long-term basis. Before
purchasing a Contract for a specialized purpose, a purchaser should consider
whether the long-term nature of the Contract is consistent with the purpose for
which it is being considered. Using a Contract for a specialized purpose may
have tax consequences. (See "Federal Tax Considerations," page 20.)
DEDUCTIONS AND CHARGES
MONTHLY DEDUCTIONS
On each Monthly Activity Date including the Contract Date, the Company will
deduct from the Account Value attributable to the Variable Account an amount
("Monthly Deduction Amount") to cover charges and expenses incurred in
connection with the Contract. Each Monthly Deduction Amount will be deducted pro
rata from each Variable Sub-Account attributable to the Contract such that the
proportion of Account Value of the Contract attributable to each Variable
Sub-Account remains the same before and after the deduction. The Monthly
Deduction Amount will vary from month to month. If the Cash Surrender Value is
not sufficient to cover a Monthly Deduction Amount due on any Monthly Activity
Date, the Contract may lapse. See "Contract Benefits and Rights -- Lapse and
Reinstatement," page 15. The following is a summary of the monthly deductions
and charges which constitute the Monthly Deduction Amount.
Cost of Insurance Charge: The cost of insurance charge covers the Company's
anticipated mortality costs for standard and substandard risks. Current cost of
insurance rates are lower after the 10th Contract Year. The current cost of
insurance charge will not exceed the guaranteed cost of insurance charge. This
charge is the maximum annual cost of insurance per $1,000 as indicated in the
Contract; multiplied by the difference between the Death Benefit and the Account
Value (both as determined on the Monthly Activity Date); divided by $1,000; and
divided by 12. For standard risks, the guaranteed cost of insurance rate is
based on the 1980 Commissioner's Standard Ordinary Mortality Table, age last
birthday. (Unisex rates may be required in some states). A table of guaranteed
cost of insurance charges per $1,000 will be included in each Contract; however,
the Company reserves the right to use rates less than those shown in the table.
Substandard risks will be charged at a higher cost of insurance rate that will
not exceed rates based on a multiple of the 1980 Commissioner's Standard
Ordinary Mortality Table, age last birthday. The multiple will be based on the
Insured's substandard rating.
The cost of insurance charge rates are applied to the difference between
the Death Benefit determined on the Monthly Activity Date and the Account Value
on that same date prior to assessing the Monthly Deduction Amount, because the
difference is the amount for which the Company is at risk should the Death
Benefit be then payable. The Death Benefit as computed on a given date is the
greater of: (1) the Specified Amount on that date; or (2) the Account Value on
that date multiplied by the applicable Death Benefit ratio. (For an explanation
of the Death Benefit, see "Contract Benefits and Rights" on page 13.)
10
<PAGE>
EXAMPLE:
<TABLE>
<S> <C> <C>
Specified Amount............................................ = $100,000
Account Value on the Monthly Activity Date.................. = $ 30,000
Insured's attained age...................................... = 45
Death Benefit ratio for age 45.............................. = 2.15
</TABLE>
On the Monthly Activity Date in this example, the Death Benefit as then
computed would be $100,000, because the Specified Amount ($100,000) is greater
than the Account Value multiplied by the applicable Death Benefit ratio ($30,000
X 2.15 = $64,500). Since the Account Value on that date is $30,000, the cost of
insurance charges per $1,000 are applied to the difference ($100,000 - $30,000 =
$70,000).
Assume that the Account Value in the above example was $50,000. The Death
Benefit would then be $107,500 (2.15 X $50,000), since this is greater than the
Specified Amount ($100,000). The cost of insurance rates in this case would be
applied to ($107,500 - $50,000) = $57,500.
Because the Account Value and, as a result, the amount for which the
Company is at risk under a Contract may vary monthly, the cost of insurance
charge may also vary on each Monthly Activity Date. However, once a risk rating
class has been assigned to an Insured when the Contract is issued, that rating
class will not change if additional premium payments or partial withdrawals
increase or decrease the Specified Amount.
Tax Expense Charge: The Company will deduct monthly from the Account Value
a tax expense charge equal to an annual rate of 0.40% of Account Value for the
first ten Contract Years. This charge compensates the Company for premium taxes
imposed by various states and local jurisdictions and for federal taxes related
to the receipt of premiums under the Contracts and that results from the
application of Section 848 of the Code. The charge includes a premium tax
deduction of 0.25% of Account Value and a federal tax deduction of 0.15% of
Account Value. The 0.25% premium tax deduction over ten Contract Years
approximates the Company's average expenses for state and local premium taxes
(2.5%). Premium taxes vary, ranging from zero to 3.5%. The premium tax deduction
will be imposed regardless of a Contract owner's state of residence and,
therefore, is made whether or not any premium tax applies. The deduction may be
higher or lower than the premium tax imposed. The 0.15% federal tax deduction
helps reimburse the Company for approximate expenses incurred for federal taxes
resulting from the application of Section 848 of the Code.
Administrative Expense Charge: The Company will deduct monthly from the
Account Value an administrative expense charge equal to an annual rate of 0.25%
of the Account Value. This charge compensates the Company for administrative
expenses incurred in the administration of the Variable Account and the
Contracts.
All monthly deductions are taken by canceling Accumulation Units of the
Variable Account under the Contract.
OTHER DEDUCTIONS
Mortality and Expense Risk Charge: The Company will deduct from the
Variable Account a daily charge equivalent to an annual rate of 0.90% of average
daily net assets for the mortality risks and expense risks the Company assumes
in relation to the Contracts. The mortality risk assumed includes the risk that
the cost of insurance charges specified in the Contract will be insufficient to
meet claims. The Company also assumes a risk that the Death Benefit will exceed
the amount on which the cost of insurance charges were based on the Monthly
Activity Date preceding the death of an Insured. The expense risk assumed is
that expenses incurred in issuing and administering the Contracts will exceed
the administrative charges set in the Contract.
Annual Maintenance Fee: If the aggregate premiums paid on a Contract are
less than $50,000, the Company will deduct from the Account Value an Annual
Maintenance Fee of $35 on each Contract Anniversary. This fee will help
reimburse the Company for administrative and maintenance costs of the Contracts.
This fee will also be deducted upon surrender of the Contract on other than a
Contract Anniversary.
Taxes Charged Against the Variable Account: Currently no charge is made to
the Variable Account for federal income taxes that may be attributable to the
operations of the Variable Account (as opposed to the federal tax related to the
receipt of premiums under the Contract). The Company may, however, make such a
charge in the future. Charges for other taxes, if any, attributable to the
Variable Account or this class of Contracts may also be made.
11
<PAGE>
Charges Against the Funds: The Variable Account purchases shares of the
Funds at net asset value. The net asset value of each of the Fund's shares
reflects investment advisory fees and administrative expenses already deducted
from the assets of the Funds. Each Funds investment management fees are a
percentage of the average daily value of the net assets of the Funds:
FUND EXPENSES
(AS A PERCENTAGE OF FUND NET ASSETS)
<TABLE>
<CAPTION>
TOTAL FUND
MANAGEMENT OTHER ANNUAL
FUND FEES EXPENSES EXPENSES
---- ---------- -------- ----------
<S> <C> <C> <C>
AIM V.I. Capital Appreciation Fund.......................... 0.64% 0.09% 0.73%
AIM V.I. Growth and Income Fund............................. 0.65% 0.13% 0.78%
AIM V.I. Global Utilities Fund.............................. 0.65% 0.90% 1.55%
AIM V.I. Diversified Income Fund............................ 0.60% 0.26% 0.86%
AIM V.I. Government Securities Fund......................... 0.50% 0.41% 0.91%
AIM V.I. Growth Fund........................................ 0.65% 0.13% 0.78%
AIM V.I. International Equity Fund.......................... 0.75% 0.21% 0.96%
AIM V.I. Value Fund......................................... 0.64% 0.09% 0.73%
AIM V.I. Money Market Fund.................................. 0.40% 0.15% 0.55%
</TABLE>
Withdrawal Charge: Upon surrender of the Contract or partial withdrawals in
excess of the Free Withdrawal Amount, a Withdrawal Charge may be assessed. The
Free Withdrawal Amount in any Contract Year is 10% of total premiums paid. Any
Free Withdrawal Amount not taken in a Contract Year may not be carried forward
to increase the Free Withdrawal Amount in any subsequent year. Withdrawals in
excess of the Free Withdrawal Amount will be subject to a withdrawal charge as
set forth in the table below:
<TABLE>
<CAPTION>
PERCENTAGE OF INITIAL
PREMIUM WITHDRAWN
(IN EXCESS OF FREE
CONTRACT YEAR WITHDRAWAL AMOUNT)
- - ------------- ---------------------
<S> <C>
1.......................................................... 7.75%
2.......................................................... 7.75%
3.......................................................... 7.75%
4.......................................................... 7.25%
5.......................................................... 6.25%
6.......................................................... 5.25%
7.......................................................... 4.25%
8.......................................................... 3.25%
9.......................................................... 2.25%
10+......................................................... 0.00%
</TABLE>
After the ninth Contract Year, no Withdrawal Charges will be imposed. In
addition, no Withdrawal Charge will be imposed on any withdrawal to the extent
that aggregate Withdrawal Charges and the federal tax portion of the tax expense
charge imposed would otherwise exceed 9% of total premiums paid prior to the
withdrawal. The Withdrawal Charge may be waived under certain circumstances if
the Insured is confined to a qualified long-term care facility or hospital. See
"Contract Benefits and Rights -- Confinement Waiver Benefit," page 16.
Due and Unpaid Premium Tax Charge: During the first nine Contract Years, a
charge for due and unpaid premium tax will be imposed on full or partial
withdrawals in excess of the Free Withdrawal Amount. This means that the Free
Withdrawal Amount is not subject to a charge for due and unpaid premium tax.
This charge is shown below, as a percent of the Account Value withdrawn:
<TABLE>
<CAPTION>
PERCENTAGE OF
INITIAL PREMIUM
CONTRACT YEAR WITHDRAWN
- - ------------- ---------------
<S> <C>
1.......................................................... 2.25%
2.......................................................... 2.00%
3.......................................................... 1.75%
4.......................................................... 1.50%
5.......................................................... 1.25%
6.......................................................... 1.00%
7.......................................................... 0.75%
8.......................................................... 0.50%
9.......................................................... 0.25%
10+......................................................... 0.00%
</TABLE>
After the ninth Contract Year, no due and unpaid premium tax charge will be
imposed. The percentages indicated above are guaranteed not to increase.
12
<PAGE>
CONTRACT BENEFITS AND RIGHTS
DEATH BENEFIT
The Contracts provide for the payment of Death Benefit proceeds to the
named beneficiary when the Insured under the Contract dies. The proceeds payable
to the beneficiary equal the Death Benefit less any Indebtedness and less any
due and unpaid Monthly Deduction Amounts occurring during a Grace Period (if
applicable). The Death Benefit equals the greater of: (1) the Specified Amount;
or (2) the Account Value multiplied by the Death Benefit Ratio. The ratios vary
according to the attained age of the Insured and are specified in the Contract.
An increase in Account Value due to favorable investment experience may increase
the Death Benefit above the Specified Amount; and a decrease in Account Value
due to unfavorable investment experience may decrease the Death Benefit (but
not below the Specified Amount).
EXAMPLES:
<TABLE>
<CAPTION>
A B
- -
<S> <C> <C>
Specified Amount: .......................................... $100,000 $100,000
Insured's Age: ............................................. 45 45
Account Value on Date of Death: ............................ $ 48,000 $ 34,000
Death Benefit Ratio......................................... 2.15 2.15
</TABLE>
In Example A, the Death Benefit equals $103,200, i.e., the greater of
$100,000 (the Specified Amount) and $103,200 (the Account Value at the Date of
Death of $48,000, multiplied by the Death Benefit Ratio of 2.15). This amount,
less any Indebtedness and due and unpaid Monthly Deduction Amounts, constitutes
the proceeds which we would pay to the beneficiary.
In Example B, the Death Benefit is $100,000, i.e., the greater of $100,000
(the Specified Amount) or $73,100 (the Account Value of $34,000 multiplied by
the Death Benefit Ratio of 2.15).
All or part of the proceeds may be paid in cash or applied under an Income
Plan. See "Other Matters -- Payment Options," page 17.
ACCELERATED DEATH BENEFIT
If the Insured becomes terminally ill, the Contract Owner may request an
accelerated Death Benefit in an amount up to the lesser of: (1) 50% of the
Specified Amount on the day we receive the request; or (2) $250,000 for all
policies issued by the Company which cover the Insured. "Terminally ill" means
an illness or physical condition of the Insured that, notwithstanding
appropriate medical care, will result in a life expectancy of 12 months or less.
If the Insured is terminally ill as the result of an illness, the accelerated
Death Benefit is not available unless the illness occurred at least 30 days
after the Issue Date. If the Insured is terminally ill as the result of an
accident, the accelerated Death Benefit is available if the accident occurred
after the Issue Date.
The Company will pay benefits due under the accelerated Death Benefit
provision upon receipt of a written request from the Contract Owner and due
proof that the Insured has been diagnosed as terminally ill. The Company
reserves the right to require supporting documentation of the diagnosis and to
require, at the Company's expense, an examination of the Insured by a physician
of the Company's choice to confirm the diagnosis. The amount of the payment will
be the amount requested by the Contract Owner, reduced by the sum of: (1) a 12
month interest discount to reflect the early payment; (2) an administrative fee
not to exceed $250; and (3) a pro rata amount of any outstanding Contract loan
and accrued loan interest. After the payment has been made, the Specified
Amount, the Account Value and any outstanding Contract loan will be reduced on a
prorata basis.
Only one request for an accelerated Death Benefit per Insured is allowed.
The accelerated Death Benefit may not be available in all states.
ACCOUNT VALUE
The Account Value of a Contract will be computed on each Valuation Day. On
the Contract Date, the Account Value is equal to the initial premium (plus an
amount equal to the interest that would have been earned had the initial premium
been invested in the AIM V.I. Money Market Sub-Account since the date of receipt
of the premium) less the Monthly Deduction Amount for the first month.
Thereafter, the Account Value will vary to reflect the investment experience of
the Funds, the value of the Loan Account and the Monthly Deduction Amounts.
There is no minimum guaranteed Account Value.
The Account Value of a particular Contract is related to the net asset
value of the Funds to which premiums paid on the Contract have been allocated.
The Account Value on any Valuation Day is calculated by multiplying the number
of Accumulation Units credited to the Contract in each Variable Sub-Account as
of the Valuation Day by the then Accumulation Unit Value of that Variable
Sub-Account and then summing the result for all the Variable Sub-Accounts
credited to the Contract and the value of the Loan Account. See "The Contract --
Accumulation Unit Values," page 10.
13
<PAGE>
TRANSFER OF ACCOUNT VALUE
While the Contract remains in force and subject to the Company's transfer
rules then in effect, the Contract Owner may request that part or all of the
Account Value of a particular Variable Sub-Account be transferred to other
Variable Sub-Accounts. The Company reserves the right to impose a $10 charge on
each such transfer in excess of 12 per Contract Year. There are no charges on
transfers at the present time. The minimum amount that can be transferred is
shown on the Contract Data page (currently, there is no minimum).
Telephone transfer requests will be accepted by the Company if received at
1(800) 776-6978 by 4:00 p.m., Eastern Time. Telephone transfer requests received
at any other telephone number or after 4:00 p.m., Eastern Time will not be
accepted by the Company. Telephone transfer requests received before 4:00 p.m.,
Eastern Time are effected at the next computed value. Transfers by telephone may
be made by the Contract Owner's agent of record or attorney-in-fact pursuant to
a power of attorney. Telephone transfers may not be permitted in some states.
The policy of the Company and its agents and affiliates is that they will not be
responsible for losses resulting from acting upon telephone requests reasonably
believed to be genuine. The Company will employ reasonable procedures to confirm
that instructions communicated by telephone are genuine; otherwise, the Company
may be liable for any losses due to unauthorized or fraudulent instructions. The
procedures the Company follows for transactions initiated by telephone include
requirements that callers on behalf of a Contract Owner identify themselves and
the Contract Owner by name and social security number or other identifying
information. All transfer instructions by telephone are tape recorded.
As a result of a transfer, the number of Accumulation Units credited to the
Variable Sub-Account from which the transfer is made will be reduced by the
number obtained by dividing the amount transferred by the Accumulation Unit
Value of the Variable Sub-Account from which the transfer is made on the
Valuation Day the Company receives the transfer request. The number of
Accumulation Units credited to the Variable Sub-Account to which the transfer is
made will be increased by the number obtained by dividing the amount transferred
by the Accumulation Unit Value of that Variable Sub-Account on the Valuation Day
the Company receives the transfer request.
DOLLAR COST AVERAGING
Transfers may be made automatically through Dollar Cost Averaging while the
Contract is in force. Dollar Cost Averaging permits the Owner to transfer a
specified amount every month (or some other frequency as may be determined by
the Company) from any Variable Sub-Account to any other Variable Sub-Account.
The theory of Dollar Cost Averaging is that, if purchases of equal dollar
amounts are made at fluctuating prices, the aggregate average cost per unit will
be less than the average of the unit prices on the same purchase dates.
Participation in the Dollar Cost Averaging program does not assure you of a
greater profit from your purchases under the program, nor will it prevent or
alleviate losses in a declining market. Transfers under Dollar Cost Averaging
are not included in the count toward the 12 free transfers per year currently
permitted.
