<PAGE>
Registration No. 333-80191
As filed with the Securities and Exchange Commission on August 25, 1999
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
PRE-EFFECTIVE AMENDMENT NO. 1 TO
FORM S-6
FOR REGISTRATION UNDER
THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS REGISTERED ON FORM N-8B-2
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
(Exact Name of Trust)
AMERICAN GENERAL LIFE INSURANCE COMPANY
(Exact Name of Depositor)
2727-A Allen Parkway
Houston, Texas 77019-2191
(Complete Address of Depositor's Principal Executive Offices)
Pauletta P. Cohn, Esq.
Associate General Counsel and Secretary
American General Life Companies
2727 Allen Parkway
Houston, Texas 77019-2191
(Name and Complete Address of Agent for Service)
Securities Being Offered: Flexible Premium Variable Life Insurance Policies.
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of this Registration Statement.
The Registrant hereby amends this Registration Statement on such date or date as
may be necessary to delay its effective date until the Registrant shall file a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
RECONCILIATION AND TIE BETWEEN ITEMS IN FORM
N-8B-2 AND THE PROSPECTUS
(PURSUANT TO INSTRUCTION 4 OF FORM S-6)
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
ITEM NO. OF FORM N-8B-2* PROSPECTUS CAPTION
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<S> <C>
1 Additional Information: Separate Account VL-R.
2 Additional Information: AGL.
3 Inapplicable.
4 Additional Information: Distribution of Policies.
5, 6 Additional Information: Separate Account VL-R.
7 Inapplicable.**
8 Inapplicable.**
9 Additional Information: Legal Matters.
10(a) Additional Information: Your Beneficiary, Assigning
Your Policy.
10(b) Basic Questions You May Have: How will the value
of my investment in a Policy change over time?
10(c)(d) Basic Questions You May Have: How can I change
my Policy's insurance coverage? How can I access
my investment in a Policy? Can I choose the form
in which AGL pays out any proceeds from my
Policy? Additional Information: Payment of Policy
Proceeds.
10(e) Basic Questions You May Have: Must I invest any
minimum amount in a policy?
10(f) Additional Information: Voting Privileges.
10(g)(1), 10(g)(4), 10(h)(3), 10(h)(2) Basic Questions You May Have: To what extent will
AGL vary the terms and conditions of the Policies
in particular cases? Additional Information: Voting
Privileges; Additional Rights That We Have.
10(g)(3), 10(g)(4), 10(h)(3), 10(h)(4) Inapplicable.**
10(i) Additional Information: Separate Account VL-R; Tax
Effects.
11 Basic Questions You May Have: How will the value
of my investment in a Policy change over time?
Additional Information: Separate Account VL-R.
12(a) Additional Information: Separate Account VL-R;
Front Cover.
12(b) Inapplicable.**
12(c), 12(d) Inapplicable.**
12(e) Inapplicable, because the Separate Account did not
commence operations until 1998.
13(a) Basic Questions You May Have: What charges will
AGL deduct from my investment in a Policy? What
charges and expenses will the Mutual Funds deduct
from the amounts I invest through my Policy?
Additional Information: More About Policy Charges.
13(b) Illustrations of Hypothetical Policy Benefits.
13(c) Inapplicable.**
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
13(d) Basic Questions You May Have: To what extent will
AGL vary the terms and conditions of the Policy in
particular cases?
13(e), 13(f), 13(g) None.
14 Basic Questions You May Have: How can I invest
money in a Policy?
15 Basic Questions You May Have: How can I invest
money in a Policy? How do I communicate with AGL?
16 Basic Questions You May Have: How will the value
of my investment in a Policy change over time?
ITEM NO. ADDITIONAL INFORMATION
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17(a), 17(b) Captions referenced under Items 10(c), 10(d), and
10(e).
17(c) Inapplicable.**
18(a) Captions referred to under Item 16.
18(b), 18(d) Inapplicable.**
18(c) Additional Information: Separate Account VL-R.
19 Additional Information: Separate Account VL-R;
Our Reports to Policy Owners.
20(a), 20(b), 20(c), 20(d), 20(e), 20(f) Inapplicable.**
21(a), 21(b) Basic Questions You May Have: How can I access
my investment in a Policy? Additional Information:
Payment of Policy Proceeds.
21(c) Inapplicable.**
22 Additional Information: Payment of Policy Proceeds-
Delay to Challenge Coverage.
23 Inapplicable.**
24 Basic Questions You May Have; Additional Information.
25 Additional Information: AGL.
26 Inapplicable, because the Separate Account did
not commence operations until 1998.
27 Additional Information: AGL.
28 Additional Information: AGL's Management.
29 Additional Information: AGL.
30, 31, 32, 33, 34 Inapplicable, because the Separate Account did not
commence operations until 1998.
35 Inapplicable.**
36 Inapplicable.**
37 None.
38, 39 Additional Information: Distribution of the Policies.
40 Inapplicable, because the Separate Account did not
commence operations until 1998.
41(a) Additional Information: Distribution of the Policies.
41(b), 41(c) Inapplicable**
41,43 Inapplicable, because the Separate Account did not
commence operations or issue any securities until 1998.
44(a)(1), 44(a)(2), 44(a)(3) Basic Questions You May Have: How will the value
of my investment in a Policy change over time?
44(a)(4) Additional Information: Tax Effects--Our taxes.
44(a)(5), 44(a)(6) Basic Questions You May Have: What charges will
AGL deduct from my investment in a Policy?
44(b) Inapplicable.**
44(c) Caption referenced in 13(d) above.
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
45 Inapplicable, because the Separate Account did not
commence operations until 1998.
46(a) Captions referenced in 44(a) above.
46(b) Inapplicable.**
47, 48, 49 None.
50 Inapplicable.**
51 Inapplicable.**
52(a), 52(c) Basic Questions You May Have: To what extent can
AGL vary the terms and conditions of the Policy in
particular cases? Additional Information:
Additional Rights That We Have.
52(b), 52(d) None.
53(a) Additional Information: Tax Effects--Our taxes.
53(b), 54 Inapplicable.**
55 Illustrations of Hypothetical Policy Benefits.
56-59 Inapplicable.**
</TABLE>
* Registrant includes this Reconciliation and Tie in its Registration Statement
in compliance with Instruction 4 as to the Prospectus as set out in Form S-6.
Separate Account VL-R (Account) has previously filed a notice of registration
as an investment company on Form N-8A under the Investment Company Act of
1940 (Act), and a Form N-8B-2 Registration Statement. Pursuant to Sections 8
and 30(b)(1) of the Act, Rule 30a-1 under the Act, and Forms N-8B-2 and N-SAR
under that Act, the Account will keep its Form N-8B-2 Registration Statement
current through the filing of periodic reports required by the Securities and
Exchange Commission (Commission).
** Not required pursuant to either Instruction 1(a) as to the Prospectus as set
out in Form S-6 or the administrative practice of the Commission and its
staff of adapting the disclosure requirements of the Commission's
registration statement forms in recognition of the differences between
variable life insurance policies and other periodic payment plan certificates
issued by investment companies and between separate accounts organized as
management companies and unit investment trusts.
<PAGE>
CORPORATE AMERICA - VARIABLE
Flexible Premium Variable Life Insurance Policy (the "Policy") Issued by
American General Life Insurance Company ("AGL")
HOME OFFICE:
(Express Delivery) (US Mail)
2727-A Allen Parkway Corporate Markets Group
Houston, Texas 77019-2191 P.O. Box 4647
PHONE: 1-888-222-4943 Houston, Texas 77210-4647
or: 1-713-831-6934
FAX: 1-713-831-4622
This booklet is called the "prospectus."
This Policy is available to individuals, corporations, and other
organizations. This Policy may be sold under certain arrangements that include
those in which a trustee or an employer, for example, purchases policies
covering a certain class of individuals. Other arrangements include those in
which an employer allows us to sell the Policy to its employees or retirees on
an individual basis.
Investment options. The AGL declared fixed interest account is the fixed
investment option for this Policy. You can also use AGL's Separate Account VL-R
("Separate Account") to invest in the following variable investment options. You
may change your selections from time to time:
<TABLE>
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<S> <C> <C> <C>
AIM Variable Insurance Funds, Inc. American General Series Dreyfus Variable MFS Variable Insurance
.AIM V.I. International Portfolio Company Investment Fund Trust
Equity Fund .International Equities .Quality Bond Portfolio .MFS Emerging Growth
.AIM V.I. Value Fund Fund/1/ .Small Cap Portfolio Series
.MidCap Index Fund/1,2/
.Money Market Fund/1/
.Stock Index Fund/1,2/
A I M Advisors, Inc.* /1/The Variable Annuity Life Massachusetts Financial
Insurance Company* The Dreyfus Corporation* Services Company*
/2/Bankers Trust Company[+]
- ------------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Dean Witter Universal Funds, Putnam Variable Trust SAFECO Resource Van Kampen Life
Inc. .Putnam VT Diversified Series Trust Investment Trust
.Equity Growth Portfolio/1/ Income Fund .Equity Portfolio .Strategic Stock
.High Yield Portfolio/2/ .Putnam VT Growth .Growth Portfolio Portfolio
and Income Fund
.Putnam VT International
/1/Morgan Stanley Dean Witter Investment Growth and Income Fund
Management Inc.* SAFECO Asset Management
/2/Miller Anderson & Sherrerd, LLP* Putnam Investment Company* Van Kampen Asset
Management, Inc.* Management Inc.*
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</TABLE>
*The Investment Adviser of the investment
option
[+]The Investment Sub-Adviser of the investment option
<PAGE>
Separate prospectuses contain more information about the mutual funds ("Funds"
or "Mutual Funds") in which we invest the accumulation value that you allocate
to any of the above-listed investment options (other than our declared fixed
interest option). The formal name of each such Fund is set forth in the chart
that appears above. Your investment results in any such option will depend on
those of the related Fund. You should also read the prospectus of the Mutual
Fund for any such investment option you may be interested in. You can request
free copies of any or all of the Mutual Fund prospectuses from your AGL
representative or from us at our Home Office listed above.
Other choices you have. During the insured person's lifetime, you may,
within limits, (1) change the amount of insurance, (2) borrow or withdraw
amounts you have invested, (3) choose when and how much you invest, and (4)
choose whether your accumulation value under your Policy, upon notification of
the insured person's death, will be added to the insurance proceeds we otherwise
will pay to the beneficiary.
Charges and expenses. We deduct charges and expenses from the amounts you
invest. These are described beginning on page 7.
Right to return. If for any reason you are not satisfied with your Policy,
you may return it to us and we will refund the greater of (i) any premium
payments received by us or (ii) your accumulation value plus any charges that
have been deducted. To exercise your right to return your Policy, you must mail
it directly to the Home Office address shown on the first page of this
prospectus or return it to the AGL representative through whom you purchased the
Policy within 10 days after you receive it. In a few states, this period may be
longer. Because you have this right, we will invest your initial net premium
payment in the money market investment option from the date your investment
performance begins until the first business day that is at least 15 days later.
Then we will automatically allocate your investment among the above-listed
investment options as you have chosen. Any additional premium we receive during
the 15-day period will also be invested in the money market division and
allocated to the investment options at the same time as your initial net
premium.
We have designed this prospectus to provide you with information that you
should have before investing in the Policy. Please read the prospectus carefully
and keep it for future reference.
Neither the Securities and Exchange Commission ("SEC") nor any state
securities commission has approved or disapproved of these securities or passed
upon the adequacy or accuracy of this prospectus. Any representation to the
contrary is a criminal offense. The Policy is not available in all states.
The Policy is not insured by the FDIC or any other agency. The Policy is
not a deposit or other obligation of any bank and is not bank guaranteed. The
Policy is subject to investment risks and possible loss of principal invested.
This prospectus is dated _________, 1999.
2
<PAGE>
GUIDE TO THIS PROSPECTUS
This prospectus contains information that you should know before you
purchase a Corporate America -Variable policy ("Policy") or exercise any of your
rights or privileges under a Policy.
Basic Information. Here are the page numbers in this prospectus where you
may find answers to most of your questions:
<TABLE>
<CAPTION>
page to
See in this
Prospectus
----------
<S> <C>
Basic Questions You May Have
- --------------------------------
. How can I invest money in a Policy?................................................................ 4
. How will the value of my investment in a Policy change over time?.................................. 5
. What is the basic amount of insurance ("death benefit")
that AGL pays when the insured person dies?...................................................... 6
. What charges will AGL deduct from my investment in a Policy?....................................... 7
. What charges and expenses will the Mutual Funds deduct from
amounts I invest through my Policy?.............................................................. 8
. Must I invest any minimum amount in a Policy?...................................................... 10
. How can I change my Policy's investment options?................................................... 11
. How can I change my Policy's insurance coverage?................................................... 11
. What additional rider benefits might I select?..................................................... 12
. How can I access my investment in a Policy?........................................................ 13
. Can I choose the form in which AGL pays out proceeds from my Policy?............................... 14
. To what extent can AGL vary the terms and conditions of the Policy in particular cases?............ 15
How will my Policy be treated for income tax purposes?............................................. 15
. How do I communicate with AGL?..................................................................... 16
</TABLE>
Illustrations of a hypothetical Policy. Starting on page 17, we have
included some examples of how the values of a sample Policy would change over
time, based on certain assumptions we have made. Because your circumstances may
vary considerably from our assumptions, your AGL representative can also provide
you with a similar sample illustration that is more tailored to your own
circumstances and wishes.
Additional information. You may find the answers to any other questions you
have under "Additional Information" beginning on page 23 or in the forms of our
Policy and riders. A table of contents for the "Additional Information" portion
of this prospectus also appears on page 23. You can obtain copies of our Policy
form from (and direct any other questions to) your AGL representative or our
Home Office (shown on the first page of this prospectus).
Financial statements. We have included certain financial statements of AGL
in this prospectus. These begin on page Q-1.
Special words and phrases. If you want more information about any words or
phrases that you read in this prospectus, you may wish to refer to the Index of
Words and Phrases that appears at the back of this prospectus. That index will
tell you on what page you can read more about many of the words and phrases that
we use.
3
<PAGE>
BASIC QUESTIONS YOU MAY HAVE
How can I invest money in a Policy?
Premium payments. We call the investments you make in a Policy "premiums"
or "premium payments." The amount we require as your initial premium varies
depending on the specifics of your Policy and the insured person. We can refuse
to accept a subsequent premium payment that is less than $300. Otherwise, with a
few exceptions mentioned below, you can make premium payments at any time and in
any amount. Premium payments received after your right to return the Policy
expires discussed on page 2 will be allocated to the available investment
options you have chosen upon receipt of funds. Premium payments we receive after
your right to return expires as discussed on page 2 will be allocated upon
receipt to the available investment options you have chosen.
Limits on premium payments. Federal tax law limits your ability to make
certain very large amounts of premium payments (relative to the amount of your
Policy's insurance coverage) and may impose penalties on amounts you take out of
your Policy if you do not observe certain additional requirements. These tax law
requirements are summarized further under "Tax Effects" beginning on page 24. We
will monitor your premium payments, however, to be sure that you do not exceed
permitted amounts or inadvertently incur any tax penalties. Also, in certain
circumstances, we may refuse to accept an additional premium if the insured
person does not provide us with adequate evidence that he/she continues to meet
our requirements for issuing insurance.
Ways to pay premiums. You can pay premiums by check or money order drawn on
a U.S. bank in U.S. dollars and made payable to "American General Life Insurance
Company," or "AGL." Premium payments after the initial premium payment must be
sent directly to our Home Office. We also accept premium payments by wire or by
exchange from another insurance company. You may obtain further information
about how to make premium payments by any of these methods from your AGL
representative or from our Home Office shown on the first page of this
prospectus.
Dollar cost averaging. Dollar cost averaging is an investment strategy
designed to reduce the risks that result from market fluctuations. The strategy
spreads the allocation of your accumulation value over a period of time. This
allows you to reduce the risk of investing most of your funds at a time when
prices are high. The success of this strategy depends on market trends and is
not guaranteed.
Under dollar cost averaging, we automatically make transfers of your
accumulation value from the money market investment option to one or more of the
other investment options that you choose. You tell us whether you want these
transfers to be made monthly, quarterly, semi-annually or annually. We make the
transfers as of the end of the valuation period that contains the day of the
month that you select other than the 29th, 30th or 31st day of the month. The
term "valuation period" is described on page 32. You must have at least $5,000
of accumulation value to start dollar cost averaging and each transfer under the
program must be at least $100. You cannot participate in dollar cost averaging
while also using automatic rebalancing (discussed below). Dollar cost averaging
ceases upon your request, or if your accumulation value in the money market
option becomes exhausted.
4
<PAGE>
Automatic rebalancing. This feature automatically rebalances the proportion
of your accumulation value in each investment option under your Policy to
correspond to your then current premium allocation designation. You tell us
whether you want us to do the rebalancing quarterly, semi-annually or annually.
The date automatic rebalancing occurs will be based on the date of issue of your
Policy. For example, if your Policy is dated January 17, and you have requested
automatic rebalancing on a quarterly basis, automatic rebalancing will start on
April 17, and will occur quarterly thereafter. Automatic rebalancing will occur
as of the end of the valuation period that contains the date of the month your
Policy was issued. You must have a total accumulation value of at least $5,000
to begin automatic rebalancing. You cannot participate in this program while
also participating in dollar cost averaging (discussed above). Rebalancing ends
upon your request.
How will the value of my investment in a Policy change over time?
Your accumulation value. From each premium payment you make, we deduct the
charges that we describe on page 7 under "Deductions from each premium payment."
We invest the rest in one or more of the investment options listed on the first
page of this prospectus. We call the amount that is at any time invested under
your Policy (including any loan collateral we are holding for your Policy loans)
your "accumulation value."
Your investment options. We invest the accumulation value that you have
allocated to any investment option (except our declared fixed interest option)
in shares of a Mutual Fund that follows investment practices, policies and
objectives that are appropriate to that option. Over time, your accumulation
value in any investment option will increase or decrease by the same amount as
if you had invested in the related Fund's shares directly (and reinvested all
dividends and distributions from the Fund in additional Fund shares); except
that your accumulation value will be reduced by certain charges that we deduct.
We describe these charges beginning on page 7 under "What charges will AGL
deduct from my investment in a Policy?"
You can review other important information about the Mutual Funds that you
can choose in the separate prospectuses for those Funds. This includes
information about the investment performance that each Fund's investment manager
has achieved. You can request additional free copies of these prospectuses from
your AGL representative or from our Home Office shown on the first page of this
prospectus.
We invest any accumulation value you have allocated to our declared fixed
interest account option as part of our general assets. We credit interest on
that accumulation value at a rate which we declare from time to time. We
guarantee that this will be at an effective annual rate of at least 4%. Although
this interest increases the amount of any accumulation value that you have in
our declared fixed interest account option, such accumulation value will also be
reduced by any charges that are allocated to this option under the procedures
described under "Allocation of charges." The "daily charge" described on page 7
and the charges and expenses of the Mutual funds discussed beginning on page 8
below do not apply to our declared fixed interest account option.
The Policy is "non-participating." You will not be entitled to any dividends
from AGL.
5
<PAGE>
What is the basic amount of insurance ("death benefit") that AGL pays when the
insured person dies?
Your specified amount of insurance. In your application to buy a Corporate
America - Variable Policy, you will tell us how much life insurance coverage you
want on the life of the insured person. We call this the "specified amount" of
insurance.
Your death benefit. The basic death benefit we will pay is reduced by any
outstanding Policy loans. You also choose whether the basic death benefit we
will pay is
. Option 1--The specified amount on the date of the insured person's
death; or
. Option 2--The specified amount on the date of the insured person's
death plus the Policy's accumulation value on the date of notification
of death.
Under Option 2, your death benefit will tend to be higher than under Option
1. However, the monthly insurance charge we deduct will also be higher to
compensate us for our additional risk. Because of this, your accumulation value
will tend to be higher under Option 1 than under Option 2.
Any premiums received by us after the date of the insured person's death
will be returned and not included in your accumulation value.
Federal tax law requires a minimum death benefit in relation to cash value
for a Policy to qualify as life insurance. The death benefit of a Policy will be
increased if necessary to ensure that the Policy will continue to qualify as
life insurance. One of two tests under current federal tax law can be used to
determine if a Policy complies with the definition of life insurance in Section
7702 of the Internal Revenue Code of 1996, as amended (the "Code").
The "guideline premium test" limits the amount of premiums payable under a
Policy to a certain amount for an insured of a particular age and gender. The
test also applies a prescribed "corridor factor" to determine a minimum ratio of
death benefit to accumulation value. The corridor factor depends upon the
attained age of the insured. The corridor factor decreases slightly (or remains
the same at older and younger ages) from year to year as the attained age of the
insured increases. Below is a sample list of corridor factors for the guideline
premium test:
TABLE OF ALTERNATIVE BASIC DEATH BENEFITS AS A PERCENTAGE MULTIPLE
OF POLICY ACCUMULATION VALUE
GUIDELINE PREMIUM TEST
<TABLE>
<CAPTION>
INSURED
PERSON'S
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AGE* 40 45 50 55 60 65 70 75 100
% 250% 215% 185% 150% 130% 120% 115% 105% 100%
</TABLE>
6
<PAGE>
The "cash value accumulation test" also limits the amount of premiums
payable under a Policy to a prescribed amount, using a minimum ratio of death
benefit to a Policy's accumulation value, but employs as a standard a "net
single premium" computed in compliance with the Code. If the accumulation value
of a Policy is at any time greater than the net single premium at the insured's
age and gender for the proposed death benefit, the death benefit will be
increased automatically by multiplying the accumulation value by a "death
benefit factor" computed in compliance with the Code. The death benefit factor
depends upon the gender and the attained age of the insured. Below is a sample
list of the cash value accumulation test factors (for a male):
TABLE OF ALTERNATIVE BASIC DEATH BENEFITS AS A PERCENTAGE MULTIPLE
OF POLICY ACCUMULATION VALUE
CASH VALUE ACCUMULATION TEST
<TABLE>
<CAPTION>
INSURED
PERSON'S
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AGE* 40 45 50 55 60 65 70 75 100
% 344% 294% 252% 218% 191% 169% 152% 138% 104%
</TABLE>
If the accumulation value is reduced (e.g., by partial surrenders, charges
or adverse investment performance) at a time when a minimum death benefit under
Section 7702 of the Code is in effect, such minimum death benefit will also be
reduced. You must elect either the guideline premium test or the cash value
accumulation test at issuance and once elected, the choice may not be changed.
What charges will AGL deduct from my investment in a Policy?
Deductions from each premium payment. We deduct from each premium payment a
charge to cover costs associated with the issuance of the Policy, administrative
services we perform and a premium tax that is then applicable to us in your
state or other jurisdiction. The amount we deduct in policy year 1 through 7 is
9% up to the "target premium" and 5% on any premium amounts in excess of the
target premium. The amount we deduct in year 8 and thereafter is 5% of all
premium payments. The target premium is an amount of premium that is
approximately equal to the seven-pay premium, which is the maximum amount of
premium that may be paid without the Policy becoming a modified endowment
contract. See "Tax Effects" starting on page 24.
Flat Monthly Charge. We will deduct $7 per month from your accumulation
value to cover administrative services we perform. Also, we have the right to
raise this charge at any time to not more than $10 per month.
Daily charge. We make a daily deduction at an annual effective rate of .65%
of your accumulation value that is then being invested in any of the investment
options for the costs associated with the mortality and expense risks we assume
under the Policy. After a Policy has been in effect for 10 years, we will reduce
the rate of the charge to a maximum of .40%, and after 20 years, we will further
reduce the charge to a maximum of .15%. Because the Policy was first offered in
1999, however, this decrease has not yet occurred for any outstanding Policy.
The daily deduction charges are the maximums we may charge; we may charge less,
but we can never charge more.
7
<PAGE>
Monthly insurance charge. Every month we will deduct from your accumulation
value a charge based on the cost of insurance rates applicable to your Policy on
the date of the deduction and our "amount at risk" on that date. Our amount at
risk is the difference between (a) the death benefit that would be payable
before reduction by policy loans if the insured person died on that date and (b)
the then total accumulation value under the Policy. For an otherwise identical
Policy, a greater amount at risk results in a higher monthly insurance charge.
The current monthly insurance charge has been designed primarily to provide
funds out of which we can make payments of death benefits under the Policy as
insured persons die.
For an otherwise identical Policy, a higher cost of insurance rate also
results in a higher monthly insurance charge. Our cost of insurance rates are
guaranteed not to exceed those that will be specified in your Policy.
In general, our cost of insurance rates increase with the insured person's
age. The longer you own your Policy, the higher the cost of insurance rate will
be. Also our cost of insurance rates will generally be lower if the insured
person is a female than if a male.
Similarly, our current cost of insurance rates are generally lower for non-
smokers than smokers. Insured persons who present particular health,
occupational or non-work related risks may be charged higher cost of insurance
rates and other additional charges based on the specified amount of insurance
coverage under their Policy.
We may offer the Policy on a guaranteed issue basis to certain groups or
classes based on our established guidelines, including face amount limitations.
Our cost of insurance rates will generally be higher for a guaranteed issue
Policy.
Our cost of insurance rates also are generally higher under a Policy that
has been in force for some period of time than they would be under an otherwise
identical Policy purchased more recently on the same insured person.
Transaction Fee. For each partial surrender you make, we may in the future
charge a $25 transaction fee to cover administrative services. This charge will
be deducted from the investment options in the same ratio as the requested
transfer unless you specify otherwise.
For a further discussion regarding the charges we will deduct from your
investment in a Policy, see "More About Policy Charges" on page 30.
Allocation of charges. You may choose the investment options from which we
deduct all monthly charges. If you do not choose or have enough accumulation
value in the investment options you selected, we will deduct these charges in
proportion to the amount of accumulation value you then have in each investment
option.
What charges and expenses will the Mutual Funds deduct from amounts I invest
through my Policy?
Each Mutual Fund pays its investment management fees and other operating
expenses. Because they reduce the investment return of a Fund, these fees and
expenses also will reduce the return you will earn on any accumulation value
that you have invested in that Fund. These charges and expenses are as
follows:
8
<PAGE>
THE MUTUAL FUNDS' ANNUAL EXPENSES/1/ (as a percentage of average net assets)
<TABLE>
<CAPTION>
Fund Other Fund Total Fund
Management Operating Operating
Fees (After Expenses (After Expenses (After
Expense Expense Expense
Name of Fund Reimbursement) 12b-1 Fees Reimbursement) Reimbursement)
------------ -------------- ---------- -------------- --------------
<S> <C> <C> <C> <C>
The following funds of AIM Variable
Insurance Funds, Inc. /(1)/
AIM V.I. International Equity Fund 0.75% 0.16% 0.91%
AIM V.I. Value Fund 0.61% 0.05% 0.66%
The following funds of American General
Series Portfolio Company:/(1)/
International Equities Fund 0.35% 0.05% 0.40%
MidCap Index Fund 0.32% 0.04% 0.36%
Money Market Fund 0.50% 0.04% 0.54%
Stock Index Fund 0.27% 0.04% .031%
The following funds of Dreyfus Variable
Investment Fund:/(1)/
Quality Bond Portfolio 0.65% 0.08% 0.73%
Small Cap Portfolio 0.75% 0.02% 0.77%
The following series of MFS Variable
Insurance Trust:(1)
MFS Emerging Growth Series 0.75% 0.10% 0.85%
The following portfolios of Morgan
Stanley Dean Witter Universal
Funds, Inc./(1)/
Equity Growth Portfolio/(2)/ 0.09% 0.76% 0.85%
High Yield Portfolio/(2)/ 0.15% 0.65% 0.80%
The following portfolios of Putnam
Variable Trust: Class "IB" Funds
Putnam VT Diversified Income Fund/(3)/ 0.50% 0.11% 0.08% 0.69%
Putnam VT Growth and Income Fund/(3)/ 0.35% 0.11% 0.03% 0.49%
Putnam VT International Growth 0.59% 0.11% 0.14% 0.84%
and Income Fund(3)
</TABLE>
(Footnotes on next Page)
9
<PAGE>
<TABLE>
<CAPTION>
Fund Other Fund Total Fund
Management Operating Operating
Fees (After Expenses (After Expenses (After
Expense Expense Expense
Name of Fund Reimbursement) 12b-1 Fees Reimbursement) Reimbursement)
------------ -------------- ---------- -------------- --------------
<S> <C> <C> <C> <C>
The following portfolios of SAFECO
Resources Series Trust:/(1)/
Equity Portfolio 0.74% 0.04% 0.78%
Growth Portfolio 0.74% 0.06% 0.80%
The following portfolio of Van Kampen
Life Investment Trust:/(1)/
Strategic Stock Portfolio/(2)/ 0.00% 0.65% 0.65%
</TABLE>
/1/ The Mutual Funds' advisers or administrators have entered into service
agreements with AGL. Under these arrangements, the advisers or administrators
pay fees to AGL for certain administrative services. The fees do not have a
direct relationship to the Mutual Fund's Annual Expenses. (See "Service
Agreements.")
/2/ Management fees and other expenses as shown for fiscal year 1998 would have
been the percentages shown below without certain voluntary expense
reimbursements from the investment adviser. Current and future fees and expenses
may vary from the fiscal year 1998 fees and expenses.
<TABLE>
<CAPTION>
Management Other Total
Fees Expenses Annual Expenses
---- -------- ---------------
<S> <C> <C> <C>
Morgan Stanley Dean Witter
Equity Growth Portfolio 0.55% 0.76% 1.31%
High Yield Portfolio 0.50% 0.65% 1.15%
Van Kampen
Strategic Stock Portfolio 0.50% 0.75% 1.25%
</TABLE>
/3/ The prospectus for Putnam Variable Trust under "Distribution Plan" discusses
this 12b-1 fee.
Must I invest any minimum amount in a Policy?
Planned periodic premiums. Page 3 of your Policy will specify a "Planned
Periodic Premium." This is the amount that you (within limits) choose to have us
bill you. Our current practice is to bill annually. However, payment of this
amount or any other specific amounts of premiums is not mandatory. You need to
invest enough to ensure that your Policy's accumulation value, less any
indebtedness and after your monthly deductions, stays above zero. The less you
invest, the more likely it is that your Policy's accumulation value, less any
indebtedness and after your monthly deductions, could fall to zero, as a result
of the deductions we periodically make from your accumulation value.
Policy lapse and reinstatement. If your Policy's accumulation value does
fall to zero, we will notify you and give you a grace period to pay at least the
amount we estimate is necessary to keep your Policy in force for a reasonable
time. If we do not receive your payment by the end of the grace period,
10
<PAGE>
your Policy and all riders will end without value and all coverage under your
Policy will cease. Although you can apply to have your Policy "reinstated," you
must do this within 5 years (or, if earlier, before the Policy's maturity date),
and you must present evidence that the insured person still meets our
requirements for issuing coverage. Also, you will have to pay enough premium to
keep your Policy in force for two months as well as pay or reinstate any
indebtedness. In the Policy, you will find additional information about the
values and terms of a Policy after it is reinstated.
How can I change my Policy's investment options?
Future premium payments. You may at any time change the investment options in
which future premiums will be invested. Your allocation must, however, be in
whole percentages that total 100%.
Transfers of existing accumulation value. You may also transfer your existing
accumulation value from one investment option under the Policy to another. You
may make transfers at any time. Unless you are transferring the entire amount
you have in an investment option, each transfer must be at least $500. See
"Additional Rights That We Have" on page 36.
Also, in any one policy year, the amount that may be transferred out of our
declared fixed interest account option each year is limited to the greatest
of:
. 25% of the accumulation value you had in the declared fixed interest
account option as of the Policy anniversary;
. the sum of any amounts transferred from the declared fixed interest account
option in the prior Policy year; or
. $500.
You may make transfers anytime, except that transfers out of our declared
fixed interest account option must be made within 60 days after the Policy
anniversary. We will not honor any request received outside that period.
Transaction Fee. We may in the future charge a $25 transaction fee for each
transfer you make in excess of 12 per Policy year.
Market Timing. The Policy is not designed for professional market timing
organizations or other entities using programmed and frequent transfers. We may
not unilaterally terminate or discontinue transfer privileges. However, we
reserve the right to suspend such privileges for a reasonable period.
How can I change my Policy's insurance coverage?
Increase in coverage. You may at any time request an increase in the specified
amount of coverage under your Policy. You must, however, provide us with
satisfactory evidence that the insured person continues to meet our requirements
for issuing insurance coverage.
11
<PAGE>
We treat an increase in specified amount in many respects as if it were the
issuance of a new Policy. For example, the monthly insurance charge for the
increase will be based on the age and risk class of the insured person at the
time of the increase.
Decrease in coverage. After the first policy year, you may request a reduction
in the specified amount of coverage, but not below certain minimums. If the
insured is younger than 65, the death benefit may be reduced to no less than
$50,000, otherwise the minimum is $25,000 (or, if greater, the minimum amount
the tax law requires).
Change of death benefit option. You may at any time request us to change your
coverage from death benefit Option 1 to 2 or vice-versa.
. If you change from Option 1 to 2, we also automatically reduce your
Policy's specified amount of insurance by the amount of your Policy's
accumulation value (but not below zero) at the time of the change.
. If you change from Option 2 to 1, we automatically increase your Policy's
specified amount by the amount of your Policy's accumulation value.
Tax consequences of changes in insurance coverage. Please read "Tax Effects"
starting on page 24 of this prospectus to learn about possible tax consequences
of changing your insurance coverage under your Policy.
What additional rider benefits might I select?
You can request that your Policy include the additional rider benefits
described below. (These riders may not be available in all states.) For most of
the riders that you choose, a charge, which will be shown on page 4 of your
Policy, will be deducted from your accumulation value on each monthly deduction
date. Eligibility for and changes in these benefits are subject to our rules and
procedures as in effect from time to time. More details are included in the form
of each rider, which we suggest that you review if you choose any of these
benefits.
. Flexible Term Rider, which provides a death benefit coverage in addition to
-------------------
the base policy death benefit. Cost of Insurance charges are the same as for
the base policy.
. Interim Term Rider, which provides temporary coverage during the period prior
------------------
to issuance of the Policy.
. Return of Premium Rider, which provides increases in the death benefit equal
-----------------------
to the sum of all premiums paid for the policy, including premiums for all
riders except for the Interim Term Rider, less:
1) the total amount of all partial withdrawals from the policy's cash
surrender value; and
2) the amount of any policy loan, reduced by unearned loan interest, if
any.
Death Benefit Option 2 may not be selected with the Return of Premium
Rider.
12
<PAGE>
. Maturity Extension Rider, which permits you to extend the Policy's maturity
------------------------
date beyond what it otherwise would be.
The death benefit after the original maturity date will be equal to the
accumulation value on the date of death. All accumulation value that is in
the separate account can remain there.
No additional premium payments, new loans, monthly insurance charge, or
changes in specified amount will be allowed after the original maturity
date. There is a flat monthly charge of no more than $10 each month after
the original maturity date. After this rider is elected, it may not be
revoked.
Extension of the maturity date beyond the insured person's age 100 may
result in the current taxation of increases in your Policy's accumulation
value as a result of interest or investment experience after that time. You
should consult a qualified tax adviser before making such an extension.
Tax consequences of additional rider benefits. Adding or deleting riders, or
increasing or decreasing coverage under existing riders can have tax
consequences. See "Tax Effects" starting on page 24. You should consult a
qualified tax adviser.
How can I access my investment in a Policy?
Full surrender. You may at any time surrender your Policy in full. If you do,
we will pay you the accumulation value, less any Policy loans. We call this
amount your "cash surrender value." During the first Policy year, the cash
surrender value will be equal to the accumulation value, less any Policy loans,
plus 40% of the deductions from each premium payment made during the first
Policy year. During the second Policy year, the cash surrender value will be
equal to the accumulation value, less any Policy loans, plus 20% of the
deductions from each premium payment made during the first Policy year.
Partial surrender. You may, at any time after the first Policy year, make a
partial surrender of your Policy's cash surrender value. A partial surrender
must be at least $500. If the Option 1 death benefit is then in effect, we will
also automatically reduce your Policy's specified amount of insurance by the
amount of your withdrawal and any related charges. We will not permit a partial
surrender if it would cause your Policy to fail to qualify as life insurance
under the tax laws or if it would cause your specified amount to fall below the
minimum allowed.
You may apply for a partial surrender without reducing your Policy's specified
amount of insurance if you meet certain requirements established by us,
including satisfactory evidence of insurability.
You may choose the investment option or options from which money that you
withdraw will be taken. Otherwise, we will allocate the withdrawal in the same
proportions as then apply for deducting monthly charges under your Policy or, if
that is not possible, in proportion to the amount of accumulation value you then
have in each investment option.
Exchange of Policy in Certain States. Certain states require that a policy
owner be given the right to exchange the Policy for a fixed benefit life
insurance policy, within either 18 or 24 months from the
13
<PAGE>
date of issue. This right is subject to various conditions imposed by the states
and us. In such states, this right has been more fully described in your Policy
or related endorsements to comply with the applicable state requirements.
Transaction Fee. We may in the future charge a $25 transaction fee for each
partial surrender you make. This charge will be deducted from the investment
options in the same ratio as the requested transfer.
Policy loans. You may at any time borrow from us an amount equal to your
Policy's cash surrender value less the interest that will be payable on your
loan and on any existing policy loans through your next Policy anniversary. This
rule is not applicable in all states.
We remove from your investment options an amount equal to your loan and hold
that amount as collateral for the loan. We will credit your Policy with interest
on this collateral amount at an effective annual rate of 4% (rather than any
amount you could otherwise earn in one of our investment options), and we will
charge you interest on your loan at an effective annual rate of 4.75% for the
first 7 years, and 4.25% thereafter. Any amount not paid by its due date will
automatically be added to the loan balance as an additional loan.
When a loan is made, we will cancel units from each applicable division of the
Separate Account and reduce the unloaned portion of the general account in the
ratio that the loan bears to the unloaned Accumulation Value of your Policy,
unless you specify otherwise in writing.
You may repay all or part of your loan at any time before the notification of
the death of the Insured while your Policy is in force. Each repayment must be
at least $100 or the entire loan balance, if less. You must designate any loan
repayment as such. Otherwise, we will treat it as a premium payment instead. We
will invest any additional loan repayments you make in the investment options
you request. In the absence of such a request we will invest the repayment in
the same proportion as you then have selected for premium payments that we
receive from you. Any unpaid loan will be deducted from the proceeds we pay
following notification of the insured person's death.
Maturity of your Policy. If the insured person is still living on the "
Maturity Date" shown on page 3 of your Policy, we will automatically pay you the
cash surrender value of the Policy, and the Policy will end. The maturity date
is the Policy anniversary nearest the insured person's 100th birthday.
Can I choose the form in which AGL pays out the proceeds from my Policy?
Choosing a payment option. You may choose to receive the full proceeds from
the Policy as a single sum. This includes proceeds that become payable upon the
death of the insured person, full surrender or the maturity date. Alternatively,
you may elect that all or part of such proceeds be applied to one or more of the
following payment options:
. Option 1 -- Equal monthly payments for a specified period of time.
. Option 2 -- Equal monthly payments of a specified amount until all amounts
are paid out.
14
<PAGE>
. Option 3 -- Equal monthly payments for the payee's life, but with payments
guaranteed for a specified number of years. These payments are based on
annuity rates that are set forth in the Policy or, at the payee's request,
the annuity rates that we then are using.
. Option 4 -- Proceeds left to accumulate with interest.
Additional payment options may also be available with our consent. We have the
right to veto any payment option, if the payee is a corporation or other entity.
You can read more about each of these options in our Policy form and in the
separate form of payment contract that we issue when any such option takes
effect.
Within 60 days after notification of the insured person's death, any
beneficiary entitled to receive proceeds as a single sum may elect one or more
payment options.
Interest rates that we credit under each option will be at least 3%.
Change of payment option. You may change any payment option you have elected
at any time while the Policy is in force and before the start date of the
payment option.
Tax impact. If a payment option is chosen, you or your beneficiary may have
tax consequences. You should consult with a qualified tax adviser before
deciding whether to elect one or more payment options.
To what extent can AGL vary the terms and conditions of the Policy in particular
cases?
Listed below are some variations we may make in the terms of a Policy. Any
variations will be made only in accordance with uniform rules that we establish.
Policy purchased through "internal rollovers." We maintain published rules
that describe the procedures necessary to replace the other life insurance we
issue with a Policy. Not all types of other insurance we issue are eligible to
be replaced with a Policy. Our published rules may be changed from time to time,
but are evenly applied to all our customers.
State law requirements. AGL is subject to the insurance laws and regulations
in every jurisdiction in which the Corporate America - Variable Policy is sold.
As a result, various time periods and other terms and conditions described in
this prospectus may vary depending on where you reside. These variations will be
reflected in your Policy and related endorsements.
Variations in expenses or risks. AGL may vary the charges and other terms of
the Policy where special circumstances result in sales, administrative or other
expenses, mortality risks or other risks that are different from those normally
associated with the Policy.
How will my Policy be treated for income tax purposes?
Generally, death benefits paid under a Policy are not subject to income tax.
Earnings on your accumulation value are not subject to income tax as long as we
do not pay them out to you. If we do pay any amount of your Policy's
accumulation value upon surrender, partial surrender, or maturity of your
15
<PAGE>
Policy, all or part of that distribution may be treated as a return of the
premiums you paid, which is not subject to income tax.
Amounts you receive as Policy loans are not taxable to you, unless you have
paid such a large amount of premiums that your Policy becomes what the tax law
calls a "modified endowment contract." In that case, the loan will be taxed to
the extent of gain. Furthermore, loans, partial surrenders and other
distributions from a modified endowment contract may require you to pay
additional taxes and penalties that otherwise would not apply.
For further information about the tax consequences of owning a Policy, please
read "Tax Effects" starting on page 24.
How do I communicate with AGL?
When we refer to "you," we mean the person who is authorized to take any
action with respect to a Policy. Generally, this is the owner named in the
Policy. Where a Policy has more than one owner, each owner generally must join
in any requested action, except for transfers and changes in the allocation of
future premiums or changes among the investment options.
General. You should mail or express checks and money orders for premium
payments and loan repayments directly to our Home Office.
The following requests must be made in writing and signed by you:
. transfer of accumulation value;
. loan;
. full surrender;
. partial surrender;
. change of beneficiary or contingent beneficiary;
. change of allocation percentages for premium payments;
. loan repayments or charges;
. change of death benefit option or manner of death benefit payment;
. increase in specified insurance amount;
16
<PAGE>
. addition or cancellation of, or other action with respect to, election of a
payment option for Policy proceeds;
. tax withholding elections; and
. telephone transaction privileges.
You should mail or express these requests to our Home Office at the appropriate
address shown on the first page of this prospectus. You should also communicate
notice of the insured person's death, and related documentation, to our Home
Office.
We have special forms which should be used for loans, assignments, partial and
full surrenders, changes of owner or beneficiary, and all other contractual
changes. You will be asked to return your Policy when you request a full
surrender. You may obtain these forms from our Home Office or from your AGL
representative. Each communication must include your name, Policy number and, if
you are not the insured person, that person's name. We cannot process any
requested action that does not include all required information.
Telephone transactions. If you have a completed telephone authorization form
on file with us, you may make transfers, or change the allocation of future
premium payments or deduction of charges, by telephone, subject to the terms of
the form. We will honor telephone instructions from any person who provides the
correct information, so there is a risk of possible loss to you if unauthorized
persons use this service in your name. Our current procedure is that only the
owner or your AGL representative may make a transfer request by phone. We are
not liable for any acts or omissions based upon instructions that we reasonably
believe to be genuine. Our procedures include verification of the Policy number,
the identity of the caller, both the insured person's and owner's names, and a
form of personal identification from the caller. We will mail you a prompt
written confirmation of the transaction. If (a) many people seek to make
telephone requests at or about the same time, or (b) our recording equipment
malfunctions, it may be impossible for you to make a telephone request at the
time you wish. You should submit a written request if you cannot make a
telephone transfer. Also, if, due to malfunction or other circumstances, the
recording of your telephone request is incomplete or not fully comprehensible,
we will not process the transaction. The phone number for telephone requests is
1-888-222-4943.
ILLUSTRATIONS OF HYPOTHETICAL POLICY BENEFITS
To help explain how our Policy works, we have prepared the following tables:
<TABLE>
<CAPTION>
Page to
See in this
Table Prospectus
- ----- ----------
<S> <C>
Cash Value Accumulation Test, Death Benefit Option 1 -
Current Charges........................................ 19
Guaranteed Maximum Charges............................. 20
Guideline Premium Test, Death Benefit Option 1-
Current Charges........................................ 21
Guaranteed Maximum Charges............................. 22
</TABLE>
17
<PAGE>
The tables show how death benefits, accumulation values, and cash surrender
values ("Policy benefits") under a sample Corporate America - Variable Policy
would change over time if the investment options had constant hypothetical gross
annual investment returns of 0%, 6% or 12% over the years covered by each table.
The tables are for a 45 year-old male non-tobacco user. Seven annual premium
payments of $10,000 are assumed to be paid for an initial $180,538 of specified
amount of coverage as determined using the Cash Value Accumulation Test death
benefit compliance method and an initial $281,220 of specified amount of
coverage as determined using the Guideline Premium Test. The illustrations
assume no Policy loan has been taken.
Although the tables below do not include an example of a Policy with an Option
2 death benefit, such a Policy would have higher death benefits and lower cash
surrender values. The tables reflect a medically underwritten Policy. A
guaranteed issue Policy would have higher cost of insurance charges and lower
cash surrender values.
Separate tables are included to show both current and guaranteed maximum
charges.
. The charges assumed in the current charge tables include a daily charge at
an annual effective rate of .65% for the first 10 Policy years, .40% for
Policy years 11-20, and .15% thereafter, plus a flat monthly charge of
$7.00 and current monthly insurance charges.
. The guaranteed maximum charge table assumes that these charges include a
daily charge at an annual rate effective rate of .65% for the first 10
Policy years, .40% for Policy years 11-20, and .15% thereafter, plus a flat
monthly charge of $10.00 and guaranteed monthly insurance charges.
The charges assumed by both the current and guaranteed maximum charge tables
also include Mutual Fund expenses of 0.67% of aggregate Mutual Fund assets,
which is the arithmetic average of the advisory fees payable with respect to
each Mutual Fund, after all reimbursements, plus the arithmetic average of all
other operating expenses of each such Fund, after all reimbursements, as
reflected on pages 9 and 10 of this prospectus. We expect the reimbursement
arrangements to continue in the future. If the reimbursement arrangements were
not currently in effect, the arithmetic average of Mutual Fund expenses would
equal .76% of aggregate Mutual Fund assets.
Individual illustrations. On request, we will furnish you with a comparable
illustration based on your Policy's characteristics. If you request
illustrations more than once in any Policy year, we may charge $25 for the
illustration.
