As Filed with the Securities and Exchange Commission on November 20, 1997
Registration No. 333-31011 811-0829
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM S-6/A
PRE-EFFECTIVE AMENDMENT NO. 1 TO REGISTRATION UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS REGISTERED ON FORM N-8B-2
AAL VARIABLE LIFE ACCOUNT I
(Exact name of trust)
AID ASSOCIATION FOR LUTHERANS
(Name of depositor)
4321 North Ballard Road
Appleton, Wisconsin 54919-0001
Name and complete address of agent for service of process:
WOODROW E. ENO, ESQ.
SECRETARY AND GENERAL COUNSEL
AID ASSOCIATION FOR LUTHERANS
4321 North Ballard Road
Appleton, WI 54919-0001
Copy to:
DIANE AMBLER, ESQ.
MAYER BROWN & PLATT
2000 Pennsylvania Avenue N. W.
Washington, D.C. 20006
(202) 463-2000
Approximate date of proposed public offering:
As soon as practicable after the effective date of this Registration Statement
Title and amount of securities being registered : Variable Universal Life
Insurance Certificates
Pursuant to Rule 24f-2 of the Investment Company Act of 1940, the Registrant
elects to register an indefinite number or amount of its securities under the
Securities Act of 1933
The Registrant hereby amends this Registration Statement on such dates as may be
necessary to delay its effective date until the Registrant shall file a further
amendment which specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a) of the Securities
Act of 1933 or until the Registration Statement shall become effective on such
date as the Commission, acting pursuant to said Section 8(a), may determine.
AAL Variable Life Account
Aid Association for Lutherans
Cross Reference to Items Required by form N-8B-2
N-8B-2 ITEM CAPTION IN PROSPECTUS
1 Cover Page,
2 Inside Cover Page
3 NA
4 Distribution
5 Investment Options
6 NA
7 Not Applicable
8 Definitions
9 Litigation
10
(a) NA
(b) NA
(c) Access to Certificate Value
(d) Access to Certificate Value, Investment Options
(e) Certificate Summary
(f) Investment Options, General Information
(g) General Information
(h) General Information
(i) Federal Tax Matters, General Information, Premiums,
Benefits, Charges, Cash Value, Access to
Certificate Values
11 Investment Options
12 NA
13
(a) Charges, Investment Options
(b) Charges
(c) Charges
(d) NA
(e) NA
(f) NA
(g) NA
14 Certificate Summary, General Information,
15 Premiums, How to Receive Service
16 Premiums, Investment Options, Cash Value
17 Access to Certificate Value, General Information
18
(a) Investment Options, Charges
(b) NA
(c) Investment Options
19 General Information
20 General Information
21 Access to Certificate Values, How to Receive Service
22 General Information, Benefits
23 NA
24 NA
25 Investment Options
26 NA
27 Inside Cover
28 General information
29 Inside Cover
30 through 37 NA
38 Certificate Summary
39 Distribution
40 NA
41 Distribution
42 NA
43 NA
44 Investment Options, Cash Value,
45 NA
46 Investment Options, Cash Value
47 NA
48 Cover page
49 NA
50 NA
51 I
(a) Cover Page
(b) NA
(c) Investment Options
(d) NA
(e) NA
(f) Cash Value, General Information Certificate
Termination
(g) Premiums
(h) NA
(i) NA
(j) NA
52
(a) General Information, Investment Options
(b) NA
53 Federal Tax Matters
54 through 58 NA
59 Financial Statements
AAL
VARIABLE
UNIVERSAL
LIFE
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Offered by:
AID ASSOCIATION FOR LUTHERANS
4321 North Ballard Road
Appleton, Wisconsin 54919-0001
(414) 734-5721
(AAL Logo)
AID ASSOCIATION FOR LUTHERANS
AAL's Variable Universal Life Provides You With These Benefits
Death Benefit Protection
Flexible Premium Payment Options
A Variety of Investment Options for Your Cash Value
Death Benefit Guarantee Upon Payment of Death Benefit Guarantee Premium
AAL Variable Life Account I
AAL Variable Product Series Fund, Inc.
The AAL Variable Product Money Market Portfolio
The AAL Variable Product Bond Portfolio
The AAL Variable Product Balanced Portfolio
The AAL Variable Product Large Company Stock Portfolio
The AAL Variable Product Small Company Stock Portfolio
AAL VARIABLE UNIVERSAL LIFE
AAL VARIABLE UNIVERSAL LIFE FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Offered by:
AID ASSOCIATION FOR LUTHERANS
4321 North Ballard Road
Appleton, Wisconsin 54919-0001
(414) 734-5721
PROSPECTUS Dated , 1998
Aid Association for Lutherans ("AAL") is offering the flexible premium variable
life insurance Certificate (the "Certificate") described in this Prospectus to
persons who are eligible for membership in AAL. Membership is open to Lutherans
and their families. AAL offers life, disability income insurance and annuities
to its members and to employees of AAL, its subsidiaries and affiliated
companies who reside in Wisconsin, and mutual funds are offered through a
subsidiary, AAL Capital Management Corporation. All members are part of one of
over 9,600 local AAL branches throughout the United States. The Certificate
provides life insurance benefits. You may choose from two death benefit options.
Under the Level Death Benefit Option the death benefit is usually the Specified
Amount. Under the Variable Death Benefit the death benefit is usually equal to
the Specified Amount plus the Certificate's Cash Value, which can vary. You can
also choose the timing and amounts of your premium payments and allocate your
Cash Value among the underlying Subaccounts. You may use your Cash Value to keep
your Certificate in force, or borrow a portion of it. You can also surrender
your Certificate and receive the Cash Value less any surrender charges and
loans.
Your Certificate's Cash Value will vary with the investment experience of the
underlying funding options you choose. Although Certificate values will vary,
the Certificate can be guaranteed to stay in force through the Guaranteed Death
Benefit Provision.
It may not be to your advantage to replace existing life insurance or supplement
existing variable life insurance with this Certificate.
Please read this prospectus carefully and retain it for future reference.
You should rely only on the information contained in this document. AAL has not
authorized anyone to provide you with information that is different.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS PROSPECTUS SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE. A PROSPECTUS
FOR THE PORTFOLIO OR PORTFOLIOS BEING CONSIDERED MUST ACCOMPANY THIS PROSPECTUS
AND SHOULD BE READ IN CONJUNCTION HEREWITH.
THE PURPOSE OF THIS VARIABLE LIFE INSURANCE CERTIFICATE IS TO PROVIDE LIFE
INSURANCE PROTECTION FOR THE BENEFICIARY NAMED THEREIN.
NO CLAIM IS MADE THAT THIS VARIABLE LIFE INSURANCE CERTIFICATE IS IN ANY WAY
SIMILAR TO OR COMPARABLE TO A SYSTEMATIC INVESTMENT PLAN OF A MUTUAL FUND.
TABLE OF CONTENTS
DEFINITIONS.....
CERTIFICATE SUMMARY
INTRODUCTION
WHAT IS AAL?
WHAT IS THE PURPOSE OF THE CERTIFICATE?
WHAT LIFE INSURANCE PROTECTION IS PROVIDED?
WHAT PREMIUMS MAY I PAY?
WHAT INVESTMENT OPTIONS DO I HAVE?
WHAT IS THE CASH VALUE OF THE CERTIFICATE?
WHAT CHARGES DO I PAY?
HOW CAN I TAKE CASH OUT OF MY CERTIFICATE?
HOW CAN MY CERTIFICATE TERMINATE?
BENEFITS
DEATH BENEFIT
INCREASING YOUR SPECIFIED AMOUNT
DECREASING YOUR SPECIFIED AMOUNT
CHANGING YOUR DEATH BENEFIT OPTION
DEATH BENEFIT GUARANTEE
MATURITY BENEFIT
ADDITIONAL BENEFITS
PREMIUMS
DEATH BENEFIT GUARANTEE PREMIUM
FLEXIBILITY
LIMITS
NET PREMIUM & PREMIUM ALLOCATION
INVESTMENT OPTIONS
FIXED ACCOUNT
VARIABLE ACCOUNT
INVESTMENT OBJECTIVES OF THE FUND PORTFOLIOS
TRANSFERS
REVIEW OF INVESTMENT STRATEGY
VOTING PRIVILEGES
CASH VALUE
FIXED ACCOUNT CASH VALUE
VARIABLE ACCOUNT CASH VALUE
WHAT AFFECTS CASH VALUE
SURRENDER VALUE
CHARGES
PERCENT OF PREMIUM CHARGE
CASH VALUE CHARGES
SURRENDER CHARGE
ACCESS TO CASH VALUE
PARTIAL WITHDRAWALS
LOANS
SURRENDER
CERTIFICATE TERMINATION
EARLY TERMINATION AND REINSTATEMENT
DEATH, MATURITY, AND SURRENDER
PAYOUT OPTIONS
SELECTION
OPTION 1: INTEREST
OPTION 2: A SELECTED AMOUNT OF INCOME
OPTION 3: A SET PERIOD
OPTION 4: LIFE PAYMENT
OPTION 5: JOINT & SURVIVOR
HOW TO MAKE PAYMENTS AND RECEIVE SERVICE
APPLYING FOR A CERTIFICATE
TIMELY PROCESSING
WRITTEN REQUESTS
TELEPHONE TRANSACTIONS
DEATH CLAIMS
GENERAL INFORMATION
FREE LOOK
ENTIRE CONTRACT
STATEMENTS IN THE APPLICATION
CHANGE OF CERTIFICATE
INCONTESTABILITY
MISSTATEMENT OF AGE OR SEX
MAINTENANCE OF SOLVENCY
BASIS OF COMPUTATIONS
REPORTS TO OWNERS
MEMBERSHIP
OWNERSHIP
BENEFICIARY
COLLATERAL ASSIGNMENT
RIGHTS RESERVED BY AAL
DIRECTORS AND OFFICERS
FEDERAL TAX MATTERS
VARIABLE ACCOUNT TAX STATUS
LIFE INSURANCE QUALIFICATION
PRE-DEATH DISTRIBUTIONS
DIVERSIFICATION REQUIREMENTS
OTHER CONSIDERATIONS
LITIGATION
DISTRIBUTION
ILLUSTRATIONS
LEGAL AND ACTUARIAL MATTERS
EXPERTS
DEFINITIONS
AAL: Aid Association for Lutherans, a fraternal benefit society organized under
the laws of the State of Wisconsin, owned and operated for its members. It is
the issuer of the Certificates.
AALCMC: AAL Capital Management Corporation, an indirect subsidiary of Aid
Association for Lutherans and a registered broker-dealer. It serves as principal
underwriter of the Certificates.
AAL Representative: An AAL District Representative who is appropriately licensed
by state insurance department officials to sell the Certificates, and is also a
licensed Registered Representative of AALCMC.
Accumulation Unit: A unit of measure used to calculate the Cash Value in each
Subaccount of the Variable Account. A further description is contained in the
Section "Cash Value", specifically the subsection "Variable Account", of this
Prospectus.
Accumulation Unit Value: On any Valuation Date, the value of the Accumulation
Unit of each Subaccount of the Variable Account. A further description is
contained in the Section "Cash Value", specifically the subsection "Variable
Account", of this Prospectus.
Age: The Issue Age of the insured plus the number of Certificate Years elapsed.
Beneficiary: The person(s) named by the Certificate Owner to receive the death
proceeds under the Certificate. A beneficiary need not be a natural person.
Cash Value: The total value of the Certificate. Cash Value equals the sum of the
Subaccount cash values plus Fixed Account cash value.
Certificate: The flexible premium variable life insurance Certificate offered by
AAL and described in this prospectus.
Certificate Anniversary: The same date in each succeeding year as the
Certificate Issue Date.
Certificate Year: The 12-month period following the Issue Date or a Certificate
Anniversary. The Certificate Year is always based upon the time elapsed since
the Issue Date.
Death Benefit: The amount paid upon the death of the Insured.
Death Benefit Option: Either of the two methods used to determine the Death
Benefit.
Death Benefit Guarantee: A Certificate provision that guarantees insurance
coverage if you meet certain conditions.
Death Benefit Guarantee Premium: The minimum monthly premium required to keep
your particular Certificate's Death Benefit Guarantee in effect. Different
combinations of age, sex, risk class, specified amount and additional benefits
will result in different Death Benefit Guarantee Premiums. Your Death Benefit
Guarantee Premium is listed on page 3A of your Certificate and it is further
described in the Section "PREMIUMS" of this Prospectus.
Fixed Account: A Cash Value accumulation option that credits an interest rate.
The Fixed Account is part of AAL's general account, which includes all of AAL's
assets other than those in any AAL separate account.
Fund: AAL Variable Product Series Fund, Inc., which is described in the Fund
Prospectus accompanying this Prospectus.
Home Office: AAL's office at 4321 Ballard Road, Appleton, Wisconsin 54919-0001,
or such other place as AAL shall specify in a notice to the Certificate Owner.
Insured: The person on whose life the Certificate is issued.
Internal Revenue Code: The Internal Revenue Code of 1986, as amended.
Issue Age: The age of the insured as of his or her last birthday on or before
the issue date.
Issue Date: The date insurance coverage begins under this Certificate.
Monthly Deduction Date: The date each month on which monthly charges are taken
from Cash Value. It occurs each month on the nearest Valuation Date, on or
preceding the day of the month which corresponds to the day of the month on
which the Certificate was issued. A further description is contained in the
"Charges" Section of this Prospectus.
Net Asset Value: The unit of valuation for a Fund portfolio as computed and
described in such Fund's prospectus.
Specified Amount: Initially, the amount of life insurance for which the
Certificate was issued. The Specified Amount of your Certificate may change, as
described in your Certificate. This is further described in the "Benefits"
Section of this Prospectus.
Subaccount: A subdivision of the Variable Account. Each Subaccount invests
exclusively in the shares of a corresponding portfolio of the Fund. This is
further described in the "Investment Options" Section, specifically in the
Variable Account" subsection.
Surrender Value: Cash Value less any applicable surrender charges and
outstanding loan balances.
Valuation Date: Any day upon which both the New York Stock Exchange is open for
regular trading and AAL is open for business. The Exchange is regularly closed
on Saturdays and Sundays and on New Year's Day, the third Monday in February,
Good Friday, the last Monday in May, Independence Day, Labor Day, Thanksgiving
and Christmas. If one of these holidays falls on a Saturday or Sunday, the
Exchange will be closed on the preceding Friday or the following Monday. AAL
will also be closed on the Friday after Thanksgiving and the day before
Christmas. When the markets are trading on days when the portfolios are not
priced, a subaccount's value may change on a day when Certificate Owners may not
be able to access their Certificate's Cash Value.
Valuation Period: The period of time from the end of one Valuation Date to the
end of the next Valuation Date.
Variable Account: The AAL Variable Life Account I. It is a separate account of
AAL.
Written Request: A written request or notice signed by the Certificate Owner,
received in good order by AAL at its Home Office.
You, Your: The Owner of the Certificate.
CERTIFICATE SUMMARY
INTRODUCTION
As you read this prospectus, keep in mind that you are considering the purchase
of a life insurance contract. Because a substantial part of your premium pays
for life insurance, you should not buy this Certificate unless a primary reason
for your purchase is to provide life insurance protection. Since it is cash
value life insurance with investment aspects, the Certificate can also serve a
second purpose. In addition to providing life insurance coverage, cash may also
be available for use during your lifetime. Because it is variable universal life
insurance, it has significant investment aspects that require you to make
investment decisions and take investment risk. No claim is made that the
Certificate is in any way similar or comparable to a systematic investment plan
of a mutual fund. This section provides only an overview of the more significant
provisions of the Certificate. It omits details that are provided in the rest of
this Prospectus. The Table of Contents will help you locate more details or
other specific topics.
WHAT IS AAL?
AAL (Aid Association for Lutherans) was organized on November 24, 1902. It is a
fraternal benefit society under Internal Revenue Code section 501(c)(8) and
incorporated under the laws of the state of Wisconsin. As of December 31, 1997,
AAL had approximately 1.7 million members and is the world's largest fraternal
benefit society in terms of assets (over $-- billion) and life insurance in
force ($--- billion), ranking it in the top two percent of all life insurers in
the United States in terms of ordinary life insurance in force.
WHAT IS THE PURPOSE OF THE CERTIFICATE?
This Certificate provides life insurance protection on the Insured as long as
the Certificate is in effect. It also may provide cash available for use during
your lifetime.
Like traditional life insurance, the Certificate has a death benefit,
accumulates a cash value and offers loan and surrender privileges. Unlike
traditional life insurance, the Certificate offers flexible premiums and a
choice of investment alternatives, including the opportunity to participate in
the risks and returns of equities.
Your choice of premiums, investment options, and your use of withdrawal and loan
privileges will be key factors in the Certificate's performance. The choices you
make directly impact how long the Certificate remains in effect and the amount
of cash available for use.
WHAT LIFE INSURANCE PROTECTION IS PROVIDED?
You choose one of two Death Benefit Options. Under the Level Death Benefit
option the death benefit is usually the Specified Amount. Under the Variable
Death Benefit option the death benefit is usually equal to the Specified Amount
plus the Certificate's Cash Value which can vary according to gains or losses as
a result of the investment options selected.
If your Cash Value builds to a large total compared to your Specified Amount,
your death benefit will be increased as necessary to comply with federal tax
law. This is required to maintain your Certificate's tax status as life
insurance.
Your Certificate is guaranteed to stay in effect as long as the Death Benefit
Guarantee is in effect. This guarantee is available until age 65 or your 10th
Certificate anniversary, if later, provided you pay certain minimum premium
amounts.
You may change Death Benefit Options, and increase or decrease your Death
Benefit by changing your Specified Amount, as provided for in your Certificate.
Additional benefits are also available. They include Accidental Death Benefit,
Disability Waiver, Guaranteed Purchase Option, and Applicant Waiver. See your
Certificate for details.
WHAT PREMIUMS MAY I PAY?
You choose when and how much premium to pay, within certain restrictions. To
keep your Certificate in effect during the first four (4) years, you should pay
at least the Death Benefit Guarantee Premium. Your Certificate will likely lapse
if you fail to pay at least these premiums.
If you want to make regular payments, AAL will send you billing statements of an
amount you select. You can choose monthly, quarterly, semi-annual or annual
payments.
To keep your Death Benefit Guarantee, your total premiums paid less partial
withdrawals must equal or exceed the total Death Benefit Guarantee Premiums plus
any outstanding loan balance. AAL recommends you pay at least the Death Benefit
Guarantee Premiums to adequately fund your Certificate. Paying these premiums
guarantees that your Certificate will not lapse until age 65, or for 10 years
from issuance if longer.
The amount of premiums paid may effect the tax status of your Certificate. The
Internal Revenue Code's definition of life insurance limits the amount of
premium you may pay.
WHAT INVESTMENT OPTIONS DO I HAVE?
You choose where to allocate your premiums among the Variable Accounts (called
"Subaccounts") and the Fixed Account.
Premiums you allocate to the Fixed Account are credited to your Fixed Account's
Cash Value. Cash Value in the Fixed Account accumulates at a fixed rate of
interest as declared by AAL. This rate is guaranteed never to be lower than 4%.
The Fixed Account is a part of AAL's general account. The general account
includes all of AAL's assets other than those in our separate accounts
(including the Variable Account).
Each Subaccount invests in a portfolio of a mutual fund. The current portfolios
are Money Market, Bond, Large Company Stock, Small Company Stock, and Balanced.
Each portfolio has a different investment strategy. Premiums allocated to a
Subaccount will increase that Subaccount's Cash Value. Each Subaccount's cash
value will accumulate based on the investment experience of that Subaccount's
portfolio.
You may transfer the Cash Value among the Subaccounts and Fixed Account, as
specified in the Certificate. This allows you to adjust your investment strategy
at any time.
WHAT IS THE CASH VALUE OF THE CERTIFICATE?
The total Cash Value at any time is equal to the sum of the Cash Values in the
Subaccounts and the Fixed Account.
Premiums increase Cash Value. Charges and cash you withdraw from the Certificate
decrease Cash Value. The investment experience of the Subaccount(s) you select
also affects your Certificate's Cash Value as does the interest credited to the
Fixed Account. Investment gains, if any, increase Cash Value, while any
investment losses decrease Cash Value.
Your decisions on the premiums to pay, the accounts to invest in, and the
amounts you withdraw from the Certificate have a great impact on your
Certificate's Cash Value.
Important Note: The primary purpose for paying enough premium to build your Cash
Value is to cover increasing Cost of Insurance rates as you (the Insured) get
older. Unless you build your Cash Value over time, you will need to cover
increasing costs with higher premiums. Your Cash Value also depends upon the
investment experience of the Subaccount(s) in which your Cash Value is invested
and, if this experience is low or negative, you may also need to pay higher
premiums.
WHAT CHARGES DO I PAY?
Charges are necessary to pay for the insurance coverage provided, cover the
expenses of issuing and administering the Certificate, and to fund AAL's
fraternal activities. Charges are:
Cost of Insurance Charge - A monthly charge for life insurance coverage. This
charge varies by risk class, sex, amount at risk, and age.
Mortality and Expense Risk Charge - Monthly charges are deducted from the
Subaccounts of the Variable Account to pay for the mortality and expense risks
borne by AAL. Currently, during the first 15 years the monthly charge is .0625%
(approximately .75% annually) of the total Subaccount cash value. This charge
drops to .02083% (approximately .25% annually) of the total Subaccount Cash
Value in Certificate Year 16.
Administrative Charge - A monthly charge of $4 is deducted to cover
administrative costs.
Issue Charge - A monthly charge to cover issue costs is deducted for the first
36 months. This charge will vary by age, risk class, sex and Specified Amount.
Percent of Premium Charge - A charge of 3 % of each premium is taken to cover
sales and other expenses and provide support for AAL's fraternal activities.
Additional Insurance Benefits Charge - A charge will be taken each month for any
additional insurance benefits you have.
Surrender Charge - If you choose to surrender your Certificate or reduce your
Specified Amount, AAL will reduce your Cash Value by the surrender charge. The
charge decreases over the first 10 Certificate years to zero in the 11th
Certificate Year. A new surrender charge schedule begins for the increase in
Specified Amount each time you increase your Specified Amount.
Portfolio Expense The expenses for each of the Portfolios are limited to the
respective maximum advisory fees, currently .35% of the average annual daily net
assets. Without this limitation through reimbursement by the adviser, which can
be changed or stopped with 30 days notice, the expenses for the year ended 1996
would have been: Money Market Portfolio - 0.65%, Bond Portfolio - 0.68%,
Balanced Portfolio - 0.60%, Large Company Stock Portfolio - 0.63%, and Small
Company Stock Portfolio - 0.75%.
HOW CAN I TAKE CASH OUT OF MY CERTIFICATE?
You can choose to take cash out of the Certificate through a loan, partial
withdrawal, or full surrender.
You may take one partial withdrawal per Certificate year at no charge. You will
be charged $25 for each additional withdrawal. A partial withdrawal will reduce
your Cash Value and may reduce your Specified Amount. It will also reduce the
amount of premiums considered "paid" to meet the Death Benefit Guarantee premium
requirement.
You make take up to 92% of your Cash Value out as a loan. You will be charged 8%
per annum on the loan balance until you reach your 15th Certificate anniversary.
Thereafter the rate will drop to 7 1/4% per annum.
Cash Value securing a loan may earn a lower interest rate than other Cash Value
in the Fixed Account. AAL will determine the rates earned.
If you surrender your Certificate, you will receive the Cash Value less any
surrender charge and outstanding loans.
Both partial withdrawals and loans will reduce the Cash Value available to pay
your insurance costs. You should carefully consider the impact on the insurance
your Certificate will be able to provide, now and in the future, before
exercising these privileges.
These privileges can be a major advantage of this Certificate. When you pay
enough premiums, the power of tax-deferred earnings, with favorable investment
experience, can build significant Cash Value. Under these circumstances, some
Cash Value will be available for your use, in addition to paying your insurance
costs.
HOW CAN MY CERTIFICATE TERMINATE?
Without the Death Benefit Guarantee, this Certificate will terminate (lapse)
when there is not enough Cash Value to pay the monthly charges. If this happens,
you have a short period to pay enough premiums to keep the Certificate in
effect. Your Certificate will not terminate while the Death Benefit Guarantee is
in effect.
Your Certificate will terminate when the Insured dies and the death benefit is
paid.
Your Certificate will terminate if you surrender your Certificate for its
surrender value (Cash Value less loans and surrender charges).
Your Certificate will terminate if you reach age 100. At that time the Cash
Value less any loans, will be paid to you.
There may be tax consequences when money is received from a Certificate. Please
consult with your tax advisor.
BENEFITS
DEATH BENEFIT
The death benefit is the amount payable upon the death of the Insured. At the
time of purchase, you must choose between two available Death Benefit Options.
The amount payable under either option will be determined as of the date of the
Insured's death. Loans plus unpaid interest always reduce the death benefit
paid.
Suicide Exclusion
If the Insured commits suicide within one year of the issue date AAL will not
pay a death benefit but will return all premiums paid. The one year period in
the Suicide Exclusion provision will apply at issue and to each increase in the
Specified Amount beginning on the effective date of each increase. The only
amount payable attributable to the increase will be a refund of the monthly
deductions for the increase.
Level Death Benefit - Option 1
The death benefit under this option is the greater of the Specified Amount, or
the death benefit factor multiplied by Cash Value. The death benefit factor is
2.5 through age 40 and decreases yearly to 1 at age 95. The death benefit factor
helps to qualify your Certificate as life insurance under federal tax law. A
table of death benefit factors is contained in your Certificate.
Option 1 generally provides a level Death Benefit. Choose Death Benefit Option 1
if: 1) you do not expect your insurance needs to generally increase; and 2) you
wish to minimize your insurance costs. All other things being equal, Option 1
will provide greater growth in Cash Value than Option 2.
Variable Death Benefit - Option 2
The death benefit will be the greater of the Specified Amount plus Cash Value or
the death benefit factor (described above) multiplied by Cash Value.
Option 2 provides a death benefit that varies over time. It increases and
decreases along with your Cash Value. Choose Death Benefit Option 2 if: 1) you
expect your insurance needs to increase; or 2) you wish to have an increasing
death benefit. Option 2 will provide a greater death benefit than Option 1.
INCREASING YOUR SPECIFIED AMOUNT
You have the right to increase the Specified Amount at any time on or before the
certificate anniversary following the insured's 80th birthday if the insured is
insurable for the increase under AAL's underwriting guidelines and policies.
An increase must be at least $10,000. Proof of insurability may be required and,
if you are not the Insured, proof of insurable interest may also be required.
When an increase is approved, it becomes effective as of the date shown on the
new page 3A that is sent to you.
The cost of insurance rates charged for each increase will vary based on factors
such as sex, risk class, age and the time elapsed since issue.
Each increase will be subject to AAL's expense charges in effect at the time of
increase. The expense charges for each increase will be based on the insured's
age on the last certificate anniversary and sex at the time of increase and will
apply for the number of months shown on the new page 3A.1. A new set of
surrender charges will apply to each increase in the Specified Amount. These
charges will all be shown on the new page 3A.1.
DECREASING YOUR SPECIFIED AMOUNT
You have the right to decrease the Specified Amount after it has been in effect
for one year. The Specified Amount remaining in effect cannot be less than
$10,000.
The decrease will be effective as of the date the request is received at the
Home Office. The decrease will be subtracted first from any previous increases
in the Specified Amount, starting with the most recent, then from the original
specified amount.
A surrender charge will be subtracted from the Cash Value if a surrender charge
is in effect for that part of the Specified Amount decreased. The surrender
charges are shown on the Table of Surrender Charges in the Certificate on page
3A.1.
CHANGING YOUR DEATH BENEFIT OPTION
You may change your Death Benefit Option at any time. A $25 charge will be
applied to your Cash Value for each Death Benefit Option Change.
If you apply to change from the Level Death Benefit option to the Variable Death
Benefit option, AAL may require proof of insurability from you. Also, your
Specified Amount of insurance decreases so your death benefit immediately after
the change will be the same as immediately before the change. The change is not
allowed if it reduces your Specified Amount below $10,000.
If you change from the Variable Death Benefit option to the Level Death Benefit
option your Specified Amount increases. The increase is determined so your Death
Benefit immediately after the change will be the same as immediately before the
change.
DEATH BENEFIT GUARANTEE
The Death Benefit Guarantee, as long as it is in effect, assures that your
coverage will continue even if the Cash Value is insufficient to pay the current
monthly deductions. To keep the Death Benefit Guarantee in effect you must meet
the test described below. Basically, the test requires you to pay a minimum
amount of premiums, and the insured to be under age 65 (or the Certificate has
been in effect not more than 10 years).
AAL will test the Death Benefit Guarantee on each monthly deduction date as
follows:
1) the sum of all premiums paid (less any partial withdrawals) must be greater
than or equal to the Death Benefit Guarantee Premium (see next page) times the
number of months since the Certificate Issue Date, plus any outstanding loan,
and
2) the Insured's age is less than 65 or the Certificate has been in effect no
more than 10 years.
If part 1) of the test is not met, AAL will notify the Certificate Owner and
allow two months to pay enough premium or loan repayment to meet the
requirements of the test. If you do not pay the required premium or loan
repayment, the Death Benefit Guarantee will end, and can not be reinstated.
Changes in the Specified Amount and optional benefits on the Certificate will
change the Death Benefit Guarantee Premium. The new Death Benefit Guarantee
Premium is required from the first monthly deduction date following the change.
MATURITY BENEFIT
Upon the Insured's attaining age 100, the Certificate will provide a maturity
benefit equal the Cash Value less any loans.
ADDITIONAL BENEFITS
Several additional benefits are available on most Certificates. They include
Accidental Death Benefit, Disability Waiver, Guaranteed Purchase Option, and
Applicant Waiver. See your Certificate for details.
PREMIUMS
DEATH BENEFIT GUARANTEE PREMIUM
The Death Benefit Guarantee Premium is the minimum premium, on a monthly basis,
that is required to keep your Death Benefit Guarantee in effect. Your Death
Benefit
Guarantee Premium is equal to:
1) a factor, based on age, sex, and risk class, multiplied by your Specified
Amount divided by 1,000; plus
2) the monthly administrative charge of $4; plus 3) a required premium for each
additional benefit you choose.
Your particular Death Benefit Guarantee Premium is listed on page 3A of your
Certificate.
You may choose to pay on a different basis than monthly or to pay lump sums. In
these cases, premiums paid in excess of the current month's Death Benefit
Guarantee Premium will be counted toward future Death Benefit Guarantee Premium
requirements.
FLEXIBILITY
You choose when and how much premium to pay, within certain restrictions. You
need to pay at least the Death Benefit Guarantee Premium for four years, without
taking any loans or partial withdrawals, to keep your Certificate in effect.
Failure to pay this Premium will likely result in the lapse of your Certificate.
After that time you may be able to pay less and keep your Certificate in effect.
However, if you do pay less, you will lose the Death Benefit Guarantee and you
run a greater risk that your Cash Value will not grow enough to keep your
Certificate in effect.
Planned periodic premiums are those you choose to pay on a regular basis. AAL
will send you billing statements of an amount you select. You can choose
quarterly, semi-annual or annual statements. Pre-authorized automatic monthly
check payments may also be arranged.
You may make payments in addition to planned periodic premiums. You also may
choose a new planned periodic premium. AAL recommends you pay at least the Death
Benefit Guarantee premiums to adequately fund your Certificate.
LIMITS
AAL reserves the right to:
- -Limit any increase in planned periodic premiums.
- -Limit the number and amount of payments in addition to planned periodic
payments.
- -Refuse any premium if the payment would increase the difference between the
Death Benefit and the Cash Value.
The Internal Revenue Code excludes life insurance death benefits from gross
income. To qualify for this exclusion, federal tax law limits the premiums you
may pay. AAL will return the portion of any premium payment that causes this
limit to be exceeded.
In the event of a reduction in the Specified Amount, if either the total premium
payments already made or the Cash Value exceeds the applicable limit stated in
the Internal Revenue Code regarding the definition of life insurance, AAL will
refund any excess premiums or Cash Value necessary to comply with the limit
stated in the Internal Revenue Code.
NET PREMIUM & PREMIUM ALLOCATION
Net premiums equal the premiums you pay less the 3% of premium charge. You
decide how to allocate your net premiums among the available accounts. At
purchase, you select a percentage for each account that will be used to allocate
each net premium.. The percentages must be whole numbers, and add to 100%. You
may change your allocation percentages at any time.
Your initial premium will be allocated to the accounts you choose (or to the
Money Market Account as discussed below) at the time the Certificate is issued.
AAL will issue your Certificate according to AAL's standard administrative
procedures and once all underwriting and other requirements are met. AAL's
standard administrative procedure is to issue new Certificates which meet
underwriting and other requirements on the 29th - 31st of any month on the first
Valuation Date in the following month Certificates are issued only on a
Valuation Date from the 1st through the 28th of any month. Premiums paid after
issue are allocated according to the premium allocation percentages you have
chosen. This allocation occurs at the end of the day if AAL receives your
premium payment before the close of the New York Stock Exchange ("NYSE"), which
is usually 3:00 P.M. Central Time, and that day is a Valuation Date. If your
payment is received on a non-Valuation Date or after the NYSE closes, the
allocation occurs as of the end of the next Valuation Date. See definition of
"Valuation Date" on page --.
In certain states, a refund of premium or the greater of premium or accumulated
values is required if you exercise your free look privilege. See "Free Look" in
the "General Information Section". In these cases, AAL reserves the right to
allocate premiums to the Money Market Subaccount until the expiration of the
"free look period" plus an additional 5 day period. After that time AAL will
allocate your accumulated premiums to the accounts based on your net premium
allocation percentages.
INVESTMENT OPTIONS
You choose where to allocate your net premiums among the Fixed Account and
Subaccounts of the Variable Account.
FIXED ACCOUNT
The Fixed Account is a Cash Value accumulation option that credits an interest
rate. The Fixed Account is part of AAL's general account, which includes all of
AAL's assets other than those in any AAL separate account.
Cash Values allocated to the Fixed Account are combined with all the general
assets of AAL and are invested in those assets chosen by AAL and allowed by
applicable law. Any premiums allocated to the Fixed Account will be subject to
all fees and expenses associated with the Variable Account, except for the Fund
annual expenses and the mortality and expense risk charge.
AAL will quarterly declare an effective annual interest rate for the Fixed
Account.
Interest is credited on each premium allocated or accumulated value transferred
to the Fixed Account from the date of the allocation or transfer. Interest is
credited daily.
Under the Fixed Account option, the guaranteed minimum interest credited to the
Fixed Account will be at the effective rate of 4% per year, compounded daily.
AAL may credit interest at a rate in excess of 4% per year; however, AAL is not
obligated to do so. There is no specific formula for the determination of excess
interest. Such excess interest, if any, will be determined by AAL based on
numerous factors. Some of the factors that AAL may consider in determining
whether to credit interest above 4% to amounts allocated to the Fixed Account,
and the amount thereof, include, but are not limited to, general economic
trends, rates of return currently available and anticipated on AAL's
investments, regulatory and tax requirements and competitive factors.
ANY INTEREST CREDITED TO AMOUNTS ALLOCATED TO THE FIXED ACCOUNT IN EXCESS OF 4%
PER YEAR WILL BE DETERMINED AT THE SOLE DISCRETION OF AAL. THE OWNER ASSUMES THE
RISK THAT INTEREST CREDITED TO FIXED ACCOUNT ALLOCATIONS MAY NOT EXCEED THE
MINIMUM GUARANTEE OF 4% FOR ANY GIVEN YEAR.
Because of exemptive and exclusionary provisions, interests in the Fixed Account
have not been registered under the Securities Act of 1933 ("1933 Act"), and the
Fixed Account has not been registered as an investment company under the
Investment Company Act of 1940 ("1940 Act"). Accordingly, neither the Fixed
Account nor any interests therein are generally subject to the provisions of the
1933 or 1940 Acts. Disclosures regarding the Fixed Account option and the Fixed
Account, however, may be subject to certain generally applicable provisions of
the federal securities laws relating to the accuracy and completeness of
statements in prospectuses.
A lower rate of interest may be credited to the portion of the Fixed Account
securing a loan.
VARIABLE ACCOUNT
The Variable Account is AAL Variable Life Account I. It is a separate account of
AAL established by the Board of Directors of AAL on May 8, 1997 pursuant to the
laws of the State of Wisconsin. The Variable Account is registered with the
Securities and Exchange Commission (the "SEC") as a unit investment trust under
the Investment Company Act of 1940. Such registration, however, does not involve
supervision by the SEC of the management or investment policies or practices of
the Variable Account.
AAL owns the assets of the Variable Account and keeps them legally segregated
from the assets of the general account. The assets of the Variable Account
shall, at the time during the year that adjustments in the reserves are made,
have a value at least equal to the reserves and other contract liabilities with
respect to the Variable Account and, at all other times, shall have a value
approximately equal to or in excess of such reserves and liabilities. The assets
of the Variable Account shall not be chargeable with liabilities arising out of
any other business AAL may conduct, except to the extent that the assets of the
Variable Account exceed the reserves and other contract liabilities of the
Variable Account arising under the Certificates supported by the Variable
Account.
Income, and gains and losses, whether or not realized, from the assets in each
Subaccount are credited to or charged against that Subaccount without regard to
any of AAL's other income, gains or losses. The value of the assets in the
Variable Account is determined at the end of each Valuation Date.
The Variable Account currently consists of five Subaccounts, which are: Money
Market, Bond, Large Company Stock, Small Company Stock, and Balanced. Each
Subaccount invests in a corresponding portfolio of the AAL Variable Product
Series Fund, Inc. (a mutual fund - referred to below as the "Fund"). Additional
Portfolios may be added or substituted for the current Portfolios.
Net premiums allocated to a Subaccount, and the resulting Cash Value, will
accumulate based on the investment experience of that Subaccount's corresponding
Fund portfolio.
Each of these portfolios has a different investment objective. No assurance may
be given that any portfolio will achieve its investment objective.
TheAAL Variable Product Series Fund, Inc. (the
"Fund") is a Maryland corporation registered with the SEC under the 1940 Act as
a diversified, open-end investment company (commonly known as a "Mutual Fund").
This registration does not involve supervision by the SEC of the management or
investment practices or policies of the Fund.
Shares of the Fund are currently offered to the AAL Variable Annuity Account I
and to the Variable Account to fund benefits payable under the Certificates. The
Fund may, at a later date, also offer its shares to other separate accounts of
AAL or to a subsidiary or affiliated company of AAL. Shares of the Fund may also
be offered directly to AAL.
The Fund currently consists of five separate Portfolios, each with its own
investment objectives, investment program, policies and restrictions. The
investment objectives of each Portfolio are described below. No assurance can be
given that each Portfolio of the Fund will achieve its investment objective.
INVESTMENT OBJECTIVES OF THE FUND PORTFOLIOS
The Money Market Portfolio: seeks to provide maximum current income to the
extent consistent with liquidity and a stable net asset value of $1.00 per share
by investing in a diversified portfolio of high quality, short-term money market
instruments.
The Bond Portfolio: seeks to achieve investment results that approximate the
total return of the Lehman Brothers Aggregate Bond Index by investing primarily
in bonds and other debt securities included in the index. This objective is
consistent with a goal of maximizing total return, consistent with reasonable
risk. Investments are in bonds and other debt securities included in the Index.
The Large Company Stock Portfolio: seeks to achieve investment results that
approximate the performance of the Standard & Poor's 500 Composite Stock Price
Index by investing primarily in common stocks included in the index.
The Balanced Portfolio: seeks to achieve investment results that reflect
investment in common stocks, bonds and money market instruments, each of which
will be selected consistent with the investment policies of the AAL Variable
Product Large Company Stock, Bond and Money Market Portfolios, respectively.
The Small Company Stock Portfolio: seeks to achieve investment results that
approximate the performance of the Wilshire Small Cap Index by investing in
common stocks included in the index.
Fund Expenses
AAL acts as investment adviser to the Fund. For this service, AAL deducts a
daily advisory fee of .35% per year of each portfolio's average daily net
assets. Additional portfolio expenses are currently reimbursed by AAL but this
reimbursement may be modified or canceled at any time. More information
concerning these additional expenses is contained in the Fund Prospectus.
TRANSFERS
You may transfer the Cash Value among the Subaccounts and Fixed Account by
submitting a written request to AAL's Home Office. You may also transfer by
telephone if you have completed the Telephone Transaction Authorization Form.
Any transfer among the Subaccounts or to the Fixed Account will result in the
crediting and cancellation of Accumulation Units based on the Accumulation Unit
values determined as of the end of the Valuation Period during which the
transfer request is received, in good order, by AAL. You should carefully
consider current market conditions and each portfolio's investment policies and
related risks before allocating money to the portfolios.
The total amount of any transfer must be at least $500, or it may be less as
long as you transfer the entire cash value from an account. Of the total
transfer being made, the amount transferred to any account must be at least $50.
Twelve transfers per Certificate Year may be made from Subaccounts without
charge. AAL reserves the right to charge $25 for each transfer in excess of
twelve.
Only one transfer may be made from the Fixed Account in each Certificate Year.
