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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 LLC
Berger IPT-Growth (formerly, Berger IPT-100)
Berger IPT-Growth and Income
Berger IPT-Small Company Growth
Berger IPT-International
CONSECO SERIES TRUST
Managed By Conseco Capital Management, Inc.
Balanced
Equity
Fixed Income
Government Securities
THE ALGER AMERICAN FUND
Managed By Fred Alger Management, Inc.
Alger American Growth Portfolio
Alger American Leveraged AllCap Portfolio
Alger American MidCap Growth Portfolio
Alger American Small Capitalization Portfolio
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.
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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 ("Dreyfus VIF")
Managed By the Dreyfus Corporation
Dreyfus VIF Disciplined Stock
Dreyfus VIF International Value
FEDERATED INSURANCE SERIES
Managed By Federated Investment Management Company
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
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.
Strong Opportunity Fund II
STRONG VARIABLE INSURANCE FUNDS, INC.
Managed By Strong Capital Management, Inc.
Strong Mid Cap 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
Date: May 1, 2000
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TABLE OF CONTENTS
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DEFINITIONS................................................................ 5
SUMMARY.................................................................... 7
1. The Variable Life Insurance Policy.................................... 7
2. Purchases............................................................. 7
3. Investment Choices.................................................... 7
4. Expenses.............................................................. 7
5. Death Benefit......................................................... 8
6. Taxes................................................................. 9
7. Access To Your Money.................................................. 9
8. Other Information..................................................... 9
9. Inquiries............................................................. 10
PART I..................................................................... 11
1. THE VARIABLE LIFE INSURANCE POLICY...................................... 11
2. PURCHASES............................................................... 11
Premiums................................................................. 11
Waiver of Planned Premiums............................................... 12
Application for a Policy................................................. 12
Issue Ages............................................................... 12
Application of Premiums.................................................. 12
Grace Period............................................................. 13
Accumulation Unit Values................................................. 13
Right to Refund.......................................................... 14
Exchange of a Policy for a BMA Policy.................................... 14
3. INVESTMENT CHOICES...................................................... 14
Transfers................................................................ 20
Dollar Cost Averaging.................................................... 21
Asset Rebalancing Option................................................. 21
Asset Allocation Option.................................................. 22
Substitution............................................................. 22
4. EXPENSES................................................................ 22
Premium Charge........................................................... 22
Monthly Deduction........................................................ 23
Surrender Charge......................................................... 24
Partial Surrender Fee.................................................... 25
Waiver of Surrender Charges.............................................. 25
Reduction or Elimination of the Surrender Charge......................... 26
Transfer Fee............................................................. 26
Taxes.................................................................... 26
Investment Option Expenses............................................... 27
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5. DEATH BENEFIT........................................................... 29
Change in Death Benefit Option........................................... 30
Change in Specified Amount............................................... 31
Guaranteed Minimum Death Benefit......................................... 31
Accelerated Death Benefit................................................ 32
6. TAXES................................................................... 32
Life Insurance in General................................................ 32
Taking Money Out of Your Policy.......................................... 32
Diversification.......................................................... 33
7. ACCESS TO YOUR MONEY.................................................... 33
Loans.................................................................... 33
Surrenders............................................................... 34
8. OTHER INFORMATION....................................................... 35
BMA...................................................................... 35
The Separate Account..................................................... 35
Distributors............................................................. 35
Administration........................................................... 35
Suspension of Payments or Transfers...................................... 36
Ownership................................................................ 36
PART II.................................................................... 37
Executive Officers and Directors of BMA.................................... 37
Officers and Directors of Jones & Babson, Inc.............................. 38
Officers and Directors of Conseco Equity Sales, Inc........................ 39
Voting..................................................................... 39
Legal Opinions............................................................. 40
Reduction or Elimination of Surrender Charge............................... 40
Net Amount at Risk......................................................... 40
Maturity Date.............................................................. 40
Misstatement of Age or Sex................................................. 41
Our Right to Contest....................................................... 41
Payment Options............................................................ 41
Federal Tax Status......................................................... 41
Reports to Owners.......................................................... 45
Legal Proceedings.......................................................... 45
Experts.................................................................... 45
Financial Statements....................................................... 45
APPENDIX A--Illustration of Policy Values.................................. A-1
APPENDIX B--Rates of Return................................................ B-1
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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.
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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.
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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 terms 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, a 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 the Investment Options which are briefly described in Section
3--Investment Choices and are more fully described in the prospectuses for the
funds.
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:
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Policy Years 1-10: 5.5% of all Premiums.
Policy Years 11 and later: 4.0% of all Premiums.
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We deduct a Policy Charge each month from the unloaned Accumulation Value
of the Policy. The Policy Charge is as follows:
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Policy Year 1: $25 each month
Policy Years 2 Currently, $5 each month. This charge is not guaranteed
and later: and may be increased.
We deduct a Risk Charge each month from the unloaned Accumulation Value of
the Policy. The Risk Charge is calculated as follows:
Policy Years Each month, .80%, on an annual basis, of the Accumulation
1-10: Value in the Separate Account.
Policy Years Each month, .40%, on an annual basis, of the Accumulation
11 and later: Value in the Separate Account.
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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 .26% to 1.44%, 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 charge 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.
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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.
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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
1-877-784-9972
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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.
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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, a 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 the application,
a medical exam, if required, or a date You request (it must be within 60 days
of the date of the application). 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.
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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.
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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, 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. Copies of these
prospectuses will be sent to you with your Policy. Certain portfolios
contained in the fund prospectuses may not be available with Your Policy.
Below is a summary of the investment objectives and strategies of each
Investment Option. There can be no assurance that the investment objectives
will be achieved. The fund prospectuses contain more complete information,
including a description of the investment objectives, policies, restrictions
and risks of each Investment Option.
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 Investment Options.
The investment objectives and policies of certain of the Investment Options
are similar to the investment objectives and policies of other mutual funds
that certain of the investment advisers manage. Although the objectives and
policies may be similar, the investment results of the Investment Options may
be higher or lower than the results of such other mutual funds. The investment
advisers cannot guarantee, and make no representation, that the investment
results of similar funds will be comparable even though the Investment Options
have the same investment advisers.
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An Investment Option's performance may be affected by risks specific to
certain types of investments, such as foreign securities, derivative
investments, non-investment grade debt securities, initial public offerings
(IPOs) or companies with relatively small market capitalizations. IPOs and
other investment techniques may have a magnified performance impact on an
Investment Option with a small asset base. An Investment Option may not
experience similar performance as its assets grow.
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 Options. 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
The goal of this Portfolio is a high level of current income with
stability of principal and liquidity. The Portfolio seeks to
accomplish this by investing in intermediate term, high-quality
corporate and mortgage-backed fixed income investments. The average
maturity of the investments in the Portfolio is five to thirteen
years. The Portfolio also looks for other opportunities to invest in
securities that have the potential for capital appreciation, but are
not likely to add risk to the Portfolio.
Mid Cap Equity Portfolio
The goal of the Portfolio is to achieve long-term growth by
investing in the common stock of mid-sized U.S. companies.
Stocks must meet two criteria in order to be included in the
Portfolio:
. they must have above-average growth potential and momentum,
and
. they must be undervalued, or "cheap," relative to other stocks
and the market as a whole.
The Portfolio's Adviser uses both mathematical models and years
of experience in individual judgment to make the stock buy and sell
decisions for the Portfolio.
Money Market Portfolio
The goal of this Portfolio is to earn the highest possible level
of current income while preserving capital and maintaining
liquidity. It invests in carefully selected short-term fixed income
securities issued by the U.S. government and its agencies and by
other stable financial institutions.
Standish International Management Company, L.P. is the Sub-Adviser to
the following Portfolio:
Global Fixed Income Portfolio
The Portfolio's objective is to maximize total return and to
generate a market level return while preserving both liquidity and
principal. Typically, assets are diversified across ten or more
countries.
Stein Roe & Farnham Incorporated is the Sub-Adviser to the following
Portfolios:
Small Cap Equity Portfolio
This Portfolio seeks long-term growth by investing in small and
medium-sized entrepreneurially managed companies that the
Portfolio's Adviser believes are selling at attractive prices and
that enjoy good management.
Large Cap Growth Portfolio
The goal of this Portfolio is long-term capital appreciation. The
Portfolio invests, under normal circumstances, at least 65 percent
of its total assets in common stocks and other equity type
securities believed to have the ability to appreciate in value over
time. The Portfolio's
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Adviser seeks to invest in companies that it believes have the
potential to maintain their competitive advantages and to create
wealth over a long period of time.
David L. Babson & Co., Inc. is the Sub-Adviser to the following
Portfolio:
Large Cap Value Portfolio
The goal of this Portfolio is long-term capital growth. It
invests in common stocks that are seen as undervalued, or "cheap,"
relative to corporate earnings, dividends, and/or assets--striving
to achieve above-average return with below average risk.
Lord, Abbett & Co. is the Sub-Adviser to the following Portfolio:
Growth & Income Portfolio
This Portfolio is value driven, seeking long-term growth of
capital and income without a lot of fluctuation in market value. It
invests in large, seasoned companies in sound financial condition
that are expected to show above average price appreciation.
Kornitzer Capital Management, Inc. is the Sub-Adviser to the following
Portfolio:
Balanced Portfolio
The goal of this Portfolio is both long-term capital growth and
high current income. It invests in both stocks and fixed income
securities. The balance of stocks and bonds in the Portfolio can
change based on the Portfolio Adviser's view of economic conditions,
interest rates, and stock prices. The fund also invests in
convertible bonds and convertible preferred stocks. Convertible
securities offer current income like a corporate bond, but can also
provide capital appreciation through their conversion feature (the
right to convert to common stock).
BERGER INSTITUTIONAL PRODUCTS TRUST
Berger Institutional Products Trust is a mutual fund with multiple
portfolios. Berger LLC is the investment adviser to all portfolios. Berger LLC
has retained Bank of Ireland Asset Management (U.S.) Limited ("BIAM") as the
subadviser to the Berger IPT--International Fund. The following Investment
Options are available under the Policy:
Berger IPT-Growth Fund (formerly, Berger IPT-100 Fund)
This Fund aims for long term capital appreciation by investing
primarily in common stocks of established companies with the
potential for strong earnings growth.
Berger IPT-Growth and Income Fund
This Fund aims for capital appreciation and has a secondary goal
of investing in securities that produce current income for the
portfolio. In pursuing these goals, the fund primarily invests in
the securities of well-established, growing companies.
Berger IPT-Small Company Growth Fund
This Fund seeks capital appreciation by investing primarily in
common stocks of small companies with the potential for rapid
earnings.
Berger IPT-International Fund
The goal of this Fund is long-term capital appreciation through
investments in non-U.S. equity securities of well-established
companies. The primary focus of the fund is on undervalued, or
"cheap," stocks of mid-sized to large companies.
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
This Portfolio seeks a high total investment return, consistent
with preservation of capital and prudent investment risk, by
allocating investments among debt securities, equity securities and
money-market investments.
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Equity Portfolio
This Portfolio seeks to provide a high total return consistent
with preservation of capital and prudent level of risk by investing
primarily in selected equity securities.
Fixed Income Portfolio
This Portfolio seeks the highest level of income, consistent with
preservation of capital, by investing primarily in investment-grade
debt securities.
Government Securities Portfolio
This Portfolio seeks safety of capital, liquidity and current
income by investing primarily in securities issued by the U.S.
government, or an agency or instrumentality of the U.S. government.
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
This Portfolio seeks long-term capital appreciation. It focuses
on growing companies that generally have broad product lines,
markets, financial resources and depth of management. Under normal
circumstances, the portfolio invests primarily in the equity
securities of large companies.
Alger American Leveraged AllCap Portfolio
This Portfolio seeks long-term capital appreciation. Under normal
circumstances, the portfolio invests in the equity securities of
companies of any size which demonstrate promising growth potential.
The portfolio can leverage, that is, borrow money in amounts up to
one-third of its total assets to buy additional securities.
Alger American MidCap Growth Portfolio
This Portfolio seeks long-term capital appreciation. It focuses
on midsize companies with promising growth potential that generally
have broad product lines, markets, financial resources and depth of
management. Under normal circumstances, the Portfolio invests
primarily in the equity securities of companies having a market
capitalization within the range of companies in the S&P MidCap 400
Index(R).
Alger American Small Capitalization Portfolio
This Portfolio seeks long-term capital appreciation by focusing
on small, fast-growing companies that offer innovative products,
services or technologies to a rapidly expanding marketplace. Under
normal circumstances, the portfolio invests primarily in the equity
securities of small capitalization companies. A small capitalization
company is one that has a market capitalization within the range of
the Russell 2000 Growth Index(R) or the S&P SmallCap 600 Index(R).
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
This Portfolio seeks dividend growth, current income, and capital
appreciation by investing in common stocks. The Portfolio invests in
mainly large company stocks, such as those in the Standard & Poor's
500 Composite Stock Price Index, but it also may invest in the
stocks of small and medium-size companies. The management team
strives to outperform the Standard & Poor's 500 Composite Stock
Price Index over time while matching its risk characteristics.
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VP International
The VP International Fund seeks capital growth. The fund managers
use a growth investment strategy developed by American Century to
invest in stocks of companies that they believe will increase in
value over time. This strategy looks for companies with earnings and
revenue growth. International investment involves special risk
considerations.
VP Value
This Portfolio seeks long-term capital growth as a primary
objective and income as a secondary objective. It invests in well-
established companies that the Portfolio's Adviser believes are
undervalued at the time of purchase.
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.
This Fund seeks capital growth, with current income as a secondary goal by
investing primarily in the common stock of companies that meet traditional
investment standards and conduct their business in a manner that contributes
to the enhancement of the quality of life in America.
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.
The objective of this Portfolio is to match, as closely as possible, the
performance of the Standard & Poor's 500 Composite Price Index (S&P 500). To
pursue this goal, the fund generally invests in all 500 stocks in the S&P 500
in proportion to their weighting in the index.
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:
Dreyfus VIF Disciplined Stock Portfolio
This Portfolio seeks investment returns (consisting of capital
appreciation and income) that are greater than the total return
performance of stocks represented by the Standard & Poor's 500
Composite Stock Price Index. To pursue this goal, the portfolio
invests in a blended portfolio of growth and value stocks chosen
through a disciplined investment process.
Dreyfus VIF International Value Portfolio
This Portfolio seeks long-term capital growth. To pursue this
goal, the Portfolio ordinarily invests most of its assets in equity
securities of foreign issuers which Dreyfus considers to be "value"
companies.
FEDERATED INSURANCE SERIES
Federated Insurance Series is an open-end, management investment company
with multiple portfolios. Federated Investment Management Company is the
investment adviser to all Investment Options except the Federated
International Equity Fund II. Federated Global Investment Management Corp. is
the adviser to the Federated International Equity Fund II. The following
Investment Options are available under the Policy:
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Federated High Income Bond Fund II
This Fund seeks high current income by investing primarily in a
professionally managed, diversified portfolio of fixed income
securities. The fund pursues its investment objective by investing
in a diversified portfolio of high-yield, lower-rated corporate
bonds.
Federated International Equity Fund II
The Fund's investment objective is to obtain a total return on
its assets. The Fund's total return will consist of two components:
(1) changes in the market value of its portfolio securities (both
realized and unrealized appreciation); and (2) income received from
its portfolio securities.
Federated Utility Fund II
This Fund's investment objective is to achieve high current
income and moderate capital appreciation. The Fund pursues its
investment objective by investing under normal market conditions, at
least 65% of its assets in equity securities (including convertible
securities) of companies that derive at least 50% of their revenues
from the provision of electricity, gas and telecommunications
related services.
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
The objective of this Portfolio is to seek a high level of
current income by investing substantially all of its assets in
lower-rated debt bonds and other debt securities as well as
preferred stock. A secondary goal is long-term capital appreciation.
INVESCO VIF--Equity Income Fund
This Portfolio seeks capital appreciation with high current
income as a secondary goal. The Portfolio normally invests at least
65% of its assets in dividend paying common and preferred stocks.
The remaining assets are generally invested in income producing
securities such as corporate bonds; however, in order to take
advantage of strong equity markets, there are no limits on the
amount of equity securities in which the Portfolio may invest. The
Portfolio may invest up to 30 percent of its total assets in non-
dividend paying common stocks.
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
This Portfolio seeks long-term capital appreciation by investing
primarily in equity securities of companies with relatively large
capitalization that the manager considers to be inexpensively priced
relative to the return on total capital or equity.
Lazard Retirement Small Cap Portfolio
This Portfolio seeks long-term capital appreciation. It invests
primarily in equity securities, principally common stocks, of
relatively small U.S. companies in the range of the Russell 2000
Index that the manager believes are undervalued based on their
earnings, cash flow or asset values.
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST
Neuberger Berman Advisers Management Trust is a mutual fund with multiple
portfolios. Neuberger Berman Management Inc. is the investment adviser. The
following Investment Options are available under the Policy:
Limited Maturity Bond Portfolio
This Portfolio seeks the highest available current income
consistent with liquidity and low risk to principal; total return is
a secondary goal. To pursue these goals, the portfolio invests
mainly in investment-grade bonds and other debt securities from U.S.
government and corporate issuers. These may include mortgage- and
asset-backed securities.
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Partners Portfolio
This Portfolio seeks growth of capital. To pursue this goal, the
portfolio invests mainly in common stocks of mid- to large-
capitalization companies. The managers look for well-managed
companies whose stock prices are believed to be undervalued.
STRONG OPPORTUNITY FUND II, INC.
