Registration No. 333-52689
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 2
TO
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS
REGISTERED ON FORM N-8B-2
A. BMA Variable Life Account A
(Exact Name of Trust)
B. Business Men's Assurance Company of America
(Name of Depositor)
C. BMA Tower, P.O. Box 412879
Kansas City, MO 84141
(Complete address of depositor's principal executive offices)
D. Name and complete address of agent for service:
David A. Gates
Business Men's Assurance Company of America
700 Karnes Blvd.
Kansas City, Missouri 64108
(800) 423-9398
Copies to:
Judith A. Hasenauer
Blazzard, Grodd & Hasenauer, P.C.
P.O. Box 5108
Westport, CT 06881
(203) 226-7866
E. Flexible Premium Adjustable Variable Life Insurance Policies (Title and
amount of securities being registered)
F. Proposed maximum aggregate offering price to the public of the securities
being registered:
Continuous offering
G. Amount of Filing Fee: Not Applicable
H. Approximate date of proposed public offering:
As soon as practicable after the effective date of this filing.
It is proposed that this filing will become effective:
___ immediately upon filing pursuant to paragraph (b) of Rule 485
_X_ on May 3, 1999 pursuant to paragraph (b) of Rule 485
___ 60 days after filing pursuant to paragraph (a)(1) of Rule 485
___ on (date) pursuant to paragraph (a)(1) of Rule 485
If appropriate, check the following:
____This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
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EXPLANATORY NOTE
This Registration Statement contains 43 portfolios of the various underlying
investment options. Two versions (Version A and Version B) of the Prospectus
will be created from this Registration Statement. The only differences between
the two versions are the underlying investment options and the illustrations of
policy values. One version will contain 17 portfolios (Version A) and the other
version will contain 43 portfolios (Version B). The distribution system for each
version of the Prospectus will be different. There are Co-Principal Underwriters
of the Policy; each of whom will distribute a different version of the
Prospectus. The Prospectus contained in this Registration Statement contains two
sets of illustrations - one for Version A of the Prospectus and the other for
Version B. The Prospectuses have been filed and will continue to be filed with
the Commission pursuant to Rule 497 under the Securities Act of 1933. The
Registrant undertakes to update this Explanatory Note, as needed, each time a
Post-Effective Amendment is filed.
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CROSS REFERENCE TO ITEMS REQUIRED
BY FORM N-8B-2
N-8B-2 Item Caption in Prospectus
- ----------- ---------------------
1 The Variable Insurance Policy
2 Other Information; The Company
3 Not Applicable
4 Other Information
5 The Separate Account
6(a) Not Applicable
(b) Not Applicable
7 Not Applicable
8 Not Applicable
9 Legal Proceedings
10 Purchases
11 Investment Options
12 Investment Options
13 Expenses
14 Purchases
15 Purchases
16 Investment Options
17 Access to Your Money
18 Access to Your Money
19 Reports to Owners
20 Not Applicable
21 Access to Your Money
22 Not Applicable
23 Not Applicable
24 Not Applicable
25 The Company
26 Expenses
27 The Company
28 The Company
29 The Company
30 The Company
31 Not Applicable
32 Not Applicable
33 Not Applicable
34 Not Applicable
35 BMA; Other Information
36 Not Applicable
37 Not Applicable
38 Other Information
39 Other Information
40 Not Applicable
41 Not Applicable
42 Not Applicable
43 Not Applicable
44 Purchases
45 Other Information
46 Access to Your Money
47 Not Applicable
48 Not Applicable
49 Not Applicable
50 Not Applicable
51 The Company; Purchases
52 Investment Options
53 The Separate Account
54 Not Applicable
55 Not Applicable
56 Not Applicable
57 Not Applicable
58 Not Applicable
59 Financial Statements
FLEXIBLE PREMIUM ADJUSTABLE VARIABLE LIFE INSURANCE POLICY
ISSUED BY
BMA VARIABLE LIFE ACCOUNT A
AND
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
This Prospectus describes the Flexible Premium Adjustable Variable Life
Insurance Policy (Policy) offered by Business Men's Assurance Company of America
(BMA).
The Policy has been designed to be used to create or conserve one's estate,
retirement planning and other insurance needs of individuals and businesses.
The Policy has 44 investment choices--a Fixed Account and 43 Investment
Options listed below.
When You buy a Policy, to the extent You have selected the Investment
Options, You bear the complete investment risk. Your Accumulation Value and,
under certain circumstances, the Death Benefit under the Policy may increase or
decrease or the duration of the Policy may vary depending on the investment
experience of the Investment Option(s) You select.
You can put Your money in the Fixed Account and/or any of the following
Investment Options:
INVESTORS MARK SERIES FUND, INC.
MANAGED BY STANDISH, AYER & WOOD, INC.
Intermediate Fixed Income
Mid Cap Equity
Money Market
MANAGED BY STANDISH INTERNATIONAL MANAGEMENT COMPANY, L.P.
Global Fixed Income
MANAGED BY STEIN ROE & FARNHAM INCORPORATED
Small Cap Equity
Large Cap Growth
MANAGED BY DAVID L. BABSON & CO. INC.
Large Cap Value
MANAGED BY LORD, ABBETT & CO.
Growth & Income
MANAGED BY KORNITZER CAPITAL MANAGEMENT, INC.
Balanced
BERGER INSTITUTIONAL PRODUCTS TRUST
MANAGED BY BERGER ASSOCIATES
Berger IPT--100
Berger IPT--Growth and Income
Berger IPT--Small Company Growth
MANAGED BY BBOI WORLDWIDE LLC
Berger/BIAM IPT--International
CONSECO SERIES TRUST
MANAGED BY CONSECO CAPITAL MANAGEMENT, INC.
Balanced (formerly, Asset Allocation)
Equity (formerly, Common Stock)
Fixed Income (formerly, Corporate Bond)
Government Securities
THE ALGER AMERICAN FUND
MANAGED BY FRED ALGER MANAGEMENT, INC.
Alger American Growth
Alger American Leveraged AllCap
Alger American MidCap Growth
Alger American Small Capitalization
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
MANAGED BY AMERICAN CENTURY INVESTMENT MANAGEMENT, INC.
VP Income & Growth
VP International
VP Value
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.
MANAGED BY THE DREYFUS CORPORATION (Sub-Adviser: NCM Capital Management
Group, Inc.)
DREYFUS STOCK INDEX FUND
MANAGED BY THE DREYFUS CORPORATION (Index Fund Manager: Mellon Equity
Associates)
DREYFUS VARIABLE INVESTMENT FUND
MANAGED BY THE DREYFUS CORPORATION
Disciplined Stock
International Value
FEDERATED INSURANCE SERIES
MANAGED BY FEDERATED INVESTMENT MANAGEMENT COMPANY (formerly,
Federated Advisers)
Federated High Income Bond Fund II
Federated Utility Fund II
MANAGED BY FEDERATED GLOBAL INVESTMENT MANAGEMENT CORP.
Federated International Equity Fund II
INVESCO VARIABLE INVESTMENT FUNDS, INC.
MANAGED BY INVESCO FUNDS GROUP, INC.
INVESCO VIF--High Yield
INVESCO VIF--Equity Income (formerly, INVESCO VIF - Industrial
Income)
LAZARD RETIREMENT SERIES, INC.
MANAGED BY LAZARD ASSET MANAGEMENT
Lazard Retirement Equity
Lazard Retirement Small Cap
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST
MANAGED BY NEUBERGER BERMAN MANAGEMENT INC.
Limited Maturity Bond
Partners
STRONG OPPORTUNITY FUND II, INC.
MANAGED BY STRONG CAPITAL MANAGEMENT, INC.
Opportunity Fund II
STRONG VARIABLE INSURANCE FUNDS, INC.
MANAGED BY STRONG CAPITAL MANAGEMENT, INC.
Strong Mid Cap Growth Fund II (formerly, Growth Fund II)
VAN ECK WORLDWIDE INSURANCE TRUST
MANAGED BY VAN ECK ASSOCIATES CORPORATION
Worldwide Bond
Worldwide Emerging Markets
Worldwide Hard Assets
Worldwide Real Estate
Please read this Prospectus before investing and keep it on file for future
reference. It contains important information about the BMA Flexible Premium
Adjustable Variable Life Insurance Policy. The Securities and Exchange
Commission maintains a Web site (http://www.sec.gov) that contains information
regarding companies that file electronically with the Commission.
The Policies:
* are not bank deposits
* are not federally insured
* are not endorsed by any bank or government agency
* are not guaranteed and may be subject to loss of principal
The Securities and Exchange Commission has not approved or disapproved
these securities or determined if this prospectus is accurate or complete. Any
representation to the contrary is a criminal offense.
Date: May 3, 1999
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
DEFINITIONS............................................................... 6
SUMMARY................................................................... 8
1. THE VARIABLE LIFE INSURANCE POLICY.................................... 8
2. PURCHASES............................................................. 8
3. INVESTMENT CHOICES.................................................... 8
4. EXPENSES.............................................................. 10
5. DEATH BENEFIT......................................................... 11
6. TAXES................................................................. 11
7. ACCESS TO YOUR MONEY.................................................. 11
8. OTHER INFORMATION..................................................... 11
9. INQUIRIES............................................................. 12
PART I.................................................................... 13
1. THE VARIABLE LIFE INSURANCE POLICY.................................... 13
2. PURCHASES............................................................. 13
Premiums............................................................. 13
Waiver of Planned Premiums........................................... 14
Application for a Policy............................................. 14
Issue Ages........................................................... 14
Application of Premiums.............................................. 14
Grace Period......................................................... 15
Accumulation Unit Values............................................. 15
Right to Refund...................................................... 16
Exchange of a Policy for a BMA Policy................................ 16
3. INVESTMENT CHOICES.................................................... 16
Transfers............................................................ 19
Dollar Cost Averaging................................................ 20
Asset Rebalancing Option............................................. 20
Asset Allocation Option.............................................. 21
Substitution......................................................... 21
4. EXPENSES.............................................................. 21
Premium Charge....................................................... 21
Monthly Deduction.................................................... 22
Surrender Charge..................................................... 23
Partial Surrender Fee................................................ 24
Waiver of Surrender Charges.......................................... 24
Reduction or Elimination of the Surrender Charge..................... 25
Transfer Fee......................................................... 25
Taxes................................................................ 25
Investment Option Expenses........................................... 25
5. DEATH BENEFIT......................................................... 29
Change in Death Benefit Option....................................... 30
Change in Specified Amount........................................... 31
Guaranteed Minimum Death Benefit..................................... 32
Accelerated Death Benefit............................................ 32
6. TAXES................................................................. 33
Life Insurance in General............................................ 33
Taking Money Out of Your Policy...................................... 33
Diversification...................................................... 33
7. ACCESS TO YOUR MONEY.................................................. 34
Loans................................................................ 34
Surrenders........................................................... 35
8. OTHER INFORMATION..................................................... 35
BMA.................................................................. 35
Year 2000............................................................ 35
The Separate Account................................................. 36
Distributors......................................................... 36
Administration....................................................... 36
Suspension of Payments or Transfers.................................. 36
Ownership............................................................ 37
PART II................................................................... 37
EXECUTIVE OFFICERS AND DIRECTORS OF BMA................................... 37
OFFICERS AND DIRECTORS OF JONES & BABSON, INC............................. 39
OFFICERS AND DIRECTORS OF CONSECO EQUITY SALES, INC....................... 40
VOTING.................................................................... 40
LEGAL OPINIONS............................................................ 41
REDUCTION OR ELIMINATION OF SURRENDER CHARGE.............................. 41
NET AMOUNT AT RISK........................................................ 41
MATURITY DATE............................................................. 41
MISSTATEMENT OF AGE OR SEX................................................ 42
OUR RIGHT TO CONTEST...................................................... 42
PAYMENT OPTIONS........................................................... 42
FEDERAL TAX STATUS........................................................ 42
REPORTS TO OWNERS......................................................... 46
LEGAL PROCEEDINGS......................................................... 46
EXPERTS................................................................... 46
FINANCIAL STATEMENTS...................................................... 46
APPENDIX A-Illustration of Policy Values.................................. A-1
APPENDIX B-Rates of Return ............................................... B-1
</TABLE>
DEFINITIONS
ACCUMULATION VALUE: The sum of Your Policy values in the Subaccounts, the
Fixed Account and the Loan Account.
ACCUMULATION UNIT: A unit of measure used to calculate Your Accumulation
Value in the Subaccounts.
AGE: Issue Age is age nearest birthday on the Policy Date. Attained Age is
the Issue Age plus the number of completed Policy Years.
AUTHORIZED REQUEST: A request, in a form satisfactory to Us, which is
received by the BMA Service Center.
BENEFICIARY: The person named in the application or at a later date to
receive the Death Proceeds of the Policy or any rider(s).
BMA: Business Men's Assurance Company of America.
BMA SERVICE CENTER: The office indicated in the Summary to which notices,
requests and Premiums must be sent. All sums payable to Us under the Policy are
payable only at the BMA Service Center.
BUSINESS DAY: Each day that the New York Stock Exchange is open for
business. The Separate Account will be valued each Business Day.
CASH SURRENDER VALUE: The Accumulation Value less the surrender charge, if
any, that applies if the Policy is surrendered in full and less any
Indebtedness.
DEATH BENEFIT: The amount used to determine the Death Proceeds payable upon
the death of the Primary Insured. The Death Benefit can be either Level or
Adjustable.
DEATH PROCEEDS: The Death Proceeds equal the Death Benefit as of the date
of the Primary Insured's death, less any Indebtedness.
FIXED ACCOUNT: A portion of the General Account into which You can allocate
Net Premiums or transfer Accumulation Values. It does not share in the
investment experience of any Subaccount of the Separate Account.
GENERAL ACCOUNT: Our general investment account which contains all of Our
assets with the exception of the Separate Account and other segregated asset
accounts.
GRACE PERIOD: The 61 days that follow the date We mail a notice to You for
payment if the Cash Surrender Value is not sufficient to cover the Monthly
Deduction.
INDEBTEDNESS: Unpaid Policy loans plus unpaid Policy loan interest.
INITIAL SPECIFIED AMOUNT: The amount of coverage selected by You at the
time of application and which will be used to determine the Death Benefit.
INVESTMENT OPTION(S): Those investment options available through the
Separate Account.
LOAN ACCOUNT: An account established within Our General Account for any
amounts transferred from the Fixed Account and the Separate Account as a result
of loans. The Loan Account is credited with interest and is not based on the
experience of any Separate Account.
MATURITY DATE: The date the Accumulation Value, less any Indebtedness,
becomes payable to You, if the Primary Insured is then living.
MINIMUM SPECIFIED AMOUNT: The smallest Specified Amount the Policy may have
is the greater of $50,000, and the Specified Amount a $300 no-lapse annual
premium, excluding amounts for riders and Special Rate Classes, will purchase.
MONTHLY ANNIVERSARY DAY: The same day of each month as the Policy Date for
each succeeding month the Policy remains in force. If the Monthly Anniversary
falls on a day that is not a Business Day, any Policy transaction due as of that
day will be processed the first Business Day following such date.
MONTHLY DEDUCTION: On the Policy Date and each Monthly Anniversary Day
thereafter We deduct certain charges from Your Policy.
NET PREMIUM: We deduct a Premium Charge from each Premium paid. The Net
Premium is the Premium paid less the Premium Charge.
OWNER: The person entitled to all the ownership rights under the Policy. If
Joint Owners are named, all references to You or Owner shall mean Joint Owner.
POLICY ANNIVERSARY: The same month and day as the Policy Date for each
succeeding year the Policy remains in force.
POLICY DATE: The date by which Policy months, years and anniversaries are
measured.
POLICY MONTH: The one month period from the Policy Date to the same date of
the next month, or from one Monthly Anniversary Day to the next.
POLICY YEAR: The one year period from the Policy Date to the first Policy
Anniversary or from one Policy Anniversary to the next.
PREMIUM: A payment You make towards the Policy and that does not re-pay any
Indebtedness.
PRIMARY INSURED: The person whose life is insured under the Policy.
RATE CLASS: This is anything that would affect the level of Your Premium,
such as health status and tobacco use.
REINSTATEMENT: To restore coverage after the Policy has terminated.
SEPARATE ACCOUNT: A segregated asset account maintained by Us in which a
portion of Our assets has been allocated for this and certain other policies.
SPECIFIED AMOUNT: The Initial Specified Amount plus each increase to the
Specified Amount and less each decrease to the Specified Amount.
UNDERWRITING PROCESS: The underwriting process begins the day We receive
Your application at the BMA Service Center and ends the day We receive and
approve all required documents, including the initial Premium, necessary to put
the Policy in force.
US, WE, OUR: Business Men's Assurance Company of America.
YOU, YOUR, YOURS: The Owner of the Policy.
SUMMARY
The prospectus is divided into three sections: Summary, Part I and Part II.
The sections in this summary correspond to sections in Part I of this prospectus
which discuss the topics in more detail. Even more detailed information is
contained in Part II.
1. THE VARIABLE LIFE INSURANCE POLICY: The variable life insurance policy
offered by BMA is a contract between You, the Owner, and BMA, an insurance
company.
The Policy provides for the payment of the Death Proceeds to Your selected
Beneficiary upon the death of the Primary Insured which should be excludable
from the gross income of the Beneficiary. The Policy can be used to create or
conserve one's estate or to save for retirement. The Policy can also be used for
certain business purposes, such as keyman insurance. The Primary Insured is the
person whose life is insured under the Policy. The Primary Insured can be the
same person as the Owner but does not have to be.
Under the Policy, You may, subject to certain limitations, make Premium
payments, in any amount and at any frequency. The Policy provides an
Accumulation Value, surrender rights, loan privileges and other features
traditionally associated with life insurance.
The Policy has a no-lapse guarantee in the first five years providing the
No-Lapse Monthly Minimum Premiums are paid. After this period, the Policy can
lapse (terminate without value) when the Cash Surrender Value is insufficient to
cover the Monthly Deduction and a Grace Period of 61 days has expired without an
adequate payment being made.
You should consult Your Policy for further understanding of its term and
conditions and for any state-specific provisions and variances that may apply to
Your Policy.
2. PURCHASES: You can buy the Policy by completing the proper forms. Your
registered representative can help You. The minimum initial Premium We will
accept will be computed for You with respect to the Specified Amount You have
requested. We will also compute the No-Lapse Monthly Minimum Premium. In some
circumstances We may contact You for additional information regarding the
Primary Insured and may require the Primary Insured to provide Us with medical
records, physician's statement or a complete paramedical examination.
The Policy is a flexible premium policy and unlike traditional insurance
policies, there is no fixed schedule for Premium payments after the initial
Premium. Although You may establish a schedule of Premium payments (Planned
Premium), if you fail to make the Planned Premium payments it will not
necessarily cause the Policy to lapse nor will paying the Planned Premium
guarantee that a Policy will remain in force until maturity. Under most
circumstances it is anticipated that You will need to make additional Premium
payments, after the initial Premium, to keep the Policy in force.
3. INVESTMENT CHOICES: You can put Your money in the Fixed Account or in
any or all of these Investment Options which are described in the prospectuses
for the funds:
INVESTORS MARK SERIES FUND, INC.
MANAGED BY STANDISH, AYER & WOOD, INC.
Intermediate Fixed Income
Mid Cap Equity
Money Market
MANAGED BY STANDISH INTERNATIONAL MANAGEMENT COMPANY, L.P.
Global Fixed Income
MANAGED BY STEIN ROE & FARNHAM INCORPORATED
Small Cap Equity
Large Cap Growth
MANAGED BY DAVID L. BABSON & CO. INC.
Large Cap Value
MANAGED BY LORD, ABBETT & CO.
Growth & Income
MANAGED BY KORNITZER CAPITAL MANAGEMENT, INC.
Balanced
BERGER INSTITUTIONAL PRODUCTS TRUST
MANAGED BY BERGER ASSOCIATES
Berger IPT--100
Berger IPT--Growth and Income
Berger IPT--Small Company Growth
MANAGED BY BBOI WORLDWIDE LLC
Berger/BIAM IPT--International
CONSECO SERIES TRUST
MANAGED BY CONSECO CAPITAL MANAGEMENT, INC.
Balanced (formerly, Asset Allocation)
Equity (formerly, Common Stock)
Fixed Income (formerly, Corporate Bond)
Government Securities
THE ALGER AMERICAN FUND
MANAGED BY FRED ALGER MANAGEMENT, INC.
Alger American Growth
Alger American Leveraged AllCap
Alger American MidCap Growth
Alger American Small Capitalization
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
MANAGED BY AMERICAN CENTURY INVESTMENT MANAGEMENT, INC.
VP Income & Growth
VP International
VP Value
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.
MANAGED BY THE DREYFUS CORPORATION (Sub-Adviser: NCM Capital
Management Group, Inc.)
DREYFUS STOCK INDEX FUND
MANAGED BY THE DREYFUS CORPORATION (Index Fund Manager: Mellon Equity
Associates)
DREYFUS VARIABLE INVESTMENT FUND
MANAGED BY THE DREYFUS CORPORATION
Disciplined Stock
International Value
FEDERATED INSURANCE SERIES
MANAGED BY FEDERATED INVESTMENT MANAGEMENT COMPANY (formerly, Federated
Advisers)
Federated High Income Bond II
Federated Utility II
MANAGED BY FEDERATED GLOBAL INVESTMENT MANAGEMENT CORP.
Federated International Equity II
INVESCO VARIABLE INVESTMENT FUNDS, INC.
MANAGED BY INVESCO FUNDS GROUP, INC.
INVESCO VIF--High Yield
INVESCO VIF--Equity Income (formerly, INVESCO VIF-Industrial Income)
LAZARD RETIREMENT SERIES, INC.
MANAGED BY LAZARD ASSET MANAGEMENT
Lazard Retirement Equity
Lazard Retirement Small Cap
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST
MANAGED BY NEUBERGER BERMAN MANAGEMENT INC.
Limited Maturity Bond
Partners
STRONG OPPORTUNITY FUND II, INC.
MANAGED BY STRONG CAPITAL MANAGEMENT, INC.
Opportunity Fund II
STRONG VARIABLE INSURANCE FUNDS, INC.
MANAGED BY STRONG CAPITAL MANAGEMENT, INC.
Strong Mid Cap Growth Fund II (formerly, Growth Fund II)
VAN ECK WORLDWIDE INSURANCE TRUST
MANAGED BY VAN ECK ASSOCIATES CORPORATION
Worldwide Bond
Worldwide Emerging Markets
Worldwide Hard Assets
Worldwide Real Estate
4. EXPENSES: The Policy has both insurance and investment features, and
there are costs related to each that reduce the return on Your investment.
We deduct a Premium Charge from each Premium payment made. The Premium
Charge is as follows:
<TABLE>
<S> <C>
Policy Years 1-10: 5.5% of all Premiums.
Policy Years 11 and
later: 4.0% of all Premiums.
</TABLE>
We deduct a Policy Charge each month from the unloaned Accumulation Value of
the Policy. The Policy Charge is as follows:
<TABLE>
<S> <C>
Policy Year 1: $25 each month
Policy Years 2 and
later: Currently, $5 each
month. This charge is
not guaranteed and
may be increased but
it will not exceed
$10.
</TABLE>
We deduct a Risk Charge each month from the unloaned Accumulation Value of
the Policy. The Risk Charge is calculated as follows:
<TABLE>
<S> <C>
Policy Years 1-10: Each month, .80%, on
an annual basis, of
the Accumulation
Value in the Separate
Account.
Policy Years 11 and
later: Each month, .40%, on
an annual basis, of
the Accumulation
Value in the Separate
Account.
</TABLE>
Each month We will make a deduction from the unloaned Accumulation Value of
the Policy for the cost of insurance. This charge will depend upon the Specified
Amount, Your Accumulation Value, and the sex, age and Rate Class of the Primary
Insured. We may also charge for any riders attached to the Policy. The maximum
deduction that will be made for cost of insurance is 83.33333 per $1,000 net
amount at risk. This is the rate at attained age 98. Therefore, this is most
likely not the rate You will be charged. Maximum rates vary by sex, tobacco use
and attained age and range from 0.08420 to 83.33333 per $1,000 net amount at
risk. See "Expenses--Monthly Deduction--Cost of Insurance" in Part I for more
information.
There are also daily investment charges which apply to the average daily
value of the Investment Options. These charges are deducted from the Investment
Options and range on an annual basis from .28% to 1.50%, depending on the
Investment Option.
If You take out more than the Free Partial Surrender Percentage, We may
assess a surrender charge which depends upon Your Initial Specified Amount, the
year of surrender, issue Age, sex and Rate Class. The maximum surrender charge
that will be deducted is $44.56 per $1,000 specified amount. The maximum varies
by issue age, sex and tobacco use and ranges from $5.40 to $44.56 per $1,000.
See "Expenses--Surrender Charge" in Part I for more information. The surrender
charge for total surrenders is level for the first four Policy Years then grades
down (pursuant to a set formula) each month beginning in the fifth Policy
Year and is zero at the end of Policy Year ten. Your Policy is issued with a
surrender charge schedule which shows the surrender charge at the end of the
Policy Year. The charge is not affected by Special Rate Classes nor by the
addition of riders.
When You make a partial surrender, We assess a pro-rata portion of the
surrender charge. In the event that You increase Your Specified Amount, a new
surrender charge schedule will be imposed on the increased amount.
There is a partial surrender fee of $25 assessed for any partial surrender
in addition to any surrender charge that may be assessed. The partial surrender
fee is deducted from the unloaned Accumulation Value of the Policy. The Free
Partial Surrender Percentage is excluded from these charges.
Each transfer after 12 in any Policy Year, unless the transfer is
pre-scheduled, will incur a transfer fee of $25.
5. DEATH BENEFIT: The amount of the Death Benefit depends on:
* the Specified Amount of Your Policy,
* the Death Benefit option in effect at the time of death, and
* under some circumstances Your Policy's Accumulation Value.
There are two Death Benefit options: Level Death Benefit and Adjustable Death
Benefit. Under certain circumstances You can change Death Benefit options. You
can also change the Specified Amount under certain circumstances.
The actual amount payable to Your Beneficiary is the Death Proceeds which
is equal to the Death Benefit less any Indebtedness. At the time of application
for a Policy, You designate a Beneficiary who is the person or persons who will
receive the Death Proceeds. You can change Your Beneficiary unless You have
designated an irrevocable Beneficiary. The Beneficiary does not have to be a
natural person.
All or part of the Death Proceeds may be paid in a lump sum or applied under
one of the Payment Options contained in the Policy.
6. TAXES: Your Policy has been designed to comply with the definition of
life insurance in the Internal Revenue Code. As a result, the Death Proceeds
paid under the Policy should be excludable from the gross income of the
Beneficiary. Your earnings in the Policy are not taxed until You take them out.
The tax treatment of the loan proceeds and surrender proceeds will depend on
whether the Policy is considered a Modified Endowment Contract (MEC). Proceeds
taken out of a MEC are considered to come from earnings first and are includible
in taxable income. If You are younger than 59 1/2 when You take money out of a
MEC, You may also be subject to a 10% federal tax penalty on the earnings
withdrawn.
7. ACCESS TO YOUR MONEY: You can terminate the Policy at any time and We
will pay You the Cash Surrender Value. After the first Policy Year, You may
surrender a part of the Cash Surrender Value subject to the requirements of the
Policy. When You terminate Your Policy or make a partial surrender, a surrender
charge (or a portion thereof in the case of a partial surrender) may be
assessed. Once each Policy Year, on a non-cumulative basis, You may make a free
partial surrender of up to 10% of Your unloaned Accumulation Value.
You can also borrow some of Your Accumulation Value.
8. OTHER INFORMATION:
FREE LOOK. You can cancel the Policy within ten days after You receive it
(or whatever period is required in Your state) and We will refund all Premiums
paid less any Indebtedness. Upon completion of the Underwriting Process, We will
allocate the initial Net Premium to the Money Market Portfolio for fifteen days
(or the Free Look period required in Your state plus five days). After that, We
will invest Your Accumulation Value as You requested.
WHO SHOULD PURCHASE THE POLICY? The Policy is designed for individuals and
businesses that have a need for death protection but who also desire to
potentially increase the values in their Policies through investment in the
Investment Options.
The Policy offers the following to individuals:
- create or conserve one's estate
- supplement retirement income
- access to funds through loans and surrenders
The Policy offers the following to businesses:
- protection for the business in the event a key employee dies
- provide debt protection for business loans
- create a fund for employee benefits, buy outs and future business needs.
If You currently own a variable life insurance policy on the life of the
Primary Insured, You should consider whether the purchase of the Policy is
appropriate.
Also, You should carefully consider whether the Policy should be used to
replace an existing Policy on the life of an Insured.
ADDITIONAL FEATURES
- You can arrange to have a regular amount of money automatically
transferred from the Money Market Portfolio to the Investment Options each
month, theoretically giving You a lower average cost per unit over time than a
single one time purchase. We call this feature the Dollar Cost Averaging Option.
- We will automatically readjust Your money between Investment Options
periodically to keep the blend You select. We call this feature the Asset
Rebalancing Option.
- If the Primary Insured becomes terminally ill, We will pay You a portion
of the Death Benefit. We call this feature the Accelerated Death Benefit Rider.
- If You pay a certain required Premium, We guarantee that the Policy will
not lapse even if Your Accumulation Value is not sufficient to cover the Monthly
Deductions. We call this feature the Guaranteed Minimum Death Benefit Rider.
- If the Primary Insured becomes totally disabled, We will waive the
Monthly Deduction, excluding the Risk Charge, or the Planned Premium. This is
provided by the Waiver of Monthly Deductions Rider or the Waiver of Planned
Premium Rider.
- We also offer a number of additional riders that are common for universal
life policies.
These features and riders may not be available in Your state and may not be
suitable for Your particular situation.
9. INQUIRIES: If You need more information about buying a Policy, please
contact Us at:
BMA
P.O. Box 412879
Kansas City, Missouri 64141-2879
1-888-262-8131
If You need policy owner service (such as changes in policy information,
inquiry into policy values, or to make a loan), please contact Us at our service
center:
BMA
P.O. Box 66793
St. Louis, Missouri 63166-6793
1-800-423-9398
PART I
1. THE VARIABLE LIFE INSURANCE POLICY
The variable life insurance policy is a contract between You, the Owner,
and BMA, an insurance company. The Policy can be used to create or conserve
one's estate and retirement planning for individuals. It can also be used for
certain business purposes.
The Policy provides for life insurance coverage on the Primary Insured and
has Accumulation Values, a Death Benefit, surrender rights, loan privileges and
other characteristics associated with traditional and universal life insurance.
However, since the Policy is a variable life insurance policy, the Accumulation
Value, to the extent invested in the Investment Options, will increase or
decrease depending upon the investment experience of those Investment Options.
The duration or amount of the Death Benefit may also vary based on the
investment performance of the underlying Investment Options. To the extent You
allocated Premium or Accumulation Value to the Separate Account, You bear the
investment risk. If the Cash Surrender Value is insufficient to pay the Monthly
Deductions, the Policy may terminate.
Because the Policy is like traditional and universal life insurance, it
provides a Death Benefit which will be paid to Your named Beneficiary. When the
Primary Insured dies, the Death Proceeds are paid to Your Beneficiary which
should be excludable from the gross income of the Beneficiary. The tax-free
Death Proceeds makes this an excellent way to accumulate money You don't think
you'll use in Your lifetime and is a tax-efficient way to provide for those You
leave behind. If You need access to Your money, You can borrow from the Policy
or make a total or partial surrender.
You should consult Your Policy for further understanding of its term and
conditions and for any state-specific provisions and variances that may apply to
Your Policy.
2. PURCHASES
PREMIUMS
Premiums are the monies You give Us to buy the Policy. The Policy is a
Flexible Premium Policy which allows You to make Premium payments in any amount
and at any time, subject of course to making sufficient Premium payments to keep
the Policy in force. Even though the Policy is flexible, when You apply for
coverage You can establish a schedule of Premium payments (Planned Premium). The
Planned Premium is selected by You. Thus they will differ from Policy to Policy.
You should consult Your Registered Representative about Your Planned Premium.
We guarantee that the Policy will stay in force for the first five years
after issue if total Premiums paid are at least as great as:
1. the cumulative five year No-Lapse Monthly Minimum Premium; plus
2. the total of all partial surrenders made; plus
3. indebtedness.
We will establish a No-Lapse Monthly Minimum Premium at the time you apply
for coverage which is the smallest level of Planned Premium.
The Policy will remain in force if the Cash Surrender Value is greater than
zero regardless of how long it has been in force.
Additional Premiums may be paid at any time. However, We reserve the right
to limit the number and amount of additional Premiums. Under some circumstances,
We may require evidence that the Primary Insured is still insurable. All
Premiums are payable at the BMA Service Center.
WAIVER OF PLANNED PREMIUMS
You can elect to have a Waiver of Planned Premium Rider added to Your
Policy. The rider provides for the Planned Premium to be waived by crediting a
Premium equal to the monthly waiver benefit on each Monthly Anniversary Day
during the Primary Insured's total disability beginning before age 60 and
continuing 6 months or more. Premiums paid during the first 6 months of
disability are refunded, and subsequent Premiums are waived as long as total
disability continues. The monthly waiver benefit to be credited as a Premium to
the Policy while benefits are payable under the rider is the Planned Premium at
the time the disability begins.
All Monthly Deductions will continue to be made.
If at the end of any Policy Month while benefits are being paid under the
rider, the Cash Surrender Value is not sufficient to cover the Monthly
Deductions, the credit of the monthly waiver benefit will cease, and the Monthly
Deductions will be waived as long as total disability continues.
If the Primary Insured is no longer totally disabled, You must begin paying
Premiums again. If You do not pay sufficient Premiums, Your Policy may lapse
depending on Your facts and circumstances at that time.
You should consult the rider for the terms and conditions. The rider is
available as an alternative to the Waiver of Monthly Deductions. You can select
either the Waiver of Monthly Deduction Rider or the Waiver of Planned Premium
Rider but not both.
APPLICATION FOR A POLICY
In order to purchase a Policy, You must submit an application to Us that
requests information about the proposed Primary Insured. In some cases, We will
ask for additional information. We may request that the Primary Insured provide
Us with medical records, physician's statement or possibly require other medical
tests.
ISSUE AGES
We currently issue to Primary Insureds whose ages are: 20-80 for Standard
rates and 20-70 for Preferred rates.
We will review all the information We are provided about the Primary
Insured and determine whether or not the Primary Insured meets Our standards for
issuing the Policy. This process is called underwriting. If the Primary Insured
meets all of Our underwriting requirements, We will issue a Policy. There are
several underwriting classes under which the Policy may be issued.
The underwriting period could be up to 60 days or longer from the time the
application is signed. If We receive the initial Premium with the application,
Your Registered Representative will give you a conditional receipt. If You
receive a conditional receipt, you will be eligible for conditional coverage.
The conditional coverage, if you meet the conditions specified on the
conditional receipt, will be effective from the later date of receipt of
a medical exam, if required or a date You request (it must be within 60 days
of the date of the receipt). It will expire 60 days from the
effective date. The conditional insurance is subject to a number of
restrictions and is only applicable if the proposed Primary Insured was an
acceptable risk for the insurance applied for.
