As filed with the Securities and Exchange Commission on April 26, 2000
Registration No. 333-37883 No. 811-08439
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Post-Effective Amendment No. 5
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933 OF
SECURITIES OF UNIT INVESTMENT TRUSTS REGISTERED ON FORM
N-8B-2
TRANSAMERICA OCCIDENTAL LIFE SEPARATE ACCOUNT VUL-1
(Exact Name of Registrant)
-
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
1150 South Olive Street
Los Angeles, CA 90015
(Address of Principal Executive Office of Depositor)
Name and Address of Agent for Service:
--------------------------------------
James W. Dederer, Esq.
Executive Vice President, General Counsel
and Corporate Secretary
Transamerica Occidental Life Insurance Company
1150 South Olive Street
Los Angeles, CA 90015
Copies to:
----------
Frederick R. Bellamy, Esq.
Sutherland, Asbill & Brennan LLP
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
Title of securities being registered: Flexible Payment Variable Life Insurance
Policies.
It is proposed that this filing will become effective:
|_|immediately upon filing pursuant to paragraph (b)
|X|on May 1, 2000 pursuant to paragraph (b)
|_|60 days after filing pursuant to paragraph (a)(1)
|_| on pursuant to paragraph (a)(1)
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RECONCILIATION AND TIE BETWEEN ITEMS
IN FORM N-8B-2 AND THE PROSPECTUS
Item No. of
Form N-8B-2 Caption in Prospectus
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1........................................................... Cover Page
2........................................................... Cover Page
3........................................................... Not Applicable
4........................................................... Distribution
5........................................................... Description of TRANSAMERICA; The Separate Account
6........................................................... The Separate Account
7........................................................... Not Applicable
8........................................................... Not Applicable
9........................................................... Legal Proceedings
10.......................................................... Summary; Description of Transamerica, The Separate
Account, The Portfolios; The Policy; Policy
Termination and Reinstatement; Other Policy
Provisions
11.......................................................... Summary; Investment Objectives and Policies
12 Summary;
13.......................................................... Summary; Charges and Deductions
14.......................................................... Summary; Application for a Policy
15.......................................................... Summary; Application for a Policy;
Payments; Allocation of Net Payments
16.......................................................... The Separate Account; Payments; Allocation of Net
Payments
17.......................................................... Summary; Surrender; Partial Withdrawal;
Charges and Deductions; Policy
Termination and Reinstatement
18.......................................................... The Separate Account; Payments
19.......................................................... Reports; Voting Rights
20.......................................................... Not Applicable
21.......................................................... Summary; Policy Loans; Other Policy
Provisions
22.......................................................... Other Policy Provisions
23.......................................................... Not Required
24.......................................................... Other Policy Provisions
25.......................................................... Description of TRANSAMERICA
26.......................................................... Not Applicable
27.......................................................... Description of TRANSAMERICA
28.......................................................... Directors and Principal Officers of Transamerica
29.......................................................... Description of TRANSAMERICA
30.......................................................... Not Applicable
31.......................................................... Not Applicable
32.......................................................... Not Applicable
33.......................................................... Not Applicable
34.......................................................... Not Applicable
35.......................................................... Distribution
36.......................................................... Not Applicable
37.......................................................... Not Applicable
38.......................................................... Summary; Distribution
39.......................................................... Summary; Distribution
40.......................................................... Not Applicable
41.......................................................... Description of TRANSAMERICA, Distribution
42.......................................................... Not Applicable
43.......................................................... Not Applicable
44.......................................................... Payments; Policy Value and Cash
Surrender Value
45.......................................................... Not Applicable
46.......................................................... Policy Value; Surrender;
Federal Tax Considerations
47.......................................................... Description of TRANSAMERICA
48.......................................................... Not Applicable
49.......................................................... Not Applicable
50.......................................................... The Separate Account
51.......................................................... Cover Page; Summary; Charges and
Deductions; The Policy; Policy Termination and
Reinstatement; Other Policy Provisions
52.......................................................... Addition, Deletion or Substitution of
Investments
53.......................................................... Federal Tax Considerations
54.......................................................... Not Applicable
55.......................................................... Not Applicable
56.......................................................... Not Applicable
57.......................................................... Not Applicable
58.......................................................... Not Applicable
59.......................................................... Not Applicable
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PROSPECTUS FOR
TRANSAMERICA TRIBUTE(R)
VARIABLE UNIVERSAL LIFE INSURANCE
AN INDIVIDUAL FLEXIBLE PAYMENT VARIABLE LIFE INSURANCE POLICY
ISSUED BY
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
OFFERING 19 SUB-ACCOUNTS UNDER SEPARATE ACCOUNT VUL-1
IN ADDITION TO A FIXED ACCOUNT
PORTFOLIO OPTIONS
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ALGER AMERICAN INCOME & GROWTH MS UIF EMERGING MARKETS EQUITY
ALLIANCE VP GROWTH AND INCOME MS UIF FIXED INCOME
ALLIANCE VP PREMIER GROWTH MS UIF HIGH YIELD
DREYFUS VIF APPRECIATION MS UIF INTERNATIONAL MAGNUM
DREYFUS VIF SMALL CAP OCC ACCUMULATION TRUST MANAGED
JANUS ASPEN SERIES BALANCED OCC ACCUMULATION TRUST SMALL CAP
JANUS ASPEN SERIES WORLDWIDE GROWTH PIMCO VIT STOCKSPLUS GROWTH AND INCOME
MFS VIT EMERGING GROWTH TRANSAMERICA VIF GROWTH
MFS VIT GROWTH WITH INCOME TRANSAMERICA VIF MONEY MARKET
MFS VIT RESEARCH
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PLEASE READ AND RETAIN THIS PROSPECTUS.
IT CONTAINS INFORMATION YOU SHOULD KNOW
BEFORE INVESTING.
NEITHER THE SEC NOR THE STATE SECURITIES
COMMISSIONS HAVE APPROVED THIS INVESTMENT OFFERING
OR DETERMINED THAT THIS PROSPECTUS IS ACCURATE OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE SEC'S WEB SITE IS HTTP://WWW.SEC.GOV
TRANSAMERICA'S WEB SITE IS HTTP://WWW.TRANSAMERICA.COM
YOU BEAR THE ENTIRE INVESTMENT RISK FOR ALL ASSETS YOU PLACE IN THE
SUB-ACCOUNTS. ADDITIONALLY, PLEASE ANALYZE ANY CURRENT POLICIES YOU MAY OWN
BEFORE INVESTING IN THIS POLICY. IT MAY NOT BE TO YOUR ADVANTAGE TO REPLACE
EXISTING INSURANCE WITH THIS POLICY.
TRANSAMERICA HAS ESTABLISHED ADEQUATE SAFEGUARDS FOR MONITORING WHETHER A POLICY
MAY BECOME A MODIFIED ENDOWMENT CONTRACT FOR FEDERAL INCOME TAX PURPOSES.
MAY 1, 2000
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TABLE OF CONTENTS
SUMMARY 4
DESCRIPTION OF TRANSAMERICA, THE SEPARATE ACCOUNT
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AND THE PORTFOLIOS...............................................................................16
THE POLICY................................................................................................17
Application for a Policy.........................................................................18
Term Life Insurance Conversions..................................................................18
Free Look Period.................................................................................18
Conversion Privilege.............................................................................19
Payments.........................................................................................19
Allocation of Net Payments.......................................................................20
Transfer Privilege...............................................................................20
Dollar Cost Averaging............................................................................21
Automatic Account Rebalancing....................................................................21
Death Benefit....................................................................................22
Level Option and Adjustable Option...............................................................22
Change to Level or Adjustable Option.............................................................24
Change in Face Amount............................................................................24
Option to Accelerate Death Benefits (Living Benefits Rider) .....................................25
Policy Value.....................................................................................26
Maturity Benefits................................................................................27
Payment Options..................................................................................27
Optional Insurance Benefits......................................................................27
Surrender........................................................................................27
Partial Withdrawal...............................................................................28
Paid-Up Insurance Option.........................................................................28
CHARGES AND DEDUCTIONS....................................................................................28
Payment Expense Charge...........................................................................29
Monthly Insurance Protection Charge..............................................................29
Charges Against or Reflected in the Asset
of the Separate Account.......................................................................31
Surrender Charges................................................................................31
Partial Withdrawal Costs.........................................................................32
Transfer Charges.................................................................................33
Charge for Change in Face Amount.................................................................33
Other Administrative Charges.....................................................................33
POLICY LOANS..............................................................................................33
Preferred Loan Option............................................................................34
Loan Interest Charged............................................................................34
Repayment of Outstanding Loan....................................................................34
Effect of Policy Loans...........................................................................34
POLICY TERMINATION AND REINSTATEMENT......................................................................35
Termination......................................................................................35
Reinstatement....................................................................................35
OTHER POLICY PROVISIONS...................................................................................36
Policy Owner ....................................................................................36
Beneficiary......................................................................................36
Assignment.......................................................................................36
Limit on Right to Challenge Policy...............................................................37
Suicide..........................................................................................37
Misstatement of Age or Sex.......................................................................37
Delay of Payments................................................................................37
FEDERAL TAX CONSIDERATIONS................................................................................38
Transamerica Occidental Life Insurance Company and
The Separate Account..........................................................................38
Taxation of the Policies.........................................................................38
Withholding......................................................................................38
Policy Loans.....................................................................................39
Interest Disallowance............................................................................39
Modified Endowment Contracts.....................................................................39
Distributions Under Modified Endowment Contracts.................................................39
VOTING RIGHTS.............................................................................................40
DIRECTORS AND PRINCIPAL OFFICERS OF
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY...................................................41
DISTRIBUTION..............................................................................................42
REPORTS 42
PERFORMANCE INFORMATION...................................................................................43
LEGAL PROCEEDINGS.........................................................................................47
ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS.........................................................47
FURTHER INFORMATION.......................................................................................48
MORE INFORMATION ABOUT THE FIXED ACCOUNT..................................................................48
General Description..............................................................................48
Fixed Account Interest...........................................................................48
Transfers, Surrenders, Partial Withdrawals and Policy Loans......................................48
INDEPENDENT AUDITORS......................................................................................49
FINANCIAL STATEMENTS......................................................................................49
APPENDIX A - GUIDELINE MINIMUM SUM INSURED TABLE..........................................................A-1
APPENDIX B - OPTIONAL INSURANCE BENEFITS..................................................................B-1
APPENDIX C - PAYMENT OPTIONS..............................................................................C-1
APPENDIX D - ILLUSTRATIONS OF DEATH BENEFIT,
POLICY VALUES AND ACCUMULATED PAYMENTS...........................................................D-1
APPENDIX E - MAXIMUM SURRENDER CHARGES....................................................................E-1
APPENDIX F- SPECIAL TERMS.................................................................................F-1
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6
7SUMMARY
This summary is intended to provide only a very brief overview of the more
significant aspects of the policy. The prospectus and the policy provide further
detail. The Transamerica Tribute(R) policy provides insurance protection for the
named beneficiary and is part of the Transamerica Series(R) of variable
insurance products. We do not claim that the policy is similar or comparable to
a systematic investment plan of a mutual fund. The policy and its attached
application are the entire agreement between you and Transamerica.
The policies are not suitable for short-term investment because of the
substantial nature of the surrender charge.
WHAT IS THE POLICY'S OBJECTIVE?
The objective of the policy is to give permanent life insurance protection and
to help you build assets on a tax-deferred basis. Features available through the
policy include:
o a net death benefit that can protect your family or beneficiaries;
o payment options that can guarantee an income for life;
o a personalized investment portfolio;
o experienced professional investment advisers; and
o tax deferral on earnings.
While the policy is in force, it will provide:
o life insurance coverage on the insured;
o policy value;
o surrender rights and partial withdrawal rights;
o loan privileges; and
o optional insurance benefits available by rider.
The policy combines features and benefits of traditional life insurance with the
advantages of professional money management. Unlike the fixed benefits of
ordinary life insurance, the policy value and the adjustable option death
benefit will increase or decrease depending on investment results of the
portfolios. Also, unlike traditional insurance policies, the policy has no fixed
schedule for payments. Within limits, you may make payments of any amount and
frequency. While you may establish a schedule of planned payments, the policy
will not necessarily lapse if you fail to make planned payments. However, making
planned payments will not guarantee that the policy will remain in force. If the
Guaranteed Death Benefit Rider is in effect, however, payments of sufficient
amounts, net of partial withdrawals, partial withdrawal charges and any
outstanding loans, will guarantee that the policy will not lapse. See Payments
on page 19 and POLICY TERMINATION AND REINSTATEMENT on page 35.
WHO ARE THE KEY PERSONS UNDER THE POLICY?
The policy is a contract between the policy owner and Transamerica. Each policy
has a policy owner, you; an insured, you or another individual you select; and a
beneficiary. As policy owner, you make payments, choose investment allocations
and select the insured and beneficiary. The insured is the person covered under
the policy. The beneficiary is the person who receives the net death benefit
when the insured dies.
WHAT HAPPENS WHEN THE INSURED DIES?
We will pay the net death benefit to the beneficiary when the insured dies while
the policy is in effect. You may choose between two death benefit options.
Under the level death benefit option, or level option, the death benefit is the
greater of either:
(a) the face amount (the amount of insurance issued adjusted for policy
changes); or
(b) the guideline minimum sum insured, which constitutes the minimum death
benefit required by federal tax law.
Under the adjustable death benefit option, or adjustable option, the death
benefit is the greater of either:
(a) the sum of the face amount and policy value; or
(b) the guideline minimum sum insured.
The net death benefit is the death benefit less:
o any outstanding loan;
o any due and unpaid partial withdrawals;
o any due and unpaid partial withdrawal charges; and
o any monthly insurance protection charges due.
Except as provided otherwise under the Guaranteed Death Benefit Rider option,
after the final payment date, the net death benefit is 101% of the policy value
less:
o any outstanding loan;
o any due and unpaid partial withdrawals; and
o any due and unpaid partial withdrawal charges.
The beneficiary may receive the net death benefit in a lump sum or under a
payment option we offer. Under certain conditions, a portion of the net death
benefit may be paid to you prior to the insured's death as provided under the
Option to Accelerate Death Benefits (Living Benefits Rider). See Death Benefit
on page 22.
CAN I EXAMINE THE POLICY?
Yes. You have the right to examine and cancel your policy by returning it to us
or to one of our representatives, generally by the later of:
o 45 days after the application for the policy is signed; or
o 10 days after you receive the policy, or a longer period as required by
state law for replacement policies or for other reasons. We refer to this
10-day or longer period as the state free look period.
In some states, the 45-day period noted above does not apply, and only the
10-day or longer provision applies. This right to examine and cancel your policy
is often referred to as the free look right.
If your policy provides for a full refund under its right to examine policy
provision as required in your state, and you exercise your free look right, your
refund will be the total of payments made to the policy.
If your policy does not provide for a full refund and you exercise your free
look right, you will receive:
o amounts allocated to the fixed account; PLUS
o the current value in the separate account; PLUS
o all fees, charges and tax deductions which have been imposed.
After an increase in face amount, a right to examine and cancel the increase
also applies. See Free Look Period on page 18.
WHAT ARE MY INVESTMENT CHOICES?
The policy gives you an opportunity to select among a number of investment
options, including sub-accounts and a fixed account. Nineteen portfolios from
nine mutual funds, each fund having its own adviser(s), offer a wide range of
investment objectives. The available sub-accounts are:
Alger American Income & Growth Alliance VP* Growth and Income Alliance VP*
Premier Growth Dreyfus VIF Appreciation* Dreyfus VIF Small Cap Janus Aspen
Series Balanced Janus Aspen Series Worldwide Growth MFS VIT Emerging Growth MFS
VIT Growth With Income MFS VIT Research MS UIF Emerging Markets Equity* MS UIF
Fixed Income* MS UIF High Yield* MS UIF International Magnum* OCC Accumulation
Trust Managed OCC Accumulation Trust Small Cap PIMCO VIT StocksPLUS Growth and
Income Transamerica VIF Growth Transamerica VIF Money Market
*Several funds have changed their names, These name changes have no reflection
on the investment policies, strategies, management or any other material
function of the funds. The Alliance VP Growth and Income sub-account was
formerly know as the Alliance VPF Growth and Income sub-account. The Alliance VP
Premier Growth sub-account was formerly known as the Alliance VPF Premier Growth
sub-account. The Dreyfus VIF Appreciation sub-account was formerly known as the
Dreyfus VIF Capital Appreciation sub-account. The MS UIF Emerging Markets Equity
sub-account was formerly known as the MSDW UF Emerging Markets Equity
sub-account. The MS UIF Fixed Income sub-account was formerly known as the MSDW
UF Fixed Income sub-account. The MS UIF High Yield sub-account was formerly
known as the MSDW UF High Yield sub-account. The MS UIF International Magnum
sub-account was formerly known as the MSDW UF International Magnum sub-account.
All sub-accounts may not be available in all jurisdictions.
This range of investment choices allows you to allocate your money among the
sub-accounts to meet your investment needs. Your policy may provide for a full
refund under its right to examine policy provision as required in your state. If
so, after the policy is issued by us, we will allocate all sub-account
investments to the sub-account investing in the Money Market portfolio of
Transamerica Variable Insurance Fund, Inc. We will maintain this allocation
until the end of four calendar days plus the number of days under the state free
look period. This period is usually 10 days, but longer under some
circumstances. After this, we will allocate all amounts to the sub-accounts as
you have chosen.
The policy also offers a fixed account, which provides a guaranteed minimum
interest rate of 4% annually on amounts allocated to the fixed account. We may
declare a higher rate. The fixed account is part of the general account of
Transamerica. Amounts in the fixed account do not vary with the investment
performance of a portfolio. See MORE INFORMATION ABOUT THE FIXED ACCOUNT on page
48.
INVESTMENT OBJECTIVES AND POLICIES, AND INVESTMENT ADVISERS
The sub-accounts invest in a variety of portfolios. A summary of investment
objectives of the portfolios is set forth below. BEFORE INVESTING, CAREFULLY
READ THE PROSPECTUSES OF THE PORTFOLIOS THAT ACCOMPANY THIS PROSPECTUS.
Statements of Additional Information for the portfolios are available on
request. There is no guarantee that the investment objectives of the portfolios
will be achieved. The policy value may be less than the aggregate payments made
to the policy.
The boards of the portfolios have responsibility for the supervision of the
affairs of the portfolios. These boards have entered into management agreements
with the investment advisers. These advisers, subject to their board's review,
are responsible for the daily affairs and general management of the portfolios.
The advisers perform the respective administrative and management services for
the portfolios, furnish to the portfolios office space, facilities and
equipment, and pay the compensation, if any, of officers and board members who
are affiliated with the advisers.
Each portfolio bears expenses incurred in its operation, other than the expenses
its advisers assume under the management agreement. Portfolio expenses include:
o costs to register and qualify the portfolio's shares under the Securities
Act of 1933, or 1933 Act.
o other fees payable to the SEC.
o independent public accountant, legal and custodian fees.
o association membership dues, taxes, interest, insurance payments and
brokerage commissions.
o fees and expenses of the board members who are not affiliated with the
advisers.
THE MANAGEMENT FEES LISTED BELOW ARE FEES SPECIFIED IN THE APPLICABLE ADVISORY
CONTRACT BEFORE ANY FEE WAIVERS. THE PORTFOLIOS' PROSPECTUSES CONTAIN MORE
DETAILED INFORMATION ON THE PORTFOLIO'S INVESTMENT OBJECTIVES, RESTRICTIONS,
RISKS, EXPENSES AND ADVISERS.
THE INCOME & GROWTH PORTFOLIO OF THE ALGER AMERICAN FUND seeks, primarily, a
high level of dividend income. Capital appreciation is a secondary objective of
the portfolio. The portfolio invests in dividend paying equity securities, such
as common or preferred stocks, preferably those which the Manager believes also
offer opportunities for capital appreciation.
Manager: Fred Alger Management, Inc.
Management Fee: 0.625%.
THE GROWTH AND INCOME PORTFOLIO OF THE ALLIANCE VARIABLE PRODUCTS SERIES FUND,
INC. seeks reasonable current income and reasonable opportunity for appreciation
through investments primarily in dividend-paying common stocks of good quality.
Whenever the economic outlook is unfavorable for investment in common stock,
this portfolio may invest in other types of securities, such as bonds,
convertible bonds, preferred stock and convertible preferred stocks. The
portfolio managers will purchase and sell portfolio securities at times and in
amounts as management deems advisable in light of market, economic and other
conditions.
Adviser: Alliance Capital Management L.P.
Management Fee: 0.63%.
THE PREMIER GROWTH PORTFOLIO OF THE ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC.
seeks growth of capital by pursuing aggressive investment policies. Since this
portfolio's investments will be made based upon their potential for capital
appreciation, current income will not be a high priority for this portfolio. The
portfolio will invest mainly in equity securities, such as common stocks,
securities convertible into common stocks and rights and warrants to subscribe
for or purchase common stocks. Equity investments will be in a limited number of
large, carefully selected, high-quality U.S. companies. In the Adviser's
judgement, the companies chosen will be those that are likely to achieve
superior earnings growth. Approximately 25 companies believed by the Adviser to
show superior potential for capital appreciation will usually constitute
approximately 70% of the portfolio's net assets at any one time. The portfolio
thus differs from more typical equity mutual funds by investing most of its
assets in a relatively small number of intensively researched companies. Under
normal circumstances the portfolio will invest at least 85% of the value of its
total assets in the equity securities of U.S. companies.
Adviser: Alliance Capital Management L.P.
Management Fee: 1.00%.
THE APPRECIATION PORTFOLIO OF THE DREYFUS VARIABLE INVESTMENT FUND seeks
long-term capital growth consistent with the preservation of capital; current
income is a secondary goal. To pursue these goals, the portfolio invests in
common stocks focusing on "blue chip" companies with total market values of more
than $5 billion at the time or purchase.
Adviser: The Dreyfus Corporation.
Sub-Adviser: Fayez Sarofim & Co.
Management Fee: 0.75%.
THE SMALL CAP PORTFOLIO OF THE DREYFUS VARIABLE INVESTMENT FUND seeks to
maximize capital appreciation. To pursue this goal, the portfolio generally
invests at least 65% of its assets in the common stock of U.S. and foreign
companies. The portfolio focuses on small-cap companies with total market values
of less than $1.5 billion.
Adviser: The Dreyfus Corporation.
Management Fee: 0.75%.
THE BALANCED PORTFOLIO OF THE JANUS ASPEN SERIES seeks long-term capital growth
consistent with preservation of capital and current income. Normally, this
diversified portfolio invests 40-60% of its assets in securities selected
primarily for their growth potential. The balance of its holdings is invested in
securities selected primarily for their capacity to generate income. Such
holdings are likely to consist of bonds and preferred stocks. Typically, at
least 25% of this portfolio is made up of fixed-income securities.
Adviser: Janus Capital Corporation.
Management Fee: 0.65%.
THE WORLDWIDE GROWTH PORTFOLIO OF THE JANUS ASPEN SERIES seeks long-term growth
of capital in a manner consistent with the preservation of capital. It is a
diversified portfolio that pursues its objective primarily through investments
in common stocks of foreign and domestic issuers. The portfolio has the
flexibility to invest on a worldwide basis in companies and other organizations
of any size, regardless of country of origin or place of principal business
activity. The portfolio normally invests in issuers from at least five different
countries, including the United States. The portfolio may at times invest in
fewer than five countries or even a single country.
Adviser: Janus Capital Corporation.
Management Fee: 0.65%.
THE EMERGING GROWTH SERIES OF THE MFS VARIABLE INSURANCE TRUST seeks long-term
growth of capital. The series may invest up to 25% of its net assets in foreign
securities, including emerging market securities. Emerging markets are generally
defined as countries in the initial stages of their industrialization cycles
with low per capita income.
Adviser: Massachusetts Financial Services Company.
Management Fee: 0.75%.
THE GROWTH WITH INCOME SERIES OF THE MFS VARIABLE INSURANCE TRUST seeks
long-term growth of capital and future income while providing more current
dividend income than is normally obtainable from a portfolio of only growth
stocks. The series invests, under normal market conditions, at least 65% of its
total assets in common stock and related securities, such as preferred stocks,
convertible securities and depositary receipts for those securities. The series
will also seek to provide income equal to approximated 90% of the dividend yield
on the Standard & Poor's 500 Composite Index. While the fund may invest in
companies of any size, the fund generally focuses on companies with larger
market capitalizations that the series' adviser believes have sustainable growth
prospects and attractive valuations based on current and expected earnings or
cash flow. The series may invest in foreign securities through which it may have
exposure to foreign currencies.
Adviser: Massachusetts Financial Services Company.
Management Fee: 0.75%.
THE RESEARCH SERIES OF THE MFS VARIABLE INSURANCE TRUST seeks long-term growth
of capital and future income. The series invests, under normal market
conditions, at least 80% of its total assets in common stocks and related
securities, such as preferred stocks, convertible securities and depositary
receipts. The series focuses on companies that the series' adviser believes have
favorable prospects for long-term growth, attractive valuations based on current
and expected earnings or cash flow, dominant or growing market share and
superior management. The series may invest in foreign equity securities
(including emerging market securities) through which it may have exposure to
foreign currencies.
Adviser: Massachusetts Financial Services Company.
Management Fee: 0.75%.
MORGAN STANLEY UNIVERSAL INSTITUTIONAL FUNDS EMERGING MARKETS EQUITY PORTFOLIO
seeks long-term capital appreciation by investing primarily in equity securities
of issuers in emerging market countries. The Adviser seeks to maximize returns
by investing in growth-oriented equity securities in emerging markets. The
Adviser's investment approach combines top-down country allocation with
bottom-up stock selection. Investment selection criteria include attractive
growth characteristics, reasonable valuations and managements with a strong
shareholder value orientation. The Adviser allocates the portfolio's assets
among emerging markets based on relative economic, political and social
fundamentals, stock valuations and investor sentiments.
Adviser: Morgan Stanley Asset Management* Management Fee: 1.25% of the first
$500 million; 1.20% of the next $500 million; and 1.15% of the assets over $1
billion.
*On December 1, 1998, Morgan Stanley Asset Management Inc. changed its name to
Morgan Stanley Dean Witter Investment Management Inc., but continues to do
business in certain instances using the name Morgan Stanley Asset Management.
MORGAN STANLEY UNIVERSAL INSTITUTIONAL FUNDS FIXED INCOME PORTFOLIO seeks
above-average total return over a market cycle of three to five years by
investing primarily in a diversified mix of dollar denominated investment grade
fixed income securities, particularly U.S. government, corporate and mortgage
securities. The Portfolio ordinarily will maintain an average weighted maturity
in excess of five years. The Portfolio may invest opportunistically in
non-dollar denominated securities and below investment grade securities.
Adviser: Miller Anderson & Sherrerd, LLP. Management Fee: 0.40% of the first
$500 million; 0.35% of the next $500 million; and 0.30% of the assets over $1
billion.
MORGAN STANLEY UNIVERSAL INSTITUTIONAL FUNDS HIGH YIELD PORTFOLIO seeks
above-average total return over a market cycle of three to five years by
investing primarily in high yield securities (commonly referred to as "junk
bonds"). The Portfolio also may invest in investment grade fixed income
securities, including U.S. Government securities, corporate bonds and mortgage
securities. The Portfolio may invest to a limited extent in foreign fixed income
securities, including emerging market securities.
Adviser: Miller Anderson & Sherrerd, LLP. Management Fee: 0.50% of the first
$500 million; 0.45% of the next $500 million; and 0.40% of the assets over $1
billion.
MORGAN STANLEY UNIVERSAL INSTITUTIONAL FUNDS INTERNATIONAL MAGNUM PORTFOLIO
seeks long-term capital appreciation by investing primarily in equity securities
of non-U.S. issuers domiciled in EAFE countries. The Adviser seeks to achieve
superior long-term returns by creating a diversified portfolio of undervalued
international equity securities. To achieve this goal, the Adviser uses a
combination of strategic geographic asset allocation and fundamental, value
oriented stock selection. The countries in which the portfolio will invest are
those comprising the Morgan Stanley Capital International EAFE Index, which
includes Australia, Japan, New Zealand, most nations located in Western Europe
and the more developed countries in Asia, such as Hong Kong and Singapore.
Collectively, we refer to these as the EAFE countries. The portfolio may invest
up to 5% of its total assets in securities of issuers domiciled in non-EAFE
countries. Under normal circumstances, at least 65% of the total assets of the
portfolio will be invested in equity securities of issuers in at least three
different EAFE countries.
Adviser: Morgan Stanley Asset Management Management Fee: 0.80% of the first $500
million; 0.75% of the next $500 million; and 0.70% of the assets over $1
billion.
THE MANAGED PORTFOLIO OF THE OCC ACCUMULATION TRUST seeks growth of capital over
time through investment in a portfolio consisting of common stocks, bonds and
cash equivalents, the percentages of which will vary based on the Adviser's
assessments of the relative outlook for such investments. Debt securities are
expected to be predominantly investment grade intermediate to long term U.S.
Government and corporate debt. The portfolio will also invest in high quality
short term money market and cash equivalent securities and may invest almost all
of its assets in such securities when necessary to preserve capital. In
addition, the portfolio may also purchase foreign securities. These foreign
securities must be listed on a domestic or foreign securities exchange or
represented by American depositary receipts.
Adviser: OpCap Advisors. Management Fee: 0.80% of the first $400 million and
0.75% of the next $400 million and 0.70% of net assets over $800 million.
THE SMALL CAP PORTFOLIO OF THE OCC ACCUMULATION TRUST seeks capital appreciation
through investments in a diversified portfolio of stocks issued by small
companies. It will consist primarily of equity securities of companies with
market capitalizations of under $1 billion. Under normal circumstances, at least
65% of the portfolio's assets will be invested in equity securities. The
majority of securities purchased by the portfolio will be traded on the New York
Stock Exchange, the American Stock Exchange or in the over-the-counter market.
The portfolio's holdings may also include options, warrants, bonds, notes and
convertible bonds. In addition, the portfolio may also purchase foreign
securities. Foreign securities must be listed on a domestic or foreign
securities exchange or be represented by American depositary receipts.
Adviser: OpCap Advisors. Management Fee: 0.80% of the first $400 million and
0.75% of the next $400 million and 0.70% of net assets over $800 million.
THE STOCKSPLUS GROWTH AND INCOME PORTFOLIO OF THE PIMCO VARIABLE INSURANCE TRUST
seeks to achieve a total return which exceeds the total return performance of
the S&P 500. The Portfolio invests in common stocks, options, futures, options
on futures and swaps. Under normal market conditions, the Portfolio invests
substantially all of its assets in S&P 500 derivatives, backed by a portfolio of
fixed income instruments. The Portfolio uses S&P 500 derivatives in addition to
or in place of S&P 500 stocks to attempt to equal or exceed the performance of
the S&P 500. The Adviser actively manages the fixed income assets held by the
Portfolio, with a view to enhancing the
Portfolio's total return investment performance, subject to an overall portfolio
duration which is normally not expected to exceed one year. The Portfolio may
invest up to 10% of its assets in high yield bonds rated B or higher by Moody's
or S&P, or if unrated, determined by the Adviser to be comparable quality. The
Portfolio may also invest up to 20% of its assets in securities denominated in
foreign currencies and may invest beyond this limit in U.S. dollar denominated
securities of foreign issuers.
Adviser: Pacific Investment Management Company.
Management Fee: 0.40%
THE GROWTH PORTFOLIO OF THE TRANSAMERICA VARIABLE INSURANCE FUND, INC. seeks
long-term capital growth. It invests at least 65% of its assets in a diversified
selection of equity securities of domestic growth companies of any size. The
manager uses a "bottom-up" approach to investing and constructs the portfolio
one company at a time. The manager focuses on identifying fundamental change in
its early stages and investing in premier companies. In the manager's view,
characteristics of premier companies include one or more of the following:
share-holder-oriented management; dominance in market share; cost production
advantages; leading brands; self-financed growth; and attractive reinvestment
opportunities. The manager of the portfolio believes in long-term investing and
does not try to time the market. However, when in the judgment of the manager
market conditions warrant, the portfolio may, for temporary defensive purposes,
hold part or all of its assets in cash or cash equivalents.
Adviser: Transamerica Investment Management, LLC.
Sub-Adviser: Transamerica Investment Services, Inc.
Management Fee: 0.75%.
THE MONEY MARKET PORTFOLIO OF THE TRANSAMERICA VARIABLE INSURANCE FUND, INC.
seeks to maximize current income consistent with liquidity and the preservation
of principal. The portfolio invests primarily in high quality U.S.
dollar-denominated money market instruments with remaining maturities of 13
months or less. These include: obligations issued or guaranteed by the U.S. and
foreign governments and their agencies and instrumentalities; obligations of
U.S. and foreign banks, or their foreign branches, and U.S. savings banks;
short-term corporate obligations, including commercial paper, notes and bonds;
other short-term debt obligations with remaining maturities of 397 days or less;
and repurchase agreements involving any of the securities mentioned above. The
portfolio may also purchase other marketable, non-convertible corporate debt
securities of U.S. issuers. These investments include bonds, debentures,
floating rate obligations, and issues with optional maturities.
Adviser: Transamerica Investment Management, LLC.
Sub-Adviser: Transamerica Investment Services, Inc..
Management Fee: 0.35%.
If there is a material change in the investment policy of a portfolio, we will
notify you of the change. If you have policy value allocated to that portfolio,
you may without charge reallocate the policy value to another portfolio or to
the fixed account. For you to exercise your rights, we must receive your written
request within sixty (60) days of the LATER of the:
o effective date of the change in the investment policy, OR
o receipt of the notice of your right to transfer.