Strong Opportunity Fund II, Inc. is managed by Strong Capital Management,
Inc. The following Investment Option is available under the Policy:
Strong Opportunity Fund II
This Fund seeks capital growth by investing primarily in medium-
size companies that the fund's manager believes are underpriced, yet
have attractive growth prospects.
STRONG VARIABLE INSURANCE FUNDS, INC.
Strong Mid Cap Growth Fund II is managed by Strong Capital Management,
Inc., the investment adviser for the fund. This fund is a series of Strong
Variable Insurance Funds, Inc. The following Investment Option is available
under the Policy:
Strong Mid Cap Growth Fund II
This Fund seeks capital appreciation. The fund invests at least
65% of its assets in stocks of medium-capitalization companies that
the fund's managers believe have favorable prospects for
accelerating growth of earnings, cash flow, or asset value.
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
This Fund seeks high total return income plus capital
appreciation by investing globally, primarily in debt securities.
Worldwide Emerging Markets Fund
This Fund seeks long-term capital appreciation by investing in
equity securities of emerging markets around the world.
Worldwide Hard Assets Fund
This Fund seeks long-term capital appreciation by investing
primarily in "hard asset securities." Income is a secondary
consideration.
Worldwide Real Estate Fund
This Fund seeks a high total return by investing primarily in
equity securities of companies that own significant real estate or
that principally do business in real estate.
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.
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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 requirement of a minimum time period between each transfer;
. not accepting transfer requests of an agent acting under a power of
attorney on behalf of more than one Owner; or
. 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
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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.
Asset Rebalancing 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>
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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:
.the Cost of Insurance for the Policy; plus
.the monthly rider charges, if any; plus
.the Risk Charge; plus
.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
----------------- -----------------
Non- Non-
Attained Age Tobacco Tobacco 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
Issue ---------------
Sex 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>
23
<PAGE>
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 Rider.
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 Surrender Charge specific to Your Policy
is shown on Your Policy Schedule.
24
<PAGE>
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
--------------- ---------------
Non- Non-
Issue Age Tobacco Tobacco 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.
25
<PAGE>
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.
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.
26
<PAGE>
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 Portfolio
Expenses Expenses
(after (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-Growth Fund.......... .75% -- .25% 1.00%
Berger IPT-Growth and Income
Fund........................... .75% -- .25% 1.00%
Berger IPT-Small Company Growth
Fund........................... .85% -- .30% 1.15%
Berger IPT-International Fund... .85% -- .35% 1.20%
CONSECO SERIES TRUST(3)
Balanced Portfolio.............. .75% -- .00% .75%
Equity Portfolio................ .75% -- .02% .77%
Fixed Income Portfolio.......... .60% -- .07% .67%
Government Securities Portfolio. .60% -- .06% .66%
THE ALGER AMERICAN FUND
Alger American Growth Portfolio. .75% -- .04% .79%
Alger American Leveraged AllCap
Portfolio(4)................... .85% -- .08% .93%
Alger American MidCap Growth
Portfolio...................... .80% -- .05% .85%
Alger American Small
Capitalization Portfolio....... .85% -- .05% .90%
AMERICAN CENTURY VARIABLE
PORTFOLIOS, INC. --
VP International................ 1.34% -- .00% 1.34%
VP Value........................ 1.00% -- .00% 1.00%
VP Income & Growth.............. .70% -- .00% .70%
THE DREYFUS SOCIALLY RESPONSIBLE
GROWTH FUND...................... .75% -- .04% .79%
DREYFUS STOCK INDEX FUND.......... .25% -- .01% .26%
DREYFUS VARIABLE INVESTMENT FUND
Dreyfus VIF Disciplined Stock
Portfolio...................... .75% -- .06% .81%
Dreyfus VIF International Value
Portfolio...................... 1.00% -- .35% 1.35%
FEDERATED INSURANCE SERIES
Federated High Income Bond Fund
II............................. .60% -- .19% .79%
Federated International Equity
Fund II(5)..................... .54% -- .71% 1.25%
Federated Utility Fund II....... .75% -- .19% .94%
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
Total Annual
Other Portfolio
Expenses Expenses
(after (after
reimbursement reimbursement
Management 12b-1 for certain for certain
Fees Fees Portfolios) Portfolios)
---------- ----- ------------- -------------
<S> <C> <C> <C> <C>
INVESCO VARIABLE INVESTMENT
FUNDS, INC.(6)
INVESCO VIF--High Yield Fund... .60% -- .47% 1.07%
INVESCO VIF--Equity Income
Fund.......................... .75% -- .42% 1.17%
LAZARD RETIREMENT SERIES, INC.(7)
Lazard Retirement Equity
Portfolio..................... .75% .25% .25% 1.25%
Lazard Retirement Small Cap
Portfolio..................... .75% .25% .25% 1.25%
NEUBERGER BERMAN ADVISERS
MANAGEMENT TRUST
Limited Maturity Bond
Portfolio..................... .65% -- .11% .76%
Partners Portfolio............. .80% -- .07% .87%
STRONG OPPORTUNITY FUND II, INC.
Strong Opportunity Fund II..... 1.00% -- .14% 1.14%
STRONG VARIABLE INSURANCE FUNDS,
INC.
Strong Mid Cap Growth Fund
II(8)......................... 1.00% -- .15% 1.15%
VAN ECK WORLDWIDE INSURANCE TRUST
Worldwide Bond Fund............ 1.00% -- .22% 1.22%
Worldwide Emerging Markets
Fund.......................... 1.00% -- .34% 1.34%
Worldwide Hard Assets Fund..... 1.00% -- .26% 1.26%
Worldwide Real Estate Fund(9).. 1.00% -- .44% 1.44%
</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, 1999 and will continue this arrangement until April 30, 2001
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, 1999 were: 2.72% for the Money Market Portfolio; 2.25%
for the Intermediate Fixed Income Portfolio; 1.67% for the Global Fixed
Income Portfolio; 2.33% for the Mid Cap Equity Portfolio; 1.72% for the
Balanced Portfolio; 1.67% for the Growth & Income Portfolio; 2.53% for the
Small Cap Equity Portfolio; 1.49% for the Large Cap Growth Portfolio; and
1.49% for the Large Cap Value Portfolio.
(2) The Funds' investment advisers have agreed to waive their advisory fee and
reimburse the Funds to the extent that, at any time during the life of a
Fund, such Fund's annual operating expenses exceed a specified amount
(1.00%--Berger IPT-Growth and Income Fund and Berger IPT-Growth Fund;
1.15%--Berger IPT-Small Company Growth Fund; 1.20%--Berger IPT-
International Fund). Absent the voluntary waiver and reimbursement, the
Management Fee for the Berger IPT-Growth Fund, Berger IPT-Growth and
Income Fund, the Berger IPT-Small Company Growth Fund and the Berger IPT-
International Fund would have been .75%, .75%, .85%, and .85%
respectively, their Other Expenses would have been: 1.43%, .43%, .64% and
1.55%, respectively, and their Total Annual Portfolio Expenses would have
been 2.18%, 1.18%, 1.49% and 2.40%, respectively.
(3) The Adviser, Conseco Capital Management, Inc., and the Administrator,
Conseco Services, LLC, have contractually agreed to waive a portion of
their fees and/or pay a portion of the portfolio expenses through 4/30/01
to ensure that total operating expenses do not exceed: 0.85% for Equity
Portfolio; 0.85% for Balanced Portfolio; 0.70% for Fixed Income Portfolio
and 0.70% for Government Securities Portfolio. The Adviser and the
Administrator may recover any money waived under the contract provisions,
to the extent the actual fees and expenses are less than the expense
limitation, for a period of 3 years, after the date of the waiver.
(4) The Alger American Leveraged AllCap Portfolio's "Other Expenses" include
.01% of interest expense.
28
<PAGE>
(5) Absent a voluntary waiver of the management fee and the voluntary
reimbursement of certain other operating expenses by Federated Global
Investment Management Corp., the Management Fee and Total Annual Portfolio
Expenses for International Equity Fund II would have been 0.75% and 1.46%,
respectively.
(6) The Fund's actual Total Annual Fund Operating Expenses were lower than the
figures shown because its custodian fees were reduced under expense offset
arrangements. The expense information presented has been restated from the
financials to reflect a change in the administrative services fee.
Certain expenses of the Fund were absorbed voluntarily by INVESCO in order
to ensure that expenses did not exceed 1.05% of the High Yield Fund's
average net assets and 1.15% of the Equity Income Fund's average net assets
pursuant to a commitment between the Fund and INVESCO. This commitment may
be changed at any time following consultation with the board of directors.
Without such absorption, but excluding any expense offset arrangements,
Other Expenses and Total Annual Operating Expenses for the fiscal year
ended December 31, 1999 were 0.48% and 1.08% respectively of the High Yield
Fund's average net assets and 0.44% and 1.19% respectively of the Equity
Income Fund's average net assets.
(7) Lazard Asset Management, Inc., the fund's investment adviser, has
voluntarily agreed to reimburse all expenses through December 31, 2000 to
the extent total annual portfolio expenses exceed in any fiscal year 1.25%
of the Portfolio's average daily net assets. Absent this expense
reimbursement, Total Portfolio Expenses for the year ended December 31,
1999 would have been 7.31% for the Lazard Retirement Small Cap Portfolio
and 5.63% for the Lazard Retirement Equity Portfolio.
(8) Strong Capital Management, Inc., the investment adviser of the Strong Mid
Cap Growth Fund II is currently absorbing expenses of .02%. Without these
absorptions, the expenses would have been 1.17% for the year ended
December 31, 1999. 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.
(9) Van Eck Associates Corporation agreed to absorb the fund's expenses for
the period January 1, 1999 to February 28, 1999. Van Eck Associates
Corporation absorbed expenses of the Worldwide Real Estate Fund exceeding
1.50% for the period March 1, 1999 to December 31, 1999. The Fund's
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. Without such absorption, for the
year ended December 31, 1999, Other Expenses were 2.23% and Total Annual
Expenses were 3.23%.
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.
29
<PAGE>
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.
30
<PAGE>
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>
GMDB
Issue Age Period
--------- ---------
<S> <C>
20-35........................................................... 25 years
36-50........................................................... to age 60
51-55........................................................... 10 years
56-59........................................................... to age 65
</TABLE>
31
<PAGE>
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.
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<PAGE>
The 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.
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<PAGE>
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.
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<PAGE>
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.
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.
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<PAGE>
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.
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<PAGE>
PART II
EXECUTIVE OFFICERS AND DIRECTORS OF BMA
As of May 1, 2000 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
------------------ -------------------------------------------
<C> <S>
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 of BMA 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--Taxes of BMA from 1986--present.
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.
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.
Mel G. Carvill.......... Director of BMA since March 9, 2000; Managing
Director, Generali Worldwide Insurance Company, Ltd.,
Channel Islands--GUERNSEY since 1993.
</TABLE>
37
<PAGE>
<TABLE>
<CAPTION>
Name and Principal Positions and Offices With Depositor and
Business Address* Business Experience for the Past Five Years
------------------ -------------------------------------------
<C> <S>
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.
Renzo Isler............. Director of BMA since December 31, 1999; Joint-
Manager Life Division, Assicurazioni Generali,
S.p.A., Trieste, Italy from 1991 to 1998; Head of
Life Branch--Assicurazioni Generali, S.p.A., Trieste,
Italy since 1998.
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.
John Kessander Lundberg. Director of BMA since 1990; Retired.
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.
Andrea Rabusin.......... Director of BMA since December 31, 1999; Manager,
Pension Fund Investments Assicurazioni Generali,
S.p.A., Trieste, Italy since 1999; Portfolio
Manager--Assicurazioni Generali, S.p.A., Trieste,
Italy 1993-1999.
</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, 2000, 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.
------------------ ----------------------------------
<C> <S>
Stephen S. Soden........ President, Chairman 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
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.
38
<PAGE>
OFFICERS AND DIRECTORS OF CONSECO EQUITY SALES, INC.
As of May 1, 2000, 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.
------------------ ----------------------------------------
<C> <S>
L. Gregory Gloeckner.... President and Director
William P. Kovacs....... Vice President, General Counsel, Secretary and
Director
James S. Adams.......... Senior Vice President, Chief Accounting Officer,
Treasurer and Director
William T. Devanney,
Jr...................... Senior Vice President, Corporate Taxes
Christene H. Darnell.... Vice President, Management Reporting
Donald B. Johnston...... Vice President, Director--Mutual Fund Sales and
Marketing
</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 We are 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 Investment Options 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.
39
<PAGE>
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.
40
<PAGE>
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.
41
<PAGE>
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,
42
<PAGE>
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
43
<PAGE>
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.
Tax Treatment of Payment Options. Under the Code, a portion of the Payment
Option payments which are in excess of the death benefit proceeds are included
in the Beneficiary's taxable income. Under a Payment Option payable for the
lifetime of the Beneficiary, the death benefit proceeds are divided by the
Beneficiary's life expectancy (or joint life expectancy in the case of a joint
and survivor option) and proceeds received in excess of these prorated amounts
are included in taxable income. The value of the death benefit proceeds is
reduced by the value of any period certain or refund guarantee. Under a fixed
payment or fixed period option, the death benefit proceeds are prorated by
dividing the proceeds over the payment period under the option. Any payments
in excess of the prorated amount will be included in taxable income.
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.
44
<PAGE>
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:
. the receipt of Premium;
. any transfer between Investment Options;
. any loan, interest repayment, or loan repayment;
. any surrender;
. exercise of the free look privilege; and
. 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,
1999 and the related statements of operations and changes in net assets for
the year ended December 31, 1999, 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, 1999 and 1998, and
for each of the three years in the period ended December 31, 1999, have been
audited by Ernst & Young LLP, independent auditors, as set forth in their
reports thereon appearing elsewhere herein, and are included in reliance upon
such reports 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.
45
<PAGE>
FINANCIAL STATEMENTS
BMA VARIABLE LIFE ACCOUNT A
Year ended December 31, 1999
and period from December 1, 1998
(inception) to December 31, 1998
with Report of Independent Auditors
46
<PAGE>
BMA VARIABLE LIFE ACCOUNT A
FINANCIAL STATEMENTS
Year ended December 31, 1999 and period from
December 1, 1998 (inception) to December 31, 1998
CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors............................................. F-1
Audited Financial Statements
Statement of Assets and Liabilities........................................ F-2
Statements of Operations and Changes in Net Assets......................... F-4
Notes to Financial Statements.............................................. F-18
</TABLE>
47
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Contract Owners
BMA Variable Life Account A
and
The Board of Directors
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, 1999, and the related
statements of operations and changes in net assets for the year ended December
31, 1999 and 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 audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments owned as of
December 31, 1999, 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 audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of BMA Variable Life Account
A at December 31, 1999, and the results of its operations and changes in net
assets for the year ended December 31, 1999 and the period from December 1,
1998 (inception) to December 31, 1998, in conformity with accounting
principles generally accepted in the United States.
