As Filed with the Securities and Exchange Commission on March 31, 1998
Registration No. 333-31011 811-08289
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM S-6
POST-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
It is proposed that this filing will become effective:
___ on (date) pursuant to paragraph (a) Rule 485
___ 60 days after filing pursuant to paragraph (a) of Rule 485
___ on May 1, 1997 pursuant to paragraph (b) of Rule 485 immediately
_X_ upon filing pursuant to paragraph (b) of Rule 485
___ this post-effective amendment designates a new effective date for a
previously filed post-effective amendment
Title and amount of securites being registered: Interests under variable life
insurance policies. Approximate Date of Proposed Public Offering: As soon as
practical after the effective date. Pursuant to Rule 24f-2 under the Investment
Company Act of 1940, the Registrant has registered an indefinite amount of
securities. Registrant will file its Form 24f-2 on or before February 28, 1999
for its most recent fiscal year ending December 31, 1998.
AAL Variable Life Account I
Aid Association for Lutherans
Cross Reference to Items Required by form N-8B-2
N-8B-2 ITEM CAPTION IN PROSPECTUS
1
(a) Cover Page, Investment Options
(b) Investment Objectives
2 Cover Page
3 NA
4 Distribution
5 Investment Options
6 NA
7 NA
8 Financial Statements
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
(d) NA
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 Cover Page
28 General information
29 Cover Page
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
Insuring and Investing for Your Future
AAL Variable Life Account I
Prospectus
March 31, 1998
for the Flexible Premium Universal Life Insurance Certificates
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. Mutual funds are offered through a
subsidiary, AAL Capital Management Corporation. All members are part of one of
over 9,700 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 Option 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 Death Benefit Guarantee Provision. It may not be to your advantage
to replace existing life insurance or supplement existing variable life
insurance with this Certificate.
This Prospectus contains information about the Variable Account and the
Certificate that you should know before you invest. A Prospectus for the AAL
Variable Product Series Fund, Inc. Accompanies this Prospectus. Please read both
Prospectuses carefully and keep them for future reference. You should rely on
the information contained in this document. AAL has not authorized anyone to
provide you with information that is different.
You can contact AAL by writing to 4321 North Ballard Road, Appleton, Wisconsin,
54919-0001, by calling 800-225-5225 or 734-5721 locally, or by sending an e-mail
to [email protected]. The Telecommunications Device for the Deaf (TDD) number is
800-735-9644.
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.
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
TRANSFER 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 by 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 North 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.
Owner: The person or entity who owns the Certificate. The person may be the
Insured or an employer, a trust or any other individual or entity specified in
the application.
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 $18.0 billion) and life insurance in
force ($82 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 Premiums. 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 in 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, Balanced, High
Yield Bond and International Stock. 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 premiums 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.
Change Fee - A $25 charge will be assessed if you choose to make changes to your
Certificate. Such Certificate changes include a reduction of insurance charges
that are in excess of standard due to insurance underwriting requirements, a
change from smoker to non-smoker risk class, a change in death benefit options,
and changes to the additional benefits under the Certificate.
Issue Expense 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 Benefits Charge - A charge will be taken each month for any
additional benefits you have.
Partial Withdrawal Charge - A $25 charge per withdrawal is made after the first
withdrawal during any Certificate Year. This charge is assessed by the
redemption of Accumulation Units and/or reduction in the Fixed Account balance.
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. Your 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 3A.1 of
your Certificate. If you decrease the Specified Amount while the Surrender
Charge applies, a portion of the Surrender Charge will be assessed. For further
details regarding Surrender Charges, see page 13.
Portfolio Expenses - The expenses for each of the portfolios are limited to the
respective advisory fees, currently .35% of the average annual daily net assets
of the AAL Variable Product Money Market, Bond, Balanced, Large Company Stock
and Small Company Stock Portfolios; .40% of the average annual daily net assets
of the High Yield Bond Portfolio; and .80% of the average daily net assets of
the International Stock Portfolio. Without this limitation through reimbursement
by the adviser, which can be changed or stopped with 30 days notice, the
expenses for the year ended 1997 would have been: Money Market Portfolio - 0
.46%, Bond Portfolio - 0.52%, Balanced Portfolio - 0.43%, Large Company Stock
Portfolio - 0.43%, and Small Company Stock Portfolio - 0.45%.
Transfer Charge - AAL will charge $25 for each transfer between Subaccounts
and/or the Fixed Account in excess of 12 in each Certificate Year.
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:
- you expect your insurance needs to increase; or
- 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 increase.
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 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 paying the Death Benefit Guarantee Premium for at least 4 years 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% 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 total 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 through the 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 --.
AAL has a plan that permits you to pay premiums on a regularly scheduled basis
by an automatic deduction from savings or checking accounts. Premium payments
under this plan will be allocated to the Subaccount(s) or Fixed Account on the
date you selected. However, when the date selected falls on a date that is not a
Valuation Date, such as a holiday or weekend, the premium will be allocated as
of the closest preceding Valuation Date.
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
annual expenses of the Fund 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 seven Subaccounts, which are: Money
Market, Bond, Large Company Stock, Small Company Stock, Balanced, High Yield
Bond, and International Stock. 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.
The AAL Variable Product Series Fund, Inc. 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 seven 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 Standard & Poor's SmallCap 600 Index* by
investing primarily incommon stocks included in the Index.
The International Stock Portfolio: seeks to achieve long-term capital growth by
investing primarily in a diversified portfolio of foreign stocks.
The High Yield Bond Portfolio: seeks to achieve high current income and
secondarily capital growth by investing primarily in a diversified portfolio of
high risk, high yield bonds commonly referred to as "junk bonds". The portfolio
actively seeks to achieve a secondary objective of capital growth to the extent
it is consistent with the primary objective of high current income.
* "Standard & Poor's(R)", "S & P (R)", "S & P 500 (R)", "Standard & Poor's 500",
"500", "Standard & Poor's SmallCap 600" and "S & P SmallCap 600" are trademarks
of The McGraw-Hill Companies, Inc. and have been licensed for use by AAL. The
Fund and the Certificates are not sponsored, endorsed, sold or promoted by
Standard & Poor's and Standard & Poor's makes no representation regarding the
advisability of investing in the fund.
Fund Expenses
AAL acts as investment adviser to the Fund. For this service, AAL deducts an
advisory fee of .35% of the average annual daily net assets of the AAL Variable
Product Money Market, Bond, Balanced, Large Company Stock and Small Company
Stock Portfolios; .40% of the average annual daily net assets of the High Yield
Bond Portfolio; and .80% of the average annual daily net assets of the
International Stock Portfolio. Portfolio expenses exceeding the advisory fees
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 will 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; or
- partial withdrawals and partial withdrawal charges are taken from the
Subaccount; or
- monthly deductions or transfer charges are taken from the Subaccount;or
- A charge for a Death Benefit Option change is allocated to the
Subaccount;or
- A charge for a Certificate change is allocated to the Subaccount;or
- 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 Total 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. This is a $25 charge that will
be assessed if you choose to make changes to your Certificate. Such Certificate
changes include a reduction of insurance charges that are in excess of standard
due to insurance underwriting requirements, a change from smoker to nonsmoker
risk class, a change in Death Benefit Options, and changes to the additional
benefits under the Certificate.
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 expense 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 Standard Ordinary
Mortality Tables (and, where unisex cost of insurance rates apply, the 1980
Commissioners Standard 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 date 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
3A.1 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 3A.1 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.
TRANSFER CHARGE
Twelve transfers per Certificate Year may be made between Subaccounts and/or the
Fixed Account without charge. AAL will charge $25 for each transfer in excess of
twelve.
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 may 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 an AAL
Variable Universal Life Certificate please contact your AAL Representative. You
can locate your Representative by calling 1-800-225-5225 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/Adding 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 CMC
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
4321 North 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 at 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 periodic reports with financial information on the portfolios,
including information on the investments held in each portfolio as required by
the SEC.
Confirmation notices will be sent during the year for certain Certificate
transactions.
MEMBERSHIP
For Insureds 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 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 the Owner of the Certificate but you are not the Insured, you should
name a successor Owner who will becomethe 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 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>
<CAPTION>
<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
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.
Paul D. Schrage Senior Executive Vice President/
Chief Marketing Officer, McDonald's
Corporation Director (1/98)
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-Georgia Director (1/97)
District, Lutheran Church
Missouri Synod
Richard L. Gunderson Chairman of the Board, Director, Chairman of the Board since 1/97
Aid Association for CEO, 12/95 to 12/96
Lutherans President 9/85 to 11/95
John O. Gilbert Director, President, CEO, COO Director, President, CEO, COO since 12/95
Aid Association Executive Vice President, 1/95 to 12/95
for Lutherans Senior Vice President, 1/92 to 1/95
Roger J. Johnson Executive Vice President Executive Vice President since 3/97
Aid Association for Senior Vice President, 12/86 to 3/97
Lutherans
Ronald G. Anderson Senior Vice President, Chief Senior Vice President, Chief
Investment Officer Investment Officer since 1/96
Aid Association for President since 1/97
Lutherans Vice President, 3/95 to 3/96
AAL Capital Chairman, 1/91 to 3/95
Management Corporation
General Re Corp.
General Re Financial Products
Corp.
Woodrow E. Eno Senior Vice President, Senior Vice President, Secretary,
Secretary, General Counsel General Counsel since 1/96
Aid Association Vice President, 5/93 to 1/96
for Lutherans Vice President/General Counsel,
AEGON 7/80 to 5/93
Health Insurance
Association of America
Steven A. Weber Senior Vice President Senior Vice President since 11/95
Aid Association for Vice President, 2/89 to
Lutherans 11/95
Jerome Laubenstein Senior Vice President Senior Vice President since 11/95
Aid Association for Vice President 1/78 to 11/95
Lutherans
Fred Ohlde Senior Vice President Senior Vice President since 11/95
Aid Association for Vice President, 5/93 to 11/95
Lutherans Second Vice President, 3/88 to 5/93
</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 Section 7702A of the
Code. 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 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 Premium
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
591/2, 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 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%, 8%, and 12%.
The Certificates illustrated include the following:
1. Male, Nonsmoker, Age 40, Level Death Benefit, Specified Amount $250,000,
Current Rates
2. Male, Nonsmoker, Age 40, Level Death Benefit, Specified Amount $250,000,
Guaranteed Rates
3. Male, Nonsmoker, Age 40, Variable Death Benefit, Specified Amount $250,000,
Current Rates
4. Male, Nonsmoker, Age 40, Variable 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%, 8%, 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 charge, 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 .42% of the aggregate average daily net assets
of the Subaccounts. This hypothetical rate is representative of the average
maximum advisory fee applicable to the portfolios in which the Subaccount
invests. Actual fees may vary by Subaccount and are subject to agreements by the
sponsor to waive or otherwise reimburse each Fund for operating expenses which
exceed certain limits. This reimbursement is further described elsewhere in
these Prospectuses. 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 (0.42)%, on 8% it would be 7.58%, and on
12% it would be 11.58%.
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.
FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE
Illustration of Death Benefits, Cash Values and
Surrender Values
Based on Current Charges
<TABLE>
Issue Age - 40
Risk Class - Standard Nonsmoker
Death Benefit Option - Level
Specified Amount - $250,000
Sex - Male
Annual Premium - $2,375
<CAPTION>
End of Annual Premium End of Year DEATH
BENEFIT Assuming
Certificate Premiums Accumulated Hypothetical Gross Annual Investment
Return of
Year Paid at 5% 0% 8% 12%
- ------------------------------------------------------------------------------------------------------------------------------------
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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 $250,000 $250,000 $389,705
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% 8% 12% 0% 8% 12%
1 $2,375 $1,454 $1,602 $1,676 $0 $0 $0
2 $2,375 $2,851 $3,271 $3,490 $1 $421 $640
3 $2,375 $4,189 $5,009 $5,455 $1,339 $2,159 $2,605
4 $2,375 $5,678 $7,041 $7,812 $3,186 $4,549 $5,320
5 $2,375 $7,126 $9,187 $10,399 $4,991 $7,052 $8,264
6 $2,375 $8,558 $11,483 $13,270 $6,781 $9,706 $11,493
7 $2,375 $9,974 $13,937 $16,454 $8,554 $12,517 $15,034
8 $2,375 $11,308 $16,495 $19,920 $10,245 $15,432 $18,858
9 $2,375 $12,605 $19,208 $23,745 $11,900 $18,503 $23,040
10 $2,375 $13,863 $22,087 $27,966 $13,516 $21,740 $27,619
15 $2,375 $19,293 $39,139 $56,528 $19,293 $39,139 $56,528
20 $2,375 $23,175 $62,777 $105,716 $23,175 $62,777 $105,716
25 $2,375 $23,514 $94,292 $190,210 $23,514 $94,292 $190,210
30 $2,375 $16,411 $135,878 $335,953 $16,411 $135,878 $335,953
</TABLE>
The values would be different from those shown above if the actual gross annual
rates of return averaged 0%, 8%, 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
Illustration of Death Benefits, Cash Values and
Surrender Values
Based on Maximum Charges
<TABLE>
Issue Age - 40
Risk Class - Standard Nonsmoker
Death Benefit Option - Level
Specified Amount - $250,000
Sex - Male
Annual Premium - $2,375
<CAPTION>
End of Annual Premium End of Year DEATH
BENEFIT Assuming
Certificate Premiums Accumulated Hypothetical Gross Annual Investment
Return of
Year Paid at 5% 0% 8% 12%
<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 $315,729
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% 8% 12% 0% 8% 12%
1 $2,375 $1,452 $1,599 $1,673 $0 $0 $0
2 $2,375 $2,843 $3,262 $3,481 $0 $412 $631
3 $2,375 $4,174 $4,992 $5,436 $1,324 $2,142 $2,586
4 $2,375 $5,631 $6,986 $7,753 $3,138 $4,494 $5,260
5 $2,375 $7,019 $8,064 $10,267 $4,884 $6,929 $8,132
6 $2,375 $8,332 $11,223 $12,990 $6,554 $9,445 $11,212
7 $2,375 $9,564 $13,463 $15,942 $8,144 $12,043 $14,522
8 $2,375 $10,714 $15,787 $19,145 $9,652 $14,725 $18,082
9 $2,375 $11,775 $18,196 $22,621 $11,070 $17,491 $21,916
10 $2,375 $12,743 $20,689 $26,397 $12,395 $20,342 $26,050
15 $2,375 $15,740 $34,230 $50,689 $15,740 $34,230 $50,689
20 $2,375 $14,659 $50,067 $89,889 $14,659 $50,067 $89,889
25 $2,375 $5,894 $66,203 $154,245 $5,894 $66,203 $154,245
30 $2,375 $0 $79,108 $267,285 $0 $79,108 $267,285
</TABLE>
The values would be different from those shown above if the actual gross annual
rates of return averaged 0%, 8%, 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
Illustration of Death Benefits, Cash Values and
Surrender Values
Based on Current Charges
<TABLE>
Issue Age - 40
Risk Class - Standard Nonsmoker
Death Benefit Option - Variable
Specified Amount - $250,000
Sex - Male
Annual Premium - $2,375
<CAPTION>
End of Annual Premium End of Year DEATH
BENEFIT Assuming
Certificate Premiums Accumulated Hypothetical Gross Annual Investment
Return of
Year Paid at 5% 0% 8% 12%
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 $2,375 $2,494 $251,450 $251,597 $251,671
2 $2,375 $5,112 $252,838 $253,257 $253,475
3 $2,375 $7,862 $254,164 $254,979 $255,422
4 $2,375 $10,748 $255,363 $256,988 $257,752
5 $2,375 $13,780 $257,062 $259,102 $260,301
6 $2,375 $16,962 $258,469 $261,357 $263,120
7 $2,375 $20,304 $259,854 $263,759 $266,238
8 $2,375 $23,813 $261,151 $266,249 $269,614
9 $2,375 $27,497 $262,406 $268,880 $273,324
10 $2,375 $31,366 $263,617 $271,657 $277,400
15 $2,375 $53,812 $268,696 $287,779 $304,468
20 $2,375 $82,458 $271,950 $309,059 $349,184
25 $2,375 $119,019 $271,228 $334,790 $420,627
30 $2,375 $165,682 $262,573 $361,798 $532,125
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% 8% 12% 0% 8% 12%
1 $2,375 $1,450 $1,597 $1,671 $0 $0 $0
2 $2,375 $2,838 $3,257 $3,475 $0 $407 $625
3 $2,375 $4,164 $4,979 $5,422 $1,314 $2,129 $2,572
4 $2,375 $5,636 $6,988 $7,752 $3,144 $4,495 $5,260
5 $2,375 $7,062 $9,102 $10,301 $4,927 $6,967 $8,166
6 $2,375 $8,469 $11,357 $13,120 $6,691 $9,579 $11,343
7 $2,375 $9,854 $13,759 $16,238 $8,434 $12,339 $14,818
8 $2,375 $11,151 $16,249 $19,614 $10,089 $15,187 $18,551
9 $2,375 $12,406 $18,880 $23,324 $11,701 $18,175 $22,619
10 $2,375 $13,617 $21,657 $27,400 $13,269 $21,310 $27,053
15 $2,375 $18,696 $37,779 $54,468 $18,696 $37,779 $54,468
20 $2,375 $21,950 $59,059 $99,184 $21,950 $59,059 $99,184
25 $2,375 $21,228 $84,790 $170,627 $21,228 $84,790 $170,627
30 $2,375 $12,573 $111,798 $282,125 $12,573 $111,798 $282,125
</TABLE>
The values would be different from those shown above if the actual gross annual
rates of return averaged 0%, 8%, 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
Illustration of Death Benefits, Cash Values and
Surrender Values
Based on Maximum Charges
<TABLE>
Issue Age - 40
Risk Class - Standard Nonsmoker
Death Benefit Option - Variable
Specified Amount - $250,000
Sex - Male
Annual Premium - $2,375
<CAPTION>
End of Premium End of Year DEATH
BENEFIT Assuming
Certificate Accumulated Hypothetical Gross Annual Investment
Return of
Year Premiums at 5% 0% 8% 12%
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 $2,375 $2,494 $251,447 $251,595 $251,668
2 $2,375 $5,112 $252,831 $253,248 $253,466
3 $2,375 $7,862 $254,149 $254,961 $255,403
4 $2,375 $10,748 $255,588 $256,933 $257,692
5 $2,375 $13,780 $256,954 $258,977 $260,166
6 $2,375 $16,962 $258,237 $261,090 $262,832
7 $2,375 $20,304 $259,434 $263,269 $265,707
8 $2,375 $23,813 $260,541 $265,516 $268,807
9 $2,375 $27,497 $261,551 $267,825 $272,147
10 $2,375 $31,366 $262,459 $270,195 $275,746
15 $2,375 $53,812 $265,003 $282,518 $298,084
20 $2,375 $82,458 $263,133 $295,097 $330,973
25 $2,375 $119,019 $253,487 $303,437 $376,416
30 $2,375 $165,682 $250,000 $299,139 $435,850
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% 8% 12% 0% 8% 12%
1 $2,375 $1,447 $1,594 $1,668 $0 $0 $0
2 $2,375 $2,831 $3,248 $3,466 $0 $398 $616
3 $2,375 $4,149 $4,961 $5,403 $1,299 $2,111 $2,553
4 $2,375 $5,588 $6,933 $7,692 $3,096 $4,440 $5,200
5 $2,375 $6,954 $8,977 $10,166 $4,819 $6,842 $8,031
6 $2,375 $8,237 $11,090 $12,832 $6,460 $9,312 $11,055
7 $2,375 $9,434 $13,269 $15,707 $8,014 $11,849 $14,287
8 $2,375 $10,541 $15,516 $18,807 $9,478 $14,453 $17,744
9 $2,375 $11,551 $17,825 $22,147 $10,846 $17,120 $21,442
10 $2,375 $12,459 $20,195 $25,746 $12,111 $19,847 $25,399
15 $2,375 $15,003 $32,518 $48,084 $15,003 $32,518 $48,084
20 $2,375 $13,133 $45,097 $80,973 $13,133 $45,097 $80,973
25 $2,375 $3,487 $53,437 $126,416 $3,487 $53,437 $126,416
30 $2,375 $0 $49,139 $185,850 $0 $49,139 $185,850
</TABLE>
The values would be different from those shown above if the actual gross annual
rates of return averaged 0%, 8%, 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
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 Life 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, 1997 and 1996, 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 financial statements of AAL should be considered only as bearing upon the
ability of AAL to meet its obligations under the Certificates. The 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 financial statements of AAL are those as of the end of the most
recent fiscal year ended December 31, 1997. 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 financial
statements, though unaudited, does not justify the additional cost that would be
incurred. In addition, AAL represents that there have been no adverse changes in
the financial condition or operations of AAL between the end of the fiscal year
ended December 31, 1997 and the date of this Prospectus.
The 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, 1997 and 1996, and the related
consolidated statements of income, changes in certificateholders' surplus and
cash flows for each of the three years in the period ended December 31, 1997.
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, 1997 and 1996, and the results of its operations and its cash flows for each
of the three years ended December 31, 1997, 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.
/s/ Ernst & Young LLP
Milwaukee, Wisconsin
Ernst & Young LLP
January 28, 1998
Aid Association for Lutherans
Consolidated Balance Sheets
<TABLE>
December 31
1997 1996
--------------------- -----------------------
(In Thousands)
<CAPTION>
<S> <C> <C>
Assets
Investments:
Securities available for sale, at fair value
Fixed maturities $ 7,717,917 $ 6,948,203
Equity securities 681,216 539,113
Fixed maturities held to maturity, at amortized 4,365,805 4,423,637
cost
Mortgage loans 3,218,193 3,298,335
Real estate 113,793 113,282
Certificate loans 501,327 501,263
Other invested assets 9,441 10,490
--------------------- -----------------------
Total investments 16,607,692 15,834,323
Cash and cash equivalents 291,302 106,568
Premiums and fees receivable 13,999 12,198
Accrued investment income 190,776 199,051
Deferred acquisition costs 659,815 704,515
Property and equipment 95,453 101,725
Assets held in separate accounts 824,995 313,072
Other assets 7,473 8,868
--------------------- -----------------------
Total Assets $ 18,691,505 $ 17,280,320
===================== =======================
Liabilities and Certificateholders' Surplus
Certificate liabilities and
accruals:
Future certificate benefits $ 2,640,172 $ 2,504,708
Unpaid claims and claim 97,670 101,770
expenses
--------------------- -----------------------
Total certificate liabilities and 2,737,842 2,606,478
accruals
Certificateholder funds 12,783,985 12,434,551
Liabilities related to separate 824,995 313,072
accounts
Other liabilities 126,616 135,390
--------------------- -----------------------
Total Liabilities 16,473,438 15,489,491
Certificateholders' Surplus
Accumulated surplus 1,890,394 1,642,126
Unrealized appreciation on
securities
available for sale 327,673 148,703
--------------------- -----------------------
Total Certificateholders' Surplus 2,218,067 1,790,829
--------------------- -----------------------
Total Liabilities and Certificateholders' Surplus $ 18,691,505 $ 17,280,320
===================== =======================
</TABLE>
See accompanying notes.
Aid Association for Lutherans
Consolidated Statements of Income
Aid Association for Lutherans
Consolidated Statements of Income
<TABLE>
Years Ended December 31
1997 1996 1995
----------------- --------------- ---------------
(In Thousands)
<CAPTION>
<S> <C> <C> <C>
Revenue
Insurance premiums $ 390,881 $ 364,078 $ 370,222
Insurance charges 297,171 278,774 261,376
Net investment income 1,210,481 1,171,590 1,103,670
Net realized investment gains 107,445 62,959 28,718
Other revenue 68,401 63,141 41,951
----------------- --------------- ---------------
Total revenue 2,074,379 1,940,542 1,805,937
Benefits and expenses
Certificate claims and other 356,943 345,786 324,870
benefits
Increase in certificate reserves 150,754 134,900 143,120
Interest credited 775,196 748,350 731,896
Surplus refunds 109,491 105,997 103,064
----------------- --------------- ---------------
Total benefits 1,392,384 1,335,033 1,302,950
Underwriting, acquisition and
insurance
expenses 329,448 303,162 268,934
Fraternal benefits and expenses 104,279 104,306 84,815
----------------- --------------- ---------------
Total expenses 433,727 407,468 353,749
----------------- --------------- ---------------
Total benefits and expenses 1,826,111 1,742,501 1,656,699
----------------- --------------- ---------------
Net income $ 248,268 $ 198,041 $ 149,238
================= =============== ===============
</TABLE>
See accompanying notes.
Aid Association for Lutherans
Consolidated Statements of Changes in Certificateholders' Surplus
<TABLE>
Unrealized
appreciation
(depreciation) on Total
securities Accumulated certificateholders'
available for sale surplus surplus
--------------------- ---------------------- ----------------------
(In Thousands)
<CAPTION>
<S> <C> <C> <C>
Balance at January 1, 1995 $ 9,057 $ 868,882 $ 877,939
Impact of adopting certain
accounting changes discussed
in Note 1 (321,267) 425,964 104,697
--------------------- ---------------------- ----------------------
Balance at January 1, 1995 as
adjusted (312,210) 1,294,846 982,637
Net income - 149,238 149,238
Increase in unrealized
appreciation of securities
available for sale 550,890 - 550,890
--------------------- ---------------------- ----------------------
Balance at December 31, 1995 238,680 1,444,085 1,682,765
Net income - 198,041 198,041
Decrease in unrealized
appreciation of securities
available for sale (89,977) - (89,977)
--------------------- ---------------------- ----------------------
Balance at December 31, 1996 148,703 1,642,126 1,790,829
Net income - 248,268 248,268
Increase in unrealized
appreciation of securities
available for sale 178,970 - 178,970
--------------------- ---------------------- ----------------------
Balance at December 31, 1997 $ 327,673 $ 1,890,394 $ 2,218,067
===================== ====================== ======================
</TABLE>
See accompanying notes.
Aid Association for Lutherans
Consolidated Statements of Cash Flows
<TABLE>
Years Ended December 31
1997 1996 1995
----------------- --------------- ---------------
(In Thousands)
<CAPTION>
<S> <C> <C> <C>
Operating Activities:
Net Income $ 248,268 $ 198,041 $ 149,238
Adjustments to reconcile net income to net cash
provided by operating
activities:
Increase in certificate liabilities and accruals 131,364 135,911 143,359
Increase in certificateholder 424,048 449,570 474,774
funds
(Increase) decrease in deferred acquisition 14,818 (17,547) (32,026)
costs
Realized gains on (104,418) (63,219) (17,530)
investments
Provisions for amortization and depreciation 17,902 20,309 19,120
Changes in other assets and 368 4,166 (5,698)
liabilities
----------------- --------------- ---------------
Net cash provided by operating
activities 732,350 727,231 731,237
Investing Activities:
Securities available for sale:
Purchases - fixed maturities (2,708,407) (2,311,534) (2,218,311)
Sales - fixed maturities 1,599,720 1,606,098 1,256,300
Maturities - fixed 513,605 476,592 565,516
maturities
Purchases - equities (419,487) (203,720) (229,771)
Sales - equities 406,714 201,119 123,108
Securities held to maturity:
Purchases (530,430) (785,732) (601,390)
Maturities 576,810 435,374 369,741
Mortgage loans funded (212,634) (559,005) (478,622)
Mortgage loans repaid 308,598 207,904 166,830
Certificate loans, net (64) (957) (6,873)
Other (7,427) 1,099 (102,670)
----------------- --------------- ---------------
Net cash used in investing activities (473,002) (932,762) (1,156,142)
Financing Activities:
Universal life and investment contract receipts 1,051,931 1,086,856 1,248,664
Universal life and investment contract withdrawals (1,126,545) (940,777) (791,821)
----------------- --------------- ---------------
Net cash provided by (used in)
financing activities (74,614) 146,079 456,843
----------------- --------------- ---------------
Net increase (decrease) in cash and 184,734 (59,452) 31,938
cash equivalents
Cash and cash equivalents,
beginning of year 106,568 166,020 134,082
----------------- --------------- ---------------
Cash and cash equivalents, end of year $ 291,302 $ 106,568 $ 166,020
================= =============== ===============
</TABLE>
See accompanying notes.
Aid Association for Lutherans
Notes to Consolidated Financial Statements
December 31, 1997
Note 1. Nature of Operations and Significant Accounting Policies
Nature of Operations
Aid Association for Lutherans (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 Capital Management
Corporation (CMC). CMC is wholly-owned by AAL Holdings Inc., AAL's wholly-owned
subsidiary. Credit union services are available to members from the AAL Member
Credit Union, an affiliate of AAL. AAL members are served by nearly 1,850
district representatives across the country.
Basis of Presentation
The accompanying consolidated financial statements of AAL and its wholly-owned
subsidiary 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, effective
January 1, 1996, AAL 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 certificateholders' surplus as of that date.
The adoption had the effect of increasing net income for 1997, 1996, and 1995 by
approximately $38,511,000, $68,339,000, and $34,772,000, respectively.
The preparation of financial statements in conformity with GAAP 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 CMC and North Meadows Investment Ltd. All significant intercompany
transactions have been 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 certificateholders' 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 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 effective interest method.
Investment real estate is valued at original cost plus capital expenditures less
accumulated depreciation. Depreciation is computed using the straight-line
method over the estimated useful life of the property. Real estate expected to
be disposed of is carried at the lower of cost or fair value, less cost to sell.
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.