The transfer may not exceed the greater of $500 or 25% of the Cash Value in the
Fixed Account at the time of transfer. This transfer is not subject to charge.
REVIEW OF INVESTMENT STRATEGY
You should periodically review the allocation of your Cash Value among the
Subaccounts and Fixed Account. Consider the current market conditions,
investment risks and objectives of the portfolios and your own objectives. A
full description of the portfolio, its investment objectives, policies and
restrictions, its expenses, risks and other aspects of its operation is
contained in the accompanying Prospectus for the Fund. Read the accompanying
Fund Prospectus carefully.
VOTING PRIVILEGES
To the extent required by law, AAL will vote the Portfolio shares held in a
Subaccount at shareholder meetings of the Fund, if any, in accordance with
instructions received from persons having voting interests in the corresponding
Subaccount of the Variable Account. If, however, the 1940 Act or any regulation
thereunder should be amended or if the present interpretation thereof should
change, and as a result AAL determines that it is permitted to vote the Fund
shares in its own right, it may elect to do so.
The Owner will have the voting interest with respect to Fund shares attributable
to the Certificate
The number of votes which an Owner has the right to instruct will be calculated
separately for each Subaccount. The number of votes that each Owner may instruct
will be determined by dividing a Certificate's Accumulated Value in a Subaccount
by the Net Asset Value per share of the corresponding Portfolio in which the
Subaccount invests. Fractional shares will be counted. The number of votes of
the portfolio which the Owner has the right to instruct will be determined as of
the record date established by the portfolio for determining shareholders
eligible to vote at the meeting of the Fund. Voting instructions will be
solicited by written communications prior to such meeting in accordance with
procedures established by the Fund.
Any portfolio shares held in the Variable Account for which AAL does not receive
timely voting instructions, or which are not attributable to Owners will be
represented at the meeting and voted by AAL in proportion to the instructions
received from all Owners. Any portfolio shares held by AAL or its affiliates
will be voted in proportion to the aggregate votes of all shareholders in the
portfolio. Each person having a voting interest in a Subaccount will receive
proxy materials, reports and other materials relating to the appropriate
portfolio.
CASH VALUE
FIXED ACCOUNT CASH VALUE
The Fixed Account Cash Value reflects net premiums allocated to it, transfers to
or from the Subaccounts, credited interest, and any deductions. Each day the
Cash Value in the Fixed Account will change based upon these factors. See the
Certificate for further detail.
VARIABLE ACCOUNT CASH VALUE
Number of Accumulation Units
The number of Accumulation Units for this Certificate in any Subaccount may
increase or decrease at the end of each Valuation Period depending on the
transactions that occur in the Subaccount during the Valuation Period. When
transactions occur, the actual dollar amounts of the transactions are converted
to Accumulation Units. The number of Accumulation Units for a transaction in a
Subaccount is determined by dividing the dollar amount of the transaction by the
Accumulation Unit Value of the Subaccount at the end of the Valuation Period
during which the transaction occurs.
The number of Accumulation Units in a Subaccount increases when the following
transactions occur during the Valuation Period:
Net premiums are allocated to the Subaccount; or
Cash value is transferred to the Subaccount from another Subaccount or from the
Fixed Account.
The number of Accumulation Units in a Subaccount decreases when the following
transactions occur during the Valuation Period:
Cash Value is transferred from the Subaccount to another Subaccount or to the
Fixed Account, including loan transfers;
Partial withdrawals and partial withdrawal charges are taken from the
Subaccount; or
Monthly deductions or transfer charges are taken from the Subaccount.
A charge for a Death Benefit Option change is allocated to the Subaccount.
A charge for a Certificate change is allocated to the Subaccount.
Surrender Charges are allocated to the Subaccount.
Accumulation Unit Value
For each Subaccount, the initial Accumulation Unit Value was set when the
Subaccount was established. The Accumulation Unit Value may increase or decrease
from one Valuation Period to the next.
The Accumulation Unit Value for a Subaccount for any Valuation Period is equal
to:
The net asset value of the corresponding fund portfolio at the end of the
Valuation Period;
Plus the amount of any dividend, capital gain or other distribution made by the
fund portfolio if the "ex-dividend" date occurs during the Valuation Period;
Plus or minus any cumulative credit or charge for taxes reserved which is
determined by AAL to have resulted from the operation of the portfolio;
Divided by the total number of accumulation units held in the Subaccount at the
end of the Valuation Period before any of the transactions, referred to in the
Number of Accumulation Units subsection above, have occurred.
WHAT AFFECTS CASH VALUE
The Cash Value of your Certificate, at any one time, is determined by: (a)
multiplying the total number of Accumulation Units for each Subaccount by its
appropriate current Accumulation Unit Value; (b) if you have elected a
combination of Subaccounts, totaling the resulting values; and (c) adding any
value in the Fixed Account. While loans are not deducted from Cash Value, loans
do reduce the amount you would receive upon surrender of your Certificate and
the amount available to pay insurance charges. Loans also accrue interest
charges and may result in less interest credited to your Certificate.
Over the life of your Certificate, many factors determine its Cash Value. They
include:
- - premiums paid
- - the investment experience of the Subaccounts - interest credited to the Fixed
Account - loans taken and loan repayments - partial withdrawals taken - charges
and deductions taken
Because a Certificate's Cash Value is based on the variables listed above, it
cannot be predetermined. Cash Value in the Variable Account will largely be
determined by market conditions and investment experience of the Fund's
portfolios corresponding to the Subaccounts chosen by the Owner. The Owner will
bear all such risk.
The value of the Fixed Account is guaranteed as to principal and interest at 4%,
subject to the charges described in the "Charges" Section. There is no
guaranteed minimum Cash Value for the Variable Account.
SURRENDER VALUE
The Surrender Value is the total amount you may withdraw from the Certificate .
It is equal to the Cash Value less any Surrender Charges and any outstanding
loan principal and accrued interest.
You will be advised at least annually as to the number of Accumulation Units
which are credited to the Certificate, the current Accumulation Unit Values, the
Variable Account Cash Value, the Fixed Account Cash Value, the Cash Value and
the Surrender Value.
CHARGES
Charges are necessary to pay for the insurance provided, cover the expenses
generated by issuing and administering the Certificate, and to fund AAL's
fraternal activities. In addition to the charges described below, a $25 change
fee will be charged for all Certificate changes.
PERCENT OF PREMIUM CHARGE
A charge of 3% of each premium payment is taken to cover sales and other
expenses and provide support for AAL's fraternal activities.
CASH VALUE CHARGES
On each Monthly Deduction Date charges are deducted from your Cash Value. These
include cost of insurance, administrative and issue charges, mortality and risk
expense charges and charges for additional benefits you may have selected. (No
mortality and risk expense charges are deducted from the Fixed Account.)
The cost of insurance charge and additional benefit charges vary by risk class,
amount at risk, Specified Amount and, in most states, sex. The cost of insurance
rates, used to calculate these charges, are determined by AAL based on
expectations as to future mortality and expense experience. Any change in these
rates will be applied on a uniform basis to all insureds of the same risk class.
However, AAL cannot use cost of insurance rates higher than the annual
guaranteed cost of insurance rates shown in the Certificate. The guaranteed
rates are no greater than certain of the 1980 Commissioners Ordinary Mortality
Tables (and, where unisex cost of insurance rates apply, the 1980 Commissioners
Ordinary Mortality Table B). These rates are based on the age and risk class of
the Insured. They are also based on the sex of the Insured, except that unisex
rates are used where appropriate under applicable laws. AAL charges rates that
are currently lower than the guaranteed rates, and may also charge current rates
in the future.
A monthly administrative charge of $4 is deducted to cover administrative costs.
This charge is for expenses such as premium billing and collection, Certificate
value calculation, transaction confirmations and periodic reports.
The monthly issue expense charge covers issue costs. It is deducted for the
first 36 months. This charge will vary by age, risk class, Specified Amount and,
in most states, sex.
Monthly mortality and expense risk charges are deducted from the Variable
Account to pay for the mortality and expense risks borne by AAL. The mortality
risk assumed is that insureds, as a group, may live for a shorter period of time
than estimated and, therefore, the cost of insurance charges specified in the
Certificate will be insufficient to meet actual claims. The expense risk assumed
is that other expenses incurred in issuing and administering the Certificates
and operating the Separate Account will be greater than the charges assessed for
such expenses. AAL will realize a gain from this charge to the extent it is not
needed to provide mortality benefits and expenses under the Certificates, and
will realize a loss to the extent the charge is not sufficient. The Monthly
Mortality and Expense Risk Charge is guaranteed never to exceed .075%
(approximately .9% annually). The charge is applied to the total cash value in
the Subaccounts on each Monthly Deduction Date. In addition, the Monthly
Mortality and Expense Risk Charge on Certificates from their 15th Certificate
Anniversary, and beyond, is guaranteed at any time to be at least .04166%
percent (approximately .5% annually) less than the rate in effect at that time
for Certificates which have not reached their 15th Certificate Anniversary. The
current charges in effect are as follows: During the first 15 years the monthly
charge is .0625% (approximately .75% annually) of the total Subaccount Cash
Value. This charge drops to .02083% (approximately .25% annually) of the total
Subaccount Cash Value in Certificate Year 16.
The Monthly Deduction is deducted from each account on a basis proportional to
the Cash Value in that account. For Subaccounts, this is accomplished by selling
Accumulation Units and withdrawing their value from that account. For the Fixed
Account the Cash Value is reduced by the Fixed Account's proportion of the
Monthly Deduction.
The Monthly Deduction is made as of the same day each month, beginning with the
Issue Date, if that day of the month is a Valuation Date. If that day of the
month does not fall on a Valuation Date, the deduction date is the nearest
previous Valuation Date.
SURRENDER CHARGE
If you choose to surrender your Certificate or reduce your Specified Amount, AAL
will reduce the Cash Value by the surrender charge assessed proportionately
against the amounts you have invested in each of your selected Subaccounts and
the Fixed Account. This charge is imposed as a deferred sales and administrative
charge. It covers expenses associated with underwriting, issuing and
distributing the Certificate.
The initial surrender charge is based on an amount per thousand of Specified
Amount for which the Certificate is issued. The amount per thousand varies by
sex, risk class, and Issue Age. Your actual surrender charges are listed on page
3A1 of your Certificate. The initial surrender charge is level for the first 3
years and, thereafter, it declines by 1/8th of the initial amount annually so
that, beginning in the 11th year after the Issue Date (assuming no increases in
Specified Amount) the surrender charge will be zero.
If you increase your Certificate's Specified Amount, a new surrender charge is
applicable, in addition to the existing surrender charge. It is based on an
amount per thousand of the Specified Amount increase. The amount per thousand
varies by sex, risk class, and age at time of increase. The actual surrender
charges for the increased Specified Amount will be listed on a new page 3A1 of
your Certificate, which will be mailed to you at the time of the increase. The
new surrender charge is level for the first 3 years after the increase and,
thereafter, it declines by 1/8th of the initial amount annually so that,
beginning in the 11th year after the increase date (assuming no additional
increases in Specified Amount) the surrender charge will be zero.
If you decrease the Specified Amount while the surrender charge applies, a
portion of the surrender charge will be assessed. The decrease will be
subtracted first from any previous increase in the Specified Amount, starting
with the most recent, then from the original Specified Amount. The portion of
the charge assessed will be proportional to the amount of the decrease, based on
the surrender charges for the Specified Amount from which the decrease is
subtracted.
ACCESS TO CASH VALUE
PARTIAL WITHDRAWALS
You may take one partial withdrawal of your Cash Value per year at no charge.
$25 is charged for each additional withdrawal during a Certificate Year. The
amount of a partial withdrawal may not exceed the Surrender Value on the date of
the request. It is implemented by either the redemption of Accumulation Units
and/or reduction in the Fixed Account balance. The partial withdrawal will be
taken from the Subaccounts and Fixed Account according to the ratio that the
cash value in the Subaccount or Fixed Account of the Certificate bears to the
total Cash Value of the Certificate at the time of the partial withdrawal; or
according to any other administrative option which you choose and is available
at the time of the partial withdrawal.
For a Certificate with the Level Death Benefit Option:
A partial withdrawal will reduce your Cash Value, Specified Amount, Death
Benefit, and the amount of premiums considered paid to meet the Death Benefit
Guarantee premium requirement. If the Death Benefit is equal to the Specified
Amount at the time of the partial withdrawal, the amount of the reduction in the
Death Benefit will be equal to the amount of the partial withdrawal. If the
Death Benefit is greater than the Specified Amount, (a) the Specified Amount
will be reduced by the amount (if any) by which the withdrawal amount exceeds
the difference between the Death Benefit and the Specified Amount, (b) the new
Death Benefit will be based on the Death Benefit factor, Cash Value, and
Specified Amount after the reduction.
The Specified Amount remaining in effect after a partial withdrawal may not be
less than $10,000. Any request for a partial withdrawal that would reduce the
Specified Amount below this amount will not be granted.
For a Certificate with the Variable Death Benefit Option:
A partial withdrawal will reduce the Cash Value and Death Benefit by the amount
of the withdrawal, but will not reduce the Specified Amount.
LOANS
You make borrow up to 92% of your Cash Value using your Certificate as security
for a loan. Interest will accrue on an annual basis at 8% on the loan balance
until you reach your 15th Certificate anniversary. Thereafter the rate will drop
to 7 1/4% per annum. The loan will be taken from the Subaccounts and Fixed
Account according to the ratio that the Cash Value in the Subaccount or Fixed
Account of the Certificate bears to the total Cash Value of the Certificate at
the time of the loan; or according to any other administrative option which you
choose and is available at the time of the loan.
A lower interest rate may be credited to the portion of the Fixed Account Cash
Value that equals the amount of the total outstanding loan. AAL will determine
the rate credited. In no case will the rate credited be less than 4% annually.
The amount of loan allocated to each Subaccount will be transferred from that
account to the Fixed Account as security for the loan. Each month, if the total
loan (principal plus accrued interest) exceeds the total Fixed Account Cash
Value, the difference will be transferred from the Variable Account to the Fixed
Account as security for the loan.
You may repay all or part of your loan at any time while your Certificate is in
force. Unless you indicate otherwise to AAL, all payments will be assumed to be
premium payments. Upon your request, AAL will set up a loan repayment schedule
for you.
If you surrender your Certificate, you will receive the Cash Value less any
surrender charge and outstanding loan balance. Partial withdrawals also reduce
your premiums credited toward the Death Benefit Guarantee requirements. Loans
are added to the required premiums when testing whether Death Benefit Guarantee
requirements have been met.
Both partial withdrawals and loans will reduce the Cash Value available to pay
your insurance costs. You should carefully consider the impact on the insurance
your Certificate will be able to provide, now and in the future, before
exercising these privileges.
SURRENDER
You may surrender this Certificate for its Surrender Value by sending a written
request to AAL.
CERTIFICATE TERMINATION
EARLY TERMINATION AND REINSTATEMENT
Termination
Your Certificate will terminate if your Monthly Deduction is greater than your
Surrender Value, your Death Benefit Guarantee is not in effect, and payment
sufficient to cover the next two monthly deductions is not received within 61
days of notification of the Cash Value deficiency (in most states). If this Cash
Value deficiency occurs, you have the right to reinstate your Certificate,
within certain limitations. The requirements for reinstatement and associated
limitations are described in your Certificate.
Reinstatement
You may reinstate the Certificate any time within three years after it has
terminated so long as you did not surrender it for its surrender value. To
reinstate your Certificate you must submit evidence of insurability satisfactory
to AAL and pay a premium at least equal to:
The reinstated loan amount; plus
Any Surrender Charge at the time of reinstatement; plus The first two Monthly
Deduction amounts after reinstatement; less The Cash Value at termination; less
Any Surrender Charge credited back at reinstatement; plus The new Surrender
Charge taken for any reduction in the Specified Amount you request at
reinstatement plus 3% on the sum of the above to cover the percent of premium
charge.
The premium paid upon reinstatement will be used first to pay any unpaid monthly
deductions that occurred during the grace period. Your Certificate will then be
reinstated as of the date AAL approves your application for reinstatement.
If you reinstate this Certificate, AAL will not contest the validity of the
reinstated Certificate after it has been in effect during the lifetime of the
insured for two years from the date of reinstatement. After this Certificate has
been in force two years from the issue date, any contest of the validity of the
reinstated Certificate will be limited to statements made in the application for
reinstatement.
DEATH, MATURITY, AND SURRENDER
Your Certificate will terminate if the Insured dies, or if the Owner surrenders
the Certificate. If the Certificate is in effect at age 100, it will mature
(end) and the Cash Value less any outstanding loan will be paid to the Owner.
PAYOUT OPTIONS
SELECTION
All or part of the life insurance proceeds from death, maturity or surrender may
be applied to one of several Payout Options in place of a lump sum payment. You
may choose or change a payout option while the Insured is alive. The beneficiary
may choose an option at the Insured's death, unless you have chosen an option
which does not allow the beneficiary to change it.
OPTION 1 : INTEREST
The proceeds are left with AAL to earn interest. The rate of interest is
determined annually by the AAL Board of Directors. It will never be less than 3%
annually.
OPTION 2: A SELECTED AMOUNT OF INCOME
The proceeds with interest are used to make payments of a selected amount at
regular intervals until the proceeds with interest have been paid. The payment
period may not exceed 30 years. The rate of interest used will not be less than
3% annually.
OPTION 3 : A SET PERIOD
The proceeds with interest are used to make payments at regular intervals. You
may choose a specified number of years, not to exceed 30. Guaranteed payments
are shown in the Certificate. The rate of interest used will not be less than 3%
annually. The amount of payment may be greater than that guaranteed, as declared
annually by AAL's Board of Directors.
OPTION 4 : LIFE PAYMENT
The proceeds are left with AAL to earn interest. These funds are used to make
payments at regular intervals while the person named to receive payments is
alive. AAL will guarantee the amount of these payments for a specified number of
years. A period of 10, or 20 years may be selected.
The amount of the payments depends on the age and sex of the persons named to
receive payments at the time AAL issues the payment contract. Representative
guaranteed payments are shown in the Certificate. They are based on a guaranteed
effective annual interest rate of 3.5% using the "1983 Table a " annuitant
mortality table.
OPTION 5 : JOINT & SURVIVOR
The proceeds with interest are used to make payments at regular intervals while
both persons named to receive payments are alive. AAL will guarantee the amount
of these payments for a specified number of years. A period of 10, or 20 years
may be selected.
Upon the death of one of the persons named to receive payments, AAL will
continue making payments to the survivor with the payments reduced by 1/3 after
the end of the guaranteed period. If the survivor also dies during the
guaranteed period, the unpaid proceeds will be paid in one sum at the survivor's
death.
The amount of the payments depends on the age and sex of the persons named to
receive payments at the time AAL issues the payment contract. Representative
guaranteed payments are shown in the Certificate. They are based on a guaranteed
effective annual interest rate of 3.5% using the "1983 Table a" annuitant
mortality table.
HOW TO MAKE PAYMENTS AND RECEIVE SERVICE
APPLYING FOR A CERTIFICATE
AAL Variable Universal Life Certificates are sold by district representatives of
AAL who are also registered representatives of AALCMC. To apply for a AAL
Variable Universal Life Certificate please contact your AAL representative. You
can locate your representative by calling 1-800-???-??? or visiting our Webpage
www.aal.org.
TIMELY PROCESSING
AAL will process all requests in a timely fashion. Requests received by 3:00
p.m. Central Time on a Valuation Date will use the Certificate's Cash Value as
of the close of that Valuation Date. AAL will process requests received after
that time using the Certificate's Cash Value as of the close of business of the
following Valuation Date.
After your Certificate is issued, AAL will process payment of any amount due
from the Variable Account within seven calendar days after AAL receives your
written request. Payment may be postponed when the New York Stock Exchange has
been closed and for such other periods as the SEC may permit . Payment from the
Fixed Account Cash Value may be deferred
up to 6 months.
WRITTEN REQUESTS
You may exercise any of the following privileges: -Premium Payment -Change in
Death Benefit Option -Increase/Decrease in Specified Amount -Partial Withdrawal
- -Surrender -Reinstatement -Transfers -Dropping an Additional Benefit -Loan
- -Filing a Death Claim -Selecting/Changing a Settlement Option -Change in
Allocation Instructions -Loan repayment -Beneficiary Change(s) by sending
written notice (and payment and/or evidence of insurability, if applicable) to
AAL at its Home Office:
AID ASSOCIATION FOR LUTHERANS
4321 North Ballard Road
Appleton, Wisconsin 54919-0001
TELEPHONE TRANSACTIONS
If AAL has received a properly completed Telephone Transaction Authorization
Form, you may perform various transactions over the phone. Phone services
include: partial withdrawals, transfers, premium payment allocation changes,
loans, and certain other transactions.
AAL has adopted reasonable security procedures to ensure the authenticity of
telephone instructions, including: requiring identifying information, recording
conversations, and providing written confirmations of transactions.
Nevertheless, AAL will honor telephone instructions from any person who provides
the correct identifying information, so there is a risk of possible loss to the
Owner if an unauthorized person uses this service in the Owner's name.
If several persons seek to effect telephone instructions at or about the same
time, or if AAL's recording equipment malfunctions, it may be impossible for you
to make a telephone transaction at that time. If this occurs, you should submit
a Written Request. Also, if due to malfunction or other circumstances, the
recording of the Owner's telephone request is incomplete or not fully
comprehensible, AAL will not process the transaction.
The Phone number for telephone transactions is 1-800-???-???
AAL reserves the right to restrict telephone transactions at any time.
DEATH CLAIMS
Written notice of death must be given to AAL. Notice should include the
Insured's name and Certificate number. Help may be obtained through an AAL
Capital Management Corporation Registered Representative.
A claim form will be sent, when AAL receives your notice. Complete the claim
form and send it to the Home Office along with a certified copy of the death
Certificate. Processing of the claim will begin as soon as these items are
received.
GENERAL INFORMATION
FREE LOOK
How to Cancel Your Certificate
Your Certificate provides for an initial "free look" period. That is, you as the
Certificate Owner, have the right to return your Certificate within 10 days
after you receive it. To return your Certificate you may either:
1. Deliver or mail your Certificate along with a written request to cancel to
your AAL Representative, or
2. Deliver or mail your Certificate along with a written request to cancel to
the Home Office:
AAL (Aid Association for Lutherans)
4321 Ballard Road
Appleton, WI 54919-0001
Generally within 7 days after AAL receives your request for cancellation, it
will cancel the Certificate and send you a refund. Some states may require a
"free look" period longer than 10 days.
The Amount Refunded After Canceling a Certificate During the "Free Look" Period
AAL will refund to you an amount equal to the Certificate's Accumulation Unit
Value as of the date the returned Certificate or notification of cancellation is
received by AAL. This may be more or less than the premium you paid depending
upon the investment experience of the Subaccount(s) you selected.
If your state requires a full refund of all premiums, your premium will be
allocated to the Money Market Subaccount until your "free look" plus five day
period has expired.
ENTIRE CONTRACT
The entire contract between you and AAL is made up of:
The Certificate including any attached riders, endorsements or amendments;
The application attached to the Certificate, including any applications for
increase in the Specified Amount; and
The AAL Articles of Incorporation and Bylaws which are in effect on the issue
date of the Certificate.
STATEMENTS IN THE APPLICATION
Statements made in the application will be treated as representations and not
warranties. No statement will be used by AAL to void the contract or to deny a
claim unless it appears in the application.
CHANGE OF CERTIFICATE
No representative of AAL except the president or the secretary may change any
part of the Certificate on behalf of AAL.
INCONTESTABILITY
AAL will not contest the validity of the Certificate after it has been in effect
during the lifetime of the insured for two years from the issue date. AAL will
not contest the validity of an increase in the Specified Amount after it has
been in effect during the lifetime of the insured for two years from the date of
increase. Any contest of the validity of the increase will be limited to
statements made in the application for the increase. See the Certificate for
more details.
MISSTATEMENT OF AGE OR SEX
The values of the Certificate are based on the insured's age and sex. If the
date of birth or sex shown on the application is wrong, the proceeds payable
will be adjusted to the amount that would be provided by the most recent cost of
insurance charge at the correct attained age or sex.
MAINTENANCE OF SOLVENCY
This provision applies only to values in the Fixed Account.
If AAL's reserves for any class of Certificates become impaired, you may be
required to make an extra payment. AAL's Board of Directors will determine the
amount of any extra payment based on each member's fair share of the deficiency.
If the payment is not made, it will be charged as a loan against the Certificate
with interest at a rate of 5 percent per year. You may choose an equivalent
reduction in benefits instead of or in combination with the loan. Any
indebtedness and interest charged against the Certificate, or any agreement for
a reduction in benefits, shall have priority over the interest of any owner,
beneficiary, or collateral assignee under the Certificate.
BASIS OF COMPUTATIONS
Minimum guaranteed Cash Values for the Fixed Account are based on the
Commissioner's 1980 Standard Ordinary Mortality Table, age last birthday, with
interest at the rate of 4 percent. These values equal or exceed the minimum
values required by law. A detailed statement of how AAL calculates cash values
for the Certificate has been filed with the insurance department of the state or
district where this Certificate was delivered.
REPORTS TO OWNERS
At least once each Certificate year, AAL will send you a report concerning the
current status of your Certificate. There is no charge for this report.
Upon your request, AAL will send you an illustration of hypothetical values for
the Certificate. AAL may charge a reasonable fee for each illustration
requested.
We will also send period reports with financial information on the Portfolios,
including information on the investments held in each Portfolio as required by
the Securities and Exchange Commission .
Confirmation notices will be sent during the year for certain Certificate
transactions.
MEMBERSHIP
For Insureds age Issue Age 15 and under, the Insured will become a benefit
member of AAL. For Insureds Issue Age 16 and over, the person who applied for
membership is a benefit member of AAL. The rights and benefits of membership are
set forth in the Articles of Incorporation and Bylaws of AAL. Membership cannot
be transferred.
OWNERSHIP
For Insureds age Issue Age 15 and under, the Insured is the owner of the
Certificate, unless ownership has been transferred. For Insureds Issue Age 16
and over, the person who is named as the Owner on the application for insurance
is the Owner, unless ownership has been transferred.
If you are not the insured, you should name a successor Owner who will become
the Owner if you die before the insured. If you die before the insured and there
is no successor Owner named, ownership of the Certificate will pass to your
estate.
During the Insured's lifetime, you may transfer ownership of the Certificate by
sending a signed written request to the AAL. The transfer must be approved by
AAL before it is valid.
BENEFICIARY
The beneficiary is the person, entity or organization named to receive the death
benefit after the Insured dies. The Bylaws of AAL list those eligible to be
beneficiaries. Beneficiaries are designated as first, second and third class.
You may name more than one person or organization in the same class.
If no beneficiary has been named or survives the insured, AAL will pay the
proceeds as follows:
To your estate if you are the Insured; or
To you if you are not the Insured.
During the Insured's lifetime, you may change the beneficiary by sending a
signed written request to AAL. The change must be approved by AAL before it is
valid.
COLLATERAL ASSIGNMENT
You may assign the Certificate as collateral security for a loan or other
obligation. This may limit your rights to the Cash Value and the beneficiary's
rights to the proceeds.
The assignments must be in writing and filed at our home office. AAL assumes no
responsibility as to the validity of any assignment. AAL is not liable for any
payment made or any other action taken on the Certificate before the assignment
was recorded at our home office.
Any Certificate loan obtained before an assignment is recorded at our home
office has priority over the assignment.
RIGHTS RESERVED BY AAL
Subject to applicable law, AAL reserves the right to make certain changes if, in
its judgment, they would best serve the interests of the Owners or would be
appropriate in carrying out the purposes of the Certificate. AAL will obtain,
when required, the necessary Owner approval or regulatory approval. Examples of
the changes AAL may make include, but are not limited to:
To operate the Variable Account in any form permitted under the 1940
Act or in any other form permitted by law.
To add, delete, combine, or modify Subaccounts in the Variable Account.
To add, delete, or substitute, for the portfolio shares held in any
Subaccount, the shares of another portfolio of the Fund or the shares of another
investment company or series thereof, or any other investment permitted by law.
To make any amendments to the Certificates necessary for the
Certificates to comply with the provisions of the Internal Revenue Code or any
other applicable federal or state law.
<TABLE>
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<S> <C> <C>
DIRECTORS AND OFFICERS
Business Experience During the Position with Aid Association for
Last Five (5) Years Lutherans
-------------------------------- -----------------------------------
Herbert J. Arkebauer Professor, Southwest Missouri Director (6/72)
State University
Raymond G. Avischious President/CEO, Shurfine Central Director (5/77)
Corp.
Richard E. Beumer President/CEO, Sverdrup Director (2/87)
Corporation
Kenneth Daly Partner, KPMG Peat Marwick LLP Director (2/94)
Elizabeth A. Duda None Director (5/79)
Edward A. Engel President, E. A. Engel & Director (11/78)
Associates
Gary J. Greenfield President, Wisconsin Lutheran Director (1/93)
College
James W. Hanson None Director (8/86)
Robert H. Hoffman Executive, Taylor Corp. Director (2/87)
Robert E. Long Senior Vice President, Park Bank Director (2/82)
Robert B. Peregrine Attorney, Peregrine Law offices, Director (2/78)
S.C.
Kathi P. Seifert Group President, Kimberly Clark Director (12/94)
Corp.
Roger B. Wheeler President, Wheel-Air, Inc., Director (8/91)
Wheel-Air Charter, Inc.
E. Marlene Wilson President, Volunteer Management Director (6/81)
Associates
Rev. Thomas Zehnder President, Florida-Geporgia Director (1/97)
District, Lutheran Church
Missouri Synod
Richard L. Gunderson Chairman of the Board, since Director, Chairman of the Board
1/97, CEO, 12/95 to 12/96,
President 9/85 to 11/95,
Aid Association for Lutherans
John O. Gilbert CEO since 1/97, President/COO Director, President/CEO
since 12/95, Executive Vice
President, 1/95 to 12/95, Senior
Vice President, 1/92 to 1/95, Aid
Association for Lutherans
Roger J. Johnson Executive Vice President since Executive Vice President
3/97, Senior Vice President,
11/95 to 3/97, prior to that,
Vice President , Aid Association for
Lutherans
Ronald G. Anderson Senior Vice President, Chief Senior Vice President, Chief
Investment Officer Aid Investment Officer
Association for Lutherans since
4/96, president, AAL Capital
Management Corporation since
1/97, Vice President, general Re
Corp. 3/95 to 3/96, Chairman
General Re Financial products
Corp. 1/91 to 3/95
Woodrow E. Eno Senior Vice President, Secretary, Senior Vice President, Secretary,
General Counsel, Aid Association General Counsel
for Lutherans since 4/96, Vice
president, AEGON, 5/93 to 1/96,
Vice President/General Counsel
Health Insurance Association of
America, 7/80 to 5/93
Steven A. Weber Senior Vice President, since Senior Vice President
11/95, Vice President 2/89 to
11/95, Aid Association for
Lutherans
Jerome Laubenstein Senior Vice President since Senior Vice President
11/95, prior to that Vice
President, Aid Association for
Lutherans
Fred Ohlde Senior Vice President since Senior Vice President
11/95, prior to that Vice
President, Aid Association for
Lutherans
</TABLE>
FEDERAL TAX MATTERS
VARIABLE ACCOUNT TAX STATUS
Both investment income and realized capital gains of the Variable Account (i.e.,
income and capital gains distributed to the Variable Account by the Fund) are
reinvested without tax since the Internal Revenue Code (the "Code") presently
imposes no applicable tax. However, AAL reserves the right to make a deduction
for taxes, should they be imposed with respect to such items in the future.
LIFE INSURANCE QUALIFICATION
Section 7702 of the Code includes a definition of life insurance for tax
purposes. The Secretary of the Treasury has been granted authority to prescribe
regulations to carry out the purposes of the section, and proposed regulations
governing mortality charges were issued in 1991. AAL believes that the
Certificate meets the statutory definition of life insurance. As such, and
assuming the diversification standards of Section 817(h), discussed below, are
satisfied, (a) death benefits paid under the Certificate should generally be
excluded from the gross income of the beneficiary for federal income tax
purposes under Section 101(a)(1) of the Code and (b) You should not generally be
taxed on the Cash Value under a Certificate, including increments thereof, prior
to actual receipt.
AAL intends to comply with any future final regulations issued under Sections
7702 and 817(h) and any amendments to these sections, and reserves the right to
make such changes as deemed necessary to assure such compliance. Any changes
will apply uniformly to affected Certificate holders and will be made only after
advance written notice.
PRE-DEATH DISTRIBUTIONS
The taxation of pre-death distributions depends on whether the Certificate is
considered a modified endowment contract (a "MEC"). A Certificate's
qualification as a MEC is discussed below.
General Rules: Assuming a Certificate is not a MEC, upon surrender you will be
taxed on the excess of Surrender Value plus unpaid Certificate loans and
interest less gross premiums paid reduced by untaxed withdrawals.
Partial withdrawals are only taxable to the extent the withdrawal exceeds total
premiums paid less prior untaxed partial withdrawals. However, partial
withdrawals made within the first 15 years may be taxable in certain limited
instances where the Surrender Value plus unpaid loans exceeds the total premiums
paid less the untaxed portion of prior partial withdrawals.
Loans received under the Certificate, assuming the Certificate is not a MEC,
will not be treated as subject to tax when taken. Generally, amounts of loan
interest paid by individuals will be considered nondeductible "personal
interest".
Modified Endowment Contracts:
A class of contracts known as "MECs" has been created under Code Section 7702A.
Pre-death distribution rules for Certificates considered to be MECs will differ
from the general rules above. A contract will be a MEC if it fails the "7-Pay
Premium test". A Certificate fails this test if the amount paid into the
Certificate in the first seven years or in the first seven years after a
material change, exceeds the amount that would have been paid had the
Certificate provided for the payment of seven level annual premiums. AAL will
notify the you if the Certificate becomes a MEC.
A MEC Certificate may be aggregated with other MECs purchased by you from AAL
during any one calendar year for purposes of determining the taxable portion of
withdrawals from the Certificate. The Certificate is subject to a 7-Pay test
during the first seven Certificate years and any time a material change to the
contract takes effect. A material change, for these purposes, includes the
exchange of a life insurance Certificate for another, and conversion of a term
life Certificate to a whole life or universal life Certificate. In addition, an
increase in the future benefits provided constitutes a material change unless
the increase is attributable to (1) the payment of premiums necessary to fund
the lowest death benefit payable in the first 7 Certificate Years, or (2) the
crediting of interest or other earnings with respect to such premiums. A
reduction in death benefits during the first 7 Certificate Years, or during any
& pay test period, may also cause a Certificate to be considered a MEC.
All distributions, including Certificate loans and collateral assignments, from
a MEC Certificate will be currently taxable to the extent that the cash value of
the Certificate immediately before payment exceeds gross premiums paid
(increased by the amount of loans previously taxed and reduced by untaxed amount
previously received). These rules may also apply to distributions made during
the two year period prior to the time that a Certificate becomes a MEC. A
penalty tax equal to 10% of the amount includible in income will also apply to
certain surrenders or loans taken by you if you have not reached the age of
59&1/2, unless you are disabled, or the surrenders are part of a series of equal
periodic payments made not less frequently than annually for your life or life
expectancy. The penalty tax will also apply to income received on a surrender or
loan if the Owner of a MEC is a corporation.
DIVERSIFICATION REQUIREMENTS
For the Certificate to be treated as a life insurance contract for federal
income tax purposes, the Variable Account and the Fund must satisfy investment
diversification requirements set forth in Section 817(h) of the Code and
Treasury Department regulations thereunder. These requirements must be satisfied
at the end of each calendar quarter, or within 30 days thereafter.
The AAL Variable Product Series Fund, Inc. has met the diversification
requirements at all relevant items. AAL intends to take any action necessary to
maintain the compliance of the Variable Account and the Fund with the
diversification requirements. In addition, the Treasury Department may provide
future guidance concerning the extent to which you may direct investments in
variable funding options under the Certificate. If such guidance is issued, the
Certificate may need to be modified to comply with it.
OTHER CONSIDERATIONS
Because of the complexity of the law and its application to a specific
individual, tax advice may be needed by a person contemplating purchase of a
Certificate or the exercise of options under a Certificate. The above comments
concerning federal income tax consequences are not exhaustive, and special rules
exist with respect to situations not discussed in the Prospectus.
The preceding description is based upon AAL's understanding of current federal
income tax law. AAL cannot assess the probability that changes in tax laws,
particularly affecting life insurance, will be made.
The preceding comments do not take into account estate and gift, state income or
other state tax considerations which may be involved in the purchase of a
Certificate or the exercise of elections under the Certificate. For complete
information on such federal and state tax considerations, a qualified tax
adviser should be consulted.
LITIGATION
There are no pending proceedings commenced by, or known to be contemplated by a
governmental authority, and no pending legal proceedings, material with respect
to prospective purchasers of the Certificates, to which the Variable Account,
AAL or the principal underwriter is a party to or to which the assets of the
Variable Account are subject. As a fraternal benefit society offering
certificates of insurance, AAL is ordinarily involved in litigation. AAL does
not believe that any current litigation or administrative proceeding is material
to the its ability to meet its obligations under the Certificate or to the
Variable Account, nor does AAL expect to incur significant losses from such
actions.
DISTRIBUTION
AAL Capital Management Corporation, 222 West College Avenue, Appleton Wisconsin,
54919-0007 ("AALCMC") is an indirect subsidiary of AAL and a registered
broker-dealer. AALCMC is a corporation organized under Delaware law in 1986 and
it serves as the principal underwriter of the Certificates. Certificates are
distributed by registered representatives of AALCMC. AALCMC also serves as the
principal underwriter of the AAL Variable Annuity and the AAL Mutual Funds.
AALCMC's fiscal year operates on a calendar year basis.
ILLUSTRATIONS
The following tables illustrate how the death benefits, Cash Values, and
Surrender Values of a hypothetical Certificate could vary over an extended
period of time, assuming hypothetical rates of return equivalent constant gross
annual rates of 0%, 6%, and 12%.
The Certificates illustrated include the following:
1. Male, Nonsmoker, Age 40, Variable Death Benefit, Specified Amount $250,000,
Current Rates
2. Male, Nonsmoker, Age 40, Variable Death Benefit, Specified Amount $250,000,
Guaranteed Rates
3. Male, Nonsmoker, Age 40, Level Death Benefit, Specified Amount $250,000,
Current Rates
4. Male, Nonsmoker, Age 40, Level Death Benefit, Specified Amount $250,000,
Guaranteed Rates
The values would be different from those shown if the gross annual investment
rates of return averaged 0%, 6%, or 12% over a period of years, but also
fluctuated above or below those averages for individual Certificate years. The
illustrations assume no Certificate loans or withdrawals have been taken. The
amounts would differ if unisex rates were used.
The second column of each table, labeled "Premiums Accumulated at 5%", shows the
amount which would accumulate if an amount equal to the annual premium, (after
taxes) were invested to earn interest at 5% compounded annually. All premium
payments are illustrated as if they were made at the beginning of the year.
The amounts shown for death benefits, Cash Values, and Surrender Values reflect
the fact that the net investment return on the Certificate is lower than the
gross investment return on the Variable Account. This results from the charges
levied against the Variable Account (e.g. the mortality and expense risk charge)
as well as the premium load, administrative charges and Surrender Charges. The
difference between the Cash Value and the Surrender Value is the Surrender
Charge.
The tables illustrate the cost of insurance and other charges at both current
rates and the maximum rates guaranteed in the Certificate. The amounts shown at
the end of each Certificate year reflect a daily investment advisory fee
equivalent to an annual rate of .35% of the aggregate average daily net assets
of the Subaccounts. Actual fees may vary by Subaccount and may be subject to
agreements by the sponsor to waive or otherwise reimburse each Fund for
operating expenses which exceed certain limits. There can be no assurance that
the expense reimbursement arrangements will continue in the future, and any
unreimbursed expenses would be reflected in the values included on the tables.
The effect of these investment management expenses on a 0% gross rate of return
would result in a net rate of return of (x.xx)%, on 6% it would be x.xx%, and on
12% it would be xxx.
The tables assume the deduction of charges including administrative and sales
charges. The tables reflect the fact that we do not currently make any charge
against the Variable Account for state or Federal taxes. If such a charge is
made in the future, it will take a higher gross rate of return than the rates
shown to produce the death benefits, Cash Values, and Surrender Values shown.
AAL will furnish, upon request, a comparable illustration based on the proposed
Insured's Issue Age, Risk Class, Sex, Specified Amount, Death Benefit Option and
premium amount requested.
