<PAGE>
THE AARP VARIABLE ANNUITY
SEPARATE ACCOUNT AMLVA
AMERICAN MATURITY LIFE INSURANCE COMPANY
P.O. BOX 7005
PASADENA, CA 91109-7005
TELEPHONE: 1-800-923-3334
This Prospectus describes information you should know before you purchase The
AARP Variable Annuity. Please read it carefully.
This Prospectus describes the AARP Variable Annuity, a group flexible premium
variable annuity contract. American Maturity Life Insurance Company ("American
Maturity" or "Company" or "We" or "Us") offers the AARP Variable Annuity by
issuing you a Certificate or Contract ("Certificate") if you are eligible. We
offer the Certificate to members of the American Association of Retired Persons
("AARP") for retirement planning purposes, where you agree to make at least one
Premium Payment to us and we agree to make a series of Annuity Payments at a
later date. This Annuity is a flexible premium, tax-deferred, variable annuity.
It is:
x Flexible, because you may add Premium Payments at any time.
x Tax-deferred, which means you don't pay taxes until you take money out or
until we start to make Annuity Payments.
x Variable, because the value of your Annuity will fluctuate with the
performance of the underlying funds.
At the time you purchase your Annuity, you allocate your Premium Payment to
"Sub-Accounts." These are subdivisions of our Separate Account, an account that
keeps your Annuity assets separate from our company assets. The Sub-Accounts
then purchase shares of mutual funds set up exclusively for variable annuity or
variable life insurance products. These funds are not the same mutual funds that
you buy through your stockbroker or through a retail mutual fund. They may have
similar investment strategies and the same portfolio managers as retail mutual
funds. This Annuity offers you Funds with investment strategies ranging from
conservative to aggressive and you may pick those Funds that meet your
investment goals and risk tolerance. The Sub-Accounts and the Funds are listed
below:
- - Money Market Portfolio of the Scudder Variable Life Investment Fund
- - Bond Portfolio of the Scudder Variable Life Investment Fund
- - Balanced Portfolio of the Janus Aspen Series
- - Capital Growth Portfolio of the Scudder Variable Life Investment Fund
- - Growth and Income Portfolio of the Scudder Variable Life Investment Fund
- - Partners Portfolio of Neuberger Berman Advisers Trust
- - Capital Appreciation Portfolio of the Dreyfus Variable Investment Fund
- - Small Cap Portfolio of the Dreyfus Variable Investment Fund
- - Worldwide Growth Portfolio of the Janus Aspen Series
You may also allocate some or all of your Premium Payment to the "Fixed
Account," which pays an interest rate guaranteed for a certain time period from
the time the Premium Payment is made. Premium Payments allocated to the Fixed
Account are not segregated from our company assets like the assets of the
Separate Account.
If you decide to buy this Annuity, you should keep this prospectus for your
records. You can also call us at 1-800-923-3334 to get a Statement of Additional
Information, free of charge. The Statement of Additional Information contains
more information about this Annuity and, like this prospectus, is filed with the
Securities and Exchange Commission ("SEC"). We have included the Table of
Contents for the Statement of Additional Information at the end of this
prospectus. Although we file the prospectus and the Statement of Additional
information with the SEC, the SEC doesn't approve or disapprove these securities
or determine if the information is truthful or complete. Anyone who represents
that the SEC does these things may be guilty of a criminal offense.
<PAGE>
This Prospectus and the Statement of Additional Information can also be obtained
from the SEC's website (HTTP:// WWW.SEC.GOV).
This Annuity IS NOT:
- - A bank deposit or obligation
- - Federally insured
- - Endorsed by any bank or governmental agency
This Annuity may not be available for sale in all states.
- --------------------------------------------------------------------------------
PROSPECTUS DATED: MAY 3, 1999
STATEMENT OF ADDITIONAL INFORMATION DATED: MAY 3, 1999
<PAGE>
AMERICAN MATURITY LIFE INSURANCE COMPANY 3
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
DEFINITIONS........................................................... 4
FEE TABLE............................................................. 6
ANNUAL FUND OPERATING EXPENSES........................................ 6
ACCUMULATION UNIT VALUES.............................................. 8
HIGHLIGHTS............................................................ 9
GENERAL CERTIFICATE INFORMATION....................................... 10
American Maturity Life Insurance Company............................ 10
The Separate Account................................................ 10
The Funds........................................................... 10
Investment Advisers to the Fund..................................... 11
PERFORMANCE RELATED INFORMATION....................................... 12
THE FIXED ACCOUNT..................................................... 12
THE CERTIFICATE....................................................... 13
Purchases and Certificate Value..................................... 13
Charges and Fees.................................................... 15
Death Benefit....................................................... 16
Surrenders.......................................................... 18
ANNUITY OPTIONS....................................................... 19
OTHER PROGRAMS AVAILABLE.............................................. 21
OTHER INFORMATION..................................................... 21
Year 2000........................................................... 21
Legal Matters and Experts........................................... 23
More Information.................................................... 23
FEDERAL TAX CONSIDERATIONS............................................ 23
A. General.......................................................... 23
B. Taxation of American Maturity and the Separate Account........... 23
C. Taxation of Annuities -- General Provisions Affecting Purchasers
Other Than Qualified Retirement Plans.............................. 23
D. Federal Income Tax Withholding................................... 26
E. General Provisions Affecting Qualified Retirement Plans.......... 26
F. Annuity Purchases By Nonresident Aliens.......................... 27
APPENDIX I -- INFORMATION REGARDING TAX-QUALIFIED RETIREMENT PLANS.... 28
TABLE OF CONTENTS TO STATEMENT OF ADDITIONAL INFORMATION.............. 31
</TABLE>
<PAGE>
4 AMERICAN MATURITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
DEFINITIONS
These terms are capitalized when used throughout this Prospectus. Please
refer to these defined terms if you have any questions as you read your
prospectus.
ACCOUNT: Any of the Sub-Accounts or Fixed Account.
ACCUMULATION UNITS: If you allocate your Premium Payment to any of the
Sub-Accounts, we will convert those payments into Accumulation Units in the
selected Sub-Accounts. Accumulation Units are valued at the end of each Business
Day and are used to calculate the value of your Certificate prior to
Annuitization.
ACCUMULATION UNIT VALUE: The daily price of Accumulation Units on any Business
Day.
ADMINISTRATION CHARGE: The dollar amount that We deduct to cover administrative
expenses. This charge is an annual percentage. It will be shown on your
Certificate on the page entitled "Certificate Specifications."
ADMINISTRATIVE OFFICE OF THE COMPANY: Our location and overnight mailing address
is: American Maturity Life Insurance Company, c/o FCNPC, 1111 South Arroyo
Parkway, First Floor, Pasadena California 91109-7122. Our standard mailing
address is: American Maturity Life Insurance Company, P.O. Box 7005, Pasadena,
California 91109-7005.
AMERICAN MATURITY LIFE INSURANCE COMPANY: American Maturity Life, we, us or our.
We do not capitalize "we," "us," or "our" in the prospectus.
ANNIVERSARY VALUE: The value equal to the Certificate Value as of a Certificate
Anniversary, increased by the dollar amount of any Premium Payments made since
that anniversary and reduced by the dollar amount of any partial Surrenders
since that anniversary.
ANNUAL FEE: An annual $25 charge deducted the day before the Certificate
Anniversary or upon full Surrender if the Certificate Value at either of those
times is less than $50,000. The charge is deducted proportionately from each
Account in which you are invested.
ANNUAL WITHDRAWAL AMOUNT: This is the amount you can Surrender per Certificate
Year without paying a Contingent Deferred Sales Charge. This amount is
non-cumulative, meaning that it cannot be carried over from one year to the
next.
ANNUITANT: The person on whose life the Certificate is based. The Annuitant may
not be changed after your Certificate is issued.
ANNUITIZATION: The time when regularly scheduled Annuity Payments begin.
ANNUITY: This is a Certificate issued by us that provides, in exchange for
Premium Payments, a series of Annuity Payments. This Certificate allows your
Premium Payments and earnings to accumulate tax deferred until Surrenders are
taken or Annuity Payments are made.
ANNUITY COMMENCEMENT DATE: The date we start to make Annuity Payments.
ANNUITY PAYMENT: The money we pay out after the Annuity Commencement Date for
the duration and frequency you select.
ANNUITY PAYMENT OPTION: Any of the options available for payment after the
Annuity Commencement Date or death of the Certificate Owner or Annuitant.
ANNUITY UNIT(S): The unit of measure we use to calculate the value of your
Annuity Payments under a variable dollar amount Annuity Payment Option.
ANNUITY UNIT VALUE: The daily price of Annuity Units on any Business Day.
BENEFICIARY: The person(s) entitled to receive a Death Benefit upon the death of
the Contract Owner or Annuitant.
BUSINESS DAY: Every day the New York Stock Exchange is open for trading. Values
of the Separate Account are determined as of the close of the New York Stock
Exchange, generally 4:00 p.m. Eastern Time.
CERTIFICATE: Your annuity policy. The Certificate is issued by Us to you. It is
evidence that you, or someone on your behalf, made a premium payment under the
group contract issued to us by the AARP Group Annuity Trust.
CERTIFICATE ANNIVERSARY: The anniversary of the date we issued your Certificate.
If the Certificate Anniversary falls on a Non-Business Day, then the Certificate
Anniversary will be the next Business Day.
CERTIFICATE OWNER OR YOU: The owner or holder of this Annuity. We do not
capitalize "you" in the prospectus.
CERTIFICATE VALUE: The total value of the Accounts on any Business Day.
CERTIFICATE YEAR: Any 12 month period between Certificate Anniversaries,
beginning with the date the Certificate was issued.
CODE: The Internal Revenue Code of 1986, as amended.
CONTINGENT ANNUITANT: The person you may designate to become the Annuitant if
the original Annuitant dies before the Annuity Commencement Date. You must name
a Contingent Annuitant before the original Annuitant's death.
CONTINGENT DEFERRED SALES CHARGE: The deferred sales charge that may apply when
you make a full or partial Surrender.
<PAGE>
AMERICAN MATURITY LIFE INSURANCE COMPANY 5
- --------------------------------------------------------------------------------
DEATH BENEFIT: The amount payable after the Certificate Owner or the Annuitant
dies.
DOLLAR COST AVERAGING: A program that allows you to systematically make
transfers between Accounts available in your Certificate.
FIXED ACCOUNT: Part of our General Account, where you may allocate all or a
portion of your Certificate Value.
GENERAL ACCOUNT: The General Account includes our company assets and any money
you have invested in the Fixed Account.
JOINT ANNUITANT: The person on whose life Annuity Payments are based if the
Annuitant dies after Annuitization. You may name a Joint Annuitant only if your
Annuity Payment Option provides for a survivor. The Joint Annuitant may not be
changed.
NET INVESTMENT FACTOR: This is used to measure the investment performance of a
Sub-Account from one Business Day to the next, and is also used to calculate
your Annuity Payment amount.
NON-QUALIFIED CERTIFICATE: A Certificate that is not defined as a tax-qualified
retirement plan by the Code.
NON-BUSINESS DAY: Any day the New York Stock Exchange is not open for trading.
PORTFOLIOS: The investment options described in this prospectus or any
supplements to the prospectus.
PREMIUM PAYMENT: Money sent to us to be invested in your Annuity.
PREMIUM TAX: A tax charged by a state or municipality on Premium Payments.
REQUIRED MINIMUM DISTRIBUTION: A federal requirement that individuals age 70 1/2
and older must take a distribution from their tax-qualified retirement account
by December 31, each year.
SEPARATE ACCOUNT: An account that we established to separate the assets of the
variable Sub-Accounts from the assets of the company.
SUB-ACCOUNT: A division of the Separate Account that purchases the Funds
available in this Certificate.
SUB-ACCOUNT VALUE: The value on or before the Annuity Commencement Date, which
is determined on any day by multiplying the number of Accumulation Units by the
Accumulation Unit Value for that Sub-Account.
SURRENDER: A complete or partial withdrawal from your Certificate.
SURRENDER VALUE: The amount we pay you if you terminate your Certificate before
the Annuity Commencement Date. The Surrender Value is equal to the Certificate
Value minus any applicable charges.
VALUATION PERIOD: The time span between the close of trading on the New York
Stock Exchange from one Business Day to the next.
<PAGE>
6 AMERICAN MATURITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
FEE TABLE
<TABLE>
<S> <C>
Sales Charge Imposed on Purchases (as a percentage of premium
payments)....................................................... None
Contingent Deferred Sales Charge (as a percentage of premium
payments)
First Year (1)................................................ 5%
Second Year (1)............................................... 4%
Third Year (1)................................................ 3%
Fourth Year (1)............................................... 2%
Fifth Year (1)................................................ 1%
Sixth Year (1)................................................ 0%
Transfer Fee (2).............................................. None
Withdrawal Fee (3)............................................ None
Annual Maintenance Fee (4).................................... $ 25
</TABLE>
- ---------
(1) Length of time from Certificate Date in years.
(2) We reserve the right to impose a transaction fee in the future of up to
$15.00 per transfer in excess of 12 in any Certificate Year. See "The
Certificate -- Transfers Between the Sub-Accounts/Fixed Account."
(3) We reserve the right to impose a withdrawal fee in the future of up to
$15.00 per withdrawal on withdrawals in excess of 12 in any Certificate
Year. See "The Certificate -- Surrenders."
(4) This fee will be charged on the day before each Certificate Anniversary
prior to your Annuity Commencement Date and at the time of a full surrender
unless your Certificate Value is at least $50,000 on that date.
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a percentage of average account value)
<TABLE>
<S> <C>
Mortality and Expense Risk Charge................................. 0.65%
Administration Fee................................................ 0.20%
Total Separate Account Expenses................................... 0.85%
</TABLE>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets
including any Fee Waiver and/or Expense Reimbursement)
<TABLE>
<CAPTION>
TOTAL FUND
OPERATING
MANAGEMENT OTHER EXPENSES
FEES EXPENSES (WITH WAIVERS)
-------------- -------- --------------
<S> <C> <C> <C>
Money Market Portfolio (Scudder)................ 0.37% 0.07% 0.44%
Bond Portfolio (Scudder)........................ 0.48% 0.09% 0.57%
Balanced Portfolio (Janus Aspen) (1)............ 0.72% 0.02% 0.74%
Capital Growth Portfolio (Scudder).............. 0.46% 0.04% 0.50%
Growth & Income Portfolio (Scudder)............. 0.47% 0.09% 0.56%
AMT Partners Portfolio (Neuberger Berman
Management) (2)............................... 0.78% 0.06% 0.84%
Capital Appreciation Portfolio (Dreyfus)........ 0.75% 0.06% 0.81%
Small Cap Portfolio (Dreyfus)................... 0.75% 0.02% 0.77%
Worldwide Growth Portfolio (Janus Aspen) (1).... 0.65% 0.07% 0.72%
</TABLE>
Other expenses are based on amounts incurred during the most recent fiscal
year or based on estimated amounts for the current fiscal year.
The purpose of the foregoing table (Annual Fund Operating Expenses) is to
assist you in understanding the expenses of the Funds that they bear directly or
indirectly. The expenses relating to the Funds have been provided to Us by the
Funds, and we have not independently verified these expenses. See the sections
on charges in the accompanying Fund prospectuses.
<PAGE>
AMERICAN MATURITY LIFE INSURANCE COMPANY 7
- --------------------------------------------------------------------------------
- ---------
(1) Janus Aspen Series. Fees and expenses in the table above are based on gross
expenses before expense offset arrangements for the fiscal year ended
December 31, 1998. The information for Balanced and the Worldwide Growth
Portfolios is net of fee reductions from Janus Capital. Currently there are
fee reductions for the Balanced and Worldwide Growth Portfolios which reduce
the Management Fee and Total Operating Expenses whereby the Management Fee
and Total Operating Expenses of each Portfolio will not exceed the
Management Fee and Total Operating of the corresponding Janus retail fund.
Without these reductions, the Management Fee, Other Expenses and Total
Operating Expenses for the Worldwide Growth Portfolio would have been,
0.67%, 0.07% and 0.74%. Janus Capital has agreed to to continue the fee
reductions until at least the next annual renewal of the advisory
agreements.
(2) Neuberger Berman Advisers Management Trust. The fees and expenses are based
on fees and expenses for the fiscal year ended December 31, 1998. Neuberger
Berman Advisers Management Trust is divided into portfolios ("Portfolios"),
each of which invests all of its net investable assets in a corresponding
series ("Series") of Advisers Managers Trust. The figures reported under
"Management Fees" include the aggregate of the administration fees paid by
the Portfolio and the management fees paid by its corresponding Series.
Similarly, "Other Expenses" includes all other expenses of the Portfolio and
its corresponding Series. (See "Expenses" in Neuberger Berman Advisers
Management Trust's prospectus).
EXAMPLE
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
If you Surrender your Contract If you annuitize your Contract If you do not Surrender your
at the end of the applicable at the end of the applicable Contract, you would pay the
time period you would pay the time period you would pay the following expenses on a $1,000
following expenses on a $1,000 following expenses on a $1,000 investment, assuming a 5%
investment, assuming a 5% investment, assuming a 5% annual return on assets:
annual return on assets: annual return on assets:
<CAPTION>
SUB-ACCOUNT 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- -------- ------ ------- ------- -------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Money Market Portfolio....... $ 59 $ 70 $ 83 $ 162 $ 13 $ 42 $ 73 $ 161 $ 14 $ 43 $ 74 $ 162
Bond Portfolio............... 60 74 90 177 15 46 80 176 15 47 81 177
Balanced Portfolio........... 62 79 99 196 16 52 89 195 17 52 90 196
Capital Growth Portfolio..... 59 72 86 169 14 44 76 168 14 45 77 169
Growth & Income Portfolio.... 60 73 89 176 14 46 80 175 15 46 80 176
AMT Partners Portfolio....... 63 82 104 207 17 55 95 206 18 55 95 207
Capital Appreciation
Portfolio.................. 63 81 103 203 17 54 93 203 18 54 94 203
Small Cap Portfolio.......... 62 80 100 199 17 53 91 198 17 53 91 199
Worldwide Growth Portfolio... 62 78 98 193 16 51 88 193 17 51 89 193
</TABLE>
The purpose of this table is to assist you in understanding various fees and
charges you will pay directly or indirectly. The table reflects expenses of the
Separate Account and underlying Funds. Premium Taxes, if any, have been taken
into Account. This EXAMPLE should not be considered a representation of past or
future expenses and actual expenses may be greater or less than those shown. The
Annual Maintenance Fee has been reflected in the Example by a method intended to
show the "average" impact of the Annual Maintenance Fee on an investment in the
Separate Account. We do this by approximating an "average" 0.05% annual charge.
<PAGE>
8 AMERICAN MATURITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
ACCUMULATION UNIT VALUES
(FOR AN ACCUMULATION UNIT OUTSTANDING THROUGHOUT THE PERIOD)
The following information, has been derived from the audited financial
statements of the Separate Account, which have been audited by Arthur Andersen,
LLP, independent accountants, as indicated in the report thereto, and should be
read in conjunction with those statements which are included in the Statement of
Additional Information, which is incorporated by reference in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
-------------------
SUB-ACCOUNTS 1998 1997
- ------------------------------------------------------------ -------- --------
<S> <C> <C>
SCUDDER MONEY MARKET FUND (INCEPTION DATE MARCH 17, 1997)
Accumulation unit value at beginning of period.............. $ 10.348 $ 10.000
Accumulation unit value at end of period.................... $ 10.804 $ 10.348
Number accumulation units outstanding at end of period (in
thousands)................................................. 370 33
SCUDDER BOND FUND (INCEPTION DATE MARCH 17, 1997)
Accumulation unit value at beginning of period.............. $ 10.820 $ 10.000
Accumulation unit value at end of period.................... $ 11.434 $ 10.820
Number accumulation units outstanding at end of period (in
thousands)................................................. 617 52
JANUS BALANCED FUND (INCEPTION DATE MARCH 17, 1997)
Accumulation unit value at beginning of period.............. $ 11.535 $ 10.000
Accumulation unit value at end of period.................... $ 15.359 $ 11.535
Number accumulation units outstanding at end of period (in
thousands)................................................. 253 26
SCUDDER CAPITAL GROWTH FUND (INCEPTION DATE MARCH 17, 1997)
Accumulation unit value at beginning of period.............. $ 12.483 $ 10.000
Accumulation unit value at end of period.................... $ 15.252 $ 12.483
Number accumulation units outstanding at end of period (in
thousands)................................................. 188 45
SCUDDER GROWTH AND INCOME FUND (INCEPTION DATE MARCH 17,
1997)
Accumulation unit value at beginning of period.............. $ 12.121 $ 10.000
Accumulation unit value at end of period.................... $ 12.848 $ 12.121
Number accumulation units outstanding at end of period (in
thousands)................................................. 805 170
NEUBERGER BERMAN PARTNERS FUND (INCEPTION DATE MARCH 17,
1997)
Accumulation unit value at beginning of period.............. $ 12.334 $ 10.000
Accumulation unit value at end of period.................... $ 12.745 $ 12.334
Number accumulation units outstanding at end of period (in
thousands)................................................. 467 71
DREYFUS CAPITAL APPRECIATION FUND (INCEPTION DATE MARCH 17,
1997)
Accumulation unit value at beginning of period.............. $ 11.787 $ 10.000
Accumulation unit value at end of period.................... $ 15.217 $ 11.787
Number accumulation units outstanding at end of period (in
thousands)................................................. 755 110
DREYFUS SMALL CAPITAL FUND (INCEPTION DATE MARCH 17, 1997)
Accumulation unit value at beginning of period.............. $ 11.833 $ 10.000
Accumulation unit value at end of period.................... $ 11.329 $ 11.833
Number accumulation units outstanding at end of period (in
thousands)................................................. 144 35
JANUS WORLD WIDE GROWTH FUND (INCEPTION DATE MARCH 17, 1997)
Accumulation unit value at beginning of period.............. $ 11.406 $ 10.000
Accumulation unit value at end of period.................... $ 14.580 $ 11.406
Number accumulation units outstanding at end of period (in
thousands)................................................. 588 116
</TABLE>
<PAGE>
AMERICAN MATURITY LIFE INSURANCE COMPANY 9
- --------------------------------------------------------------------------------
HIGHLIGHTS
HOW DO I PURCHASE THIS ANNUITY?
You must complete an Enrollment Form and submit it to us for approval with your
first Premium Payment. Your first Premium Payment must be at least $5,000 and
subsequent Premium Payments must be at least $250, unless you take advantage of
our Pre-Authorized Checking Program ("PAC").
- - For a limited time, usually within ten days after you receive your
Certificate, you may cancel your Annuity without paying a Contingent Deferred
Sales Charge. You may bear the investment risk for your Premium Payment prior
to our receipt of your written request for cancellation.
WHAT TYPE OF SALES CHARGE WILL I PAY?
- - You don't pay a sales charge when you purchase your Annuity. We may charge
you a Contingent Deferred Sales Charge when you partially or fully Surrender
your Annuity. The Contingent Deferred Sales Charge will depend on the length
of time from your Certificate Date to the time of surrender.