Securities loaned under AAL's securities lending agreement are stated in the
Statements of Financial Position at amortized cost or fair market value,
consistent with AAL's classifications of such securities as held to maturity or
available for sale. AAL measures the fair value of securities loaned against the
collateral received on a daily basis. Additional collateral is obtained as
necessary to ensure such transactions are adequately collateralized.
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
margins from interest, mortality and other factors 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 $113,453,000 and
$103,938,000 at December 31, 1997 and 1996, 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 cash values. 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% for
participating life insurance and from 7.8% to 9.6% for non-participating life
insurance.
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
1997 was 7.6% for universal life, 5.8% for portfolio-average deferred annuities,
and ranged from 5.2% to 7.2% for investment generation deferred annuities (IGA).
Reserves for health certificates are generally computed using current pricing
assumptions. The interest rate assumptions range from 3.5% to 5.0%. For Medicare
supplement and disability income certificates, reserves are computed on a net
level basis using realistic assumptions, with provision for adverse deviation.
Claim reserves are established for future payments not yet due on claims already
incurred, relating primarily to 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 certificateholder, rather than AAL, bears the
investment risk. Fees charged on separate account certificateholder 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 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 include 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 earned by AAL is generally exempt
from taxation. AAL's wholly-owned subsidiary and its subsidiaries are subject to
federal and state taxation; however, the resulting income taxes are not material
to AAL's financial statements.
Reclassifications
Certain 1996 and 1995 amounts have been reclassified to conform with the 1997
presentation.
Aid Association for Lutherans
Notes to Consolidated Financial Statements (Continued)
Note 2. Investments
AAL's investments in available for sale securities and held to maturity
securities are summarized as follows:
<TABLE>
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------------- -------------- --------------- ----------------
(In Thousands)
<CAPTION>
<S> <C> <C> <C> <C>
Available for sale securities at December 31, 1997:
Fixed maturity securities:
Loan-backed obligations of U.S.
Government corporations
and agencies $ 331,935 $ 5,319 $ (297) $ 336,957
Obligations of other
governments, states and
political subdivisions 129,229 3,894 (34) 133,089
Corporate bonds 4,985,444 120,781 (10,917) 5,095,308
Mortgage & asset-backed securities 2,124,120 33,787 (5,344) 2,152,563
---------------- -------------- --------------- ----------------
Total fixed maturity securities 7,570,728 163,781 (16,592) 7,717,917
Equity securities 468,164 213,052 0 681,216
---------------- -------------- --------------- ----------------
Total $ 8,038,892 $ 376,833 $ (16,592) $ 8,399,133
================ ============== =============== ================
Held to maturity securities at December 31, 1997:
Fixed maturity securities:
U.S. Treasury securities and
non-loan-backed obligations
of U.S. Government
corporations and agencies $ 38,598 $ 1,729 $ (470) $ 39,857
Loan-backed obligations of U.S.
Government corporations
and agencies 383,182 26,792 (360) 409,614
Obligations of other
governments, states and
political subdivisions 59,550 926 (474) 60,002
Corporate bonds 3,051,373 134,047 (5,725) 3,179,695
Mortgage & asset-backed securities 833,102 17,760 (1,386) 849,477
---------------- -------------- --------------- ----------------
Total $ 4,365,805 $ 181,254 $ (8,415) $ 4,538,645
================ ============== =============== ================
</TABLE>
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------------- -------------- ------------- -----------------
(In Thousands)
<S> <C> <C> <C> <C>
Available for sale securities at December 31, 1996:
Fixed maturity securities:
Loan-backed obligations of U.S.
Government corporations
and agencies $ 292,421 $ 2,625 $ (1,276) $ 293,770
Obligations of other
governments, states and
political subdivisions 278,167 5,907 (1,348) 282,726
Corporate bonds 4,491,290 73,719 (48,044) 4,516,965
Mortgage & asset-backed securities 1,877,261 15,114 (37,633) 1,854,742
---------------- -------------- ------------- -----------------
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
================ ============== ============= =================
Held to maturity securities at December 31, 1996:
Fixed maturity securities:
U.S. Treasury securities and
non-loan-backed obligations
of U.S. Government
corporations and agencies $ 42,106 $ 1,881 $ (782) $ 43,205
Loan-backed obligations of U.S.
Government corporations
and agencies 397,200 15,875 (3,999) 409,076
Obligations of other
governments, states and
political subdivisions 74,908 1,052 (1,248) 74,712
Corporate bonds 3,064,485 141,260 (13,766) 3,191,979
Mortgage & asset-backed securities 844,938 14,086 (8,030) 850,994
---------------- -------------- ------------- -----------------
Total $ 4,423,637 $ 174,154 $ (27,825) $ 4,569,966
================ ============== ============= =================
</TABLE>
The amortized cost and estimated fair value of fixed maturity securities at
December 31, 1997, 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 Fair Amortized Fair
Cost Value Cost Value
---------------- ---------------- ---------------- ----------------
(In Thousands)
<CAPTION>
<S> <C> <C> <C> <C>
Due in one year or less $ 150,637 $ 151,590 $ 84,745 $ 85,114
Due after one year through five years 2,992,044 3,038,801 1,281,213 1,317,079
Due after five years through ten years 1,786,649 1,841,712 1,176,807 1,232,029
Due after ten years 185,343 196,294 606,756 645,332
---------------- ---------------- ---------------- ----------------
Total fixed maturity securities
excluding mortgage and
asset-backed bonds 5,114,673 5,228,397 3,149,521 3,279,554
Loan-backed obligations of U.S.
Government corporations and
agencies 331,935 336,957 383,182 409,614
Mortgage and asset-backed securities 2,124,120 2,152,563 833,102 849,477
---------------- ---------------- ---------------- ----------------
Total fixed maturity securities $ 7,570,728 $ 7,717,917 $ 4,365,805 $ 4,538,645
================ ================ ================ ================
</TABLE>
Major categories of AAL's investment income are summarized as follows:
<TABLE>
Years Ended December 31
1997 1996 1995
---------------- ---------------- ----------------
(In Thousands)
<CAPTION>
<S> <C> <C> <C>
Fixed maturity securities $ 854,080 $ 828,565 $ 807,481
Equity securities 20,257 11,030 7,973
Mortgage loans 294,285 284,534 256,251
Investment real estate 19,570 21,998 20,418
Certificate loans 34,993 34,882 34,618
Other invested assets 4,594 6,666 3,665
---------------- ---------------- ----------------
Gross investment income 1,227,779 1,187,675 1,130,406
Investment expenses 17,298 16,085 14,616
---------------- ---------------- ----------------
Net investment income $ 1,210,481 $ 1,171,590 $ 1,115,790
================ ================ ================
</TABLE>
Aid Association for Lutherans
Notes to Consolidated Financial Statements (Continued)
Note 2. Investments (Continued)
AAL's realized gains and losses on investments are summarized as follows:
<TABLE>
Years Ended December 31
1997 1996 1995
--------------- -------------- -------------
(In Thousands)
<CAPTION>
<S> <C> <C> <C>
Securities available for sale:
Fixed maturity securities:
Gross realized gains $ 47,366 $ 41,313 $ 32,443
Gross realized losses (11,350) (9,058) (8,955)
Equity securities:
Gross realized gains 66,140 37,001 18,209
Gross realized losses (5,537) (7,546) (4,960)
Other investments, net 10,826 1,249 (20,139)
--------------- -------------- -------------
Net realized investment gains $ 107,445 $ 62,959 $ 16,598
=============== ============== =============
Net realized gains on available for sale securities were credited directly to
certificateholders' surplus as follows:
December 31
1997 1996 1995
--------------- -------------- -------------
(In Thousands)
Fair value adjustment to available for sale $ 360,241 $ 151,389 $ 284,794
securities
Decrease in deferred acquisition costs (32,568) (2,686) (46,114)
--------------- -------------- -------------
Net unrealized gains on available for sale $ 327,673 $ 148,703 $ 238,680
securities
=============== ============== =============
The increase (decrease) in unrealized appreciation on investments in fixed
maturity and equity securities is as follows:
Fixed maturity securities available for $ 138,125 $ (187,064) $ 630,394
sale
Equity securities available for sale 70,727 53,659 79,610
Deferred acquisition costs (29,882) 43,428 (159,114)
--------------- -------------- -------------
$ 178,970 $ (89,977) $ 550,890
=============== ============== =============
</TABLE>
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 as follows
as of December 31, 1997:
<TABLE>
<CAPTION>
<S> <C> <C>
Principal Percent
--------------------------------------
(In Thousands)
Geographic Region:
Pacific $ 1,106,190 33.1 %
South Atlantic 1,152,083 34.5
Midwest 622,763 18.6
Other 461,037 13.8
------------------- ---------------
Total Mortgage Loans $ 3,342,073 100.0 %
=================== ===============
Property Type:
Office $ 938,493 28.1 %
Industrial 1,008,107 30.2
Retail 442,003 13.2
Residential 431,916 12.9
Church 193,508 5.8
Other 328,046 9.8
------------------- ---------------
Total Mortgage Loans $ 3,342,073 100.0 %
=================== ===============
</TABLE>
The following table presents changes in the allowance for credit losses:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Years Ended December 31
1997 1996 1995
-------------- -------------- ---------------
(In Thousands)
Balance at January 1 $ 139,702 $ 134,402 $ 142,402
Provisions for credit losses (13,264) 9,066 18,138
Charge offs (2,558) (3,766) (26,138)
-------------- -------------- ---------------
Balance at December 31 $ 123,880 $ 139,702 $ 134,402
============== ============== ===============
</TABLE>
AAL's investment in mortgage loans includes $233,938,000 and $281,876,000 of
loans that are considered to be impaired at December 31, 1997 and 1996,
respectively, for which the related allowance for credit losses are $43,484,000
and $56,043,000 at December 31, 1997 and 1996, respectively. The average
recorded investment in impaired loans during the years ended December 31, 1997
and 1996, was $257,907,000 and $271,688,000, respectively. AAL recorded interest
income, using the accrual method, on impaired loans of $18,804,000, $19,366,000
and $18,259,000 for 1997, 1996 and 1995, respectively.
Aid Association for Lutherans
Notes to Consolidated Financial Statements (Continued)
Note 3. Deferred Acquisition Costs
The changes in deferred acquisition costs are as follows:
Note 3. Deferred Acquisition Costs
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Years Ended December 31
1997 1996 1995
----------------- ------------------ ----------------
Balance at beginning of year $ 704,515 $ 643,540 $ 770,628
Acquisition costs deferred:
Commissions, net of certificate 76,265 78,627 80,293
charges
Other costs 27,039 27,499 28,395
----------------- ------------------ ----------------
Total deferred 103,304 106,126 108,688
Acquisition costs amortized (118,122) (88,579) (76,662)
----------------- ------------------ ----------------
Increase (decrease) in deferred acquisition (14,818) 17,547 32,026
costs
Increase (decrease) related to unrealized gains on
fixed
maturity investments recorded as a
separate
component of certificateholders' (29,882) 43,428 (159,114)
surplus
----------------- ------------------ ----------------
Total increase (decrease) (44,700) 60,975 (127,088)
----------------- ------------------ ----------------
Balance at end of year $ 659,815 $ 704,515 $ 643,540
================= ================== ================
</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 $4,771,000, $6,993,000, and
$4,778,000 to the plans in 1997, 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.
Note 4. Retirement and Savings Plans
<TABLE>
<CAPTION>
<S> <C> <C>
December 31
1997 1996
--------------- ---------------
(In Thousands)
Actuarial present value of benefit obligations:
Vested benefits $ (162,324) $ (144,356)
Nonvested benefits (11,091) (6,467)
--------------- ---------------
Accumulated benefit $ (173,415) $ (150,823)
obligation
=============== ===============
Projected benefit obligation for
service
rendered to date $ (236,887) $ (202,489)
Plan assets at fair value 286,314 242,837
--------------- ---------------
Funded status--excess of plan
assets
over projected benefit 49,427 40,348
obligation
Unrecognized net loss from actual
experience different from that assumed
and impact of changes in (41,683) (30,762)
assumptions
Prior service benefit not yet
recognized
in net pension cost 837 903
Unrecognized net transition
obligation
being recognized over a period of 18 years (9,661) (11,697)
--------------- ---------------
Accrued pension liability
included in
other liabilities $ (1,080) $ (1,208)
=============== ===============
</TABLE>
Note 4. Retirement and Savings Plans (Continued)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Years Ended December 31
1997 1996 1995
------------ ------------ -------------
(In Thousands)
Net pension cost includes the following components (credits):
Service cost $ 9,286 $ 8,902 $ 7,736
Interest cost 15,835 14,862 13,724
Actual return on plan assets (48,012) (31,061) (45,008)
Net amortization and deferred items 27,534 12,342 27,844
------------ ------------ -------------
Net pension cost $ 4,643 $ 5,045 $ 4,296
============ ============ =============
</TABLE>
The following summarizes certain assumptions included in the preceding
schedules:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
December 31
1997 1996 1995
------------ ------------ -------------
------------
Assumed discount rate 7.5% 8.0% 8.0%
Expected long-term rate of return on
plan assets 9.0% 8.5% 8.5%
Rate of increase in future
compensation levels 4.0-6.0% 4.0-6.0% 4.0-6.0%
</TABLE>
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 1997, 1996, and 1995 were $3,729,000, $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.
<TABLE>
<CAPTION>
<S> <C> <C>
December 31
1997 1996
-------------- -------------
(In Thousands)
Actuarial present value of benefit obligations:
Retirees $ (20,612) $ (18,915)
Fully eligible plan participants (6,284) (6,301)
Other active plan participants (12,097) (11,975)
-------------- -------------
Total accumulated other postretirement benefit obligations (38,993) (37,191)
Unrecognized net loss (2,463) (2,848)
-------------- -------------
Other postretirement benefit liability $ (41,456) $ (40,039)
============== =============
</TABLE>
The components of the net periodic postretirement benefit cost reported in
operations are summarized as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
December 31
1997 1996 1995
------------- ------------ ------------
(In Thousands)
Service cost-benefits earned during the year $ 1,329 $ 1,385 $ 1,354
Interest cost on benefit obligation 2,931 2,771 3,063
Actual return on plan assets 0 0 0
Net amortization and deferral (313) 0 0
------------- ------------ ------------
Net periodic postretirement benefit cost $ 3,947 $ 4,156 $ 4,417
============= ============ ============
</TABLE>
The discount rate used in determining the accumulated postretirement benefit
obligation was 7.5 percent, 8.0 percent and 8.0 percent for 1997, 1996 and 1995,
respectively, and generally, the health care cost trend rate estimate was 6.0
percent each 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.