<TABLE>
FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE
Illustration of Death Benefits, Cash Values and
Surrender Values
Based on Current Charges
Issue Age - 40 Level Death Benefit Option
Risk Class - Standard Nonsmoker Specified Amount - $250,000
Sex - Male Annual Premium - $2,375
End of Annual Premium End of Year DEATH BENEFIT Assuming
Certificate Premiums Accumulated Hypothetical Gross Annual Investment Return of
Year Paid at 5% 0% 6% 12%
- -------------------------------------------------------------------------------------------------
<CAPTION>
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$2,375 $ 2,494 $250,000 $250,000 $250,000
2 $2,375 $ 5,112 $250,000 $250,000 $250,000
3 $2,375 $ 7,862 $250,000 $250,000 $250,000
4 $2,375 $10,748 $250,000 $250,000 $250,000
5 $2,375 $13,780 $250,000 $250,000 $250,000
6 $2,375 $16,962 $250,000 $250,000 $250,000
7 $2,375 $20,304 $250,000 $250,000 $250,000
8 $2,375 $23,813 $250,000 $250,000 $250,000
9 $2,375 $27,497 $250,000 $250,000 $250,000
10 $2,375 $31,366 $250,000 $250,000 $250,000
15 $2,375 $53,812 $250,000 $250,000 $250,000
20 $2,375 $82,458 $250,000 $250,000 $250,000
25 $2,375 $119,019 $250,000 $250,000 $250,000
30 $2,375 $165,682 $250,000 $250,000 $396,571
</TABLE>
<TABLE>
End of Annual End of Year End of Year
CASH VALUE Assuming SURRENDER VALUE Assuming
Certificate Premiums Hypothetical Gross Hypothetical Gross
Annual Investment Return of Annual Investment Return of
Year Paid 0% 6% 12% 0% 6% 12%
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 $2,375 $1,456 $1,566 $1,678 $0 $0 $0
2 $2,375 $2,855 $3,167 $3,494 $5 $317 $644
3 $2,375 $4,195 $4,803 $5,463 $1,345 $1,953 $2,613
4 $2,375 $5,689 $6,692 $7,826 $3,196 $4,198 $5,333
5 $2,375 $7,143 $8,649 $10,423 $5,005 $6,512 $8,285
6 $2,375 $8,582 $10,704 $13,305 $6,800 $8,923 $11,524
7 $2,375 $10,003 $12,860 $16,503 $8,578 $11,435 $15,078
8 $2,375 $11,346 $15,060 $19,988 $10,277 $13,991 $18,919
9 $2,375 $12,653 $17,347 $23,836 $11,940 $16,634 $23,123
10 $2,375 $13,921 $19,724 $28,085 $13,565 $19,368 $27,729
15 $2,375 $19,411 $32,875 $56,904 $19,411 $32,875 $56,904
20 $2,375 $23,531 $49,225 $106,895 $23,531 $49,225 $106,895
25 $2,375 $24,126 $67,719 $193,014 $24,126 $67,719 $193,014
30 $2,375 $17,433 $86,519 $341,872 $17,433 $86,519 $341,872
</TABLE>
The values would be different from those shown above if the actual gross annual
rates of return averaged 0%, 6%, and 12% over a period of years but varied above
or below that average during the period. The above values assume no loans or
withdrawals are taken.
THE HYPOTHETICAL GROSS RATES OF RETURN SHOWN ARE ILLUSTRATIVE ONLY AND SHOULD
NOT BE DEEMED AS A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS. ACTUAL
INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A
NUMBER OF FACTORS, INCLUDING THE INVESTMENT EXPERIENCE OF THE VARIABLE ACCOUNT,
AND THE ALLOCATIONS MADE TO THE VARIABLE ACCOUNT. NO REPRESENTATION CAN BE MADE
THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
THIS IS AN ILLUSTRATION. AN ILLUSTRATION IS NOT INTENDED TO PREDICT ACTUAL
PERFORMANCE. RATES OF RETURN AND VALUES SET FORTH IN THE ILLUSTRATION ARE NOT
GUARANTEED.
<TABLE>
FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE
Illustration of Death Benefits, Cash Values and
Surrender Values
Based on Guaranteed Charges
Issue Age - 40 Level Death Benefit Option
Risk Class - Standard Nonsmoker Specified Amount - $250,000
Sex - Male Annual Premium - $2,375
End of Annual Premium End of Year DEATH
BENEFIT Assuming
Certificate Premiums Accumulated Hypothetical Gross Annual Investment
Return of
Year Paid at 5% 0% 6% 12%
- ------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 $2,375 $2,494 $250,000 $250,000 $250,000
2 $2,375 $5,112 $250,000 $250,000 $250,000
3 $2,375 $7,862 $250,000 $250,000 $250,000
4 $2,375 $10,748 $250,000 $250,000 $250,000
5 $2,375 $13,780 $250,000 $250,000 $250,000
6 $2,375 $16,962 $250,000 $250,000 $250,000
7 $2,375 $20,304 $250,000 $250,000 $250,000
8 $2,375 $23,813 $250,000 $250,000 $250,000
9 $2,375 $27,497 $250,000 $250,000 $250,000
10 $2,375 $31,366 $250,000 $250,000 $250,000
15 $2,375 $53,812 $250,000 $250,000 $250,000
20 $2,375 $82,458 $250,000 $250,000 $250,000
25 $2,375 $119,019 $250,000 $250,000 $250,000
30 $2,375 $165,682 $0 $250,000 $329,354
End of Annual
End of Year CASH VALUE Assuming End of Year SURRENDER VALUE Assuming
Certificate Premiums Hypothetical Gross Hypothetical Gross Annual
Annual Investment Return of Investment Return of
Year Paid 0% 6% 12% 0% 6% 12%
- ------------------------------------------------------------------------------------------------
1 $2,375 $1,456 $1,566 $1,678 $0 $0 $0
2 $2,375 $2,855 $3,167 $3,494 $5 $317 $644
3 $2,375 $4,195 $4,803 $5,463 $1,345 $1,953 $2,613
4 $2,375 $5,665 $6,667 $7,801 $3,171 $4,173 $5,307
5 $2,375 $7,070 $8,572 $10,342 $4,932 $6,435 $8,205
6 $2,375 $8,401 $10,513 $13,103 $6,620 $8,732 $11,322
7 $2,375 $9,656 $12,487 $16,103 $8,231 $11,062 $14,678
8 $2,375 $10,830 $14,492 $19,366 $9,761 $13,423 $18,297
9 $2,375 $11,917 $16,524 $22,917 $11,205 $15,811 $22,205
10 $2,375 $12,913 $18,578 $26,784 $12,557 $18,221 $26,428
15 $2,375 $16,078 $28,789 $51,893 $16,078 $28,789 $51,893
20 $2,375 $15,191 $38,466 $93,051 $15,191 $38,466 $93,051
25 $2,375 $6,593 $43,989 $161,869 $6,593 $43,989 $161,869
30 $2,375 $0 $38,451 $283,926 $0 $38,451 $283,926
</TABLE>
The values would be different from those shown above if the actual gross annual
rates of return averaged 0%, 6%, and 12% over a period of years but varied above
or below that average during the period. The above values assume no loans or
withdrawals are taken.
THE HYPOTHETICAL GROSS RATES OF RETURN SHOWN ARE ILLUSTRATIVE ONLY AND SHOULD
NOT BE DEEMED AS A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS. ACTUAL
INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A
NUMBER OF FACTORS, INCLUDING THE INVESTMENT EXPERIENCE OF THE VARIABLE ACCOUNT,
AND THE ALLOCATIONS MADE TO THE VARIABLE ACCOUNT. NO REPRESENTATION CAN BE MADE
THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
THIS IS AN ILLUSTRATION. AN ILLUSTRATION IS NOT INTENDED TO PREDICT ACTUAL
PERFORMANCE. RATES OF RETURN AND VALUES SET FORTH IN THE ILLUSTRATION ARE NOT
GUARANTEED.
FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE
<TABLE>
Illustration of Death Benefits, Cash Values and
Surrender Values
Based on Current Charges
Issue Age - 40 Variable Death Benefit Option
Risk Class - Standard Nonsmoker Specified Amount - $250,000
Sex - Male Annual Premium - $2,375
End of Annual Premium End of Year DEATH
BENEFIT Assuming
Certificate Premiums Accumulated Hypothetical Gross Annual Investment
Return of
Year Paid at 5% 0% 6% 12%
- ---------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 $2,375 $2,494 $251,451 $251,562 $251,673
2 $2,375 $5,112 $252,842 $253,153 $253,479
3 $2,375 $7,862 $254,170 $254,774 $255,430
4 $2,375 $10,748 $255,647 $256,641 $257,766
5 $2,375 $13,780 $257,079 $258,569 $260,324
6 $2,375 $16,962 $258,492 $260,588 $263,154
7 $2,375 $20,304 $259,883 $262,698 $266,285
8 $2,375 $23,813 $261,189 $264,838 $269,679
9 $2,375 $27,497 $262,453 $267,054 $273,411
10 $2,375 $31,366 $263,672 $269,347 $277,515
15 $2,375 $53,812 $268,808 $281,757 $304,822
20 $2,375 $82,458 $272,302 $296,408 $350,343
25 $2,375 $119,019 $271,824 $311,057 $423,351
30 $2,375 $165,682 $263,528 $321,085 $538,086
End of Annual
End of Year CASH VALUE Assuming End of Year SURRENDER VALUE Assuming
Certificate Premiums Hypothetical Gross Hypothetical Gross Annual
Annual Investment Return of Investment Return of
Year Paid 0% 6% 12% 0% 6% 12%
- ------------------------------------------------------------------------------------------------------------------------------------
1 $2,375 $1,451 $1,562 $2,678 $0 $0 $0
2 $2,375 $2,842 $3,153 $5,598 $0 $303 $629
3 $2,375 $4,170 $4,774 $8,783 $1,320 $1,924 $2,580
4 $2,375 $5,647 $6,641 $12,487 $3,153 $4,147 $5,272
5 $2,375 $7,079 $8,569 $16,560 $4,941 $6,432 $8,186
6 $2,375 $8,492 $10,588 $21,070 $6,710 $8,806 $11,373
7 $2,375 $9,883 $12,698 $26,062 $8,458 $11,273 $14,860
8 $2,375 $11,189 $14,838 $31,519 $10,120 $13,770 $18,610
9 $2,375 $12,453 $17,054 $37,537 $11,740 $16,342 $22,699
10 $2,375 $13,672 $19,347 $44,173 $13,316 $18,990 $27,158
15 $2,375 $18,808 $31,757 $88,897 $18,808 $31,757 $54,822
20 $2,375 $22,302 $46,408 $165,065 $22,302 $46,408 $100,343
25 $2,375 $21,824 $61,057 $290,584 $21,824 $61,057 $173,351
30 $2,375 $13,528 $71,085 $495,293 $13,528 $71,085 $288,086
</TABLE>
The values would be different from those shown above if the actual gross annual
rates of return averaged 0%, 6%, and 12% over a period of years but varied above
or below that average during the period. The above values assume no loans or
withdrawals are taken.
THE HYPOTHETICAL GROSS RATES OF RETURN SHOWN ARE ILLUSTRATIVE ONLY AND SHOULD
NOT BE DEEMED AS A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS. ACTUAL
INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A
NUMBER OF FACTORS, INCLUDING THE INVESTMENT EXPERIENCE OF THE VARIABLE ACCOUNT,
AND THE ALLOCATIONS MADE TO THE VARIABLE ACCOUNT. NO REPRESENTATION CAN BE MADE
THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
THIS IS AN ILLUSTRATION. AN ILLUSTRATION IS NOT INTENDED TO PREDICT ACTUAL
PERFORMANCE. RATES OF RETURN AND VALUES SET FORTH IN THE ILLUSTRATION ARE NOT
GUARANTEED.
<TABLE>
FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE
Illustration of Death Benefits, Cash Values and
Surrender Values
Based on Guaranteed Charges
Issue Age - 40 Variable Death Benefit Option
Risk Class - Standard Nonsmoker Specified Amount - $250,000
Sex - Male Annual Premium - $2,375
End of Premium End of Year DEATH
BENEFIT Assuming
Certificate Accumulated Hypothetical Gross Annual Investment
Return of
Year Premiums at 5% 0% 6% 12%
- ------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 $2,375 $2,494 $251,451 $251,562 $251,673
2 $2,375 $5,112 $252,842 $253,153 $253,479
3 $2,375 $7,862 $254,170 $254,774 $255,430
4 $2,375 $10,748 $255,622 $256,615 $257,740
5 $2,375 $13,780 $257,004 $258,490 $260,241
6 $2,375 $16,962 $258,306 $260,389 $262,943
7 $2,375 $20,304 $259,524 $262,309 $265,865
8 $2,375 $23,813 $260,654 $264,245 $269,022
9 $2,375 $27,497 $261,689 $266,191 $272,434
10 $2,375 $31,366 $262,624 $268,139 $276,120
15 $2,375 $53,812 $265,321 $277,364 $299,213
20 $2,375 $82,458 $263,609 $284,623 $333,791
25 $2,375 $119,019 $254,056 $284,998 $382,648
30 $2,375 $165,682 $0 $270,047 $448,609
End of
End of Year CASH VALUE Assuming End of Year SURRENDER VALUE Assuming
Certificate Hypothetical Gross Hypothetical Gross Annual
Annual Investment Return of Investment Return of
Year Premiums 0% 6% 12% 0% 6% 12%
- ------------------------------------------------------------------------------------------------------------------------------------
1 $2,375 $1,451 $1,562 $1,673 $0 $0 $0
2 $2,375 $2,842 $3,153 $3,479 $0 $303 $629
3 $2,375 $4,170 $4,774 $5,430 $1,320 $1,924 $2,580
4 $2,375 $5,622 $6,615 $7,740 $3,129 $4,122 $5,246
5 $2,375 $7,004 $8,490 $10,241 $4,866 $6,353 $8,103
6 $2,375 $8,306 $10,389 $12,943 $6,524 $8,608 $11,162
7 $2,375 $9,524 $12,309 $15,865 $8,099 $10,884 $14,440
8 $2,375 $10,654 $14,245 $19,022 $9,585 $13,176 $17,954
9 $2,375 $11,689 $16,191 $22,434 $10,977 $15,478 $21,722
10 $2,375 $12,624 $18,139 $26,120 $12,268 $17,782 $25,764
15 $2,375 $15,321 $27,364 $49,213 $15,321 $27,364 $49,213
20 $2,375 $13,609 $34,623 $83,791 $13,609 $34,623 $83,791
25 $2,375 $4,056 $34,998 $132,648 $4,056 $34,998 $132,648
30 $2,375 $0 $20,047 $198,609 $0 $20,047 $198,609
</TABLE>
The values would be different from those shown above if the actual gross annual
rates of return averaged 0%, 6%, and 12% over a period of years but varied above
or below that average during the period. The above values assume no loans or
withdrawals are taken.
THE HYPOTHETICAL GROSS RATES OF RETURN SHOWN ARE ILLUSTRATIVE ONLY AND SHOULD
NOT BE DEEMED AS A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS. ACTUAL
INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A
NUMBER OF FACTORS, INCLUDING THE INVESTMENT EXPERIENCE OF THE VARIABLE ACCOUNT,
AND THE ALLOCATIONS MADE TO THE VARIABLE ACCOUNT. NO REPRESENTATION CAN BE MADE
THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
THIS IS AN ILLUSTRATION. AN ILLUSTRATION IS NOT INTENDED TO PREDICT ACTUAL
PERFORMANCE. RATES OF RETURN AND VALUES SET FORTH IN THE ILLUSTRATION ARE NOT
GUARANTEED.
LEGAL AND ACTUARIAL MATTTERS
The legal validity of the Certificates described in this Prospectus has been
passed upon by Mark J. Mahoney, Esq. of the law department of AAL. Mayer Brown &
Platt has acted as special counsel on matters related to the federal securities
laws.
Actuarial matters in this prospectus have been examined by David C. Vanden
Heuvel FSA, MAAA Director and Associate Actuary, for AAL. His opinion on
actuarial matters is filed as an exhibit to the registration statement filed
with the Securities and Exchange Commission for the AAL Variable Account I.
This prospectus does not contain financial statements for the Separate Account
because it has not yet commenced operations, has no assets or liabilities and it
has received no income nor incurred any expenses as of the date of this
prospectus.
EXPERTS
The consolidated financial statements of Aid Association for Lutherans at
December 31, 1996 and 1995, and for the years then ended, appearing in this
Prospectus and Registration Statement have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon appearing elsewhere
herein, and are included in reliance upon such report given upon the authority
of such firm as experts in accounting and auditing.
FINANCIAL STATEMENTS
FINANCIAL STATEMENTS The consolidated financial statements of AAL should be
considered only as bearing upon the ability of AAL to meet its obligations under
the Certificates. The consolidated financial statements of AAL should not be
considered as bearing on the investment experience of the assets held in any
variable account.
The most current consolidated financial statements of AAL are those as of the
end of the most recent fiscal year ended December 31, 1996. AAL does not prepare
financial statements more often than annually in the form required to be
included in a prospectus and believes that any incremental benefit to
prospective Certificate Owners that may result from preparing and delivering
more current consolidated financial statements, though unaudited, does not
justify the additional cost that would be incurred.
The consolidated financial statements for AAL, and the accompanying Reports of
Independent Auditors, follow.
Report of Independent Auditors
The Board of Directors
Aid Association for Lutherans
We have audited the accompanying consolidated balance sheets of Aid Association
for Lutherans (AAL) as of December 31, 1996 and 1995, and the related
consolidated statements of income, changes in certificate owners' surplus and
cash flows for the years then ended. These financial statements are the
responsibility of AAL's management. Our responsibility is to express an opinion
on these consolidated 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 consolidated financial position of AAL at December
31, 1996 and 1995, and the results of its operations and its cash flows for the
years then ended, in conformity with generally accepted accounting principles.
As discussed in Note 1, in 1996 AAL adopted certain accounting changes to
conform with generally accepted accounting principles for fraternal benefit
societies.
Milwaukee, Wisconsin
March 14, 1997
Aid Association for Lutherans
Consolidated Balance Sheets
December 31 (in thousands)
1996 1995
Assets
Investments:
Securities available for sale, at fair value
Fixed maturities $ 6,948,203 $ 6,879,601
Equity securities 539,113 453,398
Fixed maturities held to maturity, at amortized cost 4,423,637 4,069,372
Mortgage loans 3,298,335 2,952,533
Investment real estate 113,282 122,899
Certificate loans 501,263 500,306
Other invested assets 10,490 10,238
Total investments $ 15,834,323 $ 14,988,347
Cash and cash equivalents $ 106,568 $ 166,020
Premiums and fees receivable 12,198 11,500
Accrued investment income 19,9051 199,566
Deferred acquisition costs 704,515 643,540
Property and equipment 101,725 105,511
Assets held in separate accounts 313,072 49,067
Other assets 8,868 5,706
Total Assets $ 17,280,320 $ 16,169,257
Liabilities and Certificate Owners' Surplus
Certificate liabilities and accruals:
Future certificate benefits $ 2,504,708 $ 2,381,279
Unpaid claims and claim expenses 101,770 89,288
Total certificate liabilities and accruals $ 2,606,478 $ 2,470,567
Certificate Owner funds $ 12,434,551 $ 11,838,902
Liabilities related to separate accounts 313,072 49,067
Other liabilities 135,390 127,957
Total Liabilities $ 15,489,491 $414,486,493
Certificate Owners' Surplus
Accumulated surplus $ 1,642,126 $ 1,444,084
Unrealized appreciation on securities
available for sale 148,703 238,680
Total Certificate Owners' Surplus $ 1,790,829 $ 1,682,764
Total Liabilities and Certificate Owners' Surplus $ 17,280,320 16,169,257
See accompanying notes.
Consolidated Statements of Income
Year Ended December 31
(in thousands)
1996 1995
Revenue
Insurance premiums $ 364,078 $ 370,222
Insurance charges 278,774 261,376
Net investment income 1,171,590 1,115,790
Net realized investment gains 62,959 16,598
Other revenue 68,200 41,951
Total revenue 1,945,601 1,805,937
Benefits and expenses
Certificate claims and other 345,786 324,870
benefits
Increase in certificate reserves 134,900 143,120
Interest credited 748,350 731,896
Surplus refunds 105,997 103,064
Total benefits 1,335,033 1,302,950
Underwriting, acquisition and 307,982 268,934
insurance expenses
Fraternal benefits and expenses 104,545 84,815
Total expenses 412,527 353,749
Total benefits and expenses 1,747,560 1,656,699
Net income $ 198,041 $ 149,238
Consolidated Statements of Changes in Certificate Owners' Surplus
<TABLE>
Unrealized Accumulated Total certificate
appreciation surplus owners' surplus
(depreciation) of
securities available
for sale(In
Thousands)
<CAPTION>
<S> <C> <C> <C>
Balance at January 1, 1995 $ 9,057 $ 868,882 $ 877,939
Impact of adopting certain -321,267 425,964 104,697
accounting changes discussed in
Note 1
Balance at January 1, 1995 as -312,210 1,294,846 982,636
adjusted
Net income -- 149,238 149,238
Increase in unrealized appreciation 550,890 550,890
of securities available for sale
Balance at December 31, 1995 238,680 1,444,084 1,682,764
Net income -- 198,041 198,041
Decrease in unrealized appreciation -89,976 -- -89,976
of securities available for sale
Balance at December 31, 1996 $ 148,704 $1,642,125 $1,790,829
</TABLE>
Consolidated Statements of Cash Flows
Year Ended December 31
(in thousands)
1996 1995
Operating Activities:
Net Income $ 198,041 $ 149,238
Adjustments to reconcile net income to net
cash provided by operating activities:
Increase in certificate liabilities and accruals 135,911 4,143,359
Increase in certificate owner funds 449,570 474,774
Increase in deferred acquisition costs -17,547 -32,026
Realized gains on investments -63,219 -17,530
Provisions for amortization and depreciation 20,309 19,120
Changes in other assets and liabilities 4,166 -5,698
Net cash provided by operating activities 727,231 731,237
Investing Activities:
Securities available for sale:
Purchases - fixed maturities -2,311,534 -2,218,311
Sales - fixed maturities 1,606,098 1,256,300
Maturities - fixed maturities 476,592 565,516
Purchases - equities -203,720 -229,771
Sales - equities 201,119 123,108
Securities held to maturity:
Purchases -785,732 -601,390
Maturities 435,374 369,741
Mortgage loans funded -559,005 -478,622
Mortgage loans repaid 207,904 166,830
Certificate loans, net -957 -6,873
Other 1,099 -102,670
Net cash used in investing activities -932,762 -1,156,142
Financing Activities:
Universal life and investment contract receipts 1,086,856 1,248,664
Universal life and investment contract withdrawals -940,777 -791,821
Net cash provided by financing activities 146,079 456,843
Net increase (decrease) in cash and cash equivalents -59,452 31,938
Cash and cash equivalents, beginning of year $ 106,020 $ 166,020
Cash and cash equivalents, end of year $ 106,568
Notes to Consolidated Financial Statements
December 31, 1996
Note 1. Summary of Significant Accounting Policies
Nature of Operations
AAL is the nation's largest fraternal benefit society in terms of assets and
individual life insurance in force. It provides its 1.7 million members with
life insurance and retirement products (both fixed and variable), as well as
disability income and long-term care insurance, in most states. Mutual funds are
offered to members by AAL's wholly-owned subsidiary, AAL Capital Management
Corporation. Credit union services are available to members from the AAL Member
Credit Union, an affiliate of AAL. AAL members are served by more than 2,000
district representatives across the country.
Basis of Presentation
The accompanying consolidated financial statements of AAL and its wholly-owned
subsidiaries have been prepared in accordance with generally accepted accounting
principles ("GAAP"). Prior to 1996, AAL prepared its financial statements in
conformity with accounting practices prescribed by the Office of the
Commissioner of Insurance of the State of Wisconsin (statutory-basis) which were
considered GAAP for fraternal benefit societies. FASB Interpretation 40,
Applicability of Generally Accepted Accounting Principles to Mutual Life
Insurance and Other Enterprises ("FIN 40"), as amended, which is effective for
1996 annual financial statements and thereafter, no longer permits
statutory-basis financial statements to be described as being prepared in
conformity with GAAP. Accordingly, AAL has adopted GAAP including Statement of
Financial Accounting Standards 120, Accounting and Reporting by Mutual Life
Insurance Enterprises and by Insurance Enterprises for Certain Long-Duration
Participating Contracts ("FAS 120"), which addresses the accounting for
long-duration and short-duration insurance and reinsurance contracts, including
all participating business.
Pursuant to the requirements of FIN 40 and FAS 120, the effect of the changes in
accounting have been applied retroactively and the previously issued 1995
financial statements have been restated for the change. The effect of the
changes applicable to years prior to January 1, 1995, has been presented as a
restatement of certificate owners' surplus as of that date.
The adoption had the effect of increasing net income for 1996 and 1995 by
approximately $68,339,000 and $34,772,000, respectively.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
Principles of Consolidation
The consolidated financial statements include the accounts of AAL, its
wholly-owned subsidiary, AAL Holdings Inc., and its wholly-owned subsidiaries,
including AAL Capital Management Corporation and North Meadows Investment Ltd.
All significant intercompany transactions are eliminated.
The significant accounting practices used in preparation of the financial
statements are summarized on the following pages:
Investments
Investments in fixed maturities are classified as available for sale or held to
maturity according to the holder's intent. Securities classified in the
available for sale category are carried at fair value and consist of those
securities which AAL intends to hold for an indefinite period of time but not
necessarily to maturity. Securities in the held to maturity category are carried
at amortized cost and consist of those which AAL has both the ability and the
positive intent to hold to maturity. Changes in fair values of available for
sale securities, after adjustment of deferred acquisition costs (DAC), are
reported as unrealized appreciation or depreciation directly in certificate
owners' surplus and, accordingly, have no effect on net income. The DAC offsets
to the unrealized appreciation or depreciation represent valuation adjustments
of DAC that would have been required as a charge or credit to operations had
such unrealized amounts been realized. The amortized cost of fixed maturity
investments classified as available for sale and as held to maturity is adjusted
for amortization of premiums and accretion of discounts calculated using the
effective interest method. That amortization or accretion is included in net
investment income. Mortgage loans generally are stated at their outstanding
unpaid principal balances. Interest income is accrued on the unpaid principal
balance. Discounts and premiums are amortized to income using the interest
method. Investment real estate is valued at original cost plus capital
expenditures less accumulated depreciation and write-downs. Depreciation is
computed using the straight-line method over the estimated useful life of the
property. Accumulated depreciation and write-downs were $37,763,000 and
$34,660,000, at December 31, 1996 and 1995, respectively.
Certificate loans are generally valued at the aggregate unpaid balances. Other
investments, consisting of limited partnerships, are valued on the equity basis.
All investments are carried net of allowances for declines in value that are
other than temporary; the changes in those reserves are reported as realized
gains or losses on investments. Realized gains and losses on the sale of
investments and declines in value considered to be other than temporary are
recognized in the Consolidated Statements of Income on the specific
identification basis.
Cash and Cash Equivalents
Cash and cash equivalents are carried at cost and include all highly liquid
investments purchased with an original maturity of three months or less.
Deferred Acquisition Costs
Costs which vary with and are primarily attributable to the production of new
business have been deferred to the extent such costs are deemed recoverable from
future profits. Such costs include commissions, selling, selection and
certificate issue expenses. For interest sensitive life, participating life and
investment products, these costs are amortized in proportion to estimated gross
profits from interest, mortality and other margins under the contracts.
Amortization of acquisition costs for other certificates is charged to expense
in proportion to premium revenue recognized.
Property and Equipment
Property and equipment are recorded at cost less accumulated depreciation. The
cost of property and equipment is being depreciated by the straight-line method
over the estimated useful lives. Accumulated depreciation was $103,938,000 and
$100,869,000 at December 31, 1996 and 1995, respectively.
Certificate Liabilities and Accruals
Reserves for future certificate benefits for participating life insurance are
net level reserves computed using the same interest and mortality assumptions as
used to compute the cash value. Reserves for future certificate benefits for
non-participating life insurance are also net level reserves, computed using
assumptions as to mortality, interest and withdrawal, with a provision for
adverse deviation. Interest assumptions generally range from 2.5% to 4.0%.
Reserves for future certificate benefits for universal life insurance and
deferred annuities consist of certificate account balances before applicable
surrender charges. The average interest rate credited to account balances in
1996 was 7.6% for universal life, 5.8% for portfolio-average deferred annuities,
and ranged from 5.7% to 6.3% for investment generation deferred annuities,
(IGA), introduced in 1995.
Reserves for accident and health certificates are generally computed using
current pricing assumptions. The interest rate assumptions range from 3.5% to
5.0%. Reserves are computed using a net level reserve method for Medicare
supplement certificates, a one-year preliminary term method for long-term care
certificates, and a two-year preliminary term method for disability income
certificates.
Claim reserves are established for future payments not yet due on claims already
incurred, relating primarily to accident and health certificates. These reserves
are based on past experience and applicable morbidity tables. Reserves are
continuously reviewed and updated, with any resulting adjustments reflected in
current operations.
Separate Accounts
Separate account assets and liabilities reported in the accompanying balance
sheets represent funds that are separately administered for variable annuity
contracts, and for which the certificate owner, rather than AAL, bears the
investment risk. Fees charged on separate account certificate owner deposits are
included in insurance charges. Separate account assets, which are stated at fair
value based on quoted market prices, and separate account liabilities are shown
separately in the Consolidated Balance Sheets. Operating results of the separate
accounts are not included in the Consolidated Statements of Income.
Insurance Premiums and Charges
For life and some annuity contracts other than universal life or investment
contracts, premiums are recognized as revenues over the premium paying period,
with reserves for future benefits established on a prorated basis from such
premiums.
Revenues for universal life and investment contracts consist of policy charges
for the cost of insurance, policy administration and surrender charges assessed
during the period. Expenses include interest credited to certificate account
balances and benefits incurred in excess of certificate account balances.
Certain profits on limited payment certificates are deferred and recognized over
the certificate term. For accident and health certificates, gross premiums are
prorated over the contract term of the certificates with the unearned premium
included in the certificate reserves.
Surplus Refunds
Surplus refunds are recognized over the certificate year and are reflected in
the Consolidated Statements of Income. The majority of life insurance
certificates, except for universal life and term certificates, begin to receive
surplus refunds at the end of the second certificate year. Surplus refunds are
not currently being paid on interest-sensitive and health insurance
certificates. Surplus refund scales are approved annually by AAL's Board of
Directors.
Fraternal Benefits
Fraternal benefits and expenses includes all fraternal activities as well as
expenses incurred to provide or administer fraternal benefits, and expenses
related to AAL's fraternal character. This would include items such as
benevolences to help meet the needs of people, educational benefits to raise
community and family awareness of an issue, as well as various programs and
church grants. Expenses, such as those necessary to maintain the branch system,
are also included.
Other Revenue
Other revenue consists primarily of concessions and investment advisory fees of
AAL Capital Management Corporation.
Income Taxes
AAL, a fraternal benefit society, qualifies as a tax-exempt organization under
the Internal Revenue Code. Accordingly, income received by AAL is generally
exempt from taxation. AAL's wholly-owned subsidiaries are subject to federal and
state taxation.
Note 2. Investments
AAL's investments in available for sale securities and held to maturity
securities are summarized as follows:
<TABLE>
Amortized Cost Gross Gross Estimated Fair
Unrealized Unrealized Value
Gains Losses
(Thousands)
<CAPTION>
Available for Sale Securities at
December 31, 1996
Fixed Maturity Securities
<S> <C> <C> <C> <C>
Loan Backed Obligations of U.S. $ 292,421 $ 2,625 -$1,276 $ 293,770
Government Corporations and
Agencies
Obligations of other governments, 278,167 5,907 -1,348 282,726
states and political subdivisions
Corporate Bonds 4,491,290 73,719 -48,044 4,516,965
Mortgage and Asset-Backed 1,877,261 15,114 -37,633 1,854,742
Securities
Total Fixed Maturity Securities 6,939,139 97,365 -88,301 6,948,203
Equity Securities 396,788 142,325 0 539,113
Total $7,335,927 $ 239,690 -$88,301 $7,487,316
</TABLE>
<TABLE>
Amortized Cost Gross Gross Estimated
Unrealized Unrealized Fair Value
Gains Losses
(Thousands)
<CAPTION>
Held to Maturity Securities at
December 31, 1996
Fixed Maturity Securities
<S> <C> <C> <C> <C>
Loan Backed Obligations of U.S. $ 42,106 $ 1,881 -$782 $ 43,205
Government Corporations and
Agencies
Obligations of other governments, 397,200 15,875 -3,999 409,076
states and political subdivisions
Corporate Bonds 74,908 1,052 -1,248 74,712
Mortgage and Asset-Backed 3,064,485 141,260 -13,766 3,191,979
Securities
Total Fixed Maturity Securities 844,938 14,086 -8,030 850,995
Total $4,423,637 $ 174,154 -$27,825 $4,569,967
</TABLE>
<TABLE>
Amortized Cost Gross Unrealized Gross Unrealized Estimated Fair
Gains Losses Value
<CAPTION>
Available for sale (In Thousands)
securities at
December 31, 1995
Fixed maturity
securities
<S> <C> <C> <C> <C>
Loan backed $ 329,257 $ 5,949 $ 0 $ 335,206
obligations of U.S.
Government
corporations and
agencies
Obligations of other 276,646 14,882 0 291,528
governments, states
and political
subdivisions
Corporate bonds 4,074,798 170,609 -6,799 4,238,608
Mortgage & 2,002,772 21,040 -9,553 2,014,259
asset-backed
securities
Total fixed maturity 6,683,473 212,480 -16,352 6,879,601
securities
Equity securities 364,732 88,666 453,398
Total $7,048,205 $ 301,146 -$16,352 $7,332,999
</TABLE>
<TABLE>
Amortized Cost Gross Gross Estimated Fair
Unrealized Gains Unrealized Value
Losses
<CAPTION>
Held to maturity (In Thousands)
securities at December
31, 1995
Fixed maturity securities
<S> <C> <C> <C> <C>
U.S. Treasury securities $ 60,412 $ 3,385 -$328 $ 63,469
and non-loan backed
obligations of U.S.
Government corporations
and agencies
Loan backed obligations 429,971 28,017 -154 457,834
of U.S Government
corporations and agencies
Obligations of other 81,608 1,961 -245 83,324
governments, states and
political subdivisions
Corporate bonds 2,908,531 205,654 -4,660 3,109,525
Mortgage & asset-backed 588,850 19,880 -455 608,275
securities
$4,069,372 $ 258,897 -$5,842 $4,322,427
</TABLE>
The amortized cost and estimated fair value of fixed maturity securities at
December 31, 1996, by contractual maturity, are shown below. Expected maturities
will differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties.
<TABLE>
Available for sale Held to maturity
Amortized Cost Fair Value Amortized Cost Fair Value
(In Thousands)
<CAPTION>
<S> <C> <C> <C> <C>
Due in one year or less $42442 $ 42,613 $ 124,011 $ 125,181
Due after one year 2,690,343 2,713,062 1,208,261 1,247,610
through five years
Due after five years 1,817,920 1,819,148 1,176,274 1,230,269
through ten years
Due after ten years 218,752 224,868 672,953 706,836
Total fixed maturity 4,769,457 4,799,691 3,181,499 3,309,896
securities excluding
mortgage and
asset-backed bonds
Loan-backed obligations 292,421 293,770 397,200 409,076
of U.S. Government
corporations and agencies
Mortgage and 1,877,261 1,854,742 844,938 850,995
asset-backed securities
Total fixed maturity $6,939,139 $6,948,203 $4,423,637 $4,569,967
securities
</TABLE>
Major categories of AAL's investment income are summarized as follows:
Year Ended Year Ended
December 31, 1996 December 31, 1995
(In Thousands)
Fixed maturity securities $828,565 $807,481
Equity securities 11,030 7,973
Mortgage loans 284,534 256,251
Investment real estate 21,998 20,418
Certificate loans 34,882 34,618
Other invested assets 6,666 3,665
Gross investment income 1,187,675 1,130,406
Investment expenses 16,085 14,616
Net investment income $1,171,590 $1,115,790
AAL's realized gains and losses on investments are summarized as follows:
December 31, 1996 December 31, 1995
(Thousands)
Securities Available for Sale
Fixed Maturity Securities
Gross Realized Gains $41,313 $32,443
Gross Realized Losses -9,058 -8,955
Equity Securities
Gross Realized Gains 37,001 18,209
Gross Realized Losses -7,546 -4,960
Other Investments, Net 1,249 -20,139
Net Realized Gains $62,959 $16,598
Net unrealized gains on available for sale securities were credited directly to
certificate owners' surplus, as follows:
December 31, 1996 December 31, 1995
(Thousands)
Fair Value Adjustment to Available $151,389 $284,794
for Sale Securities
Decrease in Deferred Acquisition -2,686 -46,114
Costs
Net Unrealized Gains on Available $148,703 $238,680
for Sale Securities
The increase (decrease) in unrealized appreciation on investments in fixed
maturity and equity securities is as follows:
Year Ended December 31 1996 1995
(Thousands)
Fixed Maturity Securities -$187,063 $630,394
Available for Sale
Equity Securities Available for 53,659 79,610
Sale
Deferred Acquisition Costs 43,428 -159,114
Total -$89,976 $550,890
AAL invests in mortgage loans, principally involving commercial real estate.
Such investments consist of first mortgage liens on completed income producing
properties. AAL manages its investments in mortgage loans to limit credit risk
by diversifying among various geographic regions and property types follows:
Principal 1996 Principal 1995 Percent 1996 Percent 1995
(Thousands)
Geographic Region
Pacific $1,148,613 $1,086,817 33.4 35.2
South Atlantic 1,204,145 1,108,102 35 35.9
Midwest 652,296 571,206 19 18.5
Other 432,983 320,810 12.6 10.4
Total Mortgage Loans $3,438,037 $3,086,935 100 100
Property Type
Office $1,035,954 $1,001,258 30.1 32.4
Industrial 1,056,824 929,260 30.7 30.1
Retail 448,101 431,798 13 14
Residential 433,128 357,021 12.6 11.6
Church 184,259 160,560 5.4 5.2
Other 279,771 207,038 8.2 6.7
Total Mortgage Loans $3,438,037 $3,086,935 100 100
The following table presents changes in the allowance for credit losses:
1996 1995
(Thousands)
Balance at January 1 $134,402 $142,402
Provision for Credit Losses 9,066 18,138
Charge offs -3,766 -26,138
Recoveries 0 134,402
Balance at December 31 $139,702 $134,402
AAL's investment in mortgage loans includes $281,876,000 and $261,500,000 of
loans that are considered to be impaired as of December 31, 1996 and 1995,
respectively, for which the related allowance for credit losses are $56,043,000
and $60,010,000 at December 31, 1996 and 1995, respectively. AAL recorded
interest income on impaired loans of $19,366,000 and $18,259,000 for 1996 and
1995 respectively.
Note 3. Deferred Acquisition Costs
The changes in deferred acquisition costs are as follows:
(Thousands)
<TABLE>
Life Universal Life Other Annuities Health Total
<CAPTION>
<S> <C> <C> <C> <C> <C>
Balance at January 1, $404,955 $ 80,309 $228,918 $ 56,446 $770,628
1995
Acquisition costs
deferred
Commissions, net of 36,989 10,290 23,795 9,219 80,293
certificate charges
other costs 13,192 4,834 4,960 5,409 28,395
total deferred 50,181 15,124 28,755 14,628 108,688
Acquisition costs -49,084 -5,665 -18,907 -3,006 -76,662
amortized
Increase in deferred 1,097 9,459 9,848 11,622 32,026
acquisition costs
Decrease related to -70,645 -7,707 -80,762 0 -159,114
unrealized gains on
fixed maturities
recorded as a separate
component of
certificate owner
surplus
Total increase -69,548 1,752 -70,914 11,622 -127,088
(decrease)
Balance as of December 335,407 82,061 158,004 68,068 643,540
31, 1995
Acquisition costs
deferred
Commissions, net of 34,046 10,756 24,316 9,509 78,627
certificate charges
other costs 12,064 4,758 5,165 5,512 27,499
total deferred 46,110 15,514 29,481 15,021 106,126
Acquisition costs -59,213 -12,021 -14,915 -2430 -88,579
amortized
Increase in deferred -13,103 3,493 14,566 12,591 17,547
acquisition costs
Increase related to 19,160 1,936 22,332 0 43428
unrealized gains on
fixed maturities
recorded as a separate
component of
certificate owner
surplus
Total increase 6,057 5,429 36,898 12,591 60,975
(decrease)
Balance as of December $341,464 $ 87,490 $194,902 $ 80,659 $704,515
31, 1996
</TABLE>
Note 4. Retirement and Savings Plans
Retirement Plans
AAL has noncontributory defined benefit pension plans covering substantially all
home office and field employees. AAL makes annual contributions to the plans
that meet or exceed the minimum amounts specified by the Employee Retirement
Income Security Act of 1974. AAL contributed $6,993,000 and $4,778,000 to the
plans in 1996 and 1995, respectively. The accumulated benefit obligation does
not reflect the actual benefits that will be paid on retirement, but rather the
liability that would exist if the plans were terminated as of the valuation
dates. Therefore, as part of the funding process that considers future benefits,
net assets are held in excess of the accumulated benefit obligation. Pension
plan assets are invested primarily in corporate bonds, listed stocks and
commercial paper. The following tables set forth the amounts recognized in AAL's
financial statements and the plans' funding status.
