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As filed with the Securities and Exchange Commission on May 3, 2000
Registration No. 333-90449
811-09667
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933
PRE-EFFECTIVE AMENDMENT NUMBER 1
CANADA LIFE OF AMERICA VARIABLE LIFE ACCOUNT 1
(Exact Name of Trust)
CANADA LIFE INSURANCE COMPANY OF AMERICA
(Name of Depositor)
6201 Powers Ferry Road, N.W.
Atlanta, Georgia 30339
(Complete address of Depositor's Principal Executive Offices)
Craig R. Edwards, Esquire
6201 Powers Ferry Road, N.W.
Atlanta, Georgia 30339
(Name and Complete Address of Agent for Service of Process)
Copy to:
Stephen E. Roth, Esquire
Sutherland Asbill & Brennan LLP
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2415
Approximate Date of Proposed Public Offering:
As soon as practicable after the effective date of this Registration Statement.
Title of Securities Being Offered:
Interests in the Separate Account issued through Individual Flexible Premium
Variable Life Insurance Policies.
The Registrant hereby amends this registration statement on such dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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CANADA LIFE INSURANCE COMPANY OF AMERICA
HOME OFFICE: 6201 POWERS FERRY ROAD, NW, ATLANTA, GEORGIA 30339
PHONE: 1-800-232-1335
VARIABLE LIFE SERVICE CENTER: 440 LINCOLN STREET, P.O. BOX 1881,
BOSTON, MA 02266-8181
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CANADA LIFE PRESTIGE SERIES VUL
CANADA LIFE OF AMERICA VARIABLE LIFE ACCOUNT 1
INDIVIDUAL FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
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This Prospectus describes the individual flexible premium variable life
insurance policy (the Policy) offered by Canada Life Insurance Company of
America (We, Our, Us or the Company).
The Policyowner (You or Your) may choose among the divisions (the
Sub-Accounts) of the Canada Life of America Variable Life Account 1 (the
Variable Account) and/or the Fixed Account. Assets in each Sub-Account are
invested in corresponding Portfolios of the following fund companies (the
Funds):
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The Alger American Fund (Alger American) Fidelity Variable Insurance Products Fund III
Berger Institutional Products Trust (Berger (Fidelity VIP III)
Trust) Goldman Sachs Variable Insurance Trust
The Dreyfus Socially Responsible Growth Fund, (Goldman Sachs VIT)
Inc. The Montgomery Funds III (Montgomery)
(Dreyfus Socially Responsible) Seligman Portfolios, Inc. (Seligman)
Dreyfus Variable Investment Fund (Dreyfus VIF)
Fidelity Variable Insurance Products Fund
(Fidelity VIP)
Fidelity Variable Insurance Products Fund II
(Fidelity VIP II)
</TABLE>
The Policy Value will vary according to the investment performance of the
Portfolio(s) in which the Sub-Accounts You choose are invested. You bear the
entire investment risk on amounts allocated to the Variable Account. The
Policies are not suitable for short-term investment because of the substantial
nature of the surrender charge.
This Prospectus provides basic information that a prospective Policyowner
should know before investing. It may not be advantageous to replace existing
insurance with this Policy.
PLEASE READ THIS PROSPECTUS CAREFULLY BEFORE BUYING A POLICY AND KEEP IT FOR
FUTURE
REFERENCE. THIS PROSPECTUS MUST BE ACCOMPANIED BY CURRENT PROSPECTUSES
FOR THE FUNDS. THE FUNDS' PROSPECTUSES ACCOMPANY THIS PROSPECTUS.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES NOR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE POLICY AND THE SUB-ACCOUNTS ARE NOT INSURED BY THE FDIC NOR ANY OTHER
AGENCY. THEY
ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK AND ARE NOT BANK GUARANTEED.
THE POLICY DESCRIBED IN THIS PROSPECTUS IS SUBJECT TO MARKET FLUCTUATION,
INVESTMENT RISK AND POSSIBLE LOSS OF PRINCIPAL.
The date of this Prospectus is May 15, 2000.
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TABLE OF CONTENTS
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DEFINITIONS......................................... 1
SUMMARY............................................. 3
What is the Policy's Objective?................... 3
Who are the Key Persons Under the Policy?......... 3
What Happens When the Insured Dies?............... 3
Can I Examine the Policy?......................... 4
How Much Can I Invest and How Often?.............. 4
Can I Make Transfers Among the Funds and the Fixed
Account?........................................ 5
Can I Make Future Changes Under My Policy?........ 5
Can I Convert My Policy Into A Fixed Policy?...... 6
What Are the Expenses and Fees of the Funds?...... 7
THE COMPANY......................................... 10
THE VARIABLE ACCOUNT AND THE FUNDS.................. 10
The Variable Account.............................. 10
The Funds......................................... 11
Resolving Material Conflicts...................... 11
The Alger American Fund........................... 12
Alger American Growth Portfolio................. 12
Alger American Leveraged AllCap Portfolio....... 12
Alger American MidCap Growth Portfolio.......... 12
Alger American Small Capitalization Portfolio... 12
Berger Institutional Products Trust............... 12
Berger/BIAM IPT-International Fund.............. 13
Berger IPT-Small Company Growth Fund............ 14
The Dreyfus Socially Responsible Growth Fund,
Inc. ........................................... 14
Dreyfus Variable Investment Fund.................. 14
Dreyfus VIF Appreciation Portfolio.............. 14
Dreyfus VIF Growth and Income Portfolio......... 14
Fidelity Variable Insurance Products Fund......... 14
Fidelity VIP Growth Portfolio................... 14
Fidelity VIP High Income Portfolio.............. 14
Fidelity VIP Money Market Portfolio............. 14
Fidelity VIP Overseas Portfolio................. 14
Fidelity Variable Insurance Products Fund II...... 14
Fidelity VIP II Asset Manager Portfolio......... 14
Fidelity VIP II Contrafund Portfolio............ 14
Fidelity VIP II Index 500 Portfolio............. 14
Fidelity VIP II Investment Grade Bond
Portfolio..................................... 14
Fidelity Variable Insurance Products Fund III..... 15
Fidelity VIP III Growth Opportunities
Portfolio..................................... 15
Goldman Sachs Variable Insurance Trust............ 15
Goldman Sachs VIT Capital Growth Portfolio...... 15
Goldman Sachs VIT CORE U.S. Equity Portfolio.... 15
Goldman Sachs VIT Global Income Portfolio....... 15
Goldman Sachs VIT Growth and Income Portfolio... 15
The Montgomery Funds III.......................... 15
Montgomery Variable Series: Emerging Markets
Fund.......................................... 15
Montgomery Variable Series: Growth Fund......... 16
Seligman Portfolios, Inc. ........................ 16
Seligman Communications and Information
Portfolio..................................... 16
Seligman Frontier Portfolio..................... 16
Change in Investment Objective.................. 16
THE POLICY.......................................... 16
Applying for a Policy............................. 16
Right to Examine.................................. 17
Conversion Privilege.............................. 17
Payments.......................................... 17
Electronic Funds Transfer (EFT)................. 18
Allocation of Net Payments...................... 18
Transfers......................................... 18
Transfer Privilege.............................. 18
Dollar Cost Averaging........................... 19
Account Rebalancing............................... 20
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Death Benefit..................................... 20
Guideline Minimum Death Benefit................. 20
Net Death Benefit............................... 20
Election of Death Benefit Options................. 21
Death Benefit Option 1 -- Level Guideline
Premium Test.................................. 21
Death Benefit Option 2 -- Adjustable Guideline
Premium Test.................................. 21
Changing Between Death Benefit Option 1 and Death
Benefit 2....................................... 23
Change from Death Benefit Option 1 to Death
Benefit Option 2.............................. 24
Change from Death Benefit Option 2 to Death
Benefit Option 1.............................. 24
Guaranteed Death Benefit Rider.................... 24
Guaranteed Death Benefit........................ 25
Termination of the Guaranteed Death Benefit
Rider......................................... 25
Change in Face Amount............................. 25
Increases....................................... 25
Decreases....................................... 26
Policy Value...................................... 26
Sub-Accounts...................................... 27
Sub-Account Value............................... 27
Units........................................... 27
Unit Value........................................ 27
Net Investment Factor........................... 28
Payment Options................................... 28
Optional Insurance Benefits....................... 28
Surrender......................................... 28
Partial Withdrawal................................ 28
Delay of Payments................................. 29
CHARGES AND DEDUCTIONS.............................. 29
Deductions From Payments.......................... 29
Monthly Deduction................................. 30
Monthly Expense Charge.......................... 30
Monthly Administration Fee...................... 30
Monthly Mortality and Expense Risk Charge....... 30
Cost of Insurance Charges....................... 30
Fund Expenses..................................... 32
Surrender Charge.................................. 32
Partial Withdrawal Charges........................ 32
Transfer Charges.................................. 33
Other Administrative Charges...................... 33
POLICY LOANS........................................ 33
Preferred Loan Option............................. 33
Repayment of Outstanding Loan..................... 34
Effect of Policy Loans............................ 34
POLICY TERMINATION AND REINSTATEMENT................ 34
Termination....................................... 34
Reinstatement..................................... 35
OTHER POLICY PROVISIONS............................. 36
Policyowner....................................... 36
Beneficiary....................................... 36
Assignment........................................ 36
Modification...................................... 36
Notification of Death............................. 36
Written Request................................... 37
Incontestability.................................. 37
Suicide........................................... 37
Misstatement of Age or Sex........................ 37
FEDERAL TAX STATUS.................................. 37
The Company and the Variable Account.............. 37
Taxation of the Policies.......................... 38
Policy Loans...................................... 38
Modified Endowment Contracts...................... 38
Possible Tax Changes.............................. 40
VOTING RIGHTS....................................... 40
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DELETION OR SUBSTITUTION OF INVESTMENTS............. 40
FURTHER INFORMATION................................. 41
DISTRIBUTION........................................ 42
INFORMATION ABOUT THE FIXED ACCOUNT................. 42
General Description............................... 42
Fixed Account Interest............................ 42
Fixed Account Policy Value........................ 43
FINANCIAL STATEMENTS................................ 43
APPENDIX A -- GUIDELINE MINIMUM DEATH BENEFIT
TABLES............................................ A-1
APPENDIX B -- OPTIONAL INSURANCE BENEFITS........... B-1
APPENDIX C -- PAYMENT OPTIONS....................... C-1
APPENDIX D -- EXAMPLES OF DEATH BENEFIT, POLICY
VALUES AND ACCUMULATED PAYMENTS................... D-1
APPENDIX E -- CALCULATION OF MAXIMUM SURRENDER
CHARGES........................................... E-1
APPENDIX F -- PERFORMANCE INFORMATION............... F-1
APPENDIX G -- MAXIMUM MONTHLY EXPENSE CHARGES....... G-1
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DEFINITIONS
ACCEPTANCE: The date We mail the Policy if the application is approved with
no changes requiring Your consent; otherwise, the date We receive Your written
consent to any changes.
AGE: How old the Insured is on the birthday nearest to a Policy
Anniversary.
BENEFICIARY: The person or persons You name to receive the Net Death
Benefit when the Insured dies. The Owner may designate primary, contingent and
irrevocable Beneficiaries.
CASH SURRENDER VALUE: The amount payable on a full surrender. It is the
Policy Value less any Outstanding Loan and surrender charges.
DATE OF ISSUE: The date the Policy was issued, used to measure the Monthly
Processing Date, Policy months, Policy years and Policy Anniversaries. Coverage
begins on this date.
DEATH BENEFIT: The amount payable to the Beneficiary when the Insured dies
prior to the Final Payment Date, before deductions for any Outstanding Loan and
partial withdrawals, partial withdrawal charges, and due and unpaid Monthly
Deductions.
DUE PROOF OF DEATH: Proof of death that is satisfactory to Us. Such proof
may consist of: 1) a certified copy of the death certificate; or 2) a certified
copy of the decree of a court of competent jurisdiction as to the finding of
death.
EARNINGS: The amount by which the Policy Value exceeds the sum of the
payments made less all withdrawals and withdrawal charges. Earnings are
calculated at least once each month.
EVIDENCE OF INSURABILITY: Information, including medical information, used
to decide the Insured's Underwriting Class.
FACE AMOUNT: The amount of insurance coverage, selected by You and used to
compute the Death Benefit, including any additional increases or decreases.
FINAL PAYMENT DATE: The Policy Anniversary nearest the Insured's 100th
birthday. After this date, no payments may be made.
FIXED ACCOUNT: Part of Our General Account that provides a fixed interest
rate. This account is not part of and does not depend on the investment
performance of the Variable Account.
GENERAL ACCOUNT: All Our assets other than those held in a separate
investment account.
GUIDELINE MINIMUM DEATH BENEFIT: The minimum Death Benefit required to
qualify the Policy as "life insurance" under federal income tax laws.
INSURED: The person whose life is insured by this Policy.
LOAN VALUE: The maximum amount You may borrow under the Policy.
MINIMUM MONTHLY PAYMENT: A monthly amount shown in Your Policy. If You pay
this amount, We guarantee that Your Policy will not lapse before the 49th
Monthly Processing Date from the Date of Issue or increase in Face Amount,
within limits.
MONTHLY DEDUCTION: Consists of the charges taken on each Monthly Processing
Date up to the Final Payment Date, including the cost of insurance charge,
monthly expense charge, monthly administration fee, monthly mortality and
expense risk charge, and any monthly rider charges.
MONTHLY PROCESSING DATE: The date when the Monthly Deduction is taken.
NET AMOUNT AT RISK: On the Monthly Processing Date, the Death Benefit minus
the Policy Value prior to the Monthly Deduction. In any other day it is the
Death Benefit minus the Policy Value.
NET DEATH BENEFIT: The amount payable to the Beneficiary when the Insured
dies.
NET PAYMENT: Your payment less a payment expense charge.
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NON-PARTICIPATING: The Policy is non-participating and is not eligible for
dividends.
OUTSTANDING LOAN: All Policy loans taken plus loan interest due or accrued
less any loan payments.
POLICY ANNIVERSARY: The same date in each policy year as the Date of Issue.
POLICY CHANGE: Any change in the Face Amount, the addition or deletion of a
rider, underwriting reclassifications, or changing from Death Benefit Option 1
to Death Benefit Option 2 (and vice versa).
POLICYOWNER: The person who may exercise all rights under the Policy, with
the consent of any irrevocable Beneficiary. "You" and "Your" refer to the
Policyowner in this Prospectus.
POLICY VALUE: The sum of the Variable Account value and the Fixed Account
value.
PORTFOLIOS: The investment portfolios of the Funds in which the
Sub-Accounts invest.
PREMIUM: A payment You must make to Us to keep the Policy in force.
PRO-RATA ALLOCATION: An allocation among the Fixed Account and the
Sub-Accounts in the same proportion that, on the date of allocation, the
unloaned Policy Value in the Fixed Account and the Policy Value in each Sub-
Account bear to the total unloaned Policy Value.
SUB-ACCOUNT: A subdivision of the Variable Account investing exclusively in
the shares of a Portfolio.
UNDERWRITING CLASS: The insurance risk classification that We assign the
Insured based on the information in the application and other Evidence of
Insurability We consider. The Insured's Underwriting Class will affect the
Monthly Deduction and the payment required to keep the Policy in force.
UNIT: A measurement used in the determination of the Policy's Variable
Account value.
VALUATION DAY: Each day the New York Stock Exchange is open for trading.
VALUATION PERIOD: The period beginning at the close of business on a
Valuation Day and ending at the close of business on the next succeeding
Valuation Day. The close of business is the close of regular trading on the New
York Stock Exchange (usually 4:00 P.M. Eastern Time).
VARIABLE ACCOUNT: Canada Life of America Variable Life Account 1.
VARIABLE LIFE SERVICE CENTER: Our administrator's office at the mailing
address shown on page 1 of the Prospectus.
WRITTEN REQUEST: Your request in writing, satisfactory to Us, received at
the Variable Life Service Center.
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SUMMARY
This summary provides a brief description of some of the features and
charges of the Policy offered by Us. You will find more detailed information in
the rest of this Prospectus and the Policy. Please keep the Policy and its
riders or endorsements, if any, together with the application. Together they are
the entire agreement between You and Us.
WHAT IS THE POLICY'S OBJECTIVE?
The objective of the Policy is to give life insurance protection and help
You build assets tax-deferred. Features available through the Policy include:
- a Net Death Benefit that can protect Your Beneficiaries, which includes
a payment option that can guarantee an income for life;
- ability to create Your own personalized investment portfolio within
Your Policy;
- experienced professional investment advisers administering the Funds
(see the Fund prospectuses); and
- tax deferral on earnings.
While the Policy is in force, it will provide:
- life insurance coverage on the Insured;
- Policy Value;
- surrender rights and partial withdrawal rights;
- loan privileges; and
- optional insurance benefits available by rider.
The Policy combines features and benefits of traditional life insurance
with the advantages of professional money management. However, unlike the fixed
benefits of ordinary life insurance, the Policy Value and the Death Benefit
under Death Benefit Option 2, will increase or decrease depending on investment
results. Unlike traditional insurance policies, the Policy has no fixed schedule
for payments. Within limits, You may make payments of any amount and frequency.
While You may establish a schedule of payments (planned payments), the Policy
will not necessarily lapse if You fail to make planned payments. Also, making
planned payments will not guarantee that the Policy will remain in force.
WHO ARE THE KEY PERSONS UNDER THE POLICY?
The Policy is a contract between You and Us. Each Policy has a Policyowner
(You), an Insured (You or another individual You select) and a Beneficiary. As
Policyowner, You make payments, choose investment allocations and select the
Insured and Beneficiary. The Insured is the person whose life is insured under
the Policy. The Beneficiary is the person who receives the Net Death Benefit if
the Insured dies while the Policy is in force.
WHAT HAPPENS WHEN THE INSURED DIES?
We will pay the Net Death Benefit to the Beneficiary when the Insured dies
while the Policy is in force. You may choose among three Death Benefit options.
Under Death Benefit Option 1 and Death Benefit Option 3, the Death Benefit is
the greater of (a) the Face Amount or (b) the Guideline Minimum Death Benefit.
Under Death Benefit Option 2, the Death Benefit is the greater of (a) the sum of
the Face Amount and Policy Value or (b) the Guideline Minimum Death Benefit. For
more information, see "Election of Death Benefit Options" under THE POLICY.
The Net Death Benefit payable to the Beneficiary is the Death Benefit less
any Outstanding Loan, partial withdrawals, partial withdrawal charges, and due
and unpaid Monthly Deductions. However, after the Final Payment Date, the Net
Death Benefit is the Policy Value less any Outstanding Loan. The Beneficiary may
receive the Net Death Benefit in a lump sum or under a payment option We offer
at that time.
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An optional Guaranteed Death Benefit Rider is available only at issue of
the Policy. (The Guaranteed Death Benefit Rider may not be available in all
states). If this Rider is in effect, the Company:
- guarantees that Your Policy will not lapse regardless of the investment
performance of the Variable Account; and
- provides a guaranteed Net Death Benefit.
In order to maintain the Guaranteed Death Benefit Rider, certain minimum
Premium payment tests must be met on each Policy Anniversary and within 48
months following the Date of Issue and/or the date of any increase in Face
Amount. See "Death Benefits" under THE POLICY. In addition, a one-time
administrative charge of $25 will be deducted from the Policy Value when the
Guaranteed Death Benefit Rider is elected. Certain transactions, including any
Outstanding Loan, partial withdrawals, underwriting reclassifications, changes
in Face Amount, and changes in Death Benefit Options, can result in the
termination of the Rider. If this Rider is terminated, it cannot be reinstated.
For more information, see "Guaranteed Death Benefit Rider" under THE POLICY.
CAN I EXAMINE THE POLICY?
Yes. You have the right to examine and cancel Your Policy by returning it
to the Variable Life Service Center or to one of Our representatives on or
before the 10th day after You receive the Policy or longer when state law
requires. See the "Right to Examine Policy" provision in Your Policy. The Policy
will be void from the Date of Issue.
If Your Policy provides for a full refund of payments under its "Right to
Examine Policy" provision, as required by state law, the Company will mail a
refund to You within seven days. We may delay a refund of any payment made by
check until the check has cleared the bank. Your refund will be the greater of:
- Your entire payment; or
- the Policy Value plus deductions under the Policy for taxes, charges or
fees.
If Your Policy does not provide for a full refund, You will receive:
- the value in the Fixed Account; plus
- the Policy Value in the Variable Account; plus
- all fees, charges and taxes, which have been imposed at the Policy
level.
After an increase in Face Amount, a right to cancel the increase also
applies. See "Right to Examine" provision under THE POLICY.
WHAT IS THE VARIABLE ACCOUNT?
The Variable Account is a separate investment account separate from the
Fixed Account that consists of Sub-Accounts. Amounts in the Variable Account
will vary according to the investment performance of the Portfolios of the
Fund(s) in which Your elected Sub-Accounts are invested. You may allocate Your
Net Premium and make transfers, within limits, among the Sub-Accounts of the
Variable Account and the Fixed Account. The assets of each Sub-Account are
invested in the corresponding Portfolios of the Funds that are listed on the
cover page of this Prospectus. See THE VARIABLE ACCOUNT AND THE FUNDS.
WHAT IS THE FIXED ACCOUNT?
The Fixed Account offers a minimum guaranteed interest rate. It is part of
Our General Account. You may allocate all or part of Net Premium to the Fixed
Account or make transfers from the Variable Account to the Fixed Account.
Certain restrictions apply. See "Transfers; Transfer Privilege" under THE POLICY
and "INFORMATION ABOUT THE FIXED ACCOUNT".
HOW MUCH CAN I INVEST AND HOW OFTEN?
The number and frequency of Your payments are flexible. See "Payments"
under THE POLICY for additional information and restrictions.
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You can allocate Your Policy Value among the Sub-Accounts and the Fixed
Account to meet Your investment needs. If Your Policy provides for a full refund
of Premiums paid under its "Right to Examine Policy" provision, We will allocate
all Sub-Account investments to the money market Sub-Account for:
- 14 days from Acceptance; or
- 24 days from Acceptance for replacements in states with a 20-day right
to examine; or
- 34 days from Acceptance for California citizens Age 60 and older, who
have a 30-day right to examine.
After this, We will allocate all amounts as You have chosen.
CAN I MAKE TRANSFERS AMONG THE FUNDS AND THE FIXED ACCOUNT?
Yes. You may transfer among the Funds and the Fixed Account, subject to Our
consent and then current rules, see "Transfer; Transfer Privilege" under THE
POLICY. You will incur no current taxes on transfers while Your money is in the
Policy.
CAN I GET MONEY OUT OF MY POLICY?
You may borrow up to the Loan Value of Your Policy. You may also make
partial withdrawals and surrender the Policy for its Cash Surrender Value. There
are two types of loans that may be available to You:
- a standard loan option is always available to You. The Loan Value is
90% of the difference between Policy Value and surrender charges. The
Company will charge interest on the amount of the loan at a current
annual rate of 4.8%. This current rate of interest may change, but is
guaranteed not to exceed 6%. However, the Company will also credit
interest on the Policy Value securing the loan. The annual interest
rate credited to the Policy Value securing a standard loan is 4.0%.
- a preferred loan option is automatically available to You unless You
request otherwise. The preferred loan option is available on that part
of the Outstanding Loan that is attributable to Earnings. The Company
will charge interest on the amount of the loan at a current annual rate
of 4.00%. This current rate of interest may change, but is guaranteed
not to exceed 4.50%. The annual interest rate credited to the Earnings
securing a preferred loan is 4.0%.
We will allocate Policy loans among the Sub-Accounts and the Fixed Account
according to Your instructions. If You do not make an allocation, We will make a
Pro-rata Allocation. We will transfer Pro-rata Allocations from each Sub-
Account and the unloaned portion of the Fixed Account to equal the total amount
of the loan. This Outstanding Loan amount is transferred to the Fixed Account.
Loans may have tax consequences. See "Taxation of the Policies" under FEDERAL
TAX STATUS.
You may surrender Your Policy and receive its Cash Surrender Value. After
the first Policy year, You may make partial withdrawals of $200 or more from
Policy Value, subject to possible surrender charges. Under Death Benefit Option
1 and Death Benefit Option 3, the Face Amount is reduced by each partial
withdrawal not classified as a preferred partial withdrawal. We will not allow a
partial withdrawal if it would reduce the Face Amount below $40,000. A surrender
or partial withdrawal may have tax consequences. See "Taxation of the Policies"
under FEDERAL TAX STATUS.
A request for a preferred loan, a partial withdrawal after the Final
Payment Date, or the foreclosure of any Outstanding Loan will terminate a
Guaranteed Death Benefit Rider. See "Guaranteed Death Benefit Rider" under THE
POLICY.
CAN I MAKE FUTURE CHANGES UNDER MY POLICY?
Yes. There are several changes You can make after receiving Your Policy,
within limits. You may:
- cancel Your Policy under its "Right to Examine" provision;
- transfer Your ownership to someone else;
- change the Beneficiary;
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- change the allocation of payments into the Sub-Accounts and the Fixed
Account;
- make transfers of Policy Value among the Sub-Accounts and the Fixed
Account, with no current tax consequences under current law;
- adjust the Death Benefit by increasing or decreasing the Face Amount;
- change Your choice of Death Benefit options between Death Benefit
Option 1 and Death Benefit Option 2; and
- add or remove optional insurance benefits provided by a rider.
CAN I CONVERT MY POLICY INTO A FIXED POLICY?
Yes. You can convert Your Policy without charge during the first 24 months
after the Date of Issue or after an increase in Face Amount. On conversion, We
will transfer the Policy Value in the Variable Account to the Fixed Account. We
will allocate all future payments to the Fixed Account, unless You instruct Us
otherwise.