Aid Association for Lutherans
Notes to Consolidated Financial Statements (Continued)
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
certificateholders' surplus and excluded from the balance sheet; (d) the
interest maintenance reserve and asset valuation reserve are reported as part of
certificateholders' 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 certificateholders' accounts rather than
including as revenues the premiums received on these certificates. Expenses
include interest added to the certificateholders' accounts rather than reserve
changes related to the investment portion of these policies. Summarized
statutory-basis financial information for Aid Association for Lutherans on an
unconsolidated basis is as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
December 31
1997 1996
---------------- ----------------
(In Thousands)
Assets $ 17,974,813 $ 16,671,018
================ ================
Liabilities $ 16,594,333 $ 15,577,883
Unassigned funds 1,380,480 1,093,135
---------------- ----------------
Total liabilities and unassigned funds $ 17,974,813 $ 16,671,018
================ ================
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Years ended December 31
1997 1996 1995
--------------------- ---------------- ----------------
(In Thousands)
Premium income and certificate proceeds $ 1,785,172 $ 1,663,403 $ 1,665,995
Net investment income 1,205,622 1,162,629 1,110,545
Other income 27,411 23,647 17,179
--------------------- ---------------- ----------------
Total income 3,018,205 2,849,679 2,793,719
Reserve increase 518,656 741,518 1,078,575
Certificateholders' benefits 1,489,662 1,285,702 1,112,138
Surplus refunds 111,981 107,472 102,772
Commissions and operating costs 362,912 367,155 338,908
Other 365,518 226,097 48,955
--------------------- ---------------- ----------------
Total benefits and expenses 2,848,729 2,727,944 2,681,348
--------------------- ---------------- ----------------
Net gain from operations 169,476 121,735 112,371
Net realized capital gains 40,281 7,967 2,095
--------------------- ---------------- ----------------
Net income $ 209,757 $ 129,702 $ 114,466
===================== ================ ================
</TABLE>
AAL is in compliance with the statutory surplus requirements of all states.
Aid Association for Lutherans
Notes to Consolidated Financial Statements (Continued)
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 certificateholder funds in the
accompanying balance sheets.
The cost and estimated fair value of AAL's financial instruments are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1997 1996
------------------------------------ -----------------------------------
Estimated Estimated
Cost Fair Value Cost Fair Value
---------------- ------------------ ---------------- -----------------
(In Thousands)
Financial Assets:
Fixed maturities $ 11,936,533 $ 12,256,562 $ 11,362,776 $ 11,518,169
Equity securities 468,164 681,216 396,788 539,113
Mortgage loans 3,218,193 3,625,645 3,298,335 3,633,788
Cash and cash equivalents 291,302 291,302 106,568 106,568
Certificate loans 501,327 501,327 501,263 501,263
Financial Liabilities:
Deferred annuities 7,354,135 7,256,623 7,393,259 7,271,631
Variable annuities 842,301 795,052 321,514 302,087
Other 600,588 598,264 521,632 519,688
</TABLE>
Aid Association for Lutherans
Notes to Consolidated Financial Statements (Continued)
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.
Quarles & Brady
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) Underwriting Agreement
(b) Distribution Agreement (Registered Representative Contract)
(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 (Adult and Juvenile)
(6) (a) Articles of Incorporation of Aid Association for
Lutherans*
(b) By-laws of Aid Association for Lutherans***
(7) Not applicable
(8) 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 Accountants
(b) Consent of Quarles and Brady
Powers of Attorney*
Power of Attorney for Paul Schrage***
* Incorporated by reference from the registration statement filed on Form S-6
on July 10, 1997 by registrant (file numbers 333-31011, 811-08289)
** Incorporated by reference from the registration statement filed on Form S-6
on November 20, 1997 by registrant (file numbers 333-31011, 811-08289)
*** Incorporated by reference from the registration statement filed on Form N-4
on February 27, 1998 by AAL Varable Account I (file numbers 33-82054,
811-8660)
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it meets all of the requirements for effectiveness of this
amendment to the Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this amendment to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Appleton and State of Wisconsin on the 18th day of
March, 1998.
Aid Association for Lutherans
Variable Life Account I
(Registrant)
By: Aid Association for Lutherans
(Depositor)
Attest: Woodrow Eno John O. Gilbert
/s/ Woodrow Eno /s/ 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 18th day of March, 1998.
Aid Association for Lutherans
Attest: Woodrow E. Eno By: Robert Lyle
/s/ Woodrow E. Eno /s/ 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
1998
/s/ Ronald G. Anderson Chief Financial Officer
- ---------------------------------
Ronald G. Anderson
1998
/s/ Carl Rudolph (Principal Financial Officer,
- ----------------------------------- Principal Accounting Officer)
Carl Rudolph
1998
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
/s/ John O. Gilbert
- -----------------------------------
John O. Gilbert
- -----------------------------------
Robert H. Hoffman
- -----------------------------------
Rev. Thomas Zehnder
- -----------------------------------
Robert E. Long
- -----------------------------------
Robert B. Peregrine
- -----------------------------------
Paul D. Schrage
- -----------------------------------
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
- ---------------------------------- 1998
John O. Gilbert
Pursuant to the requirements of the Investment Company Act of 1940, the
Depositor of the Registrant has caused this Registration Statement to be duly
signed on behalf of the Registrant in the City of Appleton, and the State of
Wisconsin on the, March 31, 1998.
AAL Variable Life Account I
(Name of Registrant )
By: Aid Association for Lutherans
(Name of Depositor)
By: /s/ John O. Gilbert
-------------------------------
Typed Name: John O. Gilbert
Attest: Woodrow E. Eno
/s/ Woodrow E. Eno
- ---------------------------
<PAGE>
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) Underwriting Agreement
(b) Distribution Agreement (Registered Representative Contract)
(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 (Adult and Juvenile)
(6) (a) Articles of Incorporation of Aid Association for
Lutherans*
(b) By-laws of Aid Association for Lutherans***
(7) Not applicable
(8) 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 Accountants
(b) Consent of Quarles and Brady
Powers of Attorney*
Power of Attorney for Paul Schrage***
* Incorporated by reference from the registration statement filed on Form S-6
on July 10, 1997 by registrant (file numbers 333-31011, 811-08289)
** Incorporated by reference from the registration statement filed on Form S-6
on November 20, 1997 by registrant (file numbers 333-31011, 811-08289)
*** Incorporated by reference from the registration statement filed on Form N-4
on February 27, 1998 by AAL Varable Account I (file numbers 33-82054,
811-8660)
AMENDED AND RESTATED
PRINCIPAL UNDERWRITING
AND
SERVICING AGREEMENT
BY AND BETWEEN
AAL CAPITAL MANAGEMENT CORPORATION
AND
AID ASSOCIATION FOR LUTHERANS
DATED NOVEMBER 23, 1994, AND AS AMENDED AND RESTATED MARCH 4, 1998
<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 into this
23rd day of November, 1994, and amended and restated as of March 4, 1998, 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 referred to
as "Account's."
RECITALS
AAL and its VARIABLE ANNUITY ACCOUNT and VARIABLE LIFE ACCOUNT, the latter
Account's registered as an unit investment trusts 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 Account's 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 Account's and/or the Fixed Account. The Account's
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"), is authorized to
offer and sell mutual funds and variable insurance products, and acts as
DISTRIBUTOR of The AA-L Mutual Funds, an 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, the offerings to begin no sooner than on the effective date of the
registration statements in connection with 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 securities 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 Account's, 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 Account's 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, namely 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 Account's, to be promptly allocated among the sub-ACCOUNTS, or to
the AA-L General Account; as designated by the purchaser and in accordance with
the 1940 Act and rules thereunder. Premiums allocated to the sub-ACCOUNTS of the
Account's 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 Account's 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
3.1 Preparation of Sales Literature and Advertising Materials
DISTRIBUTOR and AAL will cooperate 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 Registered
Representatives as "broker-dealer only" materials under 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
literature 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 securities licensing 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 AAL and DISTRIBUTOR in the processing of
Certificate applications to assure that all of its Registered Representatives
are properly licensed when offering and selling the Certificates..
(i) DISTRIBUTOR providing securities licensing data to AAL;
(ii) AAL providing licensing data to a database that shall be maintained by
AAL
The system described herein shall be equally accessible to AAL and DISTRIBUTOR.
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 arrange for pre-licensing study and training
to 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 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, 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 delivery; payment of
commissions; and compliance with the written supervisory procedures of
DISTRIBUTOR.
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 the
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
AAL 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 agent for 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 AAL and its agent, if any, will prepare and distribute such confirmations
in accordance with DISTRIBUTOR's instructions. AAL represents that it 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
Schedule A attached hereto. DISTRIBUTOR intends to reallocate commissions to its
Registered Representatives (including General Agent and General Manager
Registered Representatives) for the sale of Certificates in accordance with a
written fee schedule agreement between DISTRIBUTOR and its Registered
Representatives. DISTRIBUTOR, for its convenience, authorizes AAL, as agent for
DISTRIBUTOR, to make commission payments due to DISTRIBUTOR directly to its
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 4.3
below.
4.2 Sales Credits and Field Expenses
Any AAL field charges or expenses 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 Account's, 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 registrations 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 17a-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 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 the DISTRIBUTOR, at any time. The parties
represent and wan-ant 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 chances 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 are
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 literature, 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,
and 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"). Services Allocation shall be initially
determined as set forth in the Final Annual Budget for the 1995 calendar year.
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 change 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 rendered, and AAL shall provide
written documentation to DISTRIBUTOR for Services Offset rendered (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 preceding, 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. Indemnification
8.1 Indemnification of AAL
DISTRIBUTOR agrees to indemnify and hold harmless AAL and each of its present or
future 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 legal counsel
fees incurred in connection therewith) to which AAL or any such person who 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 Section 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 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 Section. 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 Account's, or the FLJND, 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 ten-n 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. 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 Account's 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.
15. 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 any judicial
proceeding with respect to AAL, DISTRIBUTOR, their affiliates and their agents,
to the extent that such examination, investigation or proceeding is in
connection with Certificates under this Agreement. DISTRIBUTOR and AAL shall
furnish applicable federal and state regulatory authorities information or
reports in connection with its services under this Agreement which such
authorities request in order to ascertain whether AAL's operations are being
conducted in a manner consistent 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 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 AAL CAPITAL
MANAGEMENT CORPORATION
By: /s/ John O. Gilbert By: /s/ Robert G. Same
-------------------------------- ---------------------------
John 0. Gilbert Robert G. Same
President and Executive Vice
Chief Executive Officer President and
Chief Operating
Officer
By: /s/ Woodrow E. Eno
--------------------------------
Woodrow E. Eno
Senior Vice President
Secretary and General Counsel
AAL CAPITAL MANAGEMENT CORPORATION
REGISTERED REPRESENTATIVE'S AGREEMENT
This Registered Representative's Agreement (Agreement) is between AAL Capital
Management Corporation (the Company), 222 West College Avenue, Appleton, WI
54919-0007 and (Representative), Social Security Number
jointly referred to as the "parties."
1. The Company is a broker-dealer, registered with the United States
Securities and Exchange Commission (SEC), is a member of the National
Association of Securities Dealer, Inc. (NASD) and is licensed to do
business as a broker--dealer in all states.
2. The Company is a distributor for The AAL Mutual Funds and the AAL Variable
Annuity, and may, in the future, offer additional products. Herein after,
all approved products are referred to as "Securities."
3. All securities distributed by the Company are registered, as required with
the SEC and any states in which the securities are authorized for sale.
4. Representative is employed by Aid Association for Lutherans (AAL),
Appleton, Wisconsin, pursuant to an employment agreement and is licensed to
sell AAL insurance and annuity products.
5. Representative wishes to be licensed as an associated person with the
Company to offer and sell the securities which may be offered through the
Company and the Company wishes to have Representative offer and sell Such
securities pursuant to the terms of this Agreement.
6. Representative has passed the NASD Series 6 or 7 examination and the Series
63 if required. The Representative will also be properly licensed with all
states in which the Representative will offer the securities.
AGREEMENT
1. Licensing
a. Representative agrees to cooperate with the Company and all regulators
to maintain securities licenses with the NASD and all states in which
the Representative will offer or sell securities. Representative
agrees to offer or sell securities only when the Representative is
promptly licensed with the NASD, licensed with the state in which the
offer or sale is made and only if the securities are registered for
sale in which state. Representative agrees not to offer or sell
securities in any state(s) unless the Representative: (1) has an
effective Registered Representative's Agreement with the Company and
(2) has been notified in writing by the Company of the effectiveness
of the Representative's securities license(s) in the state(s) in which
offers and sales will be made.
b. Representative agrees not to be licensed with any other broker-dealer
while the Representative is licensed with the Company.
c. Representative agrees to pay all costs of licensing and registration
with the NASD and any states or other regulatory authorities. Costs
include: initial license fees, administration fees, examination fees,
study courses, study materials, continuing education, subsequent
renewals, termination fees and any state or local taxes.
Representative consents to the payment of renewal fees through
deductions from commissions payable by the Company or through the AAL
payroll deduction system.
d. Representative will not engage in any activity which would require
registration as an investment adviser with the SEC or any state.
e. Representative will notify the Company within 20 days of any changes
or amendments to the information contained in the Representative's
NASD Form U4 by filing an amended Form U4. The Representative will use
this amended U4 procedure to give notice to the Company of change of
home or branch office address, and/or compensation or employment from
outside business activities (except passive investments).
f. Representative will comply with NASD or state branch office
requirements, including the payment of necessary fees, when
applicable.
g. Representative agrees to comply with all continuing education
requirements.
h. Representative authorizes, to the extent permitted by law, the Company
and/or AAL to at anytime investigate the Representative's financial
and credit record through any consumer reporting agency or bureau of
the Company's choice, and further to make an investigation of
Representative's personal history including character, general
reputation and record of law enforcement activity, if any.
2. Sales Territory
Representative will conduct securities sales activities in accordance with such
policies established by AAL as it pertains to the territory or district in which
the Representative conducts AAL customer sales activities.
3. Sales Activities
a. Representative agrees to sell only securities products authorized for
sale by the Company under this Agreement and will not offer or sell
other securities or other products that may be construed as
securities.
b. Representative agrees to make only representations concerning the
securities with the then current prospectus and sales literature
approved for use by the Company Representative agrees to offer or sell
the securities only in compliance with applicable federal and state
securities and insurance laws. Representative will furnish each person
to whom any such sale or offer is made a copy of the then Current
prospectus, as it may be amended or supplemented. Representative
agrees not to furnish to any person any information related to the
securities offered through the Company which is inconsistent in any
respect with the information contained in a current prospectus. The
Representative will not use any sales literature or cause my
advertisement to be published in any newspaper, posted in any public
place or distributed in any way without the prior consent of the
Company.
c. All securities sales are subject to acceptance in writing by a
designated principal of the Company. The Company reserves the right to
reject any amounts, applications, orders or payments remitted by
Representative and refund to any Customers any payments made by them.
