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As filed with the Securities and Exchange Commission on December 22, 1998
File No. 333-61761
File No. 811-08963
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. 2 [X]
Post-Effective Amendment No. ___ [ ]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 2 [X]
TIAA-CREF LIFE SEPARATE ACCOUNT VA-1
(Exact Name of Registrant)
TIAA-CREF LIFE INSURANCE COMPANY
(Name of Depositor)
730 Third Avenue
New York, New York 10017
(800) 842-2733
(Address and Telephone Number of Depositor's Principal Executive Offices)
Peter C. Clapman, Esq.
TIAA-CREF Life Insurance Company
730 Third Avenue
New York, New York 10017
(Name and Address of Agent for Service of Process)
Copy to:
Steven B. Boehm, Esq.
Sutherland, Asbill & Brennan LLP
1275 Pennsylvania Avenue, N.W.
Washington, D. C. 20004-2415
Approximate Date of Proposed Public Offering:
As soon as practicable after effectiveness of the Registration Statement.
Title of Securities Being Registered:
Individual, Deferred Variable Annuity Contracts
THIS REGISTRATION STATEMENT SHALL HEREAFTER BECOME EFFECTIVE IN ACCORDANCE
WITH THE PROVISIONS OF SECTION 8(a) OF THE SECURITIES ACT OF 1933.
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- ---------------------------------------------------------------
PERSONAL ANNUITY
SELECT
INDIVIDUAL DEFERRED VARIABLE
ANNUITY CONTRACT
Prospectus
January 4, 1999
Issued by:
TIAA-CREF Life Insurance Company
[TIAA/CREF LOGO]
<PAGE> 3
PROSPECTUS
Dated January 4, 1999
Personal Annuity Select Individual Deferred
Variable Annuity Contract
Funded Through
TIAA-CREF Life Separate Account VA-1 of
TIAA-CREF Life Insurance Company
This prospectus describes information you should know before investing in the
Personal Annuity Select, an individual deferred variable annuity contract
offered by TIAA-CREF Life Insurance Company (TIAA-CREF Life) and funded through
the TIAA-CREF Life Separate Account VA-1 (the separate account). Read it
carefully before investing, and keep it for future reference.
The contract is designed for individual investors who desire to accumulate funds
on a tax-deferred basis for retirement or other long-term investment purposes,
and to receive future payment of those funds as lifetime income or through other
payment options. Whether the contract is available to you is subject to approval
by regulatory authorities in your state.
Contractowners may allocate premiums either to the separate account, which
currently has one investment account invested in the Stock Index Fund of the
TIAA-CREF Life Funds, or to a TIAA-CREF Life fixed account, or both.
As with all variable annuities, your accumulation in the variable component of
your contract can increase or decrease, depending on how well the investment
account, the Stock Index Fund, performs over time. TIAA-CREF Life doesn't
guarantee the investment performance of the Stock Index Fund, and you bear the
entire investment risk.
More information about the separate account and the variable component of the
contract is on file with the Securities and Exchange Commission (SEC) in a
"Statement of Additional Information" (SAI) dated January 4, 1999. You can
receive a free SAI by writing us at TIAA-CREF Life, 730 Third Avenue, New York,
New York 10017-3206 (attention: Central Services), or by calling 800 842-2733,
extension 5509. The SAI is "incorporated by reference" into the prospectus; that
means it's legally part of the prospectus. The SAI's table of contents is on the
last page of this prospectus. The SEC maintains a Website (www.sec.gov) that
contains the SAI, material incorporated by reference and other information
regarding the separate account.
THIS PROSPECTUS MUST BE ACCOMPANIED OR PRECEDED BY A CURRENT PROSPECTUS OR
PROFILE FOR THE TIAA-CREF LIFE FUNDS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
AN INVESTMENT IN THE CONTRACT IS NOT A DEPOSIT OF THE TIAA-CREF TRUST COMPANY,
FSB, AND IS NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION (FDIC) OR ANY OTHER GOVERNMENT AGENCY.
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Table of Contents
<TABLE>
<CAPTION>
ITEM PAGE
---- ----
<S> <C>
Definitions................. 2
Summary..................... 3
TIAA-CREF Life Insurance
Company and TIAA.......... 6
The Separate Account........ 7
TIAA-CREF Life Funds -- The
Stock Index Fund.......... 7
Adding and Closing Accounts
or Substituting Investment
Portfolios................ 9
The Contract -- The
Accumulation Period....... 9
Charges..................... 13
</TABLE>
<TABLE>
<CAPTION>
ITEM PAGE
---- ----
<S> <C>
The Contract -- The Annuity
Period.................... 15
Death Benefits.............. 17
Timing of Payments.......... 19
Federal Income Taxes........ 19
Condensed Financial
Information; Performance
Information............... 21
General Matters............. 22
Distribution of the
Contracts................. 24
Legal Proceedings........... 24
</TABLE>
This prospectus outlines the terms of the variable annuity issued by TIAA-CREF
Life. It doesn't constitute an offering in any jurisdiction where such an
offering can't lawfully be made. No dealer, salesman, or anyone else is
authorized to give any information or to make any representation in connection
with this offering other than those contained in this prospectus. If anyone does
offer you such information or representations, you shouldn't rely on them.
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Definitions
Throughout the prospectus, "TIAA-CREF Life," "we," and "our" refer to TIAA-CREF
Life Insurance Company. "You" and "your" mean any contractowner or any
prospective contractowner.
The terms and phrases below are defined so you'll know precisely how we're using
them. To understand some definitions, you may have to refer to other defined
terms.
1940 Act. The Investment Company Act of 1940, as amended.
Accumulation. The total value of your accumulation units.
Accumulation Period. The period that begins with your first premium and
continues as long as you still have an amount accumulated in either the separate
account or the fixed account.
Accumulation Unit. A share of participation in the separate account.
Annuitant. The natural person whose life is used in determining the annuity
payments to be received. The annuitant may be the contractowner or another
person.
Annuity Partner. The natural person whose life is used in determining the
annuity payments to be received under a survivor income option if the annuitant
dies. The annuity partner is also known as the second annuitant.
Beneficiary. Any person or institution named to receive benefits if you die
during the accumulation period or if you die while any annuity income or death
benefit payments remain due. You don't have to name the same beneficiary for
both of these two situations.
Business Day. Any day the New York Stock Exchange (NYSE) is open for trading. A
business day ends at 4 p.m. Eastern Time, or when trading closes on the NYSE, if
earlier.
Calendar Day. Any day of the year. Calendar days end at the same time as
business days.
Contract. The fixed and variable components of the individual, flexible
premium, deferred annuity described in this prospectus.
Contractowner. The person (or persons) who controls all the rights and benefits
under a contract.
Fixed Account. The component of the contract guaranteeing principal plus a
specified rate of interest supported by assets in TIAA-CREF Life's general
account.
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General Account. All of TIAA-CREF Life's assets other than those allocated to
the separate account or to any other TIAA-CREF Life separate account.
Income Option. Any of the ways you can receive annuity income, which must be
from the fixed account.
Internal Revenue Code (IRC). The Internal Revenue Code of 1986, as amended.
Premium. Any amount you invest in the contract.
Separate Account. TIAA-CREF Life Separate Account VA-1, which was established
by TIAA-CREF Life under New York State law to fund your variable annuity. The
separate account holds its assets apart from TIAA-CREF Life's other assets.
Survivor Income Option. An option that continues lifetime annuity payments as
long as either the annuitant or the annuity partner is alive.
TIAA. Teachers Insurance and Annuity Association of America, TIAA-CREF Life's
parent company.
TIAA-CREF Life. TIAA-CREF Life Insurance Company.
Valuation Day. Any day the NYSE is open for trading, as well as the last
calendar day of each month. Valuation days end as of the close of all U.S.
national exchanges where securities or other investments of the separate account
are principally traded. Valuation days that aren't business days end at 4 p.m.
Eastern Time.
Summary
Read this summary together with the detailed information you'll find in the rest
of the prospectus.
WHAT IS THE PERSONAL ANNUITY SELECT VARIABLE ANNUITY CONTRACT?
The contract is an individual, flexible premium (you can contribute varying
amounts) deferred annuity, whose variable component is funded by the TIAA-CREF
Life Separate Account VA-1, a separate investment account of TIAA-CREF Life. The
contract accepts only after-tax dollars (i.e., your contributions can't be
excluded from your gross income for tax purposes). It is available to you
subject to applicable state regulatory approval.
Currently, the separate account has only one investment account, which invests
in shares of the Stock Index Fund of the TIAA-CREF Life Funds. The value of
accumulation units credited to your contract and the amount of the variable
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annuity payments depend on the investment experience of the Stock Index Fund.
TIAA-CREF Life does not guarantee the investment performance of the separate
account. Thus, you bear the full investment risk for all amounts contributed to
the separate account.
Like earnings from other annuity products, earnings on your accumulations in the
separate account aren't taxed until withdrawn or paid as annuity income.
WHAT EXPENSES MUST I CURRENTLY PAY UNDER THE CONTRACT?
Here's a summary of the direct and indirect expenses under the contract.
<TABLE>
<S> <C>
CONTRACTOWNER TRANSACTION EXPENSES
Sales load imposed on purchases (as a percentage of
premiums)............................................... None
Deferred sales load
(as a percentage of premiums or amount surrendered, as
applicable)............................................. None
Premium taxes............................................. See below(1)
Surrender fees (as a percentage of amount surrendered).... None
Exchange fee.............................................. None
ANNUAL CONTRACT EXPENSES.................................... None
SEPARATE ACCOUNT ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE ACCOUNT VALUE)
Mortality and expense risk charge (current) (2)........... 0.10%
Administrative expense charge (current) (2)............... 0.20%
-----
Total separate account annual charges (after fee waiver)
(2)..................................................... 0.30%
FUND ANNUAL EXPENSES (AS A PERCENTAGE OF FUND AVERAGE NET
ASSETS)
TIAA-CREF Life Funds --
Stock Index Fund
Management fee (investment advisory) (after fee
waiver) (3)........................................... 0.07%
Other expenses........................................ None
Total fund annual expenses (after fee waiver) (3)..... 0.07%
-----
TOTAL ANNUAL EXPENSES (2) (3) (4)........................... 0.37%
</TABLE>
(1) Several states assess premium taxes on premiums paid under the contract.
Where TIAA-CREF Life is required to pay this premium tax, it may deduct an
amount equal to the amount of the premium tax paid from any premium payment.
TIAA-CREF Life currently intends to make this deduction from premium
payments only in Kentucky and South Dakota. In the remaining states that
assess premium taxes, a deduction will be made only upon annuitization,
death of the owner, or surrender. See "Other Charges and Expenses," page 14.
(2) Although the total separate account charges stated under the contract are
1.20% per year, TIAA-CREF Life has waived these charges to 0.30%. TIAA-CREF
Life will provide at least three months' notice before it raises these
charges.
(3) Although Teachers Advisors, Inc. (Advisors), the Stock Index Fund's
investment adviser, is entitled to an annual fee of 0.30% of the fund's
average daily net assets, it has voluntarily agreed to waive a portion of
its fee. If Teachers Advisors imposed the
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full amount of its fee, total annual expenses payable under the contract
would be 0.60%, assuming continued waiver of separate account charges.
(4) If TIAA-CREF Life and Advisors imposed the full amount of the administrative
expense, mortality and expense risk and investment advisory charges, total
annual expenses would be 1.50%.
We will provide at least three months' notice before we raise any of these
charges.
The next table gives an example of the expenses you'd incur on a hypothetical
investment of $1,000 in the Stock Index Fund investment account offered under
your contract over several periods. The table assumes a 5% annual return on
assets and that the current fee waivers are in place.
<TABLE>
<CAPTION>
ANNUAL EXPENSE DEDUCTIONS FROM NET ASSETS 1 YEAR 3 YEARS
----------------------------------------- ------ -------
<S> <C> <C>
If you withdraw your entire accumulation at the end of the
applicable time period: $4 $12
If you annuitize at the end of the applicable time period: $4 $12
If you do not withdraw your entire accumulation: $4 $12
</TABLE>
These tables are to help you understand the various expenses you would bear
directly or indirectly as an owner of a contract. Remember that they don't
represent actual past or future expenses or investment performance. Actual
expenses may be higher or lower. For more information, see "Charges," page 13.
HOW DO I PURCHASE A CONTRACT?
To purchase a contract, you must complete an application and make an initial
payment of at least $250, or $25 under an automatic investment plan using
Electronic Funds Transfer (EFT). Additional contributions must be at least $25.
For details, see "Purchasing a Contract and Remitting Premiums," page 9.
CAN I CANCEL MY CONTRACT?
You can examine the contract and return it to TIAA-CREF Life for a refund, until
the end of the "free look" period specified in your contract (which is a minimum
of 10 days, but varies by state). In states that permit it, we'll refund the
accumulation value calculated on the date that you returned the contract and the
refund request to us. (Note that the value of your initial premium may have gone
down during the period.) In states that don't allow us to refund accumulation
value only, we'll refund the premiums you paid to the contract. We will consider
the contract returned on the date it's postmarked and properly addressed with
postage pre-paid or, if it's not postmarked, on the day we receive it. We will
send you the refund within 7 days after we get written notice of cancellation
and the return contract. If you live in a state that requires refund of
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premiums, your premiums and transfers allocated to the separate account during
the "free look" period can't exceed $10,000. For details, see "Purchasing a
Contract and Remitting Premiums," page 9.
CAN I TRANSFER OR MAKE CASH WITHDRAWALS FROM THE CONTRACT?
Currently, you can transfer funds from the separate (variable) account to the
fixed account as often as you like, but you can transfer from the fixed account
to the separate account no more than once every 180 days. All transfers must be
for at least $250 or your entire account balance. All cash withdrawals must be
for at least $1,000 or your entire account balance.
YOU MAY HAVE TO PAY A TAX PENALTY IF YOU WANT TO MAKE A CASH WITHDRAWAL BEFORE
AGE 59 1/2. For more, see "Income Options," page 16, and "Federal Income Taxes,"
page 19.
WHAT ARE MY OPTIONS FOR RECEIVING ANNUITY PAYMENTS UNDER THE CONTRACT?
