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 3, 2000
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). Before you
invest, please read this prospectus carefully, along with the accompanying fund
prospectus, 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 or certain investment
options are available to you is subject to approval by regulatory authorities
in your state.
You may allocate premiums to a TIAA-CREF Life fixed account or to the separate
account's five variable investment accounts which invest in the following funds
of the TIAA-CREF Life Funds:
o Growth Equity Fund
o Growth & Income Fund
o International Equity Fund
o Stock Index Fund
o Social Choice Equity Fund
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's mutual fund investment performs over time. TIAA-CREF Life doesn't
guarantee the investment performance of the funds or the investment accounts,
and you bear the entire investment risk.
More information about the separate account and the contract is on file with
the Securities and Exchange Commission (SEC) in a "Statement of Additional
Information" (SAI) dated April 3, 2000. 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.
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation
to the contrary is a criminal offense.
An investment in the contract is not a deposit of the TIAA-CREF Trust Company,
FSB, and is not insured or guaranteed by the Federal Deposit Insurance
Corporation (FDIC) or any other government agency.
1
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Table of Contents
3 Definitions
6 Summary
11 TIAA-CREF Life Insurance Company and TIAA
11 The Separate Account
12 TIAA-CREF Life Funds
14 Adding and Closing Accounts or Substituting Investment Portfolios; Adding
or Deleting Income Methods
14 The Contract--The Accumulation Period
20 Charges
22 The Contract--The Annuity Period
26 Death Benefits
28 Timing of Payments
29 Federal Income Taxes
32 Condensed Financial Information; Performance Information
33 General Matters
35 Distributing the Contracts
35 Legal Proceedings
36 Table of Contents for the Statement of Additional Information
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 on 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.
Annuity Unit.
A measure used to calculate the amount of annuity payments due a contractowner.
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.
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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.
Commuted Value.
The present value of annuity payments used when an annuity will be paid in a
lump sum instead of a series of payments. For the fixed account, the commuted
value is the sum of payments less the interest that would have been earned from
the effective date of the commuted value calculation to the date each payment
would have been made. For any variable option annuity, the commuted value is
based on interest at an effective annual rate of 4%, calculated using the
amounts that would have been paid if periodic payments were to continue and the
annuity unit value used for each payment equaled the value as of the effective
date of the calculation.
Contract.
The fixed and variable components of the individual, flexible premium, deferred
annuity described in this prospectus.
Contractowner.
The person (or persons) who controls all the rights and benefits under a
contract.
Fixed Account.
The component of the contract guaranteeing principal plus a specified rate of
interest supported by assets in TIAA-CREF Life's general account.
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 Change Method.
How you choose to have your variable annuity payments revalued. Under the
annual income change method, your payments are revalued once each year. Under
the monthly income change method, your payments are revalued every month.
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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 is an
indirect wholly owned subsidiary of TIAA.
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?
Personal Annuity Select is an annuity product that allows individual investors
to accumulate funds on a tax-deferred basis for retirement or other long-term
investment purposes, and to receive future payment based on the amounts
accumulated as lifetime income or through other payment options.
Under the Personal Annuity Select contract, you may allocate your premiums to a
TIAA-CREF Life fixed account or to a TIAA-CREF Life separate account, which
consists of five variable investment accounts that invest in underlying mutual
funds. As with all variable annuities, your accumulation in the variable
component of your contract can increase or decrease, depending on how well the
fund underlying the investment account performs over time. TIAA-CREF Life
doesn't guarantee the investment performance of the funds or the investment
accounts, and you bear the entire investment risk.
The contract accepts only after-tax dollars, which means your premiums can't be
excluded from your gross income for tax purposes. However, earnings on your
accumulations in the separate account aren't taxed until withdrawn or paid as
annuity income. The contract is available to you provided it has been approved
by the insurance department of your state of residence. Approvals are pending
in certain jurisdictions.
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What expenses must I currently pay under the contract?
Here's a summary of the direct and indirect expenses you must currently pay
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 (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
Growth Equity Fund
Management fee (investment advisory) (after fee waiver) (3) 0.25%
- --------------------------------------------------------------------------------
Other expenses None
- --------------------------------------------------------------------------------
Total fund annual expenses (after fee waiver)(3) 0.25%
- --------------------------------------------------------------------------------
Total Separate Account and Fund Annual Expenses(2)(3)(4) 0.55%
- --------------------------------------------------------------------------------
Growth & Income Fund
Management fee (investment advisory) (after fee waiver) (3) 0.23%
- --------------------------------------------------------------------------------
Other expenses None
- --------------------------------------------------------------------------------
Total fund annual expenses (after fee waiver)(3) 0.23%
- --------------------------------------------------------------------------------
Total Separate Account and Fund Annual Expenses(2)(3)(4) 0.53%
- --------------------------------------------------------------------------------
International Equity Fund
Management fee (investment advisory) (after fee waiver) (3) 0.29%
- --------------------------------------------------------------------------------
Other expenses None
- --------------------------------------------------------------------------------
Total fund annual expenses (after fee waiver)(3) 0.29%
- --------------------------------------------------------------------------------
Total Separate Account and Fund Annual Expenses(2)(3)(4) 0.59%
- --------------------------------------------------------------------------------
</TABLE>
(continued on following page)
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<TABLE>
<S> <C>
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 Separate Account and Fund Annual Expenses(2)(3)(4) 0.37%
- --------------------------------------------------------------------------------
Social Choice Equity Fund
Management fee (investment advisory) (after fee waiver) (3) 0.18%
- --------------------------------------------------------------------------------
Other expenses None
- --------------------------------------------------------------------------------
Total fund annual expenses (after fee waiver)(3) 0.18%
- --------------------------------------------------------------------------------
Total Separate Account and Fund Annual Expenses(2)(3)(4) 0.48%
- --------------------------------------------------------------------------------
</TABLE>
Fund expenses are deducted by the underlying mutual fund before it provides
TIAA-CREF Life with the daily net asset value. TIAA-CREF Life then deducts
separate account charges from the net asset value to calculate the unit value
of the corresponding investment account.
(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 21.
(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) Teachers Advisors, Inc. (Advisors), the investment adviser for each of the
TIAA-CREF Life Funds, has agreed to waive a portion of its fee. Without
these waivers, total fund annual expenses would be 0.46% for the Growth
Equity Fund, 0.44% for the Growth & Income Fund, 0.53% for the
International Equity Fund, 0.30% for the Stock Index Fund, and 0.39% for
the Social Choice Equity Fund. This waiver is contractual and will remain
in effect until April 1, 2003.
(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 separate account and fund expenses would be 1.66%
for the Growth Equity Fund, 1.64% for the Growth & Income Fund, 1.73% for
the International Equity Fund, 1.50% for the Stock Index Fund, and 1.59%
for the Social Choice Equity Fund.
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 each of the investment accounts 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>
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Growth Equity Account $6 $18 $31 $69
- --------------------------------------------------------------------------------
Growth & Income Account $5 $17 $30 $66
- --------------------------------------------------------------------------------
International Equity Account $6 $19 $33 $74
- --------------------------------------------------------------------------------
Stock Index Account $4 $12 $21 $47
- --------------------------------------------------------------------------------
Social Choice Equity Account $5 $15 $27 $60
- --------------------------------------------------------------------------------
</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 20.
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 14.
Can I cancel my contract?
You can examine the contract and return it to TIAA-CREF Life for a refund,
until the end of the "free look" period specified in your contract (which is a
minimum of 10 days, but varies by state). In states that permit it, we'll
refund the accumulation value calculated on the date that you returned the
contract and the refund request to us. (Note that the value of your initial
premium may have gone down during the period.) In states that don't allow us to
refund accumulation value only, we'll refund the premiums you paid to the
contract. We will consider the contract returned on the date it's postmarked
and properly addressed with postage pre-paid or, if it's not postmarked, on the
day we receive it. We will send you the refund within 7 days after we get
written notice of cancellation and the return contract. If you live in a state
that requires refund of premiums, your total of 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
14.
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Can I transfer among the investment options or make cash withdrawals from the
contract?
Currently, you can transfer funds from the variable investment accounts to the
fixed account and among the variable investment account options as often as you
like (except from the International Equity Account, as described below).
Beginning July 15, 2000, our transfer policy will change so that you may not
make more than two transfers from the International Equity Account in any
90-day period. (We may impose further restrictions in the future, or take other
steps to discourage market timing). You can transfer from the fixed account to
the variable investment accounts 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. For
details, see page 18.
Cash withdrawals may be taxed and you may have to pay a tax penalty if you want
to make a cash withdrawal before age 591/2.
What are my options for receiving annuity payments under the contract?
Annuity payments currently are only available from the fixed account. Beginning
late in the year 2000, subject to regulatory approval, you also may choose to
receive variable annuity payments out of any of the variable investment
accounts. 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 22.
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 26.
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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 the State of New York 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, is a stock life insurance company, organized under the laws of the State
of New York. 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 the State of New York in 1952. Together, TIAA and CREF, serving
approximately 2.2 million people, form the principal retirement system for the
nation's education and research communities and one of the largest retirement
systems in the world, based on assets under management. As of December 31,
1999, TIAA's assets were approximately $110 billion; the combined assets for
TIAA and CREF totalled approximately $288 billion (although neither TIAA nor
CREF stands behind TIAA-CREF Life's guarantees).
The Separate Account
On July 27, 1998, TIAA-CREF Life established TIAA-CREF Life Separate Account
VA-1 as a separate investment account under New York law. The separate account
is registered with the SEC as a unit investment trust under the Investment
Company Act of 1940, as amended (the 1940 Act). As part of TIAA-CREF Life, the
separate account is also subject to regulation by the State of New York
Insurance Department (NYID) and the insurance departments of some other
jurisdictions in which the contracts are offered (see the SAI).
Although TIAA-CREF Life owns the assets of the separate account, and the
obligations under the contracts are obligations of TIAA-CREF Life, the separate
account's income, investment gains, and investment losses are credited to or
charged against the assets of the separate account without regard to TIAA-CREF
Life's other income, gains, or losses. Under New York law, we can't charge the
separate account with liabilities incurred by any other TIAA-CREF Life separate
account or other business activity TIAA-CREF Life may undertake.