4. Rules and Procedures
a. Representatives shall perform all securities activities through the
Company and in the name of the Company. Representative shall act in
accordance with the rules and regulations of the SEC, the NASD,
applicable state and insurance laws and any rules, regulations and
procedures established by the Company pursuant to those requirements.
Representative is required to be familiar with and understand the
securities laws and regulations of the state(s) in which the
Representative offers or sells securities. This responsibility is in
addition to any requirement to pass any NASD or state securities
examination.
b. Representative must be familiar with and follow all of the procedures
of the Company, which have been developed to comply with the SEC, NASD
and applicable state securities laws. Specifically, but not limited to
the following, Representative agrees to:
i. Transmit to the Company, or its designated fiduciary, within 24
hours of receipt, all monies, orders, applications and
instructions received from all sales and all customers.
Never under any circumstances accept cash or securities from a customer.
The Representative will never commingle any checks or funds received from
customers with any other monies and will not deposit customer funds in
personal, business or trust bank accounts of the Representative.
iii. Advise the Company of any securities trading account over witch
the Representative has discretionary trading authority or in
which the Representative has a financial interest. Representative
will notify the Company's Compliance Department of any existing
securities accounts at the time of the execution of this
Agreement and at the time of the opening of any new account the.
Representative will provide the account number, name and address
of the broker and information as to the type of account.
Representative shall request the broker to notify the Company
directly as to any such accounts and to provide the Company with
duplicate confirmations of all trades upon the Company's request.
iv. Keep all necessary records, for the necessary period of time, as
may be required by the Company, the NASD or other regulatory
body. All such records are considered to be the property of the
Company and shall be subject to the Company upon termination of
this Agreement. Failure to obtain or deliver records is a
violation which may result in disciplinary action.
v. Adhere to all regulatory requirements with respect to the use of
stationery, business cards, telephone numbers, business
advertising and sales literature and correspondence to
shareholders.
vi. Read understand and comply with the specific Compliance rules and
procedures set forth in the Registered Representative Desktop
Answer Book and any other procedural manuals maintained by the
Company.
vii. Maintain the following files and records on a current basis:
A Registered Representative File containing this Agreement, an NASD form
U4, NASD Status Reports confirmations licensing status, correspondence
between the Company and the Representative and any other documents
relating to Representative status as an associated person of the Company.
A Complaint File containing any written or oral complaints received from
clients in connection with the solicitation of a purchase order of
authorized securities products of the Company. Representative understands
any written or oral complaints must be immediately forwarded to the
Compliance Department of the Company.
A Daily Blotter File containing a chronological fist of all securities
transactions.
A separate Customer File for each customer, Mutual Fund and Variable
Annuity, containing, as a minimum, copies of the new account information
form, application, confirmations or customer's statements and other
matters relating to the customer to assist Representative in determining
suitability of customer transactions. Some documents may be stored to
computer disk pursuant to company policy.
A Correspondence File with copies of all correspondence and the name
and address of each person receiving such correspondence.
Representative understands that only correspondence which has been
approved by a principal of the Company may be used.
<PAGE>
An Advertising and Sales Literature File containing copies of any of
the Company's pre-approved sales literature or advertising material by
the Representative and the name and address of each person to whom
such material is given. Representative understands not to use any
sales-s literature, advertising materials or correspondence except
sales literature, advertising and correspondence pre-approved and
furnished shed by the Company.
A Commission Statement File containing chronological statements of
commissions paid to the Representative by the Company and must include
the most recent 12b-1 quarterly commission statement showing all
customers assigned to the Representative.
A Compliance Procedures and Memos File containing written compliance
memoranda and related procedures.
5. Commissions
a. The Company will compensate Representi6ve in accordance with the
current Company Schedule Of Commissions which is in effect at the time
of this Agreement, or as thereafter amended. The Company may, it its
option, and with prior notice, change the Schedule of Commissions is
it applies to the business sold by Representative after Such change.
Representative waives any right to receive commissions until such time
as the company receives the commission from the securities
transaction. Commissions and other fees shall be paid it the times set
forth in the Schedule of Commissions.
b. In the event of the termination of Representative's association with
the Company, commissions will be paid for business received in good
form through the date of termination.
c. The Company shall hive the fight to deduct any monies owed to the
Company from the Representative. Such amounts will be deducted from
the Representative's commissions or other fees until such amount, due
to the Company are fully paid.
d. In the event of a loss to a shareholder which is due to an error or
delay attributable to Representative, such loss will be borne by
Representative and may be collected directly from the Representative
or be offset against future commissions or other fees. If
Representative has no commissions or other fees, the Representative
will reimburse the company directly and within 30 days of a request
for payment.
e. If Representative violates this Agreement the company may retain, to
the extent it deems necessary, any commissions or fees Representative
otherwise would be entitled to receive-
f. If Representative fails to surrender the records referred to in
Section 4.biv. immediately following request by the Company or its
authorized representative, the Representative shall not receive any
commissions or other fees and other payments which are, or likely be,
due to the Representative until such records have been delivered.
g. The Company is authorized to make decisions relative to commissions or
other fees or any other credits and debits to Representative's account
as it believes consistent with the terms of this contract provided
that a Representative aggrieved by such a decision can submit any
dispute to arbitration.
h. Representative consents to the payment of marketing materials ordered
by Representative through deduction from commissions or other fees.
6. Independent Contractor
Representative represents to be an independent contractor with respect to the
relationship with the Company, and this Agreement shall not be construed to
create the relationship of employee and employer between Representative and the
Company. Representative shall pay the expenses in connection with all securities
sales activities. The Company shall not be liable for any financial obligations
incurred by Representative in the conduct of securities .activities.
Representative's contract and relationship with the Company are unique and
separate from any agreement the Company may have with any other person. The
Representative fights and obligations with respect to the Company are entirely
dependent upon this Agreement and this Agreement supersedes any and all prior
Agreements between the parties.
7. Indemnification
Representative shall indemnify and hold the Company harmless from any and all
expenses, costs, causes of action or damages resulting from any violation of the
terms of this Agreement including any unauthorized acts or securities
transactions by Representative.
8. No Assignment
This Agreement is personal to Representative, and neither this Agreement nor any
of the benefits to accrue hereunder shall be assigned or transferred in any way,
in whole or in part, without the written consent of the Company.
9. Amendments
No verbal statement made by any party, or any Representative of a party, shall
affect or change this Agreement in any respect. Any modification or amendment to
this Agreement except as to changes in commissions in accordance with Section
5.a., must be made in writing and signed by the parties before it shall become
effective. Any change in commissions will be determined by the Company, as set
forth in Section 5.a. of this Agreement with prior notice of such changes given
to the Representative.
10. Notices
AU notices, requests, consents and other communications hereunder shall be in
writing and shall be deemed duly given if delivered personally or sent by
first-class mail (notice sent by mail shall be deemed to be given on the date
mailed) to the business address of the Company. All notices to the
Representative shall be considered made if personally delivered, or if sent to
the last designated home address of the Representative shown on the Company's
records by first-class mail or through the AAL internal distribution system.
Representative is responsible for maintaining records regarding the current home
address and branch office address (where applicable) by written notification to
the Company.
11. Wisconsin Law
This Agreement shall be interpreted under and in accordance with laws of the
State of Wisconsin.
12. Arbitration
Any dispute between Representative and the Company must be arbitrated and will
be subject to the provisions of the NASD Code of Arbitration Procedure.
13. Termination of Agreement
This Agreement shall be continuous, but may be terminated by either party, with
or without cause, by giving written notice to the other party. Representative
will be furnished a copy of NASD Form U-5 (Uniform Termination Notice) after
termination, which should be retained by Representative and must be provided to
any broker-dealer with whom the Representative subsequently becomes affiliated.
14. Effective Date
The effective date of this Agreement shall be the date on which it is signed by
an authorized agent of the Company.
15. Severability
If any term, provision covenant or condition of this Agreement is held by a
court of competent jurisdiction to be invalid, void or unenforceable, the rest
of this Agreement will remain in full force and effect and shall in no way be
affected impaired or invalidated
Executed on the dates hereinafter set forth.
REGISTERED REPRESENTATIVE
Signature Date
Print Name
AAL CAPITAL MANAGEMENT CORPORATION
By
Signature Date
AAL CAPITAL MANAGEMENT CORPORATION
222 West College Avenue, Appleton, WI 54919-0007
800-338-9822
Schedule A
Schedule of Sales Commissions
Variable Annuity
Amount of premium deposit* Commission
First $ 100,000 2.25%
Next $150,000 1.50%
Next $250,000 1.00%
Amounts in excess of $500,000 0.50%
Age 80 and above*
First $500,000 1.00%
Amounts in excess of $500,000 0.50%
- - Commission rate based on size of the individual premium applied. It is not
based on cumulative premiums.
- - An AUM service fee is payable quarterly.
Variable Life
Commissions For: Initial issue with NO exchange of other AAL certificate.
Issue Age I' Amount Equal to MIFYP 2" Amount Equal to
0-44 47.5% 20.5%
45 43.5 18.5
46 43.0- 18.0
47 42.0 17.5
48 41.0 17.0
49 40.0 16.5
50 39.0 16.0
51 38.0 15.5
52 37.0 15.0
53 36.0 14.5
54 35.0 14.0
55 34.5 13.5
56 34.0 13.5
57 33.5 13.5
58 32.5 13.5
59 31.5 13.5
60 30.5 13.5
61 29.5 13.5
<PAGE>
62 28.5 13.5
63 27.5 13.5
64 26.5 13.5
65 25.5 13.5
66 25.5 13.5
67 25.5 13.5
68 24.5 13.5
69 24.5 13.5
70 23.5 13.5
71 23.5 13.5
72 22.5 13.5
73 22.5 13.5
74 21.5 13.5
75 21.5 13.5
76 21.5 13.5
77 21.5 13.5
78 20.5 13.5
79 20.5 13.5
80 20.5 13.5
Commissions For: Special class rating for certificate issue, certificate or
benefit increase, or addition of benefits.
Issue Age MFYP for Rating
All 70%
Commissions For: Disability Waiver, Accidental Death, Guaranteed Purchase
Option, or Applicant Waiver included at initial issue, benefit
increase or addition of benefit.
Issue Age for Benefit/Increase
All 70%
Service Commissions: The servicing registered representative, as determined by
AAL, will be paid service commissions at the rate of 2.5 percent on all
premiums applied on the certificate.
[AAL LOGO]
AID ASSOCIATION FOR LUTHERANS
4321 N. Ballard Road, Appleton WI 54919-0001
[AAL CMC LOGO]
AAL Capital Management Corporation
222 West College Avenue, Appleton, WI 54919-0007
AAL Variable Universal Life Insurance Application
New Account Information
The Variable Life Owner / Applicant must provide the following information to
meet insurance and securities industry regulatory rules designed for customer
protection. This information is confidential and is only for the use of AAL and
its affiliated companies.
Section A - Personal Information
Name of owner / applicant (print title, first, middle, last, and suffix name, as
applicable)
Birthdate (mo/day/yr) Are you a U.S. citizen? Yes No
Other citizenship description
Single Divorced Divorced Pending
Married Widowed Seperated
Number of dependents under age 18 -
Occupation:
Labor/ Trades Office/ Retail
Manager/ Sales Professional
Retired Student
Unemployed
Other
Do you own a business?
Yes - Number of employees Full-time employees
Part-time employees
No
Employer name
Employer street address
City State ZIP Code
Associated with NASD firm?
Yes- Firm -
No
Section B - Financial Suitability Information
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Prior Investment Experience none less more Annual Household Income Assets - Excluding this
than 5 than 5 purchase
years years
Bank Savings, CD's Under $20,000 Cash / CDs $
Money Market Fund $20,001 - $35,000 Stocks / Bonds $
Stocks or Equity $35,001 - $50,000 Mutual Funds $
Bonds or Fixed Income $50,001 - $75,000 Business $
Mutual Funds $75,001 - $100,000 Residence (equity) $
Variable Annuities / Life More than $100,000 Insurance (cash value) $
other Deferred Annuities $
Retirement Plans $
Other $
Total Assets $
Liquid Net worth $
</TABLE>
Need For Life Insurance
Estate Planning
Survivor's Need
Other -
Section C - Investment Information - For This Purchase Only
Purpose Retirement Other
Source of Premiums
Current Income
AAL Mutual Fund
Other Company Mutual Fund
Loans
Gift / Inheritance
Death Proceeds
Savings / Checking / CD
AAL Insurance / Annuity
Other Company Insurance/Annuity
Other -
Risk Tolerance
Check the number below that corresponds with the level of risk you are willing
to accept.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Low- 1 2 3 4 5 6 7 8 9 10 -High
CDs Utility and Blue Small Company Precious Metals
Savings Chip Stocks Emerging Growth Oil and Gas
Accounts and Bonds Securities Drilling
Money Market Funds International
Global Securities
High Yield Securities
</TABLE>
Section D - Other Information
1. Are you replacing a Variable Life contract?
Yes - Indicate the reason for the exchange of contract and
provide allocation information on the contract being replaced.
No
2. List amount of total non-AAL life insurance that is inforce or pending
$
<PAGE>
[AAL LOGO]
Adult Application For Variable Universal Life Insurance Aid Association for
With Aid Association For Lutherans, (AAL), Lutherans
A Fraternal Benefit Society, Appleton, WI 54919 4321 N. Ballard Road,
Appleton, WI 54919-0001
New Certificate Certificate Change Certificate number
Reinstatement Certificate number
Section 1 - Replacement
Yes No Is this certificate intended to replace any part of, or all of,
another company's contract?
Is this certificate intended to replace any part of, or all of, an AAL
certificate?
Is this a 1035 exchange?
Section 2 - Proposed Insured
Name (print title, first, middle, last, and suffix name, as applicable)
Date of birth (mo/day/yr) Sex Current occupation Residence state
Yes No Are you a citizen of the United States of America (USA) or a permanent
resident of the USA?
Section 3 - Proposed Third Party Owner
Type of application: Third Party Reason-
Advanced Marketing Reason-
Type of Owner Individual Multiple individuals
Other
Name (print title, first, middle, last, and suffix name, as applicable)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Relationship to insured Relationship to member Date of birth Percentage of Residence
(mo/day/yr) (mo/day/yr) common ownership state
Complete additional names if multiple owners.
Multiple owners shall be: Joint owners Common owners
Name (print title, first, middle, last, and suffix name, as applicable)
Relationship to insured Relationship to member Date of birth (mo/day/yr) Percentage of common
ownership__%*
Name (print title, first, middle, last, and suffix name, as applicable)
Relationship to insured Relationship to member Date of birth (mo/day/yr) Percentage of common
ownership__%*
Name (print title, first, middle, last, and suffix name, as applicable)
Relationship to insured Relationship to member Date of birth (mo/day/yr) Percentage of common
ownership__%*
Name (print title, first, middle, last, and suffix name, as applicable)
Relationship to insured Relationship to member Date of birth (mo/day/yr) Percentage of common
ownership__%*
</TABLE>
*Complete only if multiple owners with common ownership. If none
indicated, percentage will be equal. Joint ownership is always equal.