December 31(in thousands)
1996 1995
Actuarial Value of Benefit
Obligations
Vested Benefits -$144,356 -$132,823
Nonvested Benefits -6,467 -5,854
Accumulated benefit Obligation -150,823 -138,677
Projected Benefit Obligation of -202,489 -190,028
Service Rendered to Date
Plan Assets at Fair Value 242837 213,512
Funded Status-Excess of Plan 40,348 23,484
Assets over Projected Benefit
Obligation
Unrecognized Net Loss from Actual -30,762 -13,876
Experience Different from that
Assumed and Impact of Changes in
Assumptions
Prior Service Benefit Not Yet 903 969
Recognized in Net Pension Cost
Unrecognized net obligation at -11,697 -13,733
transition to Statement 87 on
January 1, 1987, being recognized
over a period of 18 years
Accrued pension liability -1,208 -3,156
included in other liabilities
Net Pension Cost includes the
following components
Service Cost 8,902 7,736
Interest Cost 14,862 13,742
Actual return on Plan Assets -31,061 -45,008
Net Amortization and Deferred item 12,342 27,844
Net Pension Cost $ 5,045 $ 4,296
The following summarizes certain assumptions included in the preceding
schedules:
December 31, 1996 December 31, 1995
Assumed Discount Rate 8.0% 8.0%
Expected Long-Term Rate of Return 8.5% 8.5%
on Plan Assets
Rate of Increase in Future 4.0-6.0% 4.0-6.0%
Compensation levels
Savings Plan
AAL also has a contributory savings plan covering substantially all home office
and field employees. The plan is defined under Internal Revenue Code section
401(k) as a profit sharing savings plan that allows participant contributions on
a before-tax basis as well as an after-tax basis. AAL's total contributions to
the plan for 1996 and 1995 were $3,609,000 and $3,537,000, respectively.
Note 5. Postretirement Benefits Other Than Pensions
AAL provides health and life insurance benefits for substantially all retired
home office and field employees. AAL accrues for the projected future cost of
providing postretirement benefits other than pensions as an expense over the
service life of employees.
The following tables set forth the amounts recognized in AAL's financial
statements and the postretirement benefit plan's funding status
December 31(in thousands)
1996 1995
Actuarial Value of Benefit
Obligations:
Retirees -$18,915 -$18,957
Fully Eligible Plan Participants -6,301 -5,529
Other Active Participants -11,975 -11,318
Total Accumulated Other -37,191 -35,804
Postretirement Benefits
Unrecognized net Loss -2,848 -2,238
Other Post retirement Liabilities -$40,039 -$38,042
The components of the net periodic postretirement benefit cost reported in
operations are summarized as follows:
December 31(in thousands)
1996 1995
Service benefits earned $1,385 $1,354
Interest cost on benefit 2,771 3,063
obligation
Actual return on plan assets 0 0
Net amortization and deferral 0 0
Net periodic postretirement $4,156 $4,417
benefit
The discount rate used in determining the accumulated postretirement benefit
obligation was 8.0 percent for 1996 and 1995, and generally, the health care
cost trend rate estimate was 6.0 percent per year. The health care cost trend
rate assumption can have a significant effect on the amounts reported. However,
a one percentage point increase in the assumed health care cost trend rate would
not be significant to AAL.
Note 6. Synopsis of Statutory Financial Results
The accompanying financial statements differ from those prepared in accordance
with statutory accounting practices prescribed or permitted by regulatory
authorities. The more significant differences are as follows: (a) certain
acquisition costs of new business are deferred and amortized rather than being
charged to operations as incurred; (b) the liabilities for future certificate
benefits and expenses are based on reasonably conservative estimates of expected
mortality, interest, withdrawals and future maintenance and settlement expenses
rather than using statutory rates for mortality and interest; (c) certain
assets, principally cost in excess of net assets acquired, furniture, equipment
and agents' debit balances are reported as assets rather than being charged to
certificate owners' surplus and excluded from the balance sheet; (d) the
interest maintenance reserve and asset valuation reserve are reported as part of
certificate owners' surplus rather than as a liability; and (e) revenues for
universal life and investment-type contracts include mortality, expense and
surrender charges levied against the certificate owners' accounts rather than
including as revenues the premiums received on these certificates. Expenses
include interest added to the certificate owners' accounts rather then reserve
changes related to the investment portion of these policies. Summarized
statutory-basis financial information for Aid Association for Lutherans
Fraternal Benefit Society on an unconsolidated basis is as follows:
December 31(in thousands)
1996 1995
Assets $16,671,018 $15,442,524
Liabilities 15,577,883 14,499,841
Unassigned Funds 1,093,135 942,683
Total Liabilities and Unassigned $16,671,018 $15,442,524
Funds
December 31(in thousands)
1996 1995
Premium Income and Certificate $1663,403 $1,665,995
Proceeds
Net Investment Income 1162,629 1,110,545
Other Income 23,647 17,179
Total Income $2849,679 $2,793,719
December 31(in thousands)
1996 1995
Reserve increase $741,518 $1,078,575
Certificate Owners' benefits 1,285,702 1,112,138
Surplus refunds 107,472 102,772
Commissions and operating costs 367,155 338,908
Other 226,097 48,955
Total benefits and expenses $2,727,944 $2,681,348
Note 7. Fair Value of Financial Instruments
The following methods and assumptions were used in estimating fair value
disclosures for financial instruments:
Cash and Cash Equivalents
The carrying amounts reported in the accompanying balance sheets for these
instruments approximate their fair values.
Investment Securities
Fair values for fixed maturity securities are based on quoted market prices
where available, or are estimated using values obtained from independent pricing
services. All fixed maturity issues are individually priced based on year-end
market conditions, the credit quality of the issuing company, the interest rate
and the maturity of the issue. The fair values for investments in equity
securities are based on quoted market prices.
Mortgage Loans
The fair values for mortgage loans are estimated using discounted cash flow
analyses, based on interest rates currently being offered for similar loans to
borrowers with similar credit ratings. Loans with similar characteristics are
aggregated for purposes of the calculations.
Certificate Loans
The carrying amounts reported in the accompanying balance sheets for these loans
are considered to be reasonable estimates of their fair value.
Financial Liabilities
The fair values for AAL's liabilities under investment-type contracts, such as
deferred annuities and other liabilities, including supplementary contracts
without life contingencies, deferred income settlement options and refunds on
deposit, are estimated to be the cash surrender value payable upon immediate
withdrawal. These amounts are included in certificate reserves in the
accompanying balance sheets.
The cost and estimated fair value of AAL's financial instruments are as follows:
1996 Cost 1996 Estimated 1995 Cost 1995 Estimated
Fair Value Fair Value
(Thousands)
Financial Assets
Fixed maturities $11,362,776 $11,518,170 $10,752,845 $11,202,027
Equity Securities 396,788 539,113 364,732 453,398
Mortgage Loans 3,298,335 3,633,788 2,952,533 3,511,314
Cash and Cash 106,568 106,568 166,020 166,020
equivalents
Certificate loans 501,263 501,263 500,306 500,306
Financial Liabilities
Deferred Annuities 7,393,259 7,291,815 7,169,742 7,047,240
other 521,632 519,688 471,120 469,475
Year Ended
December 31, 1996 December 31, 1996
Net gain from operations $121,735 $112,371
Net realized capital gain 7,967 2,095
Net income $129,702 $114,466
Note 8. Contingent Liabilities
AAL is involved in various lawsuits and contingencies that have arisen from the
normal conduct of business. Contingent liabilities arising from litigation, tax
and other matters are not considered material in relation to the financial
position of AAL. AAL has not made any provision in the financial statements for
liabilities, if any, that might ultimately result from these contingencies.
Part II
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities Exchange
Act of 1934, the undersigned Registrant hereby undertakes to file with the
Securities and Exchange Commission such supplementary and periodic information,
documents and reports as may be prescribed by any rule or regulation of the
Commission heretofore or hereafter duly adopted pursuant to authority conferred
in that section.
RULE 484 UNDERTAKING
Insofar as indemnification for liability arising under the Securities Act of
1933 (the "Act") may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The Bylaws of Aid Association for Lutherans do provide for the indemnification
of officers, directors, employees or agents of the Company.
REPRESENTATION PURSUANT TO SECTION 26(e)(2)(A)
AAL represents that the fees and charges deducted under the Certificate, in the
aggregate, are reasonable in relation to the services rendered, the expenses
expected to be incurred and the risks assumed by AAL.
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The facing sheet.
Cross Reference Sheet
The prospectus consisting of ___ pages. Undertaking to file reports.
Rule 484 undertaking.
Representation pursuant to Section 26(e)(2)(A).
The signatures.
Written consents of the following persons:
Mark J. Mahoney, Esq.
Mayer, Brown & Platt
Ernst & Young LLP
David C. Vanden Heuvel, Actuary
The following exhibits, corresponding to those required by paragraph A of
the instructions as to exhibits in Form N-8B-2:
1.A.
(1) Resolution of the Board of Directors of Aid Association for
Lutherans establishing AAL Variable Life Account I
(2) Not Applicable
(3) (a) Form of Underwriting Agreement
(b) Form of Distribution Agreement (see (3)(a)
(c) Schedule of Sales Commissions
(4) Not applicable
(5) (a) Specimen Flexible Premium Variable Universal Life
Insurance Certificates
(b) Certificate Riders and Endorsements
(c) Application Forms*
(6) (a) Articles of Incorporation of Aid Association for Lutherans
(b) By-laws of Aid Association for Lutherans
(7) Not applicable
(8) Form of participation agreement
(9) Not applicable
(10) Not applicable
B. Not applicable
C. Not applicable
2. Opinion and consent of Mark J. Mahoney, Esq., as to the legality of
the securities being registered
3. Not applicable
4. Not applicable
5. Not applicable
6. Opinion and consent of David C. Vanden Heuvel, FSA, MAAA Director and
Associate Actuary , as to actuarial
matters pertaining to the securities being registered
7. (a) Consent of Ernst & Young LLP, Independent Auditors (b) Consent
of Mayer Brown & Platt.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant, AAL
Variable Life Account, has duly caused this registration statement to be signed
on its behalf by the undersigned thereunto duly authorized, and its seal to be
hereunto affixed and attested, all in the City of Appleton and the State of
Wisconsin, on this day of November 14, 1997.
Aid Association for Lutherans
Variable Life Account
(SEAL) (Registrant)
By: Aid Association for Lutherans
(Depositor)
Attest: /s/ Woodrow Eno By: /s/ John O. Gilbert
------------------------ ----------------------------------
Woodrow Eno John O. Gilbert
Vice President-Counsel President
and Secretary, Secretary Aid Association for Lutherans
of the Board
Pursuant to the requirements of the Securities Act of 1933, Aid Association for
Lutherans has duly caused this registration statement to be signed on its behalf
by the undersigned thereunto duly authorized, and its seal to be hereunto
affixed and attested, all in the City of Appleton and the State of Wisconsin, on
the day of November 14, 1997.
Aid Association for Lutherans
(SEAL)
Attest: /s/ Woodrow E. Eno By: /s/ Robert Lyle
----------------------- ---------------------------------
Woodrow E. Eno Robert Lyle
Vice President-Counsel Vice President and Actuary
and Secretary, Secretary Aid Association for Lutherans
of the Board
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed below by the following persons in the capacities
indicated on the date(s) set forth below.
/s/ John O. Gilbert President and Chief Executive Officer
- ----------------------- (Principal Executive Officer)
John O. Gilbert
November 14, 1997
/s/ Ronald G. Anderson Chief Financial Officer
- -----------------------
Ronald G. Anderson
/s/ Carl Rudolph (Principal Financial Officer,
- ----------------------- Principal Accounting Officer) November 14 ,1997
Carl Rudolph
All of the Board of Directors:
- -----------------------
Herbert J. Arkebauer
- -----------------------
Raymond G. Avischious
- -----------------------
Richard E. Beumer
- -----------------------
Kenneth Daly
- -----------------------
Elizabeth A. Duda
- -----------------------
Edward A. Engel
- -----------------------
Gary J. Greenfield
- -----------------------
Richard L. Gunderson
- -----------------------
John O. Gilbert
- -----------------------
James W. Hanson
- -----------------------
Robert H. Hoffman
- -----------------------
Rev. Thomas Zehnder
- -----------------------
Robert E. Long
- -----------------------
Robert B. Peregrine
- -----------------------
Kathi P. Seifert
- -----------------------
Roger B. Wheeler
- -----------------------
E. Marlene Wilson
John O. Gilbert, by signing his name hereto, does hereby sign this document on
behalf of each of the above-named Directors of Aid Association for Lutherans
pursuant to powers of attorney duly executed by such persons.
/s/John O. Gilbert November 14, 1997
- --------------------------
John O. Gilbert
Attorney-in-Fact
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned director of AID
ASSOCIATION FOR LUTHERANS, a fraternal benefit society organized under the laws
of the state of Wisconsin (the "Society"), the Depositor of AAL Variable Life
Account I does hereby make, constitute and appoint John O. Gilbert, Ronald G.
Anderson and Woodrow E. Eno and each or any of them, the undersigned's true and
lawful attorneys-in-fact, with power of substitution, for the undersigned and in
the undersigned's name, place and stead, to sign and affix the undersigned's
name as such director of such Society to any Registration Statement or
Registration Statements, or other applicable forms relating to a variable
universal life product, and all amendments including post-effective amendments,
thereto, to be filed by such Society with the Securities and Exchange Commission
including any state Insurance Commission, if applicable, of shares of such
Society, and to file the same, with all exhibits thereto and other supporting or
related documents, with such Commission, granting unto such attorneys-in-fact,
and each of them, full power and authority to do and perform any and all acts
necessary or incidental to the performance and execution of the powers herein
expressly granted.
/s/ Herbert J. Arkebauer
- ----------------------------
Herbert J. Arkebauer
Director
AID ASSOCIATION FOR LUTHERANS
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned director of AID
ASSOCIATION FOR LUTHERANS, a fraternal benefit society organized under the laws
of the state of Wisconsin (the "Society"), the Depositor of AAL Variable Life
Account I does hereby make, constitute and appoint John O. Gilbert, Ronald G.
Anderson and Woodrow E. Eno and each or any of them, the undersigned's true and
lawful attorneys-in-fact, with power of substitution, for the undersigned and in
the undersigned's name, place and stead, to sign and affix the undersigned's
name as such director of such Society to any Registration Statement or
Registration Statements, or other applicable forms relating to a variable
universal life product, and all amendments including post-effective amendments,
thereto, to be filed by such Society with the Securities and Exchange Commission
and any state Insurance Commission, if applicable, of shares of such Society,
and to file the same, with all exhibits thereto and other supporting or related
documents, with such Commission, granting unto such attorneys-in-fact, and each
of them, full power and authority to do and perform any and all acts necessary
or incidental to the performance and execution of the powers herein expressly
granted.
/s/ Raymond G. Avischious
- ----------------------------
Raymond G. Avischious
Director
AID ASSOCIATION FOR LUTHERANS
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned director of AID
ASSOCIATION FOR LUTHERANS, a fraternal benefit society organized under the laws
of the state of Wisconsin (the "Society"), the Depositor of AAL Variable Life
Account I does hereby make, constitute and appoint John O. Gilbert, Ronald G.
Anderson and Woodrow E. Eno and each or any of them, the undersigned's true and
lawful attorneys-in-fact, with power of substitution, for the undersigned and in
the undersigned's name, place and stead, to sign and affix the undersigned's
name as such director of such Society to any Registration Statement or
Registration Statements, or other applicable forms relating to a variable
universal life product, and all amendments including post-effective amendments,
thereto, to be filed by such Society with the Securities and Exchange Commission
and any state Insurance Commission, if applicable, of shares of such Society,
and to file the same, with all exhibits thereto and other supporting or related
documents, with such Commission, granting unto such attorneys-in-fact, and each
of them, full power and authority to do and perform any and all acts necessary
or incidental to the performance and execution of the powers herein expressly
granted.
/s/ Richard E. Beumer
- ----------------------------
Richard E. Beumer
Director
AID ASSOCIATION FOR LUTHERANS
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned director of AID
ASSOCIATION FOR LUTHERANS, a fraternal benefit society organized under the laws
of the state of Wisconsin (the "Society"), the Depositor of AAL Variable Life
Account I does hereby make, constitute and appoint John O. Gilbert, Ronald G.
Anderson and Woodrow E. Eno and each or any of them, the undersigned's true and
lawful attorneys-in-fact, with power of substitution, for the undersigned and in
the undersigned's name, place and stead, to sign and affix the undersigned's
name as such director of such Society to any Registration Statement or
Registration Statements, or other applicable forms relating to a variable
universal life product, and all amendments including post-effective amendments,
thereto, to be filed by such Society with the Securities and Exchange Commission
and any state Insurance Commission, if applicable, of shares of such Society,
and to file the same, with all exhibits thereto and other supporting or related
documents, with such Commission, granting unto such attorneys-in-fact, and each
of them, full power and authority to do and perform any and all acts necessary
or incidental to the performance and execution of the powers herein expressly
granted.
/s/ Kenneth Daly
- ----------------------------
Kenneth Daly
Director
AID ASSOCIATION FOR LUTHERANS
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned director of AID
ASSOCIATION FOR LUTHERANS, a fraternal benefit society organized under the laws
of the state of Wisconsin (the "Society"), the Depositor of AAL Variable Life
Account I does hereby make, constitute and appoint John O. Gilbert, Ronald G.
Anderson and Woodrow E. Eno and each or any of them, the undersigned's true and
lawful attorneys-in-fact, with power of substitution, for the undersigned and in
the undersigned's name, place and stead, to sign and affix the undersigned's
name as such director of such Society to any Registration Statement or
Registration Statements, or other applicable forms relating to a variable
universal life product, and all amendments including post-effective amendments,
thereto, to be filed by such Society with the Securities and Exchange Commission
and any state Insurance Commission, if applicable, of shares of such Society,
and to file the same, with all exhibits thereto and other supporting or related
documents, with such Commission, granting unto such attorneys-in-fact, and each
of them, full power and authority to do and perform any and all acts necessary
or incidental to the performance and execution of the powers herein expressly
granted.
/s/ Elizabeth A. Duda
- ----------------------------
Elizabeth A. Duda
Director
AID ASSOCIATION FOR LUTHERANS
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned director of AID
ASSOCIATION FOR LUTHERANS, a fraternal benefit society organized under the laws
of the state of Wisconsin (the "Society"), the Depositor of AAL Variable Life
Account I does hereby make, constitute and appoint John O. Gilbert, Ronald G.
Anderson and Woodrow E. Eno and each or any of them, the undersigned's true and
lawful attorneys-in-fact, with power of substitution, for the undersigned and in
the undersigned's name, place and stead, to sign and affix the undersigned's
name as such director of such Society to any Registration Statement or
Registration Statements, or other applicable forms relating to a variable
universal life product, and all amendments including post-effective amendments,
thereto, to be filed by such Society with the Securities and Exchange Commission
and any state Insurance Commission, if applicable, of shares of such Society,
and to file the same, with all exhibits thereto and other supporting or related
documents, with such Commission, granting unto such attorneys-in-fact, and each
of them, full power and authority to do and perform any and all acts necessary
or incidental to the performance and execution of the powers herein expressly
granted.
/s/ Edward A. Engel
- ----------------------------
Edward A. Engel
Director
AID ASSOCIATION FOR LUTHERANS
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned director of AID
ASSOCIATION FOR LUTHERANS, a fraternal benefit society organized under the laws
of the state of Wisconsin (the "Society"), the Depositor of AAL Variable Life
Account I does hereby make, constitute and appoint Richard L. Gunderson and
Woodrow E. Eno and each or any of them, the undersigned's true and lawful
attorneys-in-fact, with power of substitution, for the undersigned and in the
undersigned's name, place and stead, to sign and affix the undersigned's name as
such director of such Society to any Registration Statement or Registration
Statements, or other applicable forms relating to a variable universal life
product, and all amendments including post-effective amendments, thereto, to be
filed by such Society with the Securities and Exchange Commission and any state
Insurance Commission, if applicable, of shares of such Society, and to file the
same, with all exhibits thereto and other supporting or related documents, with
such Commission, granting unto such attorneys-in-fact, and each of them, full
power and authority to do and perform any and all acts necessary or incidental
to the performance and execution of the powers herein expressly granted.
/s/ John O. Gilbert
- ----------------------------
John O. Gilbert
Director
AID ASSOCIATION FOR LUTHERANS
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned director of AID
ASSOCIATION FOR LUTHERANS, a fraternal benefit society organized under the laws
of the state of Wisconsin (the "Society"), the Depositor of AAL Variable Life
Account I does hereby make, constitute and appoint John O. Gilbert and Woodrow
E. Eno and each or any of them, the undersigned's true and lawful
attorneys-in-fact, with power of substitution, for the undersigned and in the
undersigned's name, place and stead, to sign and affix the undersigned's name as
such director of such Society to any Registration Statement or Registration
Statements, or other applicable forms relating to a variable universal life
product, and all amendments including post-effective amendments, thereto, to be
filed by such Society with the Securities and Exchange Commission and any state
Insurance Commission, if applicable, of shares of such Society, and to file the
same, with all exhibits thereto and other supporting or related documents, with
such Commission, granting unto such attorneys-in-fact, and each of them, full
power and authority to do and perform any and all acts necessary or incidental
to the performance and execution of the powers herein expressly granted.
/s/ Gary J. Greenfield
- ----------------------------
Gary J. Greenfield
Director
AID ASSOCIATION FOR LUTHERANS
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned director of AID
ASSOCIATION FOR LUTHERANS, a fraternal benefit society organized under the laws
of the state of Wisconsin (the "Society"), the Depositor of AAL Variable Life
Account I does hereby make, constitute and appoint John O. Gilbert, Ronald G.
Anderson and Woodrow E. Eno and each or any of them, the undersigned's true and
lawful attorneys-in-fact, with power of substitution, for the undersigned and in
the undersigned's name, place and stead, to sign and affix the undersigned's
name as such director of such Society to any Registration Statement or
Registration Statements, or other applicable forms relating to a variable
universal life product, and all amendments including post-effective amendments,
thereto, to be filed by such Society with the Securities and Exchange Commission
and any state Insurance Commission, if applicable, of shares of such Society,
and to file the same, with all exhibits thereto and other supporting or related
documents, with such Commission, granting unto such attorneys-in-fact, and each
of them, full power and authority to do and perform any and all acts necessary
or incidental to the performance and execution of the powers herein expressly
granted.
/s/ Richard L. Gunderson
- ----------------------------
Richard L. Gunderson
Director
AID ASSOCIATION FOR LUTHERANS
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned director of AID
ASSOCIATION FOR LUTHERANS, a fraternal benefit society organized under the laws
of the state of Wisconsin (the "Society"), the Depositor of AAL Variable Life
Account I does hereby make, constitute and appoint John O. Gilbert, Ronald G.
Anderson and Woodrow E. Eno and each or any of them, the undersigned's true and
lawful attorneys-in-fact, with power of substitution, for the undersigned and in
the undersigned's name, place and stead, to sign and affix the undersigned's
name as such director of such Society to any Registration Statement or
Registration Statements, or other applicable forms relating to a variable
universal life product, and all amendments including post-effective amendments,
thereto, to be filed by such Society with the Securities and Exchange Commission
and any state Insurance Commission, if applicable, of shares of such Society,
and to file the same, with all exhibits thereto and other supporting or related
documents, with such Commission, granting unto such attorneys-in-fact, and each
of them, full power and authority to do and perform any and all acts necessary
or incidental to the performance and execution of the powers herein expressly
granted.
/s/ James W. Hanson
- ----------------------------
James W. Hanson
Director
AID ASSOCIATION FOR LUTHERANS
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned director of AID
ASSOCIATION FOR LUTHERANS, a fraternal benefit society organized under the laws
of the state of Wisconsin (the "Society"), the Depositor of AAL Variable Life
Account I does hereby make, constitute and appoint John O. Gilbert, Ronald G.
Anderson and Woodrow E. Eno and each or any of them, the undersigned's true and
lawful attorneys-in-fact, with power of substitution, for the undersigned and in
the undersigned's name, place and stead, to sign and affix the undersigned's
name as such director of such Society to any Registration Statement or
Registration Statements, or other applicable forms relating to a variable
universal life product, and all amendments including post-effective amendments,
thereto, to be filed by such Society with the Securities and Exchange Commission
and any state Insurance Commission, if applicable, of shares of such Society,
and to file the same, with all exhibits thereto and other supporting or related
documents, with such Commission, granting unto such attorneys-in-fact, and each
of them, full power and authority to do and perform any and all acts necessary
or incidental to the performance and execution of the powers herein expressly
granted.
/s/ Robert H. Hoffman
- ----------------------------
Robert H. Hoffman
Director
AID ASSOCIATION FOR LUTHERANS
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned director of AID
ASSOCIATION FOR LUTHERANS, a fraternal benefit society organized under the laws
of the state of Wisconsin (the "Society"), the Depositor of AAL Variable Life
Account I does hereby make, constitute and appoint John O. Gilbert, Ronald G.
Anderson and Woodrow E. Eno and each or any of them, the undersigned's true and
lawful attorneys-in-fact, with power of substitution, for the undersigned and in
the undersigned's name, place and stead, to sign and affix the undersigned's
name as such director of such Society to any Registration Statement or
Registration Statements, or other applicable forms relating to a variable
universal life product, and all amendments including post-effective amendments,
thereto, to be filed by such Society with the Securities and Exchange Commission
and any state Insurance Commission, if applicable, of shares of such Society,
and to file the same, with all exhibits thereto and other supporting or related
documents, with such Commission, granting unto such attorneys-in-fact, and each
of them, full power and authority to do and perform any and all acts necessary
or incidental to the performance and execution of the powers herein expressly
granted.
/s/ Robert E. Long
- ----------------------------
Robert E. Long
Director
AID ASSOCIATION FOR LUTHERANS
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned director of AID
ASSOCIATION FOR LUTHERANS, a fraternal benefit society organized under the laws
of the state of Wisconsin (the "Society"), the Depositor of AAL Variable Life
Account I does hereby make, constitute and appoint John O. Gilbert, Ronald G.
Anderson and Woodrow E. Eno and each or any of them, the undersigned's true and
lawful attorneys-in-fact, with power of substitution, for the undersigned and in
the undersigned's name, place and stead, to sign and affix the undersigned's
name as such director of such Society to any Registration Statement or
Registration Statements, or other applicable forms relating to a variable
universal life product, and all amendments including post-effective amendments,
thereto, to be filed by such Society with the Securities and Exchange Commission
and any state Insurance Commission, if applicable, of shares of such Society,
and to file the same, with all exhibits thereto and other supporting or related
documents, with such Commission, granting unto such attorneys-in-fact, and each
of them, full power and authority to do and perform any and all acts necessary
or incidental to the performance and execution of the powers herein expressly
granted.
/s/ Robert B. Peregrine Sr.
- ----------------------------
Robert B. Peregrine Sr.
Director
AID ASSOCIATION FOR LUTHERANS
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned director of AID
ASSOCIATION FOR LUTHERANS, a fraternal benefit society organized under the laws
of the state of Wisconsin (the "Society"), the Depositor of AAL Variable Life
Account I does hereby make, constitute and appoint John O. Gilbert, Ronald G.
Anderson and Woodrow E. Eno and each or any of them, the undersigned's true and
lawful attorneys-in-fact, with power of substitution, for the undersigned and in
the undersigned's name, place and stead, to sign and affix the undersigned's
name as such director of such Society to any Registration Statement or
Registration Statements, or other applicable forms relating to a variable
universal life product, and all amendments including post-effective amendments,
thereto, to be filed by such Society with the Securities and Exchange Commission
and any state Insurance Commission, if applicable, of shares of such Society,
and to file the same, with all exhibits thereto and other supporting or related
documents, with such Commission, granting unto such attorneys-in-fact, and each
of them, full power and authority to do and perform any and all acts necessary
or incidental to the performance and execution of the powers herein expressly
granted.
/s/ Kathi P. Seifert
- ----------------------------
Kathi P. Seifert
Director
AID ASSOCIATION FOR LUTHERANS
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned director of AID
ASSOCIATION FOR LUTHERANS, a fraternal benefit society organized under the laws
of the state of Wisconsin (the "Society"), the Depositor of AAL Variable Life
Account I does hereby make, constitute and appoint John O. Gilbert, Ronald G.
Anderson and Woodrow E. Eno and each or any of them, the undersigned's true and
lawful attorneys-in-fact, with power of substitution, for the undersigned and in
the undersigned's name, place and stead, to sign and affix the undersigned's
name as such director of such Society to any Registration Statement or
Registration Statements, or other applicable forms relating to a variable
universal life product, and all amendments including post-effective amendments,
thereto, to be filed by such Society with the Securities and Exchange Commission
and any state Insurance Commission, if applicable, of shares of such Society,
and to file the same, with all exhibits thereto and other supporting or related
documents, with such Commission, granting unto such attorneys-in-fact, and each
of them, full power and authority to do and perform any and all acts necessary
or incidental to the performance and execution of the powers herein expressly
granted.
/s/ Roger G. Wheeler
- ----------------------------
Roger G. Wheeler
Director
AID ASSOCIATION FOR LUTHERANS
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned director of AID
ASSOCIATION FOR LUTHERANS, a fraternal benefit society organized under the laws
of the state of Wisconsin (the "Society"), the Depositor of AAL Variable Life
Account I does hereby make, constitute and appoint John O. Gilbert, Ronald G.
Anderson and Woodrow E. Eno and each or any of them, the undersigned's true and
lawful attorneys-in-fact, with power of substitution, for the undersigned and in
the undersigned's name, place and stead, to sign and affix the undersigned's
name as such director of such Society to any Registration Statement or
Registration Statements, or other applicable forms relating to a variable
universal life product, and all amendments including post-effective amendments,
thereto, to be filed by such Society with the Securities and Exchange Commission
and any state Insurance Commission, if applicable, of shares of such Society,
and to file the same, with all exhibits thereto and other supporting or related
documents, with such Commission, granting unto such attorneys-in-fact, and each
of them, full power and authority to do and perform any and all acts necessary
or incidental to the performance and execution of the powers herein expressly
granted.
/s/ Marlene Wilson
- ----------------------------
Marlene Wilson
Director
AID ASSOCIATION FOR LUTHERANS
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned director of AID
ASSOCIATION FOR LUTHERANS, a fraternal benefit society organized under the laws
of the state of Wisconsin (the "Society"), the Depositor of AAL Variable Life
Account I does hereby make, constitute and appoint John O. Gilbert, Ronald G.
Anderson and Woodrow E. Eno and each or any of them, the undersigned's true and
lawful attorneys-in-fact, with power of substitution, for the undersigned and in
the undersigned's name, place and stead, to sign and affix the undersigned's
name as such director of such Society to any Registration Statement or
Registration Statements, or other applicable forms relating to a variable
universal life product, and all amendments including post-effective amendments,
thereto, to be filed by such Society with the Securities and Exchange Commission
and any state Insurance Commission, if applicable, of shares of such Society,
and to file the same, with all exhibits thereto and other supporting or related
documents, with such Commission, granting unto such attorneys-in-fact, and each
of them, full power and authority to do and perform any and all acts necessary
or incidental to the performance and execution of the powers herein expressly
granted.
/s/ Thomas R. Zehnder
- ----------------------------
Rev. Thomas Zehnder
Director
AID ASSOCIATION FOR LUTHERANS
Exhibit Index
1.A.
(1) Resolution of the Board of Directors of Aid Association for
Lutherans establishing AAL Variable Life Account I *
(2) Not Applicable
(3) (a) Form of Underwriting Agreement
(b) Form of Distribution Agreement (see (3)(a))
(c) Schedule of Sales Commissions
(4) Not applicable
(5) (a) Specimen Flexible Premium Variable Universal Life
Insurance Certificates
(b) Certificate Riders and Endorsements*
(c) Application Forms*
(6) (a) Articles of Incorporation of Aid Association for Lutherans*
(b) By-laws of Aid Association for Lutherans*
(7) Not applicable
(8) Form of participation agreement
(9) Not applicable
(10) Not applicable
B. Not applicable
C. Not applicable
2. Opinion and consent of Mark J. Mahoney, Esq., as to the legality of
the securities being registered
3. Not applicable
4. Not applicable
5. Not applicable
6. Opinion and consent of David C. Vanden Heuvel, FSA, MAAA Director and
Associate Actuary , as to actuarial
matters pertaining to the securities being registered
7. (a) Consent of Ernst & Young LLP, Independent Auditors
(b) Consent of Mayer Brown & Platt.
*Incorporated herin by reference to the registration statement of AAL and the
AAL Variable Life Account I, filed with the Securities and Exchange Commission
on July 10, 1997 (File No. 333-31011, 811-0829)
AMENDED AND RESTATED
PRINCIPAL UNDERWRITING AND SERVICING AGREEMENT
BY AND BETWEEN AAL CAPITAL MANAGEMENT CORPORATION
AND AID ASSOCIATION FOR LUTHERANS
DATED NOVEMBER 23,1994, AS AMENDED -------,1997
<PAGE>
TABLE OF CONTENTS
1. Appointment of DISTRIBUTOR
2. Underwriting Responsibilities of DISTRIBUTOR .
3. Additional Services to be Provided by DISTRIBUTOR
3.1 Preparation of Sales Literature and Advertising
Materials
3.2 Licensing of Field and Home Office Staff
3.3 Regulatory Compliance
3.4 Field Training
3.5 Confirmations
4. Responsibilities of AAL
4.1 Sales Commissions
4.2 Sales Credits and Field Expenses
4.3 Registrations of Securities and Investment Adviser
4.4 Books and Records
4.5 Duty to Keep Informed
4.6 Transfer Agent and Management
5 Joint Procedures for Communications with the Public and
with Registered Representatives
6. Fees to be Paid to DISTRIBUTOR by AAL
6.1 Services
6.2 Determination of Charge/Expense Formulas for Services
6.3 Preparation and Negotiation of Final Annual Budget for
Services
6.4 Accounting Procedures
7. Independent Contractor
8. indemnification
8.1 Indemnification of AAL
8.2 Indemnification of DISTRIBUTOR
9. Authorized Representations
10. Amendment or Assignment of Agreement
11. Termination of Agreement
12. Miscellaneous
13. Definition of Terms
14. Compliance with Securities Laws
15. Regulatory Examinations
16. Notices
17. Governing Law
Schedule A: Variable Annuity Schedule of Sales Commissions
Schedule B: Variable Life Schedule of Sales Commissions
<PAGE>
PRINCIPAL UNDERWRITING AND SERVICING AGREEMENT
This PRINCIPAL UNDERWRITING AND SERVICING AGREEMENT made and entered this 23rd
day of November, 1994, amended and restated October 28, 1996 and -------,1997,
by and between AAL CAPITAL MANAGEMENT CORPORATION, a corporation organized and
existing under the laws of the State of Delaware, ( "DISTRIBUTOR" or "AALCMC")
and AID ASSOCIATION FOR LUTHERANS, a fraternal benefit society organized and
existing under the laws of the State of Wisconsin ("AAL"), on its own behalf and
on behalf of AAL Variable Annuity Account I "VARIABLE ANNUITY ACCOUNT" and AAL
Variable Life Account I "VARIABLE LIFE ACCOUNT) both collectively "ACCOUNTS."
RECITALS
AAL and its VARIABLE ANNUITY ACCOUNT and VARIABLE LIFE ACCOUNT, separate unit
investment trust investment accounts registered under the Investment Company Act
of 1940 (the "1940 Act"), propose to offer for sale certain flexible premium
deferred variable annuity and variable universal life contracts (the
"Certificates"), interests in the ACCOUNTS under the Certificates are registered
with the Securities and Exchange Commission (the "SEC") as securities under the
Securities Act of 1933 (the " 1933 Act").
Premiums received from owners of Certificates will be deposited at the owner's
designation in the respective ACCOUNTS and/or in the Fixed Account. The ACCOUNTS
will invest solely in portfolio shares of the AAL Variable Product Series Fund,
Inc. "FUND."
DISTRIBUTOR is a wholly-owned indirect subsidiary of AAL, is registered as a
broker-dealer with the SEC under the Securities Exchange Act of 1934 (the "1934
Act") and with state securities authorities in all 50 states, is a member of the
National Association of Securities Dealers, Inc. ("NASD"), and is authorized to
offer and sell mutual funds and variable insurance products, and acts as
DISTRIBUTOR of The AAL Mutual Funds, a registered investment company.
AAL and DISTRIBUTOR intend to enter into an agreement by which DISTRIBUTOR will
act as the principal underwriter in a continuous offering of the Certificates
for AAL, to begin no sooner than on the effective date of the registration
statements for the Certificates under the 1933 Act, and state securities and
insurance registrations. This Agreement pertains to the sale of Certificates by
Registered Representatives licensed with DISTRIBUTOR, and not to the sale of
Certificates by any other party and/or broker-dealer who may be authorized by
AAL to sell Certificates or who may have a separate Distribution or Selling
Agreement with AAL or DISTRIBUTOR.
THEREFORE, in consideration of the covenants and mutual promises of the parties
and for other good and valuable consideration, the receipt and legal sufficiency
of which are hereby acknowledged, DISTRIBUTOR and AAL agree as follows:
AGREEMENT
1. Appointment of DISTRIBUTOR
AAL hereby appoints DISTRIBUTOR as the principal underwriter for the
Certificates during the term of this Agreement in each state or other
jurisdiction where the Certificates may legally be sold. The Certificates may
also be sold by representatives of other broker-dealer firms with which AALCMC
has executed a selling agreement. In addition, AAL may retain other firms to
serve as principal underwriters of the Certificates. Anything in this Agreement
to the contrary notwithstanding, AAL retains the ultimate right to suspend sales
in any jurisdiction or jurisdictions, or to refuse to sell a Certificate to any
applicant for any reason whatsoever.
2. Underwriting Responsibilities of DISTRIBUTOR
DISTRIBUTOR agrees to offer and sell the Certificates, as agent for AAL, from
time to time during the term of this Agreement upon the terms described in the
Certificate Prospectuses. As used in this Agreement, the term "Prospectuses"
shall mean the Prospectuses and the Statements of Additional Information
included as part of the Registration Statement for AAL and the ACCOUNTS, as such
Prospectuses and Statements of Additional Information may be amended or
supplemented from time to time. The term "Registration Statement" shall mean the
Registration Statement, as amended from time to time and filed by AAL and the
respective ACCOUNTS with the SEC, and effective under the 1933 Act and/or the
1940 Act.
After the effective date of the Registration Statement for the Certificates,
DISTRIBUTOR will hold itself out to receive applications, satisfactory to
DISTRIBUTOR, for the purchase of the Certificates and will promptly transmit
applications and premiums received for the Certificates which it accepts to AAL
or to its designee..
All purchases shall be deemed effective at the time and in the manner set forth
in the Prospectuses. All applications, when accepted by DISTRIBUTOR and by AAL,
shall designate the allocation of premiums by the purchaser among the separate
investment options represented in the Certificates, by the sub-accounts of the
ACCOUNTS and the AAL Fixed Account, as defined and described in the Certificate
Prospectuses. All premiums from purchasers shall be deposited by AAL in either
the ACCOUNTS, to be promptly allocated among the sub-accounts or to the AAL
Fixed Account, as designated by the purchaser and in accordance with the 1940
Act and rules thereunder. Premiums allocated to the sub-accounts of the ACCOUNTS
shall be expressed as "accumulation units" of the Certificate as that term is
defined in the Prospectus. The above allocation statements are subject to any
specific allocation of premium requirements that may be set forth in the
Certificate.
DISTRIBUTOR agrees to be solely responsible for the operation of its business as
a registered broker-dealer in connection with all its underwriting activities
under this Agreement, and shall operate such business in accordance with all
applicable laws and regulations. All sales of the Certificates by DISTRIBUTOR
shall be made through Registered Representatives who are "Associated Persons"
("Associated Persons" as defined by the 1934 Act) of DISTRIBUTOR, and who are
also agents or District Representatives of AAL. DISTRIBUTOR shall be responsible
for selling only through Registered Representatives who are properly licensed to
sell Certificates in jurisdictions where offers and sales take place.
DISTRIBUTOR is responsible for certain services relating to the distribution of
all prospectus(es) of the ACCOUNTS and Fund used by its Registered
Representatives in the marketing of the Certificates. These services include,
but are not limited to design, layout, printing, mailing or other delivery
services.
3. Additional Services to be Provided by DISTRIBUTOR
In addition to the underwriting responsibilities of DISTRIBUTOR described in
paragraph 2 above, DISTRIBUTOR agrees to provide the following additional
services to AAL:
3.1 Preparation of Sales Literature and Advertising Materials
DISTRIBUTOR and AAL will coperate in the initiation, preparation, printing and
distribution of all public sales literature and advertising materials, as well
as all training and marketing materials distributed to its Registered
Representatives as "broker-dealer only" materials under the rules, which are
used by DISTRIBUTOR and its Registered Representatives in connection with the
sale of the Certificates. AAL will, in a timely manner, provide DISTRIBUTOR with
any and all materials and information necessary to enable DISTRIBUTOR to fulfill
its obligations set forth in this section regarding sales literature and
advertising materials. AAL will provide DISTRIBUTOR with the names of AAL
employees who will review and approve the materials described in this
subsection. DISTRIBUTOR will coordinate and provide copies of such materials to
designated employees of AAL during the development process and all advertising
and sales literature will be approved by both AAL and DISTRIBUTOR prior to use.