All annuity payments are currently paid out of the fixed account. The contract
offers a variety of annuity options, including: One-Life Annuities, which pay
income as long as you live or until the end of a specified guaranteed period,
whichever is longer; Fixed-Period Annuities, which pay income for a period of
between 2 and 30 years; and Two-Life Annuities, which pay income to you as long
as you live, then continue at either the same or a reduced level for the life of
your annuity partner or until the end of a specified guaranteed period,
whichever is longer. For details, see "The Contract -- The Annuity Period," page
15.
WHAT DEATH BENEFITS ARE AVAILABLE UNDER THE CONTRACT?
If you die before receiving annuity payments, your beneficiary can receive a
death benefit, paid out of the fixed account. The amount of the death benefit
will be the greater of the amounts you've accumulated in your accounts or the
total premiums paid under your contract (less any cash withdrawals). For
details, see "Death Benefits," page 17.
TIAA-CREF Life Insurance Company and TIAA
The contracts are issued by TIAA-CREF Life Insurance Company, a stock life
insurance company organized under the laws of New York State on November 20,
1996. All of the stock of TIAA-CREF Life is held by TIAA-CREF Enterprises, Inc.,
a wholly-owned subsidiary of Teachers Insurance and Annuity Association of
America (TIAA). TIAA-CREF Life's headquarters are at 730 Third Avenue, New York,
New York 10017-3206.
TIAA-CREF Life's parent, TIAA, is a stock life insurance company, organized
under the laws of New York State. It was founded on March 4, 1918, by the
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Carnegie Foundation for the Advancement of Teaching. TIAA is the companion
organization of the College Retirement Equities Fund (CREF), the first company
in the United States to issue a variable annuity. CREF is a nonprofit membership
corporation established in New York State in 1952. Together, TIAA and CREF,
serving approximately two million people, form the principal retirement system
for the nation's education and research communities and the largest retirement
system in the world, based on assets under management. As of September 30, 1998,
TIAA's assets were approximately $100.3 billion; the combined assets for TIAA
and CREF totalled approximately $222.1 billion (although neither TIAA nor CREF
stands behind TIAA-CREF Life's guarantees).
The Separate Account
The separate account was established by TIAA-CREF Life as a separate investment
account under New York law on July 27, 1998, by resolution of TIAA-CREF Life's
Board of Directors. The separate account is registered with the SEC as a unit
investment trust under the Investment Company Act of 1940, as amended (the 1940
Act). As part of TIAA-CREF Life, the separate account is also subject to
regulation by the State of New York Insurance Department (NYID) and the
insurance departments of some other jurisdictions in which the contracts are
offered (see the SAI).
Although TIAA-CREF Life owns the assets of the separate account, and the
obligations under the contracts are obligations of TIAA-CREF Life, the separate
account's income, investment gains, and investment losses are credited to or
charged against the assets of the separate account without regard to TIAA-CREF
Life's other income, gains, or losses. Under New York law, we cannot charge the
separate account with liabilities incurred by any other TIAA-CREF Life separate
account or other business activity TIAA-CREF Life may undertake.
Currently the separate account has only one investment account, which invests in
shares of the Stock Index Fund (fund) of the TIAA-CREF Life Funds. The fund is
described briefly below.
TIAA-CREF Life Funds -- The Stock Index Fund
GENERAL
TIAA-CREF Life Funds is an open-end management investment company that was
organized as a business trust under Delaware law on August 13, 1998. The
TIAA-CREF Life Funds currently consists of a single investment portfolio -- The
Stock Index Fund -- but may add other portfolios in the future.
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STOCK INDEX FUND
The investment objective of the Stock Index Fund is favorable long-term return
from a diversified portfolio selected to track the overall market for common
stocks publicly traded in the U.S., as represented by a broad stock market
index. The Stock Index Fund attempts to track the U.S. stock market as a whole
by investing substantially all of its assets in a sampling of stocks included in
the Russell 3000(R) index, an index consisting of the 3,000 largest
publicly-traded U.S. corporations.
Like any portfolio that the TIAA-CREF Life Funds might add in the future, the
Stock Index Fund's current portfolio is subject to the risks involved in
professional investment management, including those resulting from general
economic conditions. The value of your accumulation, as in any investment
portfolio, can fluctuate and you bear the entire risk.
FUND PROSPECTUS
The investment objective, techniques and restrictions of the TIAA-CREF Life
Funds are described fully in its prospectus and SAI. A copy of the prospectus or
a profile of that prospectus accompanies this prospectus. The prospectus and SAI
of the TIAA-CREF Life Funds may be obtained by writing TIAA-CREF Life Funds, 730
Third Avenue, New York, New York 10017-3206, or by calling 800 842-2733,
extension 5509. You should read the prospectus for the TIAA-CREF Life Funds
carefully before investing in the separate account.
INVESTMENT MANAGEMENT
Teachers Advisors, Inc. (Advisors), a subsidiary of TIAA, manages the assets of
the TIAA-CREF Life Funds. Personnel of Advisors also manage the Stock Index
Account of the TIAA Separate Account VA-1, as well as TIAA-CREF Mutual Funds.
They also manage the CREF accounts on behalf of TIAA-CREF Investment Management,
LLC, an investment adviser which is also a TIAA subsidiary.
VOTING RIGHTS
The separate account is the legal owner of the shares of the TIAA-CREF Life
Funds offered through your contract and as such, has the right to vote its
shares at any meeting of the TIAA-CREF Life Funds' shareholders, although the
fund doesn't plan to hold annual meetings of shareholders. If and when
shareholder meetings are held, we will give you the right to instruct us how to
vote the shares that are attributable to your contract. Shares as to which no
timely instructions are received will be voted by TIAA-CREF Life in the same
proportion as the voting instructions which are received with respect to all
contracts. TIAA-CREF
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Life may vote the shares of the fund in its own right in some cases, if it
determines that it is legally permitted to do so.
The number of fund shares attributable to each contractowner is determined by
dividing the contractowner's interest in the applicable investment account by
the net asset value of the fund.
Adding and Closing Accounts or
Substituting Investment Portfolios
We can add new investment accounts in the future that would invest in other fund
portfolios or other funds. We don't guarantee that the separate account, or any
investment account added in the future, will always be available. We reserve the
right to add or close accounts, substitute one investment portfolio for another,
or combine accounts or investment portfolios. We can also make any changes to
the separate account or to the contract required by applicable laws. TIAA-CREF
Life can make some changes at its discretion, subject to NYID and SEC approval
as required. The separate account can (i) operate under the Investment Company
Act of 1940 as an investment company, or in any other form permitted by law,
(ii) deregister under the 1940 Act if registration is no longer required, or
(iii) combine with other separate accounts. As permitted by law, TIAA-CREF Life
may transfer the separate account assets to another separate account or account
of TIAA-CREF Life or another insurance company or transfer the contract to
another insurance company.
The Contract -- The Accumulation Period
The contract is an individual flexible-premium (you can contribute varying
amounts) deferred annuity that accepts only after-tax dollars. The rights and
benefits under the variable component of the contract are summarized below;
however, the descriptions you read here are qualified entirely by the contract
itself. We plan on offering the contract in all fifty states and the District of
Columbia, although currently the contract will not be available to residents in
those states where we are awaiting regulatory approval.
PURCHASING A CONTRACT AND REMITTING PREMIUMS
Initial Premiums. We'll issue you a contract as soon as we receive your
completed application and your initial premium at our home office. Please send
your check, payable to TIAA-CREF Life Insurance Company, along with the
application to:
TIAA-CREF
P.O. Box 71727
Chicago, IL 60694-1727
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Initial premiums must be for at least $250. However, you may establish an
automatic investment plan using electronic funds transfers with a minimum
investment of $25 by completing an authorization form. (The initial payment must
be made by check.) We will credit your initial premium within two business days
after we receive all necessary information or the premium itself, whichever is
later. If we don't have the necessary information within five business days,
we'll return your initial premium unless you instruct us otherwise upon being
contacted.
Additional Premiums. Subsequent premiums must be for at least $25. Send a check
payable to TIAA-CREF Life Insurance Company, along with a personalized payment
coupon (supplied upon purchasing a contract) to:
TIAA-CREF
P.O. Box 95919
Chicago, IL 60694-5919
If you don't have a coupon, use a separate piece of paper to give us your name,
address and contract number. These premiums will be credited as of the business
day we receive them. Currently, TIAA-CREF Life will accept premiums at any time
both the contractowner and the annuitant are living and your contract is in the
accumulation period. However, we reserve the right not to accept premiums under
this contract after you have been given three months' notice.
Electronic Payment. You may make initial or subsequent investments by
electronic payment. A federal wire is usually received the same day and an ACH
is usually received by the second day after transmission. Be aware that your
bank may charge you a fee to wire funds, although ACH is usually less expensive
than a federal wire. Here's what you need to do:
1. If you are sending in an initial premium, send us your application;
2. Instruct your bank to wire money to:
Citibank, N.A.
ABA Number 021000089
New York, NY
Account of : TIAA-CREF Life Insurance Company
Account Number: 4068-4865
3. Specify on the wire:
- Your name, address and Social Security Number(s) or Taxpayer
Identification Number
- Indicate if this is for a new application or existing contract (provide
contract number if existing)
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Certain Restrictions. Except as described below, the contract doesn't restrict
how large your premiums are or how often you send them, although we reserve the
right to impose restrictions in the future. Your total premiums and transfers to
the separate account during the "free look" period can't exceed $10,000 if you
live in any of the following states:
<TABLE>
<CAPTION>
"FREE LOOK"
JURISDICTION PERIOD (DAYS)
------------ -------------
<S> <C>
Georgia............................................ 10
Idaho.............................................. 20
Louisiana.......................................... 10
Massachusetts...................................... 10
Michigan........................................... 10
Missouri........................................... 10
Nebraska........................................... 10
Nevada............................................. 10
New Jersey......................................... 10
North Carolina..................................... 10
Oklahoma........................................... 10
Rhode Island....................................... 10
South Carolina..................................... 31
Texas.............................................. 10
Utah............................................... 10
Washington......................................... 10
West Virginia...................................... 10
</TABLE>
In addition, total premiums and transfers to the fixed account in any 12-month
period could be limited to $300,000. Call us for more information.
ACCUMULATION UNITS
The premiums you allocate to the separate (variable) account purchase
accumulation units. We calculate how many accumulation units to credit by
dividing the amount allocated to the particular investment account of the
separate account by its accumulation unit value for the business day when we
received your premium. We may use a later business day for your initial premium.
To determine how many accumulation units to subtract for transfers and cash
withdrawals, we use the unit value for the business day when we receive your
completed transaction request and all required information and documents (unless
you've chosen a later date).
The value of the accumulation units will depend mainly on the investment
experience of the underlying investment fund, though the unit value reflects
expense deductions from assets (see "Charges," page 13). We calculate the unit
value at the close of each valuation day. We multiply the previous day's unit
value by the net investment factor for the pertinent investment account of the
separate account. The net investment factor reflects, for the most part, changes
in
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the net asset value of the shares of the fund held by the investment account,
and investment income and capital gains distributed to the investment account.
The net investment factor is decreased by the separate account's expense and
risk charges.
THE FIXED ACCOUNT
This prospectus provides information mainly about the contract's variable
component. Following is a brief description of the fixed account.
You can allocate premiums to the fixed account or transfer from the separate
account to the fixed account at any time. Premiums allocated and amounts
transferred to the fixed account become part of the general account assets of
TIAA-CREF Life, which support various insurance and annuity obligations. The
general account includes all the assets of TIAA-CREF Life, except those in the
separate account or in any other TIAA-CREF Life separate investment account.
Interests in the fixed account have not been registered under the Securities Act
of 1933 (the 1933 Act), nor is the fixed account registered as an investment
company under the 1940 Act. Neither the fixed account nor any interests therein
are generally subject to the 1933 Act or 1940 Act.
Currently, TIAA-CREF Life guarantees that amounts in the fixed account will earn
interest of at least 3 percent per year. At its discretion, TIAA-CREF Life can
credit amounts in the fixed account with interest at a higher rate than 3
percent per year.
For details about the fixed account, see your contract.
TRANSFERS
You can transfer some (at least $250 at a time) or all of the amount accumulated
under your contract between the separate account and the fixed account, and, if
additional investment accounts are added, among the separate account's
investment accounts. Transfers to the fixed account begin participating on the
day following effectiveness of the transfer (see below). Currently, we don't
charge you for transfers or limit the number of transfers from the separate
account. We reserve the right to limit transfers in the future to one every 90
days, provided we give you three months' notice. Transfers from the fixed
account to the separate account are limited to once every 180 days. TIAA-CREF
Life may defer payment of a transfer from the fixed account for up to six
months.
CASH WITHDRAWALS
You can withdraw some or all of your accumulation in the separate account as
cash. Cash withdrawals must be for at least $1,000 (or your entire accumulation,
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<PAGE> 17
if less). We reserve the right to cancel any contract where no premiums have
been paid to either the separate account or the fixed account for three years
and your total amount in the separate account and the fixed account falls below
$250. There's no charge for cash withdrawals.
If you withdraw your entire accumulation in the separate account and the fixed
account, we'll cancel your contract and all of our obligations to you under the
contract will end.
GENERAL CONSIDERATIONS FOR ALL TRANSFERS AND CASH WITHDRAWALS
You can tell us how much you want to transfer or withdraw in dollars,
accumulation units, or as a percentage of your accumulation.
Transfers and cash withdrawals are effective at the end of the business day we
receive your request and any required information and documentation. Transfers
and cash withdrawals made at any time other than during a business day will be
effective at the close of the next business day. You can also defer the
effective date of a transfer or cash withdrawal to a future business day
acceptable to us.
To request a transfer, write to TIAA-CREF Life's home office, call our Automated
Telephone Service at 800 842-2252 (there is an option to speak with a live
person, if you wish), or use our Inter/ACT service over the Internet at
www.tiaa-cref.org. If you make a telephone or Internet transfer at any time
other than during a business day, it will be effective at the close of the next
business day. We reserve the right to suspend or terminate transfers by
telephone or over the Internet.
TAX ISSUES
Make sure you understand the possible federal and other income tax consequences
of transfers and cash withdrawals. Cash withdrawals are usually taxed at the
rates for ordinary income -- i.e., they are not treated as capital gains.