AUTOMATIC PORTFOLIO REBALANCING
Transfers may be made automatically through Automatic Portfolio Rebalancing
while the Contract is in force. By electing Automatic Portfolio Rebalancing, the
Account Value in the Variable Sub-Accounts will be rebalanced to the desired
allocation on a quarterly basis, determined from the first date that you decide
to rebalance. Each quarter, Account Value will be transferred among Variable
Sub-Accounts to achieve the desired allocation.
The desired allocation will be the allocation initially selected, unless
subsequently changed. You may change the allocation at any time by giving us
written notice. The new allocation will be effective with the first rebalancing
that occurs after we receive your written request.
CONTRACT LOANS
While the Contract is in force, a Contract Owner may obtain, without the
consent of the beneficiary (provided the designation of beneficiary is not
irrevocable), one or both of two types of cash loans from the Company. These
types are Preferred Loans (described below) and non-Preferred Loans. Both types
of loans are secured by the Contract. The maximum amount available for a loan is
90% of the Contract's Cash Value, less the amount of all Contract loans existing
on the date of the loan (including loan interest to the next Contract
Anniversary), less any due and unpaid Monthly Deduction Amounts, and less any
Annual Maintenance Fee due on or before the next Contract Anniversary.
The loan amount will be transferred pro rata from each Variable Sub-Account
attributable to the Contract (unless the Contract Owner specifies otherwise) to
the Loan Account. The amounts allocated to the Loan Account will be credited
with interest at the loan credited rate set forth in the Contract. Loans will
bear interest at rates determined by the Company from time to time. Rates will
not exceed the maximum rate indicated in the Contract (currently 8% per year).
The amount of the Loan Account that equals the difference between the Account
Value and the total of all premiums paid under the Contract net of any premiums
returned due to partial withdrawals, as determined on each Contract Anniversary,
is considered a "Preferred Loan." Preferred Loans bear interest at a rate not to
exceed the Preferred Loan rate set forth in the Contract. The difference between
the value of the Loan Account and the Indebtedness will be transferred on a
pro-rata basis from the Variable Sub-Accounts to the Loan Account on each
Contract Anniversary. If the aggregate outstanding loan(s) and loan interest
secured by the Contract exceeds the Cash Value of the Contract, the Company will
give written notice
14
<PAGE>
to the Contract Owner that unless the Company receives an additional payment
within 61 days (the "Grace Period") to reduce the aggregate outstanding loan(s)
secured by the Contract, the Contract may lapse.
All or any part of any loan secured by a Contract may be repaid while the
Contract is still in force. When loan repayments or interest payments are made,
the repayment will be allocated among the Variable Sub-Accounts in the same
percentage as subsequent payments are allocated (unless the Contract Owner
requests a different allocation), and an amount equal to the payment will be
deducted from the Loan Account. Any outstanding loan at the end of a Grace
Period must be repaid before the Contract will be reinstated. See "Contract
Benefits and Rights -- Lapse and Reinstatement," page 15.
A loan, whether or not repaid, will have a permanent effect on the Account
Value because the investment results of each Variable Sub-Account will apply
only to the amount remaining in that Variable Sub-Account. The longer a loan is
outstanding, the greater the effect is likely to be. The effect could be
favorable or unfavorable. If the Variable Sub-Accounts earn more than the annual
interest rate for amounts held in the Loan Account, a Contract Owner's Account
Value will not increase as rapidly as it would have had no loan been made. If
the Variable Sub-Accounts earn less than that rate, the Contract Owner's Account
Value will be greater than it would have been had no loan been made. Also, if
not repaid, the aggregate outstanding loan(s) will reduce the Death Benefit
proceeds and Cash Surrender Value otherwise payable.
AMOUNT PAYABLE ON SURRENDER OF THE CONTRACT
While the Contract is in force, a Contract Owner may elect, without the
consent of the beneficiary (provided the designation of beneficiary is not
irrevocable), to surrender the Contract. Upon surrender, the Contract Owner will
receive the Cash Surrender Value determined as of the day the Company receives
the Contract Owner's written request for surrender or the date requested by the
Contract Owner, whichever is later. The Cash Surrender Value equals the Cash
Value less the Annual Maintenance Fee and any Indebtedness. The Company will pay
the Cash Surrender Value of the Contract within seven days of receipt by the
Company of the written request or on the effective surrender date requested by
the Contract Owner, whichever is later.
The Contract will terminate on the date of receipt of the written request,
or the date the Contract Owner requests the surrender to be effective, whichever
is later. For a discussion of the tax consequences of surrendering the Contract,
see "Federal Tax Considerations," page 20.
The Contract Owner may elect to apply the surrender proceeds to an Income
Plan (see "Other Matters -- Payment Options," page 17).
PARTIAL WITHDRAWALS
While the Contract is in force, a Contract Owner may elect, by written
request, to make partial withdrawals of at least $50 from the Cash Surrender
Value. The Cash Surrender Value, after the partial withdrawal, must at least
equal $2,000; otherwise, the request will be treated as a request for surrender.
The partial withdrawal will be deducted pro rata from each Variable Sub-Account,
unless the Contract Owner instructs otherwise. The Specified Amount after the
partial withdrawal will be the greater of:
- the Specified Amount prior to the partial withdrawal reduced
proportionately to the reduction in Account Value; or
- the minimum Specified Amount necessary in order to meet the definition of
a life insurance contract under Section 7702 of the Code.
Partial withdrawals in excess of the Free Withdrawal Amount may be subject
to a Withdrawal Charge and any due and unpaid premium tax charges. See
"Deductions and Charges -- Other Deductions -- Withdrawal Charge" and "Premium
Tax Charge." For a discussion of the tax consequences of partial withdrawals,
see "Federal Tax Considerations," page 20.
MATURITY
The Contracts have no maturity date.
LAPSE AND REINSTATEMENT
The Contract will remain in force until the Cash Surrender Value is
insufficient to cover a Monthly Deduction Amount due on a Monthly Activity Date.
The Company will give written notice to the Contract Owner that if an amount
shown in the notice (which will be sufficient to cover the Monthly Deduction
Amount(s) due) is not paid within the 61 day Grace Period, there is a danger of
lapse.
The Contract will continue through the Grace Period, but if no payment is
forthcoming, it will terminate at the end of the Grace Period. If the Insured
dies during the Grace Period, the proceeds payable under the Contract will be
reduced by the Monthly Deduction Amount(s) due and unpaid. See "Contract
Benefits and Rights -- Death Benefit," page 13.
If the Contract lapses, the Contract Owner may apply for reinstatement of
the Contract by payment of the reinstatement premium (and any applicable
charges) required under the Contract. A request for reinstatement must be made
within five years of the date the Contract entered a Grace Period. If a loan was
outstanding at the time of lapse, the Company will require repayment of the loan
before permitting reinstatement. In addition, the Company reserves the right to
require evidence of insurability satisfactory to the Company. The
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reinstatement premium is equal to an amount sufficient to: (1) cover all Monthly
Deduction Amounts and Annual Maintenance Fees due and unpaid during the Grace
Period, and (2) keep the Contract in force for three months after the date of
reinstatement. The Specified Amount upon reinstatement cannot exceed the
Specified Amount of the Contract at its lapse. The Account Value on the
reinstatement date will reflect the Account Value at the time of termination of
the Contract plus the premiums paid at the time of reinstatement. Withdrawal
charges and due and unpaid premium tax charges, Cost of Insurance, and Tax
Expense Charges will continue to be based on the original Contract Date.
CANCELLATION AND EXCHANGE RIGHTS
A Contract Owner has a limited right to return a Contract for cancellation.
This right to return exists during the free-look period. The free-look period is
a number of days (which varies by state) as specified in your Contract. If the
Contract is returned for cancellation by mail or personal delivery to the
Company or to the agent who sold the Contract within the free-look period
following delivery of the Contract to the Contract Owner, the Company will
return to the Contract Owner within 7 days the sum of: (1) the Account Value on
the date the returned Contract is received by the Company or its agent; and (2)
any deductions under the Contract or by the Funds for taxes, charges or fees.
Some states may require the Company to return the premiums paid for the returned
Contract.
Once the Contract is in effect, it may be exchanged during the first 24
months after its issuance for a non-variable permanent life insurance contract
offered by the Company on the life of the Insured. The Company reserves the
right to make available a permanent life insurance contract offered by the
Company's account or any affiliated company without evidence of insurability.
The amount at risk to the Company (i.e., the difference between the Death
Benefit and the Account Value) under the new contract will be equal to or less
than the amount at risk to the Company under the exchanged Contract on the date
of exchange. Premiums under the new Contract will be based on the same risk
classification as the exchanged Contract. The exchange is subject to adjustments
in premiums and Account Value to reflect any variance between the exchanged
Contract and the new contract. The Company reserves the right to make such a
contract available that is offered by the Company's parent or by any affiliate
of the Company.
CONFINEMENT WAIVER BENEFIT
Under the terms of an amendatory endorsement to the Contract, the Company
will waive any Withdrawal Charges on partial withdrawals and surrenders of the
Contract requested while the Insured is confined to a qualified long-term care
facility or hospital for a period of more than 90 consecutive days beginning 30
days or more after the Contract Date, or within 90 days after the Insured is
discharged from such confinement. The confinement must have been prescribed by a
licensed medical doctor or a licensed doctor of osteopathy, operating within the
scope of his or her license, and must be medically necessary. The prescribing
doctor may not be the Insured, the Contract Owner, or any spouse, child, parent,
grandchild, grandparent, sibling or in-law of the Contract Owner. "Medically
necessary" means appropriate and consistent with the diagnosis and which could
not have been omitted without adversely affecting the Insured's condition. The
confinement waiver benefit may not be available in all states.
SUSPENSION OF VALUATION, PAYMENTS AND TRANSFERS
The Company will suspend all procedures requiring valuation of the Variable
Account (including transfers, surrenders and loans) on any day the New York
Stock Exchange is closed or trading is restricted due to an existing emergency
as defined by the Commission, or on any day the Commission has ordered that the
right of surrender of the Contracts be suspended for the protection of Contract
Owners, until such emergency has ended.
LAST SURVIVOR CONTRACTS
The Contracts are offered on a single life and "last survivor" basis.
Contracts sold on a last survivor basis operate in a manner almost identical to
the single life version. The most important difference is that the last survivor
version involves two Insureds and the proceeds are paid only on the death of the
last surviving Insured. The other significant differences between the last
survivor and single life versions are listed below:
1. Last survivor Contracts are offered for prospective insured persons age
18-85.
2. The cost of insurance charges under the last survivor Contracts are
determined in a manner that reflects the anticipated mortality of the
two Insureds and the fact that the Death Benefit is not payable until
the death of the second Insured. See the last survivor illustrations in
"Appendix A," page A-1.
3. To qualify for simplified underwriting under a last survivor Contract,
both Insureds must meet the simplified underwriting standards.
4. For a last survivor Contract to be reinstated, both Insureds must be
alive on the date of reinstatement.
5. For a last survivor Contract, provisions regarding misstatement of age
or sex, suicide and incontestability apply to either Insured.
6. The Accelerated Death Benefit provision is only available upon terminal
illness of the last survivor.
7. The Confinement Waiver Benefit is available upon confinement of either
insured.
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OTHER MATTERS
VOTING PRIVILEGES
In accordance with its view of presently applicable law, the Company will
vote the shares of the Funds at regular and special meetings of the shareholders
of the Funds in accordance with instructions from Contract Owners (or the
assignee of the Contract, as the case may be) having a voting interest in the
Variable Account. The number of shares of a Fund held in a Variable Sub-Account
which are attributable to each Contract Owner is determined by dividing the
Contract Owner's interest in that Variable Sub-Account by the per share net
asset value of the corresponding Fund. The Company will vote shares for which no
instructions have been given and shares which are not attributable to Contract
Owners (i.e., shares owned by the Company) in the same proportion as it votes
shares for which it has received instructions. If the 1940 Act or any rule
promulgated thereunder should be amended, however, or if the Company's present
interpretation should change and, as a result, the Company determines it is
permitted to vote the shares of the Funds in its own right, it may elect to do
so.
The voting interests of the Contract Owner (or the assignee) in the Funds
will be determined as follows: Contract Owners are entitled to give voting
instructions to the Company with respect to Fund shares attributable to them as
described above, determined on the record date for the shareholder meeting for
that Fund. Therefore, if a Contract Owner has taken a loan secured by the
Contract, amounts transferred from the Variable Sub-Account(s) to the Loan
Account in connection with the loan (see "Contract Benefits and Rights --
Contract Loans," page 14) will not be considered in determining the voting
interests of the Contract Owner. Contract Owners should review the prospectus
for the Fund Series which accompanies this prospectus to determine matters on
which Fund Series shareholders may vote.
The Company may, when required by state insurance regulatory authorities,
disregard voting instructions if the instructions require that the shares be
voted so as to cause a change in the sub-classification or investment objective
of one or more of the Funds or to approve or disapprove an investment advisory
contract for the Funds.
The Company may disregard voting instructions in favor of changes initiated
by Contract Owners in the investment objectives or the investment advisor of the
Funds if the Company reasonably disapproves of such changes. A change would be
disapproved only if the proposed change is contrary to state law or prohibited
by state regulatory authorities. If the Company does disregard voting
instructions, a summary of that action and the reasons for such action will be
included in the next periodic report to Contract Owners.
STATEMENTS TO CONTRACT OWNERS
The Company will maintain all records relating to the Variable Account and
the Variable Sub-Accounts. At least once each Contract Year, the Company will
send to each Contract Owner a statement showing the coverage amount and the
Account Value of the Contract (indicating the number of Accumulation Units
credited to the Contract in each Variable Sub-Account and the corresponding
Accumulation Unit Value), and any outstanding loan secured by the Contract as of
the date of the statement. The statement will also show premiums paid, and
Monthly Deduction Amounts under the Contract since the last statement, and any
other information required by applicable law or regulation.
LIMIT ON RIGHT TO CONTEST
The Company may not contest the validity of the Contract after it has been
in effect during the Insured's lifetime for two years from the Contract Date. If
the Contract is reinstated, the two-year period is measured from the date of
reinstatement. Any increase in the Specified Amount for which evidence of
insurability was obtained is contestable for 2 years from its effective date. In
addition, if the Insured dies by suicide while sane or self destruction while
insane in the two-year period after the Contract Date, or such period as
specified under applicable state law, the benefit payable will be limited to the
premiums paid less any Indebtedness and partial withdrawals. If the Insured dies
by suicide while sane or self-destruction while insane in the two-year period
following an increase in the Specified Amount, the benefit payable with respect
to the increase will be limited to the additional premium paid for such
increase, less any Indebtedness and partial withdrawals.
MISSTATEMENT AS TO AGE AND SEX
If the age or sex of the Insured is incorrectly stated, the Death Benefit
will be appropriately adjusted as specified in the Contract.
PAYMENT OPTIONS
The surrender proceeds or Death Benefit proceeds under the Contracts may be
paid in a lump sum or may be applied to one of the Company's Income Plans. If
the amount to be applied to an Income Plan is less than $3,000 or if it would
result in an initial income payment of less than $20, the Company may require
that the frequency of income payments be decreased such that the income payments
are greater than $20 each, or the Company may elect to pay the amount in a lump
sum. No surrender or partial withdrawals are permitted after payments under an
Income Plan commence.
We will pay interest on the proceeds from the date of the Insured's death
to the date payment is made or a payment option is elected. At such times, the
proceeds are not subject to the investment experience of the Variable Account.
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The Income Plans are fixed annuities payable from the Company's general
account. They do not reflect the investment experience of the Variable Account.
Fixed annuity payments are determined by multiplying the amount applied to the
annuity by a rate to be determined by the Company which is no less than the rate
specified in the fixed payment annuity tables in the Contract. The annuity
payment will remain level for the duration of the annuity. The Company may
require proof of age and gender of the payee (and joint payee, if applicable)
before payments begin. The Company may also require proof that such person(s)
are living before it makes each payment.
The following options are available under the Contracts (the Company may
offer other payment options):
INCOME PLAN 1 -- LIFE INCOME WITH GUARANTEED PAYMENTS
The Company will make payments for as long as the payee lives. If the payee
dies before the selected number of guaranteed payments have been made, the
Company will continue to pay the remainder of the guaranteed payments.
INCOME PLAN 2 -- JOINT AND SURVIVOR LIFE INCOME WITH GUARANTEED PAYMENTS
The Company will make payments for as long as either the payee or joint
payee, named at the time of Income Plan selection, is living. If both the payee
and the joint payee die before the selected number of guaranteed payments have
been made, the Company will continue to pay the remainder of the guaranteed
payments.
The Company will make any other arrangements for income payments as may be
agreed on.
BENEFICIARY
The applicant names the beneficiary in the application for the Contract.
The Contract Owner may change the beneficiary (unless irrevocably named) during
the Insured's lifetime by written request to the Company. If no beneficiary is
living when the Insured dies, the proceeds will be paid to the Contract Owner if
living; otherwise to the Contract Owner's estate.
ASSIGNMENT
Unless required by state law, the Contract may not be assigned as
collateral for a loan or other obligation.
DIVIDENDS
No dividends will be paid under the Contracts. The Contracts are
nonparticipating.
GLENBROOK LIFE AND ANNUITY COMPANY
EXECUTIVE OFFICERS AND DIRECTORS OF THE COMPANY
The directors and executive officers are listed below, together with
information as to their ages, dates of election and principal business
occupations during the last five years (if other than their present business
occupations).