DISTRIBUTOR will complete all of the necessary filings and approvals with the
NASD and state securities authorities prior to the public use of such sales
material and advertising. DISTRIBUTOR will provide copies of all materials to
AAL. AAL will file and obtain approval of all such sales material and
advertising with State Insurance Commissioners where such filing is required by
state laws. AAL will promptly advise DISTRIBUTOR when such filings and approvals
are completed. Materials will only be made available for public use or
Registered Representative use after all securities and insurance filings and
approvals are completed and AAL has given approval for materials to be used.
DISTRIBUTOR will be responsible for maintaining an inventory and approval
history of all of its sales literature, advertising and "broker-dealer only"
materials, and for the distribution of such materials to its Registered
Representatives and to the public.
3.2 Licensing of Field and Home Office Staff
DISTRIBUTOR will be responsible for managing the licensing of all of its
Registered Representatives in connection with the sale of the Certificates, and
will directly handle all licensing by the NASD and state securities authorities
that is necessary for the sale of the Certificates. AAL will be responsible for
obtaining the necessary insurance licenses with state insurance authorities for
the offer and sale of the Certificates. AAL and DISTRIBUTOR shall develop data
base(es) and reporting system(s) to consolidate securities and insurance
licensing information for their District Representatives and Registered
Representatives, respectively. The system(s) will provide controls satisfactory
to DISTRIBUTOR in the processing of Certificate applications to assure that all
of its Registered Representatives are properly licensed when offering and
selling the Certificates.DISTRIBUTOR and AAL will cooperate to assure the
appropriate licensing of AAL and DISTRIBUTOR's home office employees (including
DISTRIBUTOR's wholesalers) who require securities or insurance licenses in
connection with their work on the Certificates. DISTRIBUTOR will assist such
persons in obtaining their securities licenses as requested by AAL. All AAL
employees who are Associated Persons of DISTRIBUTOR as a result of being
licensed as securities Registered Representatives will be subject to compliance
procedures and supervision of DISTRIBUTOR in connection with all work related to
the Certificates in the same manner as all other Associated Persons.
3.3 Regulatory Compliance
DISTRIBUTOR will supervise all of its Registered Representatives who are
Associated Persons of DISTRIBUTOR (including employees of AAL) with respect to
all securities laws and regulations in connection with the offer and sale of the
Certificates. Supervision shall include, but not be limited to, the following
matters: acceptance of new business; security suitability determinations (as
made in accordance with NASD rules or other applicable SEC or other regulatory
authority's rules and regulations); field training, supervision and sales
practices; books and records requirements; approval and use of all advertising,
sales literature and broker-dealer only materials;
confirmation content and processing; the payment of commissions; and compliance
with the written supervisory procedures of DISTRIBUTOR. AAL will supervise all
insurance aspects including training, suitability and issuance.
3.4 Field Training
Immediately after the effective date of the Registration Statement for the
Certificates, DISTRIBUTOR shall be responsible for conducting field training of
all of its associated Registered Representatives authorized to sell Certificates
in those states where the Certificates are approved for sale. The training
program shall be developed and conducted by DISTRIBUTOR, although AAL may also
participate in training activities. DISTRIBUTOR will coordinate with AAL
concerning those AAL employees who will be involved in the development of the
training program and in its execution. The training program shall be approved by
both AAL and DISTRIBUTOR prior to implementation.
3.5 Confirmations
DISTRIBUTOR shall be responsible to assure that all purchases, sales or other
transactions occurring in the account of an owner of a Certificate sold by its
Registered Representatives shall be confirmed to the owner in writing in a form
and manner which complies with the requirements of the 1934 Act, blue sky laws
and NASD rules. Such confirmations will be furnished by AAL to all owners of
Certificates in accordance with securities laws, will reflect the facts of the
transaction, and will show that they are being, sent by AAL on behalf of
DISTRIBUTOR, acting in the capacity of DISTRIBUTOR. The parties agree that the
form and the manner of use of confirmations in connection with transactions
occurring in such accounts shall be supervised by DISTRIBUTOR. AAL agrees that
AAL and its agent, if any, will prepare and distribute such confirmations in
accordance with DISTRIBUTOR's instructions. AAL agrees that AAL will make no
changes or variations in either the form or the manner of distribution of such
confirmations without the written approval of DISTRIBUTOR and shall cause such
confirmations to be issued as directed by DISTRIBUTOR and on behalf of
DISTRIBUTOR
4. Responsibilities of AAL
4.1 Sales Commissions
AAL will pay DISTRIBUTOR a sales commission on Certificate sales pursuant to
Schedules A and B attached hereto. DISTRIBUTOR intends to reallocate commissions
to its Registered Representatives for the sale of Certificates in accordance
with a written fee schedule agreement between DISTRIBUTOR and its associated
Registered Representatives.
All commissions for the sale of the Certificates due to DISTRIBUTOR from AAL
shall be reflected on DISTRIBUTOR's financial records as a receipt from AAL and
a disbursement to DISTRIBUTOR'S Registered Representatives, notwithstanding the
direct payment of such commissions by AAL to such Registered Representatives.
AAL agrees to pay commissions directly to such Registered Representatives as a
convenience to DISTRIBUTOR and recognizes that this agreement to pay is purely
ministerial in nature and not discretionary.
Notwithstanding the foregoing, it is agreed that AAL shall have the right in the
payment of such commissions to treat such commissions as part of AAL employee
compensation to such Registered Representatives for the purpose of calculation
of AAL benefits programs and withholding taxes.
AAL will maintain and provide records and reports reflecting the calculation of
all commissions paid to, and any other cash and non-cash compensation
(collectively "Commissions"), received by DISTRIBUTOR'S Registered
Representatives and the details of the transactions upon which such Commissions
are based, and will respond to any inquiries about Commission payments, pursuant
to this paragraph. DISTRIBUTOR shall designate to AAL the records required and
such records shall be maintained subject to the provisions of Paragraph 4.4
below.
4.2 Sales Credits and Field Expenses
Any expenses or charges for AAL field services for the Certificates will be paid
directly by AAL. Sales credits for sales of the Certificates will be based on
gross premiums received for the Certificates, subject to any exceptions that may
exist or be developed with respect to internal transfers of funds among AAL and
affiliated companies.
4.3 Registrations of Securities and Investment Adviser
AAL shall be solely responsible, at its expense, for registration of the
Certificates, the ACCOUNTS, the FUND, and for the registration of AAL as an
investment adviser of the FUND, with all required state and federal authorities.
AAL, agrees to maintain such registration statements in effect at all times
during the term of this Agreement, and to file such amendments, reports and
other documents as may be necessary to assure that there will be no untrue
statement of material fact in any Registration Statement and that there shall be
no omission to state a material fact in the Registration Statement or Form ADV,
which omission would make the statements therein misleading,. AAL may direct
DISTRIBUTOR, and DISTRIBUTOR shall perform, any or all of the services described
in this paragraph.
4.4 Books and Records
AAL agrees to maintain all books and records required and designated by
DISTRIBUTOR under the securities laws in connection with the offer and sale of
the Certificates by its Registered Representatives, as specifically required by
Section 17 of the 1934 Act, Rule I7a-3 and 17a-4 under the 1934 Act or as
required by the NASD and such other or further books or records as may be
required by rule or regulation of any other federal or state regulatory
organization or self-regulatory organization, to the extent such requirements
are applicable to the variable product operations as mutually determined for
purposes of this Agreement by DISTRIBUTOR. AAL shall maintain such books and
records as agent on behalf of DISTRIBUTOR who shall be the owner thereof. AAL
agrees that such books and records will be open and available to DISTRIBUTOR at
all times, shall be surrendered promptly on request, without charge, to
DISTRIBUTOR, and shall be subject to inspection by the SEC in accordance with
Section 17 of the 1934 Act, and by the NASD or other regulatory authorities
having jurisdiction over the securities activities of DISTRIBUTOR, at any time.
The parties represent and warrant that DISTRIBUTOR has provided a schedule to
AAL that describes the books and records to be maintained by AAL, on behalf of
DISTRIBUTOR.
4.5 Duty to Keep Informed
AAL shall at its expense keep DISTRIBUTOR fully informed on a current basis of
any changes or other material matters affecting the Certificates or the FUND.
AAL will use its best efforts to provide advance notice to DISTRIBUTOR of any
proposed changes in the Certificates or the FUND and to discuss such matters
with DISTRIBUTOR prior to taking any action. AAL shall furnish DISTRIBUTOR
copies of all information, financial statements, books and records and other
papers which DISTRIBUTOR may reasonably request in connection with its due
diligence inquiry or for use in connection with the distribution of
Certificates.
4.6 Transfer Agent and Management
AAL shall be solely responsible for the selection and supervision of a Transfer
Agent for the Certificates; management of all Certificate accounts, including
the sub-accounts, establishing and maintaining account records and processing;
and the receipt and disbursement of all monies related to the Certificates.
Notwithstanding its responsibility for these matters, AAL shall keep DISTRIBUTOR
currently informed, through reports requested by DISTRIBUTOR, of all activities
related to the Certificates and the FUND. AAL will also keep DISTRIBUTOR
informed and consult with DISTRIBUTOR in advance of any changes to the
procedures for the management or administration of the Certificates or to any of
the underlying records or documents related thereto. AAL recognizes that any
communications with Certificate owners, or prospective Certificate owners,
related to the Certificates sold by DISTRIBUTOR'S Registered Representatives
subject to securities regulations and must be approved in advance by AAL and
DISTRIBUTOR and may require filing with and approval by the NASD and state
securities authorities. Such communications include but are not limited to:
correspondence, statement stuffers, newspaper or magazine articles, confirmation
messages and other similar written materials.
5. Joint Procedures for Communications with the Public and with Registered
Representatives
The parties recognize that all written materials which are provided to AAL
members or prospective members in connection with the Certificates sold by
DISTRIBUTOR'S Registered Representatives are required to meet specific standards
established by securities and insurance regulatory authorities. Such materials
will include advertising and sales materials, correspondence, magazine articles,
newspaper articles, press releases and any other written public communication.
To assure compliance with all applicable rules and laws, it is agreed that
DISTRIBUTOR will manage and coordinate the distribution of all public written
materials related to the Certificates sold by DISTRIBUTOR'S Registered
Representatives, including materials related to the FUND. No public materials
will be released without the prior written approval of both AAL and DISTRIBUTOR,
and both parties shall cooperate in the preparation and review of such
materials. AAL will provide DISTRIBUTOR with the names of its employees
designated to give approval for such written materials. All nonpublic written
communications with DISTRIBUTOR'S Registered Representatives and to employees of
AAL or DISTRIBUTOR, related to the Certificates shall be reviewed and approved
by both AAL and DISTRIBUTOR prior to use. Such materials include, without
limitation, field updates, "broker-dealer only" materials, training materials,
compliance information. AAL and DISTRIBUTOR will establish internal policies to
insure that all such materials are appropriately and timely reviewed and shall
cooperate with each other in establishing such procedures.
6. Fees to be Paid to DISTRIBUTOR by AAL
6.1 Services
DISTRIBUTOR shall perform certain services, as requested by AAL, in connection
with DISTRIBUTOR's role as principal underwriter in AAL's continuous offering of
the Certificates ("Services"). Services shall be initially designated as
"Marketing Services", "Broker-Dealer Administration", "Licensing", "Regulatory
Compliance", "Field Training", and "Consulting". The parties represent and
warrant that AAL and DISTRIBUTOR have mutually agreed to the definition and
composition of each of the foregoing Services. AAL and DISTRIBUTOR agree that
the definition and composition of each of the foregoing Services, and additional
services to be rendered in connection with the sale of the Certificates, shall
be reaffirmed or amended, as the case may be, on an annual basis in connection
with the preparation and negotiation of the "Final Annual Budget" (as that term
is defined in Paragraph 6.3) for Services for such year.
6.2 Determination of Charge/Expense Formulas for Services
The parties represent and warrant that DISTRIBUTOR and AAL agree on the methods
to determine and calculate the amount of Services to be charged by DISTRIBUTOR
as an expense to AAL (the "Charge/Expense Formulas"). Charge/Expense Formulas
shall be initially determined and defined as "Sales Credit Charges", "Direct
Expenses", and "Per Hour Charges". AAL and DISTRIBUTOR covenant and agree that:
(i) Charge/Expense Formulas shall be reaffirmed or amended, as the case
may be, on an annual basis in connection with the preparation and negotiation of
the Final Annual Budget for Services for such year; and
(ii) Charge/Expense Formulas shall include a portion of DISTRIBUTOR's
general overhead expenses as specifically stated in the underlying detail
schedules for Charge/Expense Formulas ("Detail Schedules").
DISTRIBUTOR and AAL affirm and agree that the Detail Schedules were reviewed by
representatives of both AAL and DISTRIBUTOR in the due diligence process. The
parties represent and warrant that DISTRIBUTOR and AAL agree on the allocation
of dollar amounts of Services to the various categories of Charge/Expense
Formulas (" Services Allocation"). AAL and DISTRIBUTOR covenant and agree that
Services Allocation shall be reaffirmed or amended, as the case may be, on an
annual basis in connection with the preparation and negotiation of the Final
Annual Budget for Services for such year.
6.3 Preparation and Negotiation of Final Annual Budget for Services
Each successive year that this Agreement is in effect, DISTRIBUTOR shall prepare
a projected annual budget for the successive year (the " Projected Annual
Budget") and deliver the Projected Annual Budget to a designated representative
of AAL. Each successive year that this Agreement is in effect, AAL shall provide
comments to DISTRIBUTOR on the content of the Projected Annual Budget AAL and
DISTRIBUTOR covenant and agree that:
(i) a final, agreed form of the Projected Annual Budget (the "Final
Annual Budget") shall be determined on or before the deadline date set forth for
the submission of annual budgets pursuant to AAL budget policies; and
(ii) the policies, definitions and operating procedures (including but
not limited to "Billing Process", and "Billable Items") set forth in P.O.P. 251
- - "Subsidiary and Affiliate Billing", shall be followed in connection with the
preparation and negotiation of the Projected Annual Budget and the Final Annual
Budget.
6.4 Accounting Procedures
DISTRIBUTOR and AAL, covenant and agree that:
(i) payroll & expense records and procedures,
(ii) invoicing procedures; and
(iii) the time and manner of charge/expense payment for the Services
set forth in this Agreement shall be determined by reference to certain AALCMC
accounting manuals and procedures. Notwithstanding the foregoing, the parties
covenant and agree that the provisions of this Agreement pertaining to books and
records (e.g. Paragraph 4.4 hereof) shall apply to all transactions relating to
Services and the offering and sale of Certificates by DISTRIBUTOR The parties
agree that because of the sensitive and confidential nature of these records and
procedures, such records and procedures shall not be disclosed nor disseminated
except to authorized accounting and management personnel of AAL and DISTRIBUTOR.
DISTRIBUTOR and AAL acknowledge that unanticipated conditions may materially
change the Final Annual Budget. DISTRIBUTOR and AAL agree that the nature of
these unanticipated conditions can be characterized as either a "permanent
change" or a "temporary change". For example, a permanent change is the
elimination of a Service that DISTRIBUTOR provides pursuant to this Agreement
and a temporary chance is AAL's assumption of a Service, pursuant to
DISTRIBUTOR's request. DISTRIBUTOR and AAL covenant and agree that the
accounting treatment for permanent changes shall be redetermined on an annual
basis and the accounting treatment for a temporary change shall be as set forth
herein. In the event a temporary change occurs, DISTRIBUTOR and AAL covenant and
agree that AAL shall be permitted a payment credit towards any outstanding
charges/expenses for Services performed by DISTRIBUTOR, for certain services
rendered by AAL employees and agents in connection with the offering and sale of
the Certificates (e.g. legal or accounting services) ("Services Offset") The
relevant terms and conditions of this Agreement shall apply to the Services
Offset (e.g. determination for Final Annual Budget, accounting procedures). On a
monthly basis during the term of this Agreement DISTRIBUTOR shall provide
written documentation to AAL for Services, and AAL shall provide written
documentation to DISTRIBUTOR for Services Offset rendered during the preceding
calendar month (collectively, the "Accounting Statements").
The Accounting Statements shall reasonably itemize and detail the Services and
Services Offset provided by each of the parties during the proceeding, month.
The format for the Accounting Statements shall follow certain CMC accounting
procedures.
7. Independent Contractor
In performing its duties hereunder, DISTRIBUTOR shall be an independent
contractor and neither DISTRIBUTOR, nor any of its officers, directors,
employees, or Registered Representatives is, or shall be, an employee of AAL
solely because of this agreement. DISTRIBUTOR shall be responsible for the
employment, control, and conduct of its officers, agents and employees and for
injury to such agents or employees or to others through its agents or employees.
DISTRIBUTOR assumes full responsibility for its agents and employees under
applicable statutes and agrees to pay all employee taxes thereunder.
8. lndemnification
8.1 Indemnification of AAL
DISTRIBUTOR agrees to indemnify and hold harmless AAL and each of its present or
former directors, officers, employees, representatives and each person, if any,
who controls or previously controlled AAL within the meaning of Section 15 of
the 1933 Act, against any and all losses, liabilities, damages, claims or
expenses (including the reasonable costs of investigating or defending any
alleged loss, liability, damage, claims or expense and reasonable counsel fees
incurred in connection therewith) to which AAL or any such person may become
subject under the 1933 Act, under any other statute, at common law, or
otherwise, arising out of the acquisition of any Certificate by any person which
may be based upon any wrongful act by DISTRIBUTOR or any of DISTRIBUTOR's
directors, officers, employees or representatives, or may be based upon any
untrue statement or alleged untrue statement of a material fact contained in a
registration statement, prospectus, shareholder report or other information
covering the Certificates filed or made public by AAL or any amendment thereof
or supplement thereto, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading if such statement or omission was made in reliance upon
information furnished to AAL by DISTRIBUTOR.
In no case is DISTRIBUTOR's indemnity in favor of AAL, or any person indemnified
to be deemed to protect AAL or such indemnified person against any liability to
which AAL or such person would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of his duties or
by reason of his reckless disregard of his obligations and duties under this
Agreement, or is DISTRIBUTOR to be liable under its indemnity agreement
contained in this Paragraph with respect to any claim made against AAL or any
person indemnified unless AAL or such person, as the case may be, shall have
notified DISTRIBUTOR in writing of the claim within a reasonable time after the
summons or other first written notification giving information of the nature of
the claim shall have been served upon AAL or upon such person (or after AAL or
such person shall have received notice to such service on any designated agent).
However, failure to notify DISTRIBUTOR of any such claim shall not relieve
DISTRIBUTOR from any liability which DISTRIBUTOR may have to AAL or any person
against whom such action is brought otherwise than on account of DISTRIBUTOR's
indemnity agreement contained in this Section. DISTRIBUTOR agrees to promptly
notify AAL of the commencement of any litigation or proceedings against it or
any of its officers, employees or representatives in connection with the issue
or sale of the certificates.
8.2 Indemnification of DISTRIBUTOR
AAL agrees to indemnify and hold harmless DISTRIBUTOR and each of its present or
former directors, officers, employees, representatives and each person, if any,
who controls or previously controlled DISTRIBUTOR within the meaning of Section
15 of the 1933 Act, under any other statute, at common law, or otherwise,
arising out of the acquisition, or with regard to the terms and conditions, of
any Certificates by any person that may be based upon any wrongful act by AAL or
any of AAL's directors, officers, employees or representatives (other than
DISTRIBUTOR) or any other broker/distributors who are selling Certificates for
AAL, may be based upon any untrue statement or alleged untrue statement or a
material fact contained in a registration statement, prospectus, shareholder
report or other information covering the Certificates or the FUND filed or made
public by AAL or any amendment thereof or supplement thereto, or the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading unless such statement
or omission was made in reliance upon information furnished to AAL by
DISTRIBUTOR. In no case is AAL's indemnity in favor of DISTRIBUTOR, or any
person indemnified to be deemed to protect DISTRIBUTOR or such indemnified
person against any liability to which DISTRIBUTOR or such person would otherwise
be subject by reason of willful misfeasance, bad faith, or gross negligence in
the performance of his duties or by reason of his reckless disregard of his
obligations and duties under this Agreement, or is AAL to be liable under its
indemnity agreement contained in this Paragraph with respect to any claim made
against DISTRIBUTOR or person indemnified unless DISTRIBUTOR, or such person, as
the case may be, shall have notified AAL in writing of the claim within a
reasonable time after the summons or other first written notification giving
information of the nature of the claim shall have been served upon DISTRIBUTOR
or upon such person (or after DISTRIBUTOR or such person shall have received
notice of such service on any designated agent). However, failure to notify AAL
of any such claim shall not relieve AAL from any liability which AAL may have to
DISTRIBUTOR or any person against whom such action is brought otherwise than on
account of AAL's indemnity agreement contained in this Paragraph. AAL shall be
entitled to participate, at its own expense, in the defense, or, if AAL so
elects, to assume the defense of any suit brought to enforce any such claim, but
if AAL elects to assume the defense, such defense shall be conducted by legal
counsel chosen by AAL. AAL agrees to promptly notify DISTRIBUTOR of the
commencement of any litigation or proceedings against it or any of its trustees,
officers, employees, or representatives in connection with the issue or sale of
the Certificates.
9. Authorized Representations
DISTRIBUTOR is not authorized by AAL to give on behalf of AAL any information or
to make any representations in connection with the sale of Certificates other
than the information and representations contained in a Registration Statement
filed with the SEC under the 1933 Act and/or the 1940 Act, covering the
Certificates, the ACCOUNTS, or the FUND, as such Registration Statements may be
amended or supplemented from time to time, or contained in shareholder reports
or other material that may be prepared by or on behalf of AAL for DISTRIBUTOR's
use. This shall not be construed to prevent DISTRIBUTOR from preparing and
distributing advertising and sales literature or other material as it may deem
appropriate, subject to the requirements of Paragraph 5 above.
10. Amendment or Assignment of Agreement
This Agreement may not be amended or assigned except by written agreement of
both parties.
11. Termination of Agreement
This Agreement may be terminated by either party hereto, without the payment of
any penalty, on 90 days prior notice in writing to the other party.
12. Miscellaneous
The captions in this Agreement are included for convenience of reference only
and in no way define or delineate any of the provisions hereof or otherwise
affect their construction or effect. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument. Nothing herein contained shall be deemed to require AAL to take any
action contrary to its Charter or by-laws, or any applicable statutory or
regulatory requirement to which it is subject or by which it is bound, or to
relieve or deprive the Board of Directors of AAL of responsibility for and
control of the conduct of the affairs of AAL.
13. Definition of Terms
Any questions of interpretation of any term or provision of this Agreement
having a counterpart in or otherwise derived from a term or provision of the
1933 Act, the 1934 Act, the Advisers Act or the 1940 Act shall be resolved by
reference to such term or provision and to interpretation thereof, if any, by
the United States courts or, in the absence of any controlling decision of any
such court, by rules, regulations or orders of the SEC validly Issued pursuant
to such Act.
14. Compliance with Securities Laws
AAL represents that it is registered as an investment adviser under the Advisers
Act and agrees that it will comply with all the provisions of the Act and of the
rules and regulations thereunder. AAL and DISTRIBUTOR each agree to comply with
all of the applicable terms and provisions of the 1933 Act, the 1934 Act, the
1940 Act, the Advisers Act, and all applicable state laws and NASD rules and
regulations. Each party hereto shall advise the other promptly of (a) any action
of the SEC or any authorities of any state or territory, of which it has
knowledge, affecting the registration or qualification of the ACCOUNTS or the
Certificates, or the right to offer the Certificates for sale or (b) the
happening of any event which makes untrue any statement, or which requires the
making of any change in any Registration Statement or any current prospectus or
statement of additional information, in order to make the statements therein not
materially misleading.
I5. Regulatory Examinations
DISTRIBUTOR and AAL agree to cooperate fully in any insurance regulatory
examination, investigation, or proceeding or any judicial proceeding arising in
connection with the Certificates. DISTRIBUTOR and AAL further agree to cooperate
fully in any securities regulatory examination, investigation or proceeding or
any judicial proceeding with respect to AAL, DISTRIBUTOR, their affiliates and
their agents or representatives, to the extent that such examination,
investigation or proceeding is in connection with Certificates distributed under
this Agreement. DISTRIBUTOR shall furnish applicable Federal and state
regulatory authorities with any information or reports in connection with its
services under this Agreement which such authorities may request in order to
ascertain whether AAL's operations are being conducted in a manner consistent
with any applicable laws or regulations.
16. Notices
Any notice required to be given pursuant to this Agreement shall be deemed duly
given if delivered or mailed by registered mail, postage prepaid, to DISTRIBUTOR
or to AAL at 222 West College Avenue, Appleton, Wisconsin, 54919-0007.
17. Governing Law
This Agreement shall be governed and construed in accordance with the laws of
the State of Wisconsin.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed
by their duly authorized representatives and their respective corporate seals to
be hereunto affixed, as of the day and year first above written.
Aid Association for Lutherans
By: John 0. Gilbert, President and Chief Executive Officer
Attest: Woodrow E. Eno Senior Vice President, Secretary and General Counsel
AAL Capital Management Corporation
By: Robert G. Same, Executive Vice President and Chief Operating Officer
Attest: Joseph F. Wreschnig, Assistant Vice President and Assistant Secretary
VUL NEW ISSUE COMMISSION PERCENTS
Percent Percent Percent
of of of
Age 1st MFYP 2nd MFYP All Prems
0-44 0.475 0.205 0.025
45 0.435 0.185 0.025
46 0.43 0.18 0.025
47 0.42 0.175 0.025
48 0.41 0.17 0.025
49 0.4 0.165 0.025
50 0.39 0.16 0.025
51 0.38 0.155 0.025
52 0.37 0.15 0.025
53 0.36 0.145 0.025
54 0.35 0.14 0.025
55 0.345 0.135 0.025
56 0.34 0.135 0.025
57 0.335 0.135 0.025
58 0.325 0.135 0.025
59 0.315 0.135 0.025
60 0.305 0.135 0.025
61 0.295 0.135 0.025
62 0.285 0.135 0.025
63 0.275 0.135 0.025
64 0.265 0.135 0.025
65 0.255 0.135 0.025
66 0.255 0.135 0.025
67 0.255 0.135 0.025
68 0.245 0.135 0.025
69 0.245 0.135 0.025
70 0.235 0.135 0.025
71 0.235 0.135 0.025
72 0.225 0.135 0.025
73 0.225 0.135 0.025
74 0.215 0.135 0.025
75 0.215 0.135 0.025
76 0.215 0.135 0.025
77 0.215 0.135 0.025
78 0.205 0.135 0.025
79 0.205 0.135 0.025
80 0.205 0.135 0.025
VUL INCREASE COMMISSON AS PERCENT OF MFYP
<TABLE>
Quarter Quarter Quarter Quarter Quarter Quarter Quarter
Age 1 2 3 4 5 6 7
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0-44 0.32 0.06 0.06 0.06 0.06 0.06 0.06
45 0.3 0.055 0.055 0.055 0.055 0.05 0.05
46 0.3 0.055 0.055 0.05 0.05 0.05 0.05
47 0.295 0.05 0.05 0.05 0.05 0.05 0.05
48 0.28 0.05 0.05 0.05 0.05 0.05 0.05
49 0.275 0.05 0.05 0.05 0.05 0.045 0.045
50 0.27 0.05 0.05 0.045 0.045 0.045 0.045
51 0.265 0.045 0.045 0.045 0.045 0.045 0.045
52 0.26 0.045 0.045 0.045 0.045 0.04 0.04
53 0.255 0.045 0.045 0.04 0.04 0.04 0.04
54 0.25 0.04 0.04 0.04 0.04 0.04 0.04
55 0.25 0.04 0.04 0.04 0.04 0.035 0.035
56 0.245 0.04 0.04 0.04 0.04 0.035 0.035
57 0.24 0.04 0.04 0.04 0.04 0.035 0.035
58 0.24 0.04 0.04 0.035 0.035 0.035 0.035
59 0.24 0.035 0.035 0.035 0.035 0.035 0.035
60 0.24 0.035 0.035 0.035 0.035 0.03 0.03
61 0.24 0.035 0.035 0.03 0.03 0.03 0.03
62 0.24 0.03 0.03 0.03 0.03 0.03 0.03
63 0.23 0.03 0.03 0.03 0.03 0.03 0.03
64 0.22 0.03 0.03 0.03 0.03 0.03 0.03
65 0.22 0.03 0.03 0.03 0.03 0.025 0.025
66 0.22 0.03 0.03 0.03 0.03 0.025 0.025
67 0.22 0.03 0.03 0.03 0.03 0.025 0.025
68 0.22 0.03 0.03 0.025 0.025 0.025 0.025
69 0.22 0.03 0.03 0.025 0.025 0.025 0.025
70 0.22 0.025 0.025 0.025 0.025 0.025 0.025
71 0.22 0.025 0.025 0.025 0.025 0.025 0.025
72 0.21 0.025 0.025 0.025 0.025 0.025 0.025
73 0.21 0.025 0.025 0.025 0.025 0.025 0.025
74 0.2 0.025 0.025 0.025 0.025 0.025 0.025
75 0.2 0.025 0.025 0.025 0.025 0.025 0.025
76 0.2 0.025 0.025 0.025 0.025 0.025 0.025
77 0.2 0.025 0.025 0.025 0.025 0.025 0.025
78 0.19 0.025 0.025 0.025 0.025 0.025 0.025
79 0.19 0.025 0.025 0.025 0.025 0.025 0.025
80 0.19 0.025 0.025 0.025 0.025 0.025 0.025
</TABLE>
AID ASSOCIATION
FOR LUTHERANS
A FRATERNAL BENEFIT SOCIETY
FLEXIBLE PREMIUM VARIABLE
LIFE INSURANCE CERTIFICATE
Death benefit payable at death of insured before maturity date Maturity proceeds
payable on maturity date Adjustable death benefit Flexible premiums payable
during lifetime of insured until maturity date Death benefit guarantee upon
payment of Death Benefit Guarantee Premiums Return on cash value based on the
investment options selected
The amount and duration of the death benefit of this certificate will, under
some circumstances, vary with cash value. (See sections 2 and 4 of this
certificate.)
A death benefit guarantee is provided until the later of 10 years from the issue
date or the Insured's Attained Age 65 if minimum monthly premiums are paid as
defined in section 2.5 of this certificate.
The cash value of this certificate may increase or decrease daily depending on
the investment experience of the Subaccounts. There is no guaranteed minimum
cash value.
This is a certificate of membership and flexible premium variable life
insurance. It is a legal contract between You and Aid Association for Lutherans
(AAL). It is issued in return for the application and the payment of the first
premium.
This certificate provides insurance on the life of the person named above. AAL
will pay the death benefits to the beneficiary when the insured dies before the
maturity date if this certificate is still in effect at the time of death. AAL
will pay the owner the maturity proceeds if the insured is still living on the
maturity date and the certificate is still in effect.
NOTICE OF TEN DAY RIGHT TO
CANCEL CERTIFICATE
READ THIS CERTIFICATE CAREFULLY. Within 10 days after You first receive this
certificate, You may cancel it for any reason. To cancel, the certificate must
be delivered or mailed with a Written Request to Your AAL district
representative or the home office. If You return (cancel) the certificate, this
certificate shall be void from the beginning and AAL will pay a refund of: (1)
the difference between payments made and amounts allocated to the Variable
Account; plus (2) the value of the amount allocated to the Variable Account as
of the date the returned certificate is received by us; plus, (3) any fees
imposed on the amounts allocated to the Variable Account. Refunds will occur
within seven days of notice of cancellation.
Signed for Aid Association for Lutherans at the home office, 4321 North Ballard
Road, Appleton, Wisconsin 54919.
TABLE OF CERTIFICATE PROVISIONS
1. General Provisions And Exclusions 1.1 Definitions 1.2 Entire Contract 1.3
Statements in the Application 1.4 Change of Contract 1.5 Incontestability 1.6
Misstatement of Age or Sex 1.7 Maintenance of Solvency 1.8 Suicide 1.9 Change of
Certificate
2. Death Benefit and Maturity 2.1 Death Benefit 2.2 Level Death Benefit-Option I
2.3 Variable Death Benefit-Option II 2.4 Death Benefit Option Change 2.5 Death
Benefit Guarantee 2.6 Increases in Specified Amount 2.7 Decreases in Specified
Amount 2.8 Death Benefit Factor 2.9 Maturity
3. Premiums
3.1 When and Where to Pay Premiums 3.2 Planned Periodic Premium 3.3 Net Premium
3.4 Net Premium Allocations 3.5 Additional Premium Payments 3.6 Limits on
Premiums 3.7 Continuation of Insurance 3.8 Grace Period 3.9 Reinstatement
4. Certificate Values
4.1 Cash Value
4.2 Monthly Deductions
4.3 Cost of Insurance Rates
4.4 Cost of Insurance Charge
4.5 Expense Charges
4.6 Monthly Mortality And Expense Risk Charge
4.7 Surplus Refunds
5. Fixed Account
5.1 Fixed Account
5.2 Interest Earned on The Fixed Account
Cash Value
5.3 Fixed Account Cash Value
5.4 Basis of Computations
6. Variable Account
6.1 Variable Account
6.2 Variable Subaccount Cash Values
6.3 Number of Accumulation Units
6.4 Accumulation Unit Value
6.5 Transfer of Accumulated Values
6.6 Change of Portfolio or Investment Policy
7. Certificate Loans
7.1 Loans
7.2 Loan Interest
7.3 Total Loan
7.4 Loan Repayment
7.5 Termination Due to Excess Loan
8. Surrender @& Withdrawal
8.1 Surrender Value
8.2 Surrender Charge
8.3 Full Surrender
8.4 Partial Withdrawals
8.5 Delay of Payment
9. Certificate Reports
9.1 Annual Report
9.2 Illustrative Report
10. Membership, Ownership, Assignment And Beneficiary
10.1 Membership
10.2 Ownership
10.3 Beneficiary
10.4 Collateral Assignment
10.5 Change of Owner or Beneficiary
11. Filing a Death Claim
11.1 Notice of Death
11.2 Claim Forms
12. Settlement Options
12.1 Owner--Choosing A Settlement Option
12.2 Beneficiary--Changing A Settlement Option for the Death Proceeds
12.3 Settlement Options
12.4 Guaranteed Interest Rate on Settlement Options
12.5 Settlement Agreement
Any benefit riders and a copy of the application follow Section 12.
QQ
1. GENERAL PROVISIONS AND EXCLUSIONS
1.1 DEFINITIONS
"AAL" means Aid Association for Lutherans.
"Accumulation Unit" is a unit of measure used to calculate the cash value in
each Subaccount of the Variable Account.
"Accumulation Unit Value" on any Valuation Date, is the value of the
Accumulation Unit of each Subaccount of the Variable Account.
"Certificate Anniversary" means the same date in each succeeding year as the
Certificate Issue Date.
"Death Benefit Guarantee Premium" is the minimum monthly premium required to
keep Your particular certificate's Death Benefit Guarantee in effect.
"Fixed Account" is an investment option that credits an interest rate. The Fixed
Account is part of AAL's general account which includes all of AAL's assets
other than those in any separate account of AAL.
"Fund" means the AAL Variable Product Series Fund, Inc. The Fund has portfolios
that correspond to each of the Subaccounts of the Variable Account. The current
portfolios are shown on page 3A.
"Insured's Attained Age" is not the insured's actual current age, but is the
issue age shown on page 3A plus the number of certificate anniversaries that
have passed since the issue date of this certificate.
"Monthly Deduction Date" is the day, each month, on which monthly charges are
taken from the cash value. It occurs each month on the Valuation Date, on or
preceding the day of the month which is the same day of the month on which the
certificate was issued.
"Net Asset Value" means the unit of valuation for a Fund portfolio as computed
for a Valuation Period and described in such Fund's prospectus.
"Subaccount" means a subdivision of the Variable Account. Each Subaccount
invests exclusively in the shares of a corresponding portfolio of the Fund. The
current Subaccounts are shown on page 3.
"Valuation Date" means any day that both the New York Stock Exchange is open for
regular trading and AAL is open for business.
"Valuation Period" means the period of time from the end of one Valuation Date
to the end of the next Valuation Date.
"Variable Account" means the AAL Variable Life Account I. It is a separate
account of AAL.
"Written Request" means a Written Request signed by You that is satisfactory in
form and content to AAL.
"You" or "Your" mean the owner of this certificate.
1.2 ENTIRE CONTRACT
The entire contract between You and AAL is made up of:
This certificate including any attached riders, endorsements or amendments;
The attached application, including any applications for increase in the
specified amount; and
The AAL Articles of Incorporation and Bylaws which are in force on the issue
date of this certificate.
1.3 STATEMENTS IN THE APPLICATION
Statements made in the application will be treated as representations and not
warranties. No statement will be used by AAL to void the contract or to deny a
claim unless it appears in the application.
1.4 CHANGE OF CONTRACT
No representative of AAL except the president or the secretary may change any
part of this certificate on behalf of AAL.
1.5 INCONTESTABILITY
AAL will not contest the validity of this certificate after it has been in
effect during the lifetime of the insured for two years from the issue date.
Also see sections 2.6 and 3.9.
1.6 MISSTATEMENT OF AGE OR SEX
The values of this certificate are based on the insured's age and sex, except
where otherwise required by law. If the date of birth or sex shown on the
application is wrong, the proceeds payable will be adjusted to the amount that
would be provided by the most recent cost of insurance charge at the correct
attained age or sex.
1.7 MAINTENANCE OF
SOLVENCY
This provision applies only to values in the Fixed Account.
If AAL's reserves for any class of certificates become impaired, You may be
required to make an extra payment. AAL's Board of Directors will determine the
amount of any extra payment based on each member's fair share of the deficiency.
If the payment is not made, it will be charged as a loan against this
certificate with interest at a rate of 5 percent per year. You may choose an
equivalent reduction in benefits instead of or in combination with the loan.
Any indebtedness and interest charged against this certificate, or any agreement
for a reduction in benefits, shall have priority over the interest of any owner,
beneficiary, or collateral assignee under this certificate.
1.8 SUICIDE
The death benefit will not be paid if the insured commits suicide, while sane or
insane, within one year of the issue date. AAL will refund all premiums paid,
without interest. Any certificate loans and unpaid interest and any partial
withdrawals will be deducted from the premiums refunded. Also see section 2.6.
1.9 CHANGE OF CERTIFICATE
You have the right to have substandard ratings and flat extras reduced or
removed and to change from smoker to non-smoker risk class. These rights are all
subject to the insured being insurable for the change under AAL's underwriting
guidelines and policies at the time the certificate change is requested. A
written application providing proof of insurability for the change under AAL's
underwriting guidelines and policies may be required.
You have the right to drop additional benefits without proof of insurability.
Other rights You have to change the certificate are described elsewhere in the
certificate. All changes to the certificate are subject to section 3.6 of this
certificate entitled "Limits on Premiums."
A $25 charge will be deducted from the cash value for each change of certificate
described above.
2. DEATH BENEFIT AND MATURITY
2.1 DEATH BENEFIT
The death benefit payable upon the death of the insured depends on the death
benefit option in effect on the date of the insured's death. The death benefit
option You selected is shown on page 3A.
Any certificate loan and unpaid interest will be deducted from the death benefit
payable.
2.2 LEVEL DEATH BENEFIT - OPTION I
The death benefit payable when the insured dies is the larger of:
The specified amount shown on page 3A; or
The cash value on the date of death multiplied by the death benefit factor.
2.3 VARIABLE DEATH BENEFIT - OPTION II
The death benefit payable when the insured dies is the larger of:
The specified amount shown on page 3A plus the cash value on the date of death;
or
The cash value on the date of death multiplied by the death benefit factor.
2.4 DEATH BENEFIT OPTION CHANGE
You have the right to change from the Level Death Benefit, Option I, to the
Variable Death Benefit, Option II, upon Written Request. The insured must be
insurable for the Variable Death Benefit, Option II, according to AAL's
underwriting guidelines and policies. A written application providing proof of
insurability under AAL's guidelines and policies may be required.
If this change is made, the specified amount will be decreased so that it equals
the death benefit less the cash value immediately preceding the effective date
of the change. The decrease in specified amount will be applied in the order
specified in section 2.7. This change may not be made if it would reduce the
specified amount below $10,000.
You have the right to change from the Variable Death Benefit, Option II, to the
Level Death Benefit, Option I, upon Written Request. If this change is made, the
specified amount will be increased to equal the death benefit in effect
immediately preceding the effective date of the change.
The right to change death benefit options is subject to section 3.6 of this
certificate entitled "Limits on Premiums."
A $25 charge will be deducted from the cash value for each Death Benefit Option
change. This charge will be allocated in the method described in section 4.2. A
change of Death Benefit Option becomes effective on the date shown on the new
page 3A that is sent to You.