18
<PAGE>
Corporate America - Variable
Annual Premium $10,000 Initial Specified Amount $180,538
Death Benefit Option 1
Cash Value Accumulation Test
Male Age 45
Preferred - Medically Underwritten
Assuming Current Charges
<TABLE>
<CAPTION>
Death Benefit Accumulation Value Cash Surrender Value
End of Assuming Hypothetical Gross Assuming Hypothetical Gross Assuming Hypothetical Gross
Policy Annual Investment Return of Annual Investment Return of Annual Investment Return of
Year 0.0% 6.0% 12.0% 0.0% 6.0% 12.0% 0.0% 6.0% 12.0%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 180,538 180,538 180,538 8,792 9,332 9,872 9,152 9,692 10,232
2 180,538 180,538 180,538 17,408 19,040 20,737 17,588 19,220 20,917
3 180,538 180,538 180,538 25,848 29,140 32,701 25,848 29,140 32,701
4 180,538 180,538 180,538 34,134 39,674 45,907 34,134 39,674 45,907
5 180,538 180,538 180,538 42,283 50,679 60,511 42,283 50,679 60,511
6 180,538 180,538 189,826 50,289 62,175 76,657 50,289 62,175 76,657
7 180,538 180,538 226,973 58,142 74,176 94,407 58,142 74,176 94,407
8 180,538 180,538 242,666 56,877 77,197 103,927 56,877 77,197 103,927
9 180,538 182,155 259,387 55,538 80,295 114,340 55,538 80,295 114,340
10 180,538 184,071 277,241 54,127 83,480 125,734 54,127 83,480 125,734
15 180,538 197,414 393,390 47,107 102,518 204,290 47,107 102,518 204,290
20 180,538 212,516 560,387 37,585 125,023 329,676 37,585 125,023 329,676
</TABLE>
The values will change if premiums are paid in different amounts or
frequencies.
The investment results are an example only and are not a representation of
past or future investment results. Actual investment results may be more or less
than those shown.
19
<PAGE>
Corporate America - Variable
Annual Premium $10,000 Initial Specified Amount $180,538
Death Benefit Option 1
Cash Value Accumulation Test
Male Age 45
Preferred - Medically Underwritten
Assuming Guaranteed Charges
<TABLE>
<CAPTION>
Death Benefit Accumulation Value Cash Surrender Value
End of Assuming Hypothetical Gross Assuming Hypothetical Gross Assuming Hypothetical Gross
Policy Annual Investment Return of Annual Investment Return of Annual Investment Return of
Year 0.0% 6.0% 12.0% 0.0% 6.0% 12.0% 0.0% 6.0% 12.0%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 180,538 180,538 180,538 8,085 8,603 9,121 8,445 8,963 9,481
2 180,538 180,538 180,538 16,039 17,587 19,200 16,219 17,767 19,380
3 180,538 180,538 180,538 23,865 26,976 30,345 23,865 26,976 30,345
4 180,538 180,538 180,538 31,567 36,794 42,684 31,567 36,794 42,684
5 180,538 180,538 180,538 39,145 47,066 56,357 39,145 47,066 56,357
6 180,538 180,538 180,538 46,603 57,822 71,525 46,603 57,822 71,525
7 180,538 180,538 212,039 53,938 69,088 88,196 53,938 69,088 88,196
8 180,538 180,538 225,213 52,100 71,298 96,452 52,100 71,298 96,452
9 180,538 180,538 239,217 50,175 73,546 105,488 50,175 73,546 105,488
10 180,538 180,538 254,101 48,146 75,827 115,240 48,146 75,827 115,240
15 180,538 180,538 347,929 36,557 88,838 180,682 36,557 88,838 180,682
20 180,538 180,538 476,687 19,539 103,079 280,435 19,539 103,079 280,435
</TABLE>
The values will change if premiums are paid in different amounts or
frequencies.
The investment results are an example only and are not a representation of
past or future investment results. Actual investment results may be more or less
than those shown.
20
<PAGE>
Corporate America - Variable
Annual Premium $10,000 Initial Specified Amount
$281,220
Death Benefit Option 1
Guideline Premium Test
Male Age 45
Preferred - Medically Underwritten
Assuming Current Charges
<TABLE>
<CAPTION>
Death Benefit Accumulation Value Cash Surrender Value
End of Assuming Hypothetical Gross Assuming Hypothetical Gross Assuming Hypothetical Gross
Policy Annual Investment Return of Annual Investment Return of Annual Investment Return of
Year 0.0% 6.0% 12.0% 0.0% 6.0% 12.0% 0.0% 6.0% 12.0%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 281,220 281,220 281,220 8,730 9,268 9,807 9,090 9,628 10,167
2 281,220 281,220 281,220 17,246 18,868 20,556 17,426 19,048 20,736
3 281,220 281,220 281,220 25,539 28,807 32,343 25,539 28,807 32,343
4 281,220 281,220 281,220 33,643 39,133 45,312 33,643 39,133 45,312
5 281,220 281,220 281,220 41,580 49,888 59,620 41,580 49,888 59,620
6 281,220 281,220 281,220 49,336 61,077 75,399 49,336 61,077 75,399
7 281,220 281,220 281,220 56,882 72,698 92,793 56,882 72,698 92,793
8 281,220 281,220 281,220 55,290 75,293 101,954 55,290 75,293 101,954
9 281,220 281,220 281,220 53,555 77,781 111,998 53,555 77,781 111,998
10 281,220 281,220 281,220 51,683 80,441 123,044 51,683 80,441 123,044
15 281,220 281,220 281,220 41,749 95,380 201,382 41,749 95,380 201,382
20 281,220 281,220 406,724 27,287 111,041 333,380 27,287 111,041 333,380
</TABLE>
The values will change if premiums are paid in different amounts or
frequencies.
The investment results are an example only and are not a
representation of past or future investment results. Actual investment
results may be more or less than those shown.
21
<PAGE>
Corporate America - Variable
Annual Premium $10,000 Initial Specified Amount
$281,220
Death Benefit Option 1
Guideline Premium Test
Male Age 45
Preferred - Medically Underwritten
Assuming Guaranteed Charges
<TABLE>
<CAPTION>
Death Benefit Accumulation Value Cash Surrender Value
End of Assuming Hypothetical Gross Assuming Hypothetical Gross Assuming Hypothetical Gross
Policy Annual Investment Return of Annual Investment Return of Annual Investment Return of
Year 0.0% 6.0% 12.0% 0.0% 6.0% 12.0% 0.0% 6.0% 12.0%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 281,220 281,220 281,220 7,629 8,133 8,637 7,989 8,493 8,997
2 281,220 281,220 281,220 15,095 16,584 18,136 15,275 16,764 18,316
3 281,220 281,220 281,220 22,395 25,370 28,594 22,395 25,370 28,594
4 281,220 281,220 281,220 29,533 34,509 40,123 29,533 34,509 40,123
5 281,220 281,220 281,220 36,503 44,016 52,842 36,503 44,016 52,842
6 281,220 281,220 281,220 43,305 53,912 66,891 43,305 53,912 66,891
7 281,220 281,220 281,220 49,927 64,210 82,419 49,927 64,210 82,419
8 281,220 281,220 281,220 47,311 65,325 89,449 47,311 65,325 89,449
9 281,220 281,220 281,220 44,532 66,334 97,141 44,532 66,334 97,141
10 281,220 281,220 281,220 41,562 67,211 105,566 41,562 67,211 105,566
15 281,220 281,220 281,220 23,532 69,802 164,369 23,532 69,802 164,369
20 0 281,220 323,874 0 64,749 265,471 0 64,749 265,471
</TABLE>
The values will change if premiums are paid in different amounts or
frequencies.
The investment results are an example only and are not a
representation of past or future investment results. Actual investment
results may be more or less than those shown.
22
<PAGE>
ADDITIONAL INFORMATION
A general overview of the Policy appears at page 1 - 22. The additional
information that follows gives more details, but generally does not repeat what
is set forth above.
<TABLE>
<CAPTION>
page to
See in this
Contents of Additional Information Prospectus
- ---------------------------------- ----------
<S> <C>
AGL.................................................... 23
Separate Account VL-R.................................. 24
Tax Effects............................................ 24
Voting Privileges...................................... 29
Your Beneficiary....................................... 30
Assigning Your Policy.................................. 30
More About Policy Charges.............................. 30
Effective Date of Policy and Related Transactions...... 32
More About Our Declared Fixed Interest Account Option.. 33
Distribution of the Policy............................. 33
Payment of Policy Proceeds............................. 34
Adjustments to Death Benefit........................... 35
Additional Rights That We Have......................... 36
Performance Information................................ 36
Our Reports to Policy Owners........................... 37
AGL's Management....................................... 37
Principal Underwriter's Management..................... 40
Legal Matters.......................................... 41
Independent Auditors................................... 41
Actuarial Expert....................................... 41
Services Agreement..................................... 41
Certain Potential Conflicts............................ 41
Year 2000 Considerations............................... 42
</TABLE>
Special words and phrases. If you want more information about any words or
phrases that you read in this prospectus, you may wish to refer to the Index of
Words and Phrases that appears at the end of this prospectus (page 45, which
follows all of the financial pages). That index will tell you on what page you
can read more about many of the words and phrases that we use.
AGL
We are American General Life Insurance Company ("AGL"). AGL is a stock life
insurance company organized under the laws of Texas. AGL is a successor in
interest to a company originally organized under the laws of Delaware on January
10, 1917. AGL is an indirect, wholly-owned subsidiary of American General
Corporation (formerly American General Insurance Company), a diversified
23
<PAGE>
financial services holding company engaged primarily in the insurance business.
The commitments under the Policy are AGL's, and American General Corporation has
no legal obligation to back those commitments.
AGL is a member of the Insurance Marketplace Standards Association
("IMSA"). IMSA is a voluntary membership organization created by the life
insurance industry to promote ethical market conduct for individual life
insurance and annuity products. AGL's membership in IMSA applies only to AGL and
not its products.
Separate Account VL-R
We hold the Mutual Fund shares in which any of your accumulation value is
invested in Separate Account VL-R. Separate Account VL-R is a "separate
account," as defined by the SEC and is registered as a unit investment trust
with the SEC under the Investment Company Act of 1940, as amended. We created
the separate account on May 6, 1997 under Texas law.
For record keeping and financial reporting purposes, Separate Account VL-R
is divided into 24 separate "divisions," 17 of which correspond to the 17
variable investment options available since the inception of the Policy. The 24
divisions are currently available under other variable life policies we offer.
We hold the Mutual Fund shares in which we invest your accumulation value for an
investment option in the division that corresponds to that investment
option.
The assets in Separate Account VL-R are our property. The assets in
Separate Account VL-R would be available only to satisfy the claims of owners of
the Policy, to the extent they have allocated their accumulation value to
Separate Account VL-R. Our other creditors could reach only those Separate
Account VL-R assets (if any) that are in excess of the amount of our reserves
and other contract liabilities under the Policy with respect to Separate Account
VL-R.
Tax Effects
This discussion is based on current federal income tax law and
interpretations. It assumes that the policy owner is a natural person who is a
U.S. citizen and resident. The tax effects on corporate taxpayers, non-U.S.
residents or non-U.S. citizens, may be different. This discussion is general in
nature, and should not be considered tax advice, for which you should consult a
qualified tax adviser.
We do not know the likelihood of continuation of the present federal income
tax laws or of the current interpretations by the Internal Revenue Service. For
instance, the United States Congress has in the past and may in the future
consider legislation that, if adopted, could significantly affect the tax
treatment of corporate-owned life insurance. For example, on February 1, 1999,
the Clinton Administration announced certain proposals to amend the United
States tax law, including a proposal to change the tax treatment of corporate-
owned life insurance.
If adopted, the Clinton Administration's proposal would limit the interest
deductions allowed to certain owners that are corporations or other business
entities and that own any life insurance policies, such as a Policy that is
issued after June 8, 1997. Under this proposal, a portion of the total
outstanding indebtedness of such an owner would be allocated to the unborrowed
cash surrender values under the owner's post-June 8, 1997 Policy, and no
deduction would be allowed for the interest on the portion of
24
<PAGE>
the owner's indebtedness that is so allocated. It is uncertain at this time
whether the Administration's proposal will be adopted. You should consult a tax
adviser for further information.
General. A Corporate America - Variable Policy will be treated as "life
insurance" for federal income tax purposes (a) if it meets the definition of
life insurance under Section 7702 of the Internal Revenue Code of 1986, as
amended (the "Code") and (b) for as long as the investments made by the
underlying Mutual Funds satisfy certain investment diversification requirements
under Section 817(h) of the Code. We believe that the Policy will meet these
requirements and that:
. death benefit received by the beneficiary under your Policy will not
be subject to federal income tax; and
. increases in your Policy's accumulation value as a result of interest
or investment experience will not be subject to federal income tax
unless and until there is a distribution from your Policy, such as a
surrender or a partial surrender.
The federal income tax consequences of a distribution from your Policy can
be affected by whether your Policy is determined to be a "modified endowment
contract" (which is discussed below). In all cases, however, the character of
all income that is described below as taxable to the payee will be ordinary
income (as opposed to capital gain).
Testing for modified endowment contract status. Your Policy will be a
"modified endowment contract" if, at any time during the first seven Policy
years, you have paid a cumulative amount of premiums that exceeds the premiums
that would have been paid by that time under a similar fixed-benefit insurance
policy that was designed (based on certain assumptions mandated under the Code)
to provide for paid-up future benefits after the payment of seven level annual
premiums. This is called the "seven-pay" test.
Whenever there is a "material change" under a policy, the policy will
generally be (a) treated as a new contract for purposes of determining whether
the policy is a modified endowment contract and (b) subjected to a new seven-pay
period and a new seven-pay limit. The new seven-pay limit would be determined by
taking into account, under a prescribed formula, the accumulation value of the
policy at the time of such change. A materially changed policy would be
considered a modified endowment contract if it failed to satisfy the new seven-
pay limit. A material change for these purposes could occur as a result of a
change in death benefit option. A material change will occur as a result of an
increase in your Policy's specified amount of coverage, and certain other
changes.
If your Policy's benefits are reduced during the first seven Policy years
(or within seven years after a material change), the calculated seven-pay
premium limit will be redetermined based on the reduced level of benefits and
applied retroactively for purposes of the seven-pay test. (Such a reduction in
benefits could include, for example, a decrease in the specified amount
resulting from a partial surrender). If the premiums previously paid are greater
than the recalculated seven-payment premium level limit, the Policy will become
a modified endowment contract. A life insurance policy that is received in
exchange for a modified endowment contract will also be considered a modified
endowment contract.
25
<PAGE>
Other effects of Policy changes. Changes made to your Policy (for example,
a decrease in benefits or a lapse or reinstatement of your Policy) may also have
other effects on your Policy. Such effects may include impacting the maximum
amount of premiums that can be paid under your Policy, as well as the maximum
amount of accumulation value that may be maintained under your Policy.
Taxation of pre-death distributions if your Policy is not a modified
---
endowment contract. As long as your Policy remains in force during the insured
person's lifetime, as a non-modified endowment contract, a Policy loan will be
treated as indebtedness, and no part of the loan proceeds will be subject to
current federal income tax. Interest on the loan generally will not be tax
deductible.
After the first 15 Policy years, the proceeds from a partial surrender will
not be subject to federal income tax except to the extent such proceeds exceed
your "basis" in your Policy. (Your basis generally will equal the premiums you
have paid, less the amount of any previous distributions from your Policy that
were not taxable.) During the first 15 Policy years, the proceeds from a partial
surrender could be subject to federal income tax, under a complex formula, to
the extent that your accumulation value exceeds your basis in your Policy.
On the maturity date or upon full surrender, any excess in the amount of
proceeds we pay (including amounts we use to discharge any Policy loan) over
your basis in the Policy, will be subject to federal income tax. In addition, if
a Policy ends after a grace period while there is a policy loan, the
cancellation of such loan and accrued loan interest will be treated as a
distribution and could be subject to tax under the above rules. Finally, if you
make an assignment of rights or benefits under your Policy you may be deemed to
have received a distribution from your Policy, all or part of which may be
taxable.
Taxation of pre-death distributions if your Policy is a modified endowment
contract. If your Policy is a modified endowment contract, any distribution from
your Policy during the insured person's lifetime will be taxed on an "income-
first" basis. Distributions for this purpose include a loan (including any
increase in the loan amount to pay interest on an existing loan or an assignment
or a pledge to secure a loan) or partial surrender. Any such distributions will
be considered taxable income to you to the extent your accumulation value
exceeds your basis in the Policy. For modified endowment contracts, your basis
is similar to the basis described above for other policies, except that it also
would be increased by the amount of any prior distribution under your Policy
that was considered taxable income to you. For purposes of determining the
taxable portion of any distribution, all modified endowment contracts issued by
the same insurer (or its affiliate) to the same owner (excluding certain
qualified plans) during any calendar year are aggregated. The Treasury
Department has authority to prescribe additional rules to prevent avoidance of
"income-first" taxation on distributions from modified endowment contracts.
A 10% penalty tax also will apply to the taxable portion of most
distributions from a policy that is a modified endowment contract. The penalty
tax will not, however, apply to distributions:
. to taxpayers 59 1/2 years of age or older;
. in the case of a disability (as defined in the Code); or
. received as part of a series of substantially equal periodic annuity
payments for the life (or life expectancy) of the taxpayer or the
joint lives (or joint life expectancies) of the taxpayer and his or
her beneficiary.
26
<PAGE>
If your Policy ends after a grace period while there is a Policy loan, the
cancellation of the loan will be treated as a distribution to the extent not
previously treated as such and could be subject to tax, including the 10%
penalty tax, as described above. In addition, on the maturity date or upon a
full surrender, any excess of the proceeds we pay (including any amounts we use
to discharge any loan) over your basis in the Policy, will be subject to federal
income tax and, unless an exception applies, the 10% penalty tax.
Distributions that occur during a Policy year in which your Policy becomes
a modified endowment contract, and during any subsequent Policy years, will be
taxed as described in the two preceding paragraphs. In addition, distributions
from a policy within two years before it becomes a modified endowment contract
also will be subject to tax in this manner. This means that a distribution made
from a policy that is not a modified endowment contract could later become
taxable as a distribution from a modified endowment contract. The Treasury
Department has been authorized to prescribe rules which would treat similarly
other distributions made in anticipation of a policy becoming a modified
endowment contract.
Policy lapses and reinstatements. A Policy which has lapsed may have the tax
consequences described above, even though you may be able to reinstate that
Policy. For tax purposes, some reinstatements may be treated as the purchase of
a new insurance contract.
Diversification. Under Section 817(h) of the Code, the Treasury Department
has issued regulations that implement investment diversification requirements.
Our failure to comply with these regulations would disqualify your Policy as a
life insurance policy under Section 7702 of the Code. If this were to occur, you
would be subject to federal income tax on the income under the Policy for the
period of the disqualification and for subsequent periods. Also, if the insured
died during such period of disqualification or subsequent periods, a portion of
the death benefit proceeds would be taxable to the beneficiary. Separate Account
VL-R, through the Mutual Funds, intends to comply with these requirements.
Although we do not have direct control over the investments or activities of the
Mutual Funds, we will enter into agreements with them requiring the Mutual Funds
to comply with the diversification requirements of the Section 817(h) Treasury
Regulations.
In connection with the issuance of then temporary diversification
regulations, the Treasury Department stated that it anticipated the issuance of
guidelines prescribing the circumstances in which the ability of a policy owner
to direct his or her investment to particular Mutual Funds within Separate
Account VL-R may cause the policy owner, rather than the insurance company, to
be treated as the owner of the assets in the account. If you were considered the
owner of the assets of Separate Account VL-R, income and gains from the account
would be included in your gross income for federal income tax purposes. Under
current law, however, we believe that AGL, and not the owner of a Policy, would
be considered the owner of the assets of Separate Account VL-R.
Estate and generation skipping taxes. If the insured person is the Policy's
owner, the death benefit under a Corporate America - Variable Policy will
generally be includable in the owner's estate for purposes of federal estate
tax. If the owner is not the insured person, under certain conditions, only an
amount approximately equal to the cash surrender value of the Policy would be
includable. Federal estate tax is integrated with federal gift tax under a
unified rate schedule. In general, estates less than $650,000 (or larger amounts
specified in the Code to commence in certain future years) will not incur a
federal estate tax liability. In addition, an unlimited marital deduction may be
available for federal estate tax purposes.
27
<PAGE>
As a general rule, if a "transfer" is made to a person two or more
generations younger than the Policy's owner, a generation skipping tax may be
payable at rates similar to the maximum estate tax rate in effect at the time.
The generation skipping tax provisions generally apply to "transfers" that would
be subject to the gift and estate tax rules. Individuals are generally allowed
an aggregate generation skipping tax exemption of $1 million. Because these
rules are complex, you should consult with a qualified tax adviser for specific
information, especially where benefits are passing to younger generations.
The particular situation of each policy owner, insured person or
beneficiary will determine how ownership or receipt of Policy proceeds will be
treated for purposes of federal estate and generation skipping taxes, as well as
state and local estate, inheritance and other taxes.
Pension and profit-sharing plans. If a life insurance policy is purchased
by a trust or other entity that forms part of a pension or profit-sharing plan
qualified under Section 401(a) of the Code for the benefit of participants
covered under the plan, the federal income tax treatment of such policies will
be somewhat different from that described above.
The reasonable net premium cost for such amount of insurance that is
purchased as part of a pension or profit-sharing plan is required to be included
annually in the plan participant's gross income. This cost (generally referred
to as the "P.S. 58" cost) is reported to the participant annually. If the plan
participant dies while covered by the plan and the policy proceeds are paid to
the participant's beneficiary, then the excess of the death benefit over the
policy's accumulation value will not be subject to federal income tax. However,
the policy's accumulation value will generally be taxable to the extent it
exceeds the participant's cost basis in the policy. The participant's cost basis
will generally include the costs of insurance previously reported as income to
the participant. Special rules may apply if the participant had borrowed from
the policy or was an owner-employee under the plan.
There are limits on the amounts of life insurance that may be purchased on
behalf of a participant in a pension or profit-sharing plan. Complex rules, in
addition to those discussed above, apply whenever life insurance is purchased by
a tax qualified plan. You should consult a qualified tax adviser.
Other employee benefit programs. Complex rules may also apply when a policy
is held by an employer or a trust, or acquired by an employee, in connection
with the provision of other employee benefits. These policy owners must consider
whether the policy was applied for by or issued to a person having an insurable
interest under applicable state law and with the insured person's consent. The
lack of an insurable interest or consent may, among other things, affect the
qualification of the policy as life insurance for federal income tax purposes
and the right of the beneficiary to receive a death benefit.
ERISA. Employers and employer-created trusts may be subject to reporting,
disclosure and fiduciary obligations under the Employee Retirement Income
Security Act of 1974, as amended. You should consult a qualified legal adviser.
Our taxes. We report the operations of Separate Account VL-R in our federal
income tax return, but we currently pay no income tax on Separate Account VL-R's
investment income and capital gains, because these items are, for tax purposes,
reflected in our variable life insurance policy reserves. We currently make no
charge to any Separate Account VL-R division for taxes. We reserve the right to
make
28
<PAGE>
a charge in the future for taxes incurred; for example, a charge to Separate
Account VL-R for income taxes we incur that are allocable to the Policy.
We may have to pay state, local or other taxes in addition to applicable
taxes based on premiums. At present, these taxes are not substantial. If they
increase, we may make charges for such taxes when they are attributable to
Separate Account VL-R or allocable to the Policy.
Certain Mutual Funds in which your accumulation value is invested may elect
to pass through to AGL taxes withheld by foreign taxing jurisdictions on foreign
source income. Such an election will result in additional taxable income and
income tax to AGL. The amount of additional income tax, however, may be more
than offset by credits for the foreign taxes withheld which are also passed
through. These credits may provide a benefit to AGL.
When we withhold income taxes. Generally, unless you provide us with an
election to the contrary before we make the distribution, we are required to
withhold income tax from any proceeds we distribute as part of a taxable
transaction under your Policy. In some cases, where generation skipping taxes
may apply, we may also be required to withhold for such taxes unless we are
provided satisfactory written notification that no such taxes are due.
Tax changes. The U.S. Congress frequently considers legislation that, if
enacted, could change the tax treatment of life insurance policies. In addition,
the Treasury Department may amend existing regulations, issue regulations on the
qualification of life insurance and modified endowment contracts, or adopt new
interpretations of existing law. State and local tax law or, if you are not a
U.S. citizen and resident, foreign tax law, may also affect the tax consequences
to you, the insured person or your beneficiary, and are subject to change. Any
changes in federal, state, local or foreign tax law or interpretation could have
a retroactive effect. We suggest you consult a qualified tax adviser.
Voting Privileges
We are the legal owner of the Funds' shares held in Separate Account VL-R.
However, you may be asked to instruct us how to vote the Fund shares held in the
various Mutual Funds and attributable to your Policy at meetings of shareholders
of the Funds. The number of votes for which you may give directions will be
determined as of the record date for the meeting. The number of votes that you
may direct related to a particular Fund is equal to (a) your accumulation value
invested in that Fund divided by (b) the net asset value of one share of that
Fund. Fractional votes will be recognized.
We will vote all shares of each Fund that we hold of record, including any
shares we own on our own behalf, in the same proportions as those shares for
which we have received instructions from owners participating in that Fund
through Separate Account VL-R.
If you are asked to give us voting instructions, we will send you the proxy
material and a form for providing such instructions. Should we determine that we
are no longer required to send the owner such materials, we will vote the shares
as we determine in our sole discretion.
In certain cases, we may disregard instructions relating to changes in a
Fund's investment manager or its investment policies. We will advise you if we
do and explain the reasons in our next report to policy
29
<PAGE>
owners. AGL reserves the right to modify these procedures in any manner that the
laws in effect from time to time allow.
Your Beneficiary
You name your beneficiary when you apply for a Policy. The beneficiary is
entitled to the insurance benefits of the Policy. You may change the beneficiary
during the insured person's lifetime. We also require the consent of any
irrevocably named beneficiary. A new beneficiary designation is effective as of
the date you sign it, but will not affect any payments we may make before we
receive it. If no beneficiary is living when the insured person dies, we will
pay the insurance proceeds to the owner or the owner's estate.
Assigning Your Policy
You may assign (transfer) your rights in a Policy to someone else as
collateral for a loan or for some other reason. We will not be bound by an
assignment unless it is received in writing. You must provide us with two copies
of the assignment. We are not responsible for any payment we make or any action
taken before we receive a complete notice of the assignment in good order. We
are also not responsible for the validity of the assignment. An absolute
assignment is a change of ownership. Because there may be unfavorable tax
consequences, including recognition of taxable income and the loss of income
tax-free treatment for any death benefit payable to the beneficiary, you should
consult a qualified tax adviser before making an assignment.
More About Policy Charges
Purpose of our charges. The charges under the Policy are designed to cover,
in total, our direct and indirect costs of selling, administering and providing
benefits under the Policy. They are also designed, in total, to compensate us
for the risks we assume and services that we provide under the Policy. These
include:
. mortality risks (such as the risk that insured persons will, on
average, die before we expect, thereby increasing the amount of claims
we must pay);
. investment risks (such as the risk that adverse investment performance
will make it more difficult for us to reduce the amount of our daily
charge for revenues below what we anticipate);
. sales risks (such as the risk that the number of Policies we sell and
the premiums we receive net of withdrawals, are less than we expect,
thereby depriving us of expected economies of scale);
. regulatory risks (such as the risk that tax or other regulations may
be changed in ways adverse to issuers of variable life insurance
policies); and
. expense risks (such as the risk that the costs of administrative
services that the Policy requires us to provide will exceed what we
currently project).
If the charges that we collect from the Policy exceed our total costs in
connection with the Policy, we will earn a profit. Otherwise we will incur a
loss.
30
<PAGE>
The current monthly insurance charge has been designed primarily to provide
funds out of which we can make payments of death benefits under the Policy as
insured persons die.
Any excess from the charges discussed above is primarily intended to:
. offset other expenses in connection with the Policy (such as the
costs of processing applications for Policy and other unreimbursed
administrative expenses, costs of paying marketing and distribution
expenses for the Policy, and costs of paying death claims if the
mortality experience of insured persons is worse than we expect);
. compensate us for the risk we assume under the Policy; or
. otherwise be retained by us as profit.
Although the paragraphs above describe the primary purposes for which
charges under the Policy have been designed, these purposes are subject to
considerable change over the life of a Policy. We can retain or use the revenues
from any charge or charge increase for any purpose.
Change of tobacco use. If the person insured under your Policy is a tobacco
user, you may apply to us for an improved risk class if the insured person meets
our then applicable requirements for demonstrating that he or she has stopped
tobacco use for a sufficient period.
Gender neutral Policy. Our cost of insurance charge rates for a unisex
policy will not be greater than the comparable male rates illustrated in this
prospectus.
Congress and the legislatures of various states have from time to time
considered legislation that would require insurance rates to be the same for
males and females of the same age, rating class and tobacco user status. In
addition, employers and employee organizations should consider, in consultation
with counsel, the impact of Title VII of the Civil Rights Act of 1964 on the
purchase of life insurance policies in connection with an employment-related
insurance or benefit plan. In a 1983 decision, the United States Supreme Court
held that, under Title VII, optional annuity benefits under a deferred
compensation plan could not vary on the basis of gender.
Cost of insurance rates. Because of specified amount increases, different
cost of insurance rates may apply to different increments of specified amount
under your Policy. If so, we attribute your accumulation value first to the
oldest increments of specified amount to compute our net amount at risk at each
cost of insurance rate. See "Monthly Insurance Charge" beginning on page 8.
Miscellaneous. Each of the distributors or advisers of the Mutual Funds
listed on page 8 of this prospectus reimburses us, on a quarterly basis, for
certain administrative, Policy, and policy owner support expenses. These
reimbursements will be reasonable for the services performed and are not
designed to result in a profit. These reimbursements are paid by the
distributors or the advisers, and will not be paid by the Mutual Funds, the
divisions or the owners. No payments have yet been made under these
arrangements, because the number of Policies issued does not require a
payment.
31
<PAGE>
Effective Date of Policy and Related Transactions
Valuation dates, times, and periods. We generally compute values under a
Policy on each day that the New York Stock Exchange is open for business except,
with respect to any investment option, days on which the related Mutual Fund
does not value its shares. We call each such day a "valuation date."
We compute policy values as of 3:00 p.m., Central time, on each valuation
date. We call this our "close of business." We call the time from the close of
business on one valuation date to the close of business of the next valuation
date a "valuation period."
Date of receipt. Generally we consider that we have received a premium
payment or another communication from you on the day we actually receive it in
full and proper order at our Home Office. If we receive it after the close of
business on any valuation date, however, we consider that we have received it on
the day following that valuation date.
Commencement of insurance coverage. After you apply for a Policy, it can
sometimes take up to several weeks for us to gather and evaluate all the
information we need to decide whether to issue a Policy to you and, if so, what
the insured person's insurance rate class should be. We will not pay a death
benefit under a Policy unless (a) it has been delivered to and accepted by the
owner and at least the initial premium has been paid, and (b) at the time of
such delivery and payment, there have been no adverse developments in the
insured person's health or risk of death.
Date of issue; Policy months and years. We prepare the Policy only after we
approve an application for a Policy and assign an appropriate insurance rate
class. The day we begin to deduct charges will appear on page 3 (refers to
Policy page) of your Policy and is called the "date of issue." Policy months and
years are measured from the date of issue. To preserve a younger age at issue
for the insured person, we may assign a date of issue to a Policy that is up to
6 months earlier than otherwise would apply.
Monthly deduction days. Each charge that we deduct monthly is assessed
against your accumulation value at the close of business on the date of issue
and at the end of each subsequent valuation period that includes the first day
of a Policy month. We call these "monthly deduction days."
Commencement of investment performance. We begin to credit an investment
return to the accumulation value resulting from your initial premium payment on
the later of (a) the date of issue, or (b) the date all requirements needed to
place the Policy in force have been satisfied, including underwriting approval
and receipt in the Home Office of the necessary premium. In the case of a back-
dated Policy, we do not credit an investment return to the accumulation value
resulting from your initial premium payment until the date stated in (b) above.
Effective date of other premium payments and requests that you make.
Premium payments (after the first) and transactions made in response to your
requests and elections are generally effected at the end of the valuation period
in which we receive the payment, request or election and based on prices and
values computed as of that same time. Exceptions to this general rule are as
follows:
. Increases or decreases you request in the specified amount of insurance,
and reinstatements of a Policy that has lapsed take effect on the
Policy's monthly deduction day on or next following our approval of the
transaction;
32
<PAGE>
. We may return premium payments if we determine that such premiums would
cause your Policy to become a modified endowment contract or to cease to
qualify as life insurance under federal income tax law or exceed the
maximum net amount at risk;
. If you exercise the right to return your Policy described on the first
page of this prospectus, your coverage will end when you mail us your
Policy or deliver it to your AGL representative; and
. If you pay a premium in connection with a request which requires our
approval, your payment will be applied when received rather than
following the effective date of the change requested so long as your
coverage is in force and the amount paid will not cause you to exceed
premium limitations under the Code. If we do not approve your request, no
premium will be refunded to you except to the extent necessary to cure
any violation of the maximum premium limitations under the Code. We will
not apply this procedure to premiums you pay in connection with
reinstatement requests.
More About Our Declared Fixed Interest Account Option
Our general account. Our general account assets are all of our assets that
we do not hold in legally segregated separate accounts. Our general account
supports our obligations to you under your Policy's declared fixed interest
account option. Because of applicable exemptions, no interest in this option has
been registered under the Securities Act of 1933, as amended. Neither our
general account nor our declared fixed interest account is an investment company
under the Investment Company Act of 1940. We have been advised that the staff of
the SEC has not reviewed the disclosures that are included in this prospectus
for your information about our general account or our declared fixed interest
account option. Those disclosures, however, may be subject to certain generally
applicable provisions of the federal securities laws relating to the accuracy
and completeness of statements made in prospectuses.
How we declare interest. We can at any time change the rate of interest we
are paying on any accumulation value allocated to our declared fixed interest
account option, but it will always be at an effective annual rate of at least
4%.
Under these procedures, it is likely that at any time different interest
rates will apply to different portions of your accumulation value, depending on
when each portion was allocated to our declared fixed interest account option.
Any charges, partial surrenders, or loans that we take from any accumulation
value that you have in our declared fixed interest account option will be taken
from each portion in reverse chronological order based on the date that
accumulation value was allocated to this option.
Distribution of the Policy
American General Securities Incorporated ("AGSI") is the principal
underwriter of the Policy. AGSI is a wholly-owned subsidiary of AGL. AGL, in
turn, is a wholly-owned subsidiary of American General Corporation. AGSI's
principal office is at 2727 Allen Parkway, Houston, Texas 77019. AGSI was
organized as a Texas corporation on March 8, 1983 and is a registered broker-
dealer under the Securities Exchange Act of 1934, as amended ("1934 Act") and is
a member of the National Association of Securities Dealers, Inc. ("NASD"). AGSI
is also the principal underwriter for AGL's Separate Accounts A and D, and
Separate Account E of American General Life Insurance Company of New York, which
is a wholly-owned subsidiary of AGL. These separate accounts are registered
investment companies. AGSI, as the principal underwriter, is not paid any fees
on the Policy.
33
<PAGE>
We and AGSI have sales agreements with various broker-dealers under which
the Policy will be sold by registered representatives of the broker-dealers.
These registered representatives are also required to be authorized under
applicable state regulations as life insurance agents to sell variable life
insurance. The broker-dealers are ordinarily required to be registered with the
SEC and must be members of the NASD.
We pay compensation directly to broker-dealers for promotion and sales of
the Policy. AGSI also has its own registered representatives who will sell the
Policy, and we will pay compensation to AGSI for these sales. The compensation
payable to broker-dealers for the sales of the Policy may vary with the sales
agreement, but is generally not expected to exceed, for the Policy:
. in the first Policy year, 19% of the premiums paid up to the target
amount and 4% of the premiums in excess of the target amount;
. in Policy years 2-7, 7% of the premiums paid up to the target amount
and 4% of the premiums in excess of the target amount;
. in Policy years 8-15, 3% of the premiums paid up to the target
amount, 2% of the premiums in excess of the target amount and 0.15%
of the Policy's accumulation value (reduced by any outstanding
loans); and
. in Policy years 16 and thereafter, 2% of the premiums paid up to the
target amount, 2% of the premiums in excess of the target amount;
and 0.10% of the Policy's accumulation value (reduced by any
outstanding loans).
The maximum value of any alternative amounts we may pay for sales of the
Policy is expected to be equivalent over time to the amounts described above.
For example, we may pay a broker-dealer compensation in a lump sum which will
not exceed the aggregate compensation described above.
We pay a comparable amount of compensation to the broker-dealers with
respect to any increase in the specified amount of coverage that you request. In
addition, we may pay the broker-dealers expense allowances, bonuses, wholesaler
fees and training allowances.
We pay the compensation directly to AGSI or any other selling broker-dealer
firm. We pay the compensation from our own resources which does not result in
any additional charge to you that is not described on page 7 of the prospectus.
Each broker-dealer firm, in turn, may compensate its registered representative
or employee who acts as agent in selling you a Policy.
Payment of Policy Proceeds
General. We will pay any death benefit, maturity benefit, cash surrender
value or loan proceeds within seven days after we receive the last required form
or request (and any other documents that may be required for payment of a death
benefit). If we do not have information about the desired manner of payment
within 60 days after the date of notification of the insured person's death, we
will pay the proceeds as a single sum, normally within seven days thereafter.
34
<PAGE>
Delay for check clearance. We reserve the right to defer payment of that
portion of your accumulation value that is attributable to a premium payment
made by check for a reasonable period of time (not to exceed 15 days) to allow
the check to clear the banking system.
Delay of Separate Account VL-R proceeds. We reserve the right to defer
payment of any death benefit, loan or other distribution that comes from that
portion of your accumulation value that is allocated to Separate Account VL-R,
if:
. the New York Stock Exchange is closed other than customary weekend and
holiday closings, or trading on the New York Stock Exchange is
restricted;
. an emergency exists, as a result of which disposal of securities is not
reasonably practicable or it is not reasonably practicable to fairly
determine the accumulation value; or
. the SEC by order permits the delay for the protection of owners.
Transfers and allocations of accumulation value among the investment options may
also be postponed under these circumstances. If we need to defer calculation of
Separate Account VL-R values for any of the foregoing reasons, all delayed
transactions will be processed at the next values that we do compute.
Delay to challenge coverage. We may challenge the validity of your
insurance Policy based on any material misstatements in your application and any
application for a change in coverage. However,
. We cannot challenge the Policy after it has been in effect, during the
insured person's lifetime, for two years from the date the Policy was
issued or restored after termination. (Some states may require that we
measure this time in some other way.)
. We cannot challenge any Policy change that requires evidence of
insurability (such as an increase in specified amount) after the change
has been in effect for two years during the insured person's lifetime.
Adjustments to Death Benefit
Suicide. If the insured person commits suicide within two years after the
date on which the Policy was issued, the death benefit will be limited to the
total of all premiums that have been paid to the time of death minus any
outstanding Policy loans and any partial surrenders. If the insured person
commits suicide within two years after the effective date of an increase in
specified amount that you requested, we will pay the death benefit based on the
specified amount which was in effect before the increase, plus the monthly
insurance deductions for the increase. Some states require that we compute
differently these periods for non-contestability following a suicide.
Wrong age or gender. If the age or gender of the insured person was
misstated on your application for a Policy (or for any increase in benefits), we
will adjust any death benefit to be what the monthly insurance charge deducted
for the current month would have purchased based on the correct information.
Death during grace period. If the insured person dies during the Policy's
grace period, we will deduct any overdue monthly charges from the insurance
proceeds.
35
<PAGE>
Additional Rights That We Have
We have the right at any time to:
. transfer the entire balance in an investment option in accordance with
any transfer request you make that would reduce your accumulation value
for that option to below $500;
. transfer the entire balance in proportion to any other investment options
you then are using, if the accumulation value in an investment option is
below $500 for any other reason;
. change the underlying Mutual Fund that any investment option uses or make
any new Mutual Fund available to you;
. add or delete investment options, combine two or more investment options,
or withdraw assets relating to Corporate America - Variable from one
investment option and put them into another;
. make any changes required to comply with the requirements of any
investment option;
. operate Separate Account VL-R, or one or more investment options, in any
other form the law allows, including a form that allows us to make direct
investments. Separate Account VL-R may be charged an advisory fee if its
investments are made directly rather than through another investment
company. In that case, we may make any legal investments we wish; or
. make other changes in the Policy that in our judgment are necessary or
appropriate to ensure that the Policy continues to qualify for tax
treatment as life insurance, or that do not reduce any cash surrender
value, death benefit, accumulation value, or other accrued rights or
benefits.
You will be notified as required by law if there are any material changes
in the underlying investments of an investment option that you are using. We
intend to comply with all applicable laws in making any changes and, if
necessary, we will seek policy owner approval.
Performance Information
From time to time, we may quote performance information for the divisions
of Separate Account VL-R in advertisements, sales literature, or reports to
owners or prospective investors.
We may quote performance information in any manner permitted under
applicable law. We may, for example, present such information as a change in a
hypothetical owner's cash value or death benefit. We also may present the yield
or total return of the division based on a hypothetical investment in a Policy.
The performance information shown may cover various periods of time, including
periods beginning with the commencement of the operations of the division or the
Mutual Funds in which it invests. The performance information shown may reflect
the deduction of one or more charges, such as the premium charge, and we
generally expect to exclude costs of insurance charges because of the individual
nature of these charges.
We may compare a division's performance to that of other variable life
separate accounts or investment products, as well as to generally accepted
indices or analyses, such as those provided by research firms and rating
services. In addition, we may use performance ratings that may be reported
periodically in financial
36
<PAGE>
publications, such as Money Magazine, Forbes, Business Week, Fortune, Financial
Planning and The Wall Street Journal. We also may advertise ratings of AGL's
financial strength or claims-paying ability as determined by firms that analyze
and rate insurance companies and by nationally recognized statistical rating
organizations.
Performance information for any division reflects the performance of a
hypothetical Policy and are not illustrative of how actual investment
performance would affect the benefits under your Policy. You should not consider
such performance information to be an estimate or guarantee of future
performance.
Our Reports to Policy Owners
Shortly after the end of each Policy year, we will mail you a report that
includes information about your Policy's current death benefit, accumulation
value, cash surrender value and policy loans. We will send you notices to
confirm premium payments, transfers and certain other Policy transactions. We
will mail to you at your last known address of record, these and any other
reports and communications required by law. You should give us prompt written
notice of any address change.
AGL's Management
The directors, executive officers, and (to the extent responsible for
variable life operations) the other principal officers of AGL are listed below.
Name Business Experience Within Past Five Years
- ----------------------- ------------------------------------------
Rodney O. Martin, Jr. Senior Chairman of the Board of American General
Life Insurance Company since April, 1999 and a
Director since August 1996. President and CEO
(August 1996-July 1998). President of American
General Life Insurance Company of New York
(November 1995-August 1996). Vice President
Agencies, with Connecticut Mutual Life Insurance
Company (1990-1995).
Donald W. Britton Director and Vice Chairman of the Board of
American General Life Insurance Company since
April, 1999. President of First Colony Life,
Lynchburg, Virginia (1966 - April 1997) and
Executive Vice President of First Colony Life
(1992 - 1996).
Ronald H. Ridlehuber Director, President and Chief Executive Officer of
American General Life Insurance Company since
July, 1998. Senior Vice President and Chief
Marketing Officer of Jefferson-Pilot Life
Insurance Company in Greensboro, North Carolina
(1993-1998).
David A. Fravel Director and Senior Vice President of American
General Life Insurance Company since November
1996. Elected Executive Vice President in April,
1998. Senior Vice President of Massachusetts
Mutual, Springfield, Missouri (March 1996-June
1996); Vice President, New Business, Connecticut
Mutual Life, Hartford, Connecticut (December 1978-
March 1996).
37
<PAGE>
John V. LaGrasse Director, Senior Vice President and Chief Systems
Officer of American General Life Insurance Company
since August 1996. Elected Executive Vice President in
July, 1998. Prior thereto, Director of Citicorp
Insurance Services, Inc., Dover, Delaware (1986-1996).
Paul L. Mistretta Executive Vice President of American General Life
Insurance Company since July 1999. Senior Vice
President of First Colony Life Insurance, Lynchburg,
Virginia (1992 - July 1999).
Brian D. Murphy In April 1998 named as Senior Vice President-Insurance
Operations of American General Life Insurance Company.
Vice President-Sales, Phoenix Home Life, Hartford, CT
(January 1997-April 1998). Vice President of
Underwriting and Issue, Phoenix Home Life (July 1994-
January 1997). Various positions with Mutual of New
York, Syracuse, NY, including Agent, Agency Manager,
Marketing Life and Disability Income Underwriting
Management, (1978-July 1994).
Gary D. Reddick Executive Vice President of American General Life
Insurance Company since April 1998 and Director since
October 1998. Vice Chairman since July 1997 and
Executive Vice President-Administration of The
Franklin Life Insurance Company since February 1995.
Senior Vice President-Administration of American
General Corporation (October 1994-February 1995).
Senior Vice President for American General Life
Insurance Company (September 1986-October 1994).
Thomas M. Zurek In December 1998 named as Senior Vice President and
General Counsel of American General Life Insurance
Company. In April 1999 named Director of American
General Life Insurance Company. In February 1998 named
as Senior Vice President and Deputy General Counsel of
American General Corporation. Attorney Shareholder
with Nyemaster, Goode, Voigts, West, Hansell &
O'Brien, Des Moines, Iowa (June 1992 - February
1998).
Wayne A. Barnard Senior Vice President and Chief Actuary of American
General Life Insurance Company since November 1997 and
Vice President since February, 1991 and Chief Actuary
since February, 1993.
Rebecca G. Campbell In December 1998 named as Senior Vice President -
Organization Development and Change Management for
American General Life Insurance Company. Various
positions with American General Life Insurance Company
since 1983, including Director of Human Resources in
1993 and Vice President - Human Resources in 1996.
David J. Dietz Senior Vice President - Corporate Markets Group of
American General Life Insurance Company since January,
1999. President and Chief Executive Officer -
Individual Insurance Operations of The United States
Life Insurance Company in the City of New York since
September, 1997. President of Prudential Select Life,
Newark, New Jersey (August 1990 - September
1997).
38
<PAGE>
Barbara J. Fossum Senior Vice President of American General Life Insurance
Company since July 1999. Vice President of American
General Life Insurance Company (1988 - July 1999).
Ross D. Friend In July 1998 named as Senior Vice President and Chief
Compliance Officer of American General Life Insurance
Company. Senior Vice President and General Counsel of The
Franklin Life Insurance Company, Springfield, Illinois
(August 1996 - July 1998). Attorney-in-Charge for The
Prudential Insurance Company, Jacksonville, Florida (July
1995 - August 1996). Chief Legal Officer for
Confederation Life Insurance, Atlanta, Georgia (1982 -
June 1995).
William Guterding Senior Vice President of American General Life Insurance
Company since April 1999. Senior Vice President and Chief
Underwriting Officer of The United States Life Insurance
Company in the City of New York since October, 1980.
Robert F. Herbert, Jr. Director, Senior Vice President and Treasurer of American
General Life Insurance Company since May 1996, and
Controller and Actuary from June 1988 to May 1996.
