<PAGE>
Registration Nos. 333-63843
811-09007
As filed with the Commission on March 31, 2000
______________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [_]
Pre-Effective Amendment No. [_]
------
Post-Effective Amendment No. 1 [X]
------
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [_]
Amendment No. 4 [X]
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THE UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK
SEPARATE ACCOUNT USL VA-R
(Exact Name of Registrant)
THE UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK
(Name of Depositor)
125 Maiden Lane
New York, NY 10038
(Address of Depositor's Principal Executive Officers) (Zip Code)
(713) 831-1230
(Depositor's Telephone Number, including Area Code)
Pauletta P. Cohn
Deputy General Counsel
American General Life Companies
2929 Allen Parkway, Houston, Texas 77019
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: Continuous
It is proposed that this filing will become effective (check appropriate box)
[_] Immediately upon filing pursuant to paragraph (b) of Rule 485
[X] On April 3, 2000 pursuant to paragraph (b) of Rule 485
[_] 60 days after filing pursuant to paragraph (a)(1) of Rule 485
[_] On pursuant to paragraph (a)(1) of Rule 485
-----------
If appropriate, check the following:
[_] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment
Title of Securities Being Registered:
Units of interest in The United States Life Insurance Company in the City
of New York Separate Account USL VA-R under variable annuity contracts.
<PAGE>
THE UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK
PROFILE OF THE SELECT RESERVE(SM)
FLEXIBLE PAYMENT VARIABLE AND FIXED GROUP DEFERRED ANNUITY
CERTIFICATES
This Profile summarizes information you should know before investing in a
Certificate. The Certificates are more fully described in the Prospectus that
accompanies this Profile. Please read the Prospectus carefully.
1. THE CERTIFICATES. The Select Reserves(SM) Certificates ("Certificates") are
flexible payment variable and fixed group deferred annuity certificates issued
by The United States Life Insurance Company in the City of New York ("USL").
They are primarily designed for investment of after-tax money in non-qualified
annuities in order to provide retirement income. Because of a minimum initial
purchase payment of $50,000, the Certificates may not be suitable for many tax-
qualified plan programs. However, you may wish to use a Certificate for
programs such as a rollover individual retirement annuity.
You may use the Divisions of The United States Life Insurance Company in the
City of New York Separate Account USL VA-R ("Separate Account") for a variable
investment return under a Certificate. Variable returns are based on one or
more series of the mutual funds listed in Section 4, below. You may also use
USL's Fixed Account, for investment in Guarantee Periods with guaranteed
principal and interest.
The Divisions of the Separate Account offer an opportunity to realize better
returns than those guaranteed under the Guarantee Periods. The Divisions
involve risk, however, and you can lose money. You may make transfers among the
Divisions and Guarantee Periods.
The Certificates have an accumulation phase and an annuity phase. During the
accumulation phase, earnings accumulate on a tax-deferred basis and are taxed as
income when you make a withdrawal. When you begin receiving regular annuity
payments, a portion of each payment is taxable. Various distribution methods
are available during the accumulation phase and the annuity phase.
The amount accumulated under your Certificate during the accumulation phase will
determine the amount of annuity payments during the annuity phase.
2. ANNUITY PAYMENTS. Your Certificate's value may be applied to any one of the
following annuity payout options (assuming that you are the annuitant): (1)
Life Annuity - monthly payments during your life; (2) Life Annuity - Period
Certain - monthly payments, during your life, but with payments continuing to
the beneficiary for the balance of the 10, 15 or 20 years (as you choose) if you
die before the end of the chosen period; (3) Joint and Last Survivor-Life -
monthly payments during your life and the life of another payee, with payments
continuing during the lifetime of the survivor; (4) Certain Period - monthly
payments to you or another payee and on your death or the death of the
<PAGE>
other payee to a beneficiary for a specified period of time between five and 40
years, with no life contingencies; (5) Specified Dollar Amount - monthly
payments in amounts not less than $125 nor more than $200 per year for each
$1,000 of the original amount due, with the balance to a beneficiary if the
person receiving the payments dies prior to completion of the payments.
With the exception of option 5, you may choose annuity payments under the above
options to be made on a fixed or variable basis. The dollar amount of your
payments on a variable basis will depend upon the investment performance of the
Divisions. Option 5 is available only on a fixed basis. A payee receiving
variable (but not fixed) annuity payments under option 4 may elect at any time
to terminate the option and receive the commuted (current) value of the annuity.
3. PURCHASE. You can purchase a Certificate by submitting an application. The
minimum initial purchase payment is $50,000. You may contribute additional
amounts of $5,000 or more at any time during the accumulation phase.
4. INVESTMENT OPTIONS. Through the Divisions, you may invest in one or more of
the following series of the mutual funds named below:
<TABLE>
<S> <C> <C>
AMERICAN GENERAL SERIES NAVELLIER VARIABLE INSURANCE ROYCE CAPITAL FUND
PORTFOLIO COMPANY SERIES FUND, INC. . Royce Premier
.. Money Market Fund . Navellier Growth Portfolio
Portfolio
HOTCHKIS AND WILEY
VARIABLE TRUST OFFIT VARIABLE WRIGHT MANAGED BLUE
.. Hotchkis and Wiley Equity INSURANCE FUND, INC. CHIP SERIES TRUST
Income VIP Portfolio . OFFIT VIF- Emerging Markets . Wright International
.. Hotchkis and Wiley Low Fund Blue Chip Portfolio
Duration VIP Portfolio . OFFIT VIF- High Yield Fund . Wright Selected Blue
. OFFIT VIF- Total Return Fund Chip Portfolio
LEVCO SERIES TRUST . OFFIT VIF- U.S. Government
.. LEVCO Equity Value Securities Fund
Fund
</TABLE>
You may also invest in a Guarantee Period. Currently, USL offers a one-year
Guarantee Period. Other Guarantee Periods may be offered, in the future, with
different interest rates and durations.
Effective October 20, 1999, the OFFITBANK Variable Insurance Fund, Inc. changed
its name to OFFIT Variable Insurance Fund, Inc. Additionally, the OFFITBANK
VIF-Emerging Markets Fund, the OFFITBANK VIF-High Yield Fund, the OFFITBANK VIF-
Total Return Fund, and the OFFITBANK VIF-U.S. Government Securities Fund,
respectively, changed their names to the OFFIT VIF-Emerging Markets Fund, the
OFFIT VIF-High Yield Fund, the OFFIT VIF-Total Return Fund, and the OFFIT VIF-
U.S. Government Securities Fund.
5. EXPENSES. We deduct a daily charge for mortality and expense risks at an
annual rate of 0.36%, and a daily charge for administration expenses at an
annual rate of 0.04%, of the average daily net asset value of a Division.
Page 2
<PAGE>
There also are investment series charges, ranging from .57% to 1.85% of the
average annual assets of the series listed in Section 4, above, depending on the
series involved. Charges for state premium and other applicable taxes ("premium
taxes") may also apply at the time you elect to start receiving annuity
payments.
The first two columns in the following chart show the Certificate charges and
the investment series charges. The third column, "Total Annual Charges," shows
the total of the charges in the first two columns. The last two columns provide
two examples of the total annual charges, in dollars, that you would pay under a
Certificate, assuming that you invest $1,000 in a Certificate that earns 5%
annually and that you withdraw your money: (1) at the end of year 1, and (2) at
the end of year 10. The column for year 1 shows the total annual charges for
that year. The column for year 10 shows the aggregate of all the annual charges
assessed for the 10 years. The examples assume that there are no charges for
premium taxes.
<TABLE>
<CAPTION>
EXAMPLES OF
TOTAL ANNUAL TOTAL ANNUAL TOTAL ANNUAL
CONTRACT SERIES TOTAL ANNUAL CHARGES AT END OF:
INVESTMENT SERIES CHARGES CHARGES CHARGES 1 YEAR 10 YEARS
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Hotchkis and Wiley Equity Income VIP 0.40% 1.15% 1.55% $16 $185
Hotchkis and Wiley Low Duration VIP 0.40% 0.58% 0.98% $10 $120
LEVCO Equity Value 0.40% 1.10% 1.50% $15 $179
Navellier Growth 0.40% 1.50% 1.90% $19 $222
OFFIT VIF-Emerging Markets 0.40% 1.50% 1.90% $19 $222
OFFIT VIF-High Yield 0.40% 1.15% 1.55% $16 $185
OFFIT VIF-Total Return 0.40% 0.80% 1.20% $12 $145
OFFIT VIF-U.S. Government 0.40% 0.60% 1.00% $10 $122
Securities
Royce Premier 0.40% 1.35% 1.75% $18 $206
Wright International Blue Chip 0.40% 1.85% 2.25% $23 $258
Wright Selected Blue Chip 0.40% 1.15% 1.55% $16 $185
Money Market 0.40% 0.57% 0.97% $10 $119
</TABLE>
The charges reflect any expense reimbursement or waiver. For more information,
see the Fee Table in the Prospectus.
6. TAXES. Usually, you pay taxes on earnings only when distributions are made
from your Certificate. You may also pay a 10% penalty on the taxable portion of
distributions received prior to age 59 1/2.
7. ACCESS TO YOUR MONEY. Prior to the annuity starting date, you may receive
distributions under your Certificate through the following withdrawal options:
(1) partial withdrawals of at least $100 may be taken at any time, and (2)
systematic withdrawals paid monthly, quarterly, semiannually or annually,
subject to a $100 minimum for each payment.
Page 3
<PAGE>
You also have access to your Certificate's value by surrendering the
Certificate. You may do this at any time prior to the annuity starting date.
During the annuity payout period, a person receiving variable payments for a
designated period of time may also surrender the Certificate. Withdrawals and
surrenders may be subject to income tax and a tax penalty.
8. PERFORMANCE. During the accumulation phase, your Certificate's value in the
Divisions may fluctuate, reflecting the investment performance of the Divisions
you have selected. The following chart shows hypothetical calendar year total
returns for Divisions whose corresponding series have at least one full calendar
year of operations. The returns shown are based on the actual historical
performance of the corresponding series. They reflect all charges and
deductions of the series and the Divisions that would have been made during the
periods shown. Thus, the chart reflects all of the charges in the third column
of the chart in Section 5, above, for the Divisions included below. If also
included, premium taxes would reduce the performance numbers shown below. Past
performance is not a guarantee of future results.
CALENDAR YEAR
<TABLE>
<CAPTION>
DIVISION 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Hotchkis and Wiley (3.11)% N/A N/A N/A N/A N/A N/A N/A N/A N/A
Equity Income VIP
Hotchkis and Wiley 2.02% N/A N/A N/A N/A N/A N/A N/A N/A N/A
Low Duration VIP
LEVCO Equity Value 15.26% 15.52% N/A N/A N/A N/A N/A N/A N/A N/A
Navellier Growth 91.89% N/A N/A N/A N/A N/A N/A N/A N/A N/A
OFFIT VIF - 24.52% (16.70)% 5.77% N/A N/A N/A N/A N/A N/A N/A
Emerging Markets
OFFIT VIF - High (1.18)% 3.89% 11.20% N/A N/A N/A N/A N/A N/A N/A
Yield
OFFIT VIF - Total (2.66)% N/A N/A N/A N/A N/A N/A N/A N/A N/A
Return
Royce Premier 7.79% 8.48% 16.32% N/A N/A N/A N/A N/A N/A N/A
Wright International 31.70% 7.96% 5.06% 16.62% 9.34% N/A N/A N/A N/A N/A
Blue Chip
Wright Selected 13.60% (3.03)% 31.21% 21.99% 25.43% N/A N/A N/A N/A N/A
Blue Chip
Money Market 4.33% 4.74% 4.49% 4.32% 4.85% 3.11% 2.01% 2.57% 4.83% 7.18%
</TABLE>
Page 4
<PAGE>
9. DEATH BENEFIT. If you die before the annuity starting date, the beneficiary
will receive a death benefit. The death benefit is the Certificate value at the
time we receive proof of death and a written request specifying the manner of
payment, less premium taxes. However, if death occurs prior to age 81, and
before the annuity starting date, the death benefit is the greater of (1) the
death benefit in the preceding sentence or (2) the sum of all purchase payments
you have paid under the Certificate, less any partial withdrawals and premium
taxes.
10. OTHER INFORMATION.
TAX-QUALIFIED PLANS. Please consult your tax adviser before purchasing a
Certificate as a rollover from an existing tax-qualified retirement plan,
including another individual retirement account or annuity under Section 408 of
the Internal Revenue Code. Any discussion of taxes in this Profile does not
apply to such a Certificate.
FREE LOOK. You can examine your Certificate for a period of 10 days after you
receive it, and return it to us for a refund. Your refund will equal your
Certificate's value, reflecting any investment gain or loss in the Divisions you
have specified.
AUTOMATIC REBALANCING. You can have your money automatically rebalanced among
the Divisions quarterly, semiannually, or annually in order to retain the
proportional investments you select.
REPORTS. We will mail to Certificate owners or annuitants any reports and
communications required by law. The toll-free number for daily Division values
is 1-800-246-1924.
11. INQUIRIES. If you need more information, please contact your registered
representative. You may also contact us at:
The United States Life Insurance Company in the City of New York
Administrative Center
P.O. Box 1401
Houston, Texas 77251-1401
Telephone 1-800-246-1924
Page 5
<PAGE>
SELECT RESERVE(SM)
FLEXIBLE PAYMENT VARIABLE AND
FIXED DEFERRED ANNUITY CERTIFICATES OFFERED BY
THE UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK
<TABLE>
<CAPTION>
<S> <C> <C>
ADDRESS FOR SERVICES: ADDRESS FOR PAYMENTS VIA US MAIL: ADDRESS FOR EXPRESS DELIVERY PAYMENTS:
The United States Life Insurance The United States Life Insurance The United States Life Insurance
Company In the City of New York Company In the City of New York Company In the City of New York
Administrative Center P.O. Box 4728 Dept A c/o Southwest Bank of Texas
P.O. Box 1401 Houston, Texas 77210-4728 4400 Post Oak Parkway
Houston, Texas 77251-1401 Houston, Texas 77027
TELEPHONE: 1-800-246-1924 Attention: Lockbox Processing
</TABLE>
The United States Life Insurance Company in the City of New York ("USL") is
offering, under a group annuity master contract, the flexible payment variable
and fixed deferred annuity certificates (the "Certificates") described in this
Prospectus.
You may use The United States Life Insurance Company in the City of New York
Separate Account USL VA-R ("the Separate Account") for a variable investment
return under the Certificates based on one or more series of the mutual funds
named below, as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
AMERICAN GENERAL SERIES PORTFOLIO NAVELLIER VARIABLE INSURANCE SERIES ROYCE CAPITAL FUND
COMPANY FUND, INC. . Royce Premier
. Money Market Fund . Navellier Growth Portfolio Portfolio
HOTCHKIS AND WILEY OFFIT VARIABLE WRIGHT MANAGED BLUE
VARIABLE TRUST INSURANCE FUND, INC. CHIP SERIES TRUST
. Hotchkis and Wiley Equity . OFFIT VIF- Emerging Markets Fund . Wright International
Income VIP Portfolio . OFFIT VIF- High Yield Fund Blue Chip Portfolio
. Hotchkis and Wiley Low . OFFIT VIF- Total Return Fund . Wright Selected Blue
Duration VIP Portfolio . OFFIT VIF- U.S. Government Chip Portfolio
Securities Fund
LEVCO SERIES TRUST
. LEVCO Equity Value
Fund
</TABLE>
You may also use USL's guaranteed interest option. This option currently has
one Guarantee Period, with a guaranteed interest rate.
Effective October 20, 1999, the OFFITBANK Variable Insurance Fund, Inc. changed
its name to OFFIT Variable Insurance Fund, Inc. Additionally, the OFFITBANK
VIF-Emerging Markets Fund, the OFFITBANK VIF-High Yield Fund, the OFFITBANK
VIF-Total Return Fund, and the OFFITBANK VIF-U.S. Government Securities Fund,
respectively, changed their names to the OFFIT VIF-Emerging Markets Fund, the
OFFIT VIF-High Yield Fund, the OFFIT VIF-Total Return Fund, and the OFFIT
VIF-U.S. Government Securities Fund.
This Prospectus provides you with information that you should have before
investing in the Certificates. Please read the Prospectus carefully and keep it
for future reference.
For additional information about the Certificates, you may request a copy of the
Statement of Additional Information (the "Statement"), dated April 3, 2000. We
have filed the Statement with the Securities and Exchange Commission ("SEC") and
have incorporated it by reference into this Prospectus. The "Contents" of the
Statement appears at page 44 of this Prospectus. You may obtain a free copy of
the Statement if you write or call our Administrative Center, which is located
at 2727-A Allen Parkway, Houston, Texas 77019-2191. The telephone number is
1-800-246-1924. You may obtain the Statement through the SEC's Web site at
http://www.sec.gov.
You should rely only on the information contained in this document or that we
have referred you to. We have not authorized anyone to provide you with
information that is different.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this Prospectus. Any representation to the contrary is
a criminal offense. The Certificates are not available in all states.
This Prospectus is valid only if you also receive current fund prospectuses of
the American General Series Portfolio Company, Hotchkis and Wiley Variable
Trust, LEVCO Series Trust, Navellier Variable Insurance Series Fund, Inc.,
OFFIT Variable Insurance Fund, Inc., Royce Capital Fund, and Wright Managed Blue
Chip Series Trust.
This Prospectus is dated April 3, 2000.
<PAGE>
CONTENTS
Definitions.................................................................. 4
Fee Table.................................................................... 7
Communications to Us......................................................... 9
Performance Information...................................................... 9
Financial Ratings.......................................................... 10
Other Information.......................................................... 11
Financial Information........................................................ 11
USL.......................................................................... 11
Separate Account USL VA-R.................................................... 12
The Series................................................................... 12
Voting Privileges.......................................................... 15
The Fixed Account............................................................ 16
Guarantee Periods.......................................................... 16
Crediting Interest......................................................... 17
New Guarantee Periods...................................................... 17
Certificate Issuance and Purchase Payments................................... 18
Minimum Requirements....................................................... 18
Payments................................................................... 19
Cancellation............................................................... 19
Owner Account Value.......................................................... 20
Variable Account Value..................................................... 20
Fixed Account Value........................................................ 20
Transfer, Automatic Rebalancing, Surrender and Partial Withdrawal of Owner
Account Value.............................................................. 21
Transfers.................................................................. 21
Automatic Rebalancing...................................................... 22
Surrenders................................................................. 23
Partial Withdrawals........................................................ 23
Annuity Period and Annuity Payment Options................................... 24
Annuity Commencement Date.................................................. 24
Application of Owner Account Value......................................... 24
Fixed and Variable Annuity Payments........................................ 24
Annuity Payment Options.................................................... 25
Election of Annuity Payment Option......................................... 25
Availability of Annuity Payment Options.................................... 26
Transfers.................................................................. 28
Death Proceeds............................................................... 28
Death Proceeds Before the Annuity Commencement Date........................ 28
Death Proceeds After the Annuity Commencement Date......................... 29
Proof of Death............................................................. 30
Charges Under the Certificates............................................... 30
Premium Taxes.............................................................. 30
Transfer Charges........................................................... 31
Charge to the Separate Account............................................. 31
Miscellaneous.............................................................. 32
2
<PAGE>
Systematic Withdrawal Plan................................................. 32
Reduction in Administrative Expense Charge................................. 32
Other Aspects of the Certificates............................................ 32
Owners, Annuitants, and Beneficiaries; Assignments......................... 32
Reports.................................................................... 33
Rights Reserved by Us...................................................... 33
Payment and Deferment...................................................... 34
Federal Income Tax Matters................................................... 35
General.................................................................... 35
Non-Qualified Certificates................................................. 35
Individual Retirement Annuities ("IRAs")................................... 37
Roth IRAs.................................................................. 39
Simplified Employee Pension Plans.......................................... 40
Simple Retirement Accounts................................................. 40
Other Qualified Plans...................................................... 40
Private Employer Unfunded Deferred Compensation Plans...................... 41
Federal Income Tax Withholding and Reporting............................... 42
Taxes Payable by USL and the Separate Account.............................. 42
Distribution Arrangements.................................................... 42
Services Agreements.......................................................... 43
Legal Matters................................................................ 43
Year 2000 Considerations..................................................... 43
Other Information on File.................................................... 44
Contents of Statement of Additional Information.............................. 44
3
<PAGE>
DEFINITIONS
WE, OUR AND US - The United States Life Insurance Company in the City of New
York ("USL").
YOU AND YOUR - a reader of this Prospectus who is contemplating making purchase
payments or taking any other action in connection with a Certificate. This is
generally the Owner of a Certificate.
ACCOUNT VALUE - the sum of your Fixed Account Value and Variable Account Value
after deduction of any fees. We may subtract certain other charges from your
Account Value in the case of transfers or distribution of your Account Value.
ACCUMULATION UNIT - a measuring unit used in calculating your interest in a
Division of the Separate Account before the Annuity Commencement Date.
ADMINISTRATIVE CENTER - our annuity service center to which you should direct
all requests, instructions and other communications. Our Administrative Center
is located at 2727-A Allen Parkway, Houston, Texas 77019-2191. The mailing
address for services is P.O. Box 1401, Houston, Texas 77251-1401. The mailing
address for purchase payments is The United States Life Insurance Company in the
City of New York, P.O. Box 4728 Dept A, Houston, Texas 77210-4728.
ANNUITANT - the person named as Annuitant in the application for a Certificate
and on whose life annuity payments may be based.
ANNUITY COMMENCEMENT DATE - the date on which we begin making payments under an
Annuity Payment Option, unless you elect a single sum payment instead.
ANNUITY PAYMENT OPTION - one of the ways in which you can request us to make
annuity payments to you. An Annuity Payment Option will control the amount of
each payment, how often we make payments, and for how long we make payments.
ANNUITY PERIOD - the period of time during which we make annuity payments under
an Annuity Payment Option.
ANNUITY UNIT - a measuring unit used to calculate the amount of Variable Annuity
Payments.
BENEFICIARY - the person who will receive any proceeds due under a Certificate
following the death of an Owner or an Annuitant.
CERTIFICATE - an individual annuity Certificate offered by this Prospectus.
CERTIFICATE ANNIVERSARY - each anniversary of the date of issue of the
Certificate.
CERTIFICATE YEAR - each year beginning with the date of issue of the
Certificate.
CODE - the Internal Revenue Code of 1986, as amended.
CONTINGENT ANNUITANT - a person whom you designate under a Non-Qualified
Certificate to become the Annuitant if the Annuitant dies before the Annuity
Commencement Date and the Contingent Annuitant is alive when the Annuitant dies.
4
<PAGE>
CONTINGENT BENEFICIARY - a person whom you designate to receive any proceeds due
under a Certificate following the death of an Owner or an Annuitant, if the
Beneficiary has died but the Contingent Beneficiary is alive when the proceeds
become payable.
DIVISION - one of the several different investment options into which the
Separate Account is divided. Each Division invests in shares of a Series.
FIXED ACCOUNT - the name of the investment option that allows you to allocate
purchase payments to USL's General Account.
FIXED ACCOUNT VALUE - the sum of your net purchase payments and transfers in the
Fixed Account, plus accumulated interest less any partial withdrawals and
transfers you make out of the Fixed Account.
FIXED ANNUITY PAYMENTS - annuity payments that are fixed in amount and do not
vary with the investment experience of any Division of the Separate Account.
GENERAL ACCOUNT - all assets of USL other than those in the Separate Account or
any other legally segregated separate account established by USL.
GUARANTEED INTEREST RATE - the rate of interest we credit during any Guarantee
Period, on an effective annual basis.
GUARANTEE PERIOD - the period for which we credit a Guaranteed Interest Rate.
HOME OFFICE - our office at the following address and phone number: The United
States Life Insurance Company in the City of New York, 125 Maiden Lane, New
York, N.Y. 10038; 1-212-709-6000. (You should, however, contact your sales
representative or our Administrative Center for all services. Purchase payments
should be mailed to the address for payments shown on the first page of this
Prospectus.)
NON-QUALIFIED - not eligible for the kind of federal income tax treatment that
occurs with retirement plans allowed by Sections 401, 403, 408 or 408A of the
Code.
OWNER - the holder of record of a Certificate, except that the employer or
trustee may be the Owner of the Certificate in connection with a retirement
plan.
QUALIFIED - eligible for the kind of federal income tax treatment that occurs
with retirement plans under sections 401, 403, 408 or 408A of the Code.
SEPARATE ACCOUNT - the segregated asset account of USL named The United States
Life Insurance Company in the City of New York Separate Account USL VA-R which
invests purchase payments under the Certificates.
SERIES - an individual portfolio of a mutual fund that you may choose for
investment under the Certificates. Currently, the Series are part of either the
American General Series Portfolio Company, Hotchkis and Wiley Variable Trust,
LEVCO Series Trust, Navellier Variable Insurance Series Fund, Inc., OFFIT
Variable Insurance Fund, Inc., Royce Capital Fund, or Wright Managed Blue Chip
Series Trust.
5
<PAGE>
VALUATION DATE - a day when we are open for business. However, a day is not a
Valuation Date, if the Series in which a Division invests does not calculate the
value of its shares on that day.
VALUATION PERIOD - the period that starts at the close of regular trading on the
New York Stock Exchange on a Valuation Date and ends at the close of regular
trading on the New York Stock Exchange on the next Valuation Date.
VARIABLE ACCOUNT VALUE - the sum of your account values in the Separate Account
Divisions. Your account value in a Separate Account Division is the value of a
Division's Accumulation Unit multiplied by the number of Accumulation Units you
have in that Division.
VARIABLE ANNUITY PAYMENTS - annuity payments that vary in amount based on the
investment earnings and losses of one or more of the Divisions.
WRITTEN - signed, dated, and in a form satisfactory to us and received at our
Administrative Center. You must use special forms we or your sales
representative provide to elect an Annuity Payment Option.
6
<PAGE>
FEE TABLE
The purpose of this Fee Table is to assist you in understanding the various
costs and expenses that you will bear directly or indirectly under a
Certificate. The table reflects expenses of the Separate Account and the
Series. We may also deduct amounts for state premium taxes or similar
assessments, where applicable.
PARTICIPANT TRANSACTION CHARGES
Front-End Sales Charge Imposed on Purchases................... 0%
Surrender Charge.............................................. 0%
(computed as a percentage of purchase payments surrendered)
Transfer Charge............................................... $0/1/
ANNUAL CERTIFICATE FEE............................................. $0
SEPARATE ACCOUNT ANNUAL EXPENSES (as a percentage of average daily
net asset value)
Mortality and Expense Risk Charge 0.36%
Administrative Expense Charge 0.04%
-----
Total Separate Account Annual Expenses 0.40%
=====
- ----------------
/1/ This charge is $25 after the 12th transfer during each Certificate Year
before the Annuity Commencement Date. Certain exceptions apply.
7
<PAGE>
THE SERIES' ANNUAL EXPENSES1 (as a percentage of average daily Variable
Account Value)
<TABLE>
<CAPTION>
Management Other
Fees After Expenses Annual Expenses
Expense After Expense After Expense
Reimbursement Reimbursement Reimbursement
and Waiver/3/ and Waiver/3/ and Waiver/3/
-------------- -------------- ----------------
<S> <C> <C> <C>
Hotchkis and Wiley Equity Income VIP 0.75% 0.40% 1.15%
Hotchkis and Wiley Low Duration VIP 0.46% 0.12% 0.58%
LEVCO Equity Value 0.85% 0.25% 1.10%
Navellier Growth 0.85% 0.65% 1.50%
OFFIT VIF-Emerging Markets 0.32% 1.18% 1.50%
OFFIT VIF-High Yield 0.63% 0.52% 1.15%
OFFIT VIF-Total Return/2/ 0.00% 0.80% 0.80%
OFFIT VIF-U. S. Government Securities 0.07% 0.53% 0.60%
Royce Premier 0.00% 1.35% 1.35%
Wright International Blue Chip 0.00% 1.85% 1.85%
Wright Selected Blue Chip 0.00% 1.15% 1.15%
Money Market 0.50% 0.07% 0.57%
</TABLE>
- -----------------
/1/ The Series' advisers or managers have entered into administrative
services agreements with USL. The advisers or managers pay fees to USL for
these services. The fees do not have a direct relationship to the Series'
Annual Expenses. (See "Services Agreements.")
/2/ OFFIT VIF-Total Return may invest a portion of its assets in shares of
OFFIT VIF-High Yield, OFFIT VIF-Emerging Markets, and OFFIT VIF-U.S. Government
Securities. Shareholders of OFFIT VIF-Total Return will indirectly bear the
expenses of the underlying funds at the rates stated above.
/3/ If expense reimbursements and fee waivers were terminated, management fees
and other expenses would have been as shown in the following table.
<TABLE>
<CAPTION>
Management Other Total Annual
Fees Expenses Expenses
----------- --------- -------------
<S> <C> <C> <C>
Hotchkis and Wiley Equity Income VIP 0.75% 5.01% 5.76%
Hotchkis and Wiley Low Duration VIP 0.46% 3.54% 4.00%
LEVCO Equity Value 1.46% 0.25% 1.71%
Navellier Growth 0.85% 7.38% 8.23%
OFFIT VIF- Emerging Markets 0.90% 1.69% 2.59%
OFFIT VIF- High Yield 0.85% 0.56% 1.41%
OFFIT VIF-Total Return 0.80% 6.53% 7.33%
OFFIT VIF-U. S. Government Securities 0.35% 0.77% 1.12%
Royce Premier 1.00% 4.63% 5.63%
Wright International Blue Chip 0.80% 6.62% 7.42%
Wright Selected Blue Chip 0.65% 1.76% 2.41%
Money Market 0.50% 0.07% 0.57%
</TABLE>
8
<PAGE>
Example Whether or not you surrender or annuitize at the end of the applicable
time period, the following expenses would apply to a $1,000 investment
if you assume a 5% annual return on assets:
<TABLE>
<CAPTION>
If all amounts are allocated
to a Division that invests in
one of the following Series: 1 year 3 years 5 years 10 years
- ----------------------------------------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
Hotchkis and Wiley Equity Income VIP $16 $49 $ 84 $185
Hotchkis and Wiley Low Duration VIP $10 $31 $ 54 $120
LEVCO Equity Value $15 $47 $ 82 $179
Navellier Growth $19 $60 $103 $222
OFFIT VIF-Emerging Markets $19 $60 $103 $222
OFFIT VIF-High Yield $16 $49 $ 84 $185
OFFIT VIF-Total Return $12 $38 $ 66 $145
OFFIT VIF-U. S. Government Securities* $10 $32 N/A N/A
Royce Premier $18 $55 $ 95 $206
Wright International Blue Chip $23 $70 $120 $258
Wright Selected Blue Chip $16 $49 $ 84 $185
Money Market $10 $31 $ 54 $119
</TABLE>
* "N/A" reflects SEC rules that require OFFIT VIF-U.S. Government Securities
to complete the Example for only the one and three year periods.
THE EXAMPLE IS NOT A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES
MAY BE GREATER OR LESS THAN THOSE SHOWN. The assumed 5% annual rate of return
is not an estimate or a guarantee of future investment performance. The Example
assumes an estimated Average Account Value of $50,000.
COMMUNICATIONS TO US
You should include, in communications to us, your Certificate number, your name,
and, if different, the Annuitant's name. You may direct communications to the
addresses and phone numbers on the first page of this Prospectus.
Unless this Prospectus states differently, we will consider purchase payments or
other communications to be received on the date we actually receive them, if
they are in proper form. However, we will consider purchase payments to be
received on the next Valuation Date if we receive them (1) after the close of
regular trading on the New York Stock Exchange or (2) on a date that is not a
Valuation Date.
PERFORMANCE INFORMATION
From time to time, we may include in advertisements and other sales materials
several types of performance information for the Divisions. This information
may include "average annual total
9
<PAGE>
return" and "cumulative total return." The Hotchkis and Wiley Low Duration VIP
Division, OFFIT VIF-High Yield Division and OFFIT VIF-U.S. Government Securities
Division may also advertise "yield." The Money Market Division may advertise
"yield" and "effective yield."
The performance information that we may present is not an estimate or guarantee
of future investment performance and does not represent the actual investment
experience of amounts invested by a particular Owner. Additional information
concerning a Division's performance appears in the Statement.