Withdrawals before age 59 1/2 may subject you to early-distribution taxes as
well. For details, see "Federal Income Taxes," page 19.
Charges
SEPARATE ACCOUNT CHARGES
Charges are deducted each valuation day from the assets of the separate account
for various services required to administer the separate account and the
contracts and to cover certain insurance risks borne by TIAA-CREF Life. Total
separate account charges (i.e., administrative expense and mortality and expense
risk charges) allowable under the contract are 1.20 percent of net assets
annually. TIAA-CREF Life has waived a portion of these charges so that current
charges
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<PAGE> 18
total 0.30 percent of net assets annually. While TIAA-CREF Life reserves the
right to increase the separate account charges at any time, we will provide at
least three months' notice before any raise. TIAA-CREF Life itself provides the
administrative services for the separate account and the contracts and expects
that expense charges will remain relatively low.
Administrative Expense Charge. This charge is for administration and
operations, such as allocating premiums and administering accumulations. The
current daily deduction is equivalent to 0.20 percent of net assets annually.
Mortality and Expense Risk Charge. TIAA-CREF Life imposes a daily charge as
compensation for bearing certain mortality and expense risks in connection with
the contract. The current daily deduction is equal to 0.10 percent of net assets
annually.
TIAA-CREF Life's mortality risks come from its contractual obligations to make
annuity payments and to pay death benefits before the annuity starting date.
This assures that neither your own longevity nor any collective increase in life
expectancy will lower the amount of your annuity payments. TIAA-CREF Life also
bears a risk in connection with its death benefit guarantee, since a death
benefit may exceed the actual amount of an accumulation at the time when it's
payable.
TIAA-CREF Life's expense risk is the possibility that TIAA-CREF Life's actual
expenses for administering the contract and the separate account will exceed the
amount recovered through the administrative expense deduction.
If the mortality and expense risk charge allowable under the contract isn't
enough to cover TIAA-CREF Life's actual costs, TIAA-CREF Life will absorb the
deficit. On the other hand, if the charge more than covers costs, the excess
will belong to TIAA-CREF Life. TIAA-CREF Life will pay a fee from its general
account assets, which may include amounts derived from the mortality and expense
risk charge, to Teachers Personal Investors Services, Inc. (TPIS), the principal
underwriter of the variable component of the contract for distribution of the
variable component of the contract.
OTHER CHARGES AND EXPENSES
Fund Expenses. Certain deductions and expenses of the fund are paid out of the
assets of the TIAA-CREF Life Funds. These expenses include charges for
investment advice, portfolio accounting, custodial, and similar services
provided for the fund, as well as brokers' commissions, transfer taxes, and
other portfolio fees. The investment management agreement between Advisors and
the TIAA-CREF Life Funds sets the investment advisory fee for the Stock Index
Fund at 0.30 percent annually. Currently, Advisors has agreed to waive a portion
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<PAGE> 19
of that fee, so that the daily deduction is equivalent to 0.07 percent of net
assets annually. For a complete discussion of fund deductions and expenses, read
the fund prospectus.
No Deductions from Premiums. The contract provides for no front-end charges.
Premium Taxes. Currently, contracts issued to residents of several states and
the District of Columbia are subject to a premium tax. Charges for premium taxes
on a particular contract ordinarily will be deducted from the accumulation when
it's applied to provide annuity payments. However, if a jurisdiction requires
that premium taxes be paid at other times, such as when premiums are paid or
when cash withdrawals are taken, we'll deduct premium taxes at those times.
Current state premium taxes, where charged, range from 1.00 percent to 3.50
percent of premium payments.
The Contract -- The Annuity Period
THE ANNUITY PERIOD
All annuity payments are paid to the contractowner from the fixed account.
(Annuity payments may be available from the separate account in the future.)
TIAA-CREF Life fixed annuity payments are usually monthly. You can choose
quarterly, semi-annual, and annual payments as well. The total value of annuity
payments made may be more or less than total premiums paid by the contractowner.
Your payments are based on the value of the accumulation in your contract
determined at the end of the last calendar day of the month before the annuity
starting date. We transfer your separate account accumulation to the fixed
account on that day. At the annuity starting date, the dollar amount of each
periodic annuity payment resulting from your separate account accumulation is
fixed, based upon the number and value of the separate account accumulation
units being converted to annuity income, the annuity option chosen, the ages of
the annuitant and any annuity partner, and the annuity purchase rates. Payments
are not variable -- they won't change based on the investment experience of the
separate account. After the end of the accumulation period, your contract will
no longer participate in the separate account.
Technically all benefits are payable at TIAA-CREF Life's home office, but, as
you instruct, we'll send your annuity payments by mail to your home address or
(on your request) by mail or electronic fund transfer to your bank. If the
address or bank where you want your payments sent changes, it's your
responsibility to let us know. We can send payments to your residence or bank
abroad, although
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<PAGE> 20
there are some countries where the U.S. Treasury Department imposes
restrictions.
ANNUITY STARTING DATE
Generally you pick an annuity starting date (it has to be the first day of a
month) when you first apply for a contract. If you don't, we'll tentatively
assume the annuity starting date will be the latest permissible annuity starting
date (i.e., the first day of the month of the annuitant's ninetieth birthday).
You can change the annuity starting date at any time before annuity payments
begin (see "Choices and Changes," page 22). In any case, the annuity starting
date cannot be earlier than fourteen months after the date your contract is
issued.
For payments to begin on the annuity starting date, we must have received all
information and documentation necessary for the income option you've picked. If
we haven't received all the necessary information, we'll defer the annuity
starting date until the first day of the month after the information has reached
us, but not beyond the latest permissible annuity starting date. If, by the
latest permissible annuity starting date, you haven't picked an income option or
if we have not otherwise received all the necessary information, we will begin
payments under a One-Life Annuity with, in most cases, a ten year guaranteed
period. Your first annuity check may be delayed while we process your choice of
income options and calculate the amount of your initial payment.
INCOME OPTIONS
You have a number of different annuity options. The current options are:
- - One-Life Annuities with or without Guaranteed Period. Pays income as long as
you or your annuitant lives. If you opt for a guaranteed period (10, 15 or 20
years) and you or your annuitant dies before it's over, income payments will
continue to your beneficiary until the end of the period. If you don't opt for
a guaranteed period, all payments end at your death -- so that it's possible
for you to receive only one payment if you die less than a month after
payments start.
- - Fixed-Period Annuities. Pays income (usually monthly) for a stipulated period
of not less than two nor more than thirty years. At the end of the period
you've chosen, payments stop. If you die before the period is up, your
beneficiary becomes the contractowner.
- - Two-Life Annuities with or without Guaranteed Period. Pays income to you as
long as you live, then continues at either the same or a reduced level for the
life of your annuity partner, or until the end of the specified guaranteed
period, whichever period is longer. There are three types of two-life annuity
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options, all available with or without a guaranteed period -- Full Benefit to
Survivor, Two-Thirds Benefit to Survivor, and a Half-Benefit to Annuity
Partner.
We may make variable income options available in the future.
Death Benefits
AVAILABILITY; CHOOSING BENEFICIARIES
Death benefits are available if you or the annuitant die during the accumulation
period. When you fill out an application for a contract, you name one or more
beneficiaries to receive the death benefit if you die. You can change your
beneficiary at any time during the accumulation period (see "Choices and
Changes," page 22). For more information on designating beneficiaries, contact
TIAA-CREF Life or your legal advisor.
SPECIAL OPTION FOR SPOUSES
If your spouse is the sole beneficiary when you die, your spouse can choose to
become the contractowner and continue the contract, or receive the death
benefit. If your spouse does not make a choice within 60 days after we receive
proof of death, your spouse will automatically become the contractowner. Your
spouse will also become the annuitant if you were the annuitant.
PAYMENT OF DEATH BENEFIT
Death benefits are paid out of the fixed account. Your accumulation will
continue participating in the investment experience of the separate account
until we authorize payment of the death benefit. We will transfer your separate
account accumulation to the fixed account as of the date we authorize payment of
the death benefit.
To authorize payment and pay a death benefit, TIAA-CREF Life must have received
all necessary forms and documentation, including proof of death and the
selection of the method of payment. Even if we have not received all of the
required information, death benefits must begin by the first day of the month
following the 60th day after we receive proof of death. If no method of payment
has been chosen by that time, we'll have the option of paying the entire death
benefit to the death benefit beneficiary within five years of death, using the
Fixed-Period Annuity method.
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AMOUNT OF DEATH BENEFIT
The amount of the death benefit will equal the greater of:
(1) the amount you have accumulated in the separate and fixed accounts on the
day we authorize payment of the death benefit, or
(2) the total premiums paid under your contract minus any cash withdrawals.
If (2) is greater than (1), we'll deposit the difference in the fixed account as
of the day we authorize payment of the death benefit.
METHODS OF PAYMENT OF DEATH BENEFITS
You can choose in advance the method by which we'll pay death benefits. The
level of death benefits received will depend on the method of payment selected.
You can block your beneficiaries from changing the method you've chosen or you
can leave the choice to them. The method of payment you've chosen can be changed
by notifying us in writing, provided death benefits haven't yet started.
TIAA-CREF Life limits the methods of payment for death benefits to those
suitable under federal income tax law for annuity contracts. With methods
offering periodic payments, benefits are usually monthly, but the death benefit
beneficiary can request to receive them quarterly, semiannually, or annually
instead. At present, the methods of payment for TIAA-CREF Life death benefits
are:
- - Single-Sum Payment. The entire death benefit is paid at once. When the
beneficiary is an estate, the single-sum method is automatic, and TIAA-CREF
Life reserves the right to pay death benefits only as a single sum to any
beneficiary that is not a natural person.
- - One-Life Annuities with or without Guaranteed Period. Payable monthly for the
life of the death benefit beneficiary or through a specified guaranteed
period, whichever is longer.
- - Fixed-Period Annuities. Payable over two to thirty years, as determined by
you or your beneficiary.
The One-Life Annuities are available only if the death benefit beneficiary is a
natural person. We reserve the right to require a change in choice if the chosen
method results in payments of less than $100.
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Timing of Payments
Usually we'll make the following kinds of payments from the separate account
within seven calendar days after we've received the information we need to
process a request:
1. Cash withdrawals;
2. Transfers to the fixed account; and
3. Death benefits.
We can extend the seven-day period only if (1) the New York Stock Exchange is
closed (or trading restricted by the SEC) on a day that isn't a weekend or
holiday; (2) an SEC-recognized emergency makes it impractical for us to sell
securities or determine the value of assets in the separate account; or (3) the
SEC says by order that we can or must postpone payments to protect you and other
separate account contractowners.
Federal Income Taxes
The following discussion is based on our understanding of current federal income
tax law, and is subject to change. For complete information on your personal tax
situation, check with a qualified tax advisor.
TAXATION OF ANNUITIES
The following discussion assumes the contracts qualify as annuity contracts for
federal income tax purposes (see the SAI for more information):
In General. IRC section 72 governs annuity taxation generally. We believe an
owner who is a natural person usually won't be taxed on increases in the value
of a contract until there is a distribution (i.e., the owner withdraws all or
part of the accumulation or takes annuity payments). Assigning, pledging, or
agreeing to assign or pledge any part of the accumulation usually will be
considered a distribution. Withdrawals of accumulated investment earnings are
taxable as ordinary income. Generally under the IRC, withdrawals are first
allocated to investment earnings.
The owner of any annuity contract who is not a natural person generally must
include in income any increase in the excess of the accumulation over the
"investment in the contract" during the taxable year. There are some exceptions
to this, and agents of prospective owners that are not natural persons may wish
to discuss them with a competent tax advisor.
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The following discussion applies generally to contracts owned by a natural
person:
Withdrawals. If you withdraw funds from your contract before the annuity
starting date, IRC section 72(e) usually deems taxable any amounts received to
the extent that the accumulation value at the time you withdraw exceeds your
investment in the contract. The investment in the contract usually equals all
premiums paid by the contractowner or on the contractowner's behalf.
If you withdraw your entire accumulation under a contract, you will be taxed
only on the part that exceeds your investment in the contract.
Annuity Payments. Although tax consequences can vary with the income option you
pick, IRC section 72(b) provides generally that, before you recover the
investment in the contract, gross income does not include that fraction of any
annuity income payments that equals the ratio of investment in the contract to
the expected return at the annuity starting date. After you recover your
investment in the contract, all additional annuity payments are fully taxable.
Taxation of Death Benefit Proceeds. Amounts may be paid from a contract because
an owner has died. If the payments are made in a single sum, they're taxed the
same way a full withdrawal from the contract is taxed. If they are distributed
as annuity payments, they're taxed as annuity payments.
Penalty Tax on Some Withdrawals. You may have to pay a penalty tax (10 percent
of the amount treated as taxable income) on some withdrawals. However, there is
usually no penalty on distributions:
(1) on or after you reach 59 1/2;
(2) after you die (or after the annuitant dies, if the owner isn't an
individual);
(3) after you become disabled; or
(4) that are part of a series of substantially equal periodic (at least
annual) payments for your life (or life expectancy) or the joint life (or
life expectancy) of you and your beneficiary.
Possible Tax Changes. Legislation is proposed from time to time that would
change the taxation of annuity contracts. It is possible that such legislation
could be enacted and that it could be retroactive (that is, effective prior to
the date of the change). You should consult a tax adviser regarding legislative
developments and their effect on the contract.
TRANSFERS, ASSIGNMENTS OR EXCHANGES OF A CONTRACT
Transferring contract ownership, designating an annuitant, payee or other
beneficiary who is not also the owner, or exchanging a contract can have other
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tax consequences that we don't discuss here. If you're thinking about any of
those transactions, contact a tax advisor.
WITHHOLDING
Annuity distributions usually are subject to withholding for the recipient's
federal income tax liability at rates that vary according to the type of
distribution and the recipient's tax status. However, recipients can usually
choose not to have tax withheld from distributions.
MULTIPLE CONTRACTS
In determining gross income, section 72(e) generally treats as one contract all
TIAA-CREF Life and TIAA non-qualified deferred annuity contracts to the same
owner during any calendar year. This could affect when income is taxable and how
much might be subject to the 10 percent penalty tax (see above). Consult a tax
advisor before buying more than one annuity contract for the purpose of gaining
a tax advantage.
