As filed with the Securities and Exchange Commission on March 30, 1999
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. [ ]
Post-Effective Amendment No. 1 [X]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 3 [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
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[x] on April 1, 1999 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of rule 485
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
Cover To Come
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Prospectus
Personal Annuity Select
Individual Deferred Variable Annuity Contract
Funded Through
TIAA-CREF Life Separate Account VA-1 of TIAA-CREF Life Insurance Company
April 1, 1999
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 April 1, 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.
Although we have registered these securities with the Securities and Exchange
Commission, the SEC has not judged them for investment merit and does not
guarantee that the information in this prospectus is accurate or adequate.
Anyone who suggests otherwise is committing a federal crime.
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
3 Definitions
5 Summary
9 TIAA-CREF Life Insurance Company and TIAA
9 The separate account
10 TIAA-CREF Life Funds--the Stock Index Fund
12 Adding and closing accounts or substituting investment portfolios
12 The contract--the accumulation period
16 Charges
18 The contract--the annuity period
20 Death benefits
22 Timing of payments
22 Federal income taxes
25 Condensed financial information;
Performance information
26 General matters
28 Distribution of the contracts
28 Legal proceedings
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 about this
offering other than what is contained in this prospectus. If anyone does so,
you shouldn't rely it.
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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.
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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.
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.
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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
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.
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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
the amount of the premium tax paid from any premium payment. 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 17.
(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 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.
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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 16.
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 12.
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
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in a state that requires refund of 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
12.
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 19, and "Federal Income Taxes,"
page 22.
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,
which is greater. For details, see "The Contract--The Annuity Period," page 18.
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 20.
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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
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 2.1 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
December 31, 1998, TIAA's assets were approximately $102 billion; the combined
assets for TIAA and CREF totalled approximately $248 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).
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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.
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[RegTM] index, an index consisting of the 3,000 largest
publicly-traded U.S. corporations. It also uses certain proprietary quantitative
scoring and trading techniques to attempt to slightly outperform the index.
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.
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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), an indirect wholly-owned 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 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.
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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, the District of
Columbia and the United States Virgin Islands, 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)
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
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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 16). 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 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.
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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, 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. Currently, there's no charge for cash withdrawals.
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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 can suspend or terminate your ability to transfer by telephone
or over the Internet at any time.
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 591/2 may subject you to early-distribution taxes as
well. For details, see "Federal Income Taxes," page 22.
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
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(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 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
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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 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
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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 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 26) . 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.
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[ ] 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
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 26). 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.
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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.
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 (or
any surrender charges on 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
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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.
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.
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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 (such as a
corporation or a trust) 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.
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.
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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 591/2;
(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 lives (or joint
life expectancies) 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
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 18), but we
reserve the
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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 TIAA-CREF Life are in the SAI, which is available free upon
request.
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.
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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.
We can suspend or terminate your ability to transact by telephone or over the
Internet at any time.
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.
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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
Like all financial and business organizations, TIAA-CREF Life, the separate
account, the TIAA-CREF Life Funds and their service providers depend on the
smooth functioning of computer systems to operate. The separate account's
operations, including the servicing of contractowners, could be affected if
these computer systems fail or incorrectly process or calculate date-related
information on or after January 1, 2000.
We are dedicated to providing uninterrupted, high-quality service before,
during, and after the Year 2000. To achieve this goal, we, along with TIAA,
have developed and have been actively carrying out an extensive Year 2000 plan
to remediate, test and certify our internal computer systems, and to verify, to
the extent possible, that our external service providers and the TIAA-CREF Life
Funds will be ready for the Year 2000. While we have taken steps we believe
reasonably address the Year 2000 problem, we can't guarantee complete success
or eliminate the possibility that interaction with outside computer systems
could affect our operations. If the systems we rely upon do fail or produce
faulty data, there could be delays in properly processing transactions, or we
may be unable temporarily to engage in normal business activities. Also,
performance could be affected if a systems failure at a company or government
entity affects the price of securities the TIAA-CREF Life Funds' Stock Index
Fund owns.
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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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Table of contents for the
Statement of Additional Information
<TABLE>
<CAPTION>
Page in the
Statement
of Additional
Item Information
- ---------------------------------------------
<S> <C>
Tax Status of the Contract B-3
Performance Information B-3
Statements and Reports B-4
General Matters B-4
State Regulation B-4
Legal Matters B-4
Experts B-5
Additional Considerations B-5
Additional Information B-5
Financial Statements B-5
</TABLE>
<PAGE>
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
April 1, 1999
This Statement of Additional Information is not a prospectus and should be read
in connection with the current prospectus dated April 1, 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>
Table of Contents
<TABLE>
<CAPTION>
Item Page
- ----------------------------------------------------------------
<S> <C>
Tax Status of the Contract ................................ B-3
Performance Information ................................... B-3
Statements and Reports .................................... B-4
General Matters ........................................... B-4
State Regulation .......................................... B-4
Legal Matters ............................................. B-4
Experts ................................................... B-5
Additional Considerations ................................. B-5
Additional Information .................................... B-5
Financial Statements ...................................... B-5
</TABLE>
B-2
<PAGE>
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 contract-owners 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.
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:
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.
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 (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-3
<PAGE>
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.
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 both
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
B-4
<PAGE>
LLP, Washington, D.C., has provided advice on certain matters relating to the
federal securities laws.