WHAT CHARGES WILL I PAY?
The following charges will apply to Your Policy under the circumstances
described. Some of these charges apply throughout the Policy's duration. Other
charges apply only if You choose options under the Policy.
- From each payment, We will deduct a PAYMENT EXPENSE CHARGE of 6.00%,
which is composed of the following:
Premium Tax Charge: 2.00%
Deferred Acquisition Costs (DAC Tax) Charge: 1.00%
Front-End Sales Load: 3.00%
- On each Monthly Processing Date, We take the following deductions (the
Monthly Deduction) from the Policy Value:
Cost of Insurance Charge -- This charge varies with the sex (other than
states requiring unisex rates), age, duration, smoking status, and
Underwriting Class of the Insured and the Death Benefit Option
selected.
Monthly Expense Charge -- This charge is set at issue based on the age,
sex, and Underwriting Class of the Insured, for each $1,000 of the
Policy's Face Amount. The charge applies only for the first 10 years
after issue or an increase in Face Amount. To see the maximum Monthly
Expense Charge per $1,000 of the Policy's Face Amount, see APPENDIX
G -- MAXIMUM MONTHLY EXPENSE CHARGES.
Monthly Administration Fee -- $7.50.
Monthly Mortality and Expense Risk Charge -- This charge is currently
equal to an annual rate of 0.35% of the Policy Value in each
Sub-Account for the first 10 Policy years and an annual rate of 0.10%
for Policy year 11 and later. The charge is based on the Policy Value
in the Sub-Accounts as of the prior Monthly Processing Date. This
charge is not assessed in whole or in part against the Fixed Account.
The Company may increase this charge, subject to state and federal law,
to an annual rate of 0.60% of the Policy Value in each Sub-Account for
the first 10 Policy years and an annual rate of 0.30% for Policy year
11 and later. This charge will continue to be deducted after the Final
Payment Date.
Monthly Rider Charges -- These charges will vary based on the riders
selected and by the sex, age, and Underwriting Class of the Insured
under the rider. Please see APPENDIX B -- OPTIONAL INSURANCE BENEFITS.
- The charges below apply only if You surrender Your Policy or make
partial withdrawals:
Surrender Charge -- A surrender charge will apply to a full withdrawal,
a decrease in Face Amount, or any partial withdrawal exceeding the
preferred partial withdrawal, up to the beginning of the 10th Policy
year from Date of Issue of the Policy or from the date of increase in
Face Amount. The maximum surrender charge is
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equal to a specific dollar amount that is set at issue based on the
age, sex, and Underwriting Class of the Insured for each $1,000 of the
Policy's Face Amount. The amount of the surrender charge decreases
annually to zero by the beginning of the 10th Policy year.
If there are increases in the Face Amount, each increase will have a
corresponding surrender charge. These charges will be specified in a
supplemental schedule of benefits sent to you at the time of the
increase.
For more information, see APPENDIX E -- CALCULATION OF MAXIMUM
SURRENDER CHARGES for examples of how We compute the maximum surrender
charge.
THE SURRENDER CHARGES MAY BE SIGNIFICANT. YOU MAY HAVE NO CASH
SURRENDER VALUE IF YOU SURRENDER YOUR POLICY DURING THE EARLY POLICY
YEARS.
Partial Withdrawal Charges -- We deduct the following charges from
Policy Value:
- A transaction fee of 2% of the amount withdrawn, not to exceed $25,
is assessed against each partial withdrawal.
- A proportional amount of the full surrender charge is applied to
any partial withdrawal, except for that part of the partial
withdrawal which is considered a preferred partial withdrawal. See
"Partial Withdrawal Charges" under CHARGES AND DEDUCTIONS. We
reduce the Policy's outstanding surrender charge, if any, by this
amount.
Other charges You may incur:
Charge for Optional Guaranteed Death Benefit Rider -- A one time
administrative charge of $25 will be deducted from Policy Value when
the Rider is elected. Please see APPENDIX B -- OPTIONAL INSURANCE
BENEFITS.
Transfer Charge -- Currently, the first 12 transfers of Policy Value in
a Policy year are free. A current transfer charge of $10, never to
exceed $25, applies for each additional transfer in the same Policy
year. This charge is for the costs of processing the transfer. This
charge does not apply to Dollar Cost Averaging or Account Rebalancing.
Other Administrative Charges -- We reserve the right to charge for
other administrative costs. While there are no current charges for
these costs, We may impose a charge not to exceed $25 for:
- changing Net Payment allocation instructions;
- changing the allocation of the Monthly Deduction among the various
Sub-Accounts and the Fixed Account;
- providing a projection of values; or
- reissuance of a lost Policy (printing a duplicate Policy).
See CHARGES AND DEDUCTIONS.
WHAT ARE THE EXPENSES AND FEES OF THE FUNDS?
In addition to the charges described above, certain fees and expenses are
deducted from the assets of the underlying Funds. The levels of fees and
expenses vary among the underlying Funds. The following table shows the expenses
of the underlying Funds for 1999. For more information concerning fees and
expenses, see the prospectuses of the underlying Funds.
7
<PAGE> 12
FUNDS' ANNUAL EXPENSES FOR THE YEAR ENDED DECEMBER 31, 1999
(after Expense Reimbursement, as indicated, and as a percentage of
average net assets)
<TABLE>
<CAPTION>
OTHER EXPENSES TOTAL
MANAGEMENT (AFTER EXPENSE ANNUAL
PORTFOLIO FEES REIMBURSEMENT) EXPENSES
--------- ---------- -------------- --------
<S> <C> <C> <C>
Alger American Growth....................... 0.75% 0.04% 0.79%
Alger American Leveraged AllCap............. 0.85% 0.08% 0.93%
Alger American MidCap Growth................ 0.80% 0.05% 0.85%
Alger American Small Capitalization......... 0.85% 0.05% 0.90%
Berger/BIAM IPT-International(1)............ 0.90% 0.30% 1.20%
Berger IPT-Small Company Growth(1).......... 0.00% 1.15% 1.15%
Dreyfus VIF Appreciation.................... 0.75% 0.03% 0.78%
Dreyfus VIF Growth and Income............... 0.75% 0.04% 0.79%
Dreyfus Socially Responsible................ 0.75% 0.04% 0.79%
Fidelity VIP Growth(2)...................... 0.58% 0.08% 0.66%
Fidelity VIP High Income.................... 0.58% 0.11% 0.69%
Fidelity VIP Money Market................... 0.18% 0.09% 0.27%
Fidelity VIP Overseas(2).................... 0.73% 0.18% 0.91%
Fidelity VIP II Asset Manager(2)............ 0.53% 0.10% 0.63%
Fidelity VIP II Contrafund(R)(3)............ 0.58% 0.09% 0.67%
Fidelity VIP II Index 500(2)................ 0.24% 0.04% 0.28%
Fidelity VIP II Investment Grade Bond....... 0.43% 0.11% 0.54%
Fidelity VIP III Growth Opportunities(2).... 0.58% 0.11% 0.69%
Goldman Sachs VIT Capital Growth(4)......... 0.25% 1.00% 1.25%
Goldman Sachs VIT CORE U.S. Equity(4)....... 0.20% 0.50% 0.70%
Goldman Sachs VIT Global Income(4).......... 0.25% 1.15% 1.40%
Goldman Sachs VIT Growth and Income(4)...... 0.25% 1.00% 1.25%
Montgomery Variable Series: Emerging
Markets................................... 1.25% 0.37% 1.62%
Montgomery Variable Series: Growth(5)....... 0.52% 0.73% 1.25%
Seligman Communications and Information..... 0.75% 0.11% 0.86%
Seligman Frontier(6)........................ 0.75% 0.20% 0.95%
</TABLE>
(1) The Managers of the Berger/BIAM IPT-International Fund and Berger IPT-Small
Company Growth Fund have agreed to waive their management fees and reimburse
the Funds for additional expenses to the extent that the Funds' total annual
expenses exceed 1.20% and 1.15%, respectively. Without this waiver, the
management fees, other expenses, and total annual expenses would have been
0.90%, 1.55%, and 2.45% for the Berger/BIAM IPT-International Fund, and
0.85%, 0.64%, and 1.49% for the Berger IPT-Small Company Growth Fund. This
waiver may not be terminated or amended except by a vote of each of the
Fund's Board of Trustees.
(2) A portion of the brokerage commissions that certain Fidelity Portfolios pay
was used to reduce Fund expenses. In addition, certain Portfolios have
entered into arrangements with their custodian and transfer agent whereby
interest earned on uninvested cash balances was used to reduce custodian and
transfer agent expenses. After these reductions, Total Expenses for the
Fidelity VIP Growth Portfolio, Fidelity VIP Overseas Portfolio, Fidelity VIP
II Asset Manager Portfolio, Fidelity VIP II Contrafund Portfolio, and
Fidelity VIP II Growth Opportunities Portfolio were 0.65%, 0.87%, 0.62%,
0.65%, and 0.68%, respectively.
(3) The Fidelity VIP II's investment adviser agreed to reimburse a portion of
the Fidelity VIP II Index 500 Portfolio's expenses during the period.
Without this reimbursement, the Management Fee, Other Expenses, and Total
Expenses for the Fidelity VIP II Index 500 Portfolio would have been 0.57%,
2.77%, and 3.34%, respectively.
(4) The Goldman Sachs VIT Funds' expenses are based on estimated expenses for
fiscal year December 31, 2000. The Investment Advisers to the Goldman Sachs
VIT Capital Growth, CORE U.S. Equity, Global Income and Growth and Income
Funds have voluntarily agreed to reduce or limit certain "Other Expenses" of
such Funds (excluding management fees, taxes, interest and brokerage fees
and litigation, indemnification and other extraordinary expenses) to the
extent such expenses exceed 0.25%, 0.20%, 0.25% and 0.25% per annum of such
Funds' average daily net assets, respectively. The expenses shown include
this reimbursement. If excluded, the estimated Other Expenses and estimated
Total Expenses for the Goldman Sachs VIT Capital Growth, CORE U.S. Equity,
Global Income and Growth and Income Funds would be 0.75% and 0.94%, 0.70%
and 0.20%, 0.90% and 1.78%, and 0.75% and 0.47%, respectively. The
reductions or limits may be discontinued or modified by the investment
advisers in their discretion at any time.
8
<PAGE> 13
(5) The Manager of the Montgomery Variable Series: Growth Fund voluntarily
reimbursed the Growth Fund for a portion of its management fee. The
management fee, other expenses, and total expenses, without this voluntary
reimbursement, were 1.52%, 0.73%, and 2.25%, respectively.
(6) J. & W. Seligman & Co., Incorporated voluntarily agreed to reimburse
expenses of Seligman Frontier Portfolio, other than the management fee,
which exceed 0.20%. Without reimbursement, Other Expenses and Total Annual
Expenses would have been 0.21% and 0.96% respectively.
There is no assurance that these waiver or reimbursement policies will be
continued in the future. If any of these policies are discontinued, it will be
reflected in an updated prospectus.
The data with respect to the Funds' annual expenses have been provided to
Us by the Funds and We have not independently verified such data.
WHAT ARE THE LAPSE AND REINSTATEMENT PROVISIONS OF MY POLICY?
The Policy will not lapse if You fail to make payments unless:
- the Policy Value less an Outstanding Loan is insufficient to cover the
next Monthly Deduction and loan interest accrued; or
- an Outstanding Loan exceed Policy Value.
There is a 62-day grace period in either situation.
If You make payments at least equal to Minimum Monthly Payments, We
guarantee that Your Policy will not lapse before the 49th Monthly Processing
Date from Date of Issue or increase in Face Amount, within limits and excluding
loan foreclosure. If the Guaranteed Death Benefit Rider is in effect, the Policy
will not lapse regardless of the investment performance of the Variable Account
excluding loan foreclosure. For more information, see "Guaranteed Death Benefit
Rider."
You may reinstate Your Policy within three years after the grace period,
within limits. See POLICY TERMINATION & REINSTATEMENT for further details.
HOW WILL THE POLICY BE TAXED?
Death benefits paid to the Beneficiary generally are not subject to Federal
income tax. Under current law, undistributed increases in cash value generally
are not taxable to You. See "FEDERAL TAX STATUS."
Loans, assignments, and other pre-death distributions may have tax
consequences depending primarily on the amount which You have paid into the
Policy but also on any "material change" in the terms or benefits of the Policy
or any Death Benefit reduction. If premium payments, a Death Benefit reduction,
or a material change cause the Policy to become a "Modified Endowment Contract,"
then pre-death distributions (including loans) will be included in income on an
income first basis, and a 10% penalty tax may be imposed on income distributed
before the Policyowner attains age 59 1/2. Tax considerations may therefore
influence the amount and timing of premium payments and certain Policy
transactions which You choose to make. See "FEDERAL TAX STATUS."
If the Policy is not a Modified Endowment Contract, loans under the Policy
will generally not be taxable to You as long as the Policy has not lapsed, been
surrendered or terminated. With some exceptions, other pre-death distributions
under a Policy that is not a Modified Endowment Contract are includible in
income only to the extent that they exceed Your investment in the Policy. See
"FEDERAL TAX STATUS."
This Summary is intended to provide only a very brief overview of the more
significant aspects of the Policy. This Prospectus and the Policy provide
further detail. The Policy provides insurance protection for the named
Beneficiary.
DOES CANADA LIFE OFFER OTHER POLICIES?
We offer variable annuity policies which also invest in the same Portfolios
of the Funds. We also offer a full line of traditional life insurance and
annuity policies through Our parent company, The Canada Life Assurance Company.
For more information about these policies, please contact Your Registered
Representative.
WHAT IF I HAVE QUESTIONS?
We will be happy to answer Your questions about the Policy or Our
procedures. Call or write to Us at the Variable Life Service Center. The phone
number or address is located on page 1. All inquiries should include the Policy
number and the names of the Policyowner and the Insured.
If You have questions concerning Your investment strategies, please contact
Your Registered Representative.
9
<PAGE> 14
THE COMPANY
We are a stock life insurance company with assets as of December 31, 1999
of approximately $3.0 billion (U.S. dollars). We were incorporated under
Michigan law on April 12, 1988, and Our Home Office is located at 6201 Powers
Ferry Road, NW, Atlanta, Georgia 30339. We are principally engaged in issuing
and reinsuring annuity and life insurance policies.
We share Our A.M. Best rating with Our parent company, The Canada Life
Assurance Company. From time to time, We will quote this rating and Our ratings
from Standard & Poor's Corporation, Duff & Phelps Inc., and/or Moody's Investors
Service for claims paying ability. These ratings relate to Our financial ability
to meet Our contractual obligations under Our insurance contracts. They do not
take into account deductibles, surrender or cancellation penalties, or
timeliness of claim payment. They also do not address the suitability of a
Policy for a particular purchaser, or relate to Our ability to meet non-policy
obligations.
We are a wholly-owned subsidiary of The Canada Life Assurance Company, a
Canadian life insurance company headquartered in Toronto, Ontario, Canada. The
Canada Life Assurance Company commenced insurance operations in 1847 and has
been actively operating in the United States since 1889. It is one of the
largest life insurance companies in North America with consolidated assets as of
December 31, 1999 of approximately $36.5 billion (U.S. dollars).
Obligations under the Policies are obligations of Canada Life Insurance
Company of America.
We are subject to regulation and supervision by the Michigan Insurance
Bureau, as well as the laws and regulations of all jurisdictions in which We are
authorized to do business.
We are a charter member of the Insurance Marketplace Standards Association
(IMSA). Companies that belong to IMSA subscribe to a rigorous set of standards
that cover the various aspects of sales and service for individually sold life
insurance and annuities. IMSA members have adopted policies and procedures that
demonstrate a commitment to honesty, fairness, and integrity in all customer
contacts involving sales and service of individual life insurance and annuity
products.
SERVICES AND REINSURANCE AGREEMENTS WITH ALLMERICA FINANCIAL
We are entering into a Product Development and Administrative Services
Agreement ("Services Agreement") with First Allmerica Financial Life Insurance
Company ("Allmerica Financial"), a life insurance company organized and existing
under the laws of the Commonwealth of Massachusetts. Under the Services
Agreement, Allmerica Financial will provide, at the Variable Life Services
Center, on Our behalf, all Policy underwriting services, claims processing and
other administrative services, including maintenance of the books and records
that contain all pertinent information necessary to the administration and
operation of the Policies.
We are also entering into a modified coinsurance agreement with Allmerica
Financial, reinsuring certain of Our rights, liabilities and obligations with
respect to the Policies.
THE VARIABLE ACCOUNT AND THE FUNDS
THE VARIABLE ACCOUNT
We established the Canada Life of America Variable Life Account 1 (the
Variable Account) as a separate investment account on July 22, 1988, under
Michigan law. Although We own the assets in the Variable Account, these assets
are held separately from Our other assets and are not part of Our General
Account. The income, gains or losses, whether or not realized, from the assets
of the Variable Account are credited to or charged against the Variable Account
in accordance with the policies without regard to Our other income, gains or
losses.
The portion of the assets of the Variable Account equal to the reserves and
other contract liabilities of the Variable Account will not be charged with
liabilities that arise from any other business that We conduct. We have the
right to transfer to Our General Account any assets of the Variable Account
which are in excess of such reserves and other liabilities.
10
<PAGE> 15
The Variable Account is registered with the Securities and Exchange
Commission (the SEC) as a unit investment trust under the Investment Company Act
of 1940 (the 1940 Act) and meets the definition of a "separate account" under
the federal securities laws. However, the SEC does not supervise the management,
investment policies or practices of the Variable Account.
The Variable Account currently is divided into Sub-Accounts. Each
Sub-Account invests its assets in shares of the corresponding Portfolio of the
Funds described below.
THE FUNDS
The Variable Account invests in shares of:
<TABLE>
<S> <C>
The Alger American Fund (Alger American) Fidelity Variable Insurance Products Fund III
Berger Institutional Products Trust (Berger (Fidelity VIP III)
Trust) Goldman Sachs Variable Insurance Trust
The Dreyfus Socially Responsible Growth Fund, (Goldman Sachs VIT)
Inc. The Montgomery Funds III (Montgomery)
(Dreyfus Socially Responsible) Seligman Portfolios, Inc. (Seligman)
Dreyfus Variable Investment Fund (Dreyfus VIF)
Fidelity Variable Insurance Products Fund
(Fidelity VIP) Fidelity Variable Insurance
Products Fund II
(Fidelity VIP II)
</TABLE>
Shares of a Portfolio of the above listed Funds are purchased and redeemed
for a corresponding Sub-Account at their net asset value. Any amounts of income,
dividends and gains distributed from the shares of a Portfolio are reinvested in
additional shares of that Portfolio at their net asset value. The Funds'
prospectuses defines the net asset value of Portfolio shares.
The Funds are management investment companies with one or more investment
Portfolios. Each Fund is registered with the SEC as an open-end, management
investment company. Such registration does not involve supervision of the
management or investment practices or policies of the company or the Portfolios
by the SEC.
The Funds may, in the future, create additional portfolios that may or may
not be available as investment options under the Policies. Each Portfolio has
its own investment objectives and the income and losses for each Portfolio are
determined separately for that Portfolio.
The investment objectives and policies of certain Portfolios of the Funds
are similar to the investment objectives and policies of other portfolios that
may be managed by the same investment adviser or manager. The investment results
of the Portfolios of the Funds, however, may differ from the results of such
other portfolios. There can be no assurance, and no representation is made, that
the investment results of any of the Portfolios of the Funds will be comparable
to the investment results of any other portfolio, even if the other portfolios
have the same investment adviser or manager.
We have entered into agreements with the investment advisers of several of
the Funds pursuant to which each such investment adviser will pay Us a service
fee based upon an annual percentage of average net assets invested by Us on
behalf of the Variable Account. These agreements cover administrative services
provided to the Funds by Us. Payments of such amounts by an investment adviser
do not increase the fees paid by the Portfolios or Policyowners invested in the
Portfolios.
RESOLVING MATERIAL CONFLICTS
The Funds are now, or may be in the future, used as investment vehicles for
variable life insurance and variable annuity contracts issued by Us, as well as
registered separate accounts of other insurance companies offering variable life
and annuity contracts. In addition, certain Funds available with the Policy may
sell shares to retirement plans qualifying under Section 401 of the Code
("Retirement Plans"). As a result, there is a possibility that a material
conflict may arise between the interests of Policyowners and such Retirement
Plans or participants in such Retirement Plans.
We currently do not foresee any disadvantages to Policyowners resulting
from the Funds selling shares to support products other than Our contracts or to
Retirement Plans. However, there is a possibility that a material conflict may
arise between Policyowners whose policy values are allocated to the Variable
Account and the owners of variable life
11
<PAGE> 16
insurance policies and variable annuity contracts issued by such other companies
whose values are allocated to one or more other separate accounts investing in
any one of the Funds. In the event of a material conflict, We will take any
necessary steps, including removing the Variable Account from that Fund, to
resolve the matter. The board of directors of each Fund also will monitor events
in order to identify any material conflicts that possibly may arise and
determine what action, if any, should be taken in response to those events or
conflicts. See each individual Fund prospectus for more information.
The following is a brief description of the investment objectives of each
of the Funds' Portfolios. THERE IS NO ASSURANCE THAT THE INVESTMENT OBJECTIVE OF
ANY PORTFOLIO WILL BE ACHIEVED. Please see the accompanying prospectuses for the
Funds for more detailed information, including a description of risks and
expenses.
THE ALGER AMERICAN FUND
The Alger American Fund (Alger American) is intended to be a funding
vehicle for variable annuity contracts and variable life insurance policies to
be offered by the separate accounts of certain life insurance companies; its
shares also may be offered to qualified pension and retirement plans. Each of
its Portfolios has distinct investment objectives and policies. Further
information regarding the investment practices of each of the Portfolios is set
forth below.
ALGER AMERICAN GROWTH PORTFOLIO
The Alger American Growth Portfolio seeks long-term capital appreciation by
focusing on growing companies that generally have broad product lines, markets,
financial resources and depth of management. Under normal circumstances, the
Portfolio invests primarily in the equity securities of large companies. The
Portfolio considers a large company to have a market capitalization of $1
billion or greater.
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO
The Alger American Leveraged AllCap Portfolio seeks long-term capital
appreciation. Under normal circumstances, the Portfolio invests in the equity
securities of companies of any size which demonstrate promising growth
potential. The Portfolio can leverage, that is, borrow money, up to one-third of
its total assets to buy additional securities. By borrowing money, the Portfolio
has the potential to increase its returns if the increase in the value of the
securities purchased exceeds the cost of borrowing, including interest paid on
the money borrowed.
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
The investment objective of the Portfolio is long-term capital
appreciation. It focuses on midsize companies with promising growth potential.
Under normal circumstances, the Portfolio invest primarily in the equity
securities of companies having a market capitalization within the range of
companies in the S&P MidCap 400 Index.
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
The investment objective of the Alger American Small Capitalization
Portfolio is long-term capital appreciation. It focuses on small, fast-growing
companies that offer innovative products, services or technologies to a rapidly
expanding marketplace. Under normal circumstances, the Portfolio invests
primarily in the equity securities of small capitalization companies. A small
capitalization company is one that has a market capitalization within the range
of the Russell 2000 Growth Index or the S&P SmallCap 600 Index.
BERGER INSTITUTIONAL PRODUCTS TRUST
The Berger Institutional Products Trust (Berger Trust) is intended to be a
funding vehicle for variable annuity contracts and variable life insurance
policies offered by the separate accounts of certain life insurance companies;
and its shares may also be offered to qualified pension and retirement plans.
The Berger Trust is an open-end investment company and each of its Portfolios
has distinct investment objectives and policies. Further information regarding
the investment practices of the Portfolios available under this Policy is set
forth below.
12
<PAGE> 17
BERGER/BIAM IPT-INTERNATIONAL FUND
The Portfolio is advised by BBOI Worldwide LLC (a joint venture between
Berger LLC and Bank of Ireland Asset Management (U.S.) Limited), which has
delegated daily management of the Portfolio to Bank of Ireland Asset Management
(U.S.) Limited (BIAM). The investment objective of the Berger/BIAM
IPT-International Fund is long-term capital appreciation. The Portfolio seeks to
achieve this objective by investing primarily in common stocks of well
established companies located outside the United States. The Portfolio intends
to diversify its holdings among several countries and to have, under normal
market conditions, at least 65% of the Portfolio's total assets invested in the
securities of companies located in at least five countries, not including the
United States.
Berger LLC and BIAM have entered into an agreement to dissolve BBOI
Worldwide LLC. The dissolution of BBOI Worldwide LLC will have no effect on the
investment advisory services provided to the Fund. Contingent upon shareholder
approval, when BBOI Worldwide LLC is dissolved, Berger LLC will become the
Fund's advisor and BIAM will continue to be responsible for day-to-day
management of the Fund's portfolio as subadvisor. If approved by shareholders,
these advisory changes are expected to take place in the first half of this
year.
BERGER IPT-SMALL COMPANY GROWTH FUND
The Portfolio is advised by Berger LLC. The investment objective of the
Berger IPT-Small Company Growth Fund is capital appreciation. The Portfolio
seeks to achieve this objective by investing primarily in common stocks of small
companies and other securities with equity features. Under normal circumstances,
the Portfolio invests at least 65% of its assets in equity securities of
companies whose market capitalizations, at the time of initial purchase, is less
than the 12-month average of the maximum market capitalization for companies
included in the Russell 2000. This average is updated monthly. The balance of
the Portfolio may be invested in larger companies, government securities or
other short-term investments.
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.