Total Return and Yield Quotations. Average annual total return and cumulative
total return figures measure the net income of a Division and any realized or
unrealized gains or losses of the underlying investments in the Division, over
the period stated. Average annual total return figures are annualized and
represent the average annual percentage change in the value of an investment in
a Division over the period stated. Cumulative total return figures represent
the cumulative change in value of an investment in a Division for various
periods stated.
Yield is a measure of the net dividend and interest income earned over a
specific one-month or 30-day period (seven-day period for the Money Market
Division), expressed as a percentage of the value of the Division's Accumulation
Units. Yield is an annualized figure, which means that we assume that the
Division generates the same level of net income over a one-year period and
compound that income on a semi-annual basis. We calculate the effective yield
for the Money Market Division similarly, but include the increase due to assumed
compounding. The Money Market Division's effective yield will be slightly
higher than its yield due to this compounding effect.
Average annual total return figures reflect deduction of all recurring charges
and fees applicable under the Certificate to all Owner accounts, including the
following:
. the Mortality and Expense Risk Charge, and
. the Administrative Expense Charge.
Division Performance. The investment performance for each Division that invests
in a corresponding Series of the Trust will reflect the investment performance
of that Series for the periods stated. This information appears in the
Statement. For periods before the date the Certificates became available, we
calculate the performance information for a Division on a hypothetical basis. In
so doing, we reflect deductions of current Separate Account fees and charges
under the Certificate from the historical performance of the corresponding
Series. We may waive or reimburse certain fees or charges applicable to the
Certificate. Such waivers or reimbursements will affect each Division's
performance results.
Information about the experience of the investment advisers to the Series of the
Fund appears in the prospectus for the Fund.
FINANCIAL RATINGS
USL may advertise or report to Owners its ratings as an insurance company by the
A. M. Best Company. Each year, A. M. Best reviews the financial status of
thousands of insurers, culminating in
10
<PAGE>
the assignment of Best's Ratings. These ratings reflect A.M. Best's current
opinion of the relative financial strength and operating performance of an
insurance company in comparison to the norms of the life/health industry. Best's
Ratings range from A++ to F.
USL may also advertise or report to Owners its ratings as to claims-paying
ability by the Standard & Poor's Corporation. A Standard & Poor's insurance
claims-paying ability rating is an assessment of an operating insurance
company's financial capacity to meet the obligations of its insurance policies
in accordance with their terms. Standard & Poor's ratings range from AAA to D.
USL may additionally advertise its ratings as to claims-paying ability by the
Duff & Phelps Credit Rating Co. A Duff & Phelps' claims-paying ability rating
is an assessment of a company's insurance claims-paying ability. Duff & Phelps'
ratings range from AAA to CCC.
Current ratings from A.M. Best, Standard & Poor's, and Duff & Phelps Credit
Rating Co. may be used from time to time in any advertising about the
Certificates, as well as in any reports that publish the ratings.
The ratings reflect the claims-paying ability and financial strength of USL.
They are not a rating of investment performance that purchasers of insurance
products funded through separate accounts, such as the Separate Account, have
experienced or are likely to experience in the future.
OTHER INFORMATION
USL may also advertise endorsements from organizations, individuals or other
parties that recommend USL or the Certificates. USL may occasionally include in
advertisements (1) comparisons of currently taxable and tax-deferred investment
programs, based on selected tax brackets, or (2) discussions of alternative
investment vehicles and general economic conditions.
FINANCIAL INFORMATION
The financial statements of USL appear in the Statement. Please see the
first page of this Prospectus for information on how to obtain a copy of the
Statement. You should consider the financial statements of USL only as
bearing on the ability of USL to meet its contractual obligations under the
Certificates. The financial statements do not bear on the investment
performance of the Separate Account. (See "Contents of Statement of Additional
Information.") There are no financial statements for the Separate Account as it
had not yet begun operations as of the date of this Prospectus.
USL
USL is a stock life insurance company, organized under the laws of the State of
New York in 1850. USL is an indirect, wholly-owned subsidiary of American
General Corporation, a diversified financial services holding company engaged
primarily in the insurance business. American General Financial Group is the
marketing name for American General Corporation and its subsidiaries. USL is
principally involved in writing life insurance policies and annuity contracts in
the State of New York.
11
<PAGE>
The commitments under the Certificates are USL's, and American General
Corporation has no legal obligation to back those commitments.
USL is a member of the Insurance Marketplace Standards Association ("IMSA").
IMSA is a voluntary membership organization created by the life insurance
industry to promote ethical market conduct for individual life insurance and
annuity products. USL's membership in IMSA applies only to USL and not its
products.
SEPARATE ACCOUNT USL VA-R
USL established the Separate Account on August 8, 1997. The Separate Account
has 29 Divisions, 12 of which are available under Certificates offered by this
Prospectus. The Separate Account is registered as a unit investment trust under
the Investment Company Act of 1940 ("1940 Act").
Each Division of the Separate Account is part of USL's general business, and the
assets of the Separate Account belong to USL. Under New York law and the terms
of the Certificates, the assets of the Separate Account will not be chargeable
with liabilities arising out of any other business that USL may conduct. These
assets will be held exclusively to meet USL's obligations under variable annuity
Certificates. Furthermore, USL credits or charges the Separate Account with the
income, gains, and losses from the Separate Account's assets, whether or not
realized, without regard to other income, gains, or losses of USL.
THE SERIES
The Separate Account has 12 Divisions funding the variable benefits under the
Certificates. These Divisions invest in shares of one or more series of
American General Series Portfolio Company, Hotchkis and Wiley Variable Trust,
LEVCO Series Trust, Navellier Variable Insurance Series Fund, Inc., OFFIT
Variable Insurance Fund, Inc., Royce Capital Fund and Wright Managed Blue Chip
Series Trust (collectively, the "Underlying Funds").
The Underlying Funds offer shares of these Series, without sales charges,
exclusively to insurance company variable annuity and variable life insurance
separate accounts and not directly to the public. The Underlying Funds also
offer shares to variable annuity and variable life insurance separate accounts
of insurers that are not affiliated with USL.
We do not foresee any disadvantage to you arising out of these arrangements.
Nevertheless, differences in treatment under tax and other laws, as well as
other considerations, could cause the interests of various owners to conflict.
For example, violation of the federal tax laws by one separate account investing
in one of the Underlying Funds could cause the contracts or certificates funded
through another separate account to lose their tax-deferred status. Such a
result might require us to take remedial action. A separate account may have to
withdraw its participation in the Underlying Fund, if a material irreconcilable
conflict arises among separate accounts. In that event, the Underlying Fund may
have to liquidate portfolio securities at a loss to pay for a separate account's
redemption of Trust or Fund shares. At the same time, the Boards of Trustees
and the Boards of Directors of the Underlying Funds, and we, will
12
<PAGE>
monitor events for any material irreconcilable conflicts that may possibly arise
and determine what action, if any, to take to remedy or eliminate the conflict.
The Series of the Underlying Funds and their management are as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
INVESTMENT COMPANY SERIES ADVISER/MANAGER
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
American General Series Portfolio Money Market Fund The Variable Annuity Life
Company Insurance Company
- ------------------------------------------------------------------------------------------------------------
Hotchkis and Wiley Variable Trust Hotchkis and Wiley Equity Hotchkis and Wiley, a division of
Income VIP Portfolio Merrill Lynch Asset Management,
Hotchkis and Wiley Low L.P.
Duration VIP Portfolio
- ------------------------------------------------------------------------------------------------------------
LEVCO Series Trust LEVCO Equity Value Fund John A. Levin and Co., Inc.
- ------------------------------------------------------------------------------------------------------------
Navellier Variable Insurance Series Navellier Growth Portfolio Navellier & Associates, Inc.
Fund, Inc.
- ------------------------------------------------------------------------------------------------------------
OFFIT Variable Insurance Fund, Inc. OFFIT VIF-Emerging OFFITBANK
Markets Fund
OFFIT VIF-High Yield Fund
OFFIT VIF-Total Return Fund
OFFIT VIF- U.S. Government
Securities Fund
- ------------------------------------------------------------------------------------------------------------
Royce Capital Fund Royce Premier Portfolio Royce & Associates, Inc.
- ------------------------------------------------------------------------------------------------------------
Wright Managed Blue Chip Series Wright International Blue Wright Investors' Service, Inc.
Trust Chip Portfolio
Wright Selected Blue Chip
Portfolio
- ------------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
The following chart sets out the investment objectives of each Series. There
can be no assurance that investment objectives will be achieved.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
SERIES INVESTMENT OBJECTIVE
- ------------------------------------------------------------------------------------------------------------------
<S> <C>
Money Market Fund Liquidity, protection of capital and current income through investments in short-term
money market instruments. Shares of the Money Market Fund are neither insured nor
guaranteed by the U.S. Government. There is no assurance that this Fund will be able
to maintain a stable net asset value of $1.00 per share.
- ------------------------------------------------------------------------------------------------------------------
Hotchkis and Wiley Seeks current income and long-term growth of income, accompanied by growth of capital.
Equity Income VIP Invests primarily in U.S. stocks.
Portfolio
- ------------------------------------------------------------------------------------------------------------------
Hotchkis and Wiley Low Maximize total return, consistent with preservation of capital. Invests in bonds of
Duration VIP Portfolio varying maturities with a portfolio duration of one to three years.
- ------------------------------------------------------------------------------------------------------------------
LEVCO Equity Value Fund Achieve long-term growth of capital by emphasizing the preservation of capital and
control of volatility. A research intensive, value oriented stock selection process
is used in constructing a diversified portfolio.
- ------------------------------------------------------------------------------------------------------------------
Navellier Growth Achieve long-term growth of capital primarily through investment in companies with
Portfolio appreciation potential.
- ------------------------------------------------------------------------------------------------------------------
OFFIT VIF-Emerging Provide investors with a competitive total investment return by focusing on current
Markets Fund yield and opportunities for capital appreciation primarily by investing in corporate
and sovereign debt securities of emerging market countries.
- ------------------------------------------------------------------------------------------------------------------
OFFIT VIF-High Yield High current income, with capital appreciation as a secondary objective. Invests
Fund primarily in U.S. corporate fixed-income securities which are rated below investment
grade or unrated at the time of investment.
- ------------------------------------------------------------------------------------------------------------------
OFFIT VIF- Total Return Maximize total return from a combination of capital appreciation and current income by
Fund investing in a diversified portfolio of fixed-income securities, including U.S.
Government or agencies' obligations, investment grade fixed income, high yield and
fixed-income securities and securities of other investment companies. An SEC
exemptive order permits this Fund to purchase shares of any of the existing or any new
Series of the OFFIT Variable Insurance Fund, Inc.
- ------------------------------------------------------------------------------------------------------------------
OFFIT VIF- U.S. Current income consistent with preservation of capital. Invests at least 80% of its
Government Securities assets in U.S. Government obligations.
Fund
- ------------------------------------------------------------------------------------------------------------------
Royce Premier Portfolio Long-term growth of capital and, as a secondary objective, current income. Invests in
a limited number of equity securities of small-cap companies viewed by Royce &
Associates, Inc. as having excellent business strengths and/or prospects for growth,
high internal rates of return and low leverage and which are trading significantly
below its estimate of their current worth.
- ------------------------------------------------------------------------------------------------------------------
Wright International Long-term capital appreciation by investing primarily in equity securities of
Blue Chip Portfolio well-established, non-U.S. companies that meet the advisor's quality standards.
- ------------------------------------------------------------------------------------------------------------------
Wright Selected Blue Long-term capital appreciation and, as a secondary objective, reasonable current
Chip Portfolio income, by investing primarily in equity securities of well-established U.S. companies
that meet the Advisor's quality standards.
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
We automatically reinvest any dividends or capital gain distributions that we
receive on shares of the Series held under Certificates. We reinvest at the
Series' net asset value on the date payable. Dividends and distributions will
reduce the net asset value of each share of the corresponding Series and
increase the number of shares outstanding of the Series by an equivalent value.
However, these dividends and distributions do not change your Account Value.
14
<PAGE>
Before selecting any Division, you should carefully read the Underlying Fund
Prospectus. The Prospectus provides more complete information about the Series
in which the Division invests, including investment objectives and policies,
charges and expenses. An Underlying Fund may accompany its Prospectus with a
summary of the Prospectus called a "profile."
You can find information about the investment performance of a Series of the
Underlying Funds and information about the business experience of the investment
advisers to the Series in the Prospectuses. You may obtain additional copies of
a Prospectus by contacting our Administrative Center at the addresses and phone
numbers on the first page of this Prospectus. When making your request, please
specify the Series of the Underlying Fund in which you are interested.
High yielding fixed-income securities such as those in which the OFFIT VIF-High
Yield, Emerging Markets and Total Return Divisions invest are subject to greater
market fluctuations and risk of loss of income and principal than investments in
lower yielding fixed-income securities. You should carefully read the
Underlying Fund Prospectuses for each Series in which these Divisions invest and
consider your ability to assume the risks of making an investment in these
Divisions.
VOTING PRIVILEGES
The following people may give us voting instructions for Series' shares held in
the Separate Account Divisions attributable to their Certificate:
. You, as the Owner, before the Annuity Commencement Date, and
. The Annuitant or other payee, during the Annuity Period.
We will vote according to such instructions at meetings of shareholders of the
Series.
We will determine who is entitled to give voting instructions and the number of
votes for which they may give directions as of the record date for a meeting.
We will calculate the number of votes in fractions. We will calculate the
number of votes for any Series as follows:
. For each Owner before the Annuity Commencement Date, we will divide (1) the
Owner's Variable Account Value invested in the corresponding Division by (2)
the net asset value of one share of that Series.
. For each Annuitant or payee during the Annuity Period, we will divide (1)
our liability for future Variable Annuity Payments to the Annuitant or payee
by (2) the value of an Annuity Unit. We will calculate our liability for
future Variable Annuity Payments based on the mortality assumptions and the
assumed interest rate that we use in determining the number of Annuity Units
under a Certificate and the value of an Annuity Unit.
We will vote all shares of each Series owned by the Separate Account as follows:
. Shares for which we receive instructions, in accordance with those
instructions, and
15
<PAGE>
. Shares for which we receive no instructions, including any shares we own on
our own behalf, in the same proportion as the shares for which we receive
instructions.
Shares of each Series may be owned by separate accounts of insurance companies
other than us. We understand that each Series will see that all insurance
companies vote shares uniformly.
We believe that our voting instruction procedures comply with current federal
securities law requirements. However, we reserve the right to modify these
procedures to conform with legal requirements and interpretations that are put
in effect or modified from time to time.
THE FIXED ACCOUNT
Amounts in the Fixed Account or supporting Fixed Annuity Payments become part of
our General Account. We have not registered interests in the General Account
under the Securities Act of 1933, and we have not registered the General Account
as an investment company under the 1940 Act based on federal law exclusion and
exemption. The staff of the Securities and Exchange Commission has advised us
that it has not reviewed the disclosures in this Prospectus that relate to the
Fixed Account or Fixed Annuity Payments. At the same time, we have legal
responsibility for the accuracy and completeness of this Prospectus.
Our obligations for the Fixed Account are legal obligations of USL. Our General
Account assets support these obligations. These General Account assets also
support our obligations under other insurance and annuity contracts.
Investments purchased with amounts allocated to the Fixed Account are the
property of USL. Owners have no legal rights in such investments.
GUARANTEE PERIODS
Account Value that the Owner allocates to the Fixed Account earns a Guaranteed
Interest Rate beginning with the date of the allocation. This Guaranteed
Interest Rate continues for the number of years that the Owner selects from
among the Guarantee Periods that we then offer.
At the end of a Guarantee Period, we will allocate your Account Value in that
Guarantee Period, including interest you have earned, to a new Guarantee Period
of the same length. In the alternative, the Owner may submit a Written request
to us to allocate this amount to a different Guarantee Period or Periods or to
one or more of the Divisions of the Separate Account. We must receive this
Written request at least three business days before the end of the Guarantee
Period.
We will contact the Owner regarding the scheduled Annuity Commencement Date, if
the Owner has not provided the necessary Written request and the renewed
Guarantee Period extends beyond the scheduled Annuity Commencement Date.
The first day of the new Guarantee Period (or other reallocation) will be the
day after the end of the prior Guarantee Period. We will notify the Owner in
writing at least 30 days and not more than 60 days before the end of any
Guarantee Period.
16
<PAGE>
If the Owner's Account Value in a Guarantee Period is less than $500, we reserve
the right to transfer, without charge, the balance to the Money Market Division
at the end of that Guarantee Period. However, we will transfer the balance to
another Division selected by the Owner if we have received Written instructions
to transfer the balance to that Division.
CREDITING INTEREST
We declare the Guaranteed Interest Rates from time to time as market conditions
dictate. We tell an Owner the Guaranteed Interest Rate for a chosen Guarantee
Period at the time we receive a purchase payment, make a transfer, or renew a
Guarantee Period. We may credit a different interest rate from one Guarantee
Period to another Guarantee Period that is of the same length but that began on
a different date. The minimum Guaranteed Interest Rate is an effective annual
rate of 3%.
Proceeds from an exchange, rollover or transfer will accrue interest in the
following manner, if you allocate them to the Fixed Account within 60 days
following the date of application for a Certificate:
. We credit interest to such proceeds during the Guarantee Period chosen.
. We will calculate interest at a rate that is the higher of:
(a) the current interest rate we use on the date of application for the
Guarantee Period selected; or
(b) the current interest rate that we use on the date we receive the
proceeds.
Proceeds that we receive more than 60 days after the date the application is
signed receive interest at the rate in effect on the date we receive the
proceeds.
We credit interest to the Fixed Account starting with the date we receive the
proceeds. The interest rate we use remains the same for the duration of the
applicable Guarantee Period.
USL's management makes the final determination of the Guaranteed Interest Rates
to be declared. USL cannot predict or assure the level of any future Guaranteed
Interest Rates in excess of the minimum Guaranteed Interest Rate stated in your
Certificate.
You may obtain information concerning the Guaranteed Interest Rates that apply
to the various Guarantee Periods at any time from your sales representative or
from the addresses or telephone numbers on the first page of this Prospectus.
NEW GUARANTEE PERIODS
Each allocation or transfer of an amount to a Guarantee Period starts the
running of a new Guarantee Period for that amount. That new Guarantee Period
will earn a Guaranteed Interest Rate that will continue unchanged until the end
of that Period. The Guaranteed Interest Rate will never be less than the
minimum Guaranteed Interest Rate stated in your Certificate.
17
<PAGE>
We may offer one or more Guarantee Periods with a required dollar cost averaging
feature. (See "Transfers.") Currently, we make available a one-year Guarantee
Period and no others. However, we reserve the right to change the Guarantee
Periods that we make available at any time, except that we will always make
available a one-year Guarantee Period.
CERTIFICATE ISSUANCE AND PURCHASE PAYMENTS
The minimum initial purchase payment is $50,000. The minimum subsequent
purchase payment is $5,000. We reserve the right to modify these minimums at our
discretion.
Your application to purchase a Certificate must be on a Written application that
we provide and that you sign. USL and American General Securities Incorporated,
as distributor of the Certificates, may agree on a different medium or format
for the application. The Owner, joint Owner, Annuitant and Contingent Annuitant
must each be no older than 85. When a purchase payment accompanies an
application to purchase a Certificate and you have properly completed the
application, we will either:
. process the application, credit the purchase payment, and issue the
Certificate, or
. reject the application and return the purchase payment within two Valuation
Dates after receipt of the application.
If you have not completed the application or have not completed it correctly, we
will request additional documents or information within five Valuation Dates
after receipt of the application.
If we have not received a correctly completed application within five Valuation
Dates after receipt of the purchase payment at our Administrative Center, we
will return the purchase payment immediately. However, you may specifically
consent to our retaining the purchase payment until you complete the
application. In that case, we will credit the initial purchase payment as of
the end of the Valuation Period in which we receive the last information
required to process the application.
We will credit subsequent purchase payments as of the end of the Valuation
Period in which we receive them along with any required Written identifying
information.
We reserve the right to reject any application or purchase payment for any
reason.
MINIMUM REQUIREMENTS
If your Account Value in any Division falls below $500 because of a partial
withdrawal from the Certificate, we reserve the right to transfer, without
charge, the remaining balance in that Division to the Money Market Division.
If your Account Value in any Division falls below $500 because of a transfer to
another Division or to the Fixed Account, we reserve the right to transfer the
remaining balance in that Division, without charge and pro rata, to the
investment option or options to which the transfer was made.
18
<PAGE>
We will waive these minimum requirements for transfers under the dollar cost
averaging and automatic rebalancing programs. (See "Transfers" and "Automatic
Rebalancing.")
If your total Account Value falls below $10,000, we may cancel the Certificate.
We consider such a cancellation a full surrender of the Certificate. We will
provide you with 60 days advance notice of any cancellation in these
circumstances.
So long as the Account Value does not fall below $10,000, you do not have to
make further purchase payments. You may, however, elect to make subsequent
purchase payments at any time before the Annuity Commencement Date, if the Owner
and Annuitant are still living.
PAYMENTS
You should make checks for subsequent purchase payments payable to The United
States Life Insurance Company in the City of New York and forward them directly
to the address for payments shown on the first page of this Prospectus, unless
we ask you to use another address. We also accept purchase payments by wire or
by exchange from another insurance company. You may obtain further information
about how to make purchase payments by either of these methods from your sales
representative or from us at the addresses and telephone numbers on the first
page of this Prospectus.
You may make purchase payments pursuant to employer-sponsored plans only with
our agreement.
Your purchase payments are allocated to the Divisions of the Separate Account or
the Guarantee Periods of the Fixed Account as of the date we credit the purchase
payments to your Certificate. In your application form, you select (in whole
percentages) the amount of each purchase payment that you are allocating to each
Division and Guarantee Period. You can change these allocation percentages at
any time by Written notice to us.
We issue the Certificates under a group annuity master contract that we have
issued to the trustee of a group trust. We established the group trust under
Delaware law. The master contract provides for rights under the Certificates
and further provides that nothing in the master contract will invalidate or
impair any right granted to an Owner. The master contract does not provide any
material ownership rights to the master contract owner and, in particular, does
not authorize the master contract owner to surrender the master contract.
CANCELLATION
You may cancel your Certificate by delivering it or mailing it with a Written
cancellation request to our Administrative Center or to your sales
representative, before the close of business on the 10th day after you receive
the Certificate.
We will refund to you the sum of:
. any purchase payments allocated to a Guarantee Period of the Fixed Account,
. your Account Value allocated to the Divisions of the Separate Account, and
19
<PAGE>
. any additional amount deducted for premium taxes.
OWNER ACCOUNT VALUE
Before the Annuity Commencement Date, your Account Value under a Certificate is
the sum of your Variable Account Value and Fixed Account Value, as discussed
below.
VARIABLE ACCOUNT VALUE
As of any Valuation Date before the Annuity Commencement Date:
. Your Variable Account Value is the sum of your Variable Account Values in
each Division of the Separate Account.
. Your Variable Account Value in a Division is the product of the number of
your Accumulation Units in that Division multiplied by the value of one such
Accumulation Unit as of that Valuation Date.
There is no guaranteed minimum Variable Account Value. To the extent that your
Account Value is allocated to the Separate Account, you bear the entire
investment risk.
We credit Accumulation Units in a Division to you when you allocate purchase
payments or transfer amounts to that Division. Similarly, we redeem
Accumulation Units when you transfer or withdraw amounts from a Division or when
we pay certain charges under the Certificate. We determine the value of these
Accumulation Units at the end of the Valuation Date on which we make the credit
or charge.
The value of an Accumulation Unit for a Division on any Valuation Date is equal
to the previous value of that Division's Accumulation Unit multiplied by that
Division's net investment factor for the Valuation Period ending on that
Valuation Date.
The net investment factor for a Division is determined by dividing (1) the net
asset value per share of the Series' shares held by the Division, determined at
the end of the current Valuation Period, plus the per share amount of any
dividend or capital gains distribution made for the Series' shares held by the
Division during the current Valuation Period, by (2) the net asset value per
share of the Series' shares held in the Division determined at the end of the
previous Valuation Period. We then subtract from that result a factor
representing the mortality risk, expense risk and administrative expense charge.
FIXED ACCOUNT VALUE
As of any Valuation Date before the Annuity Commencement Date:
. Your Fixed Account Value is the sum of your Fixed Account Value in each
Guarantee Period.
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. Your Fixed Account Value in any Guarantee Period is equal to the following
amounts, in each case increased by accrued interest at the applicable
Guaranteed Interest Rate: (1) the amount of net purchase payments, renewals
and transferred amounts allocated to the Guarantee Period, less (2) the
amount of any transfers or withdrawals out of the Guarantee Period,
including withdrawals to pay applicable charges.
USL guarantees the Fixed Account Value. USL bears the investment risk for
amounts allocated to the Fixed Account, except to the extent that USL may vary
the Guaranteed Interest Rate for future Guarantee Periods (subject to the
minimum Guaranteed Interest Rate stated in your Certificate).
TRANSFER, AUTOMATIC REBALANCING, SURRENDER AND PARTIAL
WITHDRAWAL OF OWNER ACCOUNT VALUE
TRANSFERS
You can transfer your Account Value beginning 30 days after we issue your
Certificate and before the Annuity Commencement Date. The following rules
apply:
. You may transfer your Account Value at any time among the available
Divisions of the Separate Account and Guarantee Periods. Transfers will be
effective at the end of the Valuation Period in which we receive your
Written transfer request.
. If a transfer causes your Account Value in any Division or Guarantee Period
to fall below $500, we reserve the right to transfer the remaining balance
in that Division or Guarantee Period in the same proportions as the transfer
request.
. You may make up to 12 transfers each Certificate Year without charge. We
will charge you $25 for each additional transfer.
. You may transfer no more than 25% of the Account Value you allocated to a
Guarantee Period at its inception during any Certificate Year. This 25%
limitation does not apply to transfers (1) within 15 days before or after
the end of the Guarantee Period in which you held the transferred amounts,
or (2) a renewal at the end of the Guarantee Period to the same Guarantee
Period.
We reserve the right to defer any transfers from the Fixed Account to any
Division for up to six months.
You may establish an automatic transfer plan. (We also refer to this plan as a
dollar cost averaging plan.) Under this plan, we will automatically transfer
amounts from the Money Market Division or the one-year Guarantee Period (or any
other Guarantee Period that is available at that time) to one or more other
Divisions. By transferring a set amount on a regular schedule instead of
transferring the total amount at one particular time, you may reduce the risk of
investing in the corresponding Division only when the price is high. An
automatic transfer plan does not guarantee a profit and it does not protect
against a loss if market prices decline. You will select:
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. the amount we are to transfer under the plan;
. the frequency of the transfers either monthly, quarterly, semi-annually, or
annually; and
. the duration of the plan.
Transfers under any automatic transfer plan will:
. not count towards the 12 free transfers each Certificate Year,
. not incur a $25 charge,
. not be subject to the 25% limitation on transfers from a Guarantee Period,
and
. not be subject to the minimum Division Account Value requirement described
above.
You may obtain additional information about how to establish an automatic
transfer plan from your sales representative or from us at the telephone numbers
and addresses on the first page of this Prospectus. You cannot have an
automatic transfer plan in effect at the same time you have Automatic
Rebalancing, described below, in effect.
We have not designed the Certificates for professional market timing
organizations or other entities using programmed and frequent transfers. We may
not unilaterally terminate or discontinue transfer privileges. However, we
reserve the right to suspend such privileges for a reasonable period.
AUTOMATIC REBALANCING
You may arrange for Automatic Rebalancing among the Separate Account Divisions
if your Certificate has an Account Value of $25,000 or more at the time we
receive the application for Automatic Rebalancing. You may apply for Automatic
Rebalancing either at issue or after issue, and you may subsequently discontinue
it.
Under Automatic Rebalancing, we transfer funds among the Separate Account
Divisions to maintain the percentage allocation you have selected for each
Division. At your election, we will make these transfers on a quarterly, semi-
annual or annual basis, measured from the Certificate Anniversary date. A
Certificate Anniversary date that falls on the 29th, 30th, or 31st of the month
will result in Automatic Rebalancing starting with the 1st of the next month.
Automatic Rebalancing does not permit transfers to or from any Guarantee Period.
Transfers under Automatic Rebalancing will not count towards the 12 free
transfers each Certificate Year and will not incur a $25 charge. You cannot
have Automatic Rebalancing in effect at the same time you have an automatic
transfer plan, described above, in effect.
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SURRENDERS
At any time before the Annuity Commencement Date and while the Annuitant is
still living, the Owner may make a full surrender from a Certificate.
We will pay you the following upon full surrender:
. your Account Value at the end of the Valuation Period in which we receive a
Written surrender request,
. minus any applicable premium tax.
Our current practice is to require that you return the Certificate with any
request for a full surrender.
After a full surrender, or if the Owner's Account Value falls to zero, all
rights of the Owner, Annuitant or any other person under the Certificate will
end.
All collateral assignees of record must consent to any full surrender.
PARTIAL WITHDRAWALS
Your Written request for a partial withdrawal should specify the Divisions of
the Separate Account, or the Guarantee Periods of the Fixed Account, from which
you wish to make the partial withdrawal. We will take the withdrawal pro rata
from the Divisions and Guarantee Periods, if (1) you do not tell us how to make
the withdrawal, or (2) we cannot make the withdrawal as you requested.
Partial withdrawal requests must be for at least $100 or, if less, all of your
Account Value. If your remaining Account Value in a Division or Guarantee
Period would be less than $500 as a result of the withdrawal (except for the
Money Market Division), we reserve the right to transfer the remaining balance
to the Money Market Division. We will do this without charge. We may deny your
request for a partial withdrawal if it would reduce your Account Value below
$10,000.
We will always pay you the amount of your partial withdrawal request (except
that we may deny your request for a partial withdrawal if it would reduce your
Account Value below $10,000). Therefore, the value of your Accumulation Units
and Fixed Account interests that we redeem will equal the amount of the
withdrawal request, plus any applicable premium tax. You can also tell us to
take income tax from the amount you want withdrawn.
We also make available a systematic withdrawal plan. Under this plan, you may
make automatic partial withdrawals in amounts and at periodic intervals that you
specify. The terms and conditions that apply to other partial withdrawals will
also apply to this plan. You may obtain additional information about how to
establish a systematic withdrawal plan from your sales representative or from us
at the addresses and telephone numbers on the first page of this Prospectus. We
reserve the right to modify or terminate the systematic withdrawal plan at any
time.
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The Code imposes a penalty tax on certain premature surrenders or withdrawals.
See the "Federal Income Tax Matters" section for a discussion of this and other
tax implications of total surrenders and systematic and other partial
withdrawals. The section also discusses tax withholding requirements.
All collateral assignees of record must consent to any partial withdrawals.
ANNUITY PERIOD AND ANNUITY PAYMENT OPTIONS
ANNUITY COMMENCEMENT DATE
The Annuity Commencement Date may be any day of any month between the
Annuitant's 50th and 90th birthday. You may select the Annuity Commencement
Date on the Certificate application. You may also change a previously selected
date any time before that date by submitting a Written request, subject to our
approval.
See "Federal Income Tax Matters" for a discussion of the penalties that may
result from distributions prior to the Annuitant's reaching age 59 1/2 under any
Certificate or after April 1 of the year following the calendar year in which
the Annuitant reaches age 70 1/2 under certain Qualified Certificates.
APPLICATION OF OWNER ACCOUNT VALUE
We will automatically apply your Variable Account Value in any Division to
provide Variable Annuity Payments based on that Division and your Fixed Account
Value to provide Fixed Annuity Payments. However, we will apply your Account
Value in different proportions, if you give us Written instructions at least 30
days before the Annuity Commencement Date.
We deduct any applicable state and local premium taxes from the amount of
Account Value that we apply to an Annuity Payment Option. Subject to any such
adjustments, we apply your Variable and Fixed Account Values to an Annuity
Payment Option, as discussed below, as of the end of the Valuation Period that
contains the 10th day before the Annuity Commencement Date.
FIXED AND VARIABLE ANNUITY PAYMENTS
We will determine your first monthly Fixed or Variable Annuity Payment using the
annuity tables in the Certificate and the amount of your Account Value that is
applied to provide the Fixed or Variable Annuity Payments.
We determine the amount of each monthly Fixed Annuity Payment thereafter based
on the terms of the Annuity Payment Option selected.
We determine the amount of each monthly Variable Annuity Payment thereafter as
follows:
. We convert the Account Value that we apply to provide Variable Annuity
Payments to a number of Annuity Units. We do this by dividing the amount of
the first Variable Annuity Payment by the value of an Annuity Unit of a
Division as of the end of the Valuation Period that
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includes the 10th day before the Annuity Commencement Date. This number of
Annuity Units remains constant for any Annuitant.