Ernst & Young LLP
Kansas City, Missouri
February 3, 2000
48
<PAGE>
BMA VARIABLE LIFE ACCOUNT A
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
December 31, 1999
--------------------------------------
Number Share Balance
of Shares Value Cost Sheet Amount
--------- ------ -------- ------------
<S> <C> <C> <C> <C>
Assets
Investments:
Investors Mark Series Fund:
Balanced.............................. 116 $ 9.08 $ 1,107 $ 1,056
Growth and Income..................... 2,331 12.65 29,821 29,486
Large Cap Value....................... 4,495 9.40 48,520 42,249
Small Cap Equity...................... 597 13.20 5,514 7,883
Large Cap Growth...................... 11,450 18.03 165,395 206,437
Intermediate Fixed Income............. 385 9.28 3,854 3,573
Mid Cap Equity........................ 4,067 11.29 44,457 46,142
Money Market.......................... 198,370 1.00 198,370 198,370
Global Fixed Income................... 109 9.21 1,152 1,000
Berger Institutional Products Trust:
100 Fund.............................. 298 19.22 4,143 5,720
Growth and Income Fund................ 681 26.45 13,473 18,006
Small Company Growth Fund............. 615 23.51 8,062 14,449
International Fund.................... 1,885 14.63 22,776 27,580
Conseco Series Trust:
Asset Allocation Portfolio............ 1,240 14.65 17,830 18,170
Common Stock Portfolio................ 1,165 23.18 27,239 27,001
Corporate Bond Portfolio.............. 172 9.39 1,705 1,611
Government Securities Portfolio....... 89 10.96 1,080 972
The Alger American Fund:
Growth Portfolio...................... 2,885 64.38 154,950 185,759
Leveraged AllCap Portfolio............ 958 57.97 43,003 55,563
MidCap Growth Portfolio............... 611 32.23 16,642 19,677
Small Capitalization Portfolio........ 163 55.15 7,365 8,970
American Century Variable Portfolios,
Inc.:
VP Income and Growth.................. 7,320 8.00 53,825 58,562
VP International...................... 198 12.50 1,512 2,475
VP Value.............................. 3,573 5.95 22,453 21,261
Dreyfus Socially Responsible Growth
Fund, Inc............................. 456 39.07 16,360 17,825
Dreyfus Stock Index Fund............... 1,829 38.45 66,015 70,324
Dreyfus Variable Investment Fund:
Disciplined Stock Fund................ 1,364 26.92 32,974 36,708
International Value Portfolio......... 84 15.67 1,192 1,322
Federated Insurance Series:
High-Income Bond Fund II.............. 1,801 10.24 18,055 18,445
International Equity Fund II.......... 172 27.64 2,724 4,768
Utility Fund II....................... 117 14.35 1,705 1,684
Invesco Variable Investment Funds:
High-Yield Portfolio.................. 457 11.51 5,492 5,263
Industrial Income Portfolio........... 378 21.01 7,394 7,951
Lazard Retirement Series, Inc.:
Retirement Equity Portfolio........... 98 11.53 1,043 1,133
Retirement Small Cap Portfolio........ 535 9.82 5,266 5,253
Neuberger & Berman Advisors Management
Trust:
Limited Maturity Bond Portfolio....... 127 13.24 1,718 1,685
Partners Portfolio.................... 300 19.64 5,563 5,883
Strong Opportunity Fund II............. 474 25.99 10,839 12,328
Strong Variable Insurance Funds, Inc.:
Growth Fund II........................ 876 30.37 20,166 26,630
Van Eck Worldwide Insurance Trust:
Worldwide Bond Fund................... 87 10.69 1,056 932
Worldwide Emerging Markets Fund....... 619 14.26 5,421 8,826
Worldwide Hard Assets Fund............ 521 10.96 5,556 5,715
Worldwide Real Estate Fund............ 108 9.15 1,021 992
Dividend receivable..................... 549
Receivable from BMA..................... 1,960
----------
Total assets............................ 1,238,148
Liability payable to BMA................ 859
----------
Net assets.............................. $1,237,289
==========
</TABLE>
49
<PAGE>
BMA VARIABLE LIFE ACCOUNT A
STATEMENT OF ASSETS AND LIABILITIES--(Continued)
<TABLE>
<CAPTION>
December 31, 1999
--------------------------
Number
of Unit
Units Value Amount
------ -------- ----------
<S> <C> <C> <C>
Net assets are represented by:
Accumulation units:
Investors Mark Series Fund:
Balanced.......................................... 100 $10.5602 $ 1,056
Growth and Income................................. 2,454 12.0203 29,506
Large Cap Value................................... 4,183 10.0961 42,228
Small Cap Equity.................................. 451 17.4223 7,859
Large Cap Growth.................................. 13,800 14.9596 206,426
Intermediate Fixed Income......................... 357 9.9998 3,567
Mid Cap Equity.................................... 4,238 10.8833 46,131
Money Market...................................... 19,009 10.4967 199,531
Global Fixed Income............................... 100 9.9999 1,000
Berger Institutional Products Trust:
100 Fund.......................................... 354 16.0833 5,703
Growth and Income Fund............................ 1,024 17.6572 18,088
Small Company Growth Fund......................... 662 21.7576 14,399
International Fund................................ 2,022 13.5278 27,350
Conseco Series Trust:
Asset Allocation Portfolio........................ 1,312 13.8345 18,149
Common Stock Portfolio............................ 1,606 16.7040 26,826
Corporate Bond Portfolio.......................... 161 10.0021 1,611
Government Securities Portfolio................... 100 9.7420 972
The Alger American Fund:
Growth Portfolio.................................. 12,390 14.9975 185,818
Leveraged AllCap Portfolio........................ 2,686 20.7351 55,685
MidCap Growth Portfolio........................... 1,335 14.8399 19,816
Small Capitalization Portfolio.................... 555 16.1693 8,973
American Century Variable Portfolios, Inc.:
VP Income and Growth.............................. 4,683 12.5079 58,574
VP International.................................. 142 17.2891 2,456
VP Value.......................................... 2,153 9.8710 21,254
Dreyfus Socially Responsible Growth Fund, Inc..... 1,283 14.0364 18,018
Dreyfus Stock Index Fund.......................... 5,500 12.7577 70,168
Dreyfus Variable Investment Fund:
Disciplined Stock Fund............................ 2,892 12.7030 36,735
International Value Portfolio..................... 101 13.0689 1,322
Federated Insurance Series:
High-Income Bond Fund II.......................... 1,808 10.2025 18,445
International Equity Fund II...................... 241 19.9532 4,814
Utility Fund II................................... 160 10.5351 1,683
Invesco Variable Investment Funds:
High-Yield Portfolio.............................. 485 10.8317 5,263
Industrial Income Portfolio....................... 685 11.8688 8,132
Lazard Retirement Series, Inc.:
Retirement Equity Portfolio....................... 100 11.3148 1,133
Retirement Small Cap Portfolio.................... 489 10.6940 5,253
Neuberger & Berman Advisors Management Trust:
Limited Maturity Bond Portfolio................... 166 10.1625 1,685
Partners Portfolio................................ 527 10.9925 5,785
Strong Opportunity Fund II........................ 906 14.1161 12,781
Strong Variable Insurance Funds, Inc.:
Growth Fund II.................................... 1,243 21.4326 26,636
Van Eck Worldwide Insurance Trust:
Worldwide Bond Fund............................... 100 9.3626 932
Worldwide Emerging Markets Fund................... 437 20.1697 8,814
Worldwide Hard Assets Fund........................ 484 11.8276 5,720
Worldwide Real Estate Fund........................ 101 9.8601 992
----------
Net assets.......................................... $1,237,289
==========
</TABLE>
See accompanying notes.
50
<PAGE>
BMA VARIABLE LIFE ACCOUNT A
STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS
Year ended December 31, 1999
<TABLE>
<CAPTION>
Investors Mark Series Fund
-----------------------------------------------------------------
Growth Large Small Large
and Cap Cap Cap Intermediate Mid Cap
Balanced Income Value Equity Growth Fixed Income Equity
-------- ------- ------- ------ -------- ------------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net investment income:
Dividend income....... $ 50 $ 237 $ 936 $ -- $ -- $ 215 $ 109
Risk charge........... -- (91) (142) (12) (456) (17) (146)
------ ------- ------- ------ -------- ------ -------
Net investment income... 50 146 794 (12) (456) 198 (37)
Net realized and
unrealized gain (loss)
on investments:
Net realized gain
(loss) on investment
transactions......... 8 1,729 1,417 80 310 (13) 136
Unrealized
appreciation
(depreciation) on
investments.......... 22 (353) (6,240) 2,297 40,982 (221) 1,637
------ ------- ------- ------ -------- ------ -------
Net realized and
unrealized gain (loss)
on investments......... 30 1,376 (4,823) 2,377 41,292 (234) 1,773
------ ------- ------- ------ -------- ------ -------
Net increase (decrease)
in net assets resulting
from operations........ 80 1,522 (4,029) 2,365 40,836 (36) 1,736
Capital share
transactions:
Transfers of net
variable contract
deposits............. -- 5,045 1,536 799 1,835 176 3,701
Transfers of
surrenders and death
benefits............. -- -- -- -- -- -- --
Transfers of cost of
insurance and policy
charges.............. -- (2,466) (1,843) (544) (3,582) (555) (2,604)
Transfers between
subaccounts,
including fixed
interest subaccount.. -- 24,376 45,566 4,166 166,276 2,982 42,240
------ ------- ------- ------ -------- ------ -------
Net increase in net
assets resulting from
capital share
transactions........... -- 26,955 45,259 4,421 164,529 2,603 43,337
------ ------- ------- ------ -------- ------ -------
Net increase (decrease)
in net assets.......... 80 28,477 41,230 6,786 205,365 2,567 45,073
Net assets at beginning
of year................ 976 1,029 998 1,073 1,061 1,000 1,058
------ ------- ------- ------ -------- ------ -------
Net assets at end of
year................ $1,056 $29,506 $42,228 $7,859 $206,426 $3,567 $46,131
====== ======= ======= ====== ======== ====== =======
</TABLE>
51
<PAGE>
BMA VARIABLE LIFE ACCOUNT A
STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS--(Continued)
Year ended December 31, 1999
<TABLE>
<CAPTION>
Investors Mark
Series Fund Berger Institutional Products Trust
----------------- ---------------------------------------
Growth Small
Global and Company
Money Fixed 100 Income Growth International
Market Income Fund Fund Fund Fund
--------- ------ ------ ------- ------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net investment income:
Dividend income....... $ 2,339 $ 69 $ 1 $ -- $ -- $ 152
Risk charge........... (1,663) -- (10) (37) (40) (77)
--------- ------ ------ ------- ------- -------
Net investment income... 676 69 (9) (37) (40) 75
Net realized and
unrealized gain (loss)
on investments:
Net realized gain
(loss) on investment
transactions......... -- -- 63 289 45 191
Unrealized
appreciation
(depreciation) on
investments.......... -- (72) 1,510 4,447 6,255 4,758
--------- ------ ------ ------- ------- -------
Net realized and
unrealized gain (loss)
on investments......... (72) 1,573 4,736 6,300 4,949
--------- ------ ------ ------- ------- -------
Net increase (decrease)
in net assets resulting
from operations........ 676 (3) 1,564 4,699 6,260 5,024
Capital share
transactions:
Transfers of net
variable contract
deposits............. 986,922 -- 1,023 3,647 2,398 5,278
Transfers of
surrenders and death
benefits............. -- -- -- (73) -- --
Transfers of cost of
insurance and policy
charges.............. (41,858) -- (400) (2,081) (737) (3,402)
Transfers between
subaccounts,
including fixed
interest subaccount.. (747,209) -- 2,447 10,803 5,344 19,389
--------- ------ ------ ------- ------- -------
Net increase in net
assets resulting from
capital share
transactions........... 197,855 -- 3,070 12,296 7,005 21,265
--------- ------ ------ ------- ------- -------
Net increase (decrease)
in net assets.......... 198,531 (3) 4,634 16,995 13,265 26,289
Net assets at beginning
of year................ 1,000 1,003 1,069 1,093 1,134 1,061
--------- ------ ------ ------- ------- -------
Net assets at end of
year................ $ 199,531 $1,000 $5,703 $18,088 $14,399 $27,350
========= ====== ====== ======= ======= =======
</TABLE>
52
<PAGE>
BMA VARIABLE LIFE ACCOUNT A
STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS--(Continued)
Year ended December 31, 1999
<TABLE>
<CAPTION>
The Alger
Conseco Series Trust American Fund
----------------------------------------- --------------------
Asset Common Corporate Government Leveraged
Allocation Stock Bond Securities Growth AllCap
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
---------- --------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net investment income:
Dividend income....... $ 254 $ 2 $ 88 $ 54 $ 12 $ --
Risk charge........... (53) (85) (4) -- (430) (113)
------- ------- ------ ---- -------- -------
Net investment income... 201 (83) 84 54 (418) (113)
Net realized and
unrealized gain (loss)
on investments:
Net realized gain
(loss) on investment
transactions......... 2,900 7,689 (2) 22 889 1,924
Unrealized
appreciation
(depreciation) on
investments.......... 300 (337) (90) (100) 30,707 12,422
------- ------- ------ ---- -------- -------
Net realized and
unrealized gain (loss)
on investments......... 3,200 7,352 (92) (78) 31,596 14,346
------- ------- ------ ---- -------- -------
Net increase (decrease)
in net assets resulting
from operations........ 3,401 7,269 (8) (24) 31,178 14,233
Capital share
transactions:
Transfers of net
variable contract
deposits............. 11,298 8,508 383 -- 32,244 19,392
Transfers of
surrenders and death
benefits............. -- (329) -- -- (961) (965)
Transfers of cost of
insurance and policy
charges.............. (2,270) (2,173) (97) -- (10,092) (7,034)
Transfers between
subaccounts,
including fixed
interest subaccount.. 4,672 12,451 332 -- 132,347 28,921
------- ------- ------ ---- -------- -------
Net increase in net
assets resulting from
capital share
transactions........... 13,700 18,457 618 -- 153,538 40,314
------- ------- ------ ---- -------- -------
Net increase (decrease)
in net assets.......... 17,101 25,726 610 (24) 184,716 54,547
Net assets at beginning
of year................ 1,048 1,100 1,001 996 1,102 1,138
------- ------- ------ ---- -------- -------
Net assets at end of
year................ $18,149 $26,826 $1,611 $972 $185,818 $55,685
======= ======= ====== ==== ======== =======
</TABLE>
53
<PAGE>
BMA VARIABLE LIFE ACCOUNT A
STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS--(Continued)
Year ended December 31, 1999
<TABLE>
<CAPTION>
The Alger American Century
American Fund Variable Portfolios, Inc. Dreyfus
------------------------ -------------------------------- Socially
MidCap Small Responsible
Growth Capitalization VP Income VP VP Growth
Portfolio Portfolio and Growth International Value Fund, Inc.
--------- -------------- ---------- ------------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net investment income:
Dividend income....... $ -- $ -- $ -- $ -- $ 10 $ 2
Risk charge........... (41) (20) (147) (1) (37) (51)
------- ------ ------- ------ ------- -------
Net investment income... (41) (20) (147) (1) (27) (49)
Net realized and
unrealized gain (loss)
on investments:
Net realized gain
(loss) on investment
transactions......... 327 498 326 11 62 1,159
Unrealized
appreciation
(depreciation) on
investments.......... 2,917 1,491 4,694 884 (1,185) 1,444
------- ------ ------- ------ ------- -------
Net realized and
unrealized gain (loss)
on investments......... 3,244 1,989 5,020 895 (1,123) 2,603
------- ------ ------- ------ ------- -------
Net increase (decrease)
in net assets resulting
from operations........ 3,203 1,969 4,873 894 (1,150) 2,554
Capital share
transactions:
Transfers of net
variable contract
deposits............. 4,981 1,484 15,206 509 3,633 6,935
Transfers of
surrenders and death
benefits............. (316) -- (65) -- -- (208)
Transfers of cost of
insurance and policy
charges.............. (2,655) (513) (5,277) (232) (673) (2,764)
Transfers between
subaccounts,
including fixed
interest subaccount.. 13,485 4,919 42,789 206 18,451 10,440
------- ------ ------- ------ ------- -------
Net increase in net
assets resulting from
capital share
transactions........... 15,495 5,890 52,653 483 21,411 14,403
------- ------ ------- ------ ------- -------
Net increase (decrease)
in net assets.......... 18,698 7,859 57,526 1,377 20,261 16,957
Net assets at beginning
of year................ 1,118 1,114 1,048 1,079 993 1,061
------- ------ ------- ------ ------- -------
Net assets at end of
year................ $19,816 $8,973 $58,574 $2,456 $21,254 $18,018
======= ====== ======= ====== ======= =======
</TABLE>
54
<PAGE>
BMA VARIABLE LIFE ACCOUNT A
STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS--(Continued)
Year ended December 31, 1999
<TABLE>
<CAPTION>
Dreyfus Variable
Investment Fund Federated Insurance Series
------------------------- ------------------------------
Dreyfus High-
Stock International Income International
Index Disciplined Value Bond Equity Utility
Fund Stock Fund Portfolio Fund II Fund II Fund II
------- ----------- ------------- ------- ------------- -------
<S> <C> <C> <C> <C> <C> <C>
Net investment income:
Dividend income....... $ 349 $ 134 $ 10 $ 79 $ -- $ 25
Risk charge........... (169) (75) -- (36) (7) (2)
------- ------- ------ ------- ------ ------
Net investment income... 180 59 10 43 (7) 23
Net realized and
unrealized gain (loss)
on investments:
Net realized gain
(loss) on investment
transactions......... 695 387 102 (70) 44 50
Unrealized
appreciation
(depreciation) on
investments.......... 4,265 3,678 176 393 1,950 (53)
------- ------- ------ ------- ------ ------
Net realized and
unrealized gain (loss)
on investments......... 4,960 4,065 278 323 1,994 (3)
------- ------- ------ ------- ------ ------
Net increase (decrease)
in net assets resulting
from operations........ 5,140 4,124 288 366 1,987 20
Capital share
transactions:
Transfers of net
variable contract
deposits............. 21,652 519 -- -- 329 732
Transfers of
surrenders and death
benefits............. -- -- -- -- -- --
Transfers of cost of
insurance and policy
charges.............. (4,938) (2,281) -- (892) (152) (277)
Transfers between
subaccounts,
including fixed
interest subaccount.. 47,267 33,312 -- 17,974 1,556 176
------- ------- ------ ------- ------ ------
Net increase in net
assets resulting from
capital share
transactions........... 63,981 31,550 -- 17,082 1,733 631
------- ------- ------ ------- ------ ------
Net increase (decrease)
in net assets.......... 69,121 35,674 288 17,448 3,720 651
Net assets at beginning
of year................ 1,047 1,061 1,034 997 1,094 1,032
------- ------- ------ ------- ------ ------
Net assets at end of
year................ $70,168 $36,735 $1,322 $18,445 $4,814 $1,683
======= ======= ====== ======= ====== ======
</TABLE>
55
<PAGE>
BMA VARIABLE LIFE ACCOUNT A
STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS--(Continued)
Year ended December 31, 1999
<TABLE>
<CAPTION>
Neuberger & Berman
Invesco Variable Lazard Retirement Advisors Management
Investment Funds Series, Inc. Trust
-------------------- --------------------- -------------------
Limited
High- Industrial Retirement Retirement Maturity Strong
Yield Income Equity Small Cap Bond Partners Opportunity
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Fund II
--------- ---------- ---------- ---------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net investment income:
Dividend income....... $ 359 $ 94 $ 7 $ 8 $ 56 $ 13 $ 135
Risk charge........... (8) (14) -- (13) (1) (13) (35)
------ ------ ------ ------ ------ ------ -------
Net investment income... 351 80 7 (5) 55 -- 100
Net realized and
unrealized gain (loss)
on investments:
Net realized gain
(loss) on investment
transactions......... (3) 86 33 106 (6) 31 177
Unrealized
appreciation
(depreciation) on
investments.......... (118) 583 46 (32) (32) 301 1,448
------ ------ ------ ------ ------ ------ -------
Net realized and
unrealized gain (loss)
on investments......... (121) 669 79 74 (38) 332 1,625
------ ------ ------ ------ ------ ------ -------
Net increase (decrease)
in net assets resulting
from operations........ 230 749 86 69 17 332 1,725
Capital share
transactions:
Transfers of net
variable contract
deposits............. -- 78 -- 366 284 1,807 2,447
Transfers of
surrenders and death
benefits............. -- -- -- -- -- -- (139)
Transfers of cost of
insurance and policy
charges.............. (37) (436) -- (382) (109) (667) (1,114)
Transfers between
subaccounts,
including fixed
interest subaccount.. 4,077 6,715 -- 4,181 494 3,294 8,819
------ ------ ------ ------ ------ ------ -------
Net increase in net
assets resulting from
capital share
transactions........... 4,040 6,357 -- 4,165 669 4,434 10,013
------ ------ ------ ------ ------ ------ -------
Net increase (decrease)
in net assets.......... 4,270 7,106 86 4,234 686 4,766 11,738
Net assets at beginning
of year................ 993 1,026 1,047 1,019 999 1,019 1,043
------ ------ ------ ------ ------ ------ -------
Net assets at end of
year................ $5,263 $8,132 $1,133 $5,253 $1,685 $5,785 $12,781
====== ====== ====== ====== ====== ====== =======
</TABLE>
56
<PAGE>
BMA VARIABLE LIFE ACCOUNT A
STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS--(Continued)
Year ended December 31, 1999
<TABLE>
<CAPTION>
Strong
Variable
Insurance
Funds, Inc. Van Eck Worldwide Insurance Trust
----------- ---------------------------------------
Worldwide Worldwide Worldwide
Emerging Hard Real
Growth Fund Worldwide Markets Assets Estate
II Bond Fund Fund Fund Fund Total
----------- --------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net investment income:
Dividend income....... $ 2 $ 39 $ -- $ 15 $ 21 $ 5,876
Risk charge........... (36) -- (11) (12) -- (4,105)
------- ------ ------ ------ ------ ----------
Net investment income... (34) 39 (11) 3 21 1,771
Net realized and
unrealized gain (loss)
on investments:
Net realized gain
(loss) on investment
transactions......... 415 17 100 47 -- 22,271
Unrealized
appreciation
(depreciation) on
investments.......... 6,338 (135) 3,382 170 (42) 130,487
------- ------ ------ ------ ------ ----------
Net realized and
unrealized gain (loss)
on investments......... 6,753 (118) 3,482 217 (42) 152,758
------- ------ ------ ------ ------ ----------
Net increase (decrease)
in net assets resulting
from operations........ 6,719 (79) 3,471 220 (21) 154,529
Capital share
transactions:
Transfers of net
variable contract
deposits............. 6,788 -- 122 4 -- 1,152,061
Transfers of
surrenders and death
benefits............. (75) -- -- -- -- (3,131)
Transfers of cost of
insurance and policy
charges.............. (2,675) -- (302) (441) -- (108,555)
Transfers between
subaccounts,
including fixed
interest subaccount.. 14,753 -- 4,500 4,948 -- (2,541)
------- ------ ------ ------ ------ ----------
Net increase in net
assets resulting from
capital share
transactions........... 18,791 -- 4,320 4,511 -- 1,037,834
------- ------ ------ ------ ------ ----------
Net increase (decrease)
in net assets.......... 25,510 (79) 7,791 4,731 (21) 1,192,363
Net assets at beginning
of year................ 1,126 1,011 1,023 989 1,013 44,926
------- ------ ------ ------ ------ ----------
Net assets at end of
year................ $26,636 $ 932 $8,814 $5,720 $ 992 $1,237,289
======= ====== ====== ====== ====== ==========
</TABLE>
See accompanying notes.