<TABLE>
<CAPTION>
CERTIFICATE
YEAR CHARGE
--------- ---
<S> <C>
1 5%
2 4%
3 3%
4 2%
5 1%
6 or
greater 0%
</TABLE>
You won't be charged a Contingent Deferred Sales Charge on:
x The Annual Withdrawal Amount
x Premium Payments or earnings that have been in your Annuity for more than
five years.
x Distributions made due to death
x Payments we make to you as part of your Annuity Payment
x While you are confined to a nursing home (See "Nursing Home Waiver" on page
15)
x To meet IRS minimum distribution requirements on a qualified contract
x While you are under age 65 and totally disabled (See "Disability Waiver" on
page 15)
x While you have a terminal illness (See "Terminal Illness" on page 15)
IS THERE AN ANNUAL MAINTENANCE FEE?
We deduct this $25.00 fee each year on the day before your Certificate
Anniversary or when you fully Surrender your Annuity, if, on either of those
dates, the value of your Annuity is less than $50,000.
WHAT CHARGES WILL I PAY ON AN ANNUAL BASIS?
You pay three different types of charges each year. The first type of charge is
the fee you pay for insurance. This charge is:
A mortality and expense risk charge that is subtracted daily and is equal to
an annual charge of .65% of your Certificate Value invested in the Funds.
The second type of charge is the fee you pay for the Funds.
Currently, Fund charges range from 0.44% to 0.84% annually of the average
daily value of the amount you have invested in the Funds. See Annual Fund
Operating Expenses table for more complete information and the Funds'
prospectuses accompanying this prospectus.
The third type of charge is an Administration charge of .20% of your
Certificate Value in the invested Funds.
CAN I TAKE OUT ANY OF MY MONEY?
You may Surrender all or part of the amounts you have invested at any time
before we start making Annuity Payments.
- - You may have to pay tax on the money you take out and, if you Surrender
before you are age 59 1/2, you may have to pay an income tax penalty.
- - You may have to pay a Contingent Deferred Sales Charge on the money you
Surrender.
WILL AMERICAN MATURITY PAY A DEATH BENEFIT?
There is a Death Benefit if the Certificate Owner, joint owner or the Annuitant
die before we begin to make Annuity Payments. The Death Benefit will be
calculated as of the date we receive a certified death certificate or other
legal documents acceptable to us and will be the greater of:
- - The total Premium Payments you have made to us minus any amounts you have
Surrendered, or
- - The Certificate Value of your Annuity.
This Death Benefit amount will remain invested in the Sub-Accounts according
to your last instructions until we receive your settlement instructions and will
fluctuate with the performance of the underlying Funds.
WHAT ANNUITY PAYMENT OPTIONS ARE AVAILABLE?
When it comes time for us to make payments, you may choose one of the following
Annuity Payment Options: Option 1 -- Life Annuity; Option 2 -- Life Annuity with
120, 180 or 240 Monthly Payments Certain; Option 3 -- Cash Refund Life Annuity
(This option is not available for variable annuity payments); Option 4 -- Joint
and Last Survivor Life Annuity; and Option 5 -- Payments For a Designated
Period.
You must begin to take payments by the end of the Annuitant's 90th year. If
you do not tell us what Annuity
<PAGE>
10 AMERICAN MATURITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
Payment Option you want before that time, we will make payments under Option 5
- -- Payments For a Designated Period.
GENERAL CERTIFICATE
INFORMATION
AMERICAN MATURITY LIFE INSURANCE COMPANY
American Maturity is a stock insurance company engaged in the business of
writing annuities. American Maturity was incorporated under the name of First
Equicor Life Insurance Company under the laws of California on October 24, 1972.
On July 29, 1994 First Equicor Life Insurance Company redomesticated to
Connecticut and changed its name to American Maturity Life Insurance Company.
American Maturity is owned 60% by Hartford Life and Accident Insurance Company
(domiciled in Connecticut) and 40% by Pacific Mutual Life Insurance Company
(domiciled in California). Pacific Mutual serves as the administrator of the
Certificates.
AMERICAN MATURITY'S RATINGS
<TABLE>
<CAPTION>
EFFECTIVE DATE
RATING AGENCY OF RATING RATING BASIS OF RATING
- -------------------- --------------- ------ -----------------------
<S> <C> <C> <C>
A.M. Best and
Company, Inc. 1/99 A+ Financial performance.
Insurer financial
Standard & Poor's 6/98 AA strength
Duff & Phelps 12/98 AA+ Claims paying ability
</TABLE>
THE SEPARATE ACCOUNT
The Separate Account is where we set aside and invest the assets of this
Certificate. The Separate Account was established on February 28, 1996 and is
registered as a unit investment trust under the Investment Company Act of 1940.
This registration does not involve supervision by the SEC of the management or
the investment practices of the Separate Account or American Maturity Life. The
Separate Account meets the definition of "Separate Account" under federal
securities law. This Separate Account holds only assets for variable annuity
contracts. The Separate Account:
- - Holds assets for your benefit and the benefit of other Certificate Owners, and
the persons entitled to the payments described in the Certificate.
- - Is not subject to the liabilities arising out of any other business American
Maturity Life may conduct.
- - Is not affected by the rate of return of American Maturity Life's General
Account.
- - Is credited with income and gains, and takes losses, whether or not realized,
from the assets it holds.
We do not guarantee the investment results of the Separate Account. There is
no assurance that the value of your Annuity will equal the total of the payments
you make to us.
THE FUNDS
The underlying variable investments for the Certificates are certain shares
of the Dreyfus Variable Investment Fund, Janus Aspen Series, Neuberger Berman
Advisers Management Trust, and Scudder Variable Life Investment Fund, all
diversified series investment companies with multiple portfolios. We reserve the
right, subject to compliance with the law, to offer additional funds with
differing investment objectives.
A full description of the Funds, their investment policies and restrictions,
risks, charges and expenses and all other aspects of their operation is
contained in separate prospectuses (reprinted at the end of this booklet). Each
prospectus should be read in conjunction with this Prospectus before investing.
The investment objectives of each of the Funds are summarized below. There
is, of course, no assurance that any Fund will meet its objective:
THESE FUNDS MAY NOT BE AVAILABLE IN ALL STATES.
MONEY MARKET PORTFOLIO: Seeks stability and current income from a portfolio
of money market instruments. The portfolio is advised by Scudder Kemper
Investments, Inc.
BOND PORTFOLIO: Seeks high income from a high quality portfolio of bonds.
The portfolio is advised by Scudder Kemper Investments, Inc.
JANUS ASPEN BALANCED PORTFOLIO: Seeks long-term capital growth, balanced by
current income by investing in a balanced portfolio of stocks and bonds selected
primarily for their growth potential. The portfolio is advised by Janus Capital.
CAPITAL GROWTH PORTFOLIO: Seeks to maximize long-term capital growth from a
portfolio consisting primarily of equity securities. The portfolio is advised by
Scudder Kemper Investments, Inc.
GROWTH & INCOME PORTFOLIO: Seeks long term capital growth, current income
and growth of income from a portfolio consisting primarily of common stocks and
securities convertible into common stocks. The portfolio is advised by Scudder
Kemper Investments, Inc.
PARTNERS PORTFOLIO: Seeks capital growth by investing mainly in common
stocks of mid to large-capitalization companies. The portfolio is advised by
Neuberger Berman Management Inc.
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AMERICAN MATURITY LIFE INSURANCE COMPANY 11
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CAPITAL APPRECIATION PORTFOLIO: Seeks long-term capital growth by investing
primarily in the common stocks of domestic and foreign companies; current income
is a secondary investment objective. The portfolio is advised by The Dreyfus
Corporation and sub-advised by Fayez Sarofim & Co.
SMALL CAP PORTFOLIO: Seeks to maximize capital appreciation by investing
principally in the common stocks of foreign and domestic companies, focusing on
those which the adviser considers to be emerging smaller-sized companies with
prospects for growth in future earnings. The portfolio is advised by The Dreyfus
Corporation.
JANUS ASPEN WORLDWIDE GROWTH PORTFOLIO: Seeks long term growth of capital
by investing primarily in common stocks of foreign and domestic companies. The
portfolio is advised by Janus Capital Corporation.
THE FIXED ACCOUNT: Seeks guaranteed current interest income.
INVESTMENT ADVISERS TO THE FUNDS
THE DREYFUS CORPORATION
200 Park Avenue
New York, New York 10166
FAYEZ SAROFIM & CO. (Sub-Adviser)
909 Fannin
Two Houston Center
Suite 2907
Houston, Texas 77010-1083
JANUS CAPITAL CORPORATION
100 Filmore Street
Denver, Colorado 80206-4923
NEUBERGER BERMAN MANAGEMENT INC.
605 Third Avenue, 2nd Floor
New York, New York 10158-0180
SCUDDER, KEMPER INVESTMENTS, INC.
Two International Place
Boston, Massachusetts 02110-4103
Please see the prospectuses for the Dreyfus Variable Investment Fund, Janus
Aspen Series, Neuberger Berman Advisers Management Trust and Scudder Variable
Life Investment Fund for more information on each investment adviser.
MIXED AND SHARED FUNDING -- Shares of the Funds may be sold to other
separate accounts and other insurance companies to serve as the underlying
investment for both variable annuity contracts and variable life insurance
policies, a practice known as "mixed funding." As a result, there is a
possibility that a material conflict may arise between the interests of
Certificate Owners, and of owners of other contracts whose contract values are
allocated to one or more of these other separate accounts investing in any one
of the Funds. In the event of any such material conflicts, we will consider what
action may be appropriate, including removing the Fund from the Separate Account
or replacing the Fund with another underlying fund. There are certain risks
associated with mixed funding, as disclosed in the Funds' prospectus.
VOTING RIGHTS -- We are the legal owners of all Fund shares held in the
Separate Account and we have the right to vote at the Fund's shareholder
meetings. To the extent required by federal securities laws or regulations, we
will:
- - Notify you of any Fund shareholders' meeting if the shares held for your
Certificate may be voted.
- - Send proxy materials and a form of instructions that you can use to tell us
how to vote the Fund shares held for your Certificate.
- - Arrange for the handling and tallying of proxies received from Certificate
Owners.
- - Vote all Fund shares attributable to your Certificate according to
instructions received from you, and
- - Vote all Fund shares for which no voting instructions are received in the same
proportion as shares for which instructions have been received.
If any federal securities laws or regulations, or their present
interpretation, change to permit us to vote Fund shares on our own, we may
decide to do so. You may attend any Shareholder Meeting at which shares held for
your Certificate may be voted. After we begin to make payments to you, the
number of votes you have will decrease.
SUBSTITUTIONS, ADDITIONS, OR DELETIONS OF FUNDS -- We reserve the right,
subject to any applicable law, to make certain changes to the Funds offered
under Your Certificate. We may, in our sole discretion, establish new Funds. New
Funds will be made available to existing Certificate Owners as we determine
appropriate. We may also close one or more Funds to additional Payments or
transfers from existing Sub-Accounts.
We reserve the right to eliminate the shares of any of the Funds for any
reason and to substitute shares of another registered investment company for the
shares of any Fund already purchased or to be purchased in the future by the
Separate Account. To the extent required by the Investment Company Act of 1940
(the "1940 Act"), substitutions of shares attributable to your interest in a
Fund will not be made until we have the approval of the Securities and Exchange
Commission and we have notified you of the change.
In the event of any substitution or change, we may, by appropriate
endorsement, make any changes in the Certificate necessary or appropriate to
reflect the substitution or
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12 AMERICAN MATURITY LIFE INSURANCE COMPANY
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change. If we decide that it is in the best interest of Certificate owners, the
Separate Account may be operated as a management company under the 1940 Act or
any other form permitted by law, may be de-registered under the 1940 Act in the
event such registration is no longer required, or may be combined with one or
more other Separate Accounts.
PERFORMANCE RELATED INFORMATION
The Separate Account may advertise certain performance-related information
concerning the Sub-Accounts. Performance information about a Sub-Account is
based on the Sub-Account's past performance only and is no indication of future
performance.
When a Sub-Account advertises its STANDARDIZED TOTAL RETURN, it will usually
be calculated for one year, five years, and ten years or some other relevant
periods if the Sub-Account has not been in existence for at least ten years.
Total return is measured by comparing the value of an investment in the
Sub-Account at the beginning of the relevant period to the value of the
investment at the end of the period.
The Separate Account may also advertise NON-STANDARD TOTAL RETURNS THAT
PRE-DATE THE INCEPTION DATE OF THE SEPARATE ACCOUNT. These non-standardized
total returns are calculated by assuming that the Sub-Accounts have been in
existence for the same periods as the underlying Funds and by taking deductions
for charges equal to those currently assessed against the Sub-Accounts. These
non-standardized returns must be accompanied by standardized total returns.
If applicable, the Sub-Accounts may advertise YIELD IN ADDITION TO TOTAL
RETURN.The yield will be computed in the following manner: The net investment
income per unit earned during a recent one month period is divided by the unit
value on the last day of the period. This figure includes the recurring charges
at the Separate Account level including the Annual Maintenance Fee.
The Money Market Fund Sub-Account may advertise YIELD AND EFFECTIVE YIELD.
The yield of a Sub-Account is based upon the income earned by the Sub-Account
over a seven-day period and then annualized, i.e. the income earned in the
period is assumed to be earned every seven days over a 52-week period and stated
as a percentage of the investment. Effective yield is calculated similarly but
when annualized, the income earned by the investment is assumed to be reinvested
in Sub-Account units and thus compounded in the course of a 52-week period.
Yield and effective yield include the recurring charges at the Separate Account
level including the Annual Maintenance Fee.
The Separate Account may also disclose YIELD for periods prior to the date
the Separate Account commenced operations. For these periods, performance
information for the Sub-Accounts will be calculated based on the performance of
the underlying Funds and the assumption that the Sub-Accounts were in existence
for the same periods as those of the underlying Funds, with a level of charges
equal to those currently assessed against the Sub-Accounts. No yield disclosure
for periods prior to the date of the Separate Account will be used without the
yield disclosure for periods as of the inception of the Seperate Account.
The Statement of Additional Information may also present some performance
benchmarks, based on unmanaged market indices, such as the S&P 500, and on "peer
groups," which use other managed funds with similar investment objectives. These
benchmarks may give you a broader perspective when you examine hypothetical or
actual Sub-Account performance.
We may provide information on various topics to Certificate Owners and
prospective Certificate Owners in advertising, sales literature or other
materials. These topics may include the relationship between sectors of the
economy and the economy as a whole and its effect on various securities markets,
investment strategies and techniques (such as systematic investing, Dollar Cost
Averaging and asset allocation), the advantages and disadvantages of investing
in tax-deferred and taxable instruments, customer profiles and hypothetical
purchase scenarios, financial management and tax and retirement planning, and
other investment alternatives, including comparisons between the Certificate and
the characteristics of and market for such alternatives.
THE FIXED ACCOUNT
IMPORTANT INFORMATION YOU SHOULD KNOW: THIS PORTION OF THE PROSPECTUS
RELATING TO THE FIXED ACCOUNT IS NOT REGISTERED UNDER THE SECURITIES ACT OF 1933
("1933 ACT") AND THE FIXED ACCOUNT IS NOT REGISTERED AS AN INVESTMENT COMPANY
UNDER THE 1940 ACT. THE FIXED ACCOUNT OR ANY OF ITS INTERESTS ARE NOT SUBJECT TO
THE PROVISIONS OR RESTRICTIONS OF THE 1933 ACT OR THE 1940 ACT, AND THE STAFF OF
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT REVIEWED THE DISCLOSURE REGARDING
THE FIXED ACCOUNT. THE FOLLOWING DISCLOSURE ABOUT THE FIXED ACCOUNT MAY BE
SUBJECT TO CERTAIN GENERALLY APPLICABLE PROVISIONS OF THE FEDERAL SECURITIES
LAWS REGARDING THE ACCURACY AND COMPLETENESS OF DISCLOSURE.
Premium Payments and Certificate Values allocated to the Fixed Account
become a part of our General Account assets. We invest the assets of the General
Account according to the laws governing the investments of insurance company
General Accounts.
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AMERICAN MATURITY LIFE INSURANCE COMPANY 13
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Currently, we guarantee that we will credit interest at a rate of not less
than 3% per year, compounded annually, to amounts you allocate to the Fixed
Account. We reserve the right to change the rate subject only to applicable
state insurance law. We may credit interest at a rate in excess of 3% per year.
We will periodically publish the Fixed Account interest rates currently in
effect. There is no specific formula for determining interest rates. Some of the
factors that we may consider in determining whether to credit excess interest
are; general economic trends, rates of return currently available and
anticipated on our investments, regulatory and tax requirements and competitive
factors. We will account for any deductions, Surrenders or transfers from the
Fixed Account on a "first-in first-out" basis.
IMPORTANT: ANY INTEREST CREDITED TO AMOUNTS YOU ALLOCATE TO THE FIXED
ACCOUNT IN EXCESS OF 3% PER YEAR WILL BE DETERMINED AT OUR SOLE DISCRETION. YOU
ASSUME THE RISK THAT INTEREST CREDITED TO FIXED ACCOUNT MAY NOT EXCEED THE
MINIMUM GUARANTEE OF 3% FOR ANY GIVEN YEAR.
From time to time, we may credit increased interest rates under certain
programs established in our sole discretion.
DOLLAR COST AVERAGING -- Dollar cost averaging is a method in which
investors buy securities in a series of regular purchases instead of in a single
purchase. This allows the investor to have a lower average security price over
time. This allows the investor to purchase more units in a lower price
environment, and fewer units in a higher price environment. Prior to your
Annuity Commencement Date, you may use dollar cost averaging to transfer
amounts, over time, from any Sub-Account or the Fixed Account with a Certificate
Value of at least $500 to one or more other Sub-Accounts.
THE CERTIFICATE
PURCHASES AND CERTIFICATE VALUE
WHAT TYPES OF CERTIFICATE IS AVAILABLE?
The Certificate is a group tax-deferred variable annuity contract. It is
designed for retirement planning purposes and may be purchased by any eligible
member of the AARP.
HOW DO I PURCHASE A CERTIFICATE?
You may purchase a Certificate by completing and submitting an the Enrollment
Form along with an initial Premium Payment. The minimum Premium Payment is
$5,000. For additional Premium Payments, the minimum Premium Payment is $250.00.
Under certain situations, we may allow smaller Premium Payments, for example, if
you enroll in our PAC program or are part of certain tax qualified retirement
plans. Prior approval is required for Premium Payments of $1,000,000 or more.
You and your Annuitant must not be older than age 90 (age 89 in New York) on
the date that your Certificate is issued. You must be of legal age in the state
where the Certificate is issued and you are subject to the eligibility and
membership requirements of the AARP.
We reserve the right to reject any Enrollment Form or premium payment for
any reason, subject to the applicable state nondiscrimination laws and to our
own standards and guidelines.
HOW ARE PREMIUM PAYMENTS APPLIED TO MY CERTIFICATE?
Your initial Premium Payment will be invested within two Business Days of our
receipt of a properly completed Enrollment Form and the Premium Payment.
Subsequent Premium Payments are priced on the same Business Day they are
received. If we receive your Premium Payment on a Non-Business Day, the amount
will be invested on the next Business Day. Unless we receive new instructions,
we will invest the Premium Payment based on your last allocation instructions.
We will send you a confirmation when we invest your Premium Payment.
If the Enrollment Form accompanying the Premium Payment is incomplete when
received, we will hold the money in a non-interest bearing account for up to
five Business Days while we try to obtain complete information. If we cannot
obtain the information within five Business Days, we will return the Premium
Payment and explain why the Premium Payment could not be processed, unless you
authorize us to keep the Premium Payment until the necessary information is
received.
CAN I CANCEL MY CERTIFICATE AFTER I PURCHASE IT?
We want you to be satisfied with the Certificate you have purchased. We urge you
to closely examine its provisions. If for any reason you are not satisfied with
your Certificate, simply return it with a written request for cancellation
within ten days after you receive the Certificate. In some states, you may be
allowed more time to cancel your Certificate. We will not deduct any Contingent
Deferred Sales Charges during this time.
You bear the investment risk from the time the Certificate is issued until
we receive your complete cancellation request.
The amount we pay you upon cancellation depends on the requirements of the
state where you purchased your Certificate and the method of purchase.
HOW IS THE VALUE OF MY CERTIFICATE CALCULATED BEFORE THE ANNUITY COMMENCEMENT
DATE?
The Certificate Value is the sum of all Accounts. There are two things that
affect your Sub-Account value: (1) the number of Accumulation Units and (2) the
Accumulation
<PAGE>
14 AMERICAN MATURITY LIFE INSURANCE COMPANY
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Unit Value. The Sub-Account value is determined by multiplying the number of
Accumulation Units by the Accumulation Unit Value. Therefore, on any Business
Day your Certificate Value, with the exception of any Premium Payments credited
to the Fixed Account, reflects the investment performance of the Sub-Accounts
and will fluctuate with the performance of the underlying Funds.
When Premium Payments are credited to your Sub-Accounts, they are converted
into Accumulation Units by dividing the amount of your Premium Payments, minus
any Premium Taxes, by the Accumulation Unit Value for that day. The more Premium
Payments you put into your Certificate, the more Accumulation Units you will
own. You decrease the number of Accumulation Units you have by requesting
Surrenders, transferring money out of a Sub-Account, submitting a Death Benefit
claim or by annuitizing your Certificate.
To determine the current Accumulation Unit Value, we take the prior Business
Day's Accumulation Unit Value and multiply it by the Net Investment Factor for
the current Business Day.
The Net Investment Factor is used to measure the investment performance of a
Sub-Account from one Business Day to the next. The Net Investment Factor for
each Sub-Account equals:
- - The net asset value per share of each Fund held in the Sub-Account at the end
of the current Business Day divided by
- - The net asset value per share of each Fund held in the Sub-Account at the end
of the prior Business Day; minus
- - The daily mortality and expense risk charge and Administrative Charge adjusted
for the number of days in the period, and any other applicable charge.
We will send you a statement in each calendar quarter, which tells you how
many Accumulation Units you have, their value and your total Certificate Value.
CAN I TRANSFER FROM ONE SUB-ACCOUNT TO ANOTHER?
TRANSFERS BETWEEN SUB-ACCOUNTS -- Before the Annuity Commencement Date, you may
transfer from one Sub-Account to another at no extra charge. After the Annuity
Commencement Date, you may transfer from one Sub-Account to another once each
quarter. Your transfer request will be processed on the day that it is received
as long as it is received on a Business Day before the close of the New York
Stock Exchange. Otherwise, your request will be processed on the following
Business Day. We will send you a confirmation when we process your transfer. You
are responsible for verifying transfer confirmations and promptly advising us of
any errors within 30 days of receiving the confirmation.
SUB-ACCOUNT TRANSFER RESTRICTIONS -- We reserve the right to limit the
number of transfers to 12 per Certificate Year, with no transfers occurring on
consecutive Business Days. We also have the right to restrict transfers if we
believe that the transfers could have an adverse effect on other Certificate
Owners. In all states, we may:
- - Require a minimum time period between each transfer,
- - Limit the dollar amount that may be transferred on any one Valuation Day, and
- - Not accept transfer requests from an agent acting under a power of attorney
for more than one Certificate Owner.
We also have a restriction in place that involves individuals who act as a
power of attorney for multiple Certificate Owners.
Some states may have different restrictions.
TELEPHONE TRANSFERS -- We may permit you to authorize transfers among the
Sub-Accounts and the Fixed Account over the telephone. We will not be
responsible for losses resulting from acting upon telephone requests that we
reasonably believed to be genuine. We will employ reasonable procedures to
confirm that instructions communicated by telephone are genuine. All transfer
instructions by telephone are tape recorded.