LOUIS G. LOWER, II, 52, Chief Executive Officer and Chairman of the Board
(1995)*
Also Director (1986-Present) and Senior Vice President (1995-Present) of
Allstate Insurance Company; Director (1991-Present) of Allstate Life Financial
Services, Inc.; Director (1986-Present) and President (1990-Present) Allstate
Life Insurance Company; Director (1983-Present) and Chairman of the Board
(1990-Present) of Allstate Life Insurance Company of New York; Director
(1990-Present), Chairman of the Board of Directors and Chief Executive Officer
(1995-Present), Chairman of the Board of Directors and President (1990-1995) of
Glenbrook Life Insurance Company; Director and Chairman of the Board
(1995-Present) of Laughlin Group Holdings, Inc.; Director and Chairman of the
Board of Directors and Chief Executive Officer (1989-Present) Lincoln Benefit
Life Company; Director (1986-Present), Chairman of the Board of Directors and
Chief Executive Officer (1995-Present) of Northbrook Life Insurance Company; and
Chairman of the Board of Directors and Chief Executive Officer (1995-Present)
Surety Life Insurance Company.
PETER H. HECKMAN, 51, President, Chief Operating Officer and Director (1996)*
Also Director and Vice President (1988-Present) of Allstate Life Insurance
Company; Director (1990-1996), Vice President (1989-Present), Allstate Life
Insurance Company of New York; Director (1991-1993) of Allstate Life Financial
Services, Inc.; Director (1990-Present), President and Chief Operating Officer
(1996-Present), and Vice President (1990-1996), Glenbrook Life Insurance
Company; Director (1995-Present) and Vice Chairman of the Board (1996-Present)
Laughlin Group Holdings, Inc.; Director (1990-Present) and Vice Chairman of the
Board (1996-Present) Lincoln Benefit Life Company; Director (1988-Present)
President and Chief Operating Officer (1996-Present), and was Vice President
(1989-1996), Northbrook Life Insurance Company; and Director (1995-Present) and
Vice Chairman of the Board (1996-Present) Surety Life Insurance Company.
MICHAEL J. VELOTTA, 51, Vice President, Secretary, General Counsel, and Director
(1992)*
Also Director and Secretary (1993-Present) of Allstate Life Financial
Services, Inc.; Director (1992-Present) Vice President, Secretary and General
Counsel (1993-Present) Allstate Life Insurance Company; Director (1992-Present)
Vice President, Secretary and General Counsel (1993-Present) Allstate Life
Insurance Company of New York; Director (1992-Present) Vice President, Secretary
and
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General Counsel (1993-Present) Glenbrook Life Insurance Company; Director and
Secretary (1995-Present) Laughlin Group Holdings, Inc.; Director (1992-Present)
and Assistant Secretary (1995-Present) Lincoln Benefit Life Company; Director
(1992-Present) Vice President, Secretary and General Counsel (1993-Present)
Northbrook Life Insurance Company; and Director and Assistant Secretary
(1995-Present) Surety Life Insurance Company.
JOHN R. HUNTER, 42, Director (1996)*
Also Assistant Vice President (1990-Present) Allstate Life Insurance
Company; Assistant Vice President (1996-Present) Allstate Life Insurance Company
of New York; Director (1996-Present) Glenbrook Life Insurance Company; and
Director (1994-Present) and Assistant Vice President (1990-Present) Northbrook
Life Insurance Company.
G. CRAIG WHITEHEAD, 51, Senior Vice President and Director (1995)*
Also Assistant Vice President (1991-Present) Allstate Life Insurance
Company; Director (1994-Present) Assistant Vice President (1991-Present)
Glenbrook Life Insurance Company; Assistant Vice President (1992-Present)
Secretary (1995) Glenbrook Life and Annuity Company; Director (1995-Present)
Laughlin Group Holdings, Inc.
MARLA G. FRIEDMAN, 43, Vice President (1996)*
Also Director (1991-Present) and Vice President (1988-Present) Allstate
Life Insurance Company; Director (1993-1996) Allstate Life Financial Services,
Inc.; Assistant Vice President (1996-Present) Allstate Life Insurance Company of
New York; Director (1991-1996), President and Chief Operating Officer
(1995-1996) and Vice President (1990-1995) and (1996-Present) Glenbrook Life
Insurance Company; Director and Vice Chairman of the Board (1995-1996) Laughlin
Group Holdings, Inc.; and Director (1989-1996), President and Chief Operating
Officer (1995-1996) and Vice President (1996-Present) Northbrook Life Insurance
Company.
KEVIN R. SLAWIN, 39, Vice President (1996)*
Also Assistant Vice President and Assistant Treasurer (1995-1996) Allstate
Insurance Company; Director (1996-Present) and Assistant Treasurer (1995-1996)
Allstate Financial Services, Inc.; Director and Vice President (1996-Present)
and Assistant Treasurer (1995-1996) Allstate Life Insurance Company; Director
and Vice President (1996-Present) and Assistant Treasurer (1995-1996) Allstate
Life Insurance Company of New York; Director and Vice President (1996-Present)
and Assistant Treasurer (1995-1996) Glenbrook Life Insurance Company; Director
(1996-Present) and Assistant Treasurer (1995-1996) Laughlin Group Holdings,
Inc.; Director (1996-Present) Lincoln Benefit Life Company; Director and Vice
President (1996-Present) and Assistant Treasurer (1995-1996) Northbrook Life
Insurance Company; Director (1996-Present) Surety Life Insurance Company; and
Assistant Treasurer and Director (1994-1995) Sears Roebuck and Co.; and
Treasurer and First Vice President (1986-1994) Sears Mortgage Corporation.
CASEY J. SYLLA, 54, Chief Investment Officer (1995)*
Also Director (1995-Present) Senior Vice President and Chief Investment
Officer (1995-Present) Allstate Insurance Company; Director (1995-Present) Chief
Investment Officer (1995-Present) Allstate Life Insurance Company; Chief
Investment Officer (1995-Present) Allstate Life Insurance Company of New York;
Chief Investment Officer (1995-Present) Glenbrook Life Insurance Company; and
Director and Chief Investment Officer (1995-Present) Northbrook Life Insurance
Company. Prior to 1995 he was Senior Vice President and Executive Officer --
Investments (1992-1995) of Northwestern Mutual Life Insurance Company.
JAMES P. ZILS, 46, Treasurer (1995)*
Also Vice President and Treasurer (1995-Present) Allstate Insurance
Company; Treasurer (1995-Present) Allstate Life Financial Services, Inc.;
Treasurer (1995-Present) Allstate Life Insurance Company; Treasurer
(1995-Present) Allstate Life Insurance Company of New York; Treasurer
(1995-Present) Glenbrook Life Insurance Company; Treasurer (1995-Present)
Laughlin Group Holdings, Inc.; and Treasurer (1995-Present) Northbrook Life
Insurance Company. Prior to 1995 he was Vice President of Allstate Life
Insurance Company. Prior to 1993 he held various management positions.
* Date elected/appointed to current office.
DISTRIBUTION OF THE CONTRACTS
Allstate Life Financial Services, Inc. ("ALFS"), 3100 Sanders Road,
Northbrook Illinois, a wholly owned subsidiary of Allstate Life Insurance
Company, acts as the principal underwriter of the Contracts. ALFS is registered
as a broker-dealer under the Securities Exchange Act of 1934 and became a member
of the National Association of Securities Dealers, Inc. on June 30, 1993.
Contracts are sold by registered representatives of unaffiliated broker-dealers
or bank employees who are licensed insurance agents appointed by the Company,
either individually or through an incorporated insurance agency and who have
entered into a selling agreement with ALFS to sell the Contracts. In some
states, Contracts may be sold by representatives or employees of banks which may
be acting as broker-dealers without separate registration under the Securities
Exchange Act of 1934, pursuant to legal and regulatory exceptions.
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The maximum sales commission payable to Company agents, independent
registered insurance brokers, and other registered broker-dealers is 7.25% of
initial and subsequent premiums. From time to time, the Company may pay or
permit other promotional incentives, in cash or credit or other compensation.
The underwriting agreement with ALFS provides for indemnification of ALFS
by the Company for liability to Owners arising out of services rendered or
Contracts issued.
SAFEKEEPING OF THE VARIABLE
ACCOUNT'S ASSETS
The assets of the Variable Account are held by the Company. The assets of
the Variable Account are kept physically segregated and held separate and apart
from the General Account of the Company. The Company maintains records of all
purchases and redemptions of shares of the Funds.
FEDERAL TAX CONSIDERATIONS
INTRODUCTION
THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX ADVICE. THE
COMPANY MAKES NO GUARANTEE REGARDING THE TAX TREATMENT OF ANY CONTRACT OR
TRANSACTION INVOLVING A CONTRACT. Federal, state, local and other tax
consequences of ownership or purchase of a life insurance contract depend upon
the individual circumstances of each person. If you are concerned about any tax
consequences with regard to your individual circumstances, you should consult a
qualified tax advisor.
TAXATION OF THE COMPANY AND THE VARIABLE ACCOUNT
The Company is taxed as a life insurance company under Part I of Subchapter
L of the Internal Revenue Code. Since the Variable Account is not an entity
separate from the Company and its operations form a part of the Company, it will
not be taxed separately as a "Regulated Investment Company" under Subchapter M
of the Code. Investment income and realized capital gains are automatically
applied to increase reserves under the Contracts. Under existing federal income
tax law, the Company believes that the Variable Account investment income and
realized net capital gains will not be taxed to the extent that such income and
gains are applied to increase the reserves under the Contracts.
Accordingly, the Company does not anticipate that it will incur any federal
income tax liability attributable to the Variable Account, and therefore the
Company does not intend to make provisions for any such taxes. However, if
changes in the federal tax laws or interpretations thereof result in the Company
being taxed on income or gains attributable to the Variable Account, then the
Company may impose a charge against the Variable Account (with respect to some
or all Contracts) in order to set aside provisions to pay such taxes.
TAXATION OF CONTRACT BENEFITS
In order to qualify as a life insurance contract for federal income tax
purposes, the Contract must meet the definition of a life insurance contract set
forth in Section 7702 of the Code. Section 7702 limits the amount of premiums
that may be invested in a contract that is treated as life insurance. The manner
in which Section 7702 should be applied to certain features of the Contract
offered in this prospectus is not directly addressed in Section 7702.
Nevertheless, the Company believes that the Contact will meet the Section 7702
definition of a life insurance contract. This means that:
- the death benefit should be fully excludable from the gross income of the
beneficiary under Section 101(a)(1) of the Code; and
- the Contract Owner should not be considered in constructive receipt of
the Cash Value of the Contract, including any increases, until actual
cancellation of the Contract
In addition, in the absence of final regulations or other pertinent
interpretations of Section 7702, there is necessarily some uncertainty as to
whether a substandard risk Contract will meet the statutory life insurance
contract definition. If a Contract were determined not to be a life insurance
contract for purposes of Section 7702, such Contract would not provide most of
the tax advantages normally provided by a life insurance contract. The Company
reserves the right to amend the Contracts to comply with any future changes in
the Code, any regulations or rulings under the Code and any other requirements
imposed by the Internal Revenue Service.
If you own and are the Insured under the Contract, the Death Benefit will
be included in your gross estate for federal estate tax purposes if the proceeds
are payable to your estate. If the beneficiary is other than your estate but you
retained incidents of ownership in the Contract, the Death Benefit will also be
included in your gross estate. Examples of incidents of ownership include, but
are not limited to, the right to change beneficiaries, to assign the Contract or
revoke an assignment, to pledge the Contract or to obtain a policy loan. If you
own and are the Insured under the Contract and you transfer all incidents of
ownership in the Contract, the Death Benefit will be included in your gross
estate if you die within three years from the date of the ownership transfer.
State and local estate and inheritance tax consequences may also apply. In
addition, certain transfers of the Contract or Death Benefit, either during life
or at death, to individuals (or trusts for the benefit of such individuals) two
or more generations below that of the transferor may be subject to the federal
generation skipping transfer tax.
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In addition, the Contract may be used in various arrangements, including
nonqualified deferred compensation or salary continuance plans, split dollar
insurance plans, executive bonus plans, retiree medical benefit plans, and
others. The tax consequences of such plans may vary depending on the particular
facts and circumstances of each individual arrangement. Therefore, if you are
contemplating the use of a Contract in any arrangement the value of which
depends in part on its tax consequences, you should be sure to consult a
qualified tax advisor regarding the tax attributes of the particular
arrangement.
MODIFIED ENDOWMENT CONTRACTS
A life insurance contract is treated as a "modified endowment contract"
under Section 7702A of the Code if it meets the definition of life insurance in
Section 7702 but fails the "seven-pay" test of Section 7702A. The seven-pay test
provides that premiums cannot be paid at a rate more rapidly than that allowed
by the payment of seven annual premiums using specified computational rules
provided in Section 7702A(c). The large single premium permitted under the
Contract (which is equal to 100% of the "Guideline Single Premium" as defined in
Section 7702 of the Code) does not meet the specified computational rules for
the "seven-pay test" under Section 7702A(c). Therefore, the Contract will
generally be treated as a modified endowment contract for federal income tax
purposes. However, an exchange of a life insurance contract that is not a
modified endowment contract will not cause the new contract to be a modified
endowment contract if no additional premiums are paid. An exchange under Section
1035 of the Code of a life insurance contract that is a modified endowment
contract for a new life insurance contract will always cause the new contract to
be a modified endowment contract. A contract that is classified as a modified
endowment contract is generally eligible for the beneficial tax treatment
accorded to life insurance. Accordingly, the death benefit is excluded from
income and increments in value are not subject to current taxation. If a person
receives any amount as a policy loan from a modified endowment contract, or
assigns or pledges any part of the value of the contract, such amount is treated
as a distribution. Unlike other life insurance contracts, distributions received
before the insured's death are treated first as income (to the extent of gain)
and then as recovery of investment in the contract. Any amounts that are taxable
withdrawals will be subject to a 10% additional tax, with certain exceptions:
(1) distributions made on or after the date on which the taxpayer attains age
59 1/2; (2) distributions attributable to the taxpayer's becoming disabled
(within the meaning of Section 72(m)(7) of the Code); or (3) any distribution
that is part of a series of substantially equal periodic payments (not less
frequently than annually) made for the life (or life expectancy) of the taxpayer
or the joint lives (or joint life expectancies) of such taxpayer and his or her
beneficiary.
All modified endowment contracts that are issued within any calendar year
to the same Contract Owner by one company or its affiliates shall be treated as
one modified endowment contract in determining the taxable portion of any loan
or distributions.
DIVERSIFICATION REQUIREMENTS
For a Contract to be treated as a variable life insurance contract for
federal tax purposes, the investments in the Variable Account must be
"adequately diversified" in accordance with the standards provided in the
Treasury regulations. If the investments in the Variable Account are not
adequately diversified, then the Contract will not be treated as a variable life
insurance contract for federal income tax purposes and the Owner will be taxed
on the excess of the Contract Value over the investment in the Contract.
Although the Company does not have control over the Fund Series or their
investments, the Company expects the Fund Series to meet the diversification
requirements.
OWNERSHIP TREATMENT
In connection with the issuance of the regulations on the adequate
diversification standards, the Department of the Treasury announced that the
regulations do not provide guidance concerning the extent to which contract
owners may direct their investments among sub-accounts of a Variable Account.
The Internal Revenue Service has previously stated in published rulings that a
variable contract owner will be considered the owner of separate account assets
if the owner possesses incidents of ownership in those assets such as the
ability to exercise investment control over the assets. At the time the
diversification regulations were issued, the Treasury Department announced that
guidance would be issued in the future regarding the extent that owners could
direct their investments among sub-accounts without being treated as owners of
the underlying assets of the Variable Account. As of the date of this
prospectus, no such guidance has been issued.
The ownership rights under this contract are similar to, but different in
certain respects from, those described by the service in rulings in which it was
determined that contract owners were not owners of separate account assets. For
example, the Owner of this Contract has the choice of more investment options to
which to allocate premiums and contract values, and may be able to transfer
among investment options more frequently than in such rulings. These differences
could result in the Contract Owner being treated as the owner of the Variable
Account. In those circumstances, income and gain from the Variable Account
assets would be includible in the Contract Owner's gross income. In addition,
the Company does not know what standards will be set forth in the regulations or
rulings which the Treasury Department has stated it expects to issue. It is
possible that Treasury Department's position, when announced, may adversely
affect the tax treatment of existing contracts. The Company, therefore, reserves
the right to modify the contract as necessary to attempt to prevent the contract
owner from being considered the federal tax owner of the assets of the Variable
Account. However, the Company makes no guarantee that such modification to the
contract will be successful.
POLICY LOAN INTEREST
Interest paid on loans against a Contract is generally not deductible.
21
<PAGE>
ADDITIONAL INFORMATION ABOUT THE COMPANY
The Company also acts as the sponsor for four of its separate accounts that
are registered investment companies: Glenbrook Life and Annuity Company Variable
Annuity Account, Glenbrook Life and Annuity Company Separate Account A,
Glenbrook Life Variable Life Separate Account A, and Glenbrook Life
Multi-Manager Variable Account. The officers and employees of the Company are
covered by a fidelity bond in the amount of $5,000,000. No person beneficially
owns more than 5% of the outstanding voting stock of The Allstate Corporation,
of which the Company is an indirect wholly owned subsidiary.