57
<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>
Investors Mark Series Fund
--------------------------------------------------------
Growth Large Small Large Mid
and Cap Cap Cap Intermediate Cap
Balanced Income Value Equity Growth Fixed Income Equity
-------- ------ ----- ------ ------ ------------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Net investment income:
Dividend income....... $ 49 $ 11 $ 28 $ 1 $ 1 $ 60 $ 10
Risk charge........... -- -- -- -- -- -- --
----- ------ ----- ------ ------ ------ ------
Net investment income... 49 11 28 1 1 60 10
Net realized and
unrealized gain (loss)
on investments:
Net realized gain
(loss) on investment
transactions......... -- -- -- -- -- -- --
Unrealized
appreciation
(depreciation) on
investments.......... (73) 18 (30) 72 60 (60) 48
----- ------ ----- ------ ------ ------ ------
Net realized and
unrealized gain (loss)
on investments......... (73) 18 (30) 72 60 (60) 48
----- ------ ----- ------ ------ ------ ------
Net increase (decrease)
in net assets resulting
from operations........ (24) 29 (2) 73 61 -- 58
Capital share
transactions:
Transfers of net
variable contract
deposits............. 1,000 1,000 1,000 1,000 1,000 1,000 1,000
Transfers of
surrenders and death
benefits............. -- -- -- -- -- -- --
Transfers of cost of
insurance and policy
charges.............. -- -- -- -- -- -- --
Transfers between
subaccounts,
including fixed
interest subaccount.. -- -- -- -- -- -- --
Net increase in net
assets resulting from
capital share
transactions........... 1,000 1,000 1,000 1,000 1,000 1,000 1,000
----- ------ ----- ------ ------ ------ ------
Net increase in net
assets................. 976 1,029 998 1,073 1,061 1,000 1,058
Net assets at beginning
of period.............. -- -- -- -- -- -- --
----- ------ ----- ------ ------ ------ ------
Net assets at end of
period.............. $ 976 $1,029 $ 998 $1,073 $1,061 $1,000 $1,058
===== ====== ===== ====== ====== ====== ======
</TABLE>
58
<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>
Investors
Mark Series
Fund Berger Institutional Products Trust
------------- -----------------------------------
Growth Small
Global and Company
Money Fixed 100 Income Growth International
Market Income Fund Fund Fund Fund
------ ------ ------ ------ ------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net investment income:
Dividend income........... $ -- $ 83 $ 2 $ 7 $ -- $ 15
Risk charge............... -- -- -- -- -- --
------ ------ ------ ------ ------ ------
Net investment income....... -- 83 2 7 -- 15
Net realized and unrealized
gain (loss) on investments:
Net realized gain (loss)
on investment
transactions............. -- -- -- -- -- --
Unrealized appreciation
(depreciation) on
investments.............. -- (80) 67 86 134 46
------ ------ ------ ------ ------ ------
Net realized and unrealized
gain (loss) on investments. -- (80) 67 86 134 46
------ ------ ------ ------ ------ ------
Net increase (decrease) in
net assets resulting from
operations................. -- 3 69 93 134 61
Capital share transactions:
Transfers of net variable
contract deposits........ 1,000 1,000 1,000 1,000 1,000 1,000
Transfers of surrenders
and death benefits....... -- -- -- -- -- --
Transfers of cost of
insurance and policy
charges.................. -- -- -- -- -- --
Transfers between
subaccounts, including
fixed interest
subaccount............... -- -- -- -- -- --
------ ------ ------ ------ ------ ------
Net increase in net assets
resulting from capital
share transactions....... 1,000 1,000 1,000 1,000 1,000 1,000
------ ------ ------ ------ ------ ------
Net increase in net assets.. 1,000 1,003 1,069 1,093 1,134 1,061
Net assets at beginning of
period..................... -- -- -- -- -- --
------ ------ ------ ------ ------ ------
Net assets at end of
period.................. $1,000 $1,003 $1,069 $1,093 $1,134 $1,061
====== ====== ====== ====== ====== ======
</TABLE>
59
<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>
The Alger
Conseco Series Trust American Fund
----------------------------------------- -------------------
Asset Common Corporate Government Leveraged
Allocation Stock Bond Securities Growth AllCap
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
---------- --------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net investment income:
Dividend income....... $ 8 $ 1 $ 5 $ 4 $ -- $ --
Risk charge........... -- -- -- -- -- --
------ ------ ------ ------ ------ ------
Net investment income... 8 1 5 4 -- --
Net realized and
unrealized gain (loss)
on investments:
Net realized gain
(loss) on investment
transactions......... -- -- -- -- -- --
Unrealized
appreciation
(depreciation) on
investments.......... 40 99 (4) (8) 102 138
------ ------ ------ ------ ------ ------
Net realized and
unrealized gain (loss)
on investments......... 40 99 (4) (8) 102 138
------ ------ ------ ------ ------ ------
Net increase (decrease)
in net assets resulting
from operations........ 48 100 1 (4) 102 138
Capital share
transactions:
Transfers of net
variable contract
deposits............. 1,000 1,000 1,000 1,000 1,000 1,000
Transfers of
surrenders and death
benefits............. -- -- -- -- -- --
Transfers of cost of
insurance and policy
charges.............. -- -- -- -- -- --
Transfers between
subaccounts,
including fixed
interest subaccount.. -- -- -- -- -- --
------ ------ ------ ------ ------ ------
Net increase in net
assets resulting from
capital share
transactions........... 1,000 1,000 1,000 1,000 1,000 1,000
------ ------ ------ ------ ------ ------
Net increase in net
assets................. 1,048 1,100 1,001 996 1,102 1,138
Net assets at beginning
of period.............. -- -- -- -- -- --
------ ------ ------ ------ ------ ------
Net assets at end of
period.............. $1,048 $1,100 $1,001 $ 996 $1,102 $1,138
====== ====== ====== ====== ====== ======
</TABLE>
60
<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>
The Alger American Century Variable
American Fund Portfolios, Inc.
------------------------ -------------------------- Dreyfus
VP Socially
MidCap Small Income Responsible
Growth Capitalization and VP VP Growth
Portfolio Portfolio Growth International Value Fund, Inc.
--------- -------------- ------ ------------- ----- -----------
<S> <C> <C> <C> <C> <C> <C>
Net investment income:
Dividend income....... $ -- $ -- $ 5 $ -- $ -- $ 40
Risk charge........... -- -- -- -- -- --
------ ------ ------ ------ ----- ------
Net investment income... -- -- 5 -- -- 40
Net realized and
unrealized gain (loss)
on investments:
Net realized gain
(loss) on investment
transactions......... -- -- -- -- -- --
Unrealized
appreciation
(depreciation) on
investments.......... 118 114 43 79 (7) 21
------ ------ ------ ------ ----- ------
Net realized and
unrealized gain (loss)
on investments......... 118 114 43 79 (7) 21
------ ------ ------ ------ ----- ------
Net increase (decrease)
in net assets resulting
from operations........ 118 114 48 79 (7) 61
Capital share
transactions:
Transfers of net
variable contract
deposits............. 1,000 1,000 1,000 1,000 1,000 1,000
Transfers of
surrenders and death
benefits............. -- -- -- -- -- --
Transfers of cost of
insurance and policy
charges.............. -- -- -- -- -- --
Transfers between
subaccounts,
including fixed
interest subaccount.. -- -- -- -- -- --
------ ------ ------ ------ ----- ------
Net increase in net
assets resulting from
capital share
transactions........... 1,000 1,000 1,000 1,000 1,000 1,000
------ ------ ------ ------ ----- ------
Net increase in net
assets................. 1,118 1,114 1,048 1,079 993 1,061
Net assets at beginning
of period.............. -- -- -- -- -- --
------ ------ ------ ------ ----- ------
Net assets at end of
period.............. $1,118 $1,114 $1,048 $1,079 $ 993 $1,061
====== ====== ====== ====== ===== ======
</TABLE>
61
<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>
Dreyfus Variable
Investment Fund Federated Insurance Series
------------------------- ------------------------------
Dreyfus High-
Stock International Income International
Index Disciplined Value Bond Equity Utility
Fund Stock Fund Portfolio Fund II Fund II Fund II
------- ----------- ------------- ------- ------------- -------
<S> <C> <C> <C> <C> <C> <C>
Net investment income:
Dividend income....... $ 4 $ 5 $ 80 $ -- $ -- $ --
Risk charge........... -- -- -- -- -- --
------ ------ ------ ------ ------ ------
Net investment income... 4 5 80 -- -- --
Net realized and
unrealized gain (loss)
on investments:
Net realized gain
(loss) on investment
transactions......... -- -- -- -- -- --
Unrealized
appreciation
(depreciation) on
investments.......... 43 56 (46) (3) 94 32
------ ------ ------ ------ ------ ------
Net realized and
unrealized gain (loss)
on investments......... 43 56 (46) (3) 94 32
------ ------ ------ ------ ------ ------
Net increase (decrease)
in net assets resulting
from operations........ 47 61 34 (3) 94 32
Capital share
transactions:
Transfers of net
variable contract
deposits............. 1,000 1,000 1,000 1,000 1,000 1,000
Transfers of
surrenders and death
benefits............. -- -- -- -- -- --
Transfers of cost of
insurance and policy
charges.............. -- -- -- -- -- --
Transfers between
subaccounts,
including fixed
interest subaccount.. -- -- -- -- -- --
------ ------ ------ ------ ------ ------
Net increase in net
assets resulting from
capital share
transactions........... 1,000 1,000 1,000 1,000 1,000 1,000
------ ------ ------ ------ ------ ------
Net increase in net
assets................. 1,047 1,061 1,034 997 1,094 1,032
Net assets at beginning
of period.............. -- -- -- -- -- --
------ ------ ------ ------ ------ ------
Net assets at end of
period.............. $1,047 $1,061 $1,034 $ 997 $1,094 $1,032
====== ====== ====== ====== ====== ======
</TABLE>
62
<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>
Neuberger & Berman
Invesco Variable Lazard Retirement Advisors Management
Investment Funds Series, Inc. Trust
-------------------- --------------------- -------------------
Limited
High- Industrial Retirement Retirement Maturity Strong
Yield Income Equity Small Cap Bond Partners Opportunity
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Fund II
--------- ---------- ---------- ---------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net investment income:
Dividend income....... $ 104 $ 52 $ 3 $ -- $ -- $ -- $ 2
Risk charge........... -- -- -- -- -- -- --
----- ------ ------ ------ ----- ------ ------
Net investment income... 104 52 3 -- -- -- 2
Net realized and
unrealized gain (loss)
on investments:
Net realized gain
(loss) on investment
transactions......... -- -- -- -- -- -- --
Unrealized
appreciation
(depreciation) on
investments.......... (111) (26) 44 19 (1) 19 41
----- ------ ------ ------ ----- ------ ------
Net realized and
unrealized gain (loss)
on investments......... (111) (26) 44 19 (1) 19 41
----- ------ ------ ------ ----- ------ ------
Net increase (decrease)
in net assets resulting
from operations........ (7) 26 47 19 (1) 19 43
Capital share
transactions:
Transfers of net
variable contract
deposits............. 1,000 1,000 1,000 1,000 1,000 1,000 1,000
Transfers of
surrenders and death
benefits............. -- -- -- -- -- -- --
Transfers of cost of
insurance and policy
charges.............. -- -- -- -- -- -- --
Transfers between
subaccounts,
including fixed
interest subaccount.. -- -- -- -- -- -- --
----- ------ ------ ------ ----- ------ ------
Net increase in net
assets resulting from
capital share
transactions........... 1,000 1,000 1,000 1,000 1,000 1,000 1,000
----- ------ ------ ------ ----- ------ ------
Net increase in net
assets................. 993 1,026 1,047 1,019 999 1,019 1,043
Net assets at beginning
of period.............. -- -- -- -- -- -- --
----- ------ ------ ------ ----- ------ ------
Net assets at end of
period.............. $ 993 $1,026 $1,047 $1,019 $ 999 $1,019 $1,043
===== ====== ====== ====== ===== ====== ======
</TABLE>
63
<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
Variable
Insurance
Funds, Inc. Van Eck Worldwide Insurance Trust
----------- ---------------------------------------
Worldwide Worldwide Worldwide
Emerging Hard Real
Growth Fund Worldwide Markets Assets Estate
II Bond Fund Fund Fund Fund Total
----------- --------- --------- --------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
Net investment income:
Dividend income....... $ -- $ -- $ -- $ -- $ -- $ 580
Risk charge........... -- -- -- -- -- --
------ ------ ------ ----- ------ -------
Net investment income... -- -- -- -- -- 580
Net realized and
unrealized gain (loss)
on investments:
Net realized gain
(loss) on investment
transactions......... -- -- -- -- -- --
Unrealized
appreciation
(depreciation) on
investments.......... 126 11 23 (11) 13 1,346
------ ------ ------ ----- ------ -------
Net realized and
unrealized gain (loss)
on investments......... 126 11 23 (11) 13 1,346
------ ------ ------ ----- ------ -------
Net increase (decrease)
in net assets resulting
from operations........ 126 11 23 (11) 13 1,926
Capital share
transactions:
Transfers of net
variable contract
deposits............. 1,000 1,000 1,000 1,000 1,000 43,000
Transfers of
surrenders and death
benefits............. -- -- -- -- -- --
Transfers of cost of
insurance and policy
charges.............. -- -- -- -- -- --
Transfers between
subaccounts,
including fixed
interest subaccount.. -- -- -- -- -- --
------ ------ ------ ----- ------ -------
Net increase in net
assets resulting from
capital share
transactions........... 1,000 1,000 1,000 1,000 1,000 43,000
------ ------ ------ ----- ------ -------
Net increase in net
assets................. 1,126 1,011 1,023 989 1,013 44,926
Net assets at beginning
of period.............. -- -- -- -- -- --
------ ------ ------ ----- ------ -------
Net assets at end of
period.............. $1,126 $1,011 $1,023 $ 989 $1,013 $44,926
====== ====== ====== ===== ====== =======
</TABLE>
See accompanying notes.