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The separate account currently has five subaccounts, or investment accounts,
which invest in shares of the funds of the TIAA-CREF Life Funds. The TIAA-CREF
Life Funds are described briefly below.
TIAA-CREF Life Funds
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 the following five investment
portfolios but may add other portfolios in the future.
The Growth Equity Fund seeks a favorable long-term return, mainly through
capital appreciation, primarily from a diversified portfolio of common stocks
that present the opportunity for exceptional growth.
The Growth & Income Fund seeks a favorable long-term return through capital
appreciation and investment income, by investing in a broadly diversified
portfolio of common stocks selected for their investment potential.
The International Equity Fund seeks favorable long-term returns, mainly through
capital appreciation, by investing in a broadly diversified portfolio of
primarily foreign equity investments.
The Stock Index Fund seeks a favorable long-term rate of 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 Social Choice Equity Fund seeks a favorable long-term rate of return that
tracks the investment performance of the U.S. stock market while giving special
consideration to certain social criteria.
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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 subsidiary of TIAA, manages the
assets of the TIAA-CREF Life Funds. Advisors also manages the Stock Index
Account of the TIAA Separate Account VA-1, TIAA-CREF Mutual Funds, and
TIAA-CREF Institutional Mutual Funds. The same personnel also manages 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 funds of the
TIAA-CREF Life Funds offered through your contract. It therefore has the right
to vote its shares at any meeting of the TIAA-CREF Life Funds' shareholders.
The TIAA-CREF Life Funds doesn't plan to hold annual meetings of shareholders.
However, if and when shareholder meetings are held, we will give you the right
to instruct us how to vote the shares attributable to your contract. If we
don't receive timely instructions, your shares will be voted by TIAA-CREF Life
in the same proportion as the voting instructions received on all outstanding
contracts. TIAA-CREF Life may vote the shares of the funds in its own right in
some cases, if it determines that it may legally do so.
The number of fund shares attributable to you is determined by dividing your
interest in the applicable investment account by the net asset value of the
underlying fund.
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Adding and Closing Accounts or
Substituting Investment Portfolios; Adding or
Deleting Income Methods
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,
any existing investment 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, combine accounts or investment
portfolios, or add, delete or stop providing income options from any investment
account. We can also stop or start providing income-paying annuities under
either the annual or monthly income change method from any current or future
investment account. We can also make any changes to the separate account or to
the contract required by applicable laws relating to annuities or otherwise.
TIAA-CREF Life can make these and some other 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 haven't yet
received 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 530189
Atlanta, GA 30353-0189
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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
Personal Annuity Premiums
P.O. Box 530195
Atlanta, GA 30353-0195
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, and allocated in the same way as your prior premiums,
unless you instruct otherwise. 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
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3. Specify on the wire:
o Your name, address and Social Security Number(s) or Taxpayer
Identification Number
o 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 variable investment accounts 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 or transfers you make to the variable investment
accounts purchase accumulation units. We calculate how many accumulation units
to credit by dividing the amount allocated or transferred to the particular
variable investment account by its
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accumulation unit value calculated at the close of the business day when we
received your premium or completed transfer request. We may use a later
business day for your initial premium. To determine how many accumulation units
to subtract for transfers out 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 by TIAA-CREF Life. 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 expense
and risk charges.
The Fixed Account
This prospectus provides information mainly about the contract's variable
component. Following is a brief description of the fixed account.
You can allocate premiums to the fixed account or transfer from the variable
investment accounts 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 (i.e., the variable investment accounts)
or in any other TIAA-CREF Life separate 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.
17
<PAGE>
Transfers
You can transfer some (at least $250 at a time) or all of the amount you
accumulate under your contract among the separate account's variable investment
accounts and from those accounts to the fixed account. Currently, we don't
charge you for transfers or limit the number of transfers you may make from the
fixed account to a variable investment account or among the variable investment
accounts (except from the International Equity Account, as described below).
Beginning July 15, 2000, our transfer policy will change so that you may not
make more than two transfers from the International Equity Account in any
90-day period. We reserve the right to further limit transfers from any of the
investment accounts in the future to as little as one transfer every 90 days.
Transfers from the fixed account to any of the variable investment accounts are
limited to once every 180 days. TIAA-CREF Life may defer a transfer from the
fixed account for up to six months.
Market Timing
There are contractowners who may try to profit from transferring money back and
forth among investment accounts in an effort to "time" the market. As money is
shifted in and out of these accounts, we incur transaction costs and the
underlying funds incur expenses for buying and selling securities. These costs
are borne by all contractowners, including long-term investors who do not
generate the costs. To discourage this market-timing activity, we could, in
addition to imposing restrictions on the number of transfers allowed in a given
period, among other things, limit a contractowner's ability to make transfers
by telephone, fax or over the Internet.
Cash Withdrawals
You can withdraw some or all of your accumulation in the variable investment
accounts. 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.
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.
18
<PAGE>
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. Transfers to the fixed account begin participating on the day
after the business day we receive your transfer request and any required
information and documentation.
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, fax, or over the Internet at any time for any reason.
Tax Issues
Make sure you understand the possible federal and other income tax consequences
of transfers and cash withdrawals. Cash withdrawals are usually taxed at the
rates for ordinary income--i.e., they are not treated as capital gains.
Withdrawals before age 59 1/2 may subject you to early-distribution taxes as
well. For details, see "Federal Income Taxes," page 29.
19
<PAGE>
Charges
Separate Account Charges
We deduct charges each valuation day from the assets of each variable
investment account for various services required to administer the separate
account and the contracts and to cover certain insurance risks borne by
TIAA-CREF Life. The contract allows for total separate account charges (i.e.,
administrative expense and mortality and expense risk charges) of 1.20 percent
of net assets of each variable investment account annually. TIAA-CREF Life has
waived a portion of the mortality and expense risk charges so that current
separate account 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.
Administrative Expense Charge. This charge is for administration and
operations, such as allocating premiums and administering accumulations. The
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 obligations under the contract
to make annuity payments and to pay death benefits before the annuity starting
date. This assures that the amount of your annuity payments won't be affected
by how long you live or whether there is any collective change in life
expectancy by those receiving annuity payments. TIAA-CREF Life also bears a
risk in connection with its death benefit guarantee, since a death benefit may
be more than 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 expenses
for administering the contract and the separate account will be higher than the
amount recovered through the administrative expense deduction.
If the mortality and expense risk charge allowed under the contract isn't
enough to cover TIAA-CREF Life's costs, TIAA-CREF Life will absorb the deficit.
On the other hand, if the charge more than covers costs, TIAA-CREF Life will
profit. TIAA-CREF Life will pay a fee from its general account assets, which
may include amounts derived from the mortality and expense risk
20
<PAGE>
charge, to Teachers Personal Investors Services, Inc. (TPIS), the principal
distributor of the variable component of the contract.
Other Charges and Expenses
Fund Expenses. Certain deductions and expenses of the underlying funds are paid
out of the assets of the TIAA-CREF Life Funds. These expenses include charges
for investment advice, portfolio accounting, custody, and similar services
provided for the fund. Advisors is entitled to an annual fee based on a
percentage of the average daily net assets of each fund, under an investment
management agreement between Advisors and the TIAA-CREF Life Funds. Advisors
has agreed to waive a portion of the fees for each fund. These waivers are
contractual and will remain in effect until April 1, 2003. The fund fees with
and without waivers are as follows:
<TABLE>
<CAPTION>
Current
Fund Expenses Fund Expenses
(with waiver) (without waiver)
- --------------------------------------------------------------------------------
<S> <C> <C>
Growth Equity Fund 0.25% 0.46%
- --------------------------------------------------------------------------------
Growth & Income Fund 0.23% 0.44%
- --------------------------------------------------------------------------------
International Equity Fund 0.29% 0.53%
- --------------------------------------------------------------------------------
Stock Index Fund 0.07% 0.30%
- --------------------------------------------------------------------------------
Social Choice Equity Fund 0.18% 0.39%
- --------------------------------------------------------------------------------
</TABLE>
For more on underlying fund deductions and expenses, read the TIAA-CREF Life
Funds prospectus.
No Deductions from Premiums. The contract provides for no front-end charges.
Premium Taxes. Currently, residents of several states may be subject to premium
taxes on their contract. We normally will deduct any charges for premium taxes
from your 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 then. State premium taxes currently range from 1.00 percent to 3.50
percent of premium payments.
21
<PAGE>
The Contract--the Annuity Period
You can apply your contract accumulations to provide you with annuity payments.
All annuity payments currently are paid from the fixed account. Beginning late
in the year 2000, subject to regulatory approval, you also may choose to
receive variable annuity payments paid out of any of the variable investment
accounts. Annuity payments will be based, among other things, on the amount of
your accumulation, your choice of income option, and your choice among the
fixed and variable payout options (when variable options are available). In the
case of variable payments, your payments will also be based on the investment
returns of the fund(s) underlying the variable investment account(s) you choose
and the income change method you choose. Annuity payments will usually be paid
once a month. If your annuity payments would be less than $100 a month, we may
make annuity payments less frequently than that. The total value of annuity
payments made to you may be more or less than the total premiums you paid under
the contract.
When Annuity Payments Begin
Generally you pick the date when you want annuity payments to begin when you
first apply for a contract. The date you choose can't be later than the
annuitant's 90th birthday. You can choose or change this annuity starting date
at any time before annuity payments begin. In any case, the annuity starting
date will be the first day of a month and can't be earlier than fourteen months
after the day your contract is issued. Your first annuity check may be delayed
while we process your choice of income options and calculate the amount of your
initial payment.
For payments to begin on the annuity starting date you chose, 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 annuitant's 90th birthday. If
you haven't picked an income option by then or if we have not otherwise
received all the necessary information, we will begin payments under a One-Life
Annuity with, if allowed under federal tax law, a ten year guaranteed period.