LEGAL PROCEEDINGS
From time to time the Company is involved in pending and threatened
litigation in the normal course of its business in which claims for monetary
damages are asserted. Management, after consultation with legal counsel, does
not anticipate the ultimate liability arising from such pending or threatened
litigation to have a material effect on the financial condition of the Company
or the Variable Account.
LEGAL MATTERS
Katten Muchin & Zavis, of Washington, D.C., has provided advice on certain
legal matters relating to the federal securities laws applicable to the issue
and sale of the Contracts. All matters of Illinois law pertaining to the
Contracts, including the validity of the Contracts and the Company's right to
issue such Contracts under Illinois insurance law, have been passed upon by
Michael J. Velotta, General Counsel of the Company.
REGISTRATION STATEMENT
A registration statement has been filed with the Securities and Exchange
Commission under the Securities Act of 1933 as amended. This Prospectus does not
contain all information set forth in the registration statement, its amendments
and exhibits, to all of which reference is made for further information
concerning the Variable Account, the Funds, the Company, and the Contracts.
EXPERTS
The financial statements of the Company as of December 31, 1996 and 1995
and for each of the three years in the period ended December 31, 1996 and the
related financial statement schedule included in this Prospectus have been
audited by Deloitte & Touche LLP, Two Prudential Plaza, 180 North Stetson
Avenue, Chicago, IL 60601-6779, independent auditors, as stated in their report
appearing herein, and are included in reliance upon the report of such firm
given upon their authority as experts in accounting and auditing.
The hypothetical Contract illustrations included in this Prospectus have
been approved by Diana Montigney, FSA, and are included in reliance upon her
opinion as to their reasonableness.
FINANCIAL INFORMATION
Financial statements for the Variable Account are not included herein
because, as of the date of this Prospectus, sales of the Contracts had not
commenced and the Variable Account therefore had no assets. The financial
statements for the Company appearing immediately below should be considered as
bearing only on the ability of the Company to fulfill its obligations under the
Contracts. They do not relate to the investment performance of the Variable
Account.
22
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND SHAREHOLDER OF
GLENBROOK LIFE AND ANNUITY COMPANY:
We have audited the accompanying Statements of Financial Position of
Glenbrook Life and Annuity Company (the "Company") as of December 31, 1996 and
1995, and the related Statements of Operations, Shareholder's Equity and Cash
Flows for each of the three years in the period ended December 31, 1996. Our
audits also included Schedule IV -- Reinsurance. These financial statements and
financial statement schedule are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Glenbrook Life and Annuity Company as of
December 31, 1996 and 1995, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1996 in conformity
with generally accepted accounting principles. Also, in our opinion, Schedule IV
- - --Reinsurance, when considered in relation to the basic financial statements
taken as a whole, presents fairly, in all material respects, the information set
forth therein.
/s/ DELOITTE & TOUCHE LLP
Chicago, Illinois
February 21, 1997
F-1
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1996 1995
---------- ----------
($ IN THOUSANDS)
<S> <C> <C>
Assets
Investments
Fixed income securities, at fair value (amortized cost
$46,925 and $44,112).................................. $ 49,389 $ 48,815
Short-term.............................................. 1,287 2,102
---------- ----------
Total investments.................................. 50,676 50,917
Reinsurance recoverable from Allstate Life Insurance
Company................................................. 2,060,419 1,340,925
Cash...................................................... -- 264
Net receivable from affiliates............................ 19,206 --
Other assets.............................................. 2,049 2,021
Separate Accounts......................................... 272,420 15,578
---------- ----------
Total assets....................................... $2,404,770 $1,409,705
========== ==========
Liabilities
Contractholder funds...................................... $2,060,419 $1,340,925
Income taxes payable...................................... 653 1,637
Deferred income taxes..................................... 1,528 1,828
Net payable to affiliates................................. -- 255
Separate Accounts......................................... 260,290 5,048
---------- ----------
Total liabilities.................................. 2,322,890 1,349,693
---------- ----------
Shareholder's Equity
Common stock, $500 par value, 4,200 shares authorized,
issued, and outstanding................................. 2,100 2,100
Additional capital paid-in................................ 69,641 49,641
Unrealized net capital gains.............................. 2,790 3,357
Retained income........................................... 7,349 4,914
---------- ----------
Total shareholder's equity......................... 81,880 60,012
---------- ----------
Total liabilities and shareholder's equity......... $2,404,770 $1,409,705
========== ==========
</TABLE>
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1996 1995 1994
------ ------ ------
($ IN THOUSANDS)
<S> <C> <C> <C>
Revenues
Net investment income..................................... $3,774 $3,996 $2,017
Realized capital gains and losses......................... -- 459 --
------ ------ ------
Income before income tax expense............................ 3,774 4,455 2,017
Income tax expense.......................................... 1,339 1,576 723
------ ------ ------
Net income.................................................. $2,435 $2,879 $1,294
====== ====== ======
</TABLE>
See notes to financial statements.
F-2
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
STATEMENTS OF SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1996 1995 1994
------- ------- -------
($ IN THOUSANDS)
<S> <C> <C> <C>
Common stock................................................ $ 2,100 $ 2,100 $ 2,100
------- ------- -------
Additional capital paid-in
Balance, beginning of year.................................. 49,641 49,641 9,641
Capital contributions....................................... 20,000 -- 40,000
------- ------- -------
Balance, end of year........................................ 69,641 49,641 49,641
------- ------- -------
Unrealized net capital gains
Balance, beginning of year.................................. 3,357 (1,118) 693
Net (decrease) increase..................................... (567) 4,475 (1,811)
------- ------- -------
Balance, end of year........................................ 2,790 3,357 (1,118)
------- ------- -------
Retained Income
Balance, beginning of year.................................. 4,914 2,035 741
Net income.................................................. 2,435 2,879 1,294
------- ------- -------
Balance, end of year........................................ 7,349 4,914 2,035
------- ------- -------
Total shareholder's equity.................................. $81,880 $60,012 $52,658
======= ======= =======
</TABLE>
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
------- -------- --------
($ IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities
Net income................................................ $ 2,435 $ 2,879 $ 1,294
Adjustments to reconcile net income to net cash provided
by operating activities
Change in deferred income taxes......................... 4 (39) 71
Realized capital gains and losses....................... -- (459) --
Changes in other operating assets and liabilities....... (510) 1,217 (251)
------- -------- --------
Net cash provided by operating activities............ 1,929 3,598 1,114
------- -------- --------
Cash flows from investing activities
Fixed income securities
Proceeds from sales..................................... -- 7,836 --
Investment collections.................................. 2,891 1,568 649
Investment purchases.................................... (5,667) (1,491) (42,729)
Participation in Separate Accounts........................ (232) (10,069) --
Change in short-term investments, net..................... 815 (1,178) 667
------- -------- --------
Net cash used in investing activities................ (2,193) (3,334) (41,413)
------- -------- --------
Cash flows from financing activities
Capital contribution...................................... -- -- 40,000
------- -------- --------
Net cash provided by financing activities............ -- -- 40,000
------- -------- --------
Net (decrease) increase in cash............................. (264) 264 (299)
Cash at beginning of year................................... 264 -- 299
------- -------- --------
Cash at end of year......................................... $ -- $ 264 $ --
======= ======== ========
Supplemental disclosure of cash flow information
Noncash financing activity:
Capital contribution receivable from Allstate Life
Insurance Company....................................... $20,000 $ -- $ --
======= ======== ========
</TABLE>
See notes to financial statements.
F-3
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
1. GENERAL
BASIS OF PRESENTATION
The accompanying financial statements include the accounts of Glenbrook
Life and Annuity 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"). On June 30, 1995, Sears, Roebuck and Co. ("Sears") distributed
its 80.3% ownership in the Corporation to Sears common shareholders through a
tax-free dividend (the "Distribution"). These financial statements have been
prepared in conformity with generally accepted accounting principles.
To conform with the 1996 presentation, certain items in the prior years'
financial statements and notes have been reclassified.
NATURE OF OPERATIONS
The Company markets interest-sensitive life insurance and various annuity
products in the United States through banks and broker-dealers. Annuities
include deferred annuities, such as variable annuities and fixed rate flexible
premium annuities. The Company has entered into exclusive distribution
arrangements with management investment companies to market its variable annuity
contracts.
Annuity and life insurance contracts issued by the Company are subject to
discretionary withdrawal or surrender by the contractholder, subject to
applicable surrender charges. These contracts are reinsured with ALIC (see Note
3), which invests premiums and deposits to create cash flows that will fund
future benefits and expenses. In order to support competitive credited rates,
ALIC adheres to a basic philosophy of matching assets with related liabilities
to limit interest rate risk, while maintaining adequate liquidity and a prudent
and diversified level of credit risk.
The Company monitors economic and regulatory developments which have the
potential to impact its business. There continues to be proposed federal
legislation and regulation which would allow banks greater participation in
securities and insurance businesses, which could present an increased level of
competition for sales of the Company's annuity contracts. Furthermore, the
market for deferred annuities and interest-sensitive life insurance is enhanced
by the tax incentives available under current law. Any legislative changes which
lessen these incentives are likely to negatively impact the market for these
products.
The Company is authorized to sell life and annuity products in all states
except New York, as well as the District of Columbia. The top geographic
locations for statutory premiums earned are Florida, California, Pennsylvania,
Michigan, Oregon, Texas and Georgia for the year ended December 31, 1996. No
other jurisdiction accounted for more than 5% of statutory premiums. All
premiums and contract charges are ceded to ALIC under reinsurance agreements.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVESTMENTS
Fixed income securities include bonds and mortgage-backed securities. All
fixed income securities are carried at fair value and may be sold prior to their
contractual maturity ("available for sale"). The difference between amortized
cost and fair value, net of deferred income taxes, is reflected as a component
of shareholder's equity. Provisions are recognized for declines in the value of
fixed income securities that are other than temporary. Such writedowns are
included in realized capital gains and losses.
Short-term investments are carried at cost which approximates fair value.
Investment income consists primarily of interest, which is recognized on an
accrual basis. Interest income on mortgage-backed securities is determined on
the effective yield method, based on the estimated principal repayments. Accrual
of income is suspended for fixed income securities that are in default or when
the receipt of interest payments is in doubt. Realized capital gains and losses
are determined on a specific identification basis.
RECOGNITION OF PREMIUM REVENUE AND CONTRACT CHARGES
Revenues on interest-sensitive life insurance contracts are comprised of
contract charges and fees, and are recognized when assessed against the
policyholder account balance. Revenues on annuities, which are considered
investment contracts, include contract charges and fees for contract
administration and surrenders. These revenues are recognized when levied against
the contract balances.
REINSURANCE
The Company and ALIC entered into a reinsurance agreement effective on June 5,
1992. All business issued subsequent to that date is ceded to ALIC. Life
insurance in force prior to that date is ceded to non-affiliated reinsurers.
Contract charges and credited interest are ceded and shown net of such cessions
in the statements of operations. Under the reinsurance agreement with ALIC, all
premiums and
F-4
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
deposits are transferred to ALIC. The amounts shown in the Company's statements
of operations relate to the investment of those assets of the Company that are
not transferred to ALIC under the reinsurance agreement. Reinsurance recoverable
and contractholder funds are reported separately in the statements of financial
position. The Company continues to have primary liability as the direct insurer
for risks reinsured.
INCOME TAXES
The income tax provision is calculated under the liability method. Deferred
tax assets and liabilities are recorded based on the difference between the
financial statement and tax bases of assets and liabilities and the enacted tax
regulations. Deferred income taxes also arise from unrealized capital gains or
losses on fixed income securities carried at fair value.
SEPARATE ACCOUNTS
During 1995, the Company began issuing flexible premium deferred variable
annuity contracts, the assets and liabilities of which are legally segregated
and shown in the accompanying statements of financial position as assets and
liabilities of the Separate Accounts (Glenbrook Life and Annuity Company
Variable Annuity Account and Glenbrook Life and Annuity Company Separate Account
A), unit investment trusts registered with the Securities and Exchange
Commission.
Assets of the Separate Accounts, including the Company's ownership interest
("Participation"), are invested in funds of management investment companies and
are carried at fair value. Unrealized gains and losses on the Company's
Participation, net of deferred income taxes, is shown as a component of
shareholder's equity. Investment income and realized capital gains and losses
arising from the Participation are included in the Company's statements of
operations. At December 31, 1996 and 1995, the Participation amounted to $12,130
and $10,530, respectively. The Company intends to liquidate its Participation
during 1997.
Investment income and realized capital gains and losses of the Separate
Accounts, other than the portion related to the Participation, accrue directly
to the contractholders and, therefore, are not included in the accompanying
statements of operations. Revenues to the Company from the Separate Accounts
consist of contract maintenance fees, administrative fees and mortality and
expense risk charges, which are ceded to ALIC.
CONTRACTHOLDER FUNDS
Contractholder funds arise from the issuance of individual or group
contracts that include an investment component, including most annuities and
interest-sensitive life insurance. Payments received are recorded as
interest-bearing liabilities. Contractholder funds are equal to deposits
received and interest credited to the benefit of the contractholder less
withdrawals, mortality charges and administrative expenses. Credited interest
rates on contractholder funds ranged from 3.15% to 7.45% for those contracts
with fixed interest rates and from 4.25% to 7.90% for those with flexible rates
during 1996.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
3. RELATED PARTY TRANSACTIONS
REINSURANCE
Contract charges ceded to ALIC under reinsurance agreements were $4,254,
$1,523 and $409 in 1996, 1995, and 1994, respectively. Credited interest, policy
benefits and expenses ceded to ALIC amounted to $113,703, $71,905, and $26,177
in 1996, 1995, and 1994, respectively. Investment income earned on the assets
which support contractholder funds is not included in the Company's financial
statements as those assets are owned and managed by ALIC under the terms of the
reinsurance agreements.
BUSINESS OPERATIONS
The Company utilizes services and business facilities owned or leased, and
operated by AIC in conducting its business activities. The Company reimburses
AIC for the operating expenses incurred by AIC on behalf of the Company. The
cost to the Company is determined by various allocation methods and is primarily
related to the level of services provided. Operating expenses, including
compensation and retirement and other benefit programs, allocated to the Company
were $759, $348 and $271 in 1996, 1995 and 1994, respectively. Of these costs,
the Company retains investment related expenses. All other costs are ceded to
ALIC under reinsurance agreements.
F-5
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
3. RELATED PARTY TRANSACTIONS (CONTINUED)
LAUGHLIN GROUP
Laughlin Group, Inc. ("Laughlin") is an indirect wholly owned subsidiary of
ALIC. Laughlin markets certain of the Company's flexible premium deferred
variable annuity contracts and flexible premium deferred fixed annuity
contracts. Sales commissions paid to Laughlin and ceded to ALIC were $8,623
during 1996 and $3,439 subsequent to the Laughlin acquisition in September 1995.
The Company had a receivable of $850 from Laughlin at December 31, 1996, which
is included in net receivable from affiliates in the statements of financial
position.
4. INVESTMENTS
FAIR VALUES
The amortized cost, gross unrealized gains and losses and fair value for
fixed income securities are as follows:
<TABLE>
<CAPTION>
GROSS UNREALIZED
AMORTIZED -------------------- FAIR
COST GAINS (LOSSES) VALUE
--------- ------ -------- -------
<S> <C> <C> <C> <C>
AT DECEMBER 31, 1996
U.S. government and agencies................................ $24,265 $1,722 $ (3) $25,984
Corporate................................................... 6,970 96 (15) 7,051
Mortgage-backed securities.................................. 15,690 664 -- 16,354
------- ------ ---- -------
Total..................................................... $46,925 $2,482 $(18) $49,389
======= ====== ==== =======
AT DECEMBER 31, 1995
U.S. government and agencies................................ $24,722 $3,470 $ -- $28,192
Corporate................................................... 1,304 120 -- 1,424
Mortgage-backed securities.................................. 18,086 1,113 -- 19,199
------- ------ ---- -------
Total..................................................... $44,112 $4,703 $ -- $48,815
======= ====== ==== =======
</TABLE>
SCHEDULED MATURITIES
The scheduled maturities for fixed income securities at December 31, 1996
are as follows:
<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE
--------- -------
<S> <C> <C>
Due in one year or less..................................... $ -- $ --
Due after one year through five years....................... -- --
Due after five years through ten years...................... 22,395 23,325
Due after ten years......................................... 8,840 9,710
------- -------
31,235 33,035
Mortgage-backed securities.................................. 15,690 16,354
------- -------
Total..................................................... $46,925 $49,389
======= =======
</TABLE>
Actual maturities may differ from those scheduled as a result of
prepayments by the issuers.
NET INVESTMENT INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Fixed income securities..................................... $3,478 $3,850 $1,984
Short-term.................................................. 126 113 48
Participation in Separate Accounts.......................... 232 69 --
------ ------ ------
Investment income, before expense......................... 3,836 4,032 2,032
Investment expense........................................ 62 36 15
------ ------ ------
Net investment income..................................... $3,774 $3,996 $2,017
====== ====== ======
</TABLE>
F-6
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
4. INVESTMENTS (CONTINUED)
PROCEEDS FROM SALES OF FIXED INCOME SECURITIES AND REALIZED CAPITAL GAINS
There were no sales of investments in 1996 or 1994. In 1995, proceeds from
sales of investments in fixed income securities were $7,836. These sales
resulted in gross realized gains of $459 and related income taxes of $161.