64
<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) established to fund flexible premium
variable life insurance policies. 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 43 separate subaccounts,
each of which invests solely 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 Fund 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
65
<PAGE>
BMA VARIABLE LIFE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS--(Continued)
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 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 Fund 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 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.
66
<PAGE>
BMA VARIABLE LIFE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS--(Continued)
Investment Valuation
Investments in mutual fund shares are carried in the statement of assets
and liabilities 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.
The cost of investments purchased and proceeds from investment securities
sold by each subaccount were as follows:
<TABLE>
<CAPTION>
Period from
December 1,
1998
(inception)
to
Year ended December 31,
December 31, 1999 1998
------------------ ------------
Purchases Sales Purchases
--------- -------- ------------
<S> <C> <C> <C>
Investors Mark Series
Fund:
Balanced................ $ 71 $ 13 $1,049
Growth and Income....... 32,099 3,564 1,011
Large Cap Value......... 49,030 1,549 1,028
Small Cap Equity........ 4,833 399 1,000
Large Cap Growth........ 167,221 3,137 1,001
Intermediate Fixed
Income................. 3,363 534 1,060
Mid Cap Equity.......... 45,061 1,617 1,010
Money Market............ 900,334 702,964 1,000
Global Fixed Income..... 69 -- 1,083
Berger Institutional
Products Trust:
100 Fund................ 3,415 337 1,002
Growth and Income Fund.. 13,257 1,080 1,007
Small Company Growth
Fund................... 7,181 165 1,000
International Fund...... 23,408 1,838 1,015
Conseco Series Trust:
Asset Allocation
Portfolio.............. 19,427 2,661 1,008
Common Stock Portfolio.. 26,985 868 1,001
Corporate Bond
Portfolio.............. 725 24 1,005
Government Securities
Portfolio.............. 76 -- 1,004
The Alger American Fund:
Growth Portfolio........ 165,414 11,557 1,000
Leveraged AllCap
Portfolio.............. 51,728 11,523 1,000
MidCap Growth Portfolio. 16,859 1,268 1,000
Small Capitalization
Portfolio.............. 6,694 367 1,000
American Century Variable
Portfolios, Inc.:
VP Income and Growth.... 57,994 5,501 1,005
VP International........ 536 35 1,000
VP Value................ 21,759 274 1,000
Dreyfus Socially
Responsible Growth Fund,
Inc...................... 22,033 7,277 1,005
Dreyfus Stock Index Fund.. 72,270 7,616 1,004
Dreyfus Variable
Investment Fund:
Disciplined Stock Fund.. 33,580 1,777 1,005
International Value
Portfolio.............. 112 -- 1,080
</TABLE>
67
<PAGE>
BMA VARIABLE LIFE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS--(Continued)
<TABLE>
<CAPTION>
Period from
December 1,
1998
(inception)
to
Year ended December 31,
December 31, 1999 1998
------------------- ------------
Purchases Sales Purchases
---------- -------- ------------
<S> <C> <C> <C>
Federated Insurance Series:
High-Income Bond Fund II.................... $ 18,059 $ 928 $ 1,000
International Equity Fund II................ 1,746 35 1,000
Utility Fund II............................. 737 31 1,000
Invesco Variable Investment Funds:
High-Yield Portfolio........................ 4,436 45 1,104
Industrial Income Portfolio................. 6,897 597 1,052
Lazard Retirement Series, Inc.:
Retirement Equity Portfolio................. 39 -- 1,004
Retirement Small Cap Portfolio.............. 4,559 313 1,000
Neuberger & Berman Advisors Management Trust:
Limited Maturity Bond Portfolio............. 833 111 1,000
Partners Portfolio.......................... 5,040 484 1,000
Strong Opportunity Fund II.................... 11,508 1,848 1,002
Strong Variable Insurance Funds, Inc.:
Growth Fund II.............................. 19,958 1,211 1,000
Van Eck Worldwide Insurance Trust:
Worldwide Bond Fund......................... 56 -- 1,000
Worldwide Emerging Markets Fund............. 4,606 286 1,000
Worldwide Hard Assets Fund.................. 4,964 455 1,000
Worldwide Real Estate Fund.................. 21 -- 1,000
---------- -------- -------
Total..................................... $1,828,993 $774,289 $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. Under current law, no federal income taxes are payable
with respect to the Account's net investment income or net realized gain on
investments. Accordingly, no charge for income tax is currently being made to
the Account. If such taxes are incurred by BMA in the future, a charge to the
Account may be assessed.
Use of Estimates
The preparation of financial statements in accordance with accounting
principles generally accepted in the United States 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.
68
<PAGE>
BMA VARIABLE LIFE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS--(Continued)
2. Variable Life Contract Charges
The Account pays BMA certain amounts relating to the distribution and
administration of the policies funded by the Account and as reimbursement for
certain mortality and other risks assumed by BMA.
Premium 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.
Risk Charge: 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.
Policy Charges: BMA deducts a policy charge of $25 per month in the first
policy year and $5 per month thereafter.
Cost of Insurance: A deduction for cost of insurance and cost of any riders
also is made monthly. This charge will depend on the specified amount, the
accumulation value and the sex, age and rate class of the primary insured.
Surrender Charge: A surrender charge will be imposed in the event of a
partial or full surrender in excess of 10% of the unloaned accumulation value.
The surrender charge will depend on the sex, age and rate class of the primary
insured. In addition, a fee of $25 will be assessed for partial surrender in
excess of 10% of the unloaned accumulation values.
Charges retained by BMA from the proceeds of sales of variable life
contracts aggregated $4,105 during the year ended December 31, 1999 and were
not significant during 1998.
3. Summary of Unit Transactions
Transactions in units of each subaccount were as follows:
<TABLE>
<CAPTION>
Units Units Net
Sold Redeemed Increase
------ -------- --------
<S> <C> <C> <C>
Year ended December 31, 1999
Investors Mark Series Fund:
Balanced............................................. -- -- --
Growth and Income.................................... 2,577 223 2,354
Large Cap Value...................................... 4,274 191 4,083
Small Cap Equity..................................... 394 43 351
Large Cap Growth..................................... 14,020 319 13,701
Intermediate Fixed Income............................ 313 56 257
Mid Cap Equity....................................... 4,408 269 4,139
Money Market......................................... 95,438 76,529 18,909
Global Fixed Income.................................. -- -- --
Berger Institutional Products Trust:
100 Fund............................................. 288 33 255
Growth and Income Fund............................... 1,081 155 926
Small Company Growth Fund............................ 613 51 562
International Fund................................... 2,221 302 1,919
</TABLE>
69
<PAGE>
BMA VARIABLE LIFE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS--(Continued)
<TABLE>
<CAPTION>
Units Units Net
Sold Redeemed Increase
------ -------- --------
<S> <C> <C> <C>
Conseco Series Trust:
Asset Allocation Portfolio........................... 1,436 223 1,213
Common Stock Portfolio............................... 1,704 196 1,508
Corporate Bond Portfolio............................. 71 10 61
Government Securities Portfolio...................... -- -- --
The Alger American Fund:
Growth Portfolio..................................... 13,167 875 12,292
Leveraged AllCap Portfolio........................... 3,087 499 2,588
MidCap Growth Portfolio.............................. 1,476 240 1,236
Small Capitalization Portfolio....................... 498 42 456
American Century Variable Portfolios, Inc.:
VP Income and Growth................................. 5,060 476 4,584
VP International..................................... 58 18 40
VP Value............................................. 2,122 69 2,053
Dreyfus Socially Responsible Growth Fund, Inc.......... 1,428 243 1,185
Dreyfus Stock Index Fund............................... 5,859 458 5,401
Dreyfus Variable Investment Fund:
Disciplined Stock Fund............................... 2,994 201 2,793
International Value Portfolio........................ -- -- --
Federated Insurance Series:
High-Income Bond Fund II............................. 1,800 92 1,708
International Equity Fund II......................... 151 11 140
Utility Fund II...................................... 86 26 60
Invesco Variable Investment Funds:
High-Yield Portfolio................................. 390 5 385
Industrial Income Portfolio.......................... 624 38 586
Lazard Retirement Series, Inc.:
Retirement Equity Portfolio.......................... -- -- --
Retirement Small Cap Portfolio....................... 428 37 391
Neuberger & Berman Advisors Management Trust:
Limited Maturity Bond Portfolio...................... 77 11 66
Partners Portfolio................................... 492 65 427
Strong Opportunity Fund II............................. 910 104 806
Strong Variable Insurance Funds, Inc.:
Growth Fund II....................................... 1,308 165 1,143
Van Eck Worldwide Insurance Trust:
Worldwide Bond Fund.................................. -- -- --
Worldwide Emerging Markets Fund...................... 356 21 335
Worldwide Hard Assets Fund........................... 423 40 383
Worldwide Real Estate Fund........................... -- -- --
</TABLE>
<TABLE>
<CAPTION>
Units
Sold
-----
<S> <C>
Period from December 1, 1998 (inception) to December 31, 1998
Investors Mark Series Fund:
Balanced................................................................ 100
Growth and Income....................................................... 100
Large Cap Value......................................................... 100
Small Cap Equity........................................................ 100
Large Cap Growth........................................................ 99
Intermediate Fixed Income............................................... 100
</TABLE>
70
<PAGE>
BMA VARIABLE LIFE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS--(Continued)
<TABLE>
<CAPTION>
Units
Sold
-----
<S> <C>
Period from December 1, 1998 (inception) to December 31, 1998--
(Continued)
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
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>
71
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
(A Member of the Generali Group of Companies)
Years ended December 31, 1999, 1998 and 1997
with Report of Independent Auditors
72
<PAGE>
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
(A Member of the Generali Group of Companies)
CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 1999, 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 (Loss)...................... 4
Consolidated Statements of Stockholder's Equity............................. 5
Consolidated Statements of Cash Flows....................................... 6
Notes to Consolidated Financial Statements.................................. 7
</TABLE>
73
<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, 1999 and 1998, and the
related consolidated statements of operations, comprehensive income (loss),
stockholder's equity and cash flows for each of the three years in the period
ended December 31, 1999. 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 auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
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, 1999 and 1998,
and the consolidated results of its operations and its cash flows for each of
the three years in the period ended December 31, 1999, in conformity with
accounting principles generally accepted in the United States.
/s/ Ernst & Young LLP
Kansas City, Missouri
February 3, 2000
74
<PAGE>
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
(A Member of the Generali Group of Companies)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31
---------------------
1999 1998
---------- ----------
(In Thousands)
<S> <C> <C>
Assets
Investments (Notes 1 and 3):
Securities available-for-sale, at fair value:
Fixed maturities (amortized cost--$1,284,919,000 in
1999 and
$1,257,705,000 in 1998).............................. $1,231,419 $1,277,121
Equity securities (cost--$45,102,000 in 1999 and
$36,214,000 in 1998)................................. 43,204 40,373
Mortgage loans on real estate, net of allowance for
credit losses of $10,385,000 in 1999
and $9,185,000 in 1998................................ 875,882 875,117
Policy loans........................................... 57,935 59,780
Short-term investments................................. 7,476 10,779
Other (Note 3)......................................... 32,444 44,084
---------- ----------
Total investments..................................... 2,248,360 2,307,254
Cash..................................................... 97,678 30,567
Accrued investment income................................ 20,054 18,078
Premium and other receivables............................ 20,271 12,017
Deferred policy acquisition costs........................ 134,343 112,311
Property, equipment and software (Note 6)................ 14,798 16,276
Reinsurance recoverables:
Paid benefits.......................................... 2,441 6,549
Benefits and claim reserves ceded...................... 111,515 95,476
Other assets (Note 1).................................... 13,099 14,852
Assets held in separate accounts (Note 1)................ 415,077 300,366
---------- ----------
Total assets.......................................... $3,077,636 $2,913,746
========== ==========
Liabilities and stockholder's equity
Future policy benefits:
Life and annuity (Notes 4 and 10)...................... $1,294,708 $1,253,531
Health................................................. 89,539 78,527
Contract account balances (Note 4)....................... 681,958 677,444
Policy and contract claims............................... 72,163 62,953
Unearned revenue reserve................................. 10,056 9,924
Other policyholder funds................................. 14,155 14,671
Current income taxes payable (Note 7).................... 486 2,300
Deferred income taxes (Note 7)........................... 7,936 10,650
Payable to affiliate (Note 10)........................... 627 771
Other liabilities (Note 12).............................. 80,831 84,183
Liabilities related to separate accounts (Notes 1 and 4). 415,077 300,366
---------- ----------
Total liabilities........................................ 2,667,536 2,495,320
Commitments and contingencies (Note 5)
Stockholder's equity (Notes 2 and 11):
Preferred stock of $1 par value per share; authorized
3,000,000 shares, none issued and outstanding......... -- --
Common stock of $1 par value per share; 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 (loss) (41,667) 10,730
Retained earnings...................................... 399,661 355,590
---------- ----------
Total stockholder's equity............................ 410,100 418,426
---------- ----------
Total liabilities and stockholder's equity............ $3,077,636 $2,913,746
========== ==========
</TABLE>
See accompanying notes.
75
<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
---------------------------
1999 1998 1997
-------- -------- --------
(In Thousands)
<S> <C> <C> <C>
Revenues:
Premiums (Note 9):
Life and annuity.............................. $131,667 $115,863 $108,816
Health........................................ 4,863 10,828 17,035
Other insurance considerations.................. 33,788 37,599 37,928
Net investment income (Note 3).................. 185,521 176,085 162,478
Realized gains, net (Note 3).................... 8,458 10,556 5,121
Other income.................................... 37,242 43,886 35,548
-------- -------- --------
Total revenues.............................. 401,539 394,817 366,926
Benefits and expenses:
Life and annuity benefits....................... 99,280 107,033 95,286
Health benefits................................. 938 3,021 6,533
Increase in policy liabilities including
interest credited to account balances.......... 115,785 103,298 103,012
Commissions..................................... 50,568 43,949 45,019
(Increase) decrease in deferred policy
acquisition costs.............................. 330 11,271 (1,229)
Taxes, licenses and fees........................ 2,417 2,579 3,329
Other operating costs and expenses.............. 63,019 71,991 76,782
-------- -------- --------
Total benefits and expenses................. 332,337 343,142 328,732
-------- -------- --------
Income from continuing operations before income
tax expense...................................... 69,202 51,675 38,194
Income tax expense (Note 7)....................... 23,119 15,876 2,353
-------- -------- --------
Income from continuing operations................. 46,083 35,799 35,841
Discontinued operations (Note 13):
Earnings (loss) from discontinued operations,
net of income tax benefit of $994,000 in 1999
and expense of $929,000 in 1998 and $179,000 in
1997........................................... (2,012) 2,527 348
-------- -------- --------
Income (loss) from discontinued operations........ (2,012) 2,527 348
-------- -------- --------
Net income.................................. $ 44,071 $ 38,326 $ 36,189
======== ======== ========
</TABLE>
See accompanying notes.
76
<PAGE>
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
(A Member of the Generali Group of Companies)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
<TABLE>
<CAPTION>
Year ended December 31
-------------------------
1999 1998 1997
------- ------- -------
(In Thousands)
<S> <C> <C> <C>
Net income.......................................... $44,071 $38,326 $36,189
Other comprehensive income (loss):
Unrealized holding gains (losses) arising during
period........................................... (76,822) 2,597 25,009
Less realized gains included in net income........ 12,473 6,760 1,868
------- ------- -------
Net unrealized gains (losses)................... (89,295) (4,163) 23,141
Effect on deferred policy acquisition costs......... 22,362 (1,483) (7,189)
Effect on unearned revenue reserve.................. (1,370) 55 474
Related deferred income taxes....................... 15,906 1,957 (5,748)
------- ------- -------
Other comprehensive income (loss)................... (52,397) (3,634) 10,678
------- ------- -------
Comprehensive income (loss)..................... $(8,326) $34,692 $46,867
======= ======= =======
</TABLE>
See accompanying notes.
77
<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
----------------------------
1999 1998 1997
-------- -------- --------
(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 and end of year............. 40,106 40,106 40,106
Accumulated other comprehensive income (loss):
Balance at beginning of year..................... 10,730 14,364 3,686
Net change in net unrealized gains (losses).... (52,397) (3,634) 10,678
-------- -------- --------
Balance at end of year........................... (41,667) 10,730 14,364
Retained earnings:
Balance at beginning of year..................... 355,590 317,264 281,075
Net income..................................... 44,071 38,326 36,189
-------- -------- --------
Balance at end of year........................... 399,661 355,590 317,264
-------- -------- --------
Total stockholder's equity......................... $410,100 $418,426 $383,734
======== ======== ========
</TABLE>
See accompanying notes.