The Dreyfus Socially Responsible Growth Fund, Inc. (Dreyfus Socially
Responsible) seeks to provide capital growth, with current income as a secondary
goal. To pursue these goals, the Fund invests primarily in common stock of
companies that, in the opinion of the Fund's management, meet traditional
investment standards and conduct their business in a manner that contributes to
the enhancement of the quality of life in America.
DREYFUS VARIABLE INVESTMENT FUND
Dreyfus Variable Investment Fund is an open-end, management investment
company, that is intended to be a funding vehicle for variable annuity and
variable life insurance contracts. Two of the Fund's Portfolios are available
under this Policy, the Dreyfus VIF-Growth and Income Portfolio and Dreyfus
VIF-Appreciation Portfolio.
DREYFUS VIF-APPRECIATION PORTFOLIO
The Portfolio seeks long-term capital growth consistent with the
preservation of capital; current income is a secondary goal. To pursue these
goals, the Portfolio invests in common stock focusing on "blue chip" companies
with total market values of more than $5 billion at the time of purchase. These
established companies have demonstrated sustained patterns of profitability,
strong balance sheets, an expanding global presence, and the potential to
achieve predictable, above-average earnings growth.
DREYFUS VIF-GROWTH AND INCOME PORTFOLIO
The Growth and Income Portfolio seeks long-term capital growth, current
income and growth of income, consistent with reasonable investment risk. To
pursue this goal, it invests in stocks, bonds, and money market instruments of
domestic and foreign issuers. The Portfolio's stock investments may include
common stocks, preferred stocks, and convertible securities
13
<PAGE> 18
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
The Fidelity Variable Insurance Products Fund (Fidelity VIP) acts as one of
the funding vehicles for the Policy with three Portfolios available under the
Policy: Fidelity VIP Growth; Fidelity VIP High Income; and Fidelity VIP
Overseas. Fidelity VIP is managed by Fidelity Management & Research Company
(Investment Manager).
FIDELITY VIP GROWTH PORTFOLIO
The Fidelity VIP Growth Portfolio seeks to achieve capital appreciation.
The Portfolio invests primarily in common stocks.
FIDELITY VIP HIGH INCOME PORTFOLIO
The Fidelity VIP High Income Portfolio seeks to obtain a high level of
current income by investing at least 65% of total assets in income-producing
debt securities, preferred stocks and convertible securities, with an emphasis
on lower-quality debt securities, while also considering growth of capital.
Please refer to the accompanying Fidelity prospectus for a description and
explanation of the unique risks associated with investing in high risk, high
yielding, lower rated fixed income securities.
FIDELITY VIP MONEY MARKET PORTFOLIO
The Fidelity VIP Money Market Portfolio seeks to obtain a high level of
current income as is consistent with the preservation of capital and liquidity.
FIDELITY VIP OVERSEAS PORTFOLIO
The Fidelity VIP Overseas Portfolio seeks long-term growth of capital
primarily through investments in foreign securities. This Portfolio provides a
means for investors to diversify their own Portfolios by participating in
companies and economies outside of the United States.
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
The Fidelity Variable Insurance Products Fund II (Fidelity VIP II) acts as
one of the funding vehicles for the Policy with the VIP II Asset Manager, VIP II
Contrafund(R) and VIP II Index 500 Portfolios available under the Policy.
Fidelity VIP II is managed by Fidelity Management & Research Company (Investment
Manager).
FIDELITY VIP II ASSET MANAGER PORTFOLIO
The Fidelity VIP II Asset Manager Portfolio seeks high total return with
reduced risk over the long-term by allocating its assets among domestic and
foreign stocks, bonds and short-term money market instruments.
FIDELITY VIP II CONTRAFUND(R) PORTFOLIO
The Fidelity VIP II Contrafund(R) Portfolio seeks capital appreciation by
investing in securities of companies whose value the Investment Manager believes
is not fully recognized by the public.
FIDELITY VIP II INDEX 500 PORTFOLIO
The Fidelity VIP II Index 500 Portfolio seeks a total return which
corresponds to that of the Standard & Poor's Composite Index of 500 Stocks.
FIDELITY VIP II INVESTMENT GRADE BOND PORTFOLIO
The Fidelity VIP II Index 500 Portfolio seeks as high a level of current
income as is consistent with the preservation of capital.
14
<PAGE> 19
FIDELITY VARIABLE INSURANCE PRODUCTS FUND III
The Fidelity Variable Insurance Products Fund III (Fidelity VIP III) acts
as one of the funding vehicles for the Policy with the VIP III Growth
Opportunities Portfolio available under the Policy. Fidelity VIP III is managed
by Fidelity Management & Research Company (Investment Manager).
FIDELITY VIP III GROWTH OPPORTUNITIES PORTFOLIO
The Fidelity VIP III Growth Opportunities Portfolio seeks capital growth by
investing primarily in common stocks.
GOLDMAN SACHS VARIABLE INSURANCE TRUST
The Goldman Sachs Variable Insurance Trust is an open-end, management
investment company offering the following Portfolios: Goldman Sachs VIT Capital
Growth Portfolio, Goldman Sachs VIT CORE(SM) U.S. Equity Portfolio, Goldman
Sachs VIT Global Income Portfolio and Goldman Sachs VIT Growth and Income
Portfolio.
GOLDMAN SACHS VIT CAPITAL GROWTH PORTFOLIO
This Portfolio seeks long-term growth of capital through diversified
investments in equity securities of companies that are considered to have
long-term capital appreciation potential.
GOLDMAN SACHS VIT CORE U.S. EQUITY PORTFOLIO
This Portfolio seeks long-term growth of capital and dividend income
through a broadly diversified Portfolio of large cap and blue chip equity
securities representing all major sectors of the U.S. economy.
GOLDMAN SACHS VIT GLOBAL INCOME PORTFOLIO
This Portfolio seeks a high total return, emphasizing current income and,
to a lessor extent, providing opportunities for capital appreciation. The Fund
invests primarily in a portfolio of high quality fixed-income securities of U.S.
foreign issuers and foreign currencies.
GOLDMAN SACHS VIT GROWTH AND INCOME PORTFOLIO
This Portfolio seeks long-term growth of capital and growth of income
through investments in equity securities that are considered to have favorable
prospects for capital appreciation and/or dividend paying ability.
THE MONTGOMERY FUNDS III
Shares of Montgomery Variable Series: Emerging Markets Fund and Montgomery
Variable Series: Growth Fund, Portfolios of The Montgomery Funds III
(Montgomery), an open-end investment company, are available under this Policy.
MONTGOMERY VARIABLE SERIES: EMERGING MARKETS FUND
The investment objective of this Portfolio is capital appreciation, which
under normal conditions it seeks by investing at least 65% of its total assets
in equity securities of companies in countries having emerging markets. For
these purposes, the Portfolio defines an emerging market country as having an
economy that is or would be considered by the World Bank or the United Nations
to be emerging or developing.
MONTGOMERY VARIABLE SERIES: GROWTH FUND
The investment objective of this Portfolio is capital appreciation, which
under normal conditions it seeks by investing at least 65% of its total assets
in the equity securities, usually common stock of domestic companies of all
sizes and emphasizes companies having market capitalizations of $1 billion or
more.
CORE(SM) is a service mark of Goldman, Sachs & Co.
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SELIGMAN PORTFOLIOS, INC.
Seligman Portfolios, Inc. (Seligman) currently has fifteen Portfolios, two
of which are available under the Policy: Communications and Information; and
Frontier. Seligman is a diversified open-end investment company incorporated in
Maryland which uses the investment advisory services of J. & W. Seligman & Co.
Incorporated, a Delaware corporation.
SELIGMAN COMMUNICATIONS AND INFORMATION PORTFOLIO
The investment objective of this Portfolio is to produce capital gain.
Income is not an objective. The Portfolio seeks to achieve its objective by
investing primarily in securities of companies operating in the communications,
information and related industries.
SELIGMAN FRONTIER PORTFOLIO
The investment objective of this Portfolio is to produce growth in capital
value; income may be considered but will be only incidental to the Portfolio's
investment objective. The Portfolio invests primarily in equity securities of
smaller companies selected for their growth prospects.
A FULL DESCRIPTION OF THE FUNDS, THEIR INVESTMENT OBJECTIVES, THEIR
POLICIES AND RESTRICTIONS, THEIR EXPENSES AND OTHER ASPECTS OF THEIR OPERATION,
AS WELL AS A DESCRIPTION OF THE RISKS RELATED TO INVESTMENT IN THE FUNDS, IS
CONTAINED IN THE ACCOMPANYING PROSPECTUSES FOR THE FUNDS. THE PROSPECTUSES FOR
THE FUNDS SHOULD BE READ CAREFULLY BY A PROSPECTIVE PURCHASER ALONG WITH THIS
PROSPECTUS BEFORE INVESTING.
CHANGE IN INVESTMENT OBJECTIVE
The investment objective of a Sub-Account may not be changed unless the
change is approved, if required, by the Michigan Insurance Bureau. A statement
of such approval will be filed, if required, with the insurance department of
the state in which the Policy is delivered.
THE POLICY
APPLYING FOR A POLICY
After receiving a completed application from a prospective Policyowner, We
will begin underwriting to decide the insurability of the proposed Insured. We
may require medical examinations and other information before deciding
insurability. We issue a Policy only after underwriting has been completed. We
may reject an application that does not meet Our underwriting guidelines.
If a prospective Policyowner makes an initial payment of at least one
Minimum Monthly Payment, We will provide fixed conditional insurance during
underwriting. The fixed conditional insurance will be the insurance applied for,
up to a maximum of $500,000, depending on Age and Underwriting Class. This
coverage will continue for a maximum of 90 days from the date of the
application, and if required, the completed medical exam. If death is by
suicide, We will return only the Premium paid.
If no fixed conditional insurance was in effect, on Policy delivery We will
require a sufficient payment to place the insurance in force. If You made
payments before the date of Acceptance, We will allocate the payments to the
Fixed Account. IF THE POLICY IS NOT ISSUED AND ACCEPTED, THE PAYMENTS WILL BE
RETURNED TO YOU WITHOUT INTEREST.
If the Policy is issued and accepted, We will allocate Your Policy Value on
Acceptance according to Your instructions. However, if Your Policy provides for
a full refund of payments under its "Right to Examine Policy" provision, We will
initially allocate Your Sub-Account investments to the money market Sub-Account
- 14 days from Acceptance; or
- 24 days from Acceptance for replacements in states with a 20-day right
to examine; or
- 34 days from Acceptance for California citizens Age 60 and older, who
have a 30-day right to examine.
After this, We will allocate all amounts according to Your investment
choices.
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RIGHT TO EXAMINE
You have the right to examine and cancel Your Policy by returning it to the
Variable Life Service Center or to one of Our representatives on or before the
10th day after You receive the Policy . There may be a longer period in certain
jurisdictions; see the "Right to Examine Policy" provision in Your Policy. If
You decide to cancel, the Policy will be void from the Date of Issue.
If Your Policy provides for a full refund of Premium under its "Right to
Examine Policy provision, as required by state law, the Company will mail a
refund to You within seven days. We may delay a refund of any payment made by
check until the check has cleared Your bank. Where required by state law,
however, Your refund will be the GREATER of:
- Your entire payment; or
- the Policy Value PLUS deductions under the Policy or by the Sub-Account
for taxes, charges or fees.
If Your Policy does not provide for a full refund, You will receive:
- the value in the Fixed Account; plus
- the Policy Value in the Variable Account; plus
- all fees, charges and taxes which have been imposed at the Policy
level.
After an increase in Face Amount, We will mail or deliver to you a right to
examine notice for the increase. You will have the right to cancel the increase
on or before 10 days after You receive the notice. There may be a longer period
in certain jurisdictions; see the "Right to Examine Policy" provision in Your
Policy.
Upon canceling the increase, You will receive a credit to Your Policy Value
of the charges deducted for the increase. We will waive any surrender charge
computed for the increase.
CONVERSION PRIVILEGE
Within 24 months of the Date of Issue or an increase in Face Amount, You
can convert Your Policy into a fixed Policy by transferring all Policy Value in
the Sub-Accounts to the Fixed Account. The conversion will take effect as of the
end of the Valuation Period in which We receive, at Our Variable Life Service
Center, notice of the conversion satisfactory to Us. There is no charge for this
conversion. We will allocate all future payments to the Fixed Account, unless
You instruct Us otherwise.
PAYMENTS
Payments must be made payable to the Company. Payments may be made by mail
to the Variable Life Service Center. All payments after the Policy is issued are
credited to the Variable Account or Fixed Account as of the date of receipt at
the Variable Life Service Center.
You may establish a schedule of planned payments. If You do, We will bill
You at regular intervals. Making planned payments will not guarantee that the
Policy will remain in force. The Policy will not necessarily lapse if You fail
to make planned payments. You may make unscheduled payments before the Final
Payment Date or skip planned payments. If the Guaranteed Death Benefit Rider is
in effect, there are certain minimum payment requirements.
The Policy does not limit payments as to frequency and number. However, no
payment may be less than $100 without Our consent. You may choose to have
monthly Premiums automatically collected from Your checking or savings account
pursuant to an electronic funds transfer agreement (EFT). Under this method,
each month We will deduct payments from Your account and apply them to Your
Policy. The minimum automatic payment allowed is $50. Payments must be
sufficient such that the Policy Value less any Outstanding Loan must be positive
at the end of each Policy month or the Policy may lapse. See POLICY TERMINATION
AND REINSTATEMENT.
We reserve the right to underwrite if a payment increases the Death Benefit
by more than the amount of the payment.
During the first 48 Policy months following the Date of Issue or an
increase in Face Amount, a guarantee may apply to prevent the Policy from
lapsing. The guarantee will apply during this period if You make payments that,
when
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<PAGE> 22
reduced by any Outstanding Loan, partial withdrawals and partial withdrawal
charges, equal or exceed the required Minimum Monthly Payments. The required
Minimum Monthly Payments are based on the number of months:
- the Policy has been in force;
- an increase in Face Amount has been in force; or
- any Policy Change that causes a change in the Minimum Monthly Payment
has been in force.
EXCEPT AS STATED ABOVE, MAKING MONTHLY PAYMENTS EQUAL TO THE MINIMUM
MONTHLY PAYMENTS DOES NOT GUARANTEE THAT THE POLICY WILL REMAIN IN FORCE.
Under Death Benefit Option 1 and Death Benefit Option 2, total payments may
not exceed the current maximum payment limits under Federal tax law. These
limits will change with a change in Face Amount, underwriting reclassifications,
the addition or deletion of a rider, or a change between Death Benefit Option 1
and Death Benefit Option 2. Where total payments would exceed the current
maximum payment limits, the excess first will be applied to repay any
Outstanding Loan. If there are remaining excess payments, any such excess
payments will be returned to You. However, We will accept a payment needed to
prevent Policy lapse during a Policy year. See POLICY TERMINATION AND
REINSTATEMENT.
ELECTRONIC FUNDS TRANSFER (EFT)
You may choose to have monthly payments automatically collected from Your
checking or savings account pursuant to an electronic funds transfer agreement
plan (EFT). This plan may be terminated by You or Us after 30 days Written
Request , or at any time by Us if a payment has not been paid by Your bank. This
option is not available on the 29th, 30th or 31st day of each month. There is no
charge for this feature.
ALLOCATION OF NET PAYMENTS
The Net Payment equals the payment made less the Payment Expense Charge. In
the application for Your Policy, You decide the initial allocation of the Net
Payment among the Fixed Account and the Sub-Accounts. You may allocate payments
to one or more of the Sub-Accounts. The minimum amount that You may allocate to
a Sub-Account is 1.00% of the Net Payment. Allocation percentages must be in
whole numbers (for example, 33 1/3% may not be chosen) and must total 100%.
You may change the allocation of future Net Payments by Written Request or
telephone request. You have the privilege to make telephone requests, unless You
elected not to have the privilege on the application. The policy of the Company
and its representatives and affiliates is that they will not be responsible for
losses resulting from acting on telephone requests reasonably believed to be
genuine. The Company will employ reasonable methods to confirm that instructions
communicated by telephone are genuine. Such procedures may include, among
others, requiring some form of personal identification prior to acting upon
instructions received by telephone. All telephone requests are tape-recorded.
An allocation change will take effect on the date of receipt of the notice
at the Variable Life Service Center. No charge is currently imposed for changing
payment allocation instructions. We reserve the right to impose a charge in the
future, but guarantee that the charge will not exceed $25.
The Policy Value in the Sub-Accounts will vary with investment experience.
You bear this investment risk. Investment performance may also affect the Death
Benefit. Please review Your allocations of payments and Policy Value as market
conditions and Your financial planning needs change.
TRANSFERS
TRANSFER PRIVILEGE
While the Insured is still living and the Policy is in force, You may
transfer amounts between the Fixed Account and the Sub-Accounts or among the
Sub-Accounts, on request. Currently, the first 12 transfers in a Policy year are
free. We reserve the right to limit the number of free transfers in a Policy
year to six. After that, We will deduct a $10 transfer
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<PAGE> 23
charge from amounts transferred in that Policy year. We reserve the right to
increase the charge, but the charge will never exceed $25. This charge
reimburses Us for the administrative costs of processing the transfer. Transfers
are processed based on unit values next determined after We receive a transfer
request.
Each of the following transfers of Policy Value from the Sub-Accounts to
the Fixed Account is free and does not count as one of the 12 free transfers in
a Policy year:
- a conversion within the first 24 months from the Date of Issue or
increase in Face Amount;
- a transfer to the Fixed Account to secure a loan;
- a reallocation of Policy Value within 20 days of the Date of Issue; or
- Dollar-Cost Averaging and Account Rebalancing.
The transfer privilege is subject to Our consent. We reserve the right to
impose limits on transfers including, but not limited to, the:
- minimum amount that may be transferred;
- minimum amount that may remain in a Sub-Account following a transfer
from that Sub-Account;
- minimum period between transfers involving the Fixed Account; or
- maximum amounts that may be transferred from the Fixed Account.
Transfers to and from the Fixed Account are currently permitted subject to
the following restrictions:
- the amount transferred from the Fixed Account in each transfer does not
exceed the lesser of $100,000 or 25% of the Policy Value.
- You make only one transfer involving the Fixed Account in each Policy
quarter.
These rules are subject to change by the Company.
We cannot guarantee that a Sub-Account or shares of a Portfolio will always
be available. If You request an amount in a Sub-Account or the Fixed Account be
transferred to a Sub-Account at a time when the Sub-Account or underlying
Portfolio is unavailable, We will not process Your transfer request.
This request will not be counted as a transfer for purposes of determining
the number of free transfers executed in a year. The Company reserves the right
to change its minimum transfer amount requirements.
Excessive trading (including short-term "market timing" trading) may
adversely affect the performance of the Sub-Accounts. If a pattern of excessive
trading by a Policyowner or the Policyowner's agent develops, We reserve the
right not to process the transfer request. If Your request is not processed, it
will not be counted as a transfer for purposes of determining the number of free
transfers executed.
DOLLAR COST AVERAGING
You may choose to automatically transfer specific dollar amounts, of at
least $100, from any Sub-Account or the Fixed Account (either one a
"disbursement account") to any other Sub-Account(s) or the Fixed Account on a
periodic basis. Transfers are subject to Our administrative procedures and the
restrictions in "Transfer Privilege" stated above.
Dollar Cost Averaging (DCA) is a long-term investment method which provides
for regular, level investments over time. We make no representation or guarantee
that DCA will result in a profit or protect against loss. You should first
discuss this (as You would all other investment strategies) with Your registered
representative.
To initiate DCA, We must receive Your Written Request on Our form. Once
elected, transfers will be processed until one of the following occurs:
- the entire value of the disbursement account is completely depleted;
- We receive Your written revocation of DCA; or
- We discontinue this service.
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We reserve the right to change Our procedures or to discontinue DCA for any
reason upon 30 days written Request to You.
DCA transfers may be made on a monthly, quarterly, semi-annual or annual
schedule. You may request the day of the month on which the automatic transfers
will occur (the transfer date"). This option is not available on the 29th, 30th
or 31st day of each month. If You do not choose a transfer date, the transfer
date will be the 15th of the scheduled month. However, if the transfer date is
not a business day, the automatic transfer will be processed on the next
business day. Each automatic transfer is free, and will not reduce the remaining
number of transfers that are free in a Policy year.
ACCOUNT REBALANCING
Account Rebalancing (rebalancing) is an investment strategy in which Your
Policy Value, in the Sub-Accounts only, is reallocated back to its original
portfolio allocation. Rebalancing is performed regardless of changes in
individual portfolio values from the time of the last rebalancing. It is
executed on a monthly, quarterly, semi-annual or annual basis. We make no
representation or guarantee that rebalancing will result in a profit, protect
You against loss or ensure that You meet Your financial goals. To initiate
rebalancing, We must receive Your Written Request. Participation in rebalancing
is voluntary and can be modified or discontinued at any time by You, per Your
Written Request. Account Rebalancing is not available for the Fixed Account.
Once elected, We will continue to perform rebalancing until We are
instructed otherwise. We reserve the right to change Our procedures or
discontinue offering rebalancing for any reason upon 30 days
Written Request to You. This option is not available on the 29th, 30th or
31st day of each month. There is no charge for this feature.
DEATH BENEFIT
GUIDELINE MINIMUM DEATH BENEFIT
In order to qualify as "life insurance" under the Federal tax laws, this
Policy must provide a Guideline Minimum Death Benefit. The Guideline Minimum
Death Benefit is determined as of the date of death of the Insured. If Death
Benefit Option 1 or Death Benefit Option 2 is in effect, the Guideline Minimum
Death Benefit is obtained by multiplying the Policy Value by a percentage factor
for the Insured's attained age, as shown in the Table in APPENDIX A. If Death
Benefit Option 3 is in effect, the Guideline Minimum Death Benefit is obtained
by multiplying the Policy Value by a percentage for the Insured's attained age,
sex, and Underwriting Class, as set forth in the Policy.
Guideline Minimum Death Benefit Table in APPENDIX A is used when Death
Benefit Option 1 or Death Benefit Option 2 is in effect. The Guideline Minimum
Death Benefit Table in APPENDIX A reflects the requirements of the "Guideline
Premium/Guideline Death Benefit" test set forth in the Federal tax laws.
Guideline Minimum Death Benefit factors are set forth in the Policy when Death
Benefit Option 3 is in effect. These factors reflect the requirements of the
"Cash Value Accumulation" test set forth in the Federal tax laws. The Guideline
Minimum Death Benefit factors will be adjusted to conform to any changes in the
tax laws. For more information, see "Election Of Death Benefit Options", below.
NET DEATH BENEFIT
If the Policy is in force on the Insured's death, We will, with Due Proof
of Death, pay the Net Death Benefit to the named Beneficiary. We will normally
pay the Net Death Benefit within seven days of receiving Due Proof of Death, but
We may delay payment of Net Death Benefits. See "Delay of Payments." The
Beneficiary may receive the Net Death Benefit in a lump sum or under a payment
option We offer at that time. See APPENDIX C -- PAYMENT OPTIONS.
The Net Death Benefit depends on the current Face Amount and the Death
Benefit Option that is in effect on the date of death. Before the Final Payment
Date, the Net Death Benefit is:
- the Death Benefit provided under Death Benefit Option 1, Death Benefit
Option 2, or Death Benefit Option 3, whichever is in effect on the date
of death; plus
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- any other insurance on the Insured's life that is provided by rider;
minus
- any Outstanding Loan, any partial withdrawals, partial withdrawal
charges, and due and unpaid Monthly Deductions through the Policy month
in which the Insured dies.
After the Final Payment Date, if the Guaranteed Death Benefit Rider is not
in effect, the Net Death Benefit is:
- the Policy Value; minus
- any Outstanding Loan.
In most states, We will compute the Net Death Benefit on:
- the date of death of the Insured under Death Benefit Option 2; or
- the date of death for Death Benefit Options 1 and 3.
ELECTION OF DEATH BENEFIT OPTIONS
Federal tax law requires a Guideline Minimum Death Benefit in relation to
Policy Value for a Policy to qualify as life insurance. Under current Federal
tax law, either the Guideline Premium Test or the Cash Value Accumulation Test
can be used to determine if the Policy complies with the definition of "life
insurance" under the Code. At the time of application, You may elect either of
the tests. If You elect the Guideline Premium Test, You will have the choice of
electing Death Benefit Option 1 or Death Benefit Option 2. If You elect the Cash
Value Accumulation Test, Death Benefit Option 3 must apply.
Guideline Premium Test and Cash Value Accumulation Test -- There are two
main differences between the Guideline Premium Test and the Cash Value
Accumulation Test. First, the Guideline Premium Test limits the amount of
Premium that may be paid into a Policy, while no such limits apply under the
Cash Value Accumulation Test. Second, the factors that determine the Guideline
Minimum Death Benefit relative to the Policy Value are different. APPLICANTS FOR
A POLICY SHOULD CONSULT A QUALIFIED TAX ADVISER IN CHOOSING BETWEEN THE
GUIDELINE PREMIUM TEST AND THE CASH VALUE ACCUMULATION TEST AND IN CHOOSING A
DEATH BENEFIT OPTION.
The Guideline Premium Test limits the amount of Premiums payable under a
Policy to a certain amount for an Insured of a particular age, sex, and
Underwriting Class. Under the Guideline Premium Test, You may choose between
Death Benefit Option 1 or Death Benefit Option 2, as described below. After
issuance of the Policy, You may change the selection from Death Benefit Option 1
to Death Benefit Option 2, or vice versa.