APPLICATION OF PREMIUMS
When You purchase a Policy and We receive money with Your application, We
will initially put Your money in Our General Account. Your money will remain in
Our General Account during the Underwriting Process. Upon completion of the
Underwriting Process, Your money will be moved to the Money Market Portfolio
where it will remain for 15 days (or the period required in Your state plus five
days). After the 15 days, We will allocate Your money to the Investment
Option(s) You requested in the application. All allocation directions must be in
whole percentages. If You pay additional Premiums, We will allocate them in the
same way as Your first Premium unless You tell Us otherwise.
If You change Your mind about owning a Policy, You can cancel it within 10
days after receiving it (or the period required in Your state) (Free Look
Period). (If the Owner is a resident of California and is age 60 or older, the
period is 30 days.) When You cancel the Policy within this time period, We will
not assess a Surrender Charge and will give You back Your Premium payment less
any Indebtedness.
When Your application for the Policy is in good order, We will invest Your
first Premium in the Money Market Portfolio within two days after We have
completed Our underwriting. Subsequent Premiums will be allocated in accordance
with the selections in Your application.
If as a result of Our underwriting review, We do not issue You a Policy, We
will return Your Premium, and interest, if any, required by Your state. If We do
issue a Policy, on the Policy Date We will deduct the first Monthly Deduction
and credit interest. The maximum first Monthly Deduction is 100% of the first
net Premium paid. The maximum deduction that We will take from the Premium is
5.5% of the Premium paid.
GRACE PERIOD
Your Policy will stay in effect as long as Your Cash Surrender Value is
sufficient to cover Monthly Deductions. If the Cash Surrender Value of Your
Policy is not enough to cover these deductions, We will mail You a notice. You
will have 61 days from the time the notice is mailed to You to send Us the
required payment. This is called the Grace Period. Because this Policy has a
five year no-lapse guarantee, the Policy will not terminate if the No Lapse
Monthly Minimum Premiums are paid during this five year period.
ACCUMULATION UNIT VALUES
The value of Your Policy that is invested in the Investment Option(s) will
go up or down depending upon the investment performance of the Investment
Option(s) You choose. In order to keep track of the value of Your Policy, We use
a unit of measure We call an Accumulation Unit. (An Accumulation Unit works like
a share of a mutual fund.)
Every Business Day We determine the value of an Accumulation Unit for each
of the Investment Options. The value of an Accumulation Unit for any given
Business Day is determined by multiplying a factor We call the net investment
factor times the value of the Accumulation Unit for the previous Business Day.
We do this for each Investment Option. The net investment factor is a number
that reflects the change (up or down) in an underlying Investment Option share.
Our Business Days are each day that the New York Stock Exchange is open for
business. Our Business Day closes when the New York Stock Exchange closes,
usually 4:00 P.M. Eastern time.
When You make a Premium payment, We credit Your Policy with Accumulation
Units. The number of Accumulation Units credited is determined by dividing the
amount of Net Premium allocated to an Investment Option by the value of the
Accumulation Unit for the Investment Option for the Business Day when the
Premium payment is applied to Your Policy.
We calculate the value of an Accumulation Unit for each Investment Option
after the New York Stock Exchange closes each Business Day and then apply it to
Your Policy.
When We assess the Monthly Deductions, We do so by deducting Accumulation
Units from Your Policy. When You have selected more than one Investment Option
and/or the Fixed Account, We make the deductions pro-rata from all the
Investment Options and the Fixed Account.
When You make a surrender We determine the number of Accumulation Units to
be deducted by dividing the amount of the surrender from an Investment Option by
the value of an Accumulation Unit for the Investment Option. The resulting
number of Accumulation Units is deducted from Your Policy. When You make a
transfer from one Investment Option to another We treat the transaction by its
component parts, i.e. a surrender and a purchase.
EXAMPLE:
On Monday We receive a Premium payment from You. You have told Us You want
$700 of this payment to go to the Large Cap Value Portfolio. When the New York
Stock Exchange closes on that Monday, We determine that the value of an
Accumulation Unit for the Large Cap Value Portfolio is $12.70. We then divide
$700 by $12.70 and credit Your Policy on Monday night with 55.12 Accumulation
Units for the Large Cap Value Portfolio.
RIGHT TO REFUND
To receive the tax treatment accorded life insurance under Federal laws,
insurance under the Policy must initially qualify and continue to qualify as
life insurance under the Internal Revenue Code. To maintain qualification to the
maximum extent permitted by law, We reserve the right to return Premiums you
have paid which We determine will cause any coverage under the Policy to fail to
qualify as life insurance under applicable tax law and any changes in applicable
tax laws or will cause it to become a Modified Endowment Contract (MEC).
Additionally, We reserve the right to make changes in the Policy or to make
distributions to the extent We determine necessary to continue to qualify the
Policy as life insurance and to comply with applicable laws. We will provide You
advance written notice of any change.
If subsequent Premium payments will cause Your Policy to become a MEC We
will contact You prior to applying the Premium. If You elect to have the Premium
applied, We require that You acknowledge in writing that You understand the tax
consequences of a MEC before We will apply the Premiums. Section 6 contains a
discussion of certain tax considerations provisions including MECs.
EXCHANGE OF A POLICY FOR A BMA POLICY
Under federal tax law a life insurance policy may be exchanged tax-free for
another life insurance policy. However, a policy received in exchange for a MEC
will also be treated as a MEC. Any exchange of a policy for a BMA Policy must
meet Our policy exchange rules in effect at that time.
3. INVESTMENT CHOICES
The Policy offers 44 investment choices--a Fixed Account and 43 Investment
Options. Additional Investment Options may be available in the future.
You should read the prospectuses for these funds carefully before
investing. Copies of these prospectuses are attached to this prospectus. Certain
portfolios contained in the fund prospectuses may not be available with your
policy.
Shares of the funds are offered in connection with certain variable annuity
contracts and variable life insurance policies of various life insurance
companies which may or may not be affiliated with BMA. Certain portfolios are
also sold directly to qualified plans. The funds believe that offering their
shares in this manner will not be disadvantageous to you.
BMA may enter into certain arrangements under which it is reimbursed by the
Investment Options' advisers, distributors and/or affiliates for the
administrative services which it provides to the portfolios.
INVESTORS MARK SERIES FUND, INC.
Investors Mark Series Fund, Inc. is managed by Investors Mark Advisors, LLC
(Adviser), which is an affiliate of BMA. Investors Mark Series Fund, Inc. is a
mutual fund with multiple portfolios. Each Investment option has a different
investment objective. The Adviser has engaged sub-advisers to provide investment
advice for the individual Investment Option. The following Investment Options
are available under the Policy.
STANDISH, AYER & WOOD, INC. IS THE SUB-ADVISER TO THE FOLLOWING PORTFOLIOS:
Intermediate Fixed Income Portfolio
Mid Cap Equity Portfolio
Money Market Portfolio
STANDISH INTERNATIONAL MANAGEMENT COMPANY, L.P. IS THE SUB-ADVISER TO THE
FOLLOWING PORTFOLIO:
Global Fixed Income Portfolio
STEIN ROE & FARNHAM INCORPORATED IS THE SUB-ADVISER TO THE FOLLOWING
PORTFOLIOS:
Small Cap Equity Portfolio
Large Cap Growth Portfolio
DAVID L. BABSON & CO., INC. IS THE SUB-ADVISER TO THE FOLLOWING PORTFOLIO:
Large Cap Value Portfolio
LORD, ABBETT & CO. IS THE SUB-ADVISER TO THE FOLLOWING PORTFOLIO:
Growth & Income Portfolio
KORNITZER CAPITAL MANAGEMENT, INC. IS THE SUB-ADVISER TO THE FOLLOWING
PORTFOLIO:
Balanced Portfolio
BERGER INSTITUTIONAL PRODUCTS TRUST
Berger Institutional Products Trust is a mutual fund with multiple
portfolios. Berger Associates is the investment adviser to all portfolios except
the Berger/BIAM IPT--International Fund. BBOI Worldwide LLC is the adviser to
the Berger/BIAM IPT--International Fund. BBOI Worldwide LLC has retained Bank of
Ireland Asset Management (U.S.) Limited ("BIAM"). The following Investment
Options are available under the Policy:
Berger IPT--100 Fund (long-term capital appreciation)
Berger IPT--Growth and Income Fund
Berger IPT--Small Company Growth Fund
Berger/BIAM IPT--International Fund
CONSECO SERIES TRUST
Conseco Series Trust is a mutual fund with multiple portfolios. Conseco
Capital Management, Inc. is the investment adviser to the portfolios. The
following Investment Options are available under the Policy:
Balanced Portfolio (formerly, Asset Allocation Portfolio)
Equity Portfolio (formerly, Common Stock Portfolio)
Fixed Income Portfolio (formerly, Corporate Bond Portfolio)
Government Securities Portfolio
THE ALGER AMERICAN FUND
The Alger American Fund is a mutual fund with multiple portfolios. Fred
Alger Management, Inc. serves as the investment adviser. The following
Investment Options are available under the Policy:
Alger American Growth Portfolio
Alger American Leveraged AllCap Portfolio
Alger American MidCap Growth Portfolio
Alger American Small Capitalization Portfolio
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
American Century Variable Portfolios, Inc. is a series of funds managed by
American Century Investment Management, Inc. The following Investment Options
are available under the Policy:
VP Income & Growth
VP International
VP Value (long-term capital growth with income as a secondary objective)
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.
The Dreyfus Socially Responsible Growth Fund, Inc. is managed by The
Dreyfus Corporation. Dreyfus has hired NCM Capital Management Group, Inc. to
serve as sub-investment adviser and provide day-to-day management of the Fund's
investments.
DREYFUS STOCK INDEX FUND
The Dreyfus Corporation serves as the Fund's manager. Dreyfus has hired its
affiliate, Mellon Equity Associates, to serve as the Fund's index fund manager
and provide day-to-day management of the Fund's investments.
DREYFUS VARIABLE INVESTMENT FUND
The Dreyfus Variable Investment Fund is a mutual fund with multiple
portfolios. The Dreyfus Corporation serves as the investment adviser. The
following Investment Options are available under the Policy:
Disciplined Stock Portfolio (seeks to outperform the total return
performance of the Standard & Poor's 500 Composite Stock Price Index)
International Value Portfolio
FEDERATED INSURANCE SERIES
Federated Insurance Series is an open-end, management investment company
with multiple portfolios. Federated Investment Management Company (formerly,
Federated Advisers) is the investment adviser. Federated Global Investment
Management Corp. is the sub-adviser to the Federated International Equity Fund
II. The following Investment Options are available under the Policy:
Federated High Income Bond Fund II
Federated International Equity Fund II
Federated Utility Fund II
INVESCO VARIABLE INVESTMENT FUNDS, INC.
INVESCO Variable Investment Funds, Inc. is a mutual fund with multiple
portfolios. INVESCO Funds Group, Inc. is the investment adviser. The following
Investment Options are available under the Policy:
INVESCO VIF--High Yield Fund (seeks high level of current income)
INVESCO VIF--Equity Income Fund (formerly, INVESCO VIF-Industrial Income
Portfolio) (seeks high current income with growth of capital as a
secondary goal)
LAZARD RETIREMENT SERIES, INC.
Lazard Retirement Series, Inc. is a mutual fund with multiple portfolios.
Lazard Asset Management, a division of Lazard Freres & Co. LLC, a New
York limited liability company, is the investment manager for each portfolio.
The following Investment Options are available under the Policy:
Lazard Retirement Equity Portfolio
Lazard Retirement Small Cap Portfolio
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST
Each portfolio of Neuberger Berman Advisers Management Trust invests in a
corresponding series of Advisers Managers Trust. All series of Advisers Managers
Trust are managed by Neuberger Berman Management Inc. The following Investment
Options are available under the Policy:
Limited Maturity Bond Portfolio
Partners Portfolio (capital growth)
STRONG OPPORTUNITY FUND II, INC.
Strong Opportunity Fund II, Inc. is a mutual fund managed by Strong Capital
Management, Inc. The following Investment Option is available under the Policy:
Opportunity Fund II (capital growth)
STRONG VARIABLE INSURANCE FUNDS, INC.
Strong Variable Insurance Funds, Inc. is a mutual fund with multiple
series. Strong Capital Management, Inc. serves as the investment adviser. The
following Investment Option is available under the Policy:
Strong Mid Cap Growth Fund II (formerly, Growth Fund II)
VAN ECK WORLDWIDE INSURANCE TRUST
Van Eck Worldwide Insurance Trust is a mutual fund with multiple portfolios
which are managed by Van Eck Associates Corporation. The following Investment
Options are available under the Policy:
Worldwide Bond Fund
Worldwide Emerging Markets Fund
Worldwide Hard Assets Fund
Worldwide Real Estate Fund
TRANSFERS
You can transfer money among the Fixed Account and the Investment Options.
You can make 12 free transfers each Policy Year. You can make a transfer to or
from the Fixed Account and to or from any Investment Option. If You make more
than 12 transfers in a year, there is a transfer fee deducted. The fee is $25
per transfer. The following apply to any transfer:
1. The minimum amount which You can transfer from the Fixed Account or any
Investment Option is $250 or Your entire interest in the Investment Option or
the Fixed Account, if the remaining balance is less than $250.
2. The maximum amount which can be transferred from the Fixed Account is
limited to 25% of the Accumulation Value in the Fixed Account. Only one transfer
out of the Fixed Account is allowed each Policy Year. These requirements are
waived if the transfer is pursuant to a pre-scheduled transfer.
3. The minimum amount which must remain in any Investment Option or Fixed
Account after a transfer is $250.
4. A transfer will be effective as of the end of the Business Day when We
receive an Authorized Request at the BMA Service Center.
5. Neither Us nor Our BMA Service Center is liable for a transfer made in
accordance with Your instructions.
6. We reserve the right to restrict the number of transfers per year and to
restrict transfers from being made on consecutive Business Days.
7. Your right to make transfers is subject to modification if We determine,
in Our sole opinion, that the exercise of the right by one or more Owners is, or
would be, to the disadvantage of other Owners. Restrictions may be applied in
any manner reasonably designed to prevent any use of the transfer right which is
considered by Us to be to the disadvantage of other Owners. A modification could
be applied to transfers to or from one or more of the Investment Options and
could include but not be limited to:
a. a requirement of a minimum time period between each transfer;
b. not accepting transfer requests of an agent acting under a power of
attorney on behalf of more than one Owner; or
c. limiting the dollar amount that may be transferred by an Owner at any
one time.
Telephone Transfers
You may elect to make transfers by telephone. To elect this option You must
do so in an Authorized Request. If there are Joint Owners, unless We are
instructed to the contrary, instructions will be accepted from either one of the
Joint Owners. We will use reasonable procedures to confirm that instructions
communicated by telephone are genuine. If We do not, We may be liable for any
losses due to unauthorized or fraudulent instructions. The BMA Service Center
tape records all telephone instructions. Transfers do not change the allocation
instructions for future Premiums.
DOLLAR COST AVERAGING
The Dollar Cost Averaging Option allows You to systematically transfer a
set amount each month from the Money Market Portfolio to any of the other
Investment Option(s). By allocating amounts on a regular schedule as opposed to
allocating the total amount at one particular time, You may be less susceptible
to the impact of market fluctuations.
The minimum amount which can be transferred each month is $250. You must
have an unloaned Accumulation Value of at least $5,000. The amount required to
complete Your program must be in the source account in order to participate in
dollar cost averaging.
All dollar cost averaging transfers will be made on the 15th day of the
month unless that day is not a Business Day. If it is not, then the transfer
will be made the next Business Day. You must participate in dollar cost
averaging for at least 6 months.
If You participate in dollar cost averaging, the transfers made under this
option are not taken into account in determining any transfer fee. Currently,
there is no charge for participating in Dollar Cost Averaging.
ASSET REBALANCING OPTION
Once Your money has been allocated among the Investment Options, the
performance of the Accumulation Value of each option may cause Your allocation
to shift. If the unloaned Accumulation Value of Your Policy is at least $5,000,
You can direct Us to automatically rebalance Your Policy each quarter to return
to Your original percentage allocations by selecting Our asset rebalancing
option. The program will terminate if You make any transfer outside of the
Investment Options You have selected under the asset rebalancing option. The
minimum period to participate in this program is 6 months. The transfer date
will be the 15th of the month unless that day is not a Business Day. If it is
not, then the transfer will be made the next Business Day. The Fixed Account is
not part of asset rebalancing.
If You participate in the asset rebalancing option, the transfers made
under the program are not taken into account in determining any transfer fee.
Currently, there is no charge for participating in the Asset Rebalancing Option.
EXAMPLE:
Assume that You want the Accumulation Value split between two Investment
Options. You want 40% to be in the Intermediate Fixed Income Portfolio and 60%
to be in the Mid Cap Equity Portfolio. Over the next 2 1/2 months the bond
market does very well while the stock market performs poorly. At the end of the
first quarter, the Intermediate Fixed Income Portfolio now represents 50% of
Your holdings because of its increase in value. If You had chosen to have Your
holdings rebalanced quarterly, on the first day of the next quarter, We would
sell some of Your units in the Intermediate Fixed Income Portfolio to bring its
value back to 40% and use the money to buy more units in the Mid Cap Equity
Portfolio to increase those holdings to 60%.
ASSET ALLOCATION OPTION
We recognize the value to certain Owners of having available, on a
continuous basis, advice for the allocation of Your money among the Investment
Options available under the Policy. Certain providers of these types of services
have agreed to provide such services to Owners in accordance with Our
administrative rules regarding such programs.
We have made no independent investigation of these programs. We have only
established that these programs are compatible with Our administrative systems
and rules.
Even though We permit the use of approved asset allocation programs, the
Policy was not designed for professional market timing organizations. Repeated
patterns of frequent transfers are disruptive to the operations of the
Investment Options, and when We become aware of such disruptive practices, We
may modify the transfer provisions of the Policy.
If You participate in an approved asset allocation program, the transfers
made under the program are not taken into account in determining any transfer
fee. Currently, BMA does not charge for participating in an Asset Allocation
Program.
SUBSTITUTION
We may be required to substitute one of the Investment Options You have
selected with another Investment Option. We would not do this without the prior
approval of the Securities and Exchange Commission. We will give You notice of
Our intent to do this.
4. EXPENSES
There are charges and other expenses associated with the Policy that reduce
the return on Your investment in the Policy. The charges and expenses are:
PREMIUM CHARGE
We deduct a Premium Charge from each Premium payment You make. We consider
a portion of the Premium Charge a sales load. The sales load portion is 3.5% of
Premiums paid during the first ten Policy Years and 2.0% of Premiums paid
thereafter. The portion of the Surrender Charge that does not recover issue and
underwriting expenses is assessed as a sales load but only if the Policy is
surrendered during the first ten Policy Years. The Premium Charge is as
follows:
<TABLE>
<S> <C>
Policy Years 1-10:.................................... 5.5% of all Premiums.
Policy Years 11 and thereafter:....................... 4.0% of all Premiums.
</TABLE>
The Premium Charge is to cover some of Our costs incurred in selling the
Policy and in issuing it, such as commissions, premium tax, DAC tax (Deferred
Acquisition Costs) and administrative costs.
MONTHLY DEDUCTION
The initial Monthly Deduction is made on the Policy Date but does not
include a Risk Charge. On each Monthly Anniversary Day We make a Monthly
Deduction from the Accumulation Value of Your Policy. The Monthly Deduction will
be taken on a pro-rata basis from the Investment Options and the Fixed Account,
exclusive of the Loan Account. The Monthly Deduction equals:
a. the Cost of Insurance for the Policy; plus
b. the monthly rider charges, if any; plus
c. the Risk Charge; plus
d. the monthly Policy Charge
COST OF INSURANCE. This charge compensates Us for insurance coverage
provided for the month. The cost of insurance charge for a Policy month equals
the appropriate current cost of insurance rate per $1,000, including any special
Rate Classes, times the net amount at risk. The net amount at risk is different
for the Level Death Benefit Option and the Adjustable Death Benefit Option. Part
II contains a more detailed description of the net amount at risk.
The monthly cost of insurance rate, per $1,000 of net amount at risk, is
based on:
* the Specified Amount,
* issue age of the Primary Insured,
* sex of the Primary Insured,
* Rate Class of the Primary Insured and
* the Policy Year.
The maximum monthly cost of insurance rate ranges from 0.08420 to 83.33333 per
$1,000. The table below shows the largest maximum monthly cost of insurance rate
for all of the ages in the range. The maximum rate for most ages in the range
will be smaller.
MAXIMUM MONTHLY COST OF INSURANCE RATES PER $1,000
<TABLE>
<CAPTION>
Male Female
------------------------ ------------------------
Attained Age Non- Tobacco Tobacco Non- Tobacco Tobacco
- - ------------------------------ ------------ ---------- ------------ ----------
<S> <C> <C> <C> <C>
20-29......................... 0.14010 0.19437 0.10005 0.12341
30-39......................... 0.17850 0.30049 0.16097 0.22778
40-49......................... 0.37912 0.73630 0.32558 0.50808
50-59......................... 0.96089 1.79681 0.66576 0.99290
60-69......................... 2.65338 4.29327 1.63207 2.19463
70-80......................... 8.16248 10.74533 5.59571 6.58858
81-99......................... 83.33333 83.33333 83.33333 83.33333
</TABLE>
Generally, We use a cost of insurance rate that is less than the maximum
rate. The table below compares the maximum cost of insurance rate to the rate
that is currently being used (current rate) during the first Policy Year. The
rates below are based on the preferred non-tobacco Rate Class and a $150,000
Specified Amount.
MONTHLY COST OF INSURANCE RATE COMPARISON
<TABLE>
<CAPTION>
COST OF INSURANCE RATE
----------------------
SEX ISSUE AGE CURRENT MAXIMUM
- - --------------------------------------------------------- ----- --------- -----------
<S> <C> <C> <C>
Male..................................................... 45 0.26313 0.27708
Female................................................... 50 0.31223 0.34983
Male..................................................... 55 0.47878 0.65401
</TABLE>
We will determine the monthly cost of insurance rates based on the
expectations as to future experience. We may charge less than the maximum cost
of insurance rates as shown in the Table of Cost of Insurance Rates contained in
Your Policy. Any change in the cost of insurance rates will apply to all Primary
Insureds of the same Age, sex, Rate Class and Policy Year. The cost of insurance
rates are greater for insureds in special Rate Classes.
MONTHLY RIDER CHARGES. We charge separately for any riders attached to the
Policy. We deduct the cost of the riders for a Policy Month as part of the
Monthly Deduction on each Monthly Anniversary Day.
RISK CHARGE. We assess a Risk Charge which is deducted as part of the
Monthly Deduction. The Risk Charge is calculated as follows:
<TABLE>
<S> <C>
Per Policy Month for Policy
Years 1-10:....................... .80%, on an annual basis, of the
Accumulation Value in the Separate
Account.
Per Policy Month for Policy
Years 11 and later:............... .40%, on an annual basis, of the
Accumulation Value in the Separate
Account.
</TABLE>
The Risk Charge compensates Us for some of the mortality risks We assume,
and the risk that We will experience costs above that for which We are
compensated. It also compensates Us for some of the administrative costs in
administering the Policy. We expect to profit from the charge.
POLICY CHARGE. We assess a Policy Charge which is deducted each Monthly
Anniversary Day. The Policy Charge is:
<TABLE>
<S> <C>
Per Policy Month for Policy
Year 1:........................... $25
Per Policy Month for Policy
Years 2 and later:................ Currently, $5. This charge is not
guaranteed and may be increased but
it will not exceed $10.
</TABLE>
The Policy Charge compensates Us for some of the administrative costs of
the Policy and the Separate Account.
WAIVER OF MONTHLY DEDUCTION. You can elect to have a Waiver of Monthly
Deduction Rider added to Your Policy. This rider provides for all Monthly
Deductions, excluding the Risk Charge, to be waived during the Primary Insured's
total disability beginning before age 60 and continuing 6 months or more. Any
Monthly Deductions, excluding the Risk Charge, made during the first 6 months
will be credited back to the Accumulation Value and subsequent Monthly
Deductions, excluding the Risk Charge, are waived as long as total disability
continues.
You should consult the rider for the terms and conditions. The rider is
available as an alternative to the Waiver of Planned Premiums. You can select
either the Waiver of Monthly Deduction Rider or the Waiver of Planned Premium
Rider but not both. The rider is not available if the Policy is issued with the
Guaranteed Minimum Death Benefit.
SURRENDER CHARGE
If the Policy is surrendered before the 10th Policy Anniversary or within
10 years following the effective date of any increase in Specified Amount, a
Surrender Charge may be deducted. The amount of the Surrender Charge depends
upon:
* Your Specified Amount,
* the year of surrender,
* issue Age of the Primary Insured,
* sex of the Primary Insured, and
* Rate Class of the Primary Insured.
The Surrender Charge specific to Your Policy is shown on Your Policy Schedule.
The maximum Surrender Charge that will be assessed ranges from $5.40 to $44.56
per $1,000 of Specified Amount. The table below shows the maximum Surrender
Charge per $1,000 for all of the ages in the range. The maximum Surrender Charge
for some ages in the range will be smaller.
MAXIMUM INITIAL SURRENDER CHARGES PER $1,000
<TABLE>
<CAPTION>
Male Female
------------------------ ------------------------
Issue Age Non- Tobacco Tobacco Non- Tobacco Tobacco
- - ------------------------------ ------------ ---------- ------------ ----------
<S> <C> <C> <C> <C>
20-29......................... $ 8.10 $ 9.18 $ 7.20 $ 8.10
30-39......................... 12.43 14.78 10.92 12.43
40-49......................... 19.32 23.87 16.28 18.91
50-59......................... 29.52 35.07 23.52 28.11
60-69......................... 41.64 44.56 32.49 38.00
70-80......................... 49.94 42.29 35.97 39.41
</TABLE>
The charge is not affected by special Rate Classes nor by the addition of
riders. After the fourth Policy Year, or after four years following the
effective date of an increase, the Surrender Charge between Policy Years will be
pro-rated monthly (pursuant to a formula). When there is a partial surrender of
Cash Surrender Value, a pro-rata portion of the Surrender Charge is assessed for
any amount that the Specified Amount is reduced. The pro-rata Surrender Charge
is calculated in the same manner as for a requested decrease.
The Surrender Charge and the pro-rata Surrender Charge compensates Us for
the costs associated with selling the Policy and for issue and underwriting
expenses.
PARTIAL SURRENDER FEE
When there is a partial surrender of the Cash Surrender Value, in addition
to any Surrender Charge that may be assessed, We will charge a Partial Surrender
Fee of $25. This charge compensates Us for administrative expenses associated
with a surrender.
The Surrender Charge and Partial Surrender Fee are deducted from the
unloaned Accumulation Value of the Policy. The Partial Surrender Fee is deducted
pro-rata from the Investment Option(s) and/or the Fixed Account from which the
withdrawal is made.
WAIVER OF SURRENDER CHARGES
After the first Policy Anniversary, the Surrender Charge may be waived in
the following circumstances:
FREE PARTIAL SURRENDER AMOUNT. Once each Policy Year, on a non-cumulative
basis, You may make a free partial surrender up to 10% of the unloaned
Accumulation Value without the imposition of the Partial Surrender Fee or the
Surrender Charge. If you totally surrender the Policy later that Policy
Year for its Cash Surrender Value, then the pro-rata Surrender Charges for
each free partial surrender will be assessed at the time of surrender.
CONFINEMENT. The Surrender Charge will not apply if:
(1) You are confined in a long term care facility, skilled or intermediate
nursing facility or hospital;
(2) You have been so confined for at least 90 consecutive days;
(3) a physician certifies that confinement is required because of sickness
or injury; and
(4) You were not so confined on the Policy Date.
Proof of confinement will be required in a form satisfactory to Us.
TOTAL DISABILITY. The Surrender Charge will not apply if:
(1) You are totally disabled;
(2) You have been so disabled for at least 90 days;
(3) a physician certifies that You are totally disabled; and
(4) You were not so disabled on the Policy Date.
Proof of disability will be required in a form satisfactory to Us.
INVOLUNTARY UNEMPLOYMENT. The Surrender Charge will not apply if:
(1) You were employed on a "full time" basis (working at least 17 hours per
week) on the Policy Date;
(2) Your employment was terminated by Your employer;
(3) You remain unemployed for at least 90 days; and
(4) You certify in writing at the time You make Your surrender request that
You are still unemployed.
DIVORCE. The Surrender Charge will not apply if:
(1) You were married on the Policy Date;
(2) subsequent to the Policy Date a divorce proceeding is filed; and
(3) You certify in writing at the time You make Your surrender request that
You are now divorced.</R.
We will not assess pro-rata Surrender Charges for earlier free partial
withdrawals if You make a total surrender due to confinement, total disability,
involuntary unemployment or divorce.
Not all options may be available in all states.
REDUCTION OR ELIMINATION OF THE SURRENDER CHARGE
We may reduce or eliminate the amount of the Surrender Charge when the
Policy is sold under circumstances which reduce its sales expense. Some examples
are: if there is a large group of individuals that will be purchasing the Policy
or a prospective purchaser already had a relationship with Us. We will not
deduct a Surrender Charge under a Policy issued to an officer, director or
employee of BMA or any of its affiliates.
TRANSFER FEE
You can make 12 free transfers every Policy Year. If You make more than 12
transfers a year, We will deduct a transfer fee of $25. If We do assess a
transfer fee, it will be deducted from the amount transferred.
If the transfer is part of the Dollar Cost Averaging Option, the Asset
Rebalancing Option or Asset Allocation Option, it will not count in determining
the transfer fee.
TAXES
We do not currently assess any charge for income taxes which We incur as a
result of the operation of the Separate Account. We reserve the right to
assess a charge for such taxes against the Separate Account or your
Accumulation Value if we determine that such taxes will be incurred.
INVESTMENT OPTION EXPENSES
There are deductions from and expenses paid out of the assets of the
various Investment Options, which are summarized below. See the fund
prospectuses for more information.
INVESTMENT OPTION EXPENSES
(as a percentage of the average daily net assets of an Investment Option for
the most recent fiscal year, except as noted.)
<TABLE>
<CAPTION>
TOTAL ANNUAL
OTHER EXPENSES PORTFOLIO
(AFTER EXPENSES (AFTER
REIMBURSEMENT REIMBURSEMENT
MANAGEMENT 12b-1 FOR CERTAIN FOR CERTAIN
FEES FEES PORTFOLIOS) PORTFOLIOS)
------------- --------- -------------- ---------------
<S> <C> <C> <C> <C>
INVESTORS MARK SERIES FUND, INC.(1)
Intermediate Fixed Income Portfolio..................... .60% -- .20% .80%
Mid Cap Equity Portfolio................................ .80% -- .10% .90%
Money Market Portfolio.................................. .40% -- .10% .50%
Global Fixed Income Portfolio........................... .75% -- .25% 1.00%
Small Cap Equity Portfolio.............................. .95% -- .10% 1.05%
Large Cap Growth Portfolio.............................. .80% -- .10% .90%
Large Cap Value Portfolio............................... .80% -- .10% .90%
Growth & Income Portfolio............................... .80% -- .10% .90%
Balanced Portfolio...................................... .80% -- .10% .90%
BERGER INSTITUTIONAL PRODUCTS TRUST(2)
Berger IPT--100 Fund.................................... .00% -- 1.00% 1.00%
Berger IPT--Growth and Income Fund...................... .00% -- 1.00% 1.00%
Berger IPT--Small Company Growth Fund................... .00% -- 1.15% 1.15%
Berger/BIAM IPT--International Fund..................... .00% -- 1.20% 1.20%
CONSECO SERIES TRUST(3)
Balanced Portfolio(4)................................... .75% -- .00% .75%
Equity Portfolio(4)..................................... .80% -- .00% .80%
Fixed Income Portfolio.................................. .70% -- .00% .70%
Government Securities Portfolio......................... .70% -- .00% .70%
THE ALGER AMERICAN FUND
Alger American Growth Portfolio......................... .75% -- .04% .79%
Alger American Leveraged AllCap Portfolio(5)............ .85% -- .11% .96%
Alger American MidCap Growth Portfolio.................. .80% -- .04% .84%
Alger American Small Capitalization Portfolio........... .85% -- .04% .89%
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
VP International........................................ 1.50% -- .00% 1.50%
VP Value................................................ 1.00% -- .00% 1.00%
VP Income & Growth...................................... .70% -- .00% .70%
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC......... .75% -- .05% .80%
DREYFUS STOCK INDEX FUND.................................. .25% -- .01% .26%
DREYFUS VARIABLE INVESTMENT FUND
Disciplined Stock Portfolio............................. .75% -- .13% .88%
International Value Portfolio........................... 1.00% -- .29% 1.29%
</TABLE>
<TABLE>
<CAPTION>
TOTAL ANNUAL
OTHER EXPENSES PORTFOLIO
(AFTER EXPENSES (AFTER
REIMBURSEMENT REIMBURSEMENT
MANAGEMENT 12b-1 FOR CERTAIN FOR CERTAIN
FEES FEES PORTFOLIOS) PORTFOLIOS)
------------- --------- -------------- ---------------
<S> <C> <C> <C> <C>
FEDERATED INSURANCE SERIES
Federated High Income Bond Fund II...................... .60% -- .18% .78%
Federated International Equity Fund II(6)............... .53% -- .72% 1.25%
Federated Utility Fund II(6)............................ .68% -- .25% .93%
INVESCO VARIABLE INVESTMENT FUNDS, INC.
INVESCO VIF--High Yield Fund(7)......................... .60% -- .47% 1.07%
INVESCO VIF--Equity Income Fund(7)(8)................... .75% -- .18% .93%
LAZARD RETIREMENT SERIES, INC.
Lazard Retirement Equity Portfolio(9)................... .75% .25% .25% 1.25%
Lazard Retirement Small Cap Portfolio(9)................ .75% .25% .25% 1.25%
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST(10)
Limited Maturity Bond Portfolio......................... .65% -- .11% .76%
Partners Portfolio...................................... .78% -- .06% .84%
STRONG OPPORTUNITY FUND II, INC.
Opportunity Fund II..................................... 1.00% -- .16% 1.16%
STRONG VARIABLE INSURANCE FUNDS, INC.
Strong Mid Cap Growth Fund (11)......................... 1.00% -- .20% 1.20%
VAN ECK WORLDWIDE INSURANCE TRUST
Worldwide Bond Fund..................................... 1.00% -- .15% 1.15%
Worldwide Emerging Markets Fund(12)..................... 1.00% -- .50% 1.50%
Worldwide Hard Assets Fund(12).......................... 1.00% -- .16% 1.16%
Worldwide Real Estate Fund(12).......................... .89% -- .00% .89%
</TABLE>
- - ------------------------
1. Investors Mark Advisors, LLC voluntarily agreed to reimburse expenses of
each Portfolio of Investors Mark Series Fund, Inc. for the year ended December
31, 1998 and will continue this arrangement until April 30, 2000 so that the
annual expenses do not exceed the amounts set forth above under "Total Annual
Portfolio Expenses" for each Portfolio. Absent such expense reimbursement, the
Total Annual Portfolio Expenses for the year ended December 31, 1998 were: 2.89%
for the Money Market Portfolio; 1.97% for the Intermediate Fixed Income
Portfolio; 1.47% for the Global Fixed Income Portfolio; 2.38% for the Mid Cap
Growth Portfolio; 1.59% for the Balanced Portfolio; 1.75% for the Growth &
Income Portfolio; 2.29% for the Small Cap Equity Portfolio; 1.66% for the Large
Cap Growth Portfolio; and 1.55% for the Large Cap Value Portfolio.