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, 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 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
Informa-tion. 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-5
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
TIAA-CREF Life Separate Account VA-1:
Audited Financial Statements
December 31, 1998:
Report of Management Responsibility ................... B-7
Report of Independent Auditors ........................ B-8
Statement of Assets and Liabilities ................... B-9
Statement of Operations ............................... B-10
Statement of Changes in Net Assets .................... B-11
Notes to Financial Statements ......................... B-12
TIAA-CREF Life Insurance Company
(formerly, TIAA Life Insurance Company):
Audited Statutory-Basis Financial Statements
December 31, 1998, 1997 and 1996:
Report of Management Responsibility ................... B-14
Report of Independent Auditors ........................ B-15
Balance Sheets ........................................ B-16
Statement of Operations ............................... B-18
Statement of Changes in Capital and Surplus ........... B-18
Statements of Cash Flows .............................. B-19
Notes to Statutory-Basis Financial Statements ......... B-20
</TABLE>
B-6
<PAGE>
[TIAA-CREF LOGO]
- --------------------------------------------------------------------------------
REPORT OF MANAGEMENT RESPONSIBILITY
To the Contractowner of
TIAA-CREF Life Separate Account VA-1:
The accompanying financial statements of the TIAA-CREF Life Separate Account
VA-1 (the "Account") are the responsibility of management. They have been
prepared in accordance with generally accepted accounting principles and have
been presented fairly and objectively in accordance with such principles.
TIAA-CREF Life Insurance Company ("TIAA-CREF 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. In
addition, internal audit personnel provide a continuing review of the internal
controls and operations of TIAA-CREF Life, including its separate account
operations.
The accompanying financial statements 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 these
financial statements.
/s/ Thomas G. Walsh
---------------------------------
President
and Chief Executive Officer
/s/ Richard L. Gibbs
---------------------------------
Chief Financial Officer
and Executive Vice President
B-7
<PAGE>
[ERNST & YOUNG LLP LOGO] 787 Seventh Avenue Phone: 212 773 3000
New York, New York 10019
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 31, 1998,
and the related statements of operations and changes in net assets for the
period December 1, 1998 (commencement of operations) to December 31, 1998.
These financial statements are the responsibility of the Account's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the TIAA-CREF Life Separate
Account VA-1 at December 31, 1998, and the results of its operations and the
changes in its net assets for the period December 1, 1998 (commencement of
operations) to December 31, 1998, in conformity with generally accepted
accounting principles.
Ernst & Young LLP
February 5, 1999
Ernst & Young LLP is a member of Ernst & Young International, Ltd.
B-8
<PAGE>
TIAA-CREF LIFE SEPARATE ACCOUNT VA-1
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<S> <C>
ASSETS
Investment, at cost ............................................. $ 100,211
---------
Shares held in Stock Index Fund of TIAA-CREF Life Funds ......... 4,008
Net asset value per share ("NAV") ............................... 26.05
---------
Investment, at value (Shares x NAV) ............................. 104,412
---------
TOTAL ASSETS 104,412
---------
LIABILITIES
Amount due to TIAA-CREF LIFE .................................... 25
---------
TOTAL LIABILITIES 25
---------
NET ASSETS ....................................................... $ 104,387
=========
NUMBER OF ACCUMULATION UNITS OUTSTANDING--Notes 5 and 6 .......... 4,000
=========
NET ASSET VALUE, PER ACCUMULATION UNIT--Note 5 ................... $ 26.10
=========
</TABLE>
See notes to financial statements.
B-9
<PAGE>
TIAA-CREF LIFE SEPARATE ACCOUNT VA-1
STATEMENT OF OPERATIONS
For the Period December 1, 1998 (commencement of operations)
to December 31, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME
Income:
Reinvested dividends ........................................ $ 211
------
TOTAL INCOME 211
------
Expenses--Note 3:
Administrative expenses ..................................... 17
Mortality and expense risk charges .......................... 8
------
TOTAL EXPENSES 25
------
INVESTMENT INCOME--NET 186
------
UNREALIZED GAIN ON INVESTMENTS--Note 4
Net change in unrealized appreciation on investment ......... 4,201
------
NET UNREALIZED GAIN ON INVESTMENT 4,201
------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $4,387
======
</TABLE>
See notes to financial statements.
B-10
<PAGE>
TIAA-CREF LIFE SEPARATE ACCOUNT VA-1
STATEMENT OF CHANGES IN NET ASSETS
For the Period December 1, 1998 (commencement of operations)
to December 31, 1998
<TABLE>
<S> <C>
FROM OPERATIONS
Investment income--net ...................................... $ 186
Net change in unrealized appreciation on investment ......... 4,201
--------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS 4,387
--------
FROM CONTRACTOWNER TRANSACTIONS
Seed money from TIAA-CREF Life .............................. 100,000
--------
NET INCREASE IN NET ASSETS RESULTING
FROM CONTRACTOWNER TRANSACTIONS 100,000
--------
NET ASSETS, end of period .................................... $104,387
========
</TABLE>
See notes to financial statements.
B-11
<PAGE>
TIAA-CREF LIFE SEPARATE ACCOUNT VA-1
NOTES TO FINANCIAL STATEMENTS
NOTE 1--ORGANIZATION
TIAA-CREF Life Separate Account VA-1 (the "Account") was established by
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 which was 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. 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
31, 1998, the Account owned 4,008 shares in the Fund, with a total value of
$104,412. The Account began offering Accumulation Units to contractowners other
than TIAA-CREF Life 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 financial statements may require management to make estimates
and assumptions that affect the reported amounts of assets, liabilities, income,
expenses 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 Investment: 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 Investment: Securities transactions are accounted for as of the
date the securities are purchased or sold (trade date). Dividend income is
recorded on the ex-dividend date. Realized gains and losses on security
transactions are based on the specific identification method.
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.
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 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 net assets of the Account.
NOTE 4--INVESTMENTS
Purchases of Fund shares for the period December 1, 1998 (commencement of
operations) to December 31, 1998, were $100,211. There were no sales of Fund
shares during the period.
B-12
<PAGE>
TIAA-CREF LIFE SEPARATE ACCOUNT VA-1
NOTES TO FINANCIAL STATEMENTS (Concluded)
NOTE 5--CONDENSED FINANCIAL INFORMATION
Selected condensed financial information for an Accumulation Unit of the Account
for the period December 1, 1998 (commencement of operations) to December 31,
1998 is presented below.