. We determine the amount of each subsequent Variable Annuity Payment by
multiplying the number of Annuity Units by the value of an Annuity Unit as
of the end of the Valuation Period that contains the 10th day before the
date of each payment.
. If we base the Variable Annuity Payments on more than one Division, we
perform these calculations separately for each Division.
. The value of an Annuity Unit at the end of a Valuation Period is the value
of the Annuity Unit at the end of the previous Valuation Period, multiplied
by the net investment factor (see "Variable Account Value") for the
Valuation Period, with an offset for the 3.5% assumed interest rate used in
the Certificate's annuity tables.
The Certificate's annuity tables use a 3.5% assumed interest rate. A Variable
Annuity Payment based on a Division will be greater than the previous month, if
the Division's investment return for the month is at an annual rate greater than
3.5%. Conversely, a Variable Annuity Payment will be less than the previous
month, if the Division's investment return is at an annual rate less than 3.5%.
ANNUITY PAYMENT OPTIONS
Sixty to ninety days before the scheduled Annuity Commencement Date, we will (1)
notify you that the Certificate is scheduled to mature, and (2) request that you
select an Annuity Payment Option.
If you have not selected an Annuity Payment Option ten days before the Annuity
Commencement Date, we will proceed as follows:
. we will extend the Annuity Commencement Date to the Annuitant's 90th
birthday, if the scheduled Annuity Commencement Date is any date prior to
the Annuitant's 90th birthday; or
. we will pay the Account Value, less any applicable charges and premium
taxes, in one sum to you, if the scheduled Annuity Commencement Date is the
Annuitant's 90th birthday.
The Code imposes minimum distribution requirements on the Annuity Payment Option
you choose for a Qualified Certificate. (See "Federal Income Tax Matters.") We
are not responsible for monitoring or advising Owners whether they are meeting
the minimum distribution requirements, unless we have received a specific
Written request to do so.
ELECTION OF ANNUITY PAYMENT OPTION
You may elect an Annuity Payment Option only if the initial annuity payment
meets the following minimum requirements:
. your Account Value must be at least $2,000; and
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. your Annuity Payment Option must provide for monthly payments of at least
$20.
If your Account Value is below the minimum amount, or if the initial payment
would fall below $20, we will make a single payment to the Annuitant
or other properly-designated payee equal to your Account Value. We will deduct
premium tax from such payment if it is required in your state.
You may elect the annuity option for payments to a Beneficiary if you or the
Annuitant dies. If you have not made this election, the Beneficiary may do so
within 60 days after the death proceeds become payable. (See "Death Proceeds.")
Thereafter, the Beneficiary will have all the remaining rights and powers under
the Certificate and be subject to all of its terms and conditions. We will make
the first annuity payment at the beginning of the second month following the
month in which we approve the settlement request. We will credit Annuity Units
based on Annuity Unit Values at the end of the Valuation Period that contains
the 10th day before the beginning of that second month.
When an Annuity Payment Option becomes effective, you must deliver the
Certificate to our Administrative Center, in exchange for a payment contract
providing for the option elected.
We provide information about the relationship between the Annuitant's gender and
the amount of annuity payments, including any requirements for gender-neutral
annuity rates and in connection with certain employee benefit plans under
"Gender of Annuitant" in the Statement. (See "Contents of Statement of
Additional Information.")
AVAILABLE ANNUITY PAYMENT OPTIONS
Each Annuity Payment Option, except Option 5, is available on both a fixed and
variable basis. Option 5 is available on a fixed basis only.
OPTION 1 - LIFE ANNUITY - We make annuity payments monthly during the lifetime
of the Annuitant. These payments stop with the last payment due before the
death of the Annuitant. We do not guarantee a minimum number of payments under
this arrangement. For example, the Annuitant or other payee might receive only
one annuity payment if the Annuitant dies before the second annuity payment.
OPTION 2 - LIFE ANNUITY WITH 120, 180, OR 240 MONTHLY PAYMENTS CERTAIN - We make
annuity payments monthly during the lifetime of an Annuitant. In addition, we
guarantee that the Beneficiary will receive monthly payments for the remainder
of the period certain if the Annuitant dies during that period.
OPTION 3 - JOINT AND LAST SURVIVOR LIFE ANNUITY - We make annuity payments
monthly during the lifetime of the Annuitant and another payee and during the
lifetime of the survivor of the two. We stop making payments with the last
payment before the death of the survivor. We do not guarantee a minimum number
of payments under this arrangement. For example, the Annuitant or other payee
might receive only one annuity payment if both die before the second annuity
payment. The election of this option is ineffective if either one dies before
the Annuity Commencement Date. In that case,
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the survivor becomes the sole Annuitant, and we do not pay death proceeds
because of the death of the other Annuitant.
OPTION 4 - PAYMENTS FOR A DESIGNATED PERIOD - We make annuity payments monthly
to an Annuitant or other properly-designated payee, or at his or her death, to
the Beneficiary, for a selected number of years ranging from five to 40. If
this option is selected on a variable basis, the designated period may not
exceed the life expectancy of the Annuitant or other properly-designated payee.
Under the fourth Option, we make no mortality guarantee, even though we reduce
Variable Annuity Payments as a result of a charge to the Separate Account that
is partially for mortality risks. (See "Charge to the Separate Account.")
A payee receiving Variable (but not Fixed) Annuity Payments under Option 4 can
elect at any time to commute (terminate) the option and receive the current
value of the annuity option in a single sum. The current value of an annuity
under Option 4 is the value of all remaining annuity payments, assumed to be
level, discounted to present value at an annual rate of 3.5%. We calculate that
value the next time we determine values after receiving your Written request for
payment. The election of a single sum payment under Option 4 is the only way
you may terminate any Annuity Payment Option once annuity payments have started.
OPTION 5 - PAYMENTS OF A SPECIFIC DOLLAR AMOUNT - We pay the amount due in equal
monthly installments of a designated dollar amount until the remaining balance
is less than the amount of one installment. The amount of each installment may
not be less than $125 or more than $200 each year per $1,000 of the original
amount due. If the person receiving these payments dies, we continue to make
the remaining payments to the Beneficiary. Payments under this option are
available on a fixed basis only. To determine the remaining balance at the end
of any month, we decrease the balance at the end of the previous month by the
amount of any installment paid during the month. We then apply, to the
remainder, interest at a rate not less than 3.5% compounded annually. If the
remaining balance at any time is less than the amount of one installment, we
will pay the balance as the final payment under the option.
The Code may treat the election of Option 4 or Option 5 in the same manner as a
surrender of the total account. For tax consequences of such treatment, see
"Federal Income Tax Matters." In addition, the Code may not give tax-deferred
treatment to subsequent earnings.
ALTERNATIVE AMOUNT UNDER FIXED LIFE ANNUITY OPTIONS - In the case of Fixed
Annuity Payments under one of the first three Annuity Payment Options described
above, we make a special election available. In that case, the Owner (or the
Beneficiary, if the Owner has not elected a payment option) may elect monthly
payments based on single payment immediate fixed annuity rates we offer at that
time. This provision allows the Annuitant or other properly-designated payee to
receive the fixed annuity purchase rate in effect for new single payment
immediate annuity certificates, if it is more favorable.
In place of monthly payments, you may elect payments on a quarterly, semi-annual
or annual basis. In that case, we determine the amount of each annuity payment
on a basis consistent with that described above for monthly payments.
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TRANSFERS
After the Annuity Commencement Date, the Annuitant or other properly-designated
payee may make six transfers every Certificate Year among the available
Divisions of the Separate Account or from the Divisions to a Fixed Annuity
Payment Option. We will assess no charge for the transfer. We do not permit
transfers from a Fixed to a Variable Annuity Payment Option. If a transfer
causes the value in any Division to fall below $500, we reserve the right to
transfer the remaining balance in that Division in the same proportion as the
transfer request. We make transfers effective at the end of the Valuation
Period in which we receive the Written transfer request at our Administrative
Center. We reserve the right to terminate or restrict transfers at any time.
DEATH PROCEEDS
DEATH PROCEEDS BEFORE THE ANNUITY COMMENCEMENT DATE
The death proceeds described below are payable to the Beneficiary under the
Certificate if any of the following events occurs before the Annuity
Commencement Date:
. the Annuitant dies, and no Contingent Annuitant has been named under a Non-
Qualified Certificate;
. the Annuitant dies, and we also receive proof of death of any named
Contingent Annuitant; or
. the Owner (including the first to die in the case of joint Owners) of a Non-
Qualified Certificate dies, regardless of whether the deceased Owner was
also the Annuitant. (However, if the Beneficiary is the Owner's surviving
spouse, or the Owner's surviving spouse is a joint Owner, the surviving
spouse may elect to continue the Certificate as described later in this
section.)
If the deceased Owner was a joint Owner, we will pay the death proceeds to the
surviving joint Owner. In this case, we will treat the surviving joint Owner as
the Beneficiary, and we will not recognize any other designation of Beneficiary.
However, joint Owners may provide written instructions to pay death proceeds in
a different manner.
Before age 81, the death proceeds will equal the greater of:
. the sum of all net purchase payments made (less any premium taxes we
deducted previously and all prior partial withdrawals); or
. the Owner's Account Value as of the end of the Valuation Period in which we
receive, at our Administrative Center, proof of death and the Written
request as to the manner of payment.
At age 81 and afterward, the death proceeds will equal the Account Value.
In all cases, we will deduct any applicable premium taxes.
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We will pay the death proceeds to the Beneficiary as of the date the proceeds
become payable. Such date is the end of the Valuation Period in which we
receive:
. proof of the Owner's or Annuitant's death, and
. a Written request from the Beneficiary specifying the manner of payment.
If the Owner has not already done so, the Beneficiary may, within 60 days after
the date the death proceeds become payable, elect to receive the death proceeds
as (1) a single sum or (2) in the form of one of the Annuity Payment Options
provided in the Certificate. (See "Annuity Payment Options.") If we do not
receive a request specifying the manner of payment, we will make a single
payment, based on values we determine at that time.
If the Owner (including the first to die if there are joint Owners) under a Non-
Qualified Certificate dies before the Annuity Commencement Date, we will
distribute all amounts payable under the Certificate in accordance with the
following rules:
. We will distribute all amounts:
(a) within five years of the date of death, or
(b) if the Beneficiary elects, as annuity payments, beginning within one
year of the date of death and continuing over a period not extending
beyond the life or life expectancy of the Beneficiary.
. If the Beneficiary is the Owner's surviving spouse, the spouse may elect to
continue the Certificate as the new Owner. If the original Owner was the
Annuitant, the surviving spouse may also elect to become the new Annuitant.
This election is also available to the surviving spouse who is a joint
Owner, even if the surviving spouse is not the Beneficiary. In this case, we
will treat the surviving spouse as the Beneficiary, and we will not
recognize any other designation of Beneficiary.
. If the Owner is not a natural person, these distribution requirements apply
at the death of the primary Annuitant, within the meaning of the Code. Under
a parallel section of the Code, similar requirements apply to retirement
plans for which we issue Qualified Certificates.
Failure to satisfy the requirements described in this section may result in
serious adverse tax consequences.
DEATH PROCEEDS AFTER THE ANNUITY COMMENCEMENT DATE
If the Annuitant dies on or after the Annuity Commencement Date, the amounts
payable to the Beneficiary or other properly-designated payee are any continuing
payments under the Annuity Payment Option in effect. (See "Annuity Payment
Options.") In such case, the payee will:
. have all the remaining rights and powers under a Certificate, and
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. be subject to all the terms and conditions of the Certificate.
Also, if the Annuitant dies on or after the Annuity Commencement Date, no
previously named Contingent Annuitant can become the Annuitant.
If the payee under a Non-Qualified Certificate dies after the Annuity
Commencement Date, we will distribute any remaining amounts payable under the
terms of the Annuity Payment Option at least as rapidly as under the method of
distribution in effect when the payee died. If the payee is not a natural
person, this requirement applies upon the death of the primary Annuitant, within
the meaning of the Code.
Under a parallel section of the Code, similar requirements apply to retirement
plans for which we issue Qualified Certificates.
Failure to satisfy the requirements described in this section may result in
serious adverse tax consequences.
PROOF OF DEATH
We accept the following as proof of any person's death:
. a certified death certificate;
. a certified decree of a court of competent jurisdiction as to the finding of
death;
. a written statement by a medical doctor who attended the deceased at the
time of death; or
. any other proof satisfactory to us.
Once we have paid the death proceeds, the Certificate terminates, and our
obligations are complete.
CHARGES UNDER THE CERTIFICATES
PREMIUM TAXES
When applicable, we will deduct premium taxes imposed by certain states. We may
deduct such amount either at the time the tax is imposed or later. We may
deduct the amount as follows:
. from purchase payment(s) when received;
. from the Owner's Account Value at the time annuity payments begin;
. from the amount of any partial withdrawal; or
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. from proceeds payable upon termination of the Certificate for any other
reason, including death of the Owner or Annuitant, and surrender of the
Certificate.
If premium tax is paid, USL may reimburse itself for the tax when making the
deduction under the second, third, and fourth items on the list, immediately
above, by multiplying the sum of Purchase Payments being withdrawn by the
applicable premium tax percentage.
Applicable premium tax rates depend upon the Owner's then-current place of
residence. Applicable rates currently range from 0% to 3.5%. The rates are
subject to change by legislation, administrative interpretations, or judicial
acts. We will not make a profit on this charge.
TRANSFER CHARGES
We describe the charges assessed to pay for the expense of making transfers
under "Transfer, Automatic Rebalancing, Surrender and Partial Withdrawal of
Owner Account Value - Transfers" and "Annuity Period and Annuity Payment Options
- - Transfers." These charges are not designed to yield a profit.
CHARGE TO THE SEPARATE ACCOUNT
We deduct from Separate Account assets a daily charge at an annualized rate of
0.40% (which we may change, but which will never exceed 0.66%) of the average
daily net asset value of the Separate Account attributable to the Certificates.
This charge (1) offsets administrative expenses and (2) compensates us for
assuming mortality and expense risks under the Certificate. The 0.40% charge
divides into 0.04% for administrative expenses and 0.36% for assumption of
mortality and expense risk.
We do not expect to earn a profit on that portion of the charge that is for
administrative expenses. However, we do expect to derive a profit from the
portion that is for the assumption of mortality and expense risks. There is no
necessary relationship between the amount of administrative charges deducted for
a given Certificate and the amount of expenses actually attributable to that
Certificate.
In assuming the mortality risk, we incur the risks that
. our actuarial estimate of mortality rates may prove erroneous,
. Annuitants will live longer than expected, and
. more Owners or Annuitants than expected will die at a time when the death
benefit we guarantee is higher than the net surrender value of their
interests in the Certificates.
In assuming the expense risk, we incur the risk that the revenues from the
expense charges under the Certificates (charges that we guarantee will not
increase) will not cover our expense of administering the Certificates.
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MISCELLANEOUS
Each Series pays charges and expenses out of its assets. The prospectus for
each Series describes the charges and expenses.
We reserve the right to impose charges or establish reserves for any federal or
local taxes that we incur today or may incur in the future and that we deem
attributable to the Certificates.
SYSTEMATIC WITHDRAWAL PLAN
You may make automatic partial withdrawals, at periodic intervals, through a
systematic withdrawal program. Minimum payments are $100. You may choose from
schedules of monthly, quarterly, semi-annual, or annual payments. You may
start, stop, increase, or decrease payments. You may elect to (1) start
withdrawals as early as 30 days after the issue date of the Certificate and
(2) take withdrawals from the Fixed Account or any Division. Systematic
withdrawals are subject to the terms and conditions applicable to other partial
withdrawals.
REDUCTION IN ADMINISTRATIVE EXPENSE CHARGE
We may reduce the Administrative Expense Charge imposed under certain Qualified
Certificates for employer-sponsored plans. Any such reductions will reflect
differences in costs or services and will not be unfairly discriminatory as to
any person. Differences in costs and services result from factors such as
reduced sales expenses or administrative efficiencies relating to serving a
large number of employees of a single employer and functions assumed by the
employer that we otherwise would have to perform.
OTHER ASPECTS OF THE CERTIFICATES
Only an officer of USL can agree to change or waive the provisions of any
Certificate. The Certificates are non-participating, which means they are not
entitled to share in any dividends, profits or surplus of USL.
OWNERS, ANNUITANTS, AND BENEFICIARIES; ASSIGNMENTS
You, as the Owner of a Certificate, will be the same as the Annuitant, unless
you choose a different Annuitant when you purchase a Certificate. In the case
of joint ownership, both Owners must join in the exercise of any rights or
privileges under the Certificate. You choose the Annuitant and any Contingent
Annuitant in the application for a Certificate and may not change that choice.
You choose the Beneficiary and any Contingent Beneficiary when you purchase a
Certificate. You may change a Beneficiary or Contingent Beneficiary before the
Annuity Commencement Date, while the Annuitant is still alive. The payee may
make this change after the Annuity Commencement Date.
We will make any designation of a new Beneficiary or Contingent Beneficiary
effective as of the date it is signed. However, the change in designation
will not affect any payments we make or action we
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take before we receive the Written request. We also need the Written consent of
any irrevocably-named Beneficiary or Contingent Beneficiary before we make a
change. Under certain retirement programs, the law may require spousal consent
to name or change a Beneficiary to a person other than the spouse. We are not
responsible for the validity of any designation of a Beneficiary or Contingent
Beneficiary.
If the Beneficiary or Contingent Beneficiary is not living at the time we are to
make any payment, you as the Owner will be the Beneficiary. If you are not then
living, your estate will be the Beneficiary.
In the case of joint ownership, we will treat the surviving joint Owner as the
Beneficiary upon the death of a joint Owner. We will not recognize any other
designation of Beneficiary, unless joint Owners provide written instructions to
pay death proceeds in a different manner.
Owners and other payees may assign their rights under Qualified Certificates
only in certain narrow circumstances referred to in the Certificates. Owners
and other payees may assign their rights under Non-Qualified Certificates,
including their ownership rights. We take no responsibility for the validity of
any assignment. Owners must make a change in ownership rights in Writing and
send a copy to our Administrative Center. We will make the change effective on
the date it was made. However, we are not bound by a change until the date we
record it. The rights under a Certificate are subject to any assignment of
record at our Administrative Center. An assignment or pledge of a Certificate
may have adverse tax consequences. (See "Federal Income Tax Matters.")
Reports
We will mail to Owners (or anyone receiving payments following the Annuity
Commencement Date), any reports and communications required by applicable law.
We will mail to the last known address of record. You should give us prompt
written notice of any address change.
RIGHTS RESERVED BY US
Upon notice to the Owner, we may modify a Certificate to the extent necessary in
order to:
. reflect a change in the Separate Account or any Division;
. create new separate accounts;
. operate the Separate Account in any form permitted under the 1940 Act or in
any other form permitted by law;
. transfer any assets in any Division to another Division, to one or more
separate accounts, or to the Fixed Account;
. add, combine or remove Divisions in the Separate Account, or combine the
Separate Account with another separate account;
33
<PAGE>
. add, restrict or remove Guarantee Periods of the Fixed Account;
. make any new Division available to you on a basis we determine;
. substitute, for the shares held in any Division, the shares of another
Series or the shares of another investment company or any other investment
permitted by law;
. make any changes required by the Code or by any other law, regulation or
interpretation in order to continue treatment of the Certificate as an
annuity;
. commence deducting premium taxes or adjust the amount of premium taxes
deducted in accordance with state laws that apply; or
. make any changes required to comply with the rules of any Series.
When required by law, we will obtain (1) your approval of changes and (2) the
approval of any appropriate regulatory authority.
PAYMENT AND DEFERMENT
We will normally pay amounts surrendered or withdrawn from a Certificate within
seven calendar days after the end of the Valuation Period in which we receive
the Written surrender or withdrawal request at our Administrative Center. A
Beneficiary may request the manner of payment of death proceeds within 60 days
after the death proceeds become payable. If we do not receive a Written request
specifying the manner of payment, we will pay the death benefit as a single sum,
normally within seven calendar days after the end of the Valuation Period that
contains the last day of the 60 day period. We reserve the right, however, to
defer payments or transfers out of the Fixed Account Value for up to six months.
Also, we reserve the right to defer payment of that portion of your Account
Value that is attributable to a purchase payment made by check for a reasonable
period of time (not to exceed 15 days) to allow the check to clear the banking
system.
Finally, we reserve the right to defer payment of any surrender, annuity
payment, or death proceeds out of the Variable Account Value if:
. the New York Stock Exchange is closed other than customary weekend and
holiday closings, or trading on the New York Stock Exchange is restricted
as determined by the Securities and Exchange Commission ("SEC");
. the SEC determines that an emergency exists, as a result of which disposal
of securities held in a Division is not reasonably practicable or it is not
reasonably practicable to fairly determine the Variable Account Value; or
. the SEC by order permits the delay for the protection of Owners.
34
<PAGE>
We may also postpone transfers and allocations of Account Value among the
Divisions and the Fixed Account under these circumstances.
FEDERAL INCOME TAX MATTERS
GENERAL
We cannot comment on all of the federal income tax consequences associated with
the Certificates. Federal income tax law is complex. Its application to a
particular person may vary according to facts peculiar to the person.
Consequently, we do not intend for you to take this discussion as tax advice.
You should consult with a competent tax adviser before purchasing a Certificate.
We base this discussion on our understanding of the law, regulations and
interpretations existing on the date of this Prospectus. Congress, in the past,
has enacted legislation changing the tax treatment of annuities in both the
Qualified and the Non-Qualified markets and may do so again in the future. The
Treasury Department may issue new or amended regulations or other
interpretations of existing tax law. The courts may also interpret the tax law
in ways that affect the tax treatment of annuities. Any such change could have
a retroactive effect. We suggest that you consult your legal or tax adviser on
these issues.
The discussion does not address federal estate and gift tax, or social security
tax, or any state or local tax consequences associated with the Certificates.
NON-QUALIFIED CERTIFICATES
Purchase Payments. Purchasers of a Certificate that does not qualify for
special tax treatment and is "Non-Qualified" may not deduct from their gross
income the amount of purchase payments made.
Tax Deferral Before Annuity Commencement Date. Owners who are natural persons
are not taxed currently on (1) increases in their Account Value resulting from
interest earned in the Fixed Account, or (2) the investment experience of the
Separate Account so long as the Separate Account complies with certain
diversification requirements. These requirements mean that the Separate Account
must invest in Series that are "adequately diversified" in accordance with
Treasury Department regulations. We do not control the Series, but we have
received commitments from the investment advisers to the Series to use their
best efforts to operate the Series in compliance with these diversification
requirements. A Certificate investing in a Series that failed to meet the
diversification requirements would subject Owners to current taxation of income
in the Certificate for the period of such diversification failure (and any
subsequent period). Income means the excess of the Account Value over the
Owner's investment in the Certificate (discussed below).
Control over allocation of values among different investment alternatives may
cause Owners or persons receiving annuity payments to be treated as the owners
of the Separate Account's assets for tax purposes. However, current regulations
do not provide guidance as to how to avoid this result. We reserve the right to
amend the Certificates in any way necessary to avoid this result. The Treasury
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Department has stated that it may establish standards through regulations or
rulings. These standards may apply only prospectively, although they could
apply retroactively if the Treasury Department considers the standards not to
reflect a new position.
Owners that are not natural persons -- that is, Owners such as corporations --
are taxed currently on annual increases in their Account Value, unless an
exception applies. Exceptions apply for, among other things, Owners that are
not natural persons but that hold a Certificate as an agent for a natural
person.
Taxation of Annuity Payments. Part of each annuity payment received after the
Annuity Commencement Date is excludible from gross income through the use of an
exclusion ratio.
In the case of Fixed Annuity Payments, the excludible portion of each payment is
found by multiplying:
. the amount paid, by
. the ratio of the investment in the Certificate (discussed below) to the
expected return under the Fixed Annuity Payment Option.
In the case of Variable Annuity Payments, the excludible portion of each payment
is the investment in the Certificate divided by the number of expected payments.
In both cases, the remaining portion of each annuity payment, and all payments
made after the investment in the Certificate has been reduced to zero, are
included in the payee's income. Should annuity payments stop on account of the
death of the Annuitant before the investment in the Certificate has been fully
paid out, the payee is allowed a deduction for the unpaid amount. If the payee
is the Annuitant, the deduction is taken on the final tax return. If the payee
is a Beneficiary, that Beneficiary may receive the balance of the total
investment as payments are made or on the Beneficiary's final tax return. An
Owner's "investment in the Certificate" is the amount equal to the portion of
purchase payments made by or on behalf of the Owner that have not been excluded
or deducted from the individual's gross income, less amounts previously received
under the Certificate that were not included in income.
Taxation of Partial Withdrawals and Total Surrenders. Partial withdrawals from
a Certificate are includible in income to the extent that the Owner's Account
Value exceeds the investment in the Certificate. In the event you surrender a
Certificate in its entirety, the amount of your investment in the Certificate is
excludible from income, and any amount you receive in excess of your investment
in the Certificate is includible in income. All annuity contracts or
certificates we issue to the same Owner during any calendar year are aggregated
for purposes of determining the amount of any distribution that is includible in
gross income.
Penalty Tax on Premature Distributions. In the case of such a distribution,
there may be imposed a federal tax penalty equal to 10% of the amount treated as
taxable income. The penalty tax will not apply, however, to distributions:
36
<PAGE>
. made on or after the recipient reaches age 59 1/2,
. made on account of the recipient's becoming disabled,
. that are made after the death of the Owner before the Annuity Commencement
Date or of the payee after the Annuity Commencement Date (or if such person
is not a natural person, that are made after the death of the primary
Annuitant, as defined in the Code), or
. that are part of a series of substantially equal periodic payments made at
least annually over the life (or life expectancy) of the Annuitant or the
joint life (or joint life expectancies) of the Annuitant and the
Beneficiary, provided such payments are made for a minimum of 5 years and
the distribution method is not changed before the recipient reaches age 59
1/2 (except in the case of death or disability).
Premature distributions may result from an early Annuity Commencement Date, an
early surrender, partial withdrawal from or assignment of a Certificate, or the
early death of an Annuitant, unless the third clause listed above applies.
Payment of Death Proceeds. Special rules apply to the distribution of any death
proceeds payable under the Certificate. (See "Death Proceeds.")
Assignments and Loans. An assignment, loan, or pledge under a Non-Qualified
Certificate is taxed in the same manner as a partial withdrawal, as described
above. Repayment of a loan or release of an assignment or pledge is treated as
a new purchase payment.
INDIVIDUAL RETIREMENT ANNUITIES ("IRAs")
Purchase Payments. Individuals who are not active participants in a tax
qualified retirement plan may, in any year, deduct from their taxable income
purchase payments made to an IRA equal to the lesser of $2,000 or 100% of the
individual's earned income. In the case of married individuals filing a joint
return, the deduction will, in general, be the lesser of $4,000 or 100% of the
combined earned income of both spouses, reduced by any deduction for an IRA
purchase payment allowed to the spouse. Single persons who participate in a
tax-qualified retirement plan and who have adjusted gross income not in excess
of $31,000 for 1999 may fully deduct their IRA purchase payments. Those who
have adjusted gross income in excess of $41,000 for 1999 will not be able to
deduct purchase payments. For those with adjusted gross income in the range
between $31,000 and $41,000 in 1999, the deduction decreases to zero, based on
the amount of income. Beginning in 2000, that income range will increase, as
follows:
- ---------------------------------------------------------------------
2000 2001 2002 2003 2004 2005 and
thereafter
- ---------------------------------------------------------------------
$32,000 $33,000 $34,000 $40,000 $45,000 $50,000
to to to to to to
$42,000 $43,000 $44,000 $50,000 $55,000 $60,000
- ---------------------------------------------------------------------
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<PAGE>
Similarly, the otherwise deductible portion of an IRA purchase payment will be
phased out, in the case of married individuals filing joint tax returns, with
adjusted gross income between $51,000 and $61,000 in 1999, and in the case of
married individuals filing separately, with adjusted gross income between $0 and
$10,000 in 1999. (A husband and wife who file separate returns and live apart
at all times during the taxable year are not treated as married individuals.)
Beginning in 2000, the income range over which the otherwise deductible portion
of an IRA purchase payment will be phased out for married individuals filing
joint tax returns will increase as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
2000 2001 2002 2003 2004 2005 2006 2007 and
thereafter
- -----------------------------------------------------------------------------------------
$52,000 $53,000 $54,000 $60,000 $65,000 $70,000 $75,000 $ 80,000
to to to to to to to to
$62,000 $63,000 $64,000 $70,000 $75,000 $80,000 $85,000 $100,000
- -----------------------------------------------------------------------------------------
</TABLE>
A married individual filing a joint tax return, who is not an active participant
in a tax-qualified retirement plan, but whose spouse is an active participant in
such a plan, may, in any year, deduct from his or her taxable income purchase
payments for an IRA equal to the lesser of $2,000 or 100% of the individual's
earned income. For the individual, the adjusted gross income range over which
the otherwise deductible portion of an IRA purchase payment will be phased out
is $150,000 to $160,000.
Tax Free Rollovers. Amounts may be transferred, in a tax-free rollover, from
(1) a tax-qualified plan to an IRA or (2) from one IRA to another IRA if the
transfer meets certain conditions. All taxable distributions ("eligible
rollover distributions") from tax qualified plans are eligible to be rolled over
with the exception of:
. annuities paid over a life or life expectancy,
. installments for a period of ten years or more, and
. required minimum distributions under section 401(a)(9) of the Code.
Rollovers may be accomplished in two ways. First, we may pay an eligible
rollover distribution directly to an IRA (a "direct rollover"). Second, we may
pay the distribution directly to the Annuitant and then, within 60 days of
receipt, the Annuitant may roll the amount over to an IRA. However, any amount
that was not distributed as a direct rollover will be subject to 20% income tax
withholding.
Distributions from an IRA. Amounts received under an IRA as annuity payments,
upon partial withdrawal or total surrender, or on the death of the Annuitant,
are included in the Annuitant's or other recipients' income. If nondeductible
purchase payments have been made, a pro rata portion of such distributions may
not be includible in income. A 10% penalty tax is imposed on the amount
includible in gross income from distributions that occur before the Annuitant
reaches age 59 1/2 and that are not made on account of death or disability, with
certain exceptions. These exceptions include:
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<PAGE>
. distributions that are part of a series of substantially equal periodic
payments made at least annually over the life (or life expectancy) of the
Annuitant or the joint lives (or joint life expectancies) of the Annuitant
and the Beneficiary; provided such payments are made for a minimum of 5
years and the distribution method is not changed before the recipient
reaches age 59 1/2 (except in the case of death or disability);
. distributions for medical expenses in excess of 7.5% of the Annuitant's
adjusted gross income without regard to whether the Annuitant itemizes
deductions on his or her tax return;
. distributions for health insurance premiums to an unemployed individual who
has received unemployment compensation for at least 12 consecutive weeks;
. distributions for qualified first-time home purchases for the individual, a
spouse, children, grandchildren, or ancestor of the individual or the
individual's spouse, subject to a $10,000 lifetime maximum; and
. distributions for higher education expenses for the individual, a spouse,
children, or grandchildren.
Distributions of minimum amounts required by the Code must commence by April 1
of the calendar year following the calendar year in which the Annuitant reaches
age 70 1/2 or retires (whichever is later). Additional distribution rules apply
after the death of the Annuitant. These rules are similar to those governing
distributions on the death of an Owner (or other payee during the Annuity
Period) under a Non-Qualified Certificate. (See "Death Proceeds.") Failure to
comply with the minimum distribution rules will result in a penalty tax of 50%
of the amount by which the minimum distribution required exceeds the actual
distribution.
ROTH IRAs
Beginning in 1998, individuals may purchase a new type of non-deductible IRA,
known as a Roth IRA. Purchase payments for a Roth IRA are limited to $2,000 per
year. This permitted contribution is phased out for adjusted gross income
between $95,000 and $110,000 in the case of single taxpayers, between $150,000
and $160,000 in the case of married taxpayers filing joint returns, and between
$0 and $10,000 in the case of married taxpayers filing separately. An overall
$2,000 annual limitation continues to apply to all of a taxpayer's IRA
contributions, including Roth IRAs and non-Roth IRAs.