Authorized person(s) / trustee(s) who can sign on behalf of organization/
trust:
1.
2.
3.
4.
5.
Section 4 - Proposed Member Information (Complete only for Advanced Marketing)
Advanced Marketing member name Relationship of member to insured
Section 5 - Complete for New Business/Term Conversion To New Certificate Only
Specified amount $
Type of issue:
New Business
Exercise Traditional GPO - Ctf No. Amount to exercise - $
Regular Alternate* Date -
Reason: Marriage Birth Adoption New home mortgage
*If the guaranteed option being exercised is not a regular contractual option,
I hereby waive my right to exercise the next available regular option
described in the certificate from which the option is being exercised.
Term Plan / Rider Conversion
Certificate Number(s) Balance Of Term To Continue Amount Of Term Converted
$ $
$ $
$ $
AAL Group Term Amount of term converted: $
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Death Benefit Option Billed Premium Index Billed Premium Index
Level (I) Increasing (II) Yes No Type & Percentage %
Disability Waiver Benefit Guaranteed Purchase Accidental Death Total Accidental Death
(DW) Option Benefit (GPO) Benefit (AD) Benefit Other Companies:
Yes No Amount: $ Amount: $ $
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Time period between Periodic Needs Date of Periodic Needs Review (mo/day/yr)
Review 1 2 3 (if other than certificate anniversary)
Initial Premium Allocation Billed Premium Allocation
Must total 100% and be in whole numbers. Must total 100% and be in whole numbers.
Money Market % Large Company Stock % Money Market % Large Company Stock %
Balanced % Small Company Stock % Balanced % Small Company Stock %
Bond % International Stock % Bond % International Stock %
Fixed Account % Fixed Account %
High Yield Bond % High Yield Bond %
</TABLE>
Telephone Authorization: Yes No
By checking 'Yes' above, the applicant agrees and understands as follows:
1. AAL is authorized to accept and act upon telephone instructions from me for
the following purposes', transfer of accumulated values among account
options, address changes, changes in allocation of premiums, premium
payment instructions, and any other transactions made available by AAL for
telephone transfer. Any transfers shall be made on the basis of unit values
next determined following AAL's receipt of instructions in proper order.
2. AAL may refuse telephone instructions if the caller cannot provide proper
identification of person or account. Without prior disclosure, AAL may
record any telephone conversations containing such instructions. If AAL
acts in good faith upon the telephone instruction, AAL (and any affiliate
or agent) will not be liable for any loss, expense, or cost arising out of
any telephone instruction.
3. AAL may modify, suspend, or discontinue this privilege at any time without
prior notice. The privilege is subject to terms of the certificate, the
current prospectus, and any other rules enacted by AAL. This authorization
is valid until written cancellation notice signed by the owner is received
by AAL. All terms are binding on my agents, heirs, and assigns.
<PAGE>
Section 6 - Complete For Certificate Change Only
Current Death Benefit Option New Level Death Benefit Option
Level (I) Increasing (II) Level (I) Increasing (II)
Maintain Current Specified Amount
Yes No
Current Specified Amount $ New Specified Amount $
Reason for Specified Amount Change:
Unscheduled Increase
Exercise VUL GPO Amount to exercise - $
Regular PNR* Alternate Date -
Reason: Marriage Birth Adoption New home mortgage
Large Premium Payment
Exercise Traditional Gpo - Ctf No. Amount to exercise -$
Regular Alternate* Date -
Reason: Marriage Birth Adoption New home mortgage
*If the guaranteed option being exercised is not a regular contractual option, I
hereby waive my right to exercise the next available regular option described in
the certificate from which the option is being exercised.
Term Plan / Rider Conversion
Certificate Number(s) Balance Of Term To Continue Amount Of Term Converted
$ $
$ $
$ $
AAL Group Term Amount of term converted: $
Disability Waiver Benefit
Currently on Certificate Change Requested:
Yes No Add Cancel
Guaranteed Purchase Option Benefit Change Requested:
Current Amount Add S Cancel
$ increase to $ Decrease to $
Accidental Death Benefit Change Requested:
Current Amount Add $ Cancel
$ increase to $ Decrease to $
Billed Premium Indexing Change Requested:
Current Percentage New value % (type & percentage)
% Cancel
Change to nonsmoker
Reduce insured's rating Time period between Periodic Needs
Review 1 2 3
Date of Periodic Needs
Review -
Section 7 - Premium / Billing Information
Initial Premium paid by
(check mark) Type Amount
Check / Money Order $
Electronic First Premium (EFT $
Internal 1035 Exchange $
Loan $
Complete Withdrawal / Surrender $
Surplus Refunds $
Partial Withdrawal $
Other- $
None $
Total Initial Premium Amount $
Premium Billing - Type of billing:
Regular Billing - Send to special billing address? Yes No
MCA - First MCA withdrawal expected - Add to existing MCA account-
Family Billing - Add to existing Family Bill account -
Government Allotment
No bill
Frequency of billing:
Annual Semiannual
Quarterly Monthly
Premium billing amount: $
EFT withdrawal date -
Draw the EFT from the financial institution for MCA account -
Name And Address For Special Billing / Family Billing
Billing Name (print title, first, middle, last, and suffix name, as applicable)
Address City State ZIP Code
Section 8 - Special Requests
<PAGE>
Section 9 - Declaration Of Insurability
Insured:
Height Weight Weight 1 year ago Reason for weight loss
Ft In Lbs Lbs
Name of primary care provider - Indicate if none.
Patient ID no. Date last consulted Reason last consulted
Type of treatment Medication prescribed Recovery date
Yes No
1. Have you:
(a) Within the past two years used tobacco or other nicotine based
products? If Yes, indicate date last used below:
Cigarettes -
Other tobacco / nicotine -
Date started smoking cigarettes -
(b) Within the past two years participated in any of the following:
pilot, copilot, student auto racing sky diving
pilot or crew member Motorcycle racing Hang gliding
Ballooning Powerboat racing Other avocatio - provide details in
Skin / Scuba diving Mountain climbing Additional Underwriting Section
(c) Within the past three years had a license suspended or had a
moving traffic violation? If Yes, list below:
State where licensed Driver license number
Type of violation
MPH over Date Date Date
Type of violation
MPH over Date Date Date
Type of violation
MPH over Date Date Date
Type of violation
MPH over Date Date Date
Type of violation
MPH over Date Date Date
Type of violation
MPH over Date Date Date
<PAGE>
(d) Within the past seven years had a life, health, disability
income, or long-term care insurance application declined,
postponed, rated, modified, or withdrawn? If Yes, list below.
Application action Company name Date
Reason
Application action Company name Date
Reason
Application action Company name Date
Reason
Application action Company name Date
Reason
Application action Company name Date
Reason
Application action Company name Date
Reason
Yes No 2. Have your parents or siblings ever had coronary artery disease,
polycystic disease, Huntington's Chorea, or familial polypsis? If
Yes list below.
Disorder Relationship To Age At Onset Current Age Age At Death
Proposed Insured
Place details for all 'Yes' answers for questions three through nine in details
section.
Yes No 3. Within the past 10 years have you ever been diagnosed or been
treated by a physician or member of the medical profession,
chiropractor, counselor, or any other professional for:
(a) disorder of the heart, circulatory, blood, or immune system
(excluding HIV)?
If high blood pressure: Date of Diagnosis -
Last blood pressure reading -
Date of last blood pressure check -
Type of treatment - Medication taking -
Care provider / Facility with records if other than primary
care provider -
(b) abnormal growth, cyst, tumor, or cancer?
(c) disorder of the respiratory system?
(d) disorder of the digestive system such as the stomach,
intestines, rectum, liver, gallbladder, esophagus?
(e) disorder of the urinary system, such as kidneys, bladder?
(f) disorder of the endocrine / hormone system? If
diabetes: Date of diagnosis -
Regulated by:
Insulin- Daily dose (units) Oral medication Diet
Last blood sugar reading - Fasting Yes No
Date of Last Reading
Check all that apply:
Kidney disorder Eye complication Neuropathy
Circulatory problems Recurrent infection
Other complications -
Care provider / Facility with records if other than primary
care provider -
(g) disorder of the nervous system including psychological and
psychiatric care? If seizures:
Grand mal Petit mal Other -
(h) disorder of the muscle, skin, bone, or joint?
(i) disorder of the reproductive system?
(j) disorder of the eyes, ears, nose, or throat?
Yes No 4. Within the past 10 years, have you been advised to seek treatment
or counseling, being treated for or received counseling or joined
AA, NA, or other support organization for use of alcohol or
drugs?
If alcohol, date last used - Number of times treated
Attends support organization: Yes - Date last attended No
Care provider / Facility with records if other than primary care
provider -
If drugs, type - Date last used -
Number of times treated -
Attends support organization: Yes - Date last attended No
Care provider / Facility with records if other than primary care
provider -
Yes No 5. Have you abused in the past or are you currently using (for more
than two weeks) nonprescription or self-prescribed drugs such as
cocaine, marijuana, amphetamines, or narcotics?
If Yes, type - Date last used -
Yes No 6. (a) Are you currently disabled?
(b) Are disability benefits being filed for or received from
Social Security or from another source?
Date disability began - Reason for disability -
Yes No 7. Other than reported above, within the past 10 years, have you:
(a) consulted or been advised to consult a doctor, hospital,
chiropractor, clinic, psychiatrist, psychologist, or counselor
for any reason?
(b) been medically treated or evaluated at a hospital, clinic, or
other facility, received special training or special schooling or
been medically advised to have any treatment, test, surgery,
biopsy, or hospitalization not yet completed?
(c) been advised by a physician, chiropractor, or medical therapist
to restrict or avoid normal activities due to illness or injury?
(d) taken any prescription drugs other than those previously listed?
If Yes, list below.
Prescription drug used Date last used
Reason for use
Prescription drug used Date last used
Reason for use
Prescription drug used Date last used
Reason for used
Prescription drug used Date last used
Reason for use
Prescription drug used Date last used
Reason for use
Yes No 8. Other than reported above, within the past 10 years have you been
treated for, or been diagnosed as having HIV infection or
Acquired Immune Deficiency Syndrome (AIDS)?
Yes No 9. Other than reported above, have you been under the care of a
doctor or medical practitioner or are you scheduled to see a
doctor or medical practitioner?
If Yes, reason for care/appointment - Date
Care provider Facility with records if other than primary
care provider -
Section 1O - Details For Questions Answered 'Yes'
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Question: No/Ltr Type of disorder, injury, test Date of diagnosis
Date of onset Number of occurrences Treatment Date of last hospitalization
nursing home care, or home
health care
Last occurrence date Recovered Yes No Recovery date Surgery date
Last consultation date Time lost from work / school Residuals
Medication(s) currently
taking Care provider / Facility with records if other than
primary care provider
Complete for question 3b only Location Type: Benign Malignant Unknown
Question: No/Ltr Type of disorder, injury, test Date of diagnosis
Date of onset Number of occurrences Treatment Date of last hospitalization
nursing home care, or home
health care
Last occurrence date Recovered Yes No Recovery date Surgery date
Last consultation date Time lost from work / school Residuals
Medication(s) currently
taking Care provider / Facility with records if other than
primary care provider
Complete for question 3b only Location Type: Benign Malignant Unknown
Question: No/Ltr Type of disorder, injury, test Date of diagnosis
Date of onset Number of occurrences Treatment Date of last hospitalization
nursing home care, or home
health care
Last occurrence date Recovered Yes No Recovery date Surgery date
Last consultation date Time lost from work / school Residuals
Medication(s) currently
taking Care provider / Facility with records if other than
primary care provider
Question: No/Ltr Type of disorder, injury, test Date of diagnosis
Date of onset Number of occurrences Treatment Date of last hospitalization
nursing home care, or home
health care
Last occurrence date Recovered Yes No Recovery date Surgery date
Last consultation date Time lost from work / school Residuals
Medication(s) currently
taking Care provider / Facility with records if other than
primary care provider
Complete for question 3b only Location Type: Benign Malignant Unknown
<PAGE>
Question: No/Ltr Type of disorder, injury, test Date of diagnosis
Date of onset Number of occurrences Treatment Date of last hospitalization
nursing home care, or home
health care
Last occurrence date Recovered Yes No Recovery date Surgery date
Last consultation date Time lost from work / school Residuals
Medication(s) currently
taking Care provider / Facility with records if other than
primary care provider
Complete for question 3b only Location Type: Benign Malignant Unknown
Question: No/Ltr Type of disorder, injury, test Date of diagnosis
Date of onset Number of occurrences Treatment Date of last hospitalization
nursing home care, or home
health care
Last occurrence date Recovered Yes No Recovery date Surgery date
Last consultation date Time lost from work / school Residuals
Medication(s) currently
taking Care provider / Facility with records if other than
primary care provider
Complete for question 3b only Location Type: Benign Malignant Unknown
Question: No/Ltr Type of disorder, injury, test Date of diagnosis
Date of onset Number of occurrences Treatment Date of last hospitalization
nursing home care, or home
health care
Last occurrence date Recovered Yes No Recovery date Surgery date
Last consultation date Time lost from work / school Residuals
Medication(s) currently
taking Care provider / Facility with records if other than
primary care provider
Complete for question 3b only Location Type: Benign Malignant Unknown
</TABLE>
<PAGE>
Section 11 - Beneficiary Designation
If you are completing the application on paper, complete a beneficiary
designation form printed from the forms package.
If new certificate is result of Term Conversion, beneficiary designation is for
new certificate only. To change designation on existing certificate, complete
separate beneficiary form printed from Forms System.
Additional Underwriting Information
Section 12 - Agreement And Authorization
I understand and agree that:
1. I have personally read (or have had read to me) and verified all statements
and answers provided to the AAL district representative as part of this
application which includes: a. New Account information, and b. Variable
Life application.
2. I have received and reviewed the current prospectus for the AAL Variable
Life insurance contract and underlying mutual funds. I understand the
provisions of the prospectus and agree to its terms.
3. Any false or incomplete statements or answers may result in the loss of
coverage.
4. This application will become part of the Variable Life contract.
5. No change in this application shall be made without my written consent.
6. No representative of AAL except the president or secretary of AAL can make
or alter any contract or waive any of AAL's rights or requirements.
7. I have received the Notice Of Insurance Information Practices. AAL can
release information to the MIB pursuant to this notice.
8. No coverage shall take effect under the certificate applied for unless and
until: a. the certificate is delivered: b. the first full premium is paid
during the lifetime of the person to be covered- and c. the insurability of
the person to be covered remains as described in this application.
9. AAL reserves the right to allocate premium payments to the money market
subaccount until the expiration of the free look period in those states
that require a full refund of premium during the free lock period. More
detailed information on the allocation of premium payments during the free
look period is contained in the prospectus.