POSSIBLE CHARGE FOR TIAA-CREF LIFE'S TAXES
Currently we don't charge the separate account for any federal, state, or local
taxes on it or its contracts (other than premium taxes -- see page 15), but we
reserve the right to charge the separate account or the contracts for any tax or
other cost resulting from the tax laws that we believe should be attributed to
them.
TAX ADVICE
What we tell you here about federal and other taxes isn't comprehensive and is
for general information only. It doesn't cover every situation. Taxation varies
depending on the circumstances, and state and local taxes may also be involved.
For complete information on your personal tax situation, check with a qualified
tax advisor.
Condensed Financial Information;
Performance Information
CONDENSED FINANCIAL INFORMATION
The separate account has just recently commenced operations. Therefore no
condensed financial information is included in the prospectus. The financial
statements for the Separate Account and TIAA-CREF Life are in the SAI, which is
available free upon request.
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PERFORMANCE INFORMATION
We may advertise the total return and average annual total return of the
separate account. "Total return" means the cumulative percentage increase or
decrease in the value of an investment over standard one-, five-, and ten-year
periods (and occasionally other periods as well).
"Average annual total return" means the annually compounded rate that would
result in the same cumulative total return over the stated period.
All performance figures are based on past investment results. They aren't a
guarantee that the separate account will perform equally or similarly in the
future. Write or call us for current performance figures for the separate
account.
General Matters
CHOICES AND CHANGES
You can choose or change any of the following prior to receiving annuity income:
(1) an annuity starting date; (2) an income option; (3) a transfer; (4) a method
of payment for death benefits; (5) an annuity partner, beneficiary, or other
person named to receive payments; and (6) a cash withdrawal or other
distribution. You have to make your choices or changes via a written notice
satisfactory to us and received at our home office (see below). You can change
the terms of a transfer, cash withdrawal, or other cash distribution only before
they're scheduled to take place. When we receive a notice of a change in
beneficiary or other person named to receive payments, we'll execute the change
as of the date it was signed, even if the signer dies in the meantime. We
execute all other changes as of the date received.
TELEPHONE AND INTERNET TRANSACTIONS
You can use our Automated Telephone Service (ATS) or our Inter/ACT system over
the Internet to check your accumulation balances and/or your current allocation
percentages, transfer between the separate account and the fixed account, and/or
allocate future premiums to the separate account or the fixed account. You will
be asked to enter your Personal Identification Number (PIN) and Social Security
number for both systems. Both will lead you through the transaction process and
will use reasonable procedures to confirm that instructions given are genuine.
All transactions made over the ATS and Inter/ ACT are electronically recorded.
To use the ATS, you need a touch-tone phone. The toll free number for the ATS is
800 842-2252. To use Inter/ACT, access the TIAA-CREF Internet home page at
www.tiaa-cref.org.
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CONTACTING TIAA-CREF LIFE
We won't consider any notice, form, request, or payment to have been received by
TIAA-CREF Life until it reaches our home office at 730 Third Avenue, New York,
New York 10017-3206 or the post office box specifically designated for the
purpose. You can ask questions by calling toll-free 800 223-1200.
ELECTRONIC PROSPECTUSES
If you received this prospectus electronically and would like a paper copy,
please call 800 842-2733, extension 5509, and we will send it to you.
HOUSEHOLDING
To cut costs and eliminate duplicate documents sent to your home, we may, if the
SEC allows, begin mailing only one copy of the separate account prospectus,
prospectus supplements, annual and semi-annual reports, or any other required
documents, to your household, even if more than one contractowner lives there.
If you would prefer to continue receiving your own copy of any of these
documents, you may call us toll-free at 800 842-2733, extension 5509, or write
us.
SIGNATURE REQUIREMENTS
For some transactions, we may require your signature to be notarized or
guaranteed by a commercial bank or a member of a national securities exchange.
ERRORS OR OMISSIONS
We reserve the right to correct any errors or omissions on any form, report or
statement that we send you.
YEAR 2000 ISSUES
Many computer software systems in use today cannot recognize the year 2000 and
may revert to 1900 or some other date because of the way in which dates were
encoded and calculated. The separate account could be adversely affected if its
computer systems or those of its service providers do not properly process and
calculate date-related information and data on and after January 1, 2000. We
have been actively working on necessary changes to our computer systems to
prepare for the Year 2000 and have also obtained reasonable assurances from our
service providers that they are taking comparable steps with respect to their
computer systems. However, the steps we are taking do not guarantee complete
success or eliminate the possibility that interaction with outside computer
systems may have an adverse impact on the separate account.
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Distribution of the Contracts
The contracts are offered continuously by Teachers Personal Investors Services,
Inc. (TPIS) and, in some instances, TIAA-CREF Individual & Institutional
Services, Inc. (Services), subsidiaries of TIAA which are both registered with
the SEC as broker-dealers and are members of the NASD. TPIS may be considered
the "principal underwriter" for interests in the contract. Anyone distributing
the contract must be a registered representative of either TPIS or Services,
whose main offices are both at 730 Third Avenue, New York, New York 10017-3206.
No commissions are paid in connection with the distribution of the contracts.
Legal Proceedings
Neither the separate account, TIAA-CREF Life, TPIS, Services nor Advisors is
involved in any legal action that we consider material to the separate account.
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<PAGE> 29
Table of Contents for
the Statement of Additional Information
<TABLE>
<CAPTION>
PAGE IN THE STATEMENT OF
ITEM ADDITIONAL INFORMATION
---- ------------------------
<S> <C>
Tax Status of the Contract................... B-3
Performance Information...................... B-3
Statements and Reports....................... B-5
General Matters.............................. B-5
State Regulation............................. B-6
Legal Matters................................ B-6
Experts...................................... B-6
Additional Considerations.................... B-7
Additional Information....................... B-8
Financial Statements......................... B-8
</TABLE>
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Personal Annuity Select
Individual Deferred Variable Annuity Contract
Funded Through
TIAA-CREF LIFE SEPARATE ACCOUNT VA-1
and
TIAA-CREF LIFE INSURANCE COMPANY
STATEMENT OF ADDITIONAL INFORMATION
January 4, 1999
This Statement of Additional Information is not a prospectus and should be read
in connection with the current prospectus dated January 4, 1999 (the
"Prospectus"), for the variable annuity that is the variable component of the
contract. The Prospectus is available without charge by writing us at TIAA-CREF
Life Insurance Company, 730 Third Avenue, New York, N.Y. 10017-3206, or calling
us toll-free at 800 842-2733, extension 5509. Terms used in the Prospectus are
incorporated into this Statement.
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND SHOULD BE READ
ONLY IN CONJUNCTION WITH THE PROSPECTUS FOR THE CONTRACTS.
[TIAA/CREF LOGO]
<PAGE> 31
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM PAGE
---- ----
<S> <C>
Tax Status of the Contract............ B-3
Performance Information............... B-4
Statements and Reports................ B-5
General Matters....................... B-6
State Regulation...................... B-6
</TABLE>
<TABLE>
<CAPTION>
ITEM PAGE
---- ----
<S> <C>
Legal Matters......................... B-6
Experts............................... B-7
Additional Considerations............. B-7
Additional Information................ B-8
Financial Statements.................. B-8
</TABLE>
B-2
<PAGE> 32
TAX STATUS OF THE CONTRACT
DIVERSIFICATION REQUIREMENTS
Section 817(h) of the Internal Revenue Code (IRC) and the regulations under it
provide that separate account investments underlying a contract must be
"adequately diversified" for it to qualify as an annuity contract under IRC
section 72. The separate account intends to comply with the diversification
requirements of the regulations under section 817(h). This will affect how we
make investments.
Under the IRC, you could be considered the owner of the assets of the separate
account used to support your contract. If this happens, you'd have to include
income and gains from the separate account assets in your gross income. The IRS
has published rulings stating that a variable contractowner will be considered
the owner of separate account assets if the contractowner has any powers that
the actual owner of the assets might have, such as the ability to exercise
investment control. The Treasury Department says that the regulations on
investment diversification don't provide guidance about when and how investor
control of a segregated asset account's investment could cause the investor
rather than the insurance company to be treated as the owner of the assets for
tax purposes. The Treasury Department has also stated that the IRS would issue
regulations or rulings clarifying the "extent to which policyholders may direct
their investments to particular accounts without being treated as owners of the
underlying assets."
Your ownership rights under the contract are similar but not identical to those
described by the IRS in rulings that held that contractowners were not owners of
separate account assets, so the IRS therefore might not rule the same way in
your case. TIAA-CREF Life reserves the right to change the contract if necessary
to help prevent your being considered the owner of the separate account's
assets.
REQUIRED DISTRIBUTIONS
To qualify as an annuity contract under section 72(s) of the IRC, a contract
must provide that: (a) if any owner dies on or after the annuity starting date
but before all amounts under the contract have been distributed, the remaining
amounts will be distributed at least as quickly as under the method being used
when the owner died; and (b) if any owner dies before the annuity starting date,
all amounts under the contract will be distributed within five years of the date
of death. So long as the distributions begin within a year of the owner's death,
the IRS will consider these requirements satisfied for any part of the owner's
interest payable to or for the benefit of a "designated beneficiary" and
distributed over the beneficiary's life or over a period that cannot exceed the
beneficiary's life expectancy. A designated beneficiary is the person the owner
names to assume ownership when the owner dies. A designated beneficiary must be
a natural person, but if a contractowner's spouse is the designated beneficiary,
such spouse can continue the contract when such contractowner dies.
The contract is designed to comply with section 72(s). TIAA-CREF Life will
review the contract and amend it if necessary to make sure that it continues to
comply with the section's requirements.
B-3
<PAGE> 33
PERFORMANCE INFORMATION
TOTAL RETURN INFORMATION FOR THE SEPARATE ACCOUNT
Total return quotations for the investment accounts of the separate account may
be advertised. Total return quotations will reflect all aspects of the
investment account's return. Average annual total returns are determined by
finding the average annual compounded rate of return over a period that reflects
the growth (or decline) in value of a hypothetical $1,000 investment made at the
beginning of the period through the end of that period, according to the
following formula:
<TABLE>
<S> <C> <C> <C>
P(1 + T)(n) = EV
where: P = hypothetical initial payment of
$1,000
T = average annual total return
n = number of years in the period
EV = ending value of the hypothetical
investment at the end of the 1, 5,
or 10 year period.
</TABLE>
To derive the total return quotations from this formula, the percentage net
change in the value of the $1,000 investment from the beginning of the period to
the end of such period ("cumulative total return") is determined. Cumulative
total returns simply reflect the change in value of an investment over a stated
period. Since the accumulation unit value is a "total return" unit value that
reflects the investment experience of the particular investment account of the
separate account and all expense deductions made against the assets of the
separate account, the ending value, or EV, of the $1,000 hypothetical investment
is determined by applying the percentage change in the accumulation unit value
over the period to the hypothetical initial payment of $1,000 less the current
deductions from premiums (i.e., less contractowner transaction expenses, which
are currently 0%). We then solve the equation for T to derive the average annual
compounded rate of return for the separate account over the span of the period,
and the resulting "total return" quotation is carried out to the nearest
hundredth of one percent.
PERFORMANCE COMPARISONS
Performance information for the separate account and its investment accounts may
be compared, in advertisements, sales literature, and reports to contractowners
and annuitants, to the performance information reported by other investments and
to various indices and averages. Such comparisons may be made with, but are not
limited to: (1) Russell 1000, 2000, and 3000 indices, (2) the S&P 500, (3) the
Dow Jones Industrial Average ("DJIA"), (4) Lipper Analytical Services, Inc.
Mutual Fund Performance Analysis Reports and the Lipper General Equity Funds
Average, (5) Money Magazine Fund Watch, (6) Business Week's Mutual Fund
Scoreboard, (7) SEI Funds Evaluation Services Equity Fund Report, (8) CDA Mutual
Funds Performance Review and CDA Growth Mutual Fund Performance Index, (9) Value
Line Composite Average (geometric), (10) Wilshire 5000 Equity Index, (11) the
Consumer Price Index, published by the U.S. Bureau of Labor Statistics
(measurement of inflation), (12) VARDS, and (13) Morningstar, Inc. We may also
discuss ratings or rankings received from these entities, accompanied in some
cases by an explanation of those ratings or rankings, when applicable. In
addition, advertisements may discuss the performance of the indices listed
above.
B-4
<PAGE> 34
The performance of the separate account also may be compared to other indices or
averages that measure performance of a pertinent group of securities.
Contractowners should keep in mind that the composition of the investments in
the reported averages will not be identical to that of the separate account and
that certain formula calculations (i.e., yield) may differ from index to index.
In addition, there can be no assurance that the separate account will continue
its performance as compared to such indices.
ILLUSTRATING COMPOUNDING, TAX DEFERRAL, AND EXPENSE DEDUCTIONS
We may illustrate in advertisements, sales literature and reports to
contractowners or annuitants the effects of tax deferral and/or compounding of
earnings on an investment in the separate account. We may do this using a
hypothetical investment earning a specified rate of return. To illustrate the
effects of compounding, we would show how the total return from an investment of
the same dollar amount, earning the same or different interest rate, varies
depending on when the investment was made. To illustrate the effects of tax
deferral, we will show how the total return from an investment of the same
dollar amount, earning the same or different interest rates, for individuals in
the same tax bracket, would vary between tax-deferred and taxable investments.
We may also illustrate in advertisements, sales literature and reports to
contractowners or annuitants the effect of an investment fund's expenses on
total return over time. We may do this using a hypothetical investment earning a
specified rate of return. We would show how the total return, net of expenses,
from an investment of the same dollar amount in funds with the same investment
results but different expense deductions varies increasingly over time. In the
alternative, we would show the difference in the dollar amount of total expense
charges paid over time by an investor in two or more different funds that have
the same annual total return but different asset-based expense charges. We may
also compare the separate account's expense charges to those of other variable
annuities and other investment products.
STATEMENTS AND REPORTS
You will receive a confirmation statement each time you remit premiums, or make
a transfer or cash withdrawal to or from the separate account. The statement
will show the date and amount of each transaction. However, if you're using an
automatic investment plan, you'll receive a statement confirming those
transactions immediately following the end of each calendar quarter.