Transaction instructions we receive by telephone before 4:00 p.m. Eastern
time (1:00 p.m. Pacific time), (or the close of the New York Stock Exchange, if
earlier), on any Business Day will normally be effective on that day, and we
will send you written confirmation of each telephone transfer. We cannot
guarantee that you will always be able to reach us to complete a telephone
transaction in the event of busy telephone lines, severe weather conditions, or
other emergencies.
The right to reallocate Certificate Values between the Sub-Accounts is
subject to modification if we determine, in our sole opinion, that the exercise
of that right by one or more Certificate Owners is, or would be, to the
disadvantage of other Certificate Owners. Any modification could be applied to
transfers to or from some or all of the Sub-Accounts and the Fixed Account and
could include, but not be limited to, the requirement of a minimum time period
between each transfer, not accepting transfer requests of an agent acting under
a power of attorney on behalf of more than one Certificate Owner, or limiting
the dollar amount that may be transferred between the Sub-Accounts and the Fixed
Account by a Certificate Owner at any one time. Such restrictions may be applied
in any manner reasonably designed to prevent any use of the transfer right which
is considered by American Maturity to be to the disadvantage of other
Certificate Owners.
POWER OF ATTORNEY -- You may authorize another person to make transfers on
your behalf by submitting a
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AMERICAN MATURITY LIFE INSURANCE COMPANY 15
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completed Power of Attorney form. Once we have the completed form on file, we
will accept transfer instructions from your designated third party until we
receive new instructions in writing from you. You will not be able to make
transfers or other changes to your Certificate if you have authorized someone
else to act under a Power of Attorney.
CHARGES AND FEES
There are 5 charges and fees associated with the Certificate:
1. THE CONTINGENT DEFERRED SALES CHARGE
The Contingent Deferred Sales Charge covers some of the expenses relating to the
sale and distribution of the Certificate, and the cost of preparing sales
literature and other promotional activities. We assess a Contingent Deferred
Sales Charge when you request a full or partial Surrender. The percentage of the
Contingent Deferred Sales Charge is based on the length of time from your
Certificate Date to the time of surrender. The Contingent Deferred Sales Charge
will not be assessed on amounts which exceed the total amount of the Premium
Payments made. For purposes of assessing the Contingent Deferred Sales Charge,
we assume that any Surrenders come first from Premium Payments and next from
earnings. Premium Payments are Surrendered in the order in which they were
received.
The Contingent Deferred Sales Charge is a percentage of Premium Payments
Surrendered and is equal to:
<TABLE>
<CAPTION>
CERTIFICATE
YEAR CHARGE
--------- ---
<S> <C>
1 5%
2 4%
3 3%
4 2%
5 1%
6 or
greater 0%
</TABLE>
THE FOLLOWING SURRENDERS ARE NOT SUBJECT TO A CONTINGENT DEFERRED SALES
CHARGE:
- - ANNUAL WITHDRAWAL AMOUNT: During the five years from the date we issue your
Certificate, you may, each Certificate Year, take partial Surrenders up to 10%
of the Premium Payments remaining in the Certificate as of the last
Certificate Anniversary. If you do not take 10% one year, you may not take
more than 10% of the remaining Premium Payments the next year. Withdrawals in
excess of this amount will be subject to the Contingent Deferred Sales Charge.
- - SURRENDERS MADE AFTER FIVE YEARS FROM THE DATE WE ISSUE YOUR
CERTIFICATE. After the fifth Certificate Year, you may take the total of: (a)
all of your earnings, and (b) all Premium Payments held in your Certificate.
UNDER THE FOLLOWING SITUATIONS, THE CONTINGENT DEFERRED SALES CHARGE IS WAIVED:
- - NURSING HOME WAIVER -- No Contingent Deferred Sales Charge will be assessed
upon surrenders that occur during your confinement in a facility certified as
a nursing home. Such confinement (1) must have been continuous for at least 90
days before the surrender request; (2) must be at the recommendation of a U.S.
licensed physician; (3) must be for medically necessary reasons and; (4) must
be in effect at the time of the surrender request. In Massachusetts, your
nursing home confinement must also be expected to be permanent. This Nursing
Home Waiver is not available in New York.
- - DISABILITY WAIVER -- No Contingent Deferred Sales Charge will be assessed upon
surrenders that occur when you are under age 65 and Totally Disabled. You must
provide written proof, satisfactory to us, that you are Totally Disabled.
Totally Disabled means a disability that: (1) results from bodily injury or
disease; (2) begins while the Certificate is in force; (3) has existed
continuously for at least 12 months; and (4) prevents you from engaging in the
substantial and material duties of your regular occupation. During the first
12 months of Total Disability, regular occupation means your usual full time
(at least 30 hours per week) work when Total Disability begins. We reserve the
right to require reasonable proof of such work. After the first 12 months of
Total Disability, regular occupation means that for which you are reasonably
qualified by education, training or experience. This Disability Waiver is not
available in Massachusetts or New York.
- - TERMINAL ILLNESS -- No Contingent Deferred Sales Charge will be assessed upon
surrenders that occur when you have been diagnosed with a medical condition
that results in a life expectancy of less than twelve months. You must provide
written proof, satisfactory to us, that you have been diagnosed by a U.S.
licensed physician with a medical determinable condition that results in a
life expectancy of less than twelve months (2 years in Massachusetts). This
Terminal Illness waiver is not available in New York.
- - IRS MINIMUM DISTRIBUTIONS -- No Contingent Deferred Sales Charge will be
assessed against surrenders necessary to meet the minimum distribution
requirements set forth in Section 401(a) of the Code as such requirements
apply to amounts held under the Certificate if you so specify in writing.
THE FOLLOWING SITUATIONS ARE NOT SUBJECT TO A CONTINGENT DEFERRED SALES CHARGE:
- - Upon death of the Annuitant or Certificate Owner. No Contingent Deferred Sales
Charge will be deducted if the Annuitant or Certificate Owner dies, unless the
Certificate Owner is not a natural person (e.g. a trust).
<PAGE>
16 AMERICAN MATURITY LIFE INSURANCE COMPANY
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- - Upon Annuitization. The Contingent Deferred Sales Charge is not deducted when
you annuitize the Certificate.
- - Upon cancellation during the Right to Examine Period.
2. MORTALITY AND EXPENSE RISK CHARGE
For assuming mortality and expense risks under the Certificate, we deduct a
daily charge at the rate of .65% per year of Sub-Account Value (estimated at
.47% for mortality and .18% for expenses). The mortality and expense risk charge
is broken into charges for mortality risks and for an expense risk:
- - MORTALITY RISK -- There are two types of mortality risks that we assume, those
made while your Premium Payments are accumulating and those made once Annuity
Payments have begun.
During the period your Premium Payments are accumulating, we are required to
cover any difference between the Death Benefit paid and the Surrender Value.
These differences may occur during periods of declining value or in periods
where the Contingent Deferred Sales Charges would have been applicable. The
risk that we bear during this period is that actual mortality rates, in
aggregate, may exceed expected mortality rates.
Once Annuity Payments have begun, we may be required to make Annuity Payments
as long as the Annuitant is living, regardless of how long the Annuitant
lives. We would be required to make these payments if the Payment Option
chosen is the Life Annuity, Life Annuity With 120, 180 or 240 Monthly Payments
Period Certain, Cash Refund Life Annuity, or Joint and Last Survivor Life
Annuity Payment Option. The risk that we bear during this period is that the
actual mortality rates, in aggregate, may be lower than the expected mortality
rates.
- - EXPENSE RISK -- We also bear an expense risk that the Contingent Deferred
Sales Charges and the Annual Maintenance Fee collected before the Annuity
Commencement Date may not be enough to cover the actual cost of selling,
distributing and administering the Certificate.
Although variable Annuity Payments will fluctuate with the performance of
the underlying Fund selected, your Annuity Payments will not be affected by (a)
the actual mortality experience of our Annuitants, or (b) our actual expenses if
they are greater than the deductions stated in the Contract. Because we cannot
be certain how long our Annuitants will live, we charge this percentage fee
based on the mortality tables currently in use. The mortality and expense risk
charge enables us to keep our commitments and to pay you as planned.
3. ANNUAL MAINTENANCE FEE
The Annual Maintenance Fee is a flat fee that is deducted from your Certificate
Value to reimburse us for expenses relating to the administrative maintenance of
the Certificate and the Accounts. The annual $25 charge is deducted the day
before the Certificate Anniversary or when the Certificate is fully Surrendered
if the Certificate Value at either of those times is less than $50,000. The
charge is deducted proportionately from each Account in which you are invested.
WHEN IS THE ANNUAL MAINTENANCE FEE WAIVED?
We will waive the Annual Maintenance Fee if your Certificate Value is $50,000 or
more the day before your Certificate Anniversary or when you fully Surrender
your Contract.
4. ADMINISTRATION CHARGE
We charge an Administrative Fee as compensation for costs we incur in operating
the Separate Account and issuing and administering the Certificates, including
processing Enrollment Forms and payments, and issuing reports to Certificate
Owners and to regulatory authorities.
This Administration Charge is charged at an annual rate of 0.20% against all
Certificate Values held in the Sub-Accounts during the life of the Certificate.
This fee is assessed daily during both the accumulation and the annuity periods.
A relationship will not necessarily exist between the actual administrative
expenses attributable to a particular Certificate and the Administrative Fee
paid in respect of that particular Certificate.
5. PREMIUM TAXES
We deduct Premium Taxes, if required, by a state or other government agency.
Some states collect the taxes when Premium Payments are made; others collect at
Annuitization. Since we pay Premium Taxes when they are required by applicable
law, we may deduct them from your Certificate when we pay the taxes, upon
Surrender, or on the Annuity Commencement Date. The Premium Tax rate varies by
state or municipality. Currently, the maximum rate charged by any state is 3.5%.
DEATH BENEFIT
WHAT IS THE DEATH BENEFIT AND HOW IS IT CALCULATED?
The Death Benefit is the amount we will pay upon the death of the Certificate
Owner or the Annuitant. The Death Benefit is calculated when we receive a
certified death certificate or other legal document acceptable to us.
The calculated Death Benefit will remain invested in the same Accounts,
according to the Certificate Owner's last instructions until we receive complete
written settlement instructions from the Beneficiary. Therefore, the Death
Benefit amount will fluctuate with the performance of the
<PAGE>
AMERICAN MATURITY LIFE INSURANCE COMPANY 17
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underlying Funds. When there is more than one Beneficiary, we will calculate the
Accumulation Units for each Sub-account and the dollar amount for the Fixed
Account for each Beneficiary's portion of the proceeds.
If death occurs before the Annuity Commencement Date, the Death Benefit is
the greater of:
- - The Certificate Value on the date the death certificate or other legal
document acceptable to us is received; or
- - 100% of all Premium Payments paid into the Certificate minus any partial
Surrenders;
WHO WILL RECEIVE THE DEATH BENEFIT?
The distribution of the Death Benefit is based on whether death is before, on or
after the Annuity Commencement Date.
IF DEATH OCCURS BEFORE THE ANNUITY COMMENCEMENT DATE:
<TABLE>
<S> <C> <C> <C>
IF THE DECEASED IS THE... AND... AND... THEN THE...
- --------------------------------------------------------------------------------------------------------------
Certificate Owner There is a surviving joint The Annuitant is living or Joint Certificate Owner
Certificate Owner deceased receives the Death
Benefit.
- --------------------------------------------------------------------------------------------------------------
Certificate Owner There is no surviving The Annuitant is living or Designated Beneficiary
joint Certificate Owner deceased receives the Death
Benefit.
- --------------------------------------------------------------------------------------------------------------
Certificate Owner There is no surviving The Annuitant is living or Certificate Owner's estate
joint Certificate Owner deceased receives the Death
and the Beneficiary Benefit.
predeceases the Contract
Owner
- --------------------------------------------------------------------------------------------------------------
Annuitant The Certificate Owner is There is no named Death Benefit is paid to
still living Contingent Annuitant the Certificate Owner(s)
and not the designated
Beneficiary.
- --------------------------------------------------------------------------------------------------------------
Annuitant The Certificate Owner is The Contingent Annuitant Contingent Annuitant
alive is alive becomes the Annuitant, and
the Certificate continues.
</TABLE>
IF DEATH OCCURS ON OR AFTER THE ANNUITY COMMENCEMENT DATE:
<TABLE>
<S> <C> <C>
IF THE DECEASED IS THE... AND... THEN THE...
- -------------------------------------------------------------------------------------------------------------
Certificate Owner The Annuitant is living Annuitant becomes the Certificate
Owner
- -------------------------------------------------------------------------------------------------------------
Annuitant The Certificate Owner is living Certificate Owner receives the
Death Benefit.
- -------------------------------------------------------------------------------------------------------------
Annuitant The Annuitant is also the Designated Beneficiary receives the
Certificate Owner Death Benefit.
</TABLE>
THESE ARE THE MOST COMMON DEATH BENEFIT SCENARIOS, HOWEVER, THERE ARE
OTHERS. SOME OF THE ANNUITY PAYMENT OPTIONS MAY NOT RESULT IN A DEATH BENEFIT
PAYMENT. IF YOU HAVE QUESTIONS ABOUT THESE AND ANY OTHER SCENARIOS, PLEASE
CONTACT OUR CUSTOMER SERVICE SPECIALISTS AT OUR CUSTOMER SERVICE CENTER
1-800-923-3334.
HOW IS THE DEATH BENEFIT PAID?
The Death Benefit may be taken in one lump sum or under any of the Annuity
Payment Options then being offered by us. On the date we receive written
notification of due proof of death, we will compute the Death Benefit as of the
end of the Business Day in which we receive this written notification. The Death
Benefit will be paid out or applied to a selected Annuity Payment Option in
accordance the completed settlement instructions received by us. When there is
more than one Beneficiary, we will calculate the Death Benefit payable for each
Beneficiary's portion of the proceeds as of the end of the Business Day in which
we receive the Beneficiary's written settlement instructions. The Death Benefit
will be paid out or applied it to a selected Annuity Payment Option according to
each Beneficiary's settlement instructions. If we receive the complete
settlement instructions on a Non-Business Day, computations will take place on
the next Business Day.
The Beneficiary may elect under the Annuity Payment Option "Annuity Proceeds
Settlement Option" and leave proceeds from the Death Benefit with us for up to
five years
<PAGE>
18 AMERICAN MATURITY LIFE INSURANCE COMPANY
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from the date of the Certificate Owner's death if the Certificate Owner died
before the Annuity Commencement Date. Once we receive a certified death
certificate or other legal documents acceptable to us, the Beneficiary can: (a)
make Sub-Account transfers and (b) take Surrenders without paying Contingent
Deferred Sales Charges. If there are multiple Beneficiaries, Subsequent
Sub-Account transfers and Surrenders may be elected by having one beneficiary,
with a power of attorney from the remaining beneficiaries, provide us with
instructions.
REQUIRED DISTRIBUTIONS: If the Certificate Owner dies before the Annuity
Commencement Date, the Death Benefit must be distributed within five years after
death. The Beneficiary can choose any Annuity Payment Option that results in
complete Annuity Payment within five years.
If the Certificate Owner dies on or after the Annuity Commencement Date and
before the entire interest in the Certificate has been distributed, the
remaining portion of this interest shall be distributed at least as rapidly as
under the method of distribution chosen by the Certificate Owner at the time of
the Certificate Owner's death.
If the Certificate Owner is not an individual (e.g. a trust), then the
original Annuitant will be treated as the Certificate Owner in the situations
described above and any change in the original Annuitant will be treated as the
death of the Certificate Owner.
WHAT SHOULD THE BENEFICIARY CONSIDER?
ALTERNATIVES TO THE REQUIRED DISTRIBUTIONS: The selection of an Annuity Payment
Option and the timing of the selection will have an impact on the tax treatment
of the Death Benefit. To receive favorable tax treatment, the Annuity Payment
Option selected: (a) cannot extend beyond the Beneficiary's life or life
expectancy, and (b) must begin within one year of the date of death. Payment to
the Beneficiary, other than in a lump sum, may only be elected during the
sixty-day period beginning with the date of receipt of due proof of death.
If these conditions are not met, the Death Benefit will be treated as a lump
sum payment for tax purposes. This sum will be taxable in the year in which it
is considered received.
SPOUSAL CONTINUATION -- If the sole Beneficiary is the Certificate Owner's
spouse, the Beneficiary may elect to continue the Certificate as the Certificate
Owner in lieu of receiving the death benefit payment, receive the death benefit
in one lump sum payment or elect an Annuity Payment Option.
SURRENDERS
WHAT KINDS OF SURRENDERS ARE AVAILABLE?
FULL SURRENDERS BEFORE THE ANNUITY COMMENCEMENT DATE: When you Surrender your
Certificate before the Annuity Commencement Date, the Surrender Value of the
Certificate will be made in a lump sum payment. The Surrender Value is the
Certificate Value minus any applicable Premium Taxes, Contingent Deferred Sales
Charges and the Annual Maintenance Fee. The Surrender Value may be more or less
than the amount of the Premium Payments made to a Certificate.
PARTIAL SURRENDERS BEFORE THE ANNUITY COMMENCEMENT DATE: You may request a
partial Surrender of Certificate Values at any time before the Annuity
Commencement Date. There are two restrictions:
- - The partial Surrender amount must be at least equal to $500, our current
minimum for partial Surrenders, and
- - The Certificate must have a minimum Certificate Value of $5,000 after the
Surrender. The minimum Certificate Value in New York and Massachusetts must be
$2,000 after the Surrender. We reserve the right to close your Certificate and
pay the full Surrender Value if the Certificate Value is under $5,000 after
the Surrender.
PARTIAL SURRENDERS AFTER THE ANNUITY COMMENCEMENT DATE: Partial Surrenders
are permitted after the Annuity Commencement Date if you elect the Payment for a
Designated Period Annuity Option (variable annuitization only), but check with
your tax advisor because there might be adverse tax consequences.
HOW DO I REQUEST A SURRENDER?
Requests for full and partial Surrenders must be in writing. We will send your
money within seven days of receiving completed instructions. However, we may
postpone payment of Surrenders whenever: (a) the New York Stock Exchange is
closed, except for holidays or weekends, or trading on the New York Stock
Exchange is restricted by the Securities and Exchange Commission (the "SEC"),
(b) the SEC permits postponement and so orders, or (c) the SEC determines that
an emergency exists to restrict valuation.
WRITTEN REQUESTS -- To request a full or partial Surrender, complete a
Surrender Request Form or send us a letter, signed by you, stating:
- - the dollar amount that you want to receive, either before or after we withhold
taxes and deduct for any applicable charges,
- - your tax withholding amount or percentage, if any, and
- - your mailing address.
<PAGE>
AMERICAN MATURITY LIFE INSURANCE COMPANY 19
- --------------------------------------------------------------------------------
If there are joint Certificate Owners, both must authorize all Surrenders.
For a partial Surrender, specify the Accounts that you want your Surrender to
come from, otherwise, the Surrender will be taken in proportion to the value in
each Account.
WHAT SHOULD BE CONSIDERED ABOUT TAXES?
There are certain tax consequences associated with Surrenders:
PRIOR TO AGE 59 1/2: If you make a Surrender prior to age 59 1/2, there may
be adverse tax consequences including a 10% federal income tax penalty on the
taxable portion of the Surrender payment.
WE DO NOT MONITOR SURRENDER REQUESTS. TO DETERMINE WHETHER A SURRENDER IS
PERMISSIBLE, WITH OR WITHOUT FEDERAL INCOME TAX PENALTY, PLEASE CONSULT YOUR
PERSONAL TAX ADVISER.
WE ENCOURAGE YOU TO CONSULT WITH YOUR TAX ADVISER BEFORE MAKING ANY
SURRENDERS. PLEASE SEE THE "FEDERAL TAX CONSIDERATIONS" SECTION FOR MORE
INFORMATION.
ANNUITY OPTIONS
THIS SECTION DESCRIBES WHAT HAPPENS WHEN WE BEGIN TO MAKE REGULAR ANNUITY
PAYMENTS FROM YOUR CERTIFICATE. YOU, AS THE CERTIFICATE OWNER, SHOULD ANSWER
FOUR QUESTIONS:
1. When do you want Annuity Payments to begin?
2. What Annuity Payment Option do you want to use?
3. How often do you want to receive Annuity Payments?
4. Do you want Annuity Payments to be fixed or variable or a combination?
Please check with your financial advisor to select the Annuity Payment
Option that best meets your income needs.
1. WHEN DO YOU WANT ANNUITY PAYMENTS TO BEGIN?
You select an Annuity Commencement Date when you purchase your Certificate or at
any time before you begin receiving Annuity Payments. The Annuity Commencement
Date must be no earlier than your first Certificate Anniversary. You may change
the Annuity Commencement Date by notifying us thirty days prior to the date. The
Annuity Commencement Date cannot be deferred beyond the Annuitant's/Owner's 90th
year.
All Annuity Payments, regardless of frequency, will occur on the same day of
the month as the Annuity Commencement Date. After the initial payment, if an
Annuity Payment date falls on a Non-Business Day, the Annuity Payment is
computed on the prior Business Day. If the Annuity Payment date does not occur
in a given month due to a leap year or months with only 28 days (i.e. the 31st),
the Annuity Payment will be computed on the last Business Day of the month.
2. WHICH ANNUITY PAYMENT OPTION DO YOU WANT TO USE?
Your Certificate contains the Annuity Payment Options described below. The
Annuity Proceeds Settlement Option is an option that can be elected by the
Beneficiary after the death of the Certificate Owner and is described in the
"Death Benefit" section. We may at times offer other Annuity Payment Options.
FIRST OPTION: LIFE ANNUITY
An annuity payable monthly during the lifetime of the Annuitant, ceasing
with the last payment due prior to the death of the Annuitant. This option
offers the largest payment amount of any of the life Annuity options since there
is no guarantee of a minimum number of payments nor a provision for a death
benefit payable to a Beneficiary.
It would be possible under this option for an Annuitant to receive only one
Annuity payment if he died prior to the due date of the second Annuity payment,
two if he died before the due date of the third Annuity payment, etc.
SECOND OPTION: LIFE ANNUITY WITH 120, 180 OR 240 MONTHLY PAYMENTS CERTAIN
An annuity providing monthly income for a fixed period of 120 months, 180
months, or 240 months (as selected), and for as long thereafter as the Annuitant
shall live.
If, at the death of the Annuitant, payments have been made for less than the
minimum elected number of months, then the present value as of the date of the
Annuitant's death, of any remaining guaranteed payments will be paid in one sum
to the Beneficiary unless other provisions have been made and approved by
American Maturity Life.
THIRD OPTION: CASH REFUND LIFE ANNUITY
An annuity payable monthly during the lifetime of the Annuitant ceasing with
the last payment due prior to the death of the Annuitant provided that, at the
death of the Annuitant, the Beneficiary will receive an additional payment equal
to the excess, if any, of (a) minus (b) where: (a) is the Net Surrender Value
applied on the Annuity Commencement Date under this option: and (b) is the
dollar amount of annuity payments already paid. This option is not available for
variable payments.
FOURTH OPTION: JOINT AND LAST SURVIVOR LIFE ANNUITY
An annuity payable monthly during the joint lifetime of the Annuitant and a
Joint Annuitant, and thereafter during the remaining lifetime of the survivor,
ceasing with the last payment prior to the death of the survivor.