2.5 DEATH BENEFIT
GUARANTEE
Your certificate is guaranteed not to enter the grace period on a Monthly
Deduction Date if the Death Benefit Guarantee is in effect. The Death Benefit
Guarantee will remain in effect if, on each Monthly Deduction Date:
1) the Insured's Attained Age is less than 65 or less than 10 years has elapsed
since the certificate issue date, and
2) premiums paid less withdrawals equals or exceeds required premiums plus the
total certificate loan.
For this purpose:
premiums paid less withdrawals is the sum of all premiums paid, minus any
partial withdrawals and related charges; and
required premiums plus the total certificate loan is the Death Benefit Guarantee
Premium, as shown on page 3A, times the number of months since the certificate
issue date, including the current month, plus the total certificate loan as of
the Monthly Deduction Date.
At issue, Your certificate has an initial Death Benefit Guarantee Premium. Your
Death Benefit Guarantee Premium will change each time: 1) the specified amount
is increased or decreased; or 2) riders are added, changed, or terminated. The
new Death Benefit Guarantee Premium will apply from the first Monthly Deduction
Date on or after the date of each change until the next such change.
For each Death Benefit Guarantee Premium there is an associated effective
period. The effective period for the initial Death Benefit Guarantee Premium is
the number of months from the issue date up to the Monthly Deduction Date prior
to the 1st change creating a new Death Benefit Guarantee Premium. For other
Death Benefit Guarantee Premiums, the associated effective period is equal to
the number of months from the first Monthly Deduction Date on or after the date
of the change creating the Death Benefit Guarantee Premium, to the Monthly
Deduction Date prior to the next change creating a new Death Benefit Guarantee
Premium. If there has not been a subsequent change the effective period is equal
to the number of months since the first Monthly Deduction Date on or after the
date of the change, including the current month.
If Your Death Benefit Guarantee Premium has ever changed, the required premiums,
used in determining if the Death Benefit Guarantee remains in effect, are equal
to the sum of each Death Benefit Guarantee Premium times the number of months in
its associated effective period.
If on a Monthly Deduction Date, sufficient premiums have not been paid to
maintain the Death Benefit Guarantee, an additional period lasting until two
additional Monthly Deduction Dates have occurred will be allowed for payment of
a premium sufficient to meet the cumulative required premium as outlined above.
If the premium is not paid within this period, the Death Benefit Guarantee
provision will no longer be in effect, and cannot be reinstated. Notice of such
required premium will be mailed to Your last known address.
For any month in which the monthly deduction is being paid by a Waiver of
Monthly Deduction Benefit Rider attached to this contract, the Death Benefit
Guarantee Premium for that month will be zero.
2.6 INCREASES IN SPECIFIED AMOUNT
You have the right to increase the specified amount at any time on or before the
Certificate Anniversary following the insured's 80th birthday if the insured is
insurable for the increase under AAL's underwriting guidelines and policies. A
written application providing proof of insurability under AAL's underwriting
guidelines and policies may be required. An increase is not allowed if the risk
class of the insured at time of increase is standard and the risk class of the
insured shown on page 3A is "STANDARD NONSMOKER".
An increase must be at least $10,000. Proof of insurability may be required and,
if You are not the insured, proof of insurable interest may also be required.
When an increase is approved, it becomes effective on the date shown on the new
page 3A that is sent to You.
The cost of insurance rates for each increase in specified amount may differ
from the rates that apply to the existing specified amount. The cost of
insurance rates charged for each increase will vary based on factors such as
sex, age, risk class, and time elapsed since issue.
Each increase will be subject to AAL's expense charges in effect at the time of
increase. The expense charges for each increase will be based on the insured's
sex and age on the last Certificate Anniversary and will apply for the number of
months shown on the new page 3A.1. A new set of surrender charges will apply to
each increase in the specified amount. These charges will all be shown on the
new page 3A.1.
See section 4 for more detail regarding charges that apply to the increase in
specified amount.
AAL will not contest the validity of the increase after it has been in effect
during the lifetime of the insured for two years from the date of increase. Any
contest of the validity of the increase will be limited to statements made in
the application for the increase.
The one year period in the Suicide Exclusion provision will apply to each
increase beginning on the effective date of each increase. The only amount
payable will be a refund of the monthly deductions for the increase.
2.7 DECREASES IN SPECIFIED AMOUNT
You have the right to decrease the specified amount at any time after this
certificate has been in effect for one year, if specified amount remaining in
effect is at least $10,000. The right to decrease the specified amount is
subject to section 3.6 of this certificate entitled "Limits on Premiums." AAL
reserves the right to refuse to accept premiums, and to refund premiums,
earnings on premiums, or cash value necessary to ensure compliance with the
requirements in the Internal Revenue Code for tax deferral of increases in cash
value and the exclusion of death benefits from gross income.
The decrease will be effective on the date the request is received at the home
office. The decrease will be subtracted first from any previous increases in the
specified amount, starting with the most recent, then from the original
specified amount.
A surrender charge will be subtracted from the cash value if a surrender charge
is in effect for that part of the specified amount. The surrender charges are
shown on the Table of Surrender Charges on page 3A.1.
2.8 DEATH BENEFIT FACTOR
The death benefit factor depends on the Insured's Attained Age on the date of
death. The table below shows the death benefit factor for each age.
Age Factor Age Factor
0-40 2.50 68 1.17
41 2.43 69 1.16
42 2.36 70 1.15
43 2.29 71 1.13
44 2.22 72 1.11
45 2.15 73 1.09
46 2.09 74 1.07
47 2.03 75 1.05
48 1.97 76 1.05
49 1.91 77 1.05
50 1.85 78 1.05
51 1.78 79 1.05
52 1.71 80 1.05
53 1.64 81 1.05
54 1.57 82 1.05
55 1.50 83 1.05
56 1.46 84 1.05
57 1.42 85 1.05
58 1.38 86 1.05
59 1.34 87 1.05
60 1.30 88 1.05
61 1.28 89 1.05
62 1.26 90 1.05
63 1.24 91 1.04
64 1.22 92 1.03
65 1.20 93 1.02
66 1.19 94 1.01
67 1.18 95 @& over 1.00
The purpose of the death benefit factor is to help qualify Your certificate as a
life insurance contract under the Corridor Test in federal tax law.
2.9 MATURITY
AAL will pay You the maturity proceeds if the insured is still living on the
maturity date shown on page 3A. The maturity proceeds will be the cash value
less any loan and unpaid loan interest.
3. PREMIUMS
3.1 WHEN AND WHERE TO PAY PREMIUMS
Premiums may be paid at any time and in any amount, subject to the restrictions
described below. If premium payments are not sufficient to maintain a surrender
value larger than the monthly deduction amount and Your Death Benefit Guarantee
under section 3.6 is not in effect, Your insurance coverage will terminate. Pay
premiums by making Your check payable to Aid Association for Lutherans and
sending it to: Aid Association for Lutherans, 4321 North Ballard Road, Appleton,
Wisconsin 54919. Include Your certificate number.
3.2 PLANNED PERIODIC
PREMIUM
The amount and frequency of the planned periodic premium You have selected are
shown on page 3A. Changes in frequency and increases or decreases in amount of
payments may be made at any time. AAL reserves the right to limit the amount of
any increase.
3.3 NET PREMIUM
The net premium is the premium paid less the percentage of premium expense
charge. The percentage of premium expense charge is shown on page 3A.1.
3.4 NET PREMIUM
ALLOCATIONS
Net premiums are allocated to the Subaccounts and Fixed Account according to the
premium allocation percentages You select for this certificate, except as
otherwise provided below. Each net premium is allocated to a Subaccount in the
form of Accumulation Units. The number of Accumulation Units is determined by
dividing the net premium by the value of an Accumulation Unit, next computed
after AAL receives Your premium.
The initial premium allocation percentages You selected are specified in the
application. Your first premium will be allocated as of the end of the Valuation
Period during which all underwriting and administrative requirements are met.
All subsequent premiums will be allocated as of the end of the Valuation Period
during which they are received at AAL.
AAL reserves the right to allocate Your premium payments to the money market
Subaccount if this right is included under the notice of right to cancel
certificate found on the front cover of this certificate.
Each premium allocation percentage must be a whole percent. The sum of the
premium allocation percentages must be 100%%. AAL reserves the right to adjust
Your allocation to eliminate fractional percentages.
You may change Your premium allocation percentages by sending a Written Request
to AAL. AAL will provide a form for You to use to make this request. The change
will be effective as of the date Your Written Request is received at AAL's home
office. The change will apply to premium payments received at AAL on or after
the effective date of the change.
3.5 ADDITIONAL PREMIUM PAYMENTS
Additional premium payments may be made; however, AAL reserves the right to
limit the number and amount of these additional payments.
3.6 LIMITS ON PREMIUMS
The Internal Revenue Code provides for tax deferral of increases in cash value
and the exclusion of death benefits from gross income if certain requirements
are met. To qualify for this tax treatment, You must meet the Guideline Premium
Limit and the Corridor Test in the Internal Revenue Code. The Guideline Premium
Limit requires that total premium payments not exceed the limit stated in the
Code. The Corridor Test requires that the death benefit be greater than or equal
to the cash value multiplied by a factor stated in the Code. AAL reserves the
right to refuse to accept premiums and to refund any premiums, earnings on
premiums, or cash value necessary to ensure compliance with these requirements
and to ensure compliance with additional code requirements which may be imposed
to qualify for this tax treatment. AAL also reserves the right to refuse to
accept any premium that would increase the death benefit because of the
requirements of the Corridor Test.
3.7 CONTINUATION OF
INSURANCE COVERAGE
If You stop making premium payments, or payments are not large enough to cover
the monthly deductions, and the Death Benefit Guarantee under section 2.5 is not
in effect, the insurance coverage provided by this certificate will continue in
effect until the surrender value is not large enough to pay a monthly deduction.
This certificate will then terminate at the end of the grace period.
3.8 GRACE PERIOD
When the Death Benefit Guarantee under section 2.5 is not in effect, a grace
period will begin on a Monthly Deduction Date if the surrender value is less
than the amount of the monthly deductions. Written notice of the required
premium will be sent to You and any assignee at the last known address. The
grace period will end 61 days from the date the written notice is sent to You.
The required premium is the amount of premium needed to cover the next two
monthly deductions. Any surrender value is applied to reduce the premium amount
needed before notice is sent. If the full required payment is not received by
AAL at its home office before the end of the grace period, this certificate will
terminate.
When You pay a premium during the grace period, the net premium is applied to
overdue monthly deductions first. Any additional net premium amount is added to
the cash value. If the insured dies during the grace period, any unpaid monthly
deductions will be deducted from the death proceeds.
3.9 REINSTATEMENT
You may reinstate this certificate any time within three years after it has
terminated so long as You did not surrender it for its surrender value. To
reinstate Your certificate the insured must be insurable for reinstatement at
the time of reinstatement under AAL's underwriting guidelines and policies, and
pay a premium at least equal to:
The reinstated loan amount; plus
Any surrender charge at the time of reinstatement; plus
The first two monthly deduction amounts after reinstatement; less
The cash value at termination; less
Any surrender charge credited back at reinstatement; plus
The new surrender charge taken for any reduction in the specified amount at
reinstatement;
All divided by one minus the percent of premium expense charge rate.
The premium paid upon reinstatement will be used first to pay any unpaid monthly
deductions that occurred during the grace period. Your certificate will then be
reinstated on the date AAL approves Your application for reinstatement.
If You reinstate this certificate, AAL will not contest the validity of the
reinstated certificate after it has been in effect during the lifetime of the
insured for two years from the date of reinstatement. After this Certificate has
been in force two years from the issue date, any contest of the validity of the
reinstated certificate will be limited to statements made in the application for
reinstatement.
4. CERTIFICATE VALUES
4.1 CASH VALUE
The cash value on the issue date of this certificate is the first net premium
less the monthly deductions for the first month.
On any Monthly Deduction Date after the issue date the cash value is equal to
the sum of the cash values for this certificate in the Subaccounts and in the
Fixed Account. See section 5 on the Fixed Account and section 6 on the Variable
Account for how cash values are determined.
4.2 MONTHLY DEDUCTIONS
Each month on the Monthly Deduction Date, AAL will deduct from the cash value of
this certificate the following:
The cost of insurance charge; and
A monthly mortality and expense risk charge; and
The cost of any benefit riders attached to this certificate; and
Any expense charges in effect.
Allocation Method: Deductions, except for the monthly mortality and expense risk
charge (see section 4.6), will be taken from the Subaccounts and Fixed Account
according to the ratio that the cash value in the Subaccount or Fixed Account of
this certificate bears to the total cash value of this certificate at the time
of deduction. When doing this calculation the total cash value and the Fixed
Account cash value will be reduced by the total certificate loan.
Deductions from a Subaccount results in the cancellation of Accumulation Units
from that Subaccount.
So long as the surrender value is large enough to meet these deductions on the
Monthly Deduction Date or the Death Benefit Guarantee is in effect, this
certificate will remain in effect.
4.3 COST OF INSURANCE RATES
The cost of insurance rates charged will vary based on factors such as sex, age,
risk class and time elapsed since issue. Cost of insurance rates are determined
by AAL based on expectations as to future mortality and expense experience. Any
change in these rates will be applied on a uniform basis to all insureds of the
same age, sex and risk class. However, AAL cannot use cost of insurance rates
higher than the annual guaranteed cost of insurance rates shown in the table on
page 3B divided by 1.0032737. The guaranteed cost of insurance rates are based
on certain of the 1980 Commissioner's Standard Ordinary Mortality Tables, age
last birthday. These tables provide rates which vary based on age, risk class
and sex of the insured.
4.4 COST OF INSURANCE CHARGE
The cost of insurance charge is calculated on each Monthly Deduction Date for
the next month. It is equal to the cost of insurance rate multiplied by the
amount of insurance at risk. The amount of insurance at risk is:
The death benefit on the Monthly Deduction Date; less
The cash value on the Monthly Deduction Date times 1.0032737.
4.5 EXPENSE CHARGES
AAL will deduct from the cash value of this certificate the following expense
charges:
A monthly certificate fee; and
A monthly expense charge.
A premium expense charge will also be deducted from each premium payment.
All of the above charges and their durations are shown on page 3A.1.
In addition to the above charges, a $25 change fee will be charged for all
certificate changes described in the certificate.
4.6 MORTALITY AND
EXPENSE RISK CHARGES
On each Monthly Deduction Date, AAL will deduct an amount that is a percent of
the total cash value in each Subaccount of this certificate as a monthly
mortality and expense risk charge. The monthly charge applied to the total cash
value in each Subaccount is guaranteed not to exceed .075%%. In addition, the
monthly mortality and expense risk charge on certificates from their 15th
Certificate Anniversary and beyond is guaranteed at any time to be at least
.04166%% less than the rate in effect at that time for certificates which have
not reached their 15th Certificate Anniversary.
4.7 SURPLUS REFUNDS
This certificate will participate in any surplus refunds declared for this
Certificate, annually by the AAL Board of Directors. Surplus refunds will be
allocated as determined by AAL unless You request payment in cash. Charges were
determined so that AAL does not expect any surplus refund to be declared.
5. FIXED ACCOUNT
5.1 FIXED ACCOUNT
Premiums allocated to the Fixed Account and transfers of cash value from a
Subaccount to the Fixed Account become part of the general account assets of
AAL. The general account includes all of AAL's assets, except those assets
segregated in the Variable Account or any other separate account of AAL.
5.2 INTEREST EARNED ON THE FIXED ACCOUNT CASH VALUE
AAL will credit interest to the Fixed Account cash value on a daily basis. A
current interest rate will be declared periodically by AAL and is guaranteed not
to change more often than quarterly. AAL guarantees that the rate of interest
credited to the Fixed Account will never be less than 4 percent annually.
A lower rate of interest may be credited to the portion of the Fixed Account
cash value that equals the amount of any total certificate loan, but it will not
be less than 4 percent.
5.3 FIXED ACCOUNT CASH VALUE
On any Valuation Date after the issue date, the Fixed Account cash value is
equal to:
The Fixed Account cash value on the last Valuation Date increased with interest
for each day since the last Valuation Date; plus
The portion of the net premiums allocated to the Fixed Account and received
since the last Valuation Date increased with interest from the date the premium
was received to the current Valuation Date; plus
The amount of any transfers, less any charge for the transfer, from the
Subaccounts to the Fixed Account, including loan transfers, since the last
Valuation Date increased with interest from the date the transfer was received
to the current Valuation Date; less
The amount of any transfers from the Fixed Account to the Subaccounts since the
last Valuation Date, and the interest that would have been credited from the
date the transfer was made to the current Valuation Date; less
Any portion of any partial withdrawals taken from the Fixed Account and made
since the last Valuation Date, including any charge for the withdrawal, and the
interest that would have been credited from the date of the partial withdrawal
to the current Valuation Date; less
Any portion of any surrender charges taken from the Fixed Account resulting from
any decreases in specified amount since the last Valuation Date, and the
interest that would have been credited from the date of the decrease to the
current Valuation Date; less
The amount of any death benefit option change charge taken from the Fixed
Account resulting from any change in death benefit option since the last
Valuation Date, and the interest that would have been credited from the date of
the change to the current Valuation Date; less
Any portion of any certificate change charge taken from the Fixed Account and
the interest that would have been credited from the date of the change to the
current Valuation Date; less
If the Valuation Date is a Monthly Deduction Date, the monthly deductions
allocated to the Fixed Account for that month.
No interest is credited for February 29th.
5.4 BASIS OF
COMPUTATIONS
Minimum guaranteed cash values for the Fixed Account are based on the
Commissioner's 1980 Standard Ordinary Mortality Table, age last birthday, with
interest at the rate of 4 percent.
These values equal or exceed the minimum values required by law. A detailed
statement of how AAL calculates cash values for this certificate has been filed
with the insurance department of the state or district where this certificate
was delivered.
6. VARIABLE ACCOUNT
6.1 VARIABLE ACCOUNT
The AAL Variable Life Account I is a separate investment account established by
AAL under Wisconsin law. The Variable Account is registered with the Securities
and Exchange Commission as a unit investment trust under the Investment Company
Act of 1940.
AAL uses the assets of the Variable Account to buy shares in the AAL Variable
Product Series Fund, Inc. The Fund is registered with the Securities and
Exchange Commission under the Investment Company Act of 1940 as a diversified
open-end management investment company. The Variable Account has Subaccounts
which are invested in corresponding specific portfolios of the Fund. These
Subaccounts and portfolios are shown on page 3A.
AAL, consistent with then applicable law, may:
Combine one separate account with another separate account, operate the separate
account as a management investment company, deregister the separate account as
an investment company or modify the Variable Account;
Add, delete, combine or modify Subaccounts;
Make any new Subaccount available to You on a basis to be determined by AAL; and
Invest the assets of any new Subaccount in a new portfolio of the Fund, a
different investment company or in any other investment.
AAL owns the assets of the Variable Account and keeps them legally segregated
from the assets of the general account. The assets of the Variable Account
shall, at the time during the year that adjustments in the reserves are made,
have a value at least equal to the reserves and other contract liabilities with
respect to the Variable Account and, at all other times, shall have a value
approximately equal to or in excess of such reserves and liabilities. The assets
of the Variable Account shall not be chargeable with liabilities arising out of
any other business AAL may conduct, except to the extent that the assets of the
Variable Account exceed the reserves and other contract liabilities of the
Variable Account arising under the certificates supported by the Variable
Account. Income, and gains and losses, whether or not realized, from the assets
in each Subaccount are credited to or charged against that Subaccount without
regard to any of AAL's other income, gains or losses. The value of the assets in
the Variable Account is determined at the end of each Valuation Date.
6.2 VARIABLE SUBACCOUNT CASH VALUES
The cash value for this certificate in each Subaccount as of a Valuation Date is
equal to:
The number of Accumulation Units for this certificate in that Subaccount
multiplied by the Accumulation Unit Value for that Subaccount.
The cash value for any day that is not a Valuation Date will be determined as of
the next Valuation Date.
6.3 NUMBER OF
ACCUMULATION UNITS
The number of Accumulation Units for this certificate in any Subaccount may
increase or decrease at the end of each Valuation Period depending on the
transactions that occur in the Subaccount during the Valuation Period. When
transactions occur, the actual dollar amounts of the transactions are converted
to Accumulation Units. The number of Accumulation Units for a transaction in a
Subaccount is determined by dividing the dollar amount of the transaction by the
Accumulation Unit Value of the Subaccount at the end of the Valuation Period
during which the transaction occurs.
The number of Accumulation Units in a Subaccount increases when the following
transactions occur during the Valuation Period:
Net premiums are allocated to the Subaccount; or
Cash value is transferred to the Subaccount from another Subaccount or from the
Fixed Account.
The number of Accumulation Units in a Subaccount decreases when the following
transactions occur during the Valuation Period:
Cash value is transferred from the Subaccount to another Subaccount or to the
Fixed Account, including loan transfers;
Partial withdrawals and partial withdrawal charges are taken from the
Subaccount;
Monthly deductions or transfer charges are taken from the Subaccount;
A charge for a Death Benefit Option change is allocated to the Subaccount;
A charge for a certificate change is allocated to the Subaccount; or
Surrender charges are allocated to the Subaccount.
6.4 ACCUMULATION UNIT VALUE
For each Subaccount, the initial Accumulation Unit Value was set when the
Subaccount was established. The Accumulation Unit Value may increase or decrease
from one Valuation Period to the next.
The Accumulation Unit Value for a Subaccount for any Valuation Period is equal
to:
The Net Asset Value of the corresponding Fund portfolio at the end of the
Valuation Period; plus
The amount of any dividend, capital gain or other distribution made by the Fund
portfolio if the "ex-dividend" date occurs during the Valuation Period; plus or
minus
Any cumulative credit or charge for taxes reserved which is determined by AAL to
have resulted from the operation of the portfolio; then
The sum of the above is divided by the total number of Accumulation Units held
in the Subaccount at the end of the Valuation Period before any of the
transactions referred to in section 6.3 have occurred.
6.5 TRANSFER OF
CASH VALUES
At any time, You may transfer all or a portion of the cash value of this
certificate among the Subaccounts and the Fixed Account by sending a Written
Request to AAL. AAL will provide a form for You to use. The transfer will be
effective as of the end of the Valuation Period during which Your Written
Request is received at AAL. Transfers are subject to the following:
The total dollar amount of any transfer cannot be less than the smaller of $500
or the cash value of the Subaccount or Fixed Account from which the transfer is
being made at the time of transfer.
The dollar amount of any transfer to a Subaccount or the Fixed Account may not
be less than $50.
You may make 12 transfers from one or more Subaccounts to one or more other
Subaccounts or the Fixed Account in each certificate year without charge. AAL
will charge $25 per transfer for each transfer in excess of the 12th in each
certificate year, which will be applied against the transfer amount prior to the
transfer being allocated as You direct.
You may make only 1 transfer from the Fixed Account in each certificate year.
The transfer may not exceed the greater of $500 or 25%% of the cash value of the
Fixed Account at the time of transfer. This transfer will not be subject to a
transfer charge.
AAL may delay making transfers subject to the same conditions described in
section 8.5.
6.6 CHANGE OF PORTFOLIO
OR INVESTMENT POLICY
AAL may determine that a portfolio of a Fund is no longer desirable for
investment by a Subaccount or the shares of a portfolio are no longer available
for investment. If that occurs, AAL has the right to substitute another
portfolio of the Fund, or to invest in another investment company. This change
would be subject to any required prior approval by the Securities and Exchange
Commission and the insurance supervisory officials in the state where this
certificate is delivered.
Any change in the investment policy of the Variable Account will be subject to
any required prior approval by the insurance supervisory officials of the state
of Wisconsin. AAL will notify You of any material change in investment policy.
7. CERTIFICATE LOANS
7.1 LOANS
Using the value of this certificate as security, You may obtain a loan. The most
You may borrow is 92 percent of the surrender value. AAL has the right to delay
payment of the loan as described under section 8.5.
The loan will be taken from the Subaccounts and Fixed Account according to the
method described in section 4.2; or according to any other administrative option
which You choose and is available at the time of the loan. Cash value will be
transferred to the Fixed Account from each Subaccount equal to the allocation of
the loan taken from that Subaccount. On each Monthly Deduction Date the excess
of the total certificate loan over the Fixed Account cash value will be
transferred from the Subaccounts to the Fixed Account. The cash value
transferred will be allocated among the Subaccounts according to the method
described in section 4.2.
7.2 LOAN INTEREST
The annual interest rate charged to a loan prior to the 15th Certificate
Anniversary is 8 percent. Once Certificate Anniversary 15 is reached AAL will
charge 7.25%% on loans. Interest accrues daily from the loan issue date.
A lower rate of interest may be credited to the portion of the Fixed Account
cash value that equals the amount of any outstanding certificate loan.
7.3 TOTAL CERTIFICATE LOAN
The total certificate loan is equal to the loan principal plus any accrued
interest.
7.4 LOAN REPAYMENT
You may repay a loan in part or in full at any time. When You send in a payment
for Your loan, be sure to state that it is a loan payment.
7.5 TERMINATION DUE TO EXCESS LOAN
If the total certificate loan ever equals or exceeds the cash value minus any
surrender charges, and the Death Benefit Guarantee under section 2.5 is not in
effect, this certificate will enter the grace period as described in section
3.8.
8. SURRENDER & WITHDRAWALS
8.1 SURRENDER VALUE
The surrender value is the cash value minus:
Any surrender charges; and
Any loans and unpaid loan interest.
8.2 SURRENDER CHARGE
A surrender charge will be subtracted from the cash value if this certificate is
surrendered during the surrender charge period, or You decrease the specified
amount. The surrender charges are shown on the Table of Surrender Charges on
page 3A.1.
8.3 FULL SURRENDER
You may surrender this certificate for its full surrender value by sending a
Written Request to AAL. The surrender will be effective as of the date the
request is received at the home office and insurance coverage will end on that
day.
AAL has the right to delay paying the cash value as described under section 8.5.
8.4 PARTIAL WITHDRAWALS
You may withdraw part of the surrender value of this certificate by sending a
Written Request to the home office. A $25 charge will be deducted from the cash
value for each partial withdrawal after the first one in any one certificate
year.
A partial withdrawal:
Will reduce the cash value by the amount of the partial withdrawal;
Will reduce the specified amount by the amount of the partial withdrawal if
Death Benefit Option I is in effect except for the part of the withdrawal which
is equal to (a) minus (b), if positive, where:
(a) is the cash value as of the date of the partial withdrawal, before the
partial withdrawal is taken, multiplied by the death benefit factor; and
(b) is the specified amount before the partial withdrawal is taken.
A partial withdrawal may not be made if the specified amount would be reduced
below the minimum allowed by AAL.
The partial withdrawal will be taken from the Subaccounts and Fixed Account
according to the method described in section 4.2; or according to any other
administrative option which You choose and is available at the time of the
partial withdrawal.
AAL has the right to delay paying the amount withdrawn as described under
section 8.5.
8.5 DELAY OF PAYMENT
Payment of any withdrawal value, cash surrender value, or loan value will
normally be made within 7 days after Your Written Request is received at AAL.
However, AAL may delay this payment or any other type of payment from the
Variable Account for any period when:
The New York Stock Exchange is closed for trading other than customary weekend
and holiday closings;
Trading on the New York Stock Exchange is restricted;
An emergency exists as a result of which it is not reasonably practicable to
dispose of securities held in the Variable Account or to fairly determine their
value; or
The Securities and Exchange Commission by order permits the delay for the
protection of security holders.
AAL may delay payment of any withdrawal value, cash surrender value or loan
value from the Fixed Account for up to 6 months after Your Written Request is
received at AAL.
9. CERTIFICATE REPORTS
9.1 ANNUAL REPORT
At least once each certificate year, AAL will send You a report concerning the
current status of Your certificate. There is no charge for this report.
9.2 ILLUSTRATIVE REPORT
Upon Your request, AAL will send You an illustration of future values for this
certificate. AAL may charge a reasonable fee for each illustration requested.
10. MEMBERSHIP, OWNERSHIP, ASSIGNMENT AND BENEFICIARY
10.1 MEMBERSHIP
The person who applied for this certificate and is listed as the member on the
application for insurance is a benefit member of AAL. The rights and benefits of
membership are set forth in the Articles of Incorporation and Bylaws of AAL.
Membership cannot be transferred.
10.2 OWNERSHIP
The owner of this certificate is the person listed as owner on the application
for insurance, unless ownership has been transferred.
If You are not the insured, You should name a successor owner who will become
the owner if You die before the insured. If You die before the insured and there
is no successor owner named, ownership of this certificate will pass to Your
estate.
10.3 BENEFICIARY
The beneficiary is the person, entity or organization named to receive the death
benefit after the insured dies. The Bylaws of AAL list those eligible to be
beneficiaries. Beneficiaries are designated as first, second and third class.
You may name more than one person or organization in the same class.
Unless You indicate otherwise, the proceeds payable when the insured dies will
be paid as follows:
Equally to the beneficiaries in the first class who survive the insured. If none
in the first class survive the insured, then;
Equally to the beneficiaries in the second class who survive the insured. If
none in the second class survive the insured, then;
Equally to the beneficiaries in the third class who survive the insured.
If no beneficiary has been named or survives the insured, AAL will pay the
proceeds as follows:
To Your estate if You are the insured; or
To You if You are not the insured.
If any beneficiary dies at the same time as the insured, or within 15 days after
the insured dies but before the death benefits are paid, AAL will pay the
proceeds as though that beneficiary had died before the insured.
10.4 COLLATERAL
ASSIGNMENT
You may assign this certificate as collateral security for a loan or other
obligation. This may limit Your rights to the cash value and the beneficiary's
rights to the proceeds.
The assignments must be in writing and filed at our home office. AAL assumes no
responsibility as to the validity of any assignment. AAL is not liable for any
payment made or any other action taken on this certificate before the assignment
was recorded at our home office.
Any certificate loan obtained before an assignment is recorded at our home
office has priority over the assignment.
10.5 CHANGE OF OWNER OR BENEFICIARY
During the insured's lifetime, You may transfer ownership of this certificate or
change the beneficiary by sending a signed Written Request to the home office.
The transfer or change must be approved by AAL before it is valid. If approved,
it will be effective on the date it was signed or on the date it was received at
the home office if no date appears on the request. AAL will provide a form for
You to use.
The change will not affect any payment made or action taken by AAL before the
change was received and approved at the home office.
11. FILING A DEATH CLAIM
11.1 NOTICE OF DEATH
Written notice of death must be given to AAL at its home office. Notice should
include the insured's name and the certificate number. Help may be obtained
through an AAL district representative.
11.2 CLAIM FORMS
A claim form will be sent, upon receiving the death claim notice. Complete the
claim form and send it to the home office along with a certified copy of the
death certificate. Processing of the claim will begin as soon as these items are
received.
12. SETTLEMENT OPTIONS
12.1 OWNER--CHOOSING A SETTLEMENT OPTION
All or part of the proceeds from death, maturity or surrender may be applied to
one or more of the settlement options described below in place of a lump sum
payment.
You may choose a settlement option while the insured is alive.
The minimum amount that may be applied to any one settlement option is $1,000.
12.2 BENEFICIARY--CHOOSING A SETTLEMENT OPTION FOR THE DEATH
PROCEEDS
The beneficiary may choose to receive the death proceeds in a lump sum payment
or under any settlement option, unless the owner has chosen a mandatory method
of payment in the beneficiary designation that does not allow the beneficiary to
change it. AAL will provide a form to use. On lump sum payments, we will pay
interest on the death proceeds at a rate required by law from the date of the
insured's death until the date of payment.
12.3 SETTLEMENT OPTIONS
The minimum amount that may be applied to any one settlement option is $1,000.
Payments may be received on a monthly, quarterly, semiannual, or annual basis
provided each payment is at least $25. The first payment under an option will be
made on the first business day following the end of the payment interval chosen.
The settlement options are as follows:
OPTION 1 - INTEREST
The proceeds are left with AAL to earn interest. Interest earned may be paid in
cash at regular intervals or may be left with AAL to accumulate with interest.
All or part of these proceeds may be withdrawn upon request.
OPTION 2 - SPECIFIED AMOUNT INCOME
The proceeds are used to make payments at regular intervals for a specified
amount until the proceeds with interest have been paid. The payment period may
not exceed 30 years. The unpaid proceeds may be withdrawn upon request.
OPTION 3 - FIXED PERIOD INCOME
The proceeds are used to make payments at regular intervals for a fixed number
of years, not to exceed 30 years. The unpaid proceeds may be withdrawn upon
request. Guaranteed payments are shown in the table below.
MONTHLY PAYMENTS FOR EACH $1,000 OF
PROCEEDS
Number Number
of Monthly of Monthly
Years Payment Years Payment
2 $42.96 17 $6.24
3 $29.06 18 $5.98
4 $22.12 19 $5.74
5 $17.95 20 $5.53
6 $15.18 21 $5.33
7 $13.20 22 $5.16
8 $11.71 23 $5.00
9 $10.56 24 $4.85
10 $ 9.64 25 $4.72
11 $ 8.88 26 $4.60
12 $ 8.26 27 $4.49
13 $ 7.73 28 $4.38
14 $ 7.28 29 $4.28
15 $ 6.89 30 $4.19
16 $ 6.54
OPTION 4 - LIFE INCOME WITH GUARANTEED PAYMENT PERIOD
The proceeds are used to make payments at regular intervals for the lifetime of
the payee. If the payee dies during the guaranteed period, payments will be
continued to the end of that period. A period of 10 or 20 years may be elected.
The amount of the payments depends on the age and sex of the payee at the time
AAL issues the settlement agreement. Guaranteed payments are shown in the table
below.
MONTHLY PAYMENTS FOR EACH $1,000 OF
PROCEEDS
10 YEAR 20 YEAR
GUARANTEED GUARANTEED
PAYMENT PAYMENT
PERIOD PERIOD
Age Male Female Male Female
50 $4.53 $4.19 $4.38 $4.13
51 $4.61 $4.26 $4.44 $4.18
52 $4.69 $4.32 $4.50 $4.24
53 $4.77 $4.39 $4.56 $4.29
54 $4.85 $4.45 $4.62 $4.35
55 $4.93 $4.52 $4.68 $4.40
56 $5.03 $4.61 $4.74 $4.46
57 $5.14 $4.70 $4.80 $4.53
58 $5.24 $4.78 $4.87 $4.59
59 $5.35 $4.87 $4.93 $4.66
60 $5.45 $4.96 $4.99 $4.72
61 $5.58 $5.07 $5.05 $4.79
62 $5.71 $5.18 $5.11 $4.86
63 $5.85 $5.30 $5.18 $4.93
64 $5.98 $5.41 $5.24 $5.00
65 $6.11 $5.52 $5.30 $5.07
66 $6.27 $5.67 $5.35 $5.14
67 $6.43 $5.82 $5.40 $5.20
68 $6.59 $5.96 $5.44 $5.27
69 $6.75 $6.11 $5.49 $5.33
70 $6.91 $6.26 $5.54 $5.40
71 $7.09 $6.44 $5.57 $5.44
72 $7.26 $6.63 $5.60 $5.49
73 $7.44 $6.81 $5.62 $5.53
74 $7.61 $7.00 $5.65 $5.58
75 $7.79 $7.18 $5.68 $5.62
76 $7.95 $7.38 $5.69 $5.64
77 $8.12 $7.58 $5.71 $5.66
78 $8.28 $7.78 $5.72 $5.69
79 $8.45 $7.98 $5.74 $5.71
80 $8.61 $8.18 $5.75 $5.73
OPTION 5 - JOINT AND SURVIVOR LIFE INCOME WITH GUARANTEED PAYMENT PERIOD
The proceeds are used to make payments at regular intervals for the lifetime of
both payees. Upon the death of one of the payees, payments will be continued for
the lifetime of the surviving payee. If both payees die during the guaranteed
period, payments will be continued to the end of that period. A period of 10 or
20 years may be elected. The amount of the payments depends upon the age and sex
of the payees at the time AAL issues the settlement agreement. Guaranteed
payments are shown in the tables below.
MONTHLY PAYMENTS FOR EACH $1,000 OF
PROCEEDS
PAYMENTS GUARANTEED FOR 10 YEARS
Male Female Ages
Ages 50 55 60 65 70 75 80
50 $3.91 $4.05 $4.18 $4.29 $4.38 $4.45 $4.49
55 $3.99 $4.17 $4.36 $4.53 $4.67 $4.78 $4.86
60 $4.06 $4.28 $4.53 $4.77 $5.00 $5.19 $5.32
65 $4.11 $4.37 $4.67 $5.00 $5.34 $5.64 $5.87
70 $4.14 $4.43 $4.79 $5.20 $5.66 $6.11 $6.48
75 $4.17 $4.48 $4.86 $5.34 $5.91 $6.52 $7.07
80 $4.18 $4.50 $4.91 $5.44 $6.09 $6.83 $7.56
MONTHLY PAYMENTS FOR EACH $1,000 OF
PROCEEDS
PAYMENTS GUARANTEED FOR 20 YEARS
Male Female Ages
Ages 50 55 60 65 70 75 80
50 $3.90 $4.03 $4.16 $4.25 $4.32 $4.36 $4.38
55 $3.98 $4.15 $4.32 $4.47 $4.58 $4.64 $4.67
60 $4.04 $4.25 $4.47 $4.68 $4.84 $4.94 $4.98
65 $4.08 $4.32 $4.59 $4.85 $5.07 $5.21 $5.28
70 $4.11 $4.37 $4.67 $4.97 $5.24 $5.42 $5.50
75 $4.12 $4.39 $4.70 $5.04 $5.34 $5.55 $5.64
80 $4.12 $4.40 $4.72 $5.07 $5.38 $5.60 $5.71
OTHER OPTIONS
AAL also has other settlement options which may be chosen. Information about
these options may be obtained from an AAL district representative or the home
office.
12.4 GUARANTEED INTEREST RATE ON SETTLEMENT OPTIONS
Options 1, 2, and 3 are based on a guaranteed effective annual interest rate of
3%%. Options 4 and 5 are based on a guaranteed effective annual interest rate of
3 1/2%% using the "1983 Table a" annuitant mortality table.
12.5 SETTLEMENT
AGREEMENT
AAL will issue a separate settlement agreement whenever proceeds are applied to
any settlement option. The settlement agreement will be issued to the payee. The
payee is the person named to receive the payments.
If the payee dies on or after the settlement agreement commencement date and
before the entire interest in the settlement agreement has been paid, the
remaining portion of such interest will be paid at least as rapidly as under the
method of payment in effect as of the date of the payee's death.
FLEXIBLE PREMIUM
VARIABLE LIFE INSURANCE
Death benefit payable at death of insured before maturity date Maturity proceeds
payable on maturity date Adjustable death benefit Flexible premiums payable
during lifetime of insured until maturity date Death benefit guarantee of Death
Benefit Guarantee Premiums Return on cash value based on the investment options
selected QQ
<PAGE>
AID ASSOCIATION
FOR LUTHERANS
A FRATERNAL BENEFIT SOCIETY
FLEXIBLE PREMIUM VARIABLE
LIFE INSURANCE CERTIFICATE
Death benefit payable at death of insured before maturity date Maturity proceeds
payable on maturity date djustable death benefit Flexible premiums payable
during lifetime of insured until maturity date Death benefit guarantee upon
payment of Death Benefit Guarantee Premiums Return on cash value based on the
investment options selected
The amount and duration of the death benefit of this certificate will, under
some circumstances, vary with cash value. (See sections 2 and 4 of this
certificate.)
A death benefit guarantee is provided until the later of 10 years from the issue
date or the Insured's Attained Age 65 if minimum monthly premiums are paid as
defined in section 2.5 of this certificate.
The cash value of this certificate may increase or decrease daily depending on
the investment experience of the Subaccounts. There is no guaranteed minimum
cash value.
This is a certificate of membership and flexible premium variable life
insurance. It is a legal contract between You and Aid Association for Lutherans
(AAL). It is issued in return for the application and the payment of the first
premium.
This certificate provides insurance on the life of the person named above. AAL
will pay the death benefits to the beneficiary when the insured dies before the
maturity date if this certificate is still in effect at the time of death. AAL
will pay the owner the maturity proceeds if the insured is still living on the
maturity date and the certificate is still in effect.
NOTICE OF TEN DAY RIGHT TO
CANCEL CERTIFICATE
READ THIS CERTIFICATE CAREFULLY. Within 10 days after You first receive this
certificate, You may cancel it for any reason. To cancel, the certificate must
be delivered or mailed with a Written Request to Your AAL district
representative or the home office. If You return (cancel) the certificate, this
certificate shall be void from the beginning and AAL will pay a refund of: (1)
the difference between payments made and amounts allocated to the Variable
Account; plus (2) the value of the amount allocated to the Variable Account as
of the date the returned certificate is received by us; plus, (3) any fees
imposed on the amounts allocated to the Variable Account. Refunds will occur
within seven days of notice of cancellation.
Signed for Aid Association for Lutherans at the home office, 4321 North Ballard
Road, Appleton, Wisconsin 54919.