The Cash Value Accumulation Test requires that the Death Benefit must be
sufficient so that the Cash Surrender Value does not at any time exceed the Net
Single Premium required to fund the future benefits under the Policy. Under the
Cash Value Accumulation Test, required increases in the Guideline Minimum Death
Benefit (due to growth in Policy Value) will generally be greater than under the
Guideline Premium Test. If You choose the Cash Value Accumulation Test, only
Death Benefit Option 3 is available. You may not switch to or from Death Benefit
Option 3.
DEATH BENEFIT OPTION 1 -- LEVEL GUIDELINE PREMIUM TEST
Under Option 1, the Death Benefit is equal to the greater of the Face
Amount or the Guideline Minimum Death Benefit, as set forth in "Table A" in
APPENDIX A. The Death Benefit will remain level unless the Guideline Minimum
Death Benefit is greater than the Face Amount, in which case the Death Benefit
will vary as the Policy Value varies.
Death Benefit Option 1 will offer the best opportunity for the Policy Value
to increase without increasing the Death Benefit as quickly as it might under
the other options. The Death Benefit will never go below the Face Amount.
DEATH BENEFIT OPTION 2 -- ADJUSTABLE GUIDELINE PREMIUM TEST
Under Option 2, the Death Benefit is equal to the greater of (1) the Face
Amount plus the Policy Value or (2) the Guideline Minimum Death Benefit, as set
forth in "Table A" in APPENDIX A. The Death Benefit will vary as the Policy
Value changes, but will never be less than the Face Amount.
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Death Benefit Option 2 will offer the best opportunity to have an
increasing Death Benefit as early as possible. The Death Benefit will increase
whenever there is an increase in the Policy Value, and will decrease whenever
there is a decrease in the Policy Value. The Death Benefit will never go below
the Face Amount.
DEATH BENEFIT OPTION 3 -- LEVEL CASH VALUE ACCUMULATION TEST
Under Option 3, the Death Benefit will equal the greater of (1) the Face
Amount or (2) the Policy Value multiplied by the applicable factor as set forth
in the Policy. The applicable factor depends upon the Underwriting Class, sex
(unisex if required by law), and then-attained age of the Insured. The factors
decrease slightly from year to year as the attained age of the Insured
increases.
Death Benefit Option 3 will offer the best opportunity for an increasing
Death Benefit in later Policy years and/or to fund the Policy at the "seven-pay"
limit in each of the first seven years following policy issue or a material
change. The "seven pay" limit refers to the maximum payment that can be made in
each of the first seven years so that the Policy is not classified as a Modified
Endowment Contract. Please see "Modified Endowment Contracts" under FEDERAL TAX
STATUS. When the Policy Value multiplied by the applicable Death Benefit factor
exceeds the Face Amount, the Death Benefit will increase whenever there is an
increase in the Policy Value, and will decrease whenever there is a decrease in
the Policy Value. However, the Death Benefit will never go below the Face
Amount.
ALL DEATH BENEFIT OPTIONS MAY NOT BE AVAILABLE IN ALL STATES.
EXAMPLES
For the purposes of the following examples, assume that the Insured is
under the Age of 40, and that there is no Outstanding Loan.
Example using Death Benefit Option 1 -- Under Option 1, a Policy with a
$100,000 Face Amount will have a Death Benefit of $100,000. However, because the
Death Benefit must be equal to or greater than 250% of Policy Value (from
APPENDIX A), if the Policy Value exceeds $40,000 the Death Benefit will exceed
the $100,000 Face Amount. In this example, each dollar of Policy Value above
$40,000 will increase the Death Benefit by $2.50.
A Policy with a Policy Value of:
- $50,000 will have a Guideline Minimum Death Benefit of $125,000 (e.g.,
$50,000 X 2.50);
- $60,000 will produce a Guideline Minimum Death Benefit of $150,000
(e.g., $60,000 X 2.50);
- $75,000 will produce a Guideline Minimum Death Benefit of $187,500
(e.g., $75,000 X 2.50).
Similarly, if Policy Value exceeds $40,000, each dollar taken out of Policy
Value will reduce the Death Benefit by $2.50. If, for example, the Policy Value
is reduced from $60,000 to $50,000 because of partial withdrawals, charges or
negative investment performance, the Death Benefit will be reduced from $150,000
to $125,000. However, the Death Benefit will never be less than the Face Amount
of the Policy.
The Guideline Minimum Death Benefit Factor becomes lower as the Insured's
Age increases. If the Insured's Age in the above example were, for example, 50
(rather than between zero and 40), the applicable percentage would be 185% (from
APPENDIX A). The Death Benefit would be greater than $100,000 Face Amount when
the Policy Value exceeds $54,054 (rather than $40,000), and each dollar then
added to or taken from Policy Value would change the Death Benefit by $1.85.
Example using Death Benefit Option 2 -- Under Option 2, assume that the
Insured is under the Age of 40 and that there is no Outstanding Loan. The Face
Amount of the Policy is $100,000.
Under Death Benefit Option 2, a Policy with a Face Amount of $100,000 will
produce a Death Benefit of $100,000 plus Policy Value.
A Policy with Policy Value of:
- $10,000 will produce a Death Benefit of $110,000 (e.g., $100,000 +
$10,000);
- $25,000 will produce a Death Benefit of $125,000 (e.g., $100,000 +
$25,000);
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- $50,000 will produce a Death Benefit of $150,000 (e.g., $100,000 +
$50,000).
However, the Guideline Minimum Death Benefit must be at least 250% of the
Policy Value. Therefore, if the Policy Value is greater than $66,667, 250% of
the Policy Value will be Guideline Minimum Death Benefit. The Guideline Minimum
Death Benefit will be greater than the Face Amount plus Policy Value. In this
example, each dollar of Policy Value above $66,667 will increase the Death
Benefit by $2.50.
If the Policy Value is:
- $70,000, the Guideline Minimum Death Benefit will be $175,000 (e.g.,
$70,000 X 2.50);
- $80,000, the Guideline Minimum Death Benefit will be $200,000 (e.g.,
$80,000 X 2.50);
- $90,000, the Guideline Minimum Death Benefit will be $225,000 (e.g.,
$90,000 X 2.50).
Similarly, if Policy Value exceeds $66,667, each dollar taken out of Policy
Value will reduce the Death Benefit by $2.50. If, for example, the Policy Value
is reduced from $80,000 to $70,000 because of partial withdrawals, charges or
negative investment performance, the Death Benefit will be reduced from $200,000
to $175,000. However, the Death Benefit will be the Face Amount PLUS Policy
Value when the Guideline Minimum Death Benefit is less than the Face Amount plus
the Policy Value.
The Guideline Minimum Death Benefit Factor becomes lower as the Insured's
Age increases. If the Insured's Age in the above example were 50, the Death
Benefit must be at least 185% of the Policy Value. The Death Benefit would be
the sum of the Policy Value plus $100,000 unless the Policy Value exceeded
$117,647 (rather than $66,667). Each dollar added to or subtracted from the
Policy would change the Death Benefit by $1.85.
Example using Death Benefit Option 3 -- In this example assume that the
Insured is a male, Age 35, preferred non-tobacco and that there is no
Outstanding Loan. The Guideline Minimum Death Benefit Factor, for this example,
would be 437%.
Under Death Benefit Option 3, a Policy with a Face Amount of $100,000 will
have a Death Benefit of $100,000. However, because the Death Benefit must be
equal to or greater than 437% of Policy Value (in Policy year 1), if the Policy
Value exceeds $22,883 the Death Benefit will exceed the $100,000 Face Amount. In
this example, each dollar of Policy Value above $22,883 will increase the Death
Benefit by $4.37.
A Policy with a Policy Value of:
- $50,000 will produce a Death Benefit of $218,500 ($50,000 X 4.37);
- $60,000 will produce a Death Benefit of $262,200 ($60,000 X 4.37);
- $75,000 will produce a Death Benefit of $327,750 ($75,000 X 4.37).
Similarly, if Policy Value exceeds $22,883, each dollar taken out of Policy
Value will reduce the Death Benefit by $4.37. If, for example, the Policy Value
is reduced from $60,000 to $50,000 because of partial withdrawals, charges, or
negative investment performance, the Death Benefit will be reduced from $262,200
to $218,500. If, however, the product of the Policy Value times the applicable
percentage is less than the Face Amount, the Death Benefit will equal the Face
Amount.
The applicable percentage becomes lower as the Insured's Age increases. If
the Insured's Age in the above example were, for example, 50 (rather than 35),
the applicable percentage would be 270% (in Policy year 1). The Death Benefit
would not exceed the $100,000 Face Amount unless the Policy Value exceeded
$37,037 (rather than $22,883), and each dollar then added to or taken from
Policy Value would change the Death Benefit by $2.70.
CHANGING BETWEEN DEATH BENEFIT OPTION 1 AND DEATH BENEFIT 2
You may change between Death Benefit Option 1 and Death Benefit Option 2
once each Policy year by Written Request. (By law, You may not change from Death
Benefit Option 3 to Death Benefit Option 1 or to Death Benefit Option 2, or vice
versa). Changing options may require Evidence of Insurability. The change takes
effect as of the Monthly Processing Date on or following the date of
underwriting approval. We will impose no charge for changes in
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Death Benefit options. Changes in Death Benefit Options may have tax
consequences. You should consult a tax advisor before making such a change.
CHANGE FROM DEATH BENEFIT OPTION 1 TO DEATH BENEFIT OPTION 2.
If You change from Death Benefit Option 1 to Death Benefit Option 2, We
will decrease the Face Amount to equal:
- the Death Benefit; minus
- the Policy Value as of the date of the change.
The change may not be made if the Face Amount would fall below $50,000.
After the change from Death Benefit Option 1 to Death Benefit Option 2, future
cost of insurance charges may be higher or lower than if no change in option had
been made. However, the Net Amount at Risk will always equal the Face Amount,
unless the Guideline Minimum Death Benefit applies.
CHANGE FROM DEATH BENEFIT OPTION 2 TO DEATH BENEFIT OPTION 1.
If You change from Death Benefit Option 2 to Death Benefit Option 1, We
will increase the Face Amount by the Policy Value as of the date of the change.
The Death Benefit will be the greater of:
- the new Face Amount; or
- the Guideline Minimum Death Benefit under Death Benefit Option 1.
After the change from Death Benefit Option 2 to Death Benefit Option 1, an
increase in Policy Value will reduce the Net Amount at Risk and the cost of
insurance charge. A decrease in Policy Value will increase the Net Amount at
Risk and the cost of insurance charge.
A change in Death Benefit option may result in total payments exceeding the
then current maximum payment limitation under Federal tax law. Where total
payments would exceed the current maximum payment limits, the excess first will
be applied to repay any Outstanding Loan. If there are remaining excess
payments, any such excess payments will be returned to You. However, We will
accept a payment needed to prevent Policy lapse during a Policy year.
A change from Death Benefit Option 2 to Death Benefit Option 1 within five
Policy years of the Final Payment Date will terminate a Guaranteed Death Benefit
Rider.
GUARANTEED DEATH BENEFIT RIDER (NOT AVAILABLE IN ALL STATES)
An optional Guaranteed Death Benefit Rider is available only at issue of
the Policy. If this Rider is in effect, the Company:
- guarantees that Your Policy will not lapse regardless of the investment
performance of the Variable Account; and
- provides a guaranteed Net Death Benefit.
In order to maintain the Guaranteed Death Benefit Rider, the minimum
premium payment tests shown below must be met on each Policy Anniversary and
within 48 months following the Date of Issue and/or the date of any increase in
Face Amount, as described below. In addition, a one-time administrative charge
of $25 will be deducted from Policy Value when the rider is elected. Certain
transactions, including taking any preferred loans, taking partial withdrawals,
underwriting reclassifications, changing the Face Amount, and changing the Death
Benefit option, can result in the termination of the rider. If this rider is
terminated, it cannot be reinstated.
Guaranteed Death Benefit Tests. While the Guaranteed Death Benefit Rider is
in effect, the Policy will not lapse if the following two tests are met:
1. within 48 months following the Date of Issue of the Policy or of any
increase in the Face Amount, the sum of the Premiums paid, less any
outstanding loan, partial withdrawals and withdrawal charges, must be
greater than the Minimum Monthly Payment multiplied by the number of
months which have elapsed since the relevant Date of Issue; and
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2. on each Policy Anniversary, (a) must exceed (b), where, since the Date
of Issue:
(a) is the sum of Your payments, less any withdrawals, partial
withdrawal charges and outstanding loan which is classified as a
preferred loan; and
(b) is the sum of the minimum Guaranteed Death Benefit Premiums, as
shown on the specifications page of the Policy.
GUARANTEED DEATH BENEFIT
If the Guaranteed Death Benefit Rider is in effect on the Final Payment
Date, a guaranteed Death Benefit will be provided as long as the rider is in
force. The Death Benefit will be the greater of:
- the Face Amount as of the Final Payment Date; or
- the Policy Value as of the date Due Proof of Death is received by the
Company.
TERMINATION OF THE GUARANTEED DEATH BENEFIT RIDER
The Guaranteed Death Benefit Rider will end and may not be reinstated on
the first to occur of the following:
- foreclosure of any Outstanding Loan; or
- the date on which the sum of Your payments less withdrawals and
preferred loans does not meet or exceed the applicable Guaranteed Death
Benefit test (above); or
- any Policy Change that results in a negative guideline level premium;
or
- the effective date of a change from Death Benefit Option 2 to Death
Benefit Option 1, if such changes occur within 5 Policy years of the
Final Payment Date; or
- a request for a partial withdrawal or preferred loan is made after the
Final Payment Date.
It is possible that the Policy Value will not be sufficient to keep the
Policy in force on the first Monthly Processing Date following the date the
rider terminates.
CHANGE IN FACE AMOUNT
You may increase or decrease the Face Amount by Written Request. An
increase or decrease in the Face Amount takes effect as of the later of:
- the Monthly Processing Date on or next following the date of receipt of
Your Written Request; or
- the date of approval of Your Written Request, if Evidence of
Insurability is required.
A change in a Policy's Face Amount may have tax consequences. You should
consult a tax advisor before making such a change.
INCREASES
You must submit with Your Written Request for an increase satisfactory
Evidence of Insurability. The consent of the Insured is also required whenever
the Face Amount is increased. An increase in Face Amount may not be less than
$10,000. You may not increase the Face Amount after the Insured reaches Age 85.
A Written Request for an increase must include a payment if the Policy Value
less outstanding loan is less than the sum of three Minimum Monthly Payments.
We will also compute a new surrender charge and a monthly expense charge
based on the amount of the increase. An increase in the Face Amount will
increase the Net Amount at Risk and, therefore, the cost of insurance charges.
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After increasing the Face Amount, You will have the right, during a right
to examine period, to have the increase canceled. See "Right to Examine" under
THE POLICY. If You exercise this right, We will credit to Your Policy the
charges deducted for the increase.
DECREASES
You may decrease the Face Amount by Written Request. The minimum amount for
a decrease in Face Amount is $10,000. The minimum Face Amount required after a
decrease is $50,000. If You have chosen the Guideline Premium Test and the
Policy would not comply with the maximum payment limitations under Federal tax
law; and if You have previously made payments in excess of the amount allowed
for the lower Face Amount, then the excess payments will first be used to repay
any Outstanding Loan. If there are any remaining excess payments, We will pay
any such excess to You. A return of Policy Value may result in tax liability to
You.
A decrease in the Face Amount will lower the Net Amount at Risk and,
therefore, the cost of insurance charges. In computing the cost of insurance
charge, a decrease in the Face Amount will reduce the Face Amount in the
following order:
- the Face Amount provided by the most recent increase;
- the next most recent increases successively; and
- the initial Face Amount.
On a decrease in the Face Amount, We will deduct from the Policy Value, if
applicable, any surrender charge. You may allocate the deduction to one
Sub-Account. If You make no allocation, We will make a Pro-rata Allocation. We
will reduce the surrender charge by the amount of any surrender charge deducted.
POLICY VALUE
The Policy Value is the total value of Your Policy. It is the sum of:
- Your accumulation in the Fixed Account; plus
- the value of Your Units in the Sub-Accounts.
There is no guaranteed minimum Policy Value. Policy Value on any date
depends on variables that cannot be predetermined.
Your Policy Value is affected by the:
- frequency and amount of Your Net Payments;
- interest credited in the Fixed Account;
- investment performance of Your Sub-Accounts;
- partial withdrawals;
- any Outstanding Loan, loan repayments and loan interest paid or
credited;
- charges and deductions under the Policy; and
- the Death Benefit option.
Computing Policy Value -- We compute the Policy Value on the Date of Issue
and on each Valuation Day. As of the Date of Issue, the Policy Value is:
- the amount of the Premium allocated to the Fixed Account; plus
- the amount of the Premium allocated to the money market Sub-Account (if
Your Policy provides for a full refund of Premium) or to the Variable
Account.; minus
- the Monthly Deduction due; minus
- any other applicable charges.
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On each Valuation Day after the Date of Issue, the Policy Value is the sum
of:
- the value in the Fixed Account; plus
- the value in the Variable Account.
SUB-ACCOUNTS
The Variable Account consists of Sub-Accounts. Your Policy Value will vary
if all or part of it is invested in the Sub-Accounts Each Sub-Account invests
exclusively in shares of a corresponding Fund. Shares of a Fund are purchased
and redeemed for a Sub-Account at their net asset value. Any amounts of income,
dividends and gains distributed from the shares of a Fund are reinvested in
additional shares of that Fund at net asset value.
The dollar amounts of values and benefits of this Policy provided by the
Variable Account depend on the investment performance of the Sub-Accounts
selected by the Policyowner. We do not guarantee the investment performance of
the Sub-Accounts. Policyowners bear the full investment risk for Sub-Account
Values.
We reserve the right, when the law allows, to change the name of the
Variable Account or any Sub-Account. You will find a list in Your application of
the Sub-Accounts in which You first chose to invest.
SUB-ACCOUNT VALUE
The Sub-Account Value as of the Date of Issue is equal to the amount of the
initial Net Payment allocated to that Sub-Account. On subsequent Valuation Days
the Sub-Account Value for any particular Sub-Account is:
- Net Payments allocated to that Sub-Account; plus
- Policy Value transferred to that Sub-Account from another Sub-Account
or the Fixed Account; minus
- partial withdrawals from that Sub-Account, including any applicable
partial withdrawal charges; minus
- transfers from that Sub-Account, including any applicable transfer
charges; minus
- any transaction charges allocated to that Sub-Account for changes in
the Face Amount; minus
- if the Valuation Day is the Monthly Processing Date, the portion of the
Monthly Deduction allocated to that Sub-Account;
- adjusted by any interest income, dividends, and net capital gains or
losses, realized or unrealized.
UNITS
For each Sub-Account, Net Payments allocated to a Sub-Account or amounts of
Policy Value transferred to a Sub-Account are converted into Units. The number
of Units credited to a policy is determined by dividing the dollar amount
directed to each Sub-Account by the value of the Unit for that Sub-Account for
the Valuation Day on which the Net Payments or transferred amount is invested in
the Sub-Account. Therefore, Net Payments allocated to or amounts transferred to
a Sub-Account under a Policy increase the number of Units of that Sub-Account
credited to the Policy.
Certain events will reduce the number of Units of a Sub-Account credited to
a Policy. Withdrawals or transfers of Sub-Account Value from a Sub-Account will
result in the cancellation of the appropriate number of Units of that Sub-
Account as will: surrender of the Policy; payment of the Death Benefit proceeds;
and the deduction of the Monthly Deduction. Units are cancelled as of the end of
the Valuation Period in which we receive notification in writing regarding the
event.
UNIT VALUE
The Unit values for each Sub-Account were arbitrarily set initially at
[$10] when that Sub-Account began operations. Thereafter, the Unit value at the
end of every Valuation Day is the Unit value at the end of the previous
Valuation Day times the net investment factor as described below. The
Sub-Account Value is determined as of any Valuation Day by multiplying the
number of Units attributable to the Policy in that Sub-Account by the value of
the Unit for that Sub-Account on that day.
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NET INVESTMENT FACTOR
The Net Investment Factor is an index applied to measure the investment
performance of Units of a Sub-Account from one Valuation Period to the next. The
Net Investment Factor for any Sub-Account for any Valuation Period is determined
by dividing 1 by 2 where:
1. is the result of:
a. the net asset value per share of the Fund held in the Sub-Account,
determined at the end of the current Valuation Period; plus
b. the per share amount of any dividend or capital gain distributions
made by the Fund held in the Sub-Account, if the "ex-dividend"
date occurs during the current Valuation Period; plus or minus
c. a per share charge or credit for any taxes reserved for, which is
determined by us to have resulted from the operations of the
Sub-Account.
2. is the net asset value per share of the Fund held in the Sub-Account,
determined at the end of the last prior Valuation Period.
PAYMENT OPTIONS
The Net Death Benefit payable may be paid in a single sum or under one or
more of the payment options then offered by the Company. See APPENDIX
C -- PAYMENT OPTIONS. These payment options also are available at the Final
Payment Date or if the Policy is surrendered. If no election is made, We will
pay the Net Death Benefit in a lump sum.
OPTIONAL INSURANCE BENEFITS
You may add optional insurance benefits to the Policy by rider, as
described in APPENDIX B -- OPTIONAL INSURANCE BENEFITS. The cost of certain
optional insurance benefits becomes part of the Monthly Deduction.
SURRENDER
You may surrender the Policy and receive its Cash Surrender Value as long
as the Policy is in force and the Insured is living on the date We receive Your
Written Request in our Variable Life Service Center.
We will compute the Cash Surrender Value as of the Valuation Day on which
We receive the Policy with a Written Request for surrender. We will deduct a
surrender charge if You surrender the Policy on or before the last day of the
9th Policy year from the Date of Issue or increase in Face Amount. See
"Surrender Charge" under CHARGES AND DEDUCTIONS.
The Cash Surrender Value may be paid in a lump sum or under a payment
option then offered by Us. See APPENDIX C -- PAYMENT OPTIONS. We will normally
pay the Cash Surrender Value within seven days following Our receipt of the
Written Request. We may delay benefit payments under the circumstances described
in "Delay of Payments" in this section.
For important tax consequences of surrender, see FEDERAL TAX STATUS.
PARTIAL WITHDRAWAL
After the first Policy year, You may withdraw part of the Cash Surrender
Value of Your Policy upon Written Request. Your Written Request must state the
dollar amount You wish to receive. You may allocate the amount withdrawn among
the Sub-Accounts and the Fixed Account. If You do not provide allocation
instructions, We will make a Pro-rata Allocation. Each partial withdrawal must
be at least $200. We will not allow a partial withdrawal if it would reduce the
Face Amount under Death Benefit Options 1 or 3 below $40,000. The maximum amount
of a partial withdrawal is the Cash Surrender Value less the greater of $500 or
three Monthly Deductions.
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A partial withdrawal is considered a preferred partial withdrawal when the
withdrawal amount and the sum of the prior withdrawal amounts in the same Policy
year do not exceed 10% of the Policy Value as of the beginning of the Policy
year.
A partial withdrawal, unless it is a preferred partial withdrawal, will
reduce the Face Amount under both Death Benefit Options 1 and 3. The Face Amount
reductions will be made in the following order: (1) against the most recent
increase in Face Amount, (2) against the next most recent increases in Face
Amount in succession, and (3) against the Face Amount under the original
application.
On a partial withdrawal , We will cancel the number of Units of designated
Sub-Accounts equal in value to the amount withdrawn. The amount withdrawn will
be the amount You requested plus the partial withdrawal charges. See "Partial
Withdrawal Charges" under CHARGES AND DEDUCTIONS. We will normally pay the
partial withdrawal within seven days following Our receipt of Written Request.
We may delay payment as described "Delay of Payments" below.
For important tax consequences of partial withdrawals, see FEDERAL TAX
STATUS.
DELAY OF PAYMENTS
Amounts payable from the Variable Account for surrender, partial
withdrawals, Net Death Benefit, Policy loans and transfers may be postponed
whenever:
- the New York Stock Exchange is closed other than customary weekend and
holiday closings;
- the SEC restricts trading on the New York Stock Exchange; or
- the SEC determines an emergency exists, so that disposal of securities
is not reasonably practicable or it is not reasonably practicable to
compute the value of the Variable Account's net assets.
We may delay paying any amounts derived from payments You made by check
until the check has cleared Your bank.
We reserve the right to defer amounts payable from the Fixed Account. This
delay may not exceed six months from the day We receive Your Written Request
and, if it is required, Your Policy. This interest will accrue from the date the
proceeds become payable to the date of payment, but not for more than six
months, at an annual rate of 3%, or the rate and time required by law, if
greater.
CHARGES AND DEDUCTIONS
The following charges will apply to Your Policy under the circumstances
described. Some of these charges apply throughout the Policy's duration. Other
charges apply only if You choose certain options under the Policy.
DEDUCTIONS FROM PAYMENTS
From each payment, We will deduct a Payment Expense Charge of 6.00%, which
is composed of the following:
- Premium tax charge of 2.00% currently
- Deferred Acquisition Costs (DAC tax) charge of 1.00%
- Front-end sales load charge of 3.00%
The 2.00% premium tax charge approximates Our average expenses for state
and local premium taxes. Premium taxes vary, ranging from 0.0% to more than
4.00%. The premium tax deduction is made whether or not any premium tax applies.
The deduction may be higher or lower than the premium tax imposed. However, We
do not expect to make a profit from this deduction. The 1.00% DAC tax deduction
helps reimburse Us for approximate expenses incurred from federal taxes for
deferred acquisition costs (DAC taxes) of the Policies. We deduct the 3.00%
front-end sales load charge from each payment to partially compensate Us for
Policy sales expenses.
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We reserve the right to increase or decrease the premium tax deduction or
DAC tax deduction to reflect changes in Our expenses for premium taxes or DAC
taxes. The 3.00% front-end sales load charge will not change, even if sales
expenses change.