2. The Funds' investment advisers have agreed to waive their advisory fee
and reimburse the Funds for additional expenses to the extent that normal
operating expenses in any fiscal year, including the investment advisory fee but
excluding brokerage commissions, interest, taxes and extraordinary expenses, of
each of the Berger IPT--100 Fund and the Berger IPT--Growth and Income Fund
exceed 1.00%, and the normal operating expenses in any fiscal year of the Berger
IPT-- Small Company Growth Fund exceed 1.15%, and the normal operating expenses
of the Berger/BIAM IPT--International Fund exceed 1.20% of the respective Fund's
average daily net assets. Absent the voluntary waiver and reimbursement, the
Management Fee for the Berger IPT--100 Fund, Berger IPT--Growth and Income Fund,
the Berger IPT--Small Company Growth Fund and the Berger/BIAM IPT--
International Fund would have been .75%, .75%, .90%, and .90% respectively,
their Other Expenses would have been: 2.13%, 1.24%, 1.29% and 1.95%,
respectively, and their Total Annual Portfolio Expenses would have been 2.88%,
1.99%, 2.19% and 2.85%, respectively.
3. The expense information in the table has been restated to reflect
current fees. Pursuant to a contractual arrangement with the Trust, Conseco
Capital Management, Inc., the adviser, has agreed to waive fees and/or
reimburse portfolio expenses through 4/30/00, so that the annual operating
expenses of each portfolio are limited to the Total Annual Expenses for each
respective portfolio, as set forth above. This arrangement does not cover
interest, taxes, brokerage commissions, and extraordinary expenses. The
total percentages in the above table are after reimbursement. In the absence
of expense reimbursement, the total estimated fees and expenses for 1999 would
total: 0.97% for the Government Securities Portfolio; 0.89% for the Fixed
Income Portfolio; 1.01% for the Balanced Portfolio and 0.95% for the Equity
Portfolio.
4. Conseco Capital Management, Inc., since January 1, 1993, has
waived its management fees in excess of the annual rates set forth
above. Absent such fee waivers, the management fees would be: .85% for the
Balanced Portfolio; and .85% for the Equity Portfolio.
5. The Alger American Leveraged AllCap Portfolio's "Other Expenses" include
.03% of interest expense.
6. In the absence of a voluntary management fee waiver by Federated
Investment Management Company, the Funds' investment adviser, the Management Fee
and Total Annual Portfolio Expenses would have been 0.75% and 1.00%,
respectively, for Utility Fund II. Absent a voluntary waiver of the management
fee and the voluntary reimbursement of certain other operating expenses by
Federated Investment Management Company, the Management Fee, Other Expenses and
Total Annual Portfolio Expenses for International Equity Fund II would have been
1.00%, .72% and 1.72%, respectively.
7. The Fund's actual Total Annual Fund Operating Expenses were lower than
the figures shown because its transfer agent and/or custodian fees were reduced
under expense offset arrangements. Because of an SEC requirement, the figures
shown do not reflect these reductions.
8. Certain expenses of the Fund are being absorbed voluntarily by INVESCO
Funds Group, Inc. pursuant to a commitment to the Fund. In the absence of
such absorption, Other Expenses and Total Annual Fund Operating Expenses for
the year ended December 31, 1998 were .42% and 1.17%, respectively. This
commitment may be changed at any time following consultation with the board of
directors.
9. Lazard Asset Management, Inc., the fund's investment adviser, has
voluntarily agreed to reimburse all expenses through December 31, 1999
to the extent total annual portfolio expenses exceed in any fiscal year
1.25% of the Portfolio's average daily net assets. Total annual portfolio
expenses prior to waivers and/or reimbursements by the Investment Manager
totaled 16.20% for the Lazard Retirement Small Cap Portfolio and 21.32% for
the Lazard Retirement Equity Portfolio at December 31, 1998.
10. Neuberger Berman Advisers Management Trust is divided into portfolios
(Portfolios), each of which invests all of its net investable assets in a
corresponding series of Advisers Managers Trust. The figures reported under
"Management Fees" include the total of the administration fees paid by the
Portfolio and the management fees paid by its corresponding series. Similarly,
"Other Expenses" includes all other expenses of the Portfolio and its
corresponding series.
11. Strong Capital Management, Inc., the investment adviser of the Strong
Mid Cap Growth Fund II, has voluntarily agreed to cap the Fund's total
operating expenses at 1.20%. The Adviser has no current intention to, but may
in the future, discontinue or modify any waiver of fees or absorption of
expenses at its discretion with appropriate notification to its shareholders.
Absent the expense reimbursement (cap) arrangement, Other Expenses would have
been .55% and Total Annual Portfolio Expenses would have been 1.55%.
12. Van Eck Associates Corporation (the "Adviser") agreed to assume
expenses exceeding 1.50% of the Worldwide Emerging Markets Fund's average daily
net assets. Absent this expense reimbursement, Other Expenses would have been
0.61% and Total Portfolio Expenses would have been 1.61%. The Worldwide Hard
Assets Fund's Other Expenses were reduced by a fee arrangement based on cash
balances left on deposit with the custodian and a directed brokerage arrangement
where the Fund directs certain portfolio trades to a broker that, in turn, pays
a portion of the Fund's expenses. Absent these arrangements, the Other Expenses
would have been 0.20% and Total Portfolio Expenses would have been 1.20%. For
the Worldwide Real Estate Fund the Adviser agreed to waive its management fees
and assume certain expenses for the period January 1, 1998 to February 28, 1998.
The Adviser also agreed to assume expenses exceeding 1.00% of the Worldwide Real
Estate Fund's average daily net assets for the period March 1, 1998 to December
31, 1998. The Worldwide Real Estate Fund expenses were also reduced by a fee
arrangement based on cash balances left on deposit with the custodian and a
directed brokerage arrangement where the Fund directs certain portfolio trades
to a broker that, in turn, pays a portion of the Fund's expenses. Absent these
arrangements, the Other Expenses for the Worldwide Real Estate Fund would have
been 4.32% and Total Portfolio Expenses would have been 5.32%.
5. DEATH BENEFIT
The primary purpose of the Policy is to provide Death Benefit protection on
the life of the Primary Insured. While the Policy is in force, if the Primary
Insured dies, the Beneficiary(ies) will receive the Death Proceeds. The Death
Proceeds equal the Death Benefit under the Policy less any Indebtedness.
The amount of the Death Benefit depends upon:
* the Specified Amount,
* Your Policy's Accumulation Value on the date of the Primary Insured's
death, and
* the Death Benefit Option in effect at the time of death.
The Policy provides two Death Benefit options:
* a Level Death Benefit, and
* an Adjustable Death Benefit.
So long as the Policy remains in force, the Death Benefit under either
option will never be less than the Specified Amount.
LEVEL DEATH BENEFIT OPTION. The amount of the Death Benefit under the Level
Death Benefit Option is the greater of:
1. the Specified Amount on the date of death; or
2. the Accumulation Value on the date of death multiplied by the applicable
factor from the Table of Minimum Death Benefit Corridor Percentages shown
below.
ADJUSTABLE DEATH BENEFIT OPTION. The amount of the Death Benefit under the
Adjustable Death Benefit Option is the greater of:
1. the Specified Amount on the date of death plus the Accumulation Value
on the date of death; or
2. the Accumulation Value on the date of death multiplied by the
applicable factor from the Table of Minimum Death Benefit Corridor
Percentages shown below.
The applicable percentage is a percentage that is based on the attained Age
of the Primary Insured at the beginning of the Policy Year and is equal to the
following:
<TABLE>
<CAPTION>
ATTAINED CORRIDOR ATTAINED CORRIDOR
AGE PERCENTAGE AGE PERCENTAGE
- - --------- ----------- ----------- -----------
<S> <C> <C> <C>
0-40 250% 60 130%
41 243% 61 128%
42 236% 62 126%
43 229% 63 124%
44 222% 64 122%
45 215% 65 120%
46 209% 66 119%
47 203% 67 118%
48 197% 68 117%
49 191% 69 116%
50 185% 70 115%
51 178% 71 113%
52 171% 72 111%
53 164% 73 109%
54 157% 74 107%
55 150% 75-90 105%
56 146% 91 104%
57 142% 92 103%
58 138% 93 102%
59 134% 94 101%
95-100 100%
</TABLE>
CHANGE IN DEATH BENEFIT OPTION
You may change the Death Benefit option after the Policy has been in force
for at least one year, subject to the following:
1. You must submit an Authorized Request;
2. once the Death Benefit option has been changed, it cannot be changed
again for one year from the date of the change;
3. if the Level Death Benefit Option is to be changed to the Adjustable
Death Benefit Option, You must submit proof satisfactory to Us that
the Primary Insured is still insurable;
4. if the Level Death Benefit Option is changed to the Adjustable Death
Benefit Option the resulting Specified Amount can never be less than
50% of the Minimum Specified Amount. The Specified Amount will be
reduced to equal the Specified Amount less the Accumulation Value on
the date of change. This decrease will not result in any decrease in
Premiums or Surrender Charges; and
5. if the Adjustable Death Benefit Option is changed to the Level Death
Benefit Option, the Specified Amount will be increased by an amount
equal to the Accumulation Value on the date of the change. This
increase will not result in any increase in Premiums or Surrender
Charges.
Any change in a Death Benefit option will take effect on the Monthly
Anniversary Date on or following the date We approve the request for the change.
CHANGE IN SPECIFIED AMOUNT
You may change the Specified Amount of the Policy effective on any Monthly
Anniversary Day after the Policy has been in force at least one year, subject to
the following requirements. Once the Specified Amount has been changed, it
cannot be changed again for one year from the date of a change.
SPECIFIED AMOUNT INCREASE. To increase the Specified Amount You must:
1. submit an application for the increase;
2. submit proof satisfactory to Us that the Primary Insured is an
insurable risk; and
3. pay any additional Premium which is required.
The Specified Amount can only be increased before the Primary Insured
reaches Age 80. A Specified Amount increase will take effect on the Monthly
Anniversary Day on or following the day We approve the application for the
increase. The Specified Amount increase must be for at least $10,000. Each
increase will have its own Surrender Charge schedule based on the increased
issue Age, sex and Rate Class. The Rate Class that applies to any Specified
Amount increase may be different from the Rate Class that applies to the Initial
Specified Amount. Each increase will have its own cost of insurance rate.
The following changes will be made to reflect the increase in Specified
Amount:
1. the No-Lapse Monthly Minimum Premium will be increased;
2. an additional Surrender Charge for the increase in Specified Amount
will apply.
We will furnish You with documentation showing You any change in Rate Class
for the Specified Amount increase, the amount of the increase and the additional
Surrender Charges.
SPECIFIED AMOUNT DECREASE. You must request by Authorized Request any
decrease in the Specified Amount. The decrease will take effect on the later of:
1. the Monthly Anniversary Day on or following the day We receive Your
request for the decrease; or
2. the Monthly Anniversary Day one year after the last change in
Specified Amount was made.
A Specified Amount decrease will be used to reduce any previous increases
to the Specified Amount which are then in effect starting with the latest
increase and continuing in the reverse order in which the increases were made.
If any portion of the decrease is left over after all Specified Amount increases
have been reduced to zero, it will be used to reduce the Initial Specified
Amount. We will not permit a Specified Amount decrease that would reduce the
Specified Amount below the Minimum Specified Amount. The applicable Surrender
Charge for the amount of decrease will be deducted from the Accumulation Value.
The No-Lapse Monthly Minimum Premium will be reduced to reflect the
Specified Amount decrease.
GUARANTEED MINIMUM DEATH BENEFIT
You can elect to have a Guaranteed Minimum Death Benefit Rider added to
Your Policy. This rider guarantees that the Death Benefit under Your Policy will
never be less than the Specified Amount during the Guaranteed Minimum Death
Benefit (GMDB) period provided that the GMDB payment requirement has been met.
The GMDB Period is determined for each issue Age in accordance with the
following:
<TABLE>
<CAPTION>
ISSUE AGE GMDB PERIOD
- - ----------------------------------------------------------- -------------
<S> <C>
20-35...................................................... 25 years
36-50...................................................... to age 60
51-55...................................................... 10 years
56-59...................................................... to age 65
</TABLE>
There is no separate charge for this rider but in order to have the GMDB
provided by the rider You must pay a certain level of Premiums each month which
is greater than the No-Lapse Monthly Minimum Premium. The GMDB payment
requirement is that the sum of all premiums paid less any partial surrenders and
less any Indebtedness are at least as large as the sum of the GMDB monthly
Premiums since the Policy Date. The payment requirement for the GMDB rider must
be met on each Monthly Anniversary Day even though Premiums do not need to be
paid monthly. The GMDB Monthly Premium is determined by the Primary Insured's
issue Age, sex and Rate Class and includes all rider costs. Ask Your registered
representative for the particulars to Your own situation.
ACCELERATED DEATH BENEFIT
If the Primary Insured is terminally ill, under the Accelerated Death
Benefit rider, We will pre-pay a portion of the Death Benefit. You may elect to
have an Accelerated Death Benefit. You can only elect this benefit one time,
regardless of the amount You selected. No premium is charged for this rider.
You can choose an amount between 10% and 50% of the Specified Amount. The
maximum benefit amount is the greater of $250,000 and 10% of the Specified
Amount. The remaining amount of the Specified Amount in Your Policy must be at
least equal to 50% of the Minimum Specified Amount.
Benefits as specified under the Policy will be reduced upon receipt of an
Accelerated Death Benefit amount. If you receive an Accelerated Death Benefit
amount, it may be taxable. You should contact Your personal tax or financial
adviser for specific information.
After an Accelerated Death Benefit payment is made, the Policy will remain
in force and reduced Premiums will be payable. The Policy's Specified Amount,
Accumulation Value and Surrender Charge will be reduced by the percentage of the
requested portion of the available amount as specified in the rider. Any
outstanding Loan will be reduced by the portion of the Loan and repaid by the
same percentage as the Accelerated Death Benefit percentage as described in the
rider.
The receipt of an Accelerated Death Benefit amount may adversely affect the
recipient's eligibility for Medicaid or other government benefits or
entitlements.
The amount available will be reduced by an interest charge and any
repayment of Indebtedness. The interest charge is based on the same interest
charge that is used to determine loans.
6. TAXES
NOTE: BMA has prepared the following information on federal income taxes as
a general discussion of the subject. It is not intended as tax advice to any
person. You should consult your own tax adviser about your own circumstances.
BMA has included an additional discussion regarding taxes in Part II.
LIFE INSURANCE IN GENERAL
Life insurance, such as this Policy, is a means of providing for death
protection and setting aside money for future needs. Congress recognized the
importance of such planning and provided special rules in the Internal Revenue
Code (Code) for life insurance.
Simply stated, these rules provide that You will not be taxed on the
earnings on the money held in Your life insurance policy until You take the
money out. Beneficiaries generally are not taxed when they receive the Death
Proceeds upon the death of the Primary Insured. Estate taxes may apply.
TAKING MONEY OUT OF YOUR POLICY
You, as the Owner, will not be taxed on increases in the value of Your
Policy until a distribution occurs either as a surrender or as a loan. If Your
Policy is a Modified Endowment Contract (MEC) any loans or withdrawals from the
Policy will be treated as first coming from earnings and then from Your
investment in the Policy. Consequently, these earnings are included in taxable
income.
The Internal Revenue Code also provides that any amount received from a MEC
which is included in income may be subject to a 10% penalty. The penalty will
not apply if the income received is:
(1) paid on or after the taxpayer reaches age 59 1/2;
(2) paid if the taxpayer becomes totally disabled (as that term is defined
in the Code); or
(3) in a series of substantially equal payments made annually (or more
frequently) for the life or life expectancy of the taxpayer.
If Your Policy is not a MEC, any surrender proceeds will be treated as
first a recovery of the investment in the Policy and to that extent will not be
included in taxable income. Furthermore any loan will be treated as indebtedness
under the Policy and not as a taxable distribution. See "Federal Tax Status" in
Part II for more details.
DIVERSIFICATION
The Code provides that the underlying investments for a variable life
policy must satisfy certain diversification requirements in order to be treated
as a life insurance contract. We believe that the Investment Options are being
managed so as to comply with such requirements.
Under current Federal tax law, it is unclear as to the circumstances under
which You, because of the degree of control You exercise over the underlying
investments, and not Us would be considered the Owner of the shares of the
Investment Options. If You are considered the Owner of the investments, it will
result in the loss of the favorable tax treatment for the Policy. It is unknown
to what extent Owners are permitted to select Investment Options, to make
transfers among the Investment Options or the number and type of Investment
Options Owners may select from. If guidance from the Internal Revenue Service is
provided which is considered a new position, then the guidance would generally
be applied prospectively. However, if such guidance is considered not to be a
new position, it may be applied retroactively. This would mean that You, as the
Owner of the Policy, could be treated as the Owner of the Investment Options.
Due to the uncertainty in this area, BMA reserves the right to modify the Policy
in an attempt to maintain favorable tax treatment.
7. ACCESS TO YOUR MONEY
LOANS
We will loan You money while the Policy is in force and not in a Grace
Period. The Policy will be the sole security for the loan. We will advance a
loan amount not to exceed the loan value. The loan must be secured by proper
assignment of the Policy. We may defer granting loans but not for more than six
months.
The Accumulation Value securing the loan is transferred to the Loan Account
on a pro-rata basis. The amount transferred from each Investment Option and the
Fixed Account will equal the ratio of the value each bears to the total unloaned
Accumulation Value. If You desire other than the above, You may specify the
specific Investment Option from which the transfer is to be made.
Any Indebtedness will be deducted from any amount payable under the Policy.
No new loan may be taken which, in combination with existing loans and
accrued interest, is greater than the Loan Value.
EFFECT OF A LOAN. A Policy loan will result in Accumulation Value being
transferred from the Investment Options or the Fixed Account to the Loan
Account. A Policy Loan, whether or not unpaid, will have a permanent effect on
the death benefits and Policy values, because the amount of the Policy Loan
transferred to the Loan Account will not share in the investment results of the
Investment Options while the Policy Loan is outstanding. If the Loan Account
earnings rate is less than the investment performance of the selected Investment
Options and/or the Fixed Account, the values and benefits under the Policy will
be reduced (and the Policy may even terminate) as a result of the Policy Loan.
Furthermore, if not repaid, the Policy Loan will reduce the amount of Death
Benefit and Cash Surrender Value.
LOAN VALUE. The loan value is equal to 90% of the Accumulation Value as of
the date the Authorized Request for the loan is received at the BMA Service
Center less:
(a) an amount equal to the Surrender Charge, if any, that applies if the
Policy is surrendered in full;
(b) any existing Indebtedness;
(c) interest on all Indebtedness on the Policy to the next Policy
Anniversary; and
(d) prior to the ninth Policy Month, an amount equal to the balance of the
Monthly Deductions for the first Policy Year; or on or after the ninth Policy
Month, an amount equal to the sum of the next three Monthly Deductions.
LOAN INTEREST (CHARGED). You must pay interest in advance on the first
interest payment due date and on each Policy Anniversary that follows at the
loan interest rate which is shown on Your Policy Schedule. The interest rate
applies to the unpaid balance of the loan. The first interest payment is due on
the date of the loan.
If you do not pay loan interest, we will transfer the difference between
the value of the Loan Account and the Indebtedness from the Investment Options
and the Fixed Account on a pro-rata basis to the Loan Account.
INTEREST CREDITED. The Accumulation Value in the Loan Account will earn
interest at a rate not less than 4%. For Policy Years 11 and after, the
Accumulation Value in the Loan Account will earn interest at the Loan Interest
Rate.
LOAN REPAYMENT. You may repay loans at any time while the Policy is in
force. There is no minimum loan repayment amount. The amount equivalent to a
loan repayment will be deducted from the Loan Account and allocated to the
originating Investment Options and the Fixed Account in the same percentage as
was used for the transfers to the Loan Account.
AMOUNTS RECEIVED BY US WILL BE APPLIED AS PREMIUMS UNLESS WE ARE OTHERWISE
INSTRUCTED TO APPLY SUCH AMOUNTS AS REPAYMENT OF THE LOAN.
TERMINATION FOR MAXIMUM INDEBTEDNESS. The Policy will terminate when
Indebtedness equals or exceeds the Accumulation Value less the Surrender Charge,
if any, that applies if the Policy is surrendered in full. Termination will be
effective 61 days after We send notice of the termination to Your last known
address and the last known address of any assignee of record. A termination of
the Policy with a loan outstanding may have Federal income tax consequences.
(See Part II--Federal Tax Status--Tax Treatment of Loans and Surrenders).
SURRENDERS
TOTAL SURRENDER. You may terminate the Policy at any time by submitting an
Authorized Request to the BMA Service Center. We will pay the Cash Surrender
Value to You as of the Business Day the Authorized Request is received in good
order and Our liability under the Policy will cease. We may assess a Surrender
Charge.
PARTIAL SURRENDER. After the first Policy Year, You may surrender a part of
the Cash Surrender Value by submitting an Authorized Request to the BMA Service
Center. All partial surrenders are subject to the following:
1. A partial surrender must be for at least $250.
2. Unless You specify otherwise, the partial surrender will be deducted
on a pro-rata basis from the Fixed Account and the Investment Options.
The Surrender Charge and the Partial Surrender Charge are also
deducted from the Accumulation Value. You may specify if a different
allocation method is to be used. However the proportion to be taken
from the Fixed Account may never be greater than the Fixed Account's
proportion of the total unloaned Accumulation Value.
3. You cannot replace the surrendered Cash Surrender Value. Unlike a loan
repayment, all additional deposits will be considered Premium and
subject to the premium charge.
4. Upon a partial surrender, the Specified Amount may be reduced if the
Level Death Benefit Option is in effect. The Specified Amount will not
be reduced if the Adjustable Death Benefit Option is in effect. The
Specified Amount will be reduced by the amount of the partial
surrender if the Policy is not in corridor. (A Policy is in corridor
if the Accumulation Value exceeds certain specified percentages as set
forth in the Internal Revenue Code.)
5. You can make a partial surrender twice each Policy Year. The partial
surrender will be limited to such amounts so that the partial
surrender will not reduce the Specified Amount below the Minimum
Specified Amount, or reduce the remaining Cash Surrender Value below
$500.
6. We may assess a pro-rata portion of the Surrender Charge for any
amount by which the Specified Amount is reduced. We may also assess a
Partial Surrender Fee.
8. OTHER INFORMATION
BMA
Business Men's Assurance Company of America ("BMA" or the "Company"), BMA
Tower, 700 Karnes Blvd., Kansas City, Missouri 64108 was incorporated on
July 1, 1909 under the laws of the state of Missouri. BMA is licensed
to do business in the District of Columbia, Puerto Rico and all states except
New York. BMA operates as a reinsurer in the state of New York. BMA is a
wholly owned subsidiary of Assicurazioni Generali S.p.A., which is the
largest insurance organization in Italy.
YEAR 2000
Some of BMA's computer systems were written using two digits rather than
four to define the applicable year. As a result, those computer systems will not
recognize the year 2000 which, if not corrected, could cause disruptions of
operations, including, among other things, an inability to process transactions
or engage in similar normal business activities.
BMA has developed a plan to modify its information technology to be ready
for the year 2000. BMA has corrected its mission critical data processing
systems so they correctly handle year 2000 and subsequent dates. BMA currently
expects the portion of this project dealing with non-mission critical systems
to be complete by September 30, 1999. Based on this plan, BMA does not believe
that the costs to complete such system modifications or replacement will be
material to BMA.
THE SEPARATE ACCOUNT
We have established a separate account, BMA Variable Life Account A
(Separate Account), to hold the assets that underlie the Policies.
The assets of the Separate Account are being held in Our name on behalf of
the Separate Account and legally belong to Us. However, those assets that
underlie the Policies, are not chargeable with liabilities arising out of any
other business We may conduct. All the income, gains and losses (realized and
unrealized) resulting from those assets are credited to or charged against the
Policies and not against any other Policies We may issue.
DISTRIBUTORS
Jones & Babson, Inc., 700 Karnes Boulevard, Kansas City, Missouri 64108 and
Conseco Equity Sales, Inc., 11815 N. Pennsylvania Street, Carmel, Indiana 46032
act as the co-distributors of the Policies. Jones & Babson, Inc. and Conseco
Equity Sales, Inc. will each distribute the Policy in different markets through
their own distribution systems. Jones & Babson, Inc. was organized under the
laws of the state of Missouri on February 23, 1959. Conseco Equity Sales, Inc.
was organized under the laws of the state of Texas on July 12, 1965. Jones &
Babson, Inc., and Conseco Equity Sales, Inc. are both members of the National
Association of Securities Dealers, Inc. Jones & Babson, Inc. is a wholly owned
subsidiary of BMA. Conseco Equity Sales, Inc. is not affiliated with BMA.
The Policy will be sold by individuals who, in addition to being licensed
as life insurance agents for BMA, are also National Association of Securities
Dealers (NASD) registered representatives. These persons will receive
compensation for this sale.
BMA has entered into a reinsurance arrangement with Conseco Variable
Insurance Company ("Conseco Variable") whereby Conseco Variable will reinsure a
portion of the risks associated with the Policy. Conseco Equity Sales, Inc. is
an affiliate of Conseco Variable.
ADMINISTRATION
We have hired NAVISYS (formerly GENELCO, Incorporated), 9735 Landmark
Parkway Drive, St. Louis, Missouri to perform certain administrative services
regarding the Policies. The administrative services include issuance of the
Policy and maintenance of Policy records. Claims are handled jointly between BMA
and NAVISYS.
SUSPENSION OF PAYMENTS OR TRANSFERS
We may be required to suspend or postpone any payments or transfers
involving an Investment Option for any period when:
1. the New York Stock Exchange is closed (other than customary weekend
and holiday closings);
2. trading on the New York Stock Exchange is restricted;
3. an emergency exists as a result of which disposal of shares of the
Investment Options is not reasonably practicable or BMA cannot
reasonably value the shares of the Investment Options;
4. during any other period when the Securities and Exchange Commission,
by order, so permits for the protection of owners.
We may defer the portion of any transfer, amount payable or surrender, or
Policy Loan from the Fixed Account for not more than six months.
OWNERSHIP
OWNER. You, as the Owner of the Policy, have all of the rights under the
Policy. If You die while the Policy is still in force and the Primary Insured is
living, ownership passes to a successor Owner or if none, then Your estate
becomes the Owner.
JOINT OWNER. The Policy can be owned by Joint Owners. Authorization of both
Joint Owners is required for all Policy changes except for telephone transfers.
BENEFICIARY. The Beneficiary is the person(s) or entity You name to receive
any Death Proceeds. The Beneficiary is named at the time the Policy is issued
unless changed at a later date. Unless an irrevocable Beneficiary has been
named, You can change the Beneficiary at any time before the insured dies. If
there is an irrevocable Beneficiary, all Policy changes except Premium
allocations and transfers require the consent of the Beneficiary.
ASSIGNMENT. You can assign the Policy.
PART II
EXECUTIVE OFFICERS AND DIRECTORS OF BMA
As of May 1, 1999 the directors and executive officers of BMA and their
business experience for the past five years are as follows:
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES WITH DEPOSITOR AND
BUSINESS ADDRESS * BUSINESS EXPERIENCE FOR THE PAST FIVE YEARS
- - --------------------------------------- ------------------------------------------------------------------------
<S> <C>
Giorgio Balzer Director, Chairman of the Board and Chief Executive Officer of BMA; U.S.
Representative--Generali--US Branch.
Robert Thomas Rakich Director, President and Chief Operating Officer of BMA from 1995 to
present; President and Chief Executive Officer, Laurentian Capital
Corp., 1988 to October, 1995.
Dennis Keith Cisler Senior Vice President--Information Systems of BMA from 1991--present.
David Lee Higley Senior Vice President and Chief Financial Officer of BMA from
1989--present.
Stephen Stanley Soden Senior Vice President--Financial Group from 1994 to present; President &
Executive Vice President from 1985 to 1996, BMA Financial Services, Inc.
Michael Kent Deardorff Senior Vice President--Marketing BMA Financial Group from 1996-- present; Vice
President Annuity from 1994 to 1996; Vice President--Advance Markets
from 1990 to 1994.
James Evan Kilmer Vice President of BMA--Taxes.
Edward Scott Ritter Senior Vice President--Insurance Services, Corporate Development & Communications
of BMA from 1998 to present; Vice President from 1990 to 1998.
David Allen Gates Vice President and General Counsel of BMA from 1998 to present;
Regulatory Affairs Vice President from 1991 to 1998.
Martin Jefferson Fuller Senior Vice President--Workplace Benefits of BMA from 1996 to
present; Vice President--Sales Employee Benefits Division from 1993 to
1996.
</TABLE>
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES WITH DEPOSITOR AND
BUSINESS ADDRESS * BUSINESS EXPERIENCE FOR THE PAST FIVE YEARS
- - --------------------------------------- ------------------------------------------------------------------------
<S> <C>
Robert Noel Sawyer Director since 1997, Senior Vice President and Chief Investment Officer
of BMA from 1990 to present.
Vernon Wirt Voorhees II Director since 1995, Senior Vice President--Corporate Services and
Secretary of BMA 1990 to present; Senior Vice President-- Finance
1983-1990.
Margaret Mary Heidkamp Vice President--Operations, Variable and Asset Accumulation Products of BMA
from 1998 to present; Vice President, Management Services from 1986 to
1998.
Jay Brian Kinnamon Vice President and Corporate Actuary of BMA from 1991 to present.
Susan Annette Sweeney Vice President--Treasurer & Controller of BMA from 1995 to present;
Chief Financial Officer--Dean Machinery 1995; Manager of
Finance--Jackson County, Missouri from 1991 to 1995.
Gerald Wayne Selig Vice President and Actuary--Accumulation Products of BMA from 1998 to
present; Actuary--Accumulation Products from 1996 to 1998;
Actuary--Qualified Plan Services from 1989 to 1996.
Thomas Morton Bloch Director of BMA since 1993; Teacher, St. Francis Xavier School from
August 1995 to present; President and Chief Executive Officer--H & R
Block, Inc. until 1995.
Gianguido Castagno Director of BMA since 1990; Vice President--Head of Valuations
Department--Assicurazioni Generali, S.p.A., Trieste, Italy; Vice
President--Head of Corporate Operations Control Department to December
1997--Assicurazioni Generali.
William Thomas Grant II Director of BMA since 1990; President and Chief Executive Officer,
Chairman of the Board--LabOne, from 1997 to present; Chairman and Chief
Executive Officer Seafield Capital Corporation from 1993 to 1997.
Donald Joyce Hall, Jr. Director of BMA since 1990; Hallmark Vice President-- Creative--Hallmark
Cards, Inc.; Hallmark Vice President-- Product Development--Hallmark;
Hallmark Vice President-- Creative--Hallmark; General
Manager--Keepsakes--Hallmark; Executive Assistant to Executive Vice
President--Hallmark; Director, Specialty Store Development--Hallmark.
Allan Drue Jennings Director of BMA since 1990; Chairman of the Board, President and Chief
Executive Officer--Kansas City Power & Light Company.
David Woods Kemper Director of BMA since 1991; Chairman of the Board, President and Chief
Executive Officer--Commerce Bancshares, Inc.
Giorgio Liveris Director of BMA since 1992; Head of Life Branch-- Assicurazioni
Generali, S.p.A., Trieste, Italy.
John Kessander Lundberg Director of BMA since 1990; Retired.
</TABLE>
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES WITH DEPOSITOR AND
BUSINESS ADDRESS * BUSINESS EXPERIENCE FOR THE PAST FIVE YEARS
- - --------------------------------------- ------------------------------------------------------------------------
<S> <C>
John Pierre Mascotte Director of BMA since 1990; President and Chief Executive Officer--Blue
Cross Blue Shield of Kansas City, Chairman-- Johnson & Higgins of
Missouri, Inc.; Chairman and Chief Executive Officer--The Continental
Corporation.
Giovanni Perissinotto Director of BMA since 1990; Manager of the Accounting and Investment
Department--Assicurazioni Generali, S.p.A., Trieste, Italy; General
Manager--Assicurazioni Generali--1997; Deputy General Manager,
Assicurazioni Generali--1996; Manager of the Accounting and Investment
Department--Assicurazioni Generali--1995; Joint Manager of the
Accounting and Investment Department--Assicurazioni Generali--1993.
</TABLE>
- - ------------------------
* Principal business address is BMA Tower, 700 Karnes Blvd., Kansas City,
Missouri 64108-3306.
OFFICERS AND DIRECTORS OF JONES & BABSON, INC.
As of May 1, 1999, the following are the officers and directors of
Jones & Babson, Inc. and their position with Jones & Babson, Inc.
<TABLE>
<CAPTION>
NAME AND PRINCIPAL
BUSINESS ADDRESS * POSITION WITH JONES & BABSON, INC.
- - --------------------------------------- ------------------------------------------------------------------------
<S> <C>
Larry D. Armel President, Director and Chief Executive Officer
P. Bradley Adams Vice President, Chief Financial Officer and Treasurer
William G. Cooke Chief Compliance Officer
Martin A. Cramer Legal and Regulatory Affairs-Vice President and Secretary
Constance B. Martin Assistant Vice President
Stephen S. Soden Chairman of the Board and Director
Giorgio Balzer Director
Robert T. Rakich Director
Edward S. Ritter Director
Robert N. Sawyer Director
Vernon W. Voorhees II Director
</TABLE>
- - ------------------------
* Principal business address is 700 Karnes Boulevard, Kansas City, Missouri
64108-3306.
OFFICERS AND DIRECTORS OF CONSECO EQUITY SALES, INC.
As of May 1, 1999, the following are the officers and directors of
Conseco Equity Sales, Inc. and their position with Conseco Equity Sales, Inc.
<TABLE>
<CAPTION>
NAME AND PRINCIPAL
BUSINESS ADDRESS * POSITION WITH CONSECO EQUITY SALES, INC.
- - --------------------------------------- ------------------------------------------------------------------------
<S> <C>
L. Gregory Gloeckner President and Director
William P. Kovacs Vice President, Senior Counsel, Secretary and Director
James S. Adams Senior Vice President, Treasurer and Director
William T. Devanney, Jr. Senior Vice President, Corporate Taxes
Christene H. Darnell Vice President, Management Reporting
Donald B. Johnston Vice President, National Sales Director
Christine E. Monical Second Vice President and Assistant General Counsel
</TABLE>
- - ------------------------
* Principal business address is 11815 N. Pennsylvania Street, Carmel, Indiana
46032.
VOTING
In accordance with Our view of present applicable law, We will vote the
shares of the Investment Options at special meetings of shareholders in
accordance with instructions received from Owners having a voting interest. We
will vote shares for which We have not received instructions in the same
proportion as We vote shares for which We have received instructions. We will
vote shares We own in the same proportion as We vote shares for which We have
received instructions. The funds do not hold regular meetings of shareholders.
If the Investment Company Act of 1940 or any regulation thereunder is
amended or if the present interpretation of these laws should change, and as a
result We determine that it is permitted to vote the shares of the funds in Our
own right, We may elect to do so.
The voting interests of the Owner in the funds will be determined as
follows: Owners may cast one vote for each $100 of Accumulation Value of a
Policy which is allocated to an Investment Option on the record date. Fractional
votes are counted.
We will determine the number of shares which a person has a right to vote
as of the date to be chosen by Us not more than sixty (60) days prior to the
meeting of the fund. Voting instructions will be solicited by written
communication at least fourteen (14) days prior to such meeting.