PORTFOLIOS NOT PUBLICLY AVAILABLE
The portfolios are open-end management investment companies or portfolios of
series, open-end management companies registered with the SEC under the 1940 Act
that are often referred to as mutual funds. This SEC registration does not
involve SEC supervision of the investments or investment policies of the
portfolios. Shares of the portfolios are not offered to the public but solely to
the insurance company separate accounts and other qualified purchasers as
limited by federal tax laws. These portfolios are not the same as mutual funds
that may have very similar names that are sold directly to the public. The
assets of each portfolio are held separate from the assets of the other
portfolios. Each portfolio operates as a separate investment vehicle. The income
or losses of one portfolio have no effect on the investment performance of
another portfolio. The sub-accounts reinvest dividends and/or capital gains
distributions received from a portfolio in more shares of that portfolio as
retained assets.
CAN I MAKE TRANSFERS AMONG THE SUB-ACCOUNTS AND THE FIXED ACCOUNT?
Yes. You may make transfers among the sub-accounts and the fixed account,
subject to our consent and current rules. Under current tax law, you will incur
no current taxes on transfers while your money is in the policy. A transfer
charge may apply to certain transfers. See Transfer Privilege on page 20.
HOW MUCH CAN I INVEST AND HOW OFTEN?
The number and frequency of your payments are flexible, within limits. See
Payments on page 19.
WHAT IF I NEED MY MONEY?
You may borrow up to the loan value of your policy. You may also make partial
withdrawals, and you may surrender the policy for its surrender value. There are
two types of loans which may be available to you:
o A preferred loan option is available after the tenth policy year and, after
that date, will apply to any outstanding loans and new loan requests unless
you revoke the preferred loan option in writing. The guaranteed annual
interest rate credited to the portion of the policy value securing a
preferred loan will be not less than 7.5%.
o A non-preferred loan option is always available to you. The guaranteed
annual interest rate credited to the portion of the policy value securing a
non-preferred loan will be not less than 6.0%. The current annual interest
rate credited is 7.2%. We may change the interest rate credited at any time
in our sole discretion.
For policies issued subject to the jurisdiction of the Virgin Islands, the
guaranteed annual interest rate credited on a preferred loan is 5.5%; the
guaranteed annual interest rate credited on a non-preferred loan is 4.0%; and
the current annual interest rate credited on a non-preferred loan is 5.2%.
We will allocate policy loans among the sub-accounts and the fixed account
according to your instructions. If you do not make an allocation, we will make a
pro rata allocation among the sub-accounts and the fixed account. We will
transfer the policy value in each sub-account equal to the policy loan to the
fixed account.
You may surrender your policy and receive its surrender value. After the first
policy year, you may make partial withdrawals of $500 or more from the policy
value, provided you have not exercised the paid-up insurance option, subject to
partial withdrawal costs. Under the Level Option, the face amount and policy
value will be reduced by each partial withdrawal and the policy value will be
further reduced by the partial withdrawal costs. Under the adjustable option,
the policy value will be reduced by the amount of the partial withdrawal and the
partial withdrawal costs. We will not allow a partial withdrawal if it would
reduce the face amount below $50,000. A surrender or partial withdrawal may have
tax consequences.
CAN I MAKE FUTURE CHANGES UNDER MY POLICY?
Yes. There are several changes you can make after receiving your policy, within
limits. You may:
o cancel your policy under its right to examine and cancel provision.
o transfer your ownership to someone else.
o change the beneficiary.
o change the allocation of payments.
o transfer portions of the policy value among the fixed account and the
sub-accounts, with no tax consequences under current law.
o adjust the death benefit by increasing or decreasing the face amount.
o change your choice of death benefit options between the level option and
adjustable option.
o add or remove optional insurance benefits provided by rider.
CAN I CONVERT MY POLICY INTO A NON-VARIABLE POLICY?
Yes. You can convert your policy without charge during the first 24 months after
the date of issue or after an increase in face amount. On conversion, we will
transfer the policy value in the sub-accounts to the fixed account. We will
allocate all future payments to the fixed account, unless you instruct us
otherwise.
WHAT CHARGES WILL I INCUR UNDER MY POLICY?
The following charges will apply to your policy under the circumstances
described. Some of these charges apply throughout the policy's duration. Other
charges apply only if you choose options under the policy. See CHARGES AND
DEDUCTIONS on page 28.
o CHARGES DEDUCTED FROM PAYMENTS:
PAYMENT EXPENSE CHARGE - From each payment, we will deduct a payment
expense charge, currently equal to 4.0% of the payment. The payment expense
charge is deducted for state and local premium taxes, federal income tax
treatment of deferred acquisition costs, and a portion of policy sales and
administrative expenses.
o WE DEDUCT THE FOLLOWING MONTHLY CHARGE FROM POLICY VALUE:
MONTHLY INSURANCE PROTECTION CHARGE - This charge is the cost of insurance,
including optional insurance benefits provided by rider. It is deducted on
each monthly processing date starting with the date of issue and continuing
through the final payment date.
o THE FOLLOWING EXPENSES ARE CHARGED AGAINST OR REFLECTED IN THE SEPARATE
ACCOUNT:
ADMINISTRATION CHARGE - We deduct this charge during the first 20 policy
years only. It is a daily charge at a rate equivalent to an annual rate of
0.15% of the daily net asset value of each sub-account. This charge is
eliminated after the twentieth policy year. We currently waive this charge,
subject to state law, after the tenth policy year, but we
reserve the right to implement this charge after the tenth policy year.
MORTALITY AND EXPENSE RISK CHARGE - We impose a daily charge at a current
rate equivalent to an annual rate of 0.65% of the daily net asset value of
each sub-account. We may increase this charge, subject to state and federal
law, to a daily rate equivalent to a rate no greater than 0.80% annually.
PORTFOLIO EXPENSES - The portfolios incur investment advisory fees and
other expenses, which are reflected in the sub-accounts of the separate
account. The levels of fees and expenses vary among the portfolios. They
are described in the section entitled What are the Expenses and Fees of the
Portfolios? on page 13.
o CHARGES DESIGNED TO REIMBURSE US FOR POLICY ADMINISTRATIVE COSTS APPLY UNDER
THE FOLLOWING CIRCUMSTANCES:
CHARGE FOR CHANGE IN FACE AMOUNT - For each increase or decrease in face
amount you request, we deduct a charge of $40 from the policy value. In
some jurisdictions, no charge is imposed for increases in face amount.
TRANSFER CHARGE - The first 12 transfers of policy value in a policy year
are free. A current transfer charge of $10, never to exceed $25, applies
for each additional transfer in the same policy year.
OTHER ADMINISTRATIVE CHARGES - We reserve the right to charge for other
administrative costs we incur. While there are no current charges for these
costs, we may impose a charge, guaranteed never to exceed $25 per
occurrence, for:
o changing net payment allocation instructions
o changing the allocation of monthly insurance protection charges among the
various sub-accounts
o providing more than one projection of values during a policy year in
addition to your annual statement
o THE CHARGES BELOW APPLY ONLY IF YOU SURRENDER YOUR POLICY OR MAKE PARTIAL
WITHDRAWALS:
SURRENDER CHARGES - These charges only apply if you request a full
surrender of your policy or a decrease in face amount during the time the
charges are in effect. Surrender charges are intended to help compensate us
for certain administrative expenses and certain distribution expenses.
Surrender charges are computed on the date of issue for the initial face
amount and apply for ten years from the date of issue. New surrender
charges are computed for any increase in face amount. Surrender charges for
a face amount increase apply for ten years from the date the increase is
effective, and those surrender charges only apply to the face amount
increase.
The amount of the surrender charge is equal to a rate per $1,000 of face
amount. The rate varies by age and sex of the insured, as well as the
policy duration, or duration since the increase in face amount. Surrender
charge rates decrease each policy year on the policy anniversary for the
initial face amount and on each twelve-month anniversary of the effective
date of a face amount increase for the charges associated with the
increase.
PARTIAL WITHDRAWAL COSTS - We deduct the following charges from the policy
value for partial withdrawals:
o a transaction fee of 2.0% of the amount withdrawn, not to exceed $25, for
each partial withdrawal for processing costs. o a partial withdrawal charge
of 5.0% of the amount withdrawn which exceeds the Free 10% Withdrawal,
described below.
The partial withdrawal charge does not apply to:
o that part of a withdrawal equal to 10% of the policy value in a policy
year less prior free withdrawals made in the same policy year (Free 10%
Withdrawal).
o withdrawals when no surrender charges apply.
We reduce the policy's outstanding surrender charges, if any, by partial
withdrawal charges that we previously deducted.
WHAT ARE THE EXPENSES AND FEES OF THE PORTFOLIOS?
In addition to the charges described above, certain management fees and other
expenses are deducted from the assets of the underlying portfolios. The levels
of fees and expenses vary among the portfolios. The following table shows the
management fees and other expenses and total portfolio annual expenses of the
portfolios for 1999. For more information concerning these fees and expenses,
see the prospectuses of the portfolios.
<PAGE>
22
<TABLE>
<CAPTION>
PORTFOLIO EXPENSES
(as a percentage of assets after fee waiver and/or expense reimbursement)(1)
TOTAL
PORTFOLIO
MANAGEMENT OTHER ANNUAL
PORTFOLIO FEES(2) EXPENSES EXPENSES
- --------- ---- -------- --------
<S> <C> <C> <C>
Alger American Income & Growth 0.625% 0.075% 0.70%
Alliance VP Growth and Income 0.63% 0.08% 0.71%
Alliance VP Premier Growth 1.00% 0.05% 1.05%
Dreyfus VIF Appreciation 0.75% 0.03% 0.78%
Dreyfus VIF Small Cap 0.75% 0.03% 0.78%
Janus Aspen Series Balanced(3) 0.65% 0.02% 0.67%
Janus Aspen Series Worldwide Growth(3) 0.65% 0.05% 0.70%
MFS VIT Emerging Growth 0.75% 0.09% 0.84%
MFS VIT Growth With Income 0.75% 0.13% 0.88%
MFS VIT Research 0.75% 0.11% 0.86%
MS UIF Emerging Markets Equity 0.42% 1.37% 1.79%
MS UIF Fixed Income 0.14% 0.56% 0.70%
MS UIF High Yield 0.19% 0.61% 0.80%
MS UIF International Magnum 0.29% 0.87% 1.16%
OCC Accumulation Trust Managed(4) 0.77% 0.06% 0.83%
OCC Accumulation Trust Small Cap 0.80% 0.09% 0.89%
PIMCO VIT StocksPLUS Growth and Income(5) 0.40% 0.25% 0.65%
Transamerica VIF Growth 0.70% 0.15% 0.85%
Transamerica VIF Money Market 0.00% 0.60% 0.60%
</TABLE>
We may receive payment from some or all of the portfolios or their advisers in
varying amounts that may be based on the amount of assets allocated to the
portfolios. The payments are for administrative or distribution services.
Expense information regarding the portfolios has been provided by the
portfolios. We have no reason to doubt the accuracy of that information, but we
have not verified those figures. These figures are for the year ended December
31, 1999. Actual expenses in future years may be higher or lower than these
figures.
Notes to Fee Table:
(1) From time to time, the portfolio's investment advisers, each in its own
discretion, may voluntarily waive all or part of their fees and/or
voluntarily assume certain portfolio expenses. The expenses shown in the
Portfolio Expenses table are the expenses paid for 1999. The expenses shown
in the table reflect a portfolio's adviser's waivers of fees or
reimbursement of expenses, if applicable. It is anticipated that such
waivers or reimbursements will continue for calendar year 2000. Without
such waivers or reimbursements, the annual expenses for 1999 for certain
portfolios would have been, as a percentage of assets, as follows:
<TABLE>
<CAPTION>
TOTAL PORTFOLIO
MANAGEMENT FEES OTHER ANNUAL
PORTFOLIO EXPENSES EXPENSES
- --------- -------- --------
<S> <C> <C> <C>
MS UIF Emerging Markets Equity 1.25% 1.37% 2.62%
MS UIF Fixed Income 0.40% 0.56% 0.96%
MS UIF High Yield 0.50% 0.61% 1.11%
MS UIF International Magnum 0.80% 0.87% 1.67%
Transamerica VIF Growth 0.75% 0.15% 0.90%
Transamerica VIF Money Market 0.35% 1.04% 1.39%
</TABLE>
(2) The management fee of certain of the portfolios includes breakpoints at
designated asset levels. Further information on these breakpoints is
provided under Investment Objectives and Policies, and Investment Advisers,
on page 6 and in the prospectuses for the portfolios.
(3) Expenses are based upon expenses for the fiscal year ended December 31,
1999, restated to reflect a reduction in the management fee. All expenses
are shown without the effect of expense offset arrangements.
(4) The Adviser is contractually obligated to waive that portion of the
advisory fee and to assume any necessary expense to limit total operating
expenses of the portfolio to 1.00% of average net assets (net of expenses
offset) on an annual basis.
(5) PIMCO has contractually agreed to reduce total annual portfolio operating
expenses to the extent these expenses would exceed 0.65% of average daily
assets due to the payment of organizational expenses and Trustees' fees.
Without such reductions, total operating expenses for the fiscal year ended
December 31, 1999 were 0.65%. Under the Expense Limitation Agreement, PIMCO
may recoup these waivers and reimbursements in future periods, not
exceeding three years, provided total expenses, including such recoupment,
do not exceed the annual expense limit. Fees expressed are restated as of
April 1, 2000.
<PAGE>
WHAT ARE THE LAPSE AND REINSTATEMENT PROVISIONS OF MY POLICY?
The policy will not lapse if you fail to make payments unless the surrender
value is insufficient to cover the next monthly insurance protection charge and
loan interest accrued. Additionally, if the outstanding loan exceeds the policy
value less surrender charges, the outstanding loan will be in default.
In either situation there is a 62-day grace period during which you must pay
premium sufficient to keep the policy in force.
If you make payments at least equal to minimum monthly payments, we guarantee
that your policy will not lapse before the 49th monthly processing date from
date of issue or increase in face amount, within limits.
Under the Guaranteed Death Benefit Rider, if you make payments of a sufficient
amount, net of partial withdrawals, partial withdrawal charges and any
outstanding loans, we guarantee that your policy will not lapse. In order to
maintain this guarantee, on each policy anniversary through the final payment
date:
o the total of your payments, net of partial withdrawals;
o partial withdrawal charges; and
o any outstanding loans
must at least EQUAL:
o the guaranteed death benefit premium TIMES
o the number of policy years since the policy was issued, adjusted for policy
changes, if any.
The guaranteed death benefit premiums are currently 90% of the guideline level
premium if you elected the level death benefit option or 75% of the guideline
level premium if you elected the adjustable death benefit option. Certain other
conditions may apply. Once terminated, this rider may not be reinstated. The
Guaranteed Death Benefit Rider will not prevent an outstanding loan from going
into default if the outstanding loan exceeds the policy value less surrender
charges. In that case, your policy will terminate without value unless you pay
the required premium within the 62-day grace period. The Guaranteed Death
Benefit Rider may not be available in all jurisdictions and is not available in
Texas. See POLICY TERMINATION AND REINSTATEMENT on page 35.
You may reinstate your policy within three years after the date of default,
within limits and subject to state law.
CAN I ELECT PAID-UP INSURANCE WITH NO
FURTHER PREMIUMS DUE?
Yes. The policy provides a paid-up insurance option. If this option is elected,
we will provide paid-up insurance coverage, usually having a reduced face
amount, for the life of the insured with no more premiums being due under the
policy. If you elect this option, policy owner rights and benefits will be
limited. See Paid Up Insurance Option on page 28.
HOW IS MY POLICY TAXED?
The policy is given federal income tax treatment similar to a conventional fixed
benefit life insurance policy. On a withdrawal of policy value, policy owners
currently are taxed only on the amount of the withdrawal that exceeds total
payments. However, during the first 15 policy years an income-out first rule
applies to certain distributions required under Section 7702 of the Internal
Revenue Code (Code) because of a reduction of benefits under the policy.
The net death benefit under the policy is excludable from the gross income of
the beneficiary. However, in some circumstances federal estate tax may apply to
the net death benefit or the policy value.
A policy may be considered a modified endowment contract. This may occur if the
total payments during the first seven policy years exceed the total net level
payments payable if the policy had provided certain paid-up future benefits
after seven level annual payments. If the policy is considered a modified
endowment contract, all distributions during the insured's lifetime, including
policy loans, partial withdrawals, surrenders, pledges and assignments, will be
taxed on an income-out first basis. Also, a 10% penalty tax may be imposed on
that part of a distribution that is includible in income. See Federal Tax
Considerations - Modified Endowment Contracts on page 39.
DESCRIPTION OF TRANSAMERICA, THE SEPARATE ACCOUNT AND THE PORTFOLIOS
Transamerica Occidental Life Insurance Company, or Transamerica, is a stock life
insurance company incorporated under the laws of the State of California on June
30, 1906. Transamerica is principally engaged in the sale of life insurance and
annuity policies. The home office of Transamerica is 1150 South Olive Street,
Los Angeles, California 90015.
Transamerica Corporation, a subsidiary of AEGON N.V., indirectly owns the
issuing company, Transamerica Occidental Life Insurance Company.
INSURANCE MARKETPLACE STANDARDS
ASSOCIATION
In recent years, the insurance industry has recognized the need to develop
specific principles and practices to help maintain the highest standards of
marketplace behavior and enhance credibility with consumers. As a result, the
industry established the Insurance Marketplace Standards Association, or IMSA.
As an IMSA member, we agree to follow a set of standards in our advertising,
sales and service for individual life insurance and annuity products. The IMSA
logo, which you will see on our advertising and promotional materials,
demonstrates that we take our commitment to ethical conduct seriously.
THE SEPARATE ACCOUNT
Transamerica Occidental Life Separate Account VUL-1, designated as the separate
account, was established by us as a separate account under the laws of the State
of California, pursuant to resolutions adopted by our Board of Directors on June
11, 1996.
The separate account is registered with the Securities Exchange Commission, or
SEC, under the Investment Company Act of 1940, or 1940 Act, as a unit investment
trust. It meets the definition of a separate account under the federal
securities laws. However, the Commission does not supervise the management of
the investment practices or policies of the separate account.
The assets used to fund the variable part of the policies are set aside in the
separate account. The assets of the separate account are owned by Transamerica,
but they are held separately from our other assets. Section 10506 of the
California Insurance Code provides that the assets of a separate account are not
chargeable with liabilities arising out of any other business operation of the
insurance company, except to the extent provided in the policies. Income, gains
and losses incurred on the assets in the separate account, whether or not
realized, are credited to or charged against the separate account without regard
to our other income, gains or losses. Therefore, the investment performance of
the separate account is entirely independent of the investment performance of
our general account assets or any other separate account maintained by us.
The separate account currently has nineteen sub-accounts available for
investment, each of which invests solely in a specific corresponding mutual fund
portfolio. Changes to the sub-accounts may be made at our discretion. All
sub-accounts may not be available in all jurisdictions.
THE PORTFOLIOS
The portfolios are open-end management investment companies or portfolios of
series, open-end management companies registered with the SEC under the 1940 Act
and are usually referred to as mutual funds. This SEC registration does not
involve SEC supervision of the investments or investment policies of the
portfolios.
Shares of the portfolios are not offered to the public but solely to the
insurance company separate accounts and other qualified purchasers as limited by
federal tax laws. The assets of each portfolio are held separate from the assets
of the other portfolios. Each portfolio operates as a separate investment
vehicle. The income or losses of one portfolio have no effect on the investment
performance of another portfolio. The sub-accounts reinvest dividends and/or
capital gains distributions received from a portfolio in more shares of that
portfolio as retained assets.
THE SUB-ACCOUNTS AVAILABLE UNDER THE
POLICIES INVEST IN THE FOLLOWING PORTFOLIOS
o The Income & Growth Portfolio of The Alger American Fund
-----------------------
o The Growth and Income Portfolio and The Premier Growth Portfolio of the
Alliance Variable Products Series Fund, Inc.
o The Appreciation Portfolio and The Small Cap Portfolio of the Dreyfus
Variable Investment Fund --------------------------------
o The Balanced Portfolio and The Worldwide Growth Portfolio of the Janus
Aspen Series ------------------
o The Emerging Growth Series, The Growth With Income Series and The Research
Series of the MFS Variable ------------ Insurance Trust
o The Emerging Markets Equity Portfolio, The Fixed Income Portfolio, The High
Yield Portfolio, and The International Magnum Portfolio of the Morgan
Stanley Universal Institutional Funds, Inc.
o The Managed Portfolio and The Small Cap Portfolio of the OCC Accumulation
Trust ----------------------
o The StocksPLUS Growth and Income Portfolio of the PIMCO Variable Insurance
Trust ------------------------------
o........The Growth Portfolio and The Money Market Portfolio of the Transamerica
Variable Insurance Fund, Inc.
THE POLICY
The policy is subject to the insurance laws and regulations of each state or
jurisdiction in which it is available for distribution. There may be differences
between the policy issued and the general policy description contained in this
prospectus because of requirements of the state where your policy is issued.
Some of the state specific differences are included in the prospectus, but the
prospectus does NOT include references to all state specific differences. All
state specific policy features will be described in your policy.
APPLICATION FOR A POLICY
We offer policies to proposed insureds 80 years old and younger. In some
jurisdictions, however, the policy is not available to proposed insureds less
than 18 years old. After receiving a completed application from a prospective
policy owner, we will begin underwriting to decide the insurability of the
proposed insured. We may require medical examinations and other information
before deciding insurability. We issue a policy only after underwriting has been
completed. We may reject an application that does not meet our underwriting
guidelines.
If a prospective policy owner makes an initial payment of at least one minimum
monthly payment, we will issue a conditional receipt which provides fixed
conditional insurance, but not until after all its conditions are met. Included
in these conditions are the completion of both parts of the application,
completion of all underwriting requirements, and the proposed insured must be
insurable under our rules for insurance under the policy, in the amount, and in
the underwriting class applied for in the application. After all conditions are
met, the amount of fixed conditional insurance provided by the conditional
receipt will be the amount applied for, up to a maximum of $250,000 for persons
age 16 to 65 and insurable in a standard underwriting class, and up to $100,000
for all other ages and underwriting classes.
If you make payments before the date of issuance, we will allocate the payments
initially to the fixed account within two business days of receipt of the
payments at our Variable Life Service Center. If the policy is not issued, we
will return to you the amount of your payments.
If your application is approved and the policy is issued, we will allocate your
policy value within two days of the date we approve your application according
to your allocation instructions. However, if your policy provides for a full
refund of payments under its right to examine policy provision as required in
your state, we will initially allocate your sub-account investments to the
sub-account investing in the Money Market portfolio. We will also transfer
interest earned in the fixed account allocable to the portion of your payment
designated by you for the separate account. This allocation to the Money Market
sub-account will be effective for four calendar days plus the state free look
period. After this, we will allocate all amounts to the sub-accounts according
to your investment choices.
TERM LIFE INSURANCE CONVERSIONS
Owners of term life insurance policies issued by us may convert their term
insurance coverage to coverage under a policy without providing new evidence of
insurability, within limits. Conversions are subject to the provisions of any
conversion option attached to the term life insurance policy or to any change of
plan option attached to certain term-like insurance policies. Generally, a
conversion permits an owner of a term life insurance policy to replace the term
life insurance coverage with an equal amount of life insurance coverage issued
under a Transamerica Tribute(R) policy. This is done under a policy issued on
the same insured at the same underwriting class, if available under the policy,
as on the term policy, without providing new evidence of insurability. Requests
for a change in underwriting class or other changes generally will require new
evidence of insurability, however.
FREE LOOK PERIOD
The policy provides for a free look period. You have the right to examine and
cancel your policy by returning it to us or to one of our representatives by the
later of:
o 45 days after the application for the policy is signed; or
o 10 days after you receive the policy, or a longer period as required by
state law for replacement policies or for other reasons. We refer to this
10 day or longer time period as the state free look period.
In some states, the 45 day period noted above does not apply, and only the 10
day or longer provision applies.
If your policy provides for a full refund under its right to examine policy
provision as required in your state, your refund will be the total payments made
to the policy.
If your policy does not provide for a full refund, you will receive:
o amounts allocated to the fixed account; PLUS
o the policy value in the separate account; PLUS
o all fees, charges and tax deductions which have been imposed.
We may delay a refund of any payment made by check until the check has cleared
your bank.
After an increase in face amount as a result of your written request, we will
mail or deliver a notice of a free look period for the increase. You will have
the right to cancel the increase by the LATER of:
o 45 days after the application for the increase is signed; OR
o 10 days after you receive the new policy specification pages issued for the
increase.
On canceling the increase, you will receive a credit to your policy value of
charges deducted for the increase. We will refund to you the amount to be
credited if you request. We will waive any surrender charge computed for the
increase.
CONVERSION PRIVILEGE
Within 24 months of the date of issue or of the effective date of an increase in
face amount, you can convert your policy into a non-variable policy by
transferring the value in the sub-accounts to the fixed account. The conversion
will take effect at the end of the valuation period in which we receive, at our
Variable Life Service Center, notice of the conversion satisfactory to us. There
is no charge for this conversion.
We will allocate all future payments to the fixed account, unless you instruct
us otherwise.
PAYMENTS
Payments are payable to Transamerica Occidental Life Insurance Company. Payments
may be made by mail to our Variable Life Service Center or through our
authorized representative. All net payments after the initial payment are
credited to the separate account or fixed account on the valuation date of
receipt at the Variable Life Service Center. You may establish a schedule of
planned payments. If you do, we will bill you at regular intervals. Making
planned payments will not guarantee that the policy will remain in force. The
policy will not necessarily lapse if you fail to make planned payments. You may
make unscheduled payments before the final payment date or skip planned
payments.
You may choose a monthly automatic payment method of making payments. Under this
method, each month we will deduct payments from your checking account and apply
them to your policy. The minimum payment allowed under this method is $50.
The policy does not limit payments as to frequency and number. However, no
payment may be less than $100 without our consent. Payments must be sufficient
to provide a positive surrender value at the end of each policy month or the
policy may lapse. During the first 48 policy months following the date of issue
or the effective date of an increase in face amount, a guarantee may apply to
prevent the policy from lapsing. The guarantee will apply during this period if
we receive payments from you that, when reduced by outstanding loans, partial
withdrawals and partial withdrawal charges, equal or exceed the required minimum
monthly payments. The required minimum monthly payments are based on the number
of months the policy, increase in face amount or policy change that causes a
change in the minimum monthly payment has been in force. Making monthly payments
equal to the minimum monthly payments does not guarantee that the policy will
remain in force, except as stated in this paragraph.
Under the Guaranteed Death Benefit Rider, if you make payments of a sufficient
amount, net of partial withdrawals, partial withdrawal charges and any
outstanding loans, we guarantee that your policy will not lapse.
In order to maintain this guarantee, on each policy anniversary through the
final payment date, the total of your payments received by us, NET OF:
o partial withdrawals;
o partial withdrawal charges; and
o any outstanding loans
must at least equal the guaranteed death benefit premium TIMES the number of
policy years since the policy was issued.
The guaranteed death benefit premiums are currently:
o 90% of the guideline level premium if you elected the level option; OR
o 75% of the guideline level premium if you elected the adjustable option.
A policy change may affect the amount of payments necessary to keep the rider in
force. Certain other conditions may apply, and once terminated, this rider may
not be reinstated. The rider may not be available in all jurisdictions and is
not available in Texas.
Total payments may not exceed the current maximum payment limits under federal
tax law. These limits will change with:
o a change in face amount;
o the addition or deletion of a rider; or
o a change between the level option and adjustable option.
Where total payments would exceed the current maximum payment limits, we will
only accept that part of a payment that will make total payments equal the
maximum. Any part of the payments greater than that amount will first be applied
as a loan repayment, if you have an outstanding loan, and any remainder will be
returned to you. We will refund to you any excess amount, including interest,
not later than 60 days after the end of the policy year in which the excess
payment occurred.
However, we will accept a payment needed to prevent policy lapse during a policy
year. The amount refundable will not exceed the surrender value of the policy.
If the entire surrender value is refunded, we will treat the transaction as a
full surrender of your policy.
ALLOCATION OF NET PAYMENTS
The net payment equals the payment made LESS the payment expense charge. In the
application for your policy, you decide the initial allocation of the net
payment among the fixed account and the sub-accounts. You may allocate net
payments to one or more of the sub-accounts, but may not have policy value in
more than nineteen sub-accounts, plus the fixed account, at once. The minimum
amount that you may allocate to a sub-account is 1.0% of the net payment.
Allocation percentages must be in whole numbers (for example, 331/3% may not be
chosen) and the combined percentages must total 100%.
You may change the allocation of future net payments by written request or
telephone request. You have the privilege to make telephone requests, unless you
elected not to have the privilege on the application. The policy of Transamerica
and its representatives and affiliates is that they will not be responsible for
losses resulting from acting on telephone requests reasonably believed to be
genuine. We will use reasonable methods to confirm that instructions
communicated by telephone are genuine; otherwise, we may be liable for any
losses from unauthorized or fraudulent instructions. We require that callers on
behalf of a policy owner identify themselves by name and identify the policy
owner by name, date of birth and social security number. All telephone requests
are tape recorded. An allocation change will take effect on the date of receipt
of the notice at our Variable Life Service Center. No charge is currently
imposed for changing payment allocation instructions. We reserve the right to
impose a charge in the future, but guarantee that the charge will not exceed
$25.
The policy value of each sub-account will vary with the investment experience of
the portfolio in which the sub-account invests. You bear this investment risk.
Investment performance may also affect the death benefit. Review your
allocations of payments and policy value as market conditions and your financial
planning needs change.
TRANSFER PRIVILEGE
Subject to our then current rules, you may transfer amounts among the
sub-accounts or between one or more sub-accounts and the fixed account. You may
not transfer that portion of the policy value held in the fixed account that
secures a policy loan.
The transfer privilege is subject to our consent. We reserve the right to impose
limits on transfers including, but not limited to, the:
o minimum amount that may be transferred;
o minimum amount that may remain in a sub-account following a transfer from
that sub-account;
o minimum period between transfers involving the fixed account; or
o maximum amounts that may be transferred from the fixed account.
Transfers involving the fixed account are currently permitted only if:
o there has been at least a 90 day period since the last transfer from the
fixed account; AND
o the amount transferred from the fixed account in each transfer does not
exceed the lesser of $100,000 or 25% of the policy value.
These rules are subject to change by us.
We will make transfers at your written request or telephone request, as
described in THE POLICY - Allocation of Net Payments. Transfers are effected at
the value next computed after receipt of the transfer order, except for
automatic transfers.
You may apply for automatic transfers under either the dollar cost averaging, or
DCA option, or the automatic account rebalancing, or AAR option, by submitting
your written request to our Variable Life Service Center. Transfers under either
DCA or AAR are generally effective on the 15th day of each scheduled month. If
your written request is received by us prior to the 15th of the month, your
option may begin as early as the 15th of the month in which we receive your
request. Otherwise, your option may begin as early as the 15th of the following
month. You may cancel your election of an option by written request at any time
with regard to future transfers. The DCA option and the AAR option may not be
effective at the same time on your policy. If you elect one option and, at a
later date, submit written request for the other option, your new written
request will be honored, and the previously elected option will be automatically
terminated.
DOLLAR COST AVERAGING OR DCA
This option allows you to systematically transfer a set dollar amount from the
Money Market sub-account on a monthly, quarterly, or semi-annual basis to one or
more other sub-accounts. The minimum amount of each DCA transfer from the Money
Market sub-account is $100, and you may not have value in more than nineteen
sub-accounts, including the Money Market sub-account, at any time. The DCA
option is designed to reduce the risk of your purchasing units only when the
price of the units is high, but you should carefully consider your financial
ability to continue the option over a long enough period of time to purchase
units when their value is low as well as when it is high. The DCA option does
not assure a profit or protect against a loss. The DCA option will terminate
automatically when the value of your Money Market sub-account is depleted.
There is no additional charge for electing the DCA option. Transfers to the
fixed account are not permitted under the DCA option. We reserve the right to
terminate the DCA option at any time and for any reason.
AUTOMATIC ACCOUNT REBALANCING OR AAR
Once your net payments and requested transfers have been allocated among your
sub-account choices, the performance of each sub-account may cause your
allocation to shift such that the relative value of one or more sub-accounts is
no longer consistent with your overall objectives. Under the AAR option, the
balances in your selected sub-accounts can be restored to the allocation
percentages you elect on your written request by transferring values among the
sub-accounts. You may not have value in more than nineteen sub-accounts at any
time. The minimum percentage allocation without our consent is 5% for each
selected sub-account. Percentage allocations must be in whole numbers. The AAR
option is available on a quarterly, semi-annual or annual basis. The minimum
total amount of the transfers under the AAR option is $100 per scheduled date.
If the total transfer amount is less than $100, no transfer will occur on that
scheduled date. The AAR option does not guarantee a profit or protect against a
loss.
There is no additional charge for electing the AAR option. Transfers to the
fixed account are not permitted under the AAR option. We reserve the right to
terminate the AAR option at any time and for any reason.
The first 12 transfers in a policy year are free. After that, we will deduct a
$10 transfer charge from amounts transferred in that policy year. We reserve the
right to increase the charge, but we guarantee the charge will never exceed $25.
The first automatic transfer for the elected DCA or AAR option counts as one
transfer toward the 12 free transfers allowed in each policy year. Each
subsequent automatic transfer for the elected option is free, and does not
reduce the remaining number of transfers that are free in a policy year.
The following transfers will not count toward the 12 free transfers:
o any transfers made for a conversion privilege;
o transfers to or from the Money Market sub-account during the free-look
period if your policy provides for a full refund of payments under the
free-look provision;
o transfers because of a policy loan or a policy loan repayment; and
o transfers because of a material change in investment policy.