MONTHLY DEDUCTION
Before the Final Payment Date on each Monthly Processing Date, We will take
a Monthly Deduction from Your Policy Value. You may allocate the Monthly
Deduction among any number of Sub-Accounts and/or the Fixed Account. If You make
no allocation, or if the Sub-Accounts and/or the Fixed Account You choose do not
have sufficient Policy Value to cover the Monthly Deduction, We will make a
Pro-rata Allocation of the deduction among the remaining Sub-Accounts.
The following charges comprise the Monthly Deduction:
MONTHLY EXPENSE CHARGE
The Monthly Expense Charge will be charged on the Monthly Processing Date
for the first ten years after issue and a new monthly expense charge will also
be applied for the first ten years after an increase in Face Amount. This charge
reimburses the Company for underwriting and acquisition costs. The charge is set
at issue based on the age, sex, and Underwriting Class of the Insured for each
$1,000 of the Policy's Face Amount. If You increase the Face Amount, the Monthly
Expense Charge attributable to the increase is set based on the age, sex, and
Underwriting Class of the Insured at the time of the increase for each $1,000.00
of increased Face Amount. To see the maximum Monthly Expense Charge per $1,000
of the Policy's Face Amount, see APPENDIX G -- MAXIMUM MONTHLY EXPENSE CHARGES.
MONTHLY ADMINISTRATION FEE
A deduction of $7.50 will be taken from the Policy Value on each Monthly
Processing Date up to the Final Payment Date to reimburse the Company for
expenses related to issuance and maintenance of the Policy. We do not expect to
profit from this charge.
MONTHLY MORTALITY AND EXPENSE RISK CHARGE
This charge is currently equal to an annual rate of 0.35% of the Policy
Value in each Sub-Account for the first 10 Policy years and an annual rate of
0.10% for Policy year 11 and later. The charge is based on the Policy Value in
the Sub-Accounts as of the prior Monthly Processing Date. This charge is not
assessed in whole or in part against the Fixed Account. The Company may increase
this charge, subject to state and federal law, to an annual rate of 0.60% of the
Policy Value in each Sub-Account for the first 10 Policy years and an annual
rate of 0.30% for Policy year 11 and later. The charge is continued after the
Final Payment Date.
This charge compensates Us for assuming mortality and expense risks for
variable interests in the Policies. The mortality risk We assume is that
Insureds may live for a shorter time than anticipated. If this happens, We will
pay more Net Death Benefits than anticipated. The expense risk We assume is that
the expenses incurred in issuing and administering the Policies will exceed
those compensated by the administrative charges in the Policies. If the charge
for mortality and expense risks is not sufficient to cover mortality experience
and expenses, We will absorb the losses. If the charge turns out to be higher
than mortality and expense risk expenses, the difference will be a profit to Us.
If the charge provides Us with a profit, the profit will be available for Our
use to pay distribution, sales and other expenses.
MONTHLY RIDER CHARGES
Rider Charges will vary depending upon the riders selected, and by the sex,
age, and Underwriting Class of the Insured under the rider. Please see APPENDIX
B -- OPTIONAL INSURANCE BENEFITS.
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COST OF INSURANCE CHARGES
Before the Final Payment Date, We will deduct a cost of insurance charge
from Your Policy Value. This charge is the cost for insurance protection under
the Policy. The amount of the charge is equal to a current cost of insurance
rate multiplied by the Net Amount at Risk.
The Policy's cost of insurance rates will not exceed certain guaranteed
rates shown in the Policy's specifications. The guaranteed rates are no greater
than certain 1980 Commissioners Standard Ordinary Mortality Tables. These rates
are based on the Age and Underwriting Class of the Insured. They are also based
on the sex of the Insured, except that unisex rates are used where appropriate
under applicable law, and in Policies purchased by employers and employee
organizations in connection with employment related insurance or benefit
programs. The cost of insurance rate generally increases with the Age of the
Insured.
We currently place Insureds into preferred Underwriting Classes, standard
Underwriting Classes and non-standard Underwriting Classes. The Underwriting
Classes, other than preferred, are also divided into two categories: tobacco and
non-tobacco. We will place an Insured under Age 18, at the Date of Issue, in a
standard or non-standard Underwriting Class. The Insured will be placed in the
tobacco category at Age 18 unless We receive satisfactory evidence that the
Insured is eligible to receive the non-tobacco category. Prior to the Insured's
Age 18, We will give You notice of how the Insured may be classified as
non-tobacco.
We compute the cost of insurance rate separately for the initial Face
Amount and for any increase in Face Amount. However, if the Insured's
Underwriting Class improves on an increase, the Underwriting Class improvement
will apply to the total Face Amount.
We deduct the cost of insurance charge on each Monthly Processing Date
starting with the Date of Issue. We will deduct no cost of insurance charges on
or after the Final Payment Date.
Initial Face Amount. For the initial Face Amount under Death Benefit Option
1 and Death Benefit Option 3, the cost of insurance charge is the product of:
- the cost of insurance rate; times
- the difference between:
- the initial Face Amount; and
- the Policy Value at the beginning of the Policy month.
For the initial Face Amount under Death Benefit Option 2, the cost of
insurance charge is the product of:
- the cost of insurance rate; times
- the initial Face Amount.
Increases in Face Amount. For each increase in Face Amount under Death
Benefit Option 1 or Death Benefit Option 3, the cost of insurance charge is the
product of:
- the cost of insurance rate for the increase; times
- the difference between:
- the increase in Face Amount; and
- any Policy Value in excess of the initial Face Amount at the
beginning of the Policy month and not allocated to a prior
increase.
For each increase in Face Amount under Death Benefit Option 2, the cost of
insurance charge is the product of:
- the cost of insurance rate for the increase; times
- the increase in Face Amount.
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If the Guideline Minimum Death Benefit is in effect, We will compute a cost
of insurance charge for that part of the Death Benefit subject to the Guideline
Minimum Death Benefit that exceeds the current Death Benefit not subject to the
Guideline Minimum Death Benefit.
We will adjust the cost of insurance charge for any decreases in Face
Amount. See "Change in Face Amount: Decreases" under THE POLICY.
FUND EXPENSES
Each Portfolio is responsible for all of its operating expenses. In
addition, fees for investment advisory services and operating expenses are
deducted and paid daily at an annual rate from each Portfolio as a percentage of
the daily net assets of the Portfolios. The Prospectus for each Fund provides
more information concerning the investment advisory fee, other charges assessed
against the Portfolio(s) each Fund offers, and the investment advisory services
provided to such Portfolio(s).
No charges are currently made against the Sub-Accounts for federal or state
income taxes. Should income taxes be imposed, We may make deductions from the
Sub-Accounts to pay the taxes. See FEDERAL TAX STATUS.
SURRENDER CHARGE
The Company will assess a surrender charge on a surrender, a decrease in
Face Amount, or any partial withdrawal exceeding the preferred partial
withdrawal, for up to 10 years from Date of Issue of the Policy or from the date
of increase in Face Amount. The maximum surrender charge is equal to a specific
dollar amount that is based on the age (on the Date of Issue or on the date of
any increase in Face Amount), sex, and Underwriting Class of the Insured, for
each $1,000 of the Policy's Face Amount. The amount of the surrender charge
decreases by one-ninth (11.11%) annually to zero by the beginning of the 10th
Policy year. The surrender charge is designed to partially reimburse Us for the
administrative costs of product research and development, underwriting, Policy
administration, and for distribution expenses, including commissions to Our
representatives, advertising, and the printing of prospectuses and sales
literature.
We compute the surrender charge as of the Date of Issue and as of the date
of any increase in Face Amount. The surrender charge applies up to the beginning
of the 10th Policy year from Date of Issue or increase in Face Amount.
If more than one surrender charge is in effect because of one or more
increases in Face Amount, We will apply the surrender charges in inverse order.
We will apply surrender and partial withdrawal charges (described below) in this
order:
- first, the most recent increase;
- second, the next most recent increases, and so on;
- third, the initial Face Amount.
A surrender charge may be deducted on a decrease in the Face Amount or a
partial withdrawal (excluding a preferred partial withdrawal). The surrender
charge deducted is a fraction of the charge that would apply to a full
surrender. The amount of the charge is the product of:
- the decrease in Face Amount divided by the current Face Amount; times
- the surrender charge.
Where a decrease causes a partial reduction in an increase or in the
initial Face Amount, We will deduct a proportionate share of the surrender
charge for that increase or for the initial Face Amount.
See APPENDIX E -- CALCULATION OF MAXIMUM SURRENDER CHARGES for examples of
how We compute the maximum surrender charge.
The Surrender Charge may be significant. You should carefully calculate
this charge before You request a surrender, decrease in Face Amount, or partial
withdrawal. Under some circumstances, the level of Surrender Charges might
result in no Cash Surrender Value available.
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PARTIAL WITHDRAWAL CHARGES
A transaction fee of 2% of the amount withdrawn, not to exceed $25, will be
assessed against each partial withdrawal. Those partial withdrawals that are not
classified as preferred partial withdrawals (see "Partial Withdrawals" under THE
POLICY) will incur a surrender charge due to the reduction in Face Amount. This
charge is equal to a specific dollar amount that is based on the age (on the
Date of Issue or on the date of any increase in Face Amount), sex and
Underwriting Class of the Insured, for each $1,000 of the Policy's Face Amount
that reduces. For more information see -- "Surrender Charge" under THE POLICY. A
surrender charge will not be applied to preferred partial withdrawals.
For important tax consequences of partial withdrawals, see FEDERAL TAX
STATUS.
TRANSFER CHARGES
Currently, the first 12 transfers in a Policy year are free. We reserve the
right to limit the number of free transfers in a Policy year to six. After that,
We will deduct a $10 transfer charge from amounts transferred in that Policy
year. We reserve the right to increase the charge, but it will never exceed $25.
This charge reimburses Us for the administrative costs of processing the
transfer.
Each of the following transfers of Policy Value from the Sub-Accounts to
the Fixed Account is free and does not count as one of the 12 free transfers in
a Policy year:
- a conversion within the first 24 months from the Date of Issue or
increase in Face Amount;
- a transfer to the Fixed Account to secure a loan;
- a reallocation of Policy Value within 20 days of the Date of Issue;
- Dollar-Cost Averaging and Account Rebalancing.
OTHER ADMINISTRATIVE CHARGES
We reserve the right to charge for other administrative costs We incur.
While there are no current charges We may impose a charge, not to exceed $25,
for:
- changing Net Payment allocation instructions;
- changing the allocation of cost of insurance charges among the various
Sub-Accounts and the Fixed Account;
- providing a projection of values;
- reissuance of a lost Policy (printing a duplicate Policy).
POLICY LOANS
You may borrow money secured by Your Policy Value at any time. The total
amount You may borrow, including any Outstanding Loan, is the Loan Value. The
Loan Value is 90% of:
- the Policy Value; minus
- any surrender charges.
We will usually issue the loan within seven days after We receive the
Written Request. We may delay the issuance of the payment of loans as stated in
"Delay of Payments" under THE POLICY.
We will allocate the loan among the Sub-Accounts and the Fixed Account
according to Your instructions. If You do not make an allocation, We will make a
Pro-rata Allocation. We will transfer Policy Value in each Sub-Account equal to
the Policy loan to the Fixed Account. We will not count this transfer as a
transfer subject to the transfer charge.
Policy Value equal to any Outstanding Loan will earn monthly interest in
the Fixed Account at an annual rate of 4.0%. NO OTHER INTEREST WILL BE CREDITED.
The loan interest rate charged by the Company accrues daily. The
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current annual interest rate charged by the Company is 4.80%. The current annual
rate of interest charged on loans may change, but is guaranteed not to exceed
6.00%.
PREFERRED LOAN OPTION
The preferred loan option is automatically available to You, unless You
request otherwise. It may be revoked by You at any time. A request for a
preferred loan after the Final Payment Date will terminate the optional
Guaranteed Death Benefit Rider. Any part of the Outstanding Loan that represents
Earnings under the Policy may be treated as a preferred loan. There is some
uncertainty as to the tax treatment of preferred loans. Consult a qualified tax
adviser (and see FEDERAL TAX STATUS).
Policy Value equal to the Outstanding Loan will earn monthly interest in
the Fixed Account at an annual rate of at least 4.0%. NO OTHER INTEREST WILL BE
CREDITED. The loan interest rate charged by the Company accrues daily. The
current annual loan interest rate charged by the Company for preferred loans is
4.00%. The current annual rate of interest charged on preferred loans may
change, but is guaranteed not to exceed 4.50%.
REPAYMENT OF OUTSTANDING LOAN
You may repay any loans before the Policy lapses. We will allocate that
part of the Policy Value in the Fixed Account that secured a repaid loan to the
Sub-Accounts and Fixed Account according to Your instructions. If You do not
make a repayment allocation, We will allocate Policy Value according to Your
most recent payment allocation instructions. However, loan repayments allocated
to the Variable Account cannot exceed Policy Value previously transferred from
the Variable Account to secure the Outstanding Loan.
If the Outstanding Loan exceeds Policy Value less the amount needed to pay
the next Monthly Deduction, the Policy will terminate. We will mail a notice of
termination to the last known address of You and any assignee. If You do not
make sufficient payment within 62 days after this notice is mailed, the Policy
will terminate with no value. See POLICY TERMINATION AND REINSTATEMENT. The
foreclosure of any Outstanding Loan will terminate the optional Guaranteed Death
Benefit Rider.
EFFECT OF POLICY LOANS
Policy loans will permanently affect the Policy Value and Cash Surrender
Value, and may permanently affect the Death Benefit. The effect could be
favorable or unfavorable, depending on whether the investment performance of the
Sub-Accounts is less than or greater than the interest credited to the Policy
Value in the Fixed Account that secures the loan.
We will deduct any Outstanding Loan from the proceeds payable when the
Insured dies or from a surrender.
POLICY TERMINATION AND REINSTATEMENT
TERMINATION
Unless the Guaranteed Death Benefit Rider is in effect, the Policy will
terminate if:
- Policy Value less any Outstanding Loan is insufficient to cover the
next Monthly Deduction plus loan interest accrued; or
- any Outstanding Loan exceeds the Policy Value.
If one of these situations occurs, the Policy will be in default. You will
then have a grace period of 62 days, measured from the date of default, to pay a
Premium sufficient to prevent termination. On the date of default, We will send
a notice to You and to any assignee of record. The notice will state the Premium
due and the date by which it must be paid.
Failure to pay a sufficient Premium within the grace period will result in
Policy termination. If the Insured dies during the grace period, We will deduct
from the Net Death Benefit any Monthly Deduction due and unpaid through the
Policy month in which the Insured dies and any other overdue charge.
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Beginning on the date this Policy is issued or the Date of Issue of any
increase in the Face Amount, whichever is later, and continuing for the next 47
Monthly Processing Dates, the grace period will begin when both of the following
conditions occur:
- the Policy Value less Outstanding Loan is less than the amount needed
to pay the next Monthly Deduction plus loan interest accrued; and
- the sum of the payments made minus any Outstanding Loan, partial
withdrawals and partial withdrawal charges since the latest of the
following three dates:
- the date this Policy is issued;
- the Date of Issue of any increase in the Face Amount; or
- the date of any Policy Change which changes the Minimum Monthly
Payment is less than the accumulated Minimum Monthly Payments to
date.
During the first 48 Policy months following the Date of Issue or an
increase in the Face Amount, a guarantee may apply to prevent the Policy from
terminating because of insufficient Policy Value. This guarantee applies if,
during this period, You pay Premiums that, when reduced by partial withdrawals
and partial withdrawal charges, equal or exceed specified Minimum Monthly
Payments. The specified Minimum Monthly Payments are based on the number of
months the Policy, increase in Face Amount or Policy Change that causes a change
in the Minimum Monthly Payment has been in force. A Policy Change that causes a
change in the Minimum Monthly Payment is a change in the Face Amount,
underwriting reclassifications, or the addition or deletion of a rider. Except
for the first 48 months after the Date of Issue or the effective date of an
increase, payments equal to the Minimum Monthly Payment do not guarantee that
the Policy will remain in force.
If the optional Guaranteed Death Benefit Rider is in effect, the Policy
will not lapse regardless of the investment performance of the Variable Account.
See "Guaranteed Death Benefit Rider" under THE POLICY.
REINSTATEMENT
A terminated Policy may be reinstated within three years of the date of
default and before the Final Payment Date. The reinstatement takes effect on the
Monthly Processing Date following the date You submit to Us:
- written application for reinstatement;
- Evidence of Insurability showing that the Insured is insurable
according to Our underwriting rules; and
- a payment that, after the deduction of the Payment Expense Charge, is
large enough to cover the Minimum Amount Payable.
POLICIES WHICH HAVE BEEN SURRENDERED MAY NOT BE REINSTATED.
Minimum Amount Payable -- If reinstatement is requested when less than 48
monthly deductions have been taken since the Date of Issue or increase in the
Face Amount, You must pay for the lesser of three Minimum Monthly Payments or
three Monthly Deductions.
If You request reinstatement more than 48 Monthly Processing Dates from the
Date of Issue or increase in the Face Amount, You must pay 3 Monthly Deductions.
Surrender Charge -- The surrender charge on the date of reinstatement is
the surrender charge that was in effect on the date of termination.
Policy Value on Reinstatement -- The Policy Value on the date of
reinstatement is:
- the Net Payment made to reinstate the Policy and interest earned from
the date the payment was received at Our Variable Life Service Center;
plus
- the Policy Value less any Outstanding Loan on the date of default (not
to exceed the surrender charge on the date of reinstatement); minus
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- the Monthly Deduction due on the date of reinstatement.
You may reinstate an Outstanding Loan.
OTHER POLICY PROVISIONS
POLICYOWNER
The Policyowner is the Insured unless another individual has been named in
the application. As Policyowner, You are entitled to exercise all rights under
Your Policy while the Insured is alive, with the consent of any irrevocable
Beneficiary. The consent of the Insured is required whenever the Face Amount is
increased.
BENEFICIARY
The Beneficiary is the person or persons to whom the Net Death Benefit is
payable on the Insured's death. Unless otherwise stated in the Policy, the
Beneficiary has no rights in the Policy before the Insured dies. While the
Insured is alive, You may change the Beneficiary, unless You have declared the
Beneficiary to be irrevocable. If no Beneficiary is alive when the Insured dies,
the Policyowner (or the Policyowner's estate) will be the Beneficiary. If more
than one Beneficiary is alive when the Insured dies, We will pay each
Beneficiary in equal shares, unless You have chosen otherwise. Where there is
more than one Beneficiary, the interest of a Beneficiary who dies before the
Insured will pass to surviving beneficiaries proportionally.
ASSIGNMENT
You may assign a Policy as collateral or make an absolute assignment by
sending us a Written Request at any time while the Insured is alive and the
Policy is in force. All Policy rights will be transferred as to the assignee's
interest. The consent of the assignee may be required to make changes in payment
allocations, make transfers or to exercise other rights under the Policy. We are
not bound by an assignment or release thereof, unless it is in writing and
recorded at the Variable Life Service Center. When recorded, the assignment will
take effect on the date the Written Request was signed. Any rights the
assignment creates will be subject to any payments We made or actions We took
before the assignment is recorded. We are not responsible for determining the
validity of any assignment or release.
MODIFICATION
Upon notice to You, We may modify the Policy, but only if such
modification:
- is necessary to make the Policy or the Variable Account comply with any
law or regulation issued by a governmental agency to which We are
subject;
- is necessary to assure continued qualification of the Policy under the
Code or other federal or state laws relating to variable life policies;
- is necessary to reflect a change in the operation of the Variable
Accounts;
- or provides additional Variable Account and/or fixed accumulation
options.
In the event of any such modification, We may make any appropriate
endorsement to the Policy.
NOTIFICATION OF DEATH
The death of the Insured and/or the Policyowner(s) must be filed with Us
immediately, and We will require Due Proof of Death.
In most states, We will compute the Net Death Benefit on:
- the date We receive Due Proof of Death of the Insured under Death
Benefit Option 2; or
- the date of death for Death Benefit Options 1 and 3.
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WRITTEN REQUEST
Written Request must be signed and dated by You. It must be of a form and
content acceptable to Us. Your Written Request will not be effective until We
receive and file it. However, any change provided in Your Written Request will
be effective as of the date You signed the Written Request:
- subject to any payments or other actions We take prior to receiving and
filing Your Written Request; and
- whether or not You are alive when We receive and file Your Written
Request.
THE FOLLOWING POLICY PROVISIONS MAY VARY BY STATE.
INCONTESTABILITY
We cannot challenge the validity of Your Policy if the Insured was alive
after the Policy had been in force for two years from the Date of Issue or if
reinstated, for two years from the date of reinstatement. Also, We cannot
challenge the validity of any increase in the Face Amount if the Insured was
alive after the increase was in force for two years from the effective date of
the increase.
Any contest after a reinstatement or increase in Face Amount will be
limited to material statements made in the application for such reinstatement or
Face Amount increase.
SUICIDE
The Net Death Benefit will not be paid if the Insured commits suicide,
while sane or insane, within two years from the Date of Issue of the Policy.
Instead, We will pay the Beneficiary all payments made for the Policy, without
interest, less any Outstanding Loan and partial withdrawals. If the Insured
commits suicide, while sane or insane, within two years from any increase in
Face Amount, We will not recognize the increase. We will pay to the Beneficiary
the Net Death Benefit prior to the increase plus the monthly expense charges and
the cost of insurance charges associated with the increase.
MISSTATEMENT OF AGE OR SEX
If the Insured's Age or sex is not correctly stated in the Policy
application, We will adjust benefits under the Policy to reflect the correct Age
and sex. The adjusted benefit will be the benefit that the most recent cost of
insurance charge would have purchased for the correct Age and sex. We will not
reduce the Death Benefit to less than the Guideline Minimum Death Benefit. For a
unisex Policy, there is no adjusted benefit for misstatement of sex. No
adjustment for misstatement of Age or sex will be made after the Final Payment
Date.
FEDERAL TAX STATUS
THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX ADVICE
The following summary of federal tax considerations is based on Our
understanding of the present federal income tax laws as they are currently
interpreted. Legislation may be proposed which, if passed, could adversely and
possibly retroactively affect the taxation of the Policies. This summary is not
exhaustive, does not purport to cover all situations, and is not intended as tax
advice. We do not address tax provisions that may apply if the Policyowner is a
corporation or the trustee of an employee benefit plan. You should consult a
qualified tax adviser to apply the law to Your circumstances.
THE COMPANY AND THE VARIABLE ACCOUNT
The Company is taxed as a life insurance company under Subchapter L of the
Code. We file a consolidated tax return with Our parent and affiliates. We do
not currently charge for any income tax on the earnings or realized capital
gains in the Variable Account. We do not currently charge for federal income
taxes respecting the Variable Account. A charge may apply in the future for any
federal income taxes We incur. The charge may become necessary, for example, if
there is a change in Our tax status. Any charge would be designed to cover the
federal income taxes on the investment results of the Variable Account.
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Under current laws, the Company may incur state and local taxes besides
Premium taxes. These taxes are not currently significant. If there is a material
change in these taxes affecting the Variable Account, We may charge for taxes
paid or for tax reserves.
TAXATION OF THE POLICIES
In order to qualify as a life insurance contract for Federal income tax
purposes and to receive the tax treatment normally accorded life insurance
contracts under Federal tax law, a Policy must satisfy certain requirements
which are set forth in the Internal Revenue Code. Guidance as to how these
requirements are to be applied is limited. We believe that the Policy issued on
a preferred or standard Underwriting Class basis should satisfy the applicable
requirements. There is less guidance with respect to Policies issued on a
non-standard Underwriting Class basis and it is not clear that such Policies
will satisfy the applicable requirements in all cases, particularly if the full
amount of premiums permitted under the Policy is paid. If it is later determined
that a Policy does not satisfy the applicable requirements, We may take
appropriate steps to bring the Policy into compliance with such requirements and
We reserve the right to restrict Policy transactions in order to do so.
In certain circumstances, owners of variable life insurance contracts have
been considered for Federal income tax purposes to be the owners of the assets
of the variable account supporting their contracts due to their ability to
exercise investment control over those assets. Where this is the case, the
contract owners have been currently taxed on income and gains attributable to
the variable account assets. There is little guidance in this area, and some
features of the Policies, such as the flexibility of a Policyowner to allocate
premiums and cash values and the number of funds offered under the Policy, have
not been explicitly addressed in published rulings. While We believe that the
Policies do not give Policyowners investment control over Variable Account
assets, We reserve the right to modify the Policies as necessary to prevent a
Policyowner from being treated as the owner of the Variable Account assets
supporting the Policy.
In addition, the Code requires that the investments of the Variable Account
be "adequately diversified" in order for the Policies to be treated as life
insurance contracts for Federal income tax purposes. It is intended that the
Variable Account, through the Funds, will satisfy these diversification
requirements.
The following discussion assumes that the Policies will qualify as a life
insurance contracts for Federal income tax purposes.
TAX TREATMENT OF POLICY BENEFITS
IN GENERAL. We believe that the Death Benefit under a Policy should be
excludible from the gross income of the Beneficiary. Federal, state and local
transfer, and other tax consequences of ownership or receipt of Policy proceeds
depend on the circumstances of each Policyowner or Beneficiary. A tax advisor
should be consulted on these consequences.
Generally, the Policyowner will not be deemed to be in constructive receipt
of the Policy cash value until there is a distribution. When distributions from
a Policy occur, or when loans are taken out from or secured by a Policy, the tax
consequences depend on whether the Policy is classified as a "Modified Endowment
Contract."