If you have any accumulations in the separate account, you will be sent a
statement each quarter which sets forth the following:
(1) Premiums paid during the quarter;
(2) the number and dollar value of accumulation units in the separate
account credited to the contractowner during the quarter and in total;
(3) cash withdrawals from the separate account during the quarter; and
(4) any transfers between the separate account and the fixed account during
the quarter.
You will also receive, at least semi-annually, reports containing the financial
statements of the TIAA-CREF Life Funds and a schedule of investments held by the
TIAA-CREF Life Funds.
B-5
<PAGE> 35
GENERAL MATTERS
ASSIGNMENT OF CONTRACTS
You can assign the contract at any time.
PAYMENT TO AN ESTATE, GUARDIAN, TRUSTEE, ETC.
We reserve the right to pay in one sum the commuted value of any benefits due an
estate, corporation, partnership, trustee or other entity not a natural person.
Neither TIAA-CREF Life nor the separate account will be responsible for the
conduct of any executor, trustee, guardian, or other third party to whom payment
is made.
BENEFITS BASED ON INCORRECT INFORMATION
If the amounts of benefits provided under a contract were based on information
that is incorrect, benefits will be recalculated on the basis of the correct
data. If any overpayments or underpayments have been made by the separate
account, appropriate adjustments will be made.
PROOF OF SURVIVAL
We reserve the right to require satisfactory proof that anyone named to receive
benefits under a contract is living on the date payment is due. If this proof is
not received after a request in writing, the separate account will have the
right to make reduced payments or to withhold payments entirely until such proof
is received.
STATE REGULATION
TIAA-CREF Life and the separate account are subject to regulation by the New
York State Superintendent of Insurance ("Superintendent") as well as by the
insurance regulatory authorities of certain other states and jurisdictions.
TIAA-CREF Life and the separate account must file with the Superintendent
periodic statements on forms promulgated by the New York State Insurance
Department. The separate account books and assets are subject to review and
examination by the Superintendent and the Superintendent's agents at all times,
and a full examination into the affairs of the separate account is made at least
every five years. In addition, a full examination of the separate account's
operations is usually conducted periodically by some other states.
LEGAL MATTERS
All matters of applicable state law pertaining to the contracts, including
TIAA-CREF Life's right to issue the contracts, have been passed upon by Charles
H. Stamm, Executive Vice President and General Counsel of TIAA and CREF.
Sutherland, Asbill & Brennan LLP, Washington, D.C., has provided advice on
certain matters relating to the federal securities laws.
B-6
<PAGE> 36
EXPERTS
The financial statements of TIAA-CREF Life Insurance Company and the separate
account included in this Statement of Additional Information have been audited
by Ernst & Young LLP, independent auditors, as stated in their reports appearing
herein (which report on the financial statements of TIAA-CREF Life Insurance
Company expresses an opinion that such financial statements are presented in
conformity with statutory accounting practices, a comprehensive basis of
accounting as described in Note 2, and not in conformity with generally accepted
accounting principles), and have been so included in reliance upon the reports
of such firm given upon their authority as experts in accounting and auditing.
Ernst & Young LLP is located at 787 Seventh Avenue, New York, New York 10019.
ADDITIONAL CONSIDERATIONS
Over the past several years, TIAA and CREF have added many new investment
vehicles to their line of products. The growing family of TIAA and CREF products
is designed to provide additional investment options for those who want to
diversify their holdings. Most experts recommend diversification as a good
strategy for retirement and other long-term investing, both because a
diversified portfolio offers a degree of safety from the volatility of specific
markets, and because it allows the investor to benefit from the potential for
growth in several different types of investments.
The TIAA-CREF Life Funds' Stock Index Fund offered by the separate account is
suited for people who are seeking growth and are able to make long-term
investments. Although past performance is no guarantee of future results, in the
past stocks have outperformed many other types of investments. Investors who
seek to counter the effects of inflation on their long-term investments should
therefore consider investing in stocks. The Stock Index Fund could be an
appropriate investment for someone who is seeking to supplement his or her
retirement income, to purchase a retirement home, finance an extended trip, or
build a fund for philanthropic purposes. Of course, there is no guarantee that
the investment objective of that or any other fund will be met.
Before investing, you should consider whether your pension plan and social
security payments will meet your retirement needs. You should look at your
assets and liabilities to help determine whether you need to invest more money
to help provide retirement income. You should consider how much time you have
until retirement and the effect of inflation and taxes on your savings and
investments. You should also keep in mind that experts say that people need 70%
to 80% of their pre-retirement income to maintain the same standard of living
after retirement. Before contributing to a contract, you should consider whether
you have already reached your contribution limit on your 401(k) or 403(b)
savings plans. Consult your tax advisor to learn more about these limits.
You should also consider what types of investments are best suited for you and
your current needs. In particular, you should consider the tax treatment of a
variable annuity as compared with a standard mutual fund product. With
annuities, earnings generally grow tax-deferred and investors are provided the
option of lifetime income upon retirement. However, annuities may have
restrictions on withdrawals before age 59 1/2, and thus may not be suitable for
goals other than retirement. We may compare annuities to mutual funds in sales
literature and advertisements.
You should also consider the risks of any investment relative to its potential
rewards. In particular, you should be aware of the risk that arises from market
timing. Market timing is an investment technique whereby
B-7
<PAGE> 37
amounts are transferred from one category of investment to another (for example,
from stocks to bonds) based upon a perception of how each of those categories of
investments will perform relative to the others at a particular time. Investors
who engage in market timing run the risk that they may transfer out of a type of
investment with a rising market value or transfer into a type of investment with
a falling market value. We do not endorse the practice of market timing.
The variety of issues to consider highlights the importance of the support and
services that we provide. These services include: (1) retirement and life
insurance planning expertise from professional counselors rather than
commissioned salespeople; (2) detailed information through quarterly transaction
reports, newsletters and other publications about retirement planning; and (3)
seminars, individual counseling, an Information Center, and 24-hour automated
toll-free numbers for transactions and inquiries. If you request it, we will
send you periodic reminders to remit premiums to the contract.
ADDITIONAL INFORMATION
A registration statement has been filed with the Securities and Exchange
Commission ("SEC"), under the 1933 Act, with respect to the contracts discussed
in the Prospectus and in this Statement of Additional Information. Not all of
the information set forth in the registration statement, and its amendments and
exhibits has been included in the Prospectus or this Statement of Additional
Information. Statements contained in this registration statement concerning the
contents of the contracts and other legal instruments are intended to be
summaries. For a complete statement of the terms of these documents, you should
refer to the instruments filed with the SEC.
FINANCIAL STATEMENTS
Audited financial statements of the separate account and TIAA-CREF Life follow.
TIAA-CREF Life's financial statements should be considered only as bearing upon
TIAA-CREF Life's ability to meet its obligations under the contracts. They
should not be considered as bearing on the investment performance of the assets
held in the separate account.
B-8
<PAGE> 38
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
TIAA-CREF Life Separate Account VA-1
AUDITED FINANCIAL STATEMENTS
DECEMBER 14, 1998:
Report of Independent Auditors......................... B-10
Statement of Assets and Liabilities.................... B-11
Notes to Statement of Assets and Liabilities........... B-12
TIAA-CREF Life Insurance Company
(formerly, TIAA Life Insurance Company)
AUDITED STATUTORY-BASIS FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996:
Report of Management Responsibility.................... B-14
Report of Independent Auditors......................... B-15
Balance Sheets......................................... B-16
Statements of Operations............................... B-17
Statement of Changes in Capital and Surplus............ B-18
Statements of Cash Flows............................... B-19
Notes to Statutory-Basis Financial Statements.......... B-20
UNAUDITED STATUTORY-BASIS FINANCIAL STATEMENTS
SEPTEMBER 30, 1998:
Balance Sheet.......................................... B-26
Statement of Operations................................ B-27
Statement of Changes in Capital and Surplus............ B-28
Statement of Cash Flows................................ B-29
Notes to Statutory-Basis Financial Statements.......... B-30
</TABLE>
B-9
<PAGE> 39
ERNST & YOUNG LLP o 787 SEVENTH AVENUE, NEW YORK, NY 10019 o Phone: 212 773-3000
REPORT OF INDEPENDENT AUDITORS
To the Contractowner of
TIAA-CREF Life Separate Account VA-1
We have audited the accompanying statement of assets and liabilities of
TIAA-CREF Life Separate Account VA-1 (the "Account") as of December 14, 1998.
This statement of assets and liabilities is the responsibility of the Account's
management. Our responsibility is to express an opinion on the statement of
assets and liabilities based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of assets and liabilities is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the statement of assets and
liabilities. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
statement of assets and liabilities presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the statement of assets and liabilities referred to above
presents fairly, in all material respects, the financial position of TIAA-CREF
Life Separate Account VA-1 at December 14, 1998, in conformity with generally
accepted accounting principles.
[Ernst & Young LLP]
December 18, 1998
B-10
<PAGE> 40
TIAA-CREF LIFE SEPARATE ACCOUNT VA-1
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 14, 1998
<TABLE>
<S> <C>
ASSETS
Investments, at cost...................................... $100,000
--------
Shares held in Stock Index Fund of TIAA-CREF Life Funds... 4,000
Net asset value per share ("NAV")......................... 24.04
--------
Investment, at value (Shares X NAV)....................... 96,160
--------
TOTAL ASSETS 96,160
--------
LIABILITIES
Accrued expenses.......................................... 11
--------
TOTAL LIABILITIES 11
--------
NET ASSETS.................................................. $96,149
========
NUMBER OF ACCUMULATION UNITS OUTSTANDING.................... 4,000
=====
NET ASSET VALUE, PER ACCUMULATION UNIT...................... $24.04
======
</TABLE>
See notes to statement of assets and liabilities.
B-11
<PAGE> 41
TIAA-CREF LIFE SEPARATE ACCOUNT VA-1
NOTES TO STATEMENT OF ASSETS AND LIABILITIES
Note 1--Organization
TIAA-CREF Life Separate Account VA-1 (the "Account") was established by the
TIAA-CREF Life Insurance Company ("TIAA-CREF Life"), as a separate investment
account under New York law on July 27, 1998. TIAA-CREF Life, which commenced
operations as a legal reserve life insurance company under the insurance laws of
the State of New York on December 18, 1996, is a wholly-owned indirect
subsidiary of Teachers Insurance and Annuity Association of America ("TIAA"),
also a legal reserve life insurance company established under the insurance laws
of the State of New York in 1918.
The Account is registered with the Securities and Exchange Commission
("Commission") as a unit investment trust under the Investment Company Act of
1940, as amended. The Account invests in shares of the Stock Index Fund of
TIAA-CREF Life Funds (the "Fund"), an open-end management investment company
that was organized as a business trust under Delaware law on August 13, 1998.
The investment objective of the Fund is favorable long-term return from a
diversified portfolio selected to track the overall market for common stocks
publicly traded in the United States, as represented by a broad stock market
index.
The Account commenced operations on December 1, 1998 when TIAA-CREF Life
purchased 4,000 Accumulation Units of the Account at $25 per Unit, for a total
of $100,000. The Account then purchased 4,000 shares of the Fund. At December
14, 1998, TIAA-CREF Life retained the 4,000 Accumulation Units, with a total
value of $96,149. The Account is expected to begin offering Accumulation Units
to the public on January 4, 1999.
TIAA-CREF Life provides all administrative services for the Account. Teachers
Personal Investors Services, Inc. ("TPIS"), an indirect subsidiary of TIAA,
which is registered with the Commission as a broker-dealer and is a member of
the National Association of Securities Dealers, Inc., performs distribution
functions for contracts pursuant to a Principal Underwriting and Administrative
Services Agreement.
Note 2--Significant Accounting Policies
The preparation of the statement of assets and liabilities may require
management to make estimates and assumptions that affect the reported amounts of
assets, liabilities and related disclosures. Actual results may differ from
those estimates. The following is a summary of the significant accounting
policies consistently followed by the Account, which are in conformity with
generally accepted accounting principles.
VALUATION OF INVESTMENTS: The market value of the investment in the Fund is
based on the net asset value of the Fund as of the close of business on the
valuation date.
ACCOUNTING FOR INVESTMENTS: Securities transactions are accounted for as of the
date the securities are purchased or sold (trade date).
FEDERAL INCOME TAXES: Based on provisions of the Internal Revenue Code, no
federal income taxes are attributable to the net investment experience of the
Account.
B-12
<PAGE> 42
TIAA-CREF LIFE SEPARATE ACCOUNT VA-1
NOTES TO STATEMENT OF ASSETS AND LIABILITIES--(Concluded)
Note 3--Expense Charges
Daily charges are deducted from the net assets of the Account for services
required to administer the Account and the contracts, and to cover certain
insurance risks borne by TIAA-CREF Life. The administrative expense charge is
currently set at an annual rate of 0.20% of the average daily net assets of the
Account. TIAA-CREF Life also imposes a daily charge for bearing certain
mortality and expense risks in connection with the contracts equivalent to an
annual rate of 0.10% of the average daily net assets of the Account.
B-13
<PAGE> 43
REPORT OF MANAGEMENT RESPONSIBILITY
To the Board of Directors of
TIAA Life Insurance Company:
The accompanying statutory-basis financial statements of TIAA Life Insurance
Company ("TIAA Life") are the responsibility of management. They have been
prepared on the basis of statutory accounting practices, a comprehensive basis
of accounting comprised of accounting practices prescribed or permitted by the
New York State Insurance Department. The financial statements of TIAA Life have
been presented fairly and objectively in accordance with such statutory
accounting practices.
TIAA Life has established and maintains a strong system of internal controls
designed to provide reasonable assurance that assets are properly safeguarded
and transactions are properly executed in accordance with management's
authorization, and to carry out the ongoing responsibilities of management for
reliable financial statements.
The accompanying statutory-basis financial statements of TIAA Life have been
audited by the independent auditing firm of Ernst & Young LLP. The independent
auditors' report, which appears on the following page, expresses an independent
opinion on the fairness of presentation of these statutory financial statements.