<TABLE>
<S> <C>
Per Accumulation Unit Data:
Investment income ............................... $ .052
Expenses ........................................ .006
--------
Investment income--net .......................... .046
Net unrealized gain on investment ............... 1.050
--------
Net increase in Accumulation Unit Value ......... 1.096
Beginning of period ............................ 25.000
--------
End of period .................................. $ 26.096
========
Total return ..................................... 4.39%
Ratio to Average Net Assets:
Expenses ........................................ 0.02%
Investment income--net .......................... 0.18%
Portfolio turnover rate .......................... 0.00%
Thousands of Accumulation Units
outstanding at end of period .................... 4
</TABLE>
The percentages shown above are not annualized.
NOTE 6--ACCUMULATION UNITS
Changes in the number of Accumulation Units outstanding for the period December
1, 1998 (commencement of operations) to December 31, 1998 is presented below.
<TABLE>
<S> <C>
Accumulation Units:
Credited for premiums ........................................ 4,000
Credited (cancelled) for transfers and disbursements ......... --
-----
Outstanding, end of period ................................... 4,000
=====
</TABLE>
B-13
<PAGE>
[TIAA-CREF LOGO]
- --------------------------------------------------------------------------------
REPORT OF MANAGEMENT RESPONSIBILITY
To the Board of Directors of
TIAA-CREF Life Insurance Company:
The accompanying statutory-basis financial statements of TIAA-CREF Life
Insurance Company ("TIAA-CREF 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-CREF Life have been presented fairly and objectively in
accordance with such statutory accounting practices.
TIAA-CREF Life has established and maintains a strong system of internal
control 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-CREF 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>
[ERNST & YOUNG LLP 787 Seventh Avenue Phone: 212 773 3000
LETTERHEAD] New York, New York 10019
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors of
TIAA-CREF Life Insurance Company:
We have audited the accompanying statutory-basis balance sheets of TIAA-CREF
Life Insurance Company ("TIAA-CREF Life") as of December 31, 1998 and 1997, and
the related statutory-basis statements of operations, changes in capital and
surplus, and cash flows for the years then ended. These financial statements
are the responsibility of TIAA-CREF Life's management. Our responsibility is to
express an opinion on these financial statements based on our audits. TIAA-CREF
Life's financial statements for the period December 18, 1996 (commencement of
operations) through December 31, 1996, 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 audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
As described in Note 2 to the financial statements, TIAA-CREF Life presents 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 effect 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 1998 and 1997 statutory-basis financial statements referred to
above do not present fairly, in conformity with generally accepted accounting
principles, the financial position of TIAA-CREF Life at December 31, 1998 or
1997 or the results of its operations or its cash flows for the years then
ended.
However, in our opinion, the 1998 and 1997 statutory-basis financial statements
referred to above present fairly, in all material respects, the financial
position of TIAA-CREF Life at December 31, 1998 and 1997, and the results of
its operations and its cash flows for the years then ended in conformity with
statutory accounting practices prescribed or permitted by the New York State
Insurance Department.
Ernst & Young LLP
March 18, 1999
Ernst & Young LLP is a member of Ernst & Young International, Ltd.
B-15
<PAGE>
TIAA-CREF LIFE INSURANCE COMPANY
STATUTORY-BASIS BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
--------------------------------
1998 1997
--------------- --------------
<S> <C> <C>
ASSETS
Bonds .......................................................... $219,903,588 $65,542,555
Mortgages ...................................................... 27,485,357 9,236,910
Cash and short-term investments ................................ 6,098,470 7,544,346
Investment income due and accrued .............................. 2,785,756 854,894
Separate account assets ........................................ 104,388 --
Other assets ................................................... 53,071 181,268
------------ -----------
TOTAL ASSETS $256,430,630 $83,359,973
============ ===========
LIABILITIES, CAPITAL AND SURPLUS
Policy reserves ................................................ $ 37,735 $ 36,768
Federal income taxes payable ................................... 235,359 201,533
Asset Valuation Reserve ........................................ 635,512 187,864
Other liabilities .............................................. 279,252 25,567
------------ -----------
Total Liabilities 1,187,858 451,732
------------ -----------
Capital: 2,500 shares of $1,000 par value common stock issued and
outstanding .................................................... 2,500,000 2,500,000
Additional paid-in capital ...................................... 242,500,000 77,500,000
Surplus ......................................................... 10,242,772 2,908,241
------------ -----------
Total Capital and Surplus 255,242,772 82,908,241
------------ -----------
TOTAL LIABILITIES, CAPITAL AND SURPLUS $256,430,630 $83,359,973
============ ===========
</TABLE>
See notes to statutory-basis financial statements.
B-16
<PAGE>
TIAA-CREF LIFE INSURANCE COMPANY
STATUTORY-BASIS STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
December 18, 1996
For the Years Ended December 31, (Commencement
-------------------------------- of Operations)
1998 1997 to December 31, 1996
------------- -------------- ---------------------
<S> <C> <C> <C>
INCOME
Premiums ......................................... $ 13,634 $ 1,242 $43,888
Net investment income ............................ 13,295,128 4,981,871 32,958
----------- ---------- -------
TOTAL INCOME 13,308,762 4,983,113 76,846
----------- ---------- -------
EXPENSES
Policy benefits .................................. 7,986 73 430
Increase (decrease) in policy reserves ........... 967 (7,469) 43,553
Operating expenses ............................... 1,343,464 257,434 3,386
Expense allowance on reinsurance assumed ......... 2,100 232 5,000
----------- ---------- -------
TOTAL EXPENSES 1,354,517 250,270 52,369
----------- ---------- -------
Income before federal income taxes 11,954,245 4,732,843 24,477
Federal income taxes 4,176,454 1,651,906 8,624
----------- ---------- -------
NET INCOME $ 7,777,791 $3,080,937 $15,853
=========== ========== =======
</TABLE>
See notes to statutory-basis financial statements.
B-17
<PAGE>
TIAA-CREF LIFE INSURANCE COMPANY
STATUTORY-BASIS STATEMENTS 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
Net income ......................... -- -- 7,777,791 7,777,791
Transfers to the Asset Valuation
Reserve ........................... -- -- (447,648) (447,648)
Capital contribution ............... -- 165,000,000 -- 165,000,000
Increase in value of seed money in
separate account .................. -- -- 4,388 4,388
---------- ------------- ----------- -------------
Balance, December 31, 1998 ......... $2,500,000 $ 242,500,000 $10,242,772 $ 255,242,772
========== ============= =========== =============
</TABLE>
See notes to statutory-basis financial statements.