The payments will be made out of the fixed account, or, when variable payout
options are made available, the fixed and variable investment accounts to which
the contractowner's accumulations were allocated, in the same proportion as the
accumulation.
Technically all benefits are payable at TIAA-CREF Life's home office, but if
you instruct us, we'll send your annuity payments by mail to your home address
or (on your request) by mail
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<PAGE>
or electronic fund transfer to your bank. If the address or bank where you want
your payments changes, it's your responsibility to let us know. We can send
payments to your residence or most banks abroad.
Payment from the Fixed Account
Your payments from the fixed account 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. Currently, we automatically transfer your
accumulations in the variable investment accounts to the fixed account on that
day. At the annuity starting date, the dollar amount of each annuity payment
resulting from your accumulations is fixed, based upon:
o the amount of your fixed account accumulation
o the annuity option you choose
o the ages of the annuitant and any annuity partner, and
o the annuity rates specified in your contract's rate schedule.
Payments are not variable--they won't change based on the investment experience
of any variable investment account.
Payment from the Variable Investment Accounts
Beginning late in the year 2000, we plan on giving you the option of receiving
annuity payments out of the variable investment accounts as well. Your initial
income payments will be based on:
o the value of your accumulation in an investment account on the last
valuation day before the annuity starting date
o the annuity option you choose
o the ages of the annuitant and any annuity partner, and
o an assumed annual investment return of 4% and mortality basis set forth in
the contract's rate schedule
Subsequent payments will be based on the investment experience of the funds
underlying the variable investment accounts relative to the 4% assumed annual
investment return, and the income change method you choose. In general, your
payments will increase if the
23
<PAGE>
performance of the variable investment account (net of expenses) is greater
than 4% and decrease if the performance is less than 4%.
You may choose either an annual or monthly income change method for your
variable annuity payments. Under the annual income change method, payments from
the variable investment accounts will change each May 1, based on the net
investment results of the funds underlying the investment account during the
prior year (April 1 through March 31). Under the monthly income change method,
payments from the variable investment accounts will change every month, based
on the net investment results during the previous month. The amount of your
next payment will be determined on the 20th day of each month (or, if the 20th
is not a business day, the prior business day).
For a full discussion of how we determine the amount of variable annuity
payments, see the SAI.
Income Options
You have a number of different annuity options. The current options are:
o 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.
o 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.
o 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.
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<PAGE>
While guaranteed period or fixed period payments are being made, you or your
beneficiary have the right to receive in a lump sum the commuted value of any
periodic payments or other amounts remaining due.
Transfers During the Annuity Period
When we introduce variable payment options, once each calendar quarter you will
be able to transfer all or part of the future annuity income payable from any
investment account to another investment account or to the fixed account. Once
a calendar year, you will also be able to transfer income payable from the
fixed account to any of the variable investment accounts (provided they are
equity accounts), either in a lump sum limited to 20% of annuity income in any
year, or in installment payments over a five year period. Once income has been
transferred, subsequent transfers may be made only among those variable
investment accounts, but not back to the fixed account.
We'll process your transfer on the business day we receive your request. You
can also choose to have a transfer take effect at the close of any future
business day, or the last calendar day of the current or any future month, even
if it's not a business day. Transfers under the annual income payment method
will affect your annuity payments beginning on the May 1 following the March 31
which is on or after the effective date of the transfer. Transfers under the
monthly income payment method and all transfers into the fixed account will
affect your annuity payments beginning with the first payment due after the
monthly payment valuation day that is on or after the transfer date. You can
switch between the annual and monthly income change methods, and the switch
will go into effect on the following March 31.
For more, see the SAI.
25
<PAGE>
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. For more
information on designating beneficiaries, contact TIAA-CREF Life or your legal
advisor.
Special Option for Spouses
If your spouse is the sole beneficiary when you die, your spouse can choose to
become the contractowner and continue the contract, or receive the death
benefit. If your spouse does not make a choice within 60 days after we receive
proof of death, your spouse will automatically become the contractowner. Your
spouse will also become the annuitant if you were the annuitant.
Payment of Death Benefit
Death benefits currently are paid only out of the fixed account. Your
accumulation will continue participating in the investment experience of the
separate account's investment accounts until we authorize payment of the fixed
account death benefit. We will transfer your separate account accumulation to
the fixed account as of the date we authorize payment of the death benefit.
Beginning late in the year 2000, death benefits may also be paid out of the
variable investment accounts. At that time, if you or your beneficiary choose a
variable method of payment, your separate account accumulations will not
automatically be transferred to the fixed account.
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 will pay the death benefit as annual payments
for a fixed period ending in the twelve-month period before the fifth
anniversary of the death.
26
<PAGE>
Amount of Death Benefit
The amount of the death benefit will equal the greater of:
(1) the amount you have accumulated in the variable investment accounts 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:
o Single-Sum Payment. The entire death benefit is paid at once. When the
beneficiary is an estate, the single-sum method is automatic, and TIAA-CREF
Life reserves the right to pay death benefits only as a single sum to any
beneficiary that is not a natural person.
o 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. The guaranteed period can't exceed the life
expectancy of your beneficiary.
27
<PAGE>
o Fixed-Period Annuities. Payable over two to thirty years, as determined by
you or your beneficiary. The payment period can't exceed the life expectancy
of your beneficiary.
Single-sum payments must be made within five years of your death. Other methods
of payment must begin within one year of your death.
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.
The amount of your death benefit payments under a One-Life Annuity or Fixed
Period Annuity method is determined in the same way as annuity income payments.
If your beneficiary dies while guaranteed or fixed period payments are being
made, any periodic payments or other amounts remaining due will be paid to the
person named by you or the beneficiary. We may pay the commuted value of these
payments in a lump sum unless the beneficiary directs otherwise.
Timing of Payments
Usually we'll make the following kinds of payments from the variable investment
accounts within seven calendar days after we've received the information we
need to process a request:
1. Cash withdrawals;
2. Transfers to another variable investment account, the fixed account or
another company; and
3. Death benefits.
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<PAGE>
We can extend the seven-day period only if (1) the New York Stock Exchange is
closed (or trading restricted by the SEC) on a day that isn't a weekend or
holiday; (2) an SEC-recognized emergency makes it impractical for us to sell
securities or determine the value of assets in the separate account; or (3) the
SEC says by order that we can or must postpone payments to protect you and
other separate account contractowners.
Federal Income Taxes
The following discussion is based on our understanding of current federal
income tax law, and is subject to change. For complete information on your
personal tax situation, check with a qualified tax advisor.
Taxation of Annuities
The following discussion assumes the contracts qualify as annuity contracts for
federal income tax purposes (see the SAI for more information):
In General. IRC section 72 governs annuity taxation generally. We believe an
owner who is a natural person usually won't be taxed on increases in the value
of a contract until there is a distribution (i.e., the owner withdraws all or
part of the accumulation or takes annuity payments). Since transfers among
investment accounts under the contract aren't considered distributions, they
won't be taxed. 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 trust)
generally must include in income any increases in the value of the contract
during the taxable year.
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
29
<PAGE>
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, part of each annuity income payment is treated as
recovery of your investment in the contract, and can be excluded from your
income. After you recover your investment in the contract, all additional
annuity payments are fully taxable.
Taxation of Death Benefit Proceeds. Amounts may be paid from a contract because
an owner has died. If the payments are made in a single sum, they're taxed the
same way a full withdrawal from the contract is taxed. If they are distributed
as annuity payments, they're taxed as annuity payments.
Penalty Tax on Some Withdrawals. You may have to pay a penalty tax (10 percent
of the amount treated as taxable income) on some withdrawals. However, there is
usually no penalty on distributions:
(1) on or after you reach 59 1/2;
(2) after you die (or after the annuitant dies, if the owner isn't an
individual);
(3) after you become disabled; or
(4) that are part of a series of substantially equal periodic (at least annual)
payments for your life (or life expectancy) or the joint 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.
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<PAGE>
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 issued 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 21) , but we
reserve the right to charge the separate account or the contracts for any tax
or other cost resulting from the tax laws that we believe should be attributed
to them.
Tax Advice
What we tell you here about federal and other taxes isn't comprehensive and is
for general information only. It doesn't cover every situation. Taxation varies
depending on the circumstances, and state and local taxes may also be involved.
For complete information on your personal tax situation, check with a qualified
tax advisor.
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Condensed Financial Information;
Performance Information
Condensed Financial Information
Presented below is condensed financial information for the separate account's
Stock Index Account. Since the other investment accounts have limited operating
history, we have not included condensed financial information here for them,
although financial statements for those accounts are in the SAI, which is
available free upon request.
The following condensed financial information is derived from the separate
account financial statements audited by Ernst & Young LLP, independent
auditors, for the year ended December 31, 1999. The data should be read in
conjunction with the financial statements and other financial information for
the stock index account included in the SAI. It is available without charge
upon request.
<TABLE>
<CAPTION>
Year December 1, 1998
Ended (date established) to
December 31, 1999 December 31, 1998(1)
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Per Accumulation Unit Data:
Investment income $ .289 $ .052
Expenses .016 .006
-------- --------
Investment income -net .273 .046
Net realized and unrealized gain
on investments 5.184 1.050
-------- --------
Net increase in Accumulation Unit Value 5.457 1.096
Accumulation Unit Value:
Beginning of year 26.096 25.000
-------- --------
End of year $ 31.553 $ 26.096
======== ========
Total return 20.91% 4.39%
Ratio to Average Net Assets:
Expenses 0.30% 0.02%
Investment income-net 5.09% 0.18%
Portfolio turnover rate 0.17% 0.00%
Thousands of Accumulation Units outstanding
at end of period 723 4
</TABLE>
(1) The percentages shown for this period are not annualized.
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<PAGE>
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's investment accounts.
General Matters
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 among the variable investment accounts and the fixed
account, and/or allocate future premiums to the variable investment accounts 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, fax, or over
the Internet at any time for any reason.
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<PAGE>
Contacting TIAA-CREF Life
We won't consider any notice, form, request, or payment to have been received
by TIAA-CREF Life until it reaches our home office at 730 Third Avenue, New
York, New York 10017-3206 or the post office box specifically designated for
the purpose. You can ask questions by calling toll-free 800 223-1200.