Royce G. Imhoff, II Director, Senior Vice President and Chief Marketing
Officer for American General Life Insurance Company since
November 1997, Vice President (August 1996-August 1997),
and Regional Director (1992-1996).
F. Paul Kovach, Jr. Senior Vice President-Broker Dealers and FIMG for
American General Life Insurance Company since August
1997. Since October 1994, President and Director of
American General Securities Incorporated. Vice President
of Chubb Securities Corporation, Concord, New Hampshire,
(February 1990-October 1994).
Simon J. Leech In July 1997 named as Senior Vice President-Houston
Service Center for American General Life Insurance
Company. Various positions with American General Life
Insurance Company since 1981, including Director of POS
in 1993, and Vice President-Policy Administration in
1995.
JoAnn Waddell In October 1998 named as Senior Vice President - Human
Resources for American General Life Insurance Company.
Vice President - Human Resources for American General
Corporation (1995 - October 1998) and Director, Corporate
Personnel of American General Corporation (1993 -1995).
Don M. Ward In February 1998 named as Senior Vice President-Variable
Products-Marketing of American General Life Insurance
Company. Vice President
39
<PAGE>
of Pacific Life Insurance Company, Newport Beach, CA
(1991-February 1998).
The principal business address of each person listed above is our Home
Office; except that the street number for Messrs. Ridlehuber, Fravel, LaGrasse,
Martin, Reddick, Britton, Mistretta and Zurek and Ms. Campbell is 2929 Allen
Parkway, the street number for Messrs. Kovach, Ward and Friend is 2727 Allen
Parkway, the street number for Messrs. Dietz and Guterding is 125 Maiden Lane,
New York, New York and the street number for Ms. Fossum is #1 Franklin Square,
Springfield, Illinois.
Principal Underwriter's Management
The directors and principal officers of the principal underwriter are:
Position and Offices
with Underwriter,
Name and Principal American General
Business Address Securities Incorporated
- ----------------- -----------------------
F. Paul Kovach, Jr. Director and Chairman,
American General Securities Incorporated President and Chief Executive
Officer
2727 Allen Parkway
Houston, TX 77019
Royce G. Imhoff, II Director
American General Life Companies
2727-A Allen Parkway
Houston, Texas 77019
Rodney O. Martin, Jr. Director and Vice Chairman
American General Life Companies
2929 Allen Parkway
Houston, TX 77019
John A. Kalbaugh Vice President -
American General Life Companies Chief Marketing Officer
2727 Allen Parkway
Houston, TX 77019
Robert M. Roth Vice President -
American General Securities Incorporated Administration and Compliance,
2727 Allen Parkway Treasurer and Secretary
Houston, TX 77019
Pauletta P. Cohn Assistant Secretary
American General Life Companies
2727 Allen Parkway
Houston, TX 77019
40
<PAGE>
Robert F. Herbert Assistant Treasurer
American General Life Companies
2727-A Allen Parkway
Houston, Texas 77019
K. David Nunley Assistant Associate Tax Officer
2727-A Allen Parkway
Houston, TX 77019
Legal Matters
We are not involved in any legal proceedings that would be considered
material with respect to a policy owner's interest in Separate Account VL-R.
Pauletta P. Cohn, Esquire, Associate General Counsel of the American General
Life Companies, an affiliate of AGL, has opined as to the validity of the
Policy.
Independent Auditors
The financial statements of AGL for the years ended 1996, 1997 and 1998
included in this prospectus have been audited by Ernst & Young LLP, independent
auditors, as set forth in their reports appearing elsewhere in this prospectus.
Such financial statements have been included in this prospectus in reliance upon
the report of Ernst & Young LLP given upon the authority of such firm as experts
in accounting and auditing. Ernst & Young LLP is located at One Houston Center,
1221 McKinney, Suite 2400, Houston, Texas 77010-2007.
Actuarial Expert
Actuarial matters have been examined by Wayne A. Barnard, who is Senior
Vice President and Chief Actuary of AGL. His opinion on actuarial matters is
filed as an exhibit to the registration statement we have filed with the SEC in
connection with the Policy.
Services Agreement
American General Life Companies ("AGLC") is party to an existing general
services agreement with AGL. AGLC, an affiliate of AGL, is a corporation
incorporated in Delaware on November 24, 1997. Pursuant to this agreement, AGLC
provides services to AGL, including most of the administrative, data processing,
systems, customer services, product development, actuarial, auditing, accounting
and legal services for AGL and the Corporate America - Variable Policy.
Certain Potential Conflicts
The Mutual Funds sell shares to separate accounts of insurance companies,
both affiliated and not affiliated with AGL. We currently do not foresee any
disadvantages to you arising out of such sales. Differences in treatment under
tax and other laws, as well as other considerations, could cause the interests
of various owners to conflict. For example, violation of the federal tax laws by
one separate account investing in the Funds could cause the contracts funded
through another separate account to lose their tax-deferred status, unless
remedial action were taken. However, each Mutual Fund has advised us that its
board
41
<PAGE>
of trustees (or directors) intends to monitor events to identify any material
irreconcilable conflicts that possibly may arise and to determine what action,
if any, should be taken in response. If we believe that a Fund's response to any
such event insufficiently protects our policy owners, we will see to it that
appropriate action is taken to do so. If it becomes necessary for any separate
account to replace shares of any Mutual Fund in which it invests, that Fund may
have to liquidate securities in its portfolio on a disadvantageous basis.
Year 2000 Considerations
Internal Systems. Our ultimate parent, American General Corporation ("AGC"),
- ----------------
has numerous technology systems that are managed on a decentralized basis.
AGC's Year 2000 readiness efforts have been performed by its key business units
with centralized oversight. Each business unit, including AGL, has executed a
plan to minimize the risk of a significant negative impact on its
operations.
While the specifics of the plans varied, the plans included the following
activities: (1) perform an inventory of the company's information technology and
non-information technology systems; (2) assess which items in the inventory may
expose us to business interruptions due to Year 2000 issues; (3) reprogram or
replace systems that are not Year 2000 ready; (4) test systems to prove that
they will function into the next century as they do currently; and (5) return
the systems to operations.
As of June 30, 1999, these activities had been substantially completed, making
our critical systems Year 2000 ready. We will continue to test our systems
throughout 1999 to maintain Year 2000 readiness. In addition, we currently are
developing plans for the century transition, which will restrict systems
modifications from November 1999 through January 2000, create rapid response
teams to address problems, and limit vacations for key technical personnel.
Third Party Relationships. We have relationships with various third parties who
- -------------------------
must also be Year 2000 ready. These third parties provide (or receive)
resources and services to (or from) us and include organizations with which we
exchange information. Third parties include vendors of hardware, software, and
information services; providers of infrastructure services such as voice and
data communications and utilities for office facilities; investors; customers;
distribution channels; and joint venture partners. Third parties differ from
internal systems in that we exercise less, or no, control over such parties'
Year 2000 readiness.
We assessed and mitigated the risks associated with the potential failure of
third parties to achieve Year 2000 readiness. Our activities included the
following: (1) identify and classify third party dependencies; (2) research,
analyze, and document Year 2000 readiness for critical third parties; and (3)
test critical hardware and software products and electronic interfaces. As of
June 30, 1999, these activities have been substantially completed. Where
necessary, critical third party dependencies have been included in our
contingency plans. Due to the various stages of Year 2000 readiness for these
critical third-party dependencies, the company's testing activities related to
critical third parties will extend throughout 1999.
Contingency Plans. We have undertaken contingency planning to reduce the risk
- -----------------
of Year 2000-related business failures. The contingency plans, which address
both internal systems and third party relationships, included the following
activities: (1) evaluate the consequences of failure of critical business
processes with significant exposure to Year 2000 risk; (2) determine the
probability of a Year 2000-related failure for those
42
<PAGE>
critical processes that have a high consequence of failure; (3) develop an
action plan to complete contingency plans for critical processes that rank high
in consequence and probability of failure; and (4) complete the applicable
contingency plans. As of June 30, 1999, these activities have been substantially
completed. The contingency plans will continue to be tested and updated
throughout 1999.
Risks and Uncertainties. Based on the Year 2000 readiness of internal systems,
- -----------------------
century transition plans, plans to deal with third party relationships, and
contingency plans, we believe that we will experience at most isolated and minor
disruptions of business processes following the turn of the century. Such
disruptions are not expected to have a material effect on our future results of
operations, liquidity, or financial condition. However, due to the magnitude
and complexity of this project, risks and uncertainties exist and we are not
able to predict a most reasonably likely worst case scenario. If Year 2000
readiness is not achieved due to our failure to maintain critical systems as
Year 2000 ready, failure of critical third parties to achieve Year 2000
readiness on a timely basis, failure of contingency plans to reduce Year 2000-
related business failures, or other unforseen circumstances in completing our
plans, the Year 2000 issues could have a material adverse impact on the our
operations following the turn of the century.
Costs. Through June 30, 1999, we have incurred, and anticipate that we will
- -----
continue to incur, costs relative to achieving and maintaining Year 2000
readiness. The cost of activities related to Year 2000 readiness has not had a
material adverse effect on our results of operations or financial condition. In
addition, we have elected to accelerate the planned replacement of certain
systems as part of the Year 2000 plans. Costs of the replacement systems are
being capitalized and amortized over their useful lives, in accordance with our
normal accounting policies. None of the costs associated with Year 2000
readiness are passed to divisions of the Separate Account.
43
<PAGE>
FINANCIAL STATEMENTS
The financial statements of AGL contained in this prospectus should be
considered to bear only upon the ability of AGL to meet its obligations under
the Corporate America - Variable Policy. They should not be considered as
bearing upon the investment experience of Separate Account VL-R. No financial
statements of Separate Account VL-R are included because, at the date of this
prospectus, none of the 17 divisions of Separate Account VL-R were available
under the Corporate America -Variable policies.
<TABLE>
<CAPTION>
page to
Consolidated Financial Statements of See in this
American General Life Insurance Company Prospectus
- --------------------------------------- ----------
<S> <C>
Unaudited consolidated Balance Sheets as of
the six months ended June 30, 1999........................... Q-1
Unaudited consolidated Income Statements as of
the six months ended June 30, 1999........................... Q-3
Report of Ernst & Young, LLP Independent Auditors.............. F-1
Consolidated Balance Sheets as of December 31, 1998 and 1997... F-2
Consolidated Income Statements for the years ended
December 31, 1998, 1997 and 1996.......................... F-3
Consolidated Statements of Comprehensive Income
for the years ended December 31, 1998, 1997, and 1996...... F-4
Consolidated Statements of Shareholders' Equity for the years
ended December 31, 1998, 1997 and 1996................... F-5
Consolidated Statements of Cash Flows for the years
ended December 31, 1998, 1997 and 1996.................... F-6
Notes to Consolidated Financial Statements..................... F-7
</TABLE>
44
<PAGE>
American General Life Insurance Company
Consolidated Balance Sheet
(Unaudited)
<TABLE>
<CAPTION>
June 30
1999
--------------
(In Thousands)
<S> <C>
ASSETS
Investments:
Fixed maturity securities, at fair value (amortized cost -
$27,760,919) $27,824,036
Equity securities, at fair value (cost - $211,217) 251,609
Mortgage loans on real estate 1,652,569
Policy loans 1,201,538
Investment real estate 118,160
Other long-term investments 130,830
Short-term investments 253,145
--------------
Total investments 31,431,887
Cash 34,426
Investment in Parent Company (cost - $7,958) 52,733
Indebtedness from affiliates 54,474
Accrued investment income 461,536
Accounts receivable 442,267
Deferred policy acquisition costs 1,614,309
Property and equipment 72,967
Other assets 230,053
Assets held in separate accounts 18,996,977
--------------
Total assets $53,391,629
==============
</TABLE>
Q-1
<PAGE>
American General Life Insurance Company
Consolidated Balance Sheet
(Unaudited)
<TABLE>
<CAPTION>
June 30
1999
--------------
(In Thousands)
<S> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Future policy benefits $29,636,803
Other policy claims and benefits payable 51,354
Other policyholders' funds 380,790
Federal income taxes 444,260
Indebtedness to affiliates 21,773
Other liabilities 708,392
Liabilities related to separate accounts 18,996,977
--------------
Total liabilities 50,240,349
Shareholders' equity:
Common stock, $10 par value, 600,000 shares authorized,
issued, and outstanding 6,000
Preferred stock, $100 par value, 8,500 shares authorized,
issued, and outstanding 850
Additional paid-in capital 1,370,477
Accumulated other comprehensive income 111,115
Retained earnings 1,662,838
--------------
Total shareholders' equity 3,151,280
--------------
Total liabilities and shareholders' equity $53,391,629
==============
</TABLE>
Q-2
<PAGE>
American General Life Insurance Company
Consolidated Income Statement
(Unaudited)
<TABLE>
<CAPTION>
Six months
ended June 30
1999
--------------
(In Thousands)
<S> <C>
Revenues:
Premiums and other considerations $ 254,847
Net investment income 1,172,647
Net realized investment gains 5,147
Other 41,792
------------
Total revenues 1,474,433
Benefits and expenses:
Benefits 857,226
Operating costs and expenses 242,078
------------
Total benefits and expenses 1,099,304
------------
Income before income tax expense 375,129
Income tax expense 126,054
------------
Net income $ 249,075
============
</TABLE>
Q-3
<PAGE>
[ERNST & YOUNG LLP LETTERHEAD] . One Houston Center . Phone: 713 750 1500
Suite 2400 Fax: 713 750 1501
1221 McKinney
Houston, Texas 77010-2007
Report of Independent Auditors
Board of Directors and Stockholder
American General Life Insurance Company
We have audited the accompanying consolidated balance sheets of American General
Life Insurance Company (an indirectly wholly owned subsidiary of American
General Corporation) and subsidiaries as of December 31, 1998 and 1997, and the
related consolidated statements of income, comprehensive income, shareholder's
equity, and cash flows for each of the three years in the period ended
December 31, 1998. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosure in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of American General
Life Insurance Company and subsidiaries at December 31, 1998 and 1997, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1998, in conformity with generally
accepted accounting principles.
/S/ ERNST & YOUNG LLP
---------------------
February 16, 1999
Ernst & Young LLP is a member of Ernst & Young International, Ltd.
F-1
<PAGE>
American General Life Insurance Company
Consolidated Balance Sheets
<TABLE>
<CAPTION>
DECEMBER 31
1998 1997
---------------------------------
<S> <C> <C>
(In Thousands)
ASSETS
Investments:
Fixed maturity securities, at fair value (amortized cost-
$27,425,605 in 1998 and $26,131,207 in 1997) $28,906,261 $27,386,715
Equity securities, at fair value (cost - $193,368 in 1998
and $19,208 in 1997) 211,684 21,114
Mortgage loans on real estate 1,557,268 1,659,921
Policy loans 1,170,686 1,093,694
Investment real estate 119,520 129,364
Other long-term investments 86,194 55,118
Short-term investments 222,949 100,061
---------------------------------
Total investments 32,274,562 30,445,987
Cash 117,675 99,284
Investment in Parent Company (cost - $8,597 in 1998
and 1997) 54,570 37,823
Indebtedness from affiliates 161,096 96,519
Accrued investment income 459,961 433,111
Accounts receivable 196,596 208,209
Deferred policy acquisition costs 1,087,718 835,031
Property and equipment 66,197 33,827
Other assets 206,318 132,659
Assets held in separate accounts 15,616,020 11,242,270
---------------------------------
Total assets $50,240,713 $43,564,720
=================================
LIABILITIES AND SHAREHOLDER'S EQUITY
Liabilities:
Future policy benefits $29,353,022 $27,849,893
Other policy claims and benefits payable 54,278 42,677
Other policyholders' funds 398,587 398,314
Federal income taxes 677,315 543,379
Indebtedness to affiliates 18,173 4,712
Other liabilities 554,783 421,861
Liabilities related to separate accounts 15,616,020 11,242,270
---------------------------------
Total liabilities 46,672,178 40,503,106
Shareholder's equity:
Common stock, $10 par value, 600,000 shares
authorized, issued, and outstanding 6,000 6,000
Preferred stock, $100 par value, 8,500 shares authorized,
issued, and outstanding 850 850
Additional paid-in capital 1,368,089 1,184,743
Accumulated other comprehensive income 679,107 427,526
Retained earnings 1,514,489 1,442,495
---------------------------------
Total shareholder's equity 3,568,535 3,061,614
---------------------------------
Total liabilities and shareholder's equity $50,240,713 $43,564,720
=================================
</TABLE>
See accompanying notes.
F-2
<PAGE>
American General Life Insurance Company
Consolidated Statements of Income
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1998 1997 1996
----------------------------------------------------------
<S> <C> <C> <C>
(In Thousands)
Revenues:
Premiums and other considerations $ 470,238 $ 428,721 $ 382,923
Net investment income 2,316,933 2,198,623 2,095,072
Net realized investment gains (losses) (33,785) 29,865 28,502
Other 69,602 53,370 41,968
----------------------------------------------------------
Total revenues 2,822,988 2,710,579 2,548,465
Benefits and expenses:
Benefits 1,788,417 1,757,504 1,689,011
Operating costs and expenses 467,067 379,012 347,369
Interest expense 15 782 830
Litigation settlement 97,096 - -
----------------------------------------------------------
Total benefits and expenses 2,352,595 2,137,298 2,037,210
----------------------------------------------------------
Income before income tax expense 470,393 573,281 511,255
Income tax expense 153,719 198,724 176,660
----------------------------------------------------------
Net income $ 316,674 $ 374,557 $ 334,595
==========================================================
</TABLE>
See accompanying notes.
F-3
<PAGE>
American General Life Insurance Company
Consolidated Statements of Comprehensive Income
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1998 1997 1996
--------------------------------------------------------
<S> <C> <C> <C>
(In Thousands)
Net income $316,674 $374,557 $ 334,595
Other comprehensive income:
Gross change in unrealized gains (losses)
on securities (pretax: $341,000;
$318,700; ($404,900)) 222,245 207,124 (263,181)
Less: gains (losses) realized in net income (29,336) (1,251) 11,262
--------------------------------------------------------
Change in net unrealized gains (losses) on
securities (pretax: $387,000; $320,600;
($422,200) 251,581 208,375 (274,443)
-------------------------------------------------------
Comprehensive income $568,255 $582,932 $ 60,152
========================================================
</TABLE>
See accompanying notes.
F-4
<PAGE>
American General Life Insurance Company
Consolidated Statements of Shareholder's Equity
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1998 1997 1996
----------------------------------------------------------
<S> <C> <C> <C>
(In Thousands)
Common stock:
Balance at beginning of year $ 6,000 $ 6,000 $ 6,000
Change during year - - -
----------------------------------------------------------
Balance at end of year 6,000 6,000 6,000
Preferred stock:
Balance at beginning of year 850 850 850
Change during year - - -
----------------------------------------------------------
Balance at end of year 850 850 850
Additional paid-in capital:
Balance at beginning of year 1,184,743 933,342 858,075
Capital contribution from Parent
Company 182,284 250,000 75,000
Other changes during year 1,062 1,401 267
----------------------------------------------------------
Balance at end of year 1,368,089 1,184,743 933,342
Accumulated other comprehensive income:
Balance at beginning of year 427,526 219,151 493,594
Change in unrealized gains (losses) on
securities 251,581 208,375 (274,443)
----------------------------------------------------------
Balance at end of year 679,107 427,526 219,151
Retained earnings:
Balance at beginning of year 1,442,495 1,469,618 1,324,703
Net income 316,674 374,557 334,595
Dividends paid (244,680) (401,680) (189,680)
----------------------------------------------------------
Balance at end of year 1,514,489 1,442,495 1,469,618
----------------------------------------------------------
Total shareholder's equity $3,568,535 $3,061,614 $2,628,961
==========================================================
</TABLE>
See accompanying notes.
F-5
<PAGE>
American General Life Insurance Company
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1998 1997 1996
--------------------------------------------------------------------
<S> <C> <C> <C>
(In Thousands)
OPERATING ACTIVITIES
Net income $ 316,674 $ 374,557 $ 334,595
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Change in accounts receivable 11,613 (37,752) 3,846
Change in future policy benefits and other policy
claims (866,428) (1,143,736) (543,193)
Amortization of policy acquisition costs 125,062 115,467 102,189
Policy acquisition costs deferred (244,196) (219,339) (188,001)
Change in other policyholders' funds 273 21,639 (69,126)
Provision for deferred income tax expense 15,872 13,264 12,388
Depreciation 19,418 16,893 16,993
Amortization (26,775) (28,276) (30,758)
Change in indebtedness to/from affiliates (51,116) (8,695) 4,432
Change in amounts payable to brokers (894) 31,769 (25,260)
Net (gain) loss on sale of investments 37,016 (29,865) (28,502)
Other, net 57,307 30,409 32,111
--------------------------------------------------------------------
Net cash used in operating activities (606,174) (863,665) (378,286)
INVESTING ACTIVITIES
Purchases of investments and loans made (28,231,615) (29,638,861) (27,245,453)
Sales or maturities of investments and receipts from
repayment of loans 26,656,897 28,300,238 25,889,422
Sales and purchases of property, equipment, and
software, net (105,907) (9,230) (8,057)
--------------------------------------------------------------------
Net cash used in investing activities (1,680,625) (1,347,853) (1,364,088)
FINANCING ACTIVITIES
Policyholder account deposits 4,688,831 4,187,191 3,593,380
Policyholder account withdrawals (2,322,307) (1,759,660) (1,746,987)
Dividends paid (244,680) (401,680) (189,680)
Capital contribution from Parent 182,284 250,000 75,000
Other 1,062 1,401 267
--------------------------------------------------------------------
Net cash provided by financing activities 2,305,190 2,277,252 1,731,980
--------------------------------------------------------------------
Increase (decrease) in cash 18,391 65,734 (10,394)
Cash at beginning of year 99,284 33,550 43,944
--------------------------------------------------------------------
Cash at end of year $ 117,675 $ 99,284 $ 33,550
====================================================================
</TABLE>
Interest paid amounted to approximately $420,000, $1,004,000, and $1,080,000 in
1998, 1997, and 1996, respectively.
See accompanying notes.
F-6
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements
December 31, 1998
NATURE OF OPERATIONS
American General Life Insurance Company (the "Company") is a wholly owned
subsidiary of AGC Life Insurance Company, which is a wholly owned subsidiary of
American General Corporation (the "Parent Company"). The Company's wholly owned
life insurance subsidiaries are American General Life Insurance Company of New
York ("AGNY") and The Variable Annuity Life Insurance Company ("VALIC"). During
1998, the Company formed a new wholly owned subsidiary, American General Life
Companies (AGLC), to provide management services to certain life insurance
subsidiaries of the Parent Company.
The Company offers a complete portfolio of the standard forms of universal life,
variable universal life, interest-sensitive whole life, term life, structured
settlements, and fixed and variable annuities throughout the United States. In
addition, a variety of equity products is sold through its wholly owned
broker/dealer, American General Securities, Inc. The Company serves the estate
planning needs of middle- and upper-income households and the insurance needs of
small- to medium-sized businesses. AGNY offers a broad array of traditional and
interest-sensitive insurance, in addition to individual annuity products. VALIC
provides tax-deferred retirement annuities and employer-sponsored retirement
plans to employees of health care, educational, public sector, and other not-
for-profit organizations throughout the United States.
1. ACCOUNTING POLICIES
1.1 PREPARATION OF FINANCIAL STATEMENTS
The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles ("GAAP") and include the accounts of
the Company and its wholly owned subsidiaries. Transactions with the Parent
Company and other subsidiaries of the Parent Company are not eliminated from the
financial statements of the Company. All other material intercompany
transactions have been eliminated in consolidation.
The preparation of financial statements requires management to make estimates
and assumptions that affect amounts reported in the financial statements and
disclosures of contingent assets and liabilities. Ultimate results could differ
from those estimates.
F-7
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
1.2 STATUTORY ACCOUNTING
The Company and its wholly owned life insurance subsidiaries are required to
file financial statements with state regulatory authorities. State insurance
laws and regulations prescribe accounting practices for calculating statutory
net income and equity. In addition, state regulators may permit statutory
accounting practices that differ from prescribed practices. The use of such
permitted practices by the Company and its wholly owned life insurance
subsidiaries did not have a material effect on statutory equity at December 31,
1998.
Statutory financial statements differ from GAAP. Significant differences were as
follows (in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
------------------------------------------------------
<S> <C> <C> <C>
Net income:
Statutory net income (1998 balance is
unaudited) $ 259,903 $ 327,813 $ 284,070
Deferred policy acquisition costs and cost
of insurance purchased 116,597 103,872 85,812
Deferred income taxes (53,358) (13,264) (12,388)
Adjustments to policy reserves 52,445 (30,162) (19,954)
Goodwill amortization (2,033) (2,067) (2,169)
Net realized gain on investments 41,488 20,139 14,140
Litigation settlement (63,112) -- --
Other, net (35,256) (31,774) (14,916)
-------------------------------------------------------
GAAP net income $ 316,674 $ 374,557 $ 334,595
=======================================================
Shareholders' equity:
Statutory capital and surplus (1998 balance
is unaudited) $1,670,412 $1,636,327 $1,441,768
Deferred policy acquisition costs 1,109,831 835,031 1,042,783
Deferred income taxes (698,350) (535,703) (410,007)
Adjustments to policy reserves (274,532) (319,680) (297,434)
Acquisition-related goodwill 54,754 51,424 55,626
Asset valuation reserve ("AVR") 310,564 255,975 291,205
Interest maintenance reserve ("IMR") 27,323 9,596 63
Investment valuation differences 1,487,658 1,272,339 643,289
Surplus from separate accounts (174,447) (150,928) (106,026)
Other, net 55,322 7,233 (32,306)
-------------------------------------------------------
Total GAAP shareholders' equity $3,568,535 $3,061,614 $2,628,961
=======================================================
</TABLE>
F-8
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
1.2 STATUTORY ACCOUNTING (CONTINUED)
The more significant differences between GAAP and statutory accounting
principles are that under GAAP: (a) acquisition costs related to acquiring new
business are deferred and amortized (generally in proportion to the present
value of expected gross profits from surrender charges and investment,
mortality, and expense margins), rather than being charged to operations as
incurred; (b) future policy benefits are based on estimates of mortality,
interest, and withdrawals generally representing the Company's experience, which
may differ from those based on statutory mortality and interest requirements
without consideration of withdrawals; (c) deferred tax assets and liabilities
are established for temporary differences between the financial reporting basis
and the tax basis of assets and liabilities, at the enacted tax rates expected
to be in effect when the temporary differences reverse; (d) certain assets
(principally furniture and equipment, agents' debit balances, computer software,
and certain other receivables) are reported as assets rather than being charged
to retained earnings; (e) acquisitions are accounted for using the purchase
method of accounting rather than being accounted for as equity investments; and
(f) fixed maturity investments are carried at fair value rather than amortized
cost. In addition, statutory accounting principles require life insurance
companies to establish an AVR and an IMR. The AVR is designed to address the
credit-related risk for bonds, preferred stocks, derivative instruments, and
mortgages and market risk for common stocks, real estate, and other invested
assets. The IMR is composed of investment- and liability-related realized gains
and losses that result from interest rate fluctuations. These realized gains and
losses, net of tax, are amortized into income over the expected remaining life
of the asset sold or the liability released.
1.3 INSURANCE CONTRACTS
The insurance contracts accounted for in these financial statements include
primarily long-duration contracts. Long-duration contracts include traditional
whole life, endowment, guaranteed renewable term life, universal life, limited
payment, and investment contracts. Long-duration contracts generally require the
performance of various functions and services over a period of more than one
year. The contract provisions generally cannot be changed or canceled by the
insurer during the contract period; however, most new contracts written by the
Company allow the insurer to revise certain elements used in determining premium
rates or policy benefits, subject to guarantees stated in the contracts.
F-9
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
1.4 INVESTMENTS
FIXED MATURITY AND EQUITY SECURITIES
All fixed maturity and equity securities were classified as available-for-sale
and recorded at fair value at December 31, 1998, 1997, and 1996. After adjusting
related balance sheet accounts as if the unrealized gains (losses) had been
realized, the net adjustment is recorded in accumulated other comprehensive
income within shareholders' equity. If the fair value of a security classified
as available-for-sale declines below its cost and this decline is considered to
be other than temporary, the security is reduced to its fair value, and the
reduction is recorded as a realized loss.
During 1998, the Company maintained a trading portfolio of certain fixed
maturity securities. Trading securities are recorded at fair value. Unrealized
gains (losses), as well as realized gains (losses), are included in net
investment income. The Company held no trading securities at December 31, 1998,
and trading securities did not have a material effect on net investment income
in 1998.
MORTGAGE LOANS
Mortgage loans are reported at amortized cost, net of an allowance for losses.
The allowance for losses covers all non-performing loans and loans for which
management has a concern based on its assessment of risk factors, such as
potential non-payment or non-monetary default. The allowance is based on a loan-
specific review and a formula that reflects past results and current trends.
Loans for which the Company determines that collection of all amounts due under
the contractual terms is not probable are considered to be impaired. The Company
generally looks to the underlying collateral for repayment of impaired loans.
Therefore, impaired loans are considered to be collateral dependent and are
reported at the lower of amortized cost or fair value of the underlying
collateral, less estimated cost to sell.
POLICY LOANS
Policy loans are reported at unpaid principal balance.
F-10
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
1.4 INVESTMENTS (CONTINUED)
INVESTMENT REAL ESTATE
Investment real estate is classified as held for investment or available for
sale, based on management's intent. Real estate held for investment is carried
at cost, less accumulated depreciation and impairment write-downs. Real estate
available for sale is carried at the lower of cost (less accumulated
depreciation, if applicable) or fair value less cost to sell.
INVESTMENT INCOME
Interest on fixed maturity securities and performing and restructured mortgage
loans is recorded as income when earned and is adjusted for any amortization of
premium or discount. Interest on delinquent mortgage loans is recorded as income
when received. Dividends are recorded as income on ex-dividend dates.
REALIZED INVESTMENT GAINS
Realized investment gains (losses) are recognized using the specific-
identification method.
1.5 SEPARATE ACCOUNTS
Separate Accounts are assets and liabilities associated with certain contracts,
principally annuities; for which the investment risk lies solely with the
contract holder. Therefore, the Company's liability for these accounts equals
the value of the account assets. Investment income, realized investment gains
(losses), and policyholder account deposits and withdrawals related to separate
accounts are excluded from the consolidated statements of income, comprehensive
income, and cash flows. Assets held in Separate Accounts are primarily shares in
mutual funds, which are carried at fair value based on the quoted net asset
value per share.
F-11
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
1.6 DEFERRED POLICY ACQUISITION COSTS ("DPAC") AND COST OF INSURANCE PURCHASED
("CIP")
Certain costs of writing an insurance policy, including commissions,
underwriting, and marketing expenses, are deferred and reported as DPAC.
CIP represents the cost assigned to insurance contracts in force that are
acquired through the purchase of a block of business. At December 31, 1998, CIP
of $22.1 million was reported within other assets.
DPAC and CIP associated with interest-sensitive life contracts, insurance
investment contracts, and participating life insurance contracts is charged to
expense in relation to the estimated gross profits of those contracts. DPAC and
CIP associated with all other insurance contracts is charged to expense over the
premium-paying period or as the premiums are earned over the life of the
contract.
DPAC and CIP are adjusted for the impact on estimated future gross profits as if
net unrealized gains (losses) on securities had been realized at the balance
sheet date. The impact of this adjustment is included in accumulated other
comprehensive income within shareholder's equity.
The Company reviews the carrying amount of DPAC and CIP on at least an annual
basis. Management considers estimated future gross profits or future premiums,
expected mortality, interest earned and credited rates, persistency, and
expenses in determining whether the carrying amount is recoverable.
1.7 PREMIUM RECOGNITION
Most receipts for annuities and interest-sensitive life insurance policies are
classified as deposits instead of revenue. Revenues for these contracts consist
of mortality, expense, and surrender charges. Policy charges that compensate the
Company for future services are deferred and recognized in income over the
period earned, using the same assumptions used to amortize DPAC (see Note 1.6).
For limited-payment contracts, net premiums are recorded as revenue, and the
difference between the gross premium received and the net premium is deferred
and recognized in a constant relationship to insurance in force. For all other
contracts, premiums are recognized when due.
F-12
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
1.8 OTHER ASSETS
Acquisition-related goodwill, which is included in other assets, is charged to
expense in equal amounts over 40 years. The carrying value of goodwill is
regularly reviewed by management for indicators of impairment in value. If facts
and circumstances suggest that goodwill is impaired, other than temporarily, the
Company assesses the fair value of the underlying assets and reduces goodwill
accordingly.
1.9 POLICY AND CONTRACT CLAIMS RESERVES
Substantially all of the Company's insurance and annuity liabilities relate to
long-duration contracts. The contracts normally cannot be changed or canceled by
the Company during the contract period.
For interest-sensitive life and insurance investment contracts, reserves equal
the sum of the policy account balance and deferred revenue charges. Reserves for
other contracts are based on estimates of the cost of future policy benefits.
Reserves are determined using the net level premium method. Interest assumptions
used to compute reserves ranged from 2.5% to 13.5% at December 31, 1998.
1.10 REINSURANCE
The Company limits its exposure to loss on any single insured to $2.5 million by
ceding additional risks through reinsurance contracts with other insurers. The
Company diversifies its risk of reinsurance loss by using a number of reinsurers
that have strong claims-paying ability ratings. If the reinsurer could not meet
its obligations, the Company would reassume the liability. The likelihood of a
material reinsurance liability being reassumed by the Company is considered to
be remote.
A receivable is recorded for the portion of benefits paid and insurance
liabilities that have been reinsured. Reinsurance recoveries on ceded
reinsurance contracts were $63 million, $25 million, and $24 million during
1998, 1997, and 1996, respectively. The cost of reinsurance is recognized over
the life of the reinsured policies using assumptions consistent with those used
to account for the underlying policies.
F-13
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
1.10 REINSURANCE
Benefits paid and future policy benefits related to ceded insurance contracts
are recorded as reinsurance receivables. The cost of reinsurance is recognized
over the life of the underlying reinsured policies using assumptions consistent
with those used to account for the underlying policies.
1.11 PARTICIPATING POLICY CONTRACTS
Participating life insurance accounted for approximately 2% of life insurance in
force at December 31, 1998 and 1997.
The portion of earnings allocated to participating policyholders that cannot be
expected to inure to shareholders is excluded from net income and shareholder's
equity. Dividends to be paid on participating life insurance contracts are
determined annually based on estimates of the contracts' earnings. Policyholder
dividends were $4.9 million in 1998.
1.12 INCOME TAXES
The Company and its life insurance subsidiaries, together with certain other
life insurance subsidiaries of the Parent Company, are included in a life/non-
life consolidated tax return with the Parent Company and its noninsurance
subsidiaries. The Company participates in a tax sharing agreement with other
companies included in the consolidated tax return. Under this agreement, tax
payments are made to the Parent Company as if the companies filed separate tax
returns; and companies incurring operating and/or capital losses are reimbursed
for the use of these losses by the consolidated return group.
Deferred tax assets and liabilities are established for temporary differences
between the financial reporting basis and the tax basis of assets and
liabilities, at the enacted tax rates expected to be in effect when the
temporary differences reverse. The effect of a tax rate change is recognized in
income in the period of enactment. State income taxes are included in income tax
expense.
F-14
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
1.12 INCOME TAXES (CONTINUED)
A valuation allowance for deferred tax assets is provided if it is more likely
than not that some portion of the deferred tax asset will not be realized. An
increase or decrease in a valuation allowance that results from a change in
circumstances that causes a change in judgment about the realizability of the
related deferred tax asset is included in income. Changes related to
fluctuations in fair value of available-for-sale securities are included in the
consolidated statements of comprehensive income and accumulated other
comprehensive income in shareholder's equity.
1.13 ACCOUNTING CHANGES
During 1998, the Company adopted Statement of Financial Accounting Standards
(SFAS) 130, Reporting Comprehensive Income, which establishes standards for
reporting and displaying comprehensive income and its components in the
financial statements. The Company elected to report comprehensive income and its
components in a separate statement of comprehensive income. Adoption of this
statement did not change recognition or measurement of net income and,
therefore, did not impact the Company's consolidated results of operations or
financial position.
Effective December 31, 1998, the Company adopted SFAS 131, Disclosures about
Segments of an Enterprise and Related Information, which changes the way
companies report segment information. With the adoption of SFAS 131, the Company
reports division earnings exclusive of goodwill amortization, net realized
investment gains, and nonrecurring items. This methodology is consistent with
the manner in which management reviews division results. Adoption of this
statement did not impact the Company's consolidated results of operations or
financial position.
In June 1998, the Financial Accounting Standards Board issued SFAS 133,
Accounting for Derivative Instruments and Hedging Activities, which requires all
derivative instruments to be recognized at fair value as either assets or
liabilities in the balance sheet. Changes in the fair value of a derivative
instrument are to be reported as earnings or other comprehensive income,
depending upon the intended use of the derivative instrument. This statement is
effective for years beginning after June 15, 1999. Adoption of SFAS 133 is not
expected to have a material impact on the Company's consolidated results of
operations or financial position.
F-15
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
2. INVESTMENTS
2.1 INVESTMENT INCOME
Investment income by type of investment was as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------------------------------------------------------
(In Thousands)
<S> <C> <C> <C>
Investment income:
Fixed maturities $2,101,730 $1,966,528 $1,846,549
Equity securities 1,813 1,067 1,842
Mortgage loans on real estate 148,447 157,035 175,833
Investment real estate 23,139 22,157 22,752
Policy loans 66,573 62,939 58,211
Other long-term investments 3,837 3,135 2,328
Short-term investments 15,492 8,626 9,280
Investment income from affiliates 10,536 11,094 11,502
----------------------------------------------------------
Gross investment income 2,371,567 2,232,581 2,128,297
Investment expenses 54,634 33,958 33,225
----------------------------------------------------------
Net investment income $2,316,933 $2,198,623 $2,095,072
==========================================================
</TABLE>
The carrying value of investments that produced no investment income during 1998
was less than 0.2% of total invested assets. The ultimate disposition of these
investments is not expected to have a material effect on the Company's results
of operations and financial position.
F-16
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
2. INVESTMENTS (CONTINUED)
2.2 NET REALIZED INVESTMENT GAINS (LOSSES)
Realized gains (losses) by type of investment were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
--------------------------------------------------------
(In Thousands)
<S> <C> <C> <C>
Fixed maturities:
Gross gains $ 20,109 $ 42,966 $ 46,498
Gross losses (62,657) (34,456) (47,293)
--------------------------------------------------------
Total fixed maturities (42,548) 8,510 (795)
Equity securities 645 1,971 18,304
Other investments 8,118 19,384 10,993
--------------------------------------------------------
Net realized investment gains (losses)
before tax (33,785) 29,865 28,502
Income tax expense (benefit) (11,826) 10,452 9,976
--------------------------------------------------------
Net realized investment gains (losses)
after tax $(21,959) $ 19,413 $ 18,526
========================================================
</TABLE>
F-17
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
2. INVESTMENTS (CONTINUED)
2.3 FIXED MATURITY AND EQUITY SECURITIES
All fixed maturity and equity securities are classified as available-for-sale
and reported at fair value (see Note 1.4). Amortized cost and fair value at
December 31, 1998 and 1997 were as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAIN LOSS VALUE
------------------------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C>
DECEMBER 31, 1998
Fixed maturity securities:
Corporate securities:
Investment-grade $18,800,553 $1,129,504 $(26,353) $19,903,703
Below investment-grade 1,409,198 33,910 (45,789) 1,397,320
Mortgage-backed securities* 6,359,242 294,331 (870) 6,652,703
U.S. government obligations 417,822 69,321 (178) 486,965
Foreign governments 331,699 24,625 (2,437) 353,887
State and political subdivisions 86,778 4,796 (187) 91,387
Redeemable preferred stocks 20,313 - (17) 20,296
------------------------------------------------------------------------------
Total fixed maturity securities $27,425,605 $1,556,487 $(75,831) $28,906,261
==============================================================================
Equity securities $ 193,368 $ 19,426 $ (1,110) $ 211,684
==============================================================================
Investment in Parent Company $ 8,597 $ 45,973 $ - $ 54,570
==============================================================================
</TABLE>
* Primarily include pass-through securities guaranteed by and mortgage
obligations ("CMOs") collateralized by the U.S. government and government
agencies.
F-18
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
2. INVESTMENTS (CONTINUED)
2.3 FIXED MATURITY AND EQUITY SECURITIES (CONTINUED)
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAIN LOSS VALUE
------------------------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C>
DECEMBER 31, 1997
Fixed maturity securities:
Corporate securities:
Investment-grade $17,913,942 $ 906,235 $(17,551) $18,802,626
Below investment-grade 950,438 34,290 (4,032) 980,696
Mortgage-backed securities* 6,614,704 278,143 (4,260) 6,888,587
U.S. government obligations 289,406 46,529 (74) 335,861
Foreign governments 318,212 18,076 (3,534) 332,754
State and political subdivisions 44,505 1,686 -- 46,191
------------------------------------------------------------------------------
Total fixed maturity securities $26,131,207 $1,284,959 $(29,451) $27,386,715
==============================================================================
Equity securities $ 19,208 $ 2,145 $ (239) $ 21,114
==============================================================================
Investment in Parent Company $ 8,597 $ 29,226 $ -- $ 37,823
==============================================================================
</TABLE>
* Primarily include pass-through securities guaranteed by and mortgage
obligations ("CMOs") collateralized by the U.S. government and government
agencies.
F-19
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
2. INVESTMENTS (CONTINUED)
2.3 FIXED MATURITY AND EQUITY SECURITIES (CONTINUED)
Net unrealized gains (losses) on securities included in accumulated
comprehensive income in shareholders' equity at December 31 were as follows:
<TABLE>
<CAPTION>
1998 1997
--------------------------------------------
(In Thousands)
<S> <C> <C>
Gross unrealized gains $1,621,886 $1,316,330
Gross unrealized losses (76,941) (29,690)
DPAC and other fair value adjustments (488,120) (621,867)
Deferred federal income taxes (377,718) (237,247)
--------------------------------------------
Net unrealized gains on securities $ 679,107 $ 427,526
============================================
</TABLE>
The contractual maturities of fixed maturity securities at December 31, 1998
were as follows:
<TABLE>
<CAPTION>
1998 1997
-----------------------------------------------------------------------------
AMORTIZED MARKET AMORTIZED MARKET
COST VALUE COST VALUE
-----------------------------------------------------------------------------
(In Thousands) (In Thousands)
<S> <C> <C> <C> <C>
Fixed maturity securities,
excluding mortgage-
backed securities:
Due in one year or less $ 531,496 $ 536,264 $ 205,719 $ 207,364
Due after one year
through five years 5,550,665 5,812,581 5,008,933 5,216,174
Due after five years
through ten years 9,229,980 9,747,761 9,163,681 9,604,447
Due after ten years 5,754,220 6,156,950 5,138,169 5,470,143
Mortgage-backed securities 6,359,244 6,652,705 6,614,705 6,888,587
-----------------------------------------------------------------------------
Total fixed maturity securities $27,425,605 $28,906,261 $26,131,207 $27,386,715
=============================================================================
</TABLE>
Actual maturities may differ from contractual maturities, since borrowers may
have the right to call or prepay obligations. In addition, corporate
requirements and investment strategies may result in the sale of investments
before maturity. Proceeds from sales of fixed maturities were $5.4 billion,
$14.8 billion, and $16.2 billion during 1998, 1997, and 1996, respectively.
F-20
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
2. INVESTMENTS (CONTINUED)
2.4 MORTGAGE LOANS ON REAL ESTATE
Diversification of the geographic location and type of property collateralizing
mortgage loans reduces the concentration of credit risk. For new loans, the
Company requires loan-to-value ratios of 75% or less, based on management's
credit assessment of the borrower. The mortgage loan portfolio was distributed
as follows at December 31, 1998 and 1997:
<TABLE>
<CAPTION>
OUTSTANDING PERCENT OF PERCENT
AMOUNT TOTAL NONPERFORMING
------------------------------------------------------------------
(In Millions)
<S> <C> <C> <C>
DECEMBER 31, 1998
Geographic distribution:
South Atlantic $ 429 27.6% 0.2%
Pacific 320 20.6 10.4
Mid-Atlantic 326 20.9 4.1
East North Central 178 11.4 -
Mountain 95 6.1 -
West South Central 118 7.5 -
East South Central 46 3.0 -
West North Central 33 2.1 -
New England 25 1.6 -
Allowance for losses (13) (0.8) -
-------------------------------------
Total $ 1,557 100.00% 3.1%
=====================================
Property type:
Office $ 593 38.1% 7.0%
Retail 423 27.1 0.2
Industrial 292 18.8 -
Apartments 178 11.4 2.9
Hotel/motel 38 2.4 -
Other 46 3.0 -
Allowance for losses (13) (0.8) -
-------------------------------------
Total $ 1,557 100% 3.1%
=====================================
</TABLE>
F-21
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
2. INVESTMENTS (CONTINUED)
2.4 MORTGAGE LOANS ON REAL ESTATE (CONTINUED)
<TABLE>
<CAPTION>
OUTSTANDING PERCENT OF PERCENT
AMOUNT TOTAL NONPERFORMING
------------------------------------------------------------------
(In Millions)
<S> <C> <C> <C>
DECEMBER 31, 1997
Geographic distribution:
South Atlantic $ 456 27.5% 1.8%
Pacific 340 20.5 14.4
Mid-Atlantic 288 17.3 -
East North Central 186 11.2 -
Mountain 151 9.1 2.7
West South Central 132 7.9 .1
East South Central 94 5.7 -
West North Central 19 1.1 -
New England 17 1.1 -
Allowance for losses (23) (1.4) -
-------------------------------------
Total $1,660 100.0% 3.6%
=====================================
Property type:
Office $ 622 37.5% 4.6%
Retail 463 27.9 3.0
Industrial 324 19.5 1.8
Apartments 223 13.4 6.1
Hotel/motel 40 2.4 -
Other 11 .7 -
Allowance for losses (23) (1.4) -
-------------------------------------
Total $1,660 100.0% 3.6%
=====================================
</TABLE>
F-22
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
2. INVESTMENTS (CONTINUED)
2.4 MORTGAGE LOANS ON REAL ESTATE (CONTINUED)
Impaired mortgage loans on real estate and related interest income were as
follows:
<TABLE>
<CAPTION>
DECEMBER 31
1998 1997
-----------------------------------------
(In Millions)
<S> <C> <C>
Impaired loans:
With allowance* $ 13 $ 35
Without allowance - -
-----------------------------------------
Total impaired loans $ 13 $ 35
=========================================
</TABLE>
* Represents gross amounts before allowance for mortgage loan losses of $1.8
million and $10 million, respectively.