B-18
<PAGE>
TIAA-CREF LIFE INSURANCE COMPANY
STATUTORY-BASIS STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
December 18, 1996
For the Years Ended December 31, (Commencement
---------------------------------- of Operations)
1998 1997 to December 31, 1996
--------------- ---------------- ---------------------
<S> <C> <C> <C>
CASH PROVIDED
By operating activities:
Premiums .......................................... $ 13,634 $ 1,242 $ 33,069
Net investment income ............................. 11,386,874 4,220,032 --
------------ ------------- -----------
Total Receipts 11,400,508 4,221,274 33,069
------------ ------------- -----------
Policy benefits ................................... 7,961 34 --
Operating expenses ................................ 1,346,288 253,632 2,153
Expense allowance on reinsurance assumed .......... 2,100 232 5,000
Federal income taxes .............................. 4,150,443 1,477,675 --
Separate account seed money investment ............ 100,000 -- --
Other, net ........................................ (334,678) (179) (1,025)
------------ ------------- -----------
Total Disbursements 5,272,114 1,731,394 6,128
------------ ------------- -----------
Cash Provided by Operating Activities 6,128,394 2,489,880 26,941
------------ ------------- -----------
By investing activities:
Sales and redemptions of bonds and stocks ......... 602,103 -- --
Repayment of mortgage principal ................... 151,553 63,090 --
Net gains on short-term investments ............... 22,328 53,365 --
------------ ------------- -----------
Cash Provided by Investing Activities 775,984 116,455 --
------------ ------------- -----------
By financing activities:
Issuance of 2,500 shares of $1,000 par value common
stock ............................................ -- -- 2,500,000
Additional paid-in capital ........................ 165,000,000 90,000,000 7,500,000
Dividend to stockholder ........................... -- (20,000,000) --
Other, net ........................................ -- (170,448) --
------------ ------------- -----------
Cash Provided by Financing Activities 165,000,000 69,829,552 10,000,000
------------ ------------- -----------
TOTAL CASH PROVIDED 171,904,378 72,435,887 10,026,941
------------ ------------- -----------
DISBURSEMENTS FOR NEW INVESTMENTS
Investments acquired:
Bonds ............................................. 154,950,254 61,289,936 4,328,546
Mortgages ......................................... 18,400,000 9,300,000 --
------------ ------------- -----------
TOTAL DISBURSEMENTS FOR NEW INVESTMENTS 173,350,254 70,589,936 4,328,546
------------ ------------- -----------
INCREASE (DECREASE) IN CASH AND SHORT-TERM
INVESTMENTS (1,445,876) 1,845,951 5,698,395
------------ ------------- -----------
CASH AND SHORT-TERM INVESTMENTS
AT BEGINNING OF PERIOD 7,544,346 5,698,395 --
------------ ------------- -----------
CASH AND SHORT-TERM INVESTMENTS
AT END OF PERIOD $ 6,098,470 $ 7,544,346 $ 5,698,395
============ ============= ===========
</TABLE>
See notes to statutory-basis financial statements.
B-19
<PAGE>
TIAA-CREF LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS
December 31, 1998
NOTE 1--ORGANIZATION AND OPERATIONS
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. ("Enterprises"), 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.
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 December 31, 1998, all of
TIAA-CREF Life's policy reserves are associated with these reinsured policies.
Beginning in January 1999, TIAA-CREF Life began issuing personal annuity
contracts with fixed and variable components.
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, mortgage loans and short-term investments (debt
securities with maturities of one year or less at the time of acquisition) are
generally 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. Anticipated prepayments are based on
life-to-date payment speeds, using historical cash flows and internal estimates.
Separate account assets are stated at market value.
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.
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, under the grouped method of amortization,
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
earned/incurred.
Federal Income Taxes: Effective for 1998 TIAA-CREF Life will file a consolidated
federal income tax return with its qualifying affiliates. The tax sharing
agreement will follow the current reimbursement method, whereby members of the
consolidated group will generally be reimbursed for their losses on a pro-rata
basis by other members of the group to the extent that they have taxable income,
subject to limitations imposed under the Internal Revenue Code. The federal
income tax pro-
B-20
<PAGE>
TIAA-CREF LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (Continued)
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES (Concluded)
visions in the accompanying statements of operations are based on taxes actually
paid or anticipated to be paid under the tax sharing agreement.
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:
o 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;
o The IMR is eliminated and realized gains and losses resulting from interest
rate fluctuations are reported as a component of net income rather than
being accumulated in and subsequently amortized out of the IMR;
o Policy acquisition costs are deferred and amortized over the lives of the
policies issued rather than being charged to operations as incurred;
o Policy reserves are based on estimates of expected mortality and interest
rather than being based on statutory mortality and interest requirements;
o Long-term bond investments considered to be "available for sale" are carried
at fair value rather than at amortized cost;
o Deferred tax assets and liabilities are determined based on the differences
between the financial statement amounts and the tax bases of assets and
liabilities rather than not being recognized.
Management believes that the effects of these differences would increase
TIAA-CREF Life's total capital if GAAP were implemented.
Reclassification: Certain amounts in the 1997 financial statements have been
reclassified to conform with the 1998 presentation.