An individual may make a rollover contribution from a non-Roth IRA to a Roth
IRA, unless the individual has adjusted gross income over $100,000 or the
individual is a married taxpayer filing a separate return. The individual must
pay tax on any portion of the IRA being rolled over that represents income or a
previously deductible IRA contribution. There are no similar limitations on
rollovers from a Roth IRA to another Roth IRA.
Qualified distributions from Roth IRAs are entirely tax-free. A qualified
distribution requires that (1) the individual has held the Roth IRA for at least
five years and (2) the distribution is made either after the individual reaches
age 59 1/2, on the individual's death or disability, or as qualified first-time
home purchase. Qualified Distributions for a qualified first-time home
purchase, are subject to a $10,000
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<PAGE>
lifetime maximum for the individual, a spouse, child, grandchild, or ancestor of
such individual or the individual's spouse.
SIMPLIFIED EMPLOYEE PENSION PLANS
Eligible employers may establish an IRA plan known as a simplified employee
pension plan ("SEP"), if certain requirements are met. An employee may make
contributions to a SEP in accordance with the rules applicable to IRAs discussed
above. Employer contributions to an employee's SEP are deductible by the
employer and are not currently includible in the taxable income of the employee,
provided that total employer contributions do not exceed the lesser of 15% of an
employee's compensation or $30,000.
SIMPLE RETIREMENT ACCOUNTS
Eligible employers may establish an IRA plan known as a simple retirement
account ("SRA"), if they meet certain requirements. Under an SRA, the employer
contributes elective employee compensation deferrals up to a maximum of $7,000 a
year for 1999 to the employee's SRA. The employer must, in general, make a
fully vested matching contribution for employee deferrals up to a maximum of 3%
of compensation.
OTHER QUALIFIED PLANS
Purchase Payments. Purchase payments made by an employer under a pension,
profit sharing, or annuity plan qualified under section 401 or 403(a) of the
Code, not in excess of certain limits, are deductible by the employer. The
purchase payments are also excluded from the current income of the employee.
Distributions Before the Annuity Commencement Date. Purchase payments
includible in an employee's taxable income (less any amounts previously received
that were not includible in the employee's taxable income) represent the
employee's "investment in the Certificate." Amounts received before the Annuity
Commencement Date under a Certificate in connection with a section 401 or 403(a)
plan are generally allocated on a pro-rata basis between the employee's
investment in the Certificate and other amounts. A lump-sum distribution will
not be includible in income in the year of distribution, if the employee
transfers, within 60 days of receipt, all amounts received (less the employee's
investment in the Certificate), to another tax-qualified plan, to an individual
retirement account or an IRA in accordance with the rollover rules under the
Code.
However, any amount that is not distributed as a direct rollover will be subject
to 20% income tax withholding. (See "Tax Free Rollovers.") Special tax
treatment may be available, for tax years beginning before December 31, 1999, in
the case of certain lump-sum distributions that are not rolled over to another
plan or IRA.
A 10% penalty tax is imposed on the amount includible in gross income from
distributions that occur before the employee reaches age 59 1/2 and that are not
made on account of death or disability, with certain exceptions. These
exceptions include distributions that are:
40
<PAGE>
part of a series of substantially equal periodic payments made at least annually
beginning after the employee separates from service and made over the life (or
life expectancy) of the employee or the joint lives (or joint life expectancies)
of the employee and the Beneficiary, provided such payments are made for at
least 5 years and the distribution method is not changed before the recipient
reaches age 59 1/2 (except in the case of death or disability);
. made after the employee's separation from service on account of early
retirement after attaining age 55;
. made to pay for qualified higher education or first-time home buyer
expenses;
. made to an alternate payee pursuant to a qualified domestic relations
order, if the alternate payee is the spouse or former spouse of the
employee; or
. distributions for medical expenses in excess of 7.5% of the Annuitant's
adjusted gross income without regard to whether the Annuitant itemizes
deductions on his or her tax return; or
. distributions for health insurance premiums to an unemployed individual who
has received unemployment compensation for at least 12 consecutive weeks.
Annuity Payments. A portion of annuity payments received under Certificates for
section 401 and 403(a) plans after the Annuity Commencement Date may be
excludible from the employee's income, in the manner discussed above, in
connection with Variable Annuity Payments, under "Non-Qualified Certificates -
Taxation of Annuity Payments." The difference is that, here, the number of
expected payments is determined under a provision in the Code. Distributions of
minimum amounts required by the Code generally must commence by April 1 of the
calendar year following the calendar year in which the employee reaches age 70
1/2 (or retires, if later). Failure to comply with the minimum distribution
rules will result in a penalty tax of 50% of the amount by which the minimum
distribution required exceeds the actual distribution.
Self-Employed Individuals. Various special rules apply to tax-qualified plans
established by self-employed individuals.
PRIVATE EMPLOYER UNFUNDED DEFERRED COMPENSATION PLANS
Purchase Payments. Private taxable employers may establish unfunded, Non-
Qualified deferred compensation plans for a select group of management or highly
compensated employees and/or for independent contractors. To avoid current
taxation, these benefits must be subject to a substantial risk of forfeiture.
These types of programs allow individuals to defer (1) receipt of up to 100% of
compensation that would otherwise be includible in income and (2) payment of
federal income taxes on the amounts.
Deferred compensation plans represent a contractual promise on the part of the
employer to pay current compensation at some future time. The Certificate is
owned by the employer and is subject to the claims of the employer's creditors.
The individual has no right or interest in the Certificate and is
41
<PAGE>
entitled only to payment from the employer's general assets in accordance with
plan provisions. Purchase payments are not currently deductible by the employer
until benefits are included in the taxable income of the employee.
Taxation of Distributions. Amounts that an individual receives from a private
employer deferred compensation plan are includible in gross income for the
taxable year in which such amounts are paid or otherwise made available.
FEDERAL INCOME TAX WITHHOLDING AND REPORTING
Amounts distributed from a Certificate, to the extent includible in taxable
income, are subject to federal income tax withholding.
In some cases, if you own more than one Qualified annuity contract or
certificate, the contracts and certificates may be considered together to
determine whether the federal tax law requirement for minimum distributions
after age 70 1/2, or retirement in appropriate circumstances, has been
satisfied. You may rely on distributions from another annuity contract or
certificate to satisfy the minimum distribution requirement under a Qualified
Certificate we issued. However, you must sign a waiver releasing us from any
liability to you for not calculating and reporting the amount of taxes and
penalties payable for failure to make required minimum distributions under the
Certificate.
TAXES PAYABLE BY USL AND THE SEPARATE ACCOUNT
USL is taxed as a life insurance company under the Code. The operations of the
Separate Account are part of the total operations of USL and are not taxed
separately. Under existing federal income tax laws, USL is not taxed on
investment income derived by the Separate Account (including realized and
unrealized capital gains) with respect to the Certificates. USL reserves the
right to allocate to the Certificates any federal, state or other tax liability
that may result in the future from maintenance of the Separate Account or the
Certificates.
Certain Series may elect to pass through to USL any taxes withheld by foreign
taxing jurisdictions on foreign source income. Such an election will result in
additional taxable income and income tax to USL. The amount of additional income
tax, however, may be more than offset by credits for the foreign taxes withheld
that the Series will also pass through. These credits may provide a benefit to
USL.
DISTRIBUTION ARRANGEMENTS
Individuals who sell the Certificates will be licensed by state insurance
authorities as agents of USL. The individuals will also be registered
representatives of (1) American General Securities Incorporated ("AGSI"), the
principal underwriter of the Certificates, or (2) other broker-dealer firms.
However, some individuals may be representatives of firms that are exempt from
broker-dealer regulation. AGSI and any non-exempt broker-dealer firms are
registered with the Securities and Exchange Commission under the Securities
Exchange Act of 1934 as broker-dealers and are members of the National
Association of Securities Dealers, Inc.
42
<PAGE>
AGSI is an affiliate of USL. AGSI's principal business address is 2727 Allen
Parkway, Houston, Texas 77019-2191. USL offers the Certificates on a continual
basis. USL does not pay any compensation for distribution of the Certificates.
SERVICES AGREEMENTS
American General Life Companies ("AGLC") is party to a general services
agreement with USL. AGLC, an affiliate of USL, is a corporation incorporated in
Delaware on November 24, 1997. Its address is 2727-A Allen Parkway, Houston,
Texas 77019-2191. Under this agreement, AGLC provides services to USL,
including most of the administrative, data processing, systems, customer
services, product development, actuarial, auditing, accounting and legal
services for USL and the Certificates.
USL has entered into administrative services agreements with the advisers or
managers for the mutual funds that offer shares to the Divisions. USL receives
fees for the administrative services it performs. These fees do not result in
any additional charges under the Certificates that are not described under
"Charges under the Certificates."
LEGAL MATTERS
We are not involved in any legal matters about the Separate Account that would
be considered material to the interests of Owners. Pauletta P. Cohn, Esquire,
Deputy General Counsel of AGLC has passed upon the legality of the Certificates
described in this Prospectus.
YEAR 2000 CONSIDERATIONS
As of March 10, 2000, all of our ultimate parent, American General Corporation's
("AGC") major technology systems, programs, and applications, including those
which rely on third parties, are operating smoothly following our transition
into 2000. We have experienced no interruptions to normal business operations,
including the processing of customer account data and transactions. We will
continue to monitor our technology systems, including critical third party
dependencies, as necessary to maintain our Year 2000 readiness. We do not
expect any future disruptions, if they occur, to have a material effect on the
company's results of operations, liquidity, or financial condition.
Through December 31, 1999, AGC incurred and expensed pretax costs of $98 million
related to Year 2000 readiness, including $18 million in 1999 and $65 million in
1998. In 1999, Year 2000 readiness expenses were included in division earnings.
The 1998 expenses were excluded from division earnings, consistent with the
manner in which we reviewed division results. In addition, we accelerated the
planned replacement of certain systems as part of our Year 2000 plans. The cost
of these replacement systems was immaterial. We do not anticipate incurring any
significant costs in the future to maintain Year 2000 readiness.
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<PAGE>
OTHER INFORMATION ON FILE
We have filed a Registration Statement with the Securities and Exchange
Commission under the Securities Act of 1933 for the Certificates described in
this Prospectus. We have not included all of the information in the
Registration Statement and its exhibits. Statements contained in this
Prospectus concerning the group master contract, Certificates and other legal
instruments are intended to be summaries. For a complete statement of their
terms, you should refer to the documents that we filed with the Securities and
Exchange Commission.
We will send you a Statement on request without charge. Its contents are as
follows:
CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
General Information..................................................... 2
Regulation and Reserves................................................. 2
Independent Auditors.................................................... 3
Services................................................................ 3
Principal Underwriter................................................... 4
Annuity Payments........................................................ 4
Gender of Annuitant................................................... 4
Misstatement of Age or Gender and Other Errors....................... 4
Change of Investment Adviser or Investment Policy....................... 4
Performance Data for the Divisions...................................... 5
Average Annual Total Return Calculations.............................. 5
Cumulative Total Return Calculations.................................. 5
Hypothetical Performance.............................................. 5
Money Market Division Yield and Effective
Yield Calculations................................................. 7
Performance Comparisons............................................... 8
Effect of Tax-Deferred Accumulation..................................... 8
Financial Statements.................................................... 9
Index to Financial Statements........................................... 10
44
<PAGE>
(THE FOLLOWING DOCUMENTS ARE NOT PART OF A PROSPECTUS.)
SELECT RESERVE VARIABLE ANNUITY
DISCLOSURES AND FORMS SECTION
INDEX
<TABLE>
<CAPTION>
<S> <C>
Individual Retirement Annuity Disclosure Statement and Financial Disclosure page 1
Assignment and Transfer Request page 11
Service Request Form page 13
Change of Beneficiary Form page 15
Statement of Additional Information Request Form page 17
</TABLE>
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK.]
<PAGE>
(THIS DOCUMENT IS NOT PART OF A PROSPECTUS)
INDIVIDUAL RETIREMENT ANNUITY DISCLOSURE STATEMENT
INTRODUCTION
THIS DISCLOSURE STATEMENT IS DESIGNED FOR OWNERS OF IRAs ISSUED BY THE UNITED
STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK ON OR AFTER APRIL 3, 2000.
This Disclosure Statement is not part of your annuity certificate but contains
general and standardized information which must be furnished to each person who
is issued an Individual Retirement Annuity. You must refer to your annuity
certificate to determine your specific rights and obligations thereunder.
REVOCATION
If you are purchasing a new or rollover IRA, then if for any reason you, as a
recipient of this Disclosure Statement, decide within 20 days from the date your
annuity certificate is delivered that you do not desire to retain your IRA,
written notification to the Company must be mailed, together with your annuity
certificate, within that period. If such notice is mailed within 20 days,
current annuity certificate value or contributions if required, without
adjustments for any applicable sales commissions or administrative expenses,
will be refunded.
MAIL NOTIFICATION OF REVOCATION AND YOUR ANNUITY CERTIFICATE TO:
The United States Life Insurance Company in the City of New York
Administrative Center
P. O. Box 1401
Houston, Texas 77251-1401
Phone No. (800) 246-1924
ELIGIBILITY
Under Internal Revenue Code ("Code") Section 219, if you are not an active
participant (see A. below), you may make a contribution of up to the lesser of
$2,000 or 100% of compensation and take a deduction for the entire amount
contributed. If you are a married individual filing a joint return, and your
compensation is less than your spouse's, the total deduction will, in general,
be the lesser of $4,000 or 100% of the combined earned income of both spouses,
reduced by any deduction for an IRA purchase payment allowed to your spouse. If
you are an active participant, but have an adjusted gross income (AGI) below a
certain level (see B. below), you may still make a deductible contribution. If,
however, you or your spouse is an active participant and your combined AGI is
above the specified level, the amount of the deductible contribution you may
make to an IRA will be phased down and eventually eliminated.
A. ACTIVE PARTICIPANT
You are an "active participant" for a year if you are covered by a retirement
plan. You are covered by a "retirement plan" for a year if your employer or
union has a retirement plan under which money is
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added to your account or you are eligible to earn retirement credits. For
example, if you are covered under a profit-sharing plan, certain government
plans, a salary reduction arrangement (such as a tax sheltered annuity
arrangement or a 401(k) plan), a Simplified Employee Pension program (SEP), any
Simple Retirement Account or a plan which promises you a retirement benefit
which is based upon the number of years of service you have with the employer,
you are likely to be an active participant. Your Form W-2 for the year should
indicate your participation status.
You are an active participant for a year even if you are not yet vested in your
retirement benefit. Also, if you make required contributions or voluntary
employee contributions to a retirement plan, you are an active participant. In
certain plans, you may be an active participant even if you were only with the
employer for part of the year.
You are not considered an active participant if you are covered in a plan only
because of your service as 1) an Armed Forces Reservist for less than 90 days of
active service, or 2) a volunteer firefighter covered for firefighting service
by a government plan. Of course, if you are covered in any other plan, these
exceptions do not apply.
If you are married, (i) filed a separate tax return, and did not live with your
spouse at any time during the year, or (ii) filed a joint return and have a
joint AGI of less than $150,000, your spouse's active participation will not
affect your ability to make deductible contributions. If you are married and
file jointly, your deduction will be phased out between an AGI of $150,000 to
$160,000.
B. ADJUSTED GROSS INCOME (AGI)
If you are an active participant, you must look at your Adjusted Gross Income
for the year (if you and your spouse file a joint tax return, you use your
combined AGI) to determine whether you can make a deductible IRA contribution.
Your tax return will show you how to calculate your AGI for this purpose. If
you are at or below a certain AGI level, called the Threshold Level, you are
treated as if you were not an active participant and can make a deductible
contribution under the same rules as a person who is not an active participant.
If you are single, the Threshold Level is $30,000. If you are married and file
a joint tax return, the Threshold Level is $50,000. If you are married but file
a separate tax return, the Threshold Level will be $0.
For taxable years beginning in 1999, the Threshold Levels for single individuals
and for married individuals filing jointly increases as follows:
<TABLE>
<CAPTION>
Threshold Level
For taxable years beginning in: Single Married (filing jointly)
- ---------------------------------- ----------------------------------
<S> <C> <C>
1999 $31,000 $51,000
2000 $32,000 $52,000
2001 $33,000 $53,000
2002 $34,000 $54,000
2003 $40,000 $60,000
2004 $45,000 $65,000
</TABLE>
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<PAGE>
2005 $50,000 $70,000
2006 $50,000 $75,000
2007 and thereafter $50,000 $80,000
A married individual filing a joint tax return, who is not an active
participant, but whose spouse is, may, in any year, make deductible IRA
contributions equal to the lesser of $2,000 or 100% of the individual's earned
income. The Threshold Level for such individual is $150,000.
If your AGI is less than $10,000 above your Threshold Level, you will still be
able to make a deductible contribution, but it will be limited in amount. The
amount by which your AGI exceeds your Threshold Level
(AGI - Threshold Level) is called your Excess AGI. The Maximum Allowable
Deduction is $2,000. In the case of a married individual filing jointly and
earning less than his or her spouse, the maximum Allowable Deduction is the
lesser of $2,000 or the spouse's income, less any deductible IRA contributions
or contributions to a Roth IRA. You can estimate your Deduction Limit as
follows:
(Your Deduction Limit may be slightly higher if you use this formula rather than
the table provided by the IRS.)
$10,000 - Excess AGI x Maximum Allowable Deduction = Deduction Limit
--------------------
$10,000
For the taxable year beginning in 2007, the deduction limit for married
individuals filing jointly will be determined as follows:
$10,000 - Excess AGI
--------------------
$20,000 x Maximum Allowable Deduction = Deduction Limit
You must round up the result to the next highest $10 level (the next highest
number which ends in zero). For example, if the result is $1,525, you must
round it up to $1,530. If the final result is below $200 but above zero, your
Deduction Limit is $200. Your Deduction Limit cannot, in any event, exceed 100%
of your compensation.
EXAMPLE 1: Ms. Smith, a single person, is an active participant and has an AGI
of $36,619. In 1999, she would calculate her deductible IRA contribution as
follows:
Her AGI is $36,619
Her Threshold Level is $31,000
Her Excess AGI is (AGI - Threshold Level) or ($36,619-$31,000) = $5,619
Her Maximum Allowable Deduction is $2,000
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<PAGE>
So, her IRA deduction limit is:
$10,000 - $5,619
----------------
$10,000 x $2,000 = $876 (rounded to $880)
EXAMPLE 2: Mr. and Mrs. Young file a joint tax return. Each spouse earns more
than $2,000 and one is an active participant. Their 2000 combined AGI is
$55,255. Neither spouse contributed to a Roth IRA. They may each contribute to
an IRA and calculate their deductible contributions to each IRA as follows:
Their AGI is $55,255
Their Threshold Level is $52,000
Their Excess AGI is (AGI - Threshold Level) or ($55,255 - $52,000) = $3,255
The Maximum Allowable Deduction for each spouse is $2,000
So, each spouse may compute his or her IRA deduction limit as follows:
$10,000 - 3,255
---------------
$10,000 x $2,000 = $1,349 (rounded to $1,350)
EXAMPLE 3: If, in Example 2, Mr. Young did not earn any compensation, each
spouse could still contribute to an IRA and calculate their deductible
contribution to each IRA as in Example 2.
EXAMPLE 4: In 1999, Mr. Jones, a married person, files a separate tax return
and is an active participant. He has $1,500 of compensation and wishes to make
a deductible contribution to an IRA.
His AGI is $1,500
His Threshold Level is $0
His Excess AGI is (AGI - Threshold Level) or $1,500-$0) = $1,500
His Maximum Allowable Deduction is $2,000
So, his IRA deduction limit is:
$10,000 - $1,500 x $2,000 = $1,700
----------------
$10,000
Even though his IRA deduction limit under the formula is $1,700, Mr. Jones may
not deduct an amount in excess of his compensation, so, his actual deduction
is limited to $1,500.
NON-DEDUCTIBLE CONTRIBUTIONS TO IRAS
Even if you are above the Threshold Level and thus may not make a deductible
contribution of up to $2,000 (or up to $4,000 in the case of married individuals
filing a joint return), you may still contribute up to the lesser of 100% of
compensation or $2,000 to an IRA ($4,000 in the case of married individuals
filing a joint return). The amount of your contribution which is not deductible
will be a
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<PAGE>
non-deductible contribution to the IRA. You may also choose to make a
contribution non-deductible even if you could have deducted part or all of the
contribution. Interest or other earnings on your IRA contribution, whether from
deductible or non-deductible contributions, will not be taxable to you until
taken out of your IRA and distributed to you.
If you make a non-deductible contribution to an IRA, you must report the amount
of the non-deductible contribution to the IRS on Form 8606 as a part of your tax
return for the year.
You may make a $2,000 contribution (or up to $4,000 in the case of married
individuals filing a joint return) at any time during the year, if your
compensation for the year will be at least $2,000 (or up to $4,000 in the case
of married individuals filing a joint return), without having to know how much
will be deductible. When you fill out your return, you may then figure out how
much is deductible.
You may withdraw an IRA contribution made for a year any time before April 15 of
the following year. If you do so, you must also withdraw the earnings
attributable to that portion and report the earnings as income for the year for
which the contribution was made. If some portion of your contribution is not
deductible, you may decide either to withdraw the non-deductible amount, or to
leave it in the IRA and designate that portion as a non-deductible contribution
on your tax return.
IRA DISTRIBUTIONS
Generally, IRA distributions which are not rolled over (see "Rollover IRA
Rules," below) are included in your gross income in the year they are received.
Non-deductible IRA contributions, however, are made using income which has
already been taxed (that is, they are not deductible contributions). Thus, the
portion of the IRA distributions consisting of non-deductible contributions will
not be taxed again when received by you. If you make any non-deductible IRA
contributions, each distribution from your IRA(s) will consist of a non-taxable
portion (return of deductible contributions, if any, and account earnings).
Thus, you may not take a distribution which is entirely tax-free. The following
formula is used to determine the non-taxable portion of your distributions for a
taxable year:
Remaining
Non-Deductible Contributions
- ----------------------------
Year-End Total IRA Balances x Total Distributions = Nontaxable Distributions
(for the year) (for the year)
To figure the year-end total IRA balance, you treat all of your IRAs as a single
IRA. This includes all regular IRAs (whether accounts or annuities), as well as
Simplified Employee Pension (SEP) IRAs, and Rollover IRAs. You also add back
the distributions taken during the year.
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<PAGE>
EXAMPLE: An individual makes the following contributions to his or her IRA(s).
<TABLE>
<CAPTION>
YEAR DEDUCTIBLE NON-DEDUCTIBLE
---- ----------- --------------
<S> <C> <C>
1991 $2,000
1992 1,800
1995 1,000 $1,000
1997 600 1,400
------ ------
$5,400 $2,400
Deductible Contributions: $5,400
Non-Deductible Contributions: 2,400
Earnings on IRAs: 1,200
------
Total Account Balance of IRA(s) as of 12/31/99: $9,000
(before distributions in 1999).
</TABLE>
In 1999, the individual takes a distribution of $3,000. The total account
balance in the IRAs on 12/31/99 before 1999 distributions is $9,000. The non-
taxable portion of the distributions for 1999 is figured as follows:
Total non-deductible contributions $2,400
------
Total account balance in the IRAs, before distributions $9,000 x $3,000 = $800
Thus, $800 of the $3,000 distribution in 1999 will not be included in the
individual's taxable income. The remaining $2,200 will be taxable for 1999.
ROLLOVER IRA RULES
1. IRA TO IRA
You may withdraw, tax-free, all or part of the assets from an IRA and reinvest
them in one or more IRAs. The reinvestment must be completed within 60 days of
receipt of the withdrawal. No IRA deduction is allowed for the reinvestment.
Amounts required to be distributed because the individual has reached age 70 1/2
may not be rolled over. The rollover of one IRA to another may be made no more
than once during a one year period.
2. EMPLOYER PLAN DISTRIBUTIONS TO IRA
All taxable distributions (known as "eligible rollover distributions") from
qualified pension, profit-sharing, stock bonus and tax sheltered annuity plans
may be rolled over to an IRA, with the exception of (1) annuities paid over a
life or life expectancy, (2) installments for a period of ten years or more, and
(3) required minimum distributions under section 401(a)(9).
Rollovers may be accomplished in two ways. First, you may elect to have an
eligible rollover distribution paid directly to an IRA (a "direct rollover").
Second, you may receive the distribution directly and then, within 60 days of
receipt, roll the amount over to an IRA. Under the law, however, any amount
that you elect not to have distributed as a direct rollover will be subject to
20 percent income tax withholding, and, if you are younger than age 59 1/2, may
result in a 10% excise tax on any
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<PAGE>
amount of the distribution that is included in income. Questions regarding
distribution options under the Act should be directed to your Plan Trustee or
Plan Administrator, or may be answered by consulting IRS Regulations
(S)1.401(a)(31)-1, (S)1.402(c)-2T and (S)31.3405(c)-1.
PENALTIES FOR PREMATURE DISTRIBUTIONS
If you receive a distribution from your IRA before you reach age 59 1/2, an
additional tax of 10 percent will be imposed under Code (S)72(t), unless the
distribution (a) occurs because of your death or disability, (b) is for certain
medical care expenses or to an unemployed individual for health insurance
premiums, (c) is received as a part of a series of substantially equal payments
over your life or life expectancy, (d) is received as a part of a series of
substantially equal payments over the lives or life expectancy of you and your
beneficiary, or (e) the distribution is contributed to a rollover IRA, (f) is
used for a qualified first time home purchase for you, your spouse, children,
grandchildren, or ancestor, subject to a $10,000 lifetime maximum or (g) is for
higher education purposes for you, your spouse, children or grandchildren.
MINIMUM DISTRIBUTIONS
Under the rules set forth in Code (S)408(b)(3) and (S)401(a)(9), you may not
leave the funds in your annuity certificate indefinitely. Certain minimum
distributions are required. These required minimum distributions may be taken
in one of two ways: (a) by withdrawing the balance of your annuity certificate
by a "required beginning date," usually April 1 of the year following the date
at which you reach age 70 1/2; or (b) by withdrawing periodic distributions of
the balance in your annuity certificate by the required beginning date. These
periodic distributions may be taken over (a) your life; (b) the lives of you and
your named beneficiary; (c) a period not extending beyond your life expectancy;
or (d) a period not extending beyond the joint life expectancy of you and your
named beneficiary.
If you do not satisfy the minimum distribution requirements, then, pursuant to
Code (S)4974, you may have to pay a 50% excise tax on the amount not distributed
as required that year.
The foregoing minimum distribution rules are discussed in detail in IRS
Publication 590, "Individual Retirement Arrangements."
REPORTING
You are required to report penalty taxes due on excess contributions, excess
accumulations, premature distributions, and prohibited transactions. Currently,
IRS Form 5329 is used to report such information to the Internal Revenue
Service.
PROHIBITED TRANSACTIONS
Neither you nor your beneficiary may engage in a prohibited transaction, as that
term is defined in Code (S)4975.
Borrowing any money from this IRA would, under Code (S)408(e)(3), cause the
annuity certificate to cease to be an Individual Retirement Annuity and would
result in the value of the annuity being included in the owner's gross income in
the taxable year in which such loan is made.
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Use of this annuity certificate as security for a loan from the Company, if such
loan were otherwise permitted, would, under Code (S)408(e)(4), cause the portion
so used to be treated as a taxable distribution.
EXCESS CONTRIBUTIONS
Tax Code (S)4973 imposes a 6 percent excise tax as a penalty for an excess
contribution to an IRA. An excess contribution is the excess of the deductible
and nondeductible amounts contributed by the Owner to an IRA for that year over
the lesser of his or her taxable compensation or $2,000. (Different limits
apply in the case of a spousal IRA arrangement.) If the excess contribution is
not withdrawn by the due date of your tax return (including extensions) you will
be subject to the penalty. This 6% excise tax is required to be paid each year
that the excess contribution remains in the IRA.
IRS APPROVAL
Your annuity certificate and IRA endorsement have been approved by the Internal
Revenue Service as a tax qualified Individual Retirement Annuity. Such
approval by the Internal Revenue Service is a determination only as to the form
of the annuity and does not represent a determination of the merits of such
annuity.
This disclosure statement is intended to provide an overview of the applicable
tax laws relating to Individual Retirement Arrangements. It is not intended to
constitute a comprehensive explanation as to the tax consequences of your IRA.
AS WITH ALL SIGNIFICANT TRANSACTIONS SUCH AS THE ESTABLISHMENT OR MAINTENANCE
OF, OR WITHDRAWAL FROM AN IRA, APPROPRIATE TAX AND LEGAL COUNSEL SHOULD BE
CONSULTED. Further information may also be acquired by contacting your IRS
District Office or consulting IRS Publication 590.
FINANCIAL DISCLOSURE
(SELECT RESERVE VARIABLE ANNUITY, FORM NO. 98505N)
This Financial Disclosure is applicable to IRAs using a Select Reserve Variable
Annuity (certificate form number 98505N) purchased from The United States Life
Insurance Company in the City of New York on or after April 3, 2000. Earnings
under variable annuities are not guaranteed, and depend on the performance of
the investment option(s) selected. As such, earnings cannot be projected. Set
forth below are the charges associated with such annuities.
CHARGES:
(a) During the Accumulation Phase, a maximum charge of $25 for each transfer,
in excess of 12 free transfers annually, of certificate value between
divisions of the Separate Account. During the Payout Phase (the time during
which regular payments are received), this charge is applicable for each
transfer in excess of six free transfers annually.
(b) To compensate for mortality and expense risks assumed under the
certificate, variable divisions only will incur a daily charge at an
annualized rate of 0.36% of the average Separate Account Value of the
certificate during both the Accumulation and the Payout Phase.
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<PAGE>
(c) Premium taxes, if applicable, may be charged against Accumulation Value at
time of annuitization or upon the death of the Annuitant. If a
jurisdiction imposes premium taxes at the time purchase payments are made,
the Company may deduct a charge at that time, or defer the charge until the
purchase payments are withdrawn, whether on account of a full or partial
surrender, annuitization, or death of the Annuitant.
(d) To compensate for administrative expenses, a daily charge will be incurred
at an annualized rate of 0.04% of the average Separate Account Value of the
certificate during the Accumulation and the Payout Phase.
(e) Each variable division will be charged a fee for asset management and other
expenses deducted directly from the underlying fund during the Accumulation
and Payout Phase. Total fees will range between .57% and 1.85%.
Page 9
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Page 10
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
THE UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK ("USL")
Assignment and Transfer Request
- ------------------------------------------------------------------------------------------------------------------------------------
Current Trustee/Custodian: | Telephone Number:
|
- ------------------------------------------------------------------------------------------------------------------------------------
Company's Address: | City: | State: | Zip
| | |
- ------------------------------------------------------------------------------------------------------------------------------------
Owner(s): | Owner's SSN:
|
- ------------------------------------------------------------------------------------------------------------------------------------
Annuitant's Name (if different from Owner) | Contract/Account No.:
|
- ------------------------------------------------------------------------------------------------------------------------------------
Type of Transfer: (Choose only one)
[ ] 1035 Non-Taxable Exchange [ ] Non-Qualified Transfer [ ] Qualified Rollover [ ] Qualified Direct Transfer
[ ] Other: ______________________ (Transfer of funds from a (Irrevocable Direct (Direct Transfer from
non-qualified mutual funds, Rollover of Tax Sheltered current IRA trustee or
CDs, savings account, etc. to Annuities and Qualified custodian company to new IRA
a non-qualified Annuity Retirement Plans to an IRA) trustee or custodian)
Contract/Certificate) (Forward proceeds to USL
within 60 days to maintain
tax status)
- ------------------------------------------------------------------------------------------------------------------------------------
REQUEST FOR 1035 EXCHANGE
- ------------------------------------------------------------------------------------------------------------------------------------
I HEREBY ABSOLUTELY ASSIGN AND TRANSFER TO USL ALL OF MY RIGHTS, TITLE, AND INTEREST OF EVERY NATURE IN AND TO THE ABOVE REFERENCED
CONTRACT/CERTIFICATE INCLUDING, BUT NOT LIMITED TO SURRENDER, ASSIGN, TRANSFER, OR CHANGE BENEFICIARY.
.. Section 1035 of the Internal Revenue Code permits certain non-taxable exchanges of insurance policies and annuity
contracts/certificates. It is my intention that this transfer qualify as a Section 1035 exchange and that no portion of this
exchange be actually or constructively received by me. USL makes no representation concerning my tax treatment for this
transaction and has neither responsibility nor liability for my tax treatment.