DEATH BENEFIT
If the policy is in force on the date the insured dies, we will, with due proof
of death, pay the net death benefit to the named beneficiary. We will normally
pay the net death benefit within seven days of receiving due proof of the
insured's death, but we may delay payment of net death benefits. The beneficiary
may receive the net death benefit in a lump sum or under a payment option.
If the insured dies on or before the final payment date and before the paid-up
insurance option is exercised, the net death benefit is:
o the death benefit provided under the level option or adjustable option,
whichever is elected and in effect on the date of death; PLUS
o any other insurance on the insured's life that is provided by rider; MINUS
o any outstanding loan and any due and unpaid partial withdrawals, partial
withdrawal charges and monthly insurance protection charges through the
policy month in which the insured dies.
If the insured dies after the final payment date and except as otherwise
provided in the Guaranteed Death Benefit Rider, the net death benefit is:
o 101% of the policy value; MINUS
o any outstanding loan and any due and unpaid partial withdrawals and partial
withdrawal charges.
If the paid-up insurance option is exercised, the net death benefit is the
paid-up insurance amount minus any outstanding loan.
In most states, we will compute the net death benefit on the date we receive due
proof of the insured's death.
LEVEL OPTION AND ADJUSTABLE OPTION
The policy provides two death benefit options through the final payment date and
before the paid-up insurance option is exercised: the level option and the
adjustable option. You choose the desired option in the application. You may
change the option once per policy year by written request. There is no charge
for a change in option.
Under the level option, the death benefit is the GREATER of the:
o face amount; OR
o guideline minimum sum insured.
Under the adjustable option, the death benefit is the GREATER of the:
o face amount PLUS policy value; OR
o guideline minimum sum insured.
Under both the level option and adjustable option, the death benefit provides
insurance protection. Under the level option, the death benefit is level unless
the guideline minimum sum insured exceeds the face amount; then, the death
benefit varies as the policy value changes. Under the adjustable option, the
death benefit always varies as the policy value changes.
At any face amount, the death benefit will be greater under the adjustable
option than under the level option because the policy value is added to the face
amount and included in the death benefit. (If, however, the death benefit is the
guideline minimum sum insured, then the death benefit will be the same.)
However, the monthly insurance protection charge will be greater under the
adjustable option and, therefore, policy value will accumulate at a slower rate
than under the level option.
If you desire to have payments and investment performance reflected in the death
benefit, you should choose the adjustable option. If you desire to have payments
and investment performance reflected to the maximum extent in the policy value,
you should select the level option.
GUIDELINE MINIMUM SUM INSURED - The guideline minimum sum insured is a
percentage of the policy value as set forth in Appendix A - Guideline Minimum
Sum Insured Table. The guideline minimum sum insured is computed in accordance
with federal income tax laws to ensure that the policy qualifies as a life
insurance contract and that the insurance proceeds will be excluded from the
gross income of the beneficiary.
ILLUSTRATION OF THE LEVEL OPTION - In this illustration, assume that the insured
is currently age 40 and that there is no outstanding loan.
Under the level option, a policy with a $100,000 face amount will have a death
benefit of $100,000. However, because the death benefit must be equal to or
greater than 250% of policy value, if the policy value exceeds $40,000 the death
benefit will exceed the $100,000 face amount. In this example, each dollar of
policy value above $40,000 will increase the death benefit by $2.50. For
example, a policy with a policy value of $50,000 will have a guideline minimum
sum insured of $125,000 ($50,000 x 2.50); policy value of $60,000 will produce a
guideline minimum sum insured of $150,000 ($60,000 x 2.50); and policy value of
$75,000 will produce a guideline minimum sum insured of $187,500 ($75,000 x
2.50).
Similarly, if policy value exceeds $40,000, each dollar taken out of policy
value will reduce the death benefit by $2.50. If, for example, the policy value
is reduced from $60,000 to $50,000 because of partial withdrawals, charges or
negative investment performance, the death benefit will be reduced from $150,000
to $125,000. If, however, the product of the policy value times the applicable
percentage from the table in Appendix A is less than the face amount, the death
benefit will equal the face amount.
The applicable percentage becomes lower as the insured's age increases. If the
insured's attained age in the above example were, for example, 50 rather than
40, the applicable percentage would be 185%. The death benefit would not exceed
the $100,000 face amount unless the policy value exceeded $54,054 rather than
$40,000, and each dollar then added to or taken from policy value would change
the death benefit by $1.85.
ILLUSTRATION OF THE ADJUSTABLE OPTION - In this illustration, assume that the
insured is age 40 and that there is no outstanding loan.
Under the adjustable option, a policy with a face amount of $100,000 will
produce a death benefit of $100,000 plus policy value. For example, a policy
with policy value of $10,000 will produce a death benefit of $110,000 ($100,000
+ $10,000); policy value of $25,000 will produce a death benefit of $125,000
($100,000 + $25,000); policy value of $50,000 will produce a death benefit of
$150,000 ($100,000 + $50,000). However, the death benefit must be at least 250%
of the policy value. Therefore, if the policy value is greater than $66,667,
250% of that amount will be the death benefit, which will be greater than the
face amount plus policy value. In this example, each dollar of policy value
above $66,667 will increase the death benefit by $2.50. For example, if the
policy value is $70,000, the guideline minimum sum insured will be $175,000
($70,000 x 2.50); policy value of $80,000 will produce a guideline minimum sum
insured of $200,000 ($80,000 x 2.50); and policy value of $90,000 will produce a
guideline minimum sum insured of $225,000 ($90,000 x 2.50).
Similarly, if policy value exceeds $66,667, each dollar taken out of policy
value will reduce the death benefit by $2.50. If, for example, the policy value
is reduced from $80,000 to $70,000 because of partial withdrawals, charges or
negative investment performance, the death benefit will be reduced from $200,000
to $175,000. If, however, the product of the policy value times the applicable
percentage is less than the face amount plus policy value, then the death
benefit will be the current face amount plus policy value.
The applicable percentage becomes lower as the insured's age increases. If the
insured's attained age in the above example were 50, the death benefit must be
at least 185% of the policy value. The death benefit would be the sum of the
policy value plus $100,000 unless the policy value exceeded $117,647 (rather
than $66,667). Each dollar added to or subtracted from the policy would change
the death benefit by $1.85.
CHANGE TO LEVEL OR ADJUSTABLE OPTION
You may change the death benefit option once each policy year by written
request, within limits noted in Level Option and Adjustable Option provision.
Changing options will not require evidence of insurability. The change takes
effect on the monthly processing date on or next following the date of receipt
of the written request. We will impose no charge for changes in death benefit
options.
If you change the level option to the adjustable option, we will decrease the
face amount to equal:
o the death benefit under the level option; MINUS
o the policy value on the date of the change.
The change may not be made if the face amount would fall below $50,000. After
the change from the level option to the adjustable option, future monthly
insurance protection charges may be higher or lower than if no change in option
had been made. However, the insurance protection amount will always equal the
face amount unless the guideline minimum sum insured applies. No surrender
charges will be imposed for the decrease in face amount resulting solely because
of a change in death benefit options from the level option to the adjustable
option.
If you change the adjustable option to the level option, we will increase the
face amount, and the new face amount will be equal to the death benefit under
the adjustable option on the date of change. The death benefit will be the
GREATER of:
o the new face amount; OR
o the guideline minimum sum insured.
No new surrender charge rates or new surrender charge period will be imposed
solely because of a change in death benefit options. After the change from the
adjustable option to the level option, an increase in policy value will reduce
the insurance protection amount and the monthly insurance protection charge. A
decrease in policy value will increase the insurance protection amount and the
monthly insurance protection charge.
A change in death benefit option may result in total payments exceeding the then
current maximum payment limitation under federal tax law. If this occurs, we
will pay the excess to you.
CHANGE IN FACE AMOUNT
You may increase or decrease the face amount by written request. An increase or
decrease in the face amount takes effect on the later of:
o the monthly processing date on or next following the date of receipt of
your written request; OR
o the date of our approval of your written request, if evidence of
insurability is required.
INCREASES - You must submit evidence of insurability satisfactory to us with
your written request for an increase. The consent of the insured is also
required whenever the face amount is increased. An increase in face amount may
not be less than $10,000. You may not increase the face amount after the insured
reaches age 80. A written request for an increase must include a payment if the
surrender value is LESS than the SUM of:
o $40; PLUS
o two minimum monthly payments.
On the effective date of each increase in face amount, we will deduct a
transaction charge of $40 from policy value for administrative costs. In some
jurisdictions, there is no transaction charge assessed for an increase in face
amount. In these jurisdictions, a payment must accompany a request for a face
amount increase if the surrender value is less than two minimum monthly
payments. You may allocate the deduction to one sub-account. If you make no
allocation we will make a pro rata allocation. We will also compute surrender
charges for the increase. An increase in the face amount will increase the
insurance protection amount and, therefore, the monthly insurance protection
charges. We will provide you new specification pages for the policy indicating
the effective date of the increase and any additional charges due to the
increase.
After increasing the face amount, you will have the right, during a free look
period, to have the increase canceled. If you exercise this right, we will
credit to your policy the charges deducted for the increase, unless you request
a refund of these charges. We will also cancel any surrender charges for the
increase.
DECREASES - You may decrease the face amount by written request. The minimum
amount for a decrease in face amount is $10,000.
The minimum face amount in force after a decrease is $50,000. We may limit the
decrease or return policy value to you, as you choose, if the policy would not
comply with the maximum payment limitation under federal tax law. A return of
policy value may result in tax liability to you.
A decrease in the face amount will lower the insurance protection amount and,
therefore, the monthly insurance protection charge. In computing the monthly
insurance protection charge, a decrease in the face amount will reduce the face
amount in inverse order, for example, first, the most recent increase, then the
next most recent increases, then the initial face amount.
On the effective date of a decrease in the face amount, we will deduct from the
policy value a transaction charge of $40 and, if applicable, any surrender
charges. You may allocate the deduction to one sub-account. If you make no
allocation, we will make a pro rata allocation. We will reduce the surrender
charge by the amount of any surrender charge deducted. We will provide you with
new specification pages indicating the effective date of the decrease and the
new minimum monthly payment, if any.
OPTION TO ACCELERATE DEATH BENEFITS
(LIVING BENEFITS RIDER)
Subject to state law and approval, you may elect to add the option to accelerate
death benefits, the Living Benefits Rider, to your policy. There is no direct
charge for this rider. The rider allows you to receive a portion of the net
death benefit while the insured is alive, subject to the conditions of the
rider. You may submit a written request to receive the living benefit under this
rider if the policy is in force and a qualified physician certifies that the
insured has an illness or physical condition which is likely to result in the
insured's death within 12 months. You may receive the living benefit either in a
single sum or in 12 equal payments. The option may only be exercised once under
the policy.
The amount you may receive is based on the option amount. The option amount is
the portion of the death benefit you elect to apply under the rider as an
accelerated death benefit. The option amount must be at least $25,000 and may
not exceed the smallest of:
o one-half of the death benefit on the date the option is elected; OR
o the amount that would reduce the face amount to $100,000, our current
minimum issue limit; OR
o $250,000.
The living benefit is the lump sum benefit under this rider and is the amount
used to determine the monthly benefit under the rider. It is the actuarially
calculated present value of the option amount adjusted to reflect the actuarial
present value of lost future mortality charges and to reflect any outstanding
loans. The methodology used in this calculation is on file with state
departments of insurance, where required. Subject to state law, an expense
charge of $150 will be deducted from policy value if you exercise the option
under this rider.
If you elect to exercise this option, your policy will be affected as follows:
o a portion of the outstanding loan will be deducted from the living benefit,
while the remaining outstanding loan will continue in force;
o the policy's death benefit will be decreased by the option amount, with
insurance decreased or eliminated in inverse order, starting with the most
recent face amount increase and ending with the initial face amount; and
o the policy value will be reduced in the same proportion as the reduction in
the death benefit.
To the extent of the decrease in face amount as a result of exercising the
option, we will waive any surrender charges which would otherwise apply to that
decrease in face amount.
The rider is intended to provide a qualified accelerated death benefit that is
excludable from gross income for federal income tax purposes. Whether any tax
liability may be incurred, however, depends upon a number of factors.
The rider may not be available in all jurisdictions.
POLICY VALUE
The policy value is the total value of your policy. It is the SUM of:
o your accumulation in the fixed account, including amounts securing any
outstanding loans; PLUS
o the value of your units in the sub-accounts.
There is no guaranteed minimum policy value. Policy value on any date depends on
variables that can not be predetermined.
Your policy value is affected by the:
o frequency and amount of your net payments;
o interest credited in the fixed account;
o investment performance of your sub- accounts;
o partial withdrawals;
o loans, loan repayments and loan interest paid or credited;
o charges and deductions under the policy; and
o the death benefit option.
COMPUTING POLICY VALUE - We compute the policy value on the date of issue and on
each valuation date. On the date of issue, the policy value is:
o the value of the amounts allocated to the fixed account and sub-accounts,
net of mortality and expense risk charges, administration charges and
portfolio expenses; MINUS
o the monthly insurance protection charge due.
On each valuation date after the date of issue, the policy value is the SUM of:
o accumulations in the fixed account; PLUS
o the SUM of the PRODUCT of:
a) the number of units in each sub-account; TIMES
b) the value of a unit in each sub-account on the valuation date.
THE UNIT - We allocate each net payment to the sub-accounts you select. We
credit allocations to the sub-accounts as units. Units are credited separately
for each sub-account.
The number of units of each sub-account credited to the policy is the QUOTIENT
of:
o that part of the net payment allocated to the sub-account; DIVIDED BY
o the dollar value of a unit on the valuation date the payment is received at
our Variable Life Service Center.
The number of units will remain fixed unless changed by a split of unit value,
transfer, loan, partial withdrawal or surrender. Also, each deduction of charges
from a sub-account will
result in the cancellation of units equal in value to the amount deducted.
The dollar value of a unit of a sub-account varies from valuation date to
valuation date based on the investment experience of that sub-account. This
investment experience reflects the investment performance, expenses and charges
of the portfolio in which the sub-account invests.
The value of each unit was set at $10.00 on the first valuation date of each
sub-account, except that the value for the Money Market sub-account was set at
$1.00. The value of a unit on any valuation date after the first valuation date
is the PRODUCT of:
o the dollar value of the unit on the preceding valuation date; TIMES
o the net investment factor.
NET INVESTMENT FACTOR - The net investment factor measures the investment
performance of a sub-account during the valuation period that has just ended.
The net investment factor is the result of (a) plus (b), divided by (c), minus
(d) and minus (e) where:
a) is the net asset value per share of a portfolio held in the sub-account
determined at the end of the current valuation period;
b) is the per share amount of any dividend or capital gain distributions made
by the portfolio on shares held in the sub-account if the ex-dividend date
occurs during the current valuation period;
c) is the net asset value per share of a portfolio share held in the
sub-account determined as of the end of the immediately preceding valuation
period;
d) is a charge for mortality and expense risks; and
e) is a charge for administration during a period not exceeding the first
twenty policy years.
MATURITY BENEFITS
If the insured is alive on the maturity date, we will pay the surrender value as
of the maturity date to you. The surrender value may be paid in a single sum or
under a payment option as described below.
PAYMENT OPTIONS
The net death benefit payable may be paid in a single sum or under one or more
of the payment options we are then offering. Payment options are paid from our
general account and are not based on the investment experience of the separate
account. These payment options also are available at the maturity date or if the
policy is surrendered. If no election is made, we will pay the net death benefit
in a single sum.
OPTIONAL INSURANCE BENEFITS
You may add optional insurance benefits to the policy by rider, as described in
Appendix B - Optional Insurance Benefits. The cost of optional insurance
benefits becomes part of the monthly insurance protection charge, except that
the Guaranteed Death Benefit Rider cost is a one time transaction charge of $25
deducted on the first monthly processing date. All riders may not be available
in all jurisdictions, and the names of the riders may vary by jurisdiction.
SURRENDER
You may surrender the policy and receive its surrender value. The surrender
value is:
o the policy value; MINUS
o any outstanding loan and surrender charges.
We will compute the surrender value on the valuation date on which we receive
your written request for surrender. We will deduct a surrender charge if you
surrender the policy within 10 full policy years of the date of issue or of an
increase in face amount.
The surrender value may be paid in a lump sum or under a payment option then
offered by us. We will normally pay the surrender value within seven days
following our receipt of your written request. We may delay benefit payments
under the circumstances described in OTHER POLICY PROVISIONS - Delay of
Payments. For important tax consequences of a surrender, see FEDERAL TAX
CONSIDERATIONS.
PARTIAL WITHDRAWAL
After the first policy year and before the paid-up insurance option is
exercised, you may withdraw part of the surrender value of your policy by
written request. Your written request must state the dollar amount you wish to
receive. You may allocate the amount withdrawn among the sub-accounts and the
fixed account. If you do not provide allocation instructions, we will make a pro
rata allocation. Each partial withdrawal must be at least $500. Under the level
option, the face amount is reduced by the partial withdrawal. We will not allow
a partial withdrawal if it would reduce the level option face amount below
$50,000.
On a partial withdrawal from a sub-account, we will cancel the number of units
equal in value to the amount withdrawn. The amount withdrawn will be the amount
you requested plus the partial withdrawal costs. We will normally pay the
partial withdrawal within seven days following our receipt of written request.
We may delay payment as described in OTHER POLICY PROVISIONS - Delay of
Payments. For important tax consequences of partial withdrawals, see FEDERAL TAX
CONSIDERATIONS.
PAID-UP INSURANCE OPTION
On written request, you may elect life insurance coverage, usually for a reduced
amount, for the life of the insured with no further premiums due. The paid-up
insurance will be the amount that the surrender value can provide as a net
single premium applied at the insured's age and underwriting class on the date
this option is elected. If the surrender value exceeds the net single premium,
we will pay the excess to you. The net single premium is based on the
Commissioners Ultimate 1980 Standard Ordinary Mortality Tables, smoker or
non-smoker, male or female or unisex with increases in the tables for
non-standard risks. Interest will not be less than 4.5% annually.
IF THE PAID-UP INSURANCE OPTION IS ELECTED, THE FOLLOWING POLICY OWNER RIGHTS
AND BENEFITS WILL BE AFFECTED:
o as described above, the paid-up insurance benefit will be computed
differently from the net death benefit and the death benefit options will
not apply;
o we will not allow transfers of policy value from the fixed account back to
the separate account;
o you may not make further payments;
o you may not increase or decrease the face amount or make partial
withdrawals; and
o riders will continue only with our consent.
You may, after electing paid-up insurance, surrender the policy for its net cash
value. The guaranteed cash value is the net single premium for the paid-up
insurance at the insured's age. The net cash value is the cash value less any
outstanding loan. The cash value will equal the guaranteed cash value unless we
credit interest at a rate higher than 4.5% annually. We will transfer the
portion of the policy value in the sub-accounts of the separate account to the
fixed account on the date we receive your written request to elect the paid-up
insurance option.
On election of reduced paid-up insurance, the policy could become a modified
endowment contract. If a policy becomes a modified endowment contract, policy
loans, partial withdrawals or surrender will receive unfavorable federal tax
treatment.
CHARGES AND DEDUCTIONS
The following charges will apply to your policy under the circumstances
described. Some of these charges apply throughout the policy's duration. Other
charges apply only if you choose options under the policy. The charges are for
the services and benefits provided, costs and expenses incurred and risks
assumed by us under or in connection with the policies. Services and benefits
provided by us include:
o the death benefits, cash and loan benefits provided by the policy;
o investment options, including net payment allocations;
o administration of various elective options under the policy; and
o the distribution of various reports to policy owners.
Costs and expenses incurred by us include:
o those associated with underwriting applications and changes in face amount
and riders;
o various overhead and other expenses associated with providing the services
and benefits related to the policy;
o sales and marketing expenses; and
o other costs of doing business, such as federal, state and local premium and
other taxes and fees.
Risks assumed by us include the risks that insureds may live for a shorter
period of time than estimated resulting in the payment of greater death benefits
than expected, and that the costs of providing the services and benefits under
the policies will exceed the charges deducted.
PAYMENT EXPENSE CHARGE
Currently, we deduct 4.0% of each payment as a payment expense charge. This
charge is for state and local premium taxes, federal income tax treatment of
deferred acquisition costs, and certain policy sales and administrative
expenses.
Premium tax rates vary from state to state and are a percentage of payments made
by policy owners to us. Currently, rates in the fifty states and the District of
Columbia range between 0.50% and 3.50%. Since we are subject to retaliatory tax,
the effective premium tax for us typically ranges between 2.35% and 3.5%.
Typically, we pay premium taxes, including retaliatory tax in all jurisdictions,
but the payment expense charge would be deducted, even if we were not subject to
premium or retaliatory tax in a state.
We may increase or decrease the payment expense charge to reflect changes in our
expenses for taxes.
MONTHLY INSURANCE PROTECTION CHARGE
On each monthly processing date through the final payment date, we will deduct a
monthly insurance protection charge from your policy value. This charge is the
cost for insurance protection under the policy, including optional insurance
benefits provided by rider.
We deduct the monthly insurance protection charge on each monthly processing
date starting with the date of issue. You may allocate monthly insurance
protection charges to one sub-account. If you make no allocation, we will make a
pro rata allocation. If the sub-account you chose does not have sufficient funds
to cover the monthly insurance protection charges, we will make a pro rata
allocation. We will deduct no monthly insurance protection charges after the
final payment date.
COMPUTING MONTHLY INSURANCE PROTECTION CHARGE - We designed the monthly
insurance protection charge to compensate us for the anticipated cost of paying
net death benefits under the policies, as well as to compensate us for a part of
our acquisition costs, taxes, and administrative expenses. The charge is
computed monthly for the initial face amount and for each increase in face
amount. Monthly insurance protection charges can vary.
For the initial face amount under the level option, the monthly insurance
protection charge is the PRODUCT of:
o the insurance protection rate TIMES
o the DIFFERENCE between:
a) the initial face amount; AND
b) the policy value, MINUS any rider charges at the beginning of the policy
month
divided by 1,000.
Under the level option, the monthly insurance protection charge decreases as the
policy value increases if the guideline minimum sum insured is not in effect.
For the initial face amount under the adjustable option, the monthly insurance
protection charge is the PRODUCT of:
o the insurance protection rate TIMES
o the initial face amount,
divided by 1,000.
For each increase in face amount under the level option, the monthly insurance
protection charge for the increase is the PRODUCT of:
o the insurance protection rate for the increase TIMES
o the DIFFERENCE between:
(a) the increase in face amount; AND
(b) any policy value, MINUS any rider charges, GREATER than the initial face
amount at the beginning of the policy month and not allocated to a prior
increase;
divided by 1,000.
For each increase in face amount under the adjustable option, the monthly
insurance protection charge is the PRODUCT of:
o the insurance protection rate for the increase TIMES
o the increase in face amount,
divided by 1,000.
If the guideline minimum sum insured is in effect under either option, we will
compute a monthly insurance protection charge for that part of the death benefit
subject to the guideline minimum sum insured that exceeds the current death
benefit not subject to the guideline minimum sum insured.
This charge is the PRODUCT of:
o the insurance protection rate for the initial face amount, TIMES
o the DIFFERENCE between the guideline minimum insured AND:
a) the GREATER of the face amount OR the policy value, if you selected the
level option, divided by 1,000; OR
b) the face amount PLUS the policy value, if you selected the adjustable
option, divided by 1,000.
We will adjust the monthly insurance protection charge for any decreases in face
amount. INSURANCE PROTECTION RATES - We base insurance protection rates on the:
o male, female or unisex rate table,
o age and underwriting class of the insured; AND
o the effective date of an increase or date of any rider.
For unisex policies, sex-distinct rates do not apply. Unisex rates are not
available in all jurisdictions. For policies issued subject to Montana's
jurisdiction, unisex rates apply to all policies. For the initial face amount,
the insurance protection rates are based on the insured's age at the beginning
of each policy year. For an increase in face amount or for a rider, the
insurance protection rates are based on the insured's age on the effective date
of the increase or rider and, thereafter, on each anniversary of the effective
date of the increase or rider.
We base the current insurance protection rates on our expectations as to future
mortality experience. Rates will not, however, be greater than the guaranteed
insurance protection rates set forth in the policy. These guaranteed rates are
based on the Commissioners 1980 Ultimate Standard Ordinary Mortality Tables,
smoker or non-smoker, and the insured's sex, except for policies for which
unisex rates apply and age, with increases in the Tables for non-standard risks.
The tables used for this purpose set forth different mortality estimates for
males and females, and for smokers and non-smokers. Unisex rates use male rates.
Any change in the insurance protection rates will apply to all insureds of the
same age, sex and underwriting class, whose policies have been in force for the
same period.
The underwriting class of an insured will affect the insurance protection rates.
We currently place insureds into preferred underwriting classes, preferred
non-standard underwriting classes, standard underwriting classes and
non-standard underwriting classes.
The underwriting classes are also divided into two categories: smokers and
non-smokers. We will place an insured under age 18 at the date of issue in a
standard or non-standard underwriting class. We will then classify the insured
as a smoker at age 18 unless we receive satisfactory evidence that the insured
is a non-smoker. Prior to the insured's age 18, we will give you notice of how
the insured may be classified as a non-smoker. In some jurisdictions, policies
are not available for proposed insureds who are less than 18 years old.
We compute the insurance protection rate separately for the initial face amount
and for any increase in face amount. However, if the insured's underwriting
class improves on an increase, the lower insurance protection rate will apply to
the total face amount.
CHARGES AGAINST OR REFLECTED IN THE
ASSETS OF THE SEPARATE ACCOUNT
We assess each sub-account with a charge for mortality and expense risks we
assume and, during the first 20 policy years, a charge for administration
expenses related to the separate account. Portfolio expenses are also reflected
in the value of the assets of the separate account.
ADMINISTRATION CHARGE - For a period not to exceed the first 20 policy years, we
may impose a daily charge at an annual rate of 0.15% of the daily net asset
value in each sub-account. The charge is to help reimburse us for administrative
expenses incurred in the administration of the separate account and the
sub-accounts.
The administrative functions and expenses we assume for the separate account and
the sub-accounts include:
o clerical, accounting, actuarial and legal services;
o rent, postage, telephone, office equipment and supplies;
o the expenses of preparing and printing registration statements and
prospectuses which are not allocable to sales expense; and
o regulatory filing fees and other fees.
Currently, the administration charge is waived after the tenth policy year
subject to state law, but we reserve the right to impose the charge after the
tenth policy year.
MORTALITY AND EXPENSE RISK CHARGE - We impose a daily charge at a current annual
rate of 0.65% of the average daily net asset value of each sub-account. This
charge compensates us for assuming mortality and expense risks for variable
interests in the policies. We may increase this charge, subject to state and
federal law, to an annual rate no greater than 0.80%. We may realize a profit
from this charge.
The mortality risk we assume is that insureds may live for a shorter time than
anticipated. If this happens, we will pay more net death benefits than
anticipated. The expense risk we assume is that the expenses incurred in issuing
and administering the policies will exceed those compensated by the
administration charges in the policies.
PORTFOLIO EXPENSES - The value of the units of the sub-accounts will reflect the
management fee and other expenses of the portfolios whose shares the
sub-accounts purchase. The management fees and other expenses of the portfolios
are listed above under SUMMARY - What are the Expenses and Fees of the
Portfolios. The prospectuses and Statements of Additional Information of the
portfolios contain more information concerning the fees and expenses.
No charges are currently made against the sub-accounts for federal or state
income taxes. Should income taxes be imposed, we may make deductions from the
sub-accounts to pay the taxes.
SURRENDER CHARGES
The policy's surrender charges are designed to reimburse us for part of the
costs of product research and development, underwriting, policy administration,
surrendering the policy and part of sales expenses, including commissions to our
agents, advertising, and the printing of prospectuses and sales literature.
Surrender charges are computed on the date of issue for the initial face amount.
Surrender charges apply for ten years from the date of issue. We impose
surrender charges only if, during the time the charges are effective, you
request a full surrender of your policy or a decrease in face amount.
New surrender charges are computed for any increase in face amount. Surrender
charges for a face amount increase apply for ten years from the date the
increase is effective. The new surrender charges computed for an increase in
face amount apply only to the face increase.
We compute each surrender charge based on a rate per $1,000 of the related face
amount. The rate that applies to your policy is based on whether:
o the insured is male or female;
o the insured's age; and
o the number of years during which the surrender charges have been effective.
Male rates are used if the policy is issued using unisex rates. The surrender
charge rate for the initial face amount decreases each policy year on the policy
anniversary. The surrender charge rate for each increase in face amount
decreases each year on the twelve month anniversary of the effective date of the
increase in face amount.
We determine the insured's age as of the date of issue for the initial face
amount for the policy. If there is an increase in the face amount, we determine
the insured's age on the effective date of the increase.
The surrender charge amount which applies in a particular policy year on your
policy is shown on the specification pages of your policy. New specification
pages showing the new surrender charge amounts will be provided to you if there
is an increase or a decrease in face amount on your policy.
If more than one surrender charge is in effect because of one or more increases
in face amount, we will apply the surrender charges in inverse order. We will
apply surrender and partial withdrawal charges described below in this order:
o first, those related to the most recent increase;
o second, those related to the next most recent increases, and so on; and
o third, those related to the initial face amount.
A surrender charge may be deducted on a decrease in the face amount. The
surrender charge will be the surrender charges for the face amounts which are
decreased or eliminated in the order shown above.
Where a decrease causes a partial reduction in an increase or in the initial
face amount, we will deduct a proportionate share of the surrender charge for
that increase or for the initial face amount. The surrender charge deducted is a
fraction of the charge that would apply to a full surrender. The fraction is the
PRODUCT of:
o the decrease DIVIDED BY the current face amount TIMES
o the surrender charge.
See APPENDIX E - Maximum Surrender Charges for the maximum surrender charge
rates and an example of how we compute the amount of surrender charges.
PARTIAL WITHDRAWAL COSTS
For each partial withdrawal, we deduct a transaction fee of 2.0% of the amount
withdrawn, not to exceed $25.
A partial withdrawal charge may also be deducted from policy value. After the
first policy year and before you exercise the paid-up insurance option, during
each policy year you may withdraw, without a partial withdrawal charge, up to:
o 10% of the policy value on the date we receive the written request at our
Variable Life Service Center, MINUS
o the total of any prior free withdrawals in the same policy year, allowed by
the free 10% withdrawal.
The right to make the free 10% withdrawal is not cumulative from policy year to
policy year. For example, if only 8% of policy value were withdrawn in the
second policy year, the amount you could withdraw in future policy years would
not be increased by the amount you did not withdraw in the second policy year.
We impose the partial withdrawal charge on any withdrawal greater than the free
10% withdrawal the for excess withdrawal amount. The maximum charge is 5.0% of
the excess withdrawal amount up to the surrender charge. If no surrender charge
applies on withdrawal, no partial withdrawal charge will apply. We will reduce
the policy's outstanding surrender charges by the partial withdrawal charge
deducted. The partial withdrawal charge deducted will decrease existing
surrender charges in inverse order, for example, first the most recent
increase's surrender charges, then the next most recent increase's surrender
charges in succession, and last the initial face amount's surrender charges.
TRANSFER CHARGES
The first 12 transfers in a policy year are free. After that, we will deduct a
$10 transfer charge from amounts transferred in that policy year. We reserve the
right to increase the charge, but it will never exceed $25.
If you apply for automatic transfers under the dollar cost averaging or
automatic account rebalancing option, the first automatic transfer for the
elected option counts as one transfer towards the 12 free transfers allowed in
each policy year. Each future automatic transfer for the elected option is
without charge and does not reduce the remaining number of transfers that may be
made without charge.
Each of the following transfers of policy value from the sub-accounts to the
fixed account is free and does not count as one of the 12 free transfers in a
policy year:
o a conversion within the first 24 months from date of issue or increase;
o a transfer to the fixed account to secure a loan;
o a transfer from the fixed account because of a loan repayment;
o a reallocation of the value in the Money Market sub-account as described
above under THE POLICY- Free Look Period; AND a transfer made because of a
material change in investment policy.
CHARGE FOR CHANGE IN FACE AMOUNT
For each increase or decrease in face amount, we will deduct a transaction
charge of $40 from policy value to reimburse us for the administrative costs of
the change. In some jurisdictions no charge is assessed for an increase in face
amount. Unless you specify the sub-account from which the charge is to be
deducted, we will allocate the charge pro rata.
OTHER ADMINISTRATIVE CHARGES
We reserve the right to charge for other administrative costs we incur. While
there are no current charges for these costs, we may impose a charge, guaranteed
not to exceed $25 per transaction for:
o changing net payment allocation instructions;
o changing the allocation of monthly insurance protection charges among the
various sub-accounts and the fixed account; OR
o providing more than one projection of values in a policy year, in addition
to the annual statement.
POLICY LOANS
You may borrow money secured by your policy value. The total amount of loans you
may have outstanding at any time is the loan value. In the first policy year,
the loan value is 75% of:
o the policy value MINUS
o any surrender charges, unpaid monthly insurance protection charges and
outstanding loan interest through the end of the policy year.
After the first policy year, the loan value is 90% of:
o the policy value MINUS
o any surrender charges.
In some jurisdictions, the loan value after the first policy year is:
o 90% of the portion of the policy value in the sub-accounts, MINUS any
surrender charges which are allocated to the sub-accounts; PLUS
o 100% of the portion of the policy value in the fixed account, MINUS the
monthly insurance protection charges and the loan interest due to the end
of the policy year, which are allocated to the fixed account.