/s/ THOMAS G. WALSH
----------------------------------
President
B-14
<PAGE> 44
[ERNST & YOUNG LLP LETTERHEAD]
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors of
TIAA Life Insurance Company:
We have audited the accompanying statutory-basis balance sheet of TIAA Life
Insurance Company ("TIAA Life") as of December 31, 1997, and the related
statutory-basis statements of operations, changes in capital and surplus, and
cash flows for the year then ended. These financial statements are the
responsibility of TIAA Life's management. Our responsibility is to express an
opinion on these financial statements based on our audit. TIAA Life's 1996
financial statements were audited by other auditors whose report dated March 11,
1997, expressed an adverse opinion as to their conformity with generally
accepted accounting principles, because the financial statements were presented
in accordance with statutory accounting practices prescribed or permitted by the
New York State Insurance Department, and an unqualified opinion as to their
conformity with such statutory accounting practices.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
As described in Note 2 to the financial statements, TIAA Life prepares its
financial statements in conformity with statutory accounting practices, which
practices differ from generally accepted accounting principles. The differences
between such statutory accounting practices and generally accepted accounting
principles and the effects on the accompanying financial statements are
described in Note 2.
In our opinion, because of the effects of the matter described in the preceding
paragraph, the 1997 statutory-basis financial statements referred to above do
not present fairly, in conformity with generally accepted accounting principles,
the financial position of TIAA Life at December 31, 1997 or the results of its
operations or its cash flows for the year then ended.
However, in our opinion, the 1997 statutory-basis financial statements referred
to above present fairly, in all material respects, the financial position of
TIAA Life at December 31, 1997, and the results of its operations and its cash
flows for the year then ended in conformity with statutory accounting practices
prescribed or permitted by the New York State Insurance Department.
[Ernst & Young LLP]
March 30, 1998
B-15
<PAGE> 45
TIAA LIFE INSURANCE COMPANY
STATUTORY-BASIS BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1997 1996
----------- -----------
<S> <C> <C>
ASSETS
Bonds....................................................... $65,542,555 $ 4,254,167
Mortgages................................................... 9,236,910 --
Cash and short-term investments............................. 7,544,346 5,698,395
Investment income due and accrued........................... 854,894 107,667
Other assets................................................ 181,268 10,819
----------- -----------
TOTAL ASSETS $83,359,973 $10,071,048
=========== ===========
LIABILITIES, CAPITAL AND SURPLUS
Policy reserves............................................. $ 36,768 $ 43,553
Federal income taxes payable................................ 201,533 8,624
Asset Valuation Reserve..................................... 187,864 11,187
Other liabilities........................................... 25,567 3,018
----------- -----------
Total Liabilities 451,732 66,382
----------- -----------
Capital: 2,500 shares of $1,000 par value common stock
issued and outstanding.................................... 2,500,000 2,500,000
Additional paid-in capital.................................. 77,500,000 7,500,000
Surplus..................................................... 2,908,241 4,666
----------- -----------
Total Capital and Surplus 82,908,241 10,004,666
----------- -----------
TOTAL LIABILITIES, CAPITAL AND SURPLUS $83,359,973 $10,071,048
=========== ===========
</TABLE>
See notes to statutory-basis financial statements.
B-16
<PAGE> 46
TIAA LIFE INSURANCE COMPANY
STATUTORY-BASIS STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
DECEMBER 18, 1996
(COMMENCEMENT
FOR THE YEAR ENDED OF OPERATIONS)
DECEMBER 31, 1997 TO DECEMBER 31, 1996
------------------ --------------------
<S> <C> <C>
INCOME
Premiums................................................. $ 1,242 $43,888
Net investment income.................................... 4,981,837 32,958
---------- -------
TOTAL INCOME 4,983,079 76,846
---------- -------
EXPENSES
Policy benefits.......................................... 39 430
Increase (decrease) in policy reserves................... (7,469) 43,553
Operating expenses....................................... 257,434 3,386
Expense allowance on reinsurance assumed................. 232 5,000
---------- -------
TOTAL EXPENSES 250,236 52,369
---------- -------
INCOME BEFORE FEDERAL INCOME TAXES 4,732,843 24,477
FEDERAL INCOME TAXES 1,651,906 8,624
---------- -------
NET INCOME $3,080,937 $15,853
========== =======
</TABLE>
See notes to statutory-basis financial statements.
B-17
<PAGE> 47
TIAA LIFE INSURANCE COMPANY
STATUTORY-BASIS STATEMENT OF CHANGES IN CAPITAL AND SURPLUS
<TABLE>
<CAPTION>
CAPITAL ADDITIONAL
STOCK PAID-IN CAPITAL SURPLUS TOTAL
---------- --------------- ---------- ------------
<S> <C> <C> <C> <C>
Capital contribution.................... $2,500,000 $ 7,500,000 -- $ 10,000,000
Net income.............................. -- -- $ 15,853 15,853
Transfers to the Asset
Valuation Reserve..................... -- -- (11,187) (11,187)
---------- ------------ ---------- ------------
BALANCE, DECEMBER 31, 1996.............. 2,500,000 7,500,000 4,666 10,004,666
Net income.............................. -- -- 3,080,937 3,080,937
Transfers to the Asset Valuation
Reserve............................... -- -- (176,677) (176,677)
Change in valuation basis of policy
reserves.............................. -- -- (685) (685)
Capital contribution.................... -- 90,000,000 -- 90,000,000
Dividend to stockholder................. -- (20,000,000) -- (20,000,000)
---------- ------------ ---------- ------------
BALANCE, DECEMBER 31, 1997.............. $2,500,000 $ 77,500,000 $2,908,241 $ 82,908,241
========== ============ ========== ============
</TABLE>
See notes to statutory-basis financial statements.
B-18
<PAGE> 48
TIAA LIFE INSURANCE COMPANY
STATUTORY-BASIS STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
DECEMBER 18, 1996
(COMMENCEMENT
FOR THE YEAR ENDED OF OPERATIONS)
DECEMBER 31, 1997 TO DECEMBER 31, 1996
------------------ --------------------
<S> <C> <C>
CASH PROVIDED
By operating activities:
Premiums........................................... $ 1,242 $ 33,069
Net investment income.............................. 4,219,998 --
------------ -----------
Total Receipts 4,221,240 33,069
------------ -----------
Operating expenses................................. 253,632 2,153
Expense allowance on reinsurance assumed........... 232 5,000
Federal income taxes............................... 1,477,675 --
Other, net......................................... (179) (1,025)
------------ -----------
Total Disbursements 1,731,360 6,128
------------ -----------
Cash Provided (Used) by Operating Activities 2,489,880 26,941
------------ -----------
By investing activities:
Repayment of mortgage principal.................... 63,090 --
Net gains on short-term investments................ 53,365 --
------------ -----------
Cash Provided by Investing Activities 116,455 --
------------ -----------
By financing activities:
Issuance of 2,500 shares of $1,000 par value common
stock........................................... -- 2,500,000
Additional paid-in capital......................... 90,000,000 7,500,000
Dividend to stockholder............................ (20,000,000) --
Other, net......................................... (170,448) --
------------ -----------
Cash Provided by Financing Activities 69,829,552 10,000,000
------------ -----------
TOTAL CASH PROVIDED 72,435,887 10,026,941
------------ -----------
DISBURSEMENTS FOR NEW INVESTMENTS
Investments acquired:
Bonds.............................................. 61,289,936 4,328,546
Mortgages.......................................... 9,300,000 --
------------ -----------
TOTAL DISBURSEMENTS FOR
NEW INVESTMENTS 70,589,936 4,328,546
------------ -----------
INCREASE IN CASH AND SHORT-TERM
INVESTMENTS 1,845,951 5,698,395
CASH AND SHORT-TERM INVESTMENTS
AT BEGINNING OF PERIOD 5,698,395 --
------------ -----------
CASH AND SHORT-TERM INVESTMENTS
AT END OF YEAR $ 7,544,346 $ 5,698,395
============ ===========
</TABLE>
See notes to statutory-basis financial statements.
B-19
<PAGE> 49
TIAA LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS
Note 1--Organization
TIAA Life Insurance Company ("TIAA Life") commenced operations as a legal
reserve life insurance company under the insurance laws of the State of New York
on December 18, 1996. TIAA Life is a wholly-owned subsidiary of TIAA Holdings,
Inc. ("THI"), which is a wholly-owned subsidiary of Teachers Insurance and
Annuity Association of America ("TIAA"), a legal reserve life insurance company
established under the insurance laws of the State of New York in 1918. TIAA Life
was formed for the purpose of providing insurance and savings products to
employees of nonprofit educational and research organizations and their
families.
Note 2--Significant Accounting Policies
TIAA Life's statutory-basis financial statements have been prepared on the basis
of statutory accounting practices prescribed or permitted by the New York State
Insurance Department ("Department"), a comprehensive basis of accounting that
differs from generally accepted accounting principles ("GAAP"). The preparation
of TIAA Life's financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, income and
expenses. Actual results could differ from those estimates. The following is a
summary of the significant accounting policies consistently followed by TIAA
Life.
VALUATION OF INVESTMENTS: Bonds, short-term investments (debt securities with
maturities of one year or less at the time of acquisition), and mortgage loans,
are stated at amortized cost. For loan-backed bonds and structured securities,
amortized cost is determined using actual and anticipated cash flows under the
retrospective method.
ACCOUNTING FOR INVESTMENTS: Investment transactions are accounted for as of the
date the investments are settled (settlement date). Realized capital gains and
losses on investment transactions are accounted for under the specific
identification method.
POLICY RESERVES: Policy reserves are determined in accordance with standard
valuation methods approved by the Department and are computed in accordance with
standard actuarial formulas. The reserves established utilize assumptions for
interest (at an average rate of approximately 3%), mortality and other risks
insured. Such reserves establish a sufficient provision for all contractual
benefits guaranteed under policy provisions.
ASSET VALUATION RESERVE: The Asset Valuation Reserve ("AVR"), which covers all
invested asset classes, is an explicit liability reserve required by the
National Association of Insurance Commissioners ("NAIC") and is intended to
provide for potential future credit and equity losses. Formula calculations
determine the required contribution amounts, and contributions to the AVR are
reported as transfers from surplus.
B-20
<PAGE> 50
TIAA LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(Continued)
Note 2--Significant Accounting Policies--(Continued)
INTEREST MAINTENANCE RESERVE: The Interest Maintenance Reserve ("IMR") is a
liability reserve required by the NAIC which accumulates realized capital gains
and losses resulting from interest rate fluctuations. Such capital gains and
losses are amortized out of the IMR as an adjustment to net investment income
over the remaining lives of the assets sold. All capital gains were fully
amortized out of the IMR during 1997.
INCOME AND EXPENSES: Premiums, investment income and expenses are reported as
incurred.
FEDERAL INCOME TAXES: The federal income tax provision in the accompanying
statement of operations is based on taxes actually paid or anticipated to be
paid with the tax return filing.
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES: GAAP is a comprehensive basis of
accounting that is comprised of the authoritative accounting pronouncements
issued by the Financial Accounting Standards Board, its predecessor
organization, the American Institute of Certified Public Accountants and other
standard setting bodies. The differences between GAAP and statutory accounting
practices would have a material effect on TIAA Life's financial statements, and
the primary differences can be summarized as follows. Under GAAP:
- - The AVR is eliminated and, if necessary, valuation allowances are established
as contra assets based on asset-specific analyses rather than the
formula-based AVR being reflected as a liability reserve;
- - Policy acquisition costs are deferred and amortized over the lives of the
policies issued rather than being charged to operations as incurred;
- - Policy reserves are based on estimates of expected mortality and interest
rather than being based on statutory mortality and interest requirements;
- - Long-term bond investments considered to be "available for sale" are carried
at fair value rather than at amortized cost.
Management believes that the effects of these differences on TIAA Life's
financial statements would increase TIAA Life's total capital if GAAP were
implemented.
Certain amounts in the 1996 financial statements have been reclassified to
conform with the 1997 presentation.
B-21
<PAGE> 51
TIAA LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(Continued)
Note 3--Investments
At December 31, 1997 and 1996, the carrying values (balance sheet amounts) and
estimated market values of long-term bond investments, and gross unrealized
gains and losses with respect to such market values, are shown below:
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
CARRYING UNREALIZED UNREALIZED MARKET
DECEMBER 31, 1997 VALUE GAINS LOSSES VALUE
- ----------------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations
of U.S. government agencies and
corporations........................... $ 5,579,661 $ 394,125 -- $ 5,973,786
Corporate securities..................... 34,478,338 3,809,662 -- 38,288,000
Asset-backed securities.................. 25,484,556 1,116,194 -- 26,600,750
----------- ---------- ------- -----------
Total.......................... $65,542,555 $5,319,981 -- $70,862,536
=========== ========== ======= ===========
DECEMBER 31, 1996
U.S. Treasury securities and obligations
of U.S. government agencies and
corporations........................... $ 4,254,167 -- $94,167 $ 4,160,000
Corporate securities..................... -- -- -- --
Asset-backed securities.................. -- -- -- --
----------- ---------- ------- -----------
Total.......................... $ 4,254,167 -- $94,167 $ 4,160,000
=========== ========== ======= ===========
</TABLE>
The carrying values and estimated market values of long-term bond investments at
December 31, 1997, by contractual maturity, are shown below:
<TABLE>
<CAPTION>
CARRYING ESTIMATED
VALUE MARKET VALUE
----------- ------------
<S> <C> <C>
Due after ten years......................................... $40,057,999 $44,261,786
Asset-backed securities..................................... 25,484,556 26,600,750
----------- -----------
Total............................................. $65,542,555 $70,862,536
=========== ===========
</TABLE>
MORTGAGE LOAN INVESTMENTS: TIAA Life makes mortgage loans, principally
collateralized by commercial real estate. TIAA Life's mortgage underwriting
standards generally limit mortgage investments to first mortgage liens on
completed income-producing properties for which the loan-to-value ratio at the
time of closing generally ranges between 65% and 75%.
At December 31, 1997, the carrying value of the mortgage loan investment was
$9,236,910. This mortgage loan is a shopping center located in the Southeast
region and it will mature in 2012.
At December 31, 1997, there were no outstanding forward commitments for future
long-term bond or mortgage investments.