<PAGE>
20 AMERICAN MATURITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
It would be possible under this option for an Annuitant and Joint Annuitant
to receive only one payment in the event of the common or simultaneous death of
the parties prior to the due date for the second payment and so on.
FIFTH OPTION: PAYMENT FOR A DESIGNATED PERIOD
An amount payable monthly for the number of years selected which may be from
5 to 30 years.
In the event of the Annuitant's death prior to the end of the designated
period, the present value as of the date of the Annuitant's death, of any
remaining guaranteed payments will be paid in one sum to the Beneficiary unless
other provisions have been made and approved by American Maturity Life.
Option 5 is an option that does not involve life contingencies and thus no
mortality guarantee. Charges made for the mortality undertaking under the
Certificates thus provide no real benefit to a Certificate Owner.
- - If you do not elect an Annuity Payment Option, fixed Annuity Payments will
automatically begin on the Annuity Commencement Date under the Payment for a
Designated Period option. You will receive Annuity Payments over a period of
five years.
3. HOW OFTEN DO YOU WANT THE PAYEE TO RECEIVE ANNUITY PAYMENTS?
In addition to selecting an Annuity Commencement Date and an Annuity Payment
Option, you must also decide how often you want the Payee to receive Annuity
Payments. You may choose to receive Annuity Payments:
- - monthly,
- - quarterly,
- - semi-annually, or
- - annually.
Once you select a frequency, it cannot be changed. If you do not make a
selection, the Payee will receive monthly Annuity Payments. You must select a
frequency that results in an Annuity Payment of at least $50. If the amount
falls below $50, we have the right to change the frequency to bring the Annuity
Payment up to at least $50. For Certificates issued in New York and
Massachusetts, the minimum monthly Annuity Payment is $20.
THE ASSUMED INVESTMENT RETURN
The Assumed Investment Return is the investment return used to calculate
variable Annuity Payments. The Assumed Investment Return for your Annuity is 5%.
The first Annuity Payment will be based upon a 5% Assumed Investment Return. The
remaining Annuity Payments will fluctuate based on the actual investment results
of the Sub-Accounts.
4. DO YOU WANT ANNUITY PAYMENTS TO BE FIXED OR VARIABLE?
You may choose an Annuity Payment Option with fixed-dollar amounts or
variable-dollar amounts, or a combination of both depending on your income
needs.
FIXED-DOLLAR AMOUNT ANNUITY PAYMENTS -- Once a fixed-dollar amount Annuity
Payment begins, you cannot change your selection to receive a variable-dollar
amount Annuity Payment. You will receive equal fixed-dollar amount Annuity
Payments throughout the Annuity Payment period. Fixed-dollar amount Annuity
Payment amounts are determined by multiplying the Certificate Value, minus any
applicable Premium Taxes, by an Annuity rate. The annuity rate is set by us and
is not less than the rate specified in the fixed-dollar amount Annuity Payment
Option tables in your Certificate.
VARIABLE-DOLLAR AMOUNT ANNUITY PAYMENTS -- A variable-dollar amount Annuity
Payment is based on the investment performance of the Sub-Accounts. The
variable-dollar amount Annuity Payments may fluctuate with the performance of
the underlying Funds. To begin making variable-dollar amount Annuity Payments,
we convert the first Annuity Payment amount to a set number of Annuity Units and
then price those units to determine the Annuity Payment amount. The number of
Annuity Units that determines the Annuity Payment amount remains fixed unless
you transfer units between Sub-Accounts.
The dollar amount of the first variable Annuity Payment depends on:
- - the Annuity Payment Option chosen,
- - the Annuitant's attained age and gender (if applicable), and,
- - the applicable annuity purchase rates based on the 1983a Individual Annuity
Mortality table.
The total amount of the first variable-dollar amount Annuity Payment is the
sum of the values of each Sub-Account. This is determined by dividing the
Certificate Value minus any applicable Premium Taxes, by $1,000 and multiplying
the result by the payment factor defined in the Contract for the selected
Annuity Payment Option.
The dollar amount of each subsequent variable-dollar amount Annuity Payment
is equal to:
Sub-Account Annuity Units, determined from the first Annuity Payment,
multiplied by Annuity Unit Value.
The Annuity Unit Value of each Sub-Account for any Valuation Period is equal
to the Accumulation Unit Value Net Investment Factor for the current Valuation
Period multiplied by the Annuity Unit factor, multiplied by the Annuity Unit
Value for the preceding Valuation Period.
<PAGE>
AMERICAN MATURITY LIFE INSURANCE COMPANY 21
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TRANSFER OF ANNUITY UNITS: After the Annuity Commencement Date, you may
transfer the dollar amount associated with Annuity Units from one Sub-Account to
another once a quarter. On the day you make a transfer, the dollar amounts are
equal for both Sub-Accounts and the number of Annuity Units will be different.
We will transfer the dollar amount of your Annuity Units the day we receive your
written request if received before the close of the New York Stock Exchange
(1:00 p.m. Pacific Time).
OTHER PROGRAMS AVAILABLE
PRE-AUTHORIZED CHECKING PROGRAM ("PAC") -- PAC is an electronic transfer
program that allows you to have money automatically withdrawn from your checking
or savings account, and invested in your Certificate. It is available for
Premium Payments made after your initial Premium Payment. The minimum amount for
each transfer is $100. You can elect to have transfers occur either monthly or
quarterly, and they can be made into any Account available in your Certificate.
ELECTRONIC FUND TRANSFERS: Electronic Fund Transfers allow you to Surrender
up to 10% of your remaining Premium Payments each Certificate Year. We can
Surrender from the Accounts you select systematically on a monthly, quarterly,
semiannual, or annual basis. Electronic Fund Transfers may change based on your
instructions after your fifth Certificate Year.
ASSET ALLOCATION PROGRAM: The AARP Variable Annuity Asset Allocation
feature matches risk tolerance and investment objective to a professionally
designed portfolio built from various available Sub-Accounts. There are five
"standard" models (conservative, moderate-conservative, moderate,
moderate-aggressive, and aggressive) that represent different levels of risk.
Custom models are available that allow risk tolerance and investment objectives
to be more closely matched.
REBALANCING -- Asset Rebalancing is another type of asset allocation program
available to you. You select the Sub-Accounts and the percentages you want
allocated to each Sub-Account. Based on the frequency you select, your model
will automatically rebalance to the original percentages chosen. You can
transfer freely between models up to twelve times per year. You can also
allocate a portion of your investment to Sub-Accounts that are not part of the
model. You can only participate in one asset rebalancing model at a time.
EARNINGS SWEEP -- You may instruct us to make automatic periodic transfers
of your earnings from the Fixed Account to one or more Sub-Accounts.
OTHER INFORMATION
ASSIGNMENT -- Ownership of this Certificate is generally assignable. An
assignment of a Non-Qualified Certificate may subject the Certificate Values or
Surrender Value to income taxes and certain penalty taxes.
CERTIFICATE MODIFICATION -- The Annuitant may not be changed. However, if
the Annuitant is still living, the Contingent Annuitant may be changed at any
time prior to the Annuity Commencement Date by sending us written notice. We may
modify the Certificate, but no modification will effect the amount or term of
any Certificate unless a modification is required to conform the Certificate to
applicable Federal or State law. No modification will effect the method by which
Certificate Values are determined.
HOW CERTIFICATES ARE SOLD:
Hartford Securities Distribution Company, Inc. ("HSD") serves as principal
underwriter for the securities issued with respect to the Separate Account. HSD
is an affiliate of American Maturity Life. HSD and American Maturity Life are
ultimately controlled by The Hartford Financial Services Group, Inc. The
principal business address of HSD is 200 Hopmeadow Street, Simsbury, CT 06089.
HSD is registered with the SEC under the Securities Exchange Act of 1934 as a
Broker-Dealer and is a member of the National Association of Securities Dealers,
Inc.
The securities will be sold by salespersons of HSD, who represent American
Maturity Life as insurance and variable annuity agents and who are registered
representatives. These salespersons will be supervised by American Maturity Life
who will respond to telephone inquiries as a result of national advertising.
YEAR 2000
IN GENERAL -- The Year 2000 issue relates to the ability or inability of
computer hardware, software and other information technology (IT) systems, as
well as non-IT systems, such as equipment and machinery with imbedded chips and
microprocessors, to properly process information and data containing or related
to dates beginning with the year 2000 and beyond. The Year 2000 issue exists
because, historically, many IT and non-IT systems that are in use today were
developed years ago when a year was identified using a two-digit date field
rather than a four-digit date field. As information and data containing or
related to the century date are introduced to date sensitive systems, these
systems may recognize the year 2000 as "1900", or not at all, which may result
in systems processing information incorrectly. This, in turn, may significantly
and adversely affect the integrity and reliability of information databases of
IT systems, may cause the malfunctioning of certain non-IT systems, and may
result in a wide variety of adverse consequences to a company. In addition, Year
2000 problems that occur with
<PAGE>
22 AMERICAN MATURITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
third parties with which a company does business, such as suppliers, computer
vendors, distributors and others, may also adversely affect any given company.
The integrity and reliability of American Maturity Life's IT systems, as
well as the reliability of its non-IT systems, are integral aspects of American
Maturity Life's business. American Maturity Life issues annuities which contain
date sensitive data, such as policy inception dates and annuitizaton dates. In
addition, various IT systems support communications and other systems that
integrate American Maturity Life's various business entities. American Maturity
Life has business relationships with numerous third parties that affect
virtually all aspects of American Maturity Life's business, including, without
limitation, suppliers, computer hardware and software vendors and fund managers,
many of which provide date sensitive data to American Maturity Life, and whose
operations are important to American Maturity Life's business.
INTERNAL YEAR 2000 EFFORTS AND TIMETABLE -- Beginning in 1995, American
Maturity Life began working on making its IT systems Year 2000 ready, either
through installing new programs or replacing systems. Since January 1998,
American Maturity Life's Year 2000 efforts have focused on the remaining Year
2000 issues related to IT and non-IT systems in all of American Maturity Life's
business segments. These Year 2000 efforts include the following five main
initiatives: (1) identifying and assessing Year 2000 issues; (2) taking actions
to remediate IT and non-IT systems so that they are Year 2000 ready; (3) testing
IT and non-IT systems for Year 2000 readiness; (4) deploying such remediated and
tested systems back into their respective production environments; and (5)
conducting internal and external integrated testing of such systems. As of
December 31, 1998, American Maturity Life substantially completed initiatives
(1) through (4) of its internal Year 2000 efforts. American Maturity has begun
initiative (5) and management currently anticipates that such activity will
continue into the fourth quarter of 1999.
THIRD PARTY YEAR 2000 EFFORTS AND TIMETABLE -- American Maturity Life's Year
2000 efforts include assessing the potential impact on American Maturity Life of
third parties' Year 2000 readiness. American Maturity Life's third party Year
2000 efforts include the following three main initiatives: (1) identifying third
parties which have significant business relationships with American Maturity
Life, including, without limitation, third party administrators, banks and other
distributors and servicers of financial products, and inquiring of such third
parties regarding their Year 2000 readiness; (2) evaluating such third parties'
responses to American Maturity Life's inquiries; and (3) based on the evaluation
of third party responses (or a third party's failure to respond) and the
significance of the business relationship, conducting additional activities with
respect to third parties as determined to be necessary in each case. These
activities may include conducting additional inquiries, more in-depth
evaluations of Year 2000 readiness and plans, and integrated IT systems testing.
American Maturity Life has completed the first third party initiative and, as of
early 1999, had substantially completed evaluating third party responses
received. American Maturity Life has begun conducting the additional activities
described in initiative (3) and management currently anticipates that it will
continue to do so through the end of 1999. However, notwithstanding these third
party Year 2000 efforts, American Maturity Life does not have control over these
third parties and, as a result, American Maturity Life cannot currently
determine to what extent future operating results may be adversely affected by
the failure of these third parties to adequately address their Year 2000 issues.
YEAR 2000 COSTS -- The costs of American Maturity Life's Year 2000 program
that were incurred through the year ended December 31, 1997 were not material to
American Maturity's financial condition or results of operations. The after-tax
costs of American Maturity Life's Year 2000 efforts for the year ended December
31, 1998 were approximately $250,000. Management currently estimates that
after-tax costs related to the Year 2000 program to be incurred in 1999 will be
less than $250,000. These costs are being expensed as incurred.
RISKS AND CONTINGENCY PLANS -- If significant Year 2000 problems arise,
including problems arising with third parties, failures of IT and non-IT systems
could occur, which in turn could result in substantial interruptions in American
Maturity Life's business. In addition, American Maturity Life's investing
activities are an important aspect of its business and American Maturity Life
may be exposed to the risk that issuers of investments held by it will be
adversely impacted by Year 2000 issues. Given the uncertain nature of Year 2000
problems that may arise, especially those related to the readiness of third
parties discussed above, management cannot determine at this time whether the
consequences of Year 2000 related problems that could arise will have a material
impact on American Maturity Life's financial condition or results of operations.
American Maturity Life is in the process of developing certain contingency
plans so that if, despite its Year 2000 efforts, Year 2000 problems ultimately
arise, the impact of such problems may be avoided or minimized. These
contingency plans are being developed based on, among other things, known or
reasonably anticipated circumstances and potential vulnerabilities. The
contingency planning also includes assessing the dependency of American Maturity
Life's business on third parties and their Year 2000 readiness. American
Maturity Life currently anticipates that internal and external contingency plans
will be substantially complete by the end of the second quarter of 1999.
However, in many contexts, Year 2000 issues are dynamic, and ongoing assessments
of business functions, vulnerabilities and risks must be made. As such, new
contingency plans may be needed in the future and/or existing plans may need to
be modified as circumstances warrant.
<PAGE>
AMERICAN MATURITY LIFE INSURANCE COMPANY 23
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LEGAL MATTERS AND EXPERTS
There are no material legal proceedings pending to which the Separate
Account is a party.
Counsel with respect to federal laws and regulations applicable to the issue
and sale of the Certificates and with respect to Connecticut law is Lynda
Godkin, Senior Vice President, General Counsel and Corporate Secretary, American
Maturity Life Insurance Company, P.O. Box 2999, Hartford, Connecticut
06104-2999.
The audited financial statements included in this registration statement
have been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in giving said reports.
Reference is made to the report on the statutory financial statements of
American Maturity Life Insurance Company which states the statutory financial
statements are presented in accordance with statutory accounting practices
prescribed or permitted by the National Association of Insurance Commissioners
and the State of Connecticut Insurance Department, and are not presented in
accordance with generally accepted accounting principles. The principal business
address of Arthur Andersen LLP is One Financial Plaza, Hartford, Connecticut
06103.
MORE INFORMATION
You may call one of our Customer Service representatives if you have any
questions or write or call us at the address below:
American Maturity Life Insurance Company
P.O. Box 7005
Pasadena, California 91109-7005
Telephone: (800) 923-3334
FEDERAL TAX CONSIDERATIONS
What are some of the federal tax consequences which affect these Contracts?
A. GENERAL
Since federal tax law is complex, the tax consequences of purchasing this
contract will vary depending on your situation. You may need tax or legal advice
to help you determine whether purchasing this contract is right for you.
Our general discussion of the tax treatment of this contract is based on our
understanding of federal income tax laws as they are currently interpreted. A
detailed description of all federal income tax consequences regarding the
purchase of this contract cannot be made in the prospectus. We also do not
discuss state, municipal or other tax laws that may apply to this contract. For
detailed information, you should consult with a qualified tax adviser familiar
with your situation.
B. TAXATION OF AMERICAN MATURITY
AND THE SEPARATE ACCOUNT
The Separate Account is taxed as part of American Maturity which is taxed as
a life insurance company in accordance with the Internal Revenue Code of 1986,
as amended (the "Code"). Accordingly, the Separate Account will not be taxed as
a "regulated investment company" under subchapter M of Chapter 1 of the Code.
Investment income and any realized capital gains on the assets of the Separate
Account are reinvested and are taken into account in determining the value of
the Accumulation and Annuity Units (See "Value of Accumulation Units"). As a
result, such investment income and realized capital gains are automatically
applied to increase reserves under the Contract.
No taxes are due on interest, dividends and short-term or long-term capital
gains earned by the Separate Account with respect to Qualified or Non-Qualified
Contracts.
C. TAXATION OF ANNUITIES -- GENERAL
PROVISIONS AFFECTING PURCHASERS OTHER
THAN QUALIFIED RETIREMENT PLANS
Section 72 of the Code governs the taxation of annuities in general.
1. NON-NATURAL PERSONS, CORPORATIONS, ETC.
Code Section 72 contains provisions for contract owners which are not
natural persons. Non-natural persons include corporations, trusts, limited
liability companies, partnerships and other types of legal entities. The tax
rules for contracts owned by non-natural persons are different from the rules
for contracts owned by individuals. For example, the annual net increase in the
value of the contract is currently includible in the gross income of a non-
natural person, unless the non-natural person holds the contract as an agent for
a natural person. There are additional exceptions from current inclusion for:
- - certain annuities held by structured settlement companies,
- - certain annuities held by an employer with respect to a terminated qualified
retirement plan and
- - certain immediate annuities.
A non-natural person which is a tax-exempt entity for federal tax purposes
will not be subject to income tax as a result of this provision.
If the contract owner is a non-natural person, the primary annuitant is
treated as the contract owner in
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24 AMERICAN MATURITY LIFE INSURANCE COMPANY
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applying mandatory distribution rules. These rules require that certain
distributions be made upon the death of the contract owner. A change in the
primary annuitant is also treated as the death of the contract owner.
2. OTHER CONTRACT OWNERS (NATURAL PERSONS).
A Contract Owner is not taxed on increases in the value of the Contract
until an amount is received or deemed received, e.g., in the form of a lump sum
payment (full or partial value of a Contract) or as Annuity payments under the
settlement option elected.
The provisions of Section 72 of the Code concerning distributions are
summarized briefly below. Also summarized are special rules affecting
distributions from Contracts obtained in a tax-free exchange for other annuity
contracts or life insurance contracts which were purchased prior to August 14,
1982.
a. DISTRIBUTIONS PRIOR TO THE ANNUITY COMMENCEMENT DATE.
i. Total premium payments less amounts received which were not includable in
gross income equal the "investment in the contract" under Section 72 of the
Code.
ii. To the extent that the value of the Contract (ignoring any surrender
charges except on a full surrender) exceeds the "investment in the
contract," such excess constitutes the "income on the contract."
iii. Any amount received or deemed received prior to the Annuity Commencement
Date (e.g., upon a partial surrender) is deemed to come first from any
such "income on the contract" and then from "investment in the contract,"
and for these purposes such "income on the contract" shall be computed by
reference to any aggregation rule in subparagraph 2.c. below. As a result,
any such amount received or deemed received (1) shall be includable in
gross income to the extent that such amount does not exceed any such
"income on the contract," and (2) shall not be includable in gross income
to the extent that such amount does exceed any such "income on the
contract." If at the time that any amount is received or deemed received
there is no "income on the contract" (e.g., because the gross value of the
Contract does not exceed the "investment in the contract" and no
aggregation rule applies), then such amount received or deemed received
will not be includable in gross income, and will simply reduce the
"investment in the contract."
iv. The receipt of any amount as a loan under the Contract or the assignment or
pledge of any portion of the value of the Contract shall be treated as an
amount received for purposes of this subparagraph a. and the next
subparagraph b.
v. In general, the transfer of the Contract, without full and adequate
consideration, will be treated as an amount received for purposes of this
subparagraph a. and the next subparagraph b. This transfer rule does not
apply, however, to certain transfers of property between spouses or incident
to divorce.
b. DISTRIBUTIONS AFTER ANNUITY COMMENCEMENT DATE. Annuity payments made
periodically after the Annuity Commencement Date are includable in gross income
to the extent the payments exceed the amount determined by the application of
the ratio of the "investment in the contract" to the total amount of the
payments to be made after the Annuity Commencement Date (the "exclusion ratio").
i. When the total of amounts excluded from income by application of the
exclusion ratio is equal to the investment in the contract as of the Annuity
Commencement Date, any additional payments (including surrenders) will be
entirely includable in gross income.
ii. If the annuity payments cease by reason of the death of the Annuitant and,
as of the date of death, the amount of annuity payments excluded from gross
income by the exclusion ratio does not exceed the investment in the
contract as of the Annuity Commencement Date, then the remaining portion of
unrecovered investment shall be allowed as a deduction for the last taxable
year of the Annuitant.
iii. Generally, nonperiodic amounts received or deemed received after the
Annuity Commencement Date are not entitled to any exclusion ratio and
shall be fully includable in gross income. However, upon a full surrender
after such date, only the excess of the amount received (after any
surrender charge) over the remaining "investment in the contract" shall be
includable in gross income (except to the extent that the aggregation rule
referred to in the next subparagraph c. may apply).
c. AGGREGATION OF TWO OR MORE ANNUITY CONTRACTS. Contracts issued after
October 21, 1988 by the same insurer (or affiliated insurer) to the same
Contract Owner within the same calendar year (other than certain contracts held
in connection with a tax-qualified retirement arrangement) will be treated as
one annuity Contract for the purpose of determining the taxation of
distributions prior to the Annuity Commencement Date. An annuity contract
received in a tax-free exchange for another annuity contract or life insurance
contract may be treated as a new Contract for this purpose. American Maturity
believes that for any annuity subject to such aggregation, the values under the
Contracts and the investment in the contracts will be added together to
determine the taxation under subparagraph 2.a., above, of amounts received or
deemed received prior to the Annuity Commencement Date. Withdrawals will first
be treated as withdrawals of income until all of the income from all such
Contracts is withdrawn. As of the date of this Prospectus, there are no
regulations interpreting this provision.
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AMERICAN MATURITY LIFE INSURANCE COMPANY 25
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d. 10% PENALTY TAX -- APPLICABLE TO CERTAIN WITHDRAWALS AND ANNUITY
PAYMENTS.
i. If any amount is received or deemed received on the Contract (before or
after the Annuity Commencement Date), the Code applies a penalty tax equal
to ten percent of the portion of the amount includable in gross income,
unless an exception applies.
ii. The 10% penalty tax will not apply to the following distributions
(exceptions vary based upon the precise plan involved):
1. Distributions made on or after the date the recipient has attained the
age of 59 1/2.
2. Distributions made on or after the death of the holder or where the
holder is not an individual, the death of the primary annuitant.
3. Distributions attributable to a recipient's becoming disabled.
4. A distribution that is part of a scheduled series of substantially equal
periodic payments (not less frequently than annually) for the life (or
life expectancy) of the recipient (or the joint lives or life
expectancies of the recipient and the recipient's designated
Beneficiary).
5. Distributions of amounts which are allocable to the "investment in the
contract" prior to August 14, 1982 (see next subparagraph e.).
e. SPECIAL PROVISIONS AFFECTING CONTRACTS OBTAINED THROUGH A TAX-FREE
EXCHANGE OF OTHER ANNUITY OR LIFE INSURANCE CONTRACTS PURCHASED PRIOR TO AUGUST
14, 1982. If the Contract was obtained by a tax-free exchange of a life
insurance or annuity Contract purchased prior to August 14, 1982, then any
amount received or deemed received prior to the Annuity Commencement Date shall
be deemed to come (1) first from the amount of the "investment in the contract"
prior to August 14, 1982 ("pre-8/14/82 investment") carried over from the prior
Contract, (2) then from the portion of the "income on the contract" (carried
over to, as well as accumulating in, the successor Contract) that is
attributable to such pre-8/14/82 investment, (3) then from the remaining "income
on the contract" and (4) last from the remaining "investment in the contract."