10. Under the life insurance contract applied for, the Cash Value may increase
or decrease in accordance with the experience of the separate account and
is not guaranteed as to dollar amount (except for the 4% minimum return for
any portion of cash value you invest in the Fixed Account).
11. Under the life insurance contract applied for, the Death Benefit will vary
when you select the Variable Death Benefit Option. The Death Benefit will
never be less than the Specified Amount as long as the Certificate is in
force.
12. The date of this application is the date the application is signed by the
proposed insured.
Authorization To Obtain Information
I authorize the release of my medical or nonmedical information available on me
or my minor children to AAL from: any provider of health care; a consumer
reporting agency an employer; an insurance or reinsuring company; an insurance
agent; a governmental or other organization; the MIB; a family member or other
person.
This information includes: diagnosis or medical history; psychiatric history or
treatment; results of genetic tests; treatment and prognosis of any physical or
mental condition drug or alcohol abuse history or treatment.
I also authorize the release to AAL of test results or information relating to H
IV or confirmed diagnosis of or treatment for any sexually transmitted disease
as required by law in my state.
I understand that AAL may use this information to determine eligibility for
benefits under any existing certificate.
I further authorize AAL and the above sources, except the MIB, to provide the
information to any reinsurers any legal agent employed by AAL, or to any
insurance company or broker selected by AAL for the sole purpose of securing
insurance coverage for me.
AAL will only release this information to organizations performing business,
insurance, or legal services in connection with this application or claim or as
may be lawfully required.
I agree that copies of this authorization may be used in place of the original.
I may also request a copy. This authorization is valid for two years from the
date shown below unless revoked earlier.
I have read (or have had read to me) the statements and answers made on this
application. The signature below applies to all sections and statements on this
application.
Signed at City State
Signature of proposed insured / Date signed (mo/day/yr)
Signature of member / Date signed (mo/day/yr)
Signature of owner / Date signed (mo/day/yr)
Signature of owner / Date signed (mo/day/yr)
Signature of owner / Date signed (mo/day/yr)
Signature of owner / Date signed (mo/day/yr)
Signature of owner / Date signed (mo/day/yr)
Caution: If your answers on this application are incorrect or untrue, AAL
may have the right to deny benefits or rescind your certificate.
I certify that I have asked all questions and recorded all answers as they were
given to me and reviewed these with the proposed insured.
To the best of my knowledge, the certificate applied for is is not
intended to replace any part of, or all of, another contract.
Signature of AAL representative Date signed(mo/day/yr) DR name/Code number/ID
<PAGE>
Section 13 - Representative's Information
1. Requirements arranged for:
Nonmedical only
Paramedical examination (use HO approved only)
Medical examination by MD
Resting 12-lead electrocardiogram
Blood Chemistry Profile (BCP)
Other screening -
Lab code number -
Do you want the home office to electronically order the paramed exam, EKG,
and/or BCP?
Yes: Facility name -
No (Electronic ordering can only be done with transmitted applications)
Field initiated Attending Physician's Statement -
Doctor / Facility name Facility name
2. Primary care provider address
Name
Address City
State ZIP Code Telephone number
3. Other care provider addresses
Question: Name City
No / Ltr Address State ZIP Code Telephone number
Question: Name City
No / Ltr Address State ZIP Code Telephone number
Question: Name City
No / Ltr Address State ZIP Code Telephone number
Question: Name City
No / Ltr Address State ZIP Code Telephone number
Question: Name City
No / Ltr Address State ZIP Code Telephone number
Question: Name City
No / Ltr Address State ZIP Code Telephone number
Question: Name City
No / Ltr Address State ZIP Code Telephone number
4. Your estimate of
proposed insured's: Annual income (amt) Other income (amt)
Other income (source) Net worth
Yes No 5. Did you personally see the proposed insured and ask each question?
If no, explain -
Yes No 6. Did the proposed insured or proposed insured's family contact you
for this coverage?
Yes No 7. (a) Do you claim production credit on an assigned congregation
basis?
If no, explain -
Complete only if you are the servicing representative but not the DR of the
branch listed.
Service override number reason for override
(b) Should the application credit be split? If Yes, list below.
Agent Identification Number Split Percent
% Note:
% The total split percent
% must equal 100%.
%
<PAGE>
Yes No 8. (a) Does the proposed insured have any other applications pending
or being submitted other than this application? If Yes, list
below.
(b) Does any other family member have applications pending with
AAL? If Yes, list below.
Name Date Applied Plan
9. List amount of total non-AAL life insurance that is in force or
pending - $
10. Purpose for insurance?
Estate liquidity (estate taxes, clearance costs)
Business insurance
Family protection (income replacement, survivor, retirement, etc.)
Loan
11. Will this application be electronically transmitted?
Additional Details
To the best of my knowledge and belief.
A. know nothing about the proposed insured's health, habits, or
lifestyle affecting insurability which has not been stated in
this application.
B. Required disclosures, outline(s) of coverage, Notice Of Insurance
Information Practices, Buyer's Guide, Prospectus, and Receipt For
Payment And Conditional Temporary Coverage Agreement were left
with the proposed insured.
Signature of AAL representative / Date signed (mo/day/yr)
<PAGE>
[AAL LOGO]
AID ASSOCIATION FOR LUTHERANS
4321 N. Ballard Road, Appleton WI 54919-0001
[AAL CMC LOGO]
AAL Capital Management Corporation
222 West College Avenue, Appleton, WI 54919-0007
AAL Variable Universal Life Insurance Application
New Account Information
The Variable Life Owner / Applicant must provide the following information to
meet insurance and securities industry rules designed for customer protection.
This information is confidential and is only for the use of AAL.
Section A - Personal Information
Name of owner / applicant (print title, first, middle, last, and suffix name, as
applicable)
Birthdate (mo/day/yr) Are you a U.S. citizen? Yes No
Other citizenship description
Single Divorced Divorced Pending
Married Widowed Separated
Number of dependents under age 18 -
Occupation:
Labor/ Trades Office/ Retail
Manager/ Sales Professional
Retired Student
Unemployed
Other -
Do you own a business?
Yes - Number of employees Full-time employees
Part-time employees
No
Employer name
Employer street address
City State ZIP Code
Associated with NASD firm?
Yes- Firm -
No
Section B - Financial Suitability Information
Prior Investment Experience none less more
than 5 than 5
years years
Bank Savings, CD's
Money Market Fund
Stocks or Equity
Bonds or Fixed Income
Mutual Funds
Variable Annuities / Life
other
Annual Household Income Assets - Excluding this purchase
Under $20,000 Cash / CDs $
$20,001 - $35,000 Stocks / Bonds $
$35,001 - $50,000 Mutual Funds $
$50,001 - $75,000 Business $
$75,001 - $100,000 Residence (equity) $
More than $1 00, 000 Insurance (cash value) $
Deferred Annuities $
Retirement Plans $
Other $
Total Assets $
Liquid Net worth $
Need For Life Insurance Estate Planning Survivor's Need Other
Section C - Investment Information - For This Purchase Only
Purpose Retirement Other
Source of Premiums
Current Income
AAL Mutual Fund
Other Company Mutual Fund
Loans
Gift / Inheritance
Death Proceeds
Savings / Checking / CD
AAL Insurance / Annuity
Other Company Insurance/Annuity
Other -
Risk Tolerance
Check the number below that corresponds with the level of risk you are willing
to accept.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Low- 1 2 3 4 5 6 7 8 9 10 -High
CDs Utility and Blue Small Company Precious Metals
Savings Chip Stocks Emerging Growth Oil and Gas
Accounts and Bonds Securities International Drilling
Money Market Funds Global Securities
High Yield Securities
</TABLE>
Section D - Other Information
1. Are you replacing a Variable Life contract?
Yes - Indicate the reason for the exchange of contract and
provide allocation information on the contract being replaced-
No
2. List amount of total non-AAL life insurance that is inforce or pending
$
<PAGE>
Juvenile Application For Variable Universal Life Insurance
With Aid Association For Lutherans, (AAL),
A Fraternal Benefit Society, Appleton, WI 54919
[AAL LOGO]
Aid Association for Lutherans
4321 N. Ballard Road, Appleton, WI 54919-0001
New Certificate Certificate Change Certificate number
Reinstatement Certificate number
Section 1 - Replacement
Yes No
Is this certificate intended to replace any part of, or all of,
another company's contract?
Is this certificate intended to replace any part of, or all of, an
AAL certificate?
Is this a 1035 exchange?
Section 2 - Proposed Insured
Name (print title, first, middle, last, and suffix name, as applicable)
Date of birth (mo/day/yr) Sex Residence state
Section 3 Proposed Applicant/Controller
Name (print title, first, middle, last, and suffix name, as applicable)
Residence state Relationship to insured
Date of birth (mo/day/yr)
Yes No Is proposed insured a member of applicant's household?
Is proposed insured dependent upon the applicant for support and
maintenance?
Section 4 - Proposed Third Party Owner
Third Party Application Reason-
Name (print title, first, middle, last, and suffix name, as applicable)
Relationship to insured Date of birth (mo/day/yr) Residence state
Yes No Is proposed insured a member of the applicant's household?
Is proposed insured dependent upon the applicant for support and
maintenance?
Section 5 - Complete for New Business / Term Conversion To New Certificate Only
Specified amount $
Type of issue:
New Business
Term Plan/Rider Conversion
Certificate Number(s) Balance Of Term To Continue Amount of Term
Converted
$ $
$ $
$ $
Death Benefit Option Billed Premium Index Billed Premium Index
Level (I) Increasing (II) Yes No Type & Percentage %
Applicant Waiver Benefit
(AW) Yes No
Disability Waiver Benefit Guaranteed Purchase Accidental Death
(DW) Option Benefit (GPO) Benefit (AD)
Yes No Amount: $ Amount: $
Total Accidental Death
Benefit Other Companies:
$
Time period between Periodic Needs Date of Periodic Needs Review (mo/day/yr)
Review 1 2 3 (if other than certificate anniversary)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Initial Premium Allocation Billed Premium Allocation
Must total 100% and be in whole numbers. Must total 100% and be in whole
numbers.
Money Market % Large Company Stock % Money Market % Large Company Stock %
Balanced % Small Company Stock % Balanced % Small Company Stock %
Bond % International Stock % Bond % International Stock %
Fixed Account % Fixed Account %
High Yield Bond % High Yield Bond %
</TABLE>
Telephone Authorization: Yes No
By checking `Yes' above, the applicant agrees and understands as follows:
1. AAL is authorized to accept and act upon telephone instructions from me for
the following purposes; transfer of accumulated values among account
options, address changes, changes in allocation of premiums, premium
payment instructions, and any other transactions made available by AAL for
telephone transfer. Any transfers shall be made on the basis of unit values
next determined following AAL's receipt of instructions in proper order.
2. AAL may refuse telephone instructions if the caller cannot provide proper
identification of person or account. Without prior disclosure, AAL may
record any telephone conversations containing such instructions. If AAL
acts in good faith upon the telephone instruction, AAL (and any affiliate
or agent) will not be liable for any loss, expense, or cost arising out of
any telephone instruction.
3. AAL may modify, suspend, or discontinue this privilege at any time without
prior notice. The privilege is subject to terms of the certificate, the
current prospectus, and any other rules enacted by AAL. This authorization
is valid until written cancellation notice signed by the owner is received
by AAL. All terms are binding on my agents, heirs, and assigns.
<PAGE>
Section 6 - Complete For Certificate Change Only
Current Death Benefit Option New Level Death Benefit Option
Level (I) Increasing (II) Level (I) Increasing (II)
Maintain Current Specified Amount
Yes No
Current Specified Amount $ New Specified Amount $
Reason for Specified Amount Change:
Unscheduled Increase
Large Premium Payment
Term Plan / Rider Conversion
Certificate Number(s) Balance Of Term To Continue Amount Of Term Converted
$ $
$ $
$ $
Disability Waiver Benefit
Currently on Certificate Change Requested:
Yes No Add Cancel
Applicant Waiver Benefit
Currently on Certificate Change Requested:
Yes No Add Change to applicant - add AW Cancel
Guaranteed Purchase Option Benefit Change Requested:
Current Amount Add $ Cancel
$ Increase to $ Decrease to $
Accidental Death Benefit Change Requested:
Current Amount Add $ Cancel
$ Increase to $ Decrease to $
Section 6 - Complete For Certificate Change Only (Continued)
Billed Premium Indexing Change Requested
Current Percentage New value % (type & percentage)
% Cancel
Reduce insured's rating Time period between Periodic Needs Date of
Review 1 2 3 Periodic Needs
Review -
Section 7 - Premium / Billing Information
Initial Premium paid by
(check mark) Type Amount
Check / Money Order $
Electronic First Premium (EFT $
Internal 1035 Exchange $
Loan $
Complete Withdrawal / Surrender $
Surplus Refunds $
Partial Withdrawal $
Other- $
None $
Total Initial Premium Amount $
Premium Billing - Type of billing:
Regular Billing - Send to special billing address? Yes No
MCA - First MCA withdrawal expected -
Add to existing MCA account-
Family Billing - Add to existing Family Bill account
Government Allotment
No bill
Frequency of billing-.
Annual Semiannual
Quarterly Monthly
Premium billing amount: $
EFT withdrawal date -
Draw the EFT from the financial institution for MCA account -
Name And Address For Special Billing / Family Billing
Name (print title, first, middle, last, and suffix name, as applicable)
Address City State ZIP Code
Section 8 - Special Requests
<PAGE>
Section 9 - Declaration Of Insurability
Insured:
Height Weight Weight 1 year ago or at
Ft In Lbs birth if under age 1 Lbs Oz
Reason for weight loss
Name of primary care provider - Indicate if none.
Patient ID no. Date last consulted Reason last consulted
Type of treatment Medication prescribed Recovery date
Within the past five years has the juvenile:
Yes No
1. Had a life or health application declined, postponed, rated,
modified, or withdrawn? If Yes, list below.
Application action Company name Date
Reason
Application action Company name Date
Reason
Application action Company name Date
Reason
Application action Company name Date
Reason
Application action Company name Date
Reason
Place details for all 'Yes' answers for question two in Juvenile Details
Section.
Yes No
2. Been diagnosed or been treated by a physician or member of the
medical profession, chiropractor, counselor, or any other
professional for:
(a) disorder of the heart, circulatory, blood, or immune system
(excluding HIV)?
(b) abnormal growth, cyst, tumor, or cancer?
(c) disorder of the respiratory system?
(d) disorder of the digestive system such as the stomach,
intestines, rectum, liver, gallbladder, esophagus?
(e) disorder of the urinary system, such as kidneys, bladder?