NOTE 3--INVESTMENTS
Securities Investments: At December 31, 1998 and 1997, 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
Carrying Unrealized Unrealized Estimated
Value Gains Losses Market Value
-------------- ------------ -------------- ---------------
<S> <C> <C> <C> <C>
December 31, 1998
- -----------------
U.S. Treasury securities and
obligations of U.S. government
agencies and corporations ......... $ 10,379,302 $ 945,856 $ (4,878) $ 11,320,280
Corporate securities ............... 111,344,796 4,772,681 (225,445) 115,892,032
Mortgage-backed securities ......... 25,880,780 1,275,421 -- 27,156,201
Asset-backed securities ............ 72,298,710 2,706,809 (100,600) 74,904,919
------------ ---------- ---------- ------------
Total ............................ $219,903,588 $9,700,767 $ (330,923) $229,273,432
============ ========== ========== ============
</TABLE>
B-21
<PAGE>
TIAA-CREF LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (Continued)
NOTE 3--INVESTMENTS (Continued)
<TABLE>
<CAPTION>
Gross Gross
Carrying Unrealized Unrealized Estimated
Value Gains Losses Market Value
------------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
December 31, 1997
- -----------------
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
Mortgage-backed securities ......... -- -- -- --
Asset-backed securities ............ 25,484,556 1,116,194 -- 26,600,750
----------- ---------- -- -----------
Total ............................ $65,542,555 $5,319,981 -- $70,862,536
=========== ========== == ===========
</TABLE>
Debt securities amounting to approximately $6,557,000 and $426,000 at December
31, 1998 and 1997, respectively, were on deposit with governmental authorities
or trustees, as required by law.
The carrying values and estimated market values of long-term bond investments at
December 31, 1998, by contractual maturity, are shown below:
<TABLE>
<CAPTION>
Carrying Estimated
Value Market Value
-------------- ---------------
<S> <C> <C>
December 31, 1998
- ------------------
Due after five years through ten years ......... $ 47,895,235 $ 48,944,055
Due after ten years ............................ 73,828,863 78,268,257
------------ ------------
Subtotal ..................................... 121,724,098 127,212,312
------------ ------------
Mortgage-backed securities ..................... 25,880,780 27,156,201
Asset-backed securities ........................ 72,298,710 74,904,919
------------ ------------
Total ........................................ $219,903,588 $229,273,432
============ ============
</TABLE>
Bonds not due at a single maturity date have been included in the preceding
table based on the year of final maturity. Actual maturities may differ from
contractual maturities because borrowers may have the right to call or prepay
obligations, although prepayment premiums may be applicable.
At December 31, 1998 and 1997, the carrying values of long-term bond investments
were diversified by industry classification as follows:
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Asset-backed securities ................. 32.9% 38.9%
Manufacturing ........................... 28.1 14.9
Finance and financial services .......... 12.7 15.2
Mortgage-backed securities .............. 11.8 --
Government .............................. 4.7 8.5
Retail and wholesale trade .............. 4.4 14.9
Oil and gas ............................. 3.2 --
Other ................................... 2.2 7.6
----- -----
Total ................................. 100.0% 100.0%
===== =====
</TABLE>
Mortgage Loan Investments: TIAA-CREF Life makes mortgage loans, principally
collateralized by commercial real estate. TIAA-CREF Life's mortgage underwriting
standards generally result in 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%.
B-22
<PAGE>
TIAA-CREF LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (Continued)
NOTE 3--INVESTMENTS (Concluded)
TIAA-CREF Life employs a system to monitor the effects of current and expected
market conditions and other factors on the collectability of mortgage loans and
the realizability of real estate investments. This system is utilized to
identify and quantify any permanent impairments in value (none identified at
December 31, 1998 and 1997). The range of coupon rates for mortgage loans issued
during 1998 was from 6.83% to 6.95%.
The mortgage loan investments outstanding at December 31, 1998 are
collateralized by shopping centers 65.8%, and apartments 34.2% located in the
South Atlantic 65.8% and East North Central 34.2% regions.
At December 31, 1998, the contractual maturity schedule of mortgage loans is
shown below:
<TABLE>
<CAPTION>
Carrying
Value
-------------
<S> <C>
Due in one year or less ........................ $ 344,249
Due after one year through five years .......... 1,690,171
Due after five years through ten years ......... 10,357,060
Due after ten years ............................ 15,093,877
-----------
Total ........................................ $27,485,357
===========
</TABLE>
Asset Valuation Reserves: The AVR balances at December 31, 1998 and 1997 were
comprised of the following asset-specific reserves:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Bonds .............. $362,093 $115,447
Mortgages .......... 273,419 72,417
-------- --------
Total ............ $635,512 $187,864
======== ========
</TABLE>
NOTE 4--INVESTMENT INCOME AND CAPITAL GAINS AND LOSSES
Net Investment Income: For the years ended December 31, 1998 and 1997 and for
the period ended December 31, 1996 the components of net investment income were
as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------- ---------- -------
<S> <C> <C> <C>
Gross investment income:
Bonds ............................................... $ 8,564,192 $2,957,262 $16,073
Mortgages ........................................... 881,292 411,140 --
Cash and short-term investments ..................... 3,963,348 1,623,677 17,215
----------- ---------- -------
Total .............................................. 13,408,832 4,992,079 33,288
Less investment expenses ............................. (128,217) (44,895) (330)
----------- ---------- -------
Net investment income before amortization of IMR gains 13,280,615 4,947,184 32,958
Plus amortization of IMR gains ....................... 14,513 34,687 --
----------- ---------- -------
Net investment income ................................ $13,295,128 $4,981,871 $32,958
=========== ========== =======
</TABLE>
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-CREF Life using market information
available as of December 31, 1998 and 1997 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 amounts TIAA-CREF 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.
B-23
<PAGE>
TIAA-CREF LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (Continued)
NOTE 5--DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS (Concluded)
<TABLE>
<CAPTION>
Carrying Estimated
Value Market Value
--------------- ---------------
<S> <C> <C>
December 31, 1998
- -----------------
Bonds .......................................... $219,903,588 $229,273,432
Mortgages ...................................... 27,485,357 28,264,034
Cash and short-term investments ................ 6,098,470 6,098,470
Separate account seed money investment ......... 104,388 104,388
December 31, 1997
- -----------------
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
</TABLE>
Bonds: The fair values for publicly traded long-term bond investments are
determined using quoted market prices. For privately placed long-term bond
investments without a readily ascertainable market value, such values 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.
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
their fair values.
Separate account seed money investment: The carrying value is a reasonable
estimate of its fair value.
Insurance contracts: TIAA-CREF Life's reinsurance agreement entails mortality
risks and is, therefore, exempt from the fair value disclosure requirements
related to financial instruments.