Electronic Prospectuses
If you received this prospectus electronically and would like a paper copy,
please call 800 842-2733, extension 5509, and we will send it to you.
Householding
To cut costs and eliminate duplicate documents sent to your home, we may begin
mailing only one copy of the 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.
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<PAGE>
Distributing the Contracts
The contracts are offered continuously by Teachers Personal Investors Services,
Inc. (TPIS) and, in some instances, TIAA-CREF Individual & Institutional
Services, Inc. (Services), subsidiaries of TIAA which are both registered with
the SEC as broker-dealers and are members of the NASD. TPIS may be considered
the "principal underwriter" for interests in the contract. Anyone distributing
the contract must be a registered representative of either TPIS or Services,
whose main offices are both at 730 Third Avenue, New York, New York 10017-3206.
No commissions are paid in connection with the distribution of the contracts.
Legal Proceedings
Neither the separate account, TIAA-CREF Life, TPIS, Services nor Advisors is
involved in any legal action that we consider material to the separate account.
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<PAGE>
Table of Contents for the
Statement of Additional Information
<TABLE>
<CAPTION>
Page in the
Statement
of Additional
Item Information
- ---- -----------
<S> <C>
Variable Annuity Payments B-3
Tax Status of the Contract B-3
Performance Information B-4
Statements and Reports B-5
General Matters B-5
State Regulation B-5
Legal Matters B-5
Experts B-5
Additional Considerations B-5
Additional Information B-6
Financial Statements B-6
</TABLE>
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<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 3, 2000
This Statement of Additional Information is not a prospectus and should be read
in connection with the current prospectus dated April 3, 2000 (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>
VARIABLE ANNUITY PAYMENTS ....................................... B-3
TAX STATUS OF THE CONTRACT ...................................... B-3
PERFORMANCE INFORMATION ......................................... B-4
STATEMENTS AND REPORTS .......................................... B-5
GENERAL MATTERS ................................................. B-5
STATE REGULATION ................................................ B-5
LEGAL MATTERS ................................................... B-5
EXPERTS ......................................................... B-5
ADDITIONAL CONSIDERATIONS ....................................... B-5
ADDITIONAL INFORMATION .......................................... B-6
FINANCIAL STATEMENTS ............................................ B-6
</TABLE>
B-2
<PAGE>
Variable Annuity Payments
The amount of variable annuity payments we pay will depend upon the number and
value of your annuity units in a particular investment account. The number of
annuity units is first determined on the day before the annuity payments begin.
The amount of the annuity payments will change according to the income change
method chosen.
Number of Annuity Units Payable. When a contractowner or beneficiary starts
receiving variable annuity payments, the number of annuity units payable from
each investment account under an income change method will be determined by
dividing the value of the account accumulation to be applied to provide the
annuity payments, by the product of the annuity unit value for that income
change method, and a factor that represents the present value of an annuity that
continues for as long as annuity payments would need to be paid. This factor
will reflect an interest rate for discounting future payments of 4 percent, the
timing and frequency of future payments, and the mortality assumptions for the
person(s) on whose life (lives) the annuity payments will be based. Mortality
assumptions will be based on the settlement mortality schedules set forth in the
contract.
The number of annuity units payable under an income change method under your
contract will be reduced by the number of annuity units you transfer out of that
income change method under your contract. The number of annuity units payable
will be increased by any internal transfers you make to that income change
method under your contract.
Calculating Annuity Unit Values. The annuity unit value for each investment
account is calculated separately for each income change method for each business
day and for the last calendar day of each month. The annuity unit value for each
income change method is determined by updating the annuity unit value from the
previous valuation day to reflect the net investment performance of the Account
for the current valuation period relative to the 4 percent assumed investment
return. We further adjust the annuity unit value to reflect the fact that
annuity payment amounts are redetermined only once a month or once a year
(depending on the revaluation method chosen). The purpose of the adjustment is
to equitably apportion any account gains or losses among those annuitants who
receive annuity income for the entire period between valuation dates and those
who start or stop receiving annuity income between the two dates. In general,
your payments will increase if the performance of the Account is greater than 4
percent and decrease if the performance is less than 4 percent.
For participants under the annual income change method, the value of the annuity
unit for payments remains level until the following May l. For those who have
already begun receiving annuity income as of March 31, the value of the annuity
unit for payments due on and after the next succeeding May 1 is equal to the
annuity unit value determined as of such March 31.
For participants under the monthly income change method, the value of the
annuity unit for payments changes on the payment valuation day of each month for
the payment due on the first of the following month.
TIAA-CREF Life reserves the right to modify the specific dates that payments
will change and the associated payment valuation date. We also can delete or
stop offering the annual or monthly income change methods.
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.
Your ownership rights under the contract are similar but not identical to those
described by the IRS in rulings that held that contractowners were not owners of
separate account assets, so the IRS therefore might not rule the same way in
your case. TIAA-CREF Life reserves the right to change the contract if necessary
to help prevent your being considered the owner of the separate account's
assets.
Required Distributions. To qualify as an annuity contract under section 72(s) of
the IRC, a contract must provide that: (a) if any owner dies on or after the
annuity starting date but before all amounts under the contract have been
distributed, the remaining amounts will be distributed at least as quickly as
under the method being used when the owner died; and (b) if any owner dies
before the annuity starting date, all amounts under the contract will be
distributed within five years of the date of death. So long as the distributions
begin within a year of the owner's death, the IRS will consider these
requirements satisfied for any part of the owner's interest payable to or for
the benefit of a "designated beneficiary" and distributed over the beneficiary's
life or over a period that cannot exceed the beneficiary's life expectancy. A
designated beneficiary is the person the owner names to assume ownership when
the owner dies. A designated beneficiary must be a natural person, but if a
contractowner's spouse is the designated beneficiary, such spouse can continue
the contract when such contractowner dies.
B-3
<PAGE>
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.
Perfomance 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:
n
P(1 + T) = 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.
Total Returns
Set forth below is the calculation of the Stock Index investment account's
performance, which reflects all expense deductions from account assets, applied
to a hypothetical investment of $1,000 in that account. Because they are new,
we have not included the returns of the other investment accounts.
<TABLE>
<CAPTION>
Period Cumulative Total Return
- ------ ------------------------
<S> <C>
Since inception 20.91%
(January 4, 1999 to
December 31, 1999)
</TABLE>
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) the S&P 500, (2) the Dow Jones Industrial
Average ("DJIA"), (3) Lipper Analytical Services, Inc. Mutual Fund Performance
Analysis Reports and the Lipper General Equity Funds Average, (4) Money
Magazine Fund Watch, (5) Business Week's Mutual Fund Scoreboard, (6) SEI Funds
Evaluation Services Equity Fund Report, (7) CDA Mutual Funds Performance Review
and CDA Growth Mutual Fund Performance Index, (8) Value Line Composite Average
(geometric), (9) Wilshire Associates indices, (10) Frank Russell Co. Inc.
indices, (11) the Consumer Price Index, published by the U.S. Bureau of Labor
Statistics (measurement of inflation), (12) Morningstar, Inc., and (13) the
Global Market indices created by Morgan Stanley, Inc., including the Europe,
Australasia, Far East (EAFE) Index, the EAFE+Canada Index and the International
Perspective Index. 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.
The performance of the variable investment accounts also may be compared to
other indices or averages that measure performance of other variable contracts,
or other pertinent groups 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
B-4
<PAGE>
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 or among the
variable investment accounts. 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 variable investment
accounts credited to the contractowner during the quarter and in total;
(3) cash withdrawals from the variable investment accounts during the quarter;
and
(4) any transfers between the separate account's variable investment accounts
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 prior to the annuity starting date.
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 State
of New York Superintendent of Insurance ("Superintendent") as well as by the
insurance regulatory authorities of certain other states and jurisdictions.
TIAA-CREF Life and the separate account must file with the Superintendent
periodic statements on forms promulgated by the State of New York Insurance
Department. The separate account books and assets are subject to review and
examination by the Superintendent and the Superintendent's agents at all times,
and a full examination into the affairs of the separate account is made at least
every five years. In addition, a full examination of the separate account's
operations is usually conducted periodically by some other states.
Legal Matters
All matters of applicable state law pertaining to the contracts, including
TIAA-CREF Life's right to issue the contracts, have been passed upon by Charles
H. Stamm, Executive Vice President and General Counsel of TIAA and CREF.
Sutherland Asbill & Brennan LLP, Washington, D.C., has provided advice on
certain matters relating to the federal securities laws.
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.
Addtional 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
B-5
<PAGE>
because it allows the investor to benefit from the potential for growth in
several different types of investments.
The investment accounts offered under the Personal Annuity Select contract are
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 investment accounts offered under
the Personal Annuity Select contract 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 objectives of the
funds 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.
We may discuss and compare our array of products and services. At such times we
disclose which of our subsidiaries or affiliates issues which products or types
of products, as follows: TIAA-CREF Individual and Institutional Services, Inc.
distributes CREF certificates and interests in the TIAA Real Estate Account.
Teachers Personal Investors Services, Inc. distributes the variable component of
personal anuities, mutual funds and tuition savings agreements. TIAA and
TIAA-CREF Life Insurance Company issue insurance and annuities. TIAA-CREF Trust
Company, FSB provides trust services. We also disclose that the investment
products are not FDIC insured, may lose value and are not bank guaranteed.
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.
Customer service may be an important consideration for you. In our
advertisements we may report the results of surveys conducted by independent
agencies regarding customer service. We may also use certain testimonials and
quote financial experts, financial and other publications, or other services
regarding our products and services. We may also discuss in advertisements and
sales literature general economic and/or market conditions that may impact
investments in variable annuities.
Additional Information
A registration statement has been filed with the Securities and Exchange
Commission ("SEC"), under the 1933 Act, with respect to the contracts discussed
in the Prospectus and in this Statement of Additional Information. Not all of
the information set forth in the registration statement, and its amendments and
exhibits has been included in the Prospectus or this Statement of Additional
Information. Statements contained in this registration statement concerning the
contents of the contracts and other legal instruments are intended to be
summaries. For a complete statement of the terms of these documents, you should
refer to the instruments filed with the SEC.