UNREALIZED NET CAPITAL GAINS AND LOSSES
Unrealized net capital gains and losses on fixed income securities and the
Company's participation in the Separate Accounts included in shareholder's
equity at December 31, 1996 are as follows:
<TABLE>
<CAPTION>
UNREALIZED
AMORTIZED FAIR NET
COST VALUE GAINS
--------- ------- ----------
<S> <C> <C> <C>
Fixed income securities..................................... $46,925 $49,389 $ 2,464
Participation in Separate Accounts.......................... 10,301 12,130 1,829
------- ------- -------
Total..................................................... $57,226 $61,519 4,293
======= =======
Deferred income taxes....................................... (1,503)
-------
Unrealized net capital gains................................ $ 2,790
=======
</TABLE>
CHANGE IN UNREALIZED NET CAPITAL GAINS AND LOSSES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1996 1995 1994
------- ------- ----
<S> <C> <C> <C>
Fixed income securities..................................... $(2,239) $ 6,423 $(2,786)
Participation in Separate Accounts.......................... 1,368 461 --
Deferred income taxes....................................... 304 (2,409) 975
------- ------- -------
Change in unrealized net capital gains and losses......... $ (567) $ 4,475 $(1,811)
======= ======= =======
</TABLE>
SECURITIES ON DEPOSIT
At December 31, 1996, fixed income securities with a carrying value of
$9,105 were on deposit with regulatory authorities as required by law.
5. FINANCIAL INSTRUMENTS
In the normal course of business, the Company invests in various financial
assets and incurs various financial liabilities. The fair value estimates of
financial instruments are not necessarily indicative of the amounts the Company
might pay or receive in actual market transactions. Potential taxes and other
transaction costs have not been considered in estimating fair value. The
disclosures that follow do not reflect the fair value of the Company as a whole
since a number of the Company's assets (including reinsurance recoverable) and
liabilities (including deferred income taxes) are not considered financial
instruments and are not carried at fair value. Other assets and liabilities
considered financial instruments, including accrued investment income and cash,
are generally of a short-term nature. It is assumed that their carrying value
approximates fair value.
FINANCIAL ASSETS
<TABLE>
<CAPTION>
AT DECEMBER 31,
----------------------------------------
1996 1995
------------------- ------------------
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
-------- -------- -------- -------
<S> <C> <C> <C> <C>
Fixed income securities..................................... $ 49,389 $ 49,389 $48,815 $48,815
Short-term investments...................................... 1,287 1,287 2,102 2,102
Separate Accounts........................................... 272,420 272,420 15,578 15,578
</TABLE>
Fair values for fixed income securities are based on quoted market prices.
Short-term investments are highly liquid investments with maturities of less
than one year whose carrying value approximates fair value. Assets of the
Separate Accounts are carried in the statements of financial position at fair
value.
F-7
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
5. FINANCIAL INSTRUMENTS (CONTINUED)
FINANCIAL LIABILITIES
<TABLE>
<CAPTION>
AT DECEMBER 31,
-------------------------------------------------
1996 1995
----------------------- -----------------------
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Contractholder funds on investment contracts............... $2,059,642 $1,949,329 $1,340,925 $1,282,248
Separate Accounts.......................................... 260,290 260,290 5,048 5,048
</TABLE>
The fair value of contractholder funds on investment contracts is based on
the terms of the underlying contracts. Reserves on investment contracts with no
stated maturities (single premium and flexible premium deferred annuities) are
valued at the account balance less surrender charges. The fair value of
immediate annuities and annuities without life contingencies with fixed terms is
estimated using discounted cash flow calculations based on interest rates
currently offered for contracts with similar terms and durations. Separate
Account liabilities are carried at the fair value of the underlying assets.
6. INCOME TAXES
The Company will file a separate federal income tax return and is not a
party to any tax sharing agreements in the current tax year.
Prior to the Distribution, the Corporation and all of its domestic
subsidiaries including the Company (the "Allstate Group") joined with Sears and
its domestic business units (the "Sears Group") in the filing of a consolidated
federal income tax return (the "Sears Tax Group") and were parties to a federal
income tax allocation agreement (the "Tax Sharing Agreement"). Under the Tax
Sharing Agreement, the Company, through the Corporation, paid to or received
from the Sears Group the amount, if any, by which the Sears Tax Group's federal
income tax liability was affected by virtue of inclusion of the Company in the
consolidated federal income tax return. Effectively, this resulted in the
Company's annual income tax provision being computed as if the Company filed a
separate return, except that items such as net operating losses, capital losses
or similar items, which might not be recognized in a separate return, were
allocated according to the Tax Sharing Agreement.
The Allstate Group and Sears Group have entered into an agreement which
governs their respective rights and obligations with respect to federal income
taxes for all periods prior to the Distribution ("Consolidated Tax Years"). The
agreement provides that all Consolidated Tax Years will continue to be governed
by the Tax Sharing Agreement with respect to the Company's federal income tax
liability.
The Company will be eligible for inclusion in the consolidated federal
income tax return of the Corporation and its subsidiaries in 1997.
The components of the deferred income tax liability at December 31, 1996
and 1995 are as follows:
<TABLE>
<CAPTION>
AT DECEMBER 31,
---------------
1996 1995
------ ------
<S> <C> <C>
Unrealized net capital gains on fixed income securities..... $1,503 $1,807
Difference in tax bases of investments...................... 25 21
------ ------
Total deferred liability.................................. $1,528 $1,828
====== ======
</TABLE>
The components of income tax expense are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1996 1995 1994
------- ------- -----
<S> <C> <C> <C>
Current..................................................... $1,335 $1,615 $652
Deferred.................................................... 4 (39) 71
------ ------ ----
Total income tax expense.................................. $1,339 $1,576 $723
====== ====== ====
</TABLE>
The Company paid income taxes of $2,597, $874 and $57 in 1996, 1995 and
1994, respectively. The Company had income taxes payable of $653 and $1,637 at
December 31, 1996 and 1995, respectively.
F-8
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
7. STATUTORY FINANCIAL INFORMATION
The following tables reconcile net income and shareholder's equity as
reported herein in conformity with generally accepted accounting principles with
statutory net income and capital and surplus, determined in accordance with
statutory accounting practices prescribed or permitted by insurance regulatory
authorities:
<TABLE>
<CAPTION>
NET INCOME
------------------------
YEAR ENDED DECEMBER 31,
------------------------
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Balance per generally accepted accounting principles........ $2,435 $2,879 $1,294
Deferred income taxes..................................... 4 (39) 71
Unrealized gain on participation in Separate Accounts..... 1,368 -- --
Non-admitted assets and statutory reserves................ (50) (171) (80)
------ ------ ------
Balance per statutory accounting practices.................. $3,757 $2,669 $1,285
====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
SHAREHOLDER'S EQUITY
---------------------
AT DECEMBER 31,
---------------------
1996 1995
--------- ---------
<S> <C> <C>
Balance per generally accepted accounting principles........ $81,880 $60,012
Deferred income taxes..................................... 1,528 1,828
Unrealized gain/loss on fixed income securities........... (2,464) (4,703)
Non-admitted assets and statutory reserves................ (3,751) (1,419)
Other..................................................... (1,499) (1,413)
------- -------
Balance per statutory accounting practices.................. $75,694 $54,305
======= =======
</TABLE>
PERMITTED STATUTORY ACCOUNTING PRACTICES
The Company prepares its statutory financial statements in accordance with
accounting principles and practices prescribed or permitted by the Illinois
Department of Insurance. Prescribed statutory accounting practices include a
variety of publications of the National Association of Insurance Commissioners,
as well as state laws, regulations, and general administrative rules. Permitted
statutory accounting practices encompass all accounting practices not so
prescribed. The Company does not follow any permitted statutory accounting
practices that have a material effect on statutory surplus or risk-based
capital.
DIVIDENDS
The ability of the Company to pay dividends is dependent on business
conditions, income, cash requirements of the Company and other relevant factors.
The payment of shareholder dividends by insurance companies without the prior
approval of the state insurance regulator is limited to formula amounts based on
net income and capital and surplus, determined in accordance with statutory
accounting practices, as well as the timing and amount of dividends paid in the
preceding twelve months. The maximum amount of dividends that the Company can
distribute during 1997 without prior approval of the Illinois Department of
Insurance is $7,359.
F-9
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
SCHEDULE IV -- REINSURANCE
($ IN THOUSANDS)
<TABLE>
<CAPTION>
GROSS NET
AMOUNT CEDED AMOUNT
------ ----- ------
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1996
Life insurance in force..................................... $2,436 $2,436 $--
====== ====== ===
Premiums and contract charges:
Life and annuities........................................ $4,254 $4,254 $--
====== ====== ===
</TABLE>
<TABLE>
<CAPTION>
GROSS NET
AMOUNT CEDED AMOUNT
------ ----- ------
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1995
Life insurance in force..................................... $1,250 $1,250 $--
====== ====== ===
Premiums and contract charges:
Life and annuities........................................ $6,571 $6,571 $--
====== ====== ===
</TABLE>
<TABLE>
<CAPTION>
GROSS NET
AMOUNT CEDED AMOUNT
------ ----- ------
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1994
Life insurance in force..................................... $1,250 $1,250 $--
====== ====== ===
Premiums and contract charges:
Life and annuities........................................ $ 409 $ 409 $--
====== ====== ===
</TABLE>
F-10
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
STATEMENTS OF FINANCIAL POSITION
FINANCIAL STATEMENTS FOR THE QUARTER ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
----------- ------------
(UNAUDITED)
($ IN THOUSANDS)
<S> <C> <C>
Assets
Investments
Fixed income securities, at fair value (amortized cost
$67,393 and $46,925).................................. $ 67,704 $ 49,389
Short-term.............................................. 2,780 1,287
---------- ----------
Total investments.................................. 70,484 50,676
Reinsurance recoverable from Allstate Life Insurance
Company................................................... 2,212,158 2,060,419
Net receivable from affiliates.............................. -- 19,206
Other assets................................................ 2,509 2,049
Separate Accounts........................................... 343,099 272,420
---------- ----------
Total assets....................................... $2,628,250 $2,404,770
========== ==========
Liabilities
Contractholder funds...................................... $2,212,158 $2,060,419
Income taxes payable...................................... 1,167 653
Deferred income taxes..................................... 771 1,528
Net payable to affiliates................................. 1,953 --
Separate Accounts......................................... 330,925 260,290
---------- ----------
Total liabilities.................................. 2,546,974 2,322,890
Shareholder's Equity
Common stock, $500 par value, 4,200 shares authorized,
issued, and outstanding................................. 2,100 2,100
Additional capital paid-in................................ 69,641 69,641
Unrealized net capital gains.............................. 1,378 2,790
Retained income........................................... 8,157 7,349
---------- ----------
Total shareholder's equity......................... 81,276 81,880
---------- ----------
Total liabilities and shareholder's equity......... $2,628,250 $2,404,770
========== ==========
</TABLE>
GLENBROOK LIFE AND ANNUITY COMPANY
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------
1997 1996
------ ----
(UNAUDITED)
($ IN THOUSANDS)
<S> <C> <C>
Revenues
Net investment income..................................... $1,242 $923
Realized capital gains and losses......................... 7 --
------ ----
Income before income tax expense............................ 1,249 923
Income tax expense.......................................... 441 329
------ ----
Net income.................................................. $ 808 $594
====== ====
</TABLE>
See notes to financial statements.
F-11
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------
1997 1996
-------- -------
(UNAUDITED)
($ IN THOUSANDS)
<S> <C> <C>
Cash flows from operating activities
Net income................................................ $ 808 $ 594
Adjustments to reconcile net income to net cash provided
by operating activities
Change in deferred income taxes......................... 3 3
Realized capital gains and losses....................... (7) --
Changes in other operating assets and liabilities....... 1,212 (71)
-------- -------
Net cash provided by operating activities............ 2,016 526
-------- -------
Cash flows from investing activities
Fixed income securities
Investment collections.................................. 523 430
Investment purchases.................................... (20,981) --
Participation in Separate Accounts........................ (65) (52)
Change in short-term investments, net..................... (1,493) (1,168)
-------- -------
Net cash used in investing activities................ (22,016) (790)
-------- -------
Cash flows from financing activities
Capital contribution...................................... 20,000 --
-------- -------
Net cash provided by financing activities............ 20,000 --
-------- -------
Net decrease in cash........................................ -- (264)
Cash at beginning of period................................. -- 264
-------- -------
Cash at end of period....................................... $ -- $ --
======== =======
</TABLE>
See notes to financial statements.
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying financial statements include the accounts of Glenbrook
Life and Annuity Company (the "Company") a wholly owned subsidiary of Allstate
Life Insurance Company ("ALIC"), which is wholly owned by Allstate Insurance
Company, a wholly owned subsidiary of The Allstate Corporation.
The statements of financial position as of March 31, 1997, the statements
of operations for the three-month periods ended March 31, 1997 and 1996, and the
statements of cash flows for the three-month periods then ended are unaudited.
The interim 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 financial statements should be read in
conjunction with the financial statements and notes thereto included in the
Glenbrook Life and Annuity Company Annual Report on Form 10K for 1996. The
results of operations for the interim period should not be considered indicative
of results to be expected for the full year.
2. REINSURANCE
The Company and ALIC entered into a reinsurance agreement effective June 5,
1992. All business issued subsequent to that date is ceded to ALIC. Life
insurance in force prior to that date is ceded to non-affiliated reinsurers.
Contract charges and credited interest are ceded and shown net of such cessions
in the statements of operations. Under the reinsurance agreement with ALIC, all
premiums and deposits are transferred to ALIC. The amounts shown in the
Company's statements of operations relate to the investment of those assets of
the Company that are not transferred to ALIC under the reinsurance agreement.
Reinsurance recoverable and contractholder funds are reported separately in the
statements of financial position. The Company continues to have primary
liability as the direct insurer for risks reinsured.
Contract charges ceded to ALIC under reinsurance agreements were $2.1
million for the three-month period ended March 31, 1997 and $597 thousand for
the three-month period ended March 31, 1996. Credited interest, policy benefits
and expenses ceded to ALIC amounted to $37.6 million and $25.2 million for the
three-month periods ended March 31, 1997 and 1996, respectively. Investment
income earned on the assets which support contractholder funds is not included
in the Company's financial statements as those assets are owned and managed by
ALIC under the terms of reinsurance agreements.
F-12
<PAGE>
APPENDIX A
ILLUSTRATIONS OF ACCOUNT VALUES, CASH SURRENDER VALUES,
DEATH BENEFITS, AND ACCUMULATED PREMIUMS
The tables in Appendix A illustrate the way the Contracts operate. They
show how the Death Benefit, Account Value and Cash Surrender Value could vary
over an extended period of time assuming hypothetical gross rates of return
(i.e., investment income and capital gains and losses, realized or unrealized)
for the Variable Account equal to annual rates of 0%, 6%, and 12%. The tables
are based on an initial premium of $10,000 and also show the initial Death
Benefit based on that premium. The insureds are assumed to be in the standard
underwriting class. Values are first given based on current Contract charges and
then based on guaranteed Contract charges. (See "Deductions and Charges.") These
tables may assist in the comparison of Death Benefits, Account Values and Cash
Surrender Values for the Contracts with those under other variable life
insurance contracts that may be issued by other companies.
Death Benefits, Account Values and Cash Surrender Values for a Contract
would be different from the amounts shown if the actual gross rates of return
averaged 0%, 6% or 12%, but varied above and below that average for the period,
if the initial premium were paid in another amount, or additional payments were
made. They would also be different depending on the allocation of Account Value
among the Variable Account's Variable Sub-Accounts, or if the actual gross rate
of return for all Variable Sub-Accounts averaged 0%, 6% or 12%, but varied above
or below that average for individual Variable Sub-Accounts. They would also
differ if any Contract loan or partial withdrawal were made during the period of
time illustrated, or if the insured were in another risk class.
The Death Benefits, Account Values and Cash Surrender Values shown in the
tables reflect the fact that: a Monthly Deduction Amount (consisting of a cost
of insurance charge, tax expense charge, and an administrative expense charge)
is deducted from Account Value each Monthly Activity Date and that an Annual
Maintenance Fee of $35 is deducted on each Contract Anniversary from all
Variable Sub-Accounts to which Account Value is allocated. The values in the
tables also reflect a deduction from the Variable Account of a daily charge
equal to an annual rate of 0.90% for the mortality and expense risk charge. The
Cash Surrender Value shown in the tables reflect the fact that a Withdrawal
Charge is imposed on withdrawals in excess of the Free Withdrawal Amount. (See
"Deductions and Charges.") The amounts shown in the table are based on an
average of the investment advisory fees and operating expenses incurred by the
Funds, at an annual rate of .65% of the average daily net assets of the Funds.
(See "Charges and Expenses.")
Taking account of the average investment advisory fee and operating
expenses of the Funds, the gross annual rates of return of 0%, 6% and 12%
correspond to net investment experience at constant annual rates of: (-.65%,
5.35%, and 11.35%,) respectively.
The hypothetical rates of return shown in the tables do not reflect any tax
charges attributable to the Variable Account since no such charges are currently
made. If any such charges are imposed in the future, the gross annual rate of
return would have to exceed the rates shown by an amount sufficient to cover the
tax charges, in order to produce the Account Values, Cash Surrender Values, and
Death Benefits illustrated.
The second column of each table shows the amount that would accumulate if
the initial premium of $10,000 were invested to earn interest, after taxes, of
5% per year, compounded annually.
Glenbrook Life will furnish upon request a personalized illustration
reflecting the proposed insured's age, sex, and underwriting classification.
Where applicable, Glenbrook Life will also furnish upon request an illustration
for a Contract that is not affected by the sex of the insured.