B-22
<PAGE> 52
TIAA LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(Continued)
Note 3--Investments--(Concluded)
ASSET VALUATION RESERVES: The AVR balances at December 31, 1997 and 1996 were
comprised of the following asset-specific reserves:
<TABLE>
<CAPTION>
1997 1996
-------- -------
<S> <C> <C>
Bonds....................................................... $115,447 $11,187
Mortgages................................................... 72,417 --
-------- -------
Total............................................. $187,864 $11,187
======== =======
</TABLE>
Note 4--Investment Income and Capital Gains and Losses
NET INVESTMENT INCOME: For the periods ended December 31, 1997 and 1996, the
components of net investment income were as follows:
<TABLE>
<CAPTION>
1997 1996
---------- -------
<S> <C> <C>
Gross investment income:
Bonds..................................................... $2,957,262 $16,073
Mortgages................................................. 411,140 --
Cash and short-term investments........................... 1,623,643 17,215
---------- -------
Total............................................. 4,992,045 33,288
Less investment expenses.................................... (44,895) (330)
---------- -------
Net investment income before amortization of IMR gains...... 4,947,150 32,958
Plus amortization of IMR gains.............................. 34,687 --
---------- -------
Net investment income....................................... $4,981,837 $32,958
========== =======
</TABLE>
REALIZED CAPITAL GAINS: For the year ended December 31, 1997, the realized
capital gains on sales of short-term investments was $34,687, net of capital
gains taxes of $18,678.
Note 5--Disclosures About Fair Value of Financial Instruments
The estimated fair value amounts of financial instruments presented in the
following tables have been determined by TIAA Life using market information
available as of December 31, 1997 and 1996 and appropriate valuation
methodologies. However, considerable judgement is necessarily required to
interpret market data in developing the estimates of fair value for financial
instruments for which there are no available market value quotations. The
estimates presented are not necessarily indicative of the
B-23
<PAGE> 53
TIAA LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(Continued)
Note 5--Disclosures About Fair Value of Financial Instruments--(Concluded)
amounts TIAA Life could have realized in a market exchange. The use of different
market assumptions and/or estimation methodologies may have a material effect on
the estimated fair value amounts.
<TABLE>
<CAPTION>
CARRYING ESTIMATED
DECEMBER 31, 1997 VALUE FAIR VALUE
- ----------------- ----------- -----------
<S> <C> <C>
Bonds....................................................... $65,542,555 $70,862,536
Mortgages................................................... 9,236,910 9,637,792
Cash and short-term investments............................. 7,544,346 7,544,346
DECEMBER 31, 1996
Bonds....................................................... $ 4,254,167 $ 4,160,000
Cash and short-term investments............................. 5,698,395 5,698,395
</TABLE>
BONDS: The fair values for publicly traded long-term bond investments are
determined using quoted market prices.
MORTGAGES: The fair value of mortgages are determined with the assistance of an
independent pricing service utilizing a discounted cash flow methodology based
on coupon rates, maturity provisions and assigned credit ratings.
CASH AND SHORT-TERM INVESTMENTS: The carrying values are reasonable estimates
of fair values.
INSURANCE CONTRACTS: TIAA Life's reinsurance agreement entails mortality risks
and is, therefore, exempt from the fair value disclosure requirements related to
financial instruments.
Note 6--Reinsurance Agreement
Effective December 18, 1996, TIAA Life entered into an indemnity reinsurance
agreement with TIAA to reinsure a limited number of individual life insurance
policies on a 50% coinsurance basis. In 1996, TIAA Life earned $43,888 in
premiums for assuming these risks and paid TIAA a $5,000 expense allowance on
the reinsurance assumed. In 1997, five additional individual life insurance
policies were reinsured by TIAA Life on a 50% coinsurance basis. TIAA Life
earned $1,242 in premiums for assuming these risks and paid TIAA a $232 expense
allowance on the reinsurance assumed. As of December 31, 1997, all of TIAA
Life's policy reserves are associated with these reinsured policies.
Note 7--Management Agreement
The majority of services for the operation of TIAA Life are provided, at cost,
by TIAA pursuant to a Service Agreement. Expense reimbursement payments under
the Service Agreement are made quarterly
B-24
<PAGE> 54
TIAA LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(Concluded)
Note 7--Management Agreement--(Concluded)
by TIAA Life to TIAA based on estimated expenses. Payments are adjusted
quarterly to reflect the actual expenses incurred.
Note 8--Contingencies
It is the opinion of management that any liabilities which might arise, over and
above amounts already provided for in the financial statements, are not
considered material in relation to TIAA Life's financial position or the results
of its operations.
B-25
<PAGE> 55
TIAA-CREF LIFE INSURANCE COMPANY
UNAUDITED STATUTORY-BASIS BALANCE SHEET
SEPTEMBER 30, 1998
<TABLE>
<S> <C>
ASSETS
Bonds....................................................... $178,275,006
Mortgages................................................... 18,137,648
Cash and short-term investments............................. 55,697,140
Investment income due and accrued........................... 2,326,558
Other assets................................................ 327,490
------------
TOTAL ASSETS $254,763,842
============
LIABILITIES, CAPITAL AND SURPLUS
Policy reserves............................................. $ 23,929
Federal income taxes payable................................ 935,777
Asset Valuation Reserve..................................... 521,762
Other liabilities........................................... 309,998
------------
Total Liabilities 1,791,466
------------
Capital stock:2,500 shares of $1,000 par value common stock
issued and outstanding.................................... 2,500,000
Additional paid-in capital.................................. 242,500,000
Surplus..................................................... 7,972,376
------------
Total Capital and Surplus 252,972,376
------------
TOTAL LIABILITIES, CAPITAL AND SURPLUS $254,763,842
============
</TABLE>
See notes to statutory-basis financial statements.
B-26
<PAGE> 56
TIAA-CREF LIFE INSURANCE COMPANY
UNAUDITED STATUTORY-BASIS STATEMENT OF OPERATIONS
FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1998
<TABLE>
<S> <C>
INCOME
Net investment income....................................... $9,000,854
----------
TOTAL INCOME 9,000,854
----------
DISTRIBUTION OF INCOME
Policy benefits............................................. (264)
Increase (Decrease) in policy reserves...................... (12,839)
Operating expenses.......................................... 661,738
----------
TOTAL DISTRIBUTION OF INCOME 648,635
----------
INCOME BEFORE FEDERAL INCOME TAXES 8,352,219
FEDERAL INCOME TAXES 2,954,187
----------
NET INCOME $5,398,032
==========
</TABLE>
See notes to statutory-basis financial statements.
B-27
<PAGE> 57
TIAA-CREF LIFE INSURANCE COMPANY
UNAUDITED STATUTORY-BASIS STATEMENT OF CHANGES IN
CAPITAL AND SURPLUS
FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
CAPITAL ADDITIONAL
STOCK PAID-IN CAPITAL SURPLUS TOTAL
---------- --------------- ---------- ------------
<S> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1997............ $2,500,000 $ 77,500,000 $2,908,241 $ 82,908,241
Net income............................ -- -- 5,398,032 5,398,032
Transfers to the Asset Valuation
Reserve............................. -- -- (333,897) (333,897)
Capital contribution.................. -- 165,000,000 -- 165,000,000
---------- ------------ ---------- ------------
BALANCE, SEPTEMBER 30, 1998........... $2,500,000 $242,500,000 $7,972,376 $252,972,376
========== ============ ========== ============
</TABLE>
See notes to statutory-basis financial statements.
B-28
<PAGE> 58
TIAA-CREF LIFE INSURANCE COMPANY
UNAUDITED STATUTORY-BASIS STATEMENTS OF CASH FLOWS
FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1998
<TABLE>
<S> <C>
CASH PROVIDED
By operating activities:
Net investment income..................................... $ 7,508,733
------------
Total Receipts 7,508,733
------------
Operating expenses........................................ 648,178
Federal income taxes...................................... 2,228,443
Other, net................................................ (270,698)
------------
Total Disbursements 2,605,923
------------
Cash Provided by Operating Activities 4,902,810
------------
By investing activities:
Repayment of bonds........................................ 162,478
Repayment of mortgage principal........................... 99,262
Net gains on short-term investments....................... 24,287
------------
Cash Provided by Investing Activities 286,027
------------
By financing activities:
Additional paid-in capital................................ 165,000,000
Other, net................................................ (146,222)
------------
Cash Provided by Financing Activities 164,853,778
------------
TOTAL CASH PROVIDED 170,042,615
------------
DISBURSEMENTS FOR NEW INVESTMENTS
Investments acquired:
Bonds..................................................... 112,889,821
Mortgages................................................. 9,000,000
------------
TOTAL DISBURSEMENTS FOR
NEW INVESTMENTS 121,889,821
------------
INCREASE IN CASH AND SHORT-TERM
INVESTMENTS 48,152,794
CASH AND SHORT-TERM INVESTMENTS
AT BEGINNING OF PERIOD 7,544,346
------------
CASH AND SHORT-TERM INVESTMENTS
AT END OF PERIOD $ 55,697,140
============
</TABLE>
See notes to statutory-basis financial statements.
B-29
<PAGE> 59
TIAA-CREF LIFE INSURANCE COMPANY
NOTES TO UNAUDITED STATUTORY-BASIS FINANCIAL STATEMENTS
Note 1--Organization
TIAA-CREF Life Insurance Company commenced operations as a legal reserve life
insurance company under the insurance laws of the State of New York on December
18, 1996, under its former name, TIAA Life Insurance Company ("TIAA Life"). TIAA
Life changed its name to TIAA-CREF Life Insurance Company ("TIAA-CREF Life") on
May 1, 1998. TIAA-CREF Life is a wholly-owned subsidiary of TIAA-CREF
Enterprises, Inc. (formerly TIAA Holdings, Inc.), which is a wholly-owned
subsidiary of Teachers Insurance and Annuity Association of America ("TIAA"), a
legal reserve life insurance company established under the insurance laws of the
State of New York in 1918.
Note 2--Significant Accounting Policies
TIAA-CREF Life's statutory-basis financial statements have been prepared on the
basis of statutory accounting practices prescribed by the New York State
Insurance Department ("Department"), a comprehensive basis of accounting that
differs from generally accepted accounting principles ("GAAP"). The preparation
of TIAA-CREF Life's financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets, liabilities, income
and expenses. Actual results could differ from those estimates. The following is
a summary of the significant accounting policies consistently followed by
TIAA-CREF Life.
VALUATION OF INVESTMENTS: Bonds, short-term investments (debt securities with
maturities of one year or less at the time of acquisition), and mortgage loans
are stated at amortized cost. For loan-backed bonds and structured securities,
amortized cost is determined using actual and anticipated cash flows under the
retrospective method.
ACCOUNTING FOR INVESTMENTS: Investment transactions are accounted for as of the
date the investments are settled (settlement date). Realized capital gains and
losses on investment transactions are accounted for under the specific
identification method.
POLICY RESERVES: Policy reserves are determined in accordance with standard
valuation methods approved by the Department and are computed in accordance with
standard actuarial formulas. The reserves established utilize assumptions for
interest (at an average rate of approximately 3%), mortality and other risks
insured. Such reserves establish a sufficient provision for all contractual
benefits guaranteed under policy provisions.
ASSET VALUATION RESERVE: The Asset Valuation Reserve ("AVR"), which covers all
invested asset classes, is an explicit liability reserve required by the
National Association of Insurance Commissioners ("NAIC") and is intended to
provide for potential future credit and equity losses. Formula calculations
determine the required contribution amounts, and contributions to the AVR are
reported as transfers from surplus.
B-30
<PAGE> 60
TIAA-CREF LIFE INSURANCE COMPANY
NOTES TO UNAUDITED STATUTORY-BASIS FINANCIAL STATEMENTS -- (Continued)
Note 2--Significant Accounting Policies--(Concluded)
INTEREST MAINTENANCE RESERVE: The Interest Maintenance Reserve ("IMR") is a
liability reserve required by the NAIC which accumulates realized capital gains
and losses resulting from interest rate fluctuations. Such capital gains and
losses are amortized out of the IMR as an adjustment to net investment income
over the remaining lives of the assets sold. All net capital gains on short-term
investments were fully amortized out of the IMR by the end of each period
presented.
INCOME AND EXPENSES: Premiums, investment income and expenses are reported as
incurred.
FEDERAL INCOME TAXES: The federal income tax provision in the accompanying
statement of operations is based on taxes actually paid or anticipated to be
paid with the tax return filing.
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES: GAAP is a comprehensive basis of
accounting that is comprised of the authoritative accounting pronouncements
issued by the Financial Accounting Standards Board, the American Institute of
Certified Public Accountants and other standard setting bodies. The differences
between GAAP and statutory accounting practices could have a material effect on
TIAA-CREF Life's financial statements, and the primary differences can be
summarized as follows. Under GAAP:
- - The AVR is eliminated and, if necessary, valuation allowances are established
as contra assets based on asset-specific analyses rather than the
formula-based AVR being reflected as a liability reserve;
- - Policy acquisition costs are deferred and amortized over the lives of the
policies issued rather than being charged to operations as incurred;
- - Policy reserves are based on estimates of expected mortality and interest
rather than being based on statutory mortality and interest requirements;
- - Long-term bond investments considered to be "available for sale" are carried
at fair value rather than at amortized cost.
Management believes that, if GAAP were implemented, these differences would
increase TIAA-CREF Life's total capital.
B-31
<PAGE> 61
TIAA-CREF LIFE INSURANCE COMPANY
NOTES TO UNAUDITED STATUTORY-BASIS FINANCIAL STATEMENTS -- (Continued)
Note 3--Investments
At September 30, 1998 the carrying values (balance sheet amounts) of long-term
bond investments are shown below:
<TABLE>
<CAPTION>
CARRYING
VALUE
------------
<S> <C>
U.S. Treasury securities and obligations of U.S government
agencies and corporations................................. $ 9,832,516
Corporate securities........................................ 102,413,579
Asset-backed securities..................................... 51,225,082
Mortgage-backed securities.................................. 14,803,829
------------
Total............................................. $178,275,006
============
</TABLE>
At September 30, 1998, outstanding forward commitments for future long-term bond
investments approximated $18,948,000, which is scheduled for disbursement in
1998. The funding of bond commitments is contingent upon the continued favorable
financial performance of the potential borrowers.