Financial Statements
Audited financial statements of the separate account and TIAA-CREF Life follow.
TIAA-CREF Life's financial statements should be considered only as bearing upon
TIAA-CREF Life's ability to meet its obligations under the contracts. They
should not be considered as bearing on the investment performance of the assets
held in the separate account.
B-6
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
TIAA-CREF LIFE SEPARATE ACCOUNT VA-1
Audited Financial Statements-Stock Index Account
December 31, 1999:
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
Audited Financial Statements-Growth Equity, Growth & Income,
International Equity, Social Choice Equity Accounts
March 10, 2000:
Report of Management Responsibility ................... B-15
Report of Independent Auditors ........................ B-16
Statement of Assets and Liabilities ................... B-17
Statement of Operations ............................... B-18
Statement of Changes in Net Assets .................... B-19
Notes to Financial Statements ......................... B-20
TIAA-CREF LIFE INSURANCE COMPANY
Audited Statutory-Basis Financial Statements
December 31, 1999:
President's Letter .................................... B-22
Report of Management Responsibility ................... B-23
Report of Independent Auditors ........................ B-24
Balance Sheets ........................................ B-25
Statements of Operations .............................. B-26
Statement of Changes in Capital and Surplus ........... B-27
Statements of Cash Flows .............................. B-28
Notes to Financial Statements ......................... B-29
</TABLE>
B-7
<PAGE>
[TIAA CREF LOGO]
- --------------------------------------------------------------------------------
REPORT OF MANAGEMENT RESPONSIBILITY
To the Contractowners of
TIAA-CREF Life Separate Account VA-1:
The accompanying financial statements of the Stock Index Account of TIAA-CREF
Life Separate Account VA-1 (the "Account") are the responsibility of management.
They have been prepared in accordance with accounting principles generally
accepted in the United States 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 the fairness
of presentation of these financial statements.
/s/ Thomas G. Walsh
---------------------------------
President
/s/ Richard L. Gibbs
---------------------------------
Executive Vice President and
Chief Financial Officer
B-8
<PAGE>
[ERNST & YOUNG LLP LETTERHEAD]
REPORT OF INDEPENDENT AUDITORS
To the Contractowners of TIAA-CREF Life Separate Account VA-1 and
Board of Directors of TIAA-CREF Life Insurance Company:
We have audited the accompanying statement of assets and liabilities of the
Stock Index Account of TIAA-CREF Life Separate Account VA-1 (the "Account") as
of December 31, 1999, and the related statement of operations for the year then
ended and the statements of changes in net assets for the year then ended and
for the period from 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 audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Stock Index Account of the
Account at December 31, 1999, the results of its operations for the year then
ended and the changes in its net assets for the year then ended and for the
period from December 1, 1998 to December 31, 1998, in conformity with accounting
principles generally accepted in the United States.
/s/ Ernst & Young LLP
February 4, 2000
Ernst & Young LLP is a member of Ernst & Young International, Ltd.
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<PAGE>
TIAA-CREF LIFE SEPARATE ACCOUNT VA-1
STOCK INDEX ACCOUNT
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
<TABLE>
<S> <C>
ASSETS
Investments, at cost ............................................ $21,060,407
-----------
Shares held in Stock Index Fund of TIAA-CREF Life Funds ......... 729,801
Net asset value per share ("NAV") ............................... 31.11
-----------
Investments, at value (Shares x NAV) ............................ 22,704,108
Receivable from fund shares sold ................................ 186
Amount due from TIAA-CREF Life .................................. 122,742
-----------
TOTAL ASSETS 22,827,036
-----------
NET ASSETS--Accumulation Fund .................................... $22,827,036
===========
NUMBER OF ACCUMULATION UNITS OUTSTANDING--Notes 5 and 6 .......... 723,457
=======
NET ASSET VALUE, PER ACCUMULATION UNIT--Note 5 ................... $31.55
======
</TABLE>
See notes to financial statements.
B-10
<PAGE>
TIAA-CREF LIFE SEPARATE ACCOUNT VA-1
STOCK INDEX ACCOUNT
STATEMENT OF OPERATIONS
Year Ended December 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME
Income:
Reinvested dividends ......................................... $ 319,818
----------
TOTAL INCOME 319,818
----------
Expenses--Note 3:
Administrative expenses ...................................... 11,803
Mortality and expense risk charges ........................... 5,902
----------
TOTAL EXPENSES 17,705
----------
INVESTMENT INCOME--NET 302,113
----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS--Note 4
Net realized gain on investments ............................. 13,768
Net change in unrealized appreciation on investments ......... 1,639,500
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 1,653,268
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $1,955,381
==========
</TABLE>
See notes to financial statements.
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<PAGE>
TIAA-CREF LIFE SEPARATE ACCOUNT VA-1
STOCK INDEX ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
December 1, 1998
Year (commencement
Ended of operations)
December 31, 1999 to December 31, 1998
------------------- ---------------------
<S> <C> <C>
FROM OPERATIONS
Investment income--net ..................................... $ 302,113 $ 186
Net realized gain on investments ........................... 13,768 --
Net change in unrealized appreciation on investments ....... 1,639,500 4,201
----------- --------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS 1,955,381 4,387
----------- --------
FROM CONTRACTOWNER TRANASACTIONS
Seed money from TIAA-CREF Life ............................. -- 100,000
Premiums ................................................... 20,407,270 --
Net contractowner transfers from fixed account ............. 532,628 --
Withdrawals and death benefits ............................. (172,630) --
----------- --------
NET INCREASE IN NET ASSETS RESULTING
FROM CONTRACTOWNER TRANSACTIONS 20,767,268 100,000
----------- --------
NET INCREASE IN NET ASSETS 22,722,649 104,387
NET ASSETS
Beginning of period ........................................ 104,387 --
----------- --------
End of period .............................................. $22,827,036 $104,387
=========== ========
</TABLE>
See notes to financial statements.
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<PAGE>
TIAA-CREF LIFE SEPARATE ACCOUNT VA-1
STOCK INDEX ACCOUNT
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"), 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. Currently, the Account consists of a single investment portfolio, the
Stock Index Account, which 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 began offering Accumulation Units to contractowners
other than TIAA-CREF Life on January 4, 1999. At December 31, 1999, TIAA-CREF
Life continued to own 4,000 shares of the Account with a total value of
$126,211.
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 accounting
principles generally accepted in the United States.
Valuation of Investments: The market value of the investment in the Fund is
based on the net asset value of the Fund as of the close of business on the
valuation date.
Accounting for Investments: Securities transactions are accounted for as of the
date the securities are purchased or sold (trade date). 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 and sales of Fund shares for the year ended December 31, 1999 were
$21,053,168 and $108,249, respectively.
B-13
<PAGE>
TIAA-CREF LIFE SEPARATE ACCOUNT VA-1
STOCK INDEX ACCOUNT
NOTES TO FINANCIAL STATEMENTS (Concluded)
NOTE 5--CONDENSED FINANCIAL INFORMATION
Selected condensed financial information for an Accumulation Unit of the Account
is presented below.
<TABLE>
<CAPTION>
December 1, 1998
(commencement
Year Ended of operations)
December 31, 1999 December 31, 1998 (1)
------------------- ----------------------
<S> <C> <C>
Per Accumulation Unit Data:
Investment income ....................................... $ .289 $ .052
Expenses ................................................ .016 .006
------- -------
Investment income--net .................................. .273 .046
Net realized and unrealized gain on investments ......... 5.184 1.050
------- -------
Net increase in Accumulation Unit Value ................. 5.457 1.096
Accumulation Unit Value:
Beginning of period .................................... 26.096 25.000
------- -------
End of period .......................................... $31.553 $26.096
======= =======
Total return ............................................. 20.91% 4.39%
Ratio to Average Net Assets:
Expenses ................................................ 0.30% 0.02%
Investment income--net .................................. 5.09% 0.18%
Portfolio turnover rate .................................. 0.17% 0.00%
Thousands of Accumulation Units
outstanding at end of period ............................ 723 4
</TABLE>
(1) The percentages shown for this period are not annualized.
NOTE 6--ACCUMULATION UNITS
Changes in the number of Accumulation Units outstanding were as follows:
<TABLE>
<CAPTION>
December 1, 1998
(commencement of
Year Ended operations) to
December 31, 1999 December 31, 1998
------------------- ------------------
<S> <C> <C>
Accumulation Units:
Credited for premiums ........................................ 708,943 4,000
Credited for transfers and disbursements ..................... 10,514 --
Outstanding:
Beginning of period ......................................... 4,000 --
------- -----
End of period ............................................... 723,457 4,000
======= =====
</TABLE>
B-14
<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 Growth Equity, Growth & Income,
International Equity and Social Choice Equity Accounts of TIAA-CREF Life
Separate Account VA-1 (the "Account") are the responsibility of management. They
have been prepared in accordance with accounting principles generally accepted
in the United States 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, TIAA-CREF Life's 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 the fairness
of presentation of these financial statements.
/s/ Thomas G. Walsh
---------------------------------
President
/s/ Richard L. Gibbs
---------------------------------
Executive Vice President and
Chief Financial Officer
B-15
<PAGE>
[ERNST & YOUNG LLP LETTERHEAD]
REPORT OF INDEPENDENT AUDITORS
To the Contractowner of TIAA-CREF Life Separate Account VA-1 and the
Board of Directors of TIAA-CREF Life Insurance Company:
We have audited the accompanying statements of assets and liabilities of the
Growth Equity, Growth & Income, International Equity and Social Choice Equity
Accounts (four of the Accounts constituting TIAA-CREF Life Separate Account
VA-1) (the "Accounts") as of March 10, 2000, and the related statements of
operations and changes in net assets for the period from March 1, 2000
(commencement of operations) to March 10, 2000. These financial statements are
the responsibility of the Accounts' management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. 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 Accounts at March 10, 2000,
and the results of their operations and the changes in their net assets for the
period from March 1, 2000 to March 10, 2000, in conformity with accounting
principles generally accepted in the United States.