MODIFIED ENDOWMENT CONTRACTS. Under the Internal Revenue Code, certain
life insurance contracts are classified as "Modified Endowment Contracts," with
less favorable tax treatment than other life insurance contracts. Due to the
flexibility of the Policies as to premiums and benefits, the individual
circumstances of each Policy will determine whether it is classified as a
Modified Endowment Contract. The rules are too complex to be summarized here,
but generally depend on the amount of premiums paid during the first seven
Policy years. Certain changes in a Policy after it is issued could also cause it
to be classified as a Modified Endowment Contract. A current or prospective
Policyowner should consult with a competent advisor to determine whether a
Policy transaction will cause the Policy to be classified as a Modified
Endowment Contract.
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DISTRIBUTIONS OTHER THAN DEATH BENEFITS FROM MODIFIED ENDOWMENT
CONTRACTS. Policies classified as Modified Endowment Contracts are subject to
the following tax rules:
(1) All distributions other than Death Benefits, including distributions
upon surrender and withdrawals, from a Modified Endowment Contract will
be treated first as distributions of gain taxable as ordinary income
and as tax-free recovery of the Policyowner's investment in the Policy
only after all gain has been distributed.
(2) Loans taken from or secured by a Policy classified as a Modified
Endowment Contract are treated as distributions and taxed accordingly.
(3) A 10 percent additional income tax is imposed on the amount subject to
tax except where the distribution or loan is made when the Policyowner
has attained age 59 1/2 or is disabled, or where the distribution is
part of a series of substantially equal periodic payments for the life
(or life expectancy) of the Policyowner or the joint lives (or joint
life expectancies) of the Policyowner and the Policyowner's Beneficiary
or designated Beneficiary.
If a Policy becomes a Modified Endowment Contract, distributions that occur
during the Policy year will be taxed as distributions from a Modified Endowment
Contract. In addition, distributions from a Policy within two years before it
becomes a Modified Endowment Contract will be taxed in this manner. This means
that a distribution made from a Policy that is not a Modified Endowment Contract
could later become taxable as a distribution from a Modified Endowment Contract.
DISTRIBUTIONS OTHER THAN DEATH BENEFITS FROM POLICIES THAT ARE NOT MODIFIED
ENDOWMENT CONTRACTS. Distributions other than Death Benefits from a Policy that
is not classified as a Modified Endowment Contract are generally treated first
as a recovery of the Policyowner's investment in the Policy and only after the
recovery of all investment in the Policy as taxable income. However, certain
distributions which must be made in order to enable the Policy to continue to
qualify as a life insurance contract for Federal income tax purposes if Policy
benefits are reduced during the first 15 Policy years may be treated in whole or
in part as ordinary income subject to tax.
Loans from or secured by a Policy that is not a Modified Endowment Contract
are generally not treated as distributions. However, the tax consequences
associated with preferred loans are less clear and a tax adviser should be
consulted about such loans.
Finally, neither distributions from nor loans from or secured by a Policy
that is not a Modified Endowment Contract are subject to the 10 percent
additional income tax.
INVESTMENT IN THE POLICY. Your investment in the Policy is generally Your
aggregate Premiums. When a distribution is taken from the Policy, Your
investment in the Policy is reduced by the amount of the distribution that is
tax-free.
POLICY LOANS. In general, interest on a Policy loan will not be
deductible. If a Policy loan is outstanding when a Policy is canceled or lapses,
the amount of the outstanding indebtedness will be added to the amount
distributed and will be taxed accordingly. Before taking out a Policy loan, You
should consult a tax adviser as to the tax consequences.
MULTIPLE POLICIES. All Modified Endowment Contracts that are issued by Us
(or our affiliates) to the same Policyowner during any calendar year are treated
as one Modified Endowment Contract for purposes of determining the amount
includible in the Policyowner's income when a taxable distribution occurs.
CONTINUATION OF POLICY BEYOND AGE 100. The tax consequences of continuing
the Policy beyond the Insured's 100th year are unclear. You should consult a tax
adviser if You intend to keep the Policy in force beyond the Insured's 100th
year.
BUSINESS USES OF POLICY. Businesses can use the Policies in various
arrangements, including nonqualified deferred compensation or salary continuance
plans, split dollar insurance plans, executive bonus plans, tax exempt and
nonexempt welfare benefit plans, retiree medical benefit plans and others. The
tax consequences of such plans may vary depending on the particular facts and
circumstances. If You are purchasing the Policy for any arrangement the value of
which depends in part on its tax consequences, You should consult a qualified
tax adviser. In recent years, moreover, Congress has adopted new rules relating
to life insurance owned by businesses. Any business contemplating the purchase
of a new Policy or a change in an existing Policy should consult a tax adviser.
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OTHER TAX CONSIDERATIONS. The transfer of the Policy or designation of a
Beneficiary may have federal, state, and/or local transfer and inheritance tax
consequences, including the imposition of gift, estate, and generation-skipping
transfer taxes. For example, the transfer of the Policy to, or the designation
as a Beneficiary of, or the payment of proceeds to, a person who is assigned to
a generation which is two or more generations below the generation assignment of
the owner may have generation skipping transfer tax consequences under federal
tax law. The individual situation of each owner or Beneficiary will determine
the extent, if any, to which federal, state, and local transfer and inheritance
taxes may be imposed and how ownership or receipt of Policy proceeds will be
treated for purposes of federal, state and local estate, inheritance, generation
skipping and other taxes.
POSSIBLE TAX CHANGES
Although the likelihood of legislative change is uncertain, there is always
the possibility that the tax treatment of the Polices could change by
legislation or other means. It is also possible that any change could be
retroactive (that is, effective prior to the date of the change). A tax adviser
should be consulted with respect to legislative developments and their effect on
the Policy.
VOTING RIGHTS
Where the law requires, We will vote fund shares that each Sub-Account
holds according to instructions received from Policyowners with Policy Value in
the Sub-Account. If, under the 1940 Act or its rules, We may vote shares in Our
own right, whether or not the shares relate to the Policies, We reserve the
right to do so.
We will provide each person having a voting interest in a fund with proxy
materials and voting instructions. We will vote shares held in each Sub-Account
for which no timely instructions are received in proportion to all instructions
received for the Sub-Account. We will also vote in the same proportion Our
shares held in the Variable Account that does not relate to the Policies.
We will compute the number of votes that a Policyowner has the right to
instruct on the record date established for the fund. This number is the
quotient of:
- each Policyowner's Policy Value in the Sub-Account; divided by
- the net asset value of one share in the fund in which the assets of the
Sub-Account are invested.
We may, when required by state insurance regulatory authorities, disregard
voting instructions if the instructions require that Fund shares be voted so as
(1) to cause to change in the sub-classification or investment objective of one
or more of the Funds, or (2) to approve or disapprove an investment advisory
contract for the Funds. In addition, We may disregard voting instructions that
are in favor of any change in the investment policies or in any investment
adviser or principal underwriter if the change has been initiated by Contract
Policyowners or the Trustees. Our disapproval of any such change must be
reasonable and, in the case of a change in investment policies or investment
adviser, based on a good faith determination that such change would be contrary
to state law or otherwise is inappropriate in light of the objectives and
purposes of the Funds. In the event We do disregard voting instructions, a
summary of and the reasons for that action will be included in the next periodic
report to Contract Policyowners.
DELETION OR SUBSTITUTION OF INVESTMENTS
We reserve the right, subject to law, to make additions to, deletions from,
or substitutions for the shares that are held in the Sub-Accounts. We may redeem
the shares of a Fund and substitute shares of another registered open-end
management company, if:
- the shares of the fund are no longer available for investment;
- change in tax laws; or
- in Our judgment further investment in the Fund would no longer be
appropriate based on the purposes of the Variable Account or the
affected Sub-Account.
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Where the 1940 Act or other law requires, We will not substitute any shares
respecting a Policy interest in a Sub-Account without notice to Policyowners and
prior approval of the SEC and state insurance authorities. The Variable Account
may, as the law allows, purchase other securities for other policies or allow a
conversion between policies on a Policyowner's request.
We reserve the right to establish additional Sub-Accounts funded by a new
fund or by another investment company. Subject to law, We may, in Our sole
discretion, establish new Sub-Accounts or eliminate one or more Sub-Accounts.
We may change the Policy to reflect a substitution or other change and will
notify Policyowners of the change. Subject to any approvals the law may require,
the Variable Account or any Sub-Accounts may be:
- operated as a management company under the 1940 Act;
- deregistered under the 1940 Act if registration is no longer required;
or
- combined with other Sub-Accounts or Our other separate accounts.
FURTHER INFORMATION
We have filed a 1933 Act registration statement for this offering with the
SEC. Under SEC rules and regulations, We have omitted from this Prospectus part
of the registration statement and amendments. Statements contained in this
Prospectus are summaries of the Policy and other legal documents. The complete
documents and omitted information may be obtained from the SEC's Principal
Office in Washington, D.C., on payment of the SEC's prescribed fees.
DIRECTORS AND PRINCIPAL OFFICERS OF THE COMPANY
Ronald E. Beettam Director, Chairman and President, Canada Life
Insurance Company of America; Vice President of the
U.S. Division, The Canada Life Assurance Company
(2/98 - Present); Vice President of Individual
Operations, U.S. Division, The Canada Life Assurance
Company (9/97 - 2/98); Actuarial and Administrative
Vice President, Corporate Financial Management, The
Canada Life Assurance Company (1/95 - 9/97).
Kenneth T. Ledwos Director and Actuary, Canada Life Insurance Company
of America; Actuarial Vice President, The Canada
Life Assurance Company.
D. Allen Loney Director, Canada Life Insurance Company of America;
Vice President and Chief Actuary, The Canada Life
Assurance Company (1998 - Present); Vice President
of the U.S. Division, The Canada Life Assurance
Company (1987 - 1998).
Henry A. Rachfalowski Director, Canada Life Insurance Company of America;
Investment Vice President, The Canada Life Assurance
Company (1996 - Present); Vice President Portfolio
Investment, Ontario Municipal Employees Retirement
Board (1992 - 1996).
Thomas C. Scott Director and Financial Vice President, Canada Life
Insurance Company of America; Financial Vice
President, The Canada Life Assurance Company
(12/97 - Present); Executive Vice President and
Chief Financial Officer, Washington National Corp.
(11/74 - 12/97).
Stephen H. Zimmerman Director, Canada Life Insurance Company of America;
Partner, Dykema Gossett, PLLC.
George N. Isaac Treasurer, Canada Life Insurance Company of America;
Treasurer, The Canada Life Assurance Company.
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Roy W. Linden Secretary, Canada Life Insurance Company of America;
Vice President, General Counsel and Secretary, The
Canada Life Assurance Company (5/95 - Present);
Legal Vice President and General Counsel, The Canada
Life Assurance Company (5/93 - 5/95).
Charles H. MacPhaul Assistant Secretary, Canada Life Insurance Company of
America (5/98 - Present), Senior Counsel of The
Canada Life Assurance Company (2/99 - Present);
Counsel, (9/96 5/98); Counsel, ING Life Insurance
Company of Georgia (11/85 - 8/96).
William S. McIlwaine Group Sales Vice President, Canada Life Insurance
Company of America; Group Sales Vice President, The
Canada Life Assurance Company.
DISTRIBUTION
Canada Life of America Financial Services, Inc. (CLAFS) acts as the
principal underwriter and general distributor of the Policies. CLAFS, Our
wholly-owned subsidiary and a Georgia corporation organized on January 18, 1988,
is registered with the SEC under the Securities Exchange Act of 1934 (1934 Act)
as a broker/dealer and is a member of the National Association of Securities
Dealers, Inc. CLAFS' principal business address is 6201 Powers Ferry Road, NW,
Atlanta, Georgia.
We pay to broker-dealers who sell the Policy commissions based on a
commission schedule. After the Date of Issue or an increase in Face Amount,
commissions will not exceed 90% of the first-year payments up to a payment
amount We established and 4% of any excess. Commissions will not exceed 4% for
subsequent payments in years 2-10, and 3% for years 11 and over. Broker-dealers
may also receive annual renewal compensation of up to 0.20% of Policy Value less
any Outstanding Loan, depending on the circumstances. To the extent permitted by
NASD rules, overrides and promotional incentives or payments may also be
provided to General Agents, independent marketing organizations, and
broker-dealers based on sales volumes, the assumption of wholesaling functions
or other sales-related criteria. Other payments may be made for other services
that do not directly involve the sale of the Policies. These services may
include the recruitment and training of personnel, production of promotional
literature, and similar services.
Commissions paid on the Policies, including other incentives or payments,
are not charged to Policyowners or to the Variable Account.
INFORMATION ABOUT THE FIXED ACCOUNT
This Prospectus serves as a disclosure document only for the aspects of the
Policy relating to the Variable Account. For complete details on the Fixed
Account, read the Policy itself. The Fixed Account and other interests in the
General Account are not regulated under the 1933 Act or the 1940 Act because of
exemption and exclusionary provisions. The 1933 Act provisions on the accuracy
and completeness of statements made in prospectuses may apply to information on
the fixed part of the Policy and the Fixed Account. The SEC has not reviewed the
disclosures in this section of the Prospectus.
GENERAL DESCRIPTION
You may allocate part or all of Your Net Payments to accumulate at a fixed
rate of interest in the Fixed Account. The Fixed Account is a part of Our
General Account. The General Account is made up of all of Our general assets
other than those allocated to any separate account. Allocations to the Fixed
Account become part of Our General Account assets and are used to support
insurance and annuity obligations.
FIXED ACCOUNT INTEREST
We guarantee amounts allocated to the Fixed Account as to principal and a
minimum rate of interest. The minimum interest We will credit on amounts
allocated to the Fixed Account is 4.0% compounded annually. "Excess interest"
may or may not be credited at Our sole discretion. We will guarantee initial
rates on amounts allocated to the
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Fixed Account, either as payments or transfers, to the next Policy Anniversary.
At each Policy Anniversary, We will credit the then current interest rate to
money remaining in the Fixed Account. We will guarantee this rate for one year.
FIXED ACCOUNT POLICY VALUE
On any day, the Fixed Account Policy Value is:
- Net Payments allocated to the Fixed Account; plus
- Variable Account Policy Value transferred to the Fixed Account; plus
- interest credited to the Fixed Account; minus
- partial withdrawals from the Fixed Account, including any applicable
partial withdrawal charges and partial withdrawals charges; minus
- transfers from the Fixed Account, including any applicable transfer
charges; minus
- any transaction charges allocated to the Fixed Account for changes in
the Face Amount; minus
- [if any day is the Monthly Processing Date,] the portion of the Monthly
Deduction allocated to the Fixed Account.
During any policy month the Fixed Account Policy Value will be calculated
on a consistent basis. For purposes of crediting interest, Policy Value
deducted, transferred or withdrawn from the Fixed Account is accounted for on a
first-in, first-out basis.
FINANCIAL STATEMENTS
Our balance sheets as of December 31, 1999 and 1998, and the related
statements of operations, capital and surplus, and cash flows for each of the
three years in the period ended December 31, 1999, as well as the Report of
Independent Auditors, are included in this Prospectus constituting part of this
Registration Statement.
The financial statements of the Company should be considered only as
bearing on Our ability to meet Our obligations under the Policy. They should not
be considered as bearing on the investment performance of the assets held in the
Variable Account.
43
<PAGE> 48
FINANCIAL STATEMENTS
CANADA LIFE INSURANCE COMPANY OF AMERICA
1999 STATUTORY FINANCIAL STATEMENTS
WITH REPORT OF INDEPENDENT AUDITORS
<PAGE> 49
CANADA LIFE INSURANCE COMPANY OF AMERICA
STATUTORY FINANCIAL STATEMENTS
DECEMBER 31, 1999
CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors.............................. 1
Statutory Balance Sheets.................................... 2
Statutory Statements of Operations.......................... 3
Statutory Statements of Capital and Surplus................. 4
Statutory Statements of Cash Flows.......................... 5
Notes to Statutory Financial Statements..................... 6
</TABLE>
<PAGE> 50
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Canada Life Insurance Company of America
We have audited the accompanying statutory balance sheets of Canada Life
Insurance Company of America as of December 31, 1999 and 1998, and the related
statutory statements of operations, capital and surplus, and cash flows for each
of the three years in the period ended December 31, 1999. These financial
statements are the responsibility of 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.
As described in Note B to the financial statements, the Company presents
its financial statements in conformity with accounting practices prescribed or
permitted by the Michigan Insurance Department, which practices differ from
accounting principles generally accepted in the United States. The variances
between such practices and accounting principles generally accepted in the
United States are also described in Note B. The effects on the financial
statements of these variances are not reasonably determinable but are presumed
to be material.
In our opinion, because of the effects of the matter described in the
preceding paragraph, the financial statements referred to above do not present
fairly, in conformity with accounting principles generally accepted in the
United States, the financial position of Canada Life Insurance Company of
America at December 31, 1999 and 1998, or the results of its operations or its
cash flows for each of the three years in the period ended December 31, 1999.
However, in our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Canada Life
Insurance Company of America 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 practices prescribed or
permitted by the Michigan Insurance Department.
Atlanta, Georgia
February 4, 2000
<PAGE> 51
CANADA LIFE INSURANCE COMPANY OF AMERICA
STATUTORY BALANCE SHEETS
[IN THOUSANDS OF DOLLARS
EXCEPT SHARES AND PER SHARE VALUES]
<TABLE>
<CAPTION>
AT DECEMBER 31
-----------------------
1999 1998
---------- ----------
<S> <C> <C>
ADMITTED ASSETS
Investments [note C]
Bonds..................................................... $1,316,100 $1,312,081
Mortgage loans............................................ 898,623 902,549
Common and preferred stocks, including subsidiaries....... 37,827 37,642
Real estate............................................... 6,400 7,031
Policy loans.............................................. -- 9,333
Short-term investments.................................... 24,810 34,473
Cash...................................................... 3,813 2,697
Receivable for securities................................. 50 2,606
Other invested assets..................................... 3,813 833
---------- ----------
Total cash and investments........................ 2,291,436 2,309,245
Investment income due and accrued........................... 30,205 29,527
Receivable from parent and affiliates....................... 7,844 3,002
Other assets................................................ 4,133 402
Assets held in Separate Accounts [note I]................... 693,086 530,649
---------- ----------
Total admitted assets............................. $3,026,704 $2,872,825
========== ==========
LIABILITIES AND CAPITAL AND SURPLUS
Liabilities
Policy liabilities
Life and annuity reserves................................. $1,886,010 $1,884,119
Guaranteed investment contracts........................... 247,174 267,156
Policy and contract claims................................ -- 47
Dividends payable......................................... -- 1,151
Other policy and contract liabilities..................... 215 307
---------- ----------
Total policy liabilities.......................... 2,133,399 2,152,780
Interest maintenance reserve................................ 13,165 12,124
Amounts owing to parent and affiliates [note H]............. 4,335 9,836
Miscellaneous liabilities................................... 7,286 8,701
Asset valuation reserve..................................... 31,162 27,034
Transfers to Separate Accounts due or accrued (net)......... (11,399) (9,883)
Liabilities from Separate Accounts.......................... 693,086 530,649
---------- ----------
Total liabilities................................. 2,871,034 2,731,241
---------- ----------
Capital and surplus [note K]
Common stock -- $10.00 par value, authorized -- 25,000,000
shares; issued and outstanding -- 500,000 shares.......... 5,000 5,000
Redeemable preferred stock -- $10.00 par value,
authorized -- 25,000,000 shares; issued and
outstanding -- 4,100,000 shares........................... 41,000 41,000
Paid-in surplus............................................. 76,000 76,000
Accumulated surplus......................................... 33,670 19,584
---------- ----------
Total capital and surplus......................... 155,670 141,584
---------- ----------
Total liabilities and capital and surplus......... $3,026,704 $2,872,825
========== ==========
</TABLE>
See accompanying notes.
2
<PAGE> 52
CANADA LIFE INSURANCE COMPANY OF AMERICA
STATUTORY STATEMENTS OF OPERATIONS
[IN THOUSANDS OF DOLLARS]
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
REVENUES
Premiums for insurance and annuity considerations [note
G]........................................................ $238,675 $329,578 $326,559
Considerations for supplementary contracts and dividends
left on deposit........................................... 559 3,357 2,905
Net investment income [note C].............................. 190,492 188,155 184,549
Other income................................................ 8,488 7,942 3,657
-------- -------- --------
Total revenues.................................... 438,214 529,032 517,670
-------- -------- --------
BENEFITS AND EXPENSES
Benefits paid or provided to policyholders
Annuity................................................... 391,819 356,748 450,348
Life...................................................... 1,306 2,639 3,176
Supplementary contracts and dividends left on deposit..... 1,825 2,843 2,570
Dividends to policyholders................................ (593) 1,011 1,682
-------- -------- --------
Total benefits paid or provided to
policyholders.................................. 394,357 363,241 457,776
Increase (decrease) in actuarial reserves................... 11,567 63,918 (79,003)
Commissions and expense allowances on reinsurance assumed... 13,392 14,056 13,418
Commissions................................................. 5,413 6,246 7,386
General insurance expenses.................................. 7,970 8,737 8,628
Taxes, licenses and fees.................................... 722 3,913 1,497
Transfers to (from) Separate Accounts....................... (15,387) 46,271 82,213
-------- -------- --------
Total benefits and expenses....................... 418,034 506,382 491,915
-------- -------- --------
Gain from operations before net realized capital gains
(losses) and federal income taxes......................... 20,180 22,650 25,755
Federal income taxes [note E]............................... 1,593 3,992 6,823
-------- -------- --------
Gain from operations before net realized capital gains
(losses).................................................. 18,587 18,658 18,932
Net realized capital gains (losses) [Note C]................ (2,199) (373) 1,682
-------- -------- --------
Net income.................................................. $ 16,388 $ 18,285 $ 20,614
======== ======== ========
</TABLE>
See accompanying notes.
3
<PAGE> 53
CANADA LIFE INSURANCE COMPANY OF AMERICA
STATUTORY STATEMENTS OF CAPITAL AND SURPLUS
[IN THOUSANDS OF DOLLARS]
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Common stock at beginning and end of year................... $ 5,000 $ 5,000 $ 5,000
Redeemable preferred stock at beginning and end of year..... 41,000 41,000 41,000
Paid-in surplus at beginning and end of year................ 76,000 76,000 76,000
Accumulated surplus (deficit) at beginning of year.......... 19,584 7,530 (5,839)
Net income.................................................. 16,388 18,285 20,614
Change in net unrealized capital gain (loss)................ 1,693 (467) 1,253
Change in surplus (deficit) on account of:
Prior year federal income tax adjustment.................. -- 2,589 (6,195)
Actuarial valuation basis................................. -- (5,740) --
Asset valuation reserve................................... (4,128) (2,226) (3,361)
Adjustment for loss in currency exchange.................. 133 (392) (378)
Change in surplus of Separate Account..................... -- 25 1,436
Nonadmitted assets........................................ -- (20) --
-------- -------- --------
Accumulated surplus at end of year.......................... 33,670 19,584 7,530
-------- -------- --------
Total capital and surplus......................... $155,670 $141,584 $129,530
======== ======== ========
</TABLE>
See accompanying notes.
4
<PAGE> 54
CANADA LIFE INSURANCE COMPANY OF AMERICA
STATUTORY STATEMENTS OF CASH FLOWS
[IN THOUSANDS OF DOLLARS]
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Premiums, policy proceeds, and other considerations....... $239,293 $332,841 $329,344
Net investment income received............................ 179,786 177,110 178,329
Benefits paid............................................. (394,997) (362,205) (456,151)
Insurance expenses paid................................... (26,971) (32,814) (31,296)
Dividends paid to policyholders........................... (558) (1,588) (2,021)
Federal income taxes paid................................. (112) (9,738) (1,832)
Net transfers to Separate Accounts........................ 13,871 (53,553) (83,224)
Withdrawal of seed monies................................. -- 8,852 --
Other income.............................................. 8,488 7,941 3,657
Other disbursements....................................... (27,348) -- --
-------- -------- --------
Net cash provided (used) by operations...................... (8,548) 66,846 (63,194)
INVESTING ACTIVITIES
Proceeds from sales, maturities, or repayments of
investments
Bonds..................................................... 483,036 389,477 477,542
Mortgage loans and real estate............................ 89,029 61,367 70,056
Equity and other investments.............................. 11,626 22,694 18,861
Cost of investments acquired
Bonds..................................................... (470,134) (411,694) (449,592)
Mortgage loans and real estate............................ (83,911) (81,621) (59,488)
Equity and other investments.............................. (18,944) (26,403) (16,372)
Changes in policy loans..................................... 9,333 957 1,171
Taxes paid on capital gains................................. -- (6,409) (5,449)
-------- -------- --------
Net cash provided (used) by investments..................... 20,035 (51,632) 36,729
FINANCING ACTIVITIES
Other sources (uses)...................................... (20,034) 4,271 (15,853)
-------- -------- --------
Net increase (decrease) in cash and short-term
investments............................................... (8,547) 19,485 (42,318)
Cash and short-term investments -- beginning of year........ 37,170 17,685 60,003
-------- -------- --------
Cash and short-term investments -- end of year.............. $ 28,623 $ 37,170 $ 17,685
======== ======== ========
</TABLE>
See accompanying notes.