.. I understand the exact amount of the proceeds may vary depending upon the date of transfer and I agree to execute any additional
documents required to complete the transfer.
.. I understand that the exchange is not complete if the company issuing the contract/certificate is unable or unwilling to pay the
value of the above referenced contract(s)/certificate(s) to USL.
.. I understand that as of the date of surrender of the contract/certificate by the company, the surrendered contract/certificate no
longer provides any coverage and the new contract/certificate is not in effect until USL approves the new contract/certificate and
receives the funds.
.. I represent and warrant that no person, firm, or corporation has a legal or equitable interest in the contract/certificate except
the undersigned, and that no proceedings of either legal or equitable nature have been instituted or are pending against the
undersigned.
The contract/certificate is:
[ ] ENCLOSED Contract/Certificate is attached
[ ] LOST OR DESTROYED (I certify that the contract/certificate is lost or destroyed. In addition, I certify that the
contract/certificate has not been assigned or pledged as collateral.)
_____________________________________________________________________ ____________________________________________________________
Owner's Signature(s) Date
USL, OWNER OF THE ABOVE REFERENCED CONTRACT/CERTIFICATE, DOES HEREBY REQUEST IMMEDIATE SURRENDER OF THE ABOVE REFERENCED
CONTRACT/CERTIFICATE.
- ------------------------------------------------------------------------------------------------------------------------------------
REQUEST FOR NON-QUALIFIED TRANSFER, QUALIFIED ROLLOVER OR QUALIFIED DIRECT TRANSFER
- ------------------------------------------------------------------------------------------------------------------------------------
THIS SERVES AS AUTHORIZATION TO LIQUIDATE AND FORWARD:
[ ] All [ ] Partial $ _______________________ or ______________________%
of my account balance as listed above to the annuity I have established through USL.
___________________________________________________________________________________________________
FOR CD TRANSFERS: I am aware that if I request a liquidation of a CD prior to the maturity date, I may be subject to surrender or
withdrawal penalties. I direct and authorize the above liquidation and transfer of the net liquidation proceeds:
[ ] Upon receipt of this request [ ] On the maturity date of _____________________________
_____________________________________________________________________ ____________________________________________________________
Owner's Signature(s) Date
- ------------------------------------------------------------------------------------------------------------------------------------
LETTER OF ACCEPTANCE
- ------------------------------------------------------------------------------------------------------------------------------------
The above named individual has established a Qualified or Non-Qualified Annuity with USL. We will accept the transfer of cash assets
currently held in your plan for placement into the Qualified or Non-Qualified Annuity established with USL.
FOR A SECTION 1035(a) EXCHANGE, PLEASE PROVIDE US WITH THE PRE AND POST TEFRA COST BASIS.
By: _______________________________________________________________ ______________________________________________________________
Authorized Representative of USL Date
Checks should be made payable to: THE UNITED STATES LIFE Insurance Company In the City of New York
FBO (For the benefit of) _______________________________________________________
Print Name of Contract/Certificate Owner(s)
Mail to: THE UNITED STATES LIFE INSURANCE COMPANY THE UNITED STATES LIFE INSURANCE COMPANY
IN THE CITY OF NEW YORK or IN THE CITY OF NEW YORK
P.O. BOX 4728 DEPT. A overnight C/O SOUTHWEST BANK OF TEXAS DEPT. A
HOUSTON, TX 77210-4728 4400 POST OAK PARKWAY
HOUSTON, TX 77027
ATTN: LOCKBOX PROCESSING
- ------------------------------------------------------------------------------------------------------------------------------------
USL 6742 Rev 1099 Page 11
</TABLE>
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK.]
<PAGE>
<TABLE>
<CAPTION>
Complete and return to:
Administrative Center THE UNITED STATES LIFE INSURANCE COMPANY
P.O. Box 1401 IN THE CITY OF NEW YORK ("USL")
Houston, TX 77251-1401 Administrative Center: Houston, TX SELECT RESERVE
(800) 246-1924
Fax: (713) 831-3701 -- VARIABLE ANNUITY LOGO --
Hearing Impaired: (888) 436-5257 SERVICE REQUEST
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
[X] CERTIFICATE 1.| CERTIFICATE #: _____________________________________________ ANNUITANT: ______________________________
IDENTIFICATION |
(COMPLETE SECTIONS 1 & 13 | ADDRESS: _______________________________________________________________________________
FOR ALL REQUESTS.) | [_] Check here if
| change of address. _______________________________________________________________________________
INDICATE CHANGE OR |
REQUEST DESIRED BELOW. | S.S. NO. OR TAX I.D. NO.: ______________/_______/___________/ Phone Number: ( ) _________________
- -----------------------------------------------------------------------------------------------------------------------------------
[ ] NAME 2.| [_] Annuitant* [_] Beneficiary* [_] Owner(s)* (DOES NOT CHANGE ANNUITANT, BENEFICIARY OR OWNERSHIP
CHANGE | DESIGNATION)
|-------------------------------------------------------------------------------------------------------
| FROM (FIRST, MIDDLE, LAST) | TO (FIRST, MIDDLE, LAST)
| |
| ------------------------------------------------------------------------------------------------------
| REASON: [_] Marriage [_] Divorce [_] Correction [_] Other (Attach copy of a certified court order.)
- -----------------------------------------------------------------------------------------------------------------------------------
[ ] AUTOMATIC 3.| _______ By initialing here, I authorize USL to collect $ _________ (min. $100), starting on: _________
ADDITIONAL | by initiating electronic debit entries against my bank account with the MONTH/DAY
PURCHASE | following frequency:
PAYMENT OPTION |
| [_] Monthly [_] Quarterly [_] Semiannually [_] Annually (Attach voided check to Service Request.)
- -----------------------------------------------------------------------------------------------------------------------------------
[ ] DOLLAR COST 4.| Dollar cost average [_] $ _________ OR [_] ________ % (whole % only) Begin Date: _____/_____/______
AVERAGING | Taken from the [_] Money Market OR [_] 1-Year Guarantee Period MM DD YY
| FREQUENCY: [_] Monthly [_] Quarterly [_] Semi-Annually [_] Annually
| DURATION [_] 12 months [_] 24 months [_] 36 months
| to be allocated to the following division(s) as indicated. (Use only dollars OR percentages.)
| AMERICAN GENERAL SERIES PORTFOLIO COMPANY OFFIT VIF-High Yield (6) __________
| Money Market (13) ________ OFFIT VIF-Total Return (7) __________
| HOTCHKIS AND WILEY VARIABLE TRUST OFFIT VIF-U.S. Government Securities(8) __________
| Equity Income VIP (1) ________ ROYCE CAPITAL FUND
| Low Duration VIP (3) ________ Royce Premier (9) __________
| LEVCO SERIES TRUST ________ WRIGHT MANAGED BLUE CHIP SERIES TRUST
| LEVCO Equity Value (2) ________ Wright International Blue Chip (11) __________
| NAVELLIER VARIABLE INSURANCE SERIES FUND, INC. Wright Selected Blue Chip (12)
| Navellier Growth (4) ________ OTHER
| OFFIT VARIABLE INSURANCE FUND, INC. _______________________________________ __________
| OFFIT VIF-Emerging Markets (5) ________
- -----------------------------------------------------------------------------------------------------------------------------------
[ ] AUTOMATIC 5.| [ ] ADD [ ] STOP AUTOMATIC REBALANCING.
REBALANCING | [ ] CHANGE automatic rebalancing of variable investments to the percentage allocations indicated below:
($25,000 MINIMUM) | [ ] Quarterly [ ] Semiannually [ ] Annually (frequency based on certificate anniversary
| AMERICAN GENERAL SERIES PORTFOLIO COMPANY OFFIT VIF-High Yield (6) _________%
USE WHOLE PERCENTAGES. | Money Market (13) ________% OFFIT VIF-Total Return (7) _________%
TOTAL MUST EQUAL 100%. | HOTCHKIS AND WILEY VARIABLE TRUST OFFIT VIF-U.S. Government Securities (8)_________%
| Equity Income VIP (1) ________% ROYCE CAPITAL FUND
| Low Duration VIP (3) ________% Royce Premier (9) _________%
| LEVCO SERIES TRUST ________% WRIGHT MANAGED BLUE CHIP SERIES TRUST
| LEVCO Equity Value (2) ________% Wright International Blue Chip (11) _________%
| NAVELLIER VARIABLE INSURANCE SERIES FUND, INC. Wright Selected Blue Chip (12) _________%
| Navellier Growth (4) ________% OTHER
| OFFIT VARIABLE INSURANCE FUND, INC. ____________________________________ _________%
| OFFIT VIF-Emerging Markets (5) ________%
| NOTE: Automatic rebalancing is only available for variable divisions. Automatic Rebalancing will not
| change allocation of future purchase payments.
- ------------------------------------------------------------------------------------------------------------------------------------
[ ] CHANGE ALLOCATION 5.| AMERICAN GENERAL SERIES PORTFOLIO COMPANY OFFITT VIF-High Yield (7) _________%
OF FUTURE | Money Market (13) ________% OFFIT VIF-U.S. Government Securities (8)_________%
PURCHASE PAYMENTS | HOTCHKIS AND WILEY VARIABLE TRUST ROYCE CAPITAL FUND
| Equity Income VIP (1) ________% Royce Premier (9) _________%
USE WHOLE PERCENTAGES. | Low Duration VIP (3) ________% WRIGHT MANAGED BLUE CHIP SERIES TRUST
TOTAL MUST EQUAL 100%. | LEVCO SERIES TRUST ________% Wright International Blue Chip (11) _________%
| LEVCO Equity Value (2) ________% Wright Selected Blue Chip (12) _________%
| NAVELLIER VARIABLE INSURANCE SERIES OTHER
| FUND, INC. Navellier Growth (4) ________% _____________________________________ _________%
| OFFIT VARIABLE INSURANCE FUND, INC. FIXED ACCOUNT
| OFFIT VIF-Emerging Markets (5) ________% 1-Year Guarantee Period (20) _________%
| OFFIT VIF-High Yield (6) ________%
| NOTE: A change to the allocation future purchase payments will not alter Automatic Rebalancing
| allocations.
- -----------------------------------------------------------------------------------------------------------------------------------
USL 9023 REV 0499 PAGE 13
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
[ ] TRANSFER OF 7.| Indicate division number along with gross dollar or percentage amounts. (Maintain $ or % consistency.)
ACCUMULATED VALUES |
| % or $______ from Div._______ to Div._______ % or $______ from Div._______ to Div._______
|
| % or $______ from Div._______ to Div._______ % or $______ from Div._______ to Div._______
|
| % or $______ from Div._______ to Div._______ % or $______ from Div._______ to Div._______
| NOTE: If a transfer is elected and Automatic Rebalancing is active for your certificate, you may want
| to consider changing the Automatic Rebalancing allocations (Section 5). Otherwise, the Automatic
| Rebalancing will transfer funds in accordance with instructions on file.
- -----------------------------------------------------------------------------------------------------------------------------------
[ ] SYSTEMATIC 8.| Specified Dollar Amount $________________ FREQUENCY: [ ] Monthly [ ] Quarterly [ ] Semiannually
WITHDRAWAL | [ ] Annually
(ALSO COMPLETE |
SECTIONS 11, 12 & 13.) | To begin on ______/_______/_______ (Date must be between the 5TH and 24TH of the month and at least
($100 MINIMUM WITHDRAWAL) | MM DD YY 30 days after issue date.)
| Unless specified below, withdrawals will be taken from the divisions as they are currently allocated
PERCENTAGES (WHOLE % ONLY) | in your certificate.
MUST EQUAL 100%, OR |
DOLLARS MUST EQUAL TOTAL | $ or %________ Div. No.________ $ or %________ Div. No.________ $ or %________ Div. No._______
AMOUNT. |
| $ or %________ Div. No.________ $ or %________ Div. No.________ $ or %________ Div. No._______
|
| $ or %________ Div. No.________ $ or %________ Div. No.________ $ or %________ Div. No._______
- ------------------------------------------------------------------------------------------------------------------------------------
[ ] REQUEST FOR 9.| Amount requested is to be ( ) net OR ( ) gross of applicable charges. Total Amount = $________
PARTIAL |
WITHDRAWAL | $ or %________ Div. No.________ $ or %________ Div. No.________ $ or %________ Div. No._______
(ALSO COMPLETE |
SECTIONS 11, 12 & 13.) | $ or %________ Div. No.________ $ or %________ Div. No.________ $ or %________ Div. No._______
|
| $ or %________ Div. No.________ $ or %________ Div. No.________ $ or %________ Div. No._______
- -----------------------------------------------------------------------------------------------------------------------------------
[ ] REQUEST FOR 10.| [ ] Certificate attached
FULL |
SURRENDER | [ ] I hereby declare that the certificate specified above has been lost, destroyed, or misplaced and
(ALSO COMPLETE | request that the value of the certificate be paid. I agree to indemnify and hold harmless USL
SECTIONS 11, 12 & 13.) | against any claims which may be asserted on my behalf and on the behalf of my heirs, assignees,
| legal representatives, or any other person claiming rights derived through me against USL on the
| basis of the certificate.
- -----------------------------------------------------------------------------------------------------------------------------------
[ ] METHOD OF 11.| NOTE: If no method is indicated, check(s) will be mailed to the owner at the address of record.
DISTRIBUTION | Check one: [ ] Mail check to owner. [ ] Mail check to alternate address. [ ] Deposit funds
| directly to bank/
| firm.*
| (available only for
| systematic withdrawals)
| ______________________________________________________________________________________________________
| INDIVIDUAL OR BANK/FIRM
|
| _______________________________________________________ __________________________________________
| ADDRESS CITY/STATE/ZIP
|
| _______________________________________________________ Type of account: [ ] Checking [ ] Savings
| IF BANK/FIRM, PROVIDE ACCOUNT NUMBER TO BE REFERENCED
| FOR DEPOSIT.
|
| *Enclose a voided check from account where funds are PLEASE DO NOT ENCLOSE A DEPOSIT SLIP.
| to be deposited.
- ---------------------------|--------------------------------------------------------------------------------------------------------
[ ] NOTICE OF 12.| The taxable portion of the distribution you receive from your annuity certificate is subject to
WITHHOLDING | federal income tax withholding unless you elect not to have withholding apply. Withholding of state
| income tax may also be required by your state of residence. You may elect not to have withholding apply
| by checking the appropriate box below. If you elect not to have withholding apply to your distribution
| or if you do not have enough income tax withheld, you may be responsible for payment of estimated tax.
| You may incur penalties under the estimated tax rules, if your withholding and estimated tax are not
| sufficient. If no election is made we are REQUIRED to withhold Federal Income Tax.
|
| Check one: [ ] I do NOT want income tax withheld from this distribution.
|
| [ ] I do want 10% or _________% income tax withheld from this distribution.
- ------------------------------------------------------------------------------------------------------------------------------------
[ ] AFFIRMATION/ 13.| CERTIFICATION: Under penalties of perjury, I certify: (1) that the number shown on this form is my
SIGNATURE | correct taxpayer identification number and; (2) that I am not subject to backup withholding under
COMPLETE THIS SECTION FOR | Section 3406(a)(1)(C) of the Internal Revenue Code.
ALL REQUESTS. |
| The Internal Revenue Service does not require your consent to any provision of this document other than
| the certification required to avoid backup withholding.
|
|
| __________________________________________________ ______________________________________________
| DATE SIGNATURE(S) OF OWNER(S)
|
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
USL 9023 REV 0499 Page 14
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
COMPLETE AND RETURN THIS REQUEST TO: THE UNITED STATES LIFE INSURANCE COMPANY
The United States Life Insurance Company IN THE CITY OF NEW YORK ("USL")
In the City of New York Administrative Center: Houston, TX
Administrative Center SELECT RESERVE
P. O. Box 1401 CHANGE OF BENEFICIARY Variable Annuity
Houston, TX 77251-1401
(Before completing this form please read instructions below and on reverse side.)
- ------------------------------------------------------------------------------------------------------------------------------------
Contract/Certificate No. Contract/Certificate Owner Annuitant
- ------------------------------------------------------------------------------------------------------------------------------------
METHOD OF PAYMENT: The death proceeds shall be payable in equal shares to the designated beneficiaries as may be living, unless
otherwise provided below. In the event no beneficiary survives the Annuitant or Owner, and if this form or the Contract/Certificate
does not provide otherwise, the proceeds will be paid to the executors or administrators of the deceased's Estate.
====================================================================================================================================
PRIMARY BENEFICIARY:
Full Name Relationship to Annuitant Percentages (if applicable)
- --------- ------------------------- ---------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
If a living or non-testamentary trust is designated as a primary beneficiary, complete the following:
____________________________________________________________________________________________ Dated: _________________________
Name of Trust
CONTINGENT BENEFICIARY (proceeds payable under this designation only if none of the designated primary beneficiaries survives the
deceased Annuitant or Owner):
Full Name Relationship to Annuitant Percentages (if applicable)
- --------- ------------------------- ---------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
If a living or non-testamentary trust is designated as a contingent beneficiary, complete the following:
____________________________________________________________________________________________ Dated: _________________________
Name of Trust
====================================================================================================================================
The undersigned Contract/Certificate Owner hereby revokes any previous beneficiary designation and any optional mode of settlement
with respect to any death benefit proceeds payable at the death of the Annuitant or Owner.
I represent and certify that no insolvency or bankruptcy proceedings are now pending against me.
Dated at _______________________________________________________ this ______________ day of __________________________, 19_______.
____________________________________________________________ _________________________________________________________
WITNESS CONTRACT/CERTIFICATE OWNER
____________________________________________________________ _________________________________________________________
WITNESS CONTRACT/SIGNATURE (IF REQUIRED)
====================================================================================================================================
This change of beneficiary and/or method of settlement has been approved by the Company at its Administrative Center, and
presentation of the Contract/Certificate for endorsement has been waived.
THE UNITED STATES LIFE Insurance Company In the City of New York
DATE OF APPROVAL:___________________________________________ BY:______________________________________________________
</TABLE>
USL 8876-1
Page 15
<PAGE>
<TABLE>
<CAPTION>
INSTRUCTIONS FOR DESIGNATING BENEFICIARY
<S> <C>
1. All signatures must be in INK and should appear exactly as the name is given in the Contract/Certificate. A separate election
for change of beneficiary must be completed for each Contract/Certificate.
2. The full name of the new Beneficiary, relationship to the Annuitant, current mailing address and taxpayer identification number
(S.S. No.) should be given for all Beneficiaries. If Beneficiary is to receive payment under life income option, give date of
birth.
3. If a Beneficiary is a married woman, her full given name should be used. For example, Mary E. Jones, not Mrs. J.F. Jones.
If a Trustee is designated, notification as to the type of trust created should be furnished to the Company.
4. If two Beneficiaries are to share jointly, the last name entered should be followed by the words "equally, or to the survivor."
If three or more Beneficiaries are to share jointly, the last name entered should be followed by the words "equally, or to the
survivors or survivor." If the interest of one Beneficiary is to be contingent to the interest of another, after the name of the
first Beneficiary the following words should be placed: "if living; otherwise to."
For your assistance, examples of the wording to be used in some of the more common designations are set out below. In difficult
cases where there is doubt as to the proper wording, the Company will prepare a special form for your signature on request.
1. One Beneficiary Jane Doe, wife of the Annuitant
2. Two Primary Beneficiaries Jane Doe, wife of the Annuitant, and John Doe, son, equally, or to the
survivor
3. One Primary and Two Contingent Beneficiaries Jane Doe, wife of the Annuitant, if living; otherwise to John
Doe and Mary Doe, children of the Annuitant, equally, or to the survivor
4. One Primary and One Contingent Beneficiary Jane Doe, wife of the Annuitant, if living; otherwise to John Doe, son
5. Two Primary and One Contingent Beneficiary John Doe and Mary Doe, parents of the Annuitant, equally,
or to the survivor; otherwise, to Jane Doe, sister of the Annuitant
6. Wife, Primary; Named and Unnamed Children, Jane Doe, wife of the Annuitant, if living; otherwise to Henry Doe,
Contingent Beneficiaries Barbara Doe, and Paul Doe, children of the Annuitant, and any other
then living children born of the marriage of the Annuitant and said
wife, equally, or to the survivors
7. Wife, Primary; Children and Step-Children Mary Doe, wife of the Annuitant, if living; otherwise, Henry Doe, son
Contingents of the Annuitant, Mary Doe, step-daughter of the Annuitant, and any
then living children born of the marriage of the Annuitant and said
wife, equally, or to the survivor
8. Wife, Primary; Unnamed Children with Jane Doe, wife of the Annuitant, if living; otherwise any then living
Second Contingents children born of the marriage of the Annuitant and said wife, equally,
or to the survivor; otherwise to Harry Doe and Mabel Doe, parents of
the Annuitant, equally, or to the survivor
9. Business Designations A. The Beacon Oil Company, Incorporated, a Texas Corporation Houston,
Texas, employer (or creditor), or its successors or assigns
B. John Doe, Business Partner
C. Harry Doe, Employer (or employee)
10. Trustee - Written Trust The American General Bank, Houston, Texas, as Trustee, or its
successors in Trust, under Trust Instrument dated May 31, 1995
Trustee - Testamentary Trust Trustee as provided in the Last Will and Testament of the Annuitant,
or successors thereunder
11. Estate The Executors, Administrators, or Assigns of the Annuitant
</TABLE>
USL 8876-1
Page 16
<PAGE>
THE UNITED STATES LIFE Insurance Company SELECT RESERVE
IN THE CITY OF NEW YORK ("USL") VARIABLE ANNUITY
LOGO
Administrative Center: Houston, TX
To Obtain a Statement of Additional Information, please complete the form below
and mail to:
THE UNITED STATES Life Insurance Company In the City of New York
Attn: Administrative Center
P.O. Box 1401
Houston, TX 77251-1401
Please send a Statement of Additional Information for the SELECT RESERVE
Variable Annuity to me at the following address:
____________________________________________
Name
____________________________________________
Address
____________________________________________
City/State Zip Code
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK.]
<PAGE>
THE UNITED STATES LIFE INSURANCE COMPANY
IN THE CITY OF NEW YORK
SEPARATE ACCOUNT USL VA-R
SELECT RESERVE(SM)
FLEXIBLE PAYMENT VARIABLE AND
FIXED GROUP DEFERRED ANNUITY CERTIFICATES
OFFERED BY
THE UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK
ADMINISTRATIVE CENTER
P.O. BOX 1401, HOUSTON, TEXAS 77251-1401
1-800-246-1924
STATEMENT OF ADDITIONAL INFORMATION
Dated April 3, 2000
This Statement of Additional Information ("Statement") is not a prospectus. You
should read it with the Prospectus for The United States Life Insurance Company
in the City of New York Separate Account USL VA-R (the "Separate Account"),
dated April 3, 2000, concerning flexible payment variable and fixed group
deferred annuity Select Reserve(SM) certificates (the "Certificates"). The
Separate Account invests in certain Series of the:
. American General Series Portfolio Company,
. Hotchkis and Wiley Variable Trust,
. LEVCO Series Trust,
. Navellier Variable Insurance Series Fund, Inc.,
. OFFIT Variable Insurance Fund, Inc.,
. Royce Capital Fund, and
. Wright Managed Blue Chip Series Trust.
You can obtain a copy of the Prospectus for the Certificates and any Prospectus
supplements by contacting The United States Life Insurance Company in the City
of New York ("USL") at the address or telephone numbers given above. You have
the option of receiving benefits on a fixed basis through USL's Fixed Account or
on a variable basis through USL's Separate Account. Terms have the same meaning
in this Statement that they do in the Prospectus under the heading
"Definitions."
1
<PAGE>
TABLE OF CONTENTS
General Information......................................................... 2
Regulation and Reserves..................................................... 2
Independent Auditors........................................................ 3
Services.................................................................... 3
Principal Underwriter....................................................... 4
Annuity Payments............................................................ 4
Gender of Annuitant....................................................... 4
Misstatement of Age or Gender and Other Errors............................ 4
Change of Investment Adviser or Investment Policy........................... 4
Performance Data for the Divisions.......................................... 5
Average Annual Total Return Calculations.................................. 5
Cumulative Total Return Calculations...................................... 5
Hypothetical Performance.................................................. 5
Money Market Division Yield and Effective Yield Calculations.............. 7
Performance Comparisons................................................... 8
Effect of Tax-deferred Accumulation......................................... 8
Financial Statements........................................................ 9
Index to Financial Statements............................................... 10
GENERAL INFORMATION
USL is a stock life insurance company established under the laws of the state of
New York. The Company is a wholly-owned subsidiary of USLIFE Corporation, which
in turn is a wholly-owned subsidiary of AGC Life Insurance Company, a Missouri
corporation ("AG Missouri"). It is engaged primarily in the life insurance
business and annuity business. AG Missouri, in turn, is a wholly-owned
subsidiary of American General Corporation, a Texas holding corporation engaged
primarily in the insurance business.
REGULATION AND RESERVES
USL is subject to regulation and supervision by the State of New York, where it
is licensed to do business. This regulation covers a variety of areas,
including:
. benefit reserve requirements,
. adequacy of insurance company capital and surplus,
. various operational standards, and
. accounting and financial reporting procedures.
2
<PAGE>
USL's operations and accounts are subject to periodic examination by insurance
regulatory authorities.
Under most insurance guaranty fund laws, a state can assess insurers doing
business in the state for covered insurance contract losses incurred by
insolvent companies. State laws set limits for these assessments. However, USL
cannot reasonably estimate the amount of any future assessments of USL under
these laws. Most states have the authority to excuse or defer an assessment, if
it would threaten an insurer's own financial strength. The Account Value held
in the Separate Account may not be covered by insurance guaranty fund laws. The
Account Value held in the Fixed Account is covered by the insurance guaranty
fund laws.
The federal government generally has not directly regulated the business of
insurance. However, federal initiatives often have an impact on the business in
a variety of ways. Federal measures that may adversely affect the insurance
business include:
. employee benefit regulation,
. tax law changes affecting the taxation of insurance companies or of
insurance products,
. changes in the relative desirability of various personal investment
vehicles, and
. removal of impediments on the entry of banking institutions into the
business of insurance.
Also, both the executive and legislative branches of the federal government are
considering various insurance regulatory matters. This could ultimately result
in direct federal regulation of some aspects of the insurance business. USL
cannot predict whether this will occur or, if it does, what the effect on USL
would be.
State insurance law requires USL to carry reserves on its books, as liabilities,
to meet its obligations under outstanding insurance contracts. USL bases these
reserves on assumptions about future claims experience and investment returns,
among other things.
Neither the reserve requirements nor the other aspects of state insurance
regulation provide absolute protection to holders of insurance contracts,
including the Certificates, if USL were to incur claims or expenses at rates
significantly higher than expected. This might happen, for example, due to a
spread of acquired immune deficiency syndrome or other infectious diseases or
catastrophes, or significant unexpected losses on its investments.
INDEPENDENT AUDITORS
The 1999 financial statements of USL included in this Statement were audited by
Ernst & Young LLP, independent auditors, as set forth in their reports,
appearing elsewhere herein, and are included in reliance upon such reports given
on the authority of such firm as experts in accounting and auditing. Ernst &
Young LLP is located at 787 Seventh Avenue, New York, New York 10019.
SERVICES
USL and American General Life Companies ("AGLC") are parties to a services
agreement. Most of the affiliated companies within the American General
Corporation holding company system, including certain life insurance companies,
are also parties to a similar agreement. AGLC is a corporation incorporated in
Delaware on November 24, 1997, with its home office located at 2727-A Allen
Parkway, Houston, Texas 77019. AGLC provides shared services to USL and certain
other life insurance companies at cost. These services include data processing,
systems, customer services,
3
<PAGE>
product development, actuarial, auditing, accounting, and legal. USL paid AGLC
$16,649,989 in 1999.
PRINCIPAL UNDERWRITER
American General Securities Incorporated ("AGSI") is the principal underwriter
for the Certificates. AGSI also serves as principal underwriter to USL's
Separate Account USL VL-R, to American General Life Insurance Company of New
York's Separate Account E, and to AGL's Separate Account A, Separate Account D,
and Separate Account VL-R, all of which are unit investment trusts registered
under the Investment Company Act of 1940. AGSI, a Texas corporation, is a
wholly-owned subsidiary of AGL and a member of the National Association of
Securities Dealers, Inc.
As principal underwriter for the Separate Account, AGSI received no compensation
from USL for any of the past three fiscal years.
USL offers the securities under the Certificates on a continuous basis.
ANNUITY PAYMENTS
GENDER OF ANNUITANT
When annuity payments are based on life expectancy, the amount of each annuity
payment ordinarily will be higher if the Annuitant or other measuring life is a
male, as compared with a female, under an otherwise identical Certificate. This
is because, statistically, females tend to have longer life expectancies than
males.
However, Montana, and certain other jurisdictions, do not permit differences in
annuity payment rates between males and females.
In addition, employers should be aware that, under most employer-sponsored
plans, the law prohibits Certificates that make distinctions based on gender.
Under these plans, USL will make available Certificates with no such
differences.
MISSTATEMENT OF AGE OR GENDER AND OTHER ERRORS
If the age or gender of an Annuitant has been misstated to us, any amount
payable will be the amount that the purchase payments paid would have purchased
at the correct age and gender. If we made any overpayments because of incorrect
information about age or gender or any error or miscalculation, we will deduct
the overpayment from the next payment or payments due. We will add any
underpayments to the next payment. We will credit or charge the amount of any
adjustment with interest at the assumed interest rate used in the Certificate's
annuity tables.
CHANGE OF INVESTMENT ADVISER OR INVESTMENT POLICY
Unless otherwise permitted by law or regulation, no Series may change the
investment adviser to any Series or any investment policy without the consent of
the shareholders. If required, we will file approval of or change of any
investment objective with the insurance department of each state where a
Certificate has been delivered. We will notify you (or, after annuity payments
start, the payee) of any material investment policy change that we have
approved. We will also notify you of any investment policy change before its
implementation by the Separate Account, if the change requires your comment or
vote.
4
<PAGE>
PERFORMANCE DATA FOR THE DIVISIONS
We may quote investment results for the available Divisions of Separate Account
USL VA-R from time to time. These results will not be an estimate or guarantee
of future investment performance. Nor will they represent the actual experience
of amounts invested by a particular Owner. We will carry performance figures to
the nearest one-hundredth of one percent. We may include in the figures the
effect of voluntary fee waivers and expense reimbursements to the Funds from
their investment adviser and administrator.
AVERAGE ANNUAL TOTAL RETURN CALCULATIONS
Each Division may advertise its average annual total return. We calculate each
Division's average annual total return quotation under the following standard
method that the Securities and Exchange Commission ("SEC") prescribes:
.. We take a hypothetical $1,000 investment in the Division's Accumulation
Units on the first day of the period at the maximum offering price. This
figure is the Accumulation Unit Value per unit ("initial investment").
, We calculate the ending redeemable value ("redeemable value") of that
investment at the end of the period. The redeemable value reflects the
effect of all recurring charges and fees applicable under the Certificate to
all Owner accounts. Recurring charges and fees include the Mortality and
Expense Risk Charge and the Administrative Expense Charge. We do not reflect
any premium taxes in the calculation.
.. We divide the redeemable value by the initial investment.
.. We take this quotient to the Nth root (N representing the number of years in
the period), subtract 1 from the result, and express the result as a
percentage.
CUMULATIVE TOTAL RETURN CALCULATIONS
Each Division may also advertise cumulative total return performance.
Cumulative total return performance is the compound rate of return on a
hypothetical initial investment of $1,000 in each Division's Accumulation Units
on the first day of the period at the maximum offering price. This figure is
the Accumulation Unit value per unit ("initial investment"). Cumulative total
return figures (and the related "Growth of a $1,000 Investment" figures set
forth below) do not include the effect of any premium taxes. Cumulative total
return figures reflect changes in Accumulation Unit value. We calculate these
quotations by finding the cumulative rates of return of the hypothetical initial
investment over various periods, according to the following formula, and then
expressing those rates as a percentage:
C = (ERV/P) - 1
Where:
C = cumulative total return
P = a hypothetical initial investment of $1,000
ERV = ending redeemable value at the end of the applicable period of a
hypothetical $1,000 investment made at the beginning of the applicable
period.