78
<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
-------------------------------
1999 1998 1997
--------- --------- ---------
(In Thousands)
<S> <C> <C> <C>
Operating activities
Net income.................................... $ 44,071 $ 38,326 $ 36,189
Adjustments to reconcile net income to net
cash provided by operating activities:
Deferred income tax expense (benefit)........ 13,192 363 (8,416)
Realized gains, net.......................... (8,458) (10,556) (5,121)
Premium amortization (discount accretion),
net......................................... 193 (1,618) (975)
Policy loans lapsed in lieu of surrender
benefits.................................... 2,858 3,740 1,021
Depreciation................................. 2,469 2,524 3,778
Amortization................................. 782 782 782
Changes in assets and liabilities:
(Increase) decrease in accrued investment
income.................................... (1,976) 442 19
Increase in receivables and reinsurance
recoverables (net of $505,000 realized
loss in 1999)............................. (20,834) (24,876) (15,425)
Policy acquisition costs deferred.......... (25,451) (22,484) (28,449)
Policy acquisition costs amortized......... 25,781 33,755 27,220
Increase (decrease) in income taxes
payable................................... (1,814) 142 (2,187)
Increase in accrued policy benefits, claim
reserves, unearned revenues and
policyholder funds........................ 41,215 19,189 30,777
Interest credited to policyholder accounts. 80,499 77,358 79,312
(Increase) decrease in other assets and
other liabilities, net.................... (18,030) 2,344 7,269
Other, net................................... 391 19 (433)
--------- --------- ---------
Net cash provided by operating activities..... 134,888 119,450 125,361
Investing activities
Purchases of investments:
Securities available-for-sale:
Fixed maturities........................... (558,982) (603,142) (464,419)
Equity securities.......................... (48,088) (12,969) (31,625)
Mortgage and policy loans.................... (172,625) (310,127) (237,990)
Other........................................ (19,572) (41,118) --
Sales, calls or maturities of investments:
Maturities and calls of securities
available-for-sale:
Fixed maturities........................... 225,728 305,013 167,000
Sales of securities available-for-sale:
Fixed maturities........................... 312,069 360,296 284,124
Equity securities.......................... 44,158 22,632 14,379
Mortgage and policy loans.................... 169,498 277,325 98,554
Real estate.................................. -- -- 5,854
Purchase of property, equipment and software.. (1,331) (1,805) (1,949)
Net (increase) decrease in short-term
investments.................................. 3,303 (3,623) (1,456)
Distributions from unconsolidated related
parties...................................... 30,793 1,466 1,514
--------- --------- ---------
Net cash used in investing activities......... (15,049) (6,052) (166,014)
Financing activities
Deposits from interest sensitive and
investment-type contracts.................... 290,119 245,620 323,487
Withdrawals from interest sensitive and
investment-type contracts.................... (347,673) (375,459) (295,633)
Net proceeds from reverse repurchase
borrowing.................................... 143,200 30,189 40,925
Retirement of reverse repurchase borrowing.... (144,989) (20,863) (20,062)
Net proceeds from other borrowing............. 6,615 -- --
--------- --------- ---------
Net cash provided by (used in) financing
activities................................... (52,728) (120,513) 48,717
--------- --------- ---------
Net increase (decrease) in cash............... 67,111 (7,115) 8,064
Cash at beginning of year..................... 30,567 37,682 29,618
--------- --------- ---------
Cash at end of year........................... $ 97,678 $ 30,567 $ 37,682
========= ========= =========
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 equivalents
Cash paid during the year for:
Income taxes................................. $ 10,747 $ 16,300 $ 13,135
========= ========= =========
Interest paid on reverse repurchase and
other borrowings............................ $ 1,884 $ 299 $ 369
========= ========= =========
Supplemental schedule of noncash investing and
financing activities
Real estate acquired through foreclosure...... $ -- $ -- $ 1,236
========= ========= =========
</TABLE>
See accompanying notes.
79
<PAGE>
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
(A Member of the Generali Group of Companies)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
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.
Use of Estimates
The preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States 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.
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) unearned revenue
reserve (URR) and related deferred income taxes, are reported as unrealized
gains or losses directly in accumulated other comprehensive income (loss). The
DPAC and URR offsets to the unrealized gains or losses represents valuation
adjustments or reinstatements of DPAC and URR 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,
1999 and 1998, 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 declines 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 income on the
specific identification basis.
80
<PAGE>
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
(A Member of the Generali Group of Companies)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Impairment of Loans
The Financial Accounting Standards Board's (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.
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
81
<PAGE>
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
(A Member of the Generali Group of Companies)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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.
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, 1999 and 1998 was $32,791,000 and
$30,262,000, 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 (GICs). 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 $6,297,000
on December 31, 1999 and $3,409,000 on December 31, 1998.
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
(loss).
82
<PAGE>
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
(A Member of the Generali Group of Companies)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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 income in
the accompanying consolidated statements of operations. The guaranteed
interest payable 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 $408,780,000 on
December 31, 1999 and $296,957,000 on December 31, 1998.
Intangible Assets
At December 31, 1999, goodwill of $10,759,000 (1998--$11,541,000), net of
accumulated amortization of $4,889,000 (1998--$4,107,000) 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, 1999, 1998 and
1997.
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. The following represents the carrying amount
and fair value of significant assets and liabilities at December 31, 1999 and
1998:
<TABLE>
<CAPTION>
December 31, 1999 December 31, 1998
--------------------- ---------------------
Carrying Carrying
Amount Fair Value Amount Fair Value
---------- ---------- ---------- ----------
(In Thousands)
<S> <C> <C> <C> <C>
Fixed maturities (Note 3).......... $1,231,419 $1,231,419 $1,277,121 $1,277,121
Equity securities (Note 3)......... 43,204 43,204 40,373 40,373
Mortgage loans on real estate...... 875,882 852,238 875,117 934,712
Policy loans....................... 57,935 53,844 59,780 55,579
Short-term investments............. 7,476 7,476 10,779 10,779
Cash............................... 97,678 97,678 30,567 30,567
Reinsurance recoverables:
Paid benefits.................... 2,441 2,441 6,549 6,549
Benefits and claim reserves
ceded........................... 111,515 111,515 95,476 95,476
Assets held in separate accounts... 415,077 406,474 300,366 302,549
Investment-type insurance contracts
(Note 4).......................... 1,603,965 1,559,623 1,456,634 1,453,909
</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.
83
<PAGE>
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
(A Member of the Generali Group of Companies)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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.
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 on real estate and policy loans: The fair value for
mortgage loans on real estate 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.
Liabilities for flexible and single premium deferred annuities: The cash
surrender value of flexible and single premium deferred annuities
approximates their fair value.
Liabilities for 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, 1999 and
1998.
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.
Comprehensive Income (Loss)
Unrealized gains and losses on our available-for-sale securities are
included in other comprehensive income (loss) in stockholder's equity. Other
comprehensive income (loss) excludes net investment gains (losses) included in
net income which merely represent transfers from unrealized to realized gains
and losses. These amounts, which have been measured through the beginning of
the year, are net of income taxes and adjustments to deferred policy
acquisition costs, value of insurance in force acquired and unearned revenue
reserve.
84
<PAGE>
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
(A Member of the Generali Group of Companies)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Reclassifications
Certain amounts for 1998 and 1997 have been reclassified to conform to the
current year presentation.
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, 1999 and 1998, the Company's statutory stockholder's
equity was $250,774,000 and $226,345,000, respectively. Statutory net gain
from operations before realized capital gains and net income for each of the
three years in the period ended December 31, 1999 were as follows:
<TABLE>
<CAPTION>
Year ended December 31
-----------------------
1999 1998 1997
------- ------- -------
(In Thousands)
<S> <C> <C> <C>
Net gain from operations before realized capital
gains.......................................... $29,369 $36,305 $18,545
Net income...................................... 32,915 44,692 14,540
</TABLE>
3. Investment Operations
The Company's investments in securities available-for-sale are summarized
as follows:
<TABLE>
<CAPTION>
December 31, 1999
-------------------------------------------
Gross Gross
Amortized Unrealized Unrealized
Cost Gains Losses Fair Value
---------- ---------- ---------- ----------
(In Thousands)
<S> <C> <C> <C> <C>
Fixed maturities:
Bonds:
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies..... $ 74,125 $ -- $ (4,591) $ 69,534
Obligations of states and
political subdivisions........ 8,165 -- (121) 8,044
Debt securities issued by
foreign governments........... 3,560 29 (133) 3,456
Corporate securities........... 417,899 593 (14,941) 403,551
Mortgage-backed securities..... 761,504 356 (33,191) 728,669
Redeemable preferred stocks.... 19,666 -- (1,501) 18,165
---------- ------ -------- ----------
Total fixed maturities............. 1,284,919 978 (54,478) 1,231,419
Equity securities.................. 45,102 2,221 (4,119) 43,204
---------- ------ -------- ----------
$1,330,021 $3,199 $(58,597) $1,274,623
========== ====== ======== ==========
</TABLE>
85
<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, 1998
-------------------------------------------
Gross Gross
Amortized Unrealized Unrealized
Cost Gains Losses Fair Value
---------- ---------- ---------- ----------
(In Thousands)
<S> <C> <C> <C> <C>
Fixed maturities:
Bonds:
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 fixed securities............. 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>
The amortized cost and estimated fair value of fixed maturity securities at
December 31, 1999, 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............................ $ 15,545 $ 15,573
Due after one year through five years.............. 224,803 219,427
Due after five years through 10 years.............. 175,009 166,123
Due after 10 years................................. 108,058 101,627
---------- ----------
523,415 502,750
Mortgage-backed securities......................... 761,504 728,669
---------- ----------
Total fixed maturity securities.................... $1,284,919 $1,231,419
========== ==========
</TABLE>
86
<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
-----------------
1999 1998
-------- --------
(In Thousands)
<S> <C> <C>
State:
Missouri.............................................. $ 74,922 $ 62,462
California............................................ 67,674 69,913
Arizona............................................... 66,812 65,135
Texas................................................. 62,166 59,900
Florida............................................... 50,246 49,789
Utah.................................................. 48,450 44,110
Oklahoma.............................................. 39,410 38,394
Washington............................................ 33,674 38,136
Kansas................................................ 32,485 38,509
Other................................................. 400,043 408,769
-------- --------
$875,882 $875,117
======== ========
</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>
1999 1998 1997
---- ---- ------
(In Thousands)
<S> <C> <C> <C>
Impaired mortgage loans................................ $-- $ -- $1,069
Allowance for credit losses............................ -- -- 244
--- ---- ------
Net recorded investment in impaired loans.............. $-- $ -- $ 825
=== ==== ======
Average recorded investment in impaired loans.......... $-- $413 $1,325
=== ==== ======
Interest income on impaired loans...................... $-- $ -- $ 57
=== ==== ======
</TABLE>
87
<PAGE>
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
(A Member of the Generali Group of Companies)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Bonds, mortgage loans, preferred stocks and common stocks approximating
$3,840,000 and $4,900,000 were on deposit with regulatory authorities at
December 31, 1999 and 1998, respectively.
Set forth below is a summary of consolidated net investment income for the
years ended December 31:
<TABLE>
<CAPTION>
Year ended December 31
--------------------------
1999 1998 1997
-------- -------- --------
(In Thousands)
<S> <C> <C> <C>
Fixed maturities:
Bonds....................................... $102,990 $ 94,975 $ 92,741
Redeemable preferred stocks................. 1,917 1,603 1,309
Equity securities:
Common stocks............................... 957 702 793
Nonredeemable preferred stocks.............. 43 237 541
Mortgage loans on real estate................. 78,462 75,768 66,053
Real estate................................... 11 18 612
Policy loans.................................. 3,486 3,667 3,906
Short-term investments........................ 3,115 4,334 2,955
Other......................................... 2,898 2,685 1,223
-------- -------- --------
193,879 183,989 170,133
Less:
Net investment income from discontinued
operations................................. 5,681 5,443 5,480
Investment expenses......................... 2,677 2,461 2,175
-------- -------- --------
Net investment income from continuing
operations................................... $185,521 $176,085 $162,478
======== ======== ========
</TABLE>
Realized gains (losses) on securities disposed of during 1999, 1998 and
1997 consisted of the following:
<TABLE>
<CAPTION>
Year ended December 31
-------------------------
1999 1998 1997
------- ------- -------
(In Thousands)
<S> <C> <C> <C>
Fixed maturity securities:
Gross realized gains....................... $ 6,615 $ 5,149 $10,499
Gross realized losses...................... (1,636) (1,420) (4,690)
Equity securities:
Gross realized gains....................... 6,299 7,395 3,204
Gross realized losses...................... (744) (1,636) (777)
Other investments............................ (2,076) 1,068 (3,115)
------- ------- -------
Net realized gains........................... $ 8,458 $10,556 $ 5,121
======= ======= =======
</TABLE>
Sales of investments in securities in 1999, 1998 and 1997, excluding
maturities and calls, resulted in gross realized gains of $12,338,000,
$10,980,000 and $8,362,000 and gross realized losses of $2,318,000, $2,304,500
and $1,017,000, respectively.
There were no nonincome producing investments at December 31, 1999 and
1998.
88
<PAGE>
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
(A Member of the Generali Group of Companies)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The Company began investing in the Cypress Tree Investment Fund LLC during
1998. At December 31, 1999 and 1998, the Company has invested $18 million and
$40 million, respectively, in the partnership, which primarily invests in
senior secured loans. The Company's portion of the investment is approximately
16% and 43% of the total fund value at December 31, 1999 and 1998,
respectively, 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 (loss).
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>
December 31
-------------------------------------------
1999 1998
--------------------- ---------------------
Carrying Carrying
Amount Fair Value Amount Fair Value
---------- ---------- ---------- ----------
(In Thousands)
<S> <C> <C> <C> <C>
Guaranteed investment
contracts................... $ 645,619 $ 629,240 $ 640,137 $ 651,809
Flexible and single premium
deferred annuities.......... 543,269 523,519 516,131 495,873
Separate accounts............ 415,077 406,864 300,366 306,227
---------- ---------- ---------- ----------
Total investment-type
insurance contracts......... $1,603,965 $1,559,623 $1,456,634 $1,453,909
========== ========== ========== ==========
</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 April 2004. Certain other equipment and
facilities are rented monthly. Rental expense amounted to $781,000, $1,364,000
and $2,137,000 for the years ended December 31, 1999, 1998 and 1997,
respectively. As of December 31, 1999, the minimum future payments under
noncancelable operating leases for each of the next five years are as follows
(in thousands):
<TABLE>
<CAPTION>
Year ending December 31
-----------------------
<S> <C>
2000........................... $ 773
2001........................... 611
2002........................... 362
2003........................... 116
2004........................... 10
------
Total........................ $1,872
======
</TABLE>
Total outstanding commitments to fund mortgage loans were $11,632,500 and
$32,275,000 atDecember 31, 1999 and 1998, respectively.
89
<PAGE>
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
(A Member of the Generali Group of Companies)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The increase in the number of insurance companies that are under regulatory
supervision has resulted, and is expected to continue to result, in increased
assessments by state guaranty funds to cover losses to policyholders of
insolvent or rehabilitated insurance companies. Those mandatory assessments may
be partially recovered through a reduction in future premium taxes in certain
states. At December 31, 1999 and 1998, the Company accrued $350,000 and
$541,000, respectively, for guaranty fund assessments. Expenses incurred for
guaranty fund assessments were $333,000, $417,000 and $445,000 in 1999, 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.
6. Property, Equipment and Software
A summary of property, equipment and software and their respective
depreciation rates is as follows:
<TABLE>
<CAPTION>
December 31
Rate of ------------------
Depreciation 1999 1998
------------ -------- --------
(In Thousands)
<S> <C> <C> <C>
Home office building, including land
with a cost of $425,000............... 2% $ 23,218 $ 23,158
Other real estate not held-for-sale or
rental................................ 4% 208 820
Less accumulated depreciation.......... (13,667) (13,097)
-------- --------
9,759 10,881
Equipment and software................. 5%-33% 20,785 21,701
Less accumulated depreciation.......... (15,746) (16,306)
-------- --------
5,039 5,395
-------- --------
Total property, equipment and software. $ 14,798 $ 16,276
======== ========
</TABLE>
90
<PAGE>
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
(A Member of the Generali Group of Companies)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
7. Federal Income Taxes
The Company and its subsidiaries file a consolidated federal tax return.
Under a written agreement approved by the Board of Directors, the Company
collects from, or refunds to, the subsidiaries the amount of taxes or benefits
determined as if the Company and the subsidiaries filed separate returns.
The components of the provision for income taxes and the temporary
differences generating deferred income taxes are as follows:
<TABLE>
<CAPTION>
Year ended December 31
--------------------------
1999 1998 1997
------- ------- --------
(In Thousands)
<S> <C> <C> <C>
Current...................................... $ 8,933 $16,442 $ 10,948
Deferred:
Deferred policy acquisition costs.......... (204) (3,385) 143
Future policy benefits..................... 9,501 6,620 3,783
Accrual of discount........................ 438 560 197
Tax on realized gains greater than book.... (780) (1,610) 571
Recognition of tax effect previously
deferred on sale of affiliate stock in
prior period.............................. -- (1,311) (11,169)
Employee benefit plans..................... 3,002 (2,014) (2,206)
Prior year taxes........................... 1,698 1,018 --
Other, net................................. (463) 485 265
------- ------- --------
13,192 363 (8,416)
------- ------- --------
Total income tax expense..................... 22,125 16,805 2,532
Less income tax expense (benefit) from
discontinued operations..................... (994) 929 179
------- ------- --------
Total income tax expense from continuing
operations.................................. $23,119 $15,876 $ 2,353
======= ======= ========
</TABLE>
At December 31, 1999, the Company recorded an $8,000,000 valuation
allowance against deferred tax assets resulting from cumulative unrealized
losses on available-for-sale securities. The Company did not record any
valuation allowances against deferred tax assets at December 31, 1998 or 1997.