A-1
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
SINGLE LIFE OPTION
$10,000 INITIAL PREMIUM
ISSUE AGE 45 MALE
INITIAL FACE AMOUNT: $39,998
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12% (11% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES(1)
PREMIUMS -----------------------------------
END OF ACCUMULATED CASH
CONTRACT AT 5% INTEREST ACCOUNT SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT
- - -------- -------------- ------- --------- -------
<S> <C> <C> <C> <C>
1 ..................... 10,500 10,823 9,923 39,998
2 ..................... 11,025 11,717 10,840 39,998
3 ..................... 11,576 12,688 11,833 39,998
4 ..................... 12,155 13,742 12,955 39,998
5 ..................... 12,763 14,887 14,212 39,998
6 ..................... 13,401 16,130 15,567 39,998
7 ..................... 14,071 17,480 17,030 39,998
8 ..................... 14,775 18,945 18,607 39,998
9 ..................... 15,513 20,536 20,311 39,998
10 ..................... 16,289 22,264 22,264 39,998
11 ..................... 17,103 24,261 24,261 39,998
12 ..................... 17,959 26,441 26,441 39,998
13 ..................... 18,856 28,820 28,820 40,924
14 ..................... 19,799 31,419 31,419 43,358
15 ..................... 20,789 34,261 34,261 45,910
16 ..................... 21,829 37,371 37,371 48,582
17 ..................... 22,920 40,762 40,762 52,175
18 ..................... 24,066 44,460 44,460 56,019
19 ..................... 25,270 48,493 48,493 60,131
20 ..................... 26,533 52,893 52,893 64,530
25 ..................... 33,864 81,669 81,669 94,736
35 ..................... 55,160 196,879 196,879 206,723
<CAPTION>
GUARANTEED CHARGES(2)
-----------------------------------
END OF CASH
CONTRACT ACCOUNT SURRENDER DEATH
YEAR VALUE VALUE BENEFIT
- - -------- ------- --------- -------
<C> <C> <C> <C>
1 10,747 9,847 39,998
2 11,555 10,678 39,998
3 12,431 11,576 39,998
4 13,381 12,594 39,998
5 14,412 13,737 39,998
6 15,532 14,970 39,998
7 16,749 16,299 39,998
8 18,072 17,734 39,998
9 19,512 19,287 39,998
10 21,082 21,082 39,998
11 22,890 22,890 39,998
12 24,878 24,878 39,998
13 27,070 27,070 39,998
14 29,492 29,492 40,698
15 32,156 32,156 43,089
16 35,073 35,073 45,595
17 38,253 38,253 48,964
18 41,721 41,721 52,569
19 45,504 45,504 56,425
20 49,631 49,631 60,550
25 76,527 76,527 88,771
35 184,241 184,241 193,453
</TABLE>
- - ---------------
(1) Values reflect investment results using current cost of insurance rates,
administrative fees, and Mortality and Expense Risk Rates.
(2) Values reflect investment results using guaranteed cost of insurance rates,
administrative fees, and Mortality and Expense Risk Rates.
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL RESULTS MAY BE MORE OR LESS THAN THOSE
SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE, AND CASH SURRENDER VALUE FOR A CONTRACT
WILL BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RETURN APPLICABLE TO
THE CONTRACT AVERAGES 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR
BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH BENEFIT, ACCOUNT
VALUE, AND CASH SURRENDER VALUE FOR A CONTRACT WILL ALSO BE DIFFERENT FROM THOSE
SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE SEPARATE ACCOUNT AND
THE RATES OF RETURN OF THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT
THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-2
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
SINGLE LIFE OPTION
$10,000 INITIAL PREMIUM
ISSUE AGE 45 MALE
INITIAL FACE AMOUNT: $39,998
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6% (5% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES(1)
PREMIUMS -----------------------------------
END OF ACCUMULATED CASH
CONTRACT AT 5% INTEREST ACCOUNT SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT
- - -------- -------------- ------- --------- -------
<S> <C> <C> <C> <C>
1 ........................ 10,500 10,236 9,336 39,998
2 ........................ 11,025 10,479 9,602 39,998
3 ........................ 11,576 10,729 9,874 39,998
4 ........................ 12,155 10,985 10,198 39,998
5 ........................ 12,763 11,248 10,573 39,998
6 ........................ 13,401 11,519 10,956 39,998
7 ........................ 14,071 11,796 11,346 39,998
8 ........................ 14,775 12,081 11,744 39,998
9 ........................ 15,513 12,374 12,149 39,998
10 ........................ 16,289 12,675 12,675 39,998
11 ........................ 17,103 13,050 13,050 39,998
12 ........................ 17,959 13,436 13,436 39,998
13 ........................ 18,856 13,835 13,835 39,998
14 ........................ 19,799 14,247 14,247 39,998
15 ........................ 20,789 14,672 14,672 39,998
16 ........................ 21,829 15,111 15,111 39,998
17 ........................ 22,920 15,564 15,564 39,998
18 ........................ 24,066 16,032 16,032 39,998
19 ........................ 25,270 16,514 16,514 39,998
20 ........................ 26,533 17,013 17,013 39,998
25 ........................ 33,864 19,757 19,757 39,998
35 ........................ 55,160 26,744 26,744 39,998
<CAPTION>
GUARANTEED CHARGES(2)
-----------------------------------
END OF CASH
CONTRACT ACCOUNT SURRENDER DEATH
YEAR VALUE VALUE BENEFIT
- - -------- ------- --------- -------
<C> <C> <C> <C>
1 10,159 9,259 39,998
2 10,313 9,435 39,998
3 10,460 9,605 39,998
4 10,600 9,813 39,998
5 10,731 10,056 39,998
6 10,851 10,288 39,998
7 10,957 10,507 39,998
8 11,047 10,710 39,998
9 11,117 10,892 39,998
10 11,164 11,164 39,998
11 11,231 11,231 39,998
12 11,272 11,272 39,998
13 11,283 11,283 39,998
14 11,261 11,261 39,998
15 11,202 11,202 39,998
16 11,098 11,098 39,998
17 10,942 10,942 39,998
18 10,724 10,724 39,998
19 10,434 10,434 39,998
20 10,059 10,059 39,998
25 6,417 6,417 39,998
35 * * *
</TABLE>
- - ---------------
* When the account value is $0 or less, the Death Benefit is only payable if
subsequent premiums are paid to keep the policy in force.
(1) Values reflect investment results using current cost of insurance rates,
administrative fees, and Mortality and Expense Risk Rates.
(2) Values reflect investment results using guaranteed cost of insurance rates,
administrative fees, and Mortality and Expense Risk Rates.
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL RESULTS MAY BE MORE OR LESS THAN THOSE
SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE, AND CASH SURRENDER VALUE FOR A CONTRACT
WILL BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RETURN APPLICABLE TO
THE CONTRACT AVERAGES 6% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR
BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH BENEFIT, ACCOUNT
VALUE, AND CASH SURRENDER VALUE FOR A CONTRACT WILL ALSO BE DIFFERENT FROM THOSE
SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE SEPARATE ACCOUNT AND
THE RATES OF RETURN OF THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT
THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-3
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
SINGLE LIFE OPTION
$10,000 INITIAL PREMIUM
ISSUE AGE 45 MALE
INITIAL FACE AMOUNT: $39,998
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0% (-1% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES(1)
PREMIUMS -----------------------------------
END OF ACCUMULATED CASH
CONTRACT AT 5% INTEREST ACCOUNT SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT
- - -------- -------------- ------- --------- -------
<S> <C> <C> <C> <C>
1 ............................ 10,500 9,650 8,750 39,998
2 ............................ 11,025 9,310 8,433 39,998
3 ............................ 11,576 8,981 8,126 39,998
4 ............................ 12,155 8,663 7,875 39,998
5 ............................ 12,763 8,355 7,680 39,998
6 ............................ 13,401 8,056 7,494 39,998
7 ............................ 14,071 7,767 7,317 39,998
8 ............................ 14,775 7,487 7,149 39,998
9 ............................ 15,513 7,216 6,991 39,998
10 ............................ 16,289 6,953 6,953 39,998
11 ............................ 17,103 6,732 6,732 39,998
12 ............................ 17,959 6,518 6,518 39,998
13 ............................ 18,856 6,309 6,309 39,998
14 ............................ 19,799 6,105 6,105 39,998
15 ............................ 20,789 5,907 5,907 39,998
16 ............................ 21,829 5,715 5,715 39,998
17 ............................ 22,920 5,527 5,527 39,998
18 ............................ 24,066 5,345 5,345 39,998
19 ............................ 25,270 5,167 5,167 39,998
20 ............................ 26,533 4,994 4,994 39,998
25 ............................ 33,864 4,196 4,196 39,998
35 ............................ 55,160 2,891 2,891 39,998
<CAPTION>
GUARANTEED CHARGES(2)
-----------------------------------
END OF CASH
CONTRACT ACCOUNT SURRENDER DEATH
YEAR VALUE VALUE BENEFIT
- - -------- ------- --------- -------
<C> <C> <C> <C>
1 9,572 8,672 39,998
2 9,141 8,263 39,998
3 8,706 7,851 39,998
4 8,266 7,478 39,998
5 7,819 7,144 39,998
6 7,363 6,800 39,998
7 6,895 6,445 39,998
8 6,412 6,075 39,998
9 5,911 5,686 39,998
10 5,388 5,388 39,998
11 4,860 4,860 39,998
12 4,303 4,303 39,998
13 3,713 3,713 39,998
14 3,086 3,086 39,998
15 2,418 2,418 39,998
16 1,702 1,702 39,998
17 930 930 39,998
18 91 91 39,998
19 * * *
20 * * *
25 * * *
35 * * *
</TABLE>
- - ---------------
* When the account value is $0 or less, the Death Benefit is only payable if
subsequent premiums are paid to keep the policy in force.
(1) Values reflect investment results using current cost of insurance rates,
administrative fees, and Mortality and Expense Risk Rates.
(2) Values reflect investment results using guaranteed cost of insurance rates,
administrative fees, and Mortality and Expense Risk Rates.
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL RESULTS MAY BE MORE OR LESS THAN THOSE
SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE, AND CASH SURRENDER VALUE FOR A CONTRACT
WILL BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RETURN APPLICABLE TO
THE CONTRACT AVERAGES 0% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR
BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH BENEFIT, ACCOUNT
VALUE, AND CASH SURRENDER VALUE FOR A CONTRACT WILL ALSO BE DIFFERENT FROM THOSE
SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE SEPARATE ACCOUNT AND
THE RATES OF RETURN OF THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT
THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-4
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
SINGLE LIFE OPTION
$10,000 INITIAL PREMIUM
ISSUE AGE 55 FEMALE
INITIAL FACE AMOUNT: $33,138
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12% (11% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES(1)
PREMIUMS -----------------------------------
END OF ACCUMULATED CASH
CONTRACT AT 5% INTEREST ACCOUNT SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT
- - -------- -------------- ------- --------- -------
<S> <C> <C> <C> <C>
1 ..................... 10,500 10,823 9,923 33,138
2 ..................... 11,025 11,717 10,840 33,138
3 ..................... 11,576 12,688 11,833 33,138
4 ..................... 12,155 13,742 12,955 33,138
5 ..................... 12,763 14,887 14,212 33,138
6 ..................... 13,401 16,130 15,567 33,138
7 ..................... 14,071 17,480 17,030 33,138
8 ..................... 14,775 18,945 18,607 33,138
9 ..................... 15,513 20,536 20,311 33,138
10 ..................... 16,289 22,264 22,264 33,138
11 ..................... 17,103 24,261 24,261 33,138
12 ..................... 17,959 26,452 26,452 33,138
13 ..................... 18,856 28,881 28,881 34,080
14 ..................... 19,799 31,551 31,551 36,915
15 ..................... 20,789 34,469 34,469 39,984
16 ..................... 21,829 37,657 37,657 43,306
17 ..................... 22,920 41,149 41,149 46,499
18 ..................... 24,066 44,977 44,977 49,925
19 ..................... 25,270 49,177 49,177 53,603
20 ..................... 26,533 53,791 53,791 57,557
25 ..................... 33,864 84,278 84,278 88,492
35 ..................... 55,160 202,439 202,439 212,561
<CAPTION>
GUARANTEED CHARGES(2)
-----------------------------------
END OF CASH
CONTRACT ACCOUNT SURRENDER DEATH
YEAR VALUE VALUE BENEFIT
- - -------- ------- --------- -------
<C> <C> <C> <C>
1 10,719 9,819 33,138
2 11,499 10,621 33,138
3 12,348 11,493 33,138
4 13,275 12,487 33,138
5 14,286 13,611 33,138
6 15,389 14,827 33,138
7 16,594 16,144 33,138
8 17,909 17,571 33,138
9 19,344 19,119 33,138
10 20,915 20,915 33,138
11 22,732 22,732 33,138
12 24,742 24,742 33,138
13 26,973 26,973 33,138
14 29,454 29,454 34,461
15 32,175 32,175 37,323
16 35,149 35,149 40,421
17 38,406 38,406 43,399
18 41,976 41,976 46,594
19 45,893 45,893 50,024
20 50,197 50,197 53,711
25 78,633 78,633 82,565
35 186,913 186,913 196,259
</TABLE>
- - ---------------
(1) Values reflect investment results using current cost of insurance rates,
administrative fees, and Mortality and Expense Risk Rates.
(2) Values reflect investment results using guaranteed cost of insurance rates,
administrative fees, and Mortality and Expense Risk Rates.
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL RESULTS MAY BE MORE OR LESS THAN THOSE
SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE, AND CASH SURRENDER VALUE FOR A CONTRACT
WILL BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RETURN APPLICABLE TO
THE CONTRACT AVERAGES 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR
BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH BENEFIT, ACCOUNT
VALUE, AND CASH SURRENDER VALUE FOR A CONTRACT WILL ALSO BE DIFFERENT FROM THOSE
SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE SEPARATE ACCOUNT AND
THE RATES OF RETURN OF THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT
THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-5
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
SINGLE LIFE OPTION
$10,000 INITIAL PREMIUM
ISSUE AGE 55 FEMALE
INITIAL FACE AMOUNT: $33,138
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6% (5% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES(1)
PREMIUMS -----------------------------------
END OF ACCUMULATED CASH
CONTRACT AT 5% INTEREST ACCOUNT SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT
- - -------- -------------- ------- --------- -------
<S> <C> <C> <C> <C>
1 ........................ 10,500 10,236 9,336 33,138
2 ........................ 11,025 10,479 9,602 33,138
3 ........................ 11,576 10,729 9,874 33,138
4 ........................ 12,155 10,985 10,198 33,138
5 ........................ 12,763 11,248 10,573 33,138
6 ........................ 13,401 11,519 10,956 33,138
7 ........................ 14,071 11,796 11,346 33,138
8 ........................ 14,775 12,081 11,744 33,138
9 ........................ 15,513 12,374 12,149 33,138
10 ........................ 16,289 12,675 12,675 33,138
11 ........................ 17,103 13,050 13,050 33,138
12 ........................ 17,959 13,436 13,436 33,138
13 ........................ 18,856 13,835 13,835 33,138
14 ........................ 19,799 14,247 14,247 33,138
15 ........................ 20,789 14,672 14,672 33,138
16 ........................ 21,829 15,111 15,111 33,138
17 ........................ 22,920 15,564 15,564 33,138
18 ........................ 24,066 16,032 16,032 33,138
19 ........................ 25,270 16,514 16,514 33,138
20 ........................ 26,533 17,013 17,013 33,138
25 ........................ 33,864 19,757 19,757 33,138
35 ........................ 55,160 26,744 26,744 33,138
<CAPTION>
GUARANTEED CHARGES(2)
-----------------------------------
END OF CASH
CONTRACT ACCOUNT SURRENDER DEATH
YEAR VALUE VALUE BENEFIT
- - -------- ------- --------- -------
<C> <C> <C> <C>
1 10,131 9,231 33,138
2 10,257 9,379 33,138
3 10,377 9,522 33,138
4 10,492 9,705 33,138
5 10,601 9,926 33,138
6 10,700 10,138 33,138
7 10,787 10,337 33,138
8 10,856 10,519 33,138
9 10,902 10,677 33,138
10 10,921 10,921 33,138
11 10,955 10,955 33,138
12 10,958 10,958 33,138
13 10,929 10,929 33,138
14 10,865 10,865 33,138
15 10,759 10,759 33,138
16 10,603 10,603 33,138
17 10,381 10,381 33,138
18 10,076 10,076 33,138
19 9,665 9,665 33,138
20 9,125 9,125 33,138
25 3,418 3,418 33,138
35 * * *
</TABLE>
- - ---------------
* When the account value is $0 or less, the Death Benefit is only payable if
subsequent premiums are paid to keep the policy in force.
(1) Values reflect investment results using current cost of insurance rates,
administrative fees, and Mortality and Expense Risk Rates.
(2) Values reflect investment results using guaranteed cost of insurance rates,
administrative fees, and Mortality and Expense Risk Rates.