The loan value and the policy value in any policy year are the values on the
valuation date we receive your request for a loan at our Variable Life Service
Center.
There is no minimum loan amount. We will usually pay the loan within seven days
after we receive the written request. We may delay the payment of loans as
stated in OTHER POLICY PROVISIONS - Delay of Payments.
We will withdraw the amount of the loan from the sub-accounts and the fixed
account according to your instructions. If you do not provide us with
instructions, we will make a pro rata withdrawal of the loan amount. We will
transfer the portion of the policy value in each sub-account equal to the policy
loan to the fixed account to secure the outstanding loan. We will not count this
transfer as a transfer subject to the transfer charge.
The portion of the policy value securing the outstanding loan will earn monthly
interest in the fixed account at an annual rate of at least 6.0%, or, for
preferred loans 7.5%. For policies issued subject to the jurisdiction of the
Virgin Islands, the annual interest rate will be at least 4.0% or, for preferred
loans, 5.5%. No other interest will be credited.
PREFERRED LOAN OPTION
A preferred loan option is available after the tenth policy year and, after that
date, will apply to any outstanding loans and new loan requests unless you
revoke the preferred loan option in writing. The guaranteed annual interest rate
credited to the portion of the policy value securing a preferred loan will be
not less than 7.5%, or for policies issued subject to the jurisdiction of the
Virgin Islands, 5.5%. There is some uncertainty as to the tax treatment of
preferred loans. Consult a qualified tax adviser.
LOAN INTEREST CHARGED
Interest accrues daily at the annual rate of 8.0% or for policies issued subject
to the jurisdiction of the Virgin Islands, 6.0%. Interest is due and payable in
arrears at the end of each policy year or for as short a period as the loan may
exist. Interest not paid when due will be added to the loan amount and bears
interest at the same rate. If this makes the loan principal higher than the
portion of the policy value in the fixed account, we will offset this shortfall
by transferring amounts from the sub-accounts. The transferred amount will be
allocated proportionately among the sub-accounts which have value in them.
REPAYMENT OF OUTSTANDING LOAN
You may pay any loans before policy lapse and before the maturity date. On the
valuation date on which we receive your loan repayment at our Variable Life
Service Center, we will allocate that part of the policy value in the fixed
account that secured a repaid loan to the sub-accounts and fixed account
according to your instructions. If you do not make a repayment allocation, we
will allocate policy value according to your most recent payment allocation
instructions. However, loan repayments allocated to the separate account cannot
exceed that portion of the policy value previously transferred from the separate
account to secure the outstanding loan.
If the outstanding loan exceeds the policy value less the surrender charge, the
outstanding loan will be in default. We will mail a notice of default to the
last known address of you and any assignee. If you do not make sufficient
payment within 62 days after this notice is mailed, the policy will terminate
with no value.
EFFECT OF POLICY LOANS
Policy loans will permanently affect the policy value and surrender value, and
may permanently affect the death benefit. The effect could be favorable or
unfavorable, depending on whether the investment performance of the sub-accounts
is less than or greater than the interest credited to the portion of the policy
value in the fixed account that secures the loan.
We will deduct any outstanding loan from the proceeds payable when the Insured
dies or from a surrender.
If the outstanding loan on your policy exceeds the policy value minus surrender
charges, the policy will be in default. There is no charge imposed solely
because the policy goes into default. If you do not pay the required premium
within the grace period, however, the policy will terminate without value.
If you have an outstanding loan, decreases in policy value, including decreases
due to negative investment results in your sub-account allocations, could result
in default of your policy. If you have an outstanding loan and do not pay loan
interest when due, unpaid interest will be added to your loan and will bear
interest at the same rate. If your investment gains are not sufficient, the
outstanding loan could be greater than your policy value minus surrender
charges, resulting in your policy going into default.
In the event the policy lapses or is otherwise terminated while a loan is
outstanding, the loan is foreclosed and this foreclosure will be treated as cash
received from the policy for income tax purposes. Any cash received, that is,
the outstanding loan plus any other policy value less surrender charges in
excess of the policy's tax basis, should be taxable as ordinary income.
For a discussion of the federal tax considerations of policy loans, see FEDERAL
TAX CONSIDERATIONS - Policy Loans on page 39.
POLICY TERMINATION AND
REINSTATEMENT
TERMINATION
The policy will be in default if the surrender value is insufficient to cover
the next monthly insurance protection charge plus loan interest accrued.
Additionally, if an outstanding loan exceeds the policy value less surrender
charges, the outstanding loan will be in default.
On the date of default, we will send a notice to you and to any assignee of
record. The notice will state the premium due and the date by which it must be
paid. You will then have a grace period of 62 days, measured from the date of
the notice of default, to make a payment sufficient to prevent termination.
Failure to pay a sufficient premium within the grace period will result in
policy termination. If the insured dies during the grace period, we will deduct
from the net death benefit any monthly insurance protection charges due and
unpaid through the policy month in which the insured dies and any other overdue
charge.
During the first 48 policy months following the date of issue or an increase in
the face amount based on a request from the policy owner, a guarantee may apply
to prevent the policy from terminating because of insufficient surrender value.
This guarantee applies if, during this period, we receive payments from you
that, when reduced by outstanding loans, partial withdrawals and partial
withdrawal charges, equal or exceed specified minimum monthly payments. The
specified minimum monthly payments are based on the number of months the policy,
increase in face amount or policy change that causes a change in the minimum
monthly payment has been in force. A policy change that causes a change in the
minimum monthly payment is a change in the face amount, the addition or deletion
of a rider, or a change in the smoker or non-smoker underwriting class on the
policy. Except for the first 48 months after the date of issue or the effective
date of an increase, payments equal to the minimum monthly payment do not
guarantee that the policy will remain in force.
You may also elect the Guaranteed Death Benefit Rider when you apply for the
policy. There is a one time $25 charge for this rider. The charge is assessed on
the first monthly processing date. Under the Guaranteed Death Benefit Rider, if
you make payments of a sufficient amount, net of partial withdrawals, partial
withdrawal charges and any outstanding loans, we guarantee that your policy will
not lapse. In order to maintain this guarantee, on each policy anniversary
through the final payment date, the total of your payments received, net of
partial withdrawals, partial withdrawal charges and any outstanding loans must
at least equal the guaranteed death benefit premium times the number of policy
years since the policy was issued, adjusted as applicable for policy changes.
This rider may not be available in all jurisdictions and is not available in
Texas.
REINSTATEMENT
A lapsed policy may be reinstated within three years of the date of default and
before the final payment date or, before the maturity date, if the default
occurred because the outstanding loan exceeded the policy value less surrender
charges. In some states, a time period other than three years applies to the
reinstatement provision. The reinstatement takes effect on the monthly
processing date following the date you submit to us:
o a written application for reinstatement;
o evidence of insurability satisfactory to us; and
o a payment that, after the deduction of the payment expense charge, is large
enough to cover the minimum amount payable.
Policies which have been surrendered may not be reinstated.
MINIMUM AMOUNT PAYABLE - If reinstatement is requested when less than 48 monthly
insurance protection charges have been paid since the date of issue or increase
in the face amount, you must pay the LESSER of:
o the minimum monthly payment for the three months beginning on the date of
reinstatement; OR
o the SUM of:
(a) the amount by which the surrender charges or charges on the date of
reinstatement exceeds the policy value on the date of default; PLUS
(b) monthly insurance protection charges for the three months beginning on the
date of reinstatement.
If you request reinstatement more than 48 monthly processing dates from the date
of issue or increase in the face amount, you must pay the sum shown above
without regard to the three months of minimum monthly payments. Also, a lesser
amount may be required if the Guaranteed Death Benefit Rider is in effect.
SURRENDER CHARGE - The surrender charge on the date of reinstatement is the
surrender charge that would have been in effect had the policy remained in force
from the date of issue. In some jurisdictions, however, the surrender charge on
the date of reinstatement is the surrender charge that was in effect on the date
of default.
POLICY VALUE ON REINSTATEMENT - The policy value on the date of reinstatement
is:
o the net payment made to reinstate the policy and interest earned from the
date the
payment was received at our Variable Life Service Center; PLUS
o the policy value less any outstanding loan on the date of default, not to
exceed the surrender charge on the date of reinstatement; MINUS
o the monthly insurance protection charges due on the date of reinstatement.
You may repay or reinstate any outstanding loan on the date of default or
foreclosure.
OTHER POLICY PROVISIONS
POLICY OWNER
The policy owner is the insured unless another person has been named as owner in
the application. As policy owner, you are entitled to exercise all rights under
your policy while the insured is alive, with the consent of any irrevocable
beneficiary. The consent of the insured is required whenever the face amount is
increased.
BENEFICIARY
The beneficiary is the person or persons to whom the net death benefit is
payable on the insured's death. You, as the policy owner, name the beneficiary.
Unless otherwise stated in the policy, the beneficiary has no rights in the
policy before the insured dies. While the insured is alive, you may change the
beneficiary, unless you have declared the beneficiary to be irrevocable. If no
beneficiary is alive when the insured dies, you or your estate, will be the
beneficiary. If more than one beneficiary is alive when the insured dies, we
will pay each beneficiary in equal shares, unless you have chosen otherwise.
Where there is more than one beneficiary, the interest of a beneficiary who dies
before the insured will pass to surviving beneficiaries proportionally, unless
you have requested otherwise.
ASSIGNMENT
You may assign a policy as collateral or make an absolute assignment. All policy
rights will be transferred as to the assignee's interest. The consent of the
assignee may be required to make changes in payment allocations, make transfers
or to exercise other rights under the policy. We are not bound by an assignment
or release thereof, unless it is in writing and recorded at our Variable Life
Service Center. When recorded, the assignment will take effect as of the date
the written request was signed. Any rights the assignment creates will be
subject to any payments we made or actions we took before the assignment is
recorded. We are not responsible for determining the validity of any assignment
or release.
THE FOLLOWING POLICY PROVISIONS MAY VARY BY STATE.
LIMIT ON RIGHT TO CHALLENGE POLICY
Except for fraud, unless such defense is prohibited by state law, or nonpayment
of premium, we cannot challenge the validity of your policy if the insured was
alive after the policy had been in force for two years from the date of issue.
This provision does not apply to any riders providing benefits specifically for
disability or death by accident. Also, we cannot challenge the validity of any
increase in the face amount if the insured was alive after the increase was in
force for two years from the effective date of the increase. If your policy was
issued as a result of a conversion of a term life insurance policy issued by us,
the two year period during which we may challenge the policy with respect to the
coverage amount converted is measured from the later of:
o the issue date of the term life insurance policy; or
o the most recent date on which that policy was reinstated.
SUICIDE
The net death benefit will not be paid if the insured commits suicide, while
sane or insane, within two years from the date of issue. Instead, we will pay
the beneficiary all payments made for the policy, without interest, less any
outstanding loan and partial withdrawals. If the insured commits suicide, while
sane or insane, within two years from any increase in face amount, we will not
recognize the increase. We will pay to the beneficiary the monthly insurance
protection charges paid for the increase, plus any other net death benefit
payable under the policy. If your policy was issued as a result of a conversion
of a term life insurance policy issued by us, then, with respect to the coverage
amount converted, the two year period during which the net death benefit under
the policy will not be paid if the insured commits suicide will be measured from
the later of:
o the issue date of the term life insurance policy; or
o the most recent date on which that policy was reinstated.
MISSTATEMENT OF AGE OR SEX
If the insured's age or sex is not correctly stated in the policy application,
we will adjust the death benefit under the policy to reflect the correct age and
sex. The adjusted death benefit will be the policy value plus the insurance
protection amount that the most recent monthly insurance protection charge would
have purchased for the correct age and sex. We will not reduce the death benefit
to less than the guideline minimum sum insured. For a unisex policy, there is no
adjusted benefit solely for misstatement of sex. Certain rider benefits may also
be adjusted for misstatement of age or sex.
DELAY OF PAYMENTS
Amounts payable from the separate account for surrender, partial withdrawals,
net death benefit, policy loans and transfers may be postponed whenever:
o the New York Stock Exchange is closed other than customary weekend and
holiday closings;
o the SEC restricts trading on the New York Stock Exchange; or
o the SEC determines an emergency exists, so that disposal of securities is
not reasonably practicable or it is not reasonably practicable to compute
the value of the separate account's net assets.
We may delay paying any amounts derived from payments you made by check until
the check has cleared your bank.
We reserve the right to defer amounts payable from the fixed account. This delay
may not exceed six months.
FEDERAL TAX CONSIDERATIONS
The following is a summary of federal tax considerations for U.S. persons based
on our understanding of the present federal income tax laws as they are
currently interpreted. Legislation may be proposed which, if passed, could
adversely and possibly retroactively affect the taxation of the policies. This
summary is not exhaustive, does not purport to cover all situations, and is not
intended as tax advice. We do not address tax provisions that may apply if the
policy owner is a corporation. You should consult a qualified tax adviser to
apply the law to your circumstances.
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY AND THE SEPARATE ACCOUNT
Transamerica is taxed as a life insurance company under Subchapter L of the
Code. We file a consolidated tax return with our life insurance company
subsidiaries. We do not currently charge for any income tax on the earnings or
realized capital gains in the Separate Account. A charge may apply in the future
for any federal income taxes we incur. The charge may become necessary, for
example, if there is a change in our tax status. Any charge would be designed to
cover the federal income taxes on the investment results of the separate
account.
Under current laws, we may incur state and local taxes besides premium taxes.
These taxes are not currently significant. If there is a material change in
these taxes affecting the separate account, we may charge for taxes paid or for
tax reserves.
TAXATION OF THE POLICIES
We believe that the policies described in this prospectus are life insurance
contracts under Code Section 7702. Section 7702 affects the taxation of life
insurance contracts and places limits on the relationship of the policy value to
the death benefit. As life insurance contracts, the net death benefits of the
policies are generally excludable from the gross income of the beneficiaries. In
the absence of any guidance from the Internal Revenue Service (IRS) on the
issue, we believe that providing the same amount at risk after age 99 as is
provided at age 99 should be sufficient to maintain the excludability of the
death benefit after age 99. However, this lack of specific IRS guidance makes
the tax treatment of the death benefit after age 99 uncertain. Also, any
increase in policy value is not taxable until received by you or your designee,
but see Modified Endowment Contracts.
Federal tax law requires that the investment of each sub-account funding the
policies is adequately diversified according to Treasury regulations. We believe
that the portfolios currently meet the Treasury's diversification requirements.
We will monitor continued compliance with these requirements.
The Treasury Department has announced that previous regulations on
diversification do not provide guidance concerning the extent to which policy
owners may direct their investment assets to divisions of a separate investment
account without being treated as the owner of such assets who is taxed directly
on the income from such assets. Regulations may provide such guidance in the
future. The policies or our administrative rules may be modified as necessary to
prevent a policy owner from being treated as the owner of any assets of the
separate account who is taxed directly on their income.
A surrender, partial withdrawal, distribution, payment at maturity date, change
in the death benefit option, change in the face amount, lapse with policy loan
outstanding, or assignment of the policy may have tax consequences. Within the
first fifteen policy years, a distribution of cash required under Code Section
7702 because of a reduction of benefits under the policy may be taxable to the
policy owner as ordinary income respecting any investment earnings. Federal,
state and local income, estate, inheritance, and other tax consequences of
ownership or receipt of policy proceeds depend on the circumstances of each
insured, policy owner or beneficiary.
WITHHOLDING
If all or part of a distribution from the policy is includible in gross income,
the Code requires us to withhold federal income tax unless the policy owner
elects, in writing, not to have tax withholding apply. The federal income tax
withholding rate is generally 10% of the taxable amount of the distribution.
Withholding applies only if the taxable amount of the distribution is at least
$200. Some states also require withholding for state income taxes.
If payments are delivered to foreign countries, however, the tax withholding
rate will generally be 10% unless you certify to us that you are not a U.S.
person residing abroad or a "tax avoidance expatriate" as defined in Code
Section 877. Such certification may result in withholding of federal income
taxes at a different rate.
POLICY LOANS
We believe that non-preferred loans received under the policy will be treated as
an indebtedness of the policy owner for federal income tax purposes. Under
current law, these loans will not constitute income for the policy owner while
the policy is in force, but see Modified Endowment Contracts.
There is a risk, however, that a preferred loan may be characterized by the IRS
as a withdrawal and taxed accordingly. At the present time, the IRS has not
issued any guidance on whether loans with the attributes of a preferred loan
should be treated differently from a non-preferred loan. This lack of specific
guidance makes the tax treatment of preferred loans uncertain.
INTEREST DISALLOWANCE
Under Code Section 264(a)(4), as amended in 1997, interest on policy loans is
generally nondeductible for a policy issued or materially changed after June 8,
1997. In addition, under Section 264(f) certain policies under which a trade or
business (other than a sole proprietorship or a business performing services as
an employee) is directly or indirectly a beneficiary can subject a taxpayer's
interest expense to partial disallowance (if the policy is issued or materially
changed after June 8, 1997) to the extent such interest expense is allocable to
the taxpayer's unborrowed cash values thereunder. You should consult your tax
adviser on how the rules governing the non-deductibility of interest would apply
in your individual situation.
MODIFIED ENDOWMENT CONTRACTS
Special rules described below apply to the tax treatment of loans and other
distributions under any life insurance contract that is classified as a modified
endowment contract, or MEC, under Code Section 7702A. A MEC is a life insurance
contract that either fails the 7-pay test or is received in exchange for a MEC.
In general, a policy will fail this 7-pay test if:
o the cumulative premiums and other amounts paid for the policy at any time
during the first 7 contract years; or
o during any subsequent 7-year test period resulting from a material change
in the policy;
exceed the sum of the net level premiums which would have been paid up to such
time if the policy had provided for certain paid-up future benefits after the
payment of 7 level annual premiums. If to comply with this 7-pay test limit any
premium amount is refunded with applicable interest no later than 60 days after
the end of the contract year in which it is received, such refunded amount will
be removed from the cumulative amount of premiums that is compared against such
7-pay test limit.
If there is any reduction in the policy's benefits, due to a withdrawal, death
benefit reduction or termination of a rider benefit during a 7-pay test period,
the policy will be retested retroactively from the start of such period by
taking into account such reduced benefit level from such starting date.
Generally, any increase in death benefits or other material change in the policy
may be treated as producing a new contract for 7-pay test purposes, requiring
the start of a new 7-pay test period as of the date of such change.
DISTRIBUTIONS UNDER MODIFIED ENDOWMENT CONTRACTS
Under Code Section 72(e)(10), loans, withdrawals and other distributions made
before the insured's death under a MEC, or an assignment or pledge of a MEC, are
includible in gross income on an income-out-first basis. The amount received or
pledged is treated as allocable first to the income in the contract and then to
a tax-free recovery of the policy's investment in the contract, or tax basis.
Generally, a policy's tax basis is equal to its total premiums less amounts
recovered tax-free. To the extent that the policy's cash value (ignoring
surrender charges except upon a full surrender) exceeds its tax basis, such
excess constitutes its income in the contract. However, under Code Section
72(e)(11)(A)(i), where more than one MEC has been issued to the same
policyholder by the same insurer, or an affiliate during a calendar year, all
such MECs are aggregated for purposes of determining the amount of a
distribution from any such MEC that is includible in gross income.
In addition, any amount includible in gross income from a MEC distribution is
subject to a 10% penalty tax on premature distributions under Code Section
72(v), unless the taxpayer has attained age 59 1/2 or is disabled or the payment
is part of a series of substantially equal periodic payments for a qualifying
lifetime period. Furthermore, under Code Section 72(e)(4)(A), any loan, pledge,
or assignment of, or any agreement to assign or pledge any portion of a MEC's
cash value is treated as producing an amount received for purposes of these MEC
distribution rules.
It is unclear to what extent this assignment rule applies to a collateral
assignment that does not secure a loan or pledge, for example, in certain
split-dollar arrangements. Under Code Section 7702A(d) the MEC distribution
rules apply not only to:
o all distributions made during the contract year in which the policy fails
the 7-pay test, and during subsequent years; BUT ALSO TO
o any distributions made in anticipation of such failure, which is deemed to
include any distributions made during the two years prior to such failure.
The Treasury Department has not yet issued regulations or other guidance
indicating what other distributions can be treated as made in anticipation of
such a failure or how (that is, as of what date) income in the contract should
be determined for purposes of any distribution that is deemed to be made in
anticipation of a failure.
VOTING RIGHTS
We are the legal owner of all portfolio shares held in the separate account and
each sub-account. As the owner, we have the right to vote at a portfolio's
shareholder meetings. However, to the extent required by federal securities laws
and regulations, we will vote portfolio shares that each sub-account holds
according to instructions received from policy owners with policy value in the
sub-account. If any federal securities laws or regulations or their
interpretation change to permit us to vote shares in our own right, we reserve
the right to do so, whether or not the shares relate to the policies.
We will provide each person having a voting interest in a portfolio with proxy
materials and voting instructions. We will vote shares held in each sub-account
for which no timely instructions are received in proportion to all instructions
received for the sub-account. We will also vote in the same proportion our
shares held in the separate account that do not relate to the policies.
We will compute the number of votes that a policy owner has the right to
instruct on the record date established for the portfolio. This number is the
quotient of:
o each policy owner's policy value in the sub-account; DIVIDED BY
o the net asset value of one share in the portfolio in which the assets of
the sub-account are invested.
We may disregard voting instructions policy owners initiate in favor of any
change in the investment policies or in any investment adviser or principal
underwriter. Our disapproval of any change must be reasonable. A change in
investment policies or investment adviser must be based on a good faith
determination that the change would be contrary to state law or otherwise is
improper under the objectives and purposes of the portfolios. If we do disregard
voting instructions, we will include a summary of and reasons for that action in
the next report to policy owners.
<PAGE>
<TABLE>
<CAPTION>
DIRECTORS AND PRINCIPAL OFFICERS OF
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
<S> <C>
Nicki Bair* Senior Vice President of TOLIC since 1996. Vice President of TOLIC from
1991 to 1996.
Patrick S. Baird***** Director of TOLIC since
1999. Director, Senior Vice President and
Chief Operating Officer of PFL Life
Insurance Company since 1996. Executive
Vice President and Chief Operating Officer
of AEGON USA since 1995. Chief Financial
Officer of AEGON USA from 1992 to 1995.
President and Chief Tax Officer of AEGON
USA from 1984 to 1995.
Roy Chong-Kit* Senior Vice President and
Actuary of TOLIC since 1997. Vice
President and Actuary of TOLIC from 1995
to 1997. Actuary of TOLIC from 1988 to
1995.
Brenda K. Clancy***** Director of TOLIC since 1999. Senior Vice President, Corporate, of PFL
Life Insurance Company since 1991. Treasurer and Chief Financial
Officer of PFL Life Insurance Company since 1996.
James W. Dederer, CLU* Director, Executive Vice President, General Counsel and Corporate
Secretary of TOLIC since 1988.
George A. Foegele**** Director and Senior Vice President; President and Chief Executive
Officer of Transamerica Life Insurance Company of Canada.
William R. Gerner***** Executive Vice President, Diversified Financial Products Division of
TOLIC since 1999.
Daniel E. Jund, FLMI* Senior Vice President of TOLIC since 1988.
Douglas C. Kolsrud***** Director of TOLIC since 1999. Director, Senior Vice President, Chief
Investment Officer and Corporate Actuary, Investment Division, of PFL
Life Insurance Company.
Richard N. Latzer*** Director, Senior Vice President and Chief Investment Officer of
Transamerica Corporation since 1989. Director, President and Chief
Executive Officer of Transamerica Investment Services, Inc. since 1988.
Karen O. MacDonald* Director, Senior Vice
President and Corporate Actuary of TOLIC
since 1995. Senior Vice President and
Corporate Actuary from 1992 to 1995.
Larry N. Norman***** Executive Vice President, Financial Markets Division of TOLIC since
1999.
Gary U. Rolle* Director, Executive Vice President and Chief Investment Officer of
Transamerica Investment Services, Inc. since 1981.
Paul E. Rutledge III** Director and President, Reinsurance Division since 1998. President,
Life Insurance Company of Virginia, 1991-1997.
Nooruddin S. Veerjee, FSA* President of Insurance Products Division since 1997. Director,
President of Group Pension Division of TOLIC since 1993. Senior Vice
President of TOLIC from 1992 to 1993. Vice President of TOLIC from 1990
to 1992.
DIRECTORS AND PRINCIPAL OFFICERS OF
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY (CONTINUED)
Craig D. Vermie***** Director of TOLIC since 1999. Director, Vice President and General
Counsel, Corporate, of PFL Life Insurance Company since 1990.
Ron F. Wagley, CLU* Senior Vice President and Chief Agency Officer of TOLIC since 1993.
Vice President of TOLIC from 1989 to 1993.
William R. Wellnitz, FSA** Senior Vice President
and Actuary of TOLIC since 1996. Vice
President and Reinsurance Actuary of TOLIC
from 1988 to 1996.
Sally Yamada* Vice President and Treasurer of TOLIC since 1999.
</TABLE>
*The business address is 1150 South Olive Street, Los Angeles, California 90015.
**The business address is 401 North Tryon Street, Charlotte, North Carolina
28202.
***The business address is 600 Montgomery Street, San Francisco, California
94111.
****The business address is 300 Consilium Place, Scarborough, Ontario, Canada
M1H3G2.
*****The business address is 4333 Edgewood Road, N.W., Cedar Rapids, Iowa 52449.
Transamerica is insured under a broad manuscript fidelity bond program with
coverage limits of $80,000,000. The lead underwriter is Capital CNA.
DISTRIBUTION
Transamerica Securities Sales Corporation (TSSC) acts as the principal
underwriter and general distributor of the policies. TSSC is registered with the
SEC as a broker-dealer and is a member of the National Association of Securities
Dealers (NASD). TSSC was organized on February 26, 1986, under the laws of the
state of Maryland. Broker-dealers sell the policies through their registered
representatives who are appointed by us.
We pay commissions to broker-dealers who sell the policy based on a commission
schedule. After the date of issue or an increase in face amount, commissions
will be up to 90% of the first-year payments up to a payment amount we
established and up to 5% of any excess. After the first year, commissions will
be up to 2% of payments plus up to 0.30% annually of unloaned policy value. We
may pay higher rates to certain broker-dealers based on sales volumes or other
criteria. To the extent permitted by NASD rules, promotional incentives or
payments may also be provided to broker-dealers based on sales volumes, the
assumption of wholesaling functions or other sales-related criteria. Other
payments may be made for other services that do not directly involve the sale of
the policies. These services may include the recruitment and training of
personnel, production of promotional literature, and similar services.
We intend to recoup commissions and other sales expenses through:
o the payment expense charge;
o the surrender charge; and
o investment earnings on amounts allocated under the policies to the fixed
account.
Commissions paid on the policies, including other incentives or payments, are
not charged to policy owners or to the separate account.
REPORTS
We will maintain the records for the separate account. We will promptly send you
statements of transactions under your policy, including:
o payments;
o changes in face amount;
o changes in death benefit option;
o transfers among sub-accounts and the fixed account;
o partial withdrawals;
o increases in loan amount or loan repayments;
o lapse or default for any reason; and
o reinstatement.
We will send you an annual statement that summarizes all of the above
transactions and deductions of charges during the policy year. It will also set
forth the status of the death benefit, policy value, surrender value, amounts in
the sub-accounts and fixed account, and any policy loans. We will send you such
reports containing financial statements and other information for the portfolios
as the 1940 Act requires.
PERFORMANCE INFORMATION
We may advertise total return and average annual total return performance
information based on the periods that the portfolios have been in existence. The
results for any period prior to the policies being offered will be calculated as
if the policies had been offered during that period of time, with all charges
assumed to be those applicable to the sub-accounts and the portfolios.
Total return and average annual total return are based on the hypothetical
profile of a representative policy owner and historical earnings and are not
intended to indicate future performance. Total return is the total income
generated net of certain expenses and charges. Average annual total return is
net of the same expenses and charges, but reflects the historical return
compounded annually. This historical return is equal to cumulative return had
performance been constant over the entire period. Average annual total returns
are not the same as yearly results and tend to smooth out variations in the
portfolio's return.
Performance information under the policies is net of portfolio expenses,
mortality and expense risk charges, administration charges, monthly insurance
protection charges and surrender charges.
We take a representative policy owner and assume that:
o the insured is a male age 45, standard non-smoker underwriting class;
o the policy owner had allocations in each of the sub-accounts for the
portfolio durations shown; and
o there was a full surrender at the end of the applicable period.
We may compare performance information for a sub-account in reports and
promotional literature to:
o Standard & Poor's 500 Stock Index, or S&P 500;
o Dow Jones Industrial Average, or DJIA;
o Shearson Lehman Aggregate Bond Index;
o other unmanaged indices of unmanaged securities widely regarded by
investors as representative of the securities markets;
o other groups of variable life separate accounts or other investment
products tracked by Lipper Analytical Services;
o other services, companies, publications, or persons such as Morningstar,
Inc., who rank the investment products on performance or other criteria;
and
o the Consumer Price Index.
Unmanaged indices may assume the reinvestment of dividends but generally do not
reflect deductions for insurance and administration charges, separate account
charges and portfolio management costs and expenses. Performance information for
any sub-account reflects only the performance of a hypothetical investment in
the sub-account during a period. It is not representative of what may be
achieved in the future. However, performance information may be helpful in
reviewing market conditions during a period and in considering a portfolio's
success in meeting its investment objectives.
In advertising, sales literature, publications or other materials, we may give
information on various topics of interest to policy owners and prospective
policy owners. These topics may include: o the relationship between sectors of
the economy and the economy as a whole and its effect on various securities
markets, investment strategies and techniques, such as value investing, market
timing, dollar cost averaging, asset allocation and automatic account
rebalancing;
o the advantages and disadvantages of investing in tax-deferred and taxable
investments;
o customer profiles and hypothetical payment and investment scenarios;
o financial management and tax and retirement planning; and
o
investment alternatives to certificates of deposit and other financial
instruments, including comparisons between the policies and the
characteristics of, and market for, the financial instruments.
In each table below, One-Year Total Return refers to the total of the income
generated by a sub-account, based on certain charges and assumptions as
described in the respective tables, for the one-year period ended December 31,
1999. Average Annual Total Return is based on the same charges and assumptions,
but reflects the hypothetical annually compounded return that would have
produced the same cumulative return if the sub-account's performance had been
constant over the entire period. Because average annual total returns tend to
smooth out variations in annual performance return, they are not the same as
actual year-by-year results.
<PAGE>
<TABLE>
<CAPTION>
TABLE I
SUB-ACCOUNT PERFORMANCE
NET OF ALL CHARGES AND ASSUMING SURRENDER OF THE POLICY
The following performance information is based on the periods that the
portfolios have been in existence. The data is net of expenses of the
portfolios, all sub-account charges, and all policy charges, including surrender
charges for a representative policy. It is assumed that the insured is male, age
45, standard non-smoker underwriting class, that the face amount of the policy
is $200,000, that the death benefit option is the level option, that an annual
payment of $3,800, approximately the guideline level premium, was made at the
beginning of each policy year, that all payments were allocated to each
sub-account individually, and that there was a full surrender of the policy at
the end of the applicable period. Returns are for the period ending December 31,
1999.
- --------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------- 10 Year or
Life of the
Portfolio (if
Less than 10 Number
5 Year Years Since of
Average Inception) Years Since
Portfolio 1 Year Annual Average Annual Inception
Sub-Account Inception Total Total Total Return (if Less
Investing in the Date Return Return than 10
Corresponding Portfolio Years)
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Alger American Income & Growth 11/15/88 -86.28% 21.49% 13.52% N/A
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Alliance VP Growth and Income 1/14/91 -100.00% 11.85% 9.20% 8.96
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Alliance VP Premier Growth 6/26/92 -95.12% 24.71% 19.33% 7.51
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Appreciation 4/05/93 -100.00% 13.56% 11.72% 6.74
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Small Cap 8/31/90 -100.00% 3.12% 30.37% 9.33
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Janus Aspen Series Balanced 9/13/93 -99.96% 12.66% 11.67% 6.30
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Janus Aspen Series Worldwide Growth 9/13/93 -67.05% 22.15% 21.21% 6.30
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
10 Year or
Life of the
Portfolio (if
Less than 10 Number
5 Year Years Since of
Average Inception) Years Since
Sub-Account Portfolio 1 Year Annual Average Annual Inception
Investing in the Inception Total Total Total Return (if Less
Corresponding Portfolio Date Return Return than 10
Years)
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
MFS VIT Emerging Growth 7/24/95 -56.30% N/A 23.18% 4.44
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
MFS VIT Growth With Income 10/9/95 -100.00% N/A 5.84% 4.23
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
MFS VIT Research 7/26/95 -100.00% N/A 8.67% 4.43
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
MS UIF Emerging Markets Equity 10/01/96 -40.50% N/A -11.72% 3.25
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
MS UIF Fixed Income 1/02/97 -100.00% N/A -24.53% 2.99
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
MS UIF High Yield 1/02/97 -100.00% N/A -20.67% 2.99
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
MS UIF International Magnum 1/02/97 -100.00% N/A -14.47% 2.99
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust Managed(1) 8/01/88 -100.00% 7.26% 11.07% N/A
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust Small Cap(2) 8/01/88 -100.00% -5.40% 5.22% N/A
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
PIMCO VIT StocksPLUS Growth and Income 1/02/98 -100.00% N/A -24.95% 2.00
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Transamerica VIF Growth(3) 2/26/69 -90.35% 30.42% 21.72% N/A
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Transamerica VIF Money Market 1/02/98 -100.00% N/A -49.56% 1.99
- --------------------------------------------------------------------------------------------------------------------
(1) On September 16th, 1994, an investment company which had commenced
operations on August 1, 1988, called Quest for Value Accumulation Trust,
(the Old Trust), was effectively divided into two investment funds - the
Old Trust and the present OCC Accumulation Trust, (the Present Trust), at
which time the Present Trust commenced operations. The total net assets of
the managed portfolio immediately after the transaction were $682,601,380
in the Old Trust and $51,345,102 in the Present Trust. For the period prior
to September 16, 1994, the performance figures for the managed portfolio of
the Present Trust reflect the performance of the managed portfolio of the
Old Trust.