5
<PAGE> 55
CANADA LIFE INSURANCE COMPANY OF AMERICA
NOTES TO STATUTORY FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE A
NATURE OF OPERATIONS. Canada Life Insurance Company of America (CLICA or
the Company) was incorporated on April 12, 1988 in the State of Michigan and is
a wholly-owned subsidiary of The Canada Life Assurance Company (CLA), a mutual
life and accident and health insurance company. The Company's business consists
primarily of group and individual annuity policies assumed from CLA. The
Company's direct business consists of individual variable annuity and
institutional investment products. The Company is licensed to sell its products
in 48 states and the District of Columbia; however, its primary markets are
California, Florida, Michigan, Missouri, Texas and Virginia. The Company's
variable annuity products are sold by agents who are licensed and registered
representatives of the Company's subsidiary, Canada Life of America Financial
Services, Inc. as well as other independent agents.
NOTE B
ACCOUNTING PRACTICES AND BASIS OF PRESENTATION. The accompanying financial
statements have been prepared in accordance with accounting practices prescribed
or permitted by the Michigan Insurance Department, which practices differ from
generally accepted accounting principles (GAAP).
Currently, "prescribed" statutory accounting practices (SAP) are
interspersed throughout state insurance laws and regulations, the NAIC's
Accounting Practices and Procedures Manual and a variety of other NAIC
Publications. "Permitted" statutory accounting practices encompass all
accounting practices that are not prescribed; such practices may differ from
state to state, may differ from company to company within a state, and may
change in the future. CLICA currently follows only prescribed accounting
practices.
In 1998, the NAIC adopted codified statutory accounting practices
(Codification) effective January 1, 2001. Codification will likely change, to
some extent, prescribed statutory accounting practices and may result in changes
to the accounting practices that the Company uses to prepare its statutory-basis
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 Michigan must adopt Codification
as the prescribed basis of accounting on which domestic insurers must report
their statutory-basis results to the Insurance Department. The Michigan
Insurance Department plans to adopt Codification effective January 1, 2001
subject to certain modifications. Management has not yet determined the impact
of Codification on the Company's statutory-basis financial statements.
The preparation of financial statements of insurance companies requires
management to make estimates and assumptions that affect amounts reported in the
financial statements and accompanying notes. Such estimates and assumptions
could change in the future as more information becomes known, which could impact
the amounts reported and disclosed herein.
The more significant variances from GAAP are as follows:
- Investments. For SAP, all fixed maturities are reported at amortized
cost less write-downs for other-than-temporary impairments, based on
their NAIC rating. For SAP, the fair values of bonds and stocks are based
on values specified by the NAIC versus a quoted or estimated fair value
as required for GAAP.
For GAAP, such fixed maturity investments would be designated at purchase
as held-to-maturity, trading, or available-for-sale. Held-to-maturity fixed
investments would be reported at amortized cost, and the remaining fixed
maturity investments are reported at fair value with unrealized holding gains
and losses reported in operations for those designated as trading and as a
component of accumulated other comprehensive income in shareholder's equity for
those designated as available-for-sale.
Credit tenant loans are classified as bonds for SAP and would be considered
mortgage loans for GAAP.
6
<PAGE> 56
CANADA LIFE INSURANCE COMPANY OF AMERICA
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
NOTE B
ACCOUNTING PRACTICES AND BASIS OF PRESENTATION (CONTINUED)
Changes between cost and admitted asset amounts of investment real estate
are credited or charged directly to unassigned surplus rather than income, as
would be the case for GAAP.
Realized gains and losses on investments for SAP are reported in income,
net of tax. The interest maintenance reserve (IMR) serves to defer the portion
of realized gains and losses on sales of fixed income investments, principally
bonds and mortgage loans, attributable to changes in the general level of
interest rates. The deferred gains and losses are amortized into investment
income over the remaining period to maturity based on groupings of individual
investments sold in one to ten-year time periods. GAAP does not have a similar
concept. For SAP, an asset valuation reserve represents a provision for the
possible fluctuations in invested assets and is determined by an NAIC prescribed
formula and is reported as a liability rather than as a valuation allowance.
Under GAAP, realized capital gains and losses would be reported in the income
statement on a pretax basis in the period the asset is sold and valuation
allowances would be provided when there has been a decline in value deemed
other-than-temporary, in which case the provision for such declines would be
charged to earnings.
Valuation allowances, if necessary, are established for mortgage loans
based on (1) the difference between the unpaid loan balance and the estimated
fair value of the underlying real estate when such loans are determined to be in
default as to scheduled payments and (2) a reduction of the maximum percentage
of any loan to the value of the security at the time of the loan, exclusive of
insured, guaranteed or purchase money mortgages, to 75%, where necessary. Under
GAAP, valuation allowances would be established when the Company determines it
is probable that it will be unable to collect all amounts due (both principal
and interest) according to the contractual terms of the loan agreement. The
initial valuation allowance and subsequent changes in the allowance for mortgage
loans are charged or credited directly to unassigned surplus for SAP, rather
than being included as a component of earnings as would be required for GAAP.
- Policy Acquisition Costs. The costs of acquiring and renewing business
are expensed when incurred. Under GAAP, to the extent recoverable from
future gross profits, deferred policy acquisition costs are amortized
generally in proportion to the present value of expected gross profits
from surrender charges and investment, mortality, and expense margins.
- Nonadmitted Assets. Certain assets designated as nonadmitted,
principally receivables, would be included in GAAP assets but are
excluded from the SAP balance sheets with changes therein credited or
charged directly to unassigned surplus.
- Subsidiaries. The accounts and operations of the Company's subsidiaries
are not consolidated with the accounts and operations of the Company as
would be required for GAAP.
- Recognition of Premiums. Revenues for annuity policies consist of the
entire premium received and benefits incurred represent the total of
death benefits paid and the change in policy reserves. Under GAAP,
premiums received in excess of policy charges would not be recognized as
premium revenue and benefits would represent the excess of benefits paid
over the policy account value and interest credited to the account
values.
- Benefit Reserves. Certain policy reserves are calculated based on
statutorily required interest and mortality assumptions rather than on
estimated expected experience or actual account balances as would be
required under GAAP.
- Federal Income Taxes. Federal income taxes for SAP are generally
reported based on income which is currently taxable. Variances between
taxes reported and the amount subsequently paid are reported as
adjustments to accumulated surplus in the year paid. Deferred income
taxes are not provided for differences between the financial statement
and tax bases of assets and liabilities under SAP as would be required
under GAAP.
7
<PAGE> 57
CANADA LIFE INSURANCE COMPANY OF AMERICA
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
NOTE B
ACCOUNTING PRACTICES AND BASIS OF PRESENTATION (CONTINUED)
- Policyholder Dividends. Policyholder dividends are recognized when
declared rather than over the term of the related policies as required
for GAAP.
- Reinsurance. Policy and contract liabilities ceded to reinsurers have
been reported as reductions of the related reserves rather than as assets
as would be required under GAAP. For SAP, commissions allowed by
reinsurers on business ceded are reported as income when received rather
than being deferred and amortized with deferred policy acquisition costs
as under GAAP.
- Guaranty Fund and Other Assessments. Guaranty fund and other assessments
are accrued when the Company receives notice that an assessment is
payable. Under GAAP, guaranty fund and other assessments are accrued at
the time the events occur on which assessments are expected to be based.
- Statement of Cash Flows. Cash and short term investment in the statement
of cash flows represent cash balances and investments with initial
maturities of one year or less. Under GAAP, the corresponding captions of
cash and cash equivalents include cash balances and investments with
initial maturities of three months or less.
The effects of the foregoing variances from GAAP on the accompanying
statutory-basis financial statements have not been determined, but are presumed
to be material.
Other significant accounting practices are as follows:
- Investments. Bonds, preferred stocks, common stocks, short-term
investments and derivative instruments are stated at values prescribed by
the NAIC, as follows: Bonds not backed by other loans are stated at
amortized cost using the effective yield method including anticipated
future cash flows. Loan-backed bonds and structured securities are stated
at amortized cost using the interest method including anticipated
prepayments (cash flows are updated periodically to reflect prepayments).
Significant changes in estimated cash flows from the original purchase
assumptions are accounted for using the retrospective adjustment method.
Mortgage loans on real estate are carried at amortized cost.
Common stocks are stated at fair value.
Preferred stocks are carried at actual cost.
Policy loans are carried at the aggregate unpaid balance.
Investments in real estate or property acquired in satisfaction of debt are
carried at depreciated cost less encumbrances.
Other invested assets are reported using the equity method.
Short-term investments include investments with maturities of less than one
year at the date of acquisition. The carrying values reported in the balance
sheet are at cost which approximates fair value.
The Company utilizes derivative instruments where appropriate in the
management of its asset/liability matching and to hedge against fluctuations in
interest rates and foreign exchange rates. Gains and losses resulting from these
instruments are included in income on a basis consistent with the underlying
assets or liabilities that have been hedged. Options are valued at amortized
cost and futures are valued at initial margin deposit adjusted by changes in
market value. Both items are reported as other assets.
- Premiums and Annuity Considerations. Premium revenues are recognized
when due for other than annuities, which are recognized when received.
8
<PAGE> 58
CANADA LIFE INSURANCE COMPANY OF AMERICA
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
NOTE B
ACCOUNTING PRACTICES AND BASIS OF PRESENTATION (CONTINUED)
- Separate Accounts. Separate Accounts are maintained to receive and
invest premium payments under individual variable annuity policies issued
by the Company. The assets and liabilities of the Separate Account are
clearly identifiable and distinguishable from other assets and
liabilities of the Company, and the contractholder bears the investment
risk. Separate Account assets are reported at fair value. The operations
of the Separate Account are not included in the accompanying financial
statements.
- Life Insurance and Annuity Reserves. All policies, except variable
annuities and institutional investment products, were acquired through
coinsurance reinsurance agreements with CLA. The reserves established
meet the requirements of the Insurance Law and Regulations of the State
of Michigan and are consistent with the reserving practices of CLA. The
Company waives deduction of deferred fractional premium upon death of the
insured for all issues. Annual premium is assumed in the reserve
calculation and for policies with premium frequency other than annual,
the Company holds a separate NDDFP reserve which is the present value of
a death benefit of half of the gross premium for the balance of the
policy premium paying period.
Some policies promise a surrender value in excess of the reserve as legally
computed. This excess is calculated and reserved for on a policy by policy
basis.
Policies issued at premiums corresponding to ages higher than the true ages
are valued at the rated-up ages. Policies providing for payment at death during
certain periods of an amount less than the full amount of insurance, being
policies subject to liens, are valued as if the full amount is payable without
any deduction. For policies issued with, or subsequently subject to, an extra
premium payable annually, an extra reserve is held. The extra premium reserve is
45% of the gross extra premium payable during the year if the policies are rated
for reasons other than medical impairments. For medical impairments, the extra
premium reserve is calculated at the excess of the reserve based on rated
mortality over that of standard mortality.
At the end of 1999 and 1998, the Company had no insurance in force for
which the gross premiums were less than the net premiums according to the
standard of valuation set by the State of Michigan. The tabular interest and
tabular cost have been determined from the basic data for the calculation of
policy reserves. The tabular less actual reserve released and the tabular
interest on funds not involving life contingencies have been determined by
formula. Other reserve increases are insignificant and relate to the Company
valuing the deferred acquisition costs and/or back-end charges in connection
with the variable annuity.
- Policy and Contract Claims. Liabilities for policy and contract claims
are determined using case-basis evaluations and statistical analyses.
These liabilities represent estimates of the ultimate expected cost of
incurred claims. Any required revisions in these estimates are included
in operations in the period when they are determined.
- Federal Income Tax. Federal income taxes are provided based on an
estimate of the amount currently payable which may not bear a normal
relationship to pretax income because of timing and other differences in
the calculation of taxable income.
- Policyholder Dividends. Annual policyholder dividends are calculated
using either the contribution method or a modified experience premium
method. These methods distribute the aggregate divisible surplus among
policies in the same proportion as the policies are considered to have
contributed to divisible surplus. A proportion of earnings and surplus is
allocated to participating policies based on various allocation bases.
- Reclassifications: Certain amounts in the 1998 and 1997 financial
statements have been reclassified to conform to the 1999 presentation.
9
<PAGE> 59
CANADA LIFE INSURANCE COMPANY OF AMERICA
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
NOTE C
INVESTMENTS. The fair value for fixed maturities is based on quoted market
prices where available. For fixed maturities not actively traded, fair values
are estimated using values obtained from independent pricing services. The
amortized costs and the fair value of investments in bonds are summarized as
follows (in thousands of dollars):
<TABLE>
<CAPTION>
DECEMBER 31, 1999
-------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COSTS GAINS LOSSES VALUE
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
U. S. government obligations................. $ 205,861 $17,906 $ (2,997) $ 220,770
Foreign governments.......................... 7,828 -- (5) 7,823
All other corporate bonds.................... 708,220 1,594 (6,150) 703,664
Public utilities............................. 65,955 5 (431) 65,529
Mortgage-backed securities................... 196,633 -- -- 196,633
Foreign securities........................... 131,603 824 (667) 131,760
---------- ------- -------- ----------
Total fixed maturities............. $1,316,100 $20,329 $(10,250) $1,326,179
========== ======= ======== ==========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1998
-------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COSTS GAINS LOSSES VALUE
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
U. S. government obligations................. $ 321,868 $73,008 $ -- $ 394,876
Foreign governments.......................... 905 -- -- 905
All other corporate bonds.................... 585,295 10,296 (681) 594,910
Public utilities............................. 52,331 360 -- 52,691
Mortgage-backed securities................... 236,627 1,195 -- 237,822
Foreign securities........................... 115,055 2,292 (97) 117,250
---------- ------- ----- ----------
Total fixed maturities............. $1,312,081 $87,151 $(778) $1,398,454
========== ======= ===== ==========
</TABLE>
The amortized costs and fair value of fixed maturity investments at
December 31, 1999 by contractual maturity are shown below (in thousands of
dollars). Expected maturities may differ from contractual maturities because
certain borrowers have the right to call or prepay obligations with or without
call or prepayment penalties. In addition, Company requirements may result in
sales before maturity.
<TABLE>
<CAPTION>
AMORTIZED COSTS FAIR VALUE
--------------- ----------
<S> <C> <C>
In 2000..................................................... $ -- $ --
In 2001 -- 2004............................................. 213,505 212,868
In 2005 -- 2009............................................. 245,533 243,267
2010 and after.............................................. 660,429 673,412
Mortgage-backed securities.................................. 196,633 196,633
---------- ----------
$1,316,100 $1,326,179
========== ==========
</TABLE>
At December 31, 1999 and 1998, bonds with an admitted asset value of
$4,565,000 and $4,653,000, respectively, were on deposit with state insurance
departments to satisfy regulatory requirements.
10
<PAGE> 60
CANADA LIFE INSURANCE COMPANY OF AMERICA
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
NOTE C
INVESTMENTS (CONTINUED)
Information on mortgage loans at December 31 is as follows (in thousands of
dollars):
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Impaired loans.............................................. $ -- $ 2,014
Non-impaired loans.......................................... 898,623 900,535
-------- --------
Total mortgage loans.............................. $898,623 $902,549
======== ========
</TABLE>
The Company had no impaired mortgage loans in 1999. Income recognized and
received on impaired loans in 1998 was $381,500.
The maximum and minimum lending rates for commercial mortgage loans in 1999
were 8.50% and 7.00%, respectively. Fire insurance is required on all properties
covered by mortgage loans at least equal to the excess of the loan over the
maximum loan which would be permitted by law on the land without the buildings.
During 1999, the Company did not reduce interest rates on any outstanding
mortgage loan. The Company held no mortgages on which interest was more than one
year overdue at December 31, 1999 and 1998.
The mortgage loans are typically collateralized by the related properties
and the loan-to-value ratios at the date of loan origination generally do not
exceed 75%. The Company's exposure to credit loss in the event of
non-performance by the borrowers, assuming that the associated collateral proved
to be of no value, is represented by the outstanding principal and accrued
interest balances of the respective loans. The mortgage loan loss reserve
decreased $923,000 and $2,445,000 in 1999 and 1998, respectively. At December
31, 1999 and 1998 the Company held no mortgages with prior outstanding liens.
Accumulated depreciation on investment real estate was $940,800 and
$705,600 as of December 31, 1999 and 1998, respectively.
Major categories of CLICA's net investment income for years ended December
31 are summarized as follows (in thousands of dollars):
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Income:
Fixed maturities........................................ $ 98,453 $ 99,325 $ 97,506
Equity securities....................................... 3,460 1,340 1,956
Mortgage loans.......................................... 87,871 88,463 85,952
Real estate............................................. 101 211 833
Short-term investments.................................. 1,918 1,056 2,408
Derivatives............................................. 305 759 552
Policy loans............................................ 30 485 530
Amortization of IMR..................................... 772 976 883
Other income (losses)................................... 629 222 (875)
-------- -------- --------
Total investment income......................... 193,539 192,837 189,745
Less: investment expenses............................... 2,811 4,430 4,714
depreciation on real estate...................... 236 252 482
-------- -------- --------
Net investment income..................................... $190,492 $188,155 $184,549
======== ======== ========
</TABLE>
11
<PAGE> 61
CANADA LIFE INSURANCE COMPANY OF AMERICA
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
NOTE C
INVESTMENTS (CONTINUED)
Due and accrued income was excluded from investment income on mortgage
loans in foreclosure or delinquent more than ninety days and on bonds where the
collection of income is uncertain. The total amount excluded as of December 31,
1999, 1998 and 1997 was $0, $798,000 and $1,547,000, respectively.
Realized capital gains (losses) for years ended December 31 are summarized
as follows (in thousands of dollars):
<TABLE>
<CAPTION>
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Fixed maturities:
Gross gains............................................... $15,357 $15,870 $11,727
Gross losses.............................................. (9,419) (978) (1,720)
------- ------- -------
Total fixed maturities............................ 5,938 14,892 10,007
Equity securities:
Gross gains............................................... 2,163 4,374 3,569
Gross losses.............................................. (936) (957) (94)
------- ------- -------
Total equity securities........................... 1,227 3,417 3,475
Mortgage loans.............................................. (12) (1,389) (198)
Real estate................................................. -- (550) 1,584
Derivative instruments...................................... (5,031) (1,847) (2,970)
Other invested assets....................................... -- 1 503
------- ------- -------
2,122 14,524 12,401
Income tax expense.......................................... (2,508) (6,409) (5,449)
Transfer to IMR............................................. (1,813) (8,488) (5,270)
------- ------- -------
Net realized capital (losses) gains......................... $(2,199) $ (373) $ 1,682
======= ======= =======
</TABLE>
Unrealized capital gains and losses for equity securities are recorded
directly to surplus. The change in the unrealized gains and losses on equity
securities was $(907,000), $1,193,000 and $142,000 for the years ended December
31, 1999, 1998 and 1997, respectively. The accumulated gross unrealized gains
and losses on equity securities at December 31 are as follows (in thousands of
dollars):
<TABLE>
<CAPTION>
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Accumulated gross unrealized gains.......................... $4,950 $4,254 $3,015
Accumulated gross unrealized losses......................... (2,107) (504) (458)
------ ------ ------
Net unrealized gains........................................ $2,843 $3,750 $2,557
====== ====== ======
</TABLE>
The Company is party to various derivative instruments used to hedge
specific asset and liability interest rate risks. Management actively monitors
the use and level of these instruments to ensure that credit and liquidity risks
are maintained within pre-approved levels. Interest rate swaps are an
off-balance sheet item. Futures are valued at initial margin deposit adjusted
for unrealized gains and losses. The Company's involvement in derivative
instruments may also subject it to market risk which is associated with adverse
movements in the underlying interest rates, equity prices and commodity prices.
Since the Company's investment in derivative instruments is confined to hedging
activities, market risk is minimal. As of December 31, 1999 and 1998, the
notional amounts for government bond futures were $240,800,000 and $148,100,000,
respectively. The notional amounts for interest rate swaps were $21,503,000 for
1999 and 1998.
12
<PAGE> 62
CANADA LIFE INSURANCE COMPANY OF AMERICA
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
NOTE D
CONCENTRATION OF CREDIT RISK. At December 31, 1999, CLICA held unrated or
less-than-investment grade corporate bonds of $94,752,000, with an aggregate
fair value of $93,033,000. These holdings amounted to 7.2% of the bond portfolio
and 3.1% of CLICA's total admitted assets. The portfolio is well diversified by
industry.
CLICA's mortgage portfolio is well diversified by region and property type
with 17% in California (book value -- $154,834,000), 13% (book
value -- $112,918,000) in New York, 11% in Ohio (book value -- $98,459,000), 10%
(book value -- $87,001,000) in Michigan, and the remainder of the states less
than 10%. The investments consist of first mortgage liens. The mortgage
outstanding on any individual property does not exceed $16,500,000.
NOTE E
FEDERAL INCOME TAXES. The statutory federal income tax provision amount at
the statutory rate of 35% differs from the effective tax provision amount
(excluding tax on capital gains) for years ended December 31 as follows (in
thousands of dollars):
<TABLE>
<CAPTION>
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Computed income taxes at statutory rate..................... $7,063 $7,928 $9,014
Increase (decrease) in income taxes resulting from:
Policyholder dividends.................................... (403) (202) (119)
Change in nonadmitted interest............................ -- (541) --
Amortization of interest maintenance reserve.............. (270) (341) (309)
Amortization of prior year change in reserves............. (609) (609) (624)
Accrual of bond discount.................................. (85) (670) (557)
Actuarial reserves........................................ (536) 172 684
Deferred acquisition cost tax............................. (766) (251) (165)
Bad debt on mortgages..................................... (4) (486) (69)
Futures (losses) gains.................................... (1,761) (646) (1,040)
Other..................................................... (1,036) (362) 8
------ ------ ------
Federal income taxes........................................ $1,593 $3,992 $6,823
====== ====== ======
</TABLE>
At December 31, 1999 and 1998, federal income taxes receivable were
$1,279,000 and $331,000, respectively.
NOTE F
PARTICIPATING INSURANCE. During 1999, CLA recaptured the participating
life and annuity business previously reinsured to CLICA. This transaction
resulted in a recapture of 100% of the ordinary life insurance from CLICA. The
reinsurance recapture resulted in a decrease in liabilities of $29,739,000 and
the elimination of the related policy loans and dividends payable associated
with this line of business.
NOTE G
REINSURANCE. Various reinsurance agreements exist between CLICA and CLA.
The effect of the agreements is to have the Company assume certain existing and
future insurance and annuity business of the Parent. Except for variable annuity
contracts and institutional investment products issued, all premiums for
insurance and annuity considerations and benefit expenses recorded for the years
ended December 31, 1999, 1998, and 1997, were the result of the coinsurance
agreements. As of December 31, 1999 and 1998, $5,420,000 and $2,938,000,
respectively, were payable to CLA under the agreements.
13
<PAGE> 63
CANADA LIFE INSURANCE COMPANY OF AMERICA
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
NOTE G
REINSURANCE (CONTINUED)
The effect of reinsurance on premiums and annuity considerations earned for
years ended December 31 are as follows (in thousands of dollars):
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Direct premiums........................................... $ 95,430 $120,729 $124,318
Premiums assumed.......................................... 143,806 210,018 202,241
Premiums ceded............................................ (561) (1,169) --
-------- -------- --------
Net premiums and annuity considerations................... $238,675 $329,578 $326,559
======== ======== ========
</TABLE>
During 1999, the Company ceased assuming certain lines of business from
CLA.
NOTE H
RELATED PARTY TRANSACTIONS. In addition to the coinsurance agreements
mentioned above, CLA has an agreement to provide various services for CLICA. For
the years ended December 31, 1999, 1998 and 1997, the cost of these services
amounted to $7,755,000, $9,582,000 and $8,860,000, respectively.
At December 31, 1999 and 1998, the amounts receivable and payable to CLA
and affiliates, which include the above reinsurance amounts as well as
outstanding administrative expenses, are as follows (in thousands of dollars):
<TABLE>
<CAPTION>
1999 1998
------ --------
<S> <C> <C>
Receivable:
CLA....................................................... $7,598 $ 2,911
CL Capital Management, Inc................................ 27 27
Canada Life Insurance Company of New York................. -- 7
Canada Life of America Series Fund, Inc................... 219 57
------ --------
Total Receivable.................................. 7,844 3,002
Payable:
CLA....................................................... 2,335 9,220
Canada Life Insurance Company of New York................. 2,000 616
------ --------
Total Payable..................................... 4,335 9,836
------ --------
Net receivable (payable).................................... $3,509 ($ 6,834)
====== ========
</TABLE>
NOTE I
SEPARATE ACCOUNTS. The Company's non-guaranteed separate variable accounts
represent primarily funds invested in variable annuity policies issued by the
Company. The assets of these funds are invested in either shares of Canada Life
of America Series Fund, Inc., an affiliated, diversified, open-ended management
investment company, shares of six unaffiliated management investment companies,
or in funds managed by CL Capital Management, Inc., an investment management
subsidiary.
Premiums or deposits for years ended December 31, 1999, 1998 and 1997 were
$92,103,000, $124,110,000, and $135,571,000, respectively. Total reserves were
$680,050,000 and $520,260,000 at December 31, 1999 and 1998, respectively. All
reserves were subject to discretionary withdrawal, at fair value, with a
surrender charge of up to 6%.