NOTE 6--MANAGEMENT AGREEMENTS
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--SEPARATE ACCOUNT
TIAA-CREF Life Separate Account VA-1 ("VA-1") is a unit investment trust with
all of its assets invested in an underlying portfolio of mutual funds, TIAA-CREF
Life Funds. Currently, TIAA-CREF Life Funds has one investment portfolio, the
Stock Index Fund, which invests in a diversified portfolio of equity securities
selected to track the overall United States stock market. VA-1 was established
on July 22, 1998 and received a $100,000 seed money investment from TIAA-CREF
Life on December 1, 1998.
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-CREF Life's financial position or the
results of its operations.
B-24
<PAGE>
TIAA-CREF LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (Concluded)
NOTE 9--YEAR 2000 (Unaudited)
Because TIAA provides all administrative support for TIAA-CREF Life, TIAA is the
owner and operator of all computer systems and software used by TIAA-CREF Life.
Like all other financial service organizations, TIAA could be adversely affected
if the computer systems that it uses and those used by its major service
providers do not properly process and calculate date-related information on or
after January 1, 2000. TIAA has taken steps that management believes are prudent
and reasonably designed to address the Year 2000 issue. TIAA has developed, and
is executing, an extensive Year 2000 remediation and certification plan that
addresses its critical computer systems, as well as the interfaces with its
important external vendors and service providers. TIAA has also developed
contingency plans intended to minimize the impact that unexpected systems
failures (internal and external) may have on its operations. Management has
periodically apprised the TIAA Board of Trustees regarding these plans and the
progress of efforts to deal with the Year 2000 issue. Although there can be no
absolute assurance that these steps will be sufficient to address all aspects of
the Year 2000 issue, management does not anticipate that the Year 2000 issue
will have a significant adverse impact on TIAA's business operations.
B-25
<PAGE>
Part C - OTHER INFORMATION
Item 24. Financial Statements and Exhibits
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 31, 1998:
Report of Management Responsibility...........................B-8
Report of Independent Auditors................................B-9
Statement of Assets and Liabilities..........................B-10
Statement of Operations......................................B-11
Statement of Changes in Net Assets...........................B-12
Notes to Financial Statements................................B-13
TIAA-CREF LIFE INSURANCE COMPANY
(formerly, TIAA Life Insurance Company)
Audited Statutory-Basis Financial Statements
December 31, 1998, 1997 and 1996:
Report of Management Responsibility..........................B-15
Report of Independent Auditors...............................B-16
Balance Sheets...............................................B-17
Statements of Operations.....................................B-18
Statement of Changes in Capital and Surplus..................B-19
Statements of Cash Flows.....................................B-20
Notes to Statutory-Basis Financial Statements................B-21
(b) Exhibits
(1) Resolutions of the Board of Directors of TIAA-CREF Life
establishing the Registrant(1)
(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)(2)
(B) Selling Agreement between TPIS and TIAA-CREF
Individual and Institutional Services, Inc. and
Amendment thereto(1)
(4) Form of Personal Annuity Select Contract(2)
(5) Form of Application for Personal Annuity Select Contract(1)
(6) (A) Charter of TIAA-CREF Life(2)
(B) Bylaws of TIAA-CREF Life(2)
(7) None
(8) Participation/Distribution Agreement with TIAA-CREF Life
Funds(1)
C-1
<PAGE>
(9) Consent of Charles H. Stamm, Esquire
(10) (A) Consent of Sutherland Asbill & Brennan LLP
(B) Consent of Ernst & Young LLP
(11) None
(12) Seed money memorandum(2)
(13) Schedule of Computation of Performance Information(2)
(14) Financial Data Schedule - not required
____________
(1) Previously filed as part of the initial filing of this Registration
Statement on August 18, 1998.
(2) Previously filed as part of the Pre-Effective Amendments Nos. 1 and 2 to
this Registration Statement, on December 7, 1998 and December 22, 1998,
respectively.
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
</TABLE>
C-2
<PAGE>
<TABLE>
<CAPTION>
Positions and Offices
Name and Principal Business Address with the Depositor
- ----------------------------------- ---------------------
<S> <C>
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
Thomas G. Walsh Director, President
TIAA-CREF Life Insurance Company
730 Third Avenue
New York, New York 10017-3206
Leonard B. Zimmerman Director, Chief Actuary
TIAA-CREF Life Insurance Company
730 Third Avenue
New York, New York 10017-3206
Richard J. Adamski Vice President
TIAA-CREF Life Insurance Company and Treasurer
730 Third Avenue
New York, New York 10017-3206
Michael T. O'Kane Chief Investment
TIAA-CREF Life Insurance Company Officer
730 Third Avenue
New York, New York 10017-3206
Gary Chinery Assistant Treasurer
TIAA-CREF Life Insurance Company
730 Third Avenue
New York, New York 10017-3206
Edward J. Leahy Assistant Secretary
TIAA-CREF Life Insurance Company
730 Third Avenue
New York, New York 10017-3206
</TABLE>
C-3
<PAGE>
<TABLE>
<CAPTION>
Positions and Offices
Name and Principal Business Address with the Depositor
- ----------------------------------- ---------------------
<S> <C>
Benjamin Leiser Assistant Secretary
TIAA-CREF Life Insurance Company
730 Third Avenue
New York, New York 10017-3206
Mark L. Serlen Assistant Secretary
TIAA-CREF Life Insurance Company
730 Third Avenue
New York, New York 10017-3206
</TABLE>
Item 26. Persons Controlled by or under Common Control with the
Depositor or Registrant
TIAA-CREF Life Insurance Company, the depositor, is a direct
wholly-owned subsidiary of TIAA-CREF Enterprises, Inc., a direct wholly-owned
subsidiary of Teachers Insurance and Annuity Association of America (TIAA). The
following companies are subsidiaries of TIAA and are included in the
consolidated financial statements of TIAA. All TIAA subsidiary companies are
Delaware corporations, except as indicated. All trusts are Pennsylvania business
trusts.