Each Owner having such a voting interest will receive periodic reports
relating to the Investment Options in which he or she has an interest, proxy
material and a form with which to give such voting instructions.
DISREGARD OF VOTING INSTRUCTIONS. We may, when required to do so by state
insurance authorities, vote shares of the funds without regard to instructions
from Owners if such instructions would require the shares to be voted to cause
an Investment Option to make, or refrain from making, investments which would
result in changes in the sub-classification or investment objectives of the
Investment Option.
We may also disapprove changes in the investment policy initiated by Owners
or trustees of the funds, if such disapproval is reasonable and is based on a
good faith determination by Us that the change would violate state or federal
law or the change would not be consistent with the investment objectives of the
Investment Options or which varies from the general quality and nature of
investments and investment techniques used by other funds with similar
investment objectives underlying other variable contracts offered by Us or of an
affiliated company. In the event We disregard voting instructions, a summary of
this action and the reasons for such action will be included in the next
semi-annual report to Owners.
LEGAL OPINIONS
Blazzard, Grodd & Hasenauer, P.C., Westport, Connecticut has provided
advice on certain matters relating to the Federal securities and income tax laws
in connection with the Policies.
REDUCTION OR ELIMINATION OF SURRENDER CHARGE
We may reduce or eliminate the amount of the Surrender Charge on the
Policies when sales of the Policies are made to individuals or to a group of
individuals in a manner that results in savings of sales expenses. We will
determine whether the Surrender Charge will be reduced after We examine all the
relevant factors such as:
1. We will consider the size and type of group to which sales are to be
made. Generally, the sales expenses for a larger group are less than for a
smaller group because of the ability to implement large numbers of Policies with
fewer sales contacts.
2. We will consider the total amount of Premiums to be received. Per Policy
sales expenses are likely to be less on larger Premium payments than on smaller
ones.
3. We will consider any prior or existing relationship with Us. Per Policy
sales expenses are likely to be less when there is a prior existing relationship
because of the likelihood of implementing the Policy with fewer sales contacts.
4. There may be other circumstances, of which We are not presently aware,
which could result in reduced sales expenses.
If, after consideration of the foregoing factors, We determine that there
will be a reduction in sales expenses, We may provide for a reduction or
elimination of the Surrender Charge.
We may eliminate the Surrender Charge when the Policies are issued to an
officer, director or employee of BMA or any of Our affiliates. In no event will
any reduction or elimination of the Surrender Charge be permitted where the
reduction or elimination will be unfairly discriminatory to any person.
NET AMOUNT AT RISK
LEVEL DEATH BENEFIT. For the Level Death Benefit Option, the Net Amount at
Risk is the greater of:
1. the Specified Amount divided by 1.0032737 less the Accumulation Value;
and
2. the Accumulation Value times the applicable Minimum Death Benefit
Corridor Percentage (shown in Part I Section 5 Death Benefit) divided
by 1.0032737, less the Accumulation Value.
ADJUSTABLE DEATH BENEFIT OPTION. For the Adjustable Death Benefit Option,
the Net Amount at Risk is the greater of:
1. the Specified Amount plus the Accumulation Value divided by 1.0032737,
less the Accumulation Value, and
2. the Accumulation Value times the applicable Minimum Death Benefit
Corridor Percentage divided by 1.0032737, less the Accumulation Value.
MATURITY DATE
The Policy provides that We will pay the Accumulation Value of the Policy,
less Indebtedness, to You on the Maturity Date if the Primary Insured is then
living. Unless an extension is requested, the Maturity Date will be the Policy
Anniversary Date nearest the Primary Insured's 100th birthday.
At any time within the twelve calendar months prior to the Maturity Date,
You may request that the Maturity Date be extended through the Extension of
Maturity Date Rider. If We received Your written request prior to the Maturity
Date and all past due Monthly Deductions have been paid, the Policy will
continue in force beyond the Maturity Date until the earlier of the death of the
Primary Insured or the date that We receive Your request to surrender the
Policy.
No rider will be extended past the original Policy Maturity Date.
Once the Maturity Date extension is in place, the Death Benefit will be the
Accumulation Value, less any Indebtedness. The Monthly Deduction will no longer
be deducted and no new Premiums will be accepted. Interest or loans, if any,
will continue to accrue and will be added to the total Indebtedness.
Loan repayments will be accepted.
There is no charge for this rider.
MISSTATEMENT OF AGE OR SEX
The age of the Primary Insured is the Age nearest the Primary Insured's
birthday on the Policy Date or Policy Anniversary. We determine this from the
date of birth shown in the application. If the date of birth or sex shown on the
Policy Schedule is not correct, we will adjust the Death Benefit to that which
would be purchased by the most recent cost of insurance charge at the correct
date of birth and sex.
OUR RIGHT TO CONTEST
We cannot contest the validity of the Policy except in the case of fraud
after it has been in effect during the Primary Insured's lifetime for two years
from the Policy Date. If the Policy is reinstated, the two-year period is
measured from the date of reinstatement. In addition, if the Primary Insured
commits suicide in the two-year period, or such period as specified in state
law, the benefit payable will be limited to Premiums paid less loans and less
any surrenders.
PAYMENT OPTIONS
The Death Proceeds may be paid in a lump sum or may be applied to one of the
following Payment Options:
Option 1--Life Annuity
Option 2--Life Annuity with 120 or 240 Monthly Annuity Payments Guaranteed
Option 3--Joint and Last Survivor Annuity
Option 4-- Joint and Last Survivor Annuity with 120 or 240 Monthly Annuity
Payments Guaranteed.
You or the Beneficiary can select to have the Payment Options payable on
either a fixed or variable basis.
FEDERAL TAX STATUS
NOTE: The following description is based upon Our understanding of current
federal income tax law applicable to life insurance in general. We cannot
predict the probability that any changes in such laws will be made. Purchasers
are cautioned to seek competent tax advice regarding the possibility of such
changes. Section 7702 of the Internal Revenue Code of 1986, as amended ("Code"),
defines the term "life insurance contract" for purposes of the Code. We believe
that the policies to be issued will qualify as "life insurance contracts" under
Section 7702. We do not guarantee the tax status of the policies. Purchasers
bear the complete risk that the policies may not be treated as "life insurance"
under federal income tax laws. Purchasers should consult their own tax advisers.
It should be further understood that the following discussion is not exhaustive
and that special rules not described in this prospectus may be applicable in
certain situations.
INTRODUCTION. The discussion in this prospectus is general in nature and is
not intended as tax advice. Each person concerned should consult a competent tax
adviser. No attempt is made to consider any applicable state or other tax laws.
Moreover, this discussion is based upon Our understanding of current Federal
income tax laws as they are currently interpreted. No representation is made
regarding the likelihood of continuation of those current Federal income tax
laws or of the current interpretations by the Internal Revenue Service.
BMA is taxed as a life insurance company under the Code. For Federal income
tax purposes, the Separate Account is not a separate entity from BMA and its
operations form a part of BMA.
DIVERSIFICATION. Section 817(h) of the Code imposes certain diversification
standards on the underlying assets of variable life insurance policies. The Code
provides that a variable life insurance policy will not be treated as life
insurance for any period (and any subsequent period) for which the investments
are not, in accordance with regulations prescribed by the United States Treasury
Department ("Treasury Department"), adequately diversified. Disqualification of
the Policy as a life insurance contract would result in imposition of federal
income tax to the Owner with respect to earnings allocable to the Policy prior
to the receipt of payments under the Policy. The Code contains a safe harbor
provision which provides that life insurance policies such as these Policies
meet the diversification requirements if, as of the close of each quarter, the
underlying assets meet the diversification standards for a regulated investment
company and no more than fifty-five (55%) percent of the total assets consist of
cash, cash items, U.S. Government securities and securities of other regulated
investment companies. There is an exception for securities issued by the U.S.
Treasury in connection with variable life insurance policies.
On March 2, 1989, the Treasury Department issued Regulations (Treas. Reg.
Section 1.817-5), which established diversification requirements for the
investment portfolios underlying variable contracts such as the Policies. The
Regulations amplify the diversification requirements for variable contracts set
forth in the Code and provide an alternative to the safe harbor provision
described above. Under the Regulations, an investment portfolio will be deemed
adequately diversified if:
(i) no more than 55% of the value of the total assets of the portfolio is
represented by any one investment;
(ii) no more than 70% of the value of the total assets of the portfolio is
represented by any two investments;
(iii)no more than 80% of the value of the total assets of the portfolio is
represented by any three investments; and
(iv) no more than 90% of the value of the total assets of the portfolio is
represented by any four investments. For purposes of these
Regulations, all securities of the same issuer are treated as a single
investment.
The Code provides that, for purposes of determining whether or not the
diversification standards imposed on the underlying assets of variable contracts
by Section 817(h) of the Code have been met, "each United States government
agency or instrumentality shall be treated as a separate issuer".
BMA intends that each Investment Option underlying the Policies will be
managed by the managers in such a manner as to comply with these diversification
requirements.
The Treasury Department has indicated that the diversification Regulations
do not provide guidance regarding the circumstances in which Owner control of
the investments of the Separate Account will cause the Owner to be treated as
the Owner of the assets of the Separate Account, thereby resulting in the loss
of favorable tax treatment for the Policy. At this time it cannot be determined
whether additional guidance will be provided and what standards may be contained
in such guidance.
The amount of Owner control which may be exercised under the Policy is
different in some respects from the situations addressed in published rulings
issued by the Internal Revenue Service in which it was held that the policy
Owner was not the Owner of the assets of the separate account. It is unknown
whether these differences, such as the Owner's ability to transfer among
investment choices or the number and type of investment choices available, would
cause the Owner to be considered as the Owner of the assets of the Separate
Account.
In the event any forthcoming guidance or ruling is considered to set forth
a new position, such guidance or ruling will generally be applied only
prospectively. However, if such ruling or guidance was not considered to set
forth a new position, it may be applied retroactively resulting in the Owner
being retroactively determined to be the Owner of the assets of the Separate
Account.
Due to the uncertainty in this area, BMA reserves the right to modify the
Policy in an attempt to maintain favorable tax treatment.
TAX TREATMENT OF THE POLICY. The Policy has been designed to comply with
the definition of life insurance contained in Section 7702 of the Code. Although
some interim guidance has been provided and proposed regulations have been
issued, final regulations have not been adopted. Section 7702 of the Code
requires the use of reasonable mortality and other expense charges. In
establishing these charges, BMA has relied on the interim guidance provided in
IRS Notice 88-128 and proposed regulations issued on July 5, 1991. Currently,
there is even less guidance as to a Policy issued on a substandard risk basis
and thus it is even less clear whether a Policy issued on such basis would meet
the requirements of Section 7702 of the Code.
While BMA has attempted to comply with Section 7702, the law in this area
is very complex and unclear. There is a risk, therefore, that the Internal
Revenue Service will not concur with BMA's interpretations of Section 7702 that
were made in determining such compliance. In the event the Policy is determined
not to so comply, it would not qualify for the favorable tax treatment usually
accorded life insurance policies. Owners should consult their tax advisers with
respect to the tax consequences of purchasing the Policy.
POLICY PROCEEDS. The tax treatment accorded to loan proceeds and/or
surrender payments from the Policies will depend on whether the Policy is
considered to be a MEC. (See "Tax Treatment of Loans and Surrenders.")
Otherwise, BMA believes that the Policy should receive the same federal income
tax treatment as any other type of life insurance. As such, the death benefit
thereunder is excludable from the gross income of the Beneficiary under Section
101(a) of the Code. Also, the Owner is not deemed to be in constructive receipt
of the Cash Surrender Value, including increments thereon, under a Policy until
there is a distribution of such amounts.
Federal, state and local estate, inheritance and other tax consequences of
ownership, or receipt of Policy proceeds, depend on the circumstances of each
Owner or Beneficiary.
TAX TREATMENT OF LOANS AND SURRENDERS. Section 7702A of the Code sets forth
the rules for determining when a life insurance policy will be deemed to be a
MEC. A MEC is a contract which is entered into or materially changed on or after
June 21, 1988 and fails to meet the 7-pay test. A Policy fails to meet the 7-pay
test when the cumulative amount paid under the Policy at any time during the
first 7 Policy Years exceeds the sum of the net level premiums which would have
been paid on or before such time if the Policy provided for paid-up future
benefits after the payment of seven (7) level annual premiums. A material change
would include any increase in the future benefits or addition of qualified
additional benefits provided under a policy unless the increase is attributable
to: (1) the payment of premiums necessary to fund the lowest death benefit and
qualified additional benefits payable in the first seven policy years; or (2)
the crediting of interest or other earnings (including policyholder dividends)
with respect to such premiums.
Furthermore, any Policy received in exchange for a Policy classified as a
MEC will be treated as a MEC regardless of whether it meets the 7-pay test.
However, an exchange under Section 1035 of the Code of a life insurance policy
entered into before June 21, 1988 for the Policy will not cause the Policy to be
treated as a MEC if no additional premiums are paid.
Due to the flexible premium nature of the Policy, the determination of
whether it qualifies for treatment as a MEC depends on the individual
circumstances of each Policy.
If the Policy is classified as a MEC, then surrenders and/or loan proceeds
are taxable to the extent of income in the Policy. Such distributions are deemed
to be on a last-in, first-out basis, which means the taxable income is
distributed first. Loan proceeds and/or surrender payments, including those
resulting from the termination of the Policy, may also be subject to an
additional 10% federal income tax penalty applied to the income portion of
such distribution. The penalty shall not apply, however, to any distributions:
(1) made on or after the date on which the taxpayer reaches age 59 1/2;
(2) which is attributable to the taxpayer becoming disabled (within the
meaning of Section 72(m)(7) of the Code); or
(3) which is part of a series of substantially equal periodic payments
made not less frequently than annually for the life (or life
expectancy) of the taxpayer or the joint lives (or joint life
expectancies) of such taxpayer and his beneficiary.
If a Policy is not classified as a MEC, then any surrenders shall be
treated first as a recovery of the investment in the Policy which would not be
received as taxable income. However, if a distribution is the result of a
reduction in benefits under the Policy within the first fifteen years after the
Policy is issued in order to comply with Section 7702, such distribution will,
under rules set forth in Section 7702, be taxed as ordinary income to the extent
of income in the Policy.
Any loans from a Policy which is not classified as a MEC, will be treated
as indebtedness of the Owner and not a distribution. Upon complete surrender or
termination of the Policy, if the amount received plus loan indebtedness exceeds
the total premiums paid that are not treated as previously surrendered by the
Owner, the excess generally will be treated as ordinary income.
Personal interest payable on a loan under a Policy owned by an individual
is generally not deductible. Furthermore, no deduction will be allowed for
interest on loans under Policies covering the life of any employee or officer of
the taxpayer or any person financially interested in the business carried on by
the taxpayer to the extent the indebtedness for such employee, officer or
financially interested person exceeds $50,000. The deductibility of interest
payable on Policy loans may be subject to further rules and limitations under
Sections 163 and 264 of the Code.
You should seek competent tax advice on the tax consequences of taking
loans, distributions, exchanging or surrendering any Policy.
MULTIPLE POLICIES. The Code further provides that multiple MECs which are
issued within a calendar year period to the same Owner by one company or its
affiliates are treated as one MEC for purposes of determining the taxable
portion of any loans or distributions. Such treatment may result in adverse tax
consequences including more rapid taxation of the loans or distributed amounts
from such combination of contracts. You should consult a tax adviser prior to
purchasing more than one MEC in any calendar year period.
TAX TREATMENT OF ASSIGNMENTS. An assignment of a Policy or the change of
ownership of a Policy may be a taxable event. You should therefore consult a
competent tax adviser should you wish to assign or change the Owner of Your
Policy.
QUALIFIED PLANS. The Policies may be used in conjunction with certain
Qualified Plans. Because the rules governing such use are complex, you should
not do so until you have consulted a competent Qualified Plans consultant.
INCOME TAX WITHHOLDING. All distributions or the portion thereof which is
includible in gross income of the Owner are subject to federal income tax
withholding. However, the Owner in most cases may elect not to have taxes
withheld. The Owner may be required to pay penalties under the estimated tax
rules, if the Owner's withholding and estimated tax payments are insufficient.
REPORTS TO OWNERS
We will at a minimum send to each Owner semi-annual and annual reports of
the Investment Options. Within 30 days after each Policy Anniversary, an annual
statement will be sent to each Owner. We may elect to send these more often. The
statement will show:
* the current amount of Death Benefit payable under the Policy,
* the current Accumulation Value,
* the current Cash Surrender Value,
* current Loans and
* all transactions previously confirmed.
The statement will also show Premiums paid and all charges deducted during
the Policy Year.
Confirmations will be mailed to Policy Owners within seven days of the
transaction of:
(a) the receipt of Premium;
(b) any transfer between Investment Options;
(c) any loan, interest repayment, or loan repayment;
(d) any surrender;
(e) exercise of the free look privilege; and
(f) payment of the Death Benefit under the Policy.
Upon request You are entitled to a receipt of Premium payment.
LEGAL PROCEEDINGS
There are no legal proceedings to which the Separate Account or the
Co-Distributors are a party or to which the assets of the Separate Account are
subject. We are not involved in any litigation that is of material importance in
relation to our total assets or that relates to the Separate Account.
EXPERTS
The financial statements of BMA Variable Life Account A at December 31,
1998 and for the period from December 1, 1998 (inception) to December 31, 1998,
and the consolidated financial statements of Business Men's Assurance Company of
America at December 31, 1998 and 1997, and for each of the three years in the
period ended December 31, 1998, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon appearing elsewhere
herein, and are included in reliance upon such report given upon the authority
of such firm as experts in accounting and auditing.
FINANCIAL STATEMENTS
The financial statements of the Separate Account and BMA follow.
<PAGE>
FINANCIAL STATEMENTS
BMA VARIABLE LIFE ACCOUNT A
Period from December 1, 1998 (inception)
to December 31, 1998
with Report of Independent Auditors
<PAGE>
BMA VARIABLE LIFE ACCOUNT A
FINANCIAL STATEMENTS
Period from December 1, 1998 (inception) to December 31, 1998
<TABLE>
<CAPTION>
Contents Page
- -------- ----
<S> <C>
Report of Independent Auditors............................................. 1
Audited Financial Statements
Statement of Assets and Liabilities........................................ 2
Statement of Operations and Changes in Net Assets.......................... 4
Notes to Financial Statements.............................................. 8
</TABLE>
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Contract Owners of BMA Variable Life
Account A and The Board of Directors of
Business Men's Assurance Company of America
We have audited the accompanying statement of assets and liabilities of BMA
Variable Life Account A (the Account) as of December 31, 1998, and the related
statements of operations and changes in net assets for the period from
December 1, 1998 (inception) to December 31, 1998. These financial statements
are the responsibility of the Account's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of investments owned as of December 31, 1998,
by correspondence with the mutual funds' transfer agents. 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 audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of BMA Variable Life Account
A at December 31, 1998, and the results of its operations and changes in net
assets for the period from December 1, 1998 (inception) to December 31, 1998,
in conformity with generally accepted accounting principles.
Ernst & Young LLP
Kansas City, Missouri
February 5, 1999
1
<PAGE>
BMA VARIABLE LIFE ACCOUNT A
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1998
<TABLE>
<CAPTION>
Number Balance
of Share Sheet
Shares Value Cost Amount
------ ----- ------ -------
<S> <C> <C> <C> <C>
Assets
Investments (Notes 1 and 3):
Investors Mark Series Fund, Inc.:
Balanced........................................ 110 $8.88 $1,049 $ 976
Growth and Income............................... 89 11.53 1,011 1,029
Large Cap Value................................. 101 9.88 1,028 998
Small Cap Equity................................ 132 8.14 1,000 1,073
Large Cap Growth................................ 82 12.90 1,001 1,061
Intermediate Fixed Income....................... 101 9.95 1,060 1,000
Mid Cap Equity.................................. 95 11.11 1,010 1,058
Money Market.................................... 1,000 1.00 1,000 1,000
Global Fixed Income............................. 101 9.92 1,083 1,003
Berger Institutional Products Trust:
100 Fund........................................ 83 12.89 1,002 1,069
Growth and Income Fund.......................... 66 16.63 1,007 1,093
Small Company Growth Fund....................... 92 12.28 1,000 1,134
International Fund.............................. 95 11.21 1,015 1,061
Conseco Series Trust:
Asset Allocation Portfolio...................... 77 13.67 1,008 1,048
Common Stock Portfolio.......................... 52 21.59 1,001 1,100
Corporate Bond Portfolio........................ 100 10.05 1,005 1,001
Government Securities Portfolio................. 82 12.15 1,004 996
The Alger American Fund:
Growth Portfolio................................ 21 53.22 1,000 1,102
Leveraged AllCap Portfolio...................... 33 34.90 1,000 1,138
MidCap Growth Portfolio......................... 39 28.87 1,000 1,118
Small Capitalization Portfolio.................. 25 43.97 1,000 1,114
American Century Variable Portfolios, Inc.:
VP Income and Growth............................ 155 6.78 1,005 1,048
VP International................................ 142 7.62 1,000 1,079
VP Value........................................ 147 6.73 1,000 993
Dreyfus Socially Responsible Growth Fund, Inc..... 34 31.08 1,005 1,061
Dreyfus Stock Index Fund.......................... 32 32.52 1,004 1,047
Dreyfus Variable Investment Fund:
Disciplined Stock Fund.......................... 46 22.95 1,005 1,061
International Value Portfolio................... 77 13.45 1,080 1,034
Federated Insurance Series:
High-Income Bond Fund II........................ 91 10.92 1,000 997
International Equity Fund II.................... 71 15.39 1,000 1,094
Utility Fund II................................. 68 15.27 1,000 1,032
Invesco Variable Investment Funds:
High-Yield Portfolio............................ 88 11.32 1,104 993
Industrial Income Portfolio..................... 55 18.61 1,052 1,026
Lazard Retirement Series, Inc.:
Retirement Equity Portfolio..................... 95 11.05 1,004 1,047
Retirement Small Cap Portfolio.................. 107 9.52 1,000 1,019
Neuberger & Berman Advisors Management Trust:
Limited Maturity Bond Portfolio................. 72 13.82 1,000 999
Partners Portfolio.............................. 54 18.93 1,000 1,019
Strong Opportunity Fund II, Inc................... 48 21.72 1,002 1,043
Strong Variable Insurance Funds, Inc.:
Growth Fund II.................................. 70 16.02 1,000 1,126
Van Eck Worldwide Insurance Trust:
Worldwide Bond Fund............................. 82 12.28 1,000 1,011
Worldwide Emerging Markets Fund................. 144 7.12 1,000 1,023
Worldwide Hard Assets Fund...................... 108 9.20 1,000 989
Worldwide Real Estate Fund...................... 106 9.54 1,000 1,013
-------
Total Assets................................. $44,926
=======
</TABLE>
2
<PAGE>
<TABLE>
<S> <C> <C> <C>
Liabilities and net assets
Liabilities.......................................... $ --
<CAPTION>
Number of Unit
Units Value Amount
--------- ------- -------
<S> <C> <C> <C>
Net assets are represented by (Note 3):
Accumulation units:
Investors Mark Series Fund, Inc.:
Balanced........................................ 100 $9.7593 976
Growth and Income............................... 100 10.3205 1,029
Large Cap Value................................. 100 10.0173 998
Small Cap Equity................................ 100 10.7437 1,073
Large Cap Growth................................ 99 10.7032 1,061
Intermediate Fixed Income....................... 100 10.0183 1,000
Mid Cap Equity.................................. 99 10.6526 1,058
Money Market.................................... 100 10.0343 1,000
Global Fixed Income............................. 100 10.0270 1,003
Berger Institutional Products Trust:
100 Fund........................................ 99 10.7846 1,069
Growth and Income Fund.......................... 98 11.1016 1,093
Small Company Growth Fund....................... 100 11.3646 1,134
International Fund.............................. 103 10.3073 1,061
Conseco Series Trust:
Asset Allocation Portfolio...................... 99 10.5724 1,048
Common Stock Portfolio.......................... 98 11.1898 1,100
Corporate Bond Portfolio........................ 100 10.0411 1,001
Government Securities Portfolio................. 100 9.9868 996
The Alger American Fund:
Growth Portfolio................................ 98 11.2137 1,102
Leveraged AllCap Portfolio...................... 98 11.6450 1,138
MidCap Growth Portfolio......................... 99 11.2554 1,118
Small Capitalization Portfolio.................. 99 11.2744 1,114
American Century Variable Portfolios, Inc.:
VP Income and Growth............................ 99 10.5982 1,048
VP International................................ 102 10.5394 1,079
VP Value........................................ 100 9.9556 993
Dreyfus Socially Responsible Growth Fund, Inc..... 98 10.7907 1,061
Dreyfus Stock Index Fund.......................... 99 10.5782 1,047
Dreyfus Variable Investment Fund:
Disciplined Stock Fund.......................... 99 10.7245 1,061
International Value Portfolio................... 101 10.2246 1,034
Federated Insurance Series:
High-Income Bond Fund II........................ 100 9.9726 997
International Equity Fund II.................... 101 10.7924 1,094
Utility Fund II................................. 100 10.3596 1,032
Invesco Variable Investment Funds:
High-Yield Portfolio............................ 100 9.9193 993
Industrial Income Portfolio..................... 99 10.3350 1,026
Lazard Retirement Series, Inc.:
Retirement Equity Portfolio..................... 100 10.4609 1,047
Retirement Small Cap Portfolio.................. 100 10.1725 1,019
Neuberger & Berman Advisors Management Trust:
Limited Maturity Bond Portfolio................. 100 10.0145 999
Partners Portfolio.............................. 100 10.2380 1,019
Strong Opportunity Fund II, Inc................... 100 10.4636 1,043
Strong Variable Insurance Funds, Inc.:
Growth Fund II.................................. 100 11.3056 1,126
Van Eck Worldwide Insurance Trust:
Worldwide Bond Fund............................. 100 10.1572 1,011
Worldwide Emerging Markets Fund................. 102 10.0707 1,023
Worldwide Hard Assets Fund...................... 101 9.7665 989
Worldwide Real Estate Fund...................... 101 10.0633 1,013
-------
Net assets..................................... 44,926
-------
Total liabilities and net assets............... $44,926
=======
</TABLE>
See accompanying notes.
3
<PAGE>
BMA VARIABLE LIFE ACCOUNT A
STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS
Period from December 1, 1998 (inception) to December 31, 1998
<TABLE>
<CAPTION>
Berger
Institutional
Investors Mark Series Fund, Inc. Products Trust
------------------------------------------------------------------------------------ -------------------
Intermediate Global Growth
Growth and Large Cap Small Cap Large Cap Fixed Mid Cap Money Fixed and Income
Balanced Income Value Equity Growth Income Equity Market Income 100 Fund Fund
-------- ---------- --------- --------- --------- ------------ ------- ------ ------ -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment
income......... $ 49 $ 11 $ 28 $ 1 $ 1 $ 60 $ 10 $ -- $ 83 $ 2 $ 7
Expenses (Note
2):
Mortality,
expense and
administrative
charges....... -- -- -- -- -- -- -- -- -- -- --
----- ------ ----- ------ ------ ------ ------ ------ ------ ------ ------
Net investment
income......... 49 11 28 1 1 60 10 -- 83 2 7
Net realized
gains on
investments.... -- -- -- -- -- -- -- -- -- -- --
Unrealized
appreciation
(depreciation)
on investments (73) 18 (30) 72 60 (60) 48 -- (80) 67 86
----- ------ ----- ------ ------ ------ ------ ------ ------ ------ ------
Net realized and
unrealized gain
(loss) on
investments.... (73) 18 (30) 72 60 (60) 48 -- (80) 67 86
Net increase
(decrease) in
net assets
resulting from
operations (24) 29 (2) 73 61 -- 58 -- 3 69 93
Variable annuity
deposits (Notes
2 and 3)....... 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000
----- ------ ----- ------ ------ ------ ------ ------ ------ ------ ------
Net increase.... 976 1,029 998 1,073 1,061 1,000 1,058 1,000 1,003 1,069 1,093
Net assets at
beginning of
period......... -- -- -- -- -- -- -- -- -- -- --
----- ------ ----- ------ ------ ------ ------ ------ ------ ------ ------
Net assets at
end of period.. $ 976 $1,029 $ 998 $1,073 $1,061 $1,000 $1,058 $1,000 $1,003 $1,069 $1,093
===== ====== ===== ====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
4
<PAGE>
BMA VARIABLE LIFE ACCOUNT A
STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS (CONTINUED)
Period from December 1, 1998 (inception) to December 31, 1998
<TABLE>
<CAPTION>
Berger Institutional
Products Trust Conseco Series Trust The Alger American Fund
--------------------- ----------------------------------------- --------------------------------------------
Small
Company Asset Common Corporate Government Leveraged MidCap Small
Growth International Allocation Stock Bond Securities Growth AllCap Growth Capitalization
Fund Fund Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
------- ------------- ---------- --------- --------- ---------- --------- --------- --------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment
income......... $ -- $ 15 $ 8 $ 1 $ 5 $ 4 $ -- $ -- $ -- $ --
Expenses (Note
2):
Mortality,
expense and
administrative
charges....... -- -- -- -- -- -- -- -- -- --
------ ------ ------ ------ ------ ----- ------ ------ ------ ------
Net investment
income......... -- 15 8 1 5 4 -- -- -- --
Net realized
gains on
investments.... -- -- -- -- -- -- -- -- -- --
Unrealized
appreciation
(depreciation)
on
investments.... 134 46 40 99 (4) (8) 102 138 118 114
------ ------ ------ ------ ------ ----- ------ ------ ------ ------
Net realized and
unrealized gain
(loss) on
investments.... 134 46 40 99 (4) (8) 102 138 118 114
Net increase
(decrease) in
net assets
resulting from
operations 134 61 48 100 1 (4) 102 138 118 114
Variable annuity
deposits (Notes
2 and 3)....... 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000
------ ------ ------ ------ ------ ----- ------ ------ ------ ------
Net increase.... 1,134 1,061 1,048 1,100 1,001 996 1,102 1,138 1,118 1,114
Net assets at
beginning of
period......... -- -- -- -- -- -- -- -- -- --
------ ------ ------ ------ ------ ----- ------ ------ ------ ------
Net assets at
end of period.. $1,134 $1,061 $1,048 $1,100 $1,001 $ 996 $1,102 $1,138 $1,118 $1,114
====== ====== ====== ====== ====== ===== ====== ====== ====== ======
</TABLE>
5
<PAGE>
BMA VARIABLE LIFE ACCOUNT A
STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS (CONTINUED)
Period from December 1, 1998 (inception) to December 31, 1998
<TABLE>
<CAPTION>
American Century Variable Dreyfus Variable
Portfolios, Inc. Investment Fund Federated Insurance Series
-------------------------- ----------- ------- ------------------------- -----------------------------
Dreyfus High-
VP Socially Dreyfus Income
Income Responsible Stock Disciplined International Bond International
and VP VP Growth Index Stock Value Fund Equity Utility
Growth International Value Fund, Inc. Fund Fund Portfolio II Fund II Fund II
------ ------------- ----- ----------- ------- ----------- ------------- ------ ------------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment
income........... $ 5 $ -- $ -- $ 40 $ 4 $ 5 $ 80 $ -- $ -- $ --
Expenses (Note
2):
Mortality,
expense and
administrative
charges......... -- -- -- -- -- -- -- -- -- --
------ ------ ----- ------ ------ ------ ------ ----- ------ ------
Net investment
income........... 5 -- -- 40 4 5 80 -- -- --
Net realized
gains on
investments -- -- -- -- -- -- -- -- -- --
Unrealized
appreciation
(depreciation) on
investments 43 79 (7) 21 43 56 (46) (3) 94 32
------ ------ ----- ------ ------ ------ ------ ----- ------ ------
Net realized and
unrealized gain
(loss) on
investments...... 43 79 (7) 21 43 56 (46) (3) 94 32
------ ------ ----- ------ ------ ------ ------ ----- ------ ------
Net increase
(decrease) in net
assets resulting
from operations.. 48 79 (7) 61 47 61 34 (3) 94 32
Variable annuity
deposits (Notes 2
and 3)........... 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000
------ ------ ----- ------ ------ ------ ------ ----- ------ ------
Net increase..... 1,048 1,079 993 1,061 1,047 1,061 1,034 997 1,094 1,032
Net assets at
beginning of
period -- -- -- -- -- -- -- -- -- --
------ ------ ----- ------ ------ ------ ------ ----- ------ ------
Net assets at end
of period........ $1,048 $1,079 $ 993 $1,061 $1,047 $1,061 $1,034 $ 997 $1,094 $1,032
====== ====== ===== ====== ====== ====== ====== ===== ====== ======
<CAPTION>
Invesco Variable
Investment Funds
--------------------
High- Industrial
Yield Income
Portfolio Portfolio
--------- ----------
<S> <C> <C>
Investment
income........... $ 104 $ 52
Expenses (Note
2):
Mortality,
expense and
administrative
charges......... -- --
--------- ----------
Net investment
income........... 104 52
Net realized
gains on
investments -- --
Unrealized
appreciation
(depreciation) on
investments (111) (26)
--------- ----------
Net realized and
unrealized gain
(loss) on
investments...... (111) (26)
--------- ----------
Net increase
(decrease) in net
assets resulting
from operations.. (7) 26
Variable annuity
deposits (Notes 2
and 3)........... 1,000 1,000
--------- ----------
Net increase..... 993 1,026
Net assets at
beginning of
period -- --
--------- ----------
Net assets at end
of period........ $ 993 $1,026
========= ==========
</TABLE>
6
<PAGE>
BMA VARIABLE LIFE ACCOUNT A
STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS--(Continued)
Period from December 1, 1998 (inception) to December 31, 1998
<TABLE>
<CAPTION>
Strong
Neuberger & Berman Variable
Lazard Retirement Advisors Management Insurance
Series, Inc. Trust Funds, Inc. Van Eck Worldwide Insurance Trust
--------------------- ------------------- ----------- -------------------------------------------
Limited Worldwide
Retirement Retirement Maturity Strong Worldwide Emerging Worldwide Worldwide
Equity Small Cap Bond Partners Opportunity Growth Bond Markets Hard Assets Real Estate
Portfolio Portfolio Portfolio Portfolio Fund II Fund II Fund Fund Fund Fund
---------- ---------- --------- --------- ----------- ----------- --------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment
income........... $ 3 $ -- $ -- $ -- $ 2 $ -- $ -- $ -- $ -- $ --
Expenses (Note
2):
Mortality,
expense and
administrative
charges......... -- -- -- -- -- -- -- -- -- --
------ ------ ----- ------ ------ ------ ------ ------ ----- ------
Net investment
income........... 3 -- -- -- 2 -- -- -- -- --
Net realized
gains on
investments...... -- -- -- -- -- -- -- -- -- --
Unrealized
appreciation
(depreciation) on
investments...... 44 19 (1) 19 41 126 11 23 (11) 13
------ ------ ----- ------ ------ ------ ------ ------ ----- ------
Net realized and
unrealized gain
(loss) on
investments...... 44 19 (1) 19 41 126 11 23 (11) 13
------ ------ ----- ------ ------ ------ ------ ------ ----- ------
Net increase
(decrease) in net
assets resulting
from operations.. 47 19 (1) 19 43 126 11 23 (11) 13
Variable annuity
deposits (Notes 2
and 3)........... 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000
------ ------ ----- ------ ------ ------ ------ ------ ----- ------
Net increase..... 1,047 1,019 999 1,019 1,043 1,126 1,011 1,023 989 1,013
Net assets at
beginning of
period........... -- -- -- -- -- -- -- -- -- --
------ ------ ----- ------ ------ ------ ------ ------ ----- ------
Net assets at end
of period........ $1,047 $1,019 $ 999 $1,019 $1,043 $1,126 $1,011 $1,023 $ 989 $1,013
====== ====== ===== ====== ====== ====== ====== ====== ===== ======
<CAPTION>
Total
-------
<S> <C>
Investment
income........... $ 580
Expenses (Note
2):
Mortality,
expense and
administrative
charges......... --
-------
Net investment
income........... 580
Net realized
gains on
investments...... --
Unrealized
appreciation
(depreciation) on
investments...... 1,346
-------
Net realized and
unrealized gain
(loss) on
investments...... 1,346
-------
Net increase
(decrease) in net
assets resulting
from operations.. 1,926
Variable annuity
deposits (Notes 2
and 3)........... 43,000
-------
Net increase..... 44,926
Net assets at
beginning of
period........... --
-------
Net assets at end
of period........ $44,926
=======
</TABLE>
7
<PAGE>
BMA VARIABLE LIFE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
1. Summary of Significant Accounting Policies
Organization
BMA Variable Life Account A (the Account) is a separate account of Business
Men's Assurance Company of America (BMA). The Account is registered as a unit
investment trust under the Investment Company Act of 1940, as amended.