As a result, to the extent that such amount received or deemed received does not
exceed such pre-8/14/82 investment, such amount is not includable in gross
income. In addition, to the extent that such amount received or deemed received
does not exceed the sum of (a) such pre-8/14/82 investment and (b) the "income
on the contract" attributable thereto, such amount is not subject to the 10%
penalty tax. In all other respects, amounts received or deemed received from
such post-exchange Contracts are generally subject to the rules described in
this subparagraph 3.
f. REQUIRED DISTRIBUTIONS
i. Death of Contract Owner or Primary Annuitant
Subject to the alternative election or spouse beneficiary provisions in ii
or iii below:
1. If any Contract Owner dies on or after the Annuity Commencement Date and
before the entire interest in the Contract has been distributed, the
remaining portion of such interest shall be distributed at least as
rapidly as under the method of distribution being used as of the date of
such death;
2. If any Contract Owner dies before the Annuity Commencement Date, the
entire interest in the Contract will be distributed within 5 years after
such death; and
3. If the Contract Owner is not an individual, then for purposes of 1. or
2. above, the primary annuitant under the Contract shall be treated as
the Contract Owner, and any change in the primary annuitant shall be
treated as the death of the Contract Owner. The primary annuitant is the
individual, the events in the life of whom are of primary importance in
affecting the timing or amount of the payment under the Contract.
ii. Alternative Election to Satisfy Distribution
Requirements
If any portion of the interest of a Contract Owner described in i. above is
payable to or for the benefit of a designated beneficiary, such beneficiary
may elect to have the portion distributed over a period that does not extend
beyond the life or life expectancy of the beneficiary. The election must be
made and payments must begin within a year of the death.
iii. Spouse Beneficiary
If any portion of the interest of a Contract Owner is payable to or for the
benefit of his or her spouse, and the Annuitant or Contingent Annuitant is
living, such spouse shall be treated as the Contract Owner of such portion
for purposes of section i. above. This spousal continuation shall apply only
once for this contract.
3. DIVERSIFICATION REQUIREMENTS.
The Code requires that investments supporting your contract be adequately
diversified. Code Section 817 provides that a variable annuity contract will not
be treated as an annuity contract for any period during which the investments
made by the separate account or underlying fund are not adequately diversified.
If a contract is not treated as an annuity contract, the contract owner will be
subject to income tax on annual increases in cash value.
The Treasury Department's diversification regulations require, among other
things, that:
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26 AMERICAN MATURITY LIFE INSURANCE COMPANY
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- - no more than 55% of the value of the total assets of the segregated asset
account underlying a variable contract is represented by any one investment,
- - no more than 70% is represented by any two investments,
- - no more than 80% is represented by any three investments and
- - no more than 90% is represented by any four investments.
In determining whether the diversification standards are met, all securities
of the same issuer, all interests in the same real property project, and all
interests in the same commodity are each treated as a single investment. In the
case of government securities, each government agency or instrumentality is
treated as a separate issuer.
A separate account must be in compliance with the diversification standards
on the last day of each calendar quarter or within 30 days after the quarter
ends. If an insurance company inadvertently fails to meet the diversification
requirements, the company may still comply within a reasonable period and avoid
the taxation of contract income on an ongoing basis. However, either the company
or the contract owner must agree to pay the tax due for the period during which
the diversification requirements were not met.
We monitor the diversification of investments in the separate accounts and
test for diversification as required by the Code. We intend to administer all
contracts subject to the diversification requirements in a manner that will
maintain adequate diversification.
4. OWNERSHIP OF THE ASSETS IN THE SEPARATE ACCOUNT.
In order for a variable annuity contract to qualify for tax deferral, assets
in the separate accounts supporting the contract must be considered to be owned
by the insurance company and not by the contract owner. It is unclear under what
circumstances an investor is considered to have enough control over the assets
in the separate account to be considered the owner of the assets for tax
purposes.
The IRS has issued several rulings discussing investor control. These
rulings say that certain incidents of ownership by the contract owner, such as
the ability to select and control investments in a separate account, will cause
the contract owner to be treated as the owner of the assets for tax purposes.
In its explanation of the diversification regulations, the Treasury
Department recognized that the temporary regulations "do not provide guidance
concerning the circumstances in which investor control of the investments of a
segregated asset account may cause the investor, rather than the insurance
company, to be treated as the owner of the assets in the account." The
explanation further indicates that "the temporary regulations provide that in
appropriate cases a segregated asset account may include multiple sub-accounts,
but do not specify the extent to which policyholders may direct their
investments to particular sub-accounts without being treated as the owners of
the underlying assets. Guidance on this and other issues will be provided in
regulations or revenue rulings under Section 817(d), relating to the definition
of variable contract."
The final regulations issued under Section 817 did not provide guidance
regarding investor control, and as of the date of this prospectus, guidance has
yet to be issued. We do not know if additional guidance will be issued. If
guidance is issued, we do not know if it will have a retroactive effect.
Due to the lack of specific guidance on investor control, there is some
uncertainty about when a contract owner is considered the owner of the assets
for tax purposes. We reserve the right to modify the contract, as necessary, to
prevent you from being considered the owner of assets in the separate account.
D. FEDERAL INCOME TAX WITHHOLDING
The portion of a distribution which is taxable income to the recipient will
be subject to federal income tax withholding, pursuant to Section 3405 of the
Code. The application of this provision is summarized below:
1. NON-PERIODIC DISTRIBUTIONS.
The portion of a non-periodic distribution which constitutes taxable income
will be subject to federal income tax withholding unless the recipient elects
not to have taxes withheld. If there is no election to waive withholding, 10% of
the taxable distribution will be withheld as federal income tax. Election forms
will be provided at the time distributions are requested. If the necessary
election forms are not submitted to American Maturity, American Maturity will
automatically withhold 10% of the taxable distribution.
2. PERIODIC DISTRIBUTIONS (DISTRIBUTIONS PAYABLE OVER A PERIOD GREATER THAN ONE
YEAR).
The portion of a periodic distribution which constitutes taxable income will
be subject to federal income tax withholding as if the recipient were married
claiming three exemptions. A recipient may elect not to have income taxes
withheld or have income taxes withheld at a different rate by providing a
completed election form. Election forms will be provided at the time
distributions are requested.
E. GENERAL PROVISIONS AFFECTING QUALIFIED RETIREMENT PLANS
The Contract may be used for a number of qualified retirement plans. If the
Contract is being purchased with respect to some form of qualified retirement
plan, please refer to Appendix I for information relative to the types of
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AMERICAN MATURITY LIFE INSURANCE COMPANY 27
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plans for which it may be used and the general explanation of the tax features
of such plans.
F. ANNUITY PURCHASES BY NONRESIDENT
ALIENS AND FOREIGN CORPORATIONS
The discussion above provides general information regarding U.S. federal
income tax consequences to annuity purchasers that are U.S. citizens or
residents. Purchasers that are not U.S. citizens or residents will generally be
subject to U.S. federal income tax and withholding on annuity distributions at a
30% rate, unless a lower treaty rate applies. In addition, purchasers may be
subject to state premium tax, other state and/or municipal taxes, and taxes that
may be imposed by the purchaser's country of citizenship or residence.
Prospective purchasers are advised to consult with a qualified tax adviser
regarding U.S., state, and foreign taxation with respect to an annuity purchase.
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28 AMERICAN MATURITY LIFE INSURANCE COMPANY
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APPENDIX I
INFORMATION REGARDING TAX-QUALIFIED RETIREMENT PLANS
This summary does not attempt to provide more than general information about
the federal income tax rules associated with use of a Contract by a
tax-qualified retirement plan. Because of the complexity of the federal tax
rules, owners, participants and beneficiaries are encouraged to consult their
own tax advisors as to specific tax consequences.
The federal tax rules applicable to owners of Contracts under tax-qualified
retirement plans vary according to the type of plan as well as the terms and
conditions of the plan itself. Contract owners, plan participants and
beneficiaries are cautioned that the rights and benefits of any person may be
controlled by the terms and conditions of the tax-qualified retirement plan
itself, regardless of the terms and conditions of a Contract. We are not bound
by the terms and conditions of such plans to the extent such terms conflict with
a Contract, unless we specifically consent to be bound.
Some tax-qualified retirement plans are subject to distribution and other
requirements that are not incorporated into our administrative procedures.
Contract owners, participants and beneficiaries are responsible for determining
that contributions, distributions and other transactions comply with applicable
law. Tax penalties may apply to transactions with respect to tax-qualified
retirement plans if applicable federal income tax rules and restrictions are not
carefully observed.
We do not currently offer the Contracts in connection with all of the types
of tax-qualified retirement plans discussed below and may not offer the
Contracts for all types of tax-qualified retirement plans in the future.
1. TAX-QUALIFIED PENSION OR PROFIT-SHARING PLANS -- Eligible employers can
establish certain tax-qualified pension and profit-sharing plans under section
401 of the Code. Rules under section 401(k) of the Code govern certain "cash or
deferred arrangements" under such plans. Rules under section 408(k) govern
"simplified employee pensions". Tax-qualified pension and profit-sharing plans
are subject to limitations on the amount that may be contributed, the persons
who may be eligible to participate and the time when distributions must
commence. Employers intending to use the Contracts in connection with
tax-qualified pension or profit-sharing plans should seek competent tax and
other legal advice.
2. TAX SHELTERED ANNUITIES UNDER SECTION 403(b) -- Public schools and
certain types of charitable, educational and scientific organizations, as
specified in section 501(c)(3) of the Code, can purchase tax-sheltered annuity
contracts for their employees. Tax-deferred contributions can be made to
tax-sheltered annuity contracts under section 403(b) of the Code, subject to
certain limitations. Generally, such contributions may not exceed the lesser of
$10,000 (indexed) or 20% of the employee's "includable compensation" for such
employee's most recent full year of employment, subject to other adjustments.
Special provisions under the Code may allow some employees to elect a different
overall limitation.
Tax-sheltered annuity programs under section 403(b) are subject to a
PROHIBITION AGAINST DISTRIBUTIONS FROM THE CONTRACT ATTRIBUTABLE TO
CONTRIBUTIONS MADE PURSUANT TO A SALARY REDUCTION AGREEMENT, unless such
distribution is made:
- - after the participating employee attains age 59 1/2;
- - upon separation from service;
- - upon death or disability; or
- - in the case of hardship (and in the case of hardship, any income attributable
to such contributions may not be distributed).
Generally, the above restrictions do not apply to distributions attributable
to cash values or other amounts held under a section 403(b) contract as of
December 31, 1988.
3. DEFERRED COMPENSATION PLANS UNDER SECTION 457 -- A governmental employer
or a tax-exempt employer other than a governmental unit can establish a Deferred
Compensation Plan under section 457 of the Code. For these purposes, a
"governmental employer" is a State, a political subdivision of a State, or an
agency or an instrumentality of a State or political subdivision of a State.
Employees and independent contractors performing services for a governmental or
tax-exempt employer can elect to have contributions made to a Deferred
Compensation Plan of their employer in accordance with the employer's plan and
section 457 of the Code.
Deferred Compensation Plans that meet the requirements of section 457(b) of
the Code are called "eligible" Deferred Compensation Plans. Section 457(b)
limits the amount of contributions that can be made to an eligible Deferred
Compensation Plan on behalf of a participant. Generally, the limitation on
contributions is 33 1/3% of a participant's includable compensation (typically
25% of gross compensation) or, for 1999, $8,000 (indexed), whichever is less.
The plan may provide for additional "catch-up" contributions during the three
taxable years ending before the year in which the participant attains normal
retirement age.
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AMERICAN MATURITY LIFE INSURANCE COMPANY 29
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All of the assets and income of an eligible Deferred Compensation Plan
established by a governmental employer after August 20, 1996, must be held in
trust for the exclusive benefit of participants and their beneficiaries. For
this purpose, custodial accounts and certain annuity contracts are treated as
trusts. Eligible Deferred Compensation Plans that were in existence on August
20, 1996 may be amended to satisfy the trust and exclusive benefit requirements
any time prior to January 1, 1999, and must be amended not later than that date
to continue to receive favorable tax treatment. The requirement of a trust does
not apply to amounts under a Deferred Compensation Plan of a tax-exempt
(non-governmental) employer. In addition, the requirement of a trust does not
apply to amounts under a Deferred Compensation Plan of a governmental employer
if the Deferred Compensation Plan is not an eligible plan within the meaning of
section 457(b) of the Code. In the absence of such a trust, amounts under the
plan will be subject to the claims of the employer's general creditors.
In general, distributions from an eligible Deferred Compensation Plan are
prohibited under section 457 of the Code unless made after the participating
employee:
- attains age 70 1/2,
- separates from service,
- dies, or
- suffers an unforeseeable financial emergency as defined in the Code.
Under present federal tax law, amounts accumulated in a Deferred
Compensation Plan under section 457 of the Code cannot be transferred or rolled
over on a tax-deferred basis except for certain transfers to other Deferred
Compensation Plans under section 457 in limited cases.
4. INDIVIDUAL RETIREMENT ANNUITIES ("IRAS") UNDER SECTION 408
TRADITIONAL IRAS. Eligible individuals can establish individual retirement
programs under section 408 of the Code through the purchase of an IRA. Section
408 imposes limits with respect to IRAs, including limits on the amount that may
be contributed to an IRA, the amount of such contributions that may be deducted
from taxable income, the persons who may be eligible to contribute to an IRA,
and the time when distributions commence from an IRA. Distributions from certain
tax-qualified retirement plans may be "rolled-over" to an IRA on a tax-deferred
basis.
SIMPLE IRAS. Eligible employees may establish SIMPLE IRAs in connection with
a SIMPLE IRA plan of an employer under section 408(p) of the Code. Special
rollover rules apply to SIMPLE IRAs. Amounts can be rolled over from one SIMPLE
IRA to another SIMPLE IRA. However, amounts can be rolled over from a SIMPLE IRA
to a Traditional IRA only after two years have expired since the employee first
commenced participation in the employer's SIMPLE IRA plan. Amounts cannot be
rolled over to a SIMPLE IRA from a qualified plan or a Traditional IRA. American
Maturity is a non-designated financial institution for purposes of the SIMPLE
IRA rules.
ROTH IRAS. Eligible individuals may establish Roth IRAs under section 408A
of the Code. Contributions to a Roth IRA are not deductible. Subject to special
limitations, a Traditional IRA may be converted into a Roth IRA or a
distribution from a Traditional IRA may be rolled over to a Roth IRA. However, a
conversion or a rollover from a Traditional IRA to a Roth IRA is not excludable
from gross income. If certain conditions are met, qualified distributions from a
Roth IRA are tax-free.
5. FEDERAL TAX PENALTIES AND WITHHOLDING
Distributions from tax-qualified retirement plans are generally taxed as
ordinary income under section 72 of the Code. Under these rules, a portion of
each distribution may be excludable from income. The excludable amount is the
portion of the distribution that bears the same ratio as the after-tax
contributions bear to the expected return.
(a) PENALTY TAX ON EARLY DISTRIBUTIONS
Section 72(t) of the Code imposes an additional penalty tax equal to 10% of
the taxable portion of a distribution from certain tax-qualified retirement
plans. However, the 10% penalty tax does not apply to a distributions that is:
- Made on or after the date on which the employee reaches age 59 1/2;
- Made to a beneficiary (or to the estate of the employee) on or after the
death of the employee;
- Attributable to the employee's becoming disabled (as defined in the Code);
- Part of a series of substantially equal periodic payments (not less
frequently than annually) made for the life (or life expectancy) of the
employee or the joint lives (or joint life expectancies) of the employee and
his or her designated beneficiary;
- Except in the case of an IRA, made to an employee after separation from
service after reaching age 55; or
- Not greater than the amount allowable as a deduction to the employee for
eligible medical expenses during the taxable year.
In addition, the 10% penalty tax does not apply to a distribution from an
IRA that is:
- Made after separation from employment to an unemployed IRA owner for health
insurance premiums, if certain conditions are met;
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30 AMERICAN MATURITY LIFE INSURANCE COMPANY
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- Not in excess of the amount of certain qualifying higher education expenses,
as defined by section 72(t)(7) of the Code; or
- A qualified first-time homebuyer distribution meeting the requirements
specified at section 72(t)(8) of the Code.
If you are a participant in a SIMPLE IRA plan, you should be aware that the
10% penalty tax is increased to 25% with respect to non-exempt early
distributions made from your SIMPLE IRA during the first two years following the
date you first commenced participation in any SIMPLE IRA plan of your employer.
(b) MINIMUM DISTRIBUTION PENALTY TAX
If the amount distributed is less than the minimum required distribution for
the year, the Participant is subject to a 50% penalty tax on the amount that was
not properly distributed.
An individual's interest in a tax-qualified retirement plan generally must
be distributed, or begin to be distributed, not later than the Required
Beginning Date. Generally, the Required Beginning Date is April 1 of the
calendar year following the later of:
- the calendar year in which the individual attains age 70 1/2; or
- the calendar year in which the individual retires from service with the
employer sponsoring the plan.
The Required Beginning Date for an individual who is a five (5) percent
owner (as defined in the Code), or who is the owner of an IRA, is April 1 of the
calendar year following the calendar year in which the individual attains age
70 1/2.
The entire interest of the Participant must be distributed beginning no
later than the Required Beginning Date over:
- the life of the Participant or the lives of the Participant and the
Participant's designated beneficiary, or
- over a period not extending beyond the life expectancy of the Participant or
the joint life expectancy of the Participant and the Participant's
designated beneficiary.
Each annual distribution must equal or exceed a "minimum distribution
amount" which is determined by dividing the account balance by the applicable
life expectancy. This account balance is generally based upon the account value
as of the close of business on the last day of the previous calendar year. In
addition, minimum distribution incidental benefit rules may require a larger
annual distribution.
If an individual dies before reaching his or her Required Beginning Date,
the individual's entire interest must generally be distributed within five years
of the individual's death. However, this rule will be deemed satisfied, if
distributions begin before the close of the calendar year following the
individual's death to a designated beneficiary and distribution is over the life
of such designated beneficiary (or over a period not extending beyond the life
expectancy of the beneficiary). If the beneficiary is the individual's surviving
spouse, distributions may be delayed until the individual would have attained
age 70 1/2.
If an individual dies after reaching his or her Required Beginning Date or
after distributions have commenced, the individual's interest must generally be
distributed at least as rapidly as under the method of distribution in effect at
the time of the individual's death.
(c) WITHHOLDING
In general, regular wage withholding rules apply to distributions from IRAs
and plans described in section 457 of the Code. Periodic distributions from
other tax-qualified retirement plans that are made for a specified period of 10
or more years or for the life or life expectancy of the participant (or the
joint lives or life expectancies of the participant and beneficiary) are
generally subject to federal income tax withholding as if the recipient were
married claiming three exemptions. The recipient of periodic distributions may
generally elect not to have withholding apply or to have income taxes withheld
at a different rate by providing a completed election form.
Mandatory federal income tax withholding at a flat rate of 20% will
generally apply to other distributions from such other tax-qualified retirement
plans unless such distributions are:
- the non-taxable portion of the distribution;
- required minimum distributions; or
- direct transfer distributions.
Direct transfer distributions are direct payments to an IRA or to another
eligible retirement plan under Code section 401(a)(31).
Certain states require withholding of state taxes when federal income tax is
withheld.
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AMERICAN MATURITY LIFE INSURANCE COMPANY 31
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TABLE OF CONTENTS
TO
STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
SECTION PAGE
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<S> <C>
INTRODUCTION............................................................
DESCRIPTION OF AMERICAN MATURITY LIFE INSURANCE COMPANY.................
SAFEKEEPING OF ASSETS...................................................
INDEPENDENT PUBLIC ACCOUNTANTS..........................................
DISTRIBUTION OF THE CERTIFICATES........................................
ANNUITY PERIOD..........................................................
A. Annuity Payments...................................................
B. Electing the Annuity Commencement Date.............................
C. Optional Annuity Forms.............................................
Option 1: Life Annuity..............................................
Option 2: Life Annuity with 120, 180 or 240 Monthly Payment
Certain............................................................
Option 3: Cash Refund Life Annuity..................................
Option 4: Joint and Last Survivor...................................
Option 5: Payments for a Designated Period..........................
D. The Annuity Unit and Valuation.....................................
E. Determination of Amount of First Monthly Annuity Payment-Fixed and
Variable.............................................................
F. Amount of Second and Subsequent Monthly Annuity Payments...........
G. Date and Time of Annuity Payments..................................
CALCULATION OF YIELD AND RETURN.........................................
PERFORMANCE COMPARISONS.................................................
FINANCIAL STATEMENTS....................................................
</TABLE>
<PAGE>
32 AMERICAN MATURITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
To obtain a Statement of Additional Information, please complete the form
below and mail to:
American Maturity Life Insurance Company
P.O. Box 7005
Pasadena, CA. 91109-7005
Please send a Statement of Additional Information to me at the following
address:
- ----------------------------------------------------
Name
- ------------------------------------------------------------
Address
- ------------------------------------------------------------
City/State Zip
Code
<PAGE>
PART B
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
AMERICAN MATURITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT AMLVA
THE AARP VARIABLE ANNUITY
This Statement of Additional Information is not a prospectus. The information
contained herein should be read in conjunction with the Prospectus.
To obtain a Prospectus, send a written request to American Maturity Life
Insurance Company, P.O. Box 7005, Pasadena, CA. 91109-7005.
Date of Prospectus: May 3, 1999
Date of Statement of Additional Information: May 3, 1999
<PAGE>
-2-
TABLE OF CONTENTS
SECTION Page
- ------- ----
INTRODUCTION............................................................ 3
DESCRIPTION OF AMERICAN MATURITY LIFE INSURANCE COMPANY................. 3
SAFEKEEPING OF ASSETS................................................... 4
INDEPENDENT PUBLIC ACCOUNTANTS.......................................... 4
DISTRIBUTION OF THE CERTIFICATES........................................ 4
ANNUITY PERIOD.......................................................... 5
A. Annuity Payments................................................ 5
B. Electing the Annuity Commencement Date and Form of Annuity...... 5
C. Optional Annuity Forms.......................................... 6
OPTION 1: Life Annuity......................................... 6
OPTION 2: Life Annuity With 120, 180 or 240 Monthly
Payments Certain..................................... 7
OPTION 3: Cash Refund Life Annuity............................. 7
OPTION 4: Joint and Last Survivor Annuity...................... 8
OPTION 5: Payments for a Designated Period..................... 8
D. The Annuity Unit and Valuation ................................. 8
E. Determination of Amount of First Monthly Annuity
Payment-Fixed and Variable.................................... 9
F. Amount of Second and Subsequent Monthly Annuity Payments........ 9
G. Date and Time of Annuity Payments............................... 10
CALCULATION OF YIELD AND RETURN......................................... 10
PERFORMANCE COMPARISONS................................................. 13
FINANCIAL STATEMENTS....................................................
<PAGE>
-3-
INTRODUCTION
This Statement of Additional Information is to be read in conjunction
with the Prospectus of American Maturity Life Insurance Company's Separate
Account AMLVA (the AARP Variable Annuity). This Statement of Additional
Information contains information that may be of some interest to some investors.