(2) On September 16th, 1994, an investment company which had commenced
operations on August 1, 1988, called Quest for Value Accumulation Trust,
(the Old Trust), was effectively divided into two investment funds - the
Old Trust and the present OCC Accumulation Trust (the Present Trust) at
which time the Present Trust commenced operations. The total net assets of
the Small Cap Portfolio immediately after the transaction were $139,812,573
in the Old Trust and $8,129,274 in the Present Trust. For the period prior
to September 16, 1994, the performance figures for the Small Cap Portfolio
of the Present Trust reflect the performance of the Small Cap Portfolio of
the Old Trust.
(3) The Growth Portfolio of the Transamerica Variable Insurance Fund, Inc., is
the successor to Separate Account Fund C of Transamerica Occidental Life
Insurance Company, a management investment company funding variable
annuities, through a reorganization on November 1, 1996. Accordingly, the
performance data for the Transamerica VIF Growth Portfolio includes
performance of its predecessor.
Performance information reflects only the performance of a hypothetical
investment during the particular time period on which the calculations are
based. One-year total return and average annual total return figures are based
on historical earnings and are not intended to indicate future performance.
Performance information should be considered in light of the investment
objectives and policies, characteristics and quality of the portfolio in which a
sub-account invests and the market conditions during the given time period, and
should not be considered as a representation of what may be achieved in the
future.
<PAGE>
TABLE II
SUB-ACCOUNT PERFORMANCE
EXCLUDING MONTHLY POLICY CHARGES AND SURRENDER CHARGES
The following performance information is based on the periods that the
portfolios have been in existence. The performance information is net of total
portfolio expenses, all sub-account charges and premium tax and expense charges.
THE DATA DOES NOT REFLECT MONTHLY CHARGES UNDER THE POLICIES OR SURRENDER
CHARGES. Returns are for the period ending December 31, 1999.
- ------------------------------------------------------------------------------------------------------------------
10 Year or
Life of the
Portfolio (if
Less than 10 Number
5 Year Years Since of
Average Inception) Years Since
Sub-Account Portfolio 1 Year Annual Average Annual Inception
Investing in the Inception Total Total Total Return (if Less
Corresponding Portfolio Date Return Return than 10
Years)
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
Alger American Income & Growth 11/15/88 35.66% 30.39% 17.27% N/A
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
Alliance VP Growth and Income 1/14/91 6.06% 21.47% 13.74% 8.96
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
Alliance VP Premier Growth 6/26/92 26.01% 33.41% 24.31% 7.51
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Appreciation 4/05/93 6.14% 23.04% 17.98% 6.74
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Small Cap 8/31/90 17.28% 13.58% 33.77% 9.33
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
Janus Aspen Series Balanced 9/13/93 20.71% 22.21% 18.42% 6.30
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
Janus Aspen Series Worldwide Growth 9/13/93 56.61% 31.01% 27.41% 6.30
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
MFS VIT Emerging Growth 7/24/95 68.29% N/A 33.47% 4.44
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
MFS VIT Growth With Income 10/09/95 1.61% N/A 18.23% 4.23
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
MFS VIT Research 7/26/95 18.14% N/A 20.09% 4.43
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
MS UIF Emerging Markets Equity 10/01/96 85.42% N/A 8.82% 3.25
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
MS UIF Fixed Income 1/02/97 -6.32% N/A 2.35% 2.99
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
MS UIF High Yield 1/02/97 2.00% N/A 5.42% 2.99
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
MS UIF International Magnum 1/02/97 19.22% N/A 10.45% 2.99
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust Managed(1) 8/01/88 -0.01% 17.30% 14.96% N/A
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust Small Cap(2) 8/01/88 -6.51% 6.09% 9.51% N/A
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
PIMCO VIT StocksPLUS Growth and Income 1/02/98 14.14% N/A 20.65% 2.00
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
Transamerica VIF Growth(3) 2/26/69 31.22% 38.81% 25.09% N/A
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
Transamerica VIF Money Market 1/02/98 -0.37% N/A 1.15% 1.99
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) On September 16th, 1994, an investment company which had commenced
operations on August 1, 1988, called Quest for Value Accumulation Trust,
the Old Trust was effectively divided into two investment funds - the Old
Trust and the present OCC Accumulation Trust, the Present Trust at which
time the Present Trust commenced operations. The total net assets of the
managed portfolio immediately after the transaction were $682,601,380 in
the Old Trust and $51,345,102 in the Present Trust. For the period prior to
September 16, 1994, the performance figures for the managed portfolio of
the Present Trust reflect the performance of the managed portfolio of the
Old Trust.
(2) On September 16th, 1994, an investment company which had commenced
operations on August 1, 1988, called Quest for Value Accumulation Trust,
the Old Trust was effectively divided into two investment funds - the Old
Trust and the present OCC Accumulation Trust, the Present Trust at which
time the Present Trust commenced operations. The total net assets of the
Small Cap Portfolio immediately after the transaction were $139,812,573 in
the Old Trust and $8,129,274 in the Present Trust. For the period prior to
September 16, 1994, the performance figures for the Small Cap Portfolio of
the Present Trust reflect the performance of the Small Cap Portfolio of the
Old Trust.
(3) The Growth Portfolio of the Transamerica Variable Insurance Fund, Inc., is
the successor to Separate Account Fund C of Transamerica Occidental Life
Insurance Company, a management investment company funding variable
annuities, through a reorganization on November 1, 1996. Accordingly, the
performance data for the Transamerica VIF Growth Portfolio includes
performance of its predecessor.
Performance information reflects only the performance of a hypothetical
investment during the particular time period on which the calculations are
based. One-year total return and average annual total return figures are based
on historical earnings and are not intended to indicate future performance.
Performance information should be considered in light of the investment
objectives and policies, characteristics and quality of the portfolio in which a
sub-account invests and the market conditions during the given time period, and
should not be considered as a representation of what may be achieved in the
future.
<PAGE>
LEGAL PROCEEDINGS
There are no pending legal proceedings involving the separate account or its
assets. Transamerica is not involved in any litigation that is materially
important to its total assets.
ADDITION, DELETION OR
SUBSTITUTION OF INVESTMENTS
We reserve the right, subject to law, to make additions to, deletions from, or
substitutions for the shares that are held in the sub-accounts. We may redeem
the shares of a portfolio and substitute shares of another registered open-end
management company if:
o the shares of the portfolio are no longer available for investment; OR
o in our judgment further investment in the portfolio would be improper based
on the purposes of the separate account or the affected sub-account.
Where the 1940 Act or other law requires, we will not substitute any shares
respecting a policy interest in a sub-account without notice to policy owners
and prior approval of the SEC and state
insurance authorities. The separate account may, as the law allows, purchase
other securities for other policies or allow a conversion between policies on a
policy owner's request.
We reserve the right to establish additional sub-accounts funded by a new
portfolio or by another investment company. Subject to law, we may, in our sole
discretion, establish new sub-accounts or eliminate one or more sub-accounts.
Shares of the portfolios are issued to other separate accounts of Transamerica
and its affiliates that fund variable annuity contracts. Shares of the
portfolios are also issued to other unaffiliated insurance companies. This
practice is referred to as shared funding. It is conceivable that in the future
such mixed funding or shared funding may be disadvantageous for variable life
policy owners or variable annuity policy owners. We do not believe that mixed
funding is currently disadvantageous to either variable life insurance policy
owners or variable annuity policy owners. We will monitor events to identify any
material conflicts among policy owners because of mixed funding. If we conclude
that separate portfolios should be established for variable life and variable
annuity separate accounts, we will bear the expenses.
We may change the policy to reflect a substitution or other change and will
notify policy owners of the change. Subject to any approvals the law may
require, the separate account or any sub-accounts may be:
o operated as a management company under the 1940 Act;
o deregistered under the 1940 Act if registration is no longer required; OR
o combined with other sub-accounts or our other separate accounts.
FURTHER INFORMATION
We have filed a 1933 Act registration statement for this offering with the SEC.
Under SEC rules and regulations, we have omitted from this prospectus parts of
the registration statement and amendments. Statements contained in this
prospectus are summaries of the policy and other legal documents. The complete
documents and omitted information may be obtained from the SEC's principal
office in Washington, D.C., on payment of the SEC's prescribed fees.
MORE INFORMATION ABOUT THE FIXED
ACCOUNT
This prospectus serves as a disclosure document only for the aspects of the
policy relating to the separate account. For complete details on the fixed
account, read the policy itself. The fixed account and other interests in our
general account are not regulated under the 1933 Act or the 1940 Act because of
exemption and exclusionary provisions. 1933 Act provisions on the accuracy and
completeness of statements made in prospectuses may apply to information on the
fixed part of the policy and the fixed account. The SEC has not reviewed the
disclosures in this section of the prospectus.
GENERAL DESCRIPTION
You may allocate part or all of your net payments to accumulate at a fixed rate
of interest in the fixed account. The fixed account is a part of our general
account. The general account is made up of all of our general assets other than
those allocated to any separate account. Allocations to the fixed account become
part of our general account assets and are used to support insurance and annuity
obligations.
FIXED ACCOUNT INTEREST
We guarantee amounts allocated to the fixed account as to principal and a
minimum rate of interest. The interest rates credited to the portion of policy
value in the fixed account are set by us, but will never be less than 4% per
year. We may establish higher interest rates, and the initial interest rates and
the renewal interest rates may be different. We will guarantee initial interest
rates on amounts allocated to the fixed account, either as payments or
transfers, to the next policy anniversary. At each policy anniversary, we will
credit the renewal interest rate effective on that date to money remaining in
the fixed account. We will guarantee this rate for one year. The initial and the
renewal interest rates do not apply to the portion of the policy value in the
fixed account which secures any outstanding loan.
TRANSFERS, SURRENDERS, PARTIAL
WITHDRAWALS AND POLICY LOANS
If a policy is surrendered or if a partial withdrawal is made, a surrender
charge or partial withdrawal charge may be imposed. On a decrease in face
amount, the surrender charge deducted is a fraction of the charge that would
apply to a full surrender. We deduct partial withdrawals from the portion of the
policy value allocated to the fixed account on a last-in/first-out basis.
The first 12 transfers in a policy year are free. After that, we will deduct a
$10 transfer charge for each transfer in that policy year. We may increase the
charge to a maximum of $25. The transfer privilege is subject to our consent and
to our then current rules.
Policy loans may also be made from the portion of the policy value in the fixed
account. We will credit that part of the policy value that is equal to any
outstanding loan with interest at an effective annual yield of at least 6.0% or,
for preferred loans, 7.5%. For policies issued subject to the jurisdiction of
the Virgin Islands, the effective annual yield will be at least 4.0% and, for
preferred loans, 5.5%.
We may delay transfers, surrenders, partial withdrawals, net death benefits and
policy loans from the fixed account for up to six months, subject to state law.
However, if payment is delayed for 30 days or more, we will pay interest at
least equal to an effective annual yield of 3.0% per year for the deferment.
Amounts from the fixed account used to make payments on policies that we or our
affiliates issue will not be delayed.
INDEPENDENT AUDITORS
The statutory-basis financial statements of Transamerica at December 31, 1999
and 1998, and for each of the three years in the period ended December 31, 1999,
and for each of the two periods indicated therein, and the financial statements
of Separate Account VUL-1 at December 31, 1999 appearing in the prospectus have
been audited by Ernst & Young LLP, Independent Auditors, as set forth in their
attached reports. The financial statements audited by Ernst & Young LLP have
been included in reliance upon such reports given upon the authority of such
firm as experts in accounting and auditing.
FINANCIAL STATEMENTS
Statutory-basis financial statements for Transamerica are included in this
prospectus, starting on the next page. The statutory-basis financial statements
of Transamerica should be considered only as bearing on our ability to meet our
obligations under the policy. They should not be considered as bearing on the
investment performance of the assets held in the separate account.
<PAGE>
AUDITED FINANCIAL STATEMENTS
Transamerica Occidental Life Insurance Company Separate Account VUL-1
Year ended December 31, 1999
with Report of Independent Auditors
<PAGE>
Separate Account VUL-1
Transamerica Occidental Life Insurance Company
Audited Financial Statements
Year ended December 31, 1999
<TABLE>
<CAPTION>
CONTENTS
<S> <C>
Report of Independent Auditors......................................................................1
Financial Statements
Statement of Assets and Liabilities.................................................................2
Statement of Operations.............................................................................6
Statement of Changes in Net Assets.................................................................10
Notes to Financial Statements......................................................................17
</TABLE>
<PAGE>
1
Report of Independent Auditors
Unitholders of Separate Account VUL-1
of Transamerica Occidental Life Insurance Company
The Board of Directors, Transamerica Occidental Life Insurance Company
We have audited the accompanying statement of assets and liabilities of Separate
Account VUL-1 of Transamerica Occidental Life Insurance Company (comprised of
the Alger American Income & Growth, Alliance VPF Growth & Income, Alliance VPF
Premier Growth, Dreyfus VIF Capital Appreciation, Dreyfus VIF Small Cap, Janus
Aspen Balanced, Janus Aspen Worldwide Growth, MFS VIT Emerging Growth, MFS VIT
Growth with Income, MFS VIT Research, MSDW (formerly Morgan Stanley) UF Fixed
Income, MSDW (formerly Morgan Stanley) UF High Yield, MSDW (formerly Morgan
Stanley) UF International Magnum, OCC Accumulation Trust Managed, OCC
Accumulation Trust Small Cap, Transamerica VIF Growth, Transamerica VIF Money
Market, PIMCO StockPlus Growth & Income and MSDW (formerly Morgan Stanley) UF
Emerging Markets Equity sub-accounts) as of December 31, 1999, the related
statements of operations for the year then ended, and changes in net assets for
the year then ended and for the period April 13, 1998 (commencement of
operations) to December 31, 1998. These financial statements are the
responsibility of Separate Account VUL-1's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. 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. Our
procedures included confirmation of securities owned as of December 31, 1999, by
correspondence with the fund managers. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of each of the respective
sub-accounts comprising Separate Account VUL-1 of Transamerica Occidental Life
Insurance Company at December 31, 1999, the results of their operations for the
year then ended, and the changes in their net assets for the year then ended and
for the period April 13, 1998 (commencement of operations) to December 31, 1998,
in conformity with accounting principles generally accepted in the United
States.
March 31, 2000
<PAGE>
<TABLE>
<CAPTION>
Separate Account VUL-1 of
Transamerica Occidental Life Insurance Company
Statement of Assets and Liabilities
December 31, 1999
ALGER
AMERICAN ALLIANCE VPF ALLIANCE VPF DREYFUS VIF DREYFUS VIF
INCOME & GROWTHGROWTH & INCOME PREMIER CAPITAL SMALL
SUB-ACCOUNT SUB-ACCOUNT GROWTH APPRECIATION CAP
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
--------------------------------------------------------------------------------
- -------------------------------------
ASSETS
<S> <C> <C> <C> <C> <C>
Investments, at fair value $ 566,182 $ 610,410 $ 1,010,429 $ 804,280 $ 662,267
Due from Transamerica Life 20 12 30 2 24
--------------------------------------------------------------------------------
Total assets 566,202 610,422 1,010,459 804,282 662,291
LIABILITIES
Due to Transamerica Life - - - - -
--------------------------------------------------------------------------------
Total liabilities - - - - -
--------------------------------------------------------------------------------
Net assets $ 566,202 $ 610,422 $ 1,010,459 $ 804,282 $ 662,291
================================================================================
Accumulation units outstanding 30,957.96 46,822.72 56,026.46 58,872.76 55,774.94
================================================================================
Net asset value and redemption
price per unit $ 18.29 $ 13.04 $ 18.04 $ 13.66 $ 11.87
================================================================================
Investment sub-account information:
Number of mutual fund shares 32,206.02 28,013.29 24,979.72 20,172.56 9,982.92
Net asset value per share $ 17.58 $ 21.79 $ 40.45 $ 39.87 $ 66.34
Investment cost $ 428,016 $ 601,814 $ 851,423 $ 742,779 $ 539,088
See accompanying notes.
<PAGE>
Separate Account VUL-1 of
Transamerica Occidental Life Insurance Company
Statement of Assets and Liabilities (continued)
December 31, 1999
JANUS MFS VIT MSDW STANLEY UF
JANUS ASPEN MFS VIT GROWTH FIXED
ASPEN WORLDWIDE EMERGING WITH MFS VIT INCOME
BALANCED GROWTH GROWTH INCOME RESEARCH SUB-ACCOUNT
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
- --------------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments, at fair value $ 780,850 $ 1,482,912 $ 516,797 $ 247,226 $ 177,741 $ 139,183
Due from Transamerica Life 10 60 49 5 6 -
------------------------------------------------------------------------------------------------
Total assets 780,860 1,482,972 516,846 247,231 177,747 139,183
LIABILITIES
Due to Transamerica Life - - - - - 2
------------------------------------------------------------------------------------------------
Total liabilities - - - - - 2
------------------------------------------------------------------------------------------------
Net assets $ 780,860 $ 1,482,972 $ 516,846 $ 247,231 $ 177,747 $ 139,181
================================================================================================
Accumulation units
outstanding 48,209.34 74,855.35 23,220.92 19,691.38 12,277.69 13,493.48
================================================================================================
Net asset value and
redemption price per unit $ 16.20 $ 19.81 $ 22.26 $ 12.56 $ 14.48 $ 10.32
================================================================================================
Investment sub-account
information:
Number of mutual fund
shares 27,967.40 31,055.76 13,621.42 11,601.43 7,615.31 13,849.05
Net asset value per share $ 27.92 $ 47 .75 $ 37.94 $ 21.31 $ 23.34 $ 10.05
Investment cost $ 666,174 $ 1,057,715 $ 337,720 $ 230,991 $ 149,936 $ 145,814
See accompanying notes.
<PAGE>
Separate Account VUL-1 of
Transamerica Occidental Life Insurance Company
Statement of Assets and Liabilities (continued)
December 31, 1999
OCC OCC TRANSAMERICA VIF
MSDW UF MSDW UF ACCUMULATION ACCUMULATION TRANSAMERICA MONEY
HIGH INTERNATIONAL TRUST MANAGED TRUST SMALL CAP VIF MARKET
YIELD MAGNUM SUB-ACCOUNT SUB-ACCOUNT GROWTH SUB-ACCOUNT
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
- --------------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments, at fair value $ 150,930 $ 149,530 $ 227,789 $ 83,943 $ 3,726,623 $ 667,565
Due from Transamerica Life - 4 - 2 236 -
------------------------------------------------------------------------------------------------
Total assets 150,930 149,534 227,789 83,945 3,726,859 667,565
LIABILITIES
Due to Transamerica Life 3 - - - - -
Total liabilities 3 - - - - -
------------------------------------------------------------------------------------------------
Net assets $ 150,927 $ 149,534 $ 227,789 $ 83,945 $ 3,726,859 $ 667,565
================================================================================================
Accumulation units
outstanding 13,950.00 11,559.78 21,146.80 9,500.91 205,466.36 619,944.82
================================================================================================
Net asset value and
redemption price per unit $ 10.82 $ 12.94 $ 10.77 $ 8.84 $ 18.14 $ 1.08
================================================================================================
Investment sub-account
information:
Number of mutual fund
shares 14,739.28 10,765.27 5,218.54 3,727.48 140,045.94 667,565.28
Net asset value per share $ 10.24 $ 13.89 $ 43.65 $ 22.52 $ 26.61 $ 1.00
Investment cost $ 155,352 $ 128,490 $ 221,860 $ 82,924 $ 2,920,645 $ 667,565
</TABLE>
See accompanying notes.
<PAGE>
<TABLE>
<CAPTION>
Separate Account VUL-1 of
Transamerica Occidental Life Insurance Company
Statement of Assets and Liabilities (continued)
December 31, 1999
PIMCO MSDW UF
STOCKPLUS EMERGING MARKETS
GROWTH & EQUITY
INCOME SUB-ACCOUNT
SUB-ACCOUNT
- -----------------------------------------------------------------------------------------------------------
ASSETS
<S> <C> <C>
Investments, at fair value $ 6 $ 137
Due from Transamerica Life - -
---------------------------------
Total assets 6 137
LIABILITIES
Due to Transamerica Life - -
---------------------------------
Total liabilities - -
---------------------------------
Net assets $ 6 $ 137
=================================
Accumulation units
outstanding 0.53 9.23
=================================
Net asset value and
redemption price per unit $ 11.76 $ 14.79
=================================
Investment sub-account information:
Number of mutual fund shares 0.46 9.87
Net asset value per share $ 13.56 $ 13.84
Investment cost $ 7 $ 112
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Separate Account VUL-1 of
Transamerica Occidental Life Insurance Company
Statement of Operations
Year ended December 31, 1999
ALGER
AMERICAN ALLIANCE VPF ALLIANCE VPF DREYFUS VIF DREYFUS VIF
INCOME & GROWTH & INCOME PREMIER CAPITAL SMALL
GROWTH SUB-ACCOUNT GROWTH APPRECIATION CAP
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
- -------------------------------------------------------------------------------------------------------------------
- ----------------------------------------
<S> <C> <C> <C> <C> <C>
Investment income $ 8,912 $ 29,215 $ 4,298 $ 7,402 $ 213
- ----------------------------------------
- ----------------------------------------
Expenses:
- ----------------------------------------
Mortality and expense risk charge (2,213) (2,551) (3,856) (3,792) (3,107)
- -------------------------------------------------------------------------------------------------------------------
- ----------------------------------------
Net investment income (expense) 6,699 26,664 442 3,610 (2,894)
- ----------------------------------------
- ----------------------------------------
Net realized and unrealized gain (loss) on investments:
- ----------------------------------------
Realized gain (loss) on
investment transactions 13,563 3,884 34,524 5,372 488
- ----------------------------------------
Unrealized appreciation
(depreciation) of investments 125,112 (3,440) 137,666 43,894 104,191
- -------------------------------------------------------------------------------------------------------------------
- ----------------------------------------
- ----------------------------------------
Net gain (loss) on investments 138,675 444 172,190 49,266 104,679
- -------------------------------------------------------------------------------------------------------------------
- ----------------------------------------
Net increase (decrease) in net
assets resulting from $ 145,374 $ 27,108 $ 172,632 $ 52,876 $ 101,785
operations
- ---------------------------------------============================================================================
See accompanying notes.
<PAGE>
Separate Account VUL-1 of
Transamerica Occidental Life Insurance Company
Statement of Operations (continued)
Year ended December 31, 1999
JANUS MFS VIT
JANUS ASPEN MFS VIT GROWTH MSDW UF
ASPEN WORLDWIDE EMERGING WITH MFS VIT FIXED
BALANCED GROWTH GROWTH INCOME RESEARCH INCOME
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
- -----------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------
Investment income $ 12,581 $ 1,385 $ 1 $ 760 $ 994 $ 6,063
- ------------------------------------------------
- ------------------------------------------------
Expenses:
- ------------------------------------------------
Mortality and expense risk charge (3,223) (4,886) (2,102) (1,150) (849) (621)
- -----------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------
Net investment income (expense) 9,358 (3,501) (2,101) (390) 145 5,442
- ------------------------------------------------
- ------------------------------------------------
Net realized and unrealized gain (loss) on investments:
- ------------------------------------------------
Realized gain (loss) on investment
transactions 5,132 25,128 61,562 2,275 9,062 (746)
- ------------------------------------------------
Unrealized appreciation (depreciation)
of investments 96,875 399,231 158,947 9,900 21,192 (5,312)
- -----------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------
- ------------------------------------------------
Net gain (loss) on investments 102,007 424,359 220,509 12,175 30,254 (6,058)
- -----------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------
Net increase (decrease) in net assets
resulting from operations $ 111,365 $ 420,858 $ 218,408 $ 11,785 $ 30,399 $ (616)
- -----------------------------------------------====================================================================================
See accompanying notes.
<PAGE>
Separate Account VUL-1 of
Transamerica Occidental Life Insurance Company
Statement of Operations (continued)
Year ended December 31, 1999
OCC OCC
MSDW UF ACCUMULATION ACCUMULATION TRANSAMERICA
MSDW UF HIGH INTERNATIONAL TRUST MANAGED TRUST SMALL CAP TRANSAMERICA VIF VIF MONEY
YIELD MAGNUM SUB-ACCOUNT SUB-ACCOUNT GROWTH MARKET
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
- -----------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------
Investment income $ 11,079 $ 1,333 $ 6,501 $ 243 $ 7,412 $ 20,838
- ------------------------------------------
- ------------------------------------------
Expenses:
- ------------------------------------------
Mortality and expense risk charge (889) (619) (1,341) (415) (14,814) (3,718)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------
Net investment income (expense) 10,190 714 5,160 (172) (7,402) 17,120
- ------------------------------------------
- ------------------------------------------
Net realized and unrealized gain (loss) on investments:
- ------------------------------------------
Realized gain (loss) on investment
transactions 426 1,917 969 487 19,373 -
- ------------------------------------------
Unrealized appreciation
(depreciation) of investments (3,139) 20,493 1,090 (1,273) 762,517 -
- -----------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------
- ------------------------------------------
Net gain (loss) on investments (2,713) 22,410 2,059 (786) 781,890 -
- -----------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------
Net increase (decrease) in net
assets resulting from operations $ 7,477 $ 23,124 $ 7,219 $ (958) $ 774,488 $ 17,120
- -----------------------------------------===========================================================================================
See accompanying notes.
<PAGE>
Separate Account VUL-1 of
Transamerica Occidental Life Insurance Company
Statement of Operations (continued)
Year ended December 31, 1999
PIMCO MSDW UF
STOCK PLUS EMERGING
GROWTH & MARKETS
INCOME EQUITY
SUB-ACCOUNT SUB-ACCOUNT
- -----------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Investment income $ - $ -
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Expenses:
- ------------------------------------------------------------------------------
Mortality and expense risk charge - -
- -----------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Net investment income (expense) - -
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments:
- ------------------------------------------------------------------------------
Realized gain (loss) on investment transactions - -
- ------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investments - 25
- -----------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Net gain (loss) on investments - 25
- -----------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ - $ 25
- -----------------------------------------------------------------------------==============================
See accompanying notes.
<PAGE>
Separate Account VUL-1 of
Transamerica Occidental Life Insurance Company
Statement of Changes in Net Assets
Year ended December 31, 1999
ALGER
AMERICAN ALLIANCE VPF ALLIANCE VPF DREYFUS VIF DREYFUS VIF
INCOME & GROWTH & PREMIER CAPITAL SMALL
GROWTH INCOME GROWTH APPRECIATION CAP
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------
Increase (decrease) in net assets:
- -------------------------------------------------------------
From operations:
- -------------------------------------------------------------
Net investment income (expense) $ 6,699 $ 26,664 $ 442 $ 3,610 $ (2,894)
- -------------------------------------------------------------
Realized gain (loss) on investment transactions 13,563 3,884 34,524 5,372 488
- -------------------------------------------------------------
Unrealized appreciation (depreciation)
of investments 125,112 (3,440) 137,666 43,894 104,191
- ------------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------
Net increase (decrease) in net assets resulting
from operations 145,374 27,108 172,632 52,876 101,785
- -------------------------------------------------------------
- -------------------------------------------------------------
From policy related transactions:
- -------------------------------------------------------------
Premiums deposited 199,030 188,512 611,419 385,174 254,005
- -------------------------------------------------------------
Redemptions (30,830) (38,171) (78,645) (53,061) (40,785)
- -------------------------------------------------------------
Transfers between fixed account and sub-accounts 170,267 279,117 172,196 212,752 123,253
- ------------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------
Net increase in net assets resulting from policy related
transactions 338,467 429,458 704,970 544,865 336,473
- ------------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------
Total increase in net assets 483,841 456,566 877,602 597,741 438,258
- -------------------------------------------------------------
- -------------------------------------------------------------
Net assets at beginning of year 82,361 153,856 132,857 206,541 224,033
- ------------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------
Net assets at end of year $ 566,202 $ 610,422 $ 1,010,459 $ 804,282 $ 662,291
- ------------------------------------------------------------========================================================================
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Separate Account VUL-1 of
Transamerica Occidental Life Insurance Company
Statement of Changes in Net Assets (continued)
Year ended December 31, 1999
JANUS MFS VIT
JANUS ASPEN MFS VIT GROWTH MSDW UF
ASPEN WORLDWIDE EMERGING WITH MFS VIT FIXED
BALANCED GROWTH GROWTH INCOME RESEARCH INCOME
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
- -----------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------
Increase (decrease) in net assets:
- ---------------------------------------------
From operations:
- ---------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net investment income (expense) $ 9,358 $ (3,501) $ (2,101) $ (390) $ 145 $ 5,442
- ---------------------------------------------
Realized gain (loss) on investment
transactions 5,132 25,128 61,562 2,275 9,062 (746)
- ---------------------------------------------
Unrealized appreciation (depreciation)
of investments 96,875 399,231 158,947 9,900 21,192 (5,312)
- ------------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------
Net increase (decrease) in net assets
resulting from operations 111,365 420,858 218,408 11,785 30,399 (616)
- ---------------------------------------------
- ---------------------------------------------
From policy related transactions:
- ---------------------------------------------
Premiums deposited 372,741 474,430 231,628 101,497 81,529 91,127
- ---------------------------------------------
Redemptions (51,671) (69,087) (34,977) (17,573) (14,877) (14,531)
- ---------------------------------------------
Transfers between fixed account and
sub-accounts 196,882 435,173 (20,642) 74,885 31,605 26,153
- ------------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------
Net increase in net assets resulting
from policy related transactions 517,952 840,516 176,009 158,809 98,257 102,749
- ------------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------
Total increase in net assets 629,317 1,261,374 394,417 170,594 128,656 102,133
- ---------------------------------------------
- ---------------------------------------------
Net assets at beginning of year 151,543 221,598 122,429 76,637 49,091 37,048
- ------------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------
Net assets at end of year $ 780,860 $ 1,482,972 $ 516,846 $ 247,231 $ 177,747 $ 139,181
- --------------------------------------------========================================================================================
See accompanying notes.
<PAGE>
Separate Account VUL-1 of
Transamerica Occidental Life Insurance Company
Statement of Changes in Net Assets (continued)
Year ended December 31, 1999
OCC OCC TRANSAMERICA
MSDW UF MSDW UF ACCUMULATION ACCUMULATION TRANSAMERICA VIF VIF
HIGH INTERNATIONAL TRUST MANAGED TRUST SMALL CAP GROWTH MONEY
YIELD MAGNUM SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT MARKET
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------
Increase (decrease) in net assets:
- -----------------------------------------
From operations:
- -----------------------------------------
Net investment income (expense) $ 10,190 $ 714 $ 5,160 $ (172) $ (7,402) $ 17,120
- -----------------------------------------
Realized gain (loss) on
investment transactions 426 1,917 969 487 19,373 -
- -----------------------------------------
Unrealized appreciation
(depreciation) of investments (3,139) 20,493 1,090 (1,273) 762,517 -
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------
Net increase (decrease) in net assets
resulting from operations 7,477 23,124 7,219 (958) 774,488 17,120
- -----------------------------------------
- -----------------------------------------
From policy related transactions:
- -----------------------------------------
Premiums deposited 59,348 87,061 68,604 38,037 1,670,015 2,903,307
- -----------------------------------------
Redemptions (18,320) (13,429) (15,386) (5,997) (249,380) (99,333)
- -----------------------------------------
Transfers between fixed account and
sub-accounts 18,401 23,842 40,694 21,836 789,554 (2,531,306)
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------
Net increase in net assets resulting
from policy related transactions 59,429 97,474 93,912 53,876 2,210,189 272,668
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------
Total increase in net assets 66,906 120,598 101,131 52,918 2,984,677 289,788
- -----------------------------------------
- -----------------------------------------
Net assets at beginning of year 84,021 28,936 126,658 31,027 742,182 377,777
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------
Net assets at end of year $ 150,927 $ 149,534 $ 227,789 $ 83,945 $ 3,726,859 $ 667,565
- ----------------------------------------===========================================================================================
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Separate Account VUL-1 of
Transamerica Occidental Life Insurance Company
Statement of Changes in Net Assets (continued)
Year ended December 31, 1999
PIMCO MSDW UF EMERGING
STOCKPLUS MARKETS
GROWTH & EQUITY
INCOME SUB-ACCOUNT
SUB-ACCOUNT
- -----------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets:
From operations:
<S> <C> <C>
Net investment income (expense) $ - $ -
Realized gain (loss) on investment transactions - -
Unrealized appreciation (depreciation) of investments - 25
---------------------------------
Net increase (decrease) in net assets resulting from operations - 25
From policy related transactions:
Premiums deposited 8 58
Redemptions (2) (22)
Transfers between fixed account and sub-accounts - 76
---------------------------------
Net increase in net assets resulting from policy related transactions 6 112
---------------------------------
Total increase in net assets 6 137
Net assets at beginning of year - -
---------------------------------
Net assets at end of year $ 6 $ 137
=================================
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Separate Account VUL-1 of
Transamerica Occidental Life Insurance Company
Statement of Changes in Net Assets
Period April 13, 1998 (Commencement of Operations) to December 31, 1998
ALGER
AMERICAN ALLIANCE VPF ALLIANCE VPF DREYFUS VIF DREYFUS VIF
INCOME & GROWTH & PREMIER CAPITAL SMALL
GROWTH INCOME GROWTH APPRECIATION CAP
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
- ----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------
Increase (decrease) in net assets:
- -----------------------------------------------------------
From operations:
- -----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net investment income (expense) $ (3,489) $ (3,892) $ (6,275) $ (5,299) $ (6,599)
- -----------------------------------------------------------
Realized gain (loss) on investment transactions (22) 65 269 (577) (3,418)
- -----------------------------------------------------------
Unrealized appreciation (depreciation)
of investments 13,054 12,035 21,341 17,606 18,988
- ----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------
Net increase (decrease) in net assets resulting
from operations 9,543 8,208 15,335 11,730 8,971
- -----------------------------------------------------------
- -----------------------------------------------------------
From policy related transactions:
- -----------------------------------------------------------
Premiums deposited 62,119 74,612 98,221 118,326 113,208
- -----------------------------------------------------------
Terminations - - - - -
- -----------------------------------------------------------
Transfers between fixed account and sub-accounts 10,699 71,036 19,301 76,485 101,854
- ----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------
Net increase in net assets resulting from policy
related transactions 72,818 145,648 117,522 194,811 215,062
- ----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------
Total increase in net assets 82,361 153,856 132,857 206,541 224,033
- -----------------------------------------------------------
- -----------------------------------------------------------
Net assets at beginning of period - - - - -
- ----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------
Net assets at end of period $ 82,361 $ 153,856 $ 132,857 $ 206,541 $ 224,033
- ----------------------------------------------------------========================================================================
See accompanying notes.