<TABLE>
<CAPTION>
1998 1997 1996
---------------------------------------------------------------
(In Millions)
<S> <C> <C> <C>
Average investment $ 24 $ 48 $ 72
Interest income earned $ - $ 3 $ 6
Interest income - cash basis $ - $ - $ 6
</TABLE>
F-23
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
2. INVESTMENTS (CONTINUED)
2.5 INVESTMENT SUMMARY
Investments of the Company were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1998 DECEMBER 31, 1997
--------------------------------------------------------------------------------------------------------
CARRYING CARRYING
COST FAIR VALUE AMOUNT COST FAIR VALUE AMOUNT
--------------------------------------------------------------------------------------------------------
(In Thousands) (In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Fixed maturities:
Bonds:
United States government
and government agencies
and authorities $ 417,822 $ 486,965 $ 486,965 $ 289,406 $ 335,861 $ 335,861
States, municipalities,
and political subdivisions 86,778 91,387 91,387 44,505 46,191 46,191
Foreign governments 331,699 353,887 353,887 318,212 332,754 332,754
Public utilities 1,777,172 1,895,326 1,895,326 1,848,546 1,952,724 1,952,724
Mortgage-backed securities 6,359,242 6,652,703 6,652,703 6,614,704 6,888,587 6,888,587
All other corporate bonds 18,432,579 19,405,697 19,405,697 17,015,834 17,830,598 17,830,598
Redeemable preferred stocks 20,313 20,296 20,296 - - -
--------------------------------------------------------------------------------------------------------
Total fixed maturities 27,425,605 28,906,261 28,906,261 26,131,207 27,386,715 27,386,715
Equity securities:
Common stocks:
Banks, trust, and insurance
companies - - - - - -
Industrial, miscellaneous,
and other 176,321 211,684 211,684 5,604 5,785 5,785
Nonredeemable preferred
stocks 17,047 - - 13,604 15,329 15,329
--------------------------------------------------------------------------------------------------------
Total equity securities 193,368 211,684 211,684 19,208 21,114 21,114
Mortgage loans on real
estate* 1,557,268 - 1,557,268 1,659,921 - 1,659,921
Investment real estate 119,520 - 119,520 129,364 - 129,364
Policy loans 1,170,686 - 1,170,686 1,093,694 - 1,093,694
Other long-term investments 86,194 - 86,194 55,118 - 55,118
Short-term investments 222,949 - 222,949 100,061 - 100,061
--------------------------------------------------------------------------------------------------------
Total investments $30,775,590 $ - $32,274,562 $29,188,573 $ - $30,445,987
========================================================================================================
</TABLE>
* Amount is net of allowance for losses of $13 million and $23 million at
December 31, 1996 and 1997, respectively.
F-24
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
3. DEFERRED POLICY ACQUISITION COSTS
The balance of DPAC at December 31 and the components of the change reported in
operating costs and expenses for the years then ended were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------------------------------------------------------
(In Thousands)
<S> <C> <C> <C>
Balance at January 1 $ 835,031 $1,042,783 $ 605,501
Capitalization 244,196 219,339 188,001
Amortization (125,062) (115,467) (102,189)
Effect of unrealized gains (losses) on
securities 133,553 (311,624) 351,470
----------------------------------------------------------
Balance at December 31 $1,087,718 $ 835,031 $1,042,783
==========================================================
</TABLE>
4. OTHER ASSETS
Other assets consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31
1998 1997
------------------------------------
(In Thousands)
<S> <C> <C>
Goodwill $ 54,754 $ 51,424
American General Corporation CBO (Collateralized Bond
Obligation) 98-1 Ltd. 9,740 -
Cost of insurance purchased ("CIP") 22,113 -
Other 119,711 81,235
------------------------------------
Total other assets $206,318 $132,659
====================================
</TABLE>
F-25
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
4. OTHER ASSETS (CONTINUED)
A rollforward of CIP for the year ended December 31, 1998, was as follows:
<TABLE>
<CAPTION>
1998
--------------------
(In Thousands)
<S> <C>
Balance at January 1 $ --
Acquisition of business 23,915
Accretion of interest at 5.88% 733
Amortization (2,535)
--------------------
Balance at December 31 $ 22,113
====================
</TABLE>
5. FEDERAL INCOME TAXES
5.1 TAX LIABILITIES
Income tax liabilities were as follows:
<TABLE>
<CAPTION>
DECEMBER 31
1998 1997
--------------------------------------
(In Thousands)
<S> <C> <C>
Current tax (receivable) payable $ (21,035) $ 7,676
Deferred tax liabilities, applicable to:
Net income 320,632 298,456
Net unrealized investment gains 377,718 237,247
-----------------------------------------
Total deferred tax liabilities 698,350 535,703
-----------------------------------------
Total current and deferred tax liabilities $ 677,315 $ 543,379
=========================================
</TABLE>
F-26
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
5. FEDERAL INCOME TAXES (CONTINUED)
5.1 TAX LIABILITIES (CONTINUED)
Components of deferred tax liabilities and assets at December 31 were as
follows:
<TABLE>
<CAPTION>
1998 1997
------------------------------------------
(In Thousands)
<S> <C> <C>
Deferred tax liabilities applicable to:
Deferred policy acquisition costs $ 307,025 $ 226,653
Basis differential of investments 590,661 486,194
Other 150,189 139,298
------------------------------------------
Total deferred tax liabilities 1,047,875 852,145
Deferred tax assets applicable to:
Policy reserves (212,459) (232,539)
Other (137,066) (83,903)
------------------------------------------
Total deferred tax assets before valuation
allowance (349,525) (316,442)
Valuation allowance - -
------------------------------------------
Total deferred tax assets, net of valuation
allowance (349,525) (316,442)
------------------------------------------
Net deferred tax liabilities $ 698,350 $ 535,703
==========================================
</TABLE>
A portion of life insurance income earned prior to 1984 is not taxable unless it
exceeds certain statutory limitations, is distributed as dividends, or unless
the income tax deferred status of such amount is modified by future tax
legislation. Such income, accumulated in policyholders' surplus accounts,
totaled $87.1 million at December 31, 1998. At current corporate rates, the
maximum amount of tax on such income is approximately $30.5 million. Deferred
income taxes on these accumulations are not required because no distributions
are expected.
F-27
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
5. FEDERAL INCOME TAXES (CONTINUED)
5.2 TAX EXPENSE
Components of income tax expense for the years were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
--------------------------------------------------------
(In Thousands)
<S> <C> <C> <C>
Current expense $134,344 $185,460 $164,272
Deferred expense (benefit):
Deferred policy acquisition cost 33,230 27,644 21,628
Policy reserves 2,189 (27,496) (27,460)
Basis differential of investments 11,969 3,769 4,129
Litigation settlement (33,983) -- --
Year 2000 (9,653) -- --
Other, net 15,623 9,347 14,091
--------------------------------------------------------
Total deferred expense 19,375 13,264 12,388
--------------------------------------------------------
Income tax expense $153,719 $198,724 $176,660
========================================================
</TABLE>
A reconciliation between the income tax expense computed by applying the federal
income tax rate (35%) to income before taxes and the income tax expense reported
in the financial statement is presented below.
<TABLE>
<CAPTION>
1998 1997 1996
--------------------------------------------------------
(In Thousands)
<S> <C> <C> <C>
Income tax at statutory percentage of GAAP
pretax income $164,638 $200,649 $178,939
Tax-exempt investment income (11,278) (9,493) (9,347)
Goodwill 712 723 759
Other (353) 6,845 6,309
--------------------------------------------------------
Income tax expense $153,719 $198,724 $176,660
========================================================
</TABLE>
F-28
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
5. FEDERAL INCOME TAXES (CONTINUED)
5.3 TAXES PAID
Income taxes paid amounted to approximately $159 million, $168 million, and $182
million in 1998, 1997, and 1996, respectively.
5.4 TAX RETURN EXAMINATIONS
The Parent Company and the majority of its subsidiaries file a consolidated
federal income tax return. The Internal Revenue Service ("IRS") has completed
examinations of the Parent Company's tax returns through 1988. The IRS is
currently examining tax returns for 1989 through 1996. In addition, the tax
returns of companies recently acquired are also being examined. Although the
final outcome of any issues raised in examination is uncertain, the Parent
Company believes that the ultimate liability, including interest, will not
materially exceed amounts recorded in the consolidated financial statements.
6. TRANSACTIONS WITH AFFILIATES
Affiliated notes and accounts receivable were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1998 DECEMBER 31, 1997
------------------------------------------------------------------------
PAR VALUE BOOK VALUE PAR VALUE BOOK VALUE
------------------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C>
American General Corporation,
9-3/8%, due 2008 $ 4,725 $ 3,345 $ 4,725 $ 3,288
American General Corporation,
Promissory notes, due 2004 14,679 14,679 17,125 17,125
American General Corporation,
Restricted Subordinated
Note, 13-1/2%, due 2002 29,435 29,435 31,494 31,494
------------------------------------------------------------------------
Total notes receivable from
affiliates 48,839 47,459 53,344 51,907
Accounts receivable from
affiliates - 113,637 - 44,612
------------------------------------------------------------------------
Indebtedness from affiliates $48,839 $161,096 $53,344 $96,519
========================================================================
</TABLE>
F-29
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
6. TRANSACTIONS WITH AFFILIATES (CONTINUED)
Various American General companies provide services to the Company, principally
mortgage servicing and investment management services, provided by American
General Investment Management Corporation on a fee basis. The Company paid
approximately $46,921,000, $33,916,000, and $22,083,000 for such services in
1998, 1997, and 1996, respectively. Accounts payable for such services at
December 31, 1998 and 1997 were not material. The Company rents facilities and
provides services on an allocated cost basis to various American General
companies. Beginning in 1998, amounts received by the Company from affiliates
include amounts received by its wholly-owned, non-life insurance subsidiary,
American General Life Companies (AGLC). AGLC provides shared services, including
technology and Year 2000-readiness, to a number of American General
Corporation's life insurance subsidiaries. The Company received approximately
$66,550,000, $6,455,000, and $1,255,000 for such services and rent in 1998,
1997, and 1996, respectively. Accounts receivable for rent and services at
December 31, 1998 and 1997 were not material.
The Company has 8,500 shares of $100 par value cumulative preferred stock
authorized and outstanding with an $80 dividend rate, redeemable at $1,000 per
share after December 31, 2000. The holder of this stock, The Franklin Life
Insurance Company ("Franklin"), an affiliated company, is entitled to one vote
per share, voting together with the holders of common stock.
During 1996, the Company's residential mortgage loan portfolio of $42 million
was sold to American General Finance, Inc., at carrying value plus accrued
interest.
7. STOCK-BASED COMPENSATION
Certain officers of the Company participate in American General Corporation's
stock and incentive plans which provide for the award of stock options,
restricted stock awards, performance awards, and incentive awards to key
employees. Stock options constitute the majority of such awards. Expense related
to stock options is measured as the excess of the market price of the stock at
the measurement date over the exercise price. The measurement date is the first
date on which both the number of shares that the employee is entitled to receive
and the exercise price are known. Under the stock option plans, no expense is
recognized, since the market price equals the exercise price at the measurement
date.
F-30
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
7. STOCK-BASED COMPENSATION (CONTINUED)
Under an alternative accounting method, compensation expense arising from stock
options would be measured at the estimated fair value of the options at the date
of grant. Had compensation expense for the stock options been determined using
this method, net income would have been as follows:
<TABLE>
<CAPTION>
1998 1997 1996
-------------------------------------------------------
(In Thousands)
<S> <C> <C> <C>
Net income as reported $316,674 $374,557 $334,595
Net income pro forma $315,078 $373,328 $334,029
</TABLE>
The average fair values of the options granted during 1998, 1997, and 1996 were
$15.38, $10.33, and $7.07, respectively. The fair value of each option was
estimated at the date of grant using a Black-Scholes option pricing model. The
weighted average assumptions used to estimate the fair value of the stock
options were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
-------------------------------------------------------
<S> <C> <C> <C>
Dividend yield 2.5% 3.0% 4.0%
Expected volatility 23.0% 22.0% 22.3%
Risk-free interest rate 5.76% 6.4% 6.2%
Expected life 6 YEARS 6 years 6 years
</TABLE>
8. BENEFIT PLANS
8.1 PENSION PLANS
The Company has non-contributory defined benefit pension plans covering most
employees. Pension benefits are based on the participant's compensation and
length of credited service.
Equity and fixed maturity securities were 56% and 30%, respectively, of the
plans' assets at the plans' most recent balance sheet dates. Additionally, 1% of
plan assets were invested in general investment accounts of the Parent Company's
subsidiaries through deposit administration insurance contracts.
F-31
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
8. BENEFIT PLANS (CONTINUED)
8.1 PENSION PLANS (CONTINUED)
The benefit plans have purchased annuity contracts from American General
Corporation's subsidiaries to provide benefits for certain retirees. These
contracts are expected to provide future annual benefits to certain retirees of
American General Corporation and its subsidiaries of approximately $52 million.
The components of pension expense and underlying assumptions were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
--------------------------------------------------------
(In Thousands)
<S> <C> <C> <C>
Service cost (benefits earned) $ 3,693 $ 1,891 $ 1,826
Interest cost 6,289 2,929 2,660
Expected return on plan assets (9,322) (5,469) (5,027)
Amortization (557) 195 4
--------------------------------------------------------
Pension (income) expense $ 103 $ (454) $ (537)
========================================================
Discount rate on benefit obligation 7.00% 7.25% 7.50%
Rate of increase in compensation levels 4.25% 4.00% 4.00%
Expected long-term rate of return on plan
assets 10.25% 10.00% 10.00%
</TABLE>
The Company's funding policy is to contribute annually no more than the maximum
deductible for federal income tax purposes. The funded status of the plans and
the prepaid pension expense included in other assets at December 31 were as
follows:
<TABLE>
<CAPTION>
1998 1997
-----------------------------------
(In Thousands)
<S> <C> <C>
Projected benefit obligation (PBO) $ 96,554 $ 43,393
Plan assets at fair value 120,898 80,102
Plan assets at fair value in excess of PBO 24,344 36,709
Other unrecognized items, net (10,176) (23,470)
-----------------------------------
Prepaid pension expense $ 14,168 $ 13,239
===================================
</TABLE>
F-32
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
8. BENEFIT PLANS (CONTINUED)
8.1 PENSION PLANS (CONTINUED)
The change in PBO was as follows:
<TABLE>
<CAPTION>
1998 1997
---------------------------------
(In Thousands)
<S> <C> <C>
PBO at January 1 $43,393 $37,389
Service and interest costs 9,982 4,820
Benefits paid (1,954) (673)
Actuarial loss 17,089 1,810
Amendments, transfers, and acquisitions 28,044 47
---------------------------------
PBO at December 31 $96,554 $43,393
=================================
</TABLE>
The change in the fair value of plan assets was as follows:
<TABLE>
<CAPTION>
1998 1997
----------------------------------
(In Thousands)
<S> <C> <C>
Fair value of plan assets at January 1 $ 80,102 $65,158
Actual return on plan assets 12,269 14,990
Benefits paid (1,954) (673)
Acquisitions and other 30,481 627
----------------------------------
Fair value of plan assets at December 31 $120,898 $80,102
==================================
</TABLE>
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company has life, medical, supplemental major medical, and dental plans for
certain retired employees and agents. Most plans are contributory, which retiree
contributions adjusted annually to limit employer contributions to predetermined
amounts. The Company has reserved the right to change or eliminate these
benefits at any time.
F-33
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
8. BENEFIT PLANS (CONTINUED)
8.2 POSTRETIREMENT BENEFITS OTHER THAN PENSIONS (CONTINUED)
The life plans are insured through December 31, 1999. A portion of the retiree
medical and dental plans is funded through a voluntary employees' beneficiary
association (VEBA); the remainder is unfunded and self-insured. All of the
retiree medical and dental plans' assets held in the VEBA were invested in
readily marketable securities at its most recent balance sheet date.
Postretirement benefit expense in 1998, 1997, and 1996 was $60,000, $601,000,
and $844,000, respectively. The accrued liability for postretirement benefits
was $19.2 million and $3.8 million at December 31, 1998 and 1997, respectively.
These liabilities were discounted at the same rates used for the pension plans.
9. DERIVATIVE FINANCIAL INSTRUMENTS
9.1 USE OF DERIVATIVE FINANCIAL INSTRUMENTS
The Company's use of derivative financial instruments is generally limited to
reducing its exposure to interest rate and currency exchange risk by utilizing
interest rate and currency swap agreements, and options to enter into interest
rate swap agreements (called swaptions). The Company accounts for these
derivative and financial instruments as hedges. Hedge accounting requires a high
correlation between changes in fair values or cash flows of the derivative
financial instrument and the specific item being hedged, both at inception and
throughout the life of the hedge.
9.2 INTEREST RATE AND CURRENCY SWAP AGREEMENTS
Interest rate swap agreements are used to convert specific investment securities
from a floating to a fixed rate basis, or vice versa, and to hedge against the
risk of declining interest rates on anticipated security purchases. Interest
rate swap agreements are also used to convert a portion of floating-rate
borrowings to a fixed rate and to hedge against the risk of rising interest
rates on anticipated debt issuances.
Currency swap agreements are used to convert cash flows from specific investment
securities denominated in foreign currencies into U.S. dollars at specific
exchange rates, and to hedge against currency rate fluctuation on anticipated
security purchases.
F-34
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
9. DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)
9.2 INTEREST RATE AND CURRENCY SWAP AGREEMENTS (CONTINUED)
The difference between amounts paid and received on swap agreements is recorded
on an accrual basis as an adjustment to net investment income or interest
expense, as appropriate, over the periods covered by the agreements. The related
amount payable to or receivable from counterparties is included in other
liabilities or assets.
The fair values of swap agreements are recognized in the consolidated balance
sheet if the hedge investments are carried at fair value or if they hedge
anticipated purchases of such investments. In this event, changes in the fair
value of a swap agreement are reported in net unrealized gains on securities
included in other accumulated comprehensive income in shareholders' equity,
consistent with the treatment of the related investment security. The fair
values of swap agreements hedging debt are not recognized in the consolidated
balance sheet.
For swap agreements hedging anticipated investment purchases or debt issuances,
the net swap settlement amount or unrealized gain or loss is deferred and
included in the measurement of the anticipated transaction when it occurs.
Swap agreements generally have terms of two to ten years. Any gain or loss from
early termination of a swap agreement is deferred and amortized into income over
the remaining term of the related investment or debt. If the underlying
investment or debt is extinguished or sold, any related gain or loss on swap
agreements is recognized in income.
F-35
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
9. DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)
9.2 INTEREST RATE AND CURRENCY SWAP AGREEMENTS (CONTINUED)
Interest rate and currency swap agreements related to investment securities at
December 31 were as follows:
<TABLE>
<CAPTION>
1998 1997
-----------------------------------
(Dollars in Millions)
<S> <C> <C>
Interest rate swap agreements to pay fixed rate:
Notional amount $ - $ 15
Average receive rate - 6.74%
Average pay rate - 6.48%
Interest rate swap agreements to receive fixed rate:
Notional amount $ 369 $ 144
Average receive rate 6.06% 6.89%
Average pay rate 5.48% 6.37%
Currency swap agreements (receive U.S. dollars/pay
Canadian dollars):
Notional amount (in U.S. dollars) $ 124 $ 139
Average exchange rate 1.50 1.50
</TABLE>
9.3 CALL SWAPTIONS
Options to enter into interest rate swap agreements are used to limit the
Company's exposure to reduced spreads between investment yields and interest
crediting rates should interest rates decline significantly over prolonged
periods. During such periods, the spread between investment yields and interest
crediting rates may be reduced as a result of certain limitations on the
Company's ability to manage interest crediting rates. Call swaptions allow the
Company to enter into interest rate swap agreements to receive fixed rates and
pay lower floating rates, effectively increasing the spread between investment
yields and interest crediting rates.
Premiums paid to purchase call swaptions are included in investments and are
amortized to net investment income over the exercise period of the swaptions. If
a call swaption is terminated, any gain is deferred and amortized to insurance
and annuity benefits over the expected life of the insurance and annuity
contracts and any unamortized premium is charged to income. If a call swaption
ceases to be an effective hedge, any related gain or loss is recognized in
income.
F-36
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
9. DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)
9.3 CALL SWAPTIONS (CONTINUED)
Swaptions at December 31 were as follows:
<TABLE>
<CAPTION>
1998 1997
----------------------------------
(Dollars in Billions)
<S> <C> <C>
Call swaptions:
Notional amount $1.76 $1.35
Average strike rate 3.97% 4.81%
Put swaptions:
Notional amount $1.05 $ -
Average strike rate 8.33% -
</TABLE>
9.4 CREDIT AND MARKET RISK
Derivative financial instruments expose the Company to credit risk in the event
of non-performance by counterparties. The Company limits this exposure by
entering into agreements with counterparties having high credit ratings and by
regularly monitoring the ratings. The Company does not expect any counterparty
to fail to meet its obligation; however, non-performance would not have a
material impact on the Company's consolidated results of operations or financial
position.
The Company's exposure to market risk is mitigated by the offsetting effects of
changes in the value of the agreements and the related items being hedged.
F-37
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
10. FAIR VALUE OF FINANCIAL INSTRUMENTS
Carrying amounts and fair values for certain of the Company's financial
instruments at December 31 are presented below. Care should be exercised in
drawing conclusions based on fair value, since (1) the fair values presented do
not include the value associated with all the Company's assets and liabilities,
and (2) the reporting of investments at fair value without a corresponding
evaluation of related policyholders liabilities can be misinterpreted.
<TABLE>
<CAPTION>
1998 1997
--------------------------------------------------------------------------------
FAIR CARRYING FAIR CARRYING
VALUE AMOUNT VALUE AMOUNT
--------------------------------------------------------------------------------
(In Millions) (In Millions)
<S> <C> <C> <C> <C>
Assets:
Fixed maturity and equity
securities * $29,118 $29,118 $27,408 $27,408
Mortgage loans on real
estate $ 1,608 $ 1,557 $ 1,702 $ 1,660
Policy loans $ 1,252 $ 1,171 $ 1,127 $ 1,094
Investment in parent
company $ 55 $ 55 $ 38 $ 38
Indebtedness from
affiliates $ 161 $ 161 $ 97 $ 97
Liabilities:
Insurance investment
contracts $25,852 $25,675 $24,011 $24,497
</TABLE>
* Includes derivative financial instruments with negative fair values of $1.0
million and $4.2 million and positive fair values of $24.3 million and $7.2
million at December 31, 1998 and 1997, respectively.
F-38
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
10. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The following methods and assumptions were used to estimate the fair value of
financial instruments:
FIXED MATURITY AND EQUITY SECURITIES
Fair values of fixed maturity and equity securities were based on quoted
market prices, where available. For investments not actively traded, fair
values were estimated using values obtained from independent pricing
services or, in the case of some private placements, by discounting
expected future cash flows using a current market rate applicable to yield,
credit quality, and average life of investments.
MORTGAGE LOANS ON REAL ESTATE
Fair value of mortgage loans was estimated primarily using discounted cash
flows, based on contractual maturities and risk-adjusted discount rates.
POLICY LOANS
Fair value of policy loans was estimated using discounted cash flows and
actuarially determined assumptions, incorporating market rates.
INVESTMENT IN PARENT COMPANY
The fair value of the investment in Parent Company is based on quoted
market prices of American General Corporation common stock.
INSURANCE INVESTMENT CONTRACTS
Fair value of insurance investment contracts was estimated using cash flows
discounted at market interest rates.
F-39
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
10. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
INDEBTEDNESS FROM AFFILIATES
Indebtedness from affiliates is composed of accounts receivable and notes
receivable from affiliates. Due to the short-term nature of accounts
receivable, fair value is assumed to equal carrying value. Fair value of
notes receivable was estimated using discounted cash flows based on
contractual maturities and discount rates that were based on U.S. Treasury
rates for similar maturity ranges.
11. DIVIDENDS PAID
American General Life Insurance Company paid $244 million, $401 million, and
$189 million in dividends on common stock to AGC Life Insurance Company in 1998,
1997, and 1996, respectively. The Company also paid $680 thousand per year in
dividends on preferred stock to an affiliate, The Franklin Life Insurance
Company, in 1998, 1997, and 1996.
12. RESTRICTIONS, COMMITMENTS, AND CONTINGENCIES
The Company and its insurance subsidiaries are restricted by state insurance
laws as to the amounts they may pay as dividends without prior approval from
their respective state insurance departments. At December 31, 1998,
approximately $3.3 billion of consolidated shareholder's equity represents net
assets of the Company which cannot be transferred, in the form of dividends,
loans, or advances to the Parent Company. Approximately $2.5 billion of
consolidated shareholders' equity is similarly restricted as to transfer from
its subsidiaries to the Company.
Generally, the net assets of the Company's subsidiaries available for transfer
to the Parent are limited to the amounts that the subsidiaries' net assets, as
determined in accordance with statutory accounting practices, exceed minimum
statutory capital requirements. However, payments of such amounts as dividends
may be subject to approval by regulatory authorities and are generally limited
to the greater of 10% of policyholders' surplus or the previous year's statutory
net gain from operations.
The Company has various leases, substantially all of which are for office space
and facilities. Rentals under financing leases, contingent rentals, and future
minimum rental commitments and rental expense under operating leases are not
material.
F-40
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
12. RESTRICTIONS, COMMITMENTS, AND CONTINGENCIES (CONTINUED)
In recent years, various life insurance companies have been named as defendants
in class action lawsuits relating to life insurance pricing and sales practices,
and a number of these lawsuits have resulted in substantial settlements. On
December 16, 1998, American General Corporation announced that certain of its
life insurance subsidiaries had entered into agreements to resolve all pending
market conduct class action lawsuits. The settlements are not final until
approved by the courts and any appeals are resolved. If court approvals are
obtained and appeals are not taken, it is expected the settlements will be final
in third quarter 1999.
In conjunction with the proposed settlements, the Company recorded a charge of
$97.1 million ($63.1 million after-tax) in the fourth quarter of 1998. The
charge covers the cost of policyholder benefits and other anticipated expenses
resulting from the proposed settlements, as well as other administrative and
legal costs.
On December 31, 1998, the Company entered into an agreement with the Parent
Company whereby the Company assigned, and the Parent Company assumed, $80.1
million of the liabilities of the Company related to the proposed resolution.
The liabilities of American General Life Insurance Company of New York, which
totaled $17.0 million, were not assumed by the Parent Company. As consideration
for the assumption of the liabilities, the Company paid the Parent Company an
amount equal to the liabilities recorded with respect to the proposed resolution
of the litigation. The assignment of the liabilities was not a novation, and
accordingly, the Company retains a contingent liability related to the
litigation. The litigation liabilities were reduced by payments of $2.7 million,
and the remaining balance of $94.4 million was included in other liabilities on
the Company's balance sheet at December 31, 1998.
The Company is party to various other lawsuits and proceedings arising in the
ordinary course of business. Many of these lawsuits and proceedings arise in
jurisdictions, such as Alabama and Mississippi, that permit damage awards
disproportionate to the actual economic damages incurred. Based upon information
presently available, the Company believes that the total amounts that will
ultimately be paid, if any, arising from these lawsuits and proceedings will not
have a material adverse effect on the Company's consolidated results of
operations and financial position. However, it should be noted that the
frequency of large damage awards, including large punitive damage awards, that
bear little or no relation to actual economic damages incurred by plaintiffs in
jurisdictions like Alabama and Mississippi continues to create the potential for
an unpredictable judgment in any given suit.
F-41
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
12. RESTRICTIONS, COMMITMENTS, AND CONTINGENCIES (CONTINUED)
The increase in the number of insurance companies that are under regulatory
supervision has resulted, and is expected to continue to result, in increased
assessments by state guaranty funds to cover losses to policyholders of
insolvent or rehabilitated insurance companies. Those mandatory assessments may
be partially recovered through a reduction in future premium taxes in certain
states. At December 31, 1998 and 1997, the Company has accrued $6.0 million and
$7.6 million, respectively, for guaranty fund assessments, net of $3.7 million
and $4.3 million, respectively, of premium tax deductions. The Company has
recorded receivables of $6.2 million and $9.7 million at December 31, 1998 and
1997, respectively, for expected recoveries against the payment of future
premium taxes. Expenses incurred for guaranty fund assessments were $3.6
million, $2.1 million, and $6.0 million in 1998, 1997, and 1996, respectively.
F-42
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
13. REINSURANCE
Reinsurance transactions for the years ended December 31, 1998, 1997, and 1996
were as follows:
<TABLE>
<CAPTION>
CEDED TO ASSUMED PERCENTAGE OF
GROSS OTHER FROM OTHER AMOUNT
AMOUNT COMPANIES COMPANIES NET AMOUNT ASSUMED TO NET
----------------------------------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C> <C>
DECEMBER 31, 1998
Life insurance in force $46,057,031 $13,288,183 $629,791 $33,398,639 1.89%
====================================================================
Premiums:
Life insurance and annuities $ 90,298 $ 42,235 $ 117 $ 48,180 0.24%
Accident and health insurance 1,134 87 - 1,047 0.00%
--------------------------------------------------------------------
Total premiums $ 91,432 $ 42,322 $ 117 $ 49,227 0.24%
====================================================================
DECEMBER 31, 1997
Life insurance in force $45,963,710 $10,926,255 $ 4,997 $35,042,452 0.01%
====================================================================
Premiums:
Life insurance and annuities $ 100,357 $ 37,294 $ 75 $ 63,138 0.12%
Accident and health insurance 1,208 172 - 1,036 0.00%
--------------------------------------------------------------------
Total premiums $ 101,565 $ 37,466 $ 75 $ 64,174 0.12%
====================================================================
DECEMBER 31, 1996
Life insurance in force $44,535,841 $ 8,625,465 $ 5,081 $35,915,457 0.01%
====================================================================
Premiums:
Life insurance and annuities $ 104,225 $ 34,451 $ 36 $ 69,810 0.05%
Accident and health insurance 1,426 64 - 1,362 0.00%
--------------------------------------------------------------------
Total premiums $ 105,651 $ 34,515 $ 36 $ 71,172 0.05%
====================================================================
</TABLE>
Reinsurance recoverable on paid losses was approximately $7.7 million, $2.3
million, and $6.9 million at December 31, 1998, 1997, and 1996, respectively.
Reinsurance recoverable on unpaid losses was approximately $2.5 million, $3.2
million, and $4.3 million at December 31, 1998, 1997, and 1996, respectively.
F-43
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
14. YEAR 2000 CONTINGENCY (UNAUDITED)
INTERNAL SYSTEMS
The Company's ultimate parent, American General Corporation, ("AGC") has
numerous technology systems that are managed on a decentralized basis. AGC's
Year 2000 readiness efforts are therefore being undertaken by its key business
units with centralized oversight. Each business unit, including the Company, has
developed and is implementing a plan to minimize the risk of a significant
negative impact on its operations.
While the specifics of the plans vary, the plans include the following
activities: (1) perform an inventory of the Company's information technology and
non-information technology systems; (2) assess which items in the inventory may
expose the Company to business interruptions due to Year 2000 issues; (3)
reprogram or replace systems that are not Year 2000 ready; (4) test systems to
prove that they will function into the next century as they do currently; and
(5) return the systems to operations. As of December 31, 1998, substantially all
of the Company's critical systems are Year 2000 ready and have been returned to
operations. However, activities (3) through (5) for certain systems are ongoing,
with vendor upgrades expected to be received during the first half of 1999.
THIRD PARTY RELATIONSHIPS
The Company has relationships with various third parties who must also be Year
2000 ready. These third parties provide, or receive resources and services to
(or from) the Company and include organizations with which the Company exchanges
information. Third parties include vendors of hardware, software, and
information services; providers of infrastructure services such as voice and
data communications and utilities for office facilities; investors, customers;
distribution channels; and joint venture partners. Third parties differ from
internal systems in that the Company exercises less, or no, control over Year
2000 readiness. The Company has developed a plan to assess and attempt to
mitigate the risks associated with the potential failure of third parties to
achieve Year 2000 readiness. The plan includes the following activities (1)
identify and classify third party dependencies; (2) research, analyze, and
document Year 2000 readiness for critical third parties; and (3) test critical
hardware and software products and electronic interfaces. As of December 31,
1998, AGC has identified and assessed more approximately 700 critical third
party dependencies, including those related to the Company. A more detailed
evaluation will be completed during the first quarter 1999 as part of the
Company's contingency planning efforts. Due to the various stages of third
parties' Year 2000 readiness, the Company's testing activities will extend
through 1999.
F-44
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
14. YEAR 2000 CONTINGENCY (UNAUDITED) (CONTINUED)
CONTINGENCY PLANS
The Company has commenced contingency planning to reduce the risk of Year 2000-
related business failures. The contingency plans, which address both internal
systems and third party relationships, include the following activities: (1)
evaluate the consequences of failure of business processes with significant
exposure to Year 2000 risk; (2) determine the probability of a Year 2000 related
failure for those processes that have a high consequence of failure; (3) develop
an action plan to complete contingency plans for those processes that rank high
in consequence and probability of failure; and (4) complete the applicable
actions plans. The Company is currently developing action plans and expects to
substantially complete all contingency planning activities by April 30, 1999.
RISKS AND UNCERTAINTIES
Based on its plans to make internal systems ready for Year 2000, to deal with
third party relationships, and to develop contingency action, the Company
believes that it will experience at most isolated and minor disruptions of
business processes following the turn of the century. Such disruptions are not
expected to have a material effect on the Company's future results of
operations, liquidity, or financial condition. However, due to the magnitude and
complexity of this project, risks and uncertainties exist and the Company is not
able to predict a most reasonably likely worst case scenario. If conversion of
the Company's internal systems is not completed on a timely basis (due to non-
performance by significant third party vendors, lack of qualified personnel to
perform the Year 2000 work, or other unforeseen circumstances in completing the
Company's plans), or if critical third parties fail to achieve Year 2000
readiness on a timely basis, the Year 2000 issue could have a material adverse
impact on the Company's operation following the turn of the century.
COSTS
Through December 31, 1998, the Company has incurred, and anticipates that it
will continue to incur, costs for internal staff, third-party vendors, and other
expenses to achieve Year 2000 readiness. The cost of activities related to Year
2000 readiness has not had a material adverse effect on the Company's results of
operations or financial condition. In addition, the Company has elected to
accelerate the planned replacement of certain systems as part of the Year 2000
plans. Costs of the replacement systems are being capitalized and amortized over
their useful lives, in accordance with the Company's normal accounting policies.
F-45
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
15. DIVISION OPERATIONS
15.1 NATURE OF OPERATIONS
The Company manages its business operation through two divisions, which are
based on products and services offered.
RETIREMENT SERVICES
The Retirement Services Division provides tax-deferred retirement annuities and
employer-sponsored retirement plans to employees of educational, health care,
public sector, and other not-for-profit organizations marketed nationwide
through exclusive sales representatives.
LIFE INSURANCE
The Life Insurance division provides traditional, interest-sensitive, and
variable life insurance and annuities to a broad spectrum of customers through
multiple distribution channels focused on specific market segments.
15.2 DIVISION RESULTS
Results of each division exclude goodwill amortization, net realized investment
gains, and non-recurring items.
Division earnings information was as follows:
<TABLE>
<CAPTION>
REVENUES INCOME BEFORE TAXES EARNINGS
------------------------------------------------------------------------------------------------------------
1998 1997 1996 1998 1997 1996 1998 1997 1996
------------------------------------------------------------------------------------------------------------
(In Millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Retirement Services $1,987 $1,859 $1,745 $ 469 $398 $343 $315 $261 $226
Life Insurance 870 822 774 162 147 141 107 97 92
------------------------------------------------------------------------------------------------------------
Total divisions 2,857 2,681 2,519 631 545 484 422 358 318
Goodwill
amortization - - - (2) (2) (2) (2) (2) (2)
RG (L) (34) 30 29 (34) 30 29 (22) 19 19
Nonrecurring items - - - (125)(a) - - (81)(a) - -
------------------------------------------------------------------------------------------------------------
Total consolidated $2,823 $2,711 $2,548 $ 470 $573 $511 $317 $375 $335
============================================================================================================
</TABLE>
(a) Includes $97 million pretax ($63 million after-tax) in litigation
settlements and $28 million pretax ($18 million after-tax) in Year 2000
costs.
F-46
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
15. DIVISION OPERATIONS (CONTINUED)
15.2 DIVISION RESULTS (CONTINUED)
Division balance sheet information was as follows:
<TABLE>
<CAPTION>
ASSETS LIABILITIES
-------------------------------------------------------------------
DECEMBER 31
-------------------------------------------------------------------
IN MILLIONS 1998 1997 1998 1997
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Retirement Services $41,347 $35,195 $38,841 $33,136
Life Insurance 8,894 8,370 7,831 7,367
-------------------------------------------------------------------
Total consolidated $50,241 $43,565 $46,672 $40,503
===================================================================
</TABLE>
F-47
<PAGE>
INDEX OF WORDS AND PHRASES
This index should help you to locate more information about some of the
terms and phrases used in this prospectus.
<TABLE>
<CAPTION>
page to
See in this
Defined Term Prospectus
- ------------
<S> <C>
accumulation value 5
AGLC 41
AGL 1
amount at risk 8
automatic rebalancing 5
basis 25
beneficiary 30
cash surrender value 13
cash value accumulation test 7
close of business 32
Code 25
Corporate America - Variable 1
cost of insurance rates 8
daily charge 7
date of issue 32
death benefit 6
dollar cost averaging 4
full surrender 13
Fund 2
guideline premium test 6
investment option 1
lapse 10
loan, loan interest 14
maturity, maturity date 11
modified endowment contract 25
monthly deduction day 32
monthly insurance charge 8
Mutual Fund 2
option 1, 2 6
partial surrender 13
payment option 14
planned periodic premium 10
Policy 1
Policy loan 14
Policy month, year 32
premium payments 4
premiums 4
prospectus 1
</TABLE>
45
<PAGE>
<TABLE>
<CAPTION>
page to
See in this
Defined Term Prospectus
- ------------ ----------
<S> <C>
reinstate, reinstatement 10
SEC 2
separate account 1
Separate Account VL-R 1
seven-pay test 25
specified amount 6
surrender 13
telephone transactions 17
transfers 11
valuation date, period 32
</TABLE>
We have filed a registration statement relating to Separate Account VL-R
and the Policy with the SEC. The registration statement, which is required by
the Securities Act of 1933, includes additional information that is not required
in this prospectus. If you would like the additional information, you may obtain
it from the SEC's Website at http://www.sec.gov or main office in Washington,
D.C. You will have to pay a fee for the material.
You should rely only on the information contained in this prospectus or
sales materials we have approved. We have not authorized anyone to provide you
with information that is different. The policies are not available in all
states. This prospectus is not an offer in any state to any person if the offer
would be unlawful.
46
<PAGE>
PART II
(OTHER INFORMATION)
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
American General Life Insurance Company's Bylaws provide in Article VII,
Section 1 for indemnification of directors, officers and employees of the
Company.
Insofar as indemnification for liability arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
REPRESENTATION PURSUANT TO SECTION 26(e)(2)(A) OF THE INVESTMENT COMPANY ACT OF
1940
American General Life Insurance Company 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 risks
assumed by American General Life Insurance Company.
II-1
<PAGE>
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement contains the following papers and documents:
The facing sheet.
Cross-Reference Table.
Prospectus, consisting of 46 pages of text, plus 50 financial pages of American
General Life Insurance Company.
The undertaking to file reports.
The Rule 484 undertaking.
Representation pursuant to Section 26(e)(2)(A).
The signatures.
Written Consents of the following persons:
(a) Pauletta P. Cohn, Associate General Counsel of
American General Life Companies
(b) American General Life Insurance Company's actuary
(c) Independent Auditors
Independent Auditors
The following exhibits:
1. Exhibits required by Article IX, paragraph A of Form N-8B-2:
(1)(a) Resolutions of Board of Directors of American General Life
Insurance Company authorizing the establishment of Separate
Account VL-R. (1)
(1)(b) Resolutions of Board of Directors of American General Life
Insurance Company authorizing the establishment of variable
life insurance standards of suitability and conduct. (1)
(2) Not applicable.
(3)(a) Amended and Restated Distribution Agreement between American
General Securities Incorporated and American General Life
Insurance Company effective October 15, 1998. (4)
(3)(b) Form of Selling Group Agreement. (6)
(3)(c) Schedule of Commissions (incorporated by reference from the
text included under the heading "Distribution of the
Policies" in the prospectus that is filed as part of this
amended Registration Statement).
(4) Not applicable.
(5) Amended Specimen form of the "Corporate America" Variable
Universal Life Insurance Policy (Policy Form No. 99301).
(Filed herewith)
II-2
<PAGE>
(6)(a) Amended and Restated Articles of Incorporation of American
General Life Insurance Company, effective December 31,
1991. (2)
(6)(b) Bylaws of American General Life Insurance Company, adopted
January 22, 1992. (3)
(6)(c) Amendment to the Amended and Restated Articles of
Incorporation of American General Life Insurance Company,
effective July 13, 1995. (5)
(7) Not applicable.
(8)(a)(i) Form of Participation Agreement by and Among AIM Variable
Insurance Funds, Inc., AIM Distributors, Inc., American
General Life Insurance Company, on Behalf of Itself and
its Separate Accounts, and American General Securities
Incorporated. (6)
(8)(a)(ii) Amendment One to Participation Agreement by and among AIM
Variable Insurance Funds, Inc., A I M Distributors, Inc.,
American General Life Insurance Company, on Behalf of
Itself and its Separate Accounts, and American General
Securities Incorporated dated as of January 1, 1999. (8)
(8)(a)(iii) Form of Amendment Two to Participation Agreement by and
among AIM Variable Insurance Funds, Inc., A I M
Distributors, Inc., American General Life Insurance
Company, on Behalf of Itself and its Separate Accounts,
and American General Securities Incorporated dated as of
dated as of June 1, 1999. (Filed herewith)
(8)(b)(i) Form of Participation Agreement by and between The
Variable Annuity Life Insurance Company and American
General Life Insurance Company. (10)
(8)(b)(ii) Amendment One to Participation Agreement by and between
The Variable Annuity Life Insurance Company and American
General Life Insurance Company dated as of July 21, 1998.
(8)
(8)(c)(i) Form of Participation Agreement Between American General
Life Insurance Company and Dreyfus Variable Investment
Fund, The Dreyfus Socially Responsible Growth Fund, Inc.
and Dreyfus Life and Annuity Index Fund, Inc. (6)
(8)(c)(ii) Amendment One to Participation Agreement by and among
American General Life Insurance Company, Dreyfus Variable
Investment Fund, The Dreyfus Socially Responsible Growth
Fund, Inc. and Dreyfus Life and Annuity Index Fund, Inc.
dated December 1, 1998. (8)
(8)(d)(i) Form of Participation Agreement Among MFS Variable
Insurance Trust, American General Life Insurance Company
and Massachusetts Financial Services Company. (6)
II-3
<PAGE>
(8)(d)(ii) Amendment One to Participation Agreement by and among MFS
Variable Insurance Trust, American General Life Insurance
Company and Massachusetts Financial Services Company dated
December 1, 1998. (8)
(8)(d)(iii) Form of Amendment Two to Participation Agreement Among MFS
Variable Insurance Trust, American General Life Insurance
Company and Massachusetts Financial Services Company.
(Filed herewith)
(8)(e)(i) Participation Agreement by and among American General Life
Insurance Company, American General Securities
Incorporated, Morgan Stanley Universal Funds, Inc., Morgan
Stanley Asset Management Inc., and Miller Anderson &
Sherrerd LLP. (9)
(8)(e)(ii) Amendment One to Participation Agreement by and among
American General Life Insurance Company, American General
Securities Incorporated, Morgan Stanley Universal Funds,
Inc., Morgan Stanley Asset Management Inc., and Miller
Anderson & Sherrerd LLP. (Filed herewith)
(8)(e)(iii) Amended Number 2 to Participation Agreement Among Morgan
Stanley Dean Witter Universal Funds, Inc., Van Kampen
Distributors, Inc., Morgan Stanley Dean Witter Investment
Management Inc., Miller Anderson & Sherrerd, LLP, American
General Life Insurance Company, and American General
Securities Incorporated. (6)
(8)(e)(iv) Amendment Three to Participation Agreement by and among
American General Life Insurance Company, American General
Securities Incorporated, Morgan Stanley Universal Funds,
Inc., Morgan Stanley Asset Management Inc., and Miller
Anderson & Sherrerd LLP. (5)
(8)(e)(v) Amendment Four to Participation Agreement by and among
American General Life Insurance Company, American General
Securities Incorporated, Morgan Stanley Universal Funds,
Inc., Morgan Stanley Asset Management Inc., and Miller
Anderson & Sherrerd LLP. (8)
(8)(e)(vi) Form of Amendment Five to Participation Agreement by and
among American General Life Insurance Company, American
General Securities Incorporated, Morgan Stanley Universal
Funds, Inc., Morgan Stanley Asset Management Inc., and
Miller Anderson & Sherrerd LLP. (Filed herewith)
(8)(f) Form of Participation Agreement Among Putnam Variable
Trust, Putnam Mutual Funds Corp., and American General
Life Insurance Company. (6)
(8)(g)(i) Form of Participation Agreement Among American General
Life Insurance Company, American General Securities
Incorporated, SAFECO Resources Series Trust, and Safeco
Securities, Inc. (6)
(8)(g)(ii) Amendment One by and among American General Life Insurance
Company, American General Securities Incorporated and
SAFECO Resources Series Trust dated as of December 1,
1998. (8)
II-4
<PAGE>
(8)(g)(iii) Form of Amendment Two by and among American General Life
Insurance Company, American General Securities
Incorporated and SAFECO Resources Series Trust dated as of
August 2, 1999. (Filed herewith)
(8)(h)(i) Amended and Restated Participation Agreement by and among
American General Life Insurance Company, American General
Securities Incorporated, Van Kampen American Capital Life
Investment Trust, Van Kampen American Capital Asset
Management, Inc., and Van Kampen American Capital
Distributors, Inc. (9)
(8)(h)(ii) Amendment One to Amended and Restated Participation
Agreement by and among American General Life Insurance
Company, American General Securities Incorporated, Van
Kampen American Capital Life Investment Trust, Van Kampen
American Capital Asset Management, Inc., and Van Kampen
American Capital Distributors, Inc. (8)
(8)(h)(iii) Form of Amendment Number 2 to Amended and Restated
Participation Agreement among Van Kampen Life Investment
Trust, Van Kampen Distributors, Inc., Van Kampen Asset
Management, Inc., American General Life Insurance Company,
and American General Securities Incorporated. (6)
(8)(h)(iv) Amendment Three to Amended and Restated Participation
Agreement by and among American General Life Insurance
Company, American General Securities Incorporated, Van
Kampen Life Investment Trust, Van Kampen Asset Management,
Inc., and Van Kampen Distributors, Inc. (8)
(8)(h)(v) Form of Amendment Four to Amended and Restated
Participation Agreement by and among American General Life
Insurance Company, American General Securities
Incorporated, Van Kampen Life Investment Trust, Van Kampen
Asset Management, Inc., and Van Kampen Distributors, Inc.