DESCRIPTION OF AMERICAN MATURITY LIFE INSURANCE COMPANY
American Maturity Life Insurance Company ("American Maturity"), is
domiciled in Connecticut. Its principal office is at 200 Hopmeadow Street,
Simsbury, Connecticut 06089. However its mailing address is 700 Newport Center
Drive, Newport Beach, California 92660.
American Maturity is a stock insurance company engaged in the business
of writing annuities. American Maturity was originally incorporated under the
name of First Equicor Life Insurance Company under the laws of California on
October 24, 1972. On July 29, 1994 First Equicor Life Insurance Company
redomesticated to Connecticut and changed its name to American Maturity Life
Insurance Company. American Maturity is owned 60% by Hartford Life and Accident
Insurance Company (domiciled in Connecticut) and 40% by Pacific Mutual Life
Insurance Company (domiciled in California). Hartford Life and Accident
Insurance Company is a subsidiary of Hartford Fire Insurance Company. Pacific
Mutual serves as the administrator of the Certificates.
The American Association of Retired Persons ("AARP") granted American
Maturity the exclusive right to offer annuity products to the membership of AARP
pursuant to an agreement established July 6, 1994. The agreement requires
American Maturity to maintain minimum capital surplus levels, minimum ratings
from nationally recognized rating services, and generally to obtain AARP's
consent in all matters relating to the offering of annuities to AARP members.
The agreement also includes a shareholder's agreement of American Maturity's
shareholders. In return for the exclusive right to offer annuity products to
AARP members, American Maturity pays AARP a royalty fee. The agreement is
effective until December 31, 2004, at which time AARP and American Maturity may
or may not renew the agreement.
Based on its financial soundness and operating performance, American
Maturity has earned an A+ (Superior) rating from A.M. Best Company, Inc., and an
(AA+) (Excellent) rating from Standard & Poor's. Based on claims paying ability,
American Maturity has earned an (AA+) (Very High) rating from Duff and Phelps.
<PAGE>
-4-
These ratings do not apply to the performance of the Separate Account.
However, the contractual obligations under this variable annuity are the general
corporate obligations of American Maturity. These ratings do apply to American
Maturity's ability to meet its insurance obligations under the Certificate.
SAFEKEEPING OF ASSETS
The assets of the Separate Account are held by American Maturity under
a safekeeping arrangement.
INDEPENDENT PUBLIC ACCOUNTANTS
The audited financial statements included in this registration statement have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in giving said reports.
Reference is made to the report on the statutory financial statements of
American Maturity Life Insurance Company which states the statutory financial
statements are presented in accordance with statutory accounting practices
prescribed or permitted by the National Association of Insurance Commissioners
and the State of Connecticut Insurance Department, and are not presented in
accordance with generally accepted accounting principles. The principal business
address of Arthur Andersen LLP is One Financial Plaza, Hartford, Connecticut
06103.
DISTRIBUTION OF CERTIFICATES
Hartford Securities Distribution Company, Inc. ("HSD") serves as
principal underwriter for the securities issued with respect to the Separate
Account and will offer the Certificates on a continued basis.
HSD is an affiliate of American Maturity Life. HSD and American
Maturity Life are ultimately controlled by The Hartford Financial Services,
Inc. The principal business address of HSD is the same as Hartford.
HSD is registered with the Securities and Exchange Commission under
the Securities Act of 1934 as a broker-dealer and is a member of the National
Association of Securities Dealers, Inc. ("NASD").
<PAGE>
-5-
The securities will be sold by salespersons of HSD, who represent
American Maturity as insurance and variable annuity agents and who are NASD
registered representatives. These salespersons will be supervised by American
Maturity who will respond to telephone inquires as a result of national
advertising.
American Maturity is obligated to reimburse HSD for all operating
expenses associated with HSD's services provided.
American Maturity may pay a consultation service fee to AARP for
demographic, administrative, record keeping and marketing consultation services
provided. In no event will such service fee exceed 0.07% of the premiums
deposited in the Certificate.
ANNUITY PERIOD
A. Annuity Payments
Variable annuity payments are determined on the basis of (1) a
mortality table set forth in the Certificates and the type of annuity payment
option selected, and (2) the investment performance of the investment medium
selected. Fixed annuity payments are based on the Annuity tables contained in
the Certificates, and will remain level for the duration of the annuity.
The amount of the annuity payments will not be affected by adverse
mortality experience or by an increase in expenses in excess of the expense
deduction for which provision has been made (see "Charges Under the
Certificates," in the Prospectus).
For a variable annuity, the Annuitant will be paid according to the
value of a fixed number of Annuity Units. However, the value of the Annuity
Units, and the amounts of the variable annuity payments, will vary with the
investment experience of the Fund shares selected.
B. Electing the Annuity Commencement Date and Form of Annuity
The Certificate Owner selects an Annuity Commencement Date and an
Annuity Option which may be on a fixed or variable basis, or a combination
thereof. The Annuity Commencement Date will not be deferred beyond the
Annuitant's 90th birthday.
<PAGE>
-6-
The Annuity Commencement Date and/or the Annuity Option may be changed
from time to time, but any such change must be made in writing at least 30 days
before the scheduled Annuity Commencement Date.
The Certificate contains the five Annuity Options. Option 5 is
available with respect to Qualified Certificates only if the guaranteed payment
period is less than the life expectancy of the Annuitant at the time the option
becomes effective. Such life expectancy shall be computed on the basis of the
mortality table prescribed by the Internal Revenue Service, or if none is
prescribed, the mortality table then in use by American Maturity.
If you do not elect otherwise, payments will automatically begin at the
Annuitant's age 90 under Option 5, Designated Period for 5 years.
When an Annuity is effected under a Certificate, unless otherwise
specified, variable values will be applied to provide a variable annuity based
on Certificate Values as they are held in the various Sub-Accounts under the
Certificates. Fixed Account Certificate Values will be applied to provide a
fixed annuity. The Certificate Owner should consider the question of allocation
of Certificate Values among Sub-Accounts of the Separate Account and the General
Account of American Maturity to make certain that Annuity payments are based on
the investment alternative best suited to the Certificate Owner's needs for
retirement.
If at any time annuity payments are or become less than the minimum
payment amount according to Company rules then in effect, American Maturity has
the right to change the frequency of payment to such intervals as will result in
a payment at least equal to the minimum.
There may be other annuity options available offered by American
Maturity from time to time.
C. Optional Annuity Forms
OPTION 1: Life Annuity
A life annuity is an annuity payable during the lifetime of the Annuitant and
terminating with the last payment preceding the death of the Annuitant. This
option offers the maximum level of monthly payments of any of the life annuity
options since there is no guarantee of a minimum number of payments nor a
provision for a death benefit payable to a Beneficiary.
<PAGE>
-7-
It would be possible under this option for an Annuitant to receive only one
annuity payment if he died prior to the due date of the second annuity payment,
two if he died before the due date of the third annuity payment, etc.
OPTION 2: Life Annuity with 120, 180 or 240 Monthly Payments Certain
This annuity option is an annuity payable monthly during the lifetime of an
Annuitant with the provision that if, at the death of the Annuitant, payments
have been made for less than 120, 180 or 240 months, as elected, then the
present value as of the date of the Annuitant's death of the current dollar
amount at the date of death, of any remaining guaranteed monthly payments will
be paid in one sum to the Beneficiary or Beneficiaries designated.
Illustration of Annuity Payments
Male Individual Age 65, Life Annuity
With 120 Payments Certain
1. Net amount applied...............................................$10,000.00
2. Initial monthly income per $1,000 of payment applied...................6.78
3. Initial monthly payment (1X2/1,000)...................................67.80
4. Annuity Unit value.................................................0.995995
5. Number of monthly Annuity Units (3/4)................................68.073
6. Assume Annuity Unit value for second month equal to.................1.00704
7. Second monthly payment (5X6)..........................................68.55
8. Assume Annuity Unit value for third month equal to.................0.964917
9. Third monthly payment (5X8)...........................................65.68
For the purpose of this illustration, purchase is assumed to have been made on
the fifth business day preceding the first payment date. In determining the
second and subsequent payments, the Annuity Unit Value of the fifth business day
preceding the annuity due date is used.
OPTION 3: Cash Refund Life Annuity
An annuity payable monthly during the lifetime of the Annuitant ceasing with the
last payment due prior to the death of the Annuitant provided that, at the death
of the Annuitant, the Beneficiary will receive an additional payment equal to
the excess, if any, of (a) minus (b) where: (a) is the Net Surrender Value
applied on the Annuity Commencement Date under this option; and (b) is the
dollar amount of annuity payments already paid. This option is not available for
variable payouts.
<PAGE>
-8-
OPTION 4: Joint and Last Survivor Annuity
An annuity payable monthly during the joint lifetime of the Annuitant and a
designated second person, and thereafter during the remaining lifetime of the
survivor, ceasing with the last payment prior to the death of the survivor.
It would be possible under this option for an Annuitant and designated second
person in the event of the common or simultaneous death of the parties to
receive only one payment in the event of death prior to the due date for the
second payment and so on.
OPTION 5: Payments for a Designated Period
An amount payable monthly for the number of years selected which may be from 5
to 30 years. In the event of the Annuitant's death prior to the end of the
designated period, the present value as of the date of the Annuitant's death, of
the current dollar amount of any remaining guaranteed monthly payments will be
paid in one sum to the Beneficiary or Beneficiaries designated.
Under any of the annuity options above, no surrenders are permitted
after the Annuity Commencement Date.
Option 5 is an option that does not involve life contingencies and thus
no mortality guarantee, thus the Mortality and Expense Risk Charge provides no
real benefit to a Certificate Owner.
D. The Annuity Unit and Valuation
The value of an Annuity Unit Value for each Sub-Account will vary to
reflect the investment experience of the applicable Funds and will be determined
by multiplying the value of the Annuity Unit for that particular Subaccount on
the preceding Business Day by the product of (1) the net investment factor for
that Sub-Account for the day for which the Annuity Unit value is being
calculated, and (2) 0.999866 which is a factor that neutralizes an assumed
interest rate of 5.00%.
Illustration of Calculation of Annuity Unit Value
1. Net Investment Factor for period...................................1.011225
2. Adjustment for 5% Assumed Rate of Investment Return................0.999866
3. 2X1.................................................................1.01109
4. Annuity Unit value, beginning of period..............................995995
5. Annuity Unit value, end of period (3X4).............................1.00704
<PAGE>
-9-
E. Determination of Amount of First Monthly Annuity Payment -- Fixed
and Variable
When annuity payments are to commence, the value of the Certificate is
determined as the sum of the value of the Fixed Account plus the product of the
value of the Accumulation Unit of each Sub-Account and the number of
Accumulation Units credited to each Sub-Account as of the date the annuity
option is to commence. The Annuity Unit will be determined no earlier than the
close of business on the fifth Business Day preceding the date the first annuity
payment is due.
The Certificate contains tables indicating the minimum dollar amount of
the first monthly payment under the optional forms of annuity for each $1,000 of
value of a Sub-Account under a Certificate. The first monthly payment varies
according to the form and type of annuity selected. The certificate contains
annuity tables derived from the 1983a Individual Annuity Mortality table with
ages set back one year with an assumed investment rate ("A.I.R.") of 5% per
annum. The total first monthly variable annuity payment is determined by
multiplying the value (expressed in thousands of dollars) of a Sub-Account (less
any applicable Premium Taxes) by the amount of the first monthly payment per
$1,000 of value obtained from the tables in the Certificates.
Fixed annuity payments are determined at annuitization by multiplying the values
allocated to the Fixed Account by a rate to be determined by American Maturity
which is no less than the rate specified in the annuity tables in the
Certificate. The annuity payment will remain level for the duration of the
annuity.
F. Amount of Second and Subsequent Monthly Variable Annuity Payments
The amount of the first monthly variable annuity payment, determined as
described above, is divided by the value of an Annuity Unit for the appropriate
Sub-Account no earlier than the close of business on the fifth Business Day
preceding the day on which the payment is due in order to determine the number
of Annuity Units represented by the first payment. This number of Annuity Units
remains fixed during the Annuity Period, and in each subsequent month the dollar
amount of the variable annuity payment is determined by multiplying this fixed
number of Annuity Units by the then current Annuity Unit Value.
Level variable annuity payments would be produced if the investment rate
remained constant and equal to the A.I.R. In fact, payments will vary up or down
as the investment rate varies up or down from the A.I.R.
<PAGE>
-10-
G. Date and Time of Annuity Payments
The first annuity payment under any Option shall be made one month, (or the
period selected for periodic payments: annual, semi-annual, quarterly, or
monthly), following the Annuity Commencement Date. Subsequent payments shall be
made on the same calendar day of the month as was the first payment, or
preceding day if no such day exists (e.g. September 31), in accordance with the
payment period selected. The Annuity Unit Value used in calculating the amount
of the variable annuity payments will be based on an Annuity Unit Value
determined as of the close of business on a day no earlier than the fifth
Business Day preceding the date of the annuity payment.
CALCULATION OF YIELD AND RETURN
From time to time, quotations of a Sub-Account's performance may be
included in advertisements, sales literature or reports to shareholders or
prospective investors. These performance figures may be calculated in the
following manner:
YIELD CALCULATION: MONEY MARKET PORTFOLIO SUB-ACCOUNT
A. YIELD is the net annualized yield based on a specified seven calendar days
calculated at simple interest rates. Yield is calculated by
determining the net change, exclusive of capital changes, in the value
of a hypothetical pre-existing account having a balance of one share at
the beginning of the period subtracting a hypothetical charge
reflecting deductions from shareholder accounts and dividing the
difference by the value of the account at the beginning of the base
period to obtain the base period return. The yield is annualized by
multiplying the base period return by 365/7. The yield figure is
stated to the nearest hundredth of one percent.
B. EFFECTIVE YIELD is the net annualized yield for a specified seven
calendar days assuming a reinvestment of the income compounding.
Effective yield is calculated by the same method as yield except
the yield figure is compounded by adding 1, raising the sum to a
power equal to 365 divided by 7, and subtracting one from the
result, according to the following formula:
- -------------------------------------------------------------------------------
SUB-ACCOUNT YIELD EFFECTIVE YIELD
- -------------------------------------------------------------------------------
Money Market Portfolio* 4.10% 4.18%
- -------------------------------------------------------------------------------
* Yield and effective yield for the seven day period ending December 31, 1998.
<PAGE>
-11-
For purposes of the yield and effective yield computations,
the hypothetical charge reflects recurring charges on the
Separate Account level, including the annual policy fee.
As described above, yield and effective yield are based on historical
earnings and show the performance of a hypothetical investment and are not
intended to indicate future performance. Yield and effective yield will vary
based on changes in market conditions and the level of expenses.
YIELD CALCULATION: BOND PORTFOLIO SUB-ACCOUNT
YIELD is the net annualized yield based on a specified 30-day (or one
month) period assuming a semiannual compounding of income. Yield is
calculated by dividing the net investment income per unit earned during
the period by the maximum offering price per unit on the last day of
the period, according to the following formula:
- -------------------------------------------------------------------------------
SUB-ACCOUNT YIELD
- -------------------------------------------------------------------------------
Bond Portfolio** 4.95%
- -------------------------------------------------------------------------------
** Yield quotation based on a 30 day period ended December 31, 1998.
<PAGE>
-12-
TOTAL RETURN CALCULATIONS
A. AVERAGE ANNUAL TOTAL RETURN is the average annual compound
rate of return for the periods of one, five, or ten years (or
such shorter periods as may be applicable dating from the
commencement of the Sub-Account's operations) all ended on the
date of a recent calendar quarter.
Average total return quotations reflect changes in the price
of a Portfolio's shares and assume that all dividends and
capital gains distributions during the respective periods were
reinvested in Portfolio shares. Average annual return is
calculated by finding the average annual compound rates of
return over the relevant periods that would equate the initial
amount invested to the ending redeemable value, according to
the following formula:
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FOR YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
SUB-ACCOUNT INCEPTION 1 YEAR 5 YEAR 10 YEAR SINCE INCEPTION
DATE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
Dreyfus Capital Appreciation 2/28/96 21.60% N/A N/A 23.42%
- -----------------------------------------------------------------------------------------------------------------
Dreyfus Small Cap 2/28/96 -11.55% N/A N/A 4.55%
- -----------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced 2/28/96 25.65% N/A N/A 20.10%
- -----------------------------------------------------------------------------------------------------------------
Janus Aspen WW Growth 2/28/96 20.33% N/A N/A 22.02%
- -----------------------------------------------------------------------------------------------------------------
N&B Partners 2/28/96 -4.17% N/A N/A 16.03%
- -----------------------------------------------------------------------------------------------------------------
Scudder Bond 2/28/96 -1.83% N/A N/A 2.63%
- -----------------------------------------------------------------------------------------------------------------
Scudder Capital Growth 2/28/96 14.68% N/A N/A 21.24%
- -----------------------------------------------------------------------------------------------------------------
Scudder Growth & Income 2/28/96 -1.51% N/A N/A 14.82%
- -----------------------------------------------------------------------------------------------------------------
Scudder Money Market 2/28/96 -3.10% N/A N/A 0.68%
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
In addition to the standardized total return, the Sub-Account may advertise a
non-standardized total return. This figure will usually be calculated for one
year, five years, and ten years or other periods. Non-standardized total
return is measured in the same manner as the standardized total return
described above, except that the contingent deferred sales charge and the
Annual Maintenance Fee are not deducted and the time periods used to
calculate return are based on the inception date of the underlying Funds.
Therefore, non-standardized total return for a Sub-Account is higher than
standardized return for a Sub-Account.
<PAGE>
-13-
NON-STANDARDIZED ANNUALIZED TOTAL RETURN THAT PRE-DATE THE
INCEPTION DATE OF THE SEPARATE ACCOUNT FOR YEAR ENDED
DECEMBER 31, 1998
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
SUB-ACCOUNT INCEPTION 1 YEAR 5 YEAR 10 YEAR SINCE INCEPTION
DATE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Dreyfus Capital Appreciation 4/5/93 29.10% 22.52% N/A 20.57%
- -----------------------------------------------------------------------------------------------------------------
Dreyfus Small Cap 8/31/90 -4.26% 11.92% N/A 36.07%
- -----------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced 9/13/93 33.15% 18.10% N/A 18.48%
- -----------------------------------------------------------------------------------------------------------------
Janus Aspen WW Growth 9/13/93 27.83% 20.29% N/A 22.97%
- -----------------------------------------------------------------------------------------------------------------
N&B Partners 3/22/94 3.33% N/A N/A 18.69%
- -----------------------------------------------------------------------------------------------------------------
Scudder Bond 7/16/85 5.67% 5.21% 7.74% N/A
- -----------------------------------------------------------------------------------------------------------------
Scudder Capital Growth 7/16/85 22.18% 17.49% 15.90% N/A
- -----------------------------------------------------------------------------------------------------------------
Scudder Growth & Income 5/2/94 5.99% N/A N/A 19.14%
- -----------------------------------------------------------------------------------------------------------------
Scudder Money Market 7/16/85 4.40% 4.11% 4.43% N/A
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
PERFORMANCE COMPARISONS
YIELD AND TOTAL RETURN. Each Sub-Account may from time to time include its
performance in advertising and other sales literature furnished to present or
prospective shareholders. Each Sub-Account may from time to time include in
advertisements its total return (and yield in the case of certain Sub-Accounts),
and the ranking of those performance figures relative to such figures for groups
of other annuities analyzed by Lipper Analytical Services and Morningstar, Inc.
as having the same investment objectives.
The total return and yield may also be used to compare the performance of the
Sub-Accounts against certain widely acknowledged outside standards or indices
for stock and bond market performance. The Standard & Poor's Composite Index of
500 Stocks (the "S&P 500") is a market value-weighted and unmanaged index
showing the changes in the aggregate market value of 500 stocks relative to the
base period 1941-43. The S&P 500 is composed almost entirely of common stocks of
companies listed on the New York Stock Exchange, although the common stocks of a
few companies listed on the American Stock Exchange or traded over-the-counter
are included. The 500 companies represented include 400 industrial, 60
transportation and 40 financial services concerns. The S&P 500 represents about
80% of the market value of all issues traded on the New York Stock Exchange.
The NASDAQ-OTC Price Index (The "NASDAQ Index") is a market value-weighted and
unmanaged index showing the changes in the aggregate market value of
approximately 3,500 stocks relative to the base measure of 100.00 on February 5,
1971. The NASDAQ Index is composed entirely of common stocks of companies traded
over-the-counter and often through the National Association of Securities
Dealers Automated Quotations ("NASDAQ") system. Only those over-the-counter
stocks having only one market maker or traded on exchanges are excluded.
<PAGE>
-14-
The Morgan Stanley Capital International EAFE Index (the "EAFE Index") is an
unmanaged index, which includes over 1,000 companies representing the stock
markets of Europe, Australia, New Zealand, and the Far East. The EAFE Index is
weighted by market capitalization, and therefore, it has a heavy representation
in countries with large stock markets, such as Japan.
The Lehman Government Bond Index (the "Lehman Government Index") is a measure of
the market value of all public obligations of the U.S. Treasury; all publicly
issued debt of all agencies of the U.S. Government and all quasi-federal
corporations; and all corporate debt guaranteed by the U.S. Government. Mortgage
backed securities, flower bonds and foreign targeted issues are not included in
the Lehman Government Index.
The Lehman Government/Corporate Bond Index (the "Lehman Government/Corporate
Index") is a measure of the market value of approximately 5,300 bonds with a
face value currently in excess of $1.3 trillion. To be included in the Lehman
Government/Corporate Index, an issue must have amounts outstanding in excess of
$1 million, have at least one year to maturity and be rated "Baa" or higher
("investment grade") by a nationally recognized rating agency.
The manner in which total return and yield will be calculated for public use is
described above.