<PAGE>
Separate Account VUL-1 of
Transamerica Occidental Life Insurance Company
Statement of Changes in Net Assets (continued)
Period April 13, 1998 (Commencement of Operations) to December 31, 1998
JANUS MFS VIT
JANUS ASPEN MFS VIT GROWTH MSDW UF
ASPEN WORLDWIDE EMERGING WITH MFS VIT FIXED
BALANCED GROWTH GROWTH INCOME RESEARCH INCOME
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
- -----------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------
Increase (decrease) in net assets:
- ------------------------------------------------
From operations:
- ------------------------------------------------
Net investment(expense) income $ (2,215) $ (7,705) $ (5,544) $ (3,295) $ (1,575) $ 454
- ------------------------------------------------
Realized gain (loss) on investment
transactions 169 (1,358) (616) (153) (60) 2
- ------------------------------------------------
Unrealized appreciation (depreciation)
of investments 17,794 25,966 20,130 6,335 6,613 (1,319)
- -----------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------
Net increase (decrease) in net assets resulting
from operations 15,748 16,903 13,970 2,887 4,978 (863)
- ------------------------------------------------
- ------------------------------------------------
From policy related transactions:
- ------------------------------------------------
Premiums deposited 119,245 147,074 71,964 66,031 26,441 33,772
- ------------------------------------------------
Terminations - - - - - -
- ------------------------------------------------
Transfers between fixed account and
sub-accounts 16,550 57,621 36,495 7,719 17,672 4,139
- -----------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------
Net increase in net assets resulting from
policy related transactions 135,795 204,695 108,459 73,750 44,113 37,911
- -----------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------
Total increase in net assets 151,543 221,598 122,429 76,637 49,091 37,048
- ------------------------------------------------
- ------------------------------------------------
Net assets at beginning of period - - - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------
Net assets at end of period $ 151,543 $ 221,598 $ 122,429 $ 76,637 $ 49,091 $ 37,048
- -----------------------------------------------====================================================================================
See accompanying notes.
<PAGE>
Separate Account VUL-1 of
Transamerica Occidental Life Insurance Company
Statement of Changes in Net Assets (continued)
Period April 13, 1998 (Commencement of Operations) to December 31, 1998
OCC OCC TRANSAMERICA
MSDW UF MSDW UF ACCUMULATION ACCUMULATION TRANSAMERICA VIF
HIGH INTERNATIONAL TRUST TRUST SMALL CAP VIF MONEY
YIELD MAGNUM MANAGED SUB-ACCOUNT GROWTH MARKET
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------
Increase (decrease) in net assets:
- ------------------------------------------
From operations:
- ------------------------------------------
Net investment income (expense) $ 2,524 $ (1,523) $ (3,856) $ (992) $ 32,662 $ (23,947)
- ------------------------------------------
Realized gain (loss) on
investment transactions (345) - (745) (59) 794 -
- ------------------------------------------
Unrealized appreciation
(depreciation) of investments (1,283) 547 4,841 2,292 43,458 -
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------
Net increase (decrease) in net assets
resulting from operations 896 (976) 240 1,241 76,914 (23,947)
- ------------------------------------------
- ------------------------------------------
From policy related transactions:
- ------------------------------------------
Premiums deposited 77,414 23,861 48,709 21,651 539,439 1,045,010
- ------------------------------------------
Terminations - - - - - -
- ------------------------------------------
Transfers between fixed account
and sub-accounts 5,711 6,051 77,709 8,135 125,829 (643,286)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------
Net increase in net assets resulting
from policy related transactions 83,125 29,912 126,418 29,786 665,268 401,724
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------
Total increase in net assets 84,021 28,936 126,658 31,027 742,182 377,777
- ------------------------------------------
- ------------------------------------------
Net assets at beginning of period - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------
Net assets at end of period $ 84,021 $ 28,936 $ 126,658 $ 31,027 $ 742,182 $ 377,777
- -----------------------------------------===========================================================================================
</TABLE>
See accompanying notes.
<PAGE>
Separate Account VUL-1 of
Transamerica Occidental Life Insurance Company
Notes to Financial Statements
December 31, 1999
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Separate Account VUL-1 of Transamerica Occidental Life Insurance Company
(Separate Account) was established by Transamerica Occidental Life Insurance
Company (Transamerica Life) as a separate account under the laws of the state of
California on June 11, 1996. The Separate Account is registered with the
Securities and Exchange Commission (the Commission) under the Investment Company
Act of 1940, as amended, as a unit investment trust and is designed to provide
life insurance benefits pursuant to variable life insurance contracts (Contract)
issued by Transamerica Life. The Separate Account commenced operations when
initial deposits were received on April 13, 1998.
In accordance with the terms of the Policy, all payments are directed either to
the fixed account or to sub-accounts within the Separate Account. Payments
allocated to the Separate Account by policy owners must be allocated to purchase
units of any or all of the Separate Account's nineteen sub-accounts, each of
which invests exclusively in a specific corresponding mutual fund portfolio
(Fund). The mutual fund portfolios are comprised of the Alger American Income &
Growth, Alliance VPF Growth & Income, Alliance VPF Premier Growth, Dreyfus VIF
Capital Appreciation, Dreyfus VIF Small Cap, Janus Aspen Balanced, Janus Aspen
Worldwide Growth, MFS VIT Emerging Growth, MFS VIT Growth with Income, MFS VIT
Research, MSDW (formerly Morgan Stanley) UF Fixed Income, MSDW(formerly Morgan
Stanley) UF High Yield, MSDW(formerly Morgan Stanley) UF International Magnum,
OCC Accumulation Trust Managed, OCC Accumulation Trust Small Cap, Transamerica
VIF Growth, Transamerica VIF Money Market, PIMCO StockPlus Growth & Income and
MSDW (formerly Morgan Stanley) UF Emerging Markets Equity sub-accounts. The
PIMCO Stock Plus Growth & Income and MSDW UF Emerging Markets Equity
sub-accounts have been available to policyholders since October 15, 1999. The
Funds are open-end management investment companies registered under the
Investment Company Act of 1940.
BASIS OF PRESENTATION
The accompanying financial statements of the Separate Account have been prepared
on the basis of accounting principles generally accepted in the United States.
The preparation of financial statements requires management to make estimates
and assumptions that affect amounts reported in the financial statements and
accompanying notes. Such estimates and assumptions could change in the future as
more information becomes known which could impact the amounts reported and
disclosed herein. The accounting principles followed and the methods of applying
those principles are presented below:
<PAGE>
Separate Account VUL-1 of
Transamerica Occidental Life Insurance Company
Notes to Financial Statements (continued)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
BASIS OF PRESENTATION (CONTINUED)
Investment Valuation-Investments in the Funds' shares are carried at fair (net
asset) value. Realized investment gains or losses on investments are determined
on a specific identification basis. Investment transactions are accounted for on
the date the order to buy or sell is executed (trade date).
Investment Income-Investment income consists of dividend income (both ordinary
and capital gains) and is recognized on the ex-dividend date. All distributions
received are reinvested in the respective sub-accounts.
Federal Income Taxes-Operations of the Separate Account are part of, and will be
taxed with, those of Transamerica Life, which is taxed as a "life insurance
company" under the Internal Revenue Code. Under current federal income tax laws,
income from assets maintained in the Separate Account for the exclusive benefit
of participants generally is not subject to federal income tax.
2. EXPENSES AND CHARGES
Mortality and expense risk charges are deducted from each sub-account on a daily
basis which is equal, on an annual basis, to 0.65% of the daily net asset value
of the sub-account. This amount may be increased to an annual rate no greater
than 0.80% and is paid to Transamerica Life. For a period not to exceed the
first 20 policy years, an administrative expense charge is also deducted by
Transamerica Life from each sub-account on a daily basis which is equal, on an
annual basis, to 0.15% of the daily net asset value of the sub-account.
The following charges are deducted from a policyholder account by Transamerica
Life and not directly from the Separate Account. Currently, 4% of each payment
is deducted as a payment expense charge. For each partial withdrawal, a
transaction fee of 2% of the amount withdrawn not to exceed $25, is deducted.
The first 12 transfers in a policy year are free. After that, a $10 transfer
charge is deducted from amounts transferred in that policy year. For each
increase or decrease in face amount a transaction charge of $40 is deducted from
the policy value to reimburse the administrative costs of the change.
<PAGE>
3. REMUNERATION
The Separate Account pays no remuneration to directors, advisory boards or
officers or such other persons who may from time to time perform services for
the Separate Account.
4. INVESTMENT TRANSACTIONS
<TABLE>
<CAPTION>
The aggregate cost of purchases and the aggregate proceeds from the sales of
investments for the year ended December 31, 1999 were:
ALGER
AMERICAN INCOME ALLIANCE VPF ALLIANCE VPF DREYFUS VIF
& GROWTH GROWTH & INCOME PREMIER CAPITAL
SUB-ACCOUNT SUB-ACCOUNT GROWTH APPRECIATION
SUB-ACCOUNT SUB-ACCOUNT
- -------------------------------------------------------------------------------------------------
- ----------------------------------
<S> <C> <C> <C> <C>
Aggregate purchases $ 395,032 $ 479,753 $ 809,169 $ 576,897
================================================================
Aggregate proceeds from sales $ 49,883 $ 23,640 $ 103,783 $ 28,422
================================================================
JANUS
DREYFUS VIF JANUS ASPEN MFS VIT
SMALL ASPEN WORLDWIDE EMERGING GROWTH
CAP BALANCED GROWTH SUB-ACCOUNT
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
- -------------------------------------------------------------------------------------------------
- ----------------------------------
Aggregate purchases $ 367,357 $ 549,511 $ 910,211 $ 307,056
- ---------------------------------================================================================
- ----------------------------------
Aggregate proceeds from sales $ 33,794 $ 22,215 $ 73,250 $ 133,202
- ---------------------------------================================================================
MFS VIT
GROWTH MSDW UF MSDW UF
WITH MFS VIT FIXED HIGH
INCOME RESEARCH INCOME YIELD
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
- -------------------------------------------------------------------------------------------------
- ----------------------------------
Aggregate purchases $ 181,502 $ 131,018 $ 125,524 $ 84,043
- ---------------------------------================================================================
- ----------------------------------
Aggregate proceeds from sales $ 23,087 $ 32,620 $ 17,331 $ 14,422
- ---------------------------------================================================================
<PAGE>
4. INVESTMENT TRANSACTIONS (CONTINUED)
OCC OCC
MSDW UF ACCUMULATION ACCUMULATION TRANSAMERICA VIF
INTERNATIONAL TRUST MANAGED TRUST SMALL CAP GROWTH
MAGNUM SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
SUB-ACCOUNT
- -------------------------------------------------------------------------------------------------
- ----------------------------------
Aggregate purchases $ 115,333 $ 119,879 $ 64,545 $ 2,291,435
- ---------------------------------================================================================
- ----------------------------------
Aggregate proceeds from sales $ 17,149 $ 20,804 $ 10,842 $ 88,901
- ---------------------------------================================================================
TRANSAMERICA PIMCO MSDW UF
VIF STOCKPLUS EMERGING MARKETS
MONEY GROWTH & EQUITY
MARKET INCOME SUB-ACCOUNT
SUB-ACCOUNT SUB-ACCOUNT
- -------------------------------------------------------------------------------------------------
- --------------------------------------------------
Aggregate purchases $ 2,633,647 $ 7 $ 112
- -------------------------------------------------================================================
- --------------------------------------------------
Aggregate proceeds from sales $ 2,343,859 $ - $ -
- -------------------------------------------------================================================
</TABLE>
<PAGE>
<PAGE>
Transamerica Occidental Life Insurance Company
Financial Statements - Statutory Basis
Years ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
CONTENTS
<S> <C>
Report of Independent Auditors..........................................................................1
Audited Financial Statements
Balance Sheets - Statutory Basis........................................................................3
Statements of Operations - Statutory Basis..............................................................5
Statements of Changes in Capital and Surplus - Statutory Basis..........................................6
Statements of Cash Flow - Statutory Basis...............................................................7
Notes to Financial Statements - Statutory Basis.........................................................9
Statutory Basis Financial Statement Schedules
Summary of Investments - Other Than Investments in Related Parties -
Statutory Basis.....................................................................................39
Supplementary Insurance Information - Statutory Basis..................................................40
Reinsurance - Statutory Basis..........................................................................42
</TABLE>
<PAGE>
2
Report Of Independent Auditors
Board of Directors
Transamerica Occidental Life Insurance Company
We have audited the accompanying statutory-basis balance sheets of Transamerica
Occidental Life Insurance Company as of December 31, 1999 and 1998, and the
related statutory-basis statements of operations, changes in capital and
surplus, and cash flow for each of the three years in the period ended December
31, 1999. Our audits also included the accompanying statutory-basis financial
statement schedules required by Article 7 of Regulation S-X. These financial
statements and schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedules based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. 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.
As described in Note 1 to the financial statements, the Company presents its
financial statements in conformity with accounting practices prescribed or
permitted by the California Department of Insurance, which practices differ from
accounting principles generally accepted in the United States. The variances
between such practices and accounting principles generally accepted in the
United States also are described in Note 1. The effects on the financial
statements of these variances are not reasonably determinable but are presumed
to be material.
In our opinion, because of the effects of the matters described in the preceding
paragraph, the financial statements referred to above do not present fairly, in
conformity with accounting principles generally accepted in the United States,
the financial position of Transamerica Occidental Life Insurance Company at
December 31, 1999 and 1998, or the results of its operations or its cash flows
for each of the three years in the period December 31, 1999.
<PAGE>
However, in our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Transamerica
Occidental Life Insurance Company at December 31, 1999 and 1998, and the results
of its operations and its cash flow for each of the three years in the period
ended December 31, 1999, in conformity with accounting practices prescribed or
permitted by the California Department of Insurance. Also, in our opinion, the
related financial statement schedules, when considered in relation to the basic
statutory-basis financial statements taken as a whole, present fairly in all
material respects the information set forth therein.
March 31, 2000
<PAGE>
3
<TABLE>
<CAPTION>
Transamerica Occidental Life Insurance Company
Balance Sheets - Statutory Basis
(Dollars in thousands, except per share amounts)
DECEMBER 31
1999 1998
--------------------------------------
ADMITTED ASSETS Cash and invested assets:
<S> <C> <C>
Bonds $ 12,820,804 $ 12,135,178
Preferred stocks - unaffiliated 77,231 40,941
Preferred stocks - subsidiaries 58,219 56,860
Common stocks - unaffiliated 1,270,039 773,490
Common stocks - subsidiaries 984,400 965,485
Mortgage loans on real estate 385,590 387,038
Real estate 101,195 102,748
Policy loans 409,534 410,628
Cash and short-term investments 132,454 513,557
Other investments 218,997 194,264
--------------------------------------
Total cash and invested assets 16,458,463 15,580,189
Federal income tax receivable 160,075 -
Accrued investment income 226,823 210,932
Deferred and uncollected premiums 227,722 (807,951)
Reinsurance receivable 249,225 1,201,639
Other admitted assets 245,696 255,744
Separate account assets 4,229,395 3,443,277
--------------------------------------
Total admitted assets $ 21,797,399 $ 19,883,830
======================================
<PAGE>
15
DECEMBER 31
1999 1998
--------------------------------------
LIABILITIES AND CAPITAL AND SURPLUS
Liabilities:
Reserves for future policy benefits $ 9,695,196 $ 9,428,282
Policy and contract claims payable 296,789 156,147
Supplementary contracts without life contingencies 208,349 215,548
Funding agreements 2,228,261 1,927,054
Other policy liabilities 114,442 115,361
Funds held under coinsurance 2,274,229 2,123,810
Asset valuation reserve 578,958 400,616
Interest maintenance reserve 58,721 61,514
Other liabilities 310,404 285,030
Separate account liabilities 4,068,126 3,326,306
--------------------------------------
Total liabilities 19,833,475 18,039,668
Capital and surplus:
Common Stock ($12.50 par value):
Authorized - 4,000,000 shares
Issued and outstanding - 2,206,933 shares 27,587 27,587
Contributed surplus 509,600 372,538
Unassigned surplus 1,426,737 1,444,037
--------------------------------------
Total capital and surplus 1,963,924 1,844,162
--------------------------------------
Total liabilities and capital and surplus $ 21,797,399 $ 19,883,830
======================================
</TABLE>
See accompanying notes.
<PAGE>
<TABLE>
<CAPTION>
Transamerica Occidental Life Insurance Company
Statements of Operations - Statutory Basis
(Dollars in thousands)
YEAR ENDED DECEMBER 31
1999 1998 1997
-------------------------------------------------
Revenues:
<S> <C> <C> <C>
Premiums and annuity considerations $ 1,368,016 $ 1,608,525 $ 1,715,745
Fund deposits 351,170 363,889 395,162
Considerations for supplementary contracts without life
contingencies 212,513 259,660 240,065
Net investment income 1,125,042 1,078,543 1,028,054
Commissions and expense allowances on reinsurance ceded
469,910 471,943 283,794
Other 550,544 900,281 228,649
-------------------------------------------------
4,077,195 4,682,841 3,891,469
Benefits and expenses:
Benefits paid or provided for:
Death benefits 392,276 595,585 432,019
Annuity benefits 582,542 570,424 754,609
Disability benefits 10,199 36,590 139,278
Surrender benefits and other fund withdrawals 694,766 616,224 429,449
Increase (decrease) in reserves 266,814 (447,419) (631,054)
Payments on supplementary contracts 231,717 243,383 235,594
Endowments 2,397 2,504 2,000
Other 112,059 102,093 96,546
-------------------------------------------------
2,292,770 1,719,384 1,458,441
Expenses:
Commissions and expense allowances 691,802 728,533 554,979
Reinsurance reserve transfer - 671,651 792,425
Other operating expenses 857,912 1,300,821 758,855
Net transfers to separate accounts 50,572 200,243 152,998
-------------------------------------------------
1,600,286 2,901,248 2,259,257
-------------------------------------------------
3,893,056 4,620,632 3,717,698
-------------------------------------------------
Gain from operations before dividends to policyholders,
federal income tax expense (benefit) and net realized
capital gains (losses) 184,139 62,209 173,771
Dividends to policyholders 9,294 8,206 9,453
-------------------------------------------------
Gain from operations before federal income tax expense
(benefit) and net realized capital gains (losses) 174,845 54,003 164,318
Federal income tax expense (benefit) 30,330 (70,408) 58,514
-------------------------------------------------
Gain from operations before net realized capital gains
(losses) 144,515 124,411 105,804
Net realized capital gains (losses) 17,515 76,071 (9,332)
-------------------------------------------------
Net income $ 162,030 $ 200,482 $ 96,472
=================================================
See accompanying notes.
<PAGE>
Transamerica Occidental Life Insurance Company
Statements of Changes in Capital and Surplus - Statutory Basis
(Dollars in thousands)
YEAR ENDED DECEMBER 31
1999 1998 1997
------------------------------------------------------
Capital and surplus at beginning of year $ 1,844,162 $ 1,556,228 $ 1,249,045
Net income 162,030 200,482 96,472
Increase in net unrealized capital gains 119,420 261,540 246,829
Increase in non-admitted assets and
related items (2,824) (45,392) (41,778)
(Decrease) increase in liability for reinsurance in
unauthorized companies (4,646) (3,137) 1,038
Increase in asset valuation reserve (178,342) (39,153) (66,577)
Increase in surplus in separate account statement
16,637 32,572 29,459
Contributed capital 137,062 3,800 127,194
Prior year adjustments (14,710) (21,276) (47,998)
Dividends paid to parent (79,000) (80,000) (61,311)
Change in benefit reserve valuation basis - - (7,782)
Increase (decrease) as a result of
reinsurance (35,865) (21,502) 31,637
------------------------------------------------------
Capital and surplus at end of year $ 1,963,924 $ 1,844,162 $ 1,556,228
======================================================
See accompanying notes.
<PAGE>
Transamerica Occidental Life Insurance Company
Statements of Cash Flow - Statutory Basis
(Dollars in thousands)
YEAR ENDED DECEMBER 31
1999 1998 1997
------------------------------------------------------
OPERATING ACTIVITIES
Premiums and annuity considerations $ 319,552 $ 2,642,142 $ 1,612,975
Fund deposits 351,170 363,889 395,162
Other policy proceeds and considerations 212,546 259,627 240,280
Allowances and reserve adjustments received on
reinsurance ceded 1,861,584 93,368 249,623
Investment income received 1,088,846 1,068,856 996,628
Other income received 141,247 194,037 274,793
Life and accident and health claims paid (266,727) (661,006) (487,861)
Surrender benefits and other fund withdrawals paid
(695,777) (618,854) (442,793)
Annuity and other benefits paid (962,151) (948,840) (1,046,532)
Commissions, other expenses and taxes
paid (1,027,317) (950,827) (777,851)
Dividends paid to policyholders (9,136) (8,102) (10,101)
Federal income taxes received (paid) (146,945) 15,764 (12,411)
Reinsurance reserve transfers and other (618,898) (1,891,421) (1,552,528)
------------------------------------------------------
Net cash provided by (used in) operating activities
247,994 (441,367) (560,616)
INVESTING ACTIVITIES
Proceeds from investments sold, matured
or repaid:
Bonds 2,993,985 3,938,693 3,525,839
Stocks 220,666 488,559 138,284
Mortgage loans 11,248 37,335 34,216
Real estate 3,050 20,300 3,660
Other invested assets 200 3,984 8,580
Miscellaneous proceeds 407 (25,830) 7,140
------------------------------------------------------
Total investment proceeds 3,229,556 4,463,041 3,717,719
Taxes paid on capital gains - - (7,481)
------------------------------------------------------
Net proceeds from sales, maturities, or repayments
of investments 3,229,556 4,463,041 3,710,238
<PAGE>
Transamerica Occidental Life Insurance Company
Statements of Cash Flow - Statutory Basis (continued)
(Dollars in thousands)
YEAR ENDED DECEMBER 31
1999 1998 1997
------------------------------------------------------
Cost of investments acquired:
Bonds $ (3,656,035) $ (4,225,623) $ (4,103,637)
Stocks (611,404) (331,131) (311,708)
Mortgage loans (9,800) (121,139) (40,000)
Real estate (5,064) (7,030) (2,765)
Other invested assets (35,204) (36,752) (2,031)
Miscellaneous applications (93,194) - -
------------------------------------------------------
Total cost of investments acquired (4,410,701) (4,721,675) (4,460,141)
Net decrease (increase) in policy loans 1,094 (3,174) (7,996)
------------------------------------------------------
Net cost of investments acquired (4,409,607) (4,724,849) (4,468,137)
------------------------------------------------------
Net cash used in investing activities (1,180,051) (261,808) (757,899)
Financing and miscellaneous activities:
Other cash provided:
Capital and surplus paid-in 137,062 3,800 127,194
Other sources 562,978 1,485,965 1,558,615
------------------------------------------------------
Total other cash provided 700,040 1,489,765 1,685,809
Other cash provided (applied):
Dividends paid to shareholders (79,000) (80,000) (61,311)
Other applications, net (70,086) (347,482) (162,103)
------------------------------------------------------
Total other cash provided (applied) (149,086) (427,482) (223,414)
------------------------------------------------------
Net cash provided by financing and miscellaneous
activities 550,954 1,062,283 1,462,395
------------------------------------------------------
Net (decrease) increase in cash and short-term
investments (381,103) 359,108 143,880
Cash and short-term investments:
Beginning of year 513,557 154,449 10,569
------------------------------------------------------
End of year $ 132,454 $ 513,557 $ 154,449
======================================================
See accompanying notes.
</TABLE>
<PAGE>
Transamerica Occidental Life Insurance Company
Notes to Financial Statements - Statutory Basis
December 31, 1999
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Transamerica Occidental Life Insurance Company (the Company) is domiciled in
California. The Company is a wholly owned subsidiary of Transamerica Insurance
Corporation of California, which is a wholly owned subsidiary of Transamerica
Corporation. The Company has three wholly owned insurance subsidiaries:
Transamerica Life Insurance and Annuity Company (TALIAC), Transamerica Life
Insurance Company of Canada and Transamerica Life Insurance Company of New York.
TALIAC has one wholly owned insurance subsidiary, Transamerica Assurance
Company. During 1999, Transamerica Corporation was merged with an indirect
wholly owned subsidiary of AEGON N.V., a holding company organized under the
laws of the Netherlands.
NATURE OF BUSINESS
The Company engages in providing life insurance, pension and annuity products,
reinsurance, structured settlements and investment products which are
distributed through a network of independent and company-affiliated agents and
independent brokers. The Company's customers are primarily in the United States
and are distributed in 50 states (reinsurance is the only product distributed in
New York).
BASIS OF PRESENTATION
Certain amounts reported in the accompanying financial statements are based on
management's best estimates and judgment, subject to the minimum requirements
imposed by regulatory authorities. Actual results could differ from those
estimates.
The accompanying financial statements have been prepared in conformity with
statutory accounting practices (SAP) prescribed or permitted by the California
Department of Insurance (the California Department), which vary in some respects
from accounting principles generally accepted in the United States (GAAP). The
more significant variances from GAAP are as follows:
The accounts and operations of the Company's subsidiaries are not
consolidated but are included in investments in common stocks at the
statutory net carrying value. Changes in the subsidiaries' net carrying
values are charged or credited directly to unassigned surplus.
<PAGE>
Transamerica Occidental Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
BASIS OF PRESENTATION (CONTINUED)
Bonds, where permitted, are carried at amortized cost, rather than
segregating the portfolio into held-to-maturity (reported at amortized
cost), available-for-sale (reported at fair value) and trading (reported at
fair value) classifications.
The costs of acquiring new and renewal business, such as commissions and
underwriting and policy issue costs, are expensed when incurred rather than
deferred and amortized over the terms of the related policies.
Certain assets recognized under GAAP, principally agents' debit balances
and computer software, are "non-admitted" and excluded from the
accompanying financial statements under SAP and are charged directly to
unassigned surplus.
Reserves for future policy benefits generally are calculated based on
mortality and interest assumptions that are statutorily required rather
than using estimated expected experience or actual account balances. The
policy liabilities are reported net, rather than gross, of ceded amounts.
Revenues for interest-sensitive life policies and investment-type contracts
consist of the entire premium received and benefits represent the benefits
paid and the change in policy reserves. Under GAAP, premiums received in
excess of policy charges are not recognized as revenue and benefits
represent the excess of benefits paid over the policy account value and
interest credited to the account value.
An Interest Maintenance Reserve (IMR) is provided which defers certain
realized capital gains and losses attributable to changes in the general
level of interest rates. Such deferred gains or losses are amortized into
investment income over the remaining period to maturity based on groupings
of individual securities sold in five-year bands.
An Asset Valuation Reserve (AVR) is provided which reclassifies a portion
of surplus to liabilities. The AVR is calculated according to a specified
formula as prescribed by the National Association of Insurance
Commissioners (NAIC) and is intended to stabilize the Company's surplus
against possible fluctuations in the market values of bonds, equity
securities, mortgage loans, real estate, and other invested assets. Changes
in the required AVR balance are charged or credited directly to unassigned
surplus.
<PAGE>
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
BASIS OF PRESENTATION (CONTINUED)
Deferred federal income taxes are not provided for differences between the
financial statement amounts and tax bases of assets and liabilities.
Policyholder dividends are recognized when declared rather than over the
term of the related policies.
A liability for reinsurance balances has been provided for unsecured policy
reserves ceded to reinsurers unauthorized by license to assume such
business. Changes to those amounts are credited or charged directly to
unassigned surplus. Under GAAP, an allowance for amounts deemed
uncollectible would be established through a charge to earnings.
Other significant accounting policies are as follows:
INVESTMENTS
Investments are shown on the following bases:
Bonds - where permitted, at amortized cost; all others are carried at
values prescribed by the Securities Valuation Office of the NAIC (SVO);
premiums and discounts are amortized using the interest method. For
loan-backed bonds, the interest method including anticipated prepayments at
the date of purchase is used. Prepayment assumptions for loan-backed bonds
are estimated using broker dealer survey values and are based on the
current interest rate and economic environment. The retrospective
adjustment method is used to value all securities, except for interest-only
securities which are valued using the prospective method.
Preferred stocks - where permitted at cost, all others are carried at fair
value based on NAIC values.
<PAGE>
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INVESTMENTS (CONTINUED)
Common stocks - at fair value based on NAIC market values, except for
investments in subsidiaries which are at statutory net carrying values.
Mortgage loans on real estate - at the aggregate unpaid balances.
Real estate - at depreciated cost less encumbrances, except for properties
acquired in satisfaction of debt, which are carried at the lower of fair
value or cost, less encumbrances.
Policy loans - at the aggregate unpaid principal balances.
Other investments - primarily at the lower of cost or fair value.
Derivative instruments, included in other investments in the accompanying
balance sheet, are valued in accordance with the NAIC Accounting Practices
and Procedures manual and Purposes and Procedures manual of the SVO. All
derivative instruments are used for hedging purposes and valued on a basis
consistent with the hedged item.
The Company uses interest rate swaps, caps and floors, options and certain other
derivatives as part of its overall interest rate risk management strategy for
certain life insurance and annuity products. As the Company only uses
derivatives for hedging purposes, the Company values all derivative instruments
on a consistent basis as the hedged item. Upon termination, gains and losses on
those instruments are included in the carrying values of the underlying hedged
items and are amortized over the remaining lives of the hedged items as
adjustments to investment income or benefits from the hedged items. Any
unamortized gains or losses are recognized when the underlying hedged items are
sold.
Interest rate swap contracts are used to convert the interest rate
characteristics (fixed or variable) of certain investments to match those of the
related insurance liabilities that the investments are supporting. The net
interest effect of such swap transactions is reported as an adjustment of
interest income from the hedged items as incurred.
<PAGE>
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INVESTMENTS (CONTINUED)
Interest rate caps and floors are used to limit the effects of changing interest
rates on yields of variable rate or short-term assets or liabilities. The
initial cost of any such agreements is amortized to net investment income over
the life of the agreement. Periodic payments that are receivable as a result of
the agreements are accrued as an adjustment of interest income or benefits from
the hedged item.
Gains and losses on disposal of investments are recognized on the
specific-identification basis. Changes in the statutory fair values of stocks
and those bonds carried at values prescribed by the SVO, rather than amortized
cost, are reported as unrealized gains or losses directly in unassigned surplus
and, accordingly, have no effect on net income.
Short-term investments include investments with maturities of less than one year
at date of acquisition.
SEPARATE ACCOUNTS
The Company administers segregated asset accounts for pension and other clients.
The assets of the separate accounts are not subject to liabilities arising out
of any business the Company may conduct and are reported at fair value.
Investment risks associated with fair value changes are primarily borne by the
clients. The liabilities of the separate accounts represent reserves established
to meet withdrawal and future benefit payment provisions of the contracts.
POLICY RESERVES AND CONTRACT CLAIMS
Life, annuity, and accident and health benefit reserves are calculated based
upon published tables using such interest rate assumptions and valuation methods
that will provide, in the aggregate, reserves that meet the amounts required by
the California Department. The Company waives deduction of deferred fractional
premiums upon death of the insureds and returns any portion of the final premium
beyond the date of death. Additional reserves are established where the gross
premiums on any insurance in force are less than the net premiums according to
the standard valuation set by the California Department.
<PAGE>
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
POLICY RESERVES AND CONTRACT CLAIMS (CONTINUED)
Contract claim liabilities include provisions for reported claims and claims
incurred but not reported, net of reinsurance ceded.
PREMIUM REVENUES
Premiums from life insurance policies are recognized as revenue when due, and
premiums from annuity contracts are recognized when received. Accident and
health premiums are earned pro rata over the terms of the policies.
OTHER REVENUES
Other revenues consist primarily of profit sharing on reinsurance ceded and
reserve adjustments on ceded modified coinsurance transactions.
REINSURANCE
Coinsurance premiums, commissions, expense reimbursements, and reserves related
to reinsured business are accounted for on bases consistent with those used in
accounting for the original policies and the terms of the reinsurance contracts.