(Filed herewith)
(8)(i) Form of Administrative Services Agreement between American
General Life Insurance Company and fund distributor. (5)
(8)(j) Form of Administrative Services Agreement between American
General Life Insurance Company, Miller Anderson & Sherrard
LLP and Morgan Stanley Dean Witter Investment Management
Inc. (Filed herewith)
(8)(k) Form of Administrative Services Agreement between American
General Life Insurance Company and SAFECO Asset Management
Company. (Filed herewith)
(8)(l) Administrative Services Agreement between American General
Life Insurance Company and Van Kampen Asset Management
Inc. (8)
(8)(m) Form of services agreement dated July 31, 1975, (limited
to introduction and first two recitals, and sections 1-3)
among various affiliates of American General Corporation,
including American General Life Insurance Company and
American General Life Companies. (7)
II-5
<PAGE>
(8)(n) Administrative Services Agreement dated as of June 1,
1998, between American General Life Insurance Company and
AIM Advisors, Inc. (4)
(8)(o)(i) Administrative Services Agreement dated as of August 11,
1998, between American General Life Insurance Company and
The Dreyfus Corporation. (4)
(8)(o)(ii) Amendment to Administrative Services Agreement dated as of
August 11, 1998, between American General Life Insurance
Company to the Dreyfus Corporation effective as of
December 1, 1998. (4)
(8)(p) Form of Administrative Service Agreement between Van
Kampen Asset Management Inc. and American General Life
Insurance Company. (Filed herewith)
(9) Not applicable.
(10)(a) Specimen form of application for life insurance issued by
American General Life Insurance Company. (1)
(10)(b) Application for Life Insurance. (Filed herewith)
(10)(c) Service Request Form for Home Office. (6)
(10)(d) Consent Form. (Filed herewith)
(10)(e) Supplemental Application. (Filed herewith)
Other Exhibits
2(a) Opinion and Consent of Pauletta P. Cohn, Associate General
Counsel of American General Life Companies. (Filed
herewith)
2(b) Opinion and Consent of American General Life Insurance
Company's actuary. (Filed herewith)
3 Not applicable.
4 Not applicable.
5 Financial Data Schedule. (Not applicable)
6 Consent of Independent Auditors. (Filed herewith)
7 Powers of Attorney. (11)
II-6
<PAGE>
27 Financial Data Schedule. (Inapplicable, because no financial
statements of the Separate Account are being filed herewith)
/1/ Incorporated herein by reference to the initial filing of the Form S-6
Registration Statement (File No. 333-42567) of American General Life Insurance
Company Separate Account VL-R on December 18, 1997.
/2/ Incorporated herein by reference to the initial filing of the Form N-4
Registration Statement (File No. 33-43390) of Separate Account D of American
General Life Insurance Company on October 16, 1991.
/3/ Incorporated herein by reference to the filing of Post-Effective Amendment
No. 1 of the Form N-4 Registration Statement (File No. 33-43390) of Separate
Account D of American General Life Insurance Company on April 30, 1992.
/4/ Incorporated herein by reference to the initial filing of the Form N-4
Registration Statement (File No. 333-70667) of American General Life Insurance
Company Separate Account D on January 15, 1999.
/5/ Incorporated by reference to the filing of Pre-Effective Amendment No. 3 of
the Form S-6 Registration Statement (File No. 333-53909) of American General
Life Insurance Company Separate Account VL-R on August 19, 1998.
/6/ Incorporated by reference to the filing of Pre-Effective Amendment No. 1 of
the Form S-6 Registration Statement (File No. 333-42567) of American General
Life Insurance Company Separate Account VL-R on March 23, 1998.
/7/ Incorporated by reference to the filing of Pre-Effective Amendment No. 23
to the Form N-4 Registration Statement of American General Life Insurance
Company's Separate Account A (File No. 33-44745) on April 24, 1998.
/8/ Incorporated by reference to the filing of the Pre-Effective Amendment No.
1 to Form N-4 Registration Statement (File No. 333-70667) of American General
Life Insurance Company Separate Account D on March 18, 1999.
/9/ Incorporated by reference to Post-Effective Amendment No. 12 to
Registrant's Form N-4 Registration Statement (File No. 33-43390) filed on April
30, 1997.
/10/ Incorporated by reference to Pre-Effective Amendment No. 1 of the Form N-4
Registration Statement (File No. 333-40637) of Separate Account D of American
General Life Insurance Company on February 12, 1998.
/11/ Incorporated by reference to the initial filing of the Form S-6
Registration Statement (File No. 333-80191) of Separate Account VL-R of American
General Life Insurance Company on June 8, 1999.
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
American General Life Insurance Company Separate Account VL-R, has duly caused
this amended 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 Houston, and State of Texas, on the 24th day of
August, 1999.
AMERICAN GENERAL LIFE INSURANCE
COMPANY SEPARATE ACCOUNT VL-R
(Registrant)
BY: AMERICAN GENERAL LIFE
INSURANCE COMPANY
(On behalf of the Registrant and itself)
BY: /s/ ROBERT F. HERBERT, JR.
----------------------------------
Robert F. Herbert, Jr.
Senior Vice President
[SEAL]
ATTEST: /s/ JULIE A. COTTON
------------------------
Julie A. Cotton
Assistant Secretary
Pursuant to the requirements of the Securities Act of 1933, this amended
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
RONALD H. RIDLEHUBER* Principal Executive Officer August 24, 1999
- ------------------------
(Ronald H. Ridlehuber) and Director
ROBERT F. HERBERT, JR* Principal Financial and August 24, 1999
- ------------------------
(Robert F. Herbert, Jr.) Accounting Officer
and Director
DONALD W. BRITTON* Director August 24, 1999
- ------------------------
(Donald W. Britton)
DAVID A. FRAVEL* Director August 24, 1999
- ------------------------
(David A. Fravel)
ROYCE G. IMHOFF, II* Director August 24, 1999
- ------------------------
(Royce G. Imhoff, II)
II-8
<PAGE>
Signature Title Date
- --------- ----- ----
JOHN V. LAGRASSE* Director August 24, 1999
- -----------------------------
(John V. LaGrasse)
RODNEY O. MARTIN, JR* Director August 24, 1999
- -----------------------------
(Rodney O. Martin, Jr.)
GARY D. REDDICK* Director August 24, 1999
- -----------------------------
(Gary D. Reddick)
THOMAS M. ZUREK* Director August 24, 1999
- -----------------------------
(Thomas M. Zurek)
*/s/ ROBERT F. HERBERT, JR.
- -----------------------------
By: Robert F. Herbert, Jr.
Attorney-in-Fact
II-9
<PAGE>
EXHIBIT INDEX
The following exhibits:
(1)(a) Resolutions of Board of Directors of American General Life
Insurance Company authorizing the establishment of Separate
Account VL-R. (1)
(1)(b) Resolutions of Board of Directors of American General Life
Insurance Company authorizing the establishment of variable life
insurance standards of suitability and conduct. (1)
(2) Not applicable.
(3)(a) Amended and Restated Distribution Agreement between American
General Securities Incorporated and American General Life
Insurance Company effective October 15, 1998. (4)
(3)(b) Form of Selling Group Agreement. (6)
(3)(c) Schedule of Commissions (incorporated by reference from the text
included under the heading "Distribution of the Policies" in the
prospectus that is filed as part of this amended Registration
Statement).
(4) Not applicable.
(5) Amended Specimen form of the "Corporate America" Variable
Universal Life Insurance Policy (Policy Form No. 99301). (Filed
herewith)
(6)(a) Amended and Restated Articles of Incorporation of American
General Life Insurance Company, effective December 31, 1991. (2)
(6)(b) Bylaws of American General Life Insurance Company, adopted
January 22, 1992. (3)
(6)(c) Amendment to the Amended and Restated Articles of Incorporation
of American General Life Insurance Company, effective July 13,
1995. (5)
(7) Not applicable.
E-1
<PAGE>
(8)(a)(i) Form of Participation Agreement by and Among AIM Variable
Insurance Funds, Inc., AIM Distributors, Inc., American
General Life Insurance Company, on Behalf of Itself and its
Separate Accounts, and American General Securities
Incorporated. (6)
(8)(a)(ii) Amendment One to Participation Agreement by and among AIM
Variable Insurance Funds, Inc., A I M Distributors, Inc.,
American General Life Insurance Company, on Behalf of Itself
and its Separate Accounts, and American General Securities
Incorporated dated as of January 1, 1999. (8)
(8)(a)(iii) Form of Amendment Two to Participation Agreement by and
among AIM Variable Insurance Funds, Inc., A I M
Distributors, Inc., American General Life Insurance Company,
on Behalf of Itself and its Separate Accounts, and American
General Securities Incorporated dated as of dated as of June
1, 1999. (Filed herewith)
(8)(b)(i) Form of Participation Agreement by and between The Variable
Annuity Life Insurance Company and American General Life
Insurance Company. (10)
(8)(b)(ii) Amendment One to Participation Agreement by and between The
Variable Annuity Life Insurance Company and American General
Life Insurance Company dated as of July 21, 1998. (8)
(8)(c)(i) Form of Participation Agreement Between American General
Life Insurance Company and Dreyfus Variable Investment Fund,
The Dreyfus Socially Responsible Growth Fund, Inc. and
Dreyfus Life and Annuity Index Fund, Inc. (6)
(8)(c)(ii) Amendment One to Participation Agreement by and among
American General Life Insurance Company, Dreyfus Variable
Investment Fund, The Dreyfus Socially Responsible Growth
Fund, Inc. and Dreyfus Life and Annuity Index Fund, Inc.
dated December 1, 1998. (8)
(8)(d)(i) Form of Participation Agreement Among MFS Variable Insurance
Trust, American General Life Insurance Company and
Massachusetts Financial Services Company. (6)
(8)(d)(ii) Amendment One to Participation Agreement by and among MFS
Variable Insurance Trust, American General Life Insurance
Company and Massachusetts Financial Services Company dated
December 1, 1998. (8)
E-2
<PAGE>
(8)(d)(iii) Form of Amendment Two to Participation Agreement Among MFS
Variable Insurance Trust, American General Life Insurance
Company and Massachusetts Financial Services Company. (Filed
herewith)
(8)(e)(i) Participation Agreement by and among American General Life
Insurance Company, American General Securities Incorporated,
Morgan Stanley Universal Funds, Inc., Morgan Stanley Asset
Management Inc., and Miller Anderson & Sherrerd LLP. (9)
(8)(e)(ii) Amendment One to Participation Agreement by and among
American General Life Insurance Company, American General
Securities Incorporated, Morgan Stanley Universal Funds,
Inc., Morgan Stanley Asset Management Inc., and Miller
Anderson & Sherrerd LLP. (Filed herewith)
(8)(e)(iii) Amended Number 2 to Participation Agreement Among Morgan
Stanley Dean Witter Universal Funds, Inc., Van Kampen
Distributors, Inc., Morgan Stanley Dean Witter Investment
Management Inc., Miller Anderson & Sherrerd, LLP, American
General Life Insurance Company, and American General
Securities Incorporated. (6)
(8)(e)(iv) Amendment Three to Participation Agreement by and among
American General Life Insurance Company, American General
Securities Incorporated, Morgan Stanley Universal Funds,
Inc., Morgan Stanley Asset Management Inc., and Miller
Anderson & Sherrerd LLP. (5)
(8)(e)(v) Amendment Four to Participation Agreement by and among
American General Life Insurance Company, American General
Securities Incorporated, Morgan Stanley Universal Funds,
Inc., Morgan Stanley Asset Management Inc., and Miller
Anderson & Sherrerd LLP. (8)
(8)(e)(vi) Form of Amendment Five to Participation Agreement by and
among American General Life Insurance Company, American
General Securities Incorporated, Morgan Stanley Universal
Funds, Inc., Morgan Stanley Asset Management Inc., and
Miller Anderson & Sherrerd LLP. (Filed herewith)
(8)(f) Form of Participation Agreement Among Putnam Variable Trust,
Putnam Mutual Funds Corp., and American General Life
Insurance Company. (6)
(8)(g)(i) Form of Participation Agreement Among American General Life
Insurance Company, American General Securities Incorporated,
SAFECO Resources Series Trust, and Safeco Securities, Inc.
(6)
E-3
<PAGE>
(8)(g)(ii) Amendment One by and among American General Life Insurance
Company, American General Securities Incorporated and SAFECO
Resources Series Trust dated as of December 1, 1998. (8)
(8)(g)(iii) Form of Amendment Two by and among American General Life
Insurance Company, American General Securities Incorporated
and SAFECO Resources Series Trust dated as of August 2,
1999. (Filed herewith)
(8)(h)(i) Amended and Restated Participation Agreement by and among
American General Life Insurance Company, American General
Securities Incorporated, Van Kampen American Capital Life
Investment Trust, Van Kampen American Capital Asset
Management, Inc., and Van Kampen American Capital
Distributors, Inc. (9)
(8)(h)(ii) Amendment One to Amended and Restated Participation
Agreement by and among American General Life Insurance
Company, American General Securities Incorporated, Van
Kampen American Capital Life Investment Trust, Van Kampen
American Capital Asset Management, Inc., and Van Kampen
American Capital Distributors, Inc. (8)
(8)(h)(iii) Form of Amendment Number 2 to Amended and Restated
Participation Agreement among Van Kampen Life Investment
Trust, Van Kampen Distributors, Inc., Van Kampen Asset
Management, Inc., American General Life Insurance Company,
and American General Securities Incorporated. (6)
(8)(h)(iv) Amendment Three to Amended and Restated Participation
Agreement by and among American General Life Insurance
Company, American General Securities Incorporated, Van
Kampen Life Investment Trust, Van Kampen Asset Management,
Inc., and Van Kampen Distributors, Inc. (8)
(8)(h)(v) Form of Amendment Four to Amended and Restated Participation
Agreement by and among American General Life Insurance
Company, American General Securities Incorporated, Van
Kampen Life Investment Trust, Van Kampen Asset Management,
Inc., and Van Kampen Distributors, Inc. (Filed herewith)
(8)(i) Form of Administrative Services Agreement between American
General Life Insurance Company and fund distributor. (5)
(8)(j) Form of Administrative Services Agreement between American
General Life Insurance Company, Miller Anderson & Sherrard
LLP and Morgan Stanley Dean Witter Investment Management
Inc. (Filed herewith)
E-4
<PAGE>
(8)(k) Form of Administrative Services Agreement between American
General Life Insurance Company and SAFECO Asset Management
Company. (Filed herewith)
(8)(l) Administrative Services Agreement between American General
Life Insurance Company and Van Kampen Asset Management Inc.
(8)
(8)(m) Form of services agreement dated July 31, 1975, (limited to
introduction and first two recitals, and sections 1-3) among
various affiliates of American General Corporation,
including American General Life Insurance Company and
American General Life Companies. (7)
(8)(n) Administrative Services Agreement dated as of June 1, 1998,
between American General Life Insurance Company and AIM
Advisors, Inc. (4)
(8)(o)(i) Administrative Services Agreement dated as of August 11,
1998, between American General Life Insurance Company and
The Dreyfus Corporation. (4)
(8)(o)(ii) Amendment to Administrative Services Agreement dated as of
August 11, 1998, between American General Life Insurance
Company to the Dreyfus Corporation effective as of December
1, 1998. (4)
(8)(p) Form of Administrative Service Agreement between Van Kampen
Asset Management Inc. and American General Life Insurance
Company. (Filed herewith)
(9) Not applicable.
(10)(a) Specimen form of application for life insurance issued by
American General Life Insurance Company. (1)
(10)(b) Application for Life Insurance. (Filed herewith)
(10)(c) Service Request Form for Home Office. (6)
(10)(d) Consent Form. (Filed herewith)
(10)(e) Supplemental Application. (Filed herewith)
E-5
<PAGE>
Other Exhibits
2(a) Opinion and Consent of Pauletta P. Cohn, Associate General
Counsel of American General Life Companies. (Filed herewith)
2(b) Opinion and Consent of American General Life Insurance
Company's actuary. (Filed herewith)
3 Not applicable.
4 Not applicable.
5 Financial Data Schedule. (Not applicable)
6 Consent of Independent Auditors. (Filed herewith)
7 Powers of Attorney. (11)
27 Financial Data Schedule. (Inapplicable, because no financial
statements of the Separate Account are being filed herewith)
/1/ Incorporated herein by reference to the initial filing of the Form S-6
Registration Statement (File No. 333-42567) of American General Life Insurance
Company Separate Account VL-R on December 18, 1997.
/2/ Incorporated herein by reference to the initial filing of the Form N-4
Registration Statement (File No. 33-43390) of Separate Account D of American
General Life Insurance Company on October 16, 1991.
/3/ Incorporated herein by reference to the filing of Post-Effective Amendment
No. 1 of the Form N-4 Registration Statement (File No. 33-43390) of Separate
Account D of American General Life Insurance Company on April 30, 1992.
/4/ Incorporated herein by reference to the initial filing of the Form N-4
Registration Statement (File No. 333-70667) of American General Life Insurance
Company Separate Account D on January 15, 1999.
/5/ Incorporated by reference to the filing of Pre-Effective Amendment No. 3 of
the Form S-6 Registration Statement (File No. 333-53909) of American General
Life Insurance Company Separate Account VL-R on August 19, 1998.
E-6
<PAGE>
/6/ Incorporated by reference to the filing of Pre-Effective Amendment No. 1 of
the Form S-6 Registration Statement (File No. 333-42567) of American General
Life Insurance Company Separate Account VL-R on March 23, 1998.
/7/ Incorporated by reference to the filing of Pre-Effective Amendment No. 23
to the Form N-4 Registration Statement of American General Life Insurance
Company's Separate Account A (File No. 33-44745) on April 24, 1998.
/8/ Incorporated by reference to the filing of the Pre-Effective Amendment No. 1
to Form N-4 Registration Statement (File No. 333-70667) of American General Life
Insurance Company Separate Account D on March 18, 1999.
/9/ Incorporated by reference to Post-Effective Amendment No. 12 to Registrant's
Form N-4 Registration Statement (File No. 33-43390) filed on April 30, 1997.
/10/ Incorporated by reference to Pre-Effective Amendment No. 1 of the Form N-4
Registration Statement (File No. 333-40637) of Separate Account D of American
General Life Insurance Company on February 12, 1998.
/11/ Incorporated by reference to the initial filing of the Form S-6
Registration Statement (File No. 333-80191) of Separate Account VL-R of American
General Life Insurance Company on June 8, 1999.
E-7
<PAGE>
EXHIBIT 5
AMERICAN GENERAL LIFE
INSURANCE COMPANY
Home Office:
Houston, Texas
2727-A Allen Parkway JOHN DOE
P.O. Box 4647 POLICY NUMBER: 0000000000
Houston, Texas 77210-4647 A STOCK COMPANY
A Subsidiary of American General Corporation
(888) 222-4943
WE WILL PAY THE DEATH BENEFIT PROCEEDS to the Beneficiary if the Insured dies
prior to the Maturity Date and while this policy is in force. Payment will be
made after We receive due proof of the Insured's death, and will be subject to
the terms of this policy. The method for determining the amount payable is
stated in the Death Benefit Proceeds provision.
WE WILL PAY THE CASH SURRENDER VALUE of this policy to the Owner on the Maturity
Date if the Insured is living on that date.
THE AMOUNT OR DURATION OF THE DEATH BENEFIT PROCEEDS AND THE ACCUMULATION VALUES
PROVIDED BY THIS POLICY WHEN BASED ON THE INVESTMENT EXPERIENCE OF A SEPARATE
ACCOUNT, ARE VARIABLE AND NOT GUARANTEED AS TO FIXED DOLLAR AMOUNT. ACCUMULATION
VALUES MAY INCREASE OR DECREASE.
The consideration for this policy is the application and payment of the first
premium. The first premium must be paid on or before delivery of this policy.
This is a FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY. An adjustable Death
Benefit is payable upon the Insured's death prior to the Maturity Date.
Investment results are reflected in policy benefits. ACCUMULATION VALUES are
flexible and will be based on the amount and frequency of premiums paid and the
investment results of the Separate Account. NONPARTICIPATING - NOT ELIGIBLE FOR
DIVIDENDS.
NOTICE OF TEN DAY RIGHT TO EXAMINE POLICY
YOU MAY RETURN THIS POLICY WITHIN 10 DAYS AFTER DELIVERY IF YOU ARE NOT
SATISFIED WITH IT FOR ANY REASON. THE POLICY MAY BE RETURNED TO US OR TO THE
REGISTERED REPRESENTATIVE THROUGH WHOM IT WAS PURCHASED. UPON SURRENDER OF THIS
POLICY WITHIN THE 10 DAY PERIOD, IT WILL BE DEEMED VOID FROM THE DATE OF ISSUE,
AND WE WILL REFUND THE GREATER OF: (1) ANY PREMIUMS RECEIVED BY US; OR (2) YOUR
ACCUMULATION VALUE PLUS ANY CHARGES THAT HAVE BEEN DEDUCTED.
SIGNED AT THE HOME OFFICE ON THE DATE OF ISSUE.
President Secretary
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
READ YOUR POLICY CAREFULLY
99301
<PAGE>
INDEX
<TABLE>
<S> <C>
Annual Report 22
Automatic Rebalancing 16
Beneficiary and Proceeds 18
Cash Surrender Value 12
Changing Your Insurance Policy 7
Change of Ownership or Beneficiary 19
Changing the Death Benefit Option 7
Changing the Specified Amount 7
Contract 5
Cost of Insurance Rate Table 22
Date of Issue 3, 5
Death Benefit and Death Benefit Options 6
Death Benefit Corridor Rates 24-26
Dollar Cost Averaging 16
General Account 10
General Provisions 21
Grace Period 14
Incontestability 21
Investment Advisor or Investment Objective, Change of 9
Investments of the Separate Account 8
Maturity Date 3
Monthly Administration Fee 12
Owner 5
Payment Options 19
Policy Loans 17
Policy Values 10
Premium Class 2
Premium Expense Charge 6
Premium Payments 5
Reinstatement 23
Separate Account 8
Surrender, Full and Partial 14
Suspension and Deferral of Payments Provision 16
Transfer Provisions 15
Valuation of Assets 9
Valuation Dates 9
Valuation Units 9
When This Policy Terminates 23
</TABLE>
99301 Page 2
<PAGE>
COMPANY REFERENCE. We, Our, Us, or Company means American General Life
Insurance Company.
YOU, YOUR. The words You or Your mean the Owner of this policy.
HOME OFFICE. Our office at 2727-A Allen Parkway, Houston, Texas 77019; Mailing
Address P. O. Box 4647, Houston, Texas 77210-4647.
WRITTEN, IN WRITING. A written request or notice in acceptable form and
content, which is signed and dated, and received at Our Home Office.
PREMIUM CLASS. The Premium Class of this policy is shown on the Policy Schedule
as one or a combination of the following terms:
GUARANTEED ISSUE. The term "Guaranteed Issue" means the cost of insurance is
based on the Insured qualifying for simplified underwriting.
PREFERRED. The term "Preferred" means the cost of insurance is based on the
Insured being a non-user of tobacco.
STANDARD. The term "Standard" means the cost of insurance is based on the
Insured being a tobacco user.
SPECIAL. The term "Special" means an extra premium is being charged due to the
Insured's health, occupation or avocation.
NOTICE
This Policy Is A Legal Contract Between
The Policy Owner And the Company.
99301 Page 2 (Cont'd)
<PAGE>
POLICY SCHEDULE
BASIC POLICY MONTHLY COST YEARS PAYABLE
VARIABLE LIFE SEE PAGE 27 65
ADDITIONAL BENEFITS PROVIDED BY RIDERS
NONE
PREMIUM CLASS: PREFERRED
INITIAL PREMIUM: $1,000.00
PLANNED PERIODIC PREMIUM: 1,000.00 PAYABLE ANNUALLY
MONTHLY DEDUCTION DAY: 1ST DAY OF EACH MONTH
TARGET PREMIUM $1,000.00
MINIMUM PARTIAL SURRENDER $ 500.00
MINIMUM VALUE THAT MAY BE RETAINED IN A
DIVISION AFTER A PARTIAL SURRENDER OR
TRANSFER $ 500.00
MINIMUM DEATH BENEFIT AMOUNT (AFTER A
DECREASE IN SPECIFIED AMOUNT)
PRIOR TO POLICY ANNIVERSARY NEAREST AGE 65: $ 50,000
THEREAFTER $ 25,000
DEATH BENEFIT COMPLIANCE TEST CASH VALUE
COVERAGE MAY EXPIRE PRIOR TO THE MATURITY DATE SHOWN WHERE EITHER NO PREMIUMS
ARE PAID FOLLOWING PAYMENT OF THE INITIAL PREMIUM, OR SUBSEQUENT PREMIUMS ARE
INSUFFICIENT TO CONTINUE COVERAGE TO SUCH DATE.
INSURED: JOHN DOE POLICY NUMBER: 123456789
INSURANCE AGE: 35 DATE OF ISSUE: JULY 1, 1999
INITIAL SPECIFIED AMOUNT: $50,000 MATURITY DATE: JULY 1, 2064
DEATH BENEFIT OPTION: 1 THIS IS A (SEX DISTINCT) POLICY
THIS IS A (STATE NAME) POLICY
99301 Page 3
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POLICY SCHEDULE CONTINUED - POLICY NUMBER 123456789
CHARGES DEDUCTED FROM THE SEPARATE ACCOUNT
MORTALITY AND EXPENSE CHARGES:
DEDUCTIONS FROM THE SEPARATE ACCOUNT WILL BE MADE AT AN ANNUAL RATE NOT TO
EXCEED THE RATES STATED BELOW. THE ACTUAL DEDUCTION WILL BE MADE ON A DAILY
BASIS. THE CURRENT RATE ON A DAILY BASIS DURING THE FIRST 10 YEARS IS
0.001781%.
POLICY YEARS CURRENT ANNUAL RATE GUARANTEED ANNUAL RATE
1-10 [0.65%] 0.65%
11-20 [0.40%] 0.40%
THEREAFTER [0.15%] 0.15%
EXPENSE CHARGES:
PREMIUM EXPENSE CHARGE:
(ADJUSTABLE PREMIUM EXPENSE CHARGE PERCENTAGE)
<TABLE>
<CAPTION>
CURRENT PERCENTAGES GUARANTEED MAXIMUM PERCENTAGES
FOR AMOUNTS EQUAL FOR AMOUNTS FOR AMOUNTS EQUAL FOR AMOUNTS
TO OR LESS THAN THE GREATER THAN THE TO OR LESS THAN THE GREATER THAN THE
TARGET PREMIUM TARGET PREMIUM TARGET PREMIUM TARGET PREMIUM
<S> <C> <C> <C> <C>
YEARS 1 - 7 [9%] [5%] 9% 5%
THEREAFTER [5%] [5%] 5% 5%
</TABLE>
MONTHLY ADMINISTRATION FEE: CURRENT GUARANTEED
[$7.00] $10.00
BASIC POLICY CHARGES AND FEES
COST OF INSURANCE CHARGES. GUARANTEED MAXIMUM COST OF INSURANCE RATES PER
$1,000 OF NET AMOUNT AT RISK ARE SHOWN ON PAGE 27.
99301 Page 4
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CONTRACT. Your policy is a legal contract that You have entered into with Us.
You have paid the first premium and have submitted an application, a copy of
which is attached. In return, We promise to provide the insurance coverage
described in this policy.
The entire contract consists of:
1. The basic policy;
2. The riders that add benefits to the basic policy, if any;
3. Endorsements, if any; and
4. The attached copy of Your application, and any amendments or supplemental
applications.
DATE OF ISSUE. The Date of Issue of this policy is the date from which the
first policy charges are due. The Date of Issue is also the date from which all
policy years, anniversaries, and monthly deduction dates are determined.
OWNER. The Owner is as stated in the application unless later changed. During
the Insured's lifetime, the Owner may exercise every right the policy confers or
We allow (subject to the rights of any assignee of record, and to any
endorsement on this policy limiting such rights). You may have multiple Owners
of the policy. In that case, the authorizations of all Owners are required for
all policy changes except for transfers, premium allocations and deduction
allocations. We will accept the authorization of one Owner for transfers and
changes in premium and deduction allocations. The Owner and the Insured may be
the same person but do not have to be. If an Owner dies while the policy is in
force and the Insured is living, ownership rights pass on to a successor owner,
if any, or to the estate of the Owner.
PREMIUM PAYMENTS
All premiums after the first are payable in advance. Premium payments are
flexible. This means You may choose the amount and frequency of payments.
The actual amount and frequency of premium payments will affect the Accumulation
Value and the amount and duration of insurance. Please refer to the Policy
Values Provision for a detailed explanation.
PLANNED PERIODIC PREMIUMS. The amount and frequency of the Planned Periodic
Premiums You selected are shown on the Policy Schedule. You may request a change
in the amount and frequency. We may limit the amount of any increase. (See
"Maximum Premium").
UNSCHEDULED ADDITIONAL PREMIUMS. You may pay additional premiums at any time
before the Maturity Date shown on the Policy Schedule. We may limit the number
and amount of additional premiums. (See "Maximum Premium").
MAXIMUM PREMIUM. We reserve the right to refund any premium that would cause
this policy to fail to qualify as life insurance under the Death Benefit
Compliance Test selected, and under applicable tax laws. The test selected is
shown on the Policy Schedule.
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PREMIUM EXPENSE CHARGE. The Premium Expense Charge is calculated by multiplying
the premium paid by the Premium Expense Charge Percentage. Premium Expense
Charge Percentages differ according to policy year and whether or not the
premium paid is in excess of the Target Premium. The Target Premium is shown on
the Policy Schedule. The Premium Expense Charge Percentage is adjustable, but
will never be more than the guaranteed Premium Expense Charge Percentage shown
on the Policy Schedule.
NET PREMIUM. The term Net Premium as used in this policy means "The premium
paid less the Premium Expense Charge" except as follows: No Premium Expense
Charge will be deducted if the source of the premium is one of the following:
(1) Cash Surrender Values applied from another policy issued by the Company
(internal rollover); or (2) The amount of any term conversion credit.
ALLOCATION OF PREMIUMS. The initial allocation of Net Premiums is shown in the
application for this policy and will remain in effect until changed by Written
notice from the Owner. The percentage allocation for future Net Premiums may be
changed at any time by Written Notice.
The initial Net Premium will be allocated to the Money Market Division on the
later of the following dates:
1. The Date of Issue; or
2. The date all requirements needed to place the policy in force have been
satisfied, including underwriting approval and receipt in the Home Office of
the necessary premium.
The initial Net Premium will remain in the Money Market Division until the first
Valuation Date following the 15th day after it was applied. Any additional Net
Premiums received prior to the first Valuation Date which follows the 15th day
after the initial Net Premium was applied will be allocated to the Money Market
Division until such Valuation Date. At that time, We will transfer the
Accumulation Value to the selected Investment Option(s). Each premium received
after such Valuation Date will be reduced by the Premium Expense Charge and
applied directly to the elected Investment Option(s) as of the Business Day
received.
Changes in the allocation will be effective on the date we receive the Owner's
notice. The allocation may be 100% to any available Division or may be divided
among these options in whole percentage points totaling 100%. We reserve the
right to limit the number of Divisions which You may select.
WHERE TO PAY. You may make Your payments to Us at Our Home Office or to an
authorized agent. A receipt signed by an officer of the Company will be
furnished upon request.
DEATH BENEFIT AND DEATH BENEFIT OPTIONS
DEATH BENEFIT PROCEEDS. If the Insured dies prior to the Maturity Date and
while this policy is in force, We will pay the Death Benefit Proceeds to the
Beneficiary. The Death Benefit Proceeds will be subject to:
1. The Death Benefit Option in effect on the date of death; and
2. Any increases or decreases made to the Specified Amount. The Initial
Specified Amount is shown on the Policy Schedule.
Guidelines for changing the Death Benefit Option or the Specified Amount will be
found in the section entitled "Changing Your Insurance Policy".
99301 Page 6
<PAGE>
Any premium received after the date of death will be refunded and will not be
included in the Accumulation Value for purposes of calculating the Death Benefit
Amount.
The Death Benefit Proceeds will be the Death Benefit Amount, after reversing any
premium received after the date of death, less any outstanding policy loan and
will be subject to the other provisions of the Beneficiary and Proceeds section.
DEATH BENEFIT COMPLIANCE TEST. Death benefit compliance tests are used to
determine if a policy will qualify as life insurance under applicable tax laws.
There are two compliance tests which may be used: The Guideline Premium Test and
the Cash Value Accumulation Test. The test which You selected when this policy
was issued is shown on the Policy Schedule. The death benefit compliance test
may not be changed after the Date of Issue.
DEATH BENEFIT OPTION. The Death Benefit Option which You have chosen is shown
on the Policy Schedule as either Option 1 or Option 2.
OPTION 1. If You have chosen Option 1, the Death Benefit Amount will be the
greater of:
1. The Specified Amount on the date of death; or
2. The Accumulation Value as of the Business Day notification of death is
received In Writing, multiplied by the Death Benefit Corridor Rate (as shown
in the table for the Death Benefit Compliance Test which You selected) for
the Insured's age nearest birthday on the date We receive notification.
OPTION 2. If You have chosen Option 2, the Death Benefit Amount will be the
greater of:
1. The Specified Amount as of the date of death plus the Accumulation Value as
of the Business Day notification of death is received In Writing; or
2. The Accumulation Value as of the Business Day notification of death is
received In Writing, multiplied by the Death Benefit Corridor Rate (as shown
in the table for the Death Benefit Compliance Test which You selected) for
the Insured's age nearest birthday on the date We receive notification.
CHANGING YOUR INSURANCE POLICY
You may request a change in the Specified Amount or Death Benefit Option at any
time except that a decrease in the Specified Amount may not become effective
prior to the end of the first policy year. Your request must be submitted to Our
Home Office In Writing in a form acceptable to Us.
INCREASING THE SPECIFIED AMOUNT. We will require a supplemental application and
evidence of insurability satisfactory to Us for any increase in the Specified
Amount. An increase will be effective on the monthly deduction day on or next
following the date the application for increase is approved by Us. The
effective date will appear in an endorsement to this policy.
DECREASING THE SPECIFIED AMOUNT. Any decrease will go into effect on the
monthly deduction day following the day We receive the request. The Death
Benefit Amount remaining in effect after any decrease cannot be less than the
greater of:
1. The Minimum Death Benefit Amount shown on the Policy Schedule; or
2. Any Death Benefit Amount required to qualify this policy as life insurance
under applicable tax laws.
99301 Page 7
<PAGE>
Any such decrease will be applied in the following order:
1. Against the Specified Amount provided by the most recent increase;
2. Against the next most recent increases successively;
3. Against the Specified Amount provided under the original application.
CHANGING THE DEATH BENEFIT OPTION. You may request a change in the Death
Benefit Option You have chosen.
1. If You request a change from Option 1 to Option 2: The new Specified Amount
will be the Specified Amount, prior to change, less the Accumulation Value
as of the effective date of the change, but not less than zero.
2. If You request a change from Option 2 to Option 1: The new Specified Amount
will be the Death Benefit Amount as of the effective date of the change.
We will not require evidence of insurability for a change in the Death Benefit
Option. The change will go into effect on the Monthly Deduction Day following
the date We receive Your Written request for change.
CHANGING THE TERMS OF YOUR POLICY. Any change in Your policy must be approved
by one of Our senior officers. No agent has the authority to make any changes
or waive any of the terms of Your policy.
SEPARATE ACCOUNT PROVISIONS
SEPARATE ACCOUNT. Separate Account VL-R is a segregated investment account
established by the Company under Texas law to separate the assets funding the
variable benefits for the class of policies to which this policy belongs from
the other assets of the Company. That portion of the assets of the Separate
Account equal to the reserves and other policy liabilities with respect to the
Separate Account shall not be chargeable with liabilities arising out of any
other business We may conduct. Income, gains and losses, whether or not
realized from assets allocable to the Separate Account, are credited to or
charged against such Account without regard to Our other income, gains or
losses.
INVESTMENTS OF THE SEPARATE ACCOUNT. The Separate Account is segmented into
Divisions. Each Division invests in a single Investment Option. Net Premiums
will be applied to the Separate Account and allocated to one or more Divisions.
The assets of the Separate Account are invested in the Investment Option(s)
listed on the application for this policy. From time to time, We may add
additional Divisions. We may also discontinue offering one or more Divisions as
provided in the Rights Reserved by Us provision. Any change in investment
selection shall be pursuant to a duly executed change form filed with Our Home
Office. Transfers may be made to the additional Divisions subject to the rules
stated in the Transfer Provision section and any new rules or limitations which
may apply to such additional Divisions.
If shares of any of the Investment Options become unavailable for investment by
the Separate Account, or the Company's Board of Directors deems further
investment in these shares is inappropriate, the Company may limit further
investment in the shares or may substitute shares of another Investment Option
for shares already purchased under this policy as provided in the Rights
Reserved by Us provision.
99301 Page 8
<PAGE>
VALUATION OF ASSETS. The assets of the Separate Account are valued as of each
Valuation Date at their fair market value in accordance with Our established
procedures. The Separate Account Value as of any Valuation Date prior to the
Maturity Date is the sum of Your account values in each Division of the Separate
Account as of that date.
VALUATION UNITS. In order to determine policy values in the Divisions, We use
Valuation Units which are calculated separately for each Division. The
Valuation Unit value for each Division will vary to reflect the investment
experience of the applicable Investment Option. The Valuation Unit for a
Division will be determined on each Valuation Date for the Division by
multiplying the Valuation Unit value for the Division on the preceding Valuation
Date by the Net Investment Factor for that Division for the current Valuation
Date.
NET INVESTMENT FACTOR. The Net Investment Factor for each Division is
determined by dividing (1) by (2) and subtracting (3), where:
1. is the net asset value per share of the applicable Investment Option as of
the current Valuation Date (plus any per share amount of any dividend or
capital gains distribution paid by the Investment Option since the last
Valuation Date); and
2. is the net asset value per share of the shares held in the Division as
determined at the end of the previous valuation period; and
3. is a factor representing the Mortality and Expense Charge.
The net asset value of an Investment Option's shares held in each division shall
be the value reported to Us by that Investment Option.
VALUATION DATES. Valuation of the various Divisions will occur on each Business
Day during each month. If the underlying Investment Option is unable to value
or determine the Division's investment in an Investment Option due to any of the
reasons stated in the Suspension and Deferral of Payments Provision, the
Valuation Date for the Division with respect to the unvalued portion shall be
the first Business Day that the assets can be valued or determined.
BUSINESS DAY. A business day is each day that the New York Stock Exchange is
open for business. For the purpose of collecting daily charges, a business day
immediately preceded by one or more non-business calendar days will include
those non-business days as a part of that business day. For example, a business
day which falls on a Monday will consist of a Monday and the immediately
preceding Saturday and Sunday.
MINIMUM BALANCE. The minimum value that may be retained in a Division after a
partial surrender or transfer is shown on the Policy Schedule. If a partial
surrender causes the balance in any Division to drop below such minimum amount,
the Company reserves the right to transfer the remaining balance to the Money
Market Division. If a transfer causes the balance in any Division to drop below
the minimum amount, the Company reserves the right to transfer the remaining
balance in proportion to the transfer request.
CHANGE OF INVESTMENT ADVISOR OR INVESTMENT OBJECTIVE. Unless otherwise required
by law or regulation, the investment advisor or any investment objective may not
be changed without Our consent. If required, approval of or change of any
investment objective will be filed with the Insurance Department of the state
where the policy is being delivered.
99301 Page 9
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RIGHTS RESERVED BY US. Upon notice to You, this policy may be modified by Us,
but only if such modification is necessary to:
1. Operate the Separate Account in any form permitted under the Investment
Company Act of 1940 or in any other form permitted by law;
2. Transfer any assets in any Division to another Division, or to one or more
other separate accounts;
3. Add, combine or remove Divisions in the Separate Account, or combine the
Separate Account with another separate account;
4. Make any new Division available to You on a basis to be determined by Us;
5. Substitute for the shares held by any Division the shares of another
Division or the shares of another investment company or any other investment
permitted by law;
6. Make any changes as required by the Internal Revenue Code, or by any other
applicable law, regulation or interpretation in order to continue treatment
of this policy as life insurance; or
7. Make any changes required to comply with the requirements of any underlying
Investment Option.
8. Make other changes in this policy that in Our judgement are necessary or
appropriate to ensure that this policy continues to qualify for tax
treatment as life insurance, or that do not reduce any Cash Surrender Value,
Death Benefit Amount, Accumulation Value or other accrued right or benefit.
When required by law, We will obtain Your approval of changes and We will gain
approval from any appropriate regulatory authority.
GENERAL ACCOUNT
The General Account is a fixed account within Our general assets which We have
established for:
1. Any amounts transferred from the Divisions as a result of a loan; or
2. Any amounts allocated by the Owner to such Account.
The guaranteed interest rate used in calculating Accumulation Values of amounts
allocated to the General Account is .3274% per month compounded monthly. This
is equivalent to 4.0% per year, compounded annually, and is not based on the
investment experience of any Division of the Separate Account. We can use
interest rates greater than the guaranteed rates to calculate Accumulation
Values of amounts allocated to the General Account.
POLICY VALUES PROVISION
ACCUMULATION VALUE. The Accumulation Value of Your policy is the total of all
values in the Divisions of the Separate Account and in the General Account. The
Accumulation Value reflects:
1. Net Premiums paid;
2. Monthly deductions;
99301 Page 10
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3. The investment experience of the Divisions selected less the Mortality and
Expense Charge;
4. Amounts allocated to the General Account, including interest earned on
amounts in the General Account;
5. Deductions due to partial surrenders and any charges for partial surrenders;
and
6. Deductions, if any, resulting from decreases in Specified Amount.
Net premiums are allocated, in accordance with your instructions, to the General
Account or allocated to the selected Divisions of the Separate Account and
converted to Valuation Units.
On each Monthly Deduction Day, a Monthly Deduction will be made by reducing the
unloaned portion of the General Account or redeeming Valuation Units from each
applicable Division in the same ratio as the Allocation of Policy Deductions in
effect on the Monthly Deduction Day. If the unloaned portion of the General
Account or the balance in any Division of the Separate Account is insufficient
to make a Monthly Deduction in this manner, We will cancel Valuation Units from
each applicable Division and reduce the unloaned portion of the General Account
in the same ratio the Monthly Deduction bears to the unloaned Accumulation Value
of your policy. You must state in Writing in advance how Monthly Deductions
should be made if other than this method is to be used.
The Accumulation Value in any Division is determined by multiplying the value of
a Valuation Unit by the number of Valuation Units held under the policy in that
Division.
The value of the Valuation Units equal to the amount being borrowed from the
Separate Account will be transferred to the General Account as of the Business
Day that the loan request is received In Writing.
Valuation Units are surrendered to reflect a partial surrender as of the
Business Day that the request for partial surrender is received In Writing.
ON THE DATE OF ISSUE. The Accumulation Value on the Date of Issue will be
determined as follows:
1. The Net Premium received; less
2. The Monthly Deduction for the first policy month (See "How We Calculate a
Monthly Deduction").
The first deduction day is the Date of Issue. The Monthly Deduction Day is
shown on the Policy Schedule.
ON EACH MONTHLY DEDUCTION DAY. On each Monthly Deduction Day after the Date of
Issue, We will determine the Accumulation Value as follows:
1. We will take the Accumulation Value as of the last Monthly Deduction Day;
2. Add the interest earned for the month on the excess of the General Account
value on the last Monthly Deduction Day over any partial surrenders and
transfers made from the General Account since the last Monthly Deduction
Day;
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3. Add any investment gain (or subtract any investment loss) on the Divisions
of the Separate Account since the last Monthly Deduction Day as measured by
the change in the value of the Valuation Units;
4. Add all Net Premiums received since the last Monthly Deduction Day;
5. Subtract any partial surrender made and any charges for partial surrenders
since the last Monthly Deduction Day; and
6. Subtract the Monthly Deduction for the policy month following the Monthly
Deduction Day. (See "How We Calculate a Monthly Deduction").
ON ANY VALUATION DATE OTHER THAN A MONTHLY DEDUCTION DAY. The Accumulation
Value on any Valuation Date other than a Monthly Deduction Day will be the sum
of:
1. The value of the General Account as of the last Monthly Deduction Day;
2. Less any partial surrenders and any charges for partial surrenders since the
last Monthly Deduction Day;
3. Plus all Net Premiums received since the last Monthly Deduction Day; and
4. Plus the sum of the values of the Divisions of the Separate Account as of
the last Monthly Deduction Day, plus the amount of any investment gain (or
minus any investment loss) on the Divisions since the last Monthly Deduction
Day as measured by the change in the value of the Valuation Units.
CASH SURRENDER VALUE. The Cash Surrender Value of this policy will be equal to
the Accumulation Value less any indebtedness except as follows:
1. During the first policy year, the Cash Surrender Value will be equal to the
Accumulation Value, less any indebtedness, plus 40% of the Premium Expense
Charge deducted during the first policy year;
2. During the second policy year, the Cash Surrender Value will be equal to the
Accumulation Value, less any indebtedness, plus 20% of the Premium Expense
Charge deducted during the first policy year.
HOW WE CALCULATE A MONTHLY DEDUCTION. Each Monthly Deduction includes:
1. The cost of insurance provided by the basic policy;
2. The cost of insurance for benefits provided by riders, if any; and
3. The Monthly Administration Fee.
HOW WE CALCULATE THE COST OF INSURANCE FOR THE BASIC POLICY. We calculate the
cost of insurance at the beginning of each policy month as of the Monthly
Deduction Day. The cost of insurance is determined as follows:
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1. Reduce the Death Benefit Amount by the amount of Accumulation Value on the
Monthly Deduction Day before the cost of insurance deduction is taken, and
after the Monthly Administration Fee and cost of insurance for riders, if
any, are deducted;
2. Multiply the difference by the cost of insurance rate per $1,000 of the Net
Amount at Risk as provided in the Cost of Insurance Rate provision; and
3. Divide the result by 1,000.
If Option 1 is in effect, and there have been increases in the Specified Amount,
the Accumulation Value will first be considered part of the Initial Specified
Amount. If the Accumulation Value exceeds the Initial Specified Amount, the
excess will be considered part of any Specified Amount increases in the order in
which the increases were made.
COST OF INSURANCE FOR BENEFITS PROVIDED BY RIDERS. The cost of insurance for
benefits provided by riders, if any, will be as stated on the Policy Schedule or
in an endorsement to this policy.
MONTHLY ADMINISTRATION FEE. An administration fee will be deducted monthly. The
amount of the monthly fee may be adjusted, but will never be greater than the
guaranteed Monthly Administration Fee.
COST OF INSURANCE RATE. The cost of insurance rate for the Initial Specified
Amount, and for each Specified Amount increase, is based on the Insured's:
1. Sex (if issued on a Sex Distinct basis);
2. Age nearest birthday on each policy anniversary; and
3. Premium class shown on the Policy Schedule, associated with the Initial
Specified Amount and each increase in the Specified Amount.
A table of guaranteed monthly cost of insurance rates is included in this
policy. We can use cost of insurance rates that are lower than the guaranteed
rates. Any change in rates will apply to all policies in the same rate class as
this policy. The rate class of this policy is determined on its Date of Issue
according to:
1. The calendar year of issue and policy year;
2. The plan of insurance;
3. The amount of insurance; and
4. The age, sex and premium class of the Insured if issued on a Sex Distinct
basis or the age and premium class if issued on a Gender Neutral basis.