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO AMERICAN MATURITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT AMLVA AND TO THE
OWNERS OF UNITS OF INTEREST THEREIN:
- -------------------------------------------------------------------------------
We have audited the accompanying statements of assets and liabilities of
American Maturity Life Insurance Company Separate Account AMLVA (Scudder
Variable Life Investment Fund Money Market Portfolio, Scudder Variable Life
Investment Fund Bond Portfolio, Scudder Variable Life Investment Fund Capital
Growth Portfolio, Scudder Variable Life Investment Fund Growth and Income
Portfolio, Neuberger & Berman Advisers Management Trust Partners Portfolio,
Dreyfus Variable Investment Fund Capital Appreciation Portfolio, Dreyfus
Variable Investment Fund Small Cap Portfolio, Janus Aspen Series Balanced
Portfolio, and Janus Aspen Series Worldwide Growth Portfolio) (collectively, the
Account) as of December 31, 1998, and the related statements of operations and
the statements of changes in net assets for the periods presented. These
financial statements are the responsibility of the Account's management. Our
responsibility is to express an opinion on these financial statements 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, the financial statements referred to above present fairly, in
all material respects, the financial position of the Account as of December 31,
1998, and the results of their operations and the changes in their net assets
for the periods presented in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Hartford, Connecticut
February 16, 1999
SA-1
<PAGE>
SEPARATE ACCOUNT AMLVA
<TABLE>
<CAPTION>
AMERICAN MATURITY LIFE INSURANCE COMPANY
STATEMENTS OF ASSETS & LIABILITIES
DECEMBER 31, 1998
- ---------------------------------------------------------------------------------------------------------------------------------
SCUDDER
VARIABLE SCUDDER SCUDDER
LIFE INVESTMENT VARIABLE VARIABLE
FUND MONEY LIFE INVESTMENT LIFE INVESTMENT
MARKET FUND BOND FUND CAPITAL
PORTFOLIO PORTFOLIO GROWTH PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
--------------------- -------------------- ---------------------
<S> <C> <C> <C>
Assets:
Investments:
Scudder Variable Life Investment Fund Money Market
Portfolio
Shares 3,999,281
Cost $3,999,281
Market Value .................................... $3,999,281 -- --
Scudder Variable Life Investment Fund Bond Portfolio
Shares 1,025,267
Cost $7,012,923
Market Value .................................... -- $7,053,834 --
Scudder Variable Life Investment Fund Capital Growth
Portfolio
Shares 8,119,764
Cost $2,594,503
Market Value .................................... -- -- $2,868,344
Scudder Variable Life Investment Fund Growth and Income
Portfolio
Shares 922,031
Cost $10,443,763
Market Value .................................... -- -- --
Neuberger & Berman Advisers Management Trust Partners
Portfolio
Shares 314,237
Cost $6,042,120
Market Value .................................... -- -- --
Dreyfus Variable Investment Fund Capital Appreciation
Portfolio
Shares 318,153
Cost $10,082,864
Market Value .................................... -- -- --
Dreyfus Variable Investment Fund Small Cap Portfolio
Shares 30,156
Cost $1,726,258
Market Value .................................... -- -- --
Janus Aspen Series Balanced Portfolio
Shares 172,864
Cost $3,322,552
Market Value .................................... -- -- --
Janus Aspen Series Worldwide Growth Portfolio
Shares 294,834
Cost $7,802,632
Market Value .................................... -- -- --
Due from American Maturity Life Insurance Company 29,254 141,913 --
Receivable from fund shares sold .................. -- -- 15,273
--------------------- -------------------- ---------------------
Total Assets ...................................... 4,028,535 7,195,747 2,883,617
--------------------- -------------------- ---------------------
Liabilities:
Due to American Maturity Life Insurance Company ... -- -- 15,273
Payable for fund shares purchased ................. 29,254 141,913 --
--------------------- -------------------- ---------------------
Total Liabilities ................................. 29,254 141,913 15,273
--------------------- -------------------- ---------------------
Net Assets (variable annuity contract liabilities) $3,999,281 $7,053,834 $2,868,344
--------------------- -------------------- ---------------------
--------------------- -------------------- ---------------------
Deferred annuity contracts in the accumulation period:
Individual Sub-Accounts: ............................
Units Owned by Participants ....................... 370,199 616,937 188,053
Unit Values ....................................... $10.803067 $11.433644 $15.252811
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-2
<PAGE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
DREYFUS
SCUDDER NEUBERGER & VARIABLE
VARIABLE LIFE BERMAN INVESTMENT FUND
INVESTMENT FUND ADVISERS CAPITAL
GROWTH AND INCOME MANAGEMENT TRUST APPRECIATION
PORTFOLIO PARTNERS PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
--------------------- -------------------- ---------------------
<S> <C> <C> <C>
Assets:
Investments:
Scudder Variable Life Investment Fund Money Market
Portfolio
Shares 3,999,281
Cost $3,999,281
Market Value .................................... -- -- --
Scudder Variable Life Investment Fund Bond Portfolio
Shares 1,025,267
Cost $7,012,923
Market Value .................................... -- -- --
Scudder Variable Life Investment Fund Capital Growth
Portfolio
Shares 8,119,764
Cost $2,594,503
Market Value .................................... -- -- --
Scudder Variable Life Investment Fund Growth and Income
Portfolio
Shares 922,031
Cost $10,443,763
Market Value .................................... $10,345,184 -- --
Neuberger & Berman Advisers Management Trust Partners
Portfolio
Shares 314,237
Cost $6,042,120
Market Value .................................... -- $5,948,506 --
Dreyfus Variable Investment Fund Capital Appreciation
Portfolio
Shares 318,153
Cost $10,082,864
Market Value .................................... -- -- $11,488,491
Dreyfus Variable Investment Fund Small Cap Portfolio
Shares 30,156
Cost $1,726,258
Market Value .................................... -- -- --
Janus Aspen Series Balanced Portfolio
Shares 172,864
Cost $3,322,552
Market Value .................................... -- -- --
Janus Aspen Series Worldwide Growth Portfolio
Shares 294,834
Cost $7,802,632
Market Value .................................... -- -- --
Due from American Maturity Life Insurance Company 63,208 -- 38,646
Receivable from fund shares sold .................. -- 3,374 --
--------------------- -------------------- --------------------
Total Assets ...................................... 10,408,392 5,951,880 11,527,137
--------------------- -------------------- --------------------
Liabilities:
Due to American Maturity Life Insurance Company ... -- 3,374 --
Payable for fund shares purchased ................. 63,208 0 38,646
--------------------- -------------------- --------------------
Total Liabilities ................................. 63,208 3,374 38,646
--------------------- -------------------- --------------------
Net Assets (variable annuity contract liabilities) $10,345,184 $5,948,506 $11,488,491
--------------------- -------------------- --------------------
--------------------- -------------------- --------------------
Deferred annuity contracts in the accumulation period:
Individual Sub-Accounts: ............................
Units Owned by Participants ....................... 805,216 466,749 754,971
Unit Values ....................................... $12.847720 $12.744539 $15.217132
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
DREYFUS JANUS
VARIABLE JANUS ASPEN SERIES
INVESTMENT FUND ASPEN SERIES WORLDWIDE
SMALL CAP BALANCED GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
--------------------- -------------------- ---------------------
<S> <C> <C> <C>
Assets:
Investments:
Scudder Variable Life Investment Fund Money Market
Portfolio
Shares 3,999,281
Cost $3,999,281
Market Value .................................... -- -- --
Scudder Variable Life Investment Fund Bond Portfolio
Shares 1,025,267
Cost $7,012,923
Market Value .................................... -- -- --
Scudder Variable Life Investment Fund Capital Growth
Portfolio
Shares 8,119,764
Cost $2,594,503
Market Value .................................... -- -- --
Scudder Variable Life Investment Fund Growth and Income
Portfolio
Shares 922,031
Cost $10,443,763
Market Value .................................... -- -- --
Neuberger & Berman Advisers Management Trust Partners
Portfolio
Shares 314,237
Cost $6,042,120
Market Value .................................... -- -- --
Dreyfus Variable Investment Fund Capital Appreciation
Portfolio
Shares 318,153
Cost $10,082,864
Market Value .................................... -- -- --
Dreyfus Variable Investment Fund Small Cap Portfolio
Shares 30,156
Cost $1,726,258
Market Value .................................... $1,625,706 -- --
Janus Aspen Series Balanced Portfolio
Shares 172,864
Cost $3,322,552
Market Value .................................... -- $3,889,445 --
Janus Aspen Series Worldwide Growth Portfolio
Shares 294,834
Cost $7,802,632
Market Value .................................... -- -- $8,576,729
Due from American Maturity Life Insurance Company 3,736 -- 25,005
Receivable from fund shares sold .................. -- 10,867 --
--------------------- -------------------- ---------------------
Total Assets ...................................... 1,629,442 3,900,312 8,601,734
--------------------- -------------------- ---------------------
Liabilities:
Due to American Maturity Life Insurance Company ... -- 10,836 --
Payable for fund shares purchased ................. 3,736 -- 25,005
--------------------- -------------------- ---------------------
Total Liabilities ................................. 3,736 10,836 25,005
--------------------- -------------------- ---------------------
Net Assets (variable annuity contract liabilities) $1,625,706 $3,889,476 $8,576,729
--------------------- -------------------- ---------------------
--------------------- -------------------- ---------------------
Deferred annuity contracts in the accumulation period:
Individual Sub-Accounts: ............................
Units Owned by Participants ....................... 143,503 253,245 588,239
Unit Values ....................................... $11.328714 $15.358564 $14.580355
</TABLE>
SA-3
<PAGE>
SEPARATE ACCOUNT AMLVA
<TABLE>
<CAPTION>
AMERICAN MATURITY LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
- -----------------------------------------------------------------------------------------------------------------------------------
SCUDDER SCUDDER
VARIABLE VARIABLE SCUDDER
LIFE INVESTMENT LIFE VARIABLE
FUND MONEY INVESTMENT LIFE INVESTMENT
MARKET FUND BOND FUND CAPITAL
PORTFOLIO PORTFOLIO GROWTH PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------------- ---------------- -------------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends ................................................ $116,846 $175,767 $12,049
EXPENSES:
Mortality and expense undertakings ....................... (19,366) (28,887) (14,084)
----------------- ---------------- -------------------
Net investment income (loss) ........................... 97,480 146,880 (2,035)
----------------- ---------------- -------------------
CAPITAL GAINS INCOME -- 3,650 42,529
----------------- ---------------- -------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on security transactions ........ -- 629 (5,726)
Net unrealized appreciation (depreciation) of
investments during the period .......................... -- 32,172 263,771
----------------- ---------------- -------------------
Net gain (loss) on investments ....................... -- 32,801 258,045
----------------- ---------------- -------------------
Net increase (decrease) in net assets resulting from
operations ......................................... $97,480 $183,331 $298,539
----------------- ---------------- -------------------
----------------- ---------------- -------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-4
<PAGE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
DREYFUS
SCUDDER NEUBERGER VARIABLE
VARIABLE LIFE & BERMAN INVESTMENT FUND
INVESTMENT FUND ADVISERS CAPITAL
GROWTH AND INCOME MANAGEMENT TRUST APPRECIATION
PORTFOLIO PARTNERS PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------------- ------------------ -------------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends ................................................ $128,040 $5,065 $61,576
Expenses:
Mortality and expense undertakings ....................... (51,689) (29,214) (49,073)
----------------- ------------------ -------------------
Net investment income (loss) ........................... 76,351 (24,149) 12,503
----------------- ------------------ -------------------
CAPITAL GAINS INCOME 177,059 159,547 843
----------------- ------------------ -------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on security transactions ........ (14) (1,286) (983)
Net unrealized appreciation (depreciation) of
investments during the period .......................... (157,083) (124,793) 1,382,443
----------------- ------------------ -------------------
Net gain (loss) on investments ....................... (157,097) (126,079) 1,381,460
----------------- ------------------ -------------------
Net increase (decrease) in net assets resulting from
operations ......................................... $ 96,313 $ 9,319 $ 1,394,806
----------------- ------------------ -------------------
----------------- ------------------ -------------------
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
DREYFUS JANUS
VARIABLE JANUS ASPEN SERIES
INVESTMENT FUND ASPEN SERIES WORLDWIDE
SMALL CAP BALANCED GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------------- ------------------ -------------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends ................................................ $5 $81,227 $128,220
EXPENSES:
Mortality and expense undertakings ....................... (8,779) (14,376) (38,539)
----------------- ------------------ -------------------
Net investment income (loss) ........................... (8,774) 66,851 89,681
----------------- ------------------ -------------------
CAPITAL GAINS INCOME 26,295 10,381 49,802
----------------- ------------------ -------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on security transactions ........ (5,037) 512 (1,726)
Net unrealized appreciation (depreciation) of
investments during the period .......................... (80,516) 556,033 769,638
----------------- ------------------ -------------------
Net gain (loss) on investments ....................... (85,553) 556,545 767,912
----------------- ------------------ -------------------
Net increase (decrease) in net assets resulting from
operations ......................................... $ (68,032) $ 633,777 $ 907,395
----------------- ------------------ -------------------
----------------- ------------------ -------------------
</TABLE>
SA-5
<PAGE>
SEPARATE ACCOUNT AMLVA
<TABLE>
<CAPTION>
AMERICAN MATURITY LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998
- ----------------------------------------------------------------------------------------------------------------------------------
SCUDDER SCUDDER SCUDDER
VARIABLE LIFE VARIABLE LIFE VARIABLE LIFE
INVESTMENT INVESTMENT INVESTMENT
FUND MONEY MARKET FUND BOND FUND CAPITAL GROWTH
PORTFOLIO SUB-ACCOUNT PORTFOLIO SUB-ACCOUNT PORTFOLIO SUB-ACCOUNT
----------------------- ----------------------- -----------------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income (loss) ..................... $97,480 $146,880 $(2,035)
Capital gains income ............................. -- 3,650 42,529
Net realized gain (loss) on security transactions -- 629 (5,726)
Net unrealized appreciation (depreciation) of
investments during the period .................. -- 32,172 263,771
----------------------- ----------------------- -----------------------
Net increase (decrease) in net assets resulting
from operations ................................ 97,480 183,331 298,539
----------------------- ----------------------- -----------------------
UNIT TRANSACTIONS:
Purchases ........................................ 10,698,733 5,222,099 1,667,990
Net transfers .................................... (7,086,472) 1,174,593 426,611
Surrenders for benefit payments and fees ......... (52,625) (84,349) (88,437)
----------------------- ----------------------- -----------------------
Net increase (decrease) in net assets resulting
from unit transactions ......................... 3,559,636 6,312,343 2,006,164
----------------------- ----------------------- -----------------------
Total increase (decrease) in net assets .......... 3,657,116 6,495,674 2,304,703
NET ASSETS:
Beginning of period .............................. 342,165 558,160 563,641
----------------------- ----------------------- -----------------------
End of period .................................... $3,999,281 $7,053,834 $2,868,344
----------------------- ----------------------- -----------------------
----------------------- ----------------------- -----------------------
</TABLE>
SEPARATE ACCOUNT AMLVA
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
AMERICAN MATURITY LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD FROM INCEPTION, MARCH 17, 1997 TO DECEMBER 31, 1997
- ----------------------------------------------------------------------------------------------------------------------------------
SCUDDER SCUDDER SCUDDER
VARIABLE LIFE VARIABLE LIFE VARIABLE LIFE
INVESTMENT INVESTMENT INVESTMENT
FUND MONEY MARKET FUND BOND FUND CAPITAL GROWTH
PORTFOLIO SUB-ACCOUNT PORTFOLIO SUB-ACCOUNT PORTFOLIO SUB-ACCOUNT
----------------------- ----------------------- -----------------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income (loss)..................... $ 6,239 $ 5,641 $ (98)
Capital gains income............................. -- -- --
Net realized gain (loss) on security transactions -- 7 16
Net unrealized appreciation (depreciation) of
investments during the period ................. -- 8,739 10,070
----------------------- ----------------------- -----------------------
Net increase (decrease) in net assets resulting
from operations................................. 6,239 14,387 9,988
----------------------- ----------------------- -----------------------
UNIT TRANSACTIONS:
Purchases........................................ 1,398,582 465,764 478,755
Net transfers.................................... (1,031,362) 79,564 75,274
Surrenders for benefit payments and fees ........ (31,277) (1,544) (128)
Other activity................................... (17) (11) (248)
----------------------- ----------------------- -----------------------
Net increase (decrease) in net assets resulting
from unit transactions......................... 335,926 543,773 553,653
----------------------- ----------------------- -----------------------
Total increase (decrease) in net assets.......... 342,165 558,160 563,641
NET ASSETS:
Beginning of period.............................. -- -- --
----------------------- ----------------------- -----------------------
End of period.................................... $ 342,165 $ 558,160 $ 563,641
----------------------- ----------------------- -----------------------
----------------------- ----------------------- -----------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-6
<PAGE>
<TABLE>
<CAPTION>
SCUDDER
VARIABLE LIFE NEUBERGER & BERMAN DREYFUS
INVESTMENT ADVISERS MANAGEMENT VARIABLE INVESTMENT
FUND GROWTH AND TRUST PARTNERS FUND
INCOME PORTFOLIO CAPITAL APPRECIATION
PORTFOLIO SUB-ACCOUNT SUB-ACCOUNT PORTFOLIO SUB-ACCOUNT
---------------------- ------------------- ---------------------
<S> <C> <C> <C>
Operations:
Net investment income (loss) ..................... $76,351 $(24,149) $12,503
Capital gains income ............................. 177,059 159,547 843
Net realized gain (loss) on security transactions (14) (1,286) (983)
Net unrealized appreciation (depreciation) of
investments during the period .................. (157,083) (124,793) 1,382,443
---------------------- ------------------- ---------------------
Net increase (decrease) in net assets resulting
from operations ................................ 96,313 9,319 1,394,806
---------------------- ------------------- ---------------------
Unit transactions:
Purchases ........................................ 7,063,101 4,250,056 7,506,702
Net transfers .................................... 1,254,596 929,649 1,443,526
Surrenders for benefit payments and fees ......... (127,148) (118,610) (151,411)
---------------------- ------------------- ---------------------
Net increase (decrease) in net assets resulting
from unit transactions.......................... 8,190,549 5,061,095 8,798,817
---------------------- ------------------- ---------------------
Total increase (decrease) in net assets .......... 8,286,862 5,070,414 10,193,623
Net assets:
Beginning of period .............................. 2,058,322 878,092 1,294,868
---------------------- ------------------- ---------------------
End of period .................................... $10,345,184 $5,948,506 $11,488,491
---------------------- ------------------- ---------------------
---------------------- ------------------- ---------------------
<CAPTION>
DREYFUS
VARIABLE JANUS JANUS
INVESTMENT ASPEN SERIES ASPEN SERIES
FUND SMALL CAP BALANCED WORLDWIDE GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
---------------------- ------------------- ---------------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income (loss) ..................... $(8,774) $66,851 $89,681
Capital gains income ............................. 26,295 10,381 49,802
Net realized gain (loss) on security transactions (5,037) 512 (1,726)
Net unrealized appreciation (depreciation) of
investments during the period .................. (80,516) 556,033 769,638
---------------------- ------------------- ---------------------
Net increase (decrease) in net assets resulting
from operations ................................ (68,032) 633,777 907,395
---------------------- ------------------- ---------------------
UNIT TRANSACTIONS:
Purchases ........................................ 1,181,613 2,272,711 5,236,711
Net transfers .................................... 150,817 798,826 1,274,902
Surrenders for benefit payments and fees ......... (56,622) (114,573) (162,489)
---------------------- ------------------- ---------------------
Net increase (decrease) in net assets resulting
from unit transactions.......................... 1,275,808 2,956,964 6,349,124
---------------------- ------------------- ---------------------
Total increase (decrease) in net assets .......... 1,207,776 3,590,741 7,256,519
NET ASSETS:
Beginning of period .............................. 417,930 298,735 1,320,210
---------------------- ------------------- ---------------------
End of period .................................... $1,625,706 $3,889,476 $8,576,729
---------------------- ------------------- ---------------------
---------------------- ------------------- ---------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
SCUDDER
VARIABLE LIFE NEUBERGER & BERMAN DREYFUS
INVESTMENT ADVISERS MANAGEMENT VARIABLE INVESTMENT
FUND GROWTH AND TRUST PARTNERS FUND
INCOME PORTFOLIO CAPITAL APPRECIATION
PORTFOLIO SUB-ACCOUNT SUB-ACCOUNT PORTFOLIO SUB-ACCOUNT
---------------------- ------------------- ---------------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income (loss)...................... $4,792 $(1,934) $6,079
Capital gains income.............................. -- -- 752
Net realized gain (loss) on security transactions. (7,527) 48 397
Net unrealized appreciation (depreciation) of
investments during the period .................. 58,504 31,178 23,185
---------------------- ------------------- ---------------------
Net increase (decrease) in net assets resulting
from operations................................. 55,769 29,292 30,413
---------------------- ------------------- ---------------------
UNIT TRANSACTIONS:
Purchases......................................... 1,774,328 741,365 1,080,754
Net transfers..................................... 216,036 108,605 185,964
Surrenders for benefit payments and fees ......... (2,468) (1,032) (2,276)
Other activity.................................... 14,657 (138) 13
---------------------- ------------------- ---------------------
Net increase (decrease) in net assets resulting
from unit transactions.......................... 2,002,553 848,800 1,264,455
---------------------- ------------------- ---------------------
Total increase (decrease) in net assets........... 2,058,322 878,092 1,294,868
NET ASSETS:
Beginning of period............................... -- -- --
---------------------- ------------------- ---------------------
End of period..................................... $2,058,322 $878,092 $1,294,868
---------------------- ------------------- ---------------------
---------------------- ------------------- ---------------------
<CAPTION>
DREYFUS JANUS
VARIABLE JANUS ASPEN SERIES
INVESTMENT FUND ASPEN SERIES WORLDWIDE
SMALL CAP BALANCED GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------------- ------------------ -------------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income (loss)...................... $(481) $2,891 $2,071
Capital gains income.............................. 23,882 -- --
Net realized gain (loss) on security transactions. (2,631) 28 (191)
Net unrealized appreciation (depreciation) of
investments during the period .................. (20,036) 10,860 4,458
----------------- ------------------ -------------------
Net increase (decrease) in net assets resulting
from operations................................. 734 13,779 6,338
----------------- ------------------ -------------------
UNIT TRANSACTIONS:
Purchases......................................... 361,150 252,727 1,132,151
Net transfers..................................... 55,933 32,780 184,710
Surrenders for benefit payments and fees ......... (25) (325) (2,078)
Other activity.................................... 138 (226) (911)
----------------- ------------------ -------------------
Net increase (decrease) in net assets resulting
from unit transactions.......................... 417,196 284,956 1,313,872
----------------- ------------------ -------------------
Total increase (decrease) in net assets........... 417,930 298,735 1,320,210
NET ASSETS:
Beginning of period............................... -- -- --
----------------- ------------------ -------------------
End of period..................................... $417,930 $298,735 $1,320,210
----------------- ------------------ -------------------
----------------- ------------------ -------------------
</TABLE>
SA-7
<PAGE>
SEPARATE ACCOUNT AMLVA
AMERICAN MATURITY LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
- -------------------------------------------------------------------------------
1. ORGANIZATION:
Separate Account AMLVA (the Account) is a separate investment account
within American Maturity Life Insurance Company (the Company) and is
registered with the Securities and Exchange Commission (SEC) as a unit
investment trust under the Investment Company Act of 1940, as amended. Both
the Company and the Account are subject to supervision and regulation by
the Department of Insurance of the State of Connecticut and the SEC. The
Account invests deposits by variable life contractholders of the Company in
various mutual funds (The Funds) as directed by the contractholders.
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies of the
Account, which are in accordance with generally accepted accounting
principles in the investment company industry:
a) SECURITY TRANSACTIONS--Security transactions are recorded on the trade
date (date the order to buy or sell is executed). Cost of investments
sold is determined on the basis of identified cost. Dividend and
capital gains income is accrued as of the ex-dividend date. Capital
gains income represents dividends from the Funds which are
characterized as capital gains under tax regulations.
b) SECURITY VALUATION--The investments in shares of the Scudder Variable
Life Investment Funds, Janus Aspen Series, Neuberger & Berman Advisers
Management Trust and Dreyfus Variable Investment Funds are valued at
the closing net asset value per share as determined by the appropriate
Fund as of December 31, 1998.
c) FEDERAL INCOME TAXES--The operations of the Account form a part of, and
are taxed with, the total operations of the Company, which is taxed as
an insurance company under the Internal Revenue Code. Under current
law, no federal income taxes are payable with respect to the operations
of the Account.
d) 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 reported amounts of
assets and liabilities as of the date of the financial statements and
the reported amounts of income and expenses during the period.
Operating results in the future could vary from the amounts derived
from management's estimates.