Deposits received by the Account are invested in the various funds (mutual
funds not otherwise available to the public) as directed by the owners.
Amounts may be invested in shares of the following portfolios:
Investors Mark Series Fund: Balanced, Growth and Income, Large Cap
Value, Small Cap Equity, Large Cap Growth, Intermediate Fixed Income, Mid
Cap Equity, Money Market and Global Fixed Income.
Berger Institutional Products Trust (Berger IPT): 100 Fund, Growth and
Income Fund, Small Company Growth Fund and International Fund.
Conseco Series Trust: Asset Allocation Portfolio, Common Stock
Portfolio, Corporate Bond Portfolio and Government Securities Portfolio.
The Alger American Fund: Growth Portfolio, Leveraged AllCap Portfolio,
MidCap Growth Portfolio and Small Capitalization Portfolio.
American Century Variable Portfolios, Inc.: VP Income and Growth, VP
International and VP Value.
Dreyfus Socially Responsible Growth Fund, Inc.
Dreyfus Stock Index Fund.
Dreyfus Variable Investment Fund: Disciplined Stock Fund and
International Value Portfolio.
Federated Insurance Series: High-Income Bond Fund II, International
Equity Fund II and Utility Fund II.
Invesco Variable Investment Funds: High-Yield Portfolio and Industrial
Income Portfolio.
Lazard Retirement Series, Inc.: Retirement Equity Portfolio and
Retirement Small Cap Portfolio.
Neuberger & Berman Advisors Management Trust: Limited Maturity Bond
Portfolio and Partners Portfolio.
Strong Opportunity Fund II.
Strong Variable Insurance Funds, Inc.: Growth Fund II.
Van Eck Worldwide Insurance Trust: Worldwide Bond Fund, Worldwide
Emerging Markets Fund, Worldwide Hard Assets Fund and Worldwide Real Estate
Fund.
Under the terms of the investment advisory contracts, portfolio investments
of the underlying mutual funds of Investors Mark Series Funds are made by
Investors Mark Series Fund, LLC (IMSF, LLC), which is owned by Jones & Babson,
Inc., a wholly-owned subsidiary of BMA. IMSF, LLC has engaged Standish, Ayer &
Wood, Inc. to provide subadvisory services for the Intermediate Fixed Income
Portfolio, the Mid Cap Equity Portfolio and the Money Market Portfolio. IMSF,
LLC has engaged Standish International Management Company, L.P. to provide
subadvisory services for the Global Fixed Income Portfolio. IMSF, LLC has
engaged Stein Roe & Farnam, Incorporated to provide subadvisory services for
the Small Cap Equity Portfolio and the Large Cap Growth Portfolio. IMSF, LLC
has engaged David L. Babson & Co., Inc. to provide subadvisory
8
<PAGE>
BMA VARIABLE LIFE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS--(Continued)
services for the Large Cap Value Portfolio. IMSF, LLC has engaged Lord, Abbett
& Co. to provide subadvisory services for the Growth and Income Portfolio.
IMSF, LLC has engaged Kornitzer Capital Management, Inc. to provide
subadvisory services for the Balanced Portfolio.
Berger Institutional Products Trust is a mutual fund with multiple
portfolios. Berger Associates is the investment advisor to all portfolios
except the Berger/BIAM IPT--International Fund. BBOI Worldwide LLC is the
advisor to the Berger/BIAM IPT--International Fund. BBOI Worldwide LLC has
retained Bank of Ireland Asset Management (U.S.) Limited (BIAM) as subadvisor.
Conseco Series Trust is a mutual fund with multiple portfolios. Conseco
Capital Management, Inc. is the investment advisor to the portfolios.
The Alger American Fund is a mutual fund with multiple portfolios. Fred
Alger Management, Inc. serves as investment advisor.
American Century Variable Portfolios, Inc. is a series of funds managed by
American Century Investment Management, Inc.
The Dreyfus Socially Responsible Growth Fund, Inc. is managed by The
Dreyfus Corporation. Dreyfus has hired NCM Capital Management Group, Inc. to
serve as sub-investment advisor and to provide day-to-day management of the
Fund's investments. The Dreyfus Corporation serves as the Dreyfus Stock Index
Fund's manager. Dreyfus has hired an affiliate, Mellon Equity Associates, to
serve as the Fund's index fund manager and to provide day-to-day management of
the Fund's investments. The Dreyfus Variable Investment Fund is a mutual fund
with multiple portfolios. The Dreyfus Corporation serves as the investment
advisor.
Federated Insurance Series is a mutual fund with multiple portfolios.
Federated Advisors is the investment advisor.
Invesco Variable Investment Funds. Inc. is a mutual fund with multiple
portfolios. Invesco Funds Group, Inc. is the investment advisor.
Lazard Retirement Series, Inc. is a mutual fund with multiple portfolios.
Lazard Asset Management, a division of Lazard Freres & Co. LLC, is the
investment manager for each portfolio.
Each portfolio of Neuberger & Berman Advisers Management Trust invests in a
corresponding series of Advisors Managers Trust. All series of Advisors
Managers Trust are managed by Neuberger & Berman Management Incorporated.
Strong Opportunity Fund II, Inc. is a mutual fund managed by Strong Capital
Management, Inc. Strong Variable Insurance Funds, Inc. is a mutual fund with
multiple series. Strong Capital Management, Inc. serves as the investment
advisor.
Van Eck Worldwide Insurance Trust is a mutual fund with multiple portfolios
managed by Van Eck Associates Corporation.
Investment Valuation
Investments in mutual fund shares are carried in the balance sheet at
market value (net asset value of the underlying mutual fund). The first-in,
first-out method is used to determine gains and losses. Security transactions
are accounted for on the trade date, and dividend income from the funds to the
Account is recorded on the ex-dividend date and reinvested upon receipt.
Capital gain distributions from the mutual funds to the Account also are
reinvested upon receipt.
9
<PAGE>
BMA VARIABLE LIFE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS--(Continued)
The cost of investments purchased were as follows:
<TABLE>
<CAPTION>
Period from
December 1, 1998
(inception) to
December 31, 1998
-----------------
Cost of Purchases
-----------------
<S> <C>
Investors Mark Series Fund, Inc.:
Balanced................................................. $1,049
Growth and Income........................................ 1,011
Large Cap Value.......................................... 1,028
Small Cap Equity......................................... 1,000
Large Cap Growth......................................... 1,001
Intermediate Fixed Income................................ 1,060
Mid Cap Equity........................................... 1,010
Money Market............................................. 1,000
Global Fixed Income...................................... 1,083
Berger Institutional Products Trust:
100 Fund................................................. 1,002
Growth and Income Fund................................... 1,007
Small Company Growth Fund................................ 1,000
International Fund....................................... 1,015
Conseco Series Trust:
Asset Allocation Portfolio............................... 1,008
Common Stock Portfolio................................... 1,001
Corporate Bond Portfolio................................. 1,005
Government Securities Portfolio.......................... 1,004
The Alger American Fund:
Growth Portfolio......................................... 1,000
Leveraged AllCap Portfolio............................... 1,000
MidCap Growth Portfolio.................................. 1,000
Small Capitalization Portfolio........................... 1,000
American Century Variable Portfolios, Inc.:
VP Income and Growth..................................... 1,005
VP International......................................... 1,000
VP Value................................................. 1,000
Dreyfus Socially Responsible Growth Fund, Inc.............. 1,005
Dreyfus Stock Index Fund................................... 1,004
Dreyfus Variable Investment Fund:
Disciplined Stock Fund................................... 1,005
International Value Portfolio............................ 1,080
Federated Insurance Series:
High-Income Bond Fund II................................. 1,000
International Equity Fund II............................. 1,000
Utility Fund II.......................................... 1,000
Invesco Variable Investment Funds:
High-Yield Portfolio..................................... 1,104
Industrial Income Portfolio.............................. 1,052
</TABLE>
10
<PAGE>
BMA VARIABLE LIFE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS--(Continued)
<TABLE>
<CAPTION>
Period from
December 1, 1998
(inception) to
December 31, 1998
-----------------
Cost of Purchases
-----------------
<S> <C>
Lazard Retirement Series, Inc.:
Retirement Equity Portfolio.............................. 1,004
Retirement Small Cap Portfolio........................... 1,000
Neuberger & Berman Advisors Management Trust:
Limited Maturity Bond Portfolio.......................... 1,000
Partners Portfolio....................................... 1,000
Strong Opportunity Fund II................................. 1,002
Strong Variable Insurance Funds, Inc.:
Growth Fund II........................................... 1,000
Van Eck Worldwide Insurance Trust:
Worldwide Bond Fund...................................... 1,000
Worldwide Emerging Markets Fund.......................... 1,000
Worldwide Hard Assets Fund............................... 1,000
Worldwide Real Estate Fund............................... 1,000
-------
Total.................................................. $43,545
=======
</TABLE>
There were no sales of investments during the period from December 1, 1998
(inception) to December 31, 1998.
Federal Income Taxes
The operations of the Account form a part of, and are taxed with, the
operations of BMA, which is taxed as a life insurance company under the
Internal Revenue Code. As a result, the net asset values of the subaccounts
are not affected by federal income taxes on income distributions received by
the subaccounts.
Use of Estimates
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
2. Variable Life Contract Charges
BMA deducts a premium charge from each premium payment of 5.5% of all
premiums in the first through the 10th policy year and 4.0% of all premiums in
the 11th and later policy years. BMA deducts a policy charge of $25 per month
in the first policy year and $5 per month thereafter. BMA deducts a risk
charge each month of .80%, on an annual basis, of the accumulation value in
the separate account for the first through 10th policy year and .40%, on an
annual basis, of the accumulation value in the separate account for the 11th
policy year and thereafter.
A deduction for cost of insurance and cost of any riders also is made
monthly. This charge will depend upon the specified amount, the accumulation
value and the sex, age and rate class of the primary insured.
Charges retained by BMA from the proceeds of sales of variable life
contracts were not significant during 1998.
11
<PAGE>
BMA VARIABLE LIFE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS--(Continued)
3. Summary of Unit Transactions
Account deposits, all of which are attributable to BMA during 1998, by units
follow:
<TABLE>
<CAPTION>
Period from
December 1, 1998
(inception) to
December 31, 1998
-----------------
Units Deposited
<S> <C>
Investors Mark Series Fund, Inc.:
Balanced................................................. 100
Growth and Income........................................ 100
Large Cap Value.......................................... 100
Small Cap Equity......................................... 100
Large Cap Growth......................................... 99
Intermediate Fixed Income................................ 100
Mid Cap Equity........................................... 99
Money Market............................................. 100
Global Fixed Income...................................... 100
Berger Institutional Products Trust:
100 Fund................................................. 99
Growth and Income Fund................................... 98
Small Company Growth Fund................................ 100
International Fund....................................... 103
Conseco Series Trust:
Asset Allocation Portfolio............................... 99
Common Stock Portfolio................................... 98
Corporate Bond Portfolio................................. 100
Government Securities Portfolio.......................... 100
The Alger American Fund:
Growth Portfolio......................................... 98
Leveraged AllCap Portfolio............................... 98
MidCap Growth Portfolio.................................. 99
Small Capitalization Portfolio........................... 99
American Century Variable Portfolios, Inc.:
VP Income and Growth..................................... 99
VP International......................................... 102
VP Value................................................. 100
Dreyfus Socially Responsible Growth Fund, Inc.............. 98
Dreyfus Stock Index Fund................................... 99
Dreyfus Variable Investment Fund:
Disciplined Stock Fund................................... 99
International Value Portfolio............................ 101
Federated Insurance Series:
High-Income Bond Fund II................................. 100
International Equity Fund II............................. 101
Utility Fund II.......................................... 100
Invesco Variable Investment Funds:
High-Yield Portfolio..................................... 100
Industrial Income Portfolio.............................. 99
</TABLE>
12
<PAGE>
BMA VARIABLE LIFE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS--(Continued)
<TABLE>
<CAPTION>
Period from
December 1, 1998
(inception) to
December 31, 1998
-----------------
Units Deposited
<S> <C>
Lazard Retirement Series, Inc.:
Retirement Equity Portfolio.............................. 100
Retirement Small Cap Portfolio........................... 100
Neuberger & Berman Advisors Management Trust:
Limited Maturity Bond Portfolio.......................... 100
Partners Portfolio....................................... 100
Strong Opportunity Fund II................................. 100
Strong Variable Insurance Funds, Inc.:
Growth Fund II........................................... 100
Van Eck Worldwide Insurance Trust:
Worldwide Bond Fund...................................... 100
Worldwide Emerging Markets Fund.......................... 102
Worldwide Hard Assets Fund............................... 101
Worldwide Real Estate Fund............................... 101
</TABLE>
13
<PAGE>
BMA VARIABLE LIFE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS--(Continued)
4. Impact of Year 2000 (Unaudited)
BMA continues to monitor the potential impact of the year 2000 on its
systems and those of its primary vendors and business partners. This
assessment extends to both informational technology systems and noninformation
technology systems. All identified modifications to BMA's critical operating
systems have been completed as of December 31, 1998, and BMA continues to
validate completed systems to ensure ongoing compliance. Contingency plans are
being developed and management estimates that these plans will be completed by
mid-1999, prior to any anticipated impact on its operating systems. Total
costs of the modifications have been immaterial to BMA's operations and have
been expensed as incurred.
BMA does risk that one or more of its critical suppliers or customers
(external relationships) will not be able to interact with BMA due to the
third parties' inability to resolve their own year 2000 issues. BMA is
actively monitoring the compliance programs of those third parties, and formal
communication has been initiated with all major outside service providers.
However, BMA is unable to predict with certainty to what extent its external
relationships will be year 2000 ready.
The forecast costs, consequences of the year 2000 problem and the dates by
which BMA believes it will complete its various year 2000 computer
modifications are based on its best estimates, which in turn were based on
numerous assumptions of future events including third-party modification and
compliance plans, continued availability of resources and other factors. BMA
cannot be sure that these estimates will be achieved or that the assumptions
are accurate, and actual results could differ materially from those
anticipated.
14
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
(A Member of the Generali Group of Companies)
Years ended December 31, 1998 and 1997
with Report of Independent Auditors
<PAGE>
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
(A Member of the Generali Group of Companies)
CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 1998 and 1997
CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors.............................................. 1
Audited Consolidated Financial Statements
Consolidated Balance Sheets................................................. 2
Consolidated Statements of Operations....................................... 3
Consolidated Statements of Comprehensive Income............................. 4
Consolidated Statements of Stockholder's Equity............................. 5
Consolidated Statements of Cash Flows....................................... 6
Notes to Consolidated Financial Statements.................................. 7
</TABLE>
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Business Men's Assurance Company of America
We have audited the accompanying consolidated balance sheets of Business
Men's Assurance Company of America (an ultimate subsidiary of Assicurazioni
Generali, S.p.A.) (the Company) as of December 31, 1998 and 1997, and the
related consolidated statements of operations, comprehensive income,
stockholder's equity and cash flows for each of the three years in the period
ended December 31, 1998. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall consolidated financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Business Men's Assurance Company of America at December 31, 1998 and 1997,
and the consolidated results of its operations and its cash flows for each of
the three years in the period ended December 31, 1998, in conformity with
generally accepted accounting principles.
Ernst & Young LLP
Kansas City, Missouri
February 4, 1999
F-1
<PAGE>
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
(A Member of the Generali Group of Companies)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31
---------------------
1998 1997
---------- ----------
(In Thousands)
<S> <C> <C>
Assets
Investments (Notes 1 and 3):
Securities available-for-sale, at fair value:
Fixed maturities (amortized cost--$1,257,705 in 1998
and $1,308,458 in 1997)............................. $1,277,121 $1,326,018
Equity securities (cost--$36,214 in 1998 and $46,807
in 1997)............................................ 40,373 57,806
Mortgage loans on real estate, net of allowance for
losses of $9,185 in 1998 and $8,435 in 1997........... 875,117 842,149
Policy loans........................................... 59,780 62,207
Short-term investments................................. 38,815 47,507
Other.................................................. 44,084 3,424
---------- ----------
Total investments.................................... 2,335,290 2,339,111
Cash..................................................... 2,531 --
Accrued investment income................................ 18,078 18,520
Premium and other receivables............................ 12,017 10,606
Deferred policy acquisition costs........................ 112,311 125,065
Property, equipment and software (Note 6)................ 16,276 16,753
Reinsurance recoverables:
Paid benefits.......................................... 6,549 6,588
Benefits and claim reserves ceded...................... 95,476 72,000
Other assets (Note 1).................................... 14,852 16,216
Assets held in separate accounts (Note 1)................ 300,366 76,964
---------- ----------
Total assets......................................... $2,913,746 $2,681,823
========== ==========
Liabilities and stockholder's equity
Future policy benefits:
Life and annuity (Note 10)............................. $1,253,531 $1,259,319
Health................................................. 78,527 87,883
Contract account balances................................ 677,444 699,244
Policy and contract claims............................... 62,953 58,381
Unearned revenue reserve................................. 9,924 11,284
Other policyholder funds................................. 14,671 14,286
Outstanding checks in excess of bank balances............ -- 2,669
Current income taxes payable (Note 7).................... 2,300 2,158
Deferred income taxes (Note 7)........................... 10,650 12,244
Payable to affiliate (Note 10)........................... 771 799
Other liabilities........................................ 84,183 72,858
Liabilities related to separate accounts (Note 1)........ 300,366 76,964
---------- ----------
Total liabilities........................................ 2,495,320 2,298,089
Commitments and contingencies (Note 5)
Stockholder's equity (Notes 2 and 11):
Preferred stock of $1 par value; authorized 3,000,000
shares, none issued and outstanding................... -- --
Common stock of $1 par value; authorized 24,000,000
shares, 12,000,000 shares issued and outstanding...... 12,000 12,000
Paid-in capital........................................ 40,106 40,106
Accumulated other comprehensive income................. 10,730 14,364
Retained earnings...................................... 355,590 317,264
---------- ----------
Total stockholder's equity........................... 418,426 383,734
---------- ----------
Total liabilities and stockholder's equity........... $2,913,746 $2,681,823
========== ==========
</TABLE>
See accompanying notes.
F-2
<PAGE>
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
(A Member of the Generali Group of Companies)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended December 31
---------------------------
1998 1997 1996
-------- -------- --------
(In Thousands)
<S> <C> <C> <C>
Revenues:
Premiums:
Life and annuity.............................. $170,494 $154,602 $142,461
Health........................................ 27,199 43,518 60,491
Other insurance considerations.................. 37,599 37,928 38,780
Net investment income (Note 3).................. 181,528 167,958 146,564
Realized gains, net (Note 3).................... 10,556 5,121 5,906
Other income.................................... 44,123 35,941 26,802
-------- -------- --------
Total revenues.............................. 471,499 445,068 421,004
Benefits and expenses:
Life and annuity benefits....................... 144,979 126,345 122,915
Health benefits................................. 15,547 27,812 42,224
Increase in policy liabilities including
interest credited to account balances.......... 101,650 104,581 94,530
Commissions..................................... 51,881 53,622 55,180
(Increase) decrease in deferred policy
acquisition costs.............................. 11,271 (1,229) (5,459)
Taxes, licenses and fees........................ 3,739 4,654 5,229
Other operating costs and expenses.............. 87,301 90,562 78,133
-------- -------- --------
Total benefits and expenses................. 416,368 406,347 392,752
-------- -------- --------
Income from continuing operations before income
tax expense...................................... 55,131 38,721 28,252
Income tax expense (Note 7)....................... 16,805 2,532 10,168
-------- -------- --------
Income from continuing operations................. 38,326 36,189 18,084
Discontinued operations (Note 12):
Gain on sale of discontinued operations, net of
income tax expense of $735 in 1996............. -- -- 1,416
-------- -------- --------
Income from discontinued operations............... -- -- 1,416
-------- -------- --------
Net income.................................. $ 38,326 $ 36,189 $ 19,500
======== ======== ========
</TABLE>
See accompanying notes.
F-3
<PAGE>
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
(A Member of the Generali Group of Companies)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
Year ended December 31
-------------------------
1998 1997 1996
------- ------- -------
(In Thousands)
<S> <C> <C> <C>
Net income.......................................... $38,326 $36,189 $19,500
Other comprehensive income:
Unrealized holding gains (losses) arising during
period........................................... 2,597 25,009 (21,346)
Less realized gains included in net income........ 6,760 1,868 7,851
------- ------- -------
Net unrealized gains (losses)................... (4,163) 23,141 (29,197)
Effect on deferred policy acquisition costs......... (1,483) (7,189) 13,418
Effect on unearned revenue reserve.................. 55 474 (2,082)
Deferred income taxes............................... 1,957 (5,748) 6,250
------- ------- -------
Other comprehensive income.......................... (3,634) 10,678 (11,611)
------- ------- -------
Comprehensive income............................ $34,692 $46,867 $ 7,889
======= ======= =======
</TABLE>
See accompanying notes.
F-4
<PAGE>
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
(A Member of the Generali Group of Companies)
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
Year ended December 31
---------------------------
1998 1997 1996
-------- -------- --------
(In Thousands)
<S> <C> <C> <C>
Common stock:
Balance at beginning and end of year............. $ 12,000 $ 12,000 $ 12,000
Paid-in capital:
Balance at beginning of year..................... 40,106 40,106 25,106
Additional paid-in capital..................... -- -- 15,000
-------- -------- --------
Balance at end of year........................... 40,106 40,106 40,106
Accumulated other comprehensive income:
Balance at beginning of year..................... 14,364 3,686 15,297
Change in net unrealized gains (losses)........ (3,634) 10,678 (11,611)
-------- -------- --------
Balance at end of year........................... 10,730 14,364 3,686
Retained earnings:
Balance at beginning of year..................... 317,264 281,075 266,575
Net income..................................... 38,326 36,189 19,500
Dividends declared (Note 2).................... -- -- (5,000)
-------- -------- --------
Balance at end of year........................... 355,590 317,264 281,075
-------- -------- --------
Total stockholder's equity......................... $418,426 $383,734 $336,867
======== ======== ========
</TABLE>
See accompanying notes.
F-5
<PAGE>
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
(A Member of the Generali Group of Companies)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended December 31
-------------------------------
1998 1997 1996
--------- --------- ---------
(In Thousands)
<S> <C> <C> <C>
Operating activities
Net income.................................... $ 38,326 $ 36,189 $ 19,500
Adjustments to reconcile net income to net
cash provided by operating activities:
Deferred income tax (benefit)............... 363 (8,416) 4,146
Realized gains, net......................... (10,556) (5,121) (5,906)
Gain on disposal of discontinued segment.... -- -- (2,151)
Discount accretion, net..................... (1,618) (975) (1,246)
Policy loans lapsed in lieu of surrender
benefits................................... 3,740 1,021 2,996
Depreciation................................ 2,524 3,778 4,153
Amortization................................ 782 782 782
Changes in assets and liabilities:
(Increase) decrease in accrued investment
income.................................... 442 19 (1,392)
(Increase) decrease in receivables and
reinsurance recoverables.................. (24,876) (15,425) 2,761
Policy acquisition costs deferred.......... (22,484) (28,449) (31,745)
Policy acquisition costs amortized......... 33,755 27,220 26,286
Increase (decrease) in income taxes
payable................................... 142 (2,187) 5,518
Increase in accrued policy benefits, claim
reserves, unearned revenues and
policyholder funds........................ 19,189 30,777 32,331
Interest credited to policyholder accounts. 77,358 79,312 69,494
Increase (decrease) in outstanding checks
in excess of bank balances................ (2,669) (2,004) 805
Decrease in other assets and other
liabilities, net.......................... 2,344 7,269 412
Other, net................................... 19 (433) (1,208)
--------- --------- ---------
Net cash provided by operating activities..... 116,781 123,357 125,536
Investing activities
Purchases of investments:
Securities available-for-sale:
Fixed maturities........................... (603,142) (464,419) (527,172)
Equity securities.......................... (12,969) (31,625) (17,586)
Mortgage and policy loans.................... (310,127) (237,990) (259,438)
Other........................................ (41,118) -- --
Sales, calls or maturities of investments:
Maturities and calls of securities
available-for-sale:
Fixed maturities........................... 305,013 167,000 117,057
Sales of securities available-for-sale:
Fixed maturities........................... 360,296 284,124 238,051
Equity securities.......................... 22,632 14,379 12,444
Mortgage and policy loans.................... 277,325 98,554 66,934
Real estate.................................. -- 5,854 2,194
Purchase of property, equipment and software.. (1,805) (1,949) (290)
Net (increase) decrease in short-term
investments.................................. 8,692 (7,516) 36,272
Proceeds from sale of discontinued operations. -- -- 632
Distributions from unconsolidated related
parties...................................... 1,466 1,514 718
--------- --------- ---------
Net cash provided by (used in) investing
activities................................... 6,263 (172,074) (330,184)
Financing activities
Dividends paid................................ -- -- (5,000)
Additional paid-in capital.................... -- -- 15,000
Deposits from interest sensitive and
investment-type contracts.................... 245,620 323,487 381,865
Withdrawals from interest sensitive and
investment-type contracts.................... (375,459) (295,633) (187,217)
Net proceeds from reverse repurchase
borrowing.................................... 30,189 40,925 35,173
Retirement of reverse repurchase borrowing.... (20,863) (20,062) (35,173)
--------- --------- ---------
Net cash provided by (used in) financing
activities................................... (120,513) 48,717 204,648
--------- --------- ---------
Net increase in cash.......................... 2,531 -- --
Cash at beginning of year..................... -- -- --
--------- --------- ---------
Cash at end of year........................... $ 2,531 $ -- $ --
========= ========= =========
Supplemental disclosures of cash flow
information
For purposes of the statements of cash flows,
Business Men's Assurance Company of America
considers only cash on hand and demand
deposits to be cash
Cash paid during the year for:
Income taxes................................. $ 16,300 $ 13,135 $ 1,239
========= ========= =========
Interest paid on reverse repurchase
borrowing................................... $ 299 $ 369 $ 620
========= ========= =========
Supplemental schedule of noncash investing and
financing activities
Real estate acquired through foreclosure...... $ -- $ 1,236 $ 3,033
========= ========= =========
</TABLE>
See accompanying notes.
F-6
<PAGE>
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
(A Member of the Generali Group of Companies)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Organization
Business Men's Assurance Company of America (the Company) is a Missouri-
domiciled life insurance company licensed to sell insurance products in 49
states and the District of Columbia. The Company offers a diversified
portfolio of individual and group insurance and investment products both
directly, primarily distributed through general agencies, and through
reinsurance assumptions. Assicurazioni Generali S.p.A. (Generali), an Italian
insurer, is the ultimate parent company.
Principles of Consolidation and Basis of Presentation
The accompanying consolidated financial statements include the accounts of
the Company and all majority-owned subsidiaries. All significant intercompany
transactions have been eliminated in consolidation.
Investments
The Company's entire investment portfolio is designated as available-for-
sale. Changes in fair values of available-for-sale securities, after
adjustment of deferred policy acquisition costs (DPAC) and deferred income
taxes, are reported as unrealized gains or losses directly in accumulated
other comprehensive income. The DPAC offset to the unrealized gains or losses
represents valuation adjustments or reinstatements of DPAC that would have
been required as a charge or credit to operations had such unrealized amounts
been realized.
The amortized cost of fixed maturity investments classified as available-
for-sale is adjusted for amortization of premiums and accretion of discounts.
That amortization or accretion is included in net investment income.
Mortgage loans and mortgage-backed securities are carried at unpaid
balances adjusted for accrual of discount and allowances for other than
temporary decline in value. Policy loans are carried at unpaid balances.
Real estate is stated at the lower of cost or fair value. At December 31,
1998 and 1997, no real estate was owned. Profit is recognized on real estate
sales when down payment, continuing investment and transfer of risk criteria
have been satisfied. Property, equipment and software, and the home office
building are generally valued at cost, including development costs, less
allowances for depreciation and other than temporary decline in value.
Property, equipment and software are being depreciated over the estimated
useful lives of the assets, principally on a straight-line basis. Depreciation
rates on these assets are set forth in Note 6.
Realized gains and losses on sales of investments and declines in value
considered to be other than temporary are recognized in net earnings on the
specific identification basis.
Impairment of Loans
Financial Accounting Standards Board (FASB) Statement of Financial
Accounting Standards (SFAS) No. 114, "Accounting by Creditors for Impairment
of a Loan," and SFAS No. 118, "Accounting by Creditors for Impairment of a
Loan-Income Recognition and Disclosures," require that an impaired mortgage
loan's fair value be measured based on the present value of future cash flows
discounted at the loan's effective interest rate, at the loan's observable
market price or at the fair value of the collateral if the loan is collateral
dependent. If the fair value of a mortgage loan is less than the recorded
investment in the loan, the difference is recorded as an allowance for
mortgage loan losses. The change in the allowance for mortgage loan losses is
reported with realized gains or losses on investments. Interest income on
impaired loans is recognized on a cash basis.
F-7
<PAGE>
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
(A Member of the Generali Group of Companies)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Use of Estimates
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Actual results could differ from those
estimates.
Deferred Policy Acquisition Costs
Certain commissions, expenses of the policy issue and underwriting
departments and other variable policy issue expenses have been deferred. For
limited payment and other traditional life insurance policies, these deferred
acquisition costs are being amortized over a period of not more than 25 years
in proportion to the ratio of the expected annual premium revenue to the
expected total premium revenue. Expected premium revenue was estimated with
the same assumptions used for computing liabilities for future policy benefits
for these policies.
For universal life-type insurance and investment-type products, the
deferred policy acquisition costs are amortized over a period of not more than
25 years in relation to the present value of estimated gross profits arising
from estimates of mortality, interest, expense and surrender experience. The
estimates of expected gross profits are evaluated regularly and are revised if
actual experience or other evidence indicates that revision is appropriate.
Upon revision, total amortization recorded to date is adjusted by a charge or
credit to current earnings.
Deferred policy acquisition costs are evaluated to determine that the
unamortized portion of such costs does not exceed recoverable amounts after
considering anticipated investment income.
Recognition of Insurance Revenue and Related Expenses
For limited payment and other traditional life insurance policies, premium
income is reported as earned when due, with past-due premiums being reserved.
Profits are recognized over the life of these contracts by associating
benefits and expenses with insurance in force for limited payment policies and
with earned premiums for other traditional life policies. This association is
accomplished by a provision for liability for future policy benefits and the
amortization of policy acquisition costs. Accident and health premium revenue
is recognized on a pro rata basis over the terms of the policies.
For universal life and investment-type policies, contract charges for
mortality, surrender and expense, other than front-end expense charges, are
reported as other insurance considerations revenue when charged to
policyholders' accounts. Expenses consist primarily of benefit payments in
excess of policyholder account values and interest credited to policyholder
accounts. Profits are recognized over the life of universal life-type
contracts through the amortization of policy acquisition costs and deferred
front-end expense charges with estimated gross profits from mortality,
interest, surrender and expense.
Policy Liabilities and Contract Values
The liability for future policy benefits for limited payment and other
traditional life insurance contracts has been computed primarily by a net
level premium reserve method based on estimates of future investment yield,
mortality and withdrawals made at the time gross premiums were calculated.
Assumptions used in computing future policy benefits are as follows: interest
rates range from 3.25% to 8.50%, depending on the year of issue; withdrawal
rates for individual life policies issued in 1966 and after are based on
Company experience, and policies issued prior to 1966 are based on industry
tables; and mortality rates are based on mortality tables that consider
Company experience. The liability for future policy benefits is graded to
reserves stipulated by the policy over a period of 20 to 25 years or the end
of the premium paying period, if less.
F-8
<PAGE>
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
(A Member of the Generali Group of Companies)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
For universal life and investment-type contracts, the account value before
deduction of any surrender charges is held as the policy liability. An
additional liability is established for deferred front-end expense charges on
universal life-type policies. These expense charges are recognized in income
as insurance considerations using the same assumptions as are used to amortize
deferred policy acquisition costs.
Claims and benefits payable for reported disability income claims have been
computed as the present value of expected future benefit payments based on
estimates of future investment yields and claim termination rates. The amount
of benefits payable included in the future policy benefit reserves and policy
and contract claims for December 31, 1998 and 1997 was $30,262,000 and
$47,211,000, respectively. Interest rates used in the calculation of future
investment yields vary based on the year the claim was incurred and range from
3% to 8.75%. Claim termination rates are based on industry tables.
Other accident and health claims and benefits payable for reported claims
and incurred but not reported claims are estimated using prior experience. The
methods of calculating such estimates and establishing the related liabilities
are periodically reviewed and updated. Any adjustments needed as a result of
periodic reviews are reflected in current operations.
Federal Income Taxes
Deferred federal income taxes have been provided in the consolidated
financial statements to recognize temporary differences between the financial
reporting and tax bases of assets and liabilities measured using enacted tax
rates and laws (See Note 7). Temporary differences are principally related to
deferred policy acquisition costs, the provision for future policy benefits,
accrual of discounts on investments, accrued expenses, accelerated
depreciation and unrealized investment gains and losses.
Separate Accounts
These accounts arise from four lines of business--variable annuities,
variable universal life, variable 401(k) and MBIA insured guaranteed
investment contracts (GIC). The separate account assets are legally segregated
and are not subject to the claims which may arise from any other business of
the Company.
The assets and liabilities of the variable lines of business are reported
at fair value since the underlying investment risks are assumed by the
policyowners. Investment income and gains or losses arising from the variable
line of business accrue directly to the policyowners and are, therefore, not
included in investment earnings in the accompanying consolidated statements of
operations. Revenues to the Company from variable products consist primarily
of contract maintenance charges and administration fees. Separate account
assets and liabilities for the variable lines of business totaled $3,409,000
on December 31, 1998 and $30,000 on December 31, 1997.
The assets of the MBIA GIC line of business are maintained at an amount
equal to the related liabilities. These assets related to the MBIA GIC line of
business include securities available-for-sale reported at fair value and
mortgage loans carried at unpaid balances. Changes in fair values of
available-for-sale securities, net of deferred income taxes, are reported as
unrealized gains or losses directly in accumulated other comprehensive income.