CHANGES IN RATES, CHARGES AND FEES. This policy does not participate in Our
profits or surplus. Any redetermination of the cost of insurance rates, interest
rates, mortality and expense charges, Monthly Administration Fee or percentage
of premium charges will be based on Our expectations as to investment earnings,
mortality, persistency and expenses. We will not change these charges in order
to recoup any prior losses.
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GRACE PERIOD. If the Cash Surrender Value on a Monthly Deduction Day is not
enough to meet the Monthly Deduction for the current month, this policy will
remain in force during the 61-day period that follows. If the Cash Surrender
Value on a policy anniversary is not enough to pay any loan interest due, this
policy will remain in force during the 61-day period that follows. Such 61-day
period is referred to in this policy as the "Grace Period." There is no Grace
Period for the initial Monthly Deduction.
If the amount We require to keep Your policy in force is not paid by the end of
the Grace Period, this policy will terminate without value. However, We will
give You at least 31 days notice prior to termination that Your policy is in the
Grace Period and advise You of the amount required to keep Your policy in force.
Such 31 days prior notice will be sent to You at Your last known address, and to
the assignee of record, if any. If death occurs during the Grace Period,
Monthly Deductions through the policy month in which death occurred will be
deducted from the proceeds.
If a surrender request is received within 31 days after the Grace Period
commences, the Cash Surrender Value payable will not be less than the Cash
Surrender Value on the Monthly Deduction Day the Grace Period commenced. The
Monthly Deduction for the policy month following such Monthly Deduction Day will
not be subtracted in the calculation of such Cash Surrender Value.
FULL SURRENDER. Subject to the Beneficiary and Proceeds section, You may return
Your policy to Us and request its Cash Surrender Value at any time during the
Insured's lifetime before the Maturity Date. The Cash Surrender Value will be
determined as of the Business Day the policy and the signed request for
surrender are received In Writing. The Company may delay payment if the
Suspension and Deferral of Payments Provision is in effect.
PARTIAL SURRENDER. At any time after the first policy year, You may request a
portion of the Cash Surrender Value of the policy. Your request must be made In
Writing prior to the Maturity Date during the Insured's lifetime. The minimum
partial surrender is shown on the Policy Schedule.
Valuation Units are surrendered to reflect a partial surrender as of the
Business Day the request for partial surrender is received In Writing.
A partial surrender will result in a reduction of the Accumulation Value and the
Death Benefit Amount. The Accumulation Value will be reduced by the amount of
partial surrender benefit. The reduced Death Benefit Amount will be determined
in accordance with the Death Benefit Option provision. If Your Death Benefit
Option is Option 1, the Specified Amount will be reduced by the amount of the
partial surrender. (The reduced amount will not be less than zero.) The Death
Benefit Amount remaining after this reduction must be no less than the Minimum
Death Benefit Amount after a Decrease in Specified Amount shown on the Policy
Schedule.
You may apply for a partial surrender without reducing Your policy's Death
Benefit Amount subject to evidence of insurability satisfactory to Us.
A partial surrender will result in the cancellation of Valuation Units from each
applicable Division and a reduction of the unloaned portion of the General
Account in the same ratio as the Allocation of Policy Deductions in effect on
the date of partial surrender. If the number of Valuation Units in any Division
or in the unloaned portion of the General Account is insufficient to make a
partial surrender in this manner, We will cancel Valuation Units from each
applicable Division and reduce the unloaned portion of the General Account in
the ratio the partial surrender request bears to the Cash Surrender Value of
Your policy. You must state In Writing in advance how partial surrenders should
be made if other than this method is to be used.
There may be a charge for each partial surrender not to exceed $25.00.
99301 Page 14
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The Company may delay payment if the Suspension and Deferral of Payments
Provision is in effect.
PERIOD OF INSURANCE COVERAGE IF AMOUNT OR FREQUENCY OF PREMIUM PAYMENTS IS
REDUCED OR IF PREMIUM PAYMENTS ARE DISCONTINUED. If You reduce the amount or
frequency of premium payments, or if You discontinue payment of premiums, We
will continue making Monthly Deductions (as long as there is sufficient Cash
Surrender Value to make such deductions) until the Maturity Date. This policy
will remain in force until the earlier of the following dates:
1. The Maturity Date (if there is sufficient Cash Surrender Value to make
Monthly Deductions to that date);
2. Surrender of the policy;
3. The end of the Grace Period; or
4. Death of the Insured.
TRANSFER PROVISION
TRANSFER OF ACCUMULATION VALUE. Transfers will be made as of the Business Day
the transfer request is received in good order, subject to the restrictions that
follow. If You elect to use the transfer privilege, We will not be liable for a
transfer made in accordance with Your instructions. We reserve the right to
terminate, suspend or modify the transfer privilege, and to charge a $25 fee for
each transfer in excess of 12 in a 12-month period. Transfers under the Dollar
Cost Averaging and Automatic Rebalancing programs will not count towards the 12
free transfers.
TRANSFER OF ACCUMULATION VALUE (SEPARATE ACCOUNT). You may transfer all or part
of Your interest in a Division of the Separate Account subject to the following:
1. The minimum amount which may be transferred is $500.
2. If the entire amount in a Division of the Separate Account is not being
transferred, the minimum which must remain is $500.
Transfers between Separate Account Divisions result in the redemption of
Valuation Units in one Division and the purchase of Valuation Units in the
Division to which the transfer is made.
TRANSFER OF ACCUMULATION VALUE (GENERAL ACCOUNT). A transfer from the General
Account to a Division may be made during the 60 day period which begins on each
policy anniversary. The amount that may be transferred each year is limited to
the greatest of:
(a) 25% of the unloaned portion of the General Account as of the policy
anniversary;
(b) The sum of any amounts transferred from the General Account in the prior
Policy year; or
(c) $500.
TELEPHONE TRANSFER AND ALLOCATION PRIVILEGE. If We have on file a completed
telephone authorization form (Telephone Transaction), We will allow transfers
and the percentage allocation for future Net Premiums and Policy Deductions to
be changed at any time by telephone. We will honor instructions for Telephone
Transactions from any person who provides the correct information. There is a
risk of possible loss to You if unauthorized persons use this service in
99301 Page 15
<PAGE>
Your name. Under Telephone Transactions, We are not liable for any acts or
omissions based upon instructions that We reasonably believe to be genuine,
including losses arising from errors in the communication of telephone
instructions.
DOLLAR COST AVERAGING. Dollar Cost Averaging is an automatic transfer of funds
made periodically prior to the Maturity Date in accordance with the Transfers
provision, except as provided below, and instructions from the Owner. Dollar
Cost Averaging (DCA) is subject to the following guidelines:
1. DCA transfers may be made:
(a) On any day of the month except the 29th, 30th or 31st;
(b) On a monthly, quarterly, semi-annual or annual basis; and
(c) From the Money Market Division to one or more of the other Separate
Account Divisions.
2. DCA may be elected only if the Accumulation Value at the time of election is
$5,000 or more.
3. The minimum amount of each DCA transfer is $100, or the remaining amount in
the Money Market Division, if less.
4. DCA may not begin prior to the first Valuation Date following the 15th day
after the initial Net Premium is applied.
5. DCA will end when there is no longer any value in the Money Market Division,
or when You request that DCA end.
6. Amounts applied to the Money Market Division while DCA is active will be
available for future dollar cost averaging in accordance with the current
DCA request.
7. There is no charge for DCA.
8. DCA is not available if Automatic Rebalancing is active.
AUTOMATIC REBALANCING. Automatic Rebalancing occurs when funds are transferred
by the Company between the Separate Account Divisions so that the values in each
Division match the premium allocation percentages then in effect. You may
choose Automatic Rebalancing on a quarterly, semi-annual or annual basis if your
Accumulation Value is $5,000 or more. The date Automatic Rebalancing occurs will
be based on the Date of Issue of Your policy. For example, if Your policy is
dated January 17, and You have requested Automatic Rebalancing on a quarterly
basis, Automatic Rebalancing will start on April 17, and will occur quarterly
thereafter. After Automatic Rebalancing is elected, it will continue until We
are notified In Writing that it is to be discontinued. There is no charge for
Automatic Rebalancing. Automatic Rebalancing is not available if Dollar Cost
Averaging is active.
SUSPENSION AND DEFERRAL OF PAYMENTS PROVISION
We reserve the right to defer payment of any Death Benefit Amount, loan or other
distribution that comes from that portion of Your Accumulation Value that is
allocated to Separate Account VL-R, if:
99301 Page 16
<PAGE>
1. The New York Stock Exchange is closed other than customary weekend and
holiday closings, or trading on the New York Stock Exchange is restricted;
2. An emergency exists, as a result of which disposal of securities is not
reasonably practicable or it is not reasonably practicable to fairly
determine the Accumulation Value; or
3. The U.S. Securities and Exchange Commission (SEC) by order permits the delay
for the protection of Owners.
As to amounts allocated to the General Account, We may defer payment of any Cash
Surrender Value withdrawal or loan amount for up to six months after We receive
the request In Writing.
Written notice of both the imposition and termination of any such suspension
will be given to the Owners, assignees of record and any irrevocable
Beneficiaries.
Payments which were due to have been made and which were deferred following the
suspension of the calculation of the Cash Surrender Value will be made within
thirty (30) days following the lifting of the suspension, and will be calculated
based on the Valuation Date which immediately follows termination of the
suspension.
POLICY LOANS
You may borrow from Us at any time while this policy is in force, an amount
which is equal to or less than the policy's loan value. The policy loan value
will be the Cash Surrender Value, less interest on the amount to be borrowed
(including interest on any prior outstanding policy loan) to the next policy
anniversary.
The value of Valuation Units equal to the amount being borrowed from the
Separate Account will be transferred to the General Account as of the Business
Day that the loan request is received in good order.
OBTAINING A LOAN. You may obtain a policy loan by Written request and
assignment of the policy as sole security for the loan. The Company may delay a
loan if the Suspension and Deferral of Payments Provision is in effect.
EFFECT OF A LOAN. When a loan is made, an amount equal to the amount being
borrowed from the Separate Account will be transferred to the General Account. A
loan will result in cancellation of units from each applicable Division and
reduction of the unloaned portion of the General Account in the ratio that the
loan bears to the unloaned Accumulation Value of Your policy. You must state In
Writing in advance which Division units are to be canceled if a different method
is to be used.
Repayment of a loan will be allocated to the General Account. You may tell Us
how to allocate repayments in excess of any loaned amount. If You do not tell
Us, any amount in excess of the loaned amount will be transferred from the
General Account to the Divisions in the same ratio currently in effect for the
allocation of Net Premiums.
A loan, whether or not repaid, will have a permanent effect on the Cash
Surrender Values and on the death benefits. If not repaid, any indebtedness
will reduce the amount of Death Benefit Proceeds and the amount available upon
surrender of the policy.
LOAN INTEREST. Loan interest will accrue daily at an annual effective rate of
4.75% during the first 7 policy years, and 4.25% thereafter. Interest is
compounded monthly, and will be due at the end of
99301 Page 17
<PAGE>
each policy year. Unpaid loan interest will be deducted from the various
accounts according to the Allocation of Policy Deductions then in effect, and
added to the loaned portion of the General Account. If the number of Valuation
Units in any Division or unloaned portion of the General Account is insufficient
to deduct unpaid loan interest in this manner, We will cancel Valuation Units
from each applicable Division and reduce the unloaned portion of the General
Account in the same ratio the unpaid loan interest bears to the unloaned
Accumulation Value of your policy. We will credit interest monthly on the
loaned portion of the General Account at an annual effective rate of 4.0%.
You must state In Writing in advance how unpaid loan interest should be deducted
if other than this method is to be used.
HOW YOU MAY REPAY A POLICY LOAN. You may repay all or part of a policy loan at
any time, except that;
1. Repayment may be made only while this policy is in force and prior to the
death of the Insured;
2. A partial repayment must be at least $100; and
3. At the time You repay all or part of a policy loan, You must specify the
payment is to repay all or part of the policy loan.
At any time Your policy loan exceeds the Cash Surrender Value, this policy will
lapse. However, at least 31 days prior notice must be mailed by Us to Your last
known address and to the assignee of record, if any.
WE CAN DELAY PAYMENT. We can delay lending You money for up to 6 months, or the
period allowed by law, whichever is less. However, We cannot delay lending You
money if the amount is to be used to pay a premium to Us.
BENEFICIARY AND PROCEEDS
BENEFICIARY. The Beneficiary as named in the application, or later changed by
You, will receive the proceeds upon the death of the Insured.
Unless You have stated otherwise, proceeds will be paid as follows:
1. If any Beneficiary dies before the Insured, that Beneficiary's interest will
pass to any other Beneficiaries according to their respective interests.
2. If no Beneficiary survives the Insured, proceeds will be paid to You, as
Owner, if You are then living; otherwise proceeds will be paid to Your
estate.
COMMON DISASTER. If We cannot determine whether a Beneficiary or the Insured
died first in a common disaster, We will assume that the Beneficiary died first.
Proceeds will be paid on this basis unless an endorsement to this policy
provides otherwise.
PROCEEDS. Proceeds means the amount payable on:
1. The Maturity Date;
99301 Page 18
<PAGE>
2. Exercise of the full surrender benefit; or
3. The Insured's death.
The Proceeds on the Maturity Date will be the Cash Surrender Value. The
Proceeds on the Insured's death will be the Death Benefit Amount less any
outstanding policy loan.
All Proceeds are subject to the provisions of the Payment Options section and
the other provisions of this policy.
CHANGE OF OWNERSHIP OR BENEFICIARY
You may change the Owner or the Beneficiary at any time during the lifetime of
the Insured unless the previous designation provides otherwise. To do so, send
a Written request to Our Home Office. The change will go into effect when We
have recorded the change. However, after the change is recorded, it will be
deemed effective as of the date of Your Written request for change. The change
will be subject to any payment made or action taken by Us before the request is
recorded.
PAYMENT OPTIONS
Instead of being paid in one sum, all or part of the proceeds may be applied
under any of the Payment Options described below. In addition to these options
other methods of payment may be chosen with Our consent.
PAYMENT CONTRACT. When proceeds become payable under a Payment Option, a
Payment Contract will be issued to each payee. The Payment Contract will state
the rights and benefits of the payee. It will also name those who are to
receive any balance unpaid at the death of the payee.
ELECTION OF OPTIONS. The Owner may elect or change any Payment Option while the
Insured is living, subject to the provisions of this policy. This election or
change must be In Writing.
Within 60 days after notification of the Insured's death, a payee entitled to
proceeds in one sum may elect to receive proceeds under any option.
OPTION 1. PAYMENTS FOR A SPECIFIED PERIOD: Equal monthly payments will be made
for a specified period. The Option 1 Table in this policy shows the monthly
income for each $1,000 of proceeds applied.
OPTION 2. PAYMENTS OF A SPECIFIED AMOUNT: Equal monthly payments of a specified
amount will be made. Each payment must be at least $60 a year for each $1,000
of proceeds applied. Payments will continue until the amount applied, with
interest, has been paid in full.
OPTION 3. MONTHLY PAYMENTS FOR LIFE: Equal monthly payments will be made for a
specified period, and will continue after that period for as long as the payee
lives. The specified period may be 10, 15 or 20 years. The Option 3 Table in
this policy shows the monthly income for each $1,000 of proceeds applied. If
issued on a Sex Distinct basis, tables are based on the 1983a Male or Female
Tables adjusted by projection scale G for 9 years, with interest at the rate of
3% per year and a 2% load. If issued on a Gender Neutral basis, tables are
based on the 1983a Male or Female Tables, adjusted by projection scale G for 9
years, with unisex rates based on 60% female and 40% male, and interest at the
rate of 3% per year and a 2% load.
99301 Page 19
<PAGE>
At the time payments are to begin under this option, the payee may choose one of
the following:
1. Monthly payments based on the Option 3 Table; or
2. Monthly payments equal to a monthly annuity based on our single premium
immediate annuity rates then in use.
OPTION 4. PROCEEDS LEFT AT INTEREST: Proceeds may be left on deposit with Us
for any period up to 30 years. Interest earned on the proceeds may be:
1. Left on deposit to accumulate at the rate of 3% compounded annually; or
2. Paid in installments at the rate for each $1,000 of proceeds of $30
annually, $14.89 semiannually, $7.42 quarterly or $2.47 monthly.
Upon the death of the payee, or at the end of the specified period, any balance
left on deposit will be paid in a lump sum or under Payment Options 1, 2 or 3.
INTEREST RATES. The guaranteed rate of interest for proceeds held under Payment
Options 1, 2, 3 and 4 is 3% compounded annually. We may credit interest at a
higher rate. The amount of any increase will be determined by Us.
PAYMENTS. The first payment under Options 1, 2 and 3 will be made when the
claim for settlement has been approved. Payments after the first will be made
according to the manner of payment chosen. Interest under Option 4 will be
credited from the date of notification of death and paid or added to the
proceeds as provided in the Payment Contract.
AVAILABILITY OF OPTIONS. If the proposed payee is not a natural person, payment
options may be chosen only with Our consent.
If this policy is assigned, We will have the right to pay the assignee in one
sum the amount to which the assignee is entitled. Any balance will be applied
according to the option chosen.
The amount to be applied under any one option must be at least $2,000. The
payment elected under any one option must be at least $20. If the total policy
proceeds are less than $2,000, payment will be made in one lump sum.
EVIDENCE THAT PAYEE IS ALIVE. Before making any payment under a Payment Option,
We may ask for proof that the payee is alive. If proof is requested, no payment
will be made or considered due until We receive proof.
DEATH OF A PAYEE. If a payee dies, any unpaid balance will be paid as stated in
the Payment Contract. If there is no surviving payee named in the Payment
Contract, We will pay the estate of the payee:
1. Under Options 1 and 3, the value as of the date of notification of death of
the remaining payments for the specified period, discounted at the rate of
interest, compounded annually, that was used in determining the amount of
the monthly payment;
2. Under Options 2 and 4, the balance of any proceeds remaining unpaid with
accrued interest, if any.
99301 Page 20
<PAGE>
WITHDRAWAL OF PROCEEDS UNDER OPTIONS 1 OR 2. If provided in the Payment
Contract, a payee will have the right to withdraw the entire unpaid balance
under Options 1 or 2. Under Option 1, the amount will be the value of the
remaining payments for the specified period discounted at the rate of interest
used in determining monthly income. Under Option 2, the amount will be the
entire unpaid balance.
WITHDRAWAL OF PROCEEDS UNDER OPTION 4. A payee will have the right to withdraw
proceeds left under Option 4 subject to the following rules:
1. The amount to be withdrawn must be $500 or more; and
2. A partial withdrawal must leave a balance on deposit of $1,000 or more.
WITHDRAWALS MAY BE DEFERRED. We may defer payment of any withdrawal for up to 6
months from the date We receive a withdrawal request.
ASSIGNMENT. Payment Contracts may not be assigned.
CHANGE IN PAYMENT. The right to make any change in payment is available only if
it is provided in the Payment Contract.
CLAIMS OF CREDITORS. To the extent permitted by law, proceeds will not be
subject to any claims of a Beneficiary's creditors.
GENERAL PROVISIONS
ASSIGNING YOUR POLICY. During the lifetime of the Insured, You may assign this
policy as security for an obligation. We will not be bound by an assignment
unless it is received In Writing at the Home Office. Two copies of the
assignment must be submitted. We will retain one copy and return the other. We
will not be responsible for the validity of any assignment.
INCONTESTABILITY. We rely on the statements made in the application for the
policy and applications for any reinstatements or increases in Specified Amount.
These statements, in the absence of fraud, are considered representations and
not warranties. No statement may be used in defense of a claim under the policy
unless it is in such applications.
We cannot contest this policy after it has been in force during the Insured's
lifetime for 2 years from the Date of Issue. However, We can contest any
increase in Specified Amount before such increase has been in effect during the
Insured's lifetime for 2 years.
Additionally, if this policy is reinstated, We cannot contest the reinstated
policy after it has been in force during the Insured's lifetime for 2 years from
the date of reinstatement. However, We can contest a reinstatement or an
increase in Specified Amount based solely on the information provided in the
application for such reinstatement or increase.
These 2 year limitations do not apply to any Disability or Accidental Death
Benefit, or to the nonpayment of premium.
SUICIDE EXCLUSION. If the Insured takes his or her own life, while sane or
insane, within 2 years from the Date of Issue, We will limit the Death Benefit
Proceeds to the premiums paid less any policy loans and less any partial cash
surrenders paid.
99301 Page 21
<PAGE>
If there are any increases in the Specified Amount (See the section entitled
"Changing Your Insurance Policy") a new 2 year period shall apply to each
increase beginning on the date of each increase. The Death Benefit Proceeds
will be the costs of insurance associated with each increase.
When the laws of the state in which this policy is delivered require less than
this 2 year period, the period will be as stated in such laws.
AGE OR GENDER INCORRECTLY STATED (AGE INCORRECTLY STATED IF ISSUED ON A GENDER
NEUTRAL BASIS). If the (1) age or gender of the Insured (if this policy was
issued on a Sex Distinct basis) or (2) age of the Insured (if this policy was
issued on a Gender Neutral basis) has been misstated to Us, We will adjust the
excess of the Death Benefit Amount over the Accumulation Value on the date of
death to that which would have been purchased by the Monthly Deduction for the
policy month of death at the correct cost of insurance rate. By age, We mean
age nearest birthday as of the Date of Issue.
STATUTORY BASIS OF POLICY VALUES. The Accumulation Values of the policy are not
less than the minimum values required by the law of the state where this policy
is delivered. The calculation of the Accumulation Values includes a charge for
the cost of insurance, as shown in the Table of Guaranteed Monthly Cost of
Insurance Rates and for the General Account interest at the annual effective
rate of 4.0%.
If this policy was issued on a Sex Distinct basis calculation of minimum
Accumulation Values, nonforfeiture benefits and Guaranteed Cost of Insurance
Rates are based on the Composite 1980 Commissioners Standard Ordinary Male or
Female Mortality Table for the appropriate sex and age nearest birthday. If this
policy was issued on a Gender Neutral basis calculation of minimum Accumulation
Values, nonforfeiture benefits and Guaranteed Cost of Insurance Rates are based
on the Composite 1980 Commissioners Standard Ordinary Mortality Table A (100%
male) for the appropriate age nearest birthday. A detailed statement of the
method of computing values has been filed with the state insurance department
where required.
NO DIVIDENDS. This policy will not pay dividends. It will not participate in
any of Our surplus or earnings.
ANNUAL REPORT. We will send You at least once a year, without charge, an annual
report which will show a summary of all transactions since the last report,
including:
1. Premiums paid;
2. Transfers;
3. Expense charges deducted;
4. The cost of insurance deducted;
5. Partial surrender benefits deducted including partial surrender fees;
6. The amount of any outstanding policy loan;
7. Separate Account Unit Values;
8. The current Cash Surrender Value and Accumulation Values; and
99301 Page 22
<PAGE>
9. The Death Benefit Amount.
WHEN THIS POLICY TERMINATES. This policy will terminate if:
1. You request that this policy be terminated;
2. The Insured dies;
3. The policy matures; or
4. The Grace Period ends and there is not sufficient Cash Surrender Value to
cover a Monthly Deduction.
REINSTATEMENT. "Reinstating" means placing Your policy in force after it has
terminated at the end of the Grace Period. We will reinstate this policy if We
receive:
1. Your Written request within 5 years after the end of the Grace Period and
before the Maturity Date;
2. Evidence of insurability satisfactory to Us;
3. Payment of enough premiums so that the policy will remain in force for 2
months; and
4. Payment or reinstatement of any indebtedness.
The reinstated policy will be in force from the Monthly Deduction Day on or
following the date We approve the reinstatement application.
The Accumulation Value at the time of reinstatement will be:
1. The Net Premium allocated in accordance with the premium allocation
percentages at time of lapse unless the reinstatement application provides
otherwise, using Unit Values as of the date of reinstatement; plus
2. Any loan, repaid or reinstated plus an amount equal to loan interest which
will be due on the next policy anniversary; less
3. The monthly deduction for one month.
If a person other than the Insured is covered by a rider attached to this
policy, coverage will be reinstated according to that rider.
99301 Page 23
<PAGE>
DEATH BENEFIT CORRIDOR RATES
BASED ON CASH VALUE ACCUMULATION TEST
<TABLE>
<CAPTION>
ATTAINED AGE MALE FEMALE ATTAINED AGE MALE FEMALE
Nearest Birthday Nearest Birthday
(On Each Policy (On Each Policy
Anniversary) Anniversary)
<S> <C> <C> <C> <C> <C>
18 6.91090 8.30142 68 1.58236 1.76827
19 6.71267 8.03719 69 1.54923 1.72343
20 6.52076 7.78152 70 1.51753 1.68009
21 6.33350 7.53356 71 1.48726 1.63827
22 6.14981 7.29258 72 1.45844 1.59809
23 5.96881 7.05840 73 1.43116 1.55974
24 5.79038 6.83085 74 1.40548 1.52338
25 5.61443 6.61014 75 1.38142 1.48910
26 5.44092 6.39568 76 1.35889 1.45684
27 5.27031 6.18766 77 1.33775 1.42648
28 5.10316 5.98586 78 1.31783 1.39782
29 4.93975 5.79038 79 1.29892 1.37069
30 4.78046 5.60097 80 1.28090 1.34496
31 4.62543 5.41767 81 1.26375 1.32058
32 4.47504 5.24022 82 1.24746 1.29761
33 4.32914 5.06840 83 1.23212 1.27608
34 4.18798 4.90198 84 1.21783 1.25607
35 4.05148 4.74131 85 1.20460 1.23755
36 3.91965 4.58592 86 1.19234 1.22040
37 3.79247 4.43621 87 1.18093 1.20448
38 3.66997 4.29213 88 1.17021 1.18963
39 3.55206 4.15360 89 1.16000 1.17566
40 3.43868 4.02063 90 1.15008 1.16236
41 3.32968 3.89305 91 1.14024 1.14954
42 3.22506 3.77070 92 1.13021 1.13694
43 3.12447 3.65328 93 1.11971 1.12430
44 3.02787 3.54035 94 1.10841 1.11132
45 2.93502 3.43166 95 1.09607 1.09775
46 2.84584 3.32701 96 1.08265 1.08350
47 2.76008 3.22611 97 1.06839 1.06873
48 2.67761 3.12877 98 1.05387 1.05396
49 2.59824 3.03494 99 1.04001 1.04001
50 2.52192 2.94449
51 2.44849 2.85732
52 2.37800 2.77329
53 2.31039 2.69235
54 2.24563 2.61451
55 2.18370 2.53953
56 2.12443 2.46726
57 2.06772 2.39746
58 2.01335 2.32987
59 1.96120 2.26425
60 1.91115 2.20053
61 1.86315 2.13871
62 1.81717 2.07893
63 1.77320 2.02134
64 1.73126 1.96617
65 1.69130 1.91343
66 1.65326 1.86300
67 1.61699 1.81470
</TABLE>
99301 Page 24
<PAGE>
DEATH BENEFIT CORRIDOR RATES
BASED ON CASH VALUE ACCUMULATION TEST
<TABLE>
<CAPTION>
ATTAINED AGE ATTAINED AGE
Nearest Birthday Nearest Birthday
(On Each Policy GENDER (On Each Policy GENDER
Anniversary) NEUTRAL Anniversary) NEUTRAL
<S> <C> <C> <C>
18 6.91090 68 1.58236
19 6.71267 69 1.54923
20 6.52076 70 1.51753
21 6.33350 71 1.48726
22 6.14981 72 1.45844
23 5.96881 73 1.43116
24 5.79038 74 1.40548
25 5.61443 75 1.38142
26 5.44092 76 1.35889
27 5.27031 77 1.33775
28 5.10316 78 1.31783
29 4.93975 79 1.29892
30 4.78046 80 1.28090
31 4.62543 81 1.26375
32 4.47504 82 1.24746
33 4.32914 83 1.23212
34 4.18798 84 1.21783
35 4.05148 85 1.20460
36 3.91965 86 1.19234
37 3.79247 87 1.18093
38 3.66997 88 1.17021
39 3.55206 89 1.16000
40 3.43868 90 1.15008
41 3.32968 91 1.14024
42 3.22506 92 1.13021
43 3.12447 93 1.11971
44 3.02787 94 1.10841
45 2.93502 95 1.09607
46 2.84584 96 1.08265
47 2.76008 97 1.06839
48 2.67761 98 1.05387
49 2.59824 99 1.04001
50 2.52192
51 2.44849
52 2.37800
53 2.31039
54 2.24563
55 2.18370
56 2.12443
57 2.06772
58 2.01335
59 1.96120
60 1.91115
61 1.86315
62 1.81717
63 1.77320
64 1.73126
65 1.69130
66 1.65326
67 1.61699
</TABLE>
99301U Page 25
<PAGE>
DEATH BENEFIT CORRIDOR RATES
BASED ON GUIDELINE PREMIUM TEST
<TABLE>
<CAPTION>
ATTAINED ATTAINED
AGE RATE AGE RATE
<S> <C> <C> <C>
0-40 2.50 60 1.30
41 2.43 61 1.28
42 2.36 62 1.26
43 2.29 63 1.24
44 2.22 64 1.22
45 2.15 65 1.20
46 2.09 66 1.19
47 2.03 67 1.18
48 1.97 68 1.17
49 1.91 69 1.16
50 1.85 70 1.15
51 1.78 71 1.13
52 1.71 72 1.11
53 1.64 73 1.09
54 1.57 74 1.07
55 1.50 75-90 1.05
56 1.46 91 1.04
57 1.42 92 1.03
58 1.38 93 1.02
59 1.34 94 1.01
95+ 1.00
</TABLE>
99301 Page 26
<PAGE>
TABLE OF GUARANTEED MONTHLY COST OF INSURANCE RATES
PER $1,000 OF NET AMOUNT AT RISK
ATTAINED AGE MALE ATTAINED AGE MALE
Nearest Birthday Nearest Birthday
(On Each Policy (On Each Policy
Anniversary) Anniversary)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
18 0.15 68 2.82
19 0.16 69 3.07
20 0.16 70 3.36
21 0.16 71 3.70
22 0.16 72 4.08
23 0.16 73 4.52
24 0.15 74 5.01
25 0.15 75 5.54
26 0.14 76 6.11
27 0.14 77 6.71
28 0.14 78 7.33
29 0.14 79 7.99
30 0.14 80 8.71
31 0.15 81 9.52
32 0.15 82 10.45
33 0.16 83 11.50
34 0.17 84 12.67
35 0.18 85 13.93
36 0.19 86 15.25
37 0.20 87 16.63
38 0.22 88 18.06
39 0.23 89 19.55
40 0.25 90 21.11
41 0.27 91 22.80
42 0.30 92 24.66
43 0.32 93 26.82
44 0.35 94 29.67
45 0.38 95 33.93
46 0.41 96 41.28
47 0.44 97 56.04
48 0.48 98 83.33
49 0.52 99 83.33
50 0.56
51 0.61
52 0.67
53 0.73
54 0.80
55 0.88
56 0.96
57 1.05
58 1.14
59 1.24
60 1.35
61 1.48
62 1.62
63 1.78
64 1.95
65 2.15
66 2.36
67 2.58
</TABLE>
The rates shown above represent the guaranteed (maximum) monthly cost of
insurance for each $1,000 of net amount at risk. If this policy has been issued
in a special (rated) premium class, the guaranteed monthly cost will be
calculated as shown on page 3.
99301M Page 27
<PAGE>
TABLES OF MONTHLY INSTALLMENTS FOR EACH $1,000 OF PROCEEDS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
OPTION 1 TABLE
INSTALLMENTS FOR A SPECIFIED PERIOD
- -------------------------------------------------------------------------------------------------------------------------
Number Amount of Number Amount of Number Amount of Number Amount of
of Years Monthly of Years Monthly of Years Monthly of Years Monthly
Payable Installments Payable Installments Payable Installments Payable Installments
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
5 $17.91 15 $6.87 25 $4.71 35 $3.82
6 15.14 16 6.53 26 4.59 36 3.76
7 13.16 17 6.23 27 4.47 37 3.70
8 11.68 18 5.96 28 4.37 38 3.65
9 10.53 19 5.73 29 4.27 39 3.60
10 9.61 20 5.51 30 4.18 40 3.55
11 8.86 21 5.32 31 4.10
12 8.24 22 5.15 32 4.02
13 7.71 23 4.99 33 3.95
14 7.26 24 4.84 34 3.88
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
OPTION 3 TABLE
INSTALLMENTS FOR LIFE WITH SPECIFIED MINIMUM PERIOD
- -------------------------------------------------------------------------------------------------------------------------
AGE OF PAYEE GUARANTEED PERIOD AGE OF PAYEE GUARANTEED PERIOD
- -------------------------------------------------------------------------------------------------------------------------
Male 10 Years 15 Years 20 Years Male 10 Years 15 Years 20 Years
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
20* $2.95 $2.94 $2.94 50 $4.05 $4.00 $3.93
21 2.97 2.96 2.96 51 4.11 4.06 3.99
22 2.98 2.98 2.98 52 4.18 4.13 4.04
23 3.00 3.00 3.00 53 4.26 4.19 4.10
24 3.02 3.02 3.02 54 4.34 4.27 4.16
25 3.05 3.04 3.04 55 4.42 4.34 4.22
26 3.07 3.06 3.06 56 4.51 4.42 4.28
27 3.09 3.09 3.08 57 4.60 4.50 4.35
28 3.12 3.11 3.11 58 4.69 4.58 4.41
29 3.14 3.14 3.13 59 4.79 4.66 4.47
30 3.17 3.16 3.16 60 4.90 4.75 4.54
31 3.20 3.19 3.18 61 5.01 4.84 4.60
32 3.22 3.22 3.21 62 5.13 4.94 4.67
33 3.25 3.25 3.24 63 5.26 5.03 4.73
34 3.29 3.28 3.27 64 5.39 5.13 4.79
35 3.32 3.31 3.00 65 5.52 5.23 4.85
36 3.35 3.35 3.33 66 5.66 5.33 4.91
37 3.39 3.38 3.36 67 5.81 5.43 4.97
38 3.43 3.42 3.40 68 5.96 5.53 5.02
39 3.47 3.46 3.44 69 6.12 5.63 5.07
40 3.51 3.50 3.47 70 6.28 5.73 5.11
41 3.55 3.54 3.51 71 6.44 5.82 5.15
42 3.60 3.58 3.55 72 6.61 5.91 5.19
43 3.65 3.63 3.59 73 6.78 6.00 5.23
44 3.70 3.67 3.64 74 6.96 6.08 5.26
45 3.75 3.72 3.68 75 7.13 6.16 5.28
46 3.80 3.77 3.73 76 7.30 6.24 5.31
47 3.86 3.83 3.78 77 7.47 6.31 5.33
48 3.92 3.88 3.83 78 7.64 6.37 5.34
49 3.98 3.94 3.88 79 7.81 6.42 5.36
80** 7.97 6.48 5.37
- -------------------------------------------------------------------------------------------------------------------------
Payments are based upon the age, nearest birthday, of the Payee on the date the first payment is due. If monthly
installments for two or more specified periods for a given age are the same, the specified period of longer duration
will apply.
*Also applies to younger ages. **Also applies to older ages.
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
99301M Page 28
<PAGE>
TABLE OF GUARANTEED MONTHLY COST OF INSURANCE RATES
PER $1,000 OF NET AMOUNT AT RISK
ATTAINED AGE FEMALE ATTAINED AGE FEMALE
Nearest Birthday Nearest Birthday
(On Each Policy (On Each Policy
Anniversary) Anniversary)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
18 0.08 68 1.59
19 0.09 69 1.72
20 0.09 70 1.86
21 0.09 71 2.05
22 0.09 72 2.27
23 0.09 73 2.55
24 0.10 74 2.88
25 0.10 75 3.25
26 0.10 76 3.67
27 0.10 77 4.11
28 0.11 78 4.59
29 0.11 79 5.11
30 0.11 80 5.71
31 0.12 81 6.39
32 0.12 82 7.19
33 0.13 83 8.12
34 0.13 84 9.18
35 0.14 85 10.34
36 0.15 86 11.60
37 0.16 87 12.97
38 0.17 88 14.45
39 0.19 89 16.05
40 0.20 90 17.79
41 0.22 91 19.72
42 0.24 92 21.89
43 0.26 93 24.44
44 0.28 94 27.67
45 0.30 95 32.32
46 0.32 96 40.05
47 0.34 97 55.16
48 0.36 98 83.33
49 0.39 99 83.33
50 0.41
51 0.44
52 0.48
53 0.51
54 0.55
55 0.59
56 0.63
57 0.67
58 0.71
59 0.75
60 0.79
61 0.85
62 0.92
63 1.01
64 1.11
65 1.23
66 1.35
67 1.47
</TABLE>
The rates shown above represent the guaranteed (maximum) monthly cost of
insurance for each $1,000 of net amount at risk. If this policy has been issued
in a special (rated) premium class, the guaranteed monthly cost will be
calculated as shown on page 3.
99301F Page 27
<PAGE>
TABLES OF MONTHLY INSTALLMENTS FOR EACH $1,000 OF PROCEEDS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
OPTION 1 TABLE
INSTALLMENTS FOR A SPECIFIED PERIOD
- -------------------------------------------------------------------------------------------------------------------------
Number Amount of Number Amount of Number Amount of Number Amount of
of Years Monthly of Years Monthly of Years Monthly of Years Monthly
Payable Installments Payable Installments Payable Installments Payable Installments
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
5 $17.91 15 $6.87 25 $4.71 35 $3.82
6 15.14 16 6.53 26 4.59 36 3.76
7 13.16 17 6.23 27 4.47 37 3.70
8 11.68 18 5.96 28 4.37 38 3.65
9 10.53 19 5.73 29 4.27 39 3.60
10 9.61 20 5.51 30 4.18 40 3.55
11 8.86 21 5.32 31 4.10
12 8.24 22 5.15 32 4.02
13 7.71 23 4.99 33 3.95
14 7.26 24 4.84 34 3.88
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
OPTION 3 TABLE
INSTALLMENTS FOR LIFE WITH SPECIFIED MINIMUM PERIOD
- -------------------------------------------------------------------------------------------------------------------------
AGE OF PAYEE GUARANTEED PERIOD AGE OF PAYEE GUARANTEED PERIOD
- -------------------------------------------------------------------------------------------------------------------------
Female 10 Years 15 Years 20 Years Female 10 Years 15 Years 20 Years
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
20* $2.85 $2.85 $2.85 50 $3.75 $3.73 $3.69
21 2.87 2.87 2.87 51 3.80 3.78 3.74
22 2.89 2.88 2.88 52 3.86 3.84 3.79
23 2.90 2.90 2.90 53 3.92 3.89 3.85
24 2.92 2.92 2.91 54 3.99 3.96 3.90
25 2.94 2.93 2.93 55 4.06 4.02 3.96
26 2.95 2.95 2.95 56 4.13 4.09 4.02
27 2.97 2.97 2.97 57 4.21 4.16 4.08
28 2.99 2.99 2.99 58 4.29 4.23 4.15
29 3.01 3.01 3.01 59 4.37 4.31 4.21
30 3.03 3.03 3.03 60 4.46 4.39 4.28
31 3.06 3.05 3.05 61 4.56 4.47 4.35
32 3.08 3.08 3.07 62 4.66 4.56 4.42
33 3.10 3.10 3.10 63 4.76 4.65 4.49
34 3.13 3.13 3.12 64 4.88 4.75 4.56
35 3.16 3.15 3.15 65 4.99 4.85 4.63
36 3.19 3.18 3.17 66 5.12 4.95 4.70
37 3.21 3.21 3.20 67 5.25 5.05 4.77
38 3.24 3.24 3.23 68 5.39 5.16 4.83
39 3.28 3.27 3.26 69 5.53 5.27 4.90
40 3.31 3.30 3.29 70 5.69 5.38 4.96
41 3.35 3.34 3.33 71 5.85 5.49 5.02
42 3.38 3.37 3.36 72 6.02 5.60 5.08
43 3.42 3.41 3.40 73 6.19 5.71 5.13
44 3.46 3.45 3.43 74 6.37 5.82 5.17
45 3.50 3.49 3.47 75 6.56 5.92 5.21
46 3.55 3.53 3.51 76 6.75 6.02 5.25
47 3.59 3.58 3.56 77 6.95 6.11 5.28
48 3.64 3.63 3.60 78 7.14 6.20 5.30
49 3.69 3.67 3.65 79 7.34 6.28 5.32
80** 7.54 6.35 5.34
- -------------------------------------------------------------------------------------------------------------------------
Payments are based upon the age, nearest birthday, of the Payee on the date the first payment is due. If monthly
installments for two or more specified periods for a given age are the same, the specified period of longer duration
will apply.
*Also applies to younger ages. **Also applies to older ages.
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
99301F Page 28
<PAGE>
TABLE OF GUARANTEED MONTHLY COST OF INSURANCE RATES
PER $1,000 OF NET AMOUNT AT RISK
<TABLE>
<CAPTION>
ATTAINED AGE RATE ATTAINED AGE RATE
Nearest Birthday Nearest Birthday
(On Each Policy (On Each Policy
Anniversary) Anniversary)
<S> <C> <C> <C>
18 0.15 68 2.82
19 0.16 69 3.07
20 0.16 70 3.36
21 0.16 71 3.70
22 0.16 72 4.08
23 0.16 73 4.52
24 0.15 74 5.01
25 0.15 75 5.54
26 0.14 76 6.11
27 0.14 77 6.71
28 0.14 78 7.33
29 0.14 79 7.99
30 0.14 80 8.71
31 0.15 81 9.52
32 0.15 82 10.45
33 0.16 83 11.50
34 0.17 84 12.67
35 0.18 85 13.93
36 0.19 86 15.25
37 0.20 87 16.63
38 0.22 88 18.06
39 0.23 89 19.55
40 0.25 90 21.17
41 0.27 91 22.80
42 0.30 92 24.66
43 0.32 93 26.82
44 0.35 94 29.67
45 0.38 95 33.93
46 0.41 96 41.28
47 0.44 97 56.04
48 0.48 98 83.33
49 0.52 99 83.33
50 0.56
51 0.61
52 0.67
53 0.73
54 0.80
55 0.88
56 0.96
57 1.05
58 1.14
59 1.24
60 1.35
61 1.48
62 1.62
63 1.78
64 1.95
65 2.15
66 2.36
67 2.58
</TABLE>
The rates shown above represent the guaranteed (maximum) monthly cost of
insurance for each $1,000 of net amount at risk. If this policy has been issued
in a special (rated) premium class, the guaranteed monthly cost will be
calculated as shown on page 3.
99301U Page 27
<PAGE>
TABLES OF MONTHLY INSTALLMENTS FOR EACH $1,000 OF PROCEEDS
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
OPTION 1 TABLE
INSTALLMENTS FOR A SPECIFIED PERIOD
- -------------------------------------------------------------------------------------------------------------------------
Number Amount of Number Amount of Number Amount of Number Amount of
of Years Monthly of Years Monthly of Years Monthly of Years Monthly
Payable Installments Payable Installments Payable Installments Payable Installments
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
5 $17.91 15 $6.87 25 $4.71 35 $3.82
6 15.14 16 6.53 26 4.59 36 3.76
7 13.16 17 6.23 27 4.47 37 3.70
8 11.68 18 5.96 28 4.37 38 3.65
9 10.53 19 5.73 29 4.27 39 3.60
10 9.61 20 5.51 30 4.18 40 3.55
11 8.86 21 5.32 31 4.10
12 8.24 22 5.15 32 4.02
13 7.71 23 4.99 33 3.95
14 7.26 24 4.84 34 3.88
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
OPTION 3 TABLE
INSTALLMENTS FOR LIFE WITH SPECIFIED MINIMUM PERIOD
- -------------------------------------------------------------------------------------------------------------------------
GUARANTEED PERIOD GUARANTEED PERIOD
- -------------------------------------------------------------------------------------------------------------------------
AGE OF PAYEE 10 Years 15 Years 20 Years AGE OF PAYEE 10 Years 15 Years 20 Years
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
20* $2.89 $2.89 $2.89 50 $3.87 $3.84 $3.79
21 2.91 2.91 2.90 51 3.93 3.90 3.85
22 2.93 2.92 2.92 52 3.99 3.96 3.90
23 2.94 2.94 2.94 53 4.06 4.02 3.95
24 2.96 2.96 2.96 54 4.13 4.08 4.01
25 2.98 2.98 2.98 55 4.21 4.15 4.07
26 3.00 3.00 3.00 56 4.28 4.22 4.13
27 3.02 3.02 3.02 57 4.37 4.30 4.19
28 3.04 3.04 3.04 58 4.45 4.38 4.26
29 3.07 3.06 3.06 59 4.55 4.46 4.32
30 3.09 3.09 3.08 60 4.64 4.54 4.39
31 3.11 3.11 3.11 61 4.74 4.63 4.46
32 3.14 3.14 3.13 62 4.85 4.72 4.52
33 3.17 3.16 3.16 63 4.97 4.81 4.59
34 3.20 3.19 3.18 64 5.08 4.91 4.66
35 3.22 3.22 3.21 65 5.21 5.01 4.73
36 3.26 3.25 3.24 66 5.34 5.11 4.79
37 3.29 3.28 3.27 67 5.48 5.21 4.85
38 3.32 3.31 3.30 68 5.62 5.32 4.92
39 3.36 3.35 3.33 69 5.77 5.42 4.97
40 3.39 3.38 3.37 70 5.93 5.53 5.03
41 3.43 3.42 3.40 71 6.09 5.63 5.08
42 3.47 3.46 3.44 72 6.26 5.73 5.13
43 3.51 3.50 3.48 73 6.44 5.84 5.17
44 3.56 3.54 3.52 74 6.62 5.93 5.21
45 3.60 3.59 3.56 75 6.80 6.03 5.24
46 3.65 3.63 3.60 76 6.98 6.12 5.27
47 3.70 3.68 3.65 77 7.17 6.20 5.30
48 3.76 3.73 3.70 78 7.35 6.27 5.32
49 3.81 3.78 3.74 79 7.54 6.34 5.34
80** 7.72 6.41 5.35
- -------------------------------------------------------------------------------------------------------------------------
Payments are based upon the age, nearest birthday, of the Payee on the date the first payment is due. If monthly
installments for two or more specified periods for a given age are the same, the specified period of longer duration
will apply.
*Also applies to younger ages. **Also applies to older ages.
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
99301U Page 28
<PAGE>
AMERICAN GENERAL LIFE
INSURANCE COMPANY
This is a FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY. An adjustable Death
Benefit is payable upon the Insured's death prior to the Maturity Date.
Investment results are reflected in policy benefits. ACCUMULATION VALUES are
flexible and will be based on the amount and frequency of premiums paid and the
investment results of the Separate Account. NONPARTICIPATING - NOT ELIGIBLE
FOR DIVIDENDS.
For Information, Service or to make a Complaint
Contact Your Registered Representative, or Our Corporate Markets Administration
Department.