AIC Properties, Inc.
BT Properties, Inc.
College Credit Trust
DAN Properties, Inc.
ETC Repackaging, Inc.
Illinois Teachers Properties, LLC
JV California Two, Inc.
JV California Three, Inc.
JV Florida One, Inc.
JV Florida Four, Inc.
JV Georgia One, Inc.
JV Maryland One, Inc.
JV Michigan One, Inc.
JV Michigan Two, Inc.
JV Michigan Three, Inc.
JV Minnesota One, Inc.
JV North Carolina One, Inc.
JWL Properties, Inc.
Liberty Place Retail, Inc.
Light St. Partners LLP - Maryland
Macallister Holdings, Inc.
Minnesota Teachers Realty Corp. - Minnesota
MN Properties, Inc.
M.O.A. Enterprises, Inc.
ND Properties, Inc.
OWP Hawaii, LLC
Rouse-Teachers Holding Company - Nevada
Rouse-Teachers Land Holdings, Inc. - Maryland
Savannah Teachers Properties, Inc.
T114 Properties, Inc.
T-Investment Properties Corp.
T-Land Corp.
TCT Holdings, Inc.
Teachers Advisors, Inc.
Teachers Boca Properties II, Inc.
Teachers Pennsylvania Realty, Inc. - Pennsylvania
Teachers Personal Investors Services, Inc.
Teachers Properties, Inc.
Teachers REA, LLC
Teachers REA II, LLC - Pennsylvania
Teachers REA III, LLC
Teachers Realty Corporation - Pennsylvania
TEO-NP, LLC - Pennsylvania
TIAA Realty, Inc.
TIAA Timberlands I, LLC
TIAA-CREF Enterprises, Inc.
TIAA-CREF Individual & Institutional Services, Inc.
TIAA-CREF Investment Management, LLC
TIAA-CREF Life Insurance Company
TIAA-CREF Trust Company, FSB
TIAA-CREF Tuition Financing, Inc.
TIAA-Fund Equities, Inc.
C-4
<PAGE>
TPI Housing, Inc.
Washington Teachers Properties II, Inc.
WRC Properties, Inc.
730 Properties, Inc.
730 Cal Hotel Properties I, Inc.
730 Cal Hotel Properties II, Inc.
730 Penn. Hotel Properties I, Inc.
485 Properties, LLC
(1) All subsidiaries are Delaware corporations except as follows:
A) Pennsylvania non-stock, non-profit corporations:
Liberty Place Retail, Inc.
Teachers Pennsylvania Realty, Inc.
Teachers Realty Corporation
B) Minnesota Teachers Realty Corporation is a Minnesota
corporation.
C) College Credit Trust, a New York Trust.
D) TIAA-CREF Life Insurance Company is a New York corporation.
E) TIAA-CREF Trust Company, FSB is a Federal Savings Bank.
(2) All subsidiaries are 100% owned directly by TIAA, except as
follows:
A) TIAA-CREF Enterprises, Inc. owns 100% of the stock of
Teachers Advisors, Inc., Teachers Personal Investors
Services, Inc., TIAA-CREF Life Insurance Company, TIAA-CREF
Tuition Financing, Inc. and TCT Holdings, Inc.
B) TIAA-CREF Trust Company, FSB is 100% owned by TCT
Holdings, Inc.
C) T-Investment Properties Corp. and T-Land Corp. are 100%
owned by Macallister Holdings, Inc.
D) TPI Housing, Inc. is 100% owned by Teachers Properties,
Inc.
E) 730 Properties, Inc. owns 100% of the stock of 730 Cal
Hotel Properties I, Inc., 730 Cal Hotel Properties II, Inc.
and 730 Penn. Hotel Properties I, Inc.
(3) All subsidiaries have as their sole purpose the ownership of
investments which could, pursuant to New York State Insurance
Law, be owned by TIAA itself, except the following:
a) Teachers Advisors, Inc. which provides investment advice for the
Registrant.
C-5
<PAGE>
b) Teachers Personal Investors Services, Inc. which provides
broker-dealer services for the Registrant.
c) TIAA-CREF Investment Management, LLC which provides investment
advice for College Retirement Equities Fund.
d) TIAA-CREF Individual & Institutional Services, Inc., which
provides broker-dealer and administrative services for College
Retirement Equities Fund.
e) TCT Holdings, Inc. which is a unitary thrift holding company was
formed for the sole purpose of holding stock of a federal
chartered savings bank.
f) TIAA-CREF Life Insurance Company is a subsidiary life insurance
company of TIAA, and is licensed under the State of New York to
market certain life insurance products not currently offered by
TIAA.
g) TIAA-CREF Trust Company, FSB which is a federal chartered savings
bank.
h) ETC Repackaging, Inc. which was formed to hold securities
investments.
i) TIAA-CREF Tuition Financing, Inc. which was formed to
administer tuition assistance plans.
Item 27. Number of Contractowners
As of December 31, 1998, there were no owners of contracts of the class
presently offered by this Registration Statement.
Item 28. Indemnification
The TIAA-CREF Life bylaws provide that TIAA-CREF Life will indemnify, in
the manner and to the fullest extent permitted by law, each person made or
threatened to be made a party to any action, suit or proceeding, whether or not
by or in the right of TIAA-CREF Life, and whether civil, criminal,
administrative, investigative or otherwise, by reason of the fact that he or she
or his or her testator or intestate is or was a director, officer or employee of
TIAA-CREF Life, or is or was serving at the request of TIAA-CREF Life as
director, officer or employee of any other corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise, if such director,
officer or employee acted, in good faith, for a purpose which he reasonably
believed to be in, or in the case of service for any other corporation or any
partnership, joint venture trust, employee benefit plan or other enterprise, not
opposed to, the best interests of TIAA-CREF Life and in criminal actions or
proceedings, in addition, had no reasonable cause to believe his or her conduct
was unlawful. To the fullest extent permitted by law such indemnification shall
include judgments, fines, amounts paid in settlement, and reasonable expenses,
including attorneys' fees. No payment of indemnification, advance or allowance
under the foregoing provisions shall be made unless a notice shall have been
filed with the Superintendent of Insurance of the State of New York not less
than thirty days prior to such payment specifying the persons to be paid, the
amounts to be paid, the manner in which payment is authorized and the nature and
status, at the time of such notice, of the litigation or threatened litigation.