3. ADMINISTRATION OF THE ACCOUNT AND RELATED CHARGES:
a) MORTALITY AND EXPENSE UNDERTAKINGS--The Company, as issuer of variable
annuity contracts, provides the mortality and expense undertakings and,
with respect to the Account, receives a maximum annual fee of up to
.65% of the Account's average daily net assets. The Company also
provides administrative services and receives an annual fee of 0.20% of
the Account's average daily net assets.
b) DEDUCTION OF ANNUAL MAINTENANCE FEE--Annual maintenance fees are
deducted through termination of units of interest from applicable
contract owners' accounts, in accordance with the terms of the
contracts. These expenses are reflected in surrenders for benefit
payments and fees on the accompanying statements of changes in net
assets.
SA-8
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
American Maturity Life Insurance Company:
We have audited the accompanying statutory balance sheets of American
Maturity Life Insurance Company (a Connecticut corporation) (the Company) as
of December 31, 1998 and 1997, and the related statutory statements of
operations, changes in capital and surplus and cash flows for each of the
three years in the period ended December 31, 1998. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these statutory financial statements 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.
The Company presents its financial statements in conformity with statutory
accounting practices as described in Note 1 of notes to statutory financial
statements. When statutory financial statements are presented for purposes
other than for filing with a regulatory agency, generally accepted auditing
standards require that an auditors' report on them state whether they are
presented in conformity with generally accepted accounting principles. The
accounting practices used by the Company vary from generally accepted
accounting principles as explained and quantified in Note 1.
In our opinion, because of the effects of the matter discussed in the
preceding paragraph, the statutory financial statements referred to above do
not present fairly, in conformity with generally accepted accounting
principles, the financial position of the Company as of December 31, 1998 and
1997, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 1998.
However, in our opinion, the statutory financial statements referred to above
present fairly, in all material respects, the financial position of the
Company as of December 31, 1998 and 1997, and the results of its operations
and its cash flows for each of the three years in the period ended December
31, 1998, in conformity with statutory accounting practices as described in
Note 1.
ARTHUR ANDERSEN LLP
Hartford, Connecticut
January 26, 1999
F-1
<PAGE>
AMERICAN MATURITY LIFE INSURANCE COMPANY
STATUTORY BALANCE SHEETS
AS OF DECEMBER 31, 1998 AND 1997
(in thousands, except for share data)
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
ASSETS:
Bonds $ 18,173 $ 13,310
Cash and short-term investments 45,679 40,654
-------- --------
Total cash and invested assets 63,852 53,964
Investment income due and accrued 305 223
Other assets 279 387
Separate account assets 175,305 122,694
-------- --------
Total assets $239,741 $177,268
-------- --------
-------- --------
LIABILITIES:
Aggregate reserves for future benefits $ 6,791 $ 3,290
Liability for premium and other deposit
funds 17,757 4,707
Asset valuation reserve 725 478
Payable to affiliates 719 1,212
Transfers to separate accounts due
or accrued (2,312) (792)
Other liabilities 1,654 1,816
Separate account liabilities 175,305 122,594
-------- --------
Total liabilities 200,639 133,305
-------- --------
COMMITMENTS AND CONTINGENCIES (Note 7)
CAPITAL AND SURPLUS:
Common stock, $200 par value; 15,000
shares authorized, 12,500 shares
issued and outstanding 2,500 2,500
Gross paid-in and contributed surplus 57,500 57,500
Unassigned funds (20,898) (16,037)
-------- --------
Total capital and surplus 39,102 43,963
-------- --------
Total liabilities and capital
and surplus $239,741 $177,268
-------- --------
-------- --------
</TABLE>
The accompanying notes are an integral
part of these statutory financial statements.
F-2
<PAGE>
AMERICAN MATURITY LIFE INSURANCE COMPANY
STATUTORY STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(in thousands)
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
REVENUES:
Premiums and annuity considerations $ 7,553 $ 4,342 $ 3,290
Annuity and other fund deposits 60,610 64,872 39,041
Net investment income 3,215 1,390 968
Other revenues 303 10 -
------- ------- -------
Total revenues 71,681 70,614 43,299
------- ------- -------
BENEFITS AND EXPENSES:
Surrenders and other benefit payments 10,358 4,904 3,540
General insurance expenses 10,622 10,592 6,110
Increase in aggregate reserve for future
benefits and liability for premium and
other deposit funds 16,551 4,308 3,005
Net transfers to separate accounts 38,770 57,081 35,303
Other expenses 12 19 -
------- ------- -------
Total benefits and expenses 76,313 76,904 47,958
------- ------- -------
LOSS FROM OPERATIONS BEFORE FEDERAL
INCOME TAXES (4,632) (6,290) (4,659)
FEDERAL INCOME TAXES - - -
------- ------- -------
LOSS FROM OPERATIONS (4,632) (6,290) (4,659)
REALIZED CAPITAL GAINS, NET OF FEDERAL
INCOME TAXES 18 8 -
------- ------- -------
NET LOSS $(4,614) $(6,282) $(4,659)
------- ------- -------
------- ------- -------
</TABLE>
The accompanying notes are an integral
part of these statutory financial statements.
F-3
<PAGE>
AMERICAN MATURITY LIFE INSURANCE COMPANY
STATUTORY STATEMENTS OF CHANGES IN CAPITAL AND SURPLUS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(in thousands)
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
CAPITAL AND SURPLUS - beginning of year $43,963 $10,474 $15,280
------- ------- -------
Net loss (4,614) (6,282) (4,659)
Change in asset valuation reserve (247) (229) (147)
Paid-in capital - 40,000 -
------- ------- -------
Changes in capital and surplus (4,861) 33,489 (4,806)
------- ------- -------
CAPITAL AND SURPLUS - end of year $39,102 $43,963 $10,474
------- ------- -------
------- ------- -------
</TABLE>
The accompanying notes are an integral
part of these statutory financial statements.
F-4
<PAGE>
AMERICAN MATURITY LIFE INSURANCE COMPANY
STATUTORY STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(in thousands)
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
OPERATIONS:
Premiums, annuity considerations and
fund deposits $68,163 $69,215 $42,331
Investment income 3,213 1,423 1,189
Investment management fees 302 - -
Other income 87 - -
------- ------- -------
Total revenues 71,765 70,638 43,520
------- ------- -------
Benefits paid 10,357 4,904 3,540
Net transfers to separate accounts 40,290 59,165 33,881
Other expenses 10,928 10,415 5,557
------- ------- -------
Total benefits and expenses 61,575 74,484 42,978
------- ------- -------
Net cash provided by (used for)
operations 10,190 (3,846) 542
------- ------- -------
PROCEEDS FROM INVESTMENTS:
Bonds 4,770 2,488 1,000
Other 17 - -
------- ------- -------
Net investment proceeds 4,787 2,488 1,000
OTHER CASH PROVIDED:
Capital and surplus paid-in - 40,000 -
Other sources 312 528 2,533
------- ------- -------
Total proceeds 5,099 43,016 3,533
------- ------- -------
COST OF INVESTMENTS ACQUIRED:
Bonds 9,710 5,886 6,018
------- ------- -------
Total investments acquired 9,710 5,886 6,018
------- ------- -------
TOTAL OTHER CASH APPLIED 554 45 85
------- ------- -------
Total applications 10,264 5,931 6,103
------- ------- -------
NET CHANGE IN CASH AND SHORT-TERM INVESTMENTS 5,025 33,239 (2,028)
CASH AND SHORT-TERM INVESTMENTS,
beginning of year 40,654 7,415 9,443
------- ------- -------
CASH AND SHORT-TERM INVESTMENTS,
end of year $45,679 $40,654 $ 7,415
------- ------- -------
------- ------- -------
</TABLE>
The accompanying notes are an integral
part of these statutory financial statements.
F-5
<PAGE>
AMERICAN MATURITY LIFE INSURANCE COMPANY
NOTES TO STATUTORY FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
(Dollar amounts in thousands unless otherwise noted)
1. SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION -
American Maturity Life Insurance Company (AML or the Company), formerly
First Equicor Life Insurance Company (FELIC), is a sixty percent owned
subsidiary of Hartford Life and Accident Insurance Company (HLA), which
is a direct subsidiary of Hartford Life, Inc. (HLI). HLI is an indirect
subsidiary of The Hartford Financial Services Group, Inc. (The Hartford).
Forty percent of the common stock of the Company is owned by Pacific Life
Insurance Company (PLIC).
AML offers annuities exclusively to members of The American Association
of Retired Persons (AARP).
BASIS OF PRESENTATION -
The financial statements are prepared in conformity with statutory
accounting practices prescribed or permitted by the National Association
of Insurance Commissioners (NAIC) and the State of Connecticut Department
of Insurance.
Statutory accounting practices and generally accepted accounting
principles (GAAP) differ in certain material respects. These differences
principally involve:
a. Treatment of policy acquisition costs (commissions, underwriting
and selling expenses, premium taxes, etc.), which are charged to
expense when incurred for statutory purposes rather than on a
pro-rata basis over the expected life of the policies for GAAP
purposes;
b. Recognition of premium revenues, which for statutory purposes are
generally recorded as collected or when due during the premium
paying period of the contract, and which for GAAP purposes are
only recorded for policy charges for contract administration and
surrender charges assessed to policy account balances;
c. Development of reserves for future benefits, which for statutory
purposes predominantly use methods prescribed by the NAIC which
vary considerably from interest and mortality assumptions used for
GAAP financial reporting;
d. Providing for income taxes based on current taxable (tax return)
income only for statutory purposes, rather than establishing
additional assets or liabilities for deferred income taxes to
recognize the tax effect related to reporting revenues and
expenses in different periods for financial reporting and tax
return purposes;
F-6
<PAGE>
e. Excluding certain GAAP assets designated as non-admitted assets
(e.g., past due agents' balances and furniture and equipment) from
the balance sheet for statutory purposes by directly charging
surplus;
f. Establishing accruals for post-retirement and post-employment
health care benefits currently or using a twenty year phase-in
approach, whereas GAAP liabilities are required to be recorded as
incurred;
g. Establishing a formula reserve for realized and unrealized losses
due to default and equity risk associated with certain invested
assets (Asset Valuation Reserve or AVR) and the deferral and
amortization of realized gains and losses, motivated by changes in
interest rates during the period the asset is held, into income
over the remaining life to maturity of the asset sold (Interest
Maintenance Reserve or IMR), whereas on a GAAP basis, no such
formula reserve is required and realized gains and losses are
recognized in the statement of operations in the period the asset
is sold;
h. The reporting of bonds at amortized cost, whereas GAAP requires
that fixed maturities be classified as "held-to-maturity,"
"available-for-sale" or "trading" based on the Company's
intentions with respect to the ultimate disposition of the
security and its ability to effect those intentions. The Company's
fixed maturities were classified on a GAAP basis as
"available-for-sale" and accordingly, these investments were
reflected at fair value with the corresponding impact included as
a component of Capital and Surplus; and
i. No re-evaluation of assets and liabilities upon the acquisition of
FELIC by HLA, whereas on a GAAP basis the assets and liabilities
were re-valued to their fair values on the purchase date, with the
excess of the purchase price over the net fair value recorded as
goodwill.
The significant differences between statutory and GAAP basis net loss for
the years ended December 31, 1998, 1997 and 1996 are summarized as
follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
GAAP net loss: $(4,553) $(6,977) $(4,678)
Amortization and deferral
of policy acquisition costs (1,785) (1,294) (485)
Capitalized software 40 40 40
Reserves and deposit liabilities 1,859 2,139 414
Amortization of goodwill 55 55 54
Other, net (230) (245) (4)
------- ------- -------
Statutory net loss $(4,614) $(6,282) $(4,659)
------- ------- -------
------- ------- -------
</TABLE>
F-7
<PAGE>
The significant differences between statutory and GAAP basis capital and
surplus as of December 31, 1998 and 1997 are summarized as follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
GAAP capital and surplus: $42,009 $46,229
Deferral of policy acquisition costs (3,784) (1,999)
Capitalized software (40) (80)
Reserves and deposit liabilities 4,453 2,594
Asset valuation reserve (725) (478)
Deferred taxes - 140
Net unrealized gain on securities (589) (256)
Goodwill (1,970) (2,025)
Other, net (252) (162)
------- -------
Statutory capital and surplus $39,102 $43,963
------- -------
------- -------
</TABLE>
AGGREGATE RESERVES FOR FUTURE BENEFITS AND LIABILITIES FOR PREMIUM AND
OTHER DEPOSIT FUNDS -
Aggregate reserves for payment of annuity benefits were computed in
accordance with actuarial standards. On-benefit annuity reserves were
based principally on Group Annuity Tables at an interest rate of 6.25%
for 1998 and 6.75% for both 1997 and 1996 policy issues. Premium and
deposit funds were generally valued on the Commissioner's Annuity Reserve
Valuation Method (CARVM).
SEPARATE ACCOUNTS -
The Company maintains separate account assets and liabilities which are
reported at fair value. Separate accounts reflect two categories of risk
assumption: non-guaranteed separate accounts, wherein the policyholder
assumes the investment risk, and guaranteed separate accounts, wherein
the Company contractually guarantees either a minimum return or account
value to the policyholder. Non-guaranteed separate account assets are
segregated from other investments, and investment income and gains and
losses accrue directly to the policyholders.
INVESTMENTS -
Investments include bonds carried at amortized cost. Bonds which are
deemed ineligible to be held at amortized cost by the NAIC Securities
Valuation Office (SVO) are carried at the appropriate SVO published
value. When a permanent reduction in the value of securities occurs, the
decrease is reported as a realized loss in the statutory statements of
operations and the carrying value is adjusted accordingly.
F-8
<PAGE>
Realized capital gains and losses, net of taxes and amounts transferred
to the IMR, are reported in the statutory statements of operations. The
AVR is designed to provide a standardized reserve process for realized
and unrealized losses due to the default and equity risks associated with
invested assets. The AVR was increased by $247, $229, and $147 in 1998,
1997, and 1996, respectively. The IMR captures realized capital gains and
losses, net of applicable income taxes, resulting from changes in
interest rates and amortizes these gains or losses into income over the
remaining life of the asset sold. Capital gains and losses of $2, $10,
and $0, for 1998, 1997, and 1996, respectively, were reclassified to the
IMR. There was also amortization of $1, $1, and $0, for 1998, 1997, and
1996, respectively. Realized gains and losses are determined on a
specific identification basis.
RECLASSIFICATIONS -
Certain reclassifications have been made to the 1997 financial statements
to make them consistent with the 1998 presentation.
USE OF ESTIMATES -
The preparation of financial statements in conformity with statutory
accounting practices requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosures of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates. The most significant estimates include those used in
determining the liability for premium and other deposit funds and
aggregate reserves for future benefits. Although some variability is
inherent in these estimates, management believes the amounts provided are
adequate.
2. INVESTMENTS:
COMPONENTS OF NET INVESTMENT INCOME -
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Interest income from bonds and short-term
investments $3,285 $1,477 $968
------ ------ ----
Gross investment income 3,285 1,477 968
Less: investment expenses 70 87 -
------ ------ ----
Net investment income $3,215 $1,390 $968
------ ------ ----
------ ------ ----
</TABLE>
F-9
<PAGE>
UNREALIZED CAPITAL GAINS (LOSSES) ON BONDS AND SHORT TERM INVESTMENTS -
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Gross unrealized capital gains at end of year $604 $256 $ 68
Gross unrealized capital losses
at end of year (15) - (27)
---- ---- ----
Net unrealized capital gains 589 256 41
Balance at beginning of year 256 41 132
---- ---- ----
Net change in net unrealized gains $333 $215 $(91)
---- ---- ----
---- ---- ----
</TABLE>
BONDS AND SHORT-TERM INVESTMENTS -
<TABLE>
<CAPTION>
December 31, 1998
---------------------------------------------------------
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
<S> <C> <C> <C> <C>
U.S. government and
government agencies and
authorities - guaranteed
and sponsored $ 6,594 $310 $ - $ 6,904
All other corporate 11,579 294 (15) 11,858
Short-term investments 45,521 - - 45,521
------- ---- ---- -------
Total $63,694 $604 $(15) $64,283
------- ---- ---- -------
------- ---- ---- -------
</TABLE>
<TABLE>
<CAPTION>
December 31, 1997
---------------------------------------------------------
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
<S> <C> <C> <C> <C>
U.S. government and
government agencies and
authorities - guaranteed
and sponsored $ 6,558 $136 $ - $ 6,694
All other corporate 6,752 120 - 6,872
Short-term investments 40,511 - - 40,511
------- ---- ----- -------
Total $53,821 $256 $ - $54,077
------- ---- ----- -------
------- ---- ----- -------
</TABLE>
F-10
<PAGE>
The amortized cost and estimated market value of bonds and short-term
investments at December 31, 1998 by anticipated maturity are listed in
the table below. Actual maturities will vary from contractual maturities
due to the right to call or prepay.
<TABLE>
<CAPTION>
1998
------------------------
Estimated
Amortized Fair
Maturity Cost Value
-------- ---- -----
<S> <C> <C>
Due in one year or less $46,483 $46,488
Due after one year through five years 8,753 8,964
Due after five years through ten years 5,220 5,366
Due after ten years 3,238 3,465
------- -------
Total $63,694 $64,283
------- -------
------- -------
</TABLE>
Proceeds from the sales and maturities of long-term fixed maturity
investments were $4,770, $2,488 and $1,000 in 1998, 1997 and 1996,
respectively. For the year ended December 31, 1998 and 1997 there were
$18 and $8 of net realized gains, respectively. There were no gross
realized gains or losses in 1996.
CONCENTRATION OF CREDIT RISK -
Excluding U.S. government and government agencies and authorities
investments, the Company is not exposed to any significant concentration
of credit risk.
SECURITIES ON DEPOSIT -
The Company has approximately $6.5 million of U.S. Treasury securities on
deposit with various state insurance departments, as required by state
law.
3. RELATED PARTY TRANSACTIONS:
Transactions between the Company and its affiliates within The Hartford
relate principally to rent and salaries. Rent and salaries allocated by
HLA to the Company were $2,896, $2,409 and $1,601 for the years ended
December 31, 1998, 1997 and 1996, respectively. Investment management
fees were allocated by Hartford Investment Management Company (HIMCO) and
are a component of net investment income.
The Company has a capital maintenance agreement with HLA and PLIC whereby
if, during the term of the Company's contract with AARP, the total
adjusted capital of the Company falls below 150% of the company action
level risk-based capital (RBC), HLA and PLIC are required to make capital
contributions, in proportion to their respective ownership percentages,
so that the Company's total adjusted capital meets 150% of the company
action level RBC. Also, after termination of the Company's contract with
the AARP, HLA and PLIC are required to make capital contributions, in
proportion to their respective ownership percentages, so that the Company
meets 100% of the company action level RBC. As of December 31, 1998, the
Company's total adjusted capital exceeded 150% of the company action
level RBC.
F-11
<PAGE>
4. FEDERAL INCOME TAXES:
The Company files its own Federal income tax return. No Federal income
taxes were paid or payable for the years ended December 31, 1998, 1997
and 1996. The primary difference between applying the statutory rate to
the pre-tax loss and the Federal income tax expense relates to the
Company's inability to carryback the 1998 tax return loss to receive a
benefit currently.
5. CAPITAL AND SURPLUS AND SHAREHOLDER DIVIDEND RESTRICTIONS:
The maximum amount of dividends which can be paid without prior approval
by State of Connecticut domiciled insurance companies to shareholders is
restricted to the greater of 10% of surplus as of the preceding December
31 or the net gain from operations of the previous year. During 1999, the
maximum amount of dividends approximates $3.9 million. Dividends are paid
as determined by the Company's Board of Directors and are not cumulative.
There were no dividends declared or paid for the years ended December 31,
1998, 1997 and 1996.
6. PENSION PLANS AND OTHER POST-RETIREMENT AND POST-EMPLOYMENT BENEFITS:
HLI's employees, which include those allocated to the Company, are
included in The Hartford's non-contributory defined benefit pension
plans. These plans provide pension benefits that are based on years of
service and the employee's compensation during the last ten years of
employment. The Hartford's funding policy is to contribute annually an
amount between the minimum funding requirements set forth in the Employee
Retirement Income Security Act of 1974, as amended, and the maximum
amount that can be deducted for Federal income tax purposes. The Company
also participates in an Investment and Savings Plan sponsored by The
Hartford which is available to substantially all employees. This Plan
includes a deferred contribution option under IRC Section 401(k). The
liabilities for these plans are included in the financial statements of
The Hartford, and a portion of the expenses were allocated to the Company
by HLA as part of rent and salaries (see Note 3).
HLI's employees are included in The Hartford's contributory
post-retirement defined health care and life insurance benefit plans.
These plans provide health care and life insurance benefits for eligible
retired employees. Substantially all employees may become eligible for
those benefits if they reach normal or early retirement age while still
working for the Company. The Hartford has prefunded a portion of the
health care and life insurance obligations through trust funds where such
prefunding can be accomplished on a tax effective basis.
Post-retirement liabilities and expenses are allocated to the Company by
The Hartford. The assumed rate of future increases in the per capita cost
of health care (the health care trend rate) was 7.8% and 8.5% for 1998
and 1997, respectively, decreasing ratably to 5% in the year 2003.
Increasing the health care trend rates by one percent per year would have
an immaterial impact on the accumulated post-retirement benefit
obligation and the annual expense. The post-retirement benefit expense
allocated to the Company was not significant in 1998, 1997 and 1996.
F-12
<PAGE>
Post-employment benefits are primarily comprised of obligations to
provide medical and life insurance to employees on long-term disability.
The post-employment benefit expense was not significant in 1998, 1997,
and 1996.
7. COMMITMENTS AND CONTINGENCIES:
Under Insurance Guaranty Fund laws in most states, insurers doing
business therein can be assessed up to prescribed limits for policyholder
losses incurred by insolvent companies. The amount of any future
assessments on the Company under these laws cannot be reasonably
estimated. Most of these laws do provide, however, that an assessment may
be excused or deferred if it would threaten an insurer's own financial
strength. Additionally, Guaranty Fund assessments are used to reduce
state premium taxes paid by the Company in certain states. The Company
paid (received) $69, $(71) and $135 in state premium taxes during 1998,
1997, and 1996, respectively.
8. SEPARATE ACCOUNTS:
The Company maintained separate account assets totaling $175.3 million
and $122.7 million and liabilities totaling $175.3 million and $122.6
million as of December 31, 1998 and December 31, 1997, respectively,
which are reported at fair value. Separate accounts reflect two
categories of risk assumption: non-guaranteed separate accounts totaling
$55.8 million and $7.7 million at December 31, 1998 and 1997,
respectively, wherein the policyholder assumes the investment risk, and
guaranteed separate accounts totaling $119.5 million and $114.9 million
at December 31, 1998 and 1997, respectively, wherein the Company
contractually guarantees either a minimum return or account value to the
policyholder. Net investment income (including net realized capital gains
and losses) and interest credited to policyholders on separate account
assets are not separately reflected in the statutory statements of
operations, but are recorded net, as a component of net transfers to
separate accounts.
Non-guaranteed separate account assets are segregated from other
investments and net investment income and net realized capital gains and
losses accrue directly to the policyholder. The separate accounts also
include guaranteed individual annuity contracts. The average credited
interest rate on these contracts was 6.29% at December 31, 1998. The
assets that support these liabilities were comprised of $117.5 million
and $112.9 million in bonds at December 31, 1998 and 1997. The portfolios
are segregated from other investments and are managed so as to minimize
liquidity and interest rate risk. To minimize the risk of
disintermediation associated with early withdrawals, guaranteed
individual annuity contracts carry a graded surrender charge as well as a
market value adjustment.
F-13