HYPOTHETICAL PERFORMANCE
Each Division may advertise hypothetical performance, based on the calculations
described above, where all or a portion of the actual historical performance of
the corresponding Series in which the
5
<PAGE>
Division invests pre-dates the effective date of the Division. The tables below
provide hypothetical performance information for the available Divisions of the
Separate Account based on the actual historical performance of the corresponding
Series in which each of these Divisions invests. This information reflects all
actual charges and deductions of these Series and the Separate Account that
hypothetically would have been made if the Separate Account invested assets
under the Certificates in these Series for the periods indicated.
All of the actual historical performance of the corresponding Series, as of the
date of this Statement, predates the effective date of the Division investing in
that Series. The tables below will be revised, in future Statements, to show
actual annual historical performance that occurs after the effective date of a
Division.
Hypothetical Historical Average Annual Total Returns
(Through December 31, 1999)
<TABLE>
<CAPTION>
Since
Series
Investment Division One Year/1/ Five Years/1/ Ten Years/1/ Inception/1, 2/
- ------------------- ------------ -------------- ------------- ----------------
<S> <C> <C> <C> <C>
Hotchkis and Wiley Equity Income VIP (3.11)% N/A N/A (5.55)%
Hotchkis and Wiley Low Duration VIP 2.02% N/A N/A 3.28%
LEVCO Equity Value 15.26% N/A N/A 10.72%
Navellier Growth 91.89% N/A N/A 51.21%
OFFIT VIF-Emerging Markets 24.52% N/A N/A 4.80%
OFFIT VIF-High Yield (1.18)% N/A N/A 6.30%
OFFIT VIF-Total Return (2.66)% N/A N/A (0.88)%
OFFIT VIF-U.S. Gov. Securities N/A N/A N/A (1.19)%
Royce Premier 7.79% N/A N/A 11.03%
Wright International Blue Chip 31.70% 13.69% N/A 9.56%
Wright Selected Blue Chip 13.60% 17.25% N/A 12.88%
Money Market 4.33% 4.49% 4.21% N/A
</TABLE>
Hypothetical Historical Cumulative Total Returns
(Through December 31,1999)
<TABLE>
<CAPTION>
Since
Series
Investment Division One Year/1/ Five Years/1/ Ten Years/1/ Inception/1, 2/
- ------------------- ----------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
Hotchkis and Wiley Equity Income VIP (3.11)% N/A N/A (9.71)%
Hotchkis and Wiley Low Duration VIP 2.02% N/A N/A 5.95%
LEVCO Equity Value 15.26% N/A N/A 18.09%
Navellier Growth 91.89% N/A N/A 114.11%
OFFIT VIF-Emerging Markets 24.52% N/A N/A 16.95%
OFFIT VIF-High Yield (1.18)% N/A N/A 25.71%
OFFIT VIF-Total Return (2.66)% N/A N/A (1.33)%
OFFIT VIF-U.S. Gov. Securities N/A N/A N/A (0.90)%
Royce Premier 7.79% N/A N/A 37.02%
Wright International Blue Chip 31.70% 90.03% N/A 72.78%
Wright Selected Blue Chip 13.60% 121.74% N/A 106.63%
Money Market 4.33% 24.57% 51.02% N/A
</TABLE>
6
<PAGE>
Hypothetical Historical Growth of a $1,000 Investment in the Divisions
(Through December 31, 1999)
<TABLE>
<CAPTION>
Since
Series
Investment Division One Year/1/ Five Years/1/ Ten Years/1/ Inception/1, 2/
- ------------------- ----------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
Hotchkis and Wiley Equity Income VIP $ 969 N/A N/A $ 903
Hotchkis and Wiley Low Duration VIP $1,020 N/A N/A $1,060
LEVCO Equity Value $1,153 N/A N/A $1,181
Navellier Growth $1,919 N/A N/A $2,141
OFFIT VIF-Emerging Markets $1,245 N/A N/A $1,169
OFFIT VIF-High Yield $ 988 N/A N/A $1,257
OFFIT VIF-Total Return $ 973 N/A N/A $ 987
OFFIT VIF-U.S. Gov. Securities N/A N/A N/A $ 991
Royce Premier $1,078 N/A N/A $1,370
Wright International Blue Chip $1,317 $1,900 N/A $1,728
Wright Selected Blue Chip $1,136 $2,217 N/A $2,066
Money Market $1,043 $1,246 $1,510 N/A
- --------------------------
</TABLE>
/1/ "N/A" reflects SEC rules that require us to show return information for no
more than 10 years.
/2/ The inception dates for each Series funding the Divisions listed above are:
Money Market, January 16, 1986; Wright International Blue Chip and Wright
Selected Blue Chip, January 5, 1994; OFFIT VIF-High Yield, April 4, 1996; OFFIT
VIF-Emerging Markets, August 28, 1996; Royce Premier, December 27, 1996; LEVCO
Equity Value, August 4, 1997; Navellier Growth, February 27, 1998; Hotchkis and
Wiley Equity Income VIP and Hotchkis and Wiley Low Duration VIP, March 18, 1998;
OFFIT VIF-Total Return, June 29, 1998; OFFIT VIF-U.S. Government Securities,
March 31, 1999.
MONEY MARKET DIVISION YIELD AND EFFECTIVE YIELD CALCULATIONS
We calculate the Money Market Division's yield for which we use a standard
method that the SEC prescribes. Under that method, we base the current yield
quotation on a seven-day period and calculate that yield as follows:
. We take the net change in the Accumulation Unit value during the period.
. We divide that net change by the Accumulation Unit value at the beginning of
the period to obtain the base period return.
. We multiply the base period return by the fraction 365/7 to obtain the
current yield figure.
. We carry the current yield figure to the nearest one-hundredth of one
percent.
We do not include realized capital gains or losses and unrealized appreciation
or depreciation of the Division's Portfolio in the calculation. The Money
Market Division's hypothetical historical yield for the seven-day period ended
December 31, 1999 was 4.31%.
We determine the Money Market Division's effective yield by taking the base
period return (computed as described above) and calculating the effect of
assumed compounding. The formula for the effective yield is: (base period
return +1)/365/7/ -1. The Money Market Division's hypothetical historical
effective yield for the seven day period ended December 31, 1999 was 4.41%.
Yield and effective yield do not reflect the deduction of premium taxes that
may be imposed upon the redemption of Accumulation Units.
7
<PAGE>
PERFORMANCE COMPARISONS
In our advertising and sales literature, we may compare the performance of each
or all of the available Divisions of the Separate Account to the performance of
(1) other variable annuities in general or (2) particular types of variable
annuities that invest in mutual funds, or series of mutual funds, with
investment objectives similar to each of the Divisions of the Separate Account.
Lipper Inc. ("Lipper") and the Variable Annuity Research and Data Service
("VARDS (R)") are independent services that monitor and rank the performance of
variable annuity issuers in each of the major categories of investment
objectives on an industry-wide basis. Lipper's rankings include variable life
insurance issuers as well as variable annuity issuers. VARDS (R) rankings
compare only variable annuity issuers. The performance analyses prepared by
Lipper and VARDS (R) rank such issuers on the basis of total return. Total
return assumes the reinvestment of dividends and distributions, but does not
take into consideration sales charges, redemption fees or certain expense
deductions at the separate account level. In addition, VARDS (R) prepares risk-
adjusted rankings, which consider the effects of market risk on total return
performance.
In addition, we may compare each Division's performance in advertisements and
sales literature to the following benchmarks:
.. the Standard & Poor's 500 Composite Stock Price Index, an unmanaged weighted
index of 500 leading domestic companies that represents approximately 80% of
the market capitalization of the United States equity market;
.. the Dow Jones Industrial Average, an unmanaged unweighted average of 30 blue
chip industrial corporations listed on the New York Stock Exchange and
generally considered representative of the United States stock market;
.. the Consumer Price Index, published by the U.S. Bureau of Labor Statistics,
a statistical measure of change, over time, in the prices of goods and
services in major spending groups and generally is considered to be a
measure of inflation;
.. the Lehman Brothers Government and Domestic Strategic Income Index, the
Salomon Brothers High Grade Domestic Strategic Income Index, and the Merrill
Lynch Government/Corporate Master Index, unmanaged indices that are
generally considered to represent the performance of intermediate and long
term bonds during various market cycles; and
.. the Morgan Stanley Capital International Europe Australasia Far East Index,
an unmanaged index that is considered to be generally representative of
major non-United States stock markets.
EFFECT OF TAX-DEFERRED ACCUMULATION
The Certificates qualify for tax-deferred treatment on earnings. This tax-
deferred treatment increases the amount available for accumulation by deferring
taxes on any earnings until the earnings are withdrawn. The longer the taxes are
deferred, the more the potential you have for the assets under your Certificate
to grow over the term of the Certificates.
8
<PAGE>
The hypothetical tables set out below illustrate this potential. The tables
compare accumulations based on a single initial purchase payment of $100,000
compounded annually under:
.. a Certificate, under which earnings are not taxed until withdrawn in
connection with a full surrender, partial withdrawal, or annuitization, or
termination due to insufficient Account Value ("withdrawal of earnings") and
.. an investment under which earnings are taxed on a current basis ("Taxable
Investment"), based on an assumed tax rate of 28%, and the assumed earning
rates specified.
5 Years 10 Years 20 Years
-------- -------- --------
(7.50% earnings rate)
Certificate $143,563 $206,103 $424,785
Certificate (after Taxes) $131,365 $176,394 $333,845
Taxable Investment $130,078 $169,202 $286,294
(10.00% earnings rate)
Certificate $161,051 $259,374 $672,750
Certificate (after Taxes) $143,957 $214,749 $512,380
Taxable Investment $141,571 $200,423 $401,694
The hypothetical tables do not reflect any fees or charges under a Certificate
or Taxable Investment. However, the Certificates impose:
. a Mortality and Expense Risk Charge of 0.36%, and
. an Administrative Expense Charge of 0.04%.
A Taxable Investment could incur comparable fees or charges. Fees and charges
would reduce the return from a Certificate or Taxable Investment.
Under the Certificates, a withdrawal of earnings is subject to tax, and may be
subject to an additional 10% tax penalty before age 59 1/2..
These tables are only illustrations of the effect of tax-deferred accumulations
and are not a guarantee of future performance.
FINANCIAL STATEMENTS
There are no current financial statements for the Separate Account included in
this Statement, because, as of the date of this Statement, the Separate Account
had funded no Certificates and held no assets.
You should consider the financial statements of USL that we include in this
Statement primarily as bearing on the ability of USL to meet its obligations
under the Certificates.
9
<PAGE>
INDEX TO
FINANCIAL STATEMENTS
Page No.
--------
USL Financial Statements
Years Ended December 31, 1999, 1998, and 1997
Report of Independent Auditors........................................ F-1
Balance Sheets........................................................ F-2
Statements of Income.................................................. F-4
Statements of Comprehensive Income.................................... F-5
Statements of Shareholder's Equity.................................... F-6
Statements of Cash Flows.............................................. F-7
Notes to Financial Statements......................................... F-8
10
<PAGE>
[LETTERHEAD OF ERNST & YOUNG APPEARS HERE]
Report of Independent Auditors
Board of Directors and Shareholder
The United States Life Insurance Company
in the City of New York
We have audited the accompanying balance sheets of The United States Life
Insurance Company in the City of New York (an indirectly wholly owned subsidiary
of American General Corporation) as of December 31, 1999 and 1998, and the
related statements of income, comprehensive income, shareholder's equity, and
cash flows for each of the three years in the period ended December 31, 1999.
These financial statements are the responsibility of the Company'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 United States Life
Insurance Company in the City of New York 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 accounting principles
generally accepted in the United States.
/s/ ERNST & YOUNG LLP
--------------------------------
March 21, 2000 ERNST & YOUNG LLP
F-1
<PAGE>
The United States Life Insurance Company in the City of New York
Balance Sheets
<TABLE>
<CAPTION>
DECEMBER 31
1999 1998
---------------------------
(In Thousands)
<S> <C> <C>
ASSETS
Investments:
Fixed maturity securities, at fair value
(amortized cost - $1,688,015 in 1999 and
$1,897,758 in 1998) $1,665,005 $2,047,519
Equity securities, at fair value
(cost - $673 in 1999 and $568 in 1998) 735 584
Mortgage loans on real estate 112,031 84,387
Policy loans 82,784 84,412
Investment real estate 1,556 6,101
Other long-term investments 12,948 1,385
Short-term investments 191,474 3,005
---------- ----------
Total investments 2,066,533 2,227,393
Cash 8,571 5,045
Indebtedness from affiliates 1,170 6,832
Accrued investment income 33,724 37,227
Accounts and premiums receivable 93,275 231,863
Reinsurance recoverable 629,306 620,661
Deferred policy acquisition costs 146,686 98,552
Property and equipment 4,345 4,318
Other assets 18,369 12,886
---------- ----------
Total assets $3,001,979 $3,244,777
========== ==========
</TABLE>
See accompanying notes.
F-2
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31
1999 1998
---------------------------
(In Thousands)
<S> <C> <C>
LIABILITIES AND SHAREHOLDER'S EQUITY
Liabilities:
Future policy benefits
Life and Annuity $1,675,300 $1,729,001
Accident & Health 385,877 407,942
Other policy claims and benefits payable 117,684 116,912
Other policyholders' funds 109,832 109,130
Federal income taxes (51,159) (7,585)
Indebtedness to affiliates 1,568 1,848
Reinsurance payable 258,889 245,576
Other liabilities 108,921 118,339
---------- ----------
Total liabilities 2,606,912 2,721,163
========== ==========
Shareholder's equity:
Common stock, $2 par value, 1,980,658
shares authorized, issued, and
outstanding 3,961 3,961
Additional paid-in capital 8,361 8,361
Accumulated other comprehensive income (12,915) 53,394
Retained earnings 395,660 457,898
---------- ----------
Total shareholder's equity 395,067 523,614
---------- ----------
Total liabilities and shareholder's equity $3,001,979 $3,244,777
========== ==========
</TABLE>
See accompanying notes.
F-3
<PAGE>
The United States Life Insurance Company in the City of New York
Statements of Income
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1999 1998 1997
---------------------------------
(In Thousands)
<S> <C> <C> <C>
Revenues:
Premiums and other considerations $205,554 $594,155 $666,173
Net investment income 166,695 185,838 189,262
Net realized investment gains (losses) 4,689 (3,951) (3,116)
Other 6,330 4,901 26,576
---------------------------------
Total revenues 383,268 780,943 878,895
---------------------------------
Benefits and expenses:
Benefits 203,967 514,020 594,021
Operating costs and expenses 124,372 221,115 212,977
Loss on reinsurance settlements - 59,878 -
Litigation settlement - 30,689 -
Change in control costs - - 6,955
---------------------------------
Total benefits and expenses 328,339 825,702 813,953
---------------------------------
Income (loss) before income tax
expense (benefit) 54,929 (44,759) 64,942
Income tax expense (benefit) 19,167 (19,308) 22,700
---------------------------------
Net income (loss) $ 35,762 $(25,451) $ 42,242
=================================
</TABLE>
See accompanying notes.
F-4
<PAGE>
The United States Life Insurance Company in the City of New York
Statements of Comprehensive Income
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1999 1998 1997
---------------------------------
(In Thousands)
<S> <C> <C> <C>
Net income (loss) $ 35,762 $(25,451) $ 42,242
----------------------------------
Other comprehensive (loss) income:
Gross change in unrealized (losses) gains (162,179) 8,995 63,302
DPAC 61,197 (13,917) (16,397)
Tax (benefit) expense (35,345) (1,724) 16,417
----------------------------------
Net (loss) gain (65,637) (3,198) 30,488
----------------------------------
Less:
Gains (losses) realized in net income 5,321 (4,166) 3,911
DPAC (4,289) (85) (741)
Tax expense (benefit) 360 (1,489) 1,110
----------------------------------
Net (loss) gain 672 (2,762) 2,060
----------------------------------
Change in net unrealized (losses) gains (66,309) (436) 28,428
----------------------------------
Comprehensive (loss) income $ (30,547) $(25,887) $ 70,670
==================================
</TABLE>
See accompanying notes.
F-5
<PAGE>
The United States Life Insurance Company in the City of New York
Statements of Shareholder's Equity
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1999 1998 1997
---------------------------------
(In Thousands)
<S> <C> <C> <C>
Common stock:
Balance at beginning of year $ 3,961 $ 3,961 $ 3,961
Change during year - - -
----------------------------------
Balance at end of year 3,961 3,961 3,961
----------------------------------
Additional paid-in capital:
Balance at beginning of year 8,361 8,361 8,361
Change during year - - -
----------------------------------
Balance at end of year 8,361 8,361 8,361
----------------------------------
Accumulated other comprehensive income:
Balance at beginning of year 53,394 53,830 25,402
Change in unrealized (losses) gains on
securities (66,309) (436) 28,428
----------------------------------
Balance at end of year (12,915) 53,394 53,830
----------------------------------
Retained earnings:
Balance at beginning of year 457,898 483,349 441,107
Net income (loss) 35,762 (25,451) 42,242
Dividends paid (98,000) - -
----------------------------------
Balance at end of year 395,660 457,898 483,349
----------------------------------
Total shareholder's equity $395,067 $523,614 $549,501
==================================
</TABLE>
See accompanying notes.
F-6
<PAGE>
The United States Life Insurance Company in the City of New York
Statements of Cash Flows
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1999 1998 1997
-----------------------------------------
(In Thousands)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 35,762 $ (25,451) $ 42,242
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Change in accounts and premiums receivable 138,588 (167,146) (6,977)
Change in future policy benefits (52,714) 174,629 82,006
Amortization of policy acquisition costs 44,123 66,331 58,583
Policy acquisition costs deferred (31,030) (62,766) (62,651)
Change in other policyholders' funds 5,927 22,573 21,783
Provision for deferred income tax expense 2,495 (45,403) (995)
Depreciation 1,294 1,327 1,100
Amortization (4,858) (1,734) (2,360)
Change in indebtedness to/from affiliates 5,382 (8,019) 3,415
Change in reinsurance balances 4,668 (321,733) (9,492)
Net (gain) loss on sale of investments (4,689) 3,951 3,116
Other, net (21,051) 118,537 39,806
-----------------------------------------
Net cash provided by (used in) operating
activities 123,897 (244,904) 169,576
-----------------------------------------
INVESTING ACTIVITIES
Purchases of investments and loans made (4,284,385) (2,833,731) (2,407,890)
Sales or maturities of investments and
receipts from repayment of loans 4,286,356 3,183,379 2,507,408
Sales and purchases of property, equipment, and
software, net (1,290) (3,674) 274
-----------------------------------------
Net cash provided by investing activities 681 345,974 99,792
-----------------------------------------
FINANCING ACTIVITIES
Policyholder account deposits 138,580 131,386 135,668
Policyholder account withdrawals (161,632) (232,245) (407,383)
Dividends paid (98,000) - -
-----------------------------------------
Net cash (used in) financing activities (121,052) (100,859) (271,715)
-----------------------------------------
Increase (decrease) in cash 3,526 211 (2,347)
Cash at beginning of year 5,045 4,834 7,181
-----------------------------------------
Cash at end of year $ 8,571 $ 5,045 $ 4,834
=========================================
</TABLE>
Interest paid amounted to approximately $0.4 million and $5.3 million in 1999
and 1998, respectively. There was no interest paid in 1997.
See accompanying notes.
F-7
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements
December 31, 1999
NATURE OF OPERATIONS
The United States Life Insurance Company in the City of New York (the "Company")
is domiciled in the State of New York. The Company is a wholly owned subsidiary
of USLIFE Corporation. Through the acquisition of USLIFE Corporation by American
General Corporation (the "Parent Company") on June 17, 1997, American General
Corporation became the ultimate parent of the Company.
The Company offers a broad portfolio of individual life and annuity products as
well as group and credit insurance.
The individual life line of business includes universal life, level term, whole
life and interest sensitive whole life as well as annuities. These individual
and annuity products are sold primarily to affluent markets, generally through
independent general agencies and producers as well as financial institutions.
The Company also provides products for preferred international markets and other
target markets through lower cost distribution channels.
Group insurance products include group life, accidental death & dismemberment
("AD&D"), dental, vision and disability coverage and are sold through
independent general agents and producers as well as third party administrators.
These products are marketed nationwide to employers, professional and affinity
associations. The Company also offers managed care medical products to small
employers in four states (New York, New Jersey, Colorado and Illinois).
1. ACCOUNTING POLICIES
1.1 PREPARATION OF FINANCIAL STATEMENTS
The financial statements have been prepared in accordance with generally
accepted accounting principles ("GAAP"). Transactions with the Parent Company
and other subsidiaries of the Parent Company are not eliminated from the
financial statements of the Company.
The preparation of financial statements requires management to make estimates
and assumptions that affect amounts reported in the financial statements and
disclosures of contingent assets and liabilities. Ultimate results could differ
from those estimates.
1.2 INSURANCE CONTRACTS
The insurance contracts accounted for in these financial statements include both
long-duration and short-duration contracts.
Long-duration contracts include traditional whole life, endowment, guaranteed
renewable term life, universal life, limited payment, and investment contracts.
Long-duration
F-8
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
1.2 INSURANCE CONTRACTS (CONTINUED)
contracts generally require the performance of various functions and services
over a period of more than one year.
Short-duration contracts include group major medical, dental, term life, AD&D,
excess major medical, hospital indemnity and long-term and short-term disability
policies. Short-term contracts generally require the performance of various
functions and services over a period of one year or less.
The contract provisions generally cannot be changed or canceled by the insurer
during the contract period; however, most new contracts written by the Company
allow the insurer to revise certain elements used in determining premium rates
or policy benefits, subject to guarantees stated in the contracts.
1.3 INVESTMENTS
FIXED MATURITY AND EQUITY SECURITIES
All fixed maturity and equity securities were classified as available-for-sale
and recorded at fair value at December 31, 1999, 1998 and 1997. After adjusting
related balance sheet accounts as if the unrealized gains (losses) had been
realized, the net adjustment is recorded in accumulated other comprehensive
income within shareholders' equity. If the fair value of a security classified
as available-for-sale declines below its cost and this decline is considered to
be other than temporary, the security is reduced to its fair value, and the
reduction is recorded as a realized loss.
MORTGAGE LOANS
Mortgage loans are reported at amortized cost, net of an allowance for losses.
The allowance for losses covers all non-performing loans and loans for which
management has a concern based on its assessment of risk factors, such as
potential non-payment or non-monetary default. The allowance is based on a loan-
specific review and a formula that reflects past results and current trends.
Loans for which the Company determines that collection of all amounts due under
the contractual terms is not probable are considered to be impaired. The Company
generally looks to the underlying collateral for repayment of impaired loans.
Therefore, impaired loans are considered to be collateral dependent and are
reported at the lower of amortized cost or fair value of the underlying
collateral, less estimated cost to sell.
F-9
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
1.3 INVESTMENTS (CONTINUED)
POLICY LOANS
Policy loans are reported at unpaid principal balance.
INVESTMENT REAL ESTATE
Investment real estate is classified as held for investment or available for
sale, based on management's intent. Real estate held for investment is carried
at cost, less accumulated depreciation and impairment write-downs. Real estate
available for sale is carried at the lower of cost (less accumulated
depreciation, if applicable) or fair value less cost to sell.
INVESTMENT INCOME
Interest on fixed maturity securities and performing and restructured mortgage
loans is recorded as income when earned and is adjusted for any amortization of
premium or discount. Interest on delinquent mortgage loans is recorded as income
when received. Dividends are recorded as income on ex-dividend dates.
REALIZED INVESTMENT GAINS
Realized investment gains (losses) are recognized using the specific-
identification method.
1.4 DEFERRED POLICY ACQUISITION COSTS ("DPAC")
Certain costs of writing an insurance policy, including commissions,
underwriting, and marketing expenses, are deferred and reported as DPAC.
DPAC associated with interest-sensitive life contracts is charged to expense in
relation to the estimated gross profits of those contracts. DPAC associated with
insurance investment contracts is effectively charged off over the period ending
one year beyond the surrender charge period. DPAC associated with all other
insurance contracts is charged to expense over the premium-paying period or as
the premiums are earned over the life of the contract.
DPAC associated with interest-sensitive life contracts is adjusted for the
impact on estimated future gross profits as if net unrealized gains (losses) on
securities had been realized at the balance sheet date. The impact of this
adjustment is included in accumulated other comprehensive income within
shareholder's equity.
The Company reviews the carrying amount of DPAC on at least an annual basis.
Management considers estimated future gross profits or future premiums, future
lapse
F-10
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
1.4 DEFERRED POLICY ACQUISITION COSTS ("DPAC") (CONTINUED)
rates, expected mortality/morbidity, interest earned and credited rates,
persistency, and expenses in determining whether the carrying amount is
recoverable.
1.5 PREMIUM RECOGNITION
Most receipts for annuities and interest-sensitive life insurance policies are
classified as deposits instead of revenue. Revenues for these contracts consist
of mortality, expense, and surrender charges. Policy charges that compensate the
Company for future services are deferred and recognized in income over the
period earned, using the same assumptions used to amortize DPAC (see Note 1.4).
For all other contracts, premiums are recognized when due.
1.6 POLICY AND CONTRACT CLAIMS RESERVES
The Company's insurance and annuity liabilities relate to both long-duration and
short-duration contracts. The contracts normally cannot be changed or canceled
by the Company during the contract period.
For long-duration contracts such as interest-sensitive life and insurance
investment contracts, reserves equal the sum of the policy account balance and
deferred revenue charges. Reserves for other long-duration contracts are based
on estimates of the cost of future policy benefits. Reserves are determined
using the net level premium method. Interest assumptions used to compute
reserves ranged from 2.2% to 11.25% at December 31, 1999.
Short-duration contracts are rated based on attained age and are guaranteed
issue and thus not subject to the normal wear-off mortality/morbidity patterns.
No policy reserves other than unearned premium reserves are held. The unearned
premium reserve is based on gross premium and is calculated on a pro rata basis.
Incurred but not reported claim reserves are based upon patterns demonstrated
through run-out studies. Reserves for open long-term disability claims are based
on the 1985 Commissioner Disability Tables, modified for company experience. The
interest rate assumption varies by year of incurral, but averages 6.95%.
Waiver of premium reserves for life insurance are based on the 1970 Krieger
table, modified for company experience. The interest rate used is 6%.
F-11
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
1.7 REINSURANCE
The Company limits its exposure to loss on any single insured to $1.5 million by
ceding additional risks through reinsurance contracts with other insurers. The
Company diversifies its risk of reinsurance loss by using a number of reinsurers
that have strong claims-paying ability ratings. The Company remains obligated
for amounts ceded in the event that the reinsurers do not meet their
obligations.
A recoverable is recorded for the portion of benefits paid and insurance
liabilities that have been reinsured. The cost of reinsurance is recognized over
the life of the reinsured policies using assumptions consistent with those used
to account for the underlying policies.
Benefits paid and future policy benefits related to ceded insurance contracts
are recorded as reinsurance recoverables. The cost of reinsurance is recognized
over the life of the underlying reinsured policies using assumptions consistent
with those used to account for the underlying policies.
1.8 PARTICIPATING POLICY CONTRACTS
Participating life insurance accounted for approximately 38.7%, 36.7%, and 33.2%
of individual life insurance in force at December 31, 1999, 1998 and 1997
respectively.
The portion of earnings allocated to participating policyholders that cannot be
expected to inure to shareholders is excluded from net income and shareholder's
equity. Dividends to be paid on participating life insurance contracts are
determined annually based on estimates of the contracts' earnings. Policyholder
dividends were $2.2 million, $2.4 million and $2.6 million in 1999, 1998 and
1997 respectively.
1.9 INCOME TAXES
The Company was acquired by American General Corporation on June 17, 1997.
Following the acquisition, the Company will file a separate life company federal
income tax return for five years.
Deferred tax assets and liabilities are established for temporary differences
between the financial reporting basis and the tax basis of assets and
liabilities, at the enacted tax rates expected to be in effect when the
temporary differences reverse. The effect of a tax rate change is recognized in
income in the period of enactment.
A valuation allowance for deferred tax assets is provided if it is more likely
than not that some portion of the deferred tax asset will not be realized. An
increase or decrease in a
F-12
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
1.9 INCOME TAXES (CONTINUED)
valuation allowance that results from a change in circumstances that causes a
change in judgment about the realizability of the related deferred tax asset is
included in income. Changes related to fluctuations in fair value of available-
for-sale securities are included in accumulated other comprehensive income in
shareholder's equity.
1.10 CHANGES IN ACCOUNTING AND REPORTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued SFAS 133,
Accounting for Derivative Instruments and Hedging Activities, which requires all
derivative instruments to be recognized at fair value as either assets or
liabilities in the balance sheet. Changes in the fair value of a derivative
instrument are to be reported as earnings or other comprehensive income,
depending upon the intended use of the derivative instrument. This statement is
effective for fiscal years beginning after June 15, 2000. Adoption of SFAS 133
is not expected to have a material impact on the Company's results of operations
or financial position.
2. INVESTMENTS
2.1 INVESTMENT INCOME
Investment income by type of investment was as follows:
<TABLE>
<S> <C> <C> <C>
1999 1998 1997
---------------------------------------------
(In Thousands)
Investment income:
Fixed maturities $145,074 $176,449 $176,714
Equity securities 49 49 49
Mortgage loans on real estate 7,750 5,766 7,277
Investment real estate 744 1,556 1,365
Policy loans 5,468 5,521 5,683
Other long-term investments 2,852 310 652
Short-term investments 8,307 2,742 1,280
Investment income from affiliates 370 57 -
---------------------------------------------
Gross investment income 170,614 192,450 193,020
Investment expenses 3,919 6,612 3,758
---------------------------------------------
Net investment income $166,695 $185,838 $189,262
=============================================
</TABLE>
F-13
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
2. INVESTMENTS (CONTINUED)
2.2 NET REALIZED INVESTMENT GAINS (LOSSES)
Realized gains (losses) by type of investment were as follows:
<TABLE>
<S> <C> <C> <C>
1999 1998 1997
------------------------------------------------
(In Thousands)
Fixed maturities:
Gross gains $14,211 $ 2,860 $ 6,704
Gross losses (8,879) (7,111) (3,534)
------------------------------------------------
Total fixed maturities 5,332 (4,251) 3,170
Other investments (643) 300 (6,286)
------------------------------------------------
Net realized investment gains
(losses) before tax 4,689 (3,951) (3,116)
Income tax expense (benefit) 1,641 (1,383) (1,090)
------------------------------------------------
Net realized investment gains
(losses) after tax $ 3,048 $(2,568) $(2,026)
================================================
</TABLE>
2.3 FIXED MATURITY AND EQUITY SECURITIES
All fixed maturity and equity securities are classified as available-for-sale
and reported at fair value (see Note 1.3). Amortized cost and fair value at
December 31, 1999 and 1998 were as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAIN LOSS VALUE
-------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C>
DECEMBER 31, 1999
Fixed maturity securities:
Corporate securities:
Investment-grade $1,422,946 $21,597 $(37,943) $1,406,600
Below investment-grade 100,502 1,240 (8,904) 92,838
Mortgage-backed securities* 111,666 256 (1,067) 110,855
U.S. government obligations 8,699 535 (79) 9,155
Foreign governments 36,839 1,447 (77) 38,209
State and political subdivisions 4,466 - (161) 4,305
Redeemable preferred stocks 2,897 159 (13) 3,043
-------------------------------------------------------------
Total fixed maturity
securities $ 1,688,015 $25,234 $(48,244) $1,665,005
=============================================================
Equity securities $ 673 $ 62 $ - $ 735
=============================================================
</TABLE>
F-14
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
2. INVESTMENTS (CONTINUED)
2.3 FIXED MATURITY AND EQUITY SECURITIES (CONTINUED)
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAIN LOSS VALUE
-----------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C>
DECEMBER 31, 1998
Fixed maturity securities:
Corporate securities:
Investment-grade $1,626,339 $ 131,810 $ (1,684) $1,756,465
Below investment-grade 112,767 3,415 (1,173) 115,009
Mortgage-backed securities* 50,036 912 -- 50,948
U.S. government obligations 19,968 4,238 -- 24,206
Foreign governments 79,794 11,944 -- 91,738
State and political subdivisions 6,469 139 -- 6,608
Redeemable preferred stock 2,385 160 -- 2,545
-----------------------------------------------------
Total fixed maturity securities $1,897,758 $ 152,618 $ (2,857) $2,047,519
=====================================================
Equity securities $ 568 $ 25 $ (9) $ 584
=====================================================
</TABLE>
* Primarily include pass-through securities guaranteed by the U.S. government
and government agencies for both December 31, 1999 and 1998.