2727-A Allen Parkway
P.O. Box 4647
Houston, Texas 77210-4647
1-888-222-4943
A STOCK COMPANY
_______________________
A Subsidiary of American General Corporation
99301
<PAGE>
EXHIBIT (8)(a)(iii)
AMENDMENT NO. 2
PARTICIPATION AGREEMENT
The Participation Agreement (the "Agreement"), dated June 1, 1999, by and
among AIM Variable Insurance Funds, Inc., a Maryland corporation, A I M
Distributors, Inc., a Delaware Corporation, American General Life Insurance
Company, a Texas Life Insurance Company and American General Securities
Incorporated, is hereby amended as follows:
Schedule A of the Agreement is hereby deleted in its entirety and replaced
with the following:
SCHEDULE A
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
FUNDS AVAILABLE UNDER SEPARATE ACCOUNTS POLICIES/CONTRACTS FUNDED BY THE
THE POLICIES UTILIZING SOME OR SEPARATE ACCOUNTS
ALL OF THE FUNDS
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
AIM V.I. International American General Life Insurance . Platinum Investor I Flexible Premium
Equity Fund Company Separate Account VL-R Life Insurance Policy
AIM V.I. Value Fund Established: May 1, 1997 - Policy Form No. 97600
. Platinum Investor II Flexible Premium
Life Insurance Policy
- Policy Form No. 97610
. Corporate America Variable Flexible
Premium Variable Life Insurance
- Policy Form No. 99301
- ------------------------- ----------------------------------------------
AIM V.I. Value Fund . Legacy Plus Flexible Premium Life
Insurance Policy
- Policy Form No. 98615
- ------------------------------------------------------------------------------------------------------------
AIM V.I. International American General Life Insurance . Platinum Investor Variable Annuity
Equity Fund Company Separate Account D - Policy Form No. 98020
AIM V.I. Value Fund Established: November 19, 1973
- ------------------------------------------------------------------------------------------------------------
</TABLE>
All other terms and provisions of the Agreement not amended herein shall
remain in full force and effect.
Effective Date:
-------------------
AIM VARIABLE INSURANCE FUNDS, INC.
Attest: By:
--------------------------- ----------------------------
Name: Nancy L. Martin Name: Robert H. Graham
Title: Assistant Secretary Title: President
(SEAL)
Page 1 of 2
<PAGE>
A I M DISTRIBUTORS, INC.
Attest: By:
--------------------------- ----------------------------
Name: Nancy L. Martin Name: Michael J. Cemo
Title: Assistant Secretary Title: President
(SEAL)
AMERICAN GENERAL LIFE INSURANCE COMPANY
Attest: By:
--------------------------- ----------------------------
Name: Name:
--------------------------- ----------------------------
Title: Title:
--------------------------- ----------------------------
(SEAL)
AMERICAN GENERAL SECURITIES INCORPORATED
Attest: By:
--------------------------- ----------------------------
Name: Name:
--------------------------- ----------------------------
Title: Title:
--------------------------- ----------------------------
(SEAL)
Page 2 of 2
<PAGE>
EXHIBIT (8)(D)(III)
AMENDMENT NO. 2 TO PARTICIPATION AGREEMENT
Pursuant to the Participation Agreement, made and entered into as of the
13th day of April, 1998 by and among MFS Variable Insurance Trust, American
General Life Insurance Company and Massachusetts Financial Company, the parties
do hereby agree to an amended Schedule A as attached hereto.
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to
the Participation Agreement to be executed in its name and on its behalf by its
duly authorized representative. The Amendment shall take effect on ______, 1999.
AMERICAN GENERAL LIFE
INSURANCE COMPANY
By its authorized officer,
By:
-----------------------------
Title:
--------------------------
MFS VARIABLE INSURANCE TRUST,
ON BEHALF OF THE PORTFOLIOS
By its authorized officer,
By:
-----------------------------
James R. Bordewick, Jr.
Assistant Secretary
MASSACHUSETTS FINANCIAL SERVICES
COMPANY
By its authorized officer,
By:
-----------------------------
Jeffrey L. Shames
Chairman and Chief Executive Officer
<PAGE>
As of __________, 1999
SCHEDULE A
ACCOUNTS, POLICIES AND PORTFOLIOS
SUBJECT TO THE PARTICIPATION AGREEMENT
--------------------------------------
<TABLE>
<CAPTION>
================================================================================================================
NAME OF SEPARATE
ACCOUNT AND DATE POLICIES FUNDED PORTFOLIOS
ESTABLISHED BY BOARD OF DIRECTORS BY SEPARATE ACCOUNT APPLICABLE TO POLICIES
================================================================================================================
<S> <C> <C>
AMERICAN GENERAL LIFE INSURANCE PLATINUM INVESTOR I FLEXIBLE PREMIUM MFS EMERGING GROWTH
COMPANY SEPARATE ACCOUNT VL-R LIFE INSURANCE POLICY SERIES
(MAY 1, 1997) POLICY FORM NO. 97600
PLATINUM INVESTOR II FLEXIBLE PREMIUM
LIFE INSURANCE POLICY
POLICY FORM NO. 97610
LEGACY PLUS VARIABLE
LIFE INSURANCE POLICY
POLICY FORM NO. 98615
CORPORATE AMERICA-VARIABLE
LIFE INSURANCE POLICY
POLICY FORM NO. 99301
AMERICAN GENERAL LIFE INSURANCE PLATINUM INVESTOR VARIABLE ANNUITY MFS EMERGING GROWTH
COMPANY POLICY FORM NO. 98020 SERIES
SEPARATE ACCOUNT D
(NOVEMBER 19, 1973)
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT (8)(e)(ii)
AMENDMENT NUMBER 1 TO
PARTICIPATION AGREEMENT AMONG
MORGAN STANLEY UNIVERSAL FUNDS, INC.,
MORGAN STANLEY ASSET MANAGEMENT INC.,
MILLER ANDERSON & SHERRERD, LLP,
VAN KAMPEN AMERICA CAPITAL DISTRIBUTORS, INC.,
AMERICAN GENERAL LIFE INSURANCE COMPANY, AND
AMERICAN GENERAL SECURITIES INCORPORATED
This Amendment No. 1 ("Amendment") executed as of the 30th day of June,
1997 to the Participation Agreement dated as of January 24, 1997 (the
"Agreement"), among Morgan Stanley Universal Funds, Inc. (the "Fund"), Morgan
Stanley Asset Management Inc., Miller Anderson & Sherrerd, LLP, Van Kampen
American Capital Distributors, Inc., American General Life Insurance Company,
and American General Securities Incorporated.
WHEREAS, the parties desire to amend the Agreement by amending Section 1.3
of the Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements and covenants herein contained, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
1. Section 1.3 of the Agreement is hereby deleted and replaced with the
following:
"1.3 The Fund will not make its shares available for purchase by any
insurance company or separate account unless an agreement containing
provisions which afford the Company substantially the same protections
currently provided by Sections 2.4, 2.9, 3.4 and Article VII of this
Agreement is in effect to govern such sales."
2. Except as amended hereby, the Agreement is hereby ratified and
confirmed in all respects.
<PAGE>
IN WITNESS WHEREOF, the parties hereby execute this Amendment of the date
first written above.
AMERICAN GENERAL LIFE AMERICAN GENERAL SECURITES
INSURANCE COMPANY INCORPORATED
on behalf of itself and each of its
accounts named in Schedule A to
the Agreement, as amended from
time to time
By: /s/ Larry Robinson By: /s/ F. Paul Kovach
-------------------------- ---------------------------
Larry Robinson F. Paul Kovach
Vice President President
MORGAN STANLEY UNIVERSAL MILLER ANDERSON & SHERRERD,
FUNDS, INC. LLP.
By: /s/ Michael F. Klein By: /s/ Marna C. Whittington
-------------------------- ---------------------------
Michael F. Klein Marna C. Whittington
President Authorized Signatory
MORGAN STANLEY ASSET VAN KAMPEN AMERICAN CAPITAL
MANAGEMENT INC. DISTRIBUTORS, INC.
By: /s/ Jeffrey Margolis By: /s/ William R. Molino
-------------------------- ---------------------------
Jeffrey Margolis William R. Molino
Principal President
<PAGE>
EXHIBIT(8)(E)(VI)
AMENDMENT NUMBER 5 TO
PARTICIPATION AGREEMENT
AMONG MORGAN STANLEY UNIVERSAL FUNDS, INC.,
VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.,
MORGAN STANLEY ASSET MANAGEMENT INC.,
MILLER ANDERSON & SHERRERD, LLP,
AMERICAN GENERAL LIFE INSURANCE COMPANY, AND
AMERICAN GENERAL SECURITIES INCORPORATED
This Amendment No. 5 ("Amendment") executed as of ________________, 1999 to
the Participation Agreement (the "AGLI Agreement") dated as of January 24, 1997,
as amended, among Morgan Stanley Universal Funds, Inc. (the "Fund"), Van Kampen
Funds, Inc. ("VK Funds") (formerly Van Kampen American Capital Distributors,
Inc.), Morgan Stanley Dean Witter Investment Management Inc. ("MSDW Investment
Management") (formerly Morgan Stanley Asset Management Inc.), Miller Anderson &
Sherrerd, LLP ("MAS"), American General Life Insurance Company (the "Company"),
and American General Securities Incorporated ("AGSI").
WHEREAS, the parties desire to amend the Agreement to (i) add to Schedule A
of the Agreement the Contracts of the Company relating to the Corporate America
Variable Life Insurance Policies ("Corporate America"), and (ii) solely to the
extent the Agreement relates to Corporate America, amend the provisions of
Article III of the Agreement as described below.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements and covenants herein contained, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
1. Schedule B to the Agreement, a revised copy of which is attached hereto, is
hereby amended and restated to add Corporate America.
2. Solely to the extent the Agreement relates to Corporate America, Article
III of the Agreement is hereby deleted and replaced with the following:
"ARTICLE III. Prospectuses, Reports to Shareholders and Proxy
Statements; Voting
3.1. The Fund or its designee shall provide the Company with as many
printed copies of the Fund's current prospectus and statement of
additional information as the Company may reasonably request. If
requested by the Company, in lieu of providing printed copies the
Fund shall provide camera-ready film or computer diskettes
<PAGE>
containing the Fund's prospectus and statement of additional
information, and such other assistance as is reasonably necessary
in order for the Company once each year (or more frequently if
the prospectus and/or statement of additional information for the
Fund is amended during the year) to have the prospectus for the
Contracts and the Fund's prospectus printed together in one
document or separately. The Company may elect to print the
Fund's prospectus and/or its statement of additional information
in combination with other fund companies' prospectuses and
statements of additional information.
3.2(a). Except as otherwise provided in this Section 3.2., all
expenses of preparing, setting in type and printing and
distributing Fund prospectuses and statements of additional
information shall be the expense of the Company. For
prospectuses and statements of additional information provided by
the Company to its existing owners of Contracts who own shares of
the Fund in order to update disclosure as required by the 1933
Act and/or the 1940 Act, the cost of setting in type, printing
and distributing shall be borne by the Fund. If the Company
chooses to receive camera-ready film or computer diskettes in
lieu of receiving printed copies of the Fund's prospectus and/or
statement of additional information, the Fund shall bear the cost
of typesetting to provide the Fund's prospectus and/or statement
of additional information to the Company in the format in which
the Fund is accustomed to formatting prospectuses and statements
of additional information, respectively, and the Company shall
bear the expense of adjusting or changing the format to conform
with any of its prospectuses and/or statements of additional
information. In such event, the Fund will reimburse the Company
in an amount equal to the product of x and y where x is the
number of such prospectuses distributed to Participants who own
shares of the Fund, and y is the Fund's per unit cost of printing
the Fund's prospectuses. The same procedures shall be followed
with respect to the Fund's statement of additional information.
The Fund shall not pay any costs of typesetting, printing and
distributing the Fund's prospectus and/or statement of additional
information to prospective Participants.
3.2(b). The Fund, at its expense, shall provide the Company with
copies of its proxy statements, reports to shareholders, and
other communications (except for prospectuses and statements of
additional information, which are covered in Section 3.2(a)
above) to shareholders in such quantity as the Company shall
reasonably require for distributing to Participants. The Fund
shall not pay any costs of distributing such proxy-related
material, reports to
<PAGE>
shareholders, and other communications to prospective
Participants.
3.2(c). The Company agrees to provide the Fund or its designee with
such information as may be reasonably requested by the Fund to
assure that the Fund's expenses do not include the cost of
typesetting, printing or distributing any of the foregoing
documents other than those actually distributed to existing
Participants.
3.2(d). The Fund shall pay no fee or other compensation to the
Company under this Agreement, except that if the Fund or any
Portfolio adopts and implements a plan pursuant to Rule 12b-1 to
finance distribution expenses, then the Underwriter may make
payments to the Company or to the underwriter for the Contracts
if and in amounts agreed to by the Underwriter in writing.
3.2(e). All expenses, including expenses to be borne by the Fund
pursuant to Section 3.2 hereof, incident to performance by the
Fund under this Agreement shall be paid by the Fund. The Fund
shall see to it that all its shares are registered and authorized
for issuance in accordance with applicable federal law and, if
and to the extent deemed advisable by the Fund, in accordance
with applicable state laws prior to their sale. The Fund shall
bear the expenses for the cost of registration and qualification
of the Fund's shares.
3.3 The Fund's statement of additional information shall be
obtainable from the Fund, the Underwriter, the Company or such
other person as the Fund may designate.
3.4 If and to the extent required by law the Company shall distribute
all proxy material furnished by the Fund to Contract Owners to
whom voting privileges are required to be extended and shall:
(i) solicit voting instructions from Contract owners:
(ii) vote the Fund shares in accordance with instructions
received from Contract owners: and
(iii) vote Fund shares for which no instructions have been
received in the same proportion as Fund shares of such Portfolio
for which instructions have been received, so long as and to the
extent that the Securities and Exchange Commission continues to
interpret the 1940 Act to require pass-through voting privileges
for variable contract owners. The Company reserves the right to
vote Fund shares held in any segregated asset account in its own
right, to the extent permitted by law. The Fund and the Company
shall
<PAGE>
follow the procedures, and shall have the corresponding
responsibilities, for the handling of proxy and voting
instruction solicitations, as set forth in Schedule C attached
hereto and incorporated herein by reference. Participating
Insurance Companies shall be responsible for ensuring that each
of their separate accounts participating in the Fund calculates
voting privileges in a manner consistent with the standards set
forth on Schedule C, which standards will also be provided to the
other Participating Insurance Companies.
3.5. The Fund will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular the Fund will
either provide for annual meetings (except insofar as the
Securities and Exchange Commission may interpret Section 16 not
to require such meetings) or comply with Section 16(c) of the
1940 Act (although the Fund is not one of the trusts described in
Section 16(c) of that Act) as well as with Sections 16(a) and, if
and when applicable, 16(b). Further, the Fund will act in
accordance with the Securities and Exchange Commission's
interpretation of the requirements of Section 16(a) with respect
to periodic elections of directors and with whatever rules the
Commission may promulgate with respect thereto."
4. Except as amended hereby the Agreement is hereby ratified and
confirmed in all respects.
<PAGE>
IN WITNESS WHEREOF, the parties hereto execute this Amendment No. 4 as of the
date first written above.
<TABLE>
<S> <C>
AMERICAN GENERAL LIFE INSURANCE COMPANY AMERICAN GENERAL SECURITIES INCORPORATED
on behalf of itself and each of its
Accounts named in Schedule B to the
Agreement, as amended from time to time
By:________________________________ By:________________________________
VAN KAMPEN FUNDS INC.
MORGAN STANLEY UNIVERSAL (FORMERLY VAN KAMPEN AMERICAN CAPITAL
FUNDS, INC. DISTRIBUTORS, INC.)
By:________________________________ By:________________________________
MORGAN STANLEY DEAN WITTER INVESTMENT MILLER ANDERSON & SHERRERD, LLP
MANAGEMENT INC. (FORMERLY MORGAN STANLEY
ASSET MANAGEMENT INC.)
By:________________________________ By:________________________________
</TABLE>
<PAGE>
SCHEDULE B
SEPARATE ACCOUNTS AND CONTRACTS
Name of Separate Account and Form Numbers and Names of
Date Established by Board of Directors Contracts Funded by Separate Account
- -------------------------------------- ------------------------------------
American General Life Insurance Company Contract Form Numbers:
Separate Account D ---------------------
Established: November 19, 1973 95020 Rev 896
95021 Rev 896
Name of Contract:
Generations Combination Fixed
and Variable Annuity Contract
Contract Form Numbers:
---------------------
91010
91011
93020
93021
Name of Contract:
----------------
Variety Plus Combination Fixed
and Variable Annuity Contract
Contract Form Numbers:
---------------------
74010
74011
76010
76011
80010
80011
81010
81011
83010
83011
Name of Contract: None
----------------
Contract Form Number: 98020
--------------------
Name of Contract:
----------------
Platinum Investor Variable Annuity
<PAGE>
American General Life Insurance Company Contract Form Numbers:
Separate Account VL-R ---------------------
Established: May 6, 1997 97600
97610
Name of Contract:
----------------
Platinum I and Platinum II Flexible
Premium
Variable Life Insurance Policies
Contract Form Numbers:
---------------------
98615
. Name of Contract:
----------------
Legacy Plus Flexible Premium
Variable Life Insurance Policies
Contract Form Number:
--------------------
99301
Name of Contract:
----------------
Corporate America - Variable Life
Insurance Policy
<PAGE>
EXHIBIT (8)(G)(III)
SECOND AMENDMENT
TO
PARTICIPATION AGREEMENT
AMONG AMERICAN GENERAL LIFE INSURANCE COMPANY,
AMERICAN GENERAL SECURITIES INCORPORATED,
SAFECO RESOURCE SERIES TRUST, AND
SAFECO SECURITIES, INC.
THIS SECOND AMENDMENT TO PARTICIPATION AGREEMENT ("Amendment") dated as of
August 2, 1999, amends the First Amendment to the Participation Agreement as of
December 1, 1998 (the "First Amendment") and the Participation Agreement dated
as of April 1, 1998 (the "Agreement") among AMERICAN GENERAL LIFE INSURANCE
COMPANY ("AGL"), on its own behalf and on behalf of each separate account of AGL
(each a "Separate Account") set forth on Schedule A of the Agreement attached
hereto and incorporated herein (as same may be amended from time to time
"Schedule A)," AMERICAN GENERAL SECURITIES INCORPORATED ("AGSI"), SAFECO
RESOURCE SERIES TRUST (the "Fund"), and SAFECO SECURITIES, INC. (the
"Distributor "), collectively, the "Parties." All capitalized terms not
otherwise defined in this Amendment, shall have the same meaning as ascribed in
the Agreement.
WITNESSETH THAT:
WHEREAS, pursuant to the Agreement shares of the Fund's Equity Portfolio and
Growth Portfolio (the "Series"; reference herein to the "Fund" includes
reference to each of the foregoing Series to the extent the context requires)
are made available by the Distributor to serve as underlying investment media
for those variable life insurance policies of AGL that are the subject of AGL's
Form S-6 registration statement filed with the Securities and Exchange
Commission (the "SEC"), File No. 333-42567 and 811-08561 (the "Policies") and
are offered through AGSI.
WHEREAS, pursuant to the First Amendment the shares of the Series are made
available by the Distributor to serve as underlying investment media for AGL's
Platinum Investor Variable Annuity contracts ("Platinum Investor VA Contracts"),
and to be offered through AGSI.
Page 1 of 3
<PAGE>
WHEREAS, the Distributor and the Fund desire that shares of the series also be
made available by the Distributor to serve as underlying investment media for
AGL's Corporate America-Variable Life Insurance Policies ("Corporate America"),
are to be offered through AGSI; and
NOW, THEREFORE, in consideration of the mutual benefits and promises contained
herein, the parties agree as follows:
1. The Agreement shall be deemed to include as the context requires any or all
of the variable life insurance policies and variable annuity contracts
described on Schedule A hereto.
2. Except as amended hereby, the Agreement and the First Amendment are hereby
ratified in all respects.
IN WITNESS WHEREOF, the Parties hereto has caused this Agreement to be executed
in its name and on its behalf by its duly authorized representative hereto as of
the date specified above.
AMERICAN GENERAL LIFE INSURANCE COMPANY, on behalf of itself and each of its
Separate Accounts named in Schedule A hereto, as amended from time to time.
By:
--------------------------------
AMERICAN GENERAL SECURITIES INCORPORATED
By:
--------------------------------
SAFECO RESOURCE SERIES TRUST
By:
--------------------------------
SAFECO SECURITIES, INC.
By:
--------------------------------
Page 2 of 3
<PAGE>
SCHEDULE A
----------
POLICIES AND SEPARATE ACCOUNTS
------------------------------
(AS OF AUGUST 2, 1999)
<TABLE>
<CAPTION>
NAME OF SEPARATE ACCOUNTS AND REGISTRATION NUMBERS AND NAMES OF POLICIES FUNDED BY
DATE ESTABLISHED BY BOARD OF DIRECTORS SEPARATE ACCOUNTS
- -------------------------------------- -----------------
Registration Nos. Name of Contract
----------------- ----------------
(if available)
--------------
<S> <C> <C> <C>
1. American General Life Insurance Company 333-42567 Platinum Investor I and
Separate Account VL-R 811-08561 Platinum Investor II Variable Life
Insurance Policies (Contract Form
Nos. 97600 and 97610)
333-80191 Corporate America-Variable
811-08561 Life Insurance Policies
(Contract Form No. 99301)
2. American General Life Insurance Company 333-70667 Platinum Investor Variable
Separate Account D 811-02441 Annuity Contract (Contract Form
No. 98202)
</TABLE>
Page 3 of 3
<PAGE>
EXHIBIT (8)(h)(v)
AMENDMENT NUMBER 4 TO
AMENDED AND RESTATED PARTICIPATION AGREEMENT
AMONG VAN KAMPEN LIFE INVESTMENT TRUST,
VAN KAMPEN FUNDS INC.,
VAN KAMPEN ASSET MANAGEMENT INC.,
AMERICAN GENERAL LIFE INSURANCE COMPANY, AND
AMERICAN GENERAL SECURITIES INCORPORATED
This Amendment No. 4 ("Amendment No. 4") executed as of the ___ day of
__________, 1999 to the Amended and Restated Participation Agreement dated as of
January 24, 1997, as amended (the "Agreement"), among Van Kampen Life Investment
Trust (the "Fund"), Van Kampen Funds Inc., Van Kampen Asset Management Inc.,
American General Life Insurance Company (the "Company"), and American General
Securities Incorporated.
WHEREAS, the parties desire to amend the Agreement to (i) add to Schedule A
of the Agreement the Contracts of the Company relating to the Company's
Corporate America Variable Life Insurance policies, Form No. 93301 ("Corporate
America") and (ii) solely to the extent the Agreement relates to the Corporate
America, amend the provisions of Article III of the Agreement as described
below.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements and covenants herein contained, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
1. Schedule A to the Agreement, a revised copy of which is attached
hereto, is hereby amended to add the Corporate America.
2. Solely to the extent the Agreement relates to the Corporate America,
Article III of the Agreement is hereby deleted and replaced with the
following:
"ARTICLE III. Prospectuses, Reports to Shareholders and Proxy
Statements; Voting
3.1. The Fund shall provide the Company with as many printed copies of
the Fund's current prospectus and statement of additional information
as the Company may reasonably request. If requested by the Company in
lieu of providing printed copies the Fund shall provide camera-ready
film or computer diskettes containing the Fund's prospectus and
statement of additional information, and such other assistance as is
reasonably necessary in order for the Company once each year (or more
frequently if the prospectus and/or statement of additional
information for the Fund is amended during the year) to have the
prospectus for the Contracts and the Fund's prospectus printed
together in one document or separately. The Company may elect to print
the Fund's prospectus and/or its statement of additional information
in combination with other fund companies' prospectuses and statements
of additional information.
3.2(a). Except as otherwise provided in this Section 3.2., all
expenses of preparing, setting in type and printing and distributing
Fund prospectuses and statements of additional information shall be
the expense of the Company. For prospectuses and statements of
additional information
<PAGE>
update disclosure as required by the 1933 Act and/or the 1940 Act, the
cost of setting in type, printing and distributing shall be borne by
the Fund. If the Company chooses to receive camera-ready film or
computer diskettes in lieu of receiving printed copies of the Fund's
prospectus and/or statement of additional information, the Fund shall
bear the cost of typesetting to provide the Fund's prospectus and/or
statement of additional information to the Company in the format in
which the Fund is accustomed to formatting prospectuses and statements
of additional information, respectively, and the Company shall bear
the expense of adjusting or changing the format to conform with any of
its prospectuses and/or statements of additional information. In such
event, the Fund will reimburse the Company in an amount equal to the
product of x and y where x is the number of such prospectuses
distributed to owners of the Contracts, and y is the Fund's per unit
cost of printing the Fund's prospectuses. The same procedures shall be
followed with respect to the Fund's statement of additional
information. The Fund shall not pay any costs of typesetting, printing
and distributing the Fund's prospectus and/or statement of additional
information to prospective Contract owners.
3.2(b). The Fund, at its expense, shall provide the Company with
copies of its proxy statements, reports to shareholders, and other
communications (except for prospectuses and statements of additional
information, which are covered in Section 3.2(a) above) to
shareholders in such quantity as the Company shall reasonably require
for distributing to Contract owners. The Fund shall not pay any costs
of distributing such proxy-related material, reports to shareholders,
and other communications to prospective Contract owners.
3.2(c). The Company agrees to provide the Fund or its designee with
such information as may be reasonably requested by the Fund to assure
that the Fund's expenses do not include the cost of typesetting,
printing or distributing any of the foregoing documents other than
those actually distributed to existing Contract owners.
3.2(d) The Fund shall pay no fee or other compensation to the Company
under this Agreement, except that if the Fund or any Portfolio adopts
and implements a plan pursuant to Rule 12b-1 to finance distribution
expenses, then the Underwriter may make payments to the Company or to
the underwriter for the Contracts if and in amounts agreed to by the
Underwriter in writing.
3.2(e) All expenses, including expenses to be borne by the Fund
pursuant to Section 3.2 hereof, incident to performance by the Fund
under this Agreement shall be paid by the Fund. The Fund shall see to
it that all its shares are registered and authorized for issuance in
accordance with applicable federal law and, if and to the extent
deemed advisable by the Fund, in accordance with applicable state laws
prior to their sale. The Fund shall bear the expenses for the cost of
registration and qualification of the Fund's shares.
3.3. The Fund's statement of additional information shall be
obtainable from the Fund, the Underwriter, the Company or such other
person as the Fund may designate.
<PAGE>
3.4. If and to the extent required by law the Company shall distribute
all proxy material furnished by the Fund to Contract Owners to whom
voting privileges are required to be extended and shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Fund shares in accordance with instructions
received from Contract owners; and
(iii) vote Fund shares for which no instructions have been
received in the same proportion as Fund shares of such Portfolio for
which instructions have been received,
so long as and to the extent that the Securities and Exchange
Commission continues to interpret the 1940 Act to require pass-through
voting privileges for variable contract owners. The Company reserves
the right to vote Fund shares held in any segregated asset account in
its own right, to the extent permitted by law. The Fund and the
Company shall follow the procedures, and shall have the corresponding
responsibilities, for the handling of proxy and voting instruction
solicitations, as set forth in Schedule C attached hereto and
incorporated herein by reference. Participating Insurance Companies
shall be responsible for ensuring that each of their separate accounts
participating in the Fund calculates voting privileges in a manner
consistent with the standards set forth on Schedule C, which standards
will also be provided to the other Participating Insurance Companies.
3.5. The Fund will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular the Fund will
either provide for annual meetings (except insofar as the Securities
and Exchange Commission may interpret Section 16 not to require such
meetings) or comply with Section 16(c) of the 1940 Act (although the
Fund is not one of the trusts described in Section 16(c) of that Act)
as well as with Sections 16(a) and, if and when applicable, 16(b).
Further, the Fund will act in accordance with the Securities and
Exchange Commission's interpretation of the requirements of Section
16(a) with respect to periodic elections of directors and with
whatever rules the Commission may promulgate with respect thereto."
3. Except as amended hereby, the Agreement is hereby ratified and
confirmed in all respects.
<PAGE>
IN WITNESS WHEREOF, the parties hereto execute this Amendment No. 3 as of
the date first written above.
AMERICAN GENERAL LIFE INSURANCE
COMPANY
on behalf of itself and each of its Accounts
named in Schedule A to the Agreement,
as amended from time to time
By:______________________________________________
Don M. Ward
Senior Vice President - Variable Products
AMERICAN GENERAL SECURITIES INCORPORATED
By:______________________________________________
F. Paul Kovach, Jr.
President
VAN KAMPEN LIFE INVESTMENT TRUST
By:______________________________________________
Dennis J. McDonnell
President
VAN KAMPEN FUNDS INC.
By:______________________________________________
Patrick J. Woelfel
First Vice President
VAN KAMPEN ASSET MANAGEMENT INC.
By:______________________________________________
Dennis J. McDonnell
President
<PAGE>
SCHEDULE A
SEPARATE ACCOUNTS AND CONTRACTS
<TABLE>
<CAPTION>
Name of Separate Account and Form Numbers and Names of Contracts
Date Established by Board of Directors Funded by Separate Account
- -------------------------------------- ---------------------------------
<S> <C>
American General Life Insurance Contract Form Nos.:
Company Separate Account D -------------------
Established: November 19, 1973 95020 Rev 896
95021 Rev 896
Name of Contract:
-----------------
Generations Combination Fixed and Variable
Annuity Contract
Contract Form Nos.:
-------------------
91010
91011
93020
93021
Name of Contract:
-----------------
Variety Plus Combination Fixed and Variable
Annuity Contract
Contract Form Nos.:
-------------------
74010
74011
76010
76011
80010
80011
81010
81011
83010
83011
Name of Contract: None
-----------------
Contract Form Nos.:
-------------------
98020
Name of Contract:
-----------------
Platinum Investor Variable Annuity
Contract
American General Life Insurance Contract Form Nos.:
Company Separate Account VL-R -------------------
Established: May 6, 1997 97600
97610
Name of Contract:
-----------------
Platinum I and Platinum II Flexible Premium
Variable Life Insurance Policies
Contract Form Number:
--------------------
99301
Name of Contract:
----------------
Corporate America - Variable Life Insurance
Policy
</TABLE>
<PAGE>
EXHIBIT (8)(J)
AGREEMENT
THIS AGREEMENT ("Agreement") made as of January 24, 1997, is by and among MORGAN
STANLEY ASSET MANAGEMENT INC., a Delaware corporation ("MSAM"), MILLER ANDERSON
& SHERRERD, LLP, a Pennsylvania limited partnership ("MAS") (each of MSAM and
MAS are referred to herein as an "Adviser" and collectively as, the "Advisers")
and AMERICAN GENERAL LIFE INSURANCE COMPANY, a Texas corporation ("AGL").
W I T N E S S E T H:
WHEREAS, the investment company identified on Schedule One hereto ("Schedule
One," as the same may be amended from time to time), is registered as an open-
end management investment company under the Investment Company Act of 1940, as
amended (the "Act") (the "Investment Company" the portfolios of the Investment
Company identified in Schedule One are referred to herein individually as a
"Fund" and collectively as the "Funds"); and
WHEREAS, each of the Funds is available as the investment vehicle for certain
separate accounts of AGL, established for variable life insurance policies
and/or variable annuity contracts offered by AGL (individually or collectively,
the "Separate Account"); and
WHEREAS, AGL has entered into a participation agreement dated January 24, 1997
among AGL, the Investment Company and the Advisers (the "Participation
Agreement," as the same may be amended from time to time); and
WHEREAS, the Advisers provide, among other things, investment advisory and/or
administrative services to the Investment Company; and
WHEREAS, the Advisers desire AGL to provide the administrative services
specified in the attached Exhibit A ("Administrative Services"), in connection
with the ownership of interests of the Separate Account, which holds shares of
the Funds, and AGL is willing and able to provide such Administrative Services
on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and mutual covenants
hereinafter contained, each party hereto severally agrees as follows:
1. AGL agrees to perform the Administrative Services specified in Exhibit A
hereto for the benefit of variable annuity and variable life insurance
contracts that participate in the Separate Account.
2. AGL may, with the consent of an Adviser, contract with or establish
relationships with other parties for the provision of the Administrative
Services or other activities of AGL required by this Agreement, provided that
AGL shall be fully responsible for the acts and omissions of such other
parties.
1
<PAGE>
3. AGL hereby agrees to notify the Advisers promptly if for any reason it is
unable to perform fully and promptly any of its obligations under this
Agreement.
4. AGL hereby represents and covenants that it does not, and will not, own or
hold or control with power to vote any shares of the Funds which are
registered in the name of AGL or the name of its nominee and which are
maintained under AGL variable annuity or variable life insurance accounts.
5. The provisions of the Agreement shall in no way limit the authority of the
Advisers or the Investment Company to take such action as any of such parties
may deem appropriate or advisable in connection with all matters relating to
the operations of any of the Funds and/or sale of shares of the Funds.
6. In consideration of the Administrative Services provided by AGL with respect
to the variable life insurance and variable annuity contracts identified on
Schedule Two attached hereto, each Adviser agrees to pay AGL with respect to
the Funds for which it serves as adviser (as indicated on Schedule One), a
monthly fee at an annual rate which shall equal .15% of the net asset value
of the shares of each such Fund held in the Separate Account. The foregoing
fee will be paid by the applicable Adviser to AGL on a calendar quarter
basis; payment of such fee will be made by the appropriate Adviser to AGL
within thirty (30) days following the end of each calendar quarter. The
determination of applicable assets shall be made by averaging the assets of
the applicable portfolios of the Fund maintained in the Master Account for
the Shareholders as of the last Business Day (as defined in the Participation
Agreement) of each month falling within the applicable calendar quarter.
Notwithstanding anything in this Agreement or the Participation Agreement
appearing to the contrary, the payments by an Adviser to AGL relate solely to
the performance by AGL of the Administrative Services described herein only,
and do not constitute payment in any manner for services provided by AGL to
AGL policy or contract owners, or to any separate account organized by AGL,
or for any investment advisory services, or for costs associated with the
distribution of any variable annuity or variable life insurance contracts.
7. AGL shall indemnify and hold harmless the Investment Company, the Funds, and
the Advisers and each of their respective officers, Directors, employees and
agents from and against any and all losses, claims, damages, expenses, or
liabilities that any one or more of them may incur including, without
limitation, reasonable attorneys' fees, expenses and costs arising out of or
related to the performance or non-performance by AGL of the Administrative
Services under this Agreement.
8. This Agreement may be terminated without penalty at any time by AGL or by an
Adviser as to one or more of the Funds, upon one hundred and eighty days
(180) written notice to the other party. Notwithstanding the foregoing, the
provisions of paragraphs 7 and 9 of this Agreement, shall continue in full
force and effect after termination of this Agreement.
2
<PAGE>
9. After the date of any termination of this Agreement in accordance with
paragraph 8 of this Agreement, no fee will be due with respect to any shares
of the Funds first placed in the Separate Account after the date of such
termination. However, notwithstanding any such termination, the Advisers
will remain obligated to pay AGL the fee specified in paragraph 6 of this
Agreement, with respect to the net asset value of shares of the Funds
maintained in the Separate Account as of the date of such termination, for so
long as such amounts are held in the Separate Account and AGL continues to
provide the Administrative Services with respect to such amounts in
conformity with this Agreement. This Agreement, or any provision hereof,
shall survive termination to the extent necessary for each party to perform
its obligations with respect to amounts for which a fee continues to be due
subsequent to such termination.
10. AGL understands and agrees that the obligations of the Advisers under this
Agreement are not binding upon the Investment Company, upon any of its Board
members or upon any shareholder of any of the Funds.
11. It is understood and agreed that in performing the services under this
Agreement AGL, acting in its capacity described herein, shall at no time be
acting as an agent for an Adviser or the Investment Company. AGL agrees, and
agrees to cause its agents, not to make any representations concerning the
Investment Company or the Funds except those contained in the Investment
Company's then-current prospectus; in current sales literature furnished by
the Investment Company or an Adviser to AGL; in the then current prospectus
for a variable annuity contract or variable life insurance policy issued by
AGL or then current sales literature with respect to such variable annuity
contract or variable life insurance policy, approved by an Adviser.
12. This Agreement, including the provisions set forth herein in paragraph 6,
may only be amended pursuant to a written instrument signed by the party to
be charged. This Agreement may not be assigned by a party hereto, by
operation of law or otherwise, without the prior written consent of the
other party.
13. This Agreement shall be governed by the laws of the State of Texas, without
giving effect to the principles of conflicts of law of such jurisdiction.
14. This Agreement, including Exhibit A and Schedules One and Two, constitutes
the entire agreement between the parties with respect to the matters dealt
with herein and supersedes any previous agreements and documents with
respect to such matters. The parties agree that Schedule One may be
replaced from time to time with a new Schedule One to accurately reflect any
changes in the Investment Company or Funds available as investment vehicles
under the Participation Agreement.
3
<PAGE>
IN WITNESS HEREOF, the parties hereto have executed and delivered this Agreement
as of the date first above written.
AMERICAN GENERAL LIFE INSURANCE COMPANY
By: _____________________________
Authorized Signatory
______________________________
Print or Type Name
MORGAN STANLEY ASSET MANAGEMENT INC.
By:______________________________
Authorized Signatory
_______________________________
Print or Type Name
MILLER ANDERSON & SHERRERD, LLP
By:______________________________
Authorized Signatory
_______________________________
Print or Type Name
4
<PAGE>
SCHEDULE ONE
<TABLE>
<CAPTION>
INVESTMENT COMPANY NAME: FUND NAME(S) AND ADVISER TO FUND:
- ------------------------------------- --------------------------------------
<S> <C>
Morgan Stanley Universal Funds, Inc. Adviser:
Morgan Stanley Asset Management Inc.
Funds:
Equity Growth
International Magnum
Emerging Markets Equity
Global Equity
Adviser:
Miller Anderson & Sherrerd, LLP
Funds:
Fixed Income
High Yield
Mid Cap Value
Value
</TABLE>
5
<PAGE>
SCHEDULE TWO
VARIABLE LIFE INSURANCE AND
ANNUITY CONTRACTS COVERED UNDER
AGREEMENT (as of August 1, 1999)
1. PLATINUM I AND PLATINUM II FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICIES
(FORM NOS. 97600 AND 97610)
2. LEGACY PLUS FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICIES
(FORM NO. 98615)
3. PLATINUM INVESTOR VARIABLE ANNUITY
(FORM NO. 98020)
4. CORPORATE AMERICAN VARIABLE LIFE INSURANCE POLICY
(FORM NO. 93301)
6
<PAGE>
EXHIBIT A
(As of January 1, 1999)
Pursuant to the Agreement by and among the parties hereto, AGL shall perform the
following Administrative Services:
1. Assist the Investment Company in communicating with variable life insurance
policy owners and variable annuity contract owners and provide them with
information regarding the Funds, including (a) information on investment
objectives, policies and procedures, (b) information on Fund performance and
(c) answers to questions regarding Fund investments.
2. Create and utilize computer programs and other information systems that
assist the Investment Company in communicating Fund information to variable
life insurance policy owners and variable annuity contract owners.
3. Assist the Investment Company in educating AGL's home office and field
personnel on the management and operation of the Funds.
4. Transmit to variable life insurance policy owners and variable annuity
contract owners proxy materials and reports and other information received by
AGL from the Investment Company and required to be sent to policy and
contract owners under the federal securities laws and, upon request of the
Investment Company and transmit communications deemed by the Investment
Company, through its Board of Directors, to be necessary and proper for
receipt by all policy and contract owners participating in the Separate
Account.
5. Provide to the Investment Company such periodic reports as shall reasonably
be necessary to enable Investment Company and its Advisers to comply with
applicable securities and insurance laws.
7
<PAGE>
EXHIBIT (8)(K)
SAFECO
December 1, 1998 {PRIVATE}
American General Life Insurance Company
2727 Allen Parkway WT-03
Houston, Texas 77019
Ladies and Gentlemen:
This letter amends and supersedes the letter agreement dated April 1, 1998
between SAFECO Asset Management Company ("SAM") and American General Life
Insurance Company ("AGL") concerning certain administrative services to be
provided by AGL on a sub-administration basis with respect to certain series of
the SAFECO Resource Series Trust (the "Fund") in connection with the
Participation Agreement between AGL, American General Securities Incorporated,
the Fund, and SAFECO Securities, Inc. (the "Participation Agreement").
Capitalized terms not defined herein shall have the meanings ascribed to them in
the Participation Agreement.
1. Administrative Services and Expenses. AGL shall be responsible for
administrative services for purchasers of Policies and for the Separate
Accounts named in Schedule B attached hereto and made a part hereof and
which invest in the Series pursuant to the Participation Agreement.
Administrative services for the Series in which the Separate Accounts
invest, and for purchasers of shares of the Series, are the responsibility
of the Fund.
AGL has agreed to assist SAM, as SAM may request from time to time, with
the provision of administrative services ("Administrative Services") to the
Series, on a sub-administration basis, as they may relate to the investment
in the Series by the Separate Accounts. It is anticipated that
Administrative Services may include (but shall not be limited to) the
printing and mailing of informational materials to owners of the Policies
supported by the Separate Accounts with allocations to the Series; the
provision of various reports for the Fund and for submission to the Fund's
Board of Trustees; the provision of shareholder support services with
respect to the Series; and the services listed on Schedule A attached
hereto and made a part hereof.
2. Administrative Expense Payments. In consideration of the anticipated
administrative expense savings resulting from the arrangements set forth in
this Agreement, SAM agrees to pay AGL on a quarterly basis an amount set
forth in Schedule B.
For purposes of computing the payment to AGL contemplated under this
Paragraph 2 for each quarterly period, the total of the average daily net
assets invested by the Separate Accounts shall be multiplied by the rate
shown in Schedule B multiplied by the actual number of days in the period
divided by 365.
The expense payment contemplated by this Paragraph 2 shall be calculated by
SAM at the end of each quarter and will be paid to AGL within 30 days
thereafter on a pro-rata basis. Payment will be accompanied by a statement
showing the calculation of the quarterly amount payable by SAM and such
other supporting data as may be reasonably requested by AGL.
-1-
<PAGE>
3. Nature of Payments. The parties to this letter agreement recognize and
agree that payments to AGL relate to Administrative Services only. The
amount of administrative expense payments made by SAM to AGL pursuant to
Paragraph 2 of this letter agreement shall not be deemed to be conclusive
with respect to SAM's actual administrative expenses or savings.
4. Term. This letter agreement shall remain in full force and effect for so
long as the assets of the Series are attributable to amounts invested by
the Separate Accounts under the Participation Agreement, unless terminated
in accordance with Paragraph 5 of this letter agreement.
5. Termination. This letter agreement may be terminated by either party upon
90 days' advance written notice or immediately upon termination of the
Participation Agreement or upon the mutual agreement of the parties hereto
in writing.
6. Representation. AGL represents and agrees that it will maintain and
preserve all records as required by law to be maintained and preserved in
connection with providing the Administrative Services, and will otherwise
comply with all laws, rules and regulations applicable to the
Administrative Services.
7. Subcontractors. AGL may, with the prior written consent of SAM, contract
with or establish relationships with other parties for the provision of the
Administrative Services or other activities of AGL required by this letter
agreement, provided that AGL shall be fully responsible for the acts and
omissions of such other parties. SAM agrees that American General Life
Companies, an affiliate of AGL, may provide services on behalf of AGL under
this letter agreement as provided in this paragraph.
8. Authority. This letter agreement shall in no way limit the authority of
the Fund or SAM to take such action as either party may deem appropriate or
advisable in connection with all matters relating to the operations of the
Fund and/or sale of its shares. AGL understands and agrees that the
obligations of SAM under this letter agreement are not binding upon the
Fund.
9. Indemnification. This letter agreement will be subject to the
indemnification provisions in Section 12 of the Participation Agreement.
10. Miscellaneous. This letter agreement may be amended only upon mutual
agreement of the parties hereto in writing. This letter agreement may not
be assigned by either party hereto, by operation of law or otherwise,
without the prior written consent of the other party. This letter
agreement, including Schedule A and Schedule B, constitutes the entire
agreement between the parties with respect to the matters dealt with
herein, and supersedes any previous agreements and documents with respect
to such matters. This letter agreement may be executed in counterparts,
each of which shall be deemed an original but all of which shall together
constitute one and the same instrument. Each party agrees to notify the
other party promptly if for any reason it is unable to perform fully and
promptly any of its obligations under this letter agreement.
11. Notice. Any notices required to be sent hereunder shall be sent in
accordance with the Participation Agreement, except that any notice to SAM
hereunder shall be sent to:
SAFECO Asset Management Company
4333 Brooklyn Avenue N.E.
Seattle, Washington 98185
Attention: Institutional Division
-2-
<PAGE>
Please indicate AGL's understanding of, and agreement to, the matters set forth
above by signing below and returning a signed copy to us.
Very truly yours,
By: ___________________________
Name: Leslie Eggerling - Vice President
Acknowledged and Agreed:
AMERICAN GENERAL LIFE INSURANCE COMPANY
By: _______________________________
Name: ____________________________
Title: _____________________________
Attachment: Schedule A
Schedule B
-3-
<PAGE>
SCHEDULE A
I. Fund-related Policyowner services
. Fund proxies services, including facilitating distribution of proxy
material to Policyowners, tabulation and reporting.
. Telephonic support for Policyowners with respect to inquiries about the Fund
(not including information related to sales).
. Communications to Policyowners regarding performance of the Series.
II. Sub-accounting services
. Aggregating purchase and redemption orders of the Separate Accounts for
sales of the Series.
. Assistance in resolution of pricing errors.
III. Other administrative support
. Providing other administrative support to the Fund as mutually agreed
between AGL and SAM.
-4-
<PAGE>
SCHEDULE B
<TABLE>
<CAPTION>
Separate Account Registration Nos. of Variable Administrative Expense Amounts
- ---------------- Life Insurance ------------------------------
Policy(ies)/Annuity Contracts and
Policy or Contract Name(s)
---------------------------------
<S> <C> <C>
American General Life Insurance File Nos. 333-42567 SAM agrees to pay AGL a quarterly
Company Separate Account VL-R 811-08561 amount that is equal on a annual
Policies: Platinum Investor I basis to twenty-five basis points
and Platinum Investor II Variable (.25%) of the average combined
Life Insurance Policies (Contract daily net assets of all of shares
Form Nos. 97600 and 97610) of the Fund held in the Separate
Account of AGL pursuant to the
Corporate America-Variable Life Participation Agreement.
Insurance Policies (Contract
Form No. 99301)
American General Life Insurance File Nos. 333-70667 SAM agrees to pay AGL a quarterly
Company Separate Account D 811-2441 amount that is equal on a annual
Policy: Platinum Investor basis to twenty-five basis points
Variable Annuity Contract (.25%) of the average combined
(Contract Form No. 98202) daily net assets of all of shares
of the Fund held in the Separate
Account of AGL pursuant to the
Participation Agreement
</TABLE>
-5-
<PAGE>
EXHIBIT (8)(P)
AGREEMENT
THIS AGREEMENT ("Agreement") made as of December 1, 1998, is by and between VAN
KAMPEN ASSET MANAGEMENT INC., a Delaware corporation ("Adviser") and AMERICAN
GENERAL LIFE INSURANCE COMPANY, a Texas corporation ("AGL").