(f) disorder of the endocrine / hormone system? If diabetes:
Date of diagnosis -
Regulated by:
Insulin: Daily dose (units) Oral medication Diet
Last blood sugar reading - Fasting Yes No
Date of Last Reading
Check all that apply:
Kidney disorder Eye complications Neuropathy
Circulatory problems Recurrent infection
Other complications -
Care provider / Facility with records if other than primary
care provider -
<PAGE>
(g) disorder of the nervous system including psychological and
psychiatric care? If seizures:
Grand mal Petit mal Other -
(h) disorder of the muscle, skin, bone, or joint?
(i) disorder of the reproductive system?
(j) disorder of the eyes, ears, nose, or throat?
Yes No 3. Other than reported above, within the past 5 years, has the
juvenile:
(a) consulted or been advised to consult a doctor, hospital,
chiropractor, clinic, psychiatrist, psychologist, or
counselor for any reason?
(b) been medically treated or evaluated at a hospital, clinic,
or other facility, received special training or special
schooling or been medically advised to have any treatment,
test, surgery, biopsy, or hospitalization not yet completed?
(c) been advised by a physician, chiropractor, or medical
therapist to restrict or avoid normal activities due to
illness or injury?
(d) taken any prescription drugs other than those previously
listed? If Yes, list below.
Prescription drug used Date last used
Reason for use
Prescription drug used Date last used
Reason for use
Prescription drug used Date last used
Reason for used
Prescription drug used Date last used
Reason for use
Prescription drug used Date last used
Reason for use
Applicant:
Height Weight Name of primary care provider - Indicate if none.
Ft In Lbs
Date last consulted Reason last consulted Recovery date
Type of treatment Medication prescribed
Place details for all 'Yes' answers for questions in Applicant Details Section.
Yes No
1. Within the last 10 years have you had or do you currently have:
cancer, heart attack, heart trouble, insulin dependent diabetes,
rheumatoid arthritis, disorder of the nervous system, or have you
been treated for or been diagnosed as having HIV infection or
Acquired Immune Deficiency Syndrome (AIDS)?
2. Within the last five years have you been hospitalized for any
psychological / psychiatric condition, or within the last three
years have you received treatment or medication for any
psychological / psychiatric condition?
3. Within the last three years have you been disabled for greater
than two months or are you currently disabled?
<PAGE>
Section 1OA - Details For Juvenile Questions Answered 'Yes'
Question: No/Ltr Type of disorder, injury, test Date of diagnosis
Date of onset Number of occurrences Treatment
Date of last hospitalization
nursing home care, or home
health care
Last occurrence date Recovered Yes No Recovery date Surgery date
Last consultation date Time lost from work / school Residuals
Medication(s) currently taking
Care provider / Facility with records if other than primary care provider
Complete for question 2b only - Location Type:
Benign Malignant Unknown
Question: No/Ltr Type of disorder, injury, test Date of diagnosis
Date of onset Number of occurrences Treatment
Date of last hospitalization
nursing home care, or home
health care
Last occurrence date Recovered Yes No Recovery date Surgery date
Last consultation date Time lost from work / school Residuals
Medication(s) currently taking
Care provider / Facility with records if other than primary care provider
Complete for question 2b only - Location Type:
Benign Malignant Unknown
Question: No/Ltr Type of disorder, injury, test Date of diagnosis
Date of onset Number of occurrences Treatment
Date of last hospitalization
nursing home care, or home
health care
Last occurrence date Recovered Yes No Recovery date Surgery date
Last consultation date Time lost from work / school Residuals
Medication(s) currently taking
Care provider / Facility with records if other than primary care provider
Complete for question 2b only - Location Type:
Benign Malignant Unknown
Question: No/Ltr Type of disorder, injury, test Date of diagnosis
Date of onset Number of occurrences Treatment
Date of last hospitalization
nursing home care, or home
health care
Last occurrence date Recovered Yes No Recovery date Surgery date
Last consultation date Time lost from work / school Residuals
Medication(s) currently taking
Care provider / Facility with records if other than primary care provider
Complete for question 2b only - Location Type:
Benign Malignant Unknown
<PAGE>
Section 1OA - Details For Juvenile Questions Answered 'Yes' (Continued)
Question: No/Ltr Type of disorder, injury, test Date of diagnosis
Date of onset Number of occurrences Treatment
Date of last hospitalization
nursing home care, or home
health care
Last occurrence date Recovered Yes No Recovery date Surgery date
Last consultation date Time lost from work / school Residuals
Medication(s) currently taking
Care provider / Facility with records if other than primary care provider
Complete for question 2b only - Location Type:
Benign Malignant Unknown
Question: No/Ltr Type of disorder, injury, test Date of diagnosis
Date of onset Number of occurrences Treatment
Date of last hospitalization
nursing home care, or home
health care
Last occurrence date Recovered Yes No Recovery date Surgery date
Last consultation date Time lost from work / school Residuals
Medication(s) currently taking
Care provider / Facility with records if other than primary care provider
Complete for question 2b only - Location Type:
Benign Malignant Unknown
Question: No/Ltr Type of disorder, injury, test Date of diagnosis
Date of onset Number of occurrences Treatment
Date of last hospitalization
nursing home care, or home
health care
Last occurrence date Recovered Yes No Recovery date Surgery date
Last consultation date Time lost from work / school Residuals
Medication(s) currently taking
Care provider / Facility with records if other than primary care provider
Complete for question 2b only - Location Type:
Benign Malignant Unknown
Additional Underwriting Information
<PAGE>
Section 10B - Details For Applicant Questions Answered 'Yes'
Question: No/Ltr Type of disorder, injury, test Date of diagnosis
Date of onset Number of occurrences Treatment
Date of last hospitalization
nursing home care, or home
health care
Last occurrence date Recovered Yes No Recovery date Surgery date
Last consultation date Time lost from work / school Residuals
Medication(s) currently taking
Care provider / Facility with records if other than primary care provider
Complete for question 1 only - Location of Cancer
Question: No/Ltr Type of disorder, injury, test Date of diagnosis
Date of onset Number of occurrences Treatment
Date of last hospitalization
nursing home care, or home
health care
Last occurrence date Recovered Yes No Recovery date Surgery date
Last consultation date Time lost from work / school Residuals
Medication(s) currently taking
Care provider / Facility with records if other than primary care provider
Complete for question 1 only - Location of Cancer
Question: No/Ltr Type of disorder, injury, test Date of diagnosis
Date of onset Number of occurrences Treatment
Date of last hospitalization
nursing home care, or home
health care
Last occurrence date Recovered Yes No Recovery date Surgery date
Last consultation date Time lost from work / school Residuals
Medication(s) currently taking
Care provider / Facility with records if other than primary care provider
Complete for question 1 only - Location of Cancer
Additional Underwriting Information
<PAGE>
Section 11 - Beneficiary Designation
If you are completing the application on paper, complete a beneficiary
designation form printed from the forms package.
If new certificate is result of Term Conversion, beneficiary designation is for
new certificate only. To change designation on existing certificate, complete
separate beneficiary form printed from Forms Sustem.
Section 12 - Agreement And Authorization
I understand and agree that:
1. I have personally read (or have had read to me) and verified all statements
and answers provided to the AAL district representative as part of this
application which includes: a. New Account information, and b. Variable
Life application.
2. I have received and reviewed the current prospectus for the AAL Variable
Life insurance contract and underlying mutual funds. I understand the
provisions of the prospectus and agree to its terms.
3. Any false or incomplete statements or answers may result in the loss of
coverage.
4. This application will become part of the Variable Life contract.
5. No change in this application shall be made without my written consent.
6. No representative of AAL except the president or secretary of AAL can make
or alter any contract or waive any of AAL's rights or requirements.
<PAGE>
Section 12 - Agreement And Authorization (Continued)
7. I have received the Notice Of Insurance Information Practices. AAL can
release information to the MIB pursuant to this notice.
8. No coverage shall take effect under the certificate applied for unless and
until: a. the certificate is delivered: b. the first full premium is paid
during the lifetime of the person to be covered- and c. the insurability of
the person to be covered remains as described in this application.
9. AAL reserves the right to allocate premium payments to the money market
subaccount until the expiration of the free look period in those states
that require a full refund of premium during the free lock period. More
detailed information on the allocation of premium payments during the free
look period is contained in the prospectus.
10. Under the life insurance contract applied for, the Cash Value may increase
or decrease in accordance with the experience of the separate account and
is not guaranteed as to dollar amount (except for the 4% minimum return for
any portion of cash value you invest in the Fixed Account).
11. Under the life insurance contract applied for, the Death Benefit will vary
when you select the Variable Death Benefit Option. The Death Benefit will
never be less than the Specified Amount as long as the Certificate is in
force.
12. The date of this application is the date the application is signed by the
proposed insured.
Authorization To Obtain Information
I authorize the release of my medical or nonmedical information available on me
or my minor children to AAL from: any provider of health care; a consumer
reporting agency an employer; an insurance or reinsuring company; an insurance
agent; a governmental or other organization; the MIB, a family member or other
person.
This information includes: diagnosis or medical history; psychiatric history or
treatment; results of genetic tests treatment and prognosis of any physical or
mental condition drug or alcohol abuse history or treatment.
I also authorize the release to AAL of test results or information relating to
HIV or confirmed diagnosis of or treatment for any sexually transmitted disease
as required by law in my state.
I understand that AAL may use this information to determine eligibility for
benefits under any existing certificate. I further authorize AAL and the above
sources, except the MIB, to provide the information to any reinsurers any legal
agent employed by AAL, or to any insurance company or broker selected by AAL for
the sole purpose of securing insurance coverage for me.
AAL will only release this information to organizations performing business,
insurance, or legal services in connection with this application or claim or as
may be lawfully required.
I agree that copies of this authorization may be used in place of the original.
I may also request a copy.
This authorization is valid for two years from the date shown below unless
revoked earlier. I have read (or have had read to me) the statements and answers
made on this application. The signature below applies to all sections and
statements on this application.
Signed at City State
Signature of parent or guardian / Date signed (mo/day/yr)
Signature of applicant / controller
Date signed (mo/day/yr)
Signature of member / Date signed (mo/day/yr)
Signature of owner / Date signed (mo/day/yr)
Caution: If your answers on this application are incorrect or untrue, AAL
may have the right to deny benefits or rescind your certificate.
I certify that I have asked all questions and recorded all answers as they were
given to me and reviewed these with the proposed insured.
To the best of my knowledge, the certificate applied for is is not intended to
replace any part of, or all of, another contract.
Signature of AAL representative Date signed (mo/day/yr)
DR name / Code number / ID
<PAGE>
Section 13 - Representative's Information
1. Requirements arranged for:
Nonmedical only
Paramedical examination (use HO approved only)
Medical examination by MD
Resting 12-lead electrocardiogram
Blood Chemistry Profile (BCP)
Other screening -
Lab code number -
Do you want the home office to electronically order the paramed exam, EKG,
and/or BCP?
Yes: Facility name -
No (Electronic ordering can only be done with
transmitted applications)
Field initiated Attending Physician's Statement -
Doctor / Facility name Facility name
2a. Primary care provider address for juvenile proposed insured
Name
Address City State ZIP Code Telephone number
2b. Primary care provider address for applicant
Name
Address City State ZIP Code Telephone number
3. Other care provider addresses for juvenile proposed insured
Question-. Name City
No / Ltr Address State ZIP Code Telephone number
Question-. Name City
No / Ltr Address State ZIP Code Telephone number
Question-. Name City
No / Ltr Address State ZIP Code Telephone number
Question-. Name City
No / Ltr Address State ZIP Code Telephone number
Question-. Name City
No / Ltr Address State ZIP Code Telephone number
Question-. Name City
No / Ltr Address State ZIP Code Telephone number
Question-. Name City
No / Ltr Address State ZIP Code Telephone number
4. Your estimate of Annual income (amt) Other income (amt)
proposed insured's: Other income (source) Net worth
Yes No
5. Did you personally see the proposed insured and ask each
question? If no, explain -
6. Did the proposed insured or proposed insured's family contact you
for this coverage?
7. (a) Do you claim production credit on an assigned congregation
basis? If no, explain -
Complete only if you are the servicing representative but not the
DR of the branch listed.
Service override number Reason for override
(b) Should the application credit be split? If Yes, list below.
Agent Identification Number Split Percent
% Note:
% The total split percent
% must equal 100%.
%
<PAGE>
8. (a) Does the proposed insured have any other applications pending
or being submitted other than this application? If Yes, list
below.
(b) Does any other family member have applications pending with AAL?
If Yes, list below.
Name Date Applied Plan
9. List amount of total non-AAL life insurance that is inforce or
pending for juvenile: $
10. List amount of total non-AAL life insurance that is inforce or
pending for applicant: $
11. Purpose for insurance?
Estate liquidity (estate taxes, clearance costs)
Business insurance
Family protection (income replacement, survivor, retirement, etc.)
Loan
12. Will this application be electronically transmitted?
Additional Details
To the best of my knowledge and belief.
A. know nothing about the proposed insured's health, habits, or lifestyle
affecting insurability which has not been stated in this application.
B. Required disclosures, outline(s) of coverage, Notice Of Insurance
Information Practices, Buyer's Guide, Prospectus, and Receipt For Payment
And Conditional Temporary Coverage Agreement were left with the proposed
insured.
Signature of AAL representative / Date signed (mo/day/yr)
March 24, 1998
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
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 under the heading of "Experts" in the
Prospectus.
/s/ David C. Vanden Heuvel
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 January 28, 1998, in the Registration Statement (Form
S-6) and related Prospectus of AAL Variable Life Account I filed with the
Securities and Exchange Commission in this Post-Effective Amendment No. 1 to the
Registration Statement under the Securities Act of 1933 (File No. 333-31011
811-08289).
/s/ Ernst & Young
March 31, 1998
Milwaukee, Wisconsin
March 30, 1998
VIA EDGAR
Securities and Exchange Commission
Division of Investment Management
Judiciary Plaza
450 Fifth Street, N.W.
Washington, DC 20549
Re: AAL Variable Life Account 1 (the "Registrant")
1933 Act Registration No. 333-31011
CIK #0000927649
Post-Effective Amendment No. 1 to Form S-6
Filed in Accordance with Rule 485(b)
Ladies & Gentlemen:
This letter relates to the Registrant's filing, pursuant to Rule 485(b)
under the Securities Act of 1933 (the "1933 Act"), of Post-Effective Amendment
No. 1 under the 1933 Act (the "Amendment") to its Registration Statement on Form
S-6 (the "Registration Statement"). As legal counsel to the Registrant, we
assisted in the preparation of the Amendment and we certify that the Amendment
does not contain any disclosures that would render it ineligible to become
effective immediately on March 31, 1998 pursuant to Rule 485(b) under the 1933
Act.
Please direct any questions or comments regarding this filing to the
undersigned at (414) 277-5677.
Sincerely yours,
QUARLES & BRADY
/s/ Cheryl A. Johnson
Cheryl A. Johnson
CAJ:ljg