Total income taxes vary from the amounts computed by applying the federal
income tax rate of 35% to income before income tax expense for the following
reasons:
<TABLE>
<CAPTION>
Year ended December 31
--------------------------
1999 1998 1997
------- ------- --------
(In Thousands)
<S> <C> <C> <C>
Application of statutory rate to income
before taxes on income...................... $23,168 $19,296 $ 13,552
Tax-exempt municipal bond interest and
dividends received deductions............... (171) (287) (361)
Recognition of tax effect previously deferred
on sale of affiliate stock in a prior
period...................................... -- (1,311) (11,169)
Other........................................ (872) (893) 510
------- ------- --------
$22,125 $16,805 $ 2,532
======= ======= ========
</TABLE>
91
<PAGE>
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
(A Member of the Generali Group of Companies)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The significant components comprising the Company's deferred income tax
assets and liabilities as of December 31, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
December 31
---------------
1999 1998
------- -------
(In Thousands)
<S> <C> <C>
Deferred income tax liabilities:
Deferred policy acquisition costs...................... $26,142 $26,340
Unrealized investment gains............................ -- 5,778
Other.................................................. 9,754 9,860
------- -------
Total deferred income tax liability...................... 35,896 41,978
Deferred income tax assets:
Reserve for future policy benefits..................... 6,142 15,093
Unrealized investment losses, net of valuation
allowance of $8,000 in 1999........................... 10,128 --
Accrued expenses....................................... 6,642 10,969
Other.................................................. 5,048 5,266
------- -------
Total deferred income tax assets......................... 27,960 31,328
------- -------
Net deferred income tax liability........................ $ 7,936 $10,650
======= =======
</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 $297,000,000 at December 31,
1999.
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 1999, approximately
$3.4 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.
92
<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 plan's funded status at December 31:
<TABLE>
<CAPTION>
December 31
------------------
1999 1998
-------- --------
(In Thousands)
<S> <C> <C>
Change in benefit obligations:
Benefit obligation at beginning of year............ $ 66,944 $ 62,683
Service cost....................................... 1,835 1,873
Interest cost...................................... 4,556 4,557
Plan participants' contributions................... -- 1
Actuarial (gains) losses........................... (5,626) 1,249
Benefits paid...................................... (3,313) (3,419)
-------- --------
Benefit obligation at end of year.................... 64,396 66,944
Change in plan assets:
Fair value of plan assets at beginning of year..... 95,175 85,605
Actual return on plan assets....................... 18,537 12,988
Plan participant's contributions................... -- 1
Benefits paid...................................... (3,313) (3,419)
-------- --------
Fair value of plan assets at end of year............. 110,399 95,175
-------- --------
Funded status of the plan............................ 46,003 28,231
Unrecognized net actuarial loss...................... (41,634) (26,877)
Unrecognized prior service cost...................... 650 1,342
Unrecognized net asset at January 1, 1987 being
recognized over 15 years............................ (589) (883)
Adjustment to recognized minimum liability........... -- (2)
-------- --------
Prepaid pension cost................................. $ 4,430 $ 1,811
======== ========
</TABLE>
The additional minimum pension liability noted above results from the
pension plan for the Company's subsidiary, BMA Financial Services, Inc. Net
pension cost included the following components:
<TABLE>
<CAPTION>
Year ended December 31
--------------------------
1999 1998 1997
-------- ------- -------
(In Thousands)
<S> <C> <C> <C>
Service cost--benefits earned during the
period..................................... $ 1,835 $ 1,873 $ 1,767
Interest cost on projected benefit
obligation................................. 4,556 4,557 4,374
Actual return on plan assets................ (18,537) (12,988) (10,316)
Net amortization and deferral............... 9,529 5,005 2,812
-------- ------- -------
Net pension benefit......................... $ (2,617) $(1,553) $(1,363)
======== ======= =======
</TABLE>
In determining the actuarial present value of the projected benefit
obligation, the weighted-average discount rate utilized was 7.75% for 1999, 7%
for 1998 and 7.5% for 1997. The rate of increase in future compensation levels
used for 1999 was 7.5% for employees at the younger attained ages grading to
3.5% for older employees, the rate was 7% grading to 3% for 1998 and 5% for
1997. The expected long-term rate of return on assets was 8% in 1999, 1998 and
1997.
93
<PAGE>
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
(A Member of the Generali Group of Companies)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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.
The following table sets forth the combined supplemental retirement
programs' and deferred compensation plan's funded status at:
<TABLE>
<CAPTION>
December 31
------------------
1999 1998
-------- --------
(In Thousands)
<S> <C> <C>
Change in benefit obligations:
Benefit obligation at beginning of year............ $ 12,512 $ 11,281
Service cost....................................... 292 235
Interest cost...................................... 844 813
Actuarial losses................................... 563 1,085
Benefits paid...................................... (938) (902)
-------- --------
Benefit obligation at end of year.................... 13,273 12,512
Change in plan assets:
Fair value of plan assets at beginning and end of
year.............................................. -- --
-------- --------
Funded status of the plan (underfunded).............. (13,273) (12,512)
Unrecognized net actuarial loss...................... 3,460 3,164
Unrecognized prior service cost...................... 429 659
Unrecognized net asset at January 1, 1987 being
recognized over 15 years............................ 260 389
Adjustment to recognized minimum liability........... (2,212) (2,789)
-------- --------
Accrued pension cost................................. (11,336) (11,089)
Accrued benefit liability............................ 10,648 10,041
Intangible asset..................................... 688 1,048
-------- --------
Net amount recognized................................ $ -- $ --
======== ========
</TABLE>
94
<PAGE>
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
(A Member of the Generali Group of Companies)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Net pension cost included the following components:
<TABLE>
<CAPTION>
Year ended December
31
--------------------
1999 1998 1997
------ ------ ------
(In Thousands)
<S> <C> <C> <C>
Service cost--benefits earned during the period..... $ 292 $ 235 $ 190
Interest cost on projected benefit obligation....... 844 813 783
Net amortization and deferral....................... 626 541 469
------ ------ ------
Net pension cost.................................... $1,762 $1,589 $1,442
====== ====== ======
</TABLE>
In determining the actuarial present value of the projected benefit
obligation, the weighted-average discount rate utilized was 7.75% for 1999, 7%
for 1998 and 7.5% for 1997. The rate of increase in future compensation levels
used was 5.25% for 1999, 4.5% for 1998 and 5% for 1997.
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 $1,086,000 in 1999, $1,153,000 in 1998 and $1,099,000 in 1997.
Participants are fully vested in the Company match after five years of
service.
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 no costs
related to this plan in 1999, $33,000 in 1998 and $230,000 in 1997.
95
<PAGE>
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
(A Member of the Generali Group of Companies)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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:
<TABLE>
<CAPTION>
December 31
------------------
1999 1998
-------- --------
(In Thousands)
<S> <C> <C>
Change in benefit obligations:
Projected benefit obligation at beginning of year. $ 11,401 $ 11,490
Service cost...................................... 112 108
Interest cost..................................... 760 777
Actuarial (gains) losses.......................... (73) 260
Benefits paid..................................... (1,545) (1,234)
-------- --------
Projected benefit obligation at end of year......... 10,655 11,401
Change in plan assets:
Fair value of plan assets at beginning and end of
year............................................. -- --
-------- --------
Funded status of the plan (underfunded)............. (10,655) (11,401)
Unrecognized net actuarial loss..................... 455 529
Unrecognized prior service cost..................... 1,921 2,215
Unrecognized transition obligation.................. 3,814 4,107
-------- --------
Accrued pension cost................................ (4,465) (4,550)
Accrued benefit liability........................... 4,465 4,550
-------- --------
Net amount recognized............................... $ -- $ --
======== ========
</TABLE>
Net periodic postretirement benefit cost includes the following components:
<TABLE>
<CAPTION>
Year ended December
31
--------------------
1999 1998 1997
------ ------ ------
(In Thousands)
<S> <C> <C> <C>
Service cost........................................ $ 112 $ 108 $ 122
Interest cost....................................... 760 777 878
Amortization of transition obligation over 20 years. 293 293 327
Amortization of past service costs.................. 294 295 407
------ ------ ------
Net periodic benefit cost........................... 1,459 1,473 1,734
Plan curtailment adjustment......................... -- 770 --
------ ------ ------
Final periodic postretirement benefit cost.......... $1,459 $2,243 $1,734
====== ====== ======
</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.
96
<PAGE>
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
(A Member of the Generali Group of Companies)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 7.75%, 7.00% and 7.25% at December 31,
1999, 1998 and 1997, respectively.
As part 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>
Year ended December 31
-----------------------------
1999 1998 1997
--------- -------- --------
(In Thousands)
<S> <C> <C> <C>
Direct.................................... $ 144,224 $118,315 $118,192
Assumed................................... 174,794 152,844 134,541
Ceded..................................... (78,023) (73,466) (54,613)
--------- -------- --------
Total net premium......................... 240,995 197,693 198,120
Less net premium from discontinued
operations............................... (104,465) (71,002) (72,269)
--------- -------- --------
Total net premium from continuing
operations............................... $ 136,530 $126,691 $125,851
========= ======== ========
</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, 1999, the Company had
ceded to other life insurance companies individual life insurance in force of
approximately $33.1 billion and group life of approximately $1.2 billion.
Benefits and reserves ceded to other insurers amounted to $73,536,000,
$54,670,000 and $42,069,000 during the years ended December 31, 1999, 1998 and
1997, respectively. At December 31, 1999 and 1998, policy reserves ceded to
other insurers were $89,362,000 and $77,460,000, respectively. Claim reserves
ceded amounted to $22,153,000 and $18,016,000 at December 31, 1999 and 1998,
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.
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 1999, 1998 or
1997. The Company retrocedes a portion of the life insurance it assumes to
Generali. In accordance with this agreement, the Company ceded premiums of
$575,000, $756,000 and $873,000 during 1999, 1998 and 1997, respectively. The
Company ceded claims of $121,000 during 1999, $240,000 during 1998 and no
claims during 1997.
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, $9 million, $8 million and $35
million in account balances were ceded to Generali in 1999, 1998 and 1997,
respectively, and Generali loaned such amounts back to the Company. Account
balances ceded and loaned back at December 31, 1999 and
97
<PAGE>
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
(A Member of the Generali Group of Companies)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
1998 were $184 million and $196 million, respectively. The recoverable amount
from Generali was offset against the loan. The net expense related to this
agreement was $2,034,000, $1,564,000 and $1,895,000 for the years ended
December 31, 1999, 1998 and 1997, respectively. The Company held payables to
Generali of $627,000 and $771,000 at December 31, 1999 and 1998, 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 (loss)" in
stockholder's equity are summarized as follows:
<TABLE>
<CAPTION>
December 31
-----------------
1999 1998
-------- -------
(In Thousands)
<S> <C> <C>
Net unrealized gains (losses) on securities:
Fixed maturities................................. $(53,500) $19,416
Equity securities................................ (1,898) 4,159
Securities held in separate account.............. (9,315) 1,593
Other............................................ 148 (438)
-------- -------
Net unrealized gains (losses)...................... (64,565) 24,730
Adjustment to deferred policy acquisition costs.... 13,655 (8,707)
Adjustment to unearned revenue reserve............. (885) 485
Deferred income taxes.............................. 10,128 (5,778)
-------- -------
Net unrealized gains (losses)...................... $(41,667) $10,730
======== =======
</TABLE>
12. Borrowed Money
The Company has an outstanding liability for borrowed money in the amount
of $35,015,000 as of December 31, 1999, which is included in other
liabilities. This includes $28,400,000 that is a 90-day reverse repurchase
agreement due February 11, 2000 at a rate of 5.70%. Pledged collateral for
this debt consists of GNMA and FNMA securities with a face amount of
$36,509,000. On the trade date of this agreement, November 10, 1999, these
securities had a market value of $31,710,000. The remaining $6,615,000 are two
separate longer term items through the Federal Home Loan Bank: $3,535,000 is
due January 16, 2002 at a rate of 6.36% and $3,080,000 is due August 2, 2001
at a rate of 6.33%. The Company has the ability to borrow up to $80 million
from the Federal Home Loan Bank. The Company's intent is to take advantage of
investment opportunities by matching borrowing maturities to asset maturities
that have a favorable interest rate spread.
13. Discontinued Operations
In October of 1999, the Company adopted a plan to dispose of its group
insurance line of business. Accordingly, the group line of business was
considered a discontinued operation during the year ended 1999 and the
consolidated statement of operations for 1999, 1998 and 1997 separately
reported the operating results of the discontinued operations, net of related
income taxes.
The Company reached an agreement to sell the group line of business in
January 2000 and expects to close the sale in 2000. The Company estimates that
a gain on the disposal of this line of business will be realized and
recognized in 2000.
98
<PAGE>
APPENDIX A
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 fee). When these costs are taken into account, the net annual
investment return rates (net of an average of approximately .97% for these
charges) are approximately -.97%, 5.03% and 11.03%.
It is important to be aware that the illustrations assume 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 .97% of the
average net assets of the Investment Option. This is the average of the fees
and expenses of the Investment Options in 1999. The expenses of .97% 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 1.57%. The investment advisers
currently anticipate that the current waiver and/or reimbursement arrangements
will continue through at least May 1, 2001 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 illustrations assume 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.
A-1
<PAGE>
BMA
Advantage 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
<TABLE>
<CAPTION>
Death Proceeds Accumulation Value
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross
Accumulated Annual Investment Return of Annual Investment Return of
End of at 5% ------------------------------------- -------------------------------------
Policy Interest 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross
Year Per Year (-0.97% Net) (5.03% Net) (11.03% Net) (-0.97% Net) (5.03% Net) (11.03% Net)
------ ----------- ------------ ----------- ------------ ------------ ----------- ------------
<S> <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 2,729
3 6,554 150,000 150,000 150,000 3,350 3,827 4,346
4 8,961 150,000 150,000 150,000 4,409 5,196 6,087
5 11,488 150,000 150,000 150,000 5,403 6,577 7,960
6 14,141 150,000 150,000 150,000 6,332 7,969 9,978
7 16,927 150,000 150,000 150,000 7,187 9,363 12,147
8 19,853 150,000 150,000 150,000 7,959 10,750 14,476
9 22,924 150,000 150,000 150,000 8,643 12,123 16,976
10 26,149 150,000 150,000 150,000 9,227 13,471 19,655
11 29,536 150,000 150,000 150,000 9,774 14,877 22,654
12 33,092 150,000 150,000 150,000 10,205 16,247 25,889
13 36,825 150,000 150,000 150,000 10,514 17,576 29,387
14 40,746 150,000 150,000 150,000 10,693 18,854 33,174
15 44,862 150,000 150,000 150,000 10,726 20,063 37,279
16 49,184 150,000 150,000 150,000 10,596 21,187 41,734
17 53,722 150,000 150,000 150,000 10,285 22,206 46,578
18 58,487 150,000 150,000 150,000 9,766 23,092 51,851
19 63,491 150,000 150,000 150,000 9,007 23,812 57,601
20 68,744 150,000 150,000 150,000 7,975 24,328 63,889
<CAPTION>
Cash Surrender Value
Assuming Hypothetical Gross
Annual Investment Return of
End of -------------------------------------
Policy 0% Gross 6% Gross 12% Gross
Year (-0.97% Net) (5.03% Net) (11.03% Net)
------ ------------ ----------- ------------
<S> <C> <C> <C>
1 0 0 0
2 0 0 254
3 875 1,352 1,871
4 1,934 2,721 3,612
5 3,349 4,523 5,906
6 4,674 6,311 8,320
7 5,949 8,125 10,910
8 7,143 9,933 13,659
9 8,222 11,702 16,555
10 9,227 13,471 19,655
11 9,774 14,877 22,654
12 10,205 16,247 25,889
13 10,514 17,576 29,387
14 10,693 18,854 33,174
15 10,726 20,063 37,279
16 10,596 21,187 41,734
17 10,285 22,206 46,578
18 9,766 23,092 51,851
19 9,007 23,812 57,601
20 7,975 24,328 63,889
</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 Investment Options selected by the Owner.
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.
A-2
<PAGE>
BMA
Advantage Variable Universal Life
Male Age 45 Preferred Non-Tobacco
Initial Specified Amount: $150,000
Planned Premium: $1,980
Assuming Current Charges
Death Benefit Option: Level
<TABLE>
<CAPTION>
Death Proceeds Accumulation Value
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross
Accumulated Annual Investment Return of Annual Investment Return of
End of at 5% ------------------------------------- -------------------------------------
Policy Interest 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross
Year Per Year (-0.97% Net) (5.03% Net) (11.03% Net) (-0.97% Net) (5.03% Net) (11.03% Net)
------ ----------- ------------ ----------- ------------ ------------ ----------- ------------
<S> <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 2,868
3 6,554 150,000 150,000 150,000 3,598 4,093 4,630
4 8,961 150,000 150,000 150,000 4,798 5,623 6,553
5 11,488 150,000 150,000 150,000 5,957 7,199 8,655
6 14,141 150,000 150,000 150,000 7,078 8,823 10,956
7 16,927 150,000 150,000 150,000 8,158 10,497 13,473
8 19,853 150,000 150,000 150,000 9,196 12,220 16,230
9 22,924 150,000 150,000 150,000 10,191 13,994 19,249
10 26,149 150,000 150,000 150,000 11,138 15,816 22,557
11 29,536 150,000 150,000 150,000 12,113 17,788 26,319
12 33,092 150,000 150,000 150,000 13,037 19,819 30,460
13 36,825 150,000 150,000 150,000 13,900 21,905 35,016
14 40,746 150,000 150,000 150,000 14,708 24,052 40,041
15 44,862 150,000 150,000 150,000 15,455 26,259 45,584
16 49,184 150,000 150,000 150,000 16,075 28,469 51,659
17 53,722 150,000 150,000 150,000 16,625 30,737 58,376
18 58,487 150,000 150,000 150,000 17,112 33,073 65,822
19 63,491 150,000 150,000 150,000 17,525 35,473 74,080
20 68,744 150,000 150,000 150,000 17,863 37,943 83,253
<CAPTION>
Cash Surrender Value
Assuming Hypothetical Gross
Annual Investment Return of
End of -------------------------------------
Policy 0% Gross 6% Gross 12% Gross
Year (-0.97% Net) (5.03% Net) (11.03% Net)
------ ------------ ----------- ------------
<S> <C> <C> <C>
1 0 0 0
2 0 133 393
3 1,123 1,618 2,155
4 2,323 3,148 4,078
5 3,903 5,144 6,601
6 5,420 7,165 9,298
7 6,920 9,259 12,236
8 8,379 11,403 15,413
9 9,770 13,573 18,829
10 11,138 15,816 22,557
11 12,113 17,788 26,319
12 13,037 19,819 30,460
13 13,900 21,905 35,016
14 14,708 24,052 40,041
15 15,455 26,259 45,584
16 16,075 28,469 51,659
17 16,625 30,737 58,376
18 17,112 33,073 65,822
19 17,525 35,473 74,080
20 17,863 37,943 83,253
</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 Investment Options selected by the Owner.