The liabilities are reported at the original deposit amount plus accrued
interest guaranteed to the contractholders. Investment income and gains or
losses arising from MBIA GIC investments are included in investment earnings
in the accompanying consolidated statements of operations. The guaranteed
interest payable
F-9
<PAGE>
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
(A Member of the Generali Group of Companies)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
is included in the increase in policy liabilities in the accompanying
consolidated statements of operations. Separate account assets and liabilities
for the MBIA GIC line of business totaled $296,957,000 on December 31, 1998
and $76,934,000 on December 31, 1997.
Intangible Assets
At December 31, 1998, goodwill of $11,541,000 (1997--$12,323,000), net of
accumulated amortization of $4,107,000 (1997--$3,325,000) resulting from the
acquisition of a subsidiary, is included in other assets. Goodwill is being
amortized over a period of 20 years on a straight-line basis, and amortization
amounted to $782,000 for each of the years ended December 31, 1998, 1997 and
1996.
Fair Values of Financial Instruments
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments,"
requires disclosure of fair value information about financial instruments,
whether or not recognized in the balance sheets, for which it is practicable
to estimate that value. In cases where quoted market prices are not available,
fair values are based on estimates using present value or other valuation
techniques. Those techniques are significantly affected by the assumptions
used, including the discount rate and estimates of future cash flows. In that
regard, the derived fair value estimates cannot be substantiated by comparison
to independent markets and, in many cases, could not be realized in immediate
settlement of the instruments. SFAS No. 107 excludes certain financial
instruments and all nonfinancial instruments from its disclosure requirements.
Accordingly, the aggregate fair value amounts presented do not represent the
underlying value of the Company:
<TABLE>
<CAPTION>
December 31, 1998 December 31, 1997
--------------------- ---------------------
Carrying Carrying
Amount Fair Value Amount Fair Value
---------- ---------- ---------- ----------
(In Thousands)
<S> <C> <C> <C> <C>
Fixed maturities (Note 3).......... $1,277,121 $1,277,121 $1,326,018 $1,326,018
Equity securities (Note 3)......... 43,373 40,373 57,806 57,806
Mortgage loans..................... 875,117 934,712 842,149 867,552
Policy loans....................... 59,780 55,579 62,207 57,491
Short-term investments............. 38,815 38,815 47,507 47,507
Cash............................... 2,531 2,531 -- --
Reinsurance recoverables:
Paid benefits.................... 6,549 6,549 6,588 6,588
Benefits and claim reserves...... 95,476 95,476 72,000 72,000
Assets held in separate accounts... 300,366 302,549 76,964 77,061
Investment-type insurance contracts
(Note 4).......................... 1,456,634 1,453,909 1,277,362 1,256,129
</TABLE>
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments:
Cash and short-term investments: The carrying amounts reported in the
balance sheets for these instruments approximate their fair values.
Investment securities: Fair values for fixed maturity securities are
based on quoted market prices, where available. For fixed maturity
securities not actively traded, fair values are estimated using values
obtained from independent pricing services or, in the case of private
placements, by discounting expected future cash flows using a current
market rate applicable to the yield, credit quality and maturity of the
investments. The fair value for equity securities is based on quoted market
prices.
F-10
<PAGE>
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
(A Member of the Generali Group of Companies)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Off-balance-sheet instruments: The fair value for outstanding loan
commitments approximates the amount committed, as all loan commitments were
made within the last 60 days of the year.
Mortgage loans and policy loans: The fair value for mortgage loans and
policy loans is estimated using discounted cash flow analyses, using
interest rates currently being offered for loans with similar terms to
borrowers of similar credit quality. Loans with similar characteristics are
aggregated for purposes of the calculations. The carrying amount of accrued
interest approximates its fair value.
Reinsurance recoverables: The carrying values of reinsurance
recoverables approximate their fair values.
Flexible and single premium deferred annuities: The cash surrender value
of flexible and single premium deferred annuities approximates their fair
value.
Guaranteed investment contracts: The fair value for the Company's
liabilities under guaranteed investment contracts is estimated using
discounted cash flow analyses, using interest rates currently being offered
for similar contracts with maturities consistent with those remaining for
the contracts being valued.
Financial Instruments with Off-Balance-Sheet Risk
In the normal course of business, the Company becomes a party to various
financial transactions to reduce its exposure to fluctuations in interest
rates. The Company has entered into interest rate swap contracts for the
purpose of converting either the variable interest rate characteristics of
certain investments to fixed rates or from fixed rates to variable rates. The
purpose of these swaps is to better match the invested assets of the Company
with the related insurance liabilities (guaranteed investment contracts) that
the investments are supporting. The net interest effect of such swap
transactions is reported as an adjustment of interest income as incurred. The
notional amount of these contracts was $40,000,000 at December 31, 1998 and
$25,000,000 at December 31, 1997.
Postretirement Benefits
The projected future cost of providing postretirement benefits, such as
health care and life insurance, is recognized as an expense as employees
render service. See Note 8 for further disclosures with respect to
postretirement benefits other than pensions.
Accounting Changes
In 1998, the Company adopted SFAS No. 130, "Reporting Comprehensive
Income." SFAS No. 130 establishes new rules for the reporting and display of
comprehensive income and its components; however, the adoption of this
statement had no impact on the Company's net income or stockholder's equity.
SFAS No. 130 requires unrealized gains or losses on the Company's
available-for-sale securities, which prior to adoption were reported
separately in equity, to be included in other comprehensive income. Prior year
consolidated financial statements have been reclassified to conform to the
requirements of SFAS No. 130.
SFAS No. 132, "Employer's Disclosures about Pension and Other
Postretirement Benefits," enhances disclosure requirements from previously
adopted SFAS Nos. 87 and 106. This standard has no financial impact and was
adopted at year end 1998.
Reclassification
Certain amounts for 1997 and 1996 have been reclassified to conform to the
current year presentation.
F-11
<PAGE>
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
(A Member of the Generali Group of Companies)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
2. Dividend Limitations
Missouri has legislation that requires prior reporting of all dividends to
the Director of Insurance. The Company, as a regulated life insurance company,
may pay a dividend from unassigned surplus without the approval of the
Missouri Department of Insurance if the aggregate of all dividends paid during
the preceding 12-month period does not exceed the greater of 10% of statutory
stockholder's equity at the end of the preceding calendar year or the
statutory net gain from operations for the preceding calendar year. A portion
of the statutory equity of the Company that is available for dividends would
be subject to additional federal income taxes should distribution be made from
"policyholders' surplus" (see Note 7).
As of December 31, 1998 and 1997, the Company's statutory stockholder's
equity was $226,345,000 and $188,193,000, respectively. Statutory net gain
from operations and net income for each of the three years in the period ended
December 31, 1998 were as follows:
<TABLE>
<CAPTION>
Year ended December 31
-----------------------
1998 1997 1996
------- ------- -------
(In Thousands)
<S> <C> <C> <C>
Net gain from operations......................... $36,305 $18,545 $10,898
Net income....................................... 44,692 14,540 10,381
</TABLE>
3. Investment Operations
The Company's investments in securities are summarized as follows:
<TABLE>
<CAPTION>
December 31, 1998
-------------------------------------------
Gross Gross
Amortized Unrealized Unrealized
Cost Gains Losses Fair Value
---------- ---------- ---------- ----------
(In Thousands)
<S> <C> <C> <C> <C>
Fixed maturities:
U.S. Treasury securities and
obligations of U.S.
government corporations and
agencies..................... $ 83,444 $ 1,848 $ (159) $ 85,133
Obligations of states and
political subdivisions 27,093 2,160 -- 29,253
Debt securities issued by
foreign governments 4,416 82 (24) 4,474
Corporate securities.......... 411,490 12,676 (2,877) 421,289
Mortgage-backed securities.... 712,853 9,028 (3,833) 718,048
Redeemable preferred stocks... 18,409 524 (9) 18,924
---------- ------- ------- ----------
Total........................... 1,257,705 26,318 (6,902) 1,277,121
Equity securities............... 36,214 5,981 (1,822) 40,373
---------- ------- ------- ----------
$1,293,919 $32,299 $(8,724) $1,317,494
========== ======= ======= ==========
</TABLE>
F-12
<PAGE>
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
(A Member of the Generali Group of Companies)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
<TABLE>
<CAPTION>
December 31, 1997
-------------------------------------------
Gross Gross
Amortized Unrealized Unrealized
Cost Gains Losses Fair Value
---------- ---------- ---------- ----------
(In Thousands)
<S> <C> <C> <C> <C>
Fixed maturities:
U.S. Treasury securities and
obligations of U.S.
government corporations and
agencies..................... $ 67,406 $ 1,233 $ (46) $ 68,593
Obligations of states and
political subdivisions....... 36,053 1,472 (9) 37,516
Debt securities issued by
foreign governments.......... 3,975 121 (126) 3,970
Corporate securities.......... 427,242 8,955 (2,004) 434,193
Mortgage-backed securities.... 755,467 10,153 (2,330) 763,290
Redeemable preferred stocks... 18,315 206 (65) 18,456
---------- ------- ------- ----------
Total........................... 1,308,458 22,140 (4,580) 1,326,018
Equity securities............... 46,807 12,419 (1,420) 57,806
---------- ------- ------- ----------
$1,355,265 $34,559 $(6,000) $1,383,824
========== ======= ======= ==========
<CAPTION>
</TABLE>
The amortized cost and estimated fair value of fixed maturity securities at
December 31, 1998, by contractual maturity, are as follows. Expected maturities
will differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties.
Maturities of mortgage-backed securities have not been set forth in the
following table, as such securities are not due at a single maturity date:
<TABLE>
<CAPTION>
Amortized
Cost Fair Value
---------- ----------
(In Thousands)
<S> <C> <C>
Due in one year or less............................ $ 8,022 $ 8,120
Due after one year through five years.............. 194,668 199,802
Due after five years through 10 years.............. 221,128 228,871
Due after 10 years................................. 121,034 122,280
---------- ----------
544,852 559,073
Mortgage-backed securities......................... 712,853 718,048
---------- ----------
Total fixed maturity securities.................... $1,257,705 $1,277,121
========== ==========
</TABLE>
F-13
<PAGE>
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
(A Member of the Generali Group of Companies)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The majority of the Company's mortgage loan portfolio is secured by real
estate. The following table presents information about the location of the
real estate that secures mortgage loans in the Company's portfolio:
<TABLE>
<CAPTION>
Carrying Amount
as of December 31
-----------------
1998 1997
-------- --------
(In Thousands)
<S> <C> <C>
State:
California............................................ $ 69,913 $ 71,675
Arizona............................................... 65,135 65,030
Missouri.............................................. 62,462 51,839
Texas................................................. 59,900 60,821
Florida............................................... 49,789 42,549
Utah.................................................. 44,110 37,821
Kansas................................................ 38,509 34,267
Oklahoma.............................................. 38,394 47,569
Washington............................................ 38,136 39,824
Other................................................. 408,769 390,754
-------- --------
$875,117 $842,149
======== ========
</TABLE>
The following table lists the Company's investment in impaired mortgage
loans and related allowance for credit losses at December 31. The table also
includes the average recorded investment in impaired loans and interest income
on impaired loans:
<TABLE>
<CAPTION>
1998 1997 1996
---- ------ ------
(In Thousands)
<S> <C> <C> <C>
Impaired mortgage loans............................... $-- $1,069 $2,516
Allowance for credit losses........................... -- 244 691
---- ------ ------
Net recorded investment in impaired loans............. $-- $ 825 $1,825
==== ====== ======
Average recorded investment in impaired loans......... $413 $1,325 $2,667
==== ====== ======
Interest income on impaired loans..................... $-- $ 57 $ 115
==== ====== ======
</TABLE>
Bonds, mortgage loans, preferred stocks and common stocks approximating
$4,900,000 and $4,600,000 were on deposit with regulatory authorities at
December 31, 1998 and 1997, respectively.
F-14
<PAGE>
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
(A Member of the Generali Group of Companies)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Set forth below is a summary of consolidated net investment income for the
years ended December 31:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
(In Thousands)
<S> <C> <C> <C>
Fixed maturities:
Bonds....................................... $ 94,975 $ 92,741 $ 86,066
Redeemable preferred stocks................. 1,603 1,309 814
Equity securities:
Common stocks............................... 702 793 579
Nonredeemable preferred stocks.............. 237 541 438
Mortgage loans on real estate................. 75,768 66,053 52,973
Real estate................................... 18 612 935
Policy loans.................................. 3,667 3,906 3,953
Short-term investments........................ 4,334 2,955 3,016
Other......................................... 2,685 1,223 269
-------- -------- --------
183,989 170,133 149,043
Less:
Investment expenses......................... 2,461 2,175 2,479
-------- -------- --------
Net investment income from continuing
operations................................... $181,528 $167,958 $146,564
======== ======== ========
</TABLE>
Realized gains (losses) on securities disposed of during 1998, 1997 and
1996 consisted of the following:
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
(In Thousands)
<S> <C> <C> <C>
Fixed maturity securities:
Gross realized gains....................... $ 5,149 $10,499 $ 7,953
Gross realized losses...................... (1,420) (4,690) (1,622)
Equity securities:
Gross realized gains....................... 7,395 3,204 2,001
Gross realized losses...................... (1,636) (777) --
Other investments............................ 1,068 (3,115) (2,426)
------- ------- -------
Net realized gains........................... $10,556 $ 5,121 $ 5,906
======= ======= =======
</TABLE>
Sales of investments in securities in 1998, 1997 and 1996, excluding
maturities and calls, resulted in gross realized gains of $10,980,000,
$8,362,000 and $9,798,800 and gross realized losses of $2,304,500, $1,017,000
and $1,290,500 respectively.
There were no nonincome producing investments at December 31, 1998 and
1997.
The Company began investing in the Cypress Tree Investment Fund LLC during
1998. The Company has invested $40 million in the partnership, which primarily
invests in senior secured loans. The Company's portion of the investment is
approximately 43% of the total fund value at December 31, 1998 and has been
recorded under the guidelines of equity accounting. This investment is
classified in other investments on the balance sheets, with unrealized gains
and losses being reflected in accumulated other comprehensive income.
F-15
<PAGE>
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
(A Member of the Generali Group of Companies)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
4. Investment Contracts
The carrying amounts and fair values of the Company's liabilities for
investment-type insurance contracts (included with future policy benefits,
contract account balances and separate accounts in the balance sheets) at
December 31 are as follows:
<TABLE>
<CAPTION>
1998 1997
--------------------- ---------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
---------- ---------- ---------- ----------
(In Thousands)
<S> <C> <C> <C> <C>
Guaranteed investment
contracts................... $ 640,137 $ 651,809 $ 660,782 $ 662,281
Flexible and single premium
deferred annuities.......... 516,131 495,873 539,616 516,343
Separate accounts............ 300,366 306,227 76,964 77,505
---------- ---------- ---------- ----------
Total investment-type
insurance contracts......... $1,456,634 $1,453,909 $1,277,362 $1,256,129
========== ========== ========== ==========
</TABLE>
Fair values of the Company's insurance contracts other than investment
contracts are not required to be disclosed. However, the fair values of
liabilities under all insurance contracts are taken into consideration in the
Company's overall management of interest rate risk which minimizes exposure to
changing interest rates through the matching of investment maturities with
amounts due under insurance contracts.
5. Commitments and Contingencies
The Company leases equipment and certain office facilities from others
under operating leases through 2003. Certain other equipment and facilities
are rented monthly. Rental expense amounted to $1,364,000, $2,137,000 and
$2,117,000 for the years ended December 31, 1998, 1997 and 1996, respectively.
As of December 31, 1998, the minimum future payments under noncancelable
operating leases for each of the next five years are as follows (in
thousands):
<TABLE>
<S> <C>
1999.............................. $ 901
2000.............................. 622
2001.............................. 504
2002.............................. 265
2003.............................. 58
------
Total........................... $2,350
======
</TABLE>
Total outstanding commitments to fund mortgage loans were $32,275,000 and
$74,496,000 at December 31, 1998 and 1997, respectively.
The Company and its subsidiaries are parties to certain claims and legal
actions arising during the ordinary course of business. In the opinion of
management, these matters will not have a materially adverse effect on the
operations or financial position of the Company.
F-16
<PAGE>
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
(A Member of the Generali Group of Companies)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
6. Property, Equipment and Software
A summary of property, equipment and software at December 31 and their
respective depreciation rates is as follows:
<TABLE>
<CAPTION>
Rate of
Depreciation 1998 1997
------------ -------- --------
(In Thousands)
<S> <C> <C> <C>
Home office building, including land
with a cost of $425,000............... 2% $ 23,158 $ 23,158
Other real estate not held-for-sale or
rental................................ 4% 820 973
Less accumulated depreciation.......... (13,097) (12,530)
-------- --------
10,881 11,601
Equipment and software................. 5%-33% 21,701 23,937
Less accumulated depreciation.......... (16,306) (18,785)
-------- --------
5,395 5,152
-------- --------
Total property, equipment and software. $ 16,276 $ 16,753
======== ========
</TABLE>
7. Federal Income Taxes
The components of the provision for income taxes and the temporary
differences generating deferred income taxes for the years ended December 31
are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------- -------- -------
(In Thousands)
<S> <C> <C> <C>
Current............................................ $16,442 $ 10,948 $ 6,757
Deferred:
Deferred policy acquisition costs................ (3,385) 143 1,322
Future policy benefits........................... 6,620 3,783 2,424
Accrual of discount.............................. 560 197 408
Tax on realized gains greater than book.......... (1,610) 571 (1,076)
Recognition of tax effect previously deferred on
sale of affiliate stock in prior period......... (1,311) (11,169) --
Employee benefit plans........................... (2,014) (2,206) 86
Prior year taxes................................. 1,018 -- --
Other, net....................................... 485 265 982
------- -------- -------
363 (8,416) 4,146
------- -------- -------
Total.............................................. 16,805 2,532 10,903
Less taxes from discontinued operations:
Current.......................................... -- -- (149)
Deferred......................................... -- -- 884
------- -------- -------
-- -- 735
------- -------- -------
Total taxes from continuing operations............. $16,805 $ 2,532 $10,168
======= ======== =======
</TABLE>
The Company did not record any valuation allowances against deferred tax
assets at December 31, 1998, 1997 or 1996.
F-17
<PAGE>
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
(A Member of the Generali Group of Companies)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Total taxes vary from the amounts computed by applying the federal income
tax rate of 35% to earnings from continuing operations for the following
reasons:
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
(In Thousands)
<S> <C> <C> <C>
Application of statutory rate to income before
taxes on income.............................. $19,296 $13,552 $ 9,888
Tax-exempt municipal bond interest and
dividends received deductions................ (287) (361) (291)
Recognition of tax effect previously deferred
on sale of affiliate stock in a prior period. (1,311) (11,169) --
Other......................................... (893) 510 571
------- ------- -------
$16,805 $ 2,532 $10,168
======= ======= =======
</TABLE>
The significant components comprising the Company's deferred tax assets and
liabilities as of December 31, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
1998 1997
------- -------
(In Thousands)
<S> <C> <C>
Deferred tax liabilities:
Deferred acquisition costs............................. $26,340 $29,641
Unrealized investment gains and losses................. 5,778 7,735
Other.................................................. 9,860 9,655
------- -------
Total deferred tax liability............................. 41,978 47,031
Deferred tax assets:
Reserve for future policy benefits..................... 15,093 21,411
Accrued expenses....................................... 10,969 8,504
Other.................................................. 5,266 4,872
------- -------
Total deferred tax assets................................ 31,328 34,787
------- -------
Net deferred tax liability............................... $10,650 $12,244
======= =======
</TABLE>
Certain amounts that were not currently taxed under pre-1984 tax law were
credited to a "policyholders' surplus" account. This account is frozen under
the 1984 Tax Act and is taxable only when distributed to stockholders at which
time it is taxed at regular corporate rates. The policyholders' surplus of the
Company approximates $87,000,000. The Company has no present plan for
distributing the amount in policyholders' surplus. Consequently, no provision
has been made in the consolidated financial statements for the taxes thereon.
However, if such taxes were assessed, the amount of taxes payable would be
approximately $30,000,000.
Earnings taxed on a current basis are accumulated in a "shareholder's
surplus" account and can be distributed to the shareholder without tax. The
shareholder's surplus amounted to approximately $278,000,000 at December 31,
1998.
F-18
<PAGE>
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
(A Member of the Generali Group of Companies)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
8. Benefit Plans
Trusteed Employee Retirement Plan
The Company has a trusteed employee retirement plan for the benefit of
salaried employees who have reached age 21 and who have completed one year of
service. The plan, which is administered by an Employees' Retirement Committee
consisting of at least three officers appointed by the Board of Directors of
the Company, provides for normal retirement at age 65 or earlier retirement
based on minimum age and service requirements. Retirement may be deferred to
age 70. Upon retirement, the retirees receive monthly benefit payments from
the plan's BMA group pension investment contract. During 1998, approximately
$3.1 million of annual benefits were covered by a group pension investment
contract issued by the Company. Assets of the plan, primarily equities, are
held by three trustees appointed by the Board of Directors.
The following table sets forth the plan's funded status at December 31:
<TABLE>
<CAPTION>
1998 1997
------- -------
(In Thousands)
<S> <C> <C>
Change in benefit obligations:
Benefit obligation at beginning of year.............. $62,683 $57,187
Service cost......................................... 1,873 1,767
Interest cost........................................ 4,557 4,374
Plan participants' contributions..................... 1 1
Amendments........................................... -- 118
Actuarial losses..................................... 1,249 3,627
Benefits paid........................................ (3,419) (4,391)
------- -------
Benefit obligation at end of year...................... 66,944 62,683
Change in plan assets:
Fair value of plan assets at beginning of year....... 85,605 79,679
Actual return on plan assets......................... 12,988 10,316
Plan participant's contributions..................... 1 1
Benefits paid........................................ (3,419) (4,391)
------- -------
Fair value of plan assets at end of year............... 95,175 85,605
------- -------
Funded status of the plan.............................. 28,231 22,922
Unrecognized net actuarial loss........................ (26,877) (23,519)
Unrecognized prior service cost........................ 1,342 2,034
Unrecognized net asset at January 1, 1987 being
recognized over 15 years.............................. (883) (1,177)
Adjustment to recognized minimum liability............. (2) (50)
------- -------
Prepaid pension cost................................... $ 1,811 $ 210
======= =======
</TABLE>
F-19
<PAGE>
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
(A Member of the Generali Group of Companies)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The additional minimum pension liability noted above results from the
pension plan for the Company's subsidiary, BMA Financial Services, Inc.
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- ------
(In Thousands)
<S> <C> <C> <C>
Net pension cost included the following components:
Service cost--benefits earned during the period.... $ 1,873 $ 1,767 $1,797
Interest cost on projected benefit obligation...... 4,557 4,374 4,195
Actual return on plan assets....................... (12,988) (10,316) (9,745)
Net amortization and deferral...................... 5,005 2,812 3,102
------- ------- ------
Net pension benefit.................................. $(1,553) $(1,363) $ (651)
======= ======= ======
</TABLE>
In determining the actuarial present value of the projected benefit
obligation, the weighted-average discount rate utilized was 7% for 1998, 7.5%
for 1997 and 8% for 1996. The rate of increase in future compensation levels
used for 1998 was 7% for employees at the younger attained ages grading to 3%
for older employees, the rate was 5% for 1997 and 5.5% for 1996. The expected
long-term rate of return on assets was 8% in 1998, 1997 and 1996.
Supplemental Retirement Programs and Deferred Compensation Plan
The Company has supplemental retirement programs for senior executive
officers and for group sales managers and group sales persons who are
participants in the trusteed retirement plan. These programs are not qualified
under Section 401(a) of the Internal Revenue Code and are not prefunded.
Benefits are paid directly by the Company as they become due. Benefits are
equal to an amount computed on the same basis as under the trusteed retirement
plan (except incentive compensation is included and limitations under Sections
401 and 415 of the Internal Revenue Code are not considered) less the actual
benefit payable under the trusteed plan.
The Company also has a deferred compensation plan for the Company's
managers that provides retirement benefits based on renewal premium income at
retirement resulting from the sales unit developed by the manager. This
program is not qualified under Section 401(a) of the Internal Revenue Code and
is not prefunded. As of January 1, 1987, the plan was frozen with respect to
new entrants. Currently, there are two managers who have not retired and will
be entitled to future benefits under the program. The actuarial present value
of benefits shown below includes these active managers, as well as all
managers who have retired and are entitled to benefits under the program.
F-20
<PAGE>
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
(A Member of the Generali Group of Companies)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The following table sets forth the combined supplemental retirement
programs' and deferred compensation plan's funded status at December 31:
<TABLE>
<CAPTION>
1998 1997
-------- --------
(In Thousands)
<S> <C> <C>
Change in benefit obligations:
Benefit obligation at beginning of year............ $ 11,281 $ 10,179
Service cost....................................... 235 190
Interest cost...................................... 813 783
Actuarial losses................................... 1,085 1,050
Benefits paid...................................... (902) (921)
-------- --------
Benefit obligation at end of year.................... 12,512 11,281
Change in plan assets:
Fair value of plan assets at beginning and end of
year.............................................. -- --
-------- --------
Funded status of the plan (underfunded).............. (12,512) (11,281)
Unrecognized net actuarial loss...................... 3,164 2,260
Unrecognized prior service cost...................... 659 888
Unrecognized net asset at January 1, 1987 being
recognized over 15 years............................ 389 519
Adjustment to recognized minimum liability........... (2,789) (2,486)
-------- --------
Accrued pension cost................................. (11,089) (10,100)
Accrued benefit liability............................ 10,041 8,653
Intangible asset..................................... 1,048 1,447
-------- --------
Net amount recognized................................ $ -- $ --
======== ========
</TABLE>
<TABLE>
<CAPTION>
1998 1997 1996
------ ------ ------
(In Thousands)
<S> <C> <C> <C>
Net pension cost included the following
components:
Service cost--benefits earned during the period. $ 235 $ 190 $ 189
Interest cost on projected benefit obligation... 813 783 761
Net amortization and deferral................... 541 469 513
------ ------ ------
Net pension cost.................................. $1,589 $1,442 $1,463
====== ====== ======
</TABLE>
In determining the actuarial present value of the projected benefit
obligation, the weighted-average discount rate utilized was 7% for 1998, 7.5%
for 1997 and 8% for 1996. The rate of increase in future compensation levels
used was 4.5% for 1998, 5% for 1997 and 5.5% for 1996.
Savings and Investment Plans
The Company has savings and investment plans qualifying under Section
401(k) of the Internal Revenue Code. Employees and sales representatives are
eligible to participate after one year of service. Participant contributions
are invested by the trustees for the plans at the direction of the participant
in any one or more of four investment funds. The Company makes matching
contributions in varying amounts. The Company's matching contributions
amounted to $1,153,000 in 1998, $1,099,000 in 1997 and $1,284,000 in 1996.
Participants are fully vested in the Company match after five years of
service.
F-21
<PAGE>
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
(A Member of the Generali Group of Companies)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The Company has a field force retirement plan for the benefit of agents and
managers. The plan is a defined contribution plan with contributions made
entirely by the Company. Each agent or manager under a standard contract with
one year of service with the Company is eligible to participate. The Company
makes an annual contribution for each participant equal to 3% of eligible
earnings up to the Social Security wage base and 6% of eligible earnings which
are in excess of the Social Security wage base. Each participant is fully
vested in his retirement account after five years of service. Assets of the
plan are deposited in a retirement trust fund and maintained by the plan
trustees who are appointed by the Company. The Company incurred costs related
to this plan of $33,000 in 1998, $230,000 in 1997 and $225,000 in 1996.
Defined Benefit Health Care Plan
In addition to the Company's other benefit plans, the Company sponsors an
unfunded defined benefit health care plan that provides postretirement medical
benefits to full-time employees for whom the sum of the employee's age and
years of service equals or exceeds 75, with a minimum age requirement of 50
and at least 10 years of service. The plan is contributory, with retiree
contributions adjusted annually, and contains other cost-sharing features such
as deductibles and coinsurance. The accounting for the plan anticipates a
future cost-sharing arrangement with retirees that is consistent with the
Company's past practices.
The following table presents the plan's funded status at December 31:
<TABLE>
<CAPTION>
1998 1997
------- -------
(In Thousands)
<S> <C> <C>
Change in benefit obligations:
Projected benefit obligation at beginning of year.... $11,490 $12,253
Service cost......................................... 108 122
Interest cost........................................ 777 878
Amendments........................................... -- (793)
Actuarial losses..................................... 260 143
Benefits paid........................................ (1,234) (1,113)
------- -------
Projected benefit obligation at end of year............ 11,401 11,490
Change in plan assets:
Fair value of plan assets at beginning and end of
year................................................ -- --
------- -------
Funded status of the plan (underfunded)................ (11,401) (11,490)
Unrecognized net actuarial loss........................ 529 268
Unrecognized prior service cost........................ 2,215 2,808
Unrecognized transition obligation..................... 4,107 4,873
------- -------
Accrued pension cost................................... (4,550) (3,541)
Accrued benefit liability.............................. 4,550 3,541
------- -------
Net amount recognized.................................. $ -- $ --
======= =======
</TABLE>
F-22
<PAGE>
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
(A Member of the Generali Group of Companies)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Net periodic postretirement benefit cost includes the following components:
<TABLE>
<CAPTION>
1998 1997 1996
------ ------ ------
(In Thousands)
<S> <C> <C> <C>
Service cost........................................ $ 108 $ 122 $ 118
Interest cost....................................... 777 878 867
Amortization of transition obligation over 20 years. 293 327 327
Amortization of past service costs.................. 295 407 407
------ ------ ------
Net periodic benefit cost........................... 1,473 1,734 1,719
Plan curtailment adjustment......................... 770 -- --
------ ------ ------
Final periodic postretirement benefit cost.......... $2,243 $1,734 $1,719
====== ====== ======
</TABLE>
The weighted-average annual assumed rate of increase in the per capita cost
of covered benefits (i.e., health care cost trend rate) varies per year, equal
to the maximum contractual increase of the Company's contribution. Because the
Company's future contributions are contractually limited as discussed above,
an increase in the health care cost trend rate has a minimal impact on
expected benefit payments.
The weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 7%, 7.25% and 7.5% at December 31, 1998,
1997 and 1996, respectively.
As part of the restatement of the 1998 net periodic postretirement benefit
cost, a curtailment loss was recognized. The curtailment resulted from closing
certain field locations in March 1998.
9. Reinsurance
The Company actively solicits reinsurance from other companies. The Company
also cedes portions of the insurance it writes as described in the next
paragraph. The effect of reinsurance on premiums earned from continuing
operations was as follows:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
(In Thousands)
<S> <C> <C> <C>
Direct...................................... $118,315 $118,192 $124,912
Assumed..................................... 152,844 134,541 116,154
Ceded....................................... (73,466) (54,613) (38,114)
-------- -------- --------
Total net premium........................... $197,693 $198,120 $202,952
======== ======== ========
</TABLE>
The Company reinsures with other companies portions of the insurance it
writes, thereby limiting its exposure on larger risks. Normal retentions
without reinsurance are $750,000 on an individual life policy, $1,000,000 on
individual life insurance assumed and $200,000 on an individual life insured
under a single group life policy. As of December 31, 1998, the Company had
ceded to other life insurance companies individual life insurance in force of
approximately $29.6 billion and group life of approximately $890 million.
Benefits and reserves ceded to other insurers amounted to $54,670,000,
$42,069,000 and $28,132,000 during the years ended December 31, 1998, 1997 and
1996, respectively. At December 31, 1998 and 1997, policy reserves ceded to
other insurers were $77,460,000 and $55,568,000, respectively. Claim reserves
ceded amounted to $18,016,000 and $16,432,000 at December 31, 1998 and 1997,
respectively. The Company remains contingently liable on all reinsurance ceded
by it to others. This contingent liability would become an actual liability in
the event an assuming reinsurer should fail to perform its obligations under
its reinsurance agreement with the Company.
F-23
<PAGE>
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
(A Member of the Generali Group of Companies)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
10. Related-Party Transactions
The Company reimburses Generali's U.S. branch for certain expenses incurred
on the Company's behalf. These expenses were not material in 1998, 1997 or
1996. The Company retrocedes a portion of the life insurance it assumes to
Generali. In accordance with this agreement, the Company ceded premiums of
$756,000, $873,000 and $1,035,000 during 1998, 1997 and 1996, respectively.
The Company ceded claims of $240,000 during 1998 and no claims during 1997 or
1996.
In 1995, the Company entered into a modified coinsurance agreement with
Generali to cede 50% of certain single-premium deferred annuity contracts
issued. In accordance with this agreement, $8 million, $35 million and $60
million in account balances were ceded to Generali in 1998, 1997 and 1996,
respectively, and Generali loaned such amounts back to the Company. Account
balances ceded and loaned back at December 31, 1998 and 1997 were $196 million
and $213 million, respectively. The recoverable amount from Generali was
offset against the loan. The net expense related to this agreement was
$1,564,000, $1,895,000 and $1,344,000 for the years ended December 31, 1998,
1997 and 1996, respectively. The Company held payables to Generali of $771,000
and $799,000 at December 31, 1998 and 1997, respectively.
11. Stockholder's Equity
The changes in net unrealized gains (losses) that have been included in the
balance sheet caption "other accumulated comprehensive income" in
stockholder's equity are summarized as follows:
<TABLE>
<CAPTION>
1998 1997
------- -------
(In Thousands)
<S> <C> <C>
Net unrealized gains (losses) on securities:
Fixed maturities...................................... $19,416 $17,560
Equity securities..................................... 4,159 10,999
Securities held in separate account................... 1,593 334
Other................................................. (438) --
------- -------
Net unrealized gains.................................... 24,730 28,893
Adjustment to deferred policy acquisition costs......... (8,707) (7,224)
Adjustment to unearned revenue reserve.................. 485 430
Deferred income taxes................................... (5,778) (7,735)
------- -------
Net unrealized gains.................................... $10,730 $14,364
======= =======
</TABLE>
12. Discontinued Operations
In June of 1994, the Company adopted a plan to dispose of its medical line
of business. Accordingly, the medical line of business was considered a
discontinued operation for the year ended 1996 and the consolidated financial
statements reported separately the net assets and operating results of the
discontinued operations.
The Company also entered into an agreement during 1994 to dispose of the
remainder of its medical line of business effective January 1, 1995. This
transaction closed January 31, 1995 and, accordingly, was reflected in the
1995 consolidated financial statements. The agreement provided for the
reinsurance of substantially all of the Company's remaining group and
individual medical business through the renewal dates of the related
contracts. Under the agreement, the Company continued to remain primarily
liable for claims, billing and receipts through the next anniversary dates of
the policies reinsured. The estimated gain on disposal of this was recorded in
1995. An additional gain of $1,416,000, net of income taxes, was recorded in
1996 reflecting various adjustments to initial estimates.
F-24
<PAGE>
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
(A Member of the Generali Group of Companies)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
13. Impact of Year 2000 (Unaudited)
The Company continues to monitor the potential impact of the year 2000 on
its systems and that of its primary vendors and business partners. This
assessment extends to both informational technology systems and noninformation
technology systems. All identified modifications to critical operating systems
have been completed as of December 31, 1998, and the Company continues to
validate completed systems to ensure ongoing compliance. Contingency plans are
being developed and management estimates that these plans will be completed by
mid 1999, which is prior to any anticipated impact on its operating systems.