F-15
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
2. INVESTMENTS (CONTINUED)
2.3 FIXED MATURITY AND EQUITY SECURITIES (CONTINUED)
Net unrealized gains (losses) on securities included in accumulated
comprehensive income in shareholders' equity at December 31 were as follows:
<TABLE>
<CAPTION>
1999 1998
------------------------
(In Thousands)
<S> <C> <C>
Gross unrealized gains $ 25,296 $ 152,643
Gross unrealized losses (48,244) (2,866)
DPAC and other fair value adjustments 3,079 (67,632)
Deferred federal income taxes 6,954 (28,751)
------------------------
Net unrealized gains on securities $ (12,915) $ 53,394
========================
</TABLE>
The contractual maturities of fixed maturity securities at December 31, 1999 and
1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
---------------------------------------------------
Amortized Market Amortized Market
Cost Value Cost Value
---------------------------------------------------
(In Thousands) (In Thousands)
<S> <C> <C> <C> <C>
Fixed maturity securities, excluding
mortgage-backed securities:
Due in one year or less $168,709 $ 168,912 $ 193,010 $ 196,606
Due after one year through five years 346,556 348,443 551,151 579,964
Due after five years through ten years 421,727 409,119 357,288 382,038
Due after ten years 639,357 627,676 746,273 837,963
Mortgage-backed securities 111,666 110,855 50,036 50,948
---------------------------------------------------
Total fixed maturity securities $1,688,015 $1,665,005 $1,897,758 $2,047,519
===================================================
</TABLE>
Actual maturities may differ from contractual maturities, since borrowers may
have the right to call or prepay obligations. In addition, corporate
requirements and investment strategies may result in the sale of investments
before maturity. Proceeds from sales of fixed maturities were $779.4 million,
$587.3 million, and $576.2 million during 1999, 1998, and 1997 respectively.
F-16
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
2. INVESTMENTS (CONTINUED)
2.4 INVESTMENT SUMMARY
Investments of the Company were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1999 DECEMBER 31, 1998
----------------------------------------------------------------------------------
CARRYING CARRYING
COST FAIR VALUE AMOUNT COST FAIR VALUE AMOUNT
----------------------------------------------------------------------------------
(In Thousands) (In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Fixed maturities:
Bonds:
United States government and
government agencies and authorities $ 8,699 $ 9,155 $ 9,155 $ 19,968 $ 24,206 $ 24,206
States, municipalities, and political
subdivisions 4,466 4,305 4,305 6,469 6,608 6,608
Foreign governments 36,839 38,209 38,209 79,794 91,738 91,738
Pub Public utilities 189,957 189,115 189,115 320,947 345,320 345,320
Mortgage-backed securities 111,666 110,855 110,855 50,036 50,948 50,948
All other corporate bonds 1,333,491 1,310,323 1,310,323 1,418,159 1,526,154 1,526,154
Redeemable preferred stocks 2,897 3,043 3,043 2,385 2,545 2,545
----------------------------------------------------------------------------------
Total fixed maturities 1,688,015 1,665,005 1,665,005 1,897,758 2,047,519 2,047,519
Equity securities:
Nonredeemable preferred stocks 568 575 575 568 584 584
Common stocks 105 160 160 - - -
-----------------------------------------------------------------------------------
Total fixed maturities and equity
securities 1,688,688 $1,665,740 1,665,740 1,898,326 $2,048,103 2,048,103
---------- ----------
Mortgage loans on real estate* 112,031 112,031 84,387 84,387
Investment real estate 1,556 1,556 6,101 6,101
Policy loans 82,784 82,784 84,412 84,412
Other long-term investments 12,948 12,948 1,385 1,385
Short-term investments** 191,474 191,474 3,005 3,005
---------- ----------------------- ----------
Total investments $2,089,481 $2,066,533 $2,077,616 $2,227,393
========== ======================= ==========
</TABLE>
* Amount is net of allowance for losses of $0.6 million and $5 million at
December 31, 1999 and 1998, respectively.
** Includes $125 million on deposit to satisfy regulatory requirements at
December 31, 1999. There were no short-term investments on deposit at
December 31, 1998.
F-17
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
3. DEFERRED POLICY ACQUISITION COSTS
The balance of DPAC at December 31 and the components of the change reported in
operating costs and expenses for the years then ended were as follows:
<TABLE>
1999 1998 1997
--------------------------------
(In Thousands)
<S> <C> <C> <C>
Balance at January 1 $ 98,552 $185,243 $197,572
Capitalization 31,030 62,766 62,651
Amortization (44,123) (66,331) (58,583)
Effect of unrealized gains and losses
on securities 65,486 (13,832) (15,656)
Effect of realized gains and losses (4,289) (85) (741)
Reinsurance transfer 30 (69,209) -
--------------------------------
Balance at December 31 $146,686 $ 98,552 $185,243
================================
</TABLE>
4. FEDERAL INCOME TAXES
4.1 TAX LIABILITIES
Income tax liabilities were as follows:
<TABLE>
<CAPTION>
DECEMBER 31
1999 1998
---------------------
(In Thousands)
<S> <C> <C>
Current tax (recoverable) payable $ (4,156) $ 6,208
Deferred tax (assets) liabilities, applicable to:
Net income (40,049) (42,544)
Net unrealized investment (losses) gains (6,954) 28,751
---------------------
Total net deferred tax (assets) (47,003) (13,793)
---------------------
Total current and deferred tax (assets) liabilities $(51,159) $ (7,585)
---------------------
</TABLE>
F-18
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
4. FEDERAL INCOME TAXES (CONTINUED)
4.1 TAX LIABILITIES (CONTINUED)
Components of deferred tax liabilities and assets at December 31 were as
follows:
<TABLE>
<CAPTION>
December 31
1999 1998
---------------------
(In Thousands)
<S> <C> <C>
Deferred tax liabilities applicable to:
Deferred policy acquisition costs $ 49,455 $ 32,544
Basis differential of investments (5,380) 54,056
Other (10,225) 8,619
---------------------
Total deferred tax liabilities 33,850 95,219
Deferred tax assets applicable to:
Policy reserves (51,387) (56,269)
Other (29,466) (52,743)
---------------------
Total deferred tax assets (80,853) (109,012)
---------------------
Net deferred tax (assets) liabilities $(47,003) $ (13,793)
=====================
</TABLE>
A portion of life insurance income earned prior to 1984 is not taxable unless it
exceeds certain statutory limitations or is distributed as dividends. Such
income, accumulated in policyholders' surplus accounts, totaled $37.8 million at
December 31, 1999 and 1998.
At current corporate rates, the maximum amount of tax on such income is
approximately $13.2 million. Deferred taxes on these accumulations are not
required because no distributions are expected.
F-19
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
4. FEDERAL INCOME TAXES (CONTINUED)
4.2 TAX EXPENSE
Components of income tax expense (benefit) for the years were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
-------------------------------
(In Thousands)
<S> <C> <C> <C>
Current tax expense $16,672 $ 26,095 $ 23,695
Deferred tax expense (benefit):
Deferred policy acquisition cost 4,412 2,673 749
Policy reserves (1,947) (12,552) 3,160
Basis differential of investments (1,070) 132 (3,168)
Litigation settlement - (10,272) -
Reinsurance transaction - (22,133) -
Other, net 1,100 (3,251) (1,736)
-------------------------------
Total deferred tax expense (benefit) 2,495 (45,403) (995)
-------------------------------
Income tax expense (benefit) $19,167 $(19,308) $22,700
===============================
</TABLE>
A reconciliation between the income tax expense computed by applying the federal
income tax rate (35%) to income before taxes and the income tax expense reported
in the financial statement is presented below.
<TABLE>
<CAPTION>
1999 1998 1997
-------------------------------
(In Thousands)
<S> <C> <C> <C>
Income tax at statutory percentage of GAAP pretax income $19,225 $(15,666) $22,730
Tax-exempt investment income (131) (121) (134)
Other 73 (3,521) 104
-------------------------------
Income tax expense (benefit) $19,167 $(19,308) $22,700
===============================
</TABLE>
F-20
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
4. FEDERAL INCOME TAXES (CONTINUED)
4.3 TAXES PAID
Income taxes paid amounted to approximately $27.0 million, $20.5 million, and
$17.2 million in 1999, 1998, and 1997, respectively.
4.4 TAX RETURN EXAMINATIONS
The Internal Revenue Service ("IRS") has completed examinations of the Company's
tax returns through 1994. The IRS will initiate an audit of the 1995 through
June 17,1997 tax returns during 2000.
5. TRANSACTIONS WITH AFFILIATES
American General Corporation and certain affiliated companies provide services
to the Company, principally data processing, investment management, professional
and administrative services. During 1999, 1998 and 1997, the Company incurred
$28.8 million, $25.3 million and $20.5 million, respectively, for these
services. In addition, the Company provides services to certain affiliated
companies. During 1999, 1998 and 1997, the Company was reimbursed $4.3 million,
$3.5 million and $6.1 million, respectively, for these services.
The Company periodically borrows funds from the Parent Company under an
intercompany short-term borrowing agreement entered into during 1997. These
borrowings are on demand and are unsecured. Interest is charged on the average
borrowing based on the commercial paper rate. At December 31, 1999, no amounts
were outstanding under the borrowing agreement.
Affiliated accounts receivable were $1.2 million and $6.8 million in 1999 and
1998, respectively.
Following regulatory approval from the necessary authorities, the Company
reinsured 49% of its credit life and credit accident and health business to
American General Assurance Company, an affiliate, effective January 1, 1998.
This transaction resulted in the cession of approximately 218,000 life policies
representing $379.5 million of insurance in-force and approximately 41,000 A&H
policies. Assets of approximately $10 million were transferred, which resulted
in a pretax loss of approximately $4 million.
Following regulatory approval from the necessary authorities, the Company also
reinsured 49% of its New York and 100% of its non-New York group life (excluding
permanent policies), group accident and health, and individual accident and
health business to American General Assurance Company effective October 1, 1998.
This transaction resulted in the cession of approximately 21,000 life policies
representing
F-21
<PAGE>
5. TRANSACTIONS WITH AFFILIATES (CONTINUED)
$32.6 billion of insurance in-force and approximately 24,000 A&H policies.
Assets of approximately $254 million were transferred. The Company received a
$13 million ceding commission on this transaction, which resulted in a pretax
loss of approximately $56 million.
The losses on these transactions resulted from the pricing of the business to
yield a competitive market return.
Amounts recoverable of $485 million and $400 million and amounts payable of $109
million and $106 million, relating to this affiliated reinsurance, are included
under the captions "Reinsurance recoverable" and "Reinsurance payable" in the
balance sheets at December 31, 1999 and 1998, respectively.
6. ACCIDENT AND HEALTH RESERVES
Activity in the liability for unpaid claims and claim adjustment expenses for
the Company's accident and health coverage is summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1999 1998 1997
------------------------------
(In Thousands)
<S> <C> <C> <C>
Balance as of January 1, net of reinsurance recoverable $19,782 $ 85,974 $ 72,744
------------------------------
Reinsurance settlements (1) - (43,736) -
------------------------------
Add: Incurred losses (2) 37,496 179,158 263,015
------------------------------
Deduct: Paid losses related to:
Current year 16,313 78,575 82,470
Prior years 20,366 123,039 167,315
------------------------------
Total paid losses 36,679 201,614 249,785
------------------------------
Balance as of December 31, net of reinsurance recoverable 20,599 19,782 85,974
Reinsurance recoverable 45,019 45,419 1,413
------------------------------
Balance as of December 31, gross of reinsurance recoverable $65,618 $ 65,201 $ 87,387
==============================
</TABLE>
(1) See Note 5.
(2) Substantially all of the Company's incurred claims and claim adjustment
expenses relate to the respective current year.
F-22
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
6. ACCIDENT AND HEALTH RESERVES (CONTINUED)
The liability for unpaid claims and claim adjustment expenses relating to the
Company's accident and health business is based on the estimated amount payable
on claims reported prior to the date of the balance sheets which have not yet
been settled: claims reported subsequent to the date of the balance sheets which
have been incurred during the period than ended, and an estimate (based on past
experience) of incurred but unreported claims relating to such periods.
7. BENEFIT PLANS
7.1 PENSION PLANS
The Company has non-contributory defined benefit pension plans covering most
employees. Pension benefits are based on the participant's compensation and
length of credited service.
Equity and fixed maturity securities were 71% and 26%, respectively, of the
plans' assets at the plans' most recent balance sheet dates. Additionally, 1% of
plan assets were invested in general investment accounts of the Parent Company's
subsidiaries through deposit administration insurance contracts.
The benefit plans have purchased annuity contracts from American General
Corporation's subsidiaries to provide benefits for certain retirees. These
contracts are expected to provide future annual benefits to certain retirees of
American General Corporation and its subsidiaries of approximately $59 million.
The components of pension expense and underlying assumptions were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
-----------------------------
(In Thousands)
<S> <C> <C> <C>
Service cost (benefits earned) $ 1,050 $ 193 $ 1,065
Interest cost 2,159 1,205 2,593
Expected return on plan assets (2,864) (1,714) (3,331)
Amortization (424) (309) (418)
-----------------------------
Pension (income) expense $ (79) $ (625) $ (91)
=============================
Discount rate on benefit obligation 7.75% 7.00% 7.25%
Rate of increase in compensation levels 4.25% 4.25% 4.00%
Expected long-term rate of return on plan assets 10.35% 10.25% 10.00%
</TABLE>
F-23
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
7.1 PENSION PLANS (CONTINUED)
The Company's funding policy is to contribute annually no more than the maximum
deductible for federal income tax purposes. The funded status of the plans and
the prepaid pension expense included in other assets at December 31 were as
follows:
<TABLE>
<CAPTION>
1999 1998
-------------------
(In Thousands)
<S> <C> <C>
Projected benefit obligation (PBO) $29,314 $18,022
Plan assets at fair value 29,789 18,110
-------------------
Plan assets at fair value in excess of PBO 475 88
Other unrecognized items, net 140 (198)
-------------------
Prepaid (accrued) pension expense $ 615 $ (110)
===================
</TABLE>
The change in PBO was as follows:
<TABLE>
<CAPTION>
1999 1998
-------------------
(In Thousands)
<S> <C> <C>
PBO at January 1 $18,022 $26,337
Service and interest costs 3,208 1,398
Benefits paid (1,419) (915)
Actuarial (gain) loss (282) 638
Transfers and other 9,785 (9,436)
-------------------
PBO at December 31 $29,314 $18,022
===================
</TABLE>
The change in the fair value of plan assets was as follows:
<TABLE>
<CAPTION>
1999 1998
-------------------
(In Thousands)
<S> <C> <C>
Fair value of plan assets at January 1 $18,110 $23,757
Actual return on plan assets 3,217 1,175
Benefits paid (1,419) (915)
Transfers 9,881 (5,907)
-------------------
Fair value of plan assets at December 31 $29,789 $18,110
===================
</TABLE>
F-24
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
7. BENEFIT PLANS (CONTINUED)
7.2 POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company has life, medical, supplemental major medical, and dental plans for
certain retired employees and agents. Most plans are contributory, with retiree
contributions adjusted annually to limit employer contributions to predetermined
amounts. The Company has reserved the right to change or eliminate these
benefits at any time.
The life plans are insured through December 31, 1999. A portion of the retiree
medical and dental plans is funded through a voluntary employees' beneficiary
association (VEBA); the remainder is unfunded and self-insured. All of the
retiree medical and dental plans' assets held in the VEBA were invested in
readily marketable securities at its most recent balance sheet date.
Postretirement benefit expense (benefit) in 1999, 1998, and 1997 was $(574)
thousand, $(290) thousand, and $(43) thousand, respectively. The accrued
liability for postretirement benefits was $5.5 million and $3.7 million at
December 31, 1999 and 1998, respectively. These liabilities were discounted at
the same rates used for the pension plans.
8. FAIR VALUE OF FINANCIAL INSTRUMENTS
Carrying amounts and fair values for certain of the Company's financial
instruments at December 31 are presented below. Care should be exercised in
drawing conclusions based on fair value, since (1) the fair values presented do
not include the value associated with all the Company's assets and liabilities,
and (2) the reporting of investments at fair value without a corresponding
evaluation of related policyholders liabilities can be misinterpreted.
<TABLE>
<CAPTION>
1999 1998
-----------------------------------------
FAIR CARRYING FAIR CARRYING
VALUE AMOUNT VALUE AMOUNT
-----------------------------------------
(In Millions) (In Millions)
<S> <C> <C> <C> <C>
Assets:
Fixed maturity and equity
securities $1,666 $1,666 $2,048 $2,048
Mortgage loans on real estate $ 106 $ 112 $ 91 $ 84
Policy loans $ 83 $ 83 $ 84 $ 84
Indebtedness from affiliates $ 1 $ 1 $ 7 $ 7
Liabilities:
Insurance investment contracts $ 447 $ 458 $ 541 $ 560
</TABLE>
F-25
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
8. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The following methods and assumptions were used to estimate the fair value of
financial instruments:
FIXED MATURITY AND EQUITY SECURITIES
Fair values of fixed maturity and equity securities were based on quoted
market prices, where available. For investments not actively traded, fair
values were estimated using values obtained from independent pricing
services or, in the case of some private placements, by discounting
expected future cash flows using a current market rate applicable to yield,
credit quality, and average life of investments.
MORTGAGE LOANS ON REAL ESTATE
Fair value of mortgage loans was estimated primarily using discounted cash
flows, based on contractual maturities and risk-adjusted discount rates.
POLICY LOANS
Fair value of policy loans was estimated using discounted cash flows and
actuarially determined assumptions, incorporating market rates.
INDEBTEDNESS FROM AFFILIATES
Indebtedness from affiliates is composed of accounts receivable from
affiliates. Due to the short-term nature of accounts receivable, fair value
is assumed to equal carrying value.
INSURANCE INVESTMENT CONTRACTS
Fair value of insurance investment contracts was estimated using cash flows
discounted at market interest rates.
F-26
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
9. STATUTORY FINANCIAL INFORMATION; DIVIDEND PAYING CAPABILITY
The Company's statutory basis financial statements are prepared in accordance
with accounting practices prescribed or permitted by the State of New York
Insurance Department. "Prescribed" statutory accounting practices include state
laws, regulations and general administrative rules, as well as a variety of
publications by the NAIC. "Permitted" statutory accounting practices encompass
all accounting practices that are not prescribed; such practices may differ from
state to state, from company to company within a state, and may change in the
future. There were no material permitted practices utilized by the Company in
1999, 1998 or 1997.
In 1998, the NAIC adopted codified statutory accounting principles
("Codification"), which will become effective January 1, 2001. Codification will
likely change, to some extent, prescribed accounting practices and may result in
changes to the accounting practices that the Company uses to prepare its
statutory financial statements. Codification will require adoption by the
various states before it becomes the prescribed statutory basis of accounting
for insurance companies domesticated within those states. Accordingly, before
Codification becomes effective for the Company, the State of New York must adopt
Codification as the prescribed basis of accounting on which domestic insurers
must report their statutory basis results to the Insurance Department. At this
time, the State of New York has informed the insurance industry of its intention
to proceed with implementation of the new Codification rules, subject to any
provisions in New York statute which conflict with particular points in the new
Codification rules.
Policyholder's surplus and net income, as reported to the domiciliary state
insurance department in accordance with its prescribed or permitted statutory
accounting practices is summarized as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---------------------------------
(In Thousands)
<S> <C> <C> <C>
Statutory net income for the year $ 48,003 $ 31,151 $ 24,961
Statutory surplus at year-end $146,841 $212,130 $218,111
</TABLE>
Statutory accounting practices require acquisition costs on new business
(including commissions and underwriting and issue costs) to be charged to
expense when incurred. Regulatory net income includes income (loss) attributed
to participating policyholders of $(2.0) million, $(6.0) million and $(6.8)
million in 1999, 1998 and 1997, respectively, with the 1999, 1998 and 1997
losses primarily a result of higher levels of sales of participating term
insurance products. Regulatory equity capital includes capital attributed to
participating policyholders of $(45.4) million, $(37.0) million and $(24.9)
million at December 31, 1999, 1998 and 1997 respectively. Capital attributed to
participating policyholders is not available for payment of dividends to
shareholders.
F-27
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
9. STATUTORY FINANCIAL INFORMATION; DIVIDEND PAYING CAPABILITY (CONTINUED)
The Company is subject to New York Business Corporation Law, which imposes
restrictions on shareholder dividends. In addition, New York State Insurance Law
requires that no dividend may be declared without prior approval of the State of
New York Insurance Department. New York Law also states that no New York
domiciled company shall declare or distribute dividends to shareholders which
exceeds the lesser of: (1) 10% of surplus as regards policyholders or (2) 100%
of adjusted net investment income, unless the superintendent approves a greater
dividend payment. The Company paid $98 million in dividends in 1999. The Company
did not pay any dividends in 1998 or 1997.
10. LEASES
The Company has various leases, substantially all of which are for office space
and facilities. At December 31, 1999 the future minimum rental commitments under
all of the Company's noncancellable leases were as follows:
<TABLE>
<CAPTION>
YEAR ENDED OFFICE
DECEMBER 31 SPACE EQUIPMENT TOTAL
------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C>
2000 $ 4,975 $59 $ 5,034
2001 4,742 - 4,742
2002 4,540 - 4,540
2003 4,392 - 4,392
2004 1,781 - 1,781
Thereafter 3,561 - 3,561
------------------------------------
Total $23,991 $59 $24,050
====================================
</TABLE>
Rent expense incurred in 1999, 1998 and 1997 was $4.7 million, $4.6 million and
$3.6 million, respectively.
11. COMMITMENTS AND CONTINGENCIES
In recent years, various life insurance companies have been named as defendants
in class action lawsuits relating to life insurance pricing and sales practices,
and a number of these lawsuits have resulted in substantial settlements. On
December 16, 1998, American General Corporation announced that certain of its
life insurance subsidiaries had entered into agreements to resolve all pending
market conduct class action lawsuits. All of these settlements were finalized in
1999.
F-28
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
11. COMMITMENTS AND CONTINGENCIES (CONTINUED)
In conjunction with the 1998 agreement, the Company recorded a charge of $30.7
million ($19.9 million after-tax) in the fourth quarter of 1998. The charge
covers the cost of policyholder benefits and other anticipated expenses
resulting from the proposed settlements, as well as other administrative and
legal costs.
The litigation liability was reduced by payments of $1.3 million and $17.7
million in 1998 and 1999, respectively. The remaining balance of $29.4 million
and $11.7 million at December 31, 1998 and 1999, respectively, was included in
other liabilities on the Company's balance sheet.
In addition to the charges recorded in 1998, the Company will incur additional
expenses for claim administration, outside counsel and actuarial services, and
regulatory expenses, related to the resolution of the litigation, which will be
recorded as incurred. Such expenses are not expected to have a material adverse
effect on the Company's financial position or results of operations.
In 1997, prior to the acquisition by American General Corporation, USLIFE
Corporation entered the workers' compensation reinsurance business. In 1998, the
Company discontinued writing new workers' compensation reinsurance business. The
largest workers' compensation contract was a quota share reinsurance agreement
with Superior National Insurance Group (Superior National), effective May 1,
1998. On November 29, 1999, the Company initiated an arbitration proceeding to
rescind this contract from its inception, based in part on misrepresentations
and nondisclosures which the Company believes were made by Superior National.
The Company plans to fully pursue all remedies through the arbitration process.
Since management believes, on the advice of counsel, that the Company will be
successful in rescinding the Superior National contract, income and expense
items related to the contract have been excluded from the Summary of Operations.
Provision has been made for a return of net cash flows to Superior National
through a liability included in Reinsurance payable.
Although management, on the advice of counsel, believes that the Company will
succeed in rescinding the contract, risks and uncertainties remain with respect
to the ultimate outcome. In the unlikely event the Company does not prevail in
the arbitration, management does not expect the after tax losses from the
workers' compensation business to exceed $85 million, based on the current
estimate of losses that would accrue to the Company. In addition, it is the
policy of the Company's ultimate parent, American General Corporation, to manage
the capital levels in each of its principal life insurance subsidiaries to a
target of 2.5 times the NAIC Company Action Level Risk-Based Capital. If the
Company does not prevail in the arbitration, American General Corporation has
committed to make contributions to the capital of the Company sufficient to meet
its obligations under the treaty.
F-29
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
11. COMMITMENTS AND CONTINGENCIES (CONTINUED)
The Company is party to various other lawsuits and proceedings arising in the
ordinary course of business. Many of these lawsuits and proceedings arise in
jurisdictions, such as Alabama and Mississippi, that permit damage awards
disproportionate to the actual economic damages incurred. Based upon information
presently available, the Company believes that the total amounts that will
ultimately be paid, if any, arising from these lawsuits and proceedings will not
have a material adverse effect on the Company's results of operations and
financial position. However, it should be noted that the frequency of large
damage awards, including large punitive damage awards, that bear little or no
relation to actual economic damages incurred by plaintiffs in jurisdictions like
Alabama and Mississippi continues to create the potential for an unpredictable
judgment in any given suit.
12. REINSURANCE
Reinsurance transactions for the years ended December 31, 1999, 1998, and 1997
were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---------------------------------------
(In Thousands)
<S> <C> <C> <C>
LIFE INSURANCE IN FORCE
Gross $71,277,741 $70,948,300 $61,407,508
Assumed - - 11,314,869
Ceded 44,938,362 44,441,277 9,321,704
---------------------------------------
Net $26,339,379 $26,507,023 $63,400,673
=======================================
LIFE AND ANNUITY PREMIUMS
Gross $ 218,536 $ 214,384 $ 178,251
Assumed 3 22,020 26,171
Ceded 151,258 58,924 19,332
---------------------------------------
Net $ 67,281 $ 177,480 $ 185,090
=======================================
A&H PREMIUMS
Written
Gross $ 443,363 $ 459,562 $ 422,886
Assumed 17,335 170,120 1,704
Ceded 401,656 285,628 16,243
---------------------------------------
Net $ 59,042 $ 344,054 $ 408,347
=======================================
Earned
Gross $ 437,454 $ 452,348 $ 403,717
Assumed 17,498 168,331 1,503
Ceded 396,408 276,313 15,616
---------------------------------------
Net $ 58,544 $ 344,366 $ 389,604
=======================================
</TABLE>
F-30
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
12. REINSURANCE (CONTINUED)
Reinsurance recoverable on paid losses was approximately $7.5 million, $10.6
million, and $2.4 million at December 31, 1999, 1998 and 1997, respectively.
Reinsurance recoverable on unpaid losses was approximately $84.0 million, $81.7
million, and $3.2 million at December 31, 1999, 1998 and 1997, respectively. The
effect of reinsurance on benefits to policyholders and beneficiaries was $357
million, $131 million, and $13 million during 1999, 1998 and 1997, respectively.
The Company terminated its participation in both the Federal Employee Government
Life Insurance (FEGLI) and State Government Life Insurance (SGLI) pools in 1998.
The assumed premiums for these pools in 1998 were $19.5 million and $2.5
million, respectively.
The Company participates in several reinsurance pools. These pools are managed
and administered by reinsurance intermediaries on behalf of the Company. The
pools involved various coverages including life, medical and disability.
13. YEAR 2000 (UNAUDITED)
Currently, all of the Company's major technology systems, programs, and
applications, including those which rely on third parties, are operating
smoothly following transition into 2000. The Company has experienced no
interruptions to normal business operations, including the processing of
customer account data and transactions. The Company will continue to monitor its
technology systems, including critical third party dependencies, as necessary to
maintain its Year 2000 readiness. The Company does not expect any future
disruptions, if they occur, to have a material effect on its results of
operations, liquidity or financial condition.
F-31
<PAGE>
PART C
OTHER INFORMATION
-----------------
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
PART A: None.
PART B: Financial Statements of The United States Life
Insurance Company in the City of New York;
years ended December 31, 1999, 1998, and
1997:
Report of Ernst & Young LLP, Independent Auditors
Balance Sheets as of December 31, 1999 and 1998
Statements of Income for the years ended December
31, 1999, 1998, and 1997
Statements of Comprehensive Income for the years
ended December 31, 1999, 1998 and 1997
Statements of Shareholder's Equity for the years
ended December 31, 1999, 1998 and 1997
Statements of Cash Flows for the years ended
December 31, 1999, 1998 and 1997
Notes to Financial Statements
PART C: None.
(b) Exhibits
(1) Resolution of the Board of Directors of The United
States Life Insurance Company in the City of New
York authorizing the establishment of The United
States Life Insurance Company in the City of New
York Separate Account USL VA-R.1
(2) None.
(3)(a) Form of Distribution Agreement between The United
States Life Insurance Company in the City of New
York and American General Securities Incorporated.2
(b)(i) Form of Participation Agreement, including
administrative services agreement, between The
United States Life Insurance Company in the City of
New York and American General Series Portfolio
Company. /2/
C-1
<PAGE>
(ii) Participation Agreement between The United States
Life Insurance Company in the City of New York and
Hotchkis and Wiley Variable Trust dated December 1,
1998./2/
(iii) Participation Agreement between The United States
Life Insurance Company in the City of New York and
LEVCO Series Trust dated December 1, 1998./2/
(iv) Participation Agreement between The United States
Life Insurance Company in the City of New York and
Navellier Variable Insurance Series Fund, Inc. dated
December 1, 1998./2/
(v) Participation Agreement between The United States
Life Insurance Company in the City of New York and
OFFITBANK Variable Insurance Fund, Inc. dated
December 1, 1998./2/
(vi) Participation Agreement between The United States
Life Insurance Company in the City of New York and
Royce Capital Fund dated December 1, 1998./2/
(vii) Form of Participation Agreement between The United
States Life Insurance Company in the City of New
York and Wright Managed Blue Chip Series Trust dated
December 1, 1998./2/
(3)(c) Form of Selling Group Agreement among The United
States Life Insurance Company in the City of New
York, American General Securities Incorporated, and
Selling Group Member./2/
(4)(a) Form of Group Annuity Master Contract (Form No.
98506N)./3/
(b) Form of Group Annuity Certificate (Form No.
98505N)./3/
(c) Specimen form of Individual Retirement Annuity
Disclosure Statement and additional specialized
forms available under Certificate Form No. 98505N,
included in Part A of this Amendment.
(d) Form of Eligible Rollover Distribution
endorsement./4/
(e) Form of Individual Retirement Annuity (IRA)
Endorsement./4/
(5)(a)(i) Form of Application for Certificate (Form No.
USL 8986-33)./3/
(ii) Form of Application for Certificate, amended
(Form No. USL 8986-33 REV 0499)./2/
C-2
<PAGE>
(b) Specimen form of Select Reserve/SM/ Service
Request./2/
(c) Form of Confirmation of Initial Purchase Payment
for Certificate Form No. 98505N./2/
(d) Form of 1035 Exchange Instructions./4/
(e) Form of Change of Beneficiary Form./4/
(f) Form of Assignment and Transfer Request./4/
(g) Form of Election of Annuity Payment Option/Change
Form for Variable Annuities./4/
(h) Form of Request for Statement of Additional
Information for Certificate Form No. 98505N./2/
(6)(a) Copy of the Charter and all amendments thereto of
The United States Life Insurance Company in the City
of New York./1/
(b) Copy of the Bylaws, as amended, of The United States
Life Insurance Company in the City of New York./1/
(7) None.
(8)(a) Administrative Services Agreement between Hotchkis
and Wiley and The United States Life Insurance
Company in the City of New York./2/
(b) Administrative Services Agreement between John A.
Levin and Co., Inc. and The United States Life
Insurance Company in the City of New York dated
December 1, 1998./2/
(c) Administrative Services Agreement between Navellier
Variable Insurance Series Fund, Inc. and The United
States Life Insurance Company in the City of New
York dated December 1, 1998./2/
(d) Administrative Services Agreement between OFFITBANK
Variable Insurance Fund, Inc. and The United States
Life Insurance Company in the City of New York dated
December 1, 1998./2/
(e) Administrative Services Agreement between Royce
Capital Fund and The United States Life Insurance
Company in the City of New York dated December 1,
1998./2/
C-3
<PAGE>
(f) Form of Administrative Services Agreement between
Wright Managed Blue Chip Series Trust and The United
States Life Insurance Company in the City of New
York dated December 1, 1998./2/
(g) Form of Administrative Services Agreement between
The United States Life Insurance Company in the City
of New York and American General Life Companies,
limited to terms which describe registered and non-
registered product services./4/
(9) Opinion and Consent of Counsel./2/
(10) Consent of Independent Auditors. (Filed herewith)
(11) None.