/s/ Ernst & Young LLP
March 21, 2000
Ernst & Young LLP is a member of Ernst & Young International, Ltd.
B-16
<PAGE>
TIAA-CREF LIFE SEPARATE ACCOUNT VA-1
STATEMENTS OF ASSETS AND LIABILITIES
MARCH 10, 2000
<TABLE>
<CAPTION>
Growth Growth International Social Choice
Equity & Income Equity Equity
Account Account Account Account
--------- --------- ------------ -------------
<S> <C> <C> <C> <C>
ASSETS
Investments, at cost ................................... $100,000 $100,000 $100,000 $100,000
======== ======== ======== ========
Shares held in the corresponding Fund of TIAA-CREF
Life Funds ............................................ 4,000 4,000 4,000 4,000
Net asset value per share of corresponding fund ("NAV"). 25.68 25.11 24.85 24.68
-------- -------- -------- --------
Investments, at value (Shares x NAV) ................... 102,720 100,440 99,400 98,720
-------- -------- -------- --------
TOTAL ASSETS 102,720 100,440 99,400 98,720
-------- -------- -------- --------
LIABILITIES
Amounts due to General Account ......................... 8 8 8 8
-------- -------- -------- --------
TOTAL LIABILITIES 8 8 8 8
-------- -------- -------- --------
NET ASSETS -- Accumulation Fund ......................... $102,712 $100,432 $ 99,392 $ 98,712
======== ======== ======== ========
NUMBER OF ACCUMLATION UNITS OUSTANDING --
Notes 5 and 6 .......................................... 4,000 4,000 4,000 4,000
======== ======== ======== ========
NET ASSET VALUE, PER ACCUMLATION UNIT -- Note 5 ......... $ 25.68 $ 25.11 $ 24.85 $ 24.68
======== ======== ======== ========
</TABLE>
See notes to financial statements.
B-17
<PAGE>
TIAA-CREF LIFE SEPARATE ACCOUNT VA-1
STATEMENTS OF OPERATIONS
For the Period March 1, 2000 (commencement of operations)
to March 10, 2000
<TABLE>
<CAPTION>
Growth Growth International Social Choice
Equity & Income Equity Equity
Account Account Account Account
----------- ---------- --------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Income:
Dividends .......................................... $ -- $ -- $ -- $ --
------- ---- ------ -------
TOTAL INCOME -- -- -- --
------- ---- ------ -------
Expenses--Note 3:
Administrative expenses ............................ 5 5 5 5
Mortality and expense risk charges ................. 3 3 3 3
------- ---- ------ -------
TOTAL EXPENSES 8 8 8 8
------- ---- ------ -------
INVESTMENT LOSS-NET (8) (8) (8) (8)
------- ---- ------ -------
NET UNREALIZED GAIN (LOSS) ON INVESTMENTS -- NOTES 4
Net change in unrealized appreciation (depreciation)
on investments ..................................... 2,720 440 (600) (1,280)
------- ----- ------ -------
NET UNREALIZED
GAIN (LOSS) ON INVESTMENTS 2,720 440 (600) (1,280)
------- ----- ------ -------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $2,712 $432 $(608) $(1,288)
======= ===== ====== =======
</TABLE>
See notes to financial statements.
B-18
<PAGE>
TIAA-CREF LIFE SEPARATE ACCOUNT VA-1
STATEMENTS OF CHANGES IN NET ASSETS
For the Period March 1, 2000 (commencement of operations)
to March 10, 2000
<TABLE>
<CAPTION>
Growth Growth International Social Choice
Equity & Income Equity Equity
Account Account Account Account
----------- ------------ --------------- --------------
<S> <C> <C> <C> <C>
FROM OPERATIONS
Investment loss--net .................................. $ (8) $ (8) $ (8) $ (8)
Net change in unrealized appreciation (depreciation)
on investments ....................................... 2,720 440 (600) (1,280)
-------- -------- -------- --------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 2,712 432 (608) (1,288)
-------- -------- -------- --------
FROM CONTRACTOWNER TRANSACTIONS
Seed money from TIAA-CREF Life ........................ 100,000 100,000 100,000 100,000
-------- -------- -------- --------
NET INCREASE IN ASSETS RESULTING
FROM CONTRACTOWNER TRANSACTIONS 100,000 100,000 100,000 100,000
-------- -------- -------- --------
NET ASSETS, end of period ............................. $102,712 $100,432 $ 99,392 $ 98,712
======== ======== ======== ========
</TABLE>
See notes to financial statements.
B-19
<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 and consists of five sub-accounts, the Stock Index Account, the Growth
Equity Account, the Growth & Income Account, the International Equity Account
and the Social Choice Equity Account (collectively, the "Accounts"). The
Accounts invest in shares of corresponding funds of the TIAA-CREF Life Funds
(consisting of Stock Index Fund, Growth Equity Fund, Growth & Income Fund,
International Equity Fund, Stock Index Account and Social Choice Equity Fund),
an open-end management investment company that was organized as a business trust
under Delaware law on August 13, 1998. These financial statements include the
Growth Equity Account, the Growth & Income Account, the International Equity
Account and the Social Choice Equity Account.
The Accounts (excluding the Stock Index Account) commenced operations on March
1, 2000 when TIAA-CREF Life purchased 4,000 Accumulation Units of each of the
Accounts at $25 per Unit, for a total of $100,000 in each of the Accounts. Each
of the Accounts then purchased 4,000 shares at $25 per share for a total of
$100,000, of their corresponding fund in the TIAA-CREF Life Funds. The Accounts
intend to begin offering Accumulation Units to contractowners other than
TIAA-CREF Life on April 3, 2000.
TIAA-CREF Life provides all administrative services for the Accounts and has
borne any costs necessary to organize the Accounts. 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
followed by the Accounts, which are in conformity with accounting principles
generally accepted in the United States.
Valuation of Investments: The market value of the investment in the Funds is
based on the net asset value of the Funds as of the close of business on the
valuation date.
Accounting for Investments: Securities transactions are accounted for as of the
date the securities are purchased or sold (trade date). 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
Accounts.
NOTE 3--EXPENSE CHARGES
Daily charges are deducted from the net assets of each Account for services
required to administer the Accounts 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 each 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 each Account.
B-20
<PAGE>
TIAA-CREF LIFE SEPARATE ACCOUNT VA-1
NOTES TO FINANCIAL STATEMENTS (Concluded)
NOTE 4--INVESTMENTS
Purchases of Fund shares by the Growth Equity, Growth & Income, International
Equity, and Social Choice Equity Accounts for the period March 1, 2000
(commencement of operations) to March 10, 2000 were $100,000 for each Account.
NOTE 5--CONDENSED FINANCIAL INFORMATION
Selected condensed financial information for an Accumulation Unit of each
Account for the period March 1, 2000 (commencement of operations) to March 10,
2000 is presented below.
<TABLE>
<CAPTION>
Growth Growth International Social Choice
Equity & Income Equity Equity
Account Account Account Account
------------- ------------- --------------- --------------
<S> <C> <C> <C> <C>
Per Accumulation Unit Data:
Investment income .......................................... $ -- $ -- $ -- $ --
Expenses ................................................... .002 .002 .002 .002
-------- -------- --------- ---------
Investment loss--net ....................................... (.002) (.002) (.002) (.002)
Net unrealized gain (loss) on investments .................. .680 .110 (.150) (.320)
-------- -------- --------- ---------
Net increase (decrease) in Accumulation Unit Value ......... .678 .108 (.152) (.322)
Accumulation Unit Value
Beginning of period ....................................... 25.000 25.000 25.000 25.000
-------- -------- --------- ---------
End of period ............................................. $25.678 $25.108 $24.848 $24.678
======== ======== ========= =========
Total return ................................................ 2.71% 0.43% (.61%) (1.29%)
Ratio to Average Net Assets:
Expenses ................................................... 0.01% 0.01% 0.01% 0.01%
Investment loss--net ....................................... (0.01%) (0.01%) (0.01%) (0.01%)
Portfolio turnover rate ..................................... 0% 0% 0% 0%
Thousands of Accumulation Units outstanding at end
of period .................................................. 4 4 4 4
</TABLE>
The percentages shown above are not annualized.
NOTE 6--ACCUMULATION UNITS
Changes in the number of Accumulation Units outstanding for each Account for the
period March 1, 2000 (commencement of operations) to March 10, 2000 were as
follows:
<TABLE>
<CAPTION>
Growth Growth International Social Choice
Equity & Income Equity Equity
Account Account Account Account
--------- ---------- --------------- --------------
<S> <C> <C> <C> <C>
Accumulation Units:
Credited for premiums ............ 4,000 4,000 4,000 4,000
----- ----- ----- -----
Outstanding, end of period ....... 4,000 4,000 4,000 4,000
===== ===== ===== =====
</TABLE>
B-21
<PAGE>
- --------------------------------------------------------------------------------
PRESIDENT'S LETTER
To the Policyholders of
TIAA-CREF Life Insurance Company:
We are pleased to provide you with the accompanying audited statutory-basis
financial statements of TIAA-CREF Life Insurance Company ("TIAA-CREF Life") for
the year ended December 31, 1999. Our objective is to manage TIAA-CREF Life in a
prudent manner with the goal of maximizing our long-term performance within
reasonable risk parameters for the long-term benefit of our policyholders. As
you review these statements, it is important to note that TIAA-CREF Life
maintains the highest possible financial strength ratings from each of the four
nationally recognized independent rating organizations.
The report of management responsibility, on the following page, demonstrates our
ongoing commitment to conduct TIAA-CREF Life's activities in a well-controlled
management environment. Additionally, the accompanying audit report indicates an
unqualified opinion regarding TIAA-CREF Life's statutory-basis financial
statements from the independent auditing firm of Ernst & Young LLP. These
statements have been prepared consistently in accordance with statutory
accounting practices, a comprehensive basis of accounting comprised of
accounting practices prescribed or permitted by the New York State Insurance
Department ("Department").