Total costs of the modifications have been immaterial to the Company's
operations and have been expensed as incurred.
The Company does face the risk that one or more of its critical suppliers
or customers (external relationships) will not be able to interact with the
Company due to the third parties' inability to resolve their own year 2000
issues. The Company is actively monitoring the compliance programs of those
third parties, and formal communication has been initiated with all major
outside service providers. However, the Company is unable to predict with
certainty to what extent its external relationships will be year 2000 ready.
The forecast costs, consequences of the year 2000 problem and the dates on
which the Company believes it will complete its various year 2000 computer
modifications are based on its best estimates, which, in turn, were based on
numerous assumptions of future events, including third-party modification and
compliance plans, continued availability of resources and other factors. The
Company cannot be sure that these estimates will be achieved or that the
assumptions are accurate, and actual results could differ materially from
those anticipated.
F-25
APPENDIX A
ILLUSTRATION OF POLICY VALUES
VERSION A
In order to show You how the Policy works, We created some hypothetical
examples. We chose two males ages 45 and 55 and a female age 50. Our
hypothetical insureds are in good health, do not smoke and qualify for preferred
non-tobacco rates. The initial and Planned Premiums are shown in the upper
portion of each illustration. The Death Proceeds, Accumulation Values and Cash
Surrender Values would be lower if the Primary Insured was in a standard
non-tobacco, tobacco or special Rate Class since the cost of insurance charges
would increase.
There are three illustrations--all of which are based on the above. We also
assumed that the underlying Investment Option had gross rates of return of 0%,
6%, 12%. This means that the underlying Investment Option would earn these rates
of return before the deduction of the operating expenses (including the
management fee). When these costs are taken into account, the net annual
investment return rates (net of an average of approximately .89% for these
charges) are approximately -.89%, 5.11% and 11.11%.
It is important to be aware that this illustration assumes a level rate of
return for all years. If the actual rate of return moves up and down over the
years instead of remaining level, this may make a big difference in the
long-term investment results of Your Policy. In order to properly show You how
the Policy actually works, We calculated values for the Accumulation Value, Cash
Surrender Value and the Death Proceeds. The Death Proceeds are the Death Benefit
minus any outstanding loans and loan interest accrued.
We used the charges We described in the Expenses Section of the Prospectus.
These charges are: (1) Premium Charge; (2) Policy Charge; and (3) Risk Charge.
We also deducted for the cost of insurance based on both the current charges and
the guaranteed charges. The values also assume that each Investment Option will
incur expenses annually which are assumed to be approximately .89% of the
average net assets of the Investment Option. This is the average of the fees and
expenses of the Investment Options in 1998. The expenses of .89% reflect the
voluntary waiver of certain advisory fees and/or the reimbursement of operating
expenses for certain Investment Options (as noted under Expenses--Investment
Option Expenses in Part I of this prospectus). If the advisory fees had not been
waived and/or if expenses had not been reimbursed, the average expenses would
have been approximately 2.45%. The investment advisers currently anticipate that
the current waiver and/or reimbursement arrangements will continue through at
least May 1, 2000 to the extent necessary to maintain competitive total annual
portfolio expense levels as described under Expenses--Investment Option
Expenses. However, certain advisers have the right to terminate waivers and/or
reimbursements at any time at their sole discretion. If the waiver and/or
reimbursement arrangements were not in effect, the Death Proceeds, Accumulation
Values and the Cash Surrender Values shown in the illustrations below would be
lower. The illustration assumes no loans were taken.
There is also a column labeled "Premiums Accumulated at 5% Interest Per
Year." This shows how the Premium grows if it was invested at 5% per year.
We will furnish You, upon request, a comparable personalized illustration
reflecting the proposed insured's Age, Rate Class, Specified Amount, the Planned
Premiums, and reflecting both the current cost of insurance and the guaranteed
cost of insurance.
<TABLE>
<CAPTION>
BMA
Clarity Variable Universal Life
Male Age 45 Preferred Non-Tobacco Initial Specified Amount: $150,000
Planned Premium: $1,980 Assuming Guaranteed Charges Death Benefit Option: Level
- --------------------------------------------------------- ------------------------------------------------------------------- ------
Premiums
End of Accumulated
Policy at 5% Death Proceeds Accumulation Value
Year Interest Per Assuming Hypothetical Gross Assuming Hypothetical Gross
Year Annual Investment Return of Annual Investment Return of
- --------- -------------- ----------------------------------------------- -----------------------------------------------
0 % Gross 6 % Gross 12% Gross 0 % Gross 6 % Gross 12% Gross
(-0.89% Net) (5.11% Net) (11.11% Net) (-0.89% Net) (5.11% Net) (11.11% Net)
- --------- -------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 2,079 150,000 150,000 150,000 1,055 1,141 1,227
2 4,262 150,000 150,000 150,000 2,234 2,478 2,733
3 6,554 150,000 150,000 150,000 3,356 3,834 4,354
4 8,961 150,000 150,000 150,000 4,419 5,207 6,100
5 11,488 150,000 150,000 150,000 5,418 6,594 7,980
6 14,141 150,000 150,000 150,000 6,352 7,993 10,008
7 16,927 150,000 150,000 150,000 7,213 9,395 12,189
8 19,853 150,000 150,000 150,000 7,992 10,793 14,533
9 22,924 150,000 150,000 150,000 8,682 12,178 17,052
10 26,149 150,000 150,000 150,000 9,273 13,539 19,754
11 29,536 150,000 150,000 150,000 9,828 14,960 22,781
12 33,092 150,000 150,000 150,000 10,268 16,348 26,050
13 36,825 150,000 150,000 150,000 10,586 17,697 29,588
14 40,746 150,000 150,000 150,000 10,774 18,996 33,424
15 44,862 150,000 150,000 150,000 10,816 20,230 37,587
16 49,184 150,000 150,000 150,000 10,696 21,381 42,110
17 53,722 150,000 150,000 150,000 10,394 22,430 47,033
18 58,487 150,000 150,000 150,000 9,884 23,348 52,401
19 63,491 150,000 150,000 150,000 9,134 24,104 58,263
20 68,744 150,000 150,000 150,000 8,110 24,660 64,683
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------
Cash Surrender Value
Assuming Hypothetical Gross
Annual Investment Return of
- ----------------------------------------------
0 % Gross 6 % Gross 12% Gross
(-0.89% Net) (5.11% Net) (11.11% Net)
- ------------- ------------ -------------
<S> <C> <C>
0 0 0
0 3 258
881 1,359 1,879
1,944 2,732 3,625
3,364 4,540 5,926
4,694 3,662 8,350
5,975 8,158 10,952
7,175 9,976 13,716
8,261 11,757 16,631
9,273 13,539 19,754
9,828 14,960 22,781
10,268 16,348 26,050
10,586 17,697 29,588
10,774 18,996 33,424
10,816 20,230 37,587
10,696 21,381 42,110
10,394 22,430 47,033
9,884 23,348 52,401
9,134 24,104 58,263
8,110 24,660 64,683
</TABLE>
The hypothetical investment rates of return shown in this illustration are for
illustrative purposes only and should not be deemed a representation of past or
future investment rates of return. Actual rates of return may be more or less
than those shown and will depend on a number of factors including the investment
performance of the subaccounts selected by the policyowner.
The Death Proceeds, Accumulation Value and Cash Surrender Value for a policy
would differ from those shown in this illustration if the actual gross annual
rates of return averaged 0.00%, 6.00% and 12.00% over a period of years, but
also fluctuated above or below those averages for individual policy years. The
Death Proceeds, Accumulation Value and Cash Surrender Value would also be
different if any policy loans or partial surrenders were made.
No representation can be made by BMA, the separate account or the underlying
portfolios that these hypothetical rates of return can be achieved for any one
year or sustained over a period of time.
<TABLE>
<CAPTION>
BMA
Clarity Variable Universal Life
Male Age 45 Preferred Non-Tobacco Initial Specified Amount: $150,000
Planned Premium: $1,980 Assuming Current Charges
- --------------------------------------------------------- ------------------------------------------------------------------- ------
Premiums
End of Accumulated
Policy at 5% Death Proceeds Accumulation Value
Year Interest Per Assuming Hypothetical Gross Assuming Hypothetical Gross
Year Annual Investment Return of Annual Investment Return of
- --------- -------------- ----------------------------------------------- -----------------------------------------------
0 % Gross 6 % Gross 12% Gross 0 % Gross 6 % Gross 12% Gross
(-0.89% Net) (5.11% Net) (11.11% Net) (-0.89% Net) (5.11% Net) (11.11% Net)
- --------- -------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 2,079 150,000 150,000 150,000 1,079 1,166 1,253
2 4,262 150,000 150,000 150,000 2,362 2,611 2,872
3 6,554 150,000 150,000 150,000 3,605 4,100 4,637
4 8,961 150,000 150,000 150,000 4,808 5,634 6,567
5 11,488 150,000 150,000 150,000 5,973 7,216 8,676
6 14,141 150,000 150,000 150,000 7,099 8,849 10,987
7 16,927 150,000 150,000 150,000 8,185 10,532 13,518
8 19,853 150,000 150,000 150,000 9,231 12,266 16,291
9 22,924 150,000 150,000 150,000 10,234 14,053 19,332
10 26,149 150,000 150,000 150,000 11,190 15,891 22,664
11 29,536 150,000 150,000 150,000 12,175 17,881 26,458
12 33,092 150,000 150,000 150,000 13,108 19,932 30,636
13 36,825 150,000 150,000 150,000 13,983 22,041 35,238
14 40,746 150,000 150,000 150,000 14,803 24,214 40,317
15 44,862 150,000 150,000 150,000 15,561 26,450 45,926
16 49,184 150,000 150,000 150,000 16,195 28,692 52,077
17 53,722 150,000 150,000 150,000 16,758 30,996 58,885
18 58,487 150,000 150,000 150,000 17,258 33,372 66,438
19 63,491 150,000 150,000 150,000 17,685 35,817 74,821
20 68,744 150,000 150,000 150,000 18,038 38,335 84,142
</TABLE>
<TABLE>
<CAPTION>
Death Benefit Option: Level
- ------------------------------------------------
Cash Surrender Value
Assuming Hypothetical Gross
Annual Investment Return of
- ----------------------------------------------
0 % Gross 6 % Gross 12% Gross
(-0.89% Net) (5.11% Net) (11.11% Net)
- ------------- ------------ -------------
<S> <C> <C>
0 0 0
0 136 397
1,130 1,625 2,162
2,333 3,159 4,092
3,918 5,162 6,622
5,441 7,190 9,329
6,948 9,294 12,280
8,414 11,450 15,474
9,813 13,632 18,911
11,190 15,891 22,664
12,175 17,881 26,458
13,108 19,932 30,636
13,983 22,041 35,238
14,803 24,214 40,317
15,561 26,450 45,926
16,195 28,692 52,077
16,758 30,996 58,885
17,258 33,372 66,438
17,685 35,817 74,821
18,038 38,335 84,142
</TABLE>
The hypothetical investment rates of return shown in this illustration are for
illustrative purposes only and should not be deemed a representation of past or
future investment rates of return. Actual rates of return may be more or less
than those shown and will depend on a number of factors including the investment
performance of the subaccounts selected by the policyowner.
The Death Proceeds, Accumulation Value and Cash Surrender Value for a policy
would differ from those shown in this illustration if the actual gross annual
rates of return averaged 0.00%, 6.00% and 12.00% over a period of years, but
also fluctuated above or below those averages for individual policy years. The
Death Proceeds, Accumulation Value and Cash Surrender Value would also be
different if any policy loans or partial surrenders were made.
No representation can be made by BMA, the separate account or the underlying
portfolios that these hypothetical rates of return can be achieved for any one
year or sustained over a period of time.
<TABLE>
<CAPTION>
BMA
Clarity Variable Universal Life
Male Age 55 Preferred Non-Tobacco Initial Specified Amount: $150,000
Planned Premium: $3,654 Assuming Guaranteed Charges
- --------------------------------------------------------- ------------------------------------------------------------------- ------
Premiums
End of Accumulated
Policy at 5% Death Proceeds Accumulation Value
Year Interest Per Assuming Hypothetical Gross Assuming Hypothetical Gross
Year Annual Investment Return of Annual Investment Return of
- --------- -------------- ----------------------------------------------- -----------------------------------------------
0 % Gross 6 % Gross 12% Gross 0 % Gross 6 % Gross 12% Gross
(-0.89% Net) (5.11% Net) (11.11% Net) (-0.89% Net) (5.11% Net) (11.11% Net)
- --------- -------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 3,837 150,000 150,000 150,000 1,956 2,116 2,276
2 7,865 150,000 150,000 150,000 3,957 4,404 4,871
3 12,095 150,000 150,000 150,000 5,817 6,683 7,627
4 16,537 150,000 150,000 150,000 7,532 8,948 10,555
5 21,200 150,000 150,000 150,000 9,089 11,184 13,664
6 26,097 150,000 150,000 150,000 10,475 13,378 16,964
7 31,238 150,000 150,000 150,000 11,676 15,514 20,469
8 36,637 150,000 150,000 150,000 12,670 17,571 24,186
9 42,306 150,000 150,000 150,000 13,433 19,520 28,126
10 48,258 150,000 150,000 150,000 13,936 21,333 32,301
11 54,507 150,000 150,000 150,000 14,271 23,139 36,948
12 61,069 150,000 150,000 150,000 14,299 24,774 41,934
13 67,959 150,000 150,000 150,000 13,990 26,207 47,306
14 75,194 150,000 150,000 150,000 13,313 27,408 53,125
15 82,790 150,000 150,000 150,000 12,223 28,333 59,463
16 90,767 150,000 150,000 150,000 10,652 28,918 66,397
17 99,142 150,000 150,000 150,000 8,430 29,005 73,975
18 107,936 150,000 150,000 150,000 5,609 28,630 82,415
19 117,169 150,000 150,000 150,000 1,961 27,584 91,833
20 126,864 Lapse 150,000 150,000 Lapse 25,706 102,456
</TABLE>
<TABLE>
<CAPTION>
Death Benefit Option: Level
- ------------------------------------------------
Cash Surrender Value
Assuming Hypothetical Gross
Annual Investment Return of
- ----------------------------------------------
0 % Gross 6 % Gross 12% Gross
(-0.89% Net) (5.11% Net) (11.11% Net)
- ------------- ------------ -------------
<S> <C> <C>
0 0 0
303 750 1,217
2,163 3,029 3,973
3,878 5,294 6,901
6,056 8,151 10,631
8,027 10,930 14,516
9,849 13,687 18,642
11,464 16,365 22,980
12,812 18,899 27,504
13,936 21,333 32,301
14,271 23,139 36,948
14,299 24,774 41,934
13,990 26,207 47,306
13,313 27,408 53,125
12,223 28,333 59,463
10,652 28,918 66,397
8,430 29,005 73,975
5,609 28,630 82,415
1,961 27,584 91,833
Lapse 25,706 102,456
</TABLE>
The hypothetical investment rates of return shown in this illustration are for
illustrative purposes only and should not be deemed a representation of past or
future investment rates of return. Actual rates of return may be more or less
than those shown and will depend on a number of factors including the investment
performance of the subaccounts selected by the policyowner.
The Death Proceeds, Accumulation Value and Cash Surrender Value for a policy
would differ from those shown in this illustration if the actual gross annual
rates of return averaged 0.00%, 6.00% and 12.00% over a period of years, but
also fluctuated above or below those averages for individual policy years. The
Death Proceeds, Accumulation Value and Cash Surrender Value would also be
different if any policy loans or partial surrenders were made.
No representation can be made by BMA, the separate account or the underlying
portfolios that these hypothetical rates of return can be achieved for any one
year or sustained over a period of time.
<TABLE>
<CAPTION>
BMA
Clarity Variable Universal Life
Male Age 55 Preferred Non-Tobacco Initial Specified Amount: $150,000
Planned Premium: $3,654 Assuming Current Charges
- --------------------------------------------------------- ------------------------------------------------------------------- ------
Premiums
End of Accumulated
Policy at 5% Death Proceeds Accumulation Value
Year Interest Per Assuming Hypothetical Gross Assuming Hypothetical Gross
Year Annual Investment Return of Annual Investment Return of
- --------- -------------- ----------------------------------------------- -----------------------------------------------
0 % Gross 6 % Gross 12% Gross 0 % Gross 6 % Gross 12% Gross
(-0.89% Net) (5.11% Net) (11.11% Net) (-0.89% Net) (5.11% Net) (11.11% Net)
- --------- -------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 3,837 150,000 150,000 150,000 2,263 2,432 2,602
2 7,865 150,000 150,000 150,000 4,677 5,166 5,675
3 12,095 150,000 150,000 150,000 7,003 7,969 9,018
4 16,537 150,000 150,000 150,000 9,240 10,845 12,659
5 21,200 150,000 150,000 150,000 11,384 13,793 16,626
6 26,097 150,000 150,000 150,000 13,436 16,817 20,961
7 31,238 150,000 150,000 150,000 15,389 19,916 25,697
8 36,637 150,000 150,000 150,000 17,244 23,094 30,883
9 42,306 150,000 150,000 150,000 18,990 26,345 36,565
10 48,258 150,000 150,000 150,000 20,616 29,666 42,793
11 54,507 150,000 150,000 150,000 22,240 33,227 49,879
12 61,069 150,000 150,000 150,000 23,751 36,898 57,726
13 67,959 150,000 150,000 150,000 25,149 40,687 66,439
14 75,194 150,000 150,000 150,000 26,429 44,604 76,137
15 82,790 150,000 150,000 150,000 27,573 48,645 86,948
16 90,767 150,000 150,000 150,000 28,271 52,568 98,885
17 99,142 150,000 150,000 150,000 28,775 56,596 112,281
18 107,936 150,000 150,000 150,000 29,116 60,774 127,385
19 117,169 150,000 150,000 157,427 29,280 65,116 144,428
20 126,864 150,000 150,000 174,803 29,227 69,620 163,367
</TABLE>
<TABLE>
<CAPTION>
Death Benefit Option: Level
- ------------------------------------------------
Cash Surrender Value
Assuming Hypothetical Gross
Annual Investment Return of
- ----------------------------------------------
0 % Gross 6 % Gross 12% Gross
(-0.89% Net) (5.11% Net) (11.11% Net)
- ------------- ------------ -------------
<S> <C> <C>
0 0 0
1,023 1,512 2,021
3,349 4,315 5,364
5,586 7,191 9,005
8,351 10,760 13,594
10,988 14,369 18,513
13,562 18,089 23,870
16,038 21,888 29,677
18,369 25,724 35,944
20,616 29,666 42,793
22,240 33,227 49,879
23,751 36,898 57,726
25,149 40,687 66,439
26,429 44,604 76,137
27,573 48,645 86,948
28,271 52,568 98,885
28,775 56,596 112,281
29,116 60,774 127,385
29,280 65,116 144,428
29,227 69,620 163,367
</TABLE>
The hypothetical investment rates of return shown in this illustration are for
illustrative purposes only and should not be deemed a representation of past or
future investment rates of return. Actual rates of return may be more or less
than those shown and will depend on a number of factors including the investment
performance of the subaccounts selected by the policyowner.
The Death Proceeds, Accumulation Value and Cash Surrender Value for a policy
would differ from those shown in this illustration if the actual gross annual
rates of return averaged 0.00%, 6.00% and 12.00% over a period of years, but
also fluctuated above or below those averages for individual policy years. The
Death Proceeds, Accumulation Value and Cash Surrender Value would also be
different if any policy loans or partial surrenders were made.
No representation can be made by BMA, the separate account or the underlying
portfolios that these hypothetical rates of return can be achieved for any one
year or sustained over a period of time.
<TABLE>
<CAPTION>
BMA
Clarity Variable Universal Life
Female Age 50 Preferred Non-Tobacco Initial Specified Amount: $150,000
Planned Premium: $2,232 Assuming guaranteed Charges
- --------------------------------------------------------- ------------------------------------------------------------------- ------
Premiums
End of Accumulated
Policy at 5% Death Proceeds Accumulation Value
Year Interest Per Assuming Hypothetical Gross Assuming Hypothetical Gross
Year Annual Investment Return of Annual Investment Return of
- --------- -------------- ----------------------------------------------- -----------------------------------------------
0 % Gross 6 % Gross 12% Gross 0 % Gross 6 % Gross 12% Gross
(-0.89% Net) (5.11% Net) (11.11% Net) (-0.89% Net) (5.11% Net) (11.11% Net)
- --------- -------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 2,344 150,000 150,000 150,000 1,161 1,258 1,354
2 4,804 150,000 150,000 150,000 2,442 2,712 2,996
3 7,388 150,000 150,000 150,000 3,655 4,184 4,759
4 10,101 150,000 150,000 150,000 4,795 5,665 6,651
5 12,950 150,000 150,000 150,000 5,862 7,156 8,683
6 15,941 150,000 150,000 150,000 6,853 8,655 10,870
7 19,082 150,000 150,000 150,000 7,769 10,161 13,229
8 22,379 150,000 150,000 150,000 8,611 11,677 15,781
9 25,842 150,000 150,000 150,000 9,383 13,207 18,552
10 29,478 150,000 150,000 150,000 10,082 14,749 21,564
11 33,295 150,000 150,000 150,000 10,778 16,397 24,978
12 37,303 150,000 150,000 150,000 11,381 18,049 28,704
13 41,512 150,000 150,000 150,000 11,869 19,684 32,761
14 45,931 150,000 150,000 150,000 12,215 21,276 37,171
15 50,572 150,000 150,000 150,000 12,392 22,801 41,963
16 55,444 150,000 150,000 150,000 12,387 24,244 47,184
17 60,559 150,000 150,000 150,000 12,187 25,593 52,890
18 65,931 150,000 150,000 150,000 11,788 26,843 59,157
19 71,571 150,000 150,000 150,000 11,185 27,988 66,072
20 77,493 150,000 150,000 150,000 10,362 29,014 73,731
</TABLE>
<TABLE>
<CAPTION>
Death Benefit Option: Level
- -------------------------------------------------
Cash Surrender Value
Assuming Hypothetical Gross
Annual Investment Return of
----------------------------------------------
0 % Gross 6 % Gross 12% Gross
(-0.89% Net) (5.11% Net) (11.11% Net)
------------- ------------ -------------
<S> <C> <C>
0 0 0
0 201 485
1,144 1,673 2,248
2,284 3,154 4,140
3,778 5,072 6,599
5,171 6,973 9,188
6,513 8,906 11,974
7,782 10,848 14,952
8,956 12,780 18,125
10,082 14,749 21,564
10,778 16,397 24,978
11,381 18,049 28,704
11,869 19,684 32,761
12,215 21,276 37,171
12,392 22,801 41,963
12,387 24,244 47,184
12,187 25,593 52,890
11,788 26,843 59,157
11,185 27,988 66,072
10,362 29,014 73,731
</TABLE>
The hypothetical investment rates of return shown in this illustration are for
illustrative purposes only and should not be deemed a representation of past or
future investment rates of return. Actual rates of return may be more or less
than those shown and will depend on a number of factors including the investment
performance of the subaccounts selected by the policyowner.
The Death Proceeds, Accumulation Value and Cash Surrender Value for a policy
would differ from those shown in this illustration if the actual gross annual
rates of return averaged 0.00%, 6.00% and 12.00% over a period of years, but
also fluctuated above or below those averages for individual policy years. The
Death Proceeds, Accumulation Value and Cash Surrender Value would also be
different if any policy loans or partial surrenders were made.
No representation can be made by BMA, the separate account or the underlying
portfolios that these hypothetical rates of return can be achieved for any one
year or sustained over a period of time.
<TABLE>
<CAPTION>
BMA
Clarity Variable Universal Life
Female Age 50 Preferred Non-Tobacco Initial Specified Amount: $150,000
Planned Premium: $2,232 Assuming Current Charges
- --------------------------------------------------------- ------------------------------------------------------------------- ------
Premiums
End of Accumulated
Policy at 5% Death Proceeds Accumulation Value
Year Interest Per Assuming Hypothetical Gross Assuming Hypothetical Gross
Year Annual Investment Return of Annual Investment Return of
- --------- -------------- ----------------------------------------------- -----------------------------------------------
0 % Gross 6 % Gross 12% Gross 0 % Gross 6 % Gross 12% Gross
(-0.89% Net) (5.11% Net) (11.11% Net) (-0.89% Net) (5.11% Net) (11.11% Net)
- --------- -------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 2,344 150,000 150,000 150,000 1,228 1,326 1,425
2 4,804 150,000 150,000 150,000 2,658 2,940 3,234
3 7,388 150,000 150,000 150,000 4,049 4,607 5,214
4 10,101 150,000 150,000 150,000 5,397 6,327 7,378
5 12,950 150,000 150,000 150,000 6,701 8,102 9,747
6 15,941 150,000 150,000 150,000 7,964 9,934 12,343
7 19,082 150,000 150,000 150,000 9,186 11,827 15,191
8 22,379 150,000 150,000 150,000 10,368 13,786 18,320
9 25,842 150,000 150,000 150,000 11,520 15,822 21,770
10 29,478 150,000 150,000 150,000 12,640 17,938 25,575
11 33,295 150,000 150,000 150,000 13,815 20,252 29,928
12 37,303 150,000 150,000 150,000 14,957 22,663 34,748
13 41,512 150,000 150,000 150,000 16,058 25,170 40,083
14 45,931 150,000 150,000 150,000 17,101 27,761 45,978
15 50,572 150,000 150,000 150,000 18,101 30,459 52,515
16 55,444 150,000 150,000 150,000 19,001 33,213 59,723
17 60,559 150,000 150,000 150,000 19,859 36,083 67,732
18 65,931 150,000 150,000 150,000 20,670 39,074 76,635
19 71,571 150,000 150,000 150,000 21,448 42,203 86,547
20 77,493 150,000 150,000 150,000 22,192 45,480 97,591
</TABLE>
<TABLE>
<CAPTION>
Death Benefit Option: Level
- ------------------------------------------------
Cash Surrender Value
Assuming Hypothetical Gross
Annual Investment Return of
- ----------------------------------------------
0 % Gross 6 % Gross 12% Gross
(-0.89% Net) (5.11% Net) (11.11% Net)
- ------------- ------------ -------------
<S> <C> <C>
0 0 0
147 429 723
1,538 2,096 2,703
2,886 3,816 4,867
4,617 6,018 7,663
6,281 8,251 10,660
7,930 10,571 13,935
9,540 12,957 17,492
11,093 15,395 21,344
12,640 17,938 25,575
13,815 20,252 29,928
14,957 22,663 34,748
16,058 25,170 40,083
17,101 27,761 45,978
18,101 30,459 52,515
19,001 33,213 59,723
19,859 36,083 67,732
20,670 39,074 76,635
21,448 42,203 86,547
22,192 45,480 97,591
</TABLE>
The hypothetical investment rates of return shown in this illustration are for
illustrative purposes only and should not be deemed a representation of past or
future investment rates of return. Actual rates of return may be more or less
than those shown and will depend on a number of factors including the investment
performance of the subaccounts selected by the policyowner.
The Death Proceeds, Accumulation Value and Cash Surrender Value for a policy
would differ from those shown in this illustration if the actual gross annual
rates of return averaged 0.00%, 6.00% and 12.00% over a period of years, but
also fluctuated above or below those averages for individual policy years. The
Death Proceeds, Accumulation Value and Cash Surrender Value would also be
different if any policy loans or partial surrenders were made.
No representation can be made by BMA, the separate account or the underlying
portfolios that these hypothetical rates of return can be achieved for any one
year or sustained over a period of time.
VERSION B
ILLUSTRATION OF POLICY VALUES
In order to show You how the Policy works, We created some hypothetical
examples. We chose two males ages 45 and 55 and a female age 50. Our
hypothetical insureds are in good health, do not smoke and qualify for preferred
non-tobacco rates. The initial and Planned Premiums are shown in the upper
portion of each illustration. The Death Proceeds, Accumulation Values and Cash
Surrender Values would be lower if the Primary Insured was in a standard
non-tobacco, tobacco or special Rate Class since the cost of insurance charges
would increase.
There are three illustrations--all of which are based on the above. We also
assumed that the underlying Investment Option had gross rates of return of 0%,
6%, 12%. This means that the underlying Investment Option would earn these rates
of return before the deduction of the operating expenses (including the
management fees). When these costs are taken into account, the net annual
investment return rates (net of an average of approximately .96% for these
charges) are approximately -.96%, 5.04% and 11.04%.
It is important to be aware that this illustration assumes a level rate of
return for all years. If the actual rate of return moves up and down over the
years instead of remaining level, this may make a big difference in the
long-term investment results of Your Policy. In order to properly show You how
the Policy actually works, We calculated values for the Accumulation Value, Cash
Surrender Value and the Death Proceeds. The Death Proceeds are the Death Benefit
minus any outstanding loans and loan interest accrued.
We used the charges We described in the Expenses Section of the Prospectus.
These charges are: (1) Premium Charge; (2) Policy Charge; and (3) Risk Charge.
We also deducted for the cost of insurance based on both the current charges and
the guaranteed charges. The values also assume that each Investment Option will
incur expenses annually which are assumed to be approximately .96% of the
average net assets of the Investment Option. This is the average of the fees and
expenses of the Investment Options in 1998. The expenses of .96% reflect the
voluntary waiver of certain advisory fees and/or the reimbursement of operating
expenses for certain Investment Options (as noted under Expenses--Investment
Option Expenses in Part I of this prospectus). If the advisory fees had not been
waived and/or if expenses had not been reimbursed, the average expenses would
have been approximately 2.28%. The investment advisers currently anticipate that
the current waiver and/or reimbursement arrangements will continue through at
least May 1, 2000 to the extent necessary to maintain competitive total annual
portfolio expense levels as described under Expenses--Investment Option
Expenses. However, certain advisers have the right to terminate waivers and/or
reimbursements at any time at their sole discretion. If the waiver and/or
reimbursement arrangements were not in effect, the Death Proceeds, Accumulation
Values and the Cash Surrender Values shown in the illustrations below would be
lower. The illustration assumes no loans were taken.
There is also a column labeled "Premiums Accumulated at 5% Interest Per
Year." This shows how the Premium grows if it was invested at 5% per year.
We will furnish You, upon request, a comparable personalized illustration
reflecting the proposed insured's Age, Rate Class, Specified Amount, the Planned
Premiums, and reflecting both the current cost of insurance and the guaranteed
cost of insurance.
<TABLE>
<CAPTION>
BMA
Advantage VUL Variable Universal Life
Male Age 45 Preferred Non-Tobacco Initial Specified Amount: $150,000
Planned Premium: $1,980 Assuming Guaranteed Charges
- --------------------------------------------------------- ------------------------------------------------------------------- ------
Premiums
End of Accumulated
Policy at 5% Death Proceeds Accumulation Value
Year Interest Per Assuming Hypothetical Gross Assuming Hypothetical Gross
Year Annual Investment Return of Annual Investment Return of
- --------- -------------- ----------------------------------------------- -----------------------------------------------
0 % Gross 6 % Gross 12% Gross 0 % Gross 6 % Gross 12% Gross
(-0.96%Net) (5.04%Net) (11.04%Net) (-0.96%Net) (5.04%Net) (11.04%Net)
- --------- -------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 2,079 150,000 150,000 150,000 1,054 1,140 1,226
2 4,262 150,000 150,000 150,000 2,231 2,475 2,730
3 6,554 150,000 150,000 150,000 3,351 3,828 4,347
4 8,961 150,000 150,000 150,000 4,410 5,198 6,089
5 11,488 150,000 150,000 150,000 5,405 6,579 7,963
6 14,141 150,000 150,000 150,000 6,335 7,972 9,982
7 16,927 150,000 150,000 150,000 7,190 9,367 12,152
8 19,853 150,000 150,000 150,000 7,963 10,755 14,483
9 22,924 150,000 150,000 150,000 8,648 12,130 16,985
10 26,149 150,000 150,000 150,000 9,233 13,479 19,667
11 29,536 150,000 150,000 150,000 9,780 14,887 22,670
12 33,092 150,000 150,000 150,000 10,213 16,260 25,909
13 36,825 150,000 150,000 150,000 10,523 17,591 29,412
14 40,746 150,000 150,000 150,000 10,703 18,871 33,206
15 44,862 150,000 150,000 150,000 10,737 20,084 37,318
16 49,184 150,000 150,000 150,000 10,608 21,211 41,781
17 53,722 150,000 150,000 150,000 10,298 22,234 46,634
18 58,487 150,000 150,000 150,000 9,780 23,124 51,919
19 63,491 150,000 150,000 150,000 9,023 23,848 57,683
20 68,744 150,000 150,000 150,000 7,991 24,370 63,988
</TABLE>
<TABLE>
<CAPTION>
Death Benefit Option: Level
- ------------------------------------------------
Cash Surrender Value
Assuming Hypothetical Gross
Annual Investment Return of
- ----------------------------------------------
0 % Gross 6 % Gross 12% Gross
(-0.96%Net) (5.04%Net) (11.04%Net)
- ------------- ------------ -------------
<S> <C> <C>
0 0 0
0 0 255
876 1,353 1,872
1,935 2,723 3,614
3,351 4,525 5,909
4,676 6,314 8,324
5,953 8,129 10,915
7,147 9,938 13,666
8,227 11,709 16,564
9,233 13,479 19,667
9,780 14,887 22,670
10,213 16,260 25,909
10,523 17,591 29,412
10,703 18,871 33,206
10,737 20,084 37,318
10,608 21,211 41,781
10,298 22,234 46,634
9,780 23,124 51,919
9,023 23,848 57,683
7,991 24,370 63,988
</TABLE>
The hypothetical investment rates of return shown in this illustration are for
illustrative purposes only and should not be deemed a representation of past or
future investment rates of return. Actual rates of return may be more or less
than those shown and will depend on a number of factors including the investment
performance of the subaccounts selected by the policyowner.
The Death Proceeds, Accumulation Value and Cash Surrender Value for a policy
would differ from those shown in this illustration if the actual gross annual
rates of return averaged 0.00%, 6.00% and 12.00% over a period of years, but
also fluctuated above or below those averages for individual policy years. The
Death Proceeds, Accumulation Value and Cash Surrender Value would also be
different if any policy loans or partial surrenders were made.
No representation can be made by BMA, the separate account or the underlying
portfolios that these hypothetical rates of return can be achieved for any one
year or sustained over a period of time.