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL RESULTS MAY BE MORE OR LESS THAN THOSE
SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE, AND CASH SURRENDER VALUE FOR A CONTRACT
WILL BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RETURN APPLICABLE TO
THE CONTRACT AVERAGES 6% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR
BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH BENEFIT, ACCOUNT
VALUE, AND CASH SURRENDER VALUE FOR A CONTRACT WILL ALSO BE DIFFERENT FROM THOSE
SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE SEPARATE ACCOUNT AND
THE RATES OF RETURN OF THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT
THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-6
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
SINGLE LIFE OPTION
$10,000 INITIAL PREMIUM
ISSUE AGE 55 FEMALE
INITIAL FACE AMOUNT: $33,138
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0% (-1% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES(1)
PREMIUMS -----------------------------------
END OF ACCUMULATED CASH
CONTRACT AT 5% INTEREST ACCOUNT SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT
- - -------- -------------- ------- --------- -------
<S> <C> <C> <C> <C>
1 ............................ 10,500 9,650 8,750 33,138
2 ............................ 11,025 9,310 8,433 33,138
3 ............................ 11,576 8,981 8,126 33,138
4 ............................ 12,155 8,663 7,875 33,138
5 ............................ 12,763 8,355 7,680 33,138
6 ............................ 13,401 8,056 7,494 33,138
7 ............................ 14,071 7,767 7,317 33,138
8 ............................ 14,775 7,487 7,149 33,138
9 ............................ 15,513 7,216 6,991 33,138
10 ............................ 16,289 6,953 6,953 33,138
11 ............................ 17,103 6,732 6,732 33,138
12 ............................ 17,959 6,518 6,518 33,138
13 ............................ 18,856 6,309 6,309 33,138
14 ............................ 19,799 6,105 6,105 33,138
15 ............................ 20,789 5,907 5,907 33,138
16 ............................ 21,829 5,715 5,715 33,138
17 ............................ 22,920 5,527 5,527 33,138
18 ............................ 24,066 5,345 5,345 33,138
19 ............................ 25,270 5,167 5,167 33,138
20 ............................ 26,533 4,994 4,994 33,138
25 ............................ 33,864 4,196 4,196 33,138
35 ............................ 55,160 2,891 2,891 33,138
<CAPTION>
GUARANTEED CHARGES(2)
-----------------------------------
END OF CASH
CONTRACT ACCOUNT SURRENDER DEATH
YEAR VALUE VALUE BENEFIT
- - -------- ------- --------- -------
<C> <C> <C> <C>
1 9,544 8,644 33,138
2 9,085 8,208 33,138
3 8,623 7,768 33,138
4 8,159 7,371 33,138
5 7,689 7,014 33,138
6 7,212 6,650 33,138
7 6,723 6,273 33,138
8 6,217 5,879 33,138
9 5,687 5,462 33,138
10 5,128 5,128 33,138
11 4,556 4,556 33,138
12 3,948 3,948 33,138
13 3,300 3,300 33,138
14 2,611 2,611 33,138
15 1,873 1,873 33,138
16 1,074 1,074 33,138
17 197 197 33,138
18 * * *
19 * * *
20 * * *
25 * * *
35 * * *
</TABLE>
- - ---------------
* When the account value is $0 or less, the Death Benefit is only payable if
subsequent premiums are paid to keep the policy in force.
(1) Values reflect investment results using current cost of insurance rates,
administrative fees, and Mortality and Expense Risk Rates.
(2) Values reflect investment results using guaranteed cost of insurance rates,
administrative fees, and Mortality and Expense Risk Rates.
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL RESULTS MAY BE MORE OR LESS THAN THOSE
SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE, AND CASH SURRENDER VALUE FOR A CONTRACT
WILL BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RETURN APPLICABLE TO
THE CONTRACT AVERAGES 0% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR
BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH BENEFIT, ACCOUNT
VALUE, AND CASH SURRENDER VALUE FOR A CONTRACT WILL ALSO BE DIFFERENT FROM THOSE
SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE SEPARATE ACCOUNT AND
THE RATES OF RETURN OF THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT
THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-7
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
SINGLE LIFE OPTION
$10,000 INITIAL PREMIUM
ISSUE AGE 65 MALE
INITIAL FACE AMOUNT: $19,314
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12% (11% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES(1)
PREMIUMS -----------------------------------
END OF ACCUMULATED CASH
CONTRACT AT 5% INTEREST ACCOUNT SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT
- - -------- -------------- ------- --------- -------
<S> <C> <C> <C> <C>
1 ..................... 10,500 10,823 9,923 19,314
2 ..................... 11,025 11,717 10,840 19,314
3 ..................... 11,576 12,688 11,833 19,314
4 ..................... 12,155 13,742 12,955 19,314
5 ..................... 12,763 14,887 14,212 19,314
6 ..................... 13,401 16,130 15,567 19,314
7 ..................... 14,071 17,483 17,033 19,756
8 ..................... 14,775 18,967 18,630 21,054
9 ..................... 15,513 20,592 20,367 22,445
10 ..................... 16,289 22,374 22,374 23,940
11 ..................... 17,103 24,434 24,434 25,656
12 ..................... 17,959 26,678 26,678 28,012
13 ..................... 18,856 29,121 29,121 30,577
14 ..................... 19,799 31,781 31,781 33,370
15 ..................... 20,789 34,673 34,673 36,407
16 ..................... 21,829 37,817 37,817 39,708
17 ..................... 22,920 41,234 41,234 43,296
18 ..................... 24,066 44,963 44,963 47,211
19 ..................... 25,270 49,033 49,033 51,484
20 ..................... 26,533 53,474 53,474 56,147
25 ..................... 33,864 82,552 82,552 86,680
35 ..................... 55,160 198,356 198,356 200,340
<CAPTION>
GUARANTEED CHARGES(2)
-----------------------------------
END OF CASH
CONTRACT ACCOUNT SURRENDER DEATH
YEAR VALUE VALUE BENEFIT
- - -------- ------- --------- -------
<C> <C> <C> <C>
1 10,642 9,742 19,314
2 11,341 10,463 19,314
3 12,105 11,250 19,314
4 12,946 12,159 19,314
5 13,878 13,203 19,314
6 14,917 14,355 19,314
7 16,084 15,634 19,314
8 17,404 17,067 19,319
9 18,889 18,664 20,589
10 20,521 20,521 21,957
11 22,407 22,407 23,527
12 24,462 24,462 25,685
13 26,700 26,700 28,035
14 29,135 29,135 30,592
15 31,784 31,784 33,373
16 34,662 34,662 36,395
17 37,788 37,788 39,677
18 41,176 41,176 43,235
19 44,847 44,847 47,089
20 48,817 48,817 51,258
25 73,923 73,923 77,619
35 174,208 174,208 175,950
</TABLE>
- - ---------------
(1) Values reflect investment results using current cost of insurance rates,
administrative fees, and Mortality and Expense Risk Rates.
(2) Values reflect investment results using guaranteed cost of insurance rates,
administrative fees, and Mortality and Expense Risk Rates.
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL RESULTS MAY BE MORE OR LESS THAN THOSE
SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE, AND CASH SURRENDER VALUE FOR A CONTRACT
WILL BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RETURN APPLICABLE TO
THE CONTRACT AVERAGES 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR
BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH BENEFIT, ACCOUNT
VALUE, AND CASH SURRENDER VALUE FOR A CONTRACT WILL ALSO BE DIFFERENT FROM THOSE
SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE SEPARATE ACCOUNT AND
THE RATES OF RETURN OF THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT
THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-8
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
SINGLE LIFE OPTION
$10,000 INITIAL PREMIUM
ISSUE AGE 65 MALE
INITIAL FACE AMOUNT: $19,314
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6% (5% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES(1)
PREMIUMS -----------------------------------
END OF ACCUMULATED CASH
CONTRACT AT 5% INTEREST ACCOUNT SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT
- - -------- -------------- ------- --------- -------
<S> <C> <C> <C> <C>
1 ........................ 10,500 10,236 9,336 19,314
2 ........................ 11,025 10,479 9,602 19,314
3 ........................ 11,576 10,729 9,874 19,314
4 ........................ 12,155 10,985 10,198 19,314
5 ........................ 12,763 11,248 10,573 19,314
6 ........................ 13,401 11,519 10,956 19,314
7 ........................ 14,071 11,796 11,346 19,314
8 ........................ 14,775 12,081 11,744 19,314
9 ........................ 15,513 12,374 12,149 19,314
10 ........................ 16,289 12,675 12,675 19,314
11 ........................ 17,103 13,050 13,050 19,314
12 ........................ 17,959 13,436 13,436 19,314
13 ........................ 18,856 13,835 13,835 19,314
14 ........................ 19,799 14,247 14,247 19,314
15 ........................ 20,789 14,672 14,672 19,314
16 ........................ 21,829 15,111 15,111 19,314
17 ........................ 22,920 15,564 15,564 19,314
18 ........................ 24,066 16,032 16,032 19,314
19 ........................ 25,270 16,514 16,514 19,314
20 ........................ 26,533 17,013 17,013 19,314
25 ........................ 33,864 19,757 19,757 20,745
35 ........................ 55,160 26,899 26,899 27,168
<CAPTION>
GUARANTEED CHARGES(2)
-----------------------------------
END OF CASH
CONTRACT ACCOUNT SURRENDER DEATH
YEAR VALUE VALUE BENEFIT
- - -------- ------- --------- -------
<C> <C> <C> <C>
1 10,052 9,152 19,314
2 10,083 9,206 19,314
3 10,091 9,236 19,314
4 10,072 9,285 19,314
5 10,022 9,347 19,314
6 9,933 9,371 19,314
7 9,798 9,348 19,314
8 9,606 9,268 19,314
9 9,343 9,118 19,314
10 8,994 8,994 19,314
11 8,581 8,581 19,314
12 8,048 8,048 19,314
13 7,371 7,371 19,314
14 6,519 6,519 19,314
15 5,450 5,450 19,314
16 4,104 4,104 19,314
17 2,400 2,400 19,314
18 224 224 19,314
19 * * *
20 * * *
25 * * *
35 * * *
</TABLE>
- - ---------------
* When the account value is $0 or less, the Death Benefit is only payable if
subsequent premiums are paid to keep the policy in force.
(1) Values reflect investment results using current cost of insurance rates,
administrative fees, and Mortality and Expense Risk Rates.
(2) Values reflect investment results using guaranteed cost of insurance rates,
administrative fees, and Mortality and Expense Risk Rates.
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL RESULTS MAY BE MORE OR LESS THAN THOSE
SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE, AND CASH SURRENDER VALUE FOR A CONTRACT
WILL BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RETURN APPLICABLE TO
THE CONTRACT AVERAGES 6% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR
BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH BENEFIT, ACCOUNT
VALUE, AND CASH SURRENDER VALUE FOR A CONTRACT WILL ALSO BE DIFFERENT FROM THOSE
SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE SEPARATE ACCOUNT AND
THE RATES OF RETURN OF THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT
THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-9
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
SINGLE LIFE OPTION
$10,000 INITIAL PREMIUM
ISSUE AGE 65 MALE
INITIAL FACE AMOUNT: $19,314
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0% (-1% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES(1)
PREMIUMS -----------------------------------
END OF ACCUMULATED CASH
CONTRACT AT 5% INTEREST ACCOUNT SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT
- - -------- -------------- ------- --------- -------
<S> <C> <C> <C> <C>
1 ............................ 10,500 9,650 8,750 19,314
2 ............................ 11,025 9,310 8,433 19,314
3 ............................ 11,576 8,981 8,126 19,314
4 ............................ 12,155 8,663 7,875 19,314
5 ............................ 12,763 8,355 7,680 19,314
6 ............................ 13,401 8,056 7,494 19,314
7 ............................ 14,071 7,767 7,317 19,314
8 ............................ 14,775 7,487 7,149 19,314
9 ............................ 15,513 7,216 6,991 19,314
10 ............................ 16,289 6,953 6,953 19,314
11 ............................ 17,103 6,732 6,732 19,314
12 ............................ 17,959 6,518 6,518 19,314
13 ............................ 18,856 6,309 6,309 19,314
14 ............................ 19,799 6,105 6,105 19,314
15 ............................ 20,789 5,907 5,907 19,314
16 ............................ 21,829 5,715 5,715 19,314
17 ............................ 22,920 5,527 5,527 19,314
18 ............................ 24,066 5,345 5,345 19,314
19 ............................ 25,270 5,167 5,167 19,314
20 ............................ 26,533 4,994 4,994 19,314
25 ............................ 33,864 4,196 4,196 19,314
35 ............................ 55,160 2,891 2,891 19,314
<CAPTION>
GUARANTEED CHARGES(2)
-----------------------------------
END OF CASH
CONTRACT ACCOUNT SURRENDER DEATH
YEAR VALUE VALUE BENEFIT
- - -------- ------- --------- -------
<C> <C> <C> <C>
1 9,462 8,562 19,314
2 8,898 8,021 19,314
3 8,304 7,449 19,314
4 7,673 6,886 19,314
5 7,000 6,325 19,314
6 6,272 5,710 19,314
7 5,479 5,029 19,314
8 4,603 4,265 19,314
9 3,625 3,400 19,314
10 2,523 2,523 19,314
11 1,281 1,281 19,314
12 * * *
13 * * *
14 * * *
15 * * *
16 * * *
17 * * *
18 * * *
19 * * *
20 * * *
25 * * *
35 * * *
</TABLE>
- - ---------------
* When the account value is $0 or less, the Death Benefit is only payable if
subsequent premiums are paid to keep the policy in force.
(1) Values reflect investment results using current cost of insurance rates,
administrative fees, and Mortality and Expense Risk Rates.
(2) Values reflect investment results using guaranteed cost of insurance rates,
administrative fees, and Mortality and Expense Risk Rates.
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL RESULTS MAY BE MORE OR LESS THAN THOSE
SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE, AND CASH SURRENDER VALUE FOR A CONTRACT
WILL BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RETURN APPLICABLE TO
THE CONTRACT AVERAGES 0% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR
BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH BENEFIT, ACCOUNT
VALUE, AND CASH SURRENDER VALUE FOR A CONTRACT WILL ALSO BE DIFFERENT FROM THOSE
SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE SEPARATE ACCOUNT AND
THE RATES OF RETURN OF THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT
THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-10
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
JOINT LIFE OPTION
$10,000 INITIAL PREMIUM
ISSUE AGE 55 MALE / 55 FEMALE
INITIAL FACE AMOUNT: $43,779
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12% (11% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES(1)
PREMIUMS -----------------------------------
END OF ACCUMULATED CASH
CONTRACT AT 5% INTEREST ACCOUNT SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT
- - -------- -------------- ------- --------- -------
<S> <C> <C> <C> <C>
1 ..................... 10,500 10,891 9,991 43,779
2 ..................... 11,025 11,860 10,982 43,779
3 ..................... 11,576 12,911 12,056 43,779
4 ..................... 12,155 14,052 13,265 43,779
5 ..................... 12,763 15,291 14,616 43,779
6 ..................... 13,401 16,636 16,074 43,779
7 ..................... 14,071 18,097 17,647 43,779
8 ..................... 14,775 19,682 19,344 43,779
9 ..................... 15,513 21,403 21,178 43,779
10 ..................... 16,289 23,271 23,271 43,779
11 ..................... 17,103 25,405 25,405 43,779
12 ..................... 17,959 27,737 27,737 43,779
13 ..................... 18,856 30,293 30,293 43,779
14 ..................... 19,799 33,099 33,099 43,779
15 ..................... 20,789 36,188 36,188 43,779
16 ..................... 21,829 39,596 39,596 45,535
17 ..................... 22,920 43,335 43,335 48,968
18 ..................... 24,066 47,429 47,429 52,647
19 ..................... 25,270 51,916 51,916 56,589
20 ..................... 26,533 56,838 56,838 60,817
25 ..................... 33,864 89,322 89,322 93,788
35 ..................... 55,160 215,013 215,013 225,764
<CAPTION>
GUARANTEED CHARGES(2)
-----------------------------------
END OF CASH
CONTRACT ACCOUNT SURRENDER DEATH
YEAR VALUE VALUE BENEFIT
- - -------- ------- --------- -------
<C> <C> <C> <C>
1 10,891 9,991 43,779
2 11,860 10,982 43,779
3 12,911 12,056 43,779
4 14,052 13,265 43,779
5 15,291 14,616 43,779
6 16,636 16,074 43,779
7 18,097 17,647 43,779
8 19,682 19,344 43,779
9 21,403 21,178 43,779
10 23,271 23,271 43,779
11 25,405 25,405 43,779
12 27,737 27,737 43,779
13 30,293 30,293 43,779
14 33,099 33,099 43,779
15 36,188 36,188 43,779
16 39,596 39,596 45,535
17 43,335 43,335 48,968
18 47,429 47,429 52,647
19 51,916 51,916 56,589
20 56,838 56,838 60,817
25 89,322 89,322 93,788
35 212,933 212,933 223,579
</TABLE>
- - ---------------
(1) Values reflect investment results using current cost of insurance rates,
administrative fees, and Mortality and Expense Risk Rates.
(2) Values reflect investment results using guaranteed cost of insurance rates,
administrative fees, and Mortality and Expense Risk Rates.