TABLE OF CERTIFICATE PROVISIONS
1. General Provisions And Exclusions
1.1 Definitions
1.2 Entire Contract
1.3 Statements in the Application
1.4 Change of Contract
1.5 Incontestability
1.6 Misstatement of Age or Sex
1.7 Maintenance of Solvency
1.8 Suicide
1.9 Change of Certificate
2. Death Benefit and Maturity
2.1 Death Benefit
2.2 Level Death Benefit-Option I
2.3 Variable Death Benefit-Option II
2.4 Death Benefit Option Change
2.5 Death Benefit Guarantee
2.6 Increases in Specified Amount
2.7 Decreases in Specified Amount
2.8 Death Benefit Factor
2.9 Maturity
3. Premiums
3.1 When and Where to Pay Premiums
3.2 Planned Periodic Premium
3.3 Net Premium
3.4 Net Premium Allocations
3.5 Additional Premium Payments
3.6 Limits on Premiums
3.7 Continuation of Insurance
3.8 Grace Period
3.9 Reinstatement
4. Certificate Values
4.1 Cash Value
4.2 Monthly Deductions
4.3 Cost of Insurance Rates
4.4 Cost of Insurance Charge
4.5 Expense Charges
4.6 Monthly Mortality And Expense Risk Charge
4.7 Surplus Refunds
5. Fixed Account
5.1 Fixed Account
5.2 Interest Earned on The Fixed Account
Cash Value
5.3 Fixed Account Cash Value
5.4 Basis of Computations
6. Variable Account
6.1 Variable Account
6.2 Variable Subaccount Cash Values
6.3 Number of Accumulation Units
6.4 Accumulation Unit Value
6.5 Transfer of Accumulated Values
6.6 Change of Portfolio or Investment Policy
7. Certificate Loans
7.1 Loans
7.2 Loan Interest
7.3 Total Loan
7.4 Loan Repayment
7.5 Termination Due to Excess Loan
8. Surrender @& Withdrawal
8.1 Surrender Value
8.2 Surrender Charge
8.3 Full Surrender
8.4 Partial Withdrawals
8.5 Delay of Payment
9. Certificate Reports
9.1 Annual Report
9.2 Illustrative Report
10. Membership, Ownership, Assignment And Beneficiary
10.1 Membership
10.2 Ownership and Control
10.3 Transfer of Control
10.4 Beneficiary
10.5 Change of Owner or Beneficiary
10.6 Collateral Assignment
11. Filing a Death Claim
11.1 Notice of Death
11.2 Claim Forms
12. Settlement Options
12.1 Owner--Choosing A Settlement Option
12.2 Beneficiary--Changing A Settlement Option for the Death Proceeds
12.3 Settlement Options
12.4 Guaranteed Interest Rate on Settlement Options
12.5 Settlement Agreement
Any benefit riders and a copy of the application follow Section 12.
1. GENERAL PROVISIONS AND EXCLUSIONS
1.1 DEFINITIONS
"AAL" means Aid Association for Lutherans.
"Accumulation Unit" is a unit of measure used to calculate the cash value in
each Subaccount of the Variable Account.
"Accumulation Unit Value" on any Valuation Date, is the value of the
Accumulation Unit of each Subaccount of the Variable Account.
"Certificate Anniversary" means the same date in each succeeding year as the
Certificate Issue Date.
"Death Benefit Guarantee Premium" is the minimum monthly premium required to
keep Your particular certificate's Death Benefit Guarantee in effect.
"Fixed Account" is an investment option that credits an interest rate. The Fixed
Account is part of AAL's general account which includes all of AAL's assets
other than those in any separate account of AAL.
"Fund" means the AAL Variable Product Series Fund, Inc. The Fund has portfolios
that correspond to each of the Subaccounts of the Variable Account. The current
portfolios are shown on page 3A.
"Insured's Attained Age" is not the insured's actual current age, but is the
issue age shown on page 3A plus the number of certificate anniversaries that
have passed since the issue date of this certificate.
"Monthly Deduction Date" is the day, each month, on which monthly charges are
taken from the cash value. It occurs each month on the Valuation Date, on or
preceding the day of the month which is the same day of the month on which the
certificate was issued.
"Net Asset Value" means the unit of valuation for a Fund portfolio as computed
for a Valuation Period and described in such Fund's prospectus.
"Subaccount" means a subdivision of the Variable Account. Each Subaccount
invests exclusively in the shares of a corresponding portfolio of the Fund. The
current Subaccounts are shown on page 3.
"Valuation Date" means any day that both the New York Stock Exchange is open for
regular trading and AAL is open for business.
"Valuation Period" means the period of time from the end of one Valuation Date
to the end of the next Valuation Date.
"Variable Account" means the AAL Variable Life Account I. It is a separate
account of AAL.
"Written Request" means a Written Request signed by You that is satisfactory in
form and content to AAL.
"You" or "Your" mean the owner of this certificate.
1.2 ENTIRE CONTRACT
The entire contract between You and AAL is made up of:
This certificate including any attached riders, endorsements or amendments;
The attached application, including any applications for increase in the
specified amount; and
The AAL Articles of Incorporation and Bylaws which are in force on the issue
date of this certificate.
1.3 STATEMENTS IN THE APPLICATION
Statements made in the application will be treated as representations and not
warranties. No statement will be used by AAL to void the contract or to deny a
claim unless it appears in the application.
1.4 CHANGE OF CONTRACT
No representative of AAL except the president or the secretary may change any
part of this certificate on behalf of AAL.
1.5 INCONTESTABILITY
AAL will not contest the validity of this certificate after it has been in
effect during the lifetime of the insured for two years from the issue date.
Also see sections 2.6 and 3.9.
1.6 MISSTATEMENT OF AGE OR SEX
The values of this certificate are based on the insured's age and sex, except
where otherwise required by law. If the date of birth or sex shown on the
application is wrong, the proceeds payable will be adjusted to the amount that
would be provided by the most recent cost of insurance charge at the correct
attained age or sex.
1.7 MAINTENANCE OF
SOLVENCY
This provision applies only to values in the Fixed Account.
If AAL's reserves for any class of certificates become impaired, You may be
required to make an extra payment. AAL's Board of Directors will determine the
amount of any extra payment based on each member's fair share of the deficiency.
If the payment is not made, it will be charged as a loan against this
certificate with interest at a rate of 5 percent per year. You may choose an
equivalent reduction in benefits instead of or in combination with the loan.
Any indebtedness and interest charged against this certificate, or any agreement
for a reduction in benefits, shall have priority over the interest of any owner,
beneficiary, or collateral assignee under this certificate.
1.8 SUICIDE
The death benefit will not be paid if the insured commits suicide, while sane or
insane, within one year of the issue date. AAL will refund all premiums paid,
without interest. Any certificate loans and unpaid interest and any partial
withdrawals will be deducted from the premiums refunded. Also see section 2.6.
1.9 CHANGE OF CERTIFICATE
You have the right to have substandard ratings and flat extras reduced or
removed and to change from smoker to non-smoker risk class. These rights are all
subject to the insured being insurable for the change under AAL's underwriting
guidelines and policies at the time the certificate change is requested. A
written application providing proof of insurability for the change under AAL's
underwriting guidelines and policies may be required.
You have the right to drop additional benefits without proof of insurability.
Other rights You have to change the certificate are described elsewhere in the
certificate. All changes to the certificate are subject to section 3.6 of this
certificate entitled "Limits on Premiums."
A $25 charge will be deducted from the cash value for each change of certificate
described above.
2. DEATH BENEFIT AND MATURITY
2.1 DEATH BENEFIT
The death benefit payable upon the death of the insured depends on the death
benefit option in effect on the date of the insured's death. The death benefit
option You selected is shown on page 3A.
Any certificate loan and unpaid interest will be deducted from the death benefit
payable.
2.2 LEVEL DEATH BENEFIT - OPTION I
The death benefit payable when the insured dies is the larger of:
The specified amount shown on page 3A; or
The cash value on the date of death multiplied by the death benefit factor.
2.3 VARIABLE DEATH BENEFIT - OPTION II
The death benefit payable when the insured dies is the larger of:
The specified amount shown on page 3A plus the cash value on the date of death;
or
The cash value on the date of death multiplied by the death benefit factor.
2.4 DEATH BENEFIT OPTION CHANGE
You have the right to change from the Level Death Benefit, Option I, to the
Variable Death Benefit, Option II, upon Written Request. The insured must be
insurable for the Variable Death Benefit, Option II, according to AAL's
underwriting guidelines and policies. A written application providing proof of
insurability under AAL's guidelines and policies may be required.
If this change is made, the specified amount will be decreased so that it equals
the death benefit less the cash value immediately preceding the effective date
of the change. The decrease in specified amount will be applied in the order
specified in section 2.7. This change may not be made if it would reduce the
specified amount below $10,000.
You have the right to change from the Variable Death Benefit, Option II, to the
Level Death Benefit, Option I, upon Written Request. If this change is made, the
specified amount will be increased to equal the death benefit in effect
immediately preceding the effective date of the change.
The right to change death benefit options is subject to section 3.6 of this
certificate entitled "Limits on Premiums."
A $25 charge will be deducted from the cash value for each Death Benefit Option
change. This charge will be allocated in the method described in section 4.2. A
change of Death Benefit Option becomes effective on the date shown on the new
page 3A that is sent to You.
2.5 DEATH BENEFIT
GUARANTEE
Your certificate is guaranteed not to enter the grace period on a Monthly
Deduction Date if the Death Benefit Guarantee is in effect. The Death Benefit
Guarantee will remain in effect if, on each Monthly Deduction Date:
1) the Insured's Attained Age is less than 65 or less than 10 years has elapsed
since the certificate issue date, and 2) premiums paid less withdrawals equals
or exceeds required premiums plus the total certificate loan.
For this purpose:
premiums paid less withdrawals is the sum of all premiums paid, minus any
partial withdrawals and related charges; and
required premiums plus the total certificate loan is the Death Benefit Guarantee
Premium, as shown on page 3A, times the number of months since the certificate
issue date, including the current month, plus the total certificate loan as of
the Monthly Deduction Date.
At issue, Your certificate has an initial Death Benefit Guarantee Premium. Your
Death Benefit Guarantee Premium will change each time: 1) the specified amount
is increased or decreased; or 2) riders are added, changed, or terminated. The
new Death Benefit Guarantee Premium will apply from the first Monthly Deduction
Date on or after the date of each change until the next such change.
For each Death Benefit Guarantee Premium there is an associated effective
period. The effective period for the initial Death Benefit Guarantee Premium is
the number of months from the issue date up to the Monthly Deduction Date prior
to the 1st change creating a new Death Benefit Guarantee Premium. For other
Death Benefit Guarantee Premiums, the associated effective period is equal to
the number of months from the first Monthly Deduction Date on or after the date
of the change creating the Death Benefit Guarantee Premium, to the Monthly
Deduction Date prior to the next change creating a new Death Benefit Guarantee
Premium. If there has not been a subsequent change the effective period is equal
to the number of months since the first Monthly Deduction Date on or after the
date of the change, including the current month.
If Your Death Benefit Guarantee Premium has ever changed, the required premiums,
used in determining if the Death Benefit Guarantee remains in effect, are equal
to the sum of each Death Benefit Guarantee Premium times the number of months in
its associated effective period.
If on a Monthly Deduction Date, sufficient premiums have not been paid to
maintain the Death Benefit Guarantee, an additional period lasting until two
additional Monthly Deduction Dates have occurred will be allowed for payment of
a premium sufficient to meet the cumulative required premium as outlined above.
If the premium is not paid within this period, the Death Benefit Guarantee
provision will no longer be in effect, and cannot be reinstated. Notice of such
required premium will be mailed to Your last known address.
For any month in which the monthly deduction is being paid by a Waiver of
Monthly Deduction Benefit Rider attached to this contract, the Death Benefit
Guarantee Premium for that month will be zero.
2.6 INCREASES IN SPECIFIED AMOUNT
You have the right to increase the specified amount at any time on or before the
Certificate Anniversary following the insured's 80th birthday if the insured is
insurable for the increase under AAL's underwriting guidelines and policies. A
written application providing proof of insurability under AAL's underwriting
guidelines and policies may be required. An increase is not allowed if the risk
class of the insured at time of increase is standard and the risk class of the
insured shown on page 3A is "STANDARD NONSMOKER".
An increase must be at least $10,000. Proof of insurability may be required and,
if You are not the insured, proof of insurable interest may also be required.
When an increase is approved, it becomes effective on the date shown on the new
page 3A that is sent to You.
The cost of insurance rates for each increase in specified amount may differ
from the rates that apply to the existing specified amount. The cost of
insurance rates charged for each increase will vary based on factors such as
sex, age, risk class, and time elapsed since issue.
Each increase will be subject to AAL's expense charges in effect at the time of
increase. The expense charges for each increase will be based on the insured's
sex and age on the last Certificate Anniversary and will apply for the number of
months shown on the new page 3A.1. A new set of surrender charges will apply to
each increase in the specified amount. These charges will all be shown on the
new page 3A.1.
See section 4 for more detail regarding charges that apply to the increase in
specified amount.
AAL will not contest the validity of the increase after it has been in effect
during the lifetime of the insured for two years from the date of increase. Any
contest of the validity of the increase will be limited to statements made in
the application for the increase.
The one year period in the Suicide Exclusion provision will apply to each
increase beginning on the effective date of each increase. The only amount
payable will be a refund of the monthly deductions for the increase.
2.7 DECREASES IN SPECIFIED AMOUNT
You have the right to decrease the specified amount at any time after this
certificate has been in effect for one year, if specified amount remaining in
effect is at least $10,000. The right to decrease the specified amount is
subject to section 3.6 of this certificate entitled "Limits on Premiums." AAL
reserves the right to refuse to accept premiums, and to refund premiums,
earnings on premiums, or cash value necessary to ensure compliance with the
requirements in the Internal Revenue Code for tax deferral of increases in cash
value and the exclusion of death benefits from gross income.
The decrease will be effective on the date the request is received at the home
office. The decrease will be subtracted first from any previous increases in the
specified amount, starting with the most recent, then from the original
specified amount.
A surrender charge will be subtracted from the cash value if a surrender charge
is in effect for that part of the specified amount. The surrender charges are
shown on the Table of Surrender Charges on page 3A.1.
2.8 DEATH BENEFIT FACTOR
The death benefit factor depends on the Insured's Attained Age on the date of
death. The table below shows the death benefit factor for each age.
Age Factor Age Factor
0-40 2.50 68 1.17
41 2.43 69 1.16
42 2.36 70 1.15
43 2.29 71 1.13
44 2.22 72 1.11
45 2.15 73 1.09
46 2.09 74 1.07
47 2.03 75 1.05
48 1.97 76 1.05
49 1.91 77 1.05
50 1.85 78 1.05
51 1.78 79 1.05
52 1.71 80 1.05
53 1.64 81 1.05
54 1.57 82 1.05
55 1.50 83 1.05
56 1.46 84 1.05
57 1.42 85 1.05
58 1.38 86 1.05
59 1.34 87 1.05
60 1.30 88 1.05
61 1.28 89 1.05
62 1.26 90 1.05
63 1.24 91 1.04
64 1.22 92 1.03
65 1.20 93 1.02
66 1.19 94 1.01
67 1.18 95 & over 1.00
The purpose of the death benefit factor is to help qualify Your certificate as a
life insurance contract under the Corridor Test in federal tax law.
2.9 MATURITY
AAL will pay You the maturity proceeds if the insured is still living on the
maturity date shown on page 3A. The maturity proceeds will be the cash value
less any loan and unpaid loan interest.
3. PREMIUMS
3.1 WHEN AND WHERE TO PAY PREMIUMS
Premiums may be paid at any time and in any amount, subject to the restrictions
described below. If premium payments are not sufficient to maintain a surrender
value larger than the monthly deduction amount and Your Death Benefit Guarantee
under section 3.6 is not in effect, Your insurance coverage will terminate. Pay
premiums by making Your check payable to Aid Association for Lutherans and
sending it to: Aid Association for Lutherans, 4321 North Ballard Road, Appleton,
Wisconsin 54919. Include Your certificate number.
3.2 PLANNED PERIODIC
PREMIUM
The amount and frequency of the planned periodic premium You have selected are
shown on page 3A. Changes in frequency and increases or decreases in amount of
payments may be made at any time. AAL reserves the right to limit the amount of
any increase.
3.3 NET PREMIUM
The net premium is the premium paid less the percentage of premium expense
charge. The percentage of premium expense charge is shown on page 3A.1.
3.4 NET PREMIUM
ALLOCATIONS
Net premiums are allocated to the Subaccounts and Fixed Account according to the
premium allocation percentages You select for this certificate, except as
otherwise provided below. Each net premium is allocated to a Subaccount in the
form of Accumulation Units. The number of Accumulation Units is determined by
dividing the net premium by the value of an Accumulation Unit, next computed
after AAL receives Your premium.
The initial premium allocation percentages You selected are specified in the
application. Your first premium will be allocated as of the end of the Valuation
Period during which all underwriting and administrative requirements are met.
All subsequent premiums will be allocated as of the end of the Valuation Period
during which they are received at AAL.
AAL reserves the right to allocate Your premium payments to the money market
Subaccount if this right is included under the notice of right to cancel
certificate found on the front cover of this certificate.
Each premium allocation percentage must be a whole percent. The sum of the
premium allocation percentages must be 100%%. AAL reserves the right to adjust
Your allocation to eliminate fractional percentages.
You may change Your premium allocation percentages by sending a Written Request
to AAL. AAL will provide a form for You to use to make this request. The change
will be effective as of the date Your Written Request is received at AAL's home
office. The change will apply to premium payments received at AAL on or after
the effective date of the change.
3.5 ADDITIONAL PREMIUM PAYMENTS
Additional premium payments may be made; however, AAL reserves the right to
limit the number and amount of these additional payments.
3.6 LIMITS ON PREMIUMS
The Internal Revenue Code provides for tax deferral of increases in cash value
and the exclusion of death benefits from gross income if certain requirements
are met. To qualify for this tax treatment, You must meet the Guideline Premium
Limit and the Corridor Test in the Internal Revenue Code. The Guideline Premium
Limit requires that total premium payments not exceed the limit stated in the
Code. The Corridor Test requires that the death benefit be greater than or equal
to the cash value multiplied by a factor stated in the Code. AAL reserves the
right to refuse to accept premiums and to refund any premiums, earnings on
premiums, or cash value necessary to ensure compliance with these requirements
and to ensure compliance with additional code requirements which may be imposed
to qualify for this tax treatment. AAL also reserves the right to refuse to
accept any premium that would increase the death benefit because of the
requirements of the Corridor Test.
3.7 CONTINUATION OF
INSURANCE COVERAGE
If You stop making premium payments, or payments are not large enough to cover
the monthly deductions, and the Death Benefit Guarantee under section 2.5 is not
in effect, the insurance coverage provided by this certificate will continue in
effect until the surrender value is not large enough to pay a monthly deduction.
This certificate will then terminate at the end of the grace period.
3.8 GRACE PERIOD
When the Death Benefit Guarantee under section 2.5 is not in effect, a grace
period will begin on a Monthly Deduction Date if the surrender value is less
than the amount of the monthly deductions. Written notice of the required
premium will be sent to You and any assignee at the last known address. The
grace period will end 61 days from the date the written notice is sent to You.
The required premium is the amount of premium needed to cover the next two
monthly deductions. Any surrender value is applied to reduce the premium amount
needed before notice is sent. If the full required payment is not received by
AAL at its home office before the end of the grace period, this certificate will
terminate.
When You pay a premium during the grace period, the net premium is applied to
overdue monthly deductions first. Any additional net premium amount is added to
the cash value. If the insured dies during the grace period, any unpaid monthly
deductions will be deducted from the death proceeds.
3.9 REINSTATEMENT
You may reinstate this certificate any time within three years after it has
terminated so long as You did not surrender it for its surrender value. To
reinstate Your certificate the insured must be insurable for reinstatement at
the time of reinstatement under AAL's underwriting guidelines and policies, and
pay a premium at least equal to:
The reinstated loan amount; plus
Any surrender charge at the time of reinstatement; plus
The first two monthly deduction amounts after reinstatement; less
The cash value at termination; less
Any surrender charge credited back at reinstatement; plus
The new surrender charge taken for any reduction in the specified amount at
reinstatement;
All divided by one minus the percent of premium expense charge rate.
The premium paid upon reinstatement will be used first to pay any unpaid monthly
deductions that occurred during the grace period. Your certificate will then be
reinstated on the date AAL approves Your application for reinstatement.
If You reinstate this certificate, AAL will not contest the validity of the
reinstated certificate after it has been in effect during the lifetime of the
insured for two years from the date of reinstatement. After this Certificate has
been in force two years from the issue date, any contest of the validity of the
reinstated certificate will be limited to statements made in the application for
reinstatement.
4. CERTIFICATE VALUES
4.1 CASH VALUE
The cash value on the issue date of this certificate is the first net premium
less the monthly deductions for the first month.
On any Monthly Deduction Date after the issue date the cash value is equal to
the sum of the cash values for this certificate in the Subaccounts and in the
Fixed Account. See section 5 on the Fixed Account and section 6 on the Variable
Account for how cash values are determined.
4.2 MONTHLY DEDUCTIONS
Each month on the Monthly Deduction Date, AAL will deduct from the cash value of
this certificate the following:
The cost of insurance charge; and
A monthly mortality and expense risk charge; and
The cost of any benefit riders attached to this certificate; and
Any expense charges in effect.
Allocation Method: Deductions, except for the monthly mortality and expense risk
charge (see section 4.6), will be taken from the Subaccounts and Fixed Account
according to the ratio that the cash value in the Subaccount or Fixed Account of
this certificate bears to the total cash value of this certificate at the time
of deduction. When doing this calculation the total cash value and the Fixed
Account cash value will be reduced by the total certificate loan.
Deductions from a Subaccount results in the cancellation of Accumulation Units
from that Subaccount.
So long as the surrender value is large enough to meet these deductions on the
Monthly Deduction Date or the Death Benefit Guarantee is in effect, this
certificate will remain in effect.
4.3 COST OF INSURANCE RATES
The cost of insurance rates charged will vary based on factors such as sex, age,
risk class and time elapsed since issue. Cost of insurance rates are determined
by AAL based on expectations as to future mortality and expense experience. Any
change in these rates will be applied on a uniform basis to all insureds of the
same age, sex and risk class. However, AAL cannot use cost of insurance rates
higher than the annual guaranteed cost of insurance rates shown in the table on
page 3B divided by 1.0032737. The guaranteed cost of insurance rates are based
on certain of the 1980 Commissioner's Standard Ordinary Mortality Tables, age
last birthday. These tables provide rates which vary based on age, risk class
and sex of the insured.
4.4 COST OF INSURANCE CHARGE
The cost of insurance charge is calculated on each Monthly Deduction Date for
the next month. It is equal to the cost of insurance rate multiplied by the
amount of insurance at risk. The amount of insurance at risk is:
The death benefit on the Monthly Deduction Date; less
The cash value on the Monthly Deduction Date times 1.0032737.
4.5 EXPENSE CHARGES
AAL will deduct from the cash value of this certificate the following expense
charges:
A monthly certificate fee; and
A monthly expense charge.
A premium expense charge will also be deducted from each premium payment.
All of the above charges and their durations are shown on page 3A.1.
In addition to the above charges, a $25 change fee will be charged for all
certificate changes described in the certificate.
4.6 MORTALITY AND
EXPENSE RISK CHARGES
On each Monthly Deduction Date, AAL will deduct an amount that is a percent of
the total cash value in each Subaccount of this certificate as a monthly
mortality and expense risk charge. The monthly charge applied to the total cash
value in each Subaccount is guaranteed not to exceed .075%%. In addition, the
monthly mortality and expense risk charge on certificates from their 15th
Certificate Anniversary and beyond is guaranteed at any time to be at least
.04166%% less than the rate in effect at that time for certificates which have
not reached their 15th Certificate Anniversary.
4.7 SURPLUS REFUNDS
This certificate will participate in any surplus refunds declared for this
Certificate, annually by the AAL Board of Directors. Surplus refunds will be
allocated as determined by AAL unless You request payment in cash. Charges were
determined so that AAL does not expect any surplus refund to be declared.
5. FIXED ACCOUNT
5.1 FIXED ACCOUNT
Premiums allocated to the Fixed Account and transfers of cash value from a
Subaccount to the Fixed Account become part of the general account assets of
AAL. The general account includes all of AAL's assets, except those assets
segregated in the Variable Account or any other separate account of AAL.
5.2 INTEREST EARNED ON THE FIXED ACCOUNT CASH VALUE
AAL will credit interest to the Fixed Account cash value on a daily basis. A
current interest rate will be declared periodically by AAL and is guaranteed not
to change more often than quarterly. AAL guarantees that the rate of interest
credited to the Fixed Account will never be less than 4 percent annually.
A lower rate of interest may be credited to the portion of the Fixed Account
cash value that equals the amount of any total certificate loan, but it will not
be less than 4 percent.
5.3 FIXED ACCOUNT CASH VALUE
On any Valuation Date after the issue date, the Fixed Account cash value is
equal to:
The Fixed Account cash value on the last Valuation Date increased with interest
for each day since the last Valuation Date; plus
The portion of the net premiums allocated to the Fixed Account and received
since the last Valuation Date increased with interest from the date the premium
was received to the current Valuation Date; plus
The amount of any transfers, less any charge for the transfer, from the
Subaccounts to the Fixed Account, including loan transfers, since the last
Valuation Date increased with interest from the date the transfer was received
to the current Valuation Date; less
The amount of any transfers from the Fixed Account to the Subaccounts since the
last Valuation Date, and the interest that would have been credited from the
date the transfer was made to the current Valuation Date; less
Any portion of any partial withdrawals taken from the Fixed Account and made
since the last Valuation Date, including any charge for the withdrawal, and the
interest that would have been credited from the date of the partial withdrawal
to the current Valuation Date; less
Any portion of any surrender charges taken from the Fixed Account resulting from
any decreases in specified amount since the last Valuation Date, and the
interest that would have been credited from the date of the decrease to the
current Valuation Date; less
The amount of any death benefit option change charge taken from the Fixed
Account resulting from any change in death benefit option since the last
Valuation Date, and the interest that would have been credited from the date of
the change to the current Valuation Date; less
Any portion of any certificate change charge taken from the Fixed Account and
the interest that would have been credited from the date of the change to the
current Valuation Date; less
If the Valuation Date is a Monthly Deduction Date, the monthly deductions
allocated to the Fixed Account for that month.
No interest is credited for February 29th.
5.4 BASIS OF
COMPUTATIONS
Minimum guaranteed cash values for the Fixed Account are based on the
Commissioner's 1980 Standard Ordinary Mortality Table, age last birthday, with
interest at the rate of 4 percent.
These values equal or exceed the minimum values required by law. A detailed
statement of how AAL calculates cash values for this certificate has been filed
with the insurance department of the state or district where this certificate
was delivered.
6. VARIABLE ACCOUNT
6.1 VARIABLE ACCOUNT
The AAL Variable Life Account I is a separate investment account established by
AAL under Wisconsin law. The Variable Account is registered with the Securities
and Exchange Commission as a unit investment trust under the Investment Company
Act of 1940.
AAL uses the assets of the Variable Account to buy shares in the AAL Variable
Product Series Fund, Inc. The Fund is registered with the Securities and
Exchange Commission under the Investment Company Act of 1940 as a diversified
open-end management investment company. The Variable Account has Subaccounts
which are invested in corresponding specific portfolios of the Fund. These
Subaccounts and portfolios are shown on page 3A.
AAL, consistent with then applicable law, may:
Combine one separate account with another separate account, operate the separate
account as a management investment company, deregister the separate account as
an investment company or modify the Variable Account;
Add, delete, combine or modify Subaccounts;
Make any new Subaccount available to You on a basis to be determined by AAL; and
Invest the assets of any new Subaccount in a new portfolio of the Fund, a
different investment company or in any other investment.
AAL owns the assets of the Variable Account and keeps them legally segregated
from the assets of the general account. The assets of the Variable Account
shall, at the time during the year that adjustments in the reserves are made,
have a value at least equal to the reserves and other contract liabilities with
respect to the Variable Account and, at all other times, shall have a value
approximately equal to or in excess of such reserves and liabilities. The assets
of the Variable Account shall not be chargeable with liabilities arising out of
any other business AAL may conduct, except to the extent that the assets of the
Variable Account exceed the reserves and other contract liabilities of the
Variable Account arising under the certificates supported by the Variable
Account.
Income, and gains and losses, whether or not realized, from the assets in each
Subaccount are credited to or charged against that Subaccount without regard to
any of AAL's other income, gains or losses. The value of the assets in the
Variable Account is determined at the end of each Valuation Date.
6.2 VARIABLE SUBACCOUNT CASH VALUES
The cash value for this certificate in each Subaccount as of a Valuation Date is
equal to:
The number of Accumulation Units for this certificate in that Subaccount
multiplied by the Accumulation Unit Value for that Subaccount.
The cash value for any day that is not a Valuation Date will be determined as of
the next Valuation Date.
6.3 NUMBER OF
ACCUMULATION UNITS
The number of Accumulation Units for this certificate in any Subaccount may
increase or decrease at the end of each Valuation Period depending on the
transactions that occur in the Subaccount during the Valuation Period. When
transactions occur, the actual dollar amounts of the transactions are converted
to Accumulation Units. The number of Accumulation Units for a transaction in a
Subaccount is determined by dividing the dollar amount of the transaction by the
Accumulation Unit Value of the Subaccount at the end of the Valuation Period
during which the transaction occurs.
The number of Accumulation Units in a Subaccount increases when the following
transactions occur during the Valuation Period:
Net premiums are allocated to the Subaccount; or
Cash value is transferred to the Subaccount from another Subaccount or from the
Fixed Account.
The number of Accumulation Units in a Subaccount decreases when the following
transactions occur during the Valuation Period:
Cash value is transferred from the Subaccount to another Subaccount or to the
Fixed Account, including loan transfers;
Partial withdrawals and partial withdrawal charges are taken from the
Subaccount;
Monthly deductions or transfer charges are taken from the Subaccount;
A charge for a Death Benefit Option change is allocated to the Subaccount;
A charge for a certificate change is allocated to the Subaccount; or
Surrender charges are allocated to the Subaccount.
6.4 ACCUMULATION UNIT VALUE
For each Subaccount, the initial Accumulation Unit Value was set when the
Subaccount was established. The Accumulation Unit Value may increase or decrease
from one Valuation Period to the next.
The Accumulation Unit Value for a Subaccount for any Valuation Period is equal
to:
The Net Asset Value of the corresponding Fund portfolio at the end of the
Valuation Period; plus
The amount of any dividend, capital gain or other distribution made by the Fund
portfolio if the "ex-dividend" date occurs during the Valuation Period; plus or
minus
Any cumulative credit or charge for taxes reserved which is determined by AAL to
have resulted from the operation of the portfolio; then
The sum of the above is divided by the total number of Accumulation Units held
in the Subaccount at the end of the Valuation Period before any of the
transactions referred to in section 6.3 have occurred.
6.5 TRANSFER OF
CASH VALUES
At any time, You may transfer all or a portion of the cash value of this
certificate among the Subaccounts and the Fixed Account by sending a Written
Request to AAL. AAL will provide a form for You to use. The transfer will be
effective as of the end of the Valuation Period during which Your Written
Request is received at AAL. Transfers are subject to the following:
The total dollar amount of any transfer cannot be less than the smaller of $500
or the cash value of the Subaccount or Fixed Account from which the transfer is
being made at the time of transfer.
The dollar amount of any transfer to a Subaccount or the Fixed Account may not
be less than $50.
You may make 12 transfers from one or more Subaccounts to one or more other
Subaccounts or the Fixed Account in each certificate year without charge. AAL
will charge $25 per transfer for each transfer in excess of the 12th in each
certificate year, which will be applied against the transfer amount prior to the
transfer being allocated as You direct.
You may make only 1 transfer from the Fixed Account in each certificate year.
The transfer may not exceed the greater of $500 or 25%% of the cash value of the
Fixed Account at the time of transfer. This transfer will not be subject to a
transfer charge.
AAL may delay making transfers subject to the same conditions described in
section 8.5.
6.6 CHANGE OF PORTFOLIO
OR INVESTMENT POLICY
AAL may determine that a portfolio of a Fund is no longer desirable for
investment by a Subaccount or the shares of a portfolio are no longer available
for investment. If that occurs, AAL has the right to substitute another
portfolio of the Fund, or to invest in another investment company. This change
would be subject to any required prior approval by the Securities and Exchange
Commission and the insurance supervisory officials in the state where this
certificate is delivered.
Any change in the investment policy of the Variable Account will be subject to
any required prior approval by the insurance supervisory officials of the state
of Wisconsin. AAL will notify You of any material change in investment policy.
7. CERTIFICATE LOANS
7.1 LOANS
Using the value of this certificate as security, You may obtain a loan. The most
You may borrow is 92 percent of the surrender value. AAL has the right to delay
payment of the loan as described under section 8.5.
The loan will be taken from the Subaccounts and Fixed Account according to the
method described in section 4.2; or according to any other administrative option
which You choose and is available at the time of the loan. Cash value will be
transferred to the Fixed Account from each Subaccount equal to the allocation of
the loan taken from that Subaccount. On each Monthly Deduction Date the excess
of the total certificate loan over the Fixed Account cash value will be
transferred from the Subaccounts to the Fixed Account. The cash value
transferred will be allocated among the Subaccounts according to the method
described in section 4.2.
7.2 LOAN INTEREST
The annual interest rate charged to a loan prior to the 15th Certificate
Anniversary is 8 percent. Once Certificate Anniversary 15 is reached AAL will
charge 7.25%% on loans. Interest accrues daily from the loan issue date.
A lower rate of interest may be credited to the portion of the Fixed Account
cash value that equals the amount of any outstanding certificate loan.
7.3 TOTAL CERTIFICATE LOAN
The total certificate loan is equal to the loan principal plus any accrued
interest.
7.4 LOAN REPAYMENT
You may repay a loan in part or in full at any time. When You send in a payment
for Your loan, be sure to state that it is a loan payment.
7.5 TERMINATION DUE TO EXCESS LOAN
If the total certificate loan ever equals or exceeds the cash value minus any
surrender charges, and the Death Benefit Guarantee under section 2.5 is not in
effect, this certificate will enter the grace period as described in section
3.8.
8. SURRENDER & WITHDRAWALS
8.1 SURRENDER VALUE
The surrender value is the cash value minus:
Any surrender charges; and
Any loans and unpaid loan interest.
8.2 SURRENDER CHARGE
A surrender charge will be subtracted from the cash value if this certificate is
surrendered during the surrender charge period, or You decrease the specified
amount. The surrender charges are shown on the Table of Surrender Charges on
page 3A.1.
8.3 FULL SURRENDER
You may surrender this certificate for its full surrender value by sending a
Written Request to AAL. The surrender will be effective as of the date the
request is received at the home office and insurance coverage will end on that
day.
AAL has the right to delay paying the cash value as described under section 8.5.
8.4 PARTIAL WITHDRAWALS
You may withdraw part of the surrender value of this certificate by sending a
Written Request to the home office. A $25 charge will be deducted from the cash
value for each partial withdrawal after the first one in any one certificate
year.
A partial withdrawal:
Will reduce the cash value by the amount of the partial withdrawal;
Will reduce the specified amount by the amount of the partial withdrawal if
Death Benefit Option I is in effect except for the part of the withdrawal which
is equal to (a) minus (b), if positive, where:
(a) is the cash value as of the date of the partial withdrawal, before the
partial withdrawal is taken, multiplied by the death benefit factor; and
(b) is the specified amount before the partial withdrawal is taken.
A partial withdrawal may not be made if the specified amount would be reduced
below the minimum allowed by AAL.
The partial withdrawal will be taken from the Subaccounts and Fixed Account
according to the method described in section 4.2; or according to any other
administrative option which You choose and is available at the time of the
partial withdrawal.
AAL has the right to delay paying the amount withdrawn as described under
section 8.5.
8.5 DELAY OF PAYMENT
Payment of any withdrawal value, cash surrender value, or loan value will
normally be made within 7 days after Your Written Request is received at AAL.
However, AAL may delay this payment or any other type of payment from the
Variable Account for any period when:
The New York Stock Exchange is closed for trading other than customary weekend
and holiday closings;
Trading on the New York Stock Exchange is restricted;
An emergency exists as a result of which it is not reasonably practicable to
dispose of securities held in the Variable Account or to fairly determine their
value; or
The Securities and Exchange Commission by order permits the delay for the
protection of security holders.
AAL may delay payment of any withdrawal value, cash surrender value or loan
value from the Fixed Account for up to 6 months after Your Written Request is
received at AAL.
9. CERTIFICATE REPORTS
9.1 ANNUAL REPORT
At least once each certificate year, AAL will send You a report concerning the
current status of Your certificate. There is no charge for this report.
9.2 ILLUSTRATIVE REPORT
Upon Your request, AAL will send You an illustration of future values for this
certificate. AAL may charge a reasonable fee for each illustration requested.
10. MEMBERSHIP, OWNERSHIP, ASSIGNMENT AND BENEFICIARY
10.1 MEMBERSHIP
The insured will become a benefit member of AAL on the Certificate Anniversary
date on or following the insured's 16th birthday. The rights and benefits of
membership are set forth in the Articles of Incorporation and Bylaws of AAL.
Membership cannot be transferred.
10.2 OWNERSHIP AND
CONTROL
The insured is the owner of this certificate. Because of age, the insured cannot
exercise the rights of ownership. Therefore, the person who applied for this
certificate will have control over ownership rights, except for transfer of
ownership, until the insured gains control of the certificate.
10.3 TRANSFER OF CONTROL
Control of this certificate may be transferred by the person who has control to:
An eligible person other than the insured as determined by AAL; or
The insured at any time after the Certificate Anniversary date on or following
the insured's 16th birthday.
Control of this certificate shall automatically transfer to the insured:
On the Certificate Anniversary date on or following the insured's 21st birthday.
When the person who has control dies after the Certificate Anniversary date on
or following the insured's 16th birthday.
If the person who has control of this certificate dies before the Certificate
Anniversary date on or following the insured's 16th birthday, control shall be
vested in an eligible person according to AAL's Bylaws.
AAL reserves the right to divest any person of control of this certificate if
such action is in the best interest of the insured as determined by AAL. Control
shall then be vested in some other person according to AAL's Bylaws.
10.4 BENEFICIARY
The beneficiary is the person, entity or organization named to receive the death
benefit after the insured dies. The Bylaws of AAL list those eligible to be
beneficiaries. Beneficiaries are designated as first, second and third class.
You may name more than one person or organization in the same class.
Unless You indicate otherwise, the proceeds payable when the insured dies will
be paid as follows:
Equally to the beneficiaries in the first class who survive the insured. If none
in the first class survive the insured, then;
Equally to the beneficiaries in the second class who survive the insured. If
none in the second class survive the insured, then;
Equally to the beneficiaries in the third class who survive the insured.
If no beneficiary has been named or survives the insured, AAL will pay the
proceeds as follows:
To Your estate if You are the insured; or
To You if You are not the insured.
If any beneficiary dies at the same time as the insured, or within 15 days after
the insured dies but before the death benefits are paid, AAL will pay the
proceeds as though that beneficiary had died before the insured.
10.5 CHANGE OF OWNER OR BENEFICIARY
Until the insured has obtained control of this certificate, the person who has
control of the certificate may change the beneficiary by sending a signed
Written Request to the home office.
After the insured has obtained control, the insured may transfer ownership or
change the beneficiary by sending a signed Written Request to the home office.
The new owner should consider naming a successor owner who will become the owner
if the owner dies before the insured. If a successor owner is not chosen,
ownership of the certificate will pass to the owner's estate.
Any transfer or change must be approved by AAL before it is valid. Once
approved, it will be effective on the date it was signed or on the date it was
received at the home office if no date appears on the request.
AAL will provide a form for You to use.
The change will not affect any payment made or action taken by AAL before the
change was received and approved at the home office.
10.6 COLLATERAL
ASSIGNMENT
You may assign this certificate as collateral security for a loan or other
obligation. This may limit Your rights to the cash value and the beneficiary's
rights to the proceeds.
The assignments must be in writing and filed at our home office. AAL assumes no
responsibility as to the validity of any assignment. AAL is not liable for any
payment made or any other action taken on this certificate before the assignment
was recorded at our home office.
Any certificate loan obtained before an assignment is recorded at our home
office has priority over the assignment.
11. FILING A DEATH CLAIM
11.1 NOTICE OF DEATH
Written notice of death must be given to AAL at its home office. Notice should
include the insured's name and the certificate number. Help may be obtained
through an AAL district representative.
11.2 CLAIM FORMS
A claim form will be sent, upon receiving the death claim notice. Complete the
claim form and send it to the home office along with a certified copy of the
death certificate. Processing of the claim will begin as soon as these items are
received.
12. SETTLEMENT OPTIONS
12.1 OWNER--CHOOSING A SETTLEMENT OPTION
All or part of the proceeds from death, maturity or surrender may be applied to
one or more of the settlement options described below in place of a lump sum
payment.
You may choose a settlement option while the insured is alive.
The minimum amount that may be applied to any one settlement option is $1,000.