(12) None.
(13)(a) Computations of hypothetical historical average
annual total returns for each Division available
under Certificate Form No. 98505N for the one, five
and ten year periods ended December 31, 1998, and
since inception./2/
(b) Computations of hypothetical historical cumulative
total returns for each Division available under
Certificate Form No. 98505N for the one, five and
ten year periods ended December 31, 1998, and since
inception./2/
(c) Computations of hypothetical historical seven day
yield and effective yield for the Money Market
Division available under Certificate Form No. 98505N
for the seven day period ended December 31, 1998./2/
(14) Financial Data Schedule. (See Exhibit 27 below.)
(27) (Inapplicable, because, notwithstanding Item 24.(b)
as to Exhibits, the Commission staff has advised
that no such Schedule is required.)
/1/ Incorporated herein by reference to the initial filing of Registrant's Form
N-4 Registration Statement (File No. 333-63673), filed on September 18,
1998.
/2/ Previously filed in Pre-Effective Amendment No. 1 of this Form N-4
Registration Statement (File No. 333-63843), filed on May 27, 1999.
/3/ Previously filed in the initial filing of this Form N-4 Registration
Statement (File No. 333-63843), filed on September 21, 1998.
/4/ Incorporated herein by reference to Pre-Effective Amendment No. 1 to
Registrant's Form N-4 Registration Statement (File No. 333-63673), filed on
May 26, 1999.
C-4
<PAGE>
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
The directors, executive officers, and, to the extent responsible for variable
annuity operations, other officers of the depositor are listed below.
Name and Principal Positions and Offices
Business Address with the Depositor
--------------------- -------------------------
Rodney O. Martin, Jr. Director and Chairman
2929 Allen Parkway
Houston, TX 77019
James P. Corcoran Director and Vice Chairman
70 East 55th Street
14th Floor
New York, NY 10022
Donald W. Britton Director and President
2929 Allen Parkway
Houston, TX 77019
David J. Dietz Director, President and
125 Maiden Lane Chief Executive Officer -
New York, NY 10018 Individual Insurance Operations
David A. Fravel Director and Executive
2929 Allen Parkway Vice President
Houston, TX 77019
John V. LaGrasse Director, Executive
2929 Allen Parkway Vice President and
Houston, TX 77019 Chief Technology Officer
Gary D. Reddick Director and Executive
2929 Allen Parkway Vice President
Houston, TX 77019
Robert F. Herbert, Jr. Director and Senior
2727-A Allen Parkway Vice President
Houston, TX 77019
William A. Bacas Director
182 Ridge Street
Glens Falls, NY 12801
C-5
<PAGE>
John R. Corcoran Director
12 Hawthorne Drive
Sudbury, MA 01776
Dr. Patricia O. Ewers Director
Pace University
Pace Plaza
New York, NY 10038
Thomas H. Fox Director
1016 East Bay Drive
Northport, MI 49670
David L. Herzog Director
2929 Allen Parkway
Houston, TX 77019
William J. O'Hara, Jr. Director
AJ Tech
2590 Pioneer Avenue
Vista, CA 92083
George B. Trotta Director
541 East 20th Street
Apartment 14F
New York, NY 10010
William M. Keeler President and Chief
3600 Route 66 Executive Officer -
Neptune, NJ 07754 Group Insurance Operations
Paul Mistretta Executive Vice President
2929 Allen Parkway
Houston, TX 77019
Brian D. Murphy Executive Vice President
2727-A Allen Parkway
Houston, TX 77019
Thomas M. Zurek Executive Vice President,
2929 Allen Parkway General Counsel and
Houston, TX 77019 Secretary
Wayne A. Barnard Senior Vice President
2929 Allen Parkway
Houston, TX 77019
C-6
<PAGE>
Robert M. Beuerlein Senior Vice President
2929 Allen Parkway and Chief Actuary
Houston, TX 77019
Don L. Bolen Senior Vice President -
6363 Forest Park Road Dallas Service Center
Dallas, TX 75235
Felix C. Curcuru Senior Vice President -
3600 Route 66 Group Actuarial and
Neptune, NJ 07754 Underwriting
Ross D. Friend Senior Vice President and
2727 Allen Parkway Chief Compliance Officer
Houston, TX 77019
William F. Guterding Senior Vice President and
125 Maiden Lane Chief Underwriting Officer
New York, NY 10038
Kevin Harty Senior Vice President and
125 Maiden Lane Chief Agency Officer
New York, NY 10038
William J. Leary Senior Vice President -
3600 Route 66 Sales and Marketing
Neptune, NJ 07754
Simon J. Leech Senior Vice President -
2727-A Allen Parkway Houston Service Center
Houston, TX 77019
Randy J. Marash Senior Vice President
3600 Route 66 and Actuary
Neptune, NJ 07754
Robert Stuchiner Senior Vice President -
125 Maiden Lane Marketing
New York, NY 10038
Walter E. Bednarski Vice President, Treasurer
3600 Route 66 and Controller
Neptune, NJ 07754
C-7
<PAGE>
Althea R. Johnson Vice President, Assistant
2727-A Allen Parkway Controller and Assistant
Houston, TX 77019 Secretary
Richard W. Scott Vice President and Chief
2929 Allen Parkway Investment Officer
Houston, TX 77019
Don M. Ward Vice President
2727 Allen Parkway
Houston, TX 77019
Jane K. Rushton Associate General Counsel
125 Maiden Lane and Assistant Secretary
New York, NY 10038
Sandra M. Smith Associate General Counsel
300 South State Street and Assistant Secretary
Syracuse, NY 13202
Joyce Bilski Administrative Officer
2727-A Allen Parkway
Houston, TX 77019
Mark Childs Administrative Officer
2727-A Allen Parkway
Houston, TX 77019
Laura Milazzo Administrative Officer
2727-A Allen Parkway
Houston, TX 77019
Linda Price Administrative Officer
2727-A Allen Parkway
ouston, TX 77019
Pauletta P. Cohn Assistant Secretary
2929 Allen Parkway
Houston, TX 77019
Julie A. Cotton Assistant Secretary
2727 Allen Parkway
Houston, TX 77019
C-8
<PAGE>
K. David Nunley Assistant Tax Officer
2727-A Allen Parkway
Houston, TX 77019
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT
SUBSIDIARIES OF AMERICAN GENERAL CORPORATION/1/,/2/,/3/,/4/,/5/
The following is a list of American General Corporation's subsidiaries as of
February 29, 2000. All subsidiaries listed are corporations, unless otherwise
indicated. Subsidiaries of subsidiaries are indicated by indentations and
unless otherwise indicated, all subsidiaries are wholly owned. Inactive
subsidiaries are denoted by an asterisk (*).
Jurisdiction of
Name Incorporation
- ----------------------------------------------------------- ---------------
AGC Life Insurance Company................................. Missouri
American General Property Insurance Company/16/.......... Tennessee
American General Property Insurance Company of Florida.. Florida
American General Life and Accident Insurance Company/6/... Tennessee
American General Life Insurance Company/7/................ Texas
American General Annuity Service Corporation............ Texas
American General Life Companies......................... Delaware
American General Life Insurance Company of New York..... New York
The Winchester Agency Ltd. ........................... New York
The Variable Annuity Life Insurance Company............. Texas
Parkway 1999 Trust/1/7. .............................. Maryland
PESCO Plus, Inc/14/................................... Delaware
American General Gateway Services, L.L.C/15/.......... Delaware
The Variable Annuity Marketing Company................ Texas
American General Financial Advisors, Inc.............. Texas
VALIC Retirement Services Company..................... Texas
VALIC Trust Company................................... Texas
American General Assignment Corporation of New York... New York
The Franklin Life Insurance Company....................... Illinois
The American Franklin Life Insurance Company............ Illinois
Franklin Financial Services Corporation................. Delaware
HBC Development Corporation............................... Virginia
Templeton American General Life of Bermuda, Ltd/13/....... Bermuda
Western National Corporation.............................. Delaware
WNL Holding Corp. ...................................... Delaware
American General Annuity Insurance Company............ Texas
American General Assignment Corporation............... Texas
American General Distributors, Inc. .................. Delaware
A.G. Investment Advisory Services, Inc. .............. Delaware
American General Financial Institutions Group, Inc. .. Delaware
C-9
<PAGE>
WNL Insurance Services, Inc. ......................... Delaware
American General International, Inc. ...................... Delaware
American General Enterprise Services, Inc. ................ Delaware
American General Corporation/*/............................ Delaware
American General Delaware Management Corporation/1/........ Delaware
American General Finance, Inc. ............................ Indiana
HSA Residential Mortgage Services of Texas, Inc. ......... Delaware
AGF Investment Corp. ..................................... Indiana
American General Auto Finance, Inc. ...................... Delaware
American General Finance Corporation/8/................... Indiana
American General Finance Group, Inc. ................... Delaware
American General Financial Services, Inc./9/.......... Delaware
The National Life and Accident Insurance Company.... Texas
Merit Life Insurance Co. ............................... Indiana
Yosemite Insurance Company.............................. Indiana
American General Finance, Inc. ........................... Alabama
A.G. Financial Service Center, Inc. ...................... Utah
American General Bank, FSB ............................... Utah
American General Financial Center, Inc./*/................ Indiana
American General Financial Center, Incorporated/*/........ Indiana
American General Financial Center Thrift Company/*/....... California
Thrift, Incorporated/*/................................... Indiana
American General Investment Advisory Services, Inc./*/..... Texas
American General Investment Holding Corporation/10/........ Delaware
American General Investment Management, L.P./10/.......... Delaware
American General Investment Management Corporation/10/..... Delaware
American General Realty Advisors, Inc. .................... Delaware
American General Realty Investment Corporation............. Texas
AGLL Corporation/11/...................................... Delaware
American General Land Holding Company..................... Delaware
AG Land Associates, LLC/11/............................. California
GDI Holding, Inc./*//12/.................................. California
Pebble Creek Service Corporation.......................... Florida
SR/HP/CM Corporation...................................... Texas
Green Hills Corporation.................................... Delaware
Knickerbocker Corporation.................................. Texas
American Athletic Club, Inc. ............................. Texas
Pavilions Corporation...................................... Delaware
USLIFE Corporation......................................... Delaware
All American Life Insurance Company....................... Illinois
American General Assurance Company........................ Illinois
American General Indemnity Company...................... Nebraska
USLIFE Credit Life Insurance Company of Arizona......... Arizona
American General Life Insurance Company of Pennsylvania... Pennsylvania
I.C. Cal/*/............................................... California
North Central Administrators, Inc. ....................... Minnesota
C-10
<PAGE>
North Central Life Insurance Company...................... Minnesota
North Central Caribbean Life, Ltd. ..................... Nevis
The Old Line Life Insurance Company of America............ Wisconsin
The United States Life Insurance Company in the
City of New York........................................ New York
American General Bancassurance Services, Inc.............. Illinois
USMRP, Ltd.............................................. Turks & Caicos
USLIFE Realty Corporation................................. Texas
USLIFE Real Estate Services Corporation............... Texas
USLIFE Systems Corporation................................ Delaware
American General Finance Foundation, Inc. is not included on this list. It is a
non-profit corporation.
NOTES
/1/ The following limited liability companies were formed in the State of
Delaware on March 28, 1995. The limited liability interests of each are
jointly owned by AGC and AGDMC and the business and affairs of each are
managed by AGDMC:
American General Capital, L.L.C.
American General Delaware, L.L.C.
/2/ On November 26, 1996, American General Institutional Capital A ("AG Cap
Trust A"), a Delaware business trust, was created. On March 10, 1997,
American General Institutional Capital B ("AG Cap Trust B"), also a Delaware
business trust, was created. Both AG Cap Trust A's and AG Cap Trust B's
business and affairs are conducted through their trustees: Bankers Trust
Company and Bankers Trust (Delaware). Capital securities of each are held by
non-affiliated third party investors and common securities of AG Cap Trust A
and AG Cap Trust B are held by AGC.
/3/ On November 14, 1997, American General Capital I, American General Capital
II, American General Capital III, and American General Capital IV
(collectively, the "Trusts"), all Delaware business trusts, were created.
Each of the Trusts' business and affairs are conducted through its trustees:
Bankers Trust (Delaware) and James L. Gleaves (not in his individual
capacity, but solely as Trustee).
/4/ On July 10, 1997, the following insurance subsidiaries of AGC became the
direct owners of the indicated percentages of membership units of SBIL B,
L.L.C. ("SBIL B"), a U.S. limited liability company: VALIC (22.6%), FL
(8.1%), AGLA (4.8%) and AGL (4.8%). Through their aggregate 40.3% interest
in SBIL B, VALIC, FL, AGLA and AGL indirectly own approximately 28% of the
securities of SBI, an English company, and 14% of the securities of ESBL, an
English company, SBP, an English company, and SBFL, a Cayman Islands
company. These interests are held for investment purposes only.
/5/ Effective December 5, 1997, AGC and Grupo Nacional Provincial, S.A. ("GNP")
completed the purchase by AGC of a 40% interest in Grupo Nacional Provincial
Pensions S.A. de C.V., a new holding company formed by GNP, one of Mexico's
largest financial services companies.
C-11
<PAGE>
/6/ AGLA owns approximately 12% of Whirlpool Financial Corp. ("Whirlpool")
preferred stock. AGLA's holdings in Whirlpool represents approximately 3% of
the voting power of the capital stock of Whirlpool. The interests in
Whirlpool (which is a corporation that is not associated with AGC) are held
for investment purposes only.
/7/ AGL owns 100% of the common stock of American General Securities
Incorporated ("AGSI"), a full-service NASD broker-dealer. AGSI, in turn,
owns 100% of the stock of the following insurance agencies:
American General Insurance Agency, Inc. (Missouri)
American General Insurance Agency of Hawaii, Inc. (Hawaii)
American General Insurance Agency of Massachusetts, Inc. (Massachusetts)
In addition, the following agencies are indirectly related to AGSI, but not
owned or controlled by AGSI:
American General Insurance Agency of Ohio, Inc. (Ohio)
American General Insurance Agency of Texas, Inc. (Texas)
American General Insurance Agency of Oklahoma, Inc. (Oklahoma)
Insurance Masters Agency, Inc. (Texas)
The foregoing indirectly related agencies are not affiliates or subsidiaries
of AGL under applicable holding company laws, but they are part of the AGC
group of companies under other laws.
/8/ American General Finance Corporation is the parent of an additional 42
wholly-owned subsidiaries incorporated in 25 states for the purpose of
conducting its consumer finance operations, in addition to those noted in
footnote 9 below.
/9/ American General Financial Services, Inc., is the direct or indirect parent
of an additional 8 wholly-owned subsidiaries incorporated in 5 states and
Puerto Rico for the purpose of conducting its consumer finance operations.
/10/American General Investment Management, L.P., a Delaware limited
partnership, is jointly owned by AGIHC and AGIMC. AGIHC holds a 99% limited
partnership interest, and AGIMC owns a 1% general partnership interest.
/11/AG Land Associates, LLC is jointly owned by AGLH and AGLL. AGLH holds a
98.75% managing interest and AGLL owns a 1.25% managing interest.
/12/AGRI owns a 75% interest in GDI Holding, Inc.
/13/AGCL owns 50% of the common stock of TAG Life. Templeton International,
Inc., a Delaware corporation, owns the remaining 50% of TAG Life. Templeton
International, Inc. is not affiliated with AGC.
C-12
<PAGE>
/14/VALIC holds 90% of the outstanding common shares of PESCO Plus, Inc. The
Florida Education Association/United, a Florida teachers union and
unaffiliated third party, holds the remaining 10% of the outstanding common
shares.
/15/VALIC holds 90% of the outstanding common shares of American General Gateway
Services, L.L.C. Gateway Investment Services, Inc., a California corporation
and an unaffiliated third party, holds the remaining 10% of the outstanding
common shares.
/16/AGPIC is jointly owned by AGCL and AGLA. AGCL owns 51.85% and AGLA owns
48.15% of the issued and outstanding shares of AGPIC.
/17/Parkway 1999 Trust was formed as a Maryland business trust to function as an
investment subsidiary. VALIC owns 100% of its common equity.
C-13
<PAGE>
COMPANY ABBREVIATIONS AS USED IN
REGISTRATION STATEMENT AMENDMENT
<TABLE>
<CAPTION>
State/Jur.
Abb. Company of Domicile
- ------------ ------------------------------------------------------- -----------
<S> <C> <C>
AAL All American Life Insurance Company.................... IL
AAth American Athletic Club, Inc............................ TX
AFLI The American Franklin Life Insurance Company........... IL
AGAIC American General Annuity Insurance Company............. TX
ASGN-NY American General Assignment Corporation of New York.... NY
AGAC American General Assurance Company..................... IL
AGAS American General Annuity Service Corporation........... TX
AGBS American General Distributors, Inc..................... DE
AGB American General Bank, FSB............................. UT
AGC American General Corporation........................... TX
AGCL AGC Life Insurance Company............................. MO
AGDMC American General Delaware Management Corporation....... DE
AGES American General Enterprise Services, Inc.............. DE
AGF American General Finance, Inc.......................... IN
AGFC American General Finance Corporation................... IN
AGFCI American General Financial Center, Incorporated........ IN
AGFCT American General Financial Center Thrift Company....... CA
AGFG American General Finance Group, Inc.................... DE
AGF Inv AGF Investment Corp.................................... IN
AGFn A.G. Financial Service Center, Inc..................... UT
AGFnC American General Financial Center, Inc................. IN
AGFS American General Financial Services, Inc............... DE
AGFA American General Financial Advisors, Inc............... TX
AGFIG American General Financial Institutions Group, Inc..... DE
AGGS American General Gateway Services, L.L.C............... DE
AGIA American General Insurance Agency, Inc................. MO
AGIAH American General Insurance Agency of Hawaii, Inc....... HI
AGIAM American General Insurance Agency of
Massachusetts, Inc..................................... MA
AGIAO American General Insurance Agency of Ohio, Inc......... OH
AGIAOK American General Insurance Agency of Oklahoma, Inc..... OK
AGIAS A.G. Investment Advisory Services, Inc................. DE
AGIAT American General Insurance Agency of Texas, Inc........ TX
AGII American General International, Inc.................... DE
AGIHC American General Investment Holding Corporation........ DE
AGIM American General Investment Management, L.P............ DE
AGIMC American General Investment Management Corporation..... DE
AGIND American General Indemnity Company..................... NE
AGL American General Life Insurance Company................ TX
AGLC American General Life Companies ....................... DE
AGLA American General Life and Accident Insurance Company... TN
AGLH American General Land Holding Company.................. DE
AGLL AGLL Corporation....................................... DE
AGNY American General Life Insurance Company of New York.... NY
AGPA American General Life Insurance Company of Pennsylvania PA
AGPIC American General Property Insurance Company............ TN
AGRA American General Realty Advisors, Inc.................. DE
AGRI American General Realty Investment Corporation......... TX
AGSI American General Securities Incorporated............... TX
</TABLE>
C-14
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
AGX American General Exchange, Inc......................... TN
ASGN American General Assignment Corporation................ TX
FFSC Franklin Financial Services Corporation................ DE
FL The Franklin Life Insurance Company.................... IL
GHC Green Hills Corporation................................ DE
HBDC HBC Development Corporation............................ VA
KC Knickerbocker Corporation.............................. TX
ML Merit Life Insurance Co................................ IN
NLA The National Life and Accident Insurance Company....... TX
NCA North Central Administrators, Inc...................... MN
NCL North Central Life Insurance Company................... MN
NCCL North Central Caribbean Life, Ltd...................... T&C
OLL The Old Line Life Insurance Company of America......... WI
PKWY Parkway 1999 Trust..................................... MD
PAV Pavilions Corporation.................................. DE
PCSC Pebble Creek Service Corporation....................... FL
PIFLA American General Property Insurance Company of Florida. FL
PPI PESCO Plus, Inc........................................ DE
RMST HSA Residential Mortgage Services of Texas, Inc........ DE
SRHP SR/HP/CM Corporation................................... TX
TAG Life Templeton American General Life of Bermuda, Ltd........ BA
TI Thrift, Incorporated................................... IN
UAS American General Bancassurance Services, Inc........... IL
UC USLIFE Corporation..................................... DE
UCLA USLIFE Credit Life Insurance Company of Arizona........ AZ
URC USLIFE Realty Corporation.............................. TX
USC USLIFE Systems Corporation............................. DE
USL The United States Life Insurance Company in the City of
New York............................................... NY
USMRP USMRP, Ltd............................................. T&C
VALIC The Variable Annuity Life Insurance Company............ TX
VAMCO The Variable Annuity Marketing Company................. TX
VRSCO VALIC Retirement Services Company...................... TX
VTC VALIC Trust Company.................................... TX
WA The Winchester Agency Ltd.............................. NY
WIS WNL Insurance Services, Inc............................ DE
WNC Western National Corporation........................... DE
WNLH WNL Holding Corp....................................... DE
YIC Yosemite Insurance Company............................. IN
</TABLE>
ITEM 27. NUMBER OF CERTIFICATE OWNERS
As of March 1, 2000, there were no owners of Certificates offered by this
Registration Statement.
ITEM 28. INDEMNIFICATION
USL's By-Laws, as amended, include provisions concerning the
indemnification of its officers and directors, and certain other persons, which
provide in substance as follows:
Article XI of USL's By-Laws provide, in part, that USL, except to the
extent expressly prohibited by the New York Business Corporation law or New York
Insurance law, shall have the
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power to indemnity each person made or threatened to be made a party to or
called as a witness in or asked to provide information in connection with any
pending or threatened action, proceeding, hearing or investigation, whether
civil or criminal, and whether judicial, quasi-judicial, administrative, or
legislative, and whether or not for or in the right of USL or any other
enterprise, by reason of the fact that such person or such person's testator or
intestate is or was a director or officer of USL, or is or was a director or
officer of USL who also serves or served at the request of USL, any other
corporation, partnership, joint venture, trust, employee benefit plan or
otherwise enterprise in any capacity, against judgments, fines, penalties,
amounts paid in settlement and reasonable expenses, including attorneys' fees,
incurred in connection with such action or proceeding, or any appeal therein,
provided that no such indemnification shall be made if a judgment or other final
adjudication adverse to such person establishes that his or her acts were
committed in a bad faith or were the result of active and deliberate dishonesty
and were material to the cause of action so adjudicated, or that he or she
personally gained in fact a financial profit or other advantages to which he or
she was not legally entitled, and provided further that no such indemnification
shall be required with respect to any settlement or other nonadjudicated
disposition of any threatened or pending action or proceeding unless USL has
given its prior consent to such settlement or other disposition.
Under Article XI, USL shall advance or promptly reimburse, upon request of
any person entitled to indemnification, all expenses, including attorneys' fees,
reasonably incurred in defending any action or proceeding in advance of its
final disposition upon receipt of a written undertaking by or on behalf of such
person to repay such amount if such person is ultimately found not to be
entitled to indemnification or, where indemnification is granted, to the extent
the expenses so advanced or reimbursed exceed the amount to which such person is
entitled, provided, however, that such person shall cooperate in good faith with
any request by USL that common counsel be utilized by the parties to an action
or proceeding who are similarly situated unless to do so would be inappropriate
due to a actual or potential differing interests between or amount such parties.
USL agrees under Article XI that it shall not, except by elimination or
amendment of the By-Laws, take any corporate action or enter into any agreement
which prohibits, or otherwise limits the rights of any person to,
indemnification in accordance with the provisions of the By-Laws. The
indemnification of any person provided by the By-Laws shall continue after such
person has ceased to be a director or officer of USL and shall inure to the
benefit of such person's heirs, executors, administrators and legal
representatives.
USL is authorized to enter into agreements with any of its directors,
officers or employees extending rights to indemnification and advancement of
expenses to such person to the fullest extent permitted by applicable law, but
the failure to enter into any such agreement shall not affect or limit the
rights of such person pursuant to the By-Laws.
A person who has been successful, on the merits or otherwise, in the
defense of a civil or criminal action or proceeding of the character described
in Article XI of USL's By-Laws shall be entitled to indemnification as
authorized by Article XI. Except as provided in the preceding sentence and
unless ordered by a court, any indemnification under Article XI shall be made by
USL if, and only if, authorized in the specific case:
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<PAGE>
(1) By the Board of Directors acting by a quorum consisting of
directors who are not parties to such action or proceeding upon a
finding that the director or officer has met the standard of conduct
set forth in the first paragraph of Article XI (and which is
described in the first paragraph of this Item 28); or
(2) If such a quorum is not obtainable or, even if obtainable, a quorum
of disinterested directors so directs;
(a) By the Board of Directors upon the opinion in writing of
independent legal counsel that indemnification is proper in the
circumstances because the standard of conduct set forth in the
first paragraph of Article XI has been met by such director or
officer; or
(b) By the shareholders upon a finding that the directors or
officer has met the applicable standard of conduct set forth in
such paragraph.
USL shall make no payments under Article XI until it shall have complied
with all provisions then in force of New York Insurance law with respect to
indemnification.
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to Directors, Officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a Director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
Director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Registrant's principal underwriter, American General Securities
Incorporated, also acts as principal underwriter for The United States
Life Insurance Company in the City of New York Separate Account USL VL-R,
American General Life Insurance Company Separate Account D, American
General Life Insurance Company Separate Account VL-R, and American General
Life Insurance Company of New York Separate Account E.
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<PAGE>
(b) The directors and principal officers of the principal underwriter are:
Position and Offices
with Underwriter,
Name and Principal American General
Business Address Securities Incorporated
----------------- -----------------------
F. Paul Kovach, Jr. Director and Chairman,
American General Securities President and Chief Executive Officer
Incorporated
2727 Allen Parkway
Houston, TX 77019
Rodney O. Martin, Jr. Director and Vice Chairman
American General Life
Companies
2929 Allen Parkway
Houston, TX 77019
Donald W. Britton Director
American General Life
Companies
2929 Allen Parkway
Houston, TX 77019
Royce G. Imhoff, II Director
American General Life
Insurance Company
2727-A Allen Parkway
Houston, Texas 77019
Alice T. Kane Director
American General
Retirement Services
125 Maiden Lane
New York, NY 10038
John A. Kalbaugh Vice President - Chief Marketing
American General Securities Officer
Incorporated
2727 Allen Parkway
Houston, TX 77019
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<PAGE>
Robert M. Roth Vice President -
American General Securities Administration and Compliance,
Incorporated Treasurer and Secretary
2727 Allen Parkway
Houston, TX 77019
Don M. Ward Vice President
American General Life
Companies
2727 Allen Parkway
Houston, Texas 77019
Julie A. Cotton Assistant Secretary
American General Life
Companies
2727 Allen Parkway
Houston, TX 77019
Robert F. Herbert, Jr. Assistant Treasurer
American General Life
Companies
2727-A Allen Parkway
Houston, Texas 77019
D. Lynne Walters Assistant Tax Officer
American General
Corporation
2929 Allen Parkway
Houston, Texas 77019
(c) Not Applicable.
ITEM 30. LOCATION OF RECORDS
All records referenced under Section 31(a) of the 1940 Act, and Rules 31a-
1 through 31a-3 thereunder, are maintained and in the custody of American
General Life Companies at its principal executive office located at 2727-A Allen
Parkway, Houston, Texas 77019.
ITEM 31. MANAGEMENT SERVICES
Not Applicable.
ITEM 32. UNDERTAKINGS
The Registrant undertakes: A) to file a post-effective amendment to this
Registration Statement as frequently as is necessary to ensure that the audited
financial statements in the
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<PAGE>
Registration Statement are never more than 16 months old for so long as payments
under the Certificates may be accepted; B) to include either (1) as part of any
application to purchase a Certificate offered by a prospectus, a space that an
applicant can check to request a Statement of Additional Information, or (2) a
toll-free number or a post card or similar written communication affixed to or
included in the applicable prospectus that the applicant can remove to send for
a Statement of Additional Information; C) to deliver any Statement of Additional
Information and any financial statements required to be made available under
this form promptly upon written or oral request.
REPRESENTATION REGARDING THE REASONABLENESS OF AGGREGATE FEES AND CHARGES
DEDUCTED UNDER THE CONTRACTS PURSUANT TO SECTION 26(E)(2)(A) OF THE INVESTMENT
COMPANY ACT OF 1940
USL represents that the fees and charges deducted under the Contract that
is identified as Contract Form No. 98506N and the Certificates that are
identified as Certificate Form No.98505N, in the aggregate, are reasonable in
relation to the services rendered, the expenses expected to be incurred, and the
risks assumed by USL.
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<PAGE>
POWERS OF ATTORNEY
Each person whose signature appears below hereby appoints Thomas M. Zurek,
Robert F. Herbert, Jr. and Pauletta P. Cohn and each of them, any one of whom
may act without the joinder of the others, as his/her attorney-in-fact to sign
on his/her behalf and in the capacity stated below and to file all amendments to
this amended Registration Statement, which amendment or amendments may make such
changes and additions to this amended Registration Statement as such
attorney-in-fact may deem necessary or appropriate.
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant, The United States Life Insurance Company in the City of
New York Separate Account USL VA-R, certifies that it meets the requirements of
Securities Act Rule 485(b) for effectiveness of this amended Registration
Statement and has duly caused this amended Registration Statement to be signed
on its behalf, in the City of Houston, and State of Texas on this 30th day of
March, 2000.
THE UNITED STATES LIFE INSURANCE
COMPANY IN THE CITY OF NEW YORK
SEPARATE ACCOUNT USL VA-R
(Registrant)
BY: THE UNITED STATES LIFE INSURANCE
COMPANY IN THE CITY OF NEW YORK
(On behalf of the Registrant and itself)
BY: /s/ Robert F. Herbert, Jr.
-----------------------------------
Robert F. Herbert, Jr.
Senior Vice President
[SEAL]
ATTEST: /s/ Julie A. Cotton
---------------------------
Julie A. Cotton
Assistant Secretary
1
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this amended
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ DAVID J. DIETZ Principal Executive Officer March 30, 2000
- ------------------ and Director
David J. Dietz
/s/ WALTER E. BEDNARSKI Principal Financial and March 30, 2000
- ----------------------- Accounting Officer
Walter E. Bednarski
/s/ WILLIAM A. BACAS Director March 30, 2000
- ---------------------
William A. Bacas
/s/ DONALD W. BRITTON Director March 30, 2000
- ----------------------
Donald W. Britton
/s/ JAMES P. CORCORAN
- ---------------------- Director March 30, 2000
James P. Corcoran
/s/ JOHN R. CORCORAN Director March 30, 2000
- ---------------------
John R. Corcoran
/s/ DR. PATRICIA O. EWERS Director March 30, 2000
- -------------------------
Dr. Patricia O. Ewers
/s/ THOMAS H. FOX Director March 30, 2000
- -----------------
Thomas H. Fox
2
<PAGE>
/s/ DAVID A. FRAVEL Director March 30, 2000
- --------------------
David A. Fravel
/s/ ROBERT F. HERBERT, JR. Director March 30, 2000
- ----------------------------
Robert F. Herbert, Jr.
/s/ DAVID L. HERZOG Director March 30, 2000
- -------------------
David L. Herzog
/s/ JOHN V. LAGRASSE Director March 30, 2000
- --------------------
John V. LaGrasse
/s/ RODNEY O. MARTIN, JR. Director March 30, 2000
- -------------------------
Rodney O. Martin, Jr.
/s/ WILLIAM J. O'HARA, JR.. Director March 30, 2000
- ---------------------------
William J. O'Hara, Jr.
/s/ GARY D. REDDICK Director March 30, 2000
- -------------------
Gary D. Reddick
/s/ GEORGE B. TROTTA Director March 30, 2000
- --------------------
George B. Trotta
3
<PAGE>
EXHIBIT INDEX
Exhibit 10 - Consent of Independent Auditors.
<PAGE>
EXHIBIT 10
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference made to our firm under the caption "Independent
Auditors" and to the use of our report dated March 21, 2000, as to The United
States Life Insurance Company in the City of New York, in Post-Effective
Amendment No. 1 to the Registration Statement (Form N-4, Nos. 333-63843 and
811-09007) of The United States Life Insurance Company in the City of New York.
/s/ ERNST & YOUNG LLP
---------------------------
ERNST & YOUNG LLP
New York, New York
March 30, 2000