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL RESULTS MAY BE MORE OR LESS THAN THOSE
SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE, AND CASH SURRENDER VALUE FOR A CONTRACT
WILL BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RETURN APPLICABLE TO
THE CONTRACT AVERAGES 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR
BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH BENEFIT, ACCOUNT
VALUE, AND CASH SURRENDER VALUE FOR A CONTRACT WILL ALSO BE DIFFERENT FROM THOSE
SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE SEPARATE ACCOUNT AND
THE RATES OF RETURN OF THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT
THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-11
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
JOINT LIFE OPTION
$10,000 INITIAL PREMIUM
ISSUE AGE 55 MALE / 55 FEMALE
INITIAL FACE AMOUNT: $43,779
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6% (5% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES(1)
PREMIUMS -----------------------------------
END OF ACCUMULATED CASH
CONTRACT AT 5% INTEREST ACCOUNT SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT
- - -------- -------------- ------- --------- -------
<S> <C> <C> <C> <C>
1 ........................ 10,500 10,301 9,401 43,779
2 ........................ 11,025 10,605 9,728 43,779
3 ........................ 11,576 10,913 10,058 43,779
4 ........................ 12,155 11,223 10,436 43,779
5 ........................ 12,763 11,534 10,859 43,779
6 ........................ 13,401 11,844 11,281 43,779
7 ........................ 14,071 12,151 11,701 43,779
8 ........................ 14,775 12,452 12,114 43,779
9 ........................ 15,513 12,755 12,530 43,779
10 ........................ 16,289 13,066 13,066 43,779
11 ........................ 17,103 13,453 13,453 43,779
12 ........................ 17,959 13,853 13,853 43,779
13 ........................ 18,856 14,265 14,265 43,779
14 ........................ 19,799 14,691 14,691 43,779
15 ........................ 20,789 15,130 15,130 43,779
16 ........................ 21,829 15,584 15,584 43,779
17 ........................ 22,920 16,052 16,052 43,779
18 ........................ 24,066 16,536 16,536 43,779
19 ........................ 25,270 17,035 17,035 43,779
20 ........................ 26,533 17,550 17,550 43,779
25 ........................ 33,864 20,387 20,387 43,779
35 ........................ 55,160 27,610 27,610 43,779
<CAPTION>
GUARANTEED CHARGES(2)
-----------------------------------
END OF CASH
CONTRACT ACCOUNT SURRENDER DEATH
YEAR VALUE VALUE BENEFIT
- - -------- ------- --------- -------
<C> <C> <C> <C>
1 10,301 9,401 43,779
2 10,605 9,728 43,779
3 10,913 10,058 43,779
4 11,223 10,436 43,779
5 11,534 10,859 43,779
6 11,844 11,281 43,779
7 12,151 11,701 43,779
8 12,452 12,114 43,779
9 12,744 12,519 43,779
10 13,022 13,022 43,779
11 13,335 13,335 43,779
12 13,630 13,630 43,779
13 13,901 13,901 43,779
14 14,142 14,142 43,779
15 14,347 14,347 43,779
16 14,506 14,506 43,779
17 14,606 14,606 43,779
18 14,629 14,629 43,779
19 14,555 14,555 43,779
20 14,360 14,360 43,779
25 10,433 10,433 43,779
35 * * *
</TABLE>
- - ---------------
* When the account value is $0 or less, the Death Benefit is only payable if
subsequent premiums are paid to keep the policy in force.
(1) Values reflect investment results using current cost of insurance rates,
administrative fees, and Mortality and Expense Risk Rates.
(2) Values reflect investment results using guaranteed cost of insurance rates,
administrative fees, and Mortality and Expense Risk Rates.
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL RESULTS MAY BE MORE OR LESS THAN THOSE
SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE, AND CASH SURRENDER VALUE FOR A CONTRACT
WILL BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RETURN APPLICABLE TO
THE CONTRACT AVERAGES 6% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR
BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH BENEFIT, ACCOUNT
VALUE, AND CASH SURRENDER VALUE FOR A CONTRACT WILL ALSO BE DIFFERENT FROM THOSE
SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE SEPARATE ACCOUNT AND
THE RATES OF RETURN OF THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT
THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-12
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
JOINT LIFE OPTION
$10,000 INITIAL PREMIUM
ISSUE AGE 55 MALE / 55 FEMALE
INITIAL FACE AMOUNT: $43,779
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0% (-1% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES(1)
PREMIUMS -----------------------------------
END OF ACCUMULATED CASH
CONTRACT AT 5% INTEREST ACCOUNT SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT
- - -------- -------------- ------- --------- -------
<S> <C> <C> <C> <C>
1 ............................ 10,500 9,710 8,810 43,779
2 ............................ 11,025 9,421 8,544 43,779
3 ............................ 11,576 9,132 8,277 43,779
4 ............................ 12,155 8,841 8,054 43,779
5 ............................ 12,763 8,548 7,873 43,779
6 ............................ 13,401 8,248 7,686 43,779
7 ............................ 14,071 7,953 7,503 43,779
8 ............................ 14,775 7,667 7,330 43,779
9 ............................ 15,513 7,390 7,165 43,779
10 ............................ 16,289 7,122 7,122 43,779
11 ............................ 17,103 6,897 6,897 43,779
12 ............................ 17,959 6,678 6,678 43,779
13 ............................ 18,856 6,465 6,465 43,779
14 ............................ 19,799 6,257 6,257 43,779
15 ............................ 20,789 6,055 6,055 43,779
16 ............................ 21,829 5,859 5,859 43,779
17 ............................ 22,920 5,667 5,667 43,779
18 ............................ 24,066 5,481 5,481 43,779
19 ............................ 25,270 5,300 5,300 43,779
20 ............................ 26,533 5,123 5,123 43,779
25 ............................ 33,864 4,309 4,309 43,779
35 ............................ 55,160 2,977 2,977 43,779
<CAPTION>
GUARANTEED CHARGES(2)
-----------------------------------
END OF CASH
CONTRACT ACCOUNT SURRENDER DEATH
YEAR VALUE VALUE BENEFIT
- - -------- ------- --------- -------
<C> <C> <C> <C>
1 9,710 8,810 43,779
2 9,421 8,544 43,779
3 9,132 8,277 43,779
4 8,841 8,054 43,779
5 8,548 7,873 43,779
6 8,248 7,686 43,779
7 7,941 7,491 43,779
8 7,623 7,285 43,779
9 7,289 7,064 43,779
10 6,934 6,934 43,779
11 6,580 6,580 43,779
12 6,193 6,193 43,779
13 5,768 5,768 43,779
14 5,297 5,297 43,779
15 4,771 4,771 43,779
16 4,179 4,179 43,779
17 3,505 3,505 43,779
18 2,725 2,725 43,779
19 1,813 1,813 43,779
20 738 738 43,779
25 * * *
35 * * *
</TABLE>
- - ---------------
* When the account value is $0 or less, the Death Benefit is only payable if
subsequent premiums are paid to keep the policy in force.
(1) Values reflect investment results using current cost of insurance rates,
administrative fees, and Mortality and Expense Risk Rates.
(2) Values reflect investment results using guaranteed cost of insurance rates,
administrative fees, and Mortality and Expense Risk Rates.
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL RESULTS MAY BE MORE OR LESS THAN THOSE
SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE, AND CASH SURRENDER VALUE FOR A CONTRACT
WILL BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RETURN APPLICABLE TO
THE CONTRACT AVERAGES 0% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR
BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH BENEFIT, ACCOUNT
VALUE, AND CASH SURRENDER VALUE FOR A CONTRACT WILL ALSO BE DIFFERENT FROM THOSE
SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE SEPARATE ACCOUNT AND
THE RATES OF RETURN OF THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT
THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-13
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
JOINT LIFE OPTION
$10,000 INITIAL PREMIUM
ISSUE AGE 65 MALE / 65 FEMALE
INITIAL FACE AMOUNT: $27,688
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12% (11% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES(1)
PREMIUMS -----------------------------------
END OF ACCUMULATED CASH
CONTRACT AT 5% INTEREST ACCOUNT SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT
- - -------- -------------- ------- --------- -------
<S> <C> <C> <C> <C>
1 ..................... 10,500 10,887 9,987 27,688
2 ..................... 11,025 11,841 10,963 27,688
3 ..................... 11,576 12,866 12,011 27,688
4 ..................... 12,155 13,970 13,183 27,688
5 ..................... 12,763 15,160 14,485 27,688
6 ..................... 13,401 16,445 15,883 27,688
7 ..................... 14,071 17,835 17,385 27,688
8 ..................... 14,775 19,343 19,005 27,688
9 ..................... 15,513 20,984 20,759 27,688
10 ..................... 16,289 22,781 22,781 27,688
11 ..................... 17,103 24,864 24,864 27,688
12 ..................... 17,959 27,192 27,192 28,551
13 ..................... 18,856 29,751 29,751 31,239
14 ..................... 19,799 32,545 32,545 34,172
15 ..................... 20,789 35,591 35,591 37,371
16 ..................... 21,829 38,910 38,910 40,856
17 ..................... 22,920 42,523 42,523 44,649
18 ..................... 24,066 46,449 46,449 48,771
19 ..................... 25,270 50,710 50,710 53,246
20 ..................... 26,533 55,330 55,330 58,096
25 ..................... 33,864 85,425 85,425 89,696
35 ..................... 55,160 205,394 205,394 207,448
<CAPTION>
GUARANTEED CHARGES(2)
-----------------------------------
END OF CASH
CONTRACT ACCOUNT SURRENDER DEATH
YEAR VALUE VALUE BENEFIT
- - -------- ------- --------- -------
<C> <C> <C> <C>
1 10,887 9,987 27,688
2 11,841 10,963 27,688
3 12,866 12,011 27,688
4 13,970 13,183 27,688
5 15,160 14,485 27,688
6 16,445 15,883 27,688
7 17,835 17,385 27,688
8 19,342 19,005 27,688
9 20,984 20,759 27,688
10 22,781 22,781 27,688
11 24,864 24,864 27,688
12 27,191 27,191 28,551
13 29,751 29,751 31,238
14 32,544 32,544 34,172
15 35,591 35,591 37,370
16 38,910 38,910 40,855
17 42,522 42,522 44,648
18 46,448 46,448 48,771
19 50,710 50,710 53,245
20 55,329 55,329 58,095
25 84,635 84,635 88,867
35 200,320 200,320 202,323
</TABLE>
- - ---------------
(1) Values reflect investment results using current cost of insurance rates,
administrative fees, and Mortality and Expense Risk Rates.
(2) Values reflect investment results using guaranteed cost of insurance rates,
administrative fees, and Mortality and Expense Risk Rates.
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL RESULTS MAY BE MORE OR LESS THAN THOSE
SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE, AND CASH SURRENDER VALUE FOR A CONTRACT
WILL BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RETURN APPLICABLE TO
THE CONTRACT AVERAGES 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR
BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH BENEFIT, ACCOUNT
VALUE, AND CASH SURRENDER VALUE FOR A CONTRACT WILL ALSO BE DIFFERENT FROM THOSE
SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE SEPARATE ACCOUNT AND
THE RATES OF RETURN OF THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT
THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-14
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
JOINT LIFE OPTION
$10,000 INITIAL PREMIUM
ISSUE AGE 65 MALE / 65 FEMALE
INITIAL FACE AMOUNT: $27,688
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6% (5% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES(1)
PREMIUMS -----------------------------------
END OF ACCUMULATED CASH
CONTRACT AT 5% INTEREST ACCOUNT SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT
- - -------- -------------- ------- --------- -------
<S> <C> <C> <C> <C>
1 ........................ 10,500 10,296 9,396 27,688
2 ........................ 11,025 10,586 9,709 27,688
3 ........................ 11,576 10,867 10,012 27,688
4 ........................ 12,155 11,136 10,349 27,688
5 ........................ 12,763 11,404 10,729 27,688
6 ........................ 13,401 11,678 11,116 27,688
7 ........................ 14,071 11,960 11,510 27,688
8 ........................ 14,775 12,250 11,912 27,688
9 ........................ 15,513 12,547 12,322 27,688
10 ........................ 16,289 12,853 12,853 27,688
11 ........................ 17,103 13,233 13,233 27,688
12 ........................ 17,959 13,625 13,625 27,688
13 ........................ 18,856 14,030 14,030 27,688
14 ........................ 19,799 14,449 14,449 27,688
15 ........................ 20,789 14,880 14,880 27,688
16 ........................ 21,829 15,326 15,326 27,688
17 ........................ 22,920 15,786 15,786 27,688
18 ........................ 24,066 16,261 16,261 27,688
19 ........................ 25,270 16,751 16,751 27,688
20 ........................ 26,533 17,257 17,257 27,688
25 ........................ 33,864 20,043 20,043 27,688
35 ........................ 55,160 27,138 27,138 27,688
<CAPTION>
GUARANTEED CHARGES(2)
-----------------------------------
END OF CASH
CONTRACT ACCOUNT SURRENDER DEATH
YEAR VALUE VALUE BENEFIT
- - -------- ------- --------- -------
<C> <C> <C> <C>
1 10,296 9,396 27,688
2 10,586 9,709 27,688
3 10,867 10,012 27,688
4 11,136 10,349 27,688
5 11,390 10,715 27,688
6 11,623 11,061 27,688
7 11,831 11,381 27,688
8 12,005 11,667 27,688
9 12,135 11,910 27,688
10 12,210 12,210 27,688
11 12,269 12,269 27,688
12 12,249 12,249 27,688
13 12,137 12,137 27,688
14 11,913 11,913 27,688
15 11,552 11,552 27,688
16 11,022 11,022 27,688
17 10,275 10,275 27,688
18 9,249 9,249 27,688
19 7,860 7,860 27,688
20 5,996 5,996 27,688
25 * * *
35 * * *
</TABLE>
- - ---------------
* When the account value is $0 or less, the Death Benefit is only payable if
subsequent premiums are paid to keep the policy in force.
(1) Values reflect investment results using current cost of insurance rates,
administrative fees, and Mortality and Expense Risk Rates.
(2) Values reflect investment results using guaranteed cost of insurance rates,
administrative fees, and Mortality and Expense Risk Rates.
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL RESULTS MAY BE MORE OR LESS THAN THOSE
SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE, AND CASH SURRENDER VALUE FOR A CONTRACT
WILL BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RETURN APPLICABLE TO
THE CONTRACT AVERAGES 6% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR
BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH BENEFIT, ACCOUNT
VALUE, AND CASH SURRENDER VALUE FOR A CONTRACT WILL ALSO BE DIFFERENT FROM THOSE
SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE SEPARATE ACCOUNT AND
THE RATES OF RETURN OF THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT
THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-15
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
JOINT LIFE OPTION
$10,000 INITIAL PREMIUM
ISSUE AGE 65 MALE / 65 FEMALE
INITIAL FACE AMOUNT: $27,688
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0% (-1% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES(1)
PREMIUMS -----------------------------------
END OF ACCUMULATED CASH
CONTRACT AT 5% INTEREST ACCOUNT SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT
- - -------- -------------- ------- --------- -------
<S> <C> <C> <C> <C>
1 ............................ 10,500 9,706 8,806 27,688
2 ............................ 11,025 9,402 8,524 27,688
3 ............................ 11,576 9,085 8,230 27,688
4 ............................ 12,155 8,763 7,976 27,688
5 ............................ 12,763 8,452 7,777 27,688
6 ............................ 13,401 8,150 7,588 27,688
7 ............................ 14,071 7,858 7,408 27,688
8 ............................ 14,775 7,575 7,238 27,688
9 ............................ 15,513 7,301 7,076 27,688
10 ............................ 16,289 7,036 7,036 27,688
11 ............................ 17,103 6,813 6,813 27,688
12 ............................ 17,959 6,596 6,596 27,688
13 ............................ 18,856 6,385 6,385 27,688
14 ............................ 19,799 6,180 6,180 27,688
15 ............................ 20,789 5,980 5,980 27,688
16 ............................ 21,829 5,785 5,785 27,688
17 ............................ 22,920 5,596 5,596 27,688
18 ............................ 24,066 5,411 5,411 27,688
19 ............................ 25,270 5,232 5,232 27,688
20 ............................ 26,533 5,057 5,057 27,688
25 ............................ 33,864 4,252 4,252 27,688
35 ............................ 55,160 2,933 2,933 27,688
<CAPTION>
GUARANTEED CHARGES(2)
-----------------------------------
END OF CASH
CONTRACT ACCOUNT SURRENDER DEATH
YEAR VALUE VALUE BENEFIT
- - -------- ------- --------- -------
<C> <C> <C> <C>
1 9,706 8,806 27,688
2 9,402 8,524 27,688
3 9,085 8,230 27,688
4 8,751 7,964 27,688
5 8,396 7,721 27,688
6 8,013 7,451 27,688
7 7,594 7,144 27,688
8 7,129 6,791 27,688
9 6,603 6,378 27,688
10 6,001 6,001 27,688
11 5,327 5,327 27,688
12 4,535 4,535 27,688
13 3,603 3,603 27,688
14 2,501 2,501 27,688
15 1,194 1,194 27,688
16 * * *
17 * * *
18 * * *
19 * * *
20 * * *
25 * * *
35 * * *
</TABLE>
- - ---------------
* When the account value is $0 or less, the Death Benefit is only payable if
subsequent premiums are paid to keep the policy in force.
(1) Values reflect investment results using current cost of insurance rates,
administrative fees, and Mortality and Expense Risk Rates.
(2) Values reflect investment results using guaranteed cost of insurance rates,
administrative fees, and Mortality and Expense Risk Rates.
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL RESULTS MAY BE MORE OR LESS THAN THOSE
SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE, AND CASH SURRENDER VALUE FOR A CONTRACT
WILL BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RETURN APPLICABLE TO
THE CONTRACT AVERAGES 0% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR
BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH BENEFIT, ACCOUNT
VALUE, AND CASH SURRENDER VALUE FOR A CONTRACT WILL ALSO BE DIFFERENT FROM THOSE
SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE SEPARATE ACCOUNT AND
THE RATES OF RETURN OF THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT
THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-16