The carrying values of long-term bond investments at September 30, 1998, by
contractual maturity, are shown below:
<TABLE>
<CAPTION>
CARRYING
VALUE
------------
<S> <C>
Due after five years through ten years...................... $ 19,405,933
Due after ten years......................................... 92,840,162
------------
Subtotal.......................................... 112,246,095
Asset-backed securities..................................... 51,225,082
Mortgage-backed securities.................................. 14,803,829
------------
Total............................................. $178,275,006
============
</TABLE>
At September 30, 1998, the carrying values of long-term bond investments were
diversified by industry classification as follows:
<TABLE>
<S> <C>
Manufacturing............................................... 29.6%
Asset-backed securities..................................... 28.7
Finance and financial services.............................. 15.7
Mortgage-backed securities.................................. 8.3
Government.................................................. 5.5
Retail and wholesale trade.................................. 5.5
Oil and gas................................................. 3.9
Other....................................................... 2.8
-----
Total............................................. 100.0%
=====
</TABLE>
B-32
<PAGE> 62
TIAA-CREF LIFE INSURANCE COMPANY
NOTES TO UNAUDITED STATUTORY-BASIS FINANCIAL STATEMENTS -- (Continued)
Note 3--Investments--(Concluded)
MORTGAGE LOAN INVESTMENTS: TIAA-CREF Life makes mortgage loans, principally
collateralized by commercial real estate. TIAA-CREF Life's mortgage underwriting
standards generally limit mortgage investments to first mortgage liens on
completed income-producing properties for which the loan-to-value ratio at the
time of closing is approximately at 65%.
The mortgage loan investments outstanding at September 30, 1998 are
collateralized by shopping centers located in the Southeast region and are
scheduled to mature in 2008 and 2012. At September 30, 1998, outstanding forward
commitments for future mortgage loan investments approximated $9,400,000, which
is scheduled for disbursement in 1998.
ASSET VALUATION RESERVES: The AVR balances at September 30, 1998 were comprised
of the following asset-specific reserves:
<TABLE>
<S> <C>
Bonds....................................................... $324,991
Mortgages................................................... 196,771
--------
Total............................................. $521,762
========
</TABLE>
Note 4--Investment Income and Capital Gains and Losses
NET INVESTMENT INCOME: For the period ended September 30, 1998, the components
of net investment income were as follows:
<TABLE>
<S> <C>
Gross investment income:
Bonds....................................................... $4,904,927
Mortgages................................................... 526,288
Cash and short-term investments............................. 3,632,507
----------
Total............................................. 9,063,722
Less investment expenses.................................... (78,655)
----------
Net investment income before amortization of IMR gains...... 8,985,067
Plus amortization of IMR gains.............................. 15,787
----------
Net investment income....................................... $9,000,854
==========
</TABLE>
REALIZED CAPITAL GAINS AND LOSSES: For the period ended September 30, 1998, the
net realized capital gains on sales of short-term investments were $15,787, net
of capital gains taxes of $8,500.
B-33
<PAGE> 63
TIAA-CREF LIFE INSURANCE COMPANY
NOTES TO UNAUDITED STATUTORY-BASIS FINANCIAL STATEMENTS -- (Concluded)
Note 5--Reinsurance Agreement
Effective December 18, 1996, TIAA-CREF Life entered into an indemnity
reinsurance agreement with TIAA to reinsure a limited number of individual life
insurance policies on a 50% coinsurance basis. As of September 30, 1998, all of
TIAA-CREF Life's policy reserves are associated with these reinsured policies.
Note 6--Management Agreement
The majority of services for the operation of TIAA-CREF Life are provided, at
cost, by TIAA pursuant to a Service Agreement. Expense reimbursement payments
under the Service Agreement are made quarterly by TIAA-CREF Life to TIAA based
on estimated expenses. Payments are adjusted quarterly to reflect the actual
expenses incurred.
Note 7--Contingencies
It is the opinion of management that any liabilities which might arise, over and
above amounts already provided for in the financial statements, are not
considered material in relation to TIAA-CREF Life's financial position or the
results of its operations.
B-34
<PAGE> 64
PART C - OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
Part A: None
Part B: Includes the following financial
statements of the Separate Account and TIAA-CREF Life
Insurance Company:
TIAA-CREF LIFE SEPARATE ACCOUNT VA-1
Audited Financial Statements
December 14, 1998:
Report of Independent Auditors
Statement of Assets and Liabilities
Notes to Financial Statements
TIAA-CREF LIFE INSURANCE COMPANY
(formerly, TIAA Life Insurance Company)
Audited Statutory-Basis Financial Statements
December 31, 1997 and 1996:
Report of Management Responsibility
Report of Independent Auditors
Balance Sheets
Statements of Operations
Statement of Changes in Capital and Surplus
Statement of Cash Flows
Notes to Statutory-Basis Financial Statements
Unaudited Statutory-Basis Financial Statements
September 30, 1998:
Balance Sheet
Statement of Operations
Statement of Changes in Capital and Surplus
Statement of Cash Flows
Notes to Statutory-Basis Financial Statements
(b) Exhibits
(1) Resolutions of the Board of Directors of TIAA-CREF
Life establishing the Registrant */
(2) None
(3) (A) Distribution Agreement by and among TIAA-CREF
Life, TIAA-CREF Life on behalf of the Registrant,
and Teachers Personal Investors Services, Inc.
(TPIS) *
(B) Selling Agreement between TPIS and TIAA-CREF
Individual & Institutional Services, Inc. and
Amendment thereto *
(4) Form of Personal Annuity Select Contract *
(5) Form of Application for Personal Annuity Select
Contract *
(6) (A) Charter of TIAA-CREF Life *
(B) Bylaws of TIAA-CREF Life *
(7) None
(8) Participation/Distribution Agreement with TIAA-CREF
Life Funds *
(9) Opinion of Charles H. Stamm, Esquire 1/
(10) (A) Consent of Sutherland, Asbill & Brennan LLP 1/
(B) Consent of Ernst & Young LLP 1/
(C) Consent of Deloitte & Touche LLP 1/
(11) None
(12) Seed money memorandum *
(13) N/A
(14) Financial Data Schedule - not required
- ------------
* Previously filed.
1/ Filed herewith.
C-1
<PAGE> 65
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR.
<TABLE>
<CAPTION>
Positions and Offices
Name and Principal Business Address with the Depositor
<S> <C>
Scott C. Evans Director
TIAA-CREF Life Insurance Company
730 Third Avenue
New York, New York 10017-3206
Richard L. Gibbs Director, Executive Vice
TIAA-CREF Life Insurance Company President and Chief
730 Third Avenue Financial Officer
New York, New York 10017-3206
Don W. Harrell Director
TIAA-CREF Life Insurance Company
730 Third Avenue
New York, New York 10017-3206
Larry D. Hershberger Director, Secretary
TIAA-CREF Life Insurance Company
730 Third Avenue
New York, New York 10017-3206
Matina S. Horner Director
TIAA-CREF Life Insurance Company
730 Third Avenue
New York, New York 10017-3206
Martin L. Leibowitz Director
TIAA-CREF Life Insurance Company
730 Third Avenue
New York, New York 10017-3206
John J. McCormack Director
TIAA-CREF Life Insurance Company
730 Third Avenue
New York, New York 10017-3206
John A. Putney, Jr. Director
TIAA-CREF Life Insurance Company
730 Third Avenue
New York, New York 10017-3206
John A. Somers Director
TIAA-CREF Life Insurance Company
730 Third Avenue
New York, New York 10017-3206
Charles H. Stamm Director
TIAA-CREF Life Insurance Company
730 Third Avenue
New York, New York 10017-3206
</TABLE>
C-2
<PAGE> 66
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company
Act of 1940, TIAA-CREF Life Separate Account VA-1 has duly caused this
Registration Statement to be signed on its behalf, in the City of New York and
State of New York on the 21st day of December, 1998.
TIAA-CREF LIFE SEPARATE ACCOUNT VA-1
By: TIAA-CREF Life Insurance Company
(On behalf of the Registrant and itself)
By: /s/ Thomas G. Walsh
Thomas G. Walsh
President
As required by the Securities Act of 1933, this Registration Statement
has been signed by the following persons in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Thomas G. Walsh President (Principal 12/21/98
Thomas G. Walsh Executive Officer) and
Director
/s/ Richard L. Gibbs Executive Vice President 12/21/98
Richard L. Gibbs and Chief Financial Officer
(Principal Financial and
Accounting Officer) and
Director
</TABLE>
C-3
<PAGE> 67
<TABLE>
<CAPTION>
Signature of Director Date Signature of Director Date
<S> <C> <C> <C>
/s/ Scott C. Evans 12/21/98 /s/ John J. McCormack 12/21/98
Scott C. Evans John J. McCormack
/s/ Dennis D. Foley 12/21/98 /s/ John A. Putney, Jr. 12/21/98
Dennis D. Foley John A. Putney, Jr.
/s/ Don W. Harrell 12/21/98 /s/ John A. Somers 12/21/98
Don W. Harrell John A. Somers
/s/ Larry D. Hershberger 12/21/98 /s/ Charles H. Stamm 12/21/98
Larry D. Hershberger Charles H. Stamm
/s/ Matina S. Horner 12/21/98 /s/ Leonard B. Zimmerman 12/21/98
Matina S. Horner Leonard B. Zimmerman
/s/ Martin L. Leibowitz 12/21/98
Martin L. Leibowitz
</TABLE>
C-4
<PAGE> 68
EXHIBIT INDEX
(9) Opinion of Charles Stamm, Esquire
(10) (A) Consent of Sutherland, Asbill & Brennan LLP
(B) Consent of Ernst & Young LLP
(C) Consent of Deloitte & Touche LLP
<PAGE> 1
Exhibit 99.b.9
[TIAA-CREF LOGO]
Teachers Insurance and Annuity Association
College Retirement Equities Fund
730 Third Avenue
New York, New York 10017-3206
December 21, 1998
Board of Directors
TIAA-CREF Life Insurance Company
730 Third Avenue
New York, New York 10017-3206
Ladies and Gentlemen:
This opinion is furnished in connection with the filing by TIAA-CREF Life
Separate Account VA-1 (the "Separate Account") of Pre-Effective Amendment No. 2
to the Registration Statement (File Nos. 333-61761 and 811-08963) on Form N-4
under the Securities Act of 1933 for certain individual variable annuity
contracts (the "Contracts") offered and funded by the Separate Account. The
Registration Statement covers an indefinite amount of securities in the form of
interests in the Contracts.
I have examined the Charter, Bylaws and other corporate records of
TIAA-CREF Life Insurance Company ("TIAA-CREF Life"), the Plan of Operations and
other organizational records of the Separate Account, and the relevant statutes
and regulations of the State of New York. On the basis of such examination, it
is my opinion that:
1. TIAA-CREF Life Insurance Company is a stock life insurance company
duly organized and validly existing under the laws of the State of New
York.
2. The Separate Account is a "separate account" of TIAA-CREF Life within
the meaning of Section 4240 of the New York Insurance Law, duly
established by a resolution of TIAA-CREF Life's Board of Directors and
validly existing under the laws of the State of New York.
3. To the extent New York State law governs, the Contracts have been duly
authorized by TIAA-CREF Life and, when issued as contemplated by the
Registration Statement, will constitute legal, validly issued and
binding obligations of TIAA-CREF Life enforceable in accordance with
their terms.
<PAGE> 2
I hereby consent to the use of this opinion as an exhibit to the
Registration Statement, and to the reference to my name under the heading "Legal
Matters" in the Statement of Additional Information.
Sincerely,
Charles H. Stamm
Executive Vice President
and General Counsel
<PAGE> 1
Exhibit 99.b.10A
Sutherland, Asbill & Brennan LLP
Atlanta Austin New York Tallahasee Washington
1275 Pennsylvania Avenue, N.W. Tel: (202) 383-0100
Washington, D.C. 20004-2415 Fax: (202) 637-3593
STEVEN B. BOEHM
DIRECT LINE: (202) 383-0176
Internet: [email protected]
December 21, 1998
The Board of Directors
TIAA-CREF Life Insurance Company
730 Third Avenue
New York, New York 10017-3206
Re: TIAA-CREF Life Insurance Company
Registration Statement on Form N-4
File Nos. 333-61761 and 811-08963
Ladies and Gentlemen:
We hereby consent to the reference to our name under the caption "Legal
Matters" in the Statement of Additional Information filed as a part of
Pre-Effective Amendment No. 2 to the above-referenced registration statement on
Form N-4. In giving this consent, we do not admit that we are in the category of
persons whose consent is required under Section 7 of the Securities Act of 1933.
Sincerely,
SUTHERLAND, ASBILL & BRENNAN LLP
By: /s/ Steven B. Boehm
--------------------------
Steven B. Boehm
<PAGE> 1
Exhibit 99.b.10B
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference made to our firm under the caption "Experts" and to
the use of our report dated December 18, 1998 in this Registration Statement
(Form N-4 file no. 333-61761) of TIAA-CREF Life Separate Account VA-1.
We also consent to the use of our report on TIAA-CREF Life Insurance Company
("TIAA-CREF Life"), formerly TIAA Life Insurance Company, dated March 30, 1998
included in this Registration Statement. Such report expresses our opinion that
TIAA-CREF Life's 1997 statutory-basis financial statements present fairly, in
all material respects, the financial position of TIAA-CREF Life at December 31,
1997, and the results of its operations and cash flows for the year then ended
in conformity with statutory accounting practices prescribed or permitted by the
New York State Insurance Department.
[ERNST & YOUNG LLP]
New York, New York
December 21, 1998
<PAGE> 1
Ex.99.b.10c
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Pre-Effective Amendment No. 2 to the Registration
Statement No. 333-61761 and 811-08963 of TIAA-CREF Separate Account VA-1 (VA-1)
on Form N-4, of our report dated March 11, 1997 relating to the financial
statements of TIAA Life Insurance Company (TIAA Life) (now known as TIAA-CREF
Life Insurance Company) included in the statement of additional information,
which is a part of such Registration Statement. Such report expresses our
opinion that the financial statements present fairly, in all material respects,
the statutory financial position of TIAA Life at December 31, 1996 and the
result of its operations, changes in its capital and surplus, and its cash flows
for the period from December 18, 1996 (Commencement of Operations) to December
31, 1996, on the basis of statutory accounting practices, a comprehensive basis
of accounting described in Note 2 of those financial statements, and not in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
December 21, 1998