There is also a reference in the auditors' report to accounting principles
generally accepted in the United States ("GAAP"); this reference to GAAP is
required by the auditors' professional standards. GAAP is an overall accounting
methodology that, while similar in many respects to statutory accounting
practices, is a separate basis of accounting. Statutory accounting is generally
more conservative than GAAP, and these statutory-basis financial statements are
not intended to be in conformity with GAAP.
Statutory accounting is the only basis of accounting recognized by the
Department for regulatory purposes, and it is the only basis of accounting used
by the Department in measuring the financial condition and results of operations
of an insurance company. It is also the basis for determining insurance company
solvency under the New York Insurance Law. While we could prepare a separate set
of GAAP financial statements, there is no legal requirement for us to do so.
Additionally, TIAA-CREF Life does not believe at this time that it would be a
worthwhile expenditure to maintain another separate set of financial records,
particularly since it would provide little added value for our policyholders.
Accordingly, we believe that it is prudent for us to continue to manage and
report on the operations of TIAA-CREF Life under the conservative statutory
accounting methodology.
/s/ Thomas G. Walsh
----------------------------
President
B-22
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF MANAGEMENT RESPONSIBILITY
To the Policyholders 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
controls designed to provide reasonable assurance that assets are properly
safeguarded and transactions are properly executed in accordance with
management's authorization, and to carry out the ongoing responsibilities of
management for reliable financial statements.
The accompanying statutory-basis financial statements of TIAA-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-basis
financial statements.
/s/ Thomas G. Walsh
---------------------------------
President
/s/ Richard L. Gibbs
---------------------------------
Executive Vice President and
Chief Financial Officer
B-23
<PAGE>
[ERNST & YOUNG LLP LETTERHEAD]
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, 1999 and 1998, and
the related statutory-basis statements of operations, changes in capital and
surplus, and cash flows for each of the three years in the period ended December
31, 1999. 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.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. 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 accounting principles generally accepted in the United
States. The differences between such statutory accounting practices and
accounting principles generally accepted in the United States 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 1999 and 1998 statutory-basis financial statements referred to
above do not present fairly, in conformity with accounting principles generally
accepted in the United States, the financial position of TIAA-CREF Life at
December 31, 1999 and 1998 or the results of its operations or its cash flows
for each of the three years in the period ended December 31, 1999.
However, in our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of TIAA-CREF Life at
December 31, 1999 and 1998, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1999, in conformity
with statutory accounting practices prescribed or permitted by the New York
State Insurance Department.
/s/ Ernst & Young LLP
March 16, 2000
Ernst & Young LLP is a member of Ernst & Young International, Ltd.
B-24
<PAGE>
TIAA-CREF LIFE INSURANCE COMPANY
STATUTORY-BASIS BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
---------------------------------
1999 1998
--------------- ---------------
<S> <C> <C>
ASSETS
Bonds ....................................................... $251,708,760 $219,903,588
Mortgages ................................................... 29,119,139 27,485,357
Cash and short-term investments ............................. 27,141,880 6,098,470
Investment income due and accrued ........................... 3,781,907 2,785,756
Separate account assets ..................................... 22,704,294 104,388
Other assets ................................................ 1,792,472 53,071
------------ ------------
TOTAL ASSETS $336,248,452 $256,430,630
============ ============
LIABILITIES, CAPITAL AND SURPLUS
Policy and contract reserves ................................ $ 39,284,860 $ 37,735
Federal income taxes payable ................................ -- 235,359
Asset Valuation Reserve ..................................... 1,061,394 635,512
Interest Maintenance Reserve ................................ 116,028 --
Separate account liabilities ................................ 22,577,272 --
Other liabilities ........................................... 9,833,605 279,252
------------ ------------
Total Liabilities 72,873,159 1,187,858
------------ ------------
Capital: 2,500 shares of $1,000 par value common stock issued
and outstanding ............................................ 2,500,000 2,500,000
Additional paid-in capital .................................. 242,500,000 242,500,000
Surplus ..................................................... 18,375,293 10,242,772
------------ ------------
Total Capital and Surplus 263,375,293 255,242,772
------------ ------------
TOTAL LIABILITIES, CAPITAL AND SURPLUS $336,248,452 $256,430,630
============ ============
</TABLE>
See notes to statutory-basis financial statements.
B-25
<PAGE>
TIAA-CREF LIFE INSURANCE COMPANY
STATUTORY-BASIS STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Years Ended December 31,
-----------------------------------------------
1999 1998 1997
-------------- ------------- --------------
<S> <C> <C> <C>
INCOME
Insurance and annuity premiums and deposits ................. $59,475,280 $ 13,634 $ 1,242
Net investment income ....................................... 18,893,955 13,295,128 4,981,871
Other ....................................................... 30,015 -- --
----------- ----------- ----------
TOTAL INCOME 78,399,250 13,308,762 4,983,113
----------- ----------- ----------
EXPENSES
Policy and contract benefits ................................ 368,586 7,986 73
Increase (decrease) in policy and contract reserves ......... 39,247,125 967 (7,469)
Operating expenses .......................................... 4,323,980 1,345,564 257,666
Transfers to separate accounts, net ......................... 20,728,316 -- --
----------- ----------- ----------
TOTAL EXPENSES 64,668,007 1,354,517 250,270
----------- ----------- ----------
Income before federal income taxes 13,731,243 11,954,245 4,732,843
Federal income taxes 5,195,474 4,176,454 1,651,906
----------- ----------- ----------
NET INCOME $ 8,535,769 $ 7,777,791 $3,080,937
=========== =========== ==========
</TABLE>
See notes to statutory-basis financial statements.
B-26
<PAGE>
TIAA-CREF LIFE INSURANCE COMPANY
STATUTORY-BASIS STATEMENTS OF CHANGES IN
CAPITAL AND SURPLUS
FOR THE THREE YEARS ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
Capital Additional
Stock Paid-in Capital Surplus Total
------------- ----------------- -------------- ----------------
<S> <C> <C> <C> <C>
Balance, January 1, 1997 ........... $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
Net income ......................... -- -- 8,535,769 8,535,769
Transfers to the Asset
Valuation Reserve ................. -- -- (425,882) (425,882)
Increase in value of seed money in
separate account .................. -- -- 22,634 22,634
---------- ------------ ----------- ------------
Balance, December 31, 1999 ......... $2,500,000 $242,500,000 $18,375,293 $263,375,293
========== ============ =========== ============
</TABLE>
See notes to statutory-basis financial statements.
B-27
<PAGE>
TIAA-CREF LIFE INSURANCE COMPANY
STATUTORY-BASIS STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Years Ended December 31,
---------------------------------------------------
1999 1998 1997
-------------- --------------- ----------------
<S> <C> <C> <C>
CASH PROVIDED
By operating activities:
Premiums and deposits ............................. $ 59,475,280 $ 13,634 $ 1,242
Net investment income ............................. 17,922,072 11,386,874 4,220,032
Other ............................................. 30,015 -- --
------------ ------------ -------------
Total Receipts 77,427,367 11,400,508 4,221,274
------------ ------------ -------------
Policy benefits .................................... 368,537 7,961 34
Operating expenses ................................. 1,515,087 1,348,388 253,864
Federal income taxes ............................... 5,860,300 4,150,443 1,477,675
Transfers to separate account, net ................. 20,604,591 100,000 --
Other, net ......................................... (5,165,738) (334,678) (179)
------------ ------------ -------------
Total Disbursements 23,182,777 5,272,114 1,731,394
------------ ------------ -------------
Cash Provided by Operating Activities 54,244,590 6,128,394 2,489,880
------------ ------------ -------------
By investing activities:
Sales and redemptions of bonds and stocks ......... 18,909,925 602,103 --
Repayment of mortgage principal ................... 366,218 151,553 63,090
Net gains on short-term investments ............... 1,396 22,328 53,365
------------ ------------ -------------
Cash Provided by Investing Activities 19,277,539 775,984 116,455
------------ ------------ -------------
By financing activities:
Additional paid-in capital ........................ -- 165,000,000 90,000,000
Dividend to stockholder ........................... -- -- (20,000,000)
Other, net ........................................ -- -- (170,448)
------------ ------------ -------------
Cash Provided by Financing Activities -- 165,000,000 69,829,552
------------ ------------ -------------
TOTAL CASH PROVIDED 73,522,129 171,904,378 72,435,887
------------ ------------ -------------
DISBURSEMENTS FOR NEW INVESTMENTS
Investments acquired:
Bonds .............................................. 50,478,719 154,950,254 61,289,936
Mortgages .......................................... 2,000,000 18,400,000 9,300,000
------------ ------------ -------------
TOTAL DISBURSEMENTS FOR NEW INVESTMENTS 52,478,719 173,350,254 70,589,936
------------ ------------ -------------
INCREASE (DECREASE) IN CASH AND
SHORT-TERM INVESTMENTS 21,043,410 (1,445,876) 1,845,951
CASH AND SHORT-TERM INVESTMENTS
AT BEGINNING OF YEAR 6,098,470 7,544,346 5,698,395
------------ ------------ -------------
CASH AND SHORT-TERM INVESTMENTS
AT END OF YEAR $ 27,141,880 $ 6,098,470 $ 7,544,346
============ ============ =============
</TABLE>
See notes to statutory-basis financial statements.
B-28
<PAGE>
TIAA-CREF LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS
December 31, 1999
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 and 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"), 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. As of
December 31, 1999 TIAA-CREF Life was licensed as an insurance company in 34
states.
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. 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 accounting principles generally accepted in the United States
("GAAP"). The preparation of TIAA-CREF Life's statutory-basis 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 and Contract Reserves: Policy and contract reserves are determined in
accordance with standard valuation methods permitted or 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 5.25%), mortality and other risks insured. Such reserves establish
a sufficient provision for all contractual benefits guaranteed under policy and
contract 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 January 1, 1998, TIAA-CREF Life began filing a
consolidated federal income tax return with its qualifying affiliates. The tax
sharing agreement follows the current reimbursement method, whereby members of
the consolidated group are generally reimbursed for their losses on a pro-rata
basis by other members of the group to the extent they have taxable income,
subject to limitations imposed under the Internal Revenue Code. The federal
income tax provisions in the accompanying statements of operations are computed
on a seperate return basis and are based on the amount of taxes actually paid or
anticipated to be paid under the tax sharing agreement.