Gains associated with reinsurance of inforce blocks of business are included in
surplus rather than gain from operations. Premiums ceded and recoverable losses
have been reported as a reduction of premium income and benefits, respectively.
PRIOR YEAR ADJUSTMENTS
Prior year adjustments charged directly to surplus in 1999 related primarily to
expenses incurred for sales practices litigation of $7 million (after tax) and a
suspense asset adjustment of $7 million (after tax).
Prior year adjustments in 1998 relate primarily to expenses incurred for sales
practices litigation of $8 million (after-tax) and a reserve valuation
adjustment of $13 million (after-tax) on single premium immediate annuities.
Prior year adjustments in 1997 relate primarily to expenses incurred for sales
practices litigation of $15 million (after-tax) and a reserve valuation
adjustment of $30 million (after-tax) on single premium immediate annuities.
<PAGE>
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RECLASSIFICATIONS
Certain reclassifications of 1997 and 1998 amounts have been made to conform
with the 1999 presentation.
2. FAIR VALUES OF FINANCIAL INSTRUMENTS
Fair values for bonds are based on market values prescribed by the SVO (NAIC
market values) rather than on actual or estimated market values. For bonds
without available NAIC market values, amortized costs are used as estimated fair
values. As of December 31, 1999 and 1998, the fair value of investments in bonds
includes $5,366 million and $5,215 million, respectively, of bonds that were
valued at amortized cost.
Fair values for preferred and common stocks are based on NAIC market values,
except for investment in subsidiaries which are at statutory net carrying
values.
Fair values for mortgage loans on real estate and policy loans are estimated
using discounted cash flow calculations, based on interest rates currently being
offered for similar loans to borrowers with similar credit ratings. Loans with
similar characteristics are aggregated for calculation purposes.
Fair values for derivative instruments are estimated using values obtained from
independent pricing services.
The carrying amounts of cash and short-term investments and accrued investment
income approximate their fair value.
Fair values for liabilities under investment-type contracts, included in
reserves for future policy benefits and other policy liabilities, are estimated
using discounted cash flow calculations, based on interest rates currently being
offered by similar contracts with maturities consistent with those remaining for
the contracts being valued.
<PAGE>
2. FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)
<TABLE>
<CAPTION>
The carrying values and fair values of financial instruments are as follows (in
thousands):
DECEMBER 31
1999 1998
-----------------------------------------------------------------------
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
-----------------------------------------------------------------------
Financial assets:
<S> <C> <C> <C> <C>
Bonds $ 12,820,804 $ 12,681,458 $ 12,135,178 $ 12,834,818
Preferred stocks 135,450 93,071 97,801 100,909
Common stocks 2,254,439 2,254,439 1,738,975 1,738,975
Mortgage loans on real estate 385,590 363,650 387,038 409,714
Policy loans 409,534 396,956 410,628 388,076
Floors, caps and swaptions 56,964 60,129 57,311 149,447
Cash on hand and on deposit 132,454 132,454 513,557 513,557
Accrued investment income 226,823 226,823 210,932 210,932
DECEMBER 31
1999 1998
-----------------------------------------------------------------------
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
-----------------------------------------------------------------------
Financial liabilities (liabilities for investment-type contracts):
Single and flexible premium
deferred annuities $ 2,074,622 $ 1,881,238 $ 2,112,347 $ 1,927,980
Single premium immediate annuities
4,035,133 4,217,004 3,924,227 4,820,607
Other deposit contracts 2,219,143 2,222,305 1,917,574 1,915,954
Off-balance sheet assets (liabilities):
Exchange derivatives designated as hedges that are in a:
Receivable position - 30,253 - 88,062
Payable position - (96,206) - (17,025)
The Company enters into various interest-rate agreements in the normal course of
business primarily as a means of managing its interest rate exposure.
</TABLE>
<PAGE>
2. FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)
Interest rate swap agreements generally involve the periodic exchange of fixed
rate interest and floating rate interest payments by applying a specified market
index to the underlying contract or notional amount, without exchanging the
underlying notional amounts. Interest rate swap agreements are intended
primarily for asset and liability management. The differential to be paid or
received on those interest rate swap agreements that are designated as hedges of
financial assets is recorded on an accrual basis as a component of net
investment income. The differential to be paid or received on those interest
rate swap agreements that are designated as hedges of financial liabilities is
recorded on an accrual basis as a component of benefits paid or provided. While
the Company is not exposed to credit risk with respect to the notional amounts
of the interest rate swap agreements, the Company is subject to credit risk from
potential nonperformance of counterparties throughout the contract periods. The
amounts potentially subject to such credit risk are much smaller than the
notional amounts. The Company controls this credit risk by entering into
transactions with only a selected number of high quality institutions,
establishing credit limits and maintaining collateral when appropriate.
Generally, the Company is subject to basis risk when an interest rate swap
agreement is not funded. As of December 31, 1999, there were no unfunded
interest rate swap agreements.
Interest rate floor agreements generally provide for the receipt of payments in
the event the average interest rates during a settlement period fall below
specified levels under interest rate floor agreements. These agreements enable
the Company to transfer, modify, or reduce its interest rate risk and generally
require up front premium payments. The costs of interest rate floor agreements
are amortized over the contractual periods and resulting amortization expenses
are included in net investment income. The conditional receipts under these
agreements are recorded on an accrual basis as a component of net investment
income if designated as hedges of financial assets or as a component of benefits
paid or provided if designated as hedges of financial liabilities.
<PAGE>
2. FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)
<TABLE>
<CAPTION>
The information on derivative instruments is summarized as follows (in
thousands):
AGGREGATE NOTIONALWEIGHTED AVERAGE
AMOUNT FIXED RATE
FAIR VALUE
------------------------------------------------------
DECEMBER 31, 1999
Interest rate swap agreements designated as hedges of financial assets, where
the Company pays:
<S> <C> <C> <C>
Fixed rate interest $ 296,133 6.46% $ 28,092
Floating rate interest 1,516,308 5.95 (90,055)
Floating rate interest based on one index and
receives floating rate interest on another
index 4,525 6.05 20
Interest rate swap agreements designated as hedges
of financial liabilities, where the Company pays:
Floating rate interest 710,981 6.40 (4,394)
Floating rate interest based on one index and
receives floating rate interest on another
index 237,500 6.13 (260)
Interest rate floor agreements 400,000 - 3,065
Swaptions 6,500,000 6.64 25,211
Call options 31,999 - 31,853
<PAGE>
2. FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)
AGGREGATE NOTIONALWEIGHTED AVERAGE
AMOUNT FIXED RATE
FAIR VALUE
------------------------------------------------------
DECEMBER 31, 1998
Interest rate swap agreements designated as hedges of financial assets, where
the Company pays:
Fixed rate interest $ 44,950 5.95% $ 280
Fixed rate interest 212,488 5.01 (13,525)
Floating rate interest (1,495,000) 5.40 80,717
Floating rate interest based on one index and
receives floating rate interest on another
index 15,833 5.06 110
Interest rate swap agreements designated as hedges
of financial liabilities, where the Company pays:
Floating rate interest 1,204,456 5.42 3,781
Floating rate interest based on one index and
receives floating rate interest on another
index 37,500 4.84 (339)
Interest rate floor agreements 400,000 - 21,705
Swaptions 6,500,000 5.19 101,754
Call options 30,710 - 25,988
</TABLE>
Generally, notional amounts indicate the volume of transactions and estimated
fair values indicate the amounts subject to credit risk.
Financial instruments which potentially subject the Company to concentration of
credit risk consist principally of temporary cash investments, fixed maturities,
derivatives, mortgage loans on real estate and reinsurance receivables. The
Company places its temporary cash investments with high credit quality financial
institutions. Concentration of credit risk with respect to investments in fixed
maturities and mortgage loans on real
<PAGE>
2. FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)
estate is limited due to the large number of such investments and their
dispersion across many different industries and geographic areas. The Company
places reinsurance with only highly rated insurance companies. At December 31,
1999, the Company had no significant concentration of credit risk.
3. INVESTMENTS
<TABLE>
<CAPTION>
The carrying value and fair value of investments in debt securities are
summarized as follows (in thousands):
GROSS GROSS
CARRYING UNREALIZED UNREALIZED FAIR
VALUE GAINS LOSSES VALUE
-----------------------------------------------------------------------
DECEMBER 31, 1999
U.S. Treasury securities and
obligations of U.S. government
corporations
<S> <C> <C> <C> <C>
and agencies $ 189,325 $ 11,396 $ 1,968 $ 198,753
Obligations of states and political
subdivisions 106,484 3,673 1,482 108,675
Foreign governments 50,820 353 3,328 47,845
Corporate securities 9,345,228 103,079 230,148 9,218,159
Public utilities 1,718,582 20,020 38,842 1,699,760
Mortgage and other asset- backed
securities 1,410,365 - 2,099 1,408,266
-----------------------------------------------------------------------
$ 12,820,804 $ 138,521 $ 277,867 $ 12,681,458
=======================================================================
<PAGE>
3. INVESTMENTS (CONTINUED)
GROSS GROSS
CARRYING UNREALIZED UNREALIZED FAIR
VALUE GAINS LOSSES VALUE
-----------------------------------------------------------------------
DECEMBER 31, 1998
U.S. Treasury securities and
obligations of U.S. government
corporations
and agencies $ 148,427 $ 57,226 $ - $ 205,653
Obligations of states and political
subdivisions 123,255 11,752 - 135,007
Foreign governments 39,940 2,115 1,486 40,569
Corporate securities 8,430,358 476,428 22,687 8,884,099
Public utilities 2,206,740 176,863 571 2,383,032
Mortgage and other asset- backed
securities 1,186,458 - - 1,186,458
-----------------------------------------------------------------------
$ 12,135,178 $ 724,384 $ 24,744 $ 12,834,818
=======================================================================
Included in bonds is a $150 million note due from Transamerica Corporation at
December 31, 1998.
The carrying value and fair value of bonds at December 31, 1999, by contractual
maturity, are as follows (in thousands):
CARRYING FAIR
VALUE VALUE
------------------------------------
Due in one year or less $ 137,778 $ 138,280
Due after one year through five years 2,021,208 2,019,633
Due after five years through ten years 2,769,210 2,708,056
Due after ten years 6,482,243 6,407,223
Mortgage and other asset-backed securities 1,410,365 1,408,266
------------------------------------
$ 12,820,804 $ 12,681,458
====================================
Expected maturities may differ from contractual maturities because certain
borrowers have the right to call or prepay obligations with or without call or
prepayment penalties.
<PAGE>
3. INVESTMENTS (CONTINUED)
The costs and fair values of preferred stocks and common stocks (unaffiliated
companies) are as follows (in thousands):
GROSS GROSS ESTIMATED
UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
-----------------------------------------------------------------------
DECEMBER 31, 1999
Preferred stocks $ 77,231 $ 6,399 $ 41,182 $ 42,448
Common stocks 662,215 640,014 32,190 1,270,039
DECEMBER 31, 1998
Preferred stocks $ 40,941 $ 3,506 $ 18 $ 44,429
Common stocks 299,048 483,421 8,979 773,490
The components of investment in real estate are as follows (in thousands):
ACCUMULATED CARRYING
COST DEPRECIATION VALUE
------------------------------------------------------
DECEMBER 31, 1999
Properties occupied by the
Company $ 207,709 $ 111,331 $ 96,378
Other 7,450 2,633 4,817
------------------------------------------------------
$ 215,159 $ 113,964 $ 101,195
======================================================
DECEMBER 31, 1998
Properties occupied by the
Company $ 202,933 $ 105,330 $ 97,603
Other 8,514 3,369 5,145
------------------------------------------------------
$ 211,447 $ 108,699 $ 102,748
======================================================
</TABLE>
<PAGE>
3. INVESTMENTS (CONTINUED)
The maximum and minimum lending rates for mortgage loans during 1999 were 8.48%
and 7.13%, respectively. The maximum percentage of any one loan to the value of
security at the time of the loan, exclusive of any purchase money or insured or
guaranteed mortgages, was 80%. Fire insurance is carried in every case at least
equal to the excess of the loan over the maximum loan which would be permitted
by law on the land without the buildings.
<TABLE>
<CAPTION>
Net investment income (expense) by major category of investments is summarized
as follows (in thousands):
YEAR ENDED DECEMBER 31
1999 1998 1997
-----------------------------------------------------
<S> <C> <C> <C>
Bonds $ 989,340 $ 950,923 $ 934,229
Preferred stocks 5,078 1,312 790
Common stocks 53,192 53,000 43,938
Mortgage loans on real estate 28,314 28,713 25,031
Real estate 28,008 27,288 29,447
Policy loans 27,086 24,780 26,061
Cash and short-term investments 10,526 10,939 4,094
Other investments 16,343 17,198 (533)
-----------------------------------------------------
1,157,887 1,114,153 1,063,057
Investment expense (32,845) (35,610) (35,003)
-----------------------------------------------------
$ 1,125,042 $ 1,078,543 $ 1,028,054
=====================================================
</TABLE>
<PAGE>
3. INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
The realized gains and losses and other information related to investments are
summarized as follows (in thousands):
YEAR ENDED DECEMBER 31
1999 1998 1997
-----------------------------------------------------
Net gains (losses) on disposition of investments in:
<S> <C> <C> <C>
Bonds $ 2,993 $ 16,522 $ (27,875)
Preferred stocks (6,085) (2,405) (579)
Common stocks 41,011 164,984 9,792
Other (90,400) (7,021) (1,308)
-----------------------------------------------------
(52,481) 172,080 (19,970)
Related income (taxes) recovery 71,941 (84,425) (7,480)
Transfer to the IMR (1,945) (11,584) 18,118
-----------------------------------------------------
Net realized capital gains (losses) $ 17,515 $ 76,071 $ (9,332)
=====================================================
The other loss of $90.4 million in 1999 primarily results from the net pretax
loss incurred on an ineffective equity collar hedge (see Note 12).
YEAR ENDED DECEMBER 31
1999 1998 1997
-----------------------------------------------------
Proceeds from disposition of investment in bonds
$ 2,993,985 $ 3,938,693 $ 3,525,839
Gross gains on disposition of investment
in bonds 46,135 44,290 24,157
Gross losses on disposition of investment
in bonds (43,142) (27,768) (52,032)
Change in net unrealized gains (losses):
Bonds (5,756) (871) -
Preferred stocks 2,271 (2,741) 518
Common stocks 125,177 257,582 242,773
Real estate - - 3,727
Other (2,272) 7,570 (189)
------------------------------------------------------
$ 119,420 $ 261,540 $ 246,829
======================================================
</TABLE>
<PAGE>
3. INVESTMENTS (CONTINUED)
Change in net unrealized gains on common stocks in 1999, 1998 and 1997, includes
$(34) million, $156 million and $107 million, respectively, related to the
increase (decrease) in TALIAC's statutory capital and surplus for those years.
4. REINSURANCE
The Company is involved in both the cession and assumption of reinsurance with
other companies, including affiliated companies. Risks are reinsured with other
companies to permit the recovery of a portion of the direct losses. These
reinsured risks are treated as though, to the extent of the reinsurance, they
are risks for which the Company is not liable.
Policy liabilities and accruals are reported in the accompanying financial
statements net of reinsurance ceded. The Company remains liable to the extent
the reinsuring companies do not meet their obligations under these reinsurance
treaties.
<TABLE>
<CAPTION>
The following summarizes the effect of reinsurance transactions (in thousands):
CEDED/RETROCEDED TO ASSUMED FROM
-------------------------------------------------------------
DIRECT AFFILIATED UNAFFILIATED AFFILIATED UNAFFILIATED NET
AMOUNT COMPANIES COMPANIES COMPANIES COMPANIES AMOUNT
----------------------------------------------------------------------------------------------
Year ended
December 31, 1999:
<S> <C> <C> <C> <C> <C> <C>
Premium revenue $ 1,409,419 $ 112,947 $ 1,965,697 $ 157,197 $ 1,880,044 $ 1,368,016
==============================================================================================
At December 31, 1999:
Life insurance in force $ 547,304,907 $ 4,881,384 $ 365,336,549 $ 17,212,668 $ 465,086 $194,764,728
==============================================================================================
Reserves for future policy
benefits $ 14,241,446 $ 4,124,327 $ 3,056,908 $ 233,126 $ 2,401,859 $ 9,695,196
Policy and contract claims
payable 127,030 40,341 137,047 1,824 345,323 296,789
----------------------------------------------------------------------------------------------
$ 14,368,476 $ 4,164,668 $ 3,193,955 $ 234,950 $ 2,747,182 $ 9,991,985
==============================================================================================
<PAGE>
4. REINSURANCE (CONTINUED)
CEDED/RETROCEDED TO ASSUMED FROM
--------------------------------------------------------------
DIRECT AFFILIATED UNAFFILIATED AFFILIATED UNAFFILIATED NET
AMOUNT COMPANIES COMPANIES COMPANIES COMPANIES AMOUNT
----------------------------------------------------------------------------------------------
Year ended
December 31, 1998:
Premium revenue $ 1,401,733 $ 298,339 $ 2,193,006 $ 198,460 $ 2,499,677 $ 1,608,525
==============================================================================================
At December 31, 1998:
Life insurance in force $ 190,331,317 $ 950,789 $ 307,374,066 $ 25,093,946 $ 282,821,689 $ 189,922,097
==============================================================================================
Reserves for future policy
benefits $ 14,778,562 $ 4,978,700 $ 2,931,865 $ 136,208 $ 2,424,077 $ 9,428,282
Policy and contract claims
payable 121,330 45,187 316,533 11,018 385,519 156,147
----------------------------------------------------------------------------------------------
$ 14,899,892 $ 5,023,887 $ 3,248,398 $ 147,226 $ 2,809,596 $ 9,584,429
==============================================================================================
Year ended
December 31, 1997:
Premium reserve $ 1,434,511 $ 245,606 $ 1,296,529 $ 75,853 $ 1,747,516 $ 1,715,745
==============================================================================================
At December 31, 1997:
Life insurance in force $ 175,258,666 $ - $ 272,918,826 $ 26,199,512 $ 223,688,654 $ 152,228,006
==============================================================================================
Reserves for future policy
benefits $ 15,117,147 $ 5,457,334 $ 2,731,647 $ 15,306 $ 2,922,166 $ 9,865,638
Policy and contract claims
payable 94,040 42,804 197,351 20,854 357,125 231,864
----------------------------------------------------------------------------------------------
$ 15,211,187 $ 5,500,138 $ 2,928,998 $ 36,160 $ 3,279,291 $ 10,097,502
==============================================================================================
<PAGE>
4. REINSURANCE (CONTINUED)
CEDED TO ASSUMED
DIRECT OTHER FROM OTHER NET
AMOUNT COMPANIES COMPANIES AMOUNT
-----------------------------------------------------------------------
Year ended December 31, 1999:
Benefits paid or provided $ 1,632,298 $ 1,499,809 $ 1,086,642 $ 1,219,131
=======================================================================
Year ended December 31, 1998:
Benefits paid or provided $ 1,576,300 $ 1,147,899 $ 1,020,085 $ 1,448,486
=======================================================================
Year ended December 31, 1997:
Benefits paid or provided $ 1,631,249 $ 955,287 $ 887,538 $ 1,563,500
=======================================================================
</TABLE>
5. INCOME TAXES
The Company's taxable income or loss is included in the consolidated return of
Transamerica Corporation for the period ended July 21, 1999. The method of
allocation between the companies for the period ended July 21, 1999, is subject
to written agreement approved by the Board of Directors. Tax payments are made
to, or refunds received from, Transamerica Corporation in amounts which would
result from filing separate tax returns with federal taxing authorities, except
that tax benefits attributable to operating losses and other carryovers are
recognized currently since utilization of these benefits is assured by
Transamerica Corporation. The provision does not purport to represent a
proportionate share of the consolidated tax.
For the period beginning July 22, 1999, the Company will join in a consolidated
tax return with certain life affiliates: TALIAC, Transamerica Assurance Company
and Transamerica Life Insurance Company of New York. The method of allocation
between the companies for the period beginning July 22, 1999, will be subject to
written agreement to be approved by the Board of Directors. It is anticipated
that this agreement will require that tax payments are made to, or refunds are
received from, TOLIC, in amounts which would results from filing separate tax
returns with federal taxing authorities.
<PAGE>
5. INCOME TAXES (CONTINUED)
Amounts due from Transamerica Corporation for federal income taxes are $160
million at December 31, 1999. Amounts due to Transamerica Corporation for
federal income taxes were $28.5 million at December 31, 1998, and are included
in accounts payable and other liabilities in the accompanying balance sheet.
Following is a reconciliation of federal income taxes computed at the statutory
rate with the income tax provision, excluding income taxes related to net
realized gains on investment transactions (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1999 1998 1997
------------------------------------------------------
<S> <C> <C> <C>
Federal income taxes at statutory rate $ 61,196 $ 18,901 $ 57,511
Difference between statutory and tax reserves
(1,153) (3,463) 10,045
Deferred acquisition costs capitalized,
net of amortization 13,326 4,677 10,652
Reinsurance adjustments (14,442) (7,525) 12,900
Difference in statutory and tax bases
of investments (2,399) (10,990) (4,149)
Adjustment to prior year tax provision 24,640 (13,055) 4,689
Tax credits (16,000) (17,698) (11,127)
Nontaxable affiliate dividends (17,500) (17,500) (14,000)
Other (17,338) (23,755) (8,007)
------------------------------------------------------
Provision (benefit) for income taxes $ 30,330 $ (70,408) $ 58,514
======================================================
</TABLE>
Under the Life Insurance Company Income Tax Act of 1959, a portion of "gain from
operations" was not subject to current income taxation but was accumulated, for
tax purposes, in a memorandum account designated as "policyholders' surplus
account." The balance in this account was frozen at December 31, 1983, pursuant
to the Deficit Reduction Act of 1984. This amount would become subject to tax
when it exceeds a certain maximum or when cash dividends are paid therefrom. The
policyholders' surplus account balance at December 31, 1999, was $118 million.
Should the entire amount in the policyholders' surplus account become taxable,
the tax thereon computed at current rates would amount to approximately $41.3
million. No income taxes have been provided on the policyholders' surplus
account since the conditions that would cause such taxes are remote.
<PAGE>
6. INVESTMENTS IN SUBSIDIARIES
The Company's investment in common stocks of its wholly owned subsidiaries with
carrying values, based on the statutory capital and surplus of the subsidiaries,
is summarized as follows (in thousands):
<TABLE>
<CAPTION>
CARRYING VALUE
COST
------------------------------------
At December 31, 1999:
<S> <C> <C>
TALIAC $ 238,418 $ 797,109
Other 206,041 187,291
------------------------------------
$ 444,459 $ 984,400
====================================
At December 31, 1998:
TALIAC $ 237,448 $ 830,829
Others 179,891 134,656
------------------------------------
$ 417,339 $ 965,485
====================================
</TABLE>
The Company received a $50 million dividend in 1999 and 1998 from its wholly
owned subsidiary, TALIAC.
The Company's investment in preferred stocks of subsidiaries is substantially
all represented by an investment in Transamerica Life Insurance Company of
Canada.
Certain financial information with respect to TALIAC, the Company's principal
subsidiary, is as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
1999 1998
---------------------------------------
<S> <C> <C>
Cash and investments $ 14,046,255 $ 13,582,175
Other assets 6,339,057 4,783,063
---------------------------------------
Total assets 20,385,312 18,365,238
Aggregate reserves 9,221,606 8,084,356
Other liabilities 10,366,597 9,450,053
---------------------------------------
Total liabilities 19,588,203 17,534,409
---------------------------------------
Total capital and surplus $ 797,109 $ 830,829
=======================================
</TABLE>
<PAGE>
7. DEFERRED AND UNCOLLECTED PREMIUMS
<TABLE>
<CAPTION>
Components of deferred and uncollected premiums are as follows:
GROSS LOADING NET
------------------------------------------------------
DECEMBER 31, 1999
Life and annuity:
<S> <C> <C> <C>
Ordinary first-year business $ 8,630 $ - $ 8,630
Ordinary renewal business 183,107 36,000 147,107
Group life direct business 2,095 - 2,095
------------------------------------------------------
193,832 36,000 157,832
Accident and health 69,890 - 69,890
------------------------------------------------------
$ 263,722 $ 36,000 $ 227,722
======================================================
DECEMBER 31, 1998
Life and annuity:
Ordinary first-year business $ (828,090) $ 14,537 $ (842,627)
Ordinary renewal business 9,900 8,929 971
Group life direct business 5,637 - 5,637
------------------------------------------------------
(812,553) 23,466 (836,019)
Accident and health 28,068 - 28,068
------------------------------------------------------
$ (784,485) $ 23,466 $ (807,951)
======================================================
</TABLE>
The gross deferred and uncollected premiums balance at December 31, 1999, of
$263,722,000 is composed of $431,756,000 direct deferred and uncollected
premiums less reinsurance premiums payable of $168,034,000.
The gross deferred and uncollected premiums balance at December 31, 1998, of
$(784,485,000) is composed of $379,199,000 direct deferred and uncollected
premiums less reinsurance premiums payable of $(1,163,684,000).
<PAGE>
8. ANNUITY RESERVES AND DEPOSIT LIABILITIES
A portion of the Company's policy reserves and other policyholders' funds
(including separate account liabilities) relates to liabilities established on a
variety of the Company's products that are not subject to significant mortality
or morbidity risk; however, there may be certain restrictions placed upon the
amount of funds that can be withdrawn without penalty. The amount of reserves on
these products, by withdrawal characteristics, are summarized as follows (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31
1999 1998
----------------------------------------------------------------
AMOUNT PERCENT AMOUNT PERCENT
----------------------------------------------------------------
Subject to discretionary withdrawal - with adjustment:
<S> <C> <C> <C>
With market value adjustment $ 9,134 -% $ 2,955,445 21%
At book value less surrender charge 435,717 3 565,977 4
At market value 7,385,279 53 2,319,944 16
----------------------------------------------------------------
7,830,130 56 5,841,366 41
Subject to discretionary withdrawal -
without adjustment 1,748,102 13 1,839,270 13
Not subject to discretionary withdrawal
provision 4,417,004 31 6,710,422 46
----------------- ------------------
---------------- ----------------
Total annuity reserves and deposit 13,995,236 100% 14,391,058 100%
liabilities
================ ================
Less reinsurance (5,820,180) (6,736,704)
-----------------
------------------
Net annuity reserves and deposit liabilities $ 8,175,056* $ 7,654,354*
================= ==================
</TABLE>
* Includes $3,364 million and $2,622 million of annuity reserves and deposit
liabilities reported in the separate account liability at December 31, 1999
and 1998, respectively. Funding agreement liabilities that are a part of the
separate account liabilities are excluded from the above amounts.
Included in other liabilities is $2,228 million and $1,927 million at December
31, 1999 and 1998, respectively, held pursuant to funding agreements. Funding
agreements are obligations that contain no mortality or morbidity risks.
<PAGE>
9. CAPITAL AND SURPLUS
The Company is subject to the requirements of the NAIC approved Risk Based
Capital (RBC) rules and at December 31, 1999 and 1998, the Company met the RBC
requirement.
The amount of dividends which can be paid by the Company without prior approval
of the California Department is subject to restrictions related to statutory
surplus and gains from operations. The Company could pay $184 million in
dividends in 2000 without prior approval.
10. PENSION PLAN AND OTHER POSTRETIREMENT BENEFITS
Substantially all employees are covered by noncontributory defined benefit plans
sponsored by the Company and the Retirement Plan for Salaried Employees of
Transamerica Corporation and Affiliates in which the Company also participates.
Pension benefits are based on the employee's compensation during the highest
paid 60 consecutive months during the 120 months before retirement. The general
policy is to fund current service costs currently and prior service costs over
periods ranging from 10 to 30 years. Assets of those plans are invested
principally in publicly traded stocks and bonds.
The Company's total pension costs were $0.8 million, $0.6 million and $0 million
for the years ended December 31, 1999, 1998 and 1997, respectively.
The Company also participates in various contributory defined benefit programs
sponsored by Transamerica Corporation that provide medical and certain other
benefits to eligible retirees. The Company accounts for the costs of such
benefit programs under the accrual method and amortizes its transition
obligation for retirees and fully eligible or vested employees over 20 years.
Postretirement benefit costs charged to income was $3 million for each of the
years ended December 31, 1999, 1998 and 1997.
11. ASSETS ON DEPOSIT
At December 31, 1999 and 1998, $4 million and $4 million of the Company's assets
were on deposit with public officials in compliance with regulatory
requirements.
<PAGE>
12. RELATED PARTY TRANSACTIONS
The Company has various transactions with Transamerica Corporation and its
affiliated companies in the normal course of operations. These transactions
include the assumption and cession of reinsurance and the performance of certain
administrative and support services for affiliated companies. Such
reimbursements are recorded as a reduction of operating expenses.
Transactions with Transamerica Corporation and its affiliates also include
transactions related to pension plans, investments in a money market fund
managed by an affiliated company, and rental of computer services. Pension funds
administered by a subsidiary for affiliated companies amounted to $1.8 billion,
$1.6 billion and $1.3 billion at December 31, 1999, 1998 and 1997, respectively.
The investment in an affiliated money market fund was not material.
The Company had amounts due from affiliates of $41 million as of December 31,
1999, and $16 million as of December 31, 1998.
In March 1999, the Company entered into an equity collar (which expired December
17, 1999), with an unrelated party to hedge the price fluctuations of their
unaffiliated equity securities portfolio. In addition, Transamerica Corporation
agreed to protect the Company from any ineffectiveness in the hedge that would
expose the Company to loss net of tax benefit. As a result of the
ineffectiveness of the collar with the unrelated party and the payment that the
Company was required to make upon settlement, Transamerica Corporation made a
payment of $172 million to the Company in December 1999.
<PAGE>
13. LEASES
Rental expense for equipment and properties occupied by the Company was $17
million in 1999, $14 million in 1998, and $19 million in 1997. The following is
a schedule by years of future minimum rental payments required under operating
leases that have initial or remaining noncancelable lease terms in excess of one
year as of December 31, 1999 (in thousands):
Year ending December 31:
2000 $ 12,203
2001 9,998
2002 7,745
2003 6,728
2004 6,624
Later years 41,701
------------------
$ 84,999
==================
14. LITIGATION
The Company is a defendant in various legal actions arising from its operations.
These include legal actions similar to those faced by many other major life
insurers which allege damages related to sales practices for universal life
policies sold between January 1981 and June 1996. In one such action, the
Company and plaintiff's counsel entered into a settlement which was approved on
June 26, 1997. The settlement required prompt notification to affected
policyholders. Administrative and policy benefit costs associated with the
settlement of $7 million, $8 million and $15 million after-tax have been
incurred in 1999, 1998 and 1997, respectively, and reflected in these statements
as prior period adjustments. Additional costs related to the settlement are not
expected to be material and will be incurred over a period of years. In the
opinion of the Company, any ultimate liability which might result from other
litigation would not have a materially adverse effect on the combined financial
position of the Company or the results of its operations.
15. SEPARATE ACCOUNTS
Separate accounts held by the Company represent primarily funds which are
administered for pension plans. The assets consist primarily of fixed maturities
and equity securities and are carried at estimated fair value. The Company
provides a minimum guaranteed return to policyholders of certain separate
accounts. Certain other separate accounts do not have any minimum guarantees and
the investment risks associated with market value changes are borne entirely by
the policyholder.
<PAGE>
15. SEPARATE ACCOUNTS (CONTINUED)
Information regarding the separate accounts of the Company as of and for the
year ended December 31, 1999, is as follows (in thousands):
<TABLE>
<CAPTION>
SEPARATE ACCOUNTS WITH GUARANTEES
-------------------------------------------------
NONINDEXED NONINDEXED
GUARANTEE GUARANTEE NONGUARANTEED
LESS THAN OR GREATER THAN SEPARATE
INDEXED EQUAL TO 4% 4% ACCOUNTS TOTAL
--------------- ---------------- ---------------- ----------------- ------------------
Premiums, deposits and other
<S> <C> <C> <C> <C> <C>
considerations $ - $ - $ - $ 254,076 $ 254,076
=============== ================ ================ ================= ==================
Reserves for separate accounts with assets at:
Fair value $ - $ - $ - $ 3,364,426 $ 3,364,426
Amortized cost - - - - -
Other - - - 703,700 703,700
--------------- ---------------- ---------------- ----------------- ------------------
Total $ - $ - $ - $ 4,068,126 $ 4,068,126
=============== ================ ================ ================= ==================
Reserves for separate accounts by withdrawal characteristics:
Subject to discretionary withdrawal (with adjustment):
With market value
adjustment $ - $ - $ - $ - $ -
At book value less
current surrender
charge of 5% or more
- - - - -
At market value 3,364,426 3,364,426
At book value without
adjustment and with
current surrender
charges less than 5% - - - - -
--------------- ---------------- ---------------- ----------------- ------------------
Subtotal - - - 3,364,426 3,364,426
Not subject to
discretionary withdrawal - - - - -
Other - - - 703,700 703,700
--------------- ---------------- ---------------- ----------------- ------------------
Total separate account $ - $ - $ - $ 4,068,126 $ 4,068,126
liabilities
=============== ================ ================ ================= ==================
</TABLE>
<PAGE>
15. SEPARATE ACCOUNTS (CONTINUED)
A reconciliation of the amounts transferred to and from the separate accounts is
presented below (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1999 1998 1997
------------------------------------------------------
Transfer as reported in the summary of operations of the separate accounts
statement:
<S> <C> <C> <C>
Transfers to separate accounts $ 255,210 $ 352,298 $ 454,749
Transfers from separate accounts 217,729 173,152 240,381
------------------------------------------------------
Net transfers to separate accounts 37,481 179,146 214,368
Reconciling adjustments:
Deposits (withdrawals) from separate
accounts 13,091 21,097 (61,370)
------------------------------------------------------
Transfers as reported in the statements of income
$ 50,572 $ 200,243 $ 152,998
======================================================
16. DIRECT PREMIUM WRITTEN BY MANAGING GENERAL AGENTS/THIRD-PARTY ADMINISTRATORS
The Company has the following direct premiums written through managing general
agents (in thousands):
TYPES OF DIRECT
EXCLUSIVE BUSINESS AUTHORITY WRITTEN
CONTRACT WRITTEN GRANTED PREMIUMS
----------------------------------------------------------------
National Benefit Resources No Specific and * $ 38
Aggregate
Excess of Loss
Insurance
R. E. Moulton Insurance Agency, Inc. No Specific and * 6,698
Aggregate
Excess of Loss
Insurance
<PAGE>
16. DIRECT PREMIUM WRITTEN BY MANAGING GENERAL AGENTS/THIRD-PARTY ADMINISTRATORS (CONTINUED)
TYPES OF DIRECT
EXCLUSIVE BUSINESS AUTHORITY WRITTEN
CONTRACT WRITTEN GRANTED PREMIUMS
----------------------------------------------------------------
Intermediary Insurance Services, Inc. No Specific and * 2,969
Aggregate
Excess of Loss
Insurance
Excess Reinsurance Underwriters No Specific and * 12,536
Agency, Inc. Aggregate
Excess of Loss
Insurance
Risk Assessment Strategies No Specific and * 576
Aggregate
Excess of Loss
Insurance
North American Insurance Management Yes Occupational * 1,453
Accident -
Excess of Loss
Insurance
Health Reinsurance Management Partnership No Provider Excess * 25,173
Self Funding Systems No Specific and * 119
Aggregate
Excess of Loss
Insurance
*Premium collection, underwriting and commission/claim payments authority
granted.