W I T N E S S E T H:
WHEREAS, each of the investment companies listed on Schedule One hereto
("Schedule One," as the same may be amended from time to time), is registered as
an open-end management investment company under the Investment Company Act of
1940, as amended (the "Act") (such investment companies are hereinafter
collectively called the "Funds," or each a "Fund"); and
WHEREAS, each of the Funds is available as an investment vehicle for AGL for its
separate account to fund variable life insurance contracts referred to as
"Platinum Investor Variable Annuity", Form No. 98020 ("Platinum Contracts");
and
WHEREAS, AGL has entered into a participation agreement dated November 4, 1997,
among AGL, American General Securities Incorporated, Adviser, Van Kampen Funds
Inc. ("Underwriter"), and the Funds (the "Participation Agreement," as the same
may be amended from time to time); and
WHEREAS, Adviser provides, among other things, investment advisory and/or
administrative services to the Funds; and
WHEREAS, Adviser desires AGL to provide the administrative services specified in
the attached Exhibit A ("Administrative Services"), in connection with the
Platinum Contracts for the benefit of persons who maintain their ownership
interests in the separate account, whose interests are included in the master
account ("Master Account") referred to in paragraph 1 of Exhibit A
("Shareholders"), and AGL is willing and able to provide such Administrative
Services on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and mutual covenants
hereinafter contained, each party hereto severally agrees as follows:
1. AGL agrees to perform the Administrative Services specified in Exhibit A
hereto for the benefit of the Shareholders.
2. AGL represents and agrees that it will maintain and preserve all records as
required by law to be maintained and preserved in connection with providing
the Administrative Services, and will otherwise comply with all laws, rules
and regulations applicable to the Administrative Services.
<PAGE>
3. AGL agrees to provide copies of all the historical records relating to
transactions between the Funds and Shareholders, and all written
communications and other related materials regarding the Fund(s) to or from
such Shareholders, as reasonably requested by Adviser or its representatives
(which representatives, include, without limitation, its auditors, legal
counsel or the Underwriter, as the case may be), to enable Adviser or its
representatives to monitor and review the Administrative Services performed
by AGL, or comply with any request of the board of directors, or trustees or
general partners (collectively, the "Directors") of any Fund, or of a
governmental body, self-regulatory organization or Shareholder.
In addition, AGL agrees that it will permit Adviser, the Funds or their
representatives, to have reasonable access to its personnel and records in
order to facilitate the monitoring of the quality of the Administrative
Services.
4. AGL may, with the consent of Adviser, contract with or establish
relationships with other parties for the provision of the Administrative
Services or other activities of AGL required by this Agreement, or the
Participation Agreement, provided that AGL shall be fully responsible for the
acts and omissions of such other parties.
5. AGL hereby agrees to notify Adviser promptly if for any reason it is unable
to perform fully and promptly any of its obligations under this Agreement.
6. AGL hereby represents and covenants that it does not, and will not, own or
hold or control with power to vote any shares of the Funds which are
registered in the name of AGL or the name of its nominee and which are
maintained in AGL variable annuity or variable life insurance accounts. AGL
represents further that it is not registered as a broker-dealer under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and it is not
required to be so registered, including as a result of entering into this
Agreement and performing the Administrative Services, and other obligations
of AGL set forth in this Agreement.
7. The provisions of the Agreement shall in no way limit the authority of
Adviser, or any Fund or Underwriter to take such action as any of such
parties may deem appropriate or advisable in connection with all matters
relating to the operations of any of such Funds and/or sale of its shares.
8. In consideration of the performance of the Administrative Services by AGL
with respect to the Platinum Contracts, beginning on the date hereof and
during the term of the Participation Agreement, Adviser agrees to pay AGL an
annual fee which shall equal .15% of the value of each Fund's assets in the
Platinum Contracts maintained in the Master Account for the Shareholders
(excluding all assets invested during the guarantee periods available under
the Platinum Contracts). The determination of applicable assets shall be made
by averaging assets in applicable Funds as of the last Valuation Date (as
defined in the prospectus relating to the Platinum Contracts) of each month
falling within the applicable calendar year. The foregoing fee will be paid
by Adviser to AGL on a calendar year basis, and in this regard, payment of
such fee will be made by Adviser to AGL within thirty (30) days following the
end of each calendar year.
<PAGE>
Notwithstanding anything in this Agreement or the Participation Agreement
appearing to the contrary, the payments by Adviser to AGL relate solely to
the performance by AGL of the Administrative Services described herein only,
and do not constitute payment in any manner for services provided by AGL to
AGL policy or contract owners, or to any separate account organized by AGL,
or for any investment advisory services, or for costs associated with the
distribution of any variable annuity or variable life insurance contracts.
9. AGL shall indemnify and hold harmless each of the Funds, Adviser and
Underwriter and each of their respective officers, Directors, employees and
agents from and against any and all losses, claims, damages, expenses, or
liabilities that any one or more of them may incur including without
limitation reasonable attorneys' fees, expenses and costs arising out of or
related to the performance or non-performance by AGL of the Administrative
Services under this Agreement.
10. This Agreement may be terminated without penalty at any time by AGL or by
Adviser as to one or more of the Funds collectively, upon one hundred and
eighty days (180) written notice to the other party. Notwithstanding the
foregoing, the provisions of paragraphs 2, 3, 9 and 11 of this Agreement,
shall continue in full force and effect after termination of this Agreement.
This Agreement shall not require AGL to preserve any records (in any medium
or format) relating to this Agreement beyond the time periods otherwise
required by the laws to which AGL or the Funds are subject provided that
such records shall be offered to the Funds in the event AGL decides to no
longer preserve such records following such time periods.
11. After the date of any termination of this Agreement in accordance with
paragraph 10 of this Agreement, no fee will be due with respect to any
amounts in the Platinum Contracts first placed in the Master Account for the
benefit of Shareholders after the date of such termination. However,
notwithstanding any such termination, Adviser will remain obligated to pay
AGL the fee specified in paragraph 8 of this Agreement, with respect to the
value of each Fund's average daily net assets maintained in the Master
Account with respect to the Platinum Contracts as of the date of such
termination, for so long as such amounts are held in the Master Account and
AGL continues to provide the Administrative Services with respect to such
amounts in conformity with this Agreement. This Agreement, or any provision
hereof, shall survive termination to the extent necessary for each party to
perform its obligations with respect to amounts for which a fee continues to
be due subsequent to such termination.
12. AGL understands and agrees that the obligations of Adviser under this
Agreement are not binding upon any of the Funds, upon any of their Board
members or upon any shareholder of any of the Funds.
13. It is understood and agreed that in performing the services under this
Agreement AGL, acting in its capacity described herein, shall at no time be
acting as an agent for Adviser, Underwriter or any of the Funds. AGL
agrees, and agrees to cause its agents, not to make any
3
<PAGE>
representations concerning a Fund except those contained in the Fund's then-
current prospectus; in current sales literature furnished by the Fund,
Adviser or Underwriter to AGL; in the then current prospectus for a variable
annuity contract or variable life insurance policy issued by AGL or then
current sales literature with respect to such variable annuity contract or
variable life insurance policy, approved by Adviser.
14. This Agreement, including the provisions set forth herein in paragraph 8,
may only be amended pursuant to a written instrument signed by the party to
be charged. This Agreement may not be assigned by a party hereto, by
operation of law or otherwise, without the prior written consent of the
other party.
15. This Agreement shall be governed by the laws of the State of Illinois,
without giving effect to the principles of conflicts of law of such
jurisdiction.
16. This Agreement, including Exhibit A and Schedule One, constitutes the entire
agreement between the parties with respect to the matters dealt with herein
and supersedes any previous agreements and documents with respect to such
matters. The parties agree that Schedule One may be replaced from time to
time with a new Schedule One to accurately reflect any changes in the Funds
available as investment vehicles under the Participation Agreement.
4
<PAGE>
IN WITNESS HEREOF, the parties hereto have executed and delivered this Agreement
as of the date first above written.
AMERICAN GENERAL LIFE INSURANCE COMPANY
By: ___________________________________
Authorized Signatory
-----------------------------------
Print or Type Name
VAN KAMPEN ASSET MANAGEMENT INC.
By: ___________________________________
Authorized Signatory
-----------------------------------
Print or Type Name
5
<PAGE>
SCHEDULE ONE
INVESTMENT COMPANY NAME: FUND NAME(S):
- ----------------------- ------------
Van Kampen Life Investment Trust Strategic Stock Portfolio
6
<PAGE>
SCHEDULE TWO
LIST OF CONTRACTS
1. Platinum Investor I and II, Form Nos. 97600 and 97610
2. Platinum Investor Variable Annuity, Form No. 98020
3. Corporate America Variable Life Insurance, Form No. 93301
7
<PAGE>
EXHIBIT A
Pursuant to the Agreement by and among the parties hereto, AGL shall perform the
following Administrative Services:
1. Maintain separate records for each Shareholder, which records shall reflect
shares purchased and redeemed for the benefit of the Shareholder and share
balances held for the benefit of the Shareholder. AGL shall maintain the
Master Account with the transfer agent of the Fund on behalf of Shareholders
and such Master Account shall be in the name of AGL or its nominee as the
record owner of the shares held for such Shareholders.
2. For each Fund, disburse or credit to Shareholders all proceeds of redemptions
of shares of the Fund and all dividends and other distributions not
reinvested in shares of the Fund or paid to the Separate Account holding the
Shareholders' interests.
3. Prepare and transmit to Shareholders periodic account statements showing the
total number of shares held for the benefit of the Shareholder as of the
statement closing date (converted to interests in the Separate Account),
purchases and redemptions of Fund shares for the benefit of the Shareholder
during the period covered by the statement, and the dividends and other
distributions paid for the benefit of the Shareholder during the statement
period (whether paid in cash or reinvested in Fund shares).
4. Transmit to Shareholders proxy materials and reports and other information
received by AGL from any of the Funds and required to be sent to Shareholders
under the federal securities laws and, upon request of the Fund's transfer
agent, transmit to Shareholders material Fund communications deemed by the
Fund, through its Board of Directors or other similar governing body, to be
necessary and proper for receipt by all Fund beneficial shareholders.
5. Transmit to the Fund's transfer agent purchase and redemption orders on
behalf of Shareholders.
6. Provide to the Funds, or to the transfer agent for any of the Funds, or any
of the agents designated by any of them, such periodic reports as shall
reasonably be concluded to be necessary to enable each of the Funds and its
Underwriter to comply with any applicable State Blue Sky requirements.
8
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 10(b)
AMERICAN GENERAL LIFE INSURANCE COMPANY
-----------------
Corporate Markets
-----------------
Home Office: Houston, Texas
CORPORATE MARKETS
APPLICATION FOR LIFE INSURANCE
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
NAME OF [EMPLOYER] (OWNER): _______________ ABC CORP. _________________________________________________________________________
___________________________________________________________________________________________________
ADDRESS OF [EMPLOYER]: _______________ 999 HERE STREET ___________________________________________________________________
_______________ SOMEWHERE, TX 77076 _______________________________________________________________
___________________________________________________________________________________________________
[EMPLOYER] TAX ID # _______________ 999-9999999 _______________________________________________________________________
PLAN OF INSURANCE: _______________ CA-1 ______________________________________________________________________________
BENEFICIARY: _______________ ABC CORP. _________________________________________________________________________
___________________________________________________________________________________________________
Will this insurance replace, change, or use the cash value of any existing insurance policy or annuity by any
company? [x] NO [ ] YES (If "yes," indicate name of company.) __________________________________________________________
IT IS AGREED THAT:
1. This application, which includes the attached Schedule A, will be the basis for any life insurance issued in
response to it.
2. Application is made to the Company for life insurance on the lives of the individuals specified in Schedule A.
3. The amount of insurance applied for on the life of each individual is specified in Schedule A.
4. The plan of insurance applied for on the life of each individual listed in Schedule A shall be that specified
in the PLAN OF INSURANCE section above.
5. The beneficiary for each individual listed in Section A shall be that specified in the BENEFICIARY section above.
6. NO INSURANCE WILL BECOME EFFECTIVE UNTIL ALL OF THE FOLLOWING HAVE BEEN RECEIVED BY THE COMPANY:
A) THIS APPLICATION PROPERLY COMPLETED, SIGNED, AND DATED;
B) CONSENT OF EACH PROPOSED INSURED AS REQUIRED UNDER STATE LAW;
C) THE FIRST FULL PREMIUM.
I represent that the statements and answers in this application are true and complete to the best of my knowledge and belief
and that there exists between the Owner and each Proposed Insured a substantial economic interest.
ANY PERSON WHO INCLUDES ANY FALSE OR MISLEADING INFORMATION ON AN APPLICATION FOR INSURANCE POLICY IS SUBJECT TO CRIMINAL
AND CIVIL PENALTIES.
Signed at _________SOMEWHERE, TX __________________________ Date: _________ 4/30/99 __________________________________
(CITY, STATE)
Signed for the Owner by the following duly authorized official:
X ____________ SUE SMITH __________________________________ ____________________ PRESIDENT __________________________
SIGNATURE TITLE
AGENT'S STATEMENT: Do you have knowledge or reason to believe that replacement is involved in this transaction?
[x] NO [ ] YES (If "yes," submit replacement forms where required.)
____________ 01023 ____________ ______________ BOB DOE _______________ X ______________ BOB DOE ______________________
STATE LICENSE # AGENT'S NAME PRINTED SIGNATURE OF SOLICITING AGENT
- -----------------------------------------------------------------------------------------------------------------------------------
CM1014-31 CM
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SCHEDULE A
- ------------------------------------------------------------------------------------------------------------------------------------
PROPOSED INSURED FLEXIBLE
(ALPHABETICALLY, DATE SOCIAL TOBACCO USAGE IN INITIAL TERM DEATH DEATH
LAST, FIRST, OF SECURITY ANY FORM WITHIN SPECIFIED RIDER BENEFIT BENEFIT ANNUAL
MIDDLE) SEX BIRTH NUMBER THE PAST 24 MONTHS? AMOUNT AMOUNT OPTION TEST PREMIUM
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Smith, Linda, C. F 10/21/45 ###-##-#### N 50,000 500,000 1 CVAT 2,000
- ------------------------------------------------------------------------------------------------------------------------------------
Jones, Fred D. M 11/1/50 ###-##-#### N 75,000 700,000 1 CVAT 4,000
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
I represent that, to the best of my knowledge and belief:
(a) the Proposed Insureds have not been absent from work due to illness or medical treatment for a period of more than 5
consecutive days in the last 90 days; and
(b) that the Proposed Insureds have been actively at work, full time, performing all duties of their regular occupations,
at the customary place of employment (exclusive of weekends, holidays and vacations.) for the last 90 days.
Signed for the Owner by the following duly authorized official:
X ____________ Sue Smith ___________________ ____________ President ________________ ____________ 4/30/99 ____________
OFFICER SIGNATURE TITLE DATE
- ------------------------------------------------------------------------------------------------------------------------------------
CM1014-31 CM
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMERICAN GENERAL LIFE INSURANCE COMPANY
-----------------
Corporate Markets
-----------------
Home Office: Houston, Texas
CORPORATE MARKETS
APPLICATION FOR LIFE INSURANCE
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
NAME OF [EMPLOYER] (OWNER): _______________ ABC CORP. _________________________________________________________________________
___________________________________________________________________________________________________
ADDRESS OF [EMPLOYER]: _______________ 999 HERE STREET ___________________________________________________________________
_______________ SOMEWHERE, TX 77076 _______________________________________________________________
___________________________________________________________________________________________________
[EMPLOYER] TAX ID # _______________ 999-9999999 _______________________________________________________________________
PLAN OF INSURANCE: _______________ CA-1 ______________________________________________________________________________
BENEFICIARY: _______________ ABC CORP. _________________________________________________________________________
___________________________________________________________________________________________________
Will this insurance replace, change, or use the cash value of any existing insurance policy or annuity by any
company? [x] NO [ ] YES (If "yes," indicate name of company.) __________________________________________________________
IT IS AGREED THAT:
1. This application, which includes the attached Schedule A, will be the basis for any life insurance issued in
response to it.
2. Application is made to the Company for life insurance on the lives of the individuals specified in Schedule A.
3. The amount of insurance applied for on the life of each individual is specified in Schedule A.
4. The plan of insurance applied for on the life of each individual listed in Schedule A shall be that specified
in the PLAN OF INSURANCE section above.
5. The beneficiary for each individual listed in Section A shall be that specified in the BENEFICIARY section above.
6. NO INSURANCE WILL BECOME EFFECTIVE UNTIL ALL OF THE FOLLOWING HAVE BEEN RECEIVED BY THE COMPANY:
A) THIS APPLICATION PROPERLY COMPLETED, SIGNED, AND DATED;
B) CONSENT OF EACH PROPOSED INSURED AS REQUIRED UNDER STATE LAW;
C) THE FIRST FULL PREMIUM.
I represent that the statements and answers in this application are true and complete to the best of my knowledge and belief
and that there exists between the Owner and each Proposed Insured a substantial economic interest.
ANY PERSON WHO INCLUDES ANY FALSE OR MISLEADING INFORMATION ON AN APPLICATION FOR INSURANCE POLICY IS SUBJECT TO CRIMINAL
AND CIVIL PENALTIES.
Signed at _________SOMEWHERE, TX __________________________ Date: _________ 4/30/99 __________________________________
(CITY, STATE)
Signed for the Owner by the following duly authorized official:
X ____________ SUE SMITH __________________________________ ____________________ PRESIDENT __________________________
SIGNATURE TITLE
AGENT'S STATEMENT: Do you have knowledge or reason to believe that replacement is involved in this transaction:
[x] NO [ ] YES (If "yes," submit replacement forms where required.)
____________ 01023 ____________ ______________ BOB DOE _______________ X ______________ BOB DOE ______________________
STATE LICENSE # AGENT'S NAME PRINTED SIGNATURE OF SOLICITING AGENT
- -----------------------------------------------------------------------------------------------------------------------------------
CM1014-31 CM
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SCHEDULE A
- ------------------------------------------------------------------------------------------------------------------------------------
PROPOSED INSURED FLEXIBLE
(ALPHABETICALLY, DATE SOCIAL TOBACCO USAGE IN INITIAL TERM DEATH DEATH
LAST, FIRST, OF SECURITY ANY FORM WITHIN SPECIFIED RIDER BENEFIT BENEFIT ANNUAL
MIDDLE) SEX BIRTH NUMBER THE PAST 24 MONTHS? AMOUNT AMOUNT OPTION TEST PREMIUM
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Smith, Linda, C. F 10/21/45 ###-##-#### N 50,000 500,000 1 CVAT 2,000
- ------------------------------------------------------------------------------------------------------------------------------------
Jones, Fred D. M 11/1/50 ###-##-#### N 75,000 700,000 1 CVAT 4,000
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
I represent that, to the best of my knowledge and belief:
(a) the Proposed Insureds have not been absent from work due to illness or medical treatment for a period of more than 5
consecutive days in the last 90 days; and
(b) that the Proposed Insureds have been actively at work, full time, performing all duties of their regular occupations,
at the customary place of employment (exclusive of weekends, holidays and vacations.) for the last 90 days.
Signed for the Owner by the following duly authorized official:
X ____________ Sue Smith ___________________ ____________ President ________________ ____________ 4/30/99 ____________
OFFICER SIGNATURE TITLE DATE
- ------------------------------------------------------------------------------------------------------------------------------------
CM1014-31 CM
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 10(d)
AMERICAN GENERAL LIFE INSURANCE COMPANY
-----------------
Corporate Markets
-----------------
Home Office: Houston, Texas
LIFE INSURANCE CONSENT FORM
<S> <C> <C>
INSTRUCTIONS:
Please mark appropriate boxes in each section and sign below.
- ------------------------------------------------------------------------------------------------------------------------------------
1.
[x] YES, I, _________________ LINDA C. SMITH ________________ ____ 333/33/3333 ____ ____ F ____ ____ 10/21/45 ____
PRINT NAME OF PROPOSED INSURED SOCIAL SECURITY# SEX DATE OF BIRTH
do hereby consent to have insurance purchased on my life by _________________________ ABC Corp _________________________________
(EMPLOYER)
[ ] NO, I, _________________________________________ , do not want the [Employer] to purchase insurance on my life.
PRINT NAME OF PROPOSED INSURED
2.
[x] I agree and understand that the [Employer] will be the Owner and the Beneficiary of the insurance contract.
[ ] I agree and understand that the Owner and the Beneficiary of the insurance contract will be as stated in the application
for coverage.
3.
[x] YES, I have not been absent from work due to illness or medical treatment for a period of more than 5 consecutive days in the
last 90 days; and I have been actively at work, full time, performing all duties of my regular occupation, at the customary
place of employment (exclusive of weekends, holidays and vacation) for the last 90 days.
[ ] NO, I have not been actively at work as described above. The reasons for my absence(s) are as follows:
____________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________
4.
[ ] YES, I have used tobacco within the past 24 months.
Please state the type of tobacco used and the frequency of usage: ______________________________________________________________
[x] NO, I have not used tobacco within the past 24 months.
X __________________ LINDA C. SMITH __________________________ __________________ 4/29/99 _______________________
SIGNATURE OF PROPOSED INSURED DATE
_____________123 NOWHERE STREET__________________ _____SOMEWHERE____ _______ TX _______ _________ 77777 ____________
ADDRESS CITY STATE ZIP
- ------------------------------------------------------------------------------------------------------------------------------------
CM 1017-99
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMERICAN GENERAL LIFE INSURANCE COMPANY
-----------------
Corporate Markets
-----------------
Home Office: Houston, Texas
LIFE INSURANCE CONSENT FORM
<S> <C> <C>
INSTRUCTIONS:
Please mark appropriate boxes in each section and sign below.
- ------------------------------------------------------------------------------------------------------------------------------------
1.
[x] YES, I, _________________ LINDA C. SMITH ________________ ____ 333/33/3333 ____ ____ F ____ ____ 10/21/45 ____
PRINT NAME OF PROPOSED INSURED SOCIAL SECURITY# SEX DATE OF BIRTH
do hereby consent to have insurance purchased on my life by _________________________ ABC Corp _________________________________
(EMPLOYER)
[ ] NO, I, _________________________________________ , do not want the [Employer] to purchase insurance on my life.
PRINT NAME OF PROPOSED INSURED
2.
[x] I agree and understand that the [Employer] will be the Owner and the Beneficiary of the insurance contract.
[ ] I agree and understand that the Owner and the Beneficiary of the insurance contract will be as stated in the application
for coverage.
3.
[x] YES, I have not been absent from work due to illness or medical treatment for a period of more than 5 consecutive days in the
last 90 days; and I have been actively at work, full time, performing all duties of my regular occupation, at the customary
place of employment (exclusive of weekends, holidays and vacation) for the last 90 days.
[ ] NO, I have not been actively at work as described above. The reasons for my absence(s) are as follows:
____________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________
4.
[ ] YES, I have used tobacco within the past 24 months.
Please state the type of tobacco used and the frequency of usage: ______________________________________________________________
[x] NO, I have not used tobacco within the past 24 months.
X __________________ LINDA C. SMITH __________________________ __________________ 4/29/99 _______________________
SIGNATURE OF PROPOSED INSURED DATE
_____________123 NOWHERE STREET__________________ _____SOMEWHERE____ _______ TX _______ _________ 77777 ____________
ADDRESS CITY STATE ZIP
- ------------------------------------------------------------------------------------------------------------------------------------
CM 1017-99
</TABLE>
<PAGE>
EXHIBIT 10(e)
<TABLE>
<CAPTION>
AMERICAN GENERGAL LIFE INSURANCE COMPANY ("AGL")
Corporate Markets Group
Home Office: Houston, Texas
VARIABLE UNIVERSAL LIFE
INSURANCE SUPPLEMENTAL APPLICATION
(This supplement must accompany the appropriate application for life insurance.)
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
PART 1. APPLICANT INFORMATION
- ------------------------------------------------------------------------------------------------------------------------------------
Supplement to the application on the life of ABC CORP. LIFE INSURANCE PLAN , dated 4/30/99 .
- ------------------------------------------------------------------------------------------------------------------------------------
PART 2. INITIAL ALLOCATION PERCENTAGES
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPTIONS: In the "Premium Allocation" column, indicate how each premium received is to be allocated. In the "Deduction
Allocation" column, indicate which investment options are to be used for the deduction of monthly account charges. Total allocations
in each column must equal 100%. Use whole percentages only.
Premium Deduction Premium Deduction
Allocation Allocation Allocation Allocation
---------- ---------- ---------- ----------
AGL Declared Fixed Interest Account ___% ___% MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC.
[AIM VARIABLE INSURANCE FUNDS, INC. Equity Growth Division 100% 100%
AIM V.I. International Equity Division ___% ___% High Yield Division ___% ___%
AIM V.I. Value Division ___% ___% PUTNAM VARIABLE TRUST
AMERICAN GENERAL SERIES PORTFOLIO COMPANY Putnam VT Diversified Income Division ___% ___%
International Equities Division ___% ___% Putnam VT Growth and Income Division ___% ___%
MidCap Index Division ___% ___% Putnam VT Int'l Growth and Income Division ___% ___%
Money Market Division ___% ___% SAFECO RESOURCE SERIES TRUST
Stock Index Division ___% ___% Equity Division ___% ___%
DREYFUS VARIABLE INVESTMENT FUND Growth Division ___% ___%
Quality Bond Division ___% ___% VAN KAMPEN LIFE INVESTMENT TRUST
Small Cap Division ___% ___% Strategic Stock Division ___% ___%
MFS VARIABLE INSURANCE TRUST OTHER: ________________________________ ___% ___%]
MFS Emerging Growth Series ___% ___% 100% 100%
- ------------------------------------------------------------------------------------------------------------------------------------
PART 3. DOLLAR COST AVERAGING
- ------------------------------------------------------------------------------------------------------------------------------------
DOLLAR COST AVERAGING: ($5,000 minimum beginning accumulation value) An amount can be systematically transferred from the [Money
Market Division] and transferred to one or more of the investment options below. The [AGL Declared Fixed Interest Account] is not
available for Dollar Cost Averaging. Please refer to the prospectus for more information on the Dollar Cost Averaging option.
DAY OF THE MONTH FOR TRANSFERS: __________________________ (Choose a day of the month between 1-28.)
FREQUENCY OF TRANSFERS: [_] Monthly [_] Quarterly [_] Semiannually [_] Annually
TRANSFER $__________________ ($100 minimum, whole dollars only) from the [AGSPC Money Market Division] to the following division(s):
[AIM V.I. International Equity $______ Equity Growth $______
AIM V.I. Value $______ High Yield $______
International Equities $______ Putnam VT Diversified Income $______
MidCap Index $______ Putnam VT Growth and Income $______
Stock Index $______ Putnam VT Int'l Growth and Income $______
Quality Bond $______ Equity $______
Small Cap $______ Growth $______
MFS Emerging Growth Series $______ Strategic Stock $______
Other: ________________________________ $______ ]
- ------------------------------------------------------------------------------------------------------------------------------------
PART 4. AUTOMATIC REBALANCING
- ------------------------------------------------------------------------------------------------------------------------------------
AUTOMATIC REBALANCING: ($5,000 minimum beginning accumulation value) Variable division assets will be automatically rebalanced based
on the premium percentages designated in Part 2. If the [AGL Declared Fixed Interest Account] has been designated for premium
allocation in Part 2, the rebalancing will be based on the proportion allocated to the variable divisions. Please refer to the
prospectus for more information on the Automatic Rebalancing option.
[_] CHECK HERE FOR AUTOMATIC REBALANCING.
FREQUENCY: [_] Quarterly [_] Semiannually [_] Annually
NOTE: Automatic Rebalancing is not available if the Dollar Cost Averaging option has been chosen.
- ------------------------------------------------------------------------------------------------------------------------------------
PAGE 1 of 2
CM 1001-99
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMERICAN GENERAL LIFE INSURANCE COMPANY
Corporate Markets Group
Home Office: Houston, Texas
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
PART 5. TELEPHONE AUTHORIZATION
- ------------------------------------------------------------------------------------------------------------------------------------
I (or we, if Multiple Owners), hereby authorize American General Life Insurance Company ("AGL") to act on telephone instructions to
transfer values among the variable divisions and the AGL Declared Fixed Interest Account ] and to change allocations for future
purchase payments and monthly deductions given by: (Initial appropriate box below.)
[X] Contract Owner(s)-- if Multiple Owners, either of us acting independently.
[ ] Contract Owner(s) or the Agent/Registered Representative who is appointed to represent AGL and the firm authorized to service
my contract.
AGL and any person designated by this authorization will not be responsible for any claim, loss or expense based upon telephone
instructions received and acted on in good faith, including losses due to telephone instruction communication errors. AGL's
liability for erroneous transfers and allocations, unless clearly contrary to instructions received, will be limited to correction
of the allocations on a current basis. If an error, objection or other claim arises due to a telephone transaction, I/we will notify
AGL in writing within five working days from receipt of confirmation of the transaction from AGL. I/we understand that this
authorization is subject to the terms and provisions of the variable universal life insurance contract and its related prospectus.
This authorization will remain in effect until my/our written notice of its revocation is received by AGL at its home office.
[ ] Initial here to decline the above telephone Authorization.
- ------------------------------------------------------------------------------------------------------------------------------------
PART 6. SUITABILITY (ALL QUESTIONS MUST BE ANSWERED.)
- ------------------------------------------------------------------------------------------------------------------------------------
YES NO
1. Have you, the Proposed Insured or Owner (if different), received the variable universal life insurance
policy prospectus and the prospectuses describing the investment options? [X] [_]
(If "yes," please furnish the Prospectus dates.)
Variable Universal Life Insurance Policy Prospectus: _______________
Supplements (if any): _______________
2. Do you understand and acknowledge:
A. THAT THE CONTRACT APPLIED FOR IS VARIABLE, EMPLOYS THE USE OF SEGREGATED ACCOUNTS WHICH MEANS THAT
YOU NEED TO RECEIVE AND UNDERSTAND A CURRENT PROSPECTUS FOR THE CONTRACT AND THE UNDERLYING
ACCOUNTS? [X] [ ]
B. THAT ANY BENEFITS, VALUES OR PAYMENTS BASED ON PERFORMANCE OF THE SEGREGATED ACCOUNTS MAY VARY; AND
(1) ARE NOT GUARANTEED BY THE COMPANY, ANY OTHER INSURANCE COMPANY, THE U.S. GOVERNMENT OR ANY STATE
GOVERNMENT? [X] [ ]
(2) ARE NOT FEDERALLY INSURED BY THE FDIC, THE FEDERAL RESERVE BOARD OF ANY OTHER AGENCY, FEDERAL
OR STATE? [X] [ ]
C. THAT IN ESSENCE, ALL RISK IS BORNE BY THE OWNER EXCEPT FOR FUNDS PLACED IN THE AGL DECLARED FIXED
INTEREST ACCOUNT? [X] [ ]
D. THAT THE CONTRACT IS DESIGNED TO PROVIDE LIFE INSURANCE COVERAGE AND TO ALLOW FOR THE ACCUMULATION
OF VALUES IN THE SEGREGATED ACCOUNTS? [X] [ ]
E. THE AMOUNT OR DURATION OF THE DEATH BENEFIT MAY INCREASE OR DECREASE, DEPENDING ON THE INVESTMENT
EXPERIENCE OF THE SEPARATE ACCOUNT? [X] [ ]
F. THE CONTRACT VALUES MAY INCREASE OR DECREASE, DEPENDING ON THE INVESTMENT EXPERIENCE OF THE
SEPARATE ACCOUNT,THE AGL DECLARED FIXED INTEREST ACCOUNT ACCUMULATION, AND CERTAIN EXPENSE
DEDUCTIONS? [X] [ ]
3. Do you believe the Policy you selected meets your insurance and investment objectives and your anticipated
financial needs? [X] [_]
Signed at: SOMEWHERE_________________________________________________________TX__ Date:_________04/30/99______________
CITY STATE
X___________SUE SMITH______________________________________ X_______BOB DOE______________________________________________
SIGNATURE OF OWNER SIGNATURE OF REGISTERED REPRESENTATIVE
X__________________________________________________________ X_______BOB DOE______________________________________________
SIGNATURE OF MULTIPLE OWNER (If applicable) PRINT NAME OF BROKER/DEALER
- ------------------------------------------------------------------------------------------------------------------------------------
PAGE 2 of 2
CM 1001-99
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMERICAN GENERGAL LIFE INSURANCE COMPANY ("AGL")
Corporate Markets Group
Home Office: Houston, Texas
VARIABLE UNIVERSAL LIFE
INSURANCE SUPPLEMENTAL APPLICATION
(This supplement must accompany the appropriate application for life insurance.)
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
PART 1. APPLICANT INFORMATION
- ------------------------------------------------------------------------------------------------------------------------------------
Supplement to the application on the life of _______ABC CORP. LIFE INSURANCE PLAN____________, dated ______4/30/99________________.
- ------------------------------------------------------------------------------------------------------------------------------------
PART 2. INITIAL ALLOCATION PERCENTAGES
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPTIONS: In the "Premium Allocation" column, indicate how each premium received is to be allocated. In the "Deduction
Allocation" column, indicate which investment options are to be used for the deduction of monthly account charges. Total allocations
in each column must equal 100%. Use whole percentages only.
Premium Deduction Premium Deduction
Allocation Allocation Allocation Allocation
---------- ---------- ---------- ----------
AGL Declared Fixed Interest Account 100% 100% MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC.
[AIM VARIABLE INSURANCE FUNDS, INC. Equity Growth Division 100% 100%
AIM V.I. International Equity Division ___% ___% High Yield Division ___% ___%
AIM V.I. Value Division ___% ___% PUTNAM VARIABLE TRUST
AMERICAN GENERAL SERIES PORTFOLIO COMPANY Putnam VT Diversified Income Division ___% ___%
International Equities Division ___% ___% Putnam VT Growth and Income Division ___% ___%
MidCap Index Division ___% ___% Putnam VT Int'l Growth and Income Division ___% ___%
Money Market Division ___% ___% SAFECO RESOURCE SERIES TRUST
Stock Index Division ___% ___% Equity Division ___% ___%
DREYFUS VARIABLE INVESTMENT FUND Growth Division ___% ___%
Quality Bond Division ___% ___% VAN KAMPEN LIFE INVESTMENT TRUST
Small Cap Division ___% ___% Strategic Stock Division ___% ___%
MFS VARIABLE INSURANCE TRUST OTHER: ________________________________ ___% ___%]
MFS Emerging Growth Series ___% ___% 100% 100%
- ------------------------------------------------------------------------------------------------------------------------------------
PART 3. DOLLAR COST AVERAGING
- ------------------------------------------------------------------------------------------------------------------------------------
DOLLAR COST AVERAGING: ($5,000 minimum beginning accumulation value) An amount can be systematically transferred from the [Money
Market Division] and transferred to one or more of the investment options below. The [AGL Declared Fixed Interest Account] is not
available for Dollar Cost Averaging. Please refer to the prospectus for more information on the Dollar Cost Averaging option.
DAY OF THE MONTH FOR TRANSFERS: __________________________ (Choose a day of the month between 1-28.)
FREQUENCY OF TRANSFERS: [_] Monthly [_] Quarterly [_] Semiannually [_] Annually
TRANSFER $__________________ ($100 minimum, whole dollars only) from the [AGSPC Money Market Division] to the following division(s):
[AIM V.I. International Equity $______ Equity Growth $______
AIM V.I. Value $______ High Yield $______
International Equities $______ Putnam VT Diversified Income $______
MidCap Index $______ Putnam VT Growth and Income $______
Stock Index $______ Putnam VT Int'l Growth and Income $______
Quality Bond $______ Equity $______
Small Cap $______ Growth $______
MFS Emerging Growth Series $______ Strategic Stock $______
Other: ________________________________ $______ ]
- ------------------------------------------------------------------------------------------------------------------------------------
PART 4. AUTOMATIC REBALANCING
- ------------------------------------------------------------------------------------------------------------------------------------
AUTOMATIC REBALANCING: ($5,000 minimum beginning accumulation value) Variable division assets will be automatically rebalanced based
on the premium percentages designated in Part 2. If the [AGL Declared Fixed Interest Account] has been designated for premium
allocation in Part 2, the rebalancing will be based on the proportion allocated to the variable divisions. Please refer to the
prospectus for more information on the Automatic Rebalancing option.
[_] CHECK HERE FOR AUTOMATIC REBALANCING.
FREQUENCY: [_] Quarterly [_] Semiannually [_] Annually
NOTE: Automatic Rebalancing is not available if the Dollar Cost Averaging option has been chosen.
- ------------------------------------------------------------------------------------------------------------------------------------
PAGE 1 of 2
CM 1001-99
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMERICAN GENERAL LIFE INSURANCE COMPANY
Corporate Markets Group
Home Office: Houston, Texas
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
PART 5. TELEPHONE AUTHORIZATION
- ------------------------------------------------------------------------------------------------------------------------------------
I (or we, if Multiple Owners), hereby authorize American General Life Insurance Company ("AGL") to act on telephone instructions to
transfer values among the variable divisions and the AGL Declared Fixed Interest Account ] and to change allocations for future
purchase payments and monthly deductions given by: (Initial appropriate box below.)
[X] Contract Owner(s)-- if Multiple Owners, either of us acting independently.
[ ] Contract Owner(s) or the Agent/Registered Representative who is appointed to represent AGL and the firm authorized to service
my contract.
AGL and any person designated by this authorization will not be responsible for any claim, loss or expense based upon telephone
instructions received and acted on in good faith, including losses due to telephone instruction communication errors. AGL's
liability for erroneous transfers and allocations, unless clearly contrary to instructions received, will be limited to correction
of the allocations on a current basis. If an error, objection or other claim arises due to a telephone transaction, I/we will notify
AGL in writing within five working days from receipt of confirmation of the transaction from AGL. I/we understand that this
authorization is subject to the terms and provisions of the variable universal life insurance contract and its related prospectus.
This authorization will remain in effect until my/our written notice of its revocation is received by AGL at its home office.
[ ] Initial here to decline the above telephone Authorization.
- ------------------------------------------------------------------------------------------------------------------------------------
PART 6. SUITABILITY (ALL QUESTIONS MUST BE ANSWERED.)
- ------------------------------------------------------------------------------------------------------------------------------------
YES NO
1. Have you, the Proposed Insured or Owner (if different), received the variable universal life insurance
policy prospectus and the prospectuses describing the investment options? [X] [_]
(If "yes," please furnish the Prospectus dates.)
Variable Universal Life Insurance Policy Prospectus: _______________
Supplements (if any): _______________
2. Do you understand and acknowledge:
A. THAT THE CONTRACT APPLIED FOR IS VARIABLE, EMPLOYS THE USE OF SEGREGATED ACCOUNTS WHICH MEANS THAT
YOU NEED TO RECEIVE AND UNDERSTAND A CURRENT PROSPECTUS FOR THE CONTRACT AND THE UNDERLYING
ACCOUNTS? [X] [ ]
B. THAT ANY BENEFITS, VALUES OR PAYMENTS BASED ON PERFORMANCE OF THE SEGREGATED ACCOUNTS MAY VARY; AND
(1) ARE NOT GUARANTEED BY THE COMPANY, ANY OTHER INSURANCE COMPANY, THE U.S. GOVERNMENT OR ANY STATE
GOVERNMENT? [X] [ ]
(2) ARE NOT FEDERALLY INSURED BY THE FDIC, THE FEDERAL RESERVE BOARD OF ANY OTHER AGENCY, FEDERAL
OR STATE? [X] [ ]
C. THAT IN ESSENCE, ALL RISK IS BORNE BY THE OWNER EXCEPT FOR FUNDS PLACED IN THE AGL DECLARED FIXED
INTEREST ACCOUNT? [X] [ ]
D. THAT THE CONTRACT IS DESIGNED TO PROVIDE LIFE INSURANCE COVERAGE AND TO ALLOW FOR THE ACCUMULATION
OF VALUES IN THE SEGREGATED ACCOUNTS? [X] [ ]
E. THE AMOUNT OR DURATION OF THE DEATH BENEFIT MAY INCREASE OR DECREASE, DEPENDING ON THE INVESTMENT
EXPERIENCE OF THE SEPARATE ACCOUNT? [X] [ ]
F. THE CONTRACT VALUES MAY INCREASE OR DECREASE, DEPENDING ON THE INVESTMENT EXPERIENCE OF THE
SEPARATE ACCOUNT,THE AGL DECLARED FIXED INTEREST ACCOUNT ACCUMULATION, AND CERTAIN EXPENSE
DEDUCTIONS? [X] [ ]
3. Do you believe the Policy you selected meets your insurance and investment objectives and your anticipated
financial needs? [X] [_]
Signed at: SOMEWHERE_________________________________________________________TX__ Date:_________04/30/99______________
CITY STATE
X___________SUE SMITH______________________________________ X_______BOB DOE______________________________________________
SIGNATURE OF OWNER SIGNATURE OF REGISTERED REPRESENTATIVE
X__________________________________________________________ X_______BOB DOE______________________________________________
SIGNATURE OF MULTIPLE OWNER (If applicable) PRINT NAME OF BROKER/DEALER
- ------------------------------------------------------------------------------------------------------------------------------------
PAGE 2 of 2
CM 1001-99
</TABLE>
<PAGE>
American
General Exhibit 2(a)
LIFE COMPANIES
2929 Allen Parkway (A40-04), Houston, Texas 77019
Pauletta P. Cohn
Associate General Counsel
Direct Line (713) 831-8471
FAX (713) 831-1106
E-mail: [email protected]
August 25, 1999
American General Life Insurance Company
2727-A Allen Parkway
Houston, TX 77019
Dear Ladies and Gentlemen:
As Associate General Counsel of American General Life Companies, I have acted as
counsel to American General Life Insurance Company (the "Company") in connection
with the filing of Pre-effective Amendment No. 1 to the Registration Statement
on Form S-6, File Nos. 333-80191 and 811-08561 ("Registration Statement") for
Separate Account VL-R ("Separate Account VL-R") of the Company with the
Securities and Exchange Commission. The Registration Statement relates to the
proposed issuance of Corporate America - Variable (policy form No. 99301)
flexible premium variable life insurance policies by the Company ("Policies").
Net premiums received under the Policies are allocated by the Company to
Separate Account VL-R to the extent directed by owners of the Policies. Net
premiums under other policies that may be issued by the Company may also be
allocated to Separate Account VL-R. The Policies are designed to provide
retirement protection and are to be offered in the manner described in the
prospectus and the prospectus supplements included in the Registration
Statement. The Policies will be sold only in jurisdictions authorizing such
sales.
In connection with rendering this opinion, I have examined and am familiar with
originals or copies, certified or otherwise identified to my satisfaction, of
the corporate records of the Company and all such other documents as I have
deemed necessary or appropriate as a basis for the opinion expressed herein and
have assumed that prior to the issuance or sale of any Policies, the
Registration Statement, as finally amended, will be effective.
<PAGE>
American General Life Insurance Company
August 25, 1999
Page 2
Based on and subject to the foregoing and the limitations, qualifications,
exceptions and assumptions set forth herein, I am of the opinion that:
1. The Company is a corporation duly organized and validly existing under the
laws of the State of Texas.
2. Separate Account VL-R was duly established and is maintained by the Company
pursuant to the laws of the State of Texas, under which income, gains and
losses, whether or not realized, from assets allocated to Separate Account
VL-R, are, in accordance with the Policies, credited to or charged against
Separate Account VL-R without regard to other income, gains or losses of
the Company.
3. Assets allocated to Separate Account VL-R will be owned by the Company. The
Company is not a trustee with respect thereto. The Policies provide that
the portion of the assets of Separate Account VL-R equal to the reserves
and other Policy liabilities with respect to Separate Account VL-R will not
be chargeable with liabilities arising out of any other business the
Company may conduct. The Company reserves the right to transfer assets of
Separate Account VL-R in excess of such reserves and other Policy
liabilities to the general account of the Company.
4. When issued and sold as described above, the Policies (including any units
of Separate Account VL-R duly credited thereunder) will be duly authorized
and will constitute validly issued and binding obligations of the Company
in accordance with their terms.
I am admitted to the bar in the State of Texas, and I do not express any opinion
as to the laws of any other jurisprudence.
This opinion is being furnished in accordance with the requirements of Item
601(b)(5), Regulation S-K of the Securities Act of 1933 and I hereby consent to
the use of this opinion as an exhibit to the Registration Statement.
Sincerely,
/s/ PAULETTA P. COHN
----------------------
PPC:mlc
<PAGE>
[Letterhead of Wayne A. Barnard, Exhibit 2(b)
American General Financial Group]
Writer's Direct Number
(713) 831-3246
August 23, 1999
American General Life Insurance Company
2727-A Allen Parkway
Houston, Texas 77019
Dear Ladies and Gentlemen:
This opinion is furnished in connection with the Registration Statement on Form
S-6, File No. 333-80191 ("Registration Statement") of Separate Account VL-R
("Separate Account VL-R") of American General Life Insurance Company ("AGL")
covering an indefinite number of units of interest in Separate Account VL-R
under Corporate America (policy form No. 99301) flexible premium variable life
insurance policies ("Policies"). Net premiums received under the Policies may be
allocated to Separate Account VL-R as described in the prospectus included in
the Registration Statement.
I participated in the preparation of the Policies and I am familiar with their
provisions. I am also familiar with the description contained in the prospectus.
In my opinion:
The Illustrations of Hypothetical Policy Benefits appearing on page 17 of
the Prospectus (the "Illustrations") are consistent with the provisions of
the Policies. The assumptions upon which these Illustrations are based,
including the current charges and the currently planned .25% and .50%
reductions in the daily charges after a specified number of years, are
stated in the prospectus and are reasonable. The Policies have not been
designed so as to make the relationship between premiums and benefits, as
shown in the Illustrations, appear disproportionately more favorable to
prospective purchasers of Policies for preferred risk (the best risk class
offered by AGL) non-tobacco user males age 45, than to prospective
purchasers of Policies for males at other ages within this risk class or
any other risk class, or for females. The particular Illustrations shown
were not selected for the purpose of making the relationship appear more
favorable.
I hereby consent to the use of this opinion as an exhibit to the Registration
Statement and to the reference to my name under the heading "Accounting and
Actuarial Experts" in the prospectus.
/s/ WAYNE A. BARNARD
--------------------------------------
Wayne A. Barnard
Senior Vice President & Chief Actuary
<PAGE>
Exhibit 6
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference made to our firm under the caption "Independent
Auditors" and to the use of our report dated February 16, 1999, as to American
General Life Insurance Company, in Pre-Effective Amendment No. 1 to the
Registration Statement (Form S-6 Nos. 333-80191 and 811-08561) of American
General Life Insurance Company.
/s/ ERNST & YOUNG LLP
----------------------
ERNST & YOUNG LLP
Houston, Texas
August 23, 1999