B-29
<PAGE>
TIAA-CREF LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (Continued)
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES (Concluded)
Accounting Principles Generally Accepted in the United States: 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 and contract 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 1998 and 1997 financial statements have
been reclassified to conform with the 1999 presentation.
NOTE 3--INVESTMENTS
Securities Investments: At December 31, 1999 and 1998, 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, 1999
- ------------------
U.S. Treasury securities and
obligations of U.S. government
agencies and corporations ......... $ 11,706,305 -- $ (871,164) $ 10,835,141
Corporate securities ............... 143,027,045 $ 140,663 (6,773,515) 136,394,193
Mortgage-backed securities ......... 25,703,921 -- (2,373,932) 23,329,989
Asset-backed securities ............ 71,271,489 -- (4,654,224) 66,617,265
------------ ---------- ------------- ------------
Total ............................ $251,708,760 $ 140,663 $ (14,672,835) $237,176,588
============ ========== ============= ============
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-30
<PAGE>
TIAA-CREF LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (Continued)
NOTE 3--INVESTMENTS (Continued)
Debt securities amounting to approximately $7,888,000 and $6,557,000 at December
31, 1999 and 1998, 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, 1999, by contractual maturity, are shown below:
<TABLE>
<CAPTION>
Carrying Estimated
Value Market Value
-------------- ---------------
<S> <C> <C>
December 31, 1999
- -----------------
Due after one year through five years .......... $ 17,617,191 $ 17,684,940
Due after five years through ten years ......... 52,886,392 49,763,200
Due after ten years ............................ 84,229,767 79,781,194
------------ ------------
Subtotal ..................................... 154,733,350 147,229,334
Mortgage-backed securities ..................... 25,703,921 23,329,989
Asset-backed securities ........................ 71,271,489 66,617,265
------------ ------------
Total ........................................ $251,708,760 $237,176,588
============ ============
</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 prepay
obligations, although prepayment premiums may be applicable.
At December 31, 1999 and 1998, the carrying values of long-term bond investments
were diversified by industry classification as follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Manufacturing .................................. 32.4% 28.1%
Asset-backed securities ........................ 19.8 23.1
Finance and financial services ................. 12.7 12.7
Mortgage-backed securities ..................... 10.2 11.8
Commercial mortgage-backed securities .......... 8.5 9.8
Government ..................................... 4.7 4.7
Retail and wholesale trade ..................... 3.9 4.4
Oil and gas .................................... 3.9 3.2
Public utilities ............................... 2.0 --
Other .......................................... 1.9 2.2
----- -----
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%. 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 of which were identified at December 31, 1999 and
1998. The coupon rate for the mortgage loan issued during 1999 was 7.50% with a
loan-to-value ratio of 66.7%.
The mortgage loan investments outstanding at December 31, 1999 are
collateralized by shopping centers (68.0%), and apartments (32.0%) located in
the South Atlantic (68.0%) and East North Central (32.0%) regions of the United
States.
B-31
<PAGE>
TIAA-CREF LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (Continued)
NOTE 3--INVESTMENTS (Concluded)
At December 31, 1999, the contractual maturity schedule of mortgage loans is
shown below:
<TABLE>
<CAPTION>
Carrying
Value
-------------
<S> <C>
Due in one year or less ........................ $ 413,257
Due after one year through five years .......... 1,985,758
Due after five years through ten years ......... 18,532,200
Due after ten years ............................ 8,187,924
-----------
Total ........................................ $29,119,139
===========
</TABLE>
Asset Valuation Reserves: The AVR balances at December 31, 1999 and 1998, were
comprised of the following asset-specific reserves:
<TABLE>
<CAPTION>
1999 1998
---------- --------
<S> <C> <C>
Bonds .............. $ 614,364 $362,093
Mortgages .......... 447,030 273,419
---------- --------
Total ............ $1,061,394 $635,512
========== ========
</TABLE>
NOTE 4--INVESTMENT INCOME AND CAPITAL GAINS AND LOSSES
Net Investment Income: For the years ended December 31, 1999, 1998 and 1997, the
components of net investment income were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- ----------
<S> <C> <C> <C>
Gross investment income:
Bonds ......................................................... $15,597,349 $ 8,564,192 $2,957,262
Mortgages ..................................................... 2,053,110 881,292 411,140
Cash and short-term investments ............................... 1,143,214 3,963,348 1,623,677
Other ......................................................... 287,700 -- --
----------- ----------- ----------
Total ........................................................ 19,081,373 13,408,832 4,992,079
Less investment expenses ....................................... (194,176) (128,217) (44,895)
----------- ----------- ----------
Net investment income before amortization of IMR gains ......... 18,887,197 13,280,615 4,947,184
Plus amortization of IMR gains ................................. 6,758 14,513 34,687
----------- ----------- ----------
Net investment income .......................................... $18,893,955 $13,295,128 $4,981,871
=========== =========== ==========
</TABLE>
Realized Capital Gains and Losses: For the years ended December 31, 1999, 1998
and 1997, the net realized capital gains on sales and redemptions of investments
were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
--------- -------- ---------
<S> <C> <C> <C>
Bonds .................................................. $ 187,504 -- --
Short-term investments ................................. 1,396 $ 22,328 $ 53,365
--------- -------- ---------
Total realized gains before capital gains tax .......... 188,900 22,328 53,365
Capital gains tax ...................................... (66,115) (7,815) (18,678)
--------- -------- ---------
Total ................................................ $ 122,785 $ 14,513 $ 34,687
========= ======== =========
</TABLE>
B-32
<PAGE>
TIAA-CREF LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (Continued)
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, 1999 and 1998, 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.
<TABLE>
<CAPTION>
Carrying Estimated
Value Market Value
--------------- ---------------
<S> <C> <C>
December 31, 1999
- ------------------
Assets
Bonds ................................................. $251,708,760 $237,176,588
Mortgages ............................................. 29,119,139 27,009,740
Cash and short-term investments ....................... 27,141,880 27,141,880
Separate account seed money investment ................ 127,022 127,022
Liabilities
TIAA-CREF Life Personal Annuity-Fixed Account ......... 38,909,874 38,909,874
December 31, 1998
- ------------------
Assets
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
</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. The aggregate carrying values and estimated fair values
of publicly traded and privately placed bonds at December 31, 1999 and 1998 are
as follows:
<TABLE>
<CAPTION>
1999 1998
--------------------------------- ---------------------------------
Carrying Estimated Carrying Estimated
Value Fair Value Value Fair Value
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Publicly traded bonds .......... $217,617,100 $205,094,804 $184,774,708 $192,020,623
Privately placed bonds ......... 34,091,660 32,081,784 35,128,880 37,252,809
------------ ------------ ------------ ------------
Total ........................ $251,708,760 $237,176,588 $219,903,588 $229,273,432
============ ============ ============ ============
</TABLE>
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.
TIAA-CREF Life Personal Annuity-Fixed Account: The carrying values of the
liabilities are reasonable estimates of their fair values.
Insurance and Annuity Contracts: TIAA-CREF Life's reinsurance agreement entails
mortality risks and is, therefore, exempt from the fair value disclosure
requirements related to financial instruments.
B-33
<PAGE>
TIAA-CREF LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (Continued)
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--ANNUITY RESERVES
At December 31, 1999 and 1998, TIAA-CREF Life's general account annuity reserves
are summarized as follows:
<TABLE>
<CAPTION>
1999 1998
---------------------------- ---------------------
Amount Percent Amount Percent
-------------- ----------- ---------- --------
<S> <C> <C> <C> <C>
Subject to discretionary withdrawal:
At book value without adjustment ...................... $39,186,814 100.0% $ -- --%
At market value ....................................... -- -- -- --
Not subject to discretionary withdrawal ................ 14,118 -- -- --
----------- ----- ------- --
Total annuity reserves ............................... 39,200,932 100.0% -- --%
===== ==
Reconciliation to total policy and contract
reserves shown on the balance sheets:
Reserves on other life policies and contracts ......... 83,928 37,735
----------- ----- -------
Total policy and contract reserves ................... $39,284,860 $37,735
=========== =======
</TABLE>
NOTE 8--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. The value of the seed money investment at December 31,
1999 and 1998 was $127,022 and $104,388 respectively.
The balance sheet captions for separate account assets and liabilities (which
include participant account values) are stated at market value. The separate
account's operating results are reflected in the changes to these assets and
liabilities. Total separate account premiums were approximately $20,407,270 for
1999 and none for 1998 and 1997. Total separate account net transfers from other
accounts were approximately $532,628 for 1999 and none for 1998 and 1997.
Annuities offered through VA-1 include a nominal guaranteed minimum death
benefit. The account offers full or partial withdrawal at market value with no
surrender charge.
NOTE 9--CONTINGENCIES
It is the opinion of management that any liabilities which might arise from
litigation, state guaranty fund assessments, and other matters, 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.
NOTE 10--SUBSEQUENT EVENT--CODIFICATION
The Department has announced its intention to implement, subject to any
conflicting provisions in New York statute, the new Accounting Practices and
Procedures Manual ("Codification") adopted by the NAIC to become effective
January 1, 2001. Because the Department has not yet determined the extent to
which Codification will be implemented, the effect on TIAA-CREF Life's
statutory-basis financial statements cannot yet be quantified.
B-34
<PAGE>
TIAA-CREF LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (Concluded)
NOTE 11--IMPACT OF 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.
To the best of our knowledge, all of TIAA's internal systems and those of its
service providers are functioning normally in the Year 2000 environment.
Management will continue to monitor its mission critical computer applications
and those of its suppliers and vendors throughout the Year 2000 to ensure that
any latent Year 2000 matters that may arise are addressed promptly.
B-35