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.
A-3
<PAGE>
BMA
Advantage Variable Universal Life
Male Age 55 Preferred Non-Tobacco
Initial Specified Amount: $150,000
Planned Premium: $3,654
Assuming Guaranteed Charges
Death Benefit Option: Level
<TABLE>
<CAPTION>
Death Proceeds Accumulation Value Cash Surrender Value
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross Assuming Hypothetical Gross
Accumulated Annual Investment Return of Annual Investment Return of Annual Investment Return of
End of at 5% ------------------------------ ------------------------------ ------------------------------
Policy Interest 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross
Year Per Year (-0.97%) (5.03%) (11.03% Net) (-0.97%) (5.03% Net) (11.03%) (-0.97%) (5.03% Net) (11.03%)
------ ----------- -------- -------- ------------ -------- ----------- --------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 3,837 150,000 150,000 150,000 1,954 2,114 2,274 0 0 0
2 7,865 150,000 150,000 150,000 3,951 4,398 4,865 297 744 1,211
3 12,095 150,000 150,000 150,000 5,806 6,671 7,614 2,152 3,017 3,960
4 16,537 150,000 150,000 150,000 7,515 8,928 10,532 3,861 5,274 6,878
5 21,200 150,000 150,000 150,000 9,063 11,154 13,628 6,031 8,121 10,595
6 26,097 150,000 150,000 150,000 10,440 13,335 16,912 7,992 10,887 14,463
7 31,238 150,000 150,000 150,000 11,631 15,456 20,394 9,804 13,629 18,567
8 36,637 150,000 150,000 150,000 12,614 17,495 24,084 11,409 16,289 22,878
9 42,306 150,000 150,000 150,000 13,365 19,424 27,991 12,744 18,803 27,369
10 48,258 150,000 150,000 150,000 13,856 21,214 32,125 13,856 21,214 32,125
11 54,507 150,000 150,000 150,000 14,177 22,993 36,722 14,177 22,993 36,722
12 61,069 150,000 150,000 150,000 14,192 24,597 41,646 14,192 24,597 41,646
13 67,959 150,000 150,000 150,000 13,869 25,996 46,944 13,869 25,996 46,944
14 75,194 150,000 150,000 150,000 13,177 27,158 52,673 13,177 27,158 52,673
15 82,790 150,000 150,000 150,000 12,073 28,040 58,902 12,073 28,040 58,902
16 90,767 150,000 150,000 150,000 10,489 28,577 65,705 10,489 28,577 65,705
17 99,142 150,000 150,000 150,000 8,253 28,609 73,124 8,253 28,609 73,124
18 107,936 150,000 150,000 150,000 5,420 28,173 81,370 5,420 28,173 81,370
19 117,169 150,000 150,000 150,000 1,761 27,059 90,552 1,761 27,059 90,552
20 126,864 Lapse 150,000 150,000 Lapse 25,104 100,883 Lapse 25,104 100,883
</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 Investment Options selected by the Owner.
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.
A-4
<PAGE>
BMA
Advantage Variable Universal Life
Male Age 55 Preferred Non-Tobacco
Initial Specified Amount: $150,000
Planned Premium: $3,654
Assuming Current Charges
Death Benefit Option: Level
<TABLE>
<CAPTION>
Death Proceeds Accumulation Value
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross
Accumulated Annual Investment Return of Annual Investment Return of
End of at 5% ------------------------------------- -------------------------------------
Policy Interest 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross
Year Per Year (-0.97% Net) (5.03% Net) (11.03% Net) (-0.97% Net) (5.03% Net) (11.03% Net)
------ ----------- ------------ ----------- ------------ ------------ ----------- ------------
<S> <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 4,671 5,159 5,668
3 12,095 150,000 150,000 150,000 6,991 7,956 9,003
4 16,537 150,000 150,000 150,000 9,220 10,822 12,633
5 21,200 150,000 150,000 150,000 11,354 13,758 16,586
6 26,097 150,000 150,000 150,000 13,395 16,768 20,900
7 31,238 150,000 150,000 150,000 15,336 19,848 25,610
8 36,637 150,000 150,000 150,000 17,177 23,004 30,764
9 42,306 150,000 150,000 150,000 18,908 26,230 36,405
10 48,258 150,000 150,000 150,000 20,517 29,521 42,584
11 54,507 150,000 150,000 150,000 22,122 33,049 49,608
12 61,069 150,000 150,000 150,000 23,614 36,680 57,381
13 67,959 150,000 150,000 150,000 24,990 40,424 66,004
14 75,194 150,000 150,000 150,000 26,248 44,289 75,593
15 82,790 150,000 150,000 150,000 27,368 48,273 86,273
16 90,767 150,000 150,000 150,000 28,041 52,130 98,051
17 99,142 150,000 150,000 150,000 28,519 56,083 111,257
18 107,936 150,000 150,000 150,000 28,833 60,179 126,134
19 117,169 150,000 150,000 155,783 28,969 64,427 142,920
20 126,864 150,000 150,000 172,896 28,887 68,826 161,585
<CAPTION>
Cash Surrender Value
Assuming Hypothetical Gross
Annual Investment Return of
End of -------------------------------------
Policy 0% Gross 6% Gross 12% Gross
Year (-0.97% Net) (5.03% Net) (11.03% Net)
------ ------------ ----------- ------------
<S> <C> <C> <C>
1 0 0 0
2 1,017 1,505 2,014
3 3,337 4,302 5,349
4 5,566 7,168 8,979
5 8,321 10,725 13,553
6 10,947 14,319 18,452
7 13,509 18,021 23,783
8 15,971 21,798 29,558
9 18,286 25,609 35,784
10 20,517 29,521 42,584
11 22,122 33,049 49,608
12 23,614 36,680 57,381
13 24,990 40,424 66,004
14 26,248 44,289 75,593
15 27,368 48,273 86,273
16 28,041 52,130 98,051
17 28,519 56,083 111,257
18 28,833 60,179 126,134
19 28,969 64,427 142,920
20 28,887 68,826 161,585
</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 Investment Options selected by the Owner.
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.
A-5
<PAGE>
BMA
Advantage Variable Universal Life
Female Age 50 Preferred Non-Tobacco
Initial Specified Amount: $150,000
Planned Premium: $2,232
Assuming Guaranteed Charges
Death Benefit Option: Level
<TABLE>
<CAPTION>
Death Proceeds Accumulation Value Cash Surrender Value
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross Assuming Hypothetical Gross
Accumulated Annual Investment Return of Annual Investment Return of Annual Investment Return of
End of at 5% ------------------------------ ------------------------------ ------------------------------
Policy Interest 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross
Year Per Year (-0.97%) (5.03%) (11.03% Net) (-0.97%) (5.03% Net) (11.03%) (-0.97%) (5.03% Net) (11.03%)
------ ----------- -------- -------- ------------ -------- ----------- --------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 2,344 150,000 150,000 150,000 1,160 1,256 1,353 0 0 0
2 4,804 150,000 150,000 150,000 2,438 2,709 2,992 0 198 481
3 7,388 150,000 150,000 150,000 3,649 4,177 4,751 1,138 1,666 2,240
4 10,101 150,000 150,000 150,000 4,785 5,653 6,637 2,274 3,142 4,126
5 12,950 150,000 150,000 150,000 5,847 7,138 8,661 3,762 5,054 6,577
6 15,941 150,000 150,000 150,000 6,832 8,628 10,838 5,149 6,946 9,155
7 19,082 150,000 150,000 150,000 7,741 10,125 13,183 6,485 8,870 11,928
8 22,379 150,000 150,000 150,000 8,576 11,630 15,718 7,747 10,801 14,889
9 25,842 150,000 150,000 150,000 9,340 13,147 18,468 8,913 12,720 18,041
10 29,478 150,000 150,000 150,000 10,031 14,674 21,456 10,031 14,674 21,456
11 33,295 150,000 150,000 150,000 10,718 16,305 24,838 10,718 16,305 24,838
12 37,303 150,000 150,000 150,000 11,312 17,938 28,527 11,312 17,938 28,527
13 41,512 150,000 150,000 150,000 11,790 19,551 32,539 11,790 19,551 32,539
14 45,931 150,000 150,000 150,000 12,125 21,119 36,896 12,125 21,119 36,896
15 50,572 150,000 150,000 150,000 12,292 22,616 41,624 12,292 22,616 41,624
16 55,444 150,000 150,000 150,000 12,276 24,029 46,769 12,276 24,029 46,769
17 60,559 150,000 150,000 150,000 12,066 25,344 52,385 12,066 25,344 52,385
18 65,931 150,000 150,000 150,000 11,655 26,557 58,545 11,655 26,557 58,545
19 71,571 150,000 150,000 150,000 11,042 27,661 65,335 11,042 27,661 65,335
20 77,493 150,000 150,000 150,000 10,209 28,642 72,846 10,209 28,642 72,846
</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 Investment Options selected by the Owner.
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.
A-6
<PAGE>
BMA
Advantage Variable Universal Life
Female Age 50 Preferred Non-Tobacco
Initial Specified Amount: $150,000
Planned Premium: $2,232
Assuming Current Charges
Death Benefit Option: Level
<TABLE>
<CAPTION>
Death Proceeds Accumulation Value
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross
Accumulated Annual Investment Return of Annual Investment Return of
End of at 5% ------------------------------------- -------------------------------------
Policy Interest 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross
Year Per Year (-0.97% Net) (5.03% Net) (11.03% Net) (-0.97% Net) (5.03% Net) (11.03% Net)
------ ----------- ------------ ----------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 2,344 150,000 150,000 150,000 1,226 1,325 1,424
2 4,804 150,000 150,000 150,000 2,655 2,936 3,230
3 7,388 150,000 150,000 150,000 4,042 4,599 5,205
4 10,101 150,000 150,000 150,000 5,385 6,314 7,363
5 12,950 150,000 150,000 150,000 6,684 8,082 9,724
6 15,941 150,000 150,000 150,000 7,940 9,905 12,307
7 19,082 150,000 150,000 150,000 9,155 11,787 15,140
8 22,379 150,000 150,000 150,000 10,329 13,734 18,251
9 25,842 150,000 150,000 150,000 11,472 15,755 21,678
10 29,478 150,000 150,000 150,000 12,582 17,853 25,453
11 33,295 150,000 150,000 150,000 13,746 20,147 29,771
12 37,303 150,000 150,000 150,000 14,876 22,536 34,548
13 41,512 150,000 150,000 150,000 15,964 25,016 39,832
14 45,931 150,000 150,000 150,000 16,993 27,579 45,666
15 50,572 150,000 150,000 150,000 17,980 30,243 52,128
16 55,444 150,000 150,000 150,000 18,865 32,960 59,250
17 60,559 150,000 150,000 150,000 19,707 35,788 67,155
18 65,931 150,000 150,000 150,000 20,502 38,733 75,936
19 71,571 150,000 150,000 150,000 21,263 41,811 85,706
20 77,493 150,000 150,000 150,000 21,990 45,031 96,582
<CAPTION>
Cash Surrender Value
Assuming Hypothetical Gross
Annual Investment Return of
End of -------------------------------------
Policy 0% Gross 6% Gross 12% Gross
Year (-0.97% Net) (5.03% Net) (11.03% Net)
------ ------------ ----------- ------------
<S> <C> <C> <C>
1 0 0 0
2 144 425 719
3 1,531 2,088 2,694
4 2,874 3,803 4,852
5 4,600 5,998 7,639
6 6,258 8,222 10,625
7 7,899 10,532 13,885
8 9,500 12,905 17,422
9 11,045 15,328 21,251
10 12,582 17,853 25,453
11 13,746 20,147 29,771
12 14,876 22,536 34,548
13 15,964 25,016 39,832
14 16,993 27,579 45,666
15 17,980 30,243 52,128
16 18,865 32,960 59,250
17 19,707 35,788 67,155
18 20,502 38,733 75,936
19 21,263 41,811 85,706
20 21,990 45,031 96,582
</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 Investment Options selected by the Owner.
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.
A-7
<PAGE>
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 1 10 Years/
Investment Option Date Year 5 Years Since Inception
----------------- --------- ----- ------- ---------------
<S> <C> <C> <C> <C>
INVESTORS MARK SERIES
FUND, INC.
Intermediate Fixed
Income................. 11/13/97 -0.19% N/A 2.91%
Mid Cap Equity.......... 11/13/97 2.26% N/A 6.78%
Money Market............ 11/13/97 4.60% N/A 4.87%
Global Fixed Income..... 11/13/97 -0.27% N/A 4.02%
Small Cap Equity........ 11/13/97 62.16% N/A 13.94%
Large Cap Growth........ 11/13/97 35.46% N/A 31.90%
Large Cap Value......... 12/2/97 0.79% N/A 1.26%
Growth & Income......... 11/12/97 16.65% N/A 15.59%
Balanced................ 11/17/97 8.21% N/A 0.88%
BERGER INSTITUTIONAL
PRODUCTS TRUST
Berger IPT--Growth...... 5/1/96 49.13% N/A 21.60%
Berger IPT--Growth and
Income................. 5/1/96 59.05% N/A 31.98%
Berger IPT--Small
Company Growth......... 5/1/96 91.45% N/A 26.24%
Berger IPT--
International.......... 8/1/97 31.24% N/A 16.17%
CONSECO SERIES TRUST
Balanced................ 5/1/87 30.83% 24.85% 16.85%
Equity.................. 8/20/84 50.28% 35.08% 21.18%
Fixed Income............ 5/1/93 -0.44% 7.92% 6.23%
Government Securities... 10/19/83 -2.48% 6.61% 7.30%
THE ALGER AMERICAN FUND
Alger American Growth... 1/9/89 33.74% 30.94% 23.05%
Alger American Leveraged
AllCap................. 1/25/95 78.06% N/A 46.44%
Alger American MidCap
Growth................. 5/3/93 31.85% 25.48% 24.72%
Alger American Small
Capitalization......... 9/21/88 43.42% 22.64% 20.86%
</TABLE>
B-1
<PAGE>
<TABLE>
<CAPTION>
Portfolio
Inception 10 Years/
Investment Option Date 1 Year 5 Years Since Inception
----------------- --------- ------ ------- ---------------
<S> <C> <C> <C> <C>
AMERICAN CENTURY VARIABLE PORTFOLIOS,
INC.
VP Income & Growth................. 10/30/97 18.02% N/A 24.69%
VP International .................. 5/1/94 64.04% 24.28% 20.07%
VP Value........................... 5/1/96 -0.85% N/A 11.10%
THE DREYFUS SOCIALLY RESPONSIBLE
GROWTH FUND, INC.................... 10/7/93 30.08% 28.66% 24.11%
DREYFUS STOCK INDEX FUND............. 9/29/89 20.60% 28.07% 17.70%
DREYFUS VARIABLE INVESTMENT FUND
Dreyfus VIF Disciplined Stock...... 5/1/96 18.45% N/A 26.61%
Dreyfus VIF International Value.... 5/1/96 27.82% N/A 12.93%
FEDERATED INSURANCE SERIES
Federated High Income Bond II...... 3/1/94 2.31% 10.48% 8.22%
Federated International Equity II.. 5/8/95 84.88% N/A 25.39%
Federated Utility II............... 2/10/94 1.69% 15.25% 12.15%
INVESCO VARIABLE INVESTMENT FUNDS,
INC.
INVESCO VIF--High Yield............ 5/27/94 9.20% 12.65% 11.38%
INVESCO VIF--Equity Income......... 8/10/94 14.84% 21.81% 20.34%
LAZARD RETIREMENT SERIES, INC.
Lazard Retirement Equity........... 2/19/98 8.16% N/A 10.68%
Lazard Retirement Small Cap........ 11/4/97 5.13% N/A 0.13%
NEUBERGER & BERMAN ADVISERS
MANAGEMENT TRUST
Limited Maturity Bond.............. 9/10/84 1.48% 5.52% 5.86%
Partners........................... 3/22/94 7.37% 21.03% 17.47%
STRONG OPPORTUNITY FUND II, INC.
Strong Opportunity Fund II......... 5/8/92 34.91% 23.36% 17.76%
STRONG VARIABLE INSURANCE FUNDS, INC.
Strong Mid Cap Growth Fund II...... 12/31/96 89.88% N/A 46.90%
VAN ECK WORLDWIDE INSURANCE TRUST
Worldwide Bond..................... 9/1/89 -7.82% 5.06% 5.44%
Worldwide Emerging Markets......... 12/27/95 100.28% N/A 9.92%
Worldwide Hard Assets.............. 9/1/89 21.00% 1.49% 3.06%
Worldwide Real Estate.............. 6/23/97 -2.01% N/A 1.52%
</TABLE>
The figures shown in this chart do not reflect any charges at the Separate
Account or the Policy level.
B-2