</TABLE>
<PAGE>
17. NAIC CODIFICATION
In 1998, the NAIC adopted codified statutory accounting principles
(Codification) effective January 1, 2001. Codification will likely change, to
some extent, prescribed statutory accounting practices and may result in changes
to the accounting practices that the Company uses to prepare its statutory-basis
financial statements. Codification will require adoption by the various states
before it becomes the prescribed statutory basis of accounting for insurance
companies domesticated within those states. Accordingly, before Codification
becomes effective for the Company, the state of California must adopt
Codification as the prescribed basis of accounting on which domestic insurers
must report their statutory-basis results to the Insurance Department. The state
of California has stated affirmatively that it will adopt Codification effective
January 1, 2001. Management believes that the impact of Codification will not be
material to the Company's statutory-basis financial statements
18. YEAR 2000 (UNAUDITED)
In prior years, the Company discussed the nature and progress of its plans to
become Year 2000 ready. In 1999, the Company completed its remediation and
testing of systems. As a result of those planning and implementation efforts,
the Company experienced no significant disruptions in mission critical
information technology and non-information technology systems and believes those
systems successfully responded to the Year 2000 date change. The Company is not
aware of any material problems resulting from Year 2000 issues, either with its
products, its internal systems, or the products and services of third parties.
The Company will continue to monitor its mission critical computer applications
and those of its suppliers and vendors throughout the year 2000 to ensure that
any latent Year 2000 matters that may arise are addressed promptly.
<PAGE>
Statutory Basis
Financial Statement Schedules
<PAGE>
39
<TABLE>
<CAPTION>
Transamerica Occidental Life Insurance Company
Summary of Investments - Other Than Investments in Related Parties - Statutory Basis
(Dollars in thousands)
December 31, 1999
SCHEDULE I
AMOUNT AT
WHICH SHOWN
MARKET IN THE
TYPE OF INVESTMENT COST (1) VALUE BALANCE SHEET
- -----------------------------------------------------------------------------------------------------------
FIXED MATURITIES
Bonds:
United States government and government
<S> <C> <C> <C>
agencies and authorities $ 189,325 $ 198,753 $ 189,325
States, municipalities and political
subdivisions 106,484 108,675 106,484
Foreign governments 50,820 47,845 50,820
Public utilities 1,718,582 1,699,760 1,718,582
All other corporate bonds 9,345,228 9,218,159 9,345,228
Mortgage and other asset-backed securities
1,410,365 1,408,266 1,410,365
Redeemable preferred stock 66,841 30,448 66,371
-----------------------------------------------------------
Total fixed maturities 12,887,645 12,711,906 12,887,175
EQUITY SECURITIES
Common stocks:
Affiliated entities 444,459 984,400 984,400
Banks, trust and insurance 36,481 38,892 38,892
Industrial, miscellaneous and all other 625,734 1,231,147 1,231,147
Nonredeemable preferred stock 69,079 62,623 69,079
-----------------------------------------------------------
Total equity securities 1,175,753 2,317,062 2,323,518
Mortgage loans on real estate 385,590 363,650 385,590
Real estate 101,195 50,000 101,195
Policy loans 409,534 396,956 409,534
Other long-term investments 218,997 155,562 218,997
Cash and short-term investments 132,454 132,454 132,454
-----------------------------------------------------------
Total investments $ 15,311,168 $ 16,127,590 $ 16,458,463
===========================================================
(1) Original cost of equity securities and, as to fixed maturities, original
cost reduced by repayments and adjusted for amortization of premiums or
accrual discounts.
<PAGE>
40
Transamerica Occidental Life Insurance Company
Supplementary Insurance Information - Statutory Basis
(Dollars in thousands)
December 31, 1999
SCHEDULE III
FUTURE POLICY POLICY AND
BENEFITS AND UNEARNED CONTRACT
EXPENSES PREMIUMS LIABILITIES
- -----------------------------------------------------------------------------------------------------------
Year ended December 31, 1999
Individual life $ 4,988,602 $ - $ 240,452
Individual health 42,065 28,046 33,481
Group life and health 31,586 2,616 32,963
Annuity 4,602,281 - (10,107)
-----------------------------------------------------------
9,664,534 30,662 296,789
Year ended December 31, 1998
Individual life 4,595,349 - 121,089
Individual health 26,439 41,669 (9,445)
Group life and health 12,953 3,675 47,840
Annuity 4,748,197 - (3,337)
-----------------------------------------------------------
9,382,938 45,344 156,147
Year ended December 31, 1997
Individual life 4,207,937 - 155,424
Individual health 27,254 31,297 2,606
Group life and health 16,964 2,124 51,052
Annuity 5,580,062 - 22,781
-----------------------------------------------------------
$ 9,832,217 $ 33,421 $ 231,863
===========================================================
</TABLE>
<PAGE>
41
<TABLE>
<CAPTION>
BENEFITS, CLAIMS
LOSSES AND
NET SETTLEMENT EXPENSES OTHER
PREMIUM INVESTMENT OPERATING PREMIUMS
REVENUE INCOME* EXPENSES* WRITTEN
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 891,749 $ 405,705 $ 909,143 $ 703,605 $ 1,178,607
(10,184) 2,770 (33,811) 35,665 80,328
158,775 10,967 134,414 124,689 65,217
327,676 705,600 1,283,024 736,327 85,267
- --------------------------------------------------------------------------------------------------
1,368,016 1,125,042 2,292,770 1,600,286 1,409,419
905,725 400,313 1,242,592 492,976 1,087,850
51,827 4,483 3,265 100,839 63,828
195,431 4,003 160,581 89,231 50,433
455,542 669,744 312,946 2,218,202 199,622
- --------------------------------------------------------------------------------------------------
1,608,525 1,078,543 1,719,384 2,901,248 1,401,733
761,853 370,027 933,474 383,255 1,042,734
23,988 6,216 19,252 49,460 56,861
236,688 5,074 200,224 123,772 111,314
693,216 646,737 305,491 1,702,770 223,602
- --------------------------------------------------------------------------------------------------
$ 1,715,745 $ 1,028,054 $ 1,458,441 $ 2,259,257 $ 1,434,511
==================================================================================================
</TABLE>
*Allocations of net investment income and other operating expenses are based on
a number of assumptions of estimates, and the results would change if
different methods were applied.
<PAGE>
42
<TABLE>
<CAPTION>
Transamerica Occidental Life Insurance Company
Reinsurance - Statutory Basis
(Dollars in thousands)
December 31, 1999
SCHEDULE IV
ASSUMED PERCENTAGE
CEDED TO FROM OF AMOUNT
GROSS OTHER OTHER NET ASSUMED
AMOUNT COMPANIES COMPANIES AMOUNT TO NET
- -------------------------------------------------------------------------------------------------------------------------
Year ended December 31,
1999
<S> <C> <C> <C> <C> <C>
Life insurance in force $ 547,304,907 $ 370,217,933 $ 17,677,754 $ 194,764,728 9%
Premiums:
Individual life $ 1,178,607 $ 1,220,329 $ 933,471 $ 891,749 105%
Individual health 80,328 97,296 6,784 (10,184) -%
Group life and health 65,217 247,870 341,428 158,775 215%
Annuity 85,267 513,149 755,558 327,676 231%
-----------------------------------------------------------------------------------------
$ 1,409,419 $ 2,078,644 $ 2,037,241 $ 1,368,016 149%
=========================================================================================
Year ended December 31,
1998
Life insurance in force $ 190,331,317 $ 308,297,855 $ 307,915,635 $ 189,922,097 162%
Premiums:
Individual life $ 1,087,850 $ 958,929 $ 776,803 $ 905,725 86%
Individual health 63,828 134,991 122,991 51,827 237%
Group life and health 50,433 268,973 413,971 195,431 212%
Annuity 199,622 1,128,452 1,384,372 455,542 304%
-----------------------------------------------------------------------------------------
$ 1,401,733 $ 2,491,345 $ 2,698,137 $ 1,608,525 168%
=========================================================================================
Year ended December 31,
1997
Life insurance in force $ 175,258,666 $ 272,918,826 $ 249,888,166 $ 152,228,006 164%
Premiums:
Individual life $ 1,042,734 $ 967,543 $ 686,662 $ 761,853 90%
Individual health 56,861 47,651 14,778 23,988 61%
Group life and health 111,314 274,270 399,644 236,688 169%
Annuity 223,602 252,671 722,285 693,216 104%
-----------------------------------------------------------------------------------------
$ 1,434,511 $ 1,542,135 $ 1,823,369 $ 1,715,745 106%
=========================================================================================
</TABLE>
<PAGE>
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
Article V, Section I, of Transamerica's Bylaws provides: Each person who was or
is a party or is threatened to be made a party to or is involved, even as a
witness, in any threatened, pending, or completed action, suit, or proceeding,
whether civil, criminal, administrative, or investigative (hereafter a
"Proceeding"), by reason of the fact that he, or a person of whom he is the
legal representative, is or was a director, officer, employee, or agent of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another foreign or domestic corporation
partnership, joint venture, trust, or other enterprise, or was a director,
officer, employee, or agent of a foreign or domestic corporation that was a
predecessor corporation of the corporation or of another enterprise at the
request of such predecessor corporation, including service with respect to
employee benefit plans, whether the basis of the Proceeding is alleged action in
an official capacity as a director, officer, employee, or agent or in any other
capacity while serving as a director, officer, employee, or agent (hereafter an
"Agent"), shall be indemnified and held harmless by the corporation to the
fullest extent authorized by statutory and decisional law, as the same exists or
may hereafter be interpreted or amended (but, in the case of any such amendment
or interpretation, only to the extent that such amendment or interpretation
permits the corporation to provide broader indemnification rights than were
permitted prior thereto) against all expenses, liability, and loss (including
attorneys' fees, judgments, fines, ERISA excise taxes and penalties, amounts
paid or to be paid in settlement, any interest, assessments, or other charges
imposed thereon, and any federal, state, local, or foreign taxes imposed on any
Agent as a result of the actual or deemed receipt of any payments under this
Article) incurred or suffered by such person in connection with investigating,
defending, being a witness in, or participating in (including on appeal), or
preparing for any of the foregoing, in any Proceeding (hereafter "Expenses");
provided, however, that except as to actions to enforce indemnification rights
pursuant to Section 3 of this Article, the corporation shall indemnify any Agent
seeking indemnification in connection with a Proceeding (or part thereof)
initiated by such person only if the Proceeding (or part thereof) was authorized
by the Board of Directors of the corporation. The right to indemnification
conferred in this Article shall be a contract right. (It is the Corporation's
intent that these bylaws provide indemnification in excess of that expressly
permitted by Section 317 of the California General Corporation Law, as
authorized by the corporation's Articles of Incorporation.)
Insofar as indemnification for liability arising under the Securities Act of
1933 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 directors and officers of Transamerica Occidental Life Insurance Company are
covered under a Directors and Officers liability program which includes direct
coverage to directors and officers (Coverage A) and corporate reimbursement
(Coverage B) to reimburse the Company for indemnification of its directors and
officers. Such directors and officers are indemnified for loss arising from any
covered claim by reason of any Wrongful Act in their capacities as directors or
officers. In general, the term "loss" means any amount which the insureds are
legally obligated to pay for a claim for Wrongful Acts. In general, the term
"Wrongful Acts" means any breach of duty, neglect, error, misstatement,
misleading statement or omission caused, committed or attempted by a director or
officer while acting individually or collectively in their capacity as such,
claimed against them solely by reason of their being directors and officers. The
limit of liability under the program is $95,000,000 for Coverage A and
$80,000,000 for Coverage B for the period 11/15/98 to 11/15/2000. Coverage B is
subject to a self insured retention of $15,000,000. The primary policy under the
program is with CNA Lloyds, Gulf, Chubb and Travelers.
REPRESENTATIONS PURSUANT TO SECTION 26(E) OF THE INVESTMENT COMPANY ACT OF 1940
Transamerica hereby represents that the fees and charges deducted under the
Policy, in the aggregate, are reasonable in relation to the services rendered,
the expenses expected to be incurred, and the risks assumed by Transamerica.
<PAGE>
CONTENTS OF THE REGISTRATION STATEMENT
This registration statement comprises the following papers and documents:
The facing sheet.
Cross-reference to items required by Form N-8B-2. The prospectus consists of
____ pages. The undertaking to file reports.
The undertaking pursuant to Rule 484 under the Securities Act of 1933.
Representations Pursuant to Section 26(e) of the Investment Company Act of 1940
The signatures.
Written consents of the following persons:
1. Ernst & Young LLP
2. Actuarial Opinion
The following exhibits:
1. Exhibit 1
(Exhibits required by paragraph A of the instructions to Form N-8B-2)
(1) Certified copy of Resolutions of the Board of Directors of the Company of
December 6, 1996 establishing the Transamerica Occidental Life Separate
Account VUL-1. 1/
(2) Not Applicable.
(3) (a) Form of Distribution Agreement between Transamerica Securities Sales
Corporation and Transamerica Occidental Life Insurance Company. 1/
(b) Form of Sales Agreement between Transamerica Life Companies, Transamerica
Securities Sales Corporation and Broker-Dealers 1/
(4) Not Applicable.
(5) Forms of Policy and Policy riders. 1/2/
(6) Organizational documents of the Company, as amended. 1/
(7) Not Applicable.
(8) Form of Participation Agreement between:
Transamerica Occidental Life Insurance Company and:
(a) The Alger American Fund 2/
(b) Alliance Variable Products Series Fund, Inc.2/
(c) Janus Aspen Series 2/
(d) Morgan Stanley Universal Funds, Inc. 2/
(e) OCC Accumulation Trust 2/
(f) PIMCO Variable Insurance Trust 7/
(9) Administrative Agreements between Transamerica Occidental Life Insurance
Company and First Allmerica Financial Life Insurance Company 2/
(10) Form of Application 1/
(11) Issuance, Transfer and Redemption Procedures Memorandum.2/
(12) Financial Data Schedule. 2/ 3/
2. Form of Policy and Policy riders are included in Exhibit 1 above.
3. Opinion of Counsel. 1/
4. Not Applicable.
5. Not Applicable.
6. Actuarial consent 2/4/
7. Consent of Independent Auditors 2/ 3/4/5/ 8/
8. Powers of Attorney 1/ 3/4/5/ 8/
1/ Incorporated herein by reference to the initial filing of this Registration
Statement (File No. -- 333-37883) on October 14, 1997.
2/ Incorporated herein by reference to the Pre-Effective Amendment No. 1 to
this Registration Statement (File No. 333-37883) on December 24, 1998.
3/ Incorporated herein by reference to the Pre-Effective Amendment No. 2 to
this Registration Statement (File No. 333-37883) on January 23, 1998.
4/ Incorporated herein by reference to the Post-Effective Amendment No. 1 to
this Registration Statement (File No. 333-37883) on April 29, 1998.
5/ Incorporated herein by reference to the Post-Effective Amendment No. 2 to
this Registration Statement (File No. 333-37883) on February 26, 1999.
6/ Incorporated herein by reference to the Post-Effective Amendment No. 3 to
this Registration Statement (File No. 333-37883) on April 30, 1999.
7/ Incorporated by reference to the Post-Effective Amendment No. 4 to this
Registration Statement (File No. 333-37883) on October 1, 2000.
8/ Filed herewith.
<PAGE>
SIGNATURE
As required by the Securities Act of 1933 and the Investment Company Act of
1940, Transamerica Occidental Life Insurance Company certifies that this
Amendment meets the requirements of Securities Act Rule 485(b) for effectiveness
of this Registration Statement and has caused this Registration Statement to be
signed on its behalf by the undersigned in the City of Los Angeles, State of
California on the 26th day of April, 2000.
Transamerica Occidental Life Separate Account VUL-1
(Registrant)
(SEAL)
Attest:___________________________ By:___________________________________
(Title) (Name) David M. Goldstein
(Title) Vice President
Transamerica Occidental Life Insurance Company
Pursuant to the requirements of the Securities Act of 1933, Transamerica
Occidental Life Insurance Company 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 Los Angeles and the
State of California, on the 26th day of April, 2000.
Transamerica Occidental Life Insurance Company
(SEAL)
Attest:___________________________ By:___________________________________
(Title) (Name) David M. Goldstein
(Title) Vice President
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.
<TABLE>
<CAPTION>
Signatures Titles Date
<S> <C> <C>
______________________* Director and President - April 26, 2000
Nooruddin S. Veerjee Insurance Products Division
_________________* Director April 26, 2000
Patrick S. Baird
_________________* Director and Senior Vice President April 26, 2000
Brenda K. Clancy
______________________* Director, Executive Vice President April 26, 2000
James W. Dederer General Counsel and Corporate Secretary
______________________* Director and April 26, 2000
Karen MacDonald and Acting Chief Financial Officer
______________________* Director April 26, 2000
George A. Foegele
______________________* Director and Senior Vice President April 26, 2000
Douglas C. Kolsrud
______________________* Director April 26, 2000
Richard N. Latzer
______________________* Director April 26, 2000
Gary U. Rolle'
______________________* Director April 26, 2000
Paul E. Rutledge III
______________________* Director, Vice President and Counsel April 26, 2000
Craig D. Vermie
_________________________________________ On April 26, 2000 as Attorney-in-Fact pursuant to
*By: David M. Goldstein powers of attorney previously filed and filed herewith,
and in his own capacity as Vice President.
</TABLE>
<PAGE>
Exhibit 7 Consent of Auditors
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to Our firm under the caption "Independent Auditors"
and to the use of our report dated March 31, 2000 with respect to the
statutory-basis financial statements of Transamerica Occidental Life Insurance
Company and our report dated March 31, 2000 with respect to the financial
statements of Transamerica Occidental Life Separate Account VUL-1 in
Post-Effective Amendment No. 5 to the Registration Statement (Form S-6 No. 333-3
7883) and related Prospectus of Transamerica Occidental Life Separate Account
VUL-1.
Los Angeles, California
April 24, 2000
<PAGE>
Exhibit 8 Powers of Attorney
<PAGE>
POWER OF ATTORNEY
The undersigned Director of Transamerica Occidental Life Insurance Company, a
California corporation (the "Company"), hereby constitutes and appoints Frank A.
Camp, James W. Dederer, David M. Goldstein, David E. Gooding, Priscilla I.
Hechler, William M. Hurst, Larry N. Norman, Thomas E. Pierpan, Stephen E. Price,
Colleen Tobiason, Ronald L. Ziegler and each of them (with full power to each of
them to act alone), his true and lawful attorney-in-fact and agent, with full
power of substitution to each, for him and on his behalf and in his name, place
and stead, to execute and file any of the documents referred to below relating
to registrations under the Securities Act of 1933 and under the Investment
Company Act of 1940 with respect to any life insurance and annuity policies:
registration statements on any form or forms under the Securities Act of 1933
and under the Investment Company Act of 1940, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his or their substitutes being empowered to act with or without the others
or other, and to have full power and authority to do or cause to be done in the
name and on behalf of the undersigned each and every act and thing requisite and
necessary or appropriate with respect thereto to be done in and about the
premises in order to effectuate the same, as fully to all intents and purposes
as the undersigned might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may do or cause to
be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand, this
______ day of December, 1999.
------------------------------
Patrick S. Baird
<PAGE>
Power of Attorney
The undersigned Director of Transamerica Occidental Life Insurance Company, a
California corporation (the "Company"), hereby constitutes and appoints Frank A.
Camp, James W. Dederer, David M. Goldstein, David E. Gooding, Priscilla I.
Hechler, William M. Hurst, Larry N. Norman, Thomas E. Pierpan, Stephen E. Price,
Colleen Tobiason, Ronald L. Ziegler and each of them (with full power to each of
them to act alone), her true and lawful attorney-in-fact and agent, with full
power of substitution to each, for her and on her behalf and in her name, place
and stead, to execute and file any of the documents referred to below relating
to registrations under the Securities Act of 1933 and under the Investment
Company Act of 1940 with respect to any life insurance and annuity policies:
registration statements on any form or forms under the Securities Act of 1933
and under the Investment Company Act of 1940, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his or their substitutes being empowered to act with or without the others
or other, and to have full power and authority to do or cause to be done in the
name and on behalf of the undersigned each and every act and thing requisite and
necessary or appropriate with respect thereto to be done in and about the
premises in order to effectuate the same, as fully to all intents and purposes
as the undersigned might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may do or cause to
be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereunto set her hand, this
______ day of December, 1999.
------------------------------
Brenda K. Clancy
<PAGE>
POWER OF ATTORNEY
The undersigned Director of Transamerica Occidental Life Insurance Company, a
California corporation (the "Company"), hereby constitutes and appoints Frank A.
Camp, James W. Dederer, David M. Goldstein, David E. Gooding, Priscilla I.
Hechler, William M. Hurst, Larry N. Norman, Thomas E. Pierpan, Stephen E. Price,
Colleen Tobiason, Ronald L. Ziegler and each of them (with full power to each of
them to act alone), his true and lawful attorney-in-fact and agent, with full
power of substitution to each, for him and on his behalf and in his name, place
and stead, to execute and file any of the documents referred to below relating
to registrations under the Securities Act of 1933 and under the Investment
Company Act of 1940 with respect to any life insurance and annuity policies:
registration statements on any form or forms under the Securities Act of 1933
and under the Investment Company Act of 1940, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his or their substitutes being empowered to act with or without the others
or other, and to have full power and authority to do or cause to be done in the
name and on behalf of the undersigned each and every act and thing requisite and
necessary or appropriate with respect thereto to be done in and about the
premises in order to effectuate the same, as fully to all intents and purposes
as the undersigned might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may do or cause to
be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand, this
______ day of December, 1999.
------------------------------
James W. Dederer
<PAGE>
POWER OF ATTORNEY
The undersigned Director of Transamerica Occidental Life Insurance Company, a
California corporation (the "Company"), hereby constitutes and appoints Frank A.
Camp, James W. Dederer, David M. Goldstein, David E. Gooding, Priscilla I.
Hechler, William M. Hurst, Larry N. Norman, Thomas E. Pierpan, Stephen E. Price,
Colleen Tobiason, Ronald L. Ziegler and each of them (with full power to each of
them to act alone), his true and lawful attorney-in-fact and agent, with full
power of substitution to each, for him and on his behalf and in his name, place
and stead, to execute and file any of the documents referred to below relating
to registrations under the Securities Act of 1933 and under the Investment
Company Act of 1940 with respect to any life insurance and annuity policies:
registration statements on any form or forms under the Securities Act of 1933
and under the Investment Company Act of 1940, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his or their substitutes being empowered to act with or without the others
or other, and to have full power and authority to do or cause to be done in the
name and on behalf of the undersigned each and every act and thing requisite and
necessary or appropriate with respect thereto to be done in and about the
premises in order to effectuate the same, as fully to all intents and purposes
as the undersigned might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may do or cause to
be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand, this
______ day of December, 1999.
------------------------------
George A. Foegele
<PAGE>
POWER OF ATTORNEY
The undersigned Director of Transamerica Occidental Life Insurance Company, a
California corporation (the "Company"), hereby constitutes and appoints Frank A.
Camp, James W. Dederer, David M. Goldstein, David E. Gooding, Priscilla I.
Hechler, William M. Hurst, Larry N. Norman, Thomas E. Pierpan, Stephen E. Price,
Colleen Tobiason, Ronald L. Ziegler and each of them (with full power to each of
them to act alone), his true and lawful attorney-in-fact and agent, with full
power of substitution to each, for him and on his behalf and in his name, place
and stead, to execute and file any of the documents referred to below relating
to registrations under the Securities Act of 1933 and under the Investment
Company Act of 1940 with respect to any life insurance and annuity policies:
registration statements on any form or forms under the Securities Act of 1933
and under the Investment Company Act of 1940, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his or their substitutes being empowered to act with or without the others
or other, and to have full power and authority to do or cause to be done in the
name and on behalf of the undersigned each and every act and thing requisite and
necessary or appropriate with respect thereto to be done in and about the
premises in order to effectuate the same, as fully to all intents and purposes
as the undersigned might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may do or cause to
be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand, this
______ day of December, 1999.
------------------------------
Douglas C. Kolsrud
<PAGE>
POWER OF ATTORNEY
The undersigned Director of Transamerica Occidental Life Insurance Company, a
California corporation (the "Company"), hereby constitutes and appoints Frank A.
Camp, James W. Dederer, David M. Goldstein, David E. Gooding, Priscilla I.
Hechler, William M. Hurst, Larry N. Norman, Thomas E. Pierpan, Stephen E. Price,
Colleen Tobiason, Ronald L. Ziegler and each of them (with full power to each of
them to act alone), his true and lawful attorney-in-fact and agent, with full
power of substitution to each, for him and on his behalf and in his name, place
and stead, to execute and file any of the documents referred to below relating
to registrations under the Securities Act of 1933 and under the Investment
Company Act of 1940 with respect to any life insurance and annuity policies:
registration statements on any form or forms under the Securities Act of 1933
and under the Investment Company Act of 1940, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his or their substitutes being empowered to act with or without the others
or other, and to have full power and authority to do or cause to be done in the
name and on behalf of the undersigned each and every act and thing requisite and
necessary or appropriate with respect thereto to be done in and about the
premises in order to effectuate the same, as fully to all intents and purposes
as the undersigned might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may do or cause to
be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand, this
______ day of December, 1999.
------------------------------
Richard N. Latzer
<PAGE>
POWER OF ATTORNEY
The undersigned Director and Acting Chief Financial Officer of Transamerica
Occidental Life Insurance Company, a California corporation (the "Company"),
hereby constitutes and appoints Frank A. Camp, James W. Dederer, David M.
Goldstein, David E. Gooding, Priscilla I. Hechler, William M. Hurst, Larry N.
Norman, Thomas E. Pierpan, Stephen E. Price, Colleen Tobiason, Ronald L. Ziegler
and each of them (with full power to each of them to act alone), her true and
lawful attorney-in-fact and agent, with full power of substitution to each, for
her and on her behalf and in her name, place and stead, to execute and file any
of the documents referred to below relating to registrations under the
Securities Act of 1933 and under the Investment Company Act of 1940 with respect
to any life insurance and annuity policies: registration statements on any form
or forms under the Securities Act of 1933 and under the Investment Company Act
of 1940, and any and all amendments and supplements thereto, with all exhibits
and all instruments necessary or appropriate in connection therewith, each of
said attorneys-in-fact and agents and his or their substitutes being empowered
to act with or without the others or other, and to have full power and authority
to do or cause to be done in the name and on behalf of the undersigned each and
every act and thing requisite and necessary or appropriate with respect thereto
to be done in and about the premises in order to effectuate the same, as fully
to all intents and purposes as the undersigned might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents, or
any of them, may do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereunto set her hand, this
______ day of December, 1999.
------------------------------
Karen O. MacDonald
<PAGE>
POWER OF ATTORNEY
The undersigned Director of Transamerica Occidental Life Insurance Company, a
California corporation (the "Company"), hereby constitutes and appoints Frank A.
Camp, James W. Dederer, David M. Goldstein, David E. Gooding, Priscilla I.
Hechler, William M. Hurst, Larry N. Norman, Thomas E. Pierpan, Stephen E. Price,
Colleen Tobiason, Ronald L. Ziegler and each of them (with full power to each of
them to act alone), his true and lawful attorney-in-fact and agent, with full
power of substitution to each, for him and on his behalf and in his name, place
and stead, to execute and file any of the documents referred to below relating
to registrations under the Securities Act of 1933 and under the Investment
Company Act of 1940 with respect to any life insurance and annuity policies:
registration statements on any form or forms under the Securities Act of 1933
and under the Investment Company Act of 1940, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his or their substitutes being empowered to act with or without the others
or other, and to have full power and authority to do or cause to be done in the
name and on behalf of the undersigned each and every act and thing requisite and
necessary or appropriate with respect thereto to be done in and about the
premises in order to effectuate the same, as fully to all intents and purposes
as the undersigned might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may do or cause to
be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand, this
______ day of December, 1999.
------------------------------
Gary U. Rolle'
<PAGE>
POWER OF ATTORNEY
The undersigned Director of Transamerica Occidental Life Insurance Company, a
California corporation (the "Company"), hereby constitutes and appoints Frank A.
Camp, James W. Dederer, David M. Goldstein, David E. Gooding, Priscilla I.
Hechler, William M. Hurst, Larry N. Norman, Thomas E. Pierpan, Stephen E. Price,
Colleen Tobiason, Ronald L. Ziegler and each of them (with full power to each of
them to act alone), his true and lawful attorney-in-fact and agent, with full
power of substitution to each, for him and on his behalf and in his name, place
and stead, to execute and file any of the documents referred to below relating
to registrations under the Securities Act of 1933 and under the Investment
Company Act of 1940 with respect to any life insurance and annuity policies:
registration statements on any form or forms under the Securities Act of 1933
and under the Investment Company Act of 1940, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his or their substitutes being empowered to act with or without the others
or other, and to have full power and authority to do or cause to be done in the
name and on behalf of the undersigned each and every act and thing requisite and
necessary or appropriate with respect thereto to be done in and about the
premises in order to effectuate the same, as fully to all intents and purposes
as the undersigned might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may do or cause to
be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand, this
______ day of December, 1999.
------------------------------
Paul E. Rutledge III
<PAGE>
POWER OF ATTORNEY
The undersigned Director and President of the Insurance Products Division of
Transamerica Occidental Life Insurance Company, a California corporation (the
"Company"), hereby constitutes and appoints Frank A. Camp, James W. Dederer,
David M. Goldstein, David E. Gooding, Priscilla I. Hechler, William M. Hurst,
Larry N. Norman, Thomas E. Pierpan, Stephen E. Price, Colleen Tobiason, Ronald
L. Ziegler and each of them (with full power to each of them to act alone), his
true and lawful attorney-in-fact and agent, with full power of substitution to
each, for him and on his behalf and in his name, place and stead, to execute and
file any of the documents referred to below relating to registrations under the
Securities Act of 1933 and under the Investment Company Act of 1940 with respect
to any life insurance and annuity policies: registration statements on any form
or forms under the Securities Act of 1933 and under the Investment Company Act
of 1940, and any and all amendments and supplements thereto, with all exhibits
and all instruments necessary or appropriate in connection therewith, each of
said attorneys-in-fact and agents and his or their substitutes being empowered
to act with or without the others or other, and to have full power and authority
to do or cause to be done in the name and on behalf of the undersigned each and
every act and thing requisite and necessary or appropriate with respect thereto
to be done in and about the premises in order to effectuate the same, as fully
to all intents and purposes as the undersigned might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents, or
any of them, may do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand, this
______ day of December, 1999.
------------------------------
Nooruddin Veerjee
<PAGE>
POWER OF ATTORNEY
The undersigned Director of Transamerica Occidental Life Insurance Company, a
California corporation (the "Company"), hereby constitutes and appoints Frank A.
Camp, James W. Dederer, David M. Goldstein, David E. Gooding, Priscilla I.
Hechler, William M. Hurst, Larry N. Norman, Thomas E. Pierpan, Stephen E. Price,
Colleen Tobiason, Ronald L. Ziegler and each of them (with full power to each of
them to act alone), his true and lawful attorney-in-fact and agent, with full
power of substitution to each, for him and on his behalf and in his name, place
and stead, to execute and file any of the documents referred to below relating
to registrations under the Securities Act of 1933 and under the Investment
Company Act of 1940 with respect to any life insurance and annuity policies:
registration statements on any form or forms under the Securities Act of 1933
and under the Investment Company Act of 1940, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his or their substitutes being empowered to act with or without the others
or other, and to have full power and authority to do or cause to be done in the
name and on behalf of the undersigned each and every act and thing requisite and
necessary or appropriate with respect thereto to be done in and about the
premises in order to effectuate the same, as fully to all intents and purposes
as the undersigned might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may do or cause to
be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand, this
______ day of December, 1999.
------------------------------
Craig D. Vermie