C-6
<PAGE>
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to officers and directors of the Depositor,
pursuant to the foregoing provision or otherwise, the Depositor has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in that Act and is
therefore unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Depositor of expenses incurred
or paid by a director or officer in connection with the successful defense of
any action, suit or proceeding) is asserted by a director or officer in
connection with the securities being registered, the Depositor will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in that Act and will
be governed by the final adjudication of such issue.
Item 29. Principal Underwriters
(a) Teachers Personal Investors Service, Inc. ("TPIS"), acts as
principal underwriter for Registrant, TIAA Separate Account VA-1, TIAA-CREF Life
Funds and TIAA-CREF Mutual Funds.
(b) The officers of TPIS and their positions and offices with TPIS and
the Registrant are listed in Schedule A of Form BD as currently on file with the
Commission (File No. 8-47051), the text of which is hereby incorporated by
reference.
(c) Not Applicable.
Item 30. Location of Accounts and Records
All accounts, books and other documents required to be maintained by
Section 31(a) of the 1940 Act and the rules promulgated thereunder are
maintained at the Registrant's home office, 730 Third Avenue, New York, New York
10017, and at other offices of the Registrant located at 750 Third Avenue and
485 Lexington Avenue, both in New York, New York 10017. In addition, certain
duplicated records are maintained at Pierce Leahy Archives, 64 Leone Lane,
Chester, New York 10918.
Item 31. Management Services
Not Applicable.
C-7
<PAGE>
Item 32. Undertakings and Representations
(a) The Registrant undertakes to file a post-effective amendment to this
Registration Statement as frequently as is necessary to ensure that the audited
financial statements in the Registration Statement are never more than 16 months
old for so long as payments under the variable annuity contracts may be
accepted.
(b) The Registrant undertakes to include either (1) as part of any
application to purchase a contract offered by the Prospectus, a space that an
applicant can check to request a Statement of Additional Information, or (2) a
postcard or similar written communication affixed to or included in the
Prospectus that the applicant can remove to send for a Statement of Additional
Information.
(c) The Registrant undertakes to deliver any Statement of Additional
Information and any financial statements required to be made available under
Form N-4 promptly upon written or oral request.
(d) TIAA-CREF Life represents that the fees and charges deducted under
the Contracts, in the aggregate, are reasonable in relation to the services
rendered, the expenses expected to be incurred, and the risks assumed by
TIAA-CREF Life. TIAA-CREF Life bases its representation on its assessment of all
of the facts and circumstances, including such relevant factors, as: the nature
and extent of such services, expenses and risks; the need for TIAA-CREF Life to
earn a profit; and the degree to which the contracts include innovative
features. This representation applies to all contracts sold pursuant to this
Registration Statement, including those sold on the terms specifically described
in the Prospectus contained herein, or any variations therein, based on
supplements, endorsements, or riders to any Contracts or prospectus, or
otherwise.
C-8
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment
Company Act of 1940, TIAA-CREF Life Separate Account VA-1 certifies that it
meets the requirements of Securities Act Rule 485(b) for effectiveness of this
Registration Statement and has duly caused this Registration Statement to be
signed on its behalf, in the City of New York and State of New York on the 26th
day of March, 1999.
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 3/26/99
- ------------------ Executive Officer) and
Thomas G. Walsh Director
/s/Richard L. Gibbs Executive Vice President 3/26/99
- ------------------ and Chief Financial Officer
Richard L. Gibbs (Principal Financial and
Accounting Officer) and
Director
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Signature of Director Date Signature of Director Date
- --------------------- ---- --------------------- ----
<S> <C> <C> <C>
/s/ Scott C. Evans 3/26/99 /s/ John J. McCormack 3/26/99
- ------------------------- ---------------------------
Scott C. Evans John J. McCormack
/s/ Dennis D. Foley 3/26/99 /s/ John A. Putney, Jr. 3/26/99
- ------------------------- ---------------------------
Dennis D. Foley John A. Putney, Jr.
/s/ Don W. Harrell 3/26/99 /s/ John A. Somers 3/26/99
- ------------------------- ---------------------------
Don W. Harrell John A. Somers
/s/ Larry D. Hershberger 3/26/99 /s/ Charles H. Stamm 3/26/99
- ------------------------- ---------------------------
Larry D. Hershberger Charles H. Stamm
/s/ Matina S. Horner 3/26/99 /s/ Leonard B. Zimmerman 3/26/99
- ------------------------- ---------------------------
Matina S. Horner Leonard B. Zimmerman
/s/ Martin L. Leibowitz 3/26/99
- -------------------------
Martin L. Leibowitz
</TABLE>
<PAGE>
Exhibit Index
(9) Consent of Charles H. Stamm, Esquire
(10) (A) Consent of Sutherland Asbill & Brennan LLP
(B) Consent of Ernst & Young LLP
[TIAA-CREF LOGO]
Teachers Insurance and Annuity Association
College Retirement Equities Fund
730 Third Avenue
New York, New York 10017-3206
March 29, 1999
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 Post-Effective
Amendment No.1 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>
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,
/s/ Charles H. Stamm
-------------------------
Charles H. Stamm
Executive Vice President
and General Counsel
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]
March 29, 1999
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 Post-Effective Amendment No. 1 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
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated February 5, 1999 on TIAA-CREF Life Separate Account VA-1
included in this Registration Statement on Form N-4 (File 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") dated March 18, 1999 included in this Registration Statement.
Such report expresses our opinion that TIAA-CREF Life's 1998 and 1997
statutory-basis financial statements present fairly, in all materials respects,
the financial position of TIAA-CREF Life at December 31, 1998 and December 31,
1997, respectively, 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 and not in conformity with
generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
New York, New York
March 29, 1999