12.2 BENEFICIARY--CHOOSING A SETTLEMENT OPTION FOR THE DEATH
PROCEEDS
The beneficiary may choose to receive the death proceeds in a lump sum payment
or under any settlement option, unless the owner has chosen a mandatory method
of payment in the beneficiary designation that does not allow the beneficiary to
change it. AAL will provide a form to use. On lump sum payments, we will pay
interest on the death proceeds at a rate required by law from the date of the
insured's death until the date of payment.
12.3 SETTLEMENT OPTIONS
The minimum amount that may be applied to any one settlement option is $1,000.
Payments may be received on a monthly, quarterly, semiannual, or annual basis
provided each payment is at least $25. The first payment under an option will be
made on the first business day following the end of the payment interval chosen.
The settlement options are as follows:
OPTION 1 - INTEREST
The proceeds are left with AAL to earn interest. Interest earned may be paid in
cash at regular intervals or may be left with AAL to accumulate with interest.
All or part of these proceeds may be withdrawn upon request.
OPTION 2 - SPECIFIED AMOUNT INCOME
The proceeds are used to make payments at regular intervals for a specified
amount until the proceeds with interest have been paid. The payment period may
not exceed 30 years. The unpaid proceeds may be withdrawn upon request.
OPTION 3 - FIXED PERIOD INCOME
The proceeds are used to make payments at regular intervals for a fixed number
of years, not to exceed 30 years. The unpaid proceeds may be withdrawn upon
request. Guaranteed payments are shown in the table below.
MONTHLY PAYMENTS FOR EACH $1,000 OF
PROCEEDS
Number Number
of Monthly of Monthly
Years Payment Years Payment
2 $42.96 17 $6.24
3 $29.06 18 $5.98
4 $22.12 19 $5.74
5 $17.95 20 $5.53
6 $15.18 21 $5.33
7 $13.20 22 $5.16
8 $11.71 23 $5.00
9 $10.56 24 $4.85
10 $ 9.64 25 $4.72
11 $ 8.88 26 $4.60
12 $ 8.26 27 $4.49
13 $ 7.73 28 $4.38
14 $ 7.28 29 $4.28
15 $ 6.89 30 $4.19
16 $ 6.54
OPTION 4 - LIFE INCOME WITH GUARANTEED PAYMENT PERIOD
The proceeds are used to make payments at regular intervals for the lifetime of
the payee. If the payee dies during the guaranteed period, payments will be
continued to the end of that period. A period of 10 or 20 years may be elected.
The amount of the payments depends on the age and sex of the payee at the time
AAL issues the settlement agreement. Guaranteed payments are shown in the table
below.
MONTHLY PAYMENTS FOR EACH $1,000 OF
PROCEEDS
10 YEAR 20 YEAR
GUARANTEED GUARANTEED
PAYMENT PAYMENT
PERIOD PERIOD
Age Male Female Male Female
50 $4.53 $4.19 $4.38 $4.13
51 $4.61 $4.26 $4.44 $4.18
52 $4.69 $4.32 $4.50 $4.24
53 $4.77 $4.39 $4.56 $4.29
54 $4.85 $4.45 $4.62 $4.35
55 $4.93 $4.52 $4.68 $4.40
56 $5.03 $4.61 $4.74 $4.46
57 $5.14 $4.70 $4.80 $4.53
58 $5.24 $4.78 $4.87 $4.59
59 $5.35 $4.87 $4.93 $4.66
60 $5.45 $4.96 $4.99 $4.72
61 $5.58 $5.07 $5.05 $4.79
62 $5.71 $5.18 $5.11 $4.86
63 $5.85 $5.30 $5.18 $4.93
64 $5.98 $5.41 $5.24 $5.00
65 $6.11 $5.52 $5.30 $5.07
66 $6.27 $5.67 $5.35 $5.14
67 $6.43 $5.82 $5.40 $5.20
68 $6.59 $5.96 $5.44 $5.27
69 $6.75 $6.11 $5.49 $5.33
70 $6.91 $6.26 $5.54 $5.40
71 $7.09 $6.44 $5.57 $5.44
72 $7.26 $6.63 $5.60 $5.49
73 $7.44 $6.81 $5.62 $5.53
74 $7.61 $7.00 $5.65 $5.58
75 $7.79 $7.18 $5.68 $5.62
76 $7.95 $7.38 $5.69 $5.64
77 $8.12 $7.58 $5.71 $5.66
78 $8.28 $7.78 $5.72 $5.69
79 $8.45 $7.98 $5.74 $5.71
80 $8.61 $8.18 $5.75 $5.73
OPTION 5 - JOINT AND SURVIVOR LIFE INCOME WITH GUARANTEED PAYMENT PERIOD
The proceeds are used to make payments at regular intervals for the lifetime of
both payees. Upon the death of one of the payees, payments will be continued for
the lifetime of the surviving payee. If both payees die during the guaranteed
period, payments will be continued to the end of that period. A period of 10 or
20 years may be elected. The amount of the payments depends upon the age and sex
of the payees at the time AAL issues the settlement agreement. Guaranteed
payments are shown in the tables below.
MONTHLY PAYMENTS FOR EACH $1,000 OF
PROCEEDS
PAYMENTS GUARANTEED FOR 10 YEARS
Male Female Ages
Ages 50 55 60 65 70 75 80
50 $3.91 $4.05 $4.18 $4.29 $4.38 $4.45 $4.49
55 $3.99 $4.17 $4.36 $4.53 $4.67 $4.78 $4.86
60 $4.06 $4.28 $4.53 $4.77 $5.00 $5.19 $5.32
65 $4.11 $4.37 $4.67 $5.00 $5.34 $5.64 $5.87
70 $4.14 $4.43 $4.79 $5.20 $5.66 $6.11 $6.48
75 $4.17 $4.48 $4.86 $5.34 $5.91 $6.52 $7.07
80 $4.18 $4.50 $4.91 $5.44 $6.09 $6.83 $7.56
MONTHLY PAYMENTS FOR EACH $1,000 OF
PROCEEDS
PAYMENTS GUARANTEED FOR 20 YEARS
Male Female Ages
Ages 50 55 60 65 70 75 80
50 $3.90 $4.03 $4.16 $4.25 $4.32 $4.36 $4.38
55 $3.98 $4.15 $4.32 $4.47 $4.58 $4.64 $4.67
60 $4.04 $4.25 $4.47 $4.68 $4.84 $4.94 $4.98
65 $4.08 $4.32 $4.59 $4.85 $5.07 $5.21 $5.28
70 $4.11 $4.37 $4.67 $4.97 $5.24 $5.42 $5.50
75 $4.12 $4.39 $4.70 $5.04 $5.34 $5.55 $5.64
80 $4.12 $4.40 $4.72 $5.07 $5.38 $5.60 $5.71
OTHER OPTIONS
AAL also has other settlement options which may be chosen. Information about
these options may be obtained from an AAL district representative or the home
office.
12.4 GUARANTEED INTEREST RATE ON SETTLEMENT OPTIONS
Options 1, 2, and 3 are based on a guaranteed effective annual interest rate of
3%%. Options 4 and 5 are based on a guaranteed effective annual interest rate of
3 1/2%% using the "1983 Table a" annuitant mortality table.
12.5 SETTLEMENT
AGREEMENT
AAL will issue a separate settlement agreement whenever proceeds are applied to
any settlement option. The settlement agreement will be issued to the payee. The
payee is the person named to receive the payments.
If the payee dies on or after the settlement agreement commencement date and
before the entire interest in the settlement agreement has been paid, the
remaining portion of such interest will be paid at least as rapidly as under the
method of payment in effect as of the date of the payee's death.
FLEXIBLE PREMIUM
VARIABLE LIFE INSURANCE
Death benefit payable at death of insured before maturity date Maturity proceeds
payable on maturity date Adjustable death benefit Flexible premiums payable
during lifetime of insured until maturity date Death benefit guarantee of Death
Benefit Guarantee Premiums Return on cash value based on the investment options
selected QQ
AMENDED AND RESTATED PARTICIPATION AGREEMENT
BY AND BETWEEN AID ASSOCIATION FOR LUTHERANS
AND AAL VARIABLE PRODUCT ACCOUNTS
AND AAL VARIABLE PRODUCT SERIES FUND, INC.,
DATED _____, 1994, AS AMENDED _____, 1997
<PAGE>
TABLE OF CONTENTS
Page
1 Sale of FUND Shares
2. Representations and Warranties
3. Prospectus and Proxy Statements: Voting
4. Sales Material and Information
5. Fees and Expenses
6. Diversification
7. Indemnification 8
8. Term and Termination Of This Agreement I
9. Notices
10. Miscellaneous
<PAGE>
PARTICIPATION AGREEMENT
This PARTICIPATION AGREEMENT, is made and entered into as of this
______day of _____________, 1997, by and among AID ASSOCIATION FOR LUTHERANS
("AAL"), on its own behalf and on behalf of AAL VARIABLE ANNUITY ACCOUNT I and
AAL VARIABLE LIFE ACCOUNT I (the "ACCOUNTS"), and AAL VARIABLE PRODUCT SERIES
FUND, INC. (the "FUND"), (collectively the "Parties").
WITNESSETH:
WHEREAS, AAL is a fraternal benefit society organized under the laws of
the State of Wisconsin engaged in the writing of life insurance, annuity
contracts, and other insurance products, and serves as sponsor and depositor of
the ACCOUNTS and as investment adviser of the FUND registered under the
Investment Advisers Act of 1940;
WHEREAS, the ACCOUNTS are legally segregated asset accounts of AAL,
established pursuant to the laws of the State of Wisconsin, and currently
consists of five subaccounts (the "Subaccounts"), for the purpose of funding
certain variable universal life insurance contracts and variable annuity
contracts (collectively the "Certificates");
WHEREAS, the FUND is registered with the Securities and Exchange
Commission (the "SEC"), as a diversified, open-end management investment company
under the Investment Company Act of 1940 (the "1940 Act"), and its shares are
registered with the SEC under the Securities Act of 1933 (the "1933 Act"); and
Whereas, the Fund is a series company, meaning its Board of Directors may
designate various series ("Portfolios") into which the FUND's authorized shares
are to be divided from time to time, with each such Portfolio consisting of a
specific number of the FUND's authorized shares, representing an interest in a
separate portfolio of securities and other assets, and having its own
invwestment objectives, policies and restrictions (the Board of Directors
currently has designated seven such Portfolios); and
WHEREAS, to the extent permitted by applicable insurance, tax and other
laws and regulations, AAL intends to purchase shares in the FUND on behalf of
the ACCOUNTS to fund the Certificates and on behalf of the ACCOUNTS [or on its
own behalf for related purposes,] and the FUND is authorized to sell such shares
to the ACCOUNTS and to AAL at net asset value;
WHEREAS, the FUND has entered into an Investment Advisory Agreement with
AAL, dated the twenty-seventh day of September, 1994, wherein AAL has agreed to
serve as investment adviser to the FUND, and to accept certain obligations of
the FUND as set forth herein, i.e., to compute the daily net asset value and the
net asset value per share for each Portfolio and to comply with Subchapter M and
Section 817(h) of the Internal Revenue Code of 1986 (the "Code");
NOW, THEREFORE, in consideration of the covenants and mutual promises
contained herein, and other good and valuable consideration, the receipt and
legal sufficiency of which are hereby acknowledged, and intending to be legally
bound hereby, the Parties agree as follows:
1. Sale of FUND Shares
1.1 The Certificates funded through the ACCOUNTS will provide for the
allocation of net amounts among certain Subaccounts for investment in
such shares of the Portfolios as may be offered from time to time in the
prospectus of the ACCOUNTS for the Certificates. The selection of the
particular Subaccount is to be made by the Certificate owner, and such
selection may be changed in accordance with the terms of the
Certificates.
1.2 The FUND will sell to AAL those shares of each available Portfolio
that AAL orders based on transactions under Certificates, effecting such
orders on a daily basis at the Portfolio's net asset value per share
computed as provided in the FUND prospectus.
1.3 The Board of Directors of the FUND (the "Board") may refuse to sell
shares of any Portfolio to AAL, or suspend or terminate the offering of
shares of any Portfolio, if such action is required by law or by
regulatory authorities having jurisdiction or is, in the sole discretion
of the Board, acting in good faith and in light of their fiduciary
duties under federal and any applicable state laws, necessary in the
best interests of the shareholders of the FUND.
1.4 The FUND agrees that its shares will be sold only to AAL. No shares
of any Portfolio will be sold to the general public or to any life
insurance company other than AAL.
1.5 The FUND will redeem for cash from AAL those full or fractional
shares of each Portfolio that AAL requests based on transactions under
Certificates, effecting such requests on a daily basis at the
Portfolio's net asset value per share next computed as provided in the
FUND prospectus.
1.6 Issuance and transfer of the FUND's shares will be by book entry
only. Stock certificates will not be issued to AAL. Shares ordered from
the FUND will be recorded in an appropriate title for AAL.
1.7 The FUND shall furnish notice promptly to AAL of any income,
dividends or capital gain distributions payable on the shares of any
Portfolio. AAL hereby elects to receive all such income, dividends and
capital gain distributions as are payable on FUND shares in additional
shares of that Portfolio. AAL reserves the right to revoke this election
and to receive all such income, dividends and capital gain distributions
in cash. The FUND shall notify AAL of the number of shares so issued as
payment of such income, dividends and distributions.
1.8 The FUND shall make the net asset value per share for each Portfolio
available to AAL on a daily basis, as soon as reasonably practical after
the net asset value per share is calculated.
1.9 The FUND may establish additional Portfolios to provide additional
funding media for the Certificates, or delete, combine, or modify
existing Portfolios. The shares of any additional Portfolio may be made
available to the ACCOUNTS by the FUND, pursuant to the terms of this
Agreement, and any applicable reference to any Portfolio, the FUND or
its shares herein shall include a reference to any such Portfolio.
2. Representations and Warranties
2.1 AAL represents and warrants that interests in the ACCOUNTS under the
Certificates are or will be registered under the 1933 Act to the extent
required by the 1933 Act, that the Certificates will be issued and sold
in compliance in all material respects with all applicable federal and
state laws and that the sale of the Certificates will comply in all
material respects with state insurance and federal securities law
suitability requirements. AAL further represents and warrants that it is
a fraternal benefit society organized under the laws of the State of
Wisconsin and engaged in the writing of life insurance, annuity
contracts, and other insurance products; that it has legally and validly
established its ACCOUNTS as segregated asset accounts under Wisconsin
insurance law; and that it has registered or will register the ACCOUNTS
as a unit investment trust in accordance with the provisions of the 1940
Act to serve as segregated investment accounts for the Certificates, to
the extent required by the 1940 Act.
2.2 AAL represents and warrants that any interests in the ACCOUNTS being
offered for sale under the Certificates are or will be registered under
the 1933 Act to the extent required by the 1933 Act, that the
Certificates will be issued and sold in compliance in all material
respects with all applicable federal and state laws, and that the sale
of the Certificates will comply in all material respects with state
insurance law, and federal securities laws, including the rules of the
National Association of Securities Dealers, Inc. ("NASD").
2.3 The FUND represents and warrants that its shares sold pursuant to
this Agreement are or will be registered under the 1933 Act to the
extent required by the 1933 Act, duly authorized for issuance and sold
in compliance with the laws of the state of Maryland and all applicable
federal securities laws and that the FUND is or will be registered under
the 1940 Act to the extent required by the 1940 Act. The FUND will amend
the registration statement for its shares under the 1933 Act, as well as
its registration statement under the 1940 Act, as required in order to
effect the continuous offering of its shares. The FUND will register and
qualify the shares for sale in accordance with the laws of the various
states only if and to the extent deemed advisable by the FUND.
2.4 AAL represents and warrants that its Certificates are currently
treated as annuity contracts under applicable provisions of the Code and
that it will make every effort to maintain such treatment.
2.5 The FUND makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses) complies
with the insurance laws or regulations of the various states. The FUND
intends to comply with the insurance laws of any relevant state
regarding any Portfolio's investment objectives, policies and
restrictions to the extent that AAL advises the FUND, in writing, of
such laws or any change in such laws.
2.6 The FUND represents and warrants that each of its Portfolios will
qualify as a regulated investment company under Subchapter M of the Code
and that the investments of each of its Portfolios will comply with the
diversification requirements of Section 817(h) of the Code and the
regulations thereunder, and that it will notify AAL immediately upon
having a reasonable basis for believing that it has ceased to so qualify
or that it might not so qualify in the future.
3. Prospectus and Proxy Statements: Voting
3.1 The FUND will provide such documentation (including a final copy of
any new prospectus, statement of additional information ("SAI"), or
supplement) and other assistance as is reasonably necessary in order for
AAL or its designee to timely distribute the current FUND prospectus,
SAI and any supplement thereto, or, in the alternative, to have the
prospectus of the ACCOUNTS for the Certificates and the FUND's
prospectus printed together in one document once each year (or more
frequently if the prospectus for the FUND is amended) (such printing to
be at the FUND's expense, as provided in Section 5.1).
3.2 The FUND will provide such documentation (including a final copy of
any proxy material, report to shareholders, and other communication to
shareholders) and other assistance as is reasonably necessary for AAL or
its designee to timely distribute the proxy material, report to
shareholders, and other communication (such printing and distribution to
be at AAL's expense, as provided in Section 5.1).
3.3 If, and to the extent required by law, AAL shall, at AAL's
expense, as provided in Section 5.2:
(a) solicit voting instructions from Certificate owners;
(b) vote Portfolio shares in accordance with instructions
received from Certificate owners;
(c) vote Portfolio shares for which no instructions have been
received, as well as Portfolio shares attributable to AAL other
than under Certificates, in the same proportion as shares of such
Portfolio for which instructions have been received, so long as
and to the extent that the SEC continues to interpret the 1940
Act to require pass-through voting privileges. AAL reserves the
right to vote Portfolio shares held in any segregated asset
accounts or in general accounts in its own right, to the extent
permitted by law.
3.4 The FUND reserves the right to take all actions, including but not
limited to the dissolution, merger, and sale of all assets of the FUND
solely upon the authorization of its Board and/or the 1940 Act.
4. Sales Material and Information
4.1 AAL or its designee will furnish, or will cause to be furnished, to
the FUND or its designee, each piece of sales literature or other
promotional material in which the FUND or AAL is named, at least fifteen
(15) days prior to its intended use. No such material will be used if
the FUND or its designee objects to such intended use within fifteen
(15) days after receipt of such material.
4.2 AAL will not give any information or make any representation or
statement, or cause such information to be given or representation to be
made, on behalf of the FUND or concerning any Portfolio in connection
with the sale of the Certificates other than the information or
representations contained in the registration statement, prospectus, and
SAI for FUND shares, as such registration statement, prospectus, and SAI
may be amended or supplemented from time to time, or in reports or proxy
materials for the FUND, or in sales literature or other promotional
material approved by the FUND or its designee, except with the
permission of the FUND or its designee.
4.3 The FUND or its designee will furnish, or will cause to be
furnished, to AAL or its designee, each piece of sales literature or
other promotional material of the FUND in which AAL and/or its ACCOUNTS
is named, at least fifteen (15) days prior to its intended use. No such
material will be used if AAL or its designee objects to such intended
use within fifteen (15) days after receipt of such material.
4.4 The FUND will not give any information or make any representations
or statements, or cause such information to be given or representations
to be made, on behalf of AAL or concerning AAL, its ACCOUNTS or its
Certificates other than the information or representations contained in
a registration statement or prospectus for such Certificates, as such
registration statement and prospectus may be amended or supplemented
from time to time, or in published reports for the ACCOUNTS that are in
the public domain or approved by AAL for distribution to owners, or in
sales literature or other promotional material approved by AAL or its
designee, except with the permission of AAL or its designee .
4.5 The FUND will provide to AAL one complete copy of all registration
statements, prospectuses, SAIs, reports, proxy material, sales
literature and other promotional material, applications for exemptions,
requests for no-action letters, and all amendments to any of the above,
that relate to the FUND or its shares, contemporaneously with the filing
of such document with the SEC or other regulatory authorities.
4.6 AAL will provide to the FUND one complete copy of all registration
statements, prospectuses, SAIs, reports, solicitations for voting
instructions, sales literature and other promotional material,
applications for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to the ACCOUNTS or its
Certificates, contemporaneously with the filing of such document with
the SEC or other regulatory authorities.
5. Fees and Expenses
5.1 The FUND will pay all expenses incident to the FUND's performance
under this Agreement. In addition to the investment advisory fee,
subject to the expense reimbursement arrangement discussed below, each
Portfolio will bear all of its operating expenses that are not
specifically assumed by AAL, including the following: (i) interest and
taxes (ii) brokerage commissions; (iii) insurance premiums; (iv)
compensation and expenses for those Directors who are not "interested"
persons under Section 2(a)(19) of the Act; (v) independent legal and
audit expenses; (vi) fees and expenses of the FUND's custodian,
shareholder servicing or transfer agent and accounting services agent;
(vii) expenses incident to the issuance of its shares, including stock
certificates and issuance of shares on the payment of, or reinvestment
of dividends; (viii) fees and expenses incident to the registration
under Federal or state securities laws of the FUND or its shares; (ix)
FUND or portfolio organizational expenses; (x) fund expenses of
preparing, printing and mailing reports and notices, proxy material and
prospectuses to shareholders of the FUND; (xi) all other expenses
incidental to holding meetings of the FUND's shareholders; (xii) dues or
assessments of or contributions to the Investment Company Institute or
any successor or other industry association; (xiii) such non-recurring
expenses as may arise, including litigation affecting the FUND and the
legal obligations which the FUND may have to indemnify its officers and
Directors with respect thereto; and (xiv) cost of daily evaluation of
each of the Portfolio's securities and net asset value per share.
5.2 AAL will pay all expenses incident to AAL's performance under this
Agreement. In addition, AAL will bear the expenses of printing and
distributing to its Certificate owners the FUND proxy materials, proxy
cards and voting instruction forms (collectively "proxy information"),
tabulating the results of proxy solicitations to its Certificate owners,
printing and distributing to its Certificate owners the FUND prospectus,
SAI, supplement, proxy material, report to shareholders, and other
communication to shareholders, and any expenses associated with
administration of its Certificates.
6. Diversification
6.1 The Portfolios will at all times invest money from the Certificates
in such a manner as to ensure that the Certificates will be treated as
variable life insurance contracts under the Code and the regulations
thereunder insofar as such investment is required for such treatment.
Without limiting the scope of the foregoing, the Portfolios will at all
times comply with Section 817(h) of the Code and Treasury Regulations
Section 1.817 relating to the diversification requirements for variable
annuity, endowment, or life insurance contracts and any amendments or
other modifications to such Section or Regulations.
6.2 The FUND shall furnish to AAL on a regular basis reports of all of
the investments of each Portfolio in a form sufficient to permit AAL to
determine whether each Portfolio is in compliance with the
diversification requirements of Section 817(h) of the Code and the
Regulations thereunder and shall take immediate action, on learning
through its own monitoring, or on advice from AAL, that any Portfolio is
not in compliance with such requirements, to return to compliance with
such requirements.
6.3 If any Portfolio is found not to comply with the diversification
requirements at the end of a calendar quarter and the 30-day grace
period allowed under the Regulations, the FUND shall take all
appropriate efforts immediately to restore any such Portfolio to
compliance and shall fully cooperate with AAL in any effort to correct
such diversification failure under procedures established by the
Internal Revenue Service, including those set forth in Revenue Procedure
92-25.
7. Indemnification
7.1 Indemnification By AAL
(a) AAL will indemnify and hold harmless the FUND and each of its
directors, officers, and employees and each person, if any, who
controls the FUND within the meaning of Section 15 of the 1933
Act (collectively, the "Indemnified Parties" for purposes of this
Section 7.1) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the
written consent of AAL) or litigation (including legal and other
expenses), to which the Indemnified Parties may become subject
under any statute, regulation, at common law or otherwise, and
which:
(i) arise out of or are based upon any failure by AAL to
perform the duties or assume the general business
responsibilities of AAL with respect to the design,
drafting, state approvals, issuance, servicing and
administration of the Certificates, or the establishment
and maintenance of the ACCOUNTS; or
(ii) arise out of or are based upon any untrue statements
or alleged untrue statements of any material fact
contained in the registration statement, prospectus, or
SAI for the Certificates, or the ACCOUNTS, or contained in
the Certificates or sales literature for the Certificates
(or any amendment or supplement to any of the foregoing),
or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements
therein not misleading, provided that this Agreement to
indemnify will not apply as to any Indemnified Party if
such statement or omission or such alleged statement or
omission was made in reliance upon and in conformity with
information furnished in writing to AAL by or on behalf of
the FUND for use in the registration statement,
prospectus, or SAI for the Certificates or the ACCOUNTS or
in the Certificates or sales literature (or any amendment
or supplement) or otherwise for use in connection with the
sale of the Certificates or FUND shares; or
(iii) arise out of or are based upon statements or
representations (other than statements or representations
contained in the registration statement, prospectus, SAI,
or sales literature of the FUND not supplied by AAL, or
persons under its control) or wrongful conduct of AAL or
persons under its control, or failure to supervise persons
under AAL's control or entities or individuals with which
AAL contracts, with respect to the sale or distribution of
the Certificates or FUND shares; or
(iv) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration
statement, prospectus, or sales literature of the FUND or
any amendment thereof or supplement thereto or the
omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make
the statements therein not misleading if such a statement
or omission was made in reliance upon information
furnished in writing to the FUND by or on behalf of AAL;
or
(v) arise out of or result from any failure by AAL to
provide the services and furnish the materials
contemplated by this Agreement; or
(vi) arise out of or result from any material breach of
any representation and/or warranty made by AAL in this
Agreement or arise out of or result from any other
material breach of this Agreement by AAL, as limited by
and in accordance with the provisions of Sections 7.1(b).
and 7.1(c) hereof.
(b) AAL will not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or
litigation to which an Indemnified Party would be subject by
reason of such Indemnified Party's willful misfeasance, bad
faith, or gross negligence in the performance of such Indemnified
Party's duties or by reason of such Indemnified Party's reckless
disregard of obligations or duties under this Agreement or to the
Fund, whichever is applicable.
(c) AAL will not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party
unless such Indemnified Party shall have notified AAL in writing
within a reasonable time after the summons or other first legal
process giving information of the nature of the claim shall have
been served upon such Indemnified Party (or after such
Indemnified Party shall have received notice of such service on
any designated agent), but failure to notify AAL of any such
claim will not relieve AAL from any liability that it may have to
the Indemnified Party against whom such action is brought
otherwise than on account of this indemnification provision. In
case any such action is brought against the Indemnified Parties,
AAL shall be entitled to participate, at its own expense, in the
defense thereof. AAL also will be entitled to assume the defense
thereof, with counsel satisfactory to the party named in the
action. After notice from AAL to such party of AAL's election to
assume the defense thereof, the Indemnified Party will bear the
fees and expenses of any additional counsel retained by it, and
AAL will not be liable to such party under this Agreement for any
legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than
reasonable costs of investigation.
(d) The Indemnified Party will promptly notify AAL of the
commencement of any litigation or proceeding against it or any of
its respective officers or directors in connection with
transactions that are the subject of this Agreement whether or
not indemnification is being sought hereunder.
7.2 Indemnification By the FUND
(a) The FUND will indemnify and hold harmless AAL and each of its
directors, officers and employees and each person, if any, who
controls AAL within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this
Section 7.2) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the
written consent of FUND) or litigation (including legal and other
expenses) to which the Indemnified Parties may become subject
under any statute, regulation at common law or otherwise, which:
(i) arise out of or are based upon any failure by the FUND
to perform the duties or assume the general business
responsibilities with respect to the sale of shares of the
FUND to AAL; or
(ii) arise out of or are based upon any untrue statements
or alleged untrue statements of any material fact
contained in the sales literature for the FUND and/or the
Certificates, or arise out of or are based upon the
omission or the alleged omission to state therein a
material fact required to be stated therein or necessary
to make the statements therein not misleading, provided
that this agreement to indemnify will not apply as to any
Indemnified Party if such statement or omission or such
alleged statement or omission was made in reliance upon
and in conformity with information furnished in writing to
the FUND by or on behalf of AAL for use in the
registration statement, prospectus, or SAI for use in the
sales literature or otherwise for use in connection with
the sale of Portfolio shares; or
(iii) arise out of or are based upon statements or
representations (other than statements or representations
contained in the registration statement, prospectus, SAI,
or sales literature of the FUND not supplied by the FUND,
or persons under its control) or wrongful conduct of the
FUND or persons under its control, or failure to supervise
persons under the FUND's control or entities or
individuals with which the FUND contracts, with respect to
the sale or distribution of the Certificates or FUND
shares; or
(iv) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration
statement, prospectus, or sales literature of the FUND or
any amendment thereof or supplement thereto or the
omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make
the statements therein not misleading if such a statement
or omission was made in reliance upon information
furnished in writing to AAL by or on behalf of AAL; or
(v) arise out of or result from any failure by the FUND to
provide the services and furnish the materials
contemplated by this Agreement; or
(vi) arise out of or result from any material breach of
any representation and/or warranty made by the FUND in
this Agreement or arise out of or result from any other
material breach of this Agreement by the FUND, except to
the extent provided in Section 7.2(b) and 7.2(c) hereof.
(b) The FUND will not be liable under this indemnification
provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would be
subject by reason of such Indemnified Party's willful
misfeasance, bad faith, or gross negligence in the performance of
such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations or duties under this
Agreement or to the FUND, whichever is applicable.
(c) The FUND will not be liable under this indemnification
provision with respect to any claim made against an Indemnified
Party unless such Indemnified Party shall have notified the FUND
in writing within a reasonable time after the summons or other
first legal process giving information of the nature of the claim
shall have been served upon such Indemnified Party (or after such
Indemnified Party shall have received notice of such service on
any designated agent), but failure to notify the FUND of any such
claim will not relieve the FUND from any liability that it may
have to the Indemnified Party against whom such action is brought
otherwise than on account of this indemnification provision. In
case any such action is brought against the Indemnified Parties,
the FUND shall be entitled to participate, at its own expense, in
the defense thereof. The FUND also will be entitled to assume the
defense thereof, with counsel satisfactory to the party named in
the action. After notice from the FUND to such party of the
FUND's election to assume the defense thereof, the Indemnified
Party will bear the fees and expenses of any additional counsel
retained by it, and the FUND will not be liable to such party
under this Agreement for any legal or other expenses subsequently
incurred by such party independently in connection with the
defense thereof other than reasonable costs of investigation.
(d) The Indemnified Party will promptly notify the FUND of the
commencement of any litigation or proceeding against it or any of
its respective officers or directors in connection with
transactions that are the subject of this Agreement whether or
not indemnification is being sought hereunder.
8. Term and Termination Of This Agreement
8.1 This Agreement will terminate:
(a) as to any party hereto, at the option of that party, upon
prior written notice to the other party as provided in Section
8.3 herein; or
(b) at the option of the FUND in the event that formal
administrative proceedings are instituted against AAL by the
NASD, the SEC, any state securities or insurance commissioner or
any other regulatory body regarding AAL's duties under this
Agreement or related to the sale of the Certificates, the
operation of the ACCOUNTS, or the purchase of FUND shares,
provided, however, that the FUND determines, in its sole judgment
exercised in good faith, that any such administrative proceedings
will have a material adverse effect upon the ability of AAL to
perform its obligations under this Agreement; or
(c) at the option of AAL in the event that formal administrative
proceedings are instituted against the FUND by the NASD, the SEC,
or any state securities or insurance commission or any other
regulatory body, regarding the FUND's duties under this Agreement
or related to the sale of FUND shares or the operation of the
FUND, provided, however, that AAL determines, in its sole
judgment exercised in good faith, that any such administrative
proceedings will have a material adverse effect upon the ability
of the FUND to perform its obligations under this Agreement; or
(d) at the option of AAL with respect to the ACCOUNTS, upon
requisite authority to substitute the shares of another
investment company for shares of the FUND in accordance with the
terms of the Certificates or in accordance with the ACCOUNTS
investment policy or standards of conduct; or
(e) at the option of AAL, in the event any of the FUND's shares
are not registered, issued, or sold in accordance with applicable
federal and any state law or such law precludes the use of such
shares as the underlying investment media of the Certificates
issued or to be issued by AAL; or
(f) at the option of AAL, if the FUND fails to meet the
requirements specified in Section 2.6 hereof; or
(g) at the option of the FUND, if the investments of the ACCOUNTS
fail to satisfy the diversification requirements of the Code
and the regulations thereunder, or
(h) at the option of AAL, if the FUND dissolves or becomes
otherwise unable to sell shares to fund the Accounts.
8.2 It is understood and agreed that the right of any party hereto to
terminate this Agreement pursuant to Section 8.1(a) may be exercised for
any reason or for no reason.
8.3 Notice Requirement for Termination. No termination of this Agreement
will be effective unless and until the party terminating this Agreement
gives prior written notice to the other party to this Agreement of its
intent to terminate, and such notice shall set forth the basis for such
termination. Furthermore,
(a) in the event that any termination is based upon the
provisions of Section 8.1(a) hereof, such prior written notice
shall be given at least one hundred eighty (180) days in advance
of the effective date of termination as required by such
provision;
(b) in the event that any termination is based upon the
provisions of Section 8.1(b) or Section 8.1(c) hereof, such prior
written notice shall be given at least ninety (90) days in
advance of the effective date of termination;
(c) in the event that any termination is based upon the
provisions of Section 8.1(d) hereof, AAL will give at least sixty
(60) days prior written notice to the FUND of the date of any
proposed action to substitute FUND shares, including the filing
of any applicable exemptive application under the 1940 Act
relating to the ACCOUNTS; and AAL will provide the FUND with a
copy of any such exemptive application; and
(d) in the event that any termination is based upon the
provisions of Section 8.1(e), Section 8.1(f), or Section 8.1(g)
hereof, such prior written notice shall be given as soon as
possible within twenty-four (24) hours after the terminating
party learns of the event causing termination to be required.
8.4 Partial Termination. It is also understood that this Agreement may
be terminated with regard to a specific Portfolio or Portfolios of the
FUND, or the entire FUND at the discretion of the terminating party.
Notwithstanding any termination of this Agreement, the FUND shall, at
the option of AAL, continue to make available additional shares of the
FUND pursuant to the terms and conditions of this Agreement, for all
Certificates in effect on the effective date of termination of this
Agreement (hereinafter referred to as "Existing Certificates").
Specifically, without limitation, the owners of the Existing
Certificates shall be permitted to transfer or reallocate investments
under the Certificates, redeem investments in the FUND and/or invest in
the FUND upon the making of additional purchase payments under the
Existing Certificates.
9. Notices
Any notice will be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
If to AAL: 4321 North Ballard Road
Appleton, Wisconsin 54919-0001
Attention: Woodrow E. Eno
If to the FUND: 4321 North Ballard Road
Appleton, Wisconsin 54919-0001
Attention: Steven A. Weber
10. Miscellaneous
10.1 This Agreement will be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of
Maryland, where the sale of any FUND share shall be deemed to have been
made; provided, however, that if such laws or any of the provisions of
this Agreement conflict with applicable Provisions of the 1940 Act, the
latter shall control.
10.2 If any provision of this Agreement will be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of the
Agreement will not be effected thereby.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the ________
day of _________________, 1997.
AID ASSOCIATION FOR LUTHERANS and
AAL VARIABLE ANNUITY ACCOUNT I and AAL Variable Life Account I and
AAL VARIABLE LIFE ACCOUNT I
By:
John O. Gilbert
President and Chief Executive Officer
Attest:
Woodrow E. Eno
Senior Vice President
Secretary and General Counsel
AAL VARIABLE PRODUCT SERIES FUND, INC.
By:
Steven A. Weber
President
Attest:
Mark J. Mahoney
Secretary
[AAL LOGO]
[AAL LETTERHEAD]
Board of Directors
Aid Association for Lutherans
4321 North Ballard Road
Appleton, WI 54919
Subject: Opinion of counsel -- Variable Universal Life Registration of
Certificates
Board Members:
This opinion is furnished in connection with the filing of a registration
statement on Form S-6 ("Registration Statement") under the Securities Act of
1933, as amended, (the "1933 Act") and the Investment Company Act of 1940, by
Aid Association for Lutherans ("AAL") and AAL Variable Life Account I (the
"Variable Account"). The securities being registered under the Registration
Statement are units of interest ("Units") to be issued by the Variable Account
pursuant to certain individual flexible premium variable universal life
contracts ("Certificates") described in the Registration Statement.
I am Assistant General Counsel and Assistant Secretary of AAL, and in such
capacity, I am familiar with AAL's Articles of Incorporation and Bylaws and have
reviewed all statements, records, instruments and documents which I have deemed
it necessary to examine for the purpose of this opinion. I have examined the
form of the Registration Statement to by filed with the Securities and Exchange
Commission in connection with the registration under the 1933 Act, of an
indefinite number of Units to be issued by the Variable Account in connection
with the Certificates. I am familiar with the proceedings taken and proposed to
be taken in connection with the authorization, issuance and sale of the Units.
Based upon a review of those documents and such laws that I consider
appropriate, I am of the opinion that:
1. AAL is a fraternal benefit society organized under the laws of the
State of Wisconsin;
2. the Variable Account is duly organized under the provisions of the
Wisconsin Insurance Code, under which income, gains, or losses, whether
realized or unrealized, from assets allocated to the Variable Account,
are, in accordance with the terms of the Certificates, credited to or
charged against the Variable Account without regard to the income,
gains, or losses to AAL;
3. the portion of the assets to be held in the Variable Account equal to
reserves and other liabilities under the Certificates will not be
chargeable with liabilities arising out of any other business AAL may
conduct; and
4. the Certificates have been duly authorized by AAL and, when issued in
the manner contemplated by the Registration Statement, the Units
thereunder will constitute legal, validly issued and binding
obligations of AAL in accordance with the terms of the Certificates.
I hereby consent to the use of this opinion as an exhibit to the Registration
Statement and the reference to me under the caption "Legal Matters" in the
Statement of Additional Information contained in the Registration Statement. In
giving this consent, I do not thereby admit that I come within the category of
persons whose consent is required under section 7 of the 1933 Act or the rules
and regulations of the Securities and Exchange Commission.
Respectfully submitted,
/s/ Mark J. Mahoney
Mark J. Mahoney
Assistant General Counsel
and Assistant Secretary
November 12, 1997
Aid Association for Lutherans
AAL Variable Universal Life
Product Design Specifications and Pricing Assumptions
June 24, 1997
Aid Association For Lutherans
4321 North Ballard Road
Appleton, WI 54919-0001
In my capacity as a Director and Associate Actuary for Aid Association For
Lutherans (AAL), I have provided actuarial advice concerning:
A. The preparation of the registration statement of Form S-6 to be filed
by Aid Association for Lutherans and AAL Variable Life Insurance
Account I with the Securities and Exchange Commission (SEC) under the
Securities Act of 1933 with respect to the AAL Variable Universal Life
insurance certificate (the "Registration Statement"); and
B. The preparation of the certificate forms for the variable universal life
insurance certificate described in the registration statement (the
"Certificate").
It is my professional opinion that:
1. Pursuant to Section 26(e)(2)(A) of the Investment Company Act of 1940, the
fees and charges deducted on AAL Variable Universal Life Certificate (Form
Number S-6), in the aggregate, are reasonable in relation to the services
rendered, the expenses expected to be incurred, and the risks assumed by
Aid Association for Lutherans.
2. The illustrations of death benefits, cash value, surrender value and total
premiums paid plus interest at 5% shown in the prospectus, based on the
assumptions stated in the illustration, are consistent with the provisions
of the Certificate. The rate structure of the Certificate has not been
designed so as to make the relationship between premiums and benefits, as
shown in the illustrations included, appear to be correspondingly more
favorable to prospective buyers than other illustrations which could have
been provided at other combinations of ages, sex of the insured, death
benefit option and amount, and premium amounts.
3. All other numerical examples shown in the prospectus are consistent with
the Certificate and our practices, and have not been designed to appear
more favorable to prospective buyers than other examples which could have
been provided.
I hereby consent to the filing of this opinion as an Exhibit to the Registration
Statement and the use of my name in the Prospectus.
/s/David C. Vanden Heuvel
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David C. Vanden Heuvel, FSA, MAAA
Director and Associate Actuary
Aid Association for Lutherans
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated March 14, 1997 on Aid Association for Lutherans's
consolidated financial statements, in the Pre-effective Amendment No. 1 to the
Registration Statement (Form S-6 No. 333-31011) and related Prospectus for the
AAL Variable Life Account I.
Ernst & Young LLP
Milwaukee, Wisconsin
November 18,1997
CONSENT OF
MAYER, BROWN & PLATT
We hereby consent to the reference to our firm under the caption "LEGAL AND
ACTUARIAL MATTERS AND EXPERTS" in the prospectus comprising a part of
Pre-Effective Amendment No. 1 to the Form S-6 Registration Statement of Aid
Association for Lutherans and AAL Variable Life Account 1, File Nos. 333-31011
and 811-08289.
MAYER, BROWN & PLATT
Washington, D.C.
November 20, 1997