<TABLE>
<CAPTION>
BMA
Advantage VUL Variable Universal Life
Male Age 45 Preferred Non-Tobacco Initial Specified Amount: $150,000
Planned Premium: $1,980 Assuming Current Charges
- --------------------------------------------------------- ------------------------------------------------------------------- ------
Premiums
End of Accumulated
Policy at 5% Death Proceeds Accumulation Value
Year Interest Per Assuming Hypothetical Gross Assuming Hypothetical Gross
Year Annual Investment Return of Annual Investment Return of
- --------- -------------- ----------------------------------------------- -----------------------------------------------
0 % Gross 6 % Gross 12% Gross 0 % Gross 6 % Gross 12% Gross
(-0.96%Net) (5.04%Net) (11.04%Net) (-0.96%Net) (5.04%Net) (11.04%Net)
- --------- -------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 2,079 150,000 150,000 150,000 1,078 1,165 1,252
2 4,262 150,000 150,000 150,000 2,359 2,608 2,869
3 6,554 150,000 150,000 150,000 3,599 4,094 4,631
4 8,961 150,000 150,000 150,000 4,799 5,624 6,555
5 11,488 150,000 150,000 150,000 5,959 7,200 8,658
6 14,141 150,000 150,000 150,000 7,081 8,826 10,960
7 16,927 150,000 150,000 150,000 8,161 10,501 13,479
8 19,853 150,000 150,000 150,000 9,200 12,226 16,238
9 22,924 150,000 150,000 150,000 10,196 14,001 19,260
10 26,149 150,000 150,000 150,000 11,144 15,825 22,570
11 29,536 150,000 150,000 150,000 12,121 17,800 26,336
12 33,092 150,000 150,000 150,000 13,045 19,834 30,482
13 36,825 150,000 150,000 150,000 13,911 21,922 35,044
14 40,746 150,000 150,000 150,000 14,720 24,072 40,075
15 44,862 150,000 150,000 150,000 15,468 26,283 45,627
16 49,184 150,000 150,000 150,000 16,090 28,497 51,711
17 53,722 150,000 150,000 150,000 16,642 30,769 58,440
18 58,487 150,000 150,000 150,000 17,130 33,110 65,898
19 63,491 150,000 150,000 150,000 17,545 35,516 74,172
20 68,744 150,000 150,000 150,000 17,885 37,991 83,363
</TABLE>
<TABLE>
<CAPTION>
Death Benefit Option: Level
- ------------------------------------------------
Cash Surrender Value
Assuming Hypothetical Gross
Annual Investment Return of
- ----------------------------------------------
0 % Gross 6 % Gross 12% Gross
(-0.96%Net) (5.04%Net) (11.04%Net)
- ------------- ------------ -------------
<S> <C> <C>
0 0 0
0 133 394
1,124 1,619 2,156
2,324 3,149 4,080
3,905 5,146 6,604
5,423 7,168 9,301
6,924 9,263 12,241
8,384 11,409 15,421
9,775 13,580 18,839
11,144 15,825 22,570
12,121 17,800 26,336
13,045 19,834 30,482
13,911 21,922 35,044
14,720 24,072 40,075
15,468 26,283 45,627
16,090 28,497 51,711
16,642 30,769 58,440
17,130 33,110 65,898
17,545 35,516 74,172
17,885 37,991 83,363
</TABLE>
The hypothetical investment rates of return shown in this illustration are for
illustrative purposes only and should not be deemed a representation of past or
future investment rates of return. Actual rates of return may be more or less
than those shown and will depend on a number of factors including the investment
performance of the subaccounts selected by the policyowner.
The Death Proceeds, Accumulation Value and Cash Surrender Value for a policy
would differ from those shown in this illustration if the actual gross annual
rates of return averaged 0.00%, 6.00% and 12.00% over a period of years, but
also fluctuated above or below those averages for individual policy years. The
Death Proceeds, Accumulation Value and Cash Surrender Value would also be
different if any policy loans or partial surrenders were made.
No representation can be made by BMA, the separate account or the underlying
portfolios that these hypothetical rates of return can be achieved for any one
year or sustained over a period of time.
<TABLE>
<CAPTION>
BMA
Advantage VUL Variable Universal Life
Male Age 55 Preferred Non-Tobacco Initial Specified Amount: $150,000
Planned Premium: $3,654 Assuming Guaranteed Charges
- --------------------------------------------------------- ------------------------------------------------------------------- ------
Premiums
End of Accumulated
Policy at 5% Death Proceeds Accumulation Value
Year Interest Per Assuming Hypothetical Gross Assuming Hypothetical Gross
Year Annual Investment Return of Annual Investment Return of
- --------- -------------- ----------------------------------------------- -----------------------------------------------
0 % Gross 6 % Gross 12% Gross 0 % Gross 6 % Gross 12% Gross
(-0.96%Net) (5.04%Net) (11.04%Net) (-0.96%Net) (5.04%Net) (11.04%Net)
- --------- -------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 3,837 150,000 150,000 150,000 1,955 2,114 2,275
2 7,865 150,000 150,000 150,000 3,952 4,398 4,866
3 12,095 150,000 150,000 150,000 5,808 6,673 7,615
4 16,537 150,000 150,000 150,000 7,517 8,930 10,535
5 21,200 150,000 150,000 150,000 9,067 11,157 13,633
6 26,097 150,000 150,000 150,000 10,445 13,340 16,918
7 31,238 150,000 150,000 150,000 11,636 15,463 20,403
8 36,637 150,000 150,000 150,000 12,621 17,505 24,097
9 42,306 150,000 150,000 150,000 13,374 19,436 28,007
10 48,258 150,000 150,000 150,000 13,866 21,229 32,147
11 54,507 150,000 150,000 150,000 14,189 23,011 36,750
12 61,069 150,000 150,000 150,000 14,205 24,619 41,682
13 67,959 150,000 150,000 150,000 13,884 26,022 46,989
14 75,194 150,000 150,000 150,000 13,194 27,189 52,729
15 82,790 150,000 150,000 150,000 12,092 28,076 58,972
16 90,767 150,000 150,000 150,000 10,509 28,619 65,791
17 99,142 150,000 150,000 150,000 8,275 28,659 73,230
18 107,936 150,000 150,000 150,000 5,444 28,230 81,500
19 117,169 150,000 150,000 150,000 1,786 27,124 90,711
20 126,864 Lapse 150,000 150,000 Lapse 25,179 101,078
</TABLE>
<TABLE>
<CAPTION>
Death Benefit Option: Level
- ------------------------------------------------
Cash Surrender Value
Assuming Hypothetical Gross
Annual Investment Return of
- ----------------------------------------------
0 % Gross 6 % Gross 12% Gross
(-0.96%Net) (5.04%Net) (11.04%Net)
- ------------- ------------ -------------
<S> <C> <C>
0 0 0
298 744 1,212
2,154 3,019 3,961
3,863 5,276 6,881
6,034 8,124 10,600
7,996 10,892 14,470
9,809 13,636 18,576
11,415 16,299 22,891
12,752 18,815 27,386
13,866 21,229 32,147
14,189 23,011 36,750
14,205 24,619 41,682
13,884 26,022 46,989
13,194 27,189 52,729
12,092 28,076 58,972
10,509 28,619 65,791
8,275 28,659 73,230
5,444 28,230 81,500
1,786 27,124 90,711
Lapse 25,179 101,078
</TABLE>
The hypothetical investment rates of return shown in this illustration are for
illustrative purposes only and should not be deemed a representation of past or
future investment rates of return. Actual rates of return may be more or less
than those shown and will depend on a number of factors including the investment
performance of the subaccounts selected by the policyowner.
The Death Proceeds, Accumulation Value and Cash Surrender Value for a policy
would differ from those shown in this illustration if the actual gross annual
rates of return averaged 0.00%, 6.00% and 12.00% over a period of years, but
also fluctuated above or below those averages for individual policy years. The
Death Proceeds, Accumulation Value and Cash Surrender Value would also be
different if any policy loans or partial surrenders were made.
No representation can be made by BMA, the separate account or the underlying
portfolios that these hypothetical rates of return can be achieved for any one
year or sustained over a period of time.
<TABLE>
<CAPTION>
BMA
Advantage VUL Variable Universal Life
Male Age 55 Preferred Non-Tobacco Initial Specified Amount: $150,000
Planned Premium: $3,654 Assuming Current Charges
- --------------------------------------------------------- ------------------------------------------------------------------- ------
Premiums
End of Accumulated
Policy at 5% Death Proceeds Accumulation Value
Year Interest Per Assuming Hypothetical Gross Assuming Hypothetical Gross
Year Annual Investment Return of Annual Investment Return of
- --------- -------------- ----------------------------------------------- -----------------------------------------------
0 % Gross 6 % Gross 12% Gross 0 % Gross 6 % Gross 12% Gross
(-0.96%Net) (5.04%Net) (11.04%Net) (-0.96%Net) (5.04%Net) (11.04%Net)
- --------- -------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 3,837 150,000 150,000 150,000 2,261 2,430 2,600
2 7,865 150,000 150,000 150,000 4,672 5,160 5,669
3 12,095 150,000 150,000 150,000 6,992 7,957 9,005
4 16,537 150,000 150,000 150,000 9,223 10,825 12,636
5 21,200 150,000 150,000 150,000 11,358 13,762 16,591
6 26,097 150,000 150,000 150,000 13,400 16,774 20,907
7 31,238 150,000 150,000 150,000 15,343 19,857 25,621
8 36,637 150,000 150,000 150,000 17,185 23,015 30,779
9 42,306 150,000 150,000 150,000 18,918 26,245 36,425
10 48,258 150,000 150,000 150,000 20,529 29,539 42,610
11 54,507 150,000 150,000 150,000 22,137 33,071 49,642
12 61,069 150,000 150,000 150,000 23,631 36,707 57,424
13 67,959 150,000 150,000 150,000 25,010 40,457 66,058
14 75,194 150,000 150,000 150,000 26,270 44,329 75,661
15 82,790 150,000 150,000 150,000 27,393 48,319 86,357
16 90,767 150,000 150,000 150,000 28,070 52,185 98,155
17 99,142 150,000 150,000 150,000 28,551 56,147 111,385
18 107,936 150,000 150,000 150,000 28,868 60,253 126,289
19 117,169 150,000 150,000 155,988 29,007 64,512 143,108
20 126,864 150,000 150,000 173,133 28,929 68,924 161,807
</TABLE>
<TABLE>
<CAPTION>
Death Benefit Option: Level
- ------------------------------------------------
Cash Surrender Value
Assuming Hypothetical Gross
Annual Investment Return of
- ----------------------------------------------
0 % Gross 6 % Gross 12% Gross
(-0.96%Net) (5.04%Net) (11.04%Net)
- ------------- ------------ -------------
<S> <C> <C>
0 0 0
1,018 1,506 2,015
3,338 4,303 5,351
5,569 7,171 8,982
8,325 10,729 13,558
10,952 14,326 18,459
13,516 18,030 23,794
15,979 21,809 29,573
18,297 25,623 35,804
20,529 29,539 42,610
22,137 33,071 49,642
23,631 36,707 57,424
25,010 40,457 66,058
26,270 44,329 75,661
27,393 48,319 86,357
28,070 52,185 98,155
28,551 56,147 111,385
28,868 60,253 126,289
29,007 64,512 143,108
28,929 68,924 161,807
</TABLE>
The hypothetical investment rates of return shown in this illustration are for
illustrative purposes only and should not be deemed a representation of past or
future investment rates of return. Actual rates of return may be more or less
than those shown and will depend on a number of factors including the investment
performance of the subaccounts selected by the policyowner.
The Death Proceeds, Accumulation Value and Cash Surrender Value for a policy
would differ from those shown in this illustration if the actual gross annual
rates of return averaged 0.00%, 6.00% and 12.00% over a period of years, but
also fluctuated above or below those averages for individual policy years. The
Death Proceeds, Accumulation Value and Cash Surrender Value would also be
different if any policy loans or partial surrenders were made.
No representation can be made by BMA, the separate account or the underlying
portfolios that these hypothetical rates of return can be achieved for any one
year or sustained over a period of time.
<TABLE>
<CAPTION>
BMA
Advantage VUL Variable Universal Life
Female Age 50 Preferred Non-Tobacco Initial Specified Amount: $150,000
Planned Premium: $2,232 Assuming guaranteed Charges
- --------------------------------------------------------- ------------------------------------------------------------------- ------
Premiums
End of Accumulated
Policy at 5% Death Proceeds Accumulation Value
Year Interest Per Assuming Hypothetical Gross Assuming Hypothetical Gross
Year Annual Investment Return of Annual Investment Return of
- --------- -------------- ----------------------------------------------- -----------------------------------------------
0 % Gross 6 % Gross 12% Gross 0 % Gross 6 % Gross 12% Gross
(-0.96%Net) (5.04%Net) (11.04%Net) (-0.96%Net) (5.04%Net) (11.04%Net)
- --------- -------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 2,344 150,000 150,000 150,000 1,160 1,257 1,353
2 4,804 150,000 150,000 150,000 2,439 2,709 2,992
3 7,388 150,000 150,000 150,000 3,649 4,178 4,752
4 10,101 150,000 150,000 150,000 4,786 5,654 6,638
5 12,950 150,000 150,000 150,000 5,848 7,140 8,664
6 15,941 150,000 150,000 150,000 6,835 8,632 10,842
7 19,082 150,000 150,000 150,000 7,744 10,130 13,189
8 22,379 150,000 150,000 150,000 8,580 11,636 15,726
9 25,842 150,000 150,000 150,000 9,345 13,154 18,478
10 29,478 150,000 150,000 150,000 10,037 14,683 21,469
11 33,295 150,000 150,000 150,000 10,726 16,317 24,856
12 37,303 150,000 150,000 150,000 11,321 17,952 28,549
13 41,512 150,000 150,000 150,000 11,800 19,568 32,567
14 45,931 150,000 150,000 150,000 12,136 21,138 36,930
15 50,572 150,000 150,000 150,000 12,304 22,639 41,666
16 55,444 150,000 150,000 150,000 12,290 24,056 46,820
17 60,559 150,000 150,000 150,000 12,081 25,375 52,448
18 65,931 150,000 150,000 150,000 11,672 26,592 58,621
19 71,571 150,000 150,000 150,000 11,060 27,702 65,427
20 77,493 150,000 150,000 150,000 10,228 28,688 72,956
</TABLE>
<TABLE>
<CAPTION>
Death Benefit Option: Level
- ------------------------------------------------
Cash Surrender Value
Assuming Hypothetical Gross
Annual Investment Return of
- ----------------------------------------------
0 % Gross 6 % Gross 12% Gross
(-0.96%Net) (5.04%Net) (11.04%Net)
- ------------- ------------ -------------
<S> <C> <C>
0 0 0
0 198 481
1,138 1,667 2,241
2,275 3,143 4,127
3,764 5,056 6,580
5,152 6,949 9,159
6,489 8,874 11,933
7,751 10,807 14,897
8,918 12,728 18,052
10,037 14,683 21,469
10,726 16,317 24,856
11,321 17,952 28,549
11,800 19,568 32,567
12,136 21,138 36,930
12,304 22,639 41,666
12,290 24,056 46,820
12,081 25,375 52,448
11,672 26,592 58,621
11,060 27,702 65,427
10,228 28,688 72,956
</TABLE>
The hypothetical investment rates of return shown in this illustration are for
illustrative purposes only and should not be deemed a representation of past or
future investment rates of return. Actual rates of return may be more or less
than those shown and will depend on a number of factors including the investment
performance of the subaccounts selected by the policyowner.
The Death Proceeds, Accumulation Value and Cash Surrender Value for a policy
would differ from those shown in this illustration if the actual gross annual
rates of return averaged 0.00%, 6.00% and 12.00% over a period of years, but
also fluctuated above or below those averages for individual policy years. The
Death Proceeds, Accumulation Value and Cash Surrender Value would also be
different if any policy loans or partial surrenders were made.
No representation can be made by BMA, the separate account or the underlying
portfolios that these hypothetical rates of return can be achieved for any one
year or sustained over a period of time.
<TABLE>
<CAPTION>
BMA
Advantage VUL Variable Universal Life
Female Age 50 Preferred Non-Tobacco Initial Specified Amount: $150,000
Planned Premium: $2,232 Assuming Current Charges
- --------------------------------------------------------- ------------------------------------------------------------------- ------
Premiums
End of Accumulated
Policy at 5% Death Proceeds Accumulation Value
Year Interest Per Assuming Hypothetical Gross Assuming Hypothetical Gross
Year Annual Investment Return of Annual Investment Return of
- --------- -------------- ----------------------------------------------- -----------------------------------------------
0 % Gross 6 % Gross 12% Gross 0 % Gross 6 % Gross 12% Gross
(-0.96%Net) (5.04%Net) (11.04%Net) (-0.96%Net) (5.04%Net) (11.04%Net)
- --------- -------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 2,344 150,000 150,000 150,000 1,227 1,325 1,424
2 4,804 150,000 150,000 150,000 2,655 2,937 3,231
3 7,388 150,000 150,000 150,000 4,042 4,600 5,206
4 10,101 150,000 150,000 150,000 5,386 6,316 7,365
5 12,950 150,000 150,000 150,000 6,686 8,084 9,726
6 15,941 150,000 150,000 150,000 7,943 9,908 12,312
7 19,082 150,000 150,000 150,000 9,158 11,792 15,147
8 22,379 150,000 150,000 150,000 10,334 13,740 18,260
9 25,842 150,000 150,000 150,000 11,478 15,764 21,689
10 29,478 150,000 150,000 150,000 12,589 17,864 25,468
11 33,295 150,000 150,000 150,000 13,755 20,160 29,791
12 37,303 150,000 150,000 150,000 14,886 22,552 34,573
13 41,512 150,000 150,000 150,000 15,976 25,036 39,863
14 45,931 150,000 150,000 150,000 17,007 27,601 45,704
15 50,572 150,000 150,000 150,000 17,995 30,269 52,177
16 55,444 150,000 150,000 150,000 18,882 32,991 59,309
17 60,559 150,000 150,000 150,000 19,726 35,825 67,227
18 65,931 150,000 150,000 150,000 20,523 38,775 76,023
19 71,571 150,000 150,000 150,000 21,286 41,859 85,810
20 77,493 150,000 150,000 150,000 22,015 45,087 96,708
</TABLE>
<TABLE>
<CAPTION>
Death Benefit Option: Level
- ------------------------------------------------
Cash Surrender Value
Assuming Hypothetical Gross
Annual Investment Return of
- ----------------------------------------------
0 % Gross 6 % Gross 12% Gross
(-0.96%Net) (5.04%Net) (11.04%Net)
- ------------- ------------ -------------
<S> <C> <C>
0 0 0
144 426 720
1,531 2,089 2,695
2,875 3,805 4,854
4,602 6,000 7,642
6,261 8,226 10,629
7,903 10,537 13,891
9,505 12,912 17,431
11,051 15,337 21,263
12,589 17,864 25,468
13,755 20,160 29,791
14,886 22,552 34,573
15,976 25,036 39,863
17,007 27,601 45,704
17,955 30,269 52,177
18,882 32,991 59,309
19,726 35,825 67,227
20,523 38,775 76,023
21,286 41,859 85,810
22,015 45,087 96,708
</TABLE>
The hypothetical investment rates of return shown in this illustration are for
illustrative purposes only and should not be deemed a representation of past or
future investment rates of return. Actual rates of return may be more or less
than those shown and will depend on a number of factors including the investment
performance of the subaccounts selected by the policyowner.
The Death Proceeds, Accumulation Value and Cash Surrender Value for a policy
would differ from those shown in this illustration if the actual gross annual
rates of return averaged 0.00%, 6.00% and 12.00% over a period of years, but
also fluctuated above or below those averages for individual policy years. The
Death Proceeds, Accumulation Value and Cash Surrender Value would also be
different if any policy loans or partial surrenders were made.
No representation can be made by BMA, the separate account or the underlying
portfolios that these hypothetical rates of return can be achieved for any one
year or sustained over a period of time.
APPENDIX B - RATES OF RETURN
From time to time, We may report different types of historical performance for
the Investment Options available under the Policy. We may report the average
annual total returns of the funds over various time periods. Such returns will
reflect the operating expenses (including management fees) of the funds, but not
deductions at the Separate Account or Policy level for Risk Charges and Policy
expenses, which, if included, would reduce performance. See Section 4. Expenses
for a discussion of the charges and deductions from a Policy.
At the request of a purchaser, BMA will accompany the returns of the funds with
at least one of the following: (i) returns, for the same periods as shown for
the funds, which include deductions under the Separate Account for the Risk
Charge in addition to the deductions of fund expenses, but does not include
other charges under the Policy; or (ii) an illustration of Accumulation Values
and Cash Surrender Values as of the performance reporting date for a
hypothetical Insured of given age, gender, risk classification, premium level
and initial Specified Amount. The illustration will be based either on actual
historic fund performance or on a hypothetical investment return between 0% and
12% as requested by the purchaser. The Cash Surrender Value figures will assume
all fund charges, the Risk Charge, and all other Policy charges are deducted.
The Accumulation Value figures will assume all charges except the Surrender
Charges are deducted.
We also may distribute sales literature comparing the percentage change in the
net asset values of the funds or in the Accumulation Unit Values for any of the
Investment Options to established market indices, such as the Standard & Poor's
500 Composite Stock Price Index and the Dow Jones Industrial Average. We also
may make comparisons to the percentage change in values of other mutual funds
with investment objectives similar to those of the Investment Options being
compared.
The chart below shows the Effective Annual Rates of Return of the funds based on
the actual investment performance (after deduction of investment management fees
and direct operating expenses of the funds). These rates do not reflect the Risk
Charge assessed. The rates do not reflect deductions from premiums or Monthly
Deductions assessed against the Accumulation Value of the Policy, nor do they
reflect the Policy's Surrender Charges. (For a discussion of these charges,
please see Section 4. - Expenses.) Therefore, these rates are not illustrative
of how actual investment performance will affect the benefits under the Policy
(see, however, Appendix A - Illustration of Policy Values).
The rates of return shown are not indicative of future performance. These rates
of return may be considered, however, in assessing the competence and
performance of the investment advisers.
<TABLE>
<CAPTION>
PORTFOLIO
INCEPTION 10 YEARS/
INVESTMENT OPTION DATE 1 YEAR 5 YEARS SINCE INCEPTION
- ----------------- ---- ------ ------- ---------------
INVESTORS MARK SERIES FUND, INC.
<S> <C> <C> <C> <C>
Intermediate Fixed Income 11/13/97 5.16% N/A 5.72%
Mid Cap Equity 11/13/97 7.03% N/A 10.94%
Money Market 11/13/97 5.05% N/A 5.11%
Global Fixed Income 11/13/97 7.23% N/A 7.95%
Small Cap Equity 11/13/97 -16.22% N/A -16.60%
Large Cap Growth 11/13/97 24.35% N/A 28.22%
Large Cap Value 12/2/97 5.03% N/A 1.71%
Growth & Income 11/12/97 12.03% N/A 14.67%
Balanced 11/17/97 -6.03% N/A -5.24%
BERGER INSTITUTIONAL PRODUCTS TRUST
Berger IPT-100 5/1/96 16.29% N/A 12.65%
Berger IPT--Growth and Income 5/1/96 25.03% N/A 23.08%
Berger IPT--Small Company Growth 5/1/96 1.87% N/A 8.01%
Berger/BIAM IPT - International 8/1/97 16.13% N/A 7.99%
CONSECO SERIES TRUST
Balanced 5/1/87 10.37% 16.90% 14.15%
Equity 8/20/84 15.62% 22.57% 18.26%
Fixed Income 5/1/93 6.17% 7.11% 7.34%
Government Securities 10/19/83 7.07% 6.32% 8.40%
THE ALGER AMERICAN FUND
Alger American Growth 1/9/89 48.07% 23.90% 22.03%
Alger American Leveraged AllCap 1/25/95 57.83% N/A 39.34%
Alger American MidCap Growth 5/3/93 30.30% 18.98% 23.50%
Alger American Small
Capitalization 9/21/88 15.53% 13.09% 19.85%
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
VP Income & Growth 10/30/97 26.87% N/A 30.68%
VP International 5/1/94 18.76% N/A 12.30%
VP Value 5/1/96 4.81% N/A 15.94%
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH
FUND, INC. 10/7/93 29.38% N/A 23.01%
DREYFUS STOCK INDEX FUND 9/29/89 28.21% 23.58% 17.12%
DREYFUS VARIABLE INVESTMENT FUND
Disciplined Stock 5/1/96 26.72% N/A 29.18%
International Value 5/1/96 8.74% N/A 7.81%
FEDERATED INSURANCE SERIES
Federated High Income Bond II 3/1/94 2.70% N/A 9.49%
Federated International Equity II 5/8/95 25.57% N/A 12.75%
Federated Utility II 2/10/94 13.95% N/A 14.42%
INVESCO VARIABLE INVESTMENT FUNDS, INC.
INVESCO VIF - High Yield 5/27/94 1.42% N/A 11.82%
INVESCO VIF - Equity Income 8/10/94 15.30% N/A 21.63%
LAZARD RETIREMENT SERIES, INC.
Lazard Retirement Equity 3/19/98 N/A N/A 10.89%
Lazard Retirement Small Cap 11/4/97 -3.22% N/A -3.99%
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST
Limited Maturity Bond 9/10/84 4.39% 5.18% 6.79%
Partners 3/22/94 4.21% N/A 19.71%
STRONG OPPORTUNITY FUND II, INC.
Opportunity Fund II 5/8/92 13.54% 17.01% 19.06%
STRONG VARIABLE INSURANCE FUNDS, INC.
Growth Fund II 12/31/96 28.68% N/A 29.21%
VAN ECK WORLDWIDE INSURANCE TRUST
Worldwide Bond 9/1/89 12.75% 6.50% 6.85%
Worldwide Emerging Markets 12/27/95 -34.15% N/A -9.89%
Worldwide Hard Assets 9/1/89 -30.93% -3.26% 2.10%
Worldwide Real Estate 6/23/97 -11.35% N/A 3.92%
</TABLE>
The figures shown in this chart do not reflect any charges at the Separate
Account or the Policy level.
PART II
UNDERTAKING TO FILE REPORTS
a. Subject to the terms and conditions of Section 15(d) of the Securities and
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 confined in that section.
b. Pursuant to Investment Company Act Section 26(e), Business Men's Assurance
Company of America ("Company") hereby represents that the fees and charges
deducted under the Policy described in the Prospectus, in the aggregate, are
reasonable in relation to the services rendered, the expenses expected to be
incurred, and the risks assumed by the Company.
INDEMNIFICATION
The Bylaws of the Company (Article IV) provide that:
Section 1: Indemnification. Each person who is or was a Director, officer or
employee of the Corporation or is or was serving at the request of the
Corporation as a Director, officer or employee of another corporation,
partnership, joint venture, trust or other enterprise (including the heirs,
executors, administrators or estate of such person) shall be indemnified by the
Corporation as a right to the full extent permitted or authorized by the laws of
the State of Missouri, as now in effect and as hereafter amended, against any
liability, judgment, fine, amount paid in settlement, cost and expense
(including attorneys' fees) asserted or threatened against and incurred by such
person in his capacity as or arising out of his status as a Director, officer or
employee of the Corporation, or if serving at the request of the Corporation, as
a Director, officer or employee of another corporation, partnership, joint
venture, trust or other enterprise. The indemnification provided by this Bylaw
provision shall not be exclusive of any other rights to which those indemnified
may be entitled under any other bylaw or under any agreement, vote of
shareholders or disinterested directors or otherwise, and shall not limit in any
way any right which the Corporation may have to make different or further
indemnifications with respect to the same or different persons or classes of
persons.
Without limiting the foregoing, the Corporation is authorized to enter into an
agreement with any Director, officer or employee of the Corporation providing
indemnification for such person against expenses, including attorneys' fees,
judgments, fines and amounts paid in settlement that result from any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, including any action by or in the right of the
Corporation, that arises by reason of the fact that such person is or was a
Director, officer or employee of the Corporation, or is or was serving at the
request of the Corporation as a Director, officer or employee of another
corporation, partnership, joint venture, trust or other enterprise, to the full
extent allowed by law, whether or not such indemnification would otherwise be
provided for in this Bylaw, except that no such agreement shall indemnify any
person from or on account of such person's conduct which was finally adjudged to
have been knowingly fraudulent, deliberately dishonest or willful misconduct.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted for directors and officers or controlling persons of the
Company pursuant to the foregoing, or otherwise, the Company 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, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Company of expenses incurred or paid
by a director, officer or controlling person of the Company 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
Company 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.
CONTENTS OF REGISTRATION STATEMENT
The Registration Statement comprises the papers and documents:
The facing sheet
The Prospectus consisting of 100 pages.
Undertakings to file reports.
The signatures.
Written consents of the following persons: Consent of Actuary
Consent of Counsel
Consent of Independent Auditors
The following exhibits.
A. Copies of all exhibits required by paragraph A of instructions for
Exhibits in Form N-8B-2.
1. Resolution of the Board of Directors of the Company*
2. Not Applicable
3.a. Form of Co-Principal Underwriters' Agreement**
3.b. Form of Selling Agreements**
3.c. Schedule of Commissions**
4. Not Applicable
5. Flexible Premium Adjustable Variable Life Insurance Policy*
6.a. Articles of Incorporation of the Company*
6.b. Bylaws of the Company*
7. Not Applicable
8. Form of Fund Participation Agreements**
9. Form of Reinsurance Agreement**
10. Application Form**
11. Powers of Attorney*
B. Opinion and Consent of Counsel
C. Consent of Actuary
D. Consent of Independent Auditors
*Incorporated by reference to Form S-6 (File No. 333-52689) electronically
filed on May 14, 1998.
**Incorporated by reference to Pre-Effective Amendment No. 1 (File No. 333-
52689) electronically filed on August 28, 1998.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it meets the requirements of Securities Act Rule 485(b) for
effectiveness of this registration statement and has duly caused this
registration statement to be signed on its behalf by the undersigned
thereunto duly authorized in the City of Kansas City and State of Missouri
on this 16th day of April, 1999.
BMA VARIABLE LIFE ACCOUNT A
Registrant
By: BUSINESS MEN'S ASSURANCE
COMPANY OF AMERICA
By: /S/ DAVID A. GATES
------------------------------
BUSINESS MEN'S ASSURANCE
COMPANY OF AMERICA
By: /S/ MICHAEL K. DEARDORFF
----------------------------
Attest:
/S/ MARGARET M. HEIDKAMP
- ----------------------------
(Name)
Vice President
- ----------------------------
Title
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed below by the following persons in the capacities and
on the dates indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
SIGNATURE TITLE DATE
- --------- ----- ----
Giorgio Balzer* Director, Chairman of the Board 4/16/99
- ------------------------- -------
Giorgio Balzer and Chief Executive Officer Date
Thomas Morton Bloch* Director 4/16/99
- ------------------------- -------
Thomas Morton Bloch Date
Gianguido Castagno* Director 4/16/99
- ------------------------- -------
Gianguido Castagno Date
William Thomas Grant II * Director 4/16/99
- ------------------------- -------
William Thomas Grant II Date
Donald Joyce Hall, Jr.* Director 4/16/99
- ------------------------- -------
Donald Joyce Hall, Jr. Date
Allan Drue Jennings* Director 4/16/99
- ------------------------- -------
Allan Drue Jennings Date
David Woods Kemper* Director 4/16/99
- ------------------------- -------
David Woods Kemper Date
Giorgio Liveris* Director 4/16/99
- ------------------------- -------
Giorgio Liveris Date
John Kessander Lundberg* Director 4/16/99
- ------------------------- -------
John Kessander Lundberg Date
John Pierre Mascotte* Director 4/16/99
- ------------------------- -------
John Pierre Mascotte Date
Giovanni Perissinotto* Director 4/16/99
- ------------------------- -------
Giovanni Perissinotto Date
/S/ ROBERT T. RAKICH Director, President and Chief 4/16/99
- ------------------------- -------
Robert Thomas Rakich Operating Officer Date
/S/ VERNON W. VOORHEES II Director, Senior Vice President - 4/16/99
- --------------------------- -------
Vernon Wirt Voorhees II Corporate Services & Secretary Date
/S/ DAVID L. HIGLEY Senior Vice President & Chief 4/15/99
- ------------------------- -------
David Lee Higley Financial Officer Date
/S/ SUSAN A. SWEENEY Vice President - Treasurer & 4/15/99
- ------------------------- -------
Susan Annette Sweeney Controller Date
</TABLE>
*By: /S/ VERNON W. VOORHEES II
--------------------
Attorney-in-Fact
*By: /S/ ROBERT T. RAKICH
--------------------
Attorney-in-Fact
INDEX TO EXHIBITS
EX-B Opinion and Consent of Counsel
EX-C Consent of Actuary
EX-D Consent of Independent Auditors
Blazzard, Grodd & Hasenauer, P.C.
943 Post Road East
Westport, CT 06880
(203) 226-7866
April 30, 1999
Board of Directors
Business Men's Assurance Company
of America
700 Karnes Boulevard
Kansas City, MO 64108
RE: Opinion of Counsel - BMA Variable Life Account A
Gentlemen:
You have requested our Opinion of Counsel in connection with the filing with the
Securities and Exchange Commission pursuant to the Securities Act of 1933, as
amended, of a Post-Effective Amendment to Form S-6 for the Flexible Premium
Adjustable Variable Life Insurance Policies to be issued by Business Men's
Assurance Company of America and its separate account, BMA Variable Life Account
A.
We have made such examination of the law and have examined such records and
documents as in our judgment are necessary or appropriate to enable us to render
the opinions expressed below.
We are of the following opinions:
1. BMA Variable Life Account A is a Unit Investment Trust as that term is
defined in Section 4(2) of the Investment Company Act of 1940 (the "Act"), and
is currently registered with the Securities and Exchange Commission, pursuant to
Section 8(a) of the Act.
2. Upon the acceptance of premiums paid by an Owner pursuant to a Policy
issued in accordance with the Prospectus contained in the Registration Statement
and upon compliance with applicable law, such an Owner will have a legally-
issued, fully paid, non-assessable contractual interest under such Policy.
You may use this opinion letter, or a copy thereof, as an exhibit to the
Registration Statement.
We consent to the reference to our Firm under the caption "Legal Opinions"
contained in the Prospectus which forms a part of the Registration Statement.
Sincerely,
BLAZZARD, GRODD & HASENAUER, P.C.
By: /S/ LYNN KORMAN STONE
-------------------------
Lynn Korman Stone
Actuarial Opinion and Consent
This opinion is furnished in connection with the registration of the individual
flexible premium variable universal life policy of the BMA Variable Life
Account A of Business Men's Assurance Company of America.
I am familiar with all of the policy provisions and the terms of the
Registration Statement. In my professional opinion:
1. The illustrations of policy values that appear in the prospectus are
consistent with the provisions of the policy, and are based on the assumptions
stated in the accompanying text.
2. The illustrations show values on both a current basis and a guaranteed
basis. The current basis uses the charges that are currently assessed by
the company. The guaranteed basis uses the maximum charges that could be
assessed at any future date during the lifetime of a policy.
3. The specific ages, sexes, Specified Amounts, and premium amounts used in
these illustrations are representative of the typical purchasers that BMA
expects will purchase the product, and have not been selected so as to make
the relationship between premiums and benefits look more favorable in these
specific instances than it would for prospective male or female purchasers
at other ages, Specified Amounts, or paying other premium amounts.
Generally, rate classes other than the one shown have higher cost of
insurance charges.
I hereby consent to the use of this opinion as an Exhibit to the registration,
and to the reference to my name as an "Expert" in the prospectus.
/S/ RANDALL E. MEYER
-------------------------------
Randall E. Meyer, FSA, MAAA
Individual Actuarial Vice President
April 30, 1999
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts," and to the
use of our report dated February 4, 1999 with respect to the consolidated
financial statements of Business Men's Assurance Company of America and our
report dated February 5, 1999 with respect to the financial statements of
Business Men's Assurance Variable Life Account A, included in the Post-Effective
Amendment No. 2 to the Registration Statement (Form S-6 No. 333-52689) and the
related Prospectus.
/S/ ERNST & YOUNG LLP
Ernst & Young LLP
Kansas City, Missouri
April 30, 1999