14
<PAGE> 64
CANADA LIFE INSURANCE COMPANY OF AMERICA
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
NOTE I
SEPARATE ACCOUNTS (CONTINUED)
A reconciliation of the amounts transferred to and from the Separate
Accounts for years ended December 31 is presented below (in thousands of
dollars):
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Transfers as reported in the Summary of Operations of the
Separate Accounts statement:
Transfers to Separate Accounts........................... $ 92,103 $124,110 $135,571
Transfers from Separate Accounts......................... 108,031 136,151 93,073
-------- -------- --------
Net transfers (from) to Separate Accounts.................. (15,928) (12,041) 42,498
Reconciling adjustments:
Gains transferred........................................ -- -- 187
Net policyholder transactions............................ 541 58,312 39,528
-------- -------- --------
Transfers as reported in the Summary of Operations of the
Life, Accident & Health annual statement................. $(15,387) $ 46,271 $ 82,213
======== ======== ========
</TABLE>
NOTE J
ACTUARIAL RESERVES. CLICA's withdrawal characteristics for annuity
reserves and deposit fund liabilities at December 31 are summarized as follows
(in thousands of dollars):
<TABLE>
<CAPTION>
AMOUNT PERCENT OF TOTAL
----------------------- -----------------
1999 1998 1999 1998
---------- ---------- ------- -------
<S> <C> <C> <C> <C>
Subject to discretionary withdrawal:
With market value adjustment..................... $ 134,653 $ 146,576 6.3% 6.9%
At book value less surrender charge of 5% or
more.......................................... 197,838 202,269 9.3% 9.5%
---------- ---------- ----- -----
Subtotal........................................... 332,491 348,845 15.6% 16.4%
Subject to discretionary withdrawal without
adjustment at book value (minimal or no charge
adjustment)...................................... 115,568 119,235 5.4% 5.6%
Not subject to discretionary withdrawal............ 1,686,844 1,653,768 79.0% 78.0%
---------- ---------- ----- -----
Total.................................... 2,134,903 2,121,848 100.0% 100.0%
Less: reinsurance ceded............................ 1,730 --
---------- ----------
Net annuity reserves and deposit fund
liabilities...................................... $2,133,173 $2,121,848
========== ==========
</TABLE>
NOTE K
CAPITAL AND SURPLUS. The Company has two classes of capital stock:
redeemable preferred stock ($10.00 par value) and common stock ($10.00 par
value), ranked in order of liquidation preference. The preferred shares have no
interest rate assigned, are non-voting and are redeemable by the Company at any
time at a redemption price of $10.00 per share.
Under applicable Michigan insurance law, the Company is required to
maintain a minimum capital of $1,000,000 and initial surplus of $500,000. At
December 31, 1999, surplus was $109,670,000.
15
<PAGE> 65
CANADA LIFE INSURANCE COMPANY OF AMERICA
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
NOTE K
CAPITAL AND SURPLUS (CONTINUED)
The amount of dividends that can be distributed by Michigan domiciled
companies without prior approval from the Michigan Insurance Department is
subject to restrictions relating to capital and surplus. The maximum dividend
payout which may be made without prior approval in 2000 is $18,587,000.
At December 31, 1999, the Company's capital and surplus exceeded the NAIC's
"Risk Based Capital" requirements for life and health companies.
NOTE L
FAIR VALUE OF FINANCIAL INSTRUMENTS. The fair value of certain financial
instruments along with their corresponding carrying values at December 31
follows (in thousands of dollars). As the fair value of all CLICA's assets and
liabilities is not presented, this information in the aggregate does not
represent the underlying value of CLICA.
<TABLE>
<CAPTION>
1999 1998
----------------------- -----------------------
FAIR CARRYING FAIR CARRYING VALUATION
VALUE VALUE VALUE VALUE METHOD
---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
FINANCIAL ASSETS
Bonds........................ $1,326,179 $1,316,100 $1,398,454 $1,312,081 1
Common & preferred stocks
excluding investment in
subsidiaries.............. 20,247 20,247 20,492 20,492 1
Mortgage loans............... 930,505 898,623 1,018,988 902,549 2
Policy loans................. -- -- 9,333 9,333 3
FINANCIAL LIABILITIES
Investment-type Insurance
contracts................. 432,704 438,822 511,896 469,498 4
OFF-BALANCE SHEET
Derivatives
Interest rate swaps....... 2,357 -- 5,020 -- 5
Futures................... 3,688 3,688 785 785 5
========== ========== ========== ========== ==
</TABLE>
1. Fair values are based on publicly quoted market prices at the close of
trading on the last business day of the year. In cases where publicly
quoted prices are not available, fair values are based on estimates
using values obtained from independent pricing services, or, in the case
of private placements, by discounting expected future cash flows using a
current market rate applicable to the yield, credit quality, and
maturity of the investments.
2. Fair values are estimated using discounted cash flow analysis based on
interest rates currently being offered for similar credit ratings.
3. Carrying value approximates fair value.
4. Fair values for liabilities under investment-type insurance contracts
are estimated using discounted liability calculations, adjusted to
approximate the effect of current market interest rates for the assets
supporting the liabilities.
5. Fair values for futures contracts and swaps that have not settled are
based on current settlement values.
16
<PAGE> 66
APPENDIX A
GUIDELINE MINIMUM DEATH BENEFIT TABLES
TABLE A -- DEATH BENEFIT OPTION 1 AND DEATH BENEFIT OPTION 2
Under the Option 1 and Option 2, the Guideline Minimum Death Benefit is a
percentage of the Policy Value as set forth below:
GUIDELINE MINIMUM DEATH BENEFIT FACTORS
<TABLE>
<CAPTION>
AGE OF INSURED PERCENTAGE OF
ON DATE OF DEATH POLICY VALUE
---------------- -------------
<S> <C>
40 and under................................................ 250%
45.......................................................... 215%
50.......................................................... 185%
55.......................................................... 150%
60.......................................................... 130%
65.......................................................... 120%
70.......................................................... 115%
75.......................................................... 105%
80.......................................................... 105%
85.......................................................... 105%
90.......................................................... 105%
95 and above................................................ 100%
</TABLE>
For the ages not listed, the progression between the listed ages is linear.
A-1
<PAGE> 67
APPENDIX B
OPTIONAL INSURANCE BENEFITS
This Appendix provides only a summary of other insurance benefits available
by rider for an additional charge. For more information, contact Your
representative.
ACCELERATED DEATH BENEFIT OPTION
This endorsement allows part of the Policy proceeds to be available before
death if the Insured becomes terminally ill or is permanently confined to a
nursing home. There is no charge for this rider. This rider can be added at any
time subject to underwriting and Our then current issue age constraints. This
rider can be canceled at any time.
The tax consequences associated with receiving benefits under this
endorsement are uncertain. A tax advisor should be consulted.
DISABILITY WAIVER OF PAYMENT RIDER
This rider provides that, during periods of total disability continuing
more than four months, We will add to the Policy Value each month an amount You
selected or the amount needed to pay the cost of insurance charges, whichever is
greater. This amount will keep the Policy in force. This benefit is subject to
Our maximum issue benefits. There is a charge for this rider, which will change
yearly. This rider can be added at any time subject to underwriting and Our then
current issue age constraints. This rider can be canceled at any time.
GUARANTEED DEATH BENEFIT RIDER
This rider, which may be elected only at issue, (a) guarantees that Your
Policy will not lapse regardless of the Performance of the Variable Account and
(b) provides a guaranteed Net Death Benefit. A one-time administrative charge of
$25 will be deducted from Policy Value when this rider is elected. This rider
may be canceled at any time but it can not be reinstated once canceled.
OTHER INSURED TERM INSURANCE RIDER
This rider provides a term insurance benefit for up to five Insureds. At
present this benefit is only available for the spouse and children of the
primary Insured. The rider includes a feature that allows the "other Insured" to
convert the coverage to a flexible premium adjustable life insurance policy.
There is a charge for this rider, which will change yearly. This rider can be
added at any time subject to underwriting and Our then current issue age
constraints. This rider can be canceled at any time.
TERM LIFE INSURANCE RIDER
This rider provides an additional term insurance benefit for the Insured.
There is a charge for this rider, which will change yearly. This rider can be
added at any time subject to underwriting and Our then current issue age
constraints. This rider can be canceled at any time.
Certain Riders may not be available in all states.
B-1
<PAGE> 68
APPENDIX C
PAYMENT OPTIONS
PAYMENT OPTIONS
On Written Request, the Cash Surrender Value or all or part of any payable
Net Death Benefit may be paid under one or more payment options then offered by
the Company. If You do not make an election, We will pay the benefits in a lump
sum. If a payment Level Death Benefit Options selected, the Beneficiary may pay
to Us any amount that would otherwise be deducted from the Death Benefit. A
certificate will be provided to the payee describing the payment option
selected.
The amounts payable under a payment option are paid from the General
Account. These amounts are not based on the investment experience of the
Variable Account.
SELECTION OF PAYMENT OPTIONS
The amount applied under any one option for any one payee must be at least
$5,000. The periodic payment for any one payee must be at least $50. Subject to
the Policyowner and Beneficiary provisions, any option selection may be changed
before the Net Death Benefit becomes payable. If You make no selection, the
Beneficiary may select from the payment options We offer at that time when the
Net Death Benefit becomes payable.
C-1
<PAGE> 69
APPENDIX D
EXAMPLES OF DEATH BENEFIT, POLICY VALUES
AND ACCUMULATED PAYMENTS
The following tables illustrate the way in which the Policy's Death Benefit
and Policy Value could vary over an extended period of time. On request, We will
provide a comparable illustration based on the proposed Insured's Age, sex, and
Underwriting Class, and for the requested Face Amount, Death Benefit option and
riders.
ASSUMPTIONS
The tables illustrate a Policy issued to a male, Age 35, under a standard
Underwriting Class and qualifying for the non-tobacco discount, and a Policy
issued to a male, Age 45, under a standard Underwriting Class and qualifying for
the non-tobacco discount. In each case, one table illustrates the guaranteed
cost of insurance rates and the other table illustrates the current cost of
insurance rates as presently in effect.
The tables assume that no Policy loans have been made, that You have not
requested an increase or decrease in the initial Face Amount, that no partial
withdrawals have been made, and that no transfers above 12 have been made in any
Policy year (so that no transaction or transfer charges have been incurred).
The tables assume that all Premiums are allocated to and remain in the
Variable Account for the entire period shown. The tables are based on
hypothetical gross investment rates of return for the underlying Fund (i.e.,
investment income and capital gains and losses, realized or unrealized)
equivalent to constant gross (after tax) annual rate of 0%, 6%, and 12%. The
second column of the tables show the amount which would accumulate if an amount
equal to the Guideline Level Premium were invested each year to earn interest
(after taxes) at 5%, compounded annually.
The Policy Values and Death Proceeds would be different from those shown if
the gross annual investment rates of return averaged 0%, 6%, and 12% over a
period of years, but fluctuated above or below such averages for individual
Policy years. The values also would be different depending on the allocation of
the Policy's total Policy Value among the Sub-Accounts of the Variable Account,
if the actual rates of return averaged 0%, 6% or 12%, but the rates of each
underlying Fund varied above and below such averages.
DEDUCTIONS FOR CHARGES
The amounts shown in the tables take into account the deduction of the tax
charges and Payment Expense Charge from Premiums and the Monthly Deduction from
Policy Value.
EXPENSES OF THE UNDERLYING FUNDS
The amounts shown in the tables also take into account the underlying Fund
advisory fees and operating expenses, which are assumed to be at an annual rate
of 0.84% of the average daily net assets of the underlying Funds. The actual
fees and expenses of each underlying Fund vary, and in 1999, ranged from an
annual rate of 0.27% to an annual rate of 1.62% of average daily net assets. The
fees and expenses associated with Your Policy may be more or less than 0.84% in
the aggregate, depending upon how You make allocations of Policy Value among the
Sub-Accounts.
NET ANNUAL RATES OF INVESTMENT
Applying the average Fund advisory fees and operating expenses of 0.84% of
average net assets, in the current cost of insurance charges tables the gross
annual rates of investment return of 0%, 6% and 12% would produce net annual
rates of -0.84%, 5.16% and 11.16%. In the guaranteed cost of insurance charges
tables, the gross annual rates of investment return of 0%, 6% and 12% would
produce net annual rates of -0.84%, 5.16% and 11.16%, respectively.
D-1
<PAGE> 70
The hypothetical returns shown in the tables do not reflect any charges for
income taxes against the Variable Account since no charges are currently made.
However, if in the future the charges are made, to produce illustrated Death
Benefits and cash values, the gross annual investment rates of return would have
to exceed 0%, 6% or 12% by a sufficient amount to cover the tax charges.
D-2
<PAGE> 71
CANADA LIFE INSURANCE COMPANY OF AMERICA
VARIABLE LIFE POLICY
FACE AMOUNT = $75,000
MALE NON-TOBACCO AGE 35
DEATH BENEFIT OPTION 2
BASED ON CURRENT MONTHLY COST OF INSURANCE
CHARGES WITHOUT RIDERS
<TABLE>
<CAPTION>
PREMIUMS HYPOTHETICAL 0% HYPOTHETICAL 6%
PAID PLUS GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
INTEREST ------------------------------- -------------------------------
POLICY AT 5% SURRENDER POLICY DEATH SURRENDER POLICY DEATH
YEAR PER YEAR (1) VALUE VALUE (2) BENEFIT VALUE VALUE (2) BENEFIT
------ ------------ --------- --------- ------- --------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
1.................... 2,741 408 2120 77,120 545 2,257 77,257
2.................... 5,618 2698 4219 79,219 3106 4,627 79,627
3.................... 8,639 4958 6,290 81,290 5,778 7,109 82,109
4.................... 11,812 7201 8,342 83,342 8,578 9,719 84,719
5.................... 15,143 9425 10,376 85,376 11,513 12,464 87,464
6.................... 18,641 11,634 12,395 87,395 14,596 15,356 90,356
7.................... 22,313 13,825 14,396 89,396 17,828 18,399 93,399
8.................... 26,169 15,998 16,379 91,379 21,221 21,601 96,601
9.................... 30,218 18,153 18,344 93,344 24,779 24,970 99,970
10................... 34,470 20,291 20,291 95,291 28,517 28,517 103,517
11................... 38,934 22,448 22,448 97,448 32,503 32,503 107,503
12................... 43,621 24,593 24,593 99,593 36,713 36,713 111,713
13................... 48,542 26,726 26,726 101,726 41,158 41,158 116,158
14................... 53,710 28,848 28,848 103,848 45,851 45,851 120,851
15................... 59,136 30,959 30,959 105,959 50,810 50,810 125,810
16................... 64,833 33,059 33,059 108,059 56,047 56,047 131,047
17................... 70,816 35,134 35,134 110,134 61,565 61,565 136,565
18................... 77,097 37,184 37,184 112,184 67,380 67,380 142,380
19................... 83,692 39,205 39,205 114,205 73,505 73,505 148,505
20................... 90,617 41,197 41,197 116,197 79,958 79,958 154,958
Age 60............... 130,796 50,616 50,616 125,616 117,710 117,710 192,710
Age 65............... 182,076 58,757 58,757 133,757 166,304 166,304 241,304
Age 70............... 247,523 64,945 64,945 139,945 228,437 228,437 303,437
Age 75............... 331,052 68,154 68,154 143,154 307,265 307,265 382,265
<CAPTION>
HYPOTHETICAL 12%
GROSS INVESTMENT RETURN
---------------------------------
POLICY SURRENDER POLICY DEATH
YEAR VALUE VALUE (2) BENEFIT
------ --------- --------- ---------
<S> <C> <C> <C>
1.................... 682 2,393 77,393
2.................... 3,530 5,051 80,051
3.................... 6,665 7,997 82,997
4.................... 10,130 11,270 86,270
5.................... 13,963 14,914 89,914
6.................... 18,210 18,971 93,971
7.................... 22,915 23,486 98,486
8.................... 28,130 28,511 103,511
9.................... 33,914 34,105 109,105
10................... 40,335 40,335 115,335
11................... 47,561 47,561 122,561
12................... 55,629 55,629 130,629
13................... 64,639 64,639 139,639
14................... 74,700 74,700 149,700
15................... 85,937 85,937 164,139
16................... 98,478 98,478 182,184
17................... 112,462 112,462 200,182
18................... 128,054 128,054 218,973
19................... 145,445 145,445 238,529
20................... 164,844 164,844 258,805
Age 60............... 301,064 301,064 403,426
Age 65............... 535,996 535,996 653,915
Age 70............... 940,043 940,043 1,090,450
Age 75............... 1,636,961 1,636,961 1,751,548
</TABLE>
- ---------------
(1) Assumes a $2,610.00 payment is made at the beginning of each Policy year.
Values will be different if payments are made with a different frequency or
in different amounts.
(2) Assumes that no Policy loan has been made. Excessive loans or withdrawals
may cause this Policy to lapse because of insufficient Policy Value.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN ARE ILLUSTRATIVE ONLY, AND
SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF
RETURN. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN, AND WILL
DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY A POLICY
OWNER, AND THE DIFFERENT INVESTMENT RATES OF RETURN FOR THE UNDERLYING FUNDS.
THE VALUE OF UNITS, POLICY VALUE, AND DEATH BENEFIT FOR A POLICY WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF INVESTMENT RETURN AVERAGED 0%,
6%, AND 12% OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE AND BELOW THOSE
AVERAGES FOR INDIVIDUAL POLICY YEARS, OR IF ANY PREMIUMS WERE ALLOCATED OR
POLICY VALUE TRANSFERRED TO THE FIXED ACCOUNT. NO REPRESENTATIONS CAN BE MADE
THAT THESE HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
D-3
<PAGE> 72
CANADA LIFE INSURANCE COMPANY OF AMERICA
VARIABLE LIFE POLICY
FACE AMOUNT = $75,000
MALE NON-TOBACCO AGE 35
DEATH BENEFIT OPTION 2
BASED ON GUARANTEED MONTHLY COST OF INSURANCE
CHARGES WITHOUT RIDERS
<TABLE>
<CAPTION>
PREMIUMS HYPOTHETICAL 0% HYPOTHETICAL 6%
PAID PLUS GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
INTEREST ------------------------------- -------------------------------
POLICY AT 5% SURRENDER POLICY DEATH SURRENDER POLICY DEATH
YEAR PER YEAR (1) VALUE VALUE (2) BENEFIT VALUE VALUE (2) BENEFIT
------ ------------ --------- --------- ------- --------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
1.................... 2,741 408 2120 77,120 545 455 75,455
2.................... 5,618 2698 4219 79,219 3106 927 75,927
3.................... 8,639 4958 6,290 81,290 5,778 1,407 76,407
4.................... 11,812 7200 8,341 83,341 8,578 1,904 76,904
5.................... 15,143 9424 10,375 85,375 11,513 2,417 77,417
6.................... 18,641 11,572 12,332 87,332 14,532 2,876 77,876
7.................... 22,313 13,696 14,267 89,267 17,691 3,347 78,347
8.................... 26,169 15,797 16,178 91,178 21,001 3,830 78,830
9.................... 30,218 17,873 18,064 93,064 24,465 4,322 79,322
10................... 34,470 19,924 19,924 94,924 28,094 28,094 103,094
11................... 38,934 21,983 21,983 96,983 31,954 31,954 106,954
12................... 43,621 24,016 24,016 99,016 36,015 36,015 111,015
13................... 48,542 26,021 26,021 101,021 40,286 40,286 115,286
14................... 53,710 27,999 27,999 102,999 44,780 44,780 119,780
15................... 59,136 29,946 29,946 104,946 49,505 49,505 124,505
16................... 64,833 31,860 31,860 106,860 54,473 54,473 129,473
17................... 70,816 33,736 33,736 108,736 59,691 59,691 134,691
18................... 77,097 35,568 35,568 110,568 65,171 65,171 140,171
19................... 83,692 37,354 37,354 112,354 70,921 70,921 145,921
20................... 90,617 39,085 39,085 114,085 76,950 76,950 151,950
Age 60............... 130,796 46,742 46,742 121,742 111,674 111,674 186,674
Age 65............... 182,076 52,012 52,012 127,012 154,966 154,966 229,966
Age 70............... 247,523 53,237 53,237 128,237 207,640 207,640 282,640
Age 75............... 331,052 47,764 47,764 122,764 269,630 269,630 344,630
<CAPTION>
HYPOTHETICAL 12%
GROSS INVESTMENT RETURN
---------------------------------
POLICY SURRENDER POLICY DEATH
YEAR VALUE VALUE (2) BENEFIT
------ --------- --------- ---------
<S> <C> <C> <C>
1.................... 682 2,393 77,393
2.................... 3,530 5,051 80,051
3.................... 6,665 7,997 82,997
4.................... 10,130 11,270 86,270
5.................... 13,962 14,913 89,913
6.................... 18,144 18,905 93,905
7.................... 22,769 23,340 98,340
8.................... 27,891 28,271 103,271
9.................... 33,563 33,753 108,753
10................... 39,848 39,848 114,848
11................... 46,912 46,912 121,912
12................... 54,783 54,783 129,783
13................... 63,557 63,557 138,557
14................... 73,336 73,336 148,336
15................... 84,236 84,236 160,890
16................... 96,374 96,374 178,291
17................... 109,883 109,883 195,591
18................... 124,917 124,917 213,608
19................... 141,655 141,655 232,314
20................... 160,293 160,293 251,660
Age 60............... 290,381 290,381 389,110
Age 65............... 512,465 512,465 625,207
Age 70............... 888,798 888,798 1,031,006
Age 75............... 1,529,536 1,529,536 1,636,603
</TABLE>
- ---------------
(1) Assumes a $2,610.00 payment is made at the beginning of each Policy year.
Values will be different if payments are made with a different frequency or
in different amounts.
(2) Assumes that no Policy loan has been made. Excessive loans or withdrawals
may cause this Policy to lapse because of insufficient Policy Value.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN ARE ILLUSTRATIVE ONLY, AND
SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF
RETURN. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN, AND WILL
DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY A POLICY
OWNER, AND THE DIFFERENT INVESTMENT RATES OF RETURN FOR THE UNDERLYING FUNDS.
THE VALUE OF UNITS, POLICY VALUE, AND DEATH BENEFIT FOR A POLICY WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF INVESTMENT RETURN AVERAGED 0%,
6% AND 12% OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE AND BELOW THOSE AVERAGES
FOR INDIVIDUAL POLICY YEARS, OR IF ANY PREMIUMS WERE ALLOCATED OR POLICY VALUE
TRANSFERRED TO THE FIXED ACCOUNT. NO REPRESENTATIONS CAN BE MADE THAT THESE
HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
D-4
<PAGE> 73
CANADA LIFE INSURANCE COMPANY OF AMERICA
VARIABLE LIFE POLICY
FACE AMOUNT = $250,000
MALE NON-TOBACCO AGE 45
DEATH BENEFIT OPTION 1
BASED ON CURRENT MONTHLY COST OF INSURANCE
CHARGES WITHOUT RIDERS
<TABLE>
<CAPTION>
PREMIUMS HYPOTHETICAL 0% HYPOTHETICAL 6%
PAID PLUS GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
INTEREST ------------------------------- -------------------------------
POLICY AT 5% SURRENDER POLICY DEATH SURRENDER POLICY DEATH
YEAR PER YEAR (1) VALUE VALUE (2) BENEFIT VALUE VALUE (2) BENEFIT
------ ------------ --------- --------- ------- --------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
1.................... 5,011 0 2753 250,000 0 2,955 250,000
2.................... 10,273 0 5400 250,000 0 5,980 250,000
3.................... 15,798 2208 7,945 250,000 3,340 9,078 250,000
4.................... 21,599 5505 10,423 250,000 7,368 12,285 250,000
5.................... 27,690 8748 12,848 250,000 11,525 15,625 250,000
6.................... 34,085 11,948 15,228 250,000 15,830 19,110 250,000
7.................... 40,801 15,113 17,573 250,000 20,298 22,758 250,000
8.................... 47,852 18,245 19,885 250,000 24,938 26,575 250,000
9.................... 55,255 21,343 22,160 250,000 29,755 30,575 250,000
10................... 63,029 24,403 24,403 250,000 34,758 34,758 250,000
11................... 71,192 27,645 27,645 250,000 40,235 40,235 250,000
12................... 79,763 30,793 30,793 250,000 45,930 45,930 250,000
13................... 88,762 33,833 33,833 250,000 51,845 51,845 250,000
14................... 98,211 36,763 36,763 250,000 57,993 57,993 250,000
15................... 108,133 39,585 39,585 250,000 64,385 64,385 250,000
16................... 118,551 42,210 42,210 250,000 70,963 70,963 250,000
17................... 129,489 44,723 44,723 250,000 77,810 77,810 250,000
18................... 140,975 47,113 47,113 250,000 84,948 84,948 250,000
19................... 153,035 49,378 49,378 250,000 92,390 92,390 250,000
20................... 165,698 51,513 51,513 250,000 100,153 100,153 250,000
Age 60............... 108,133 39,585 39,585 250,000 64,385 64,385 250,000
Age 65............... 165,698 51,513 51,513 250,000 100,153 100,153 250,000
Age 70............... 239,166 59,843 59,843 250,000 144,573 144,573 250,000
Age 75............... 332,933 63,018 63,018 250,000 201,503 201,503 250,000
<CAPTION>
HYPOTHETICAL 12%
GROSS INVESTMENT RETURN
-------------------------------
POLICY SURRENDER POLICY DEATH
YEAR VALUE VALUE (2) BENEFIT
------ --------- --------- -------
<S> <C> <C> <C>
1.................... 0 3,160 250,000
2.................... 28 6,585 250,000
3.................... 4,570 10,308 250,000
4.................... 9,478 14,395 250,000
5.................... 14,800 18,900 250,000
6.................... 20,600 23,880 250,000
7.................... 26,935 29,395 250,000
8.................... 33,865 35,505 250,000
9.................... 41,453 42,273 250,000
10................... 49,773 49,773 250,000
11................... 59,253 59,253 250,000
12................... 69,735 69,735 250,000
13................... 81,330 81,330 250,000
14................... 94,163 94,163 250,000
15................... 108,390 108,390 250,000
16................... 124,118 124,118 250,000
17................... 141,595 141,595 250,000
18................... 161,040 161,040 250,000
19................... 182,695 182,695 250,000
20................... 206,843 206,843 250,000
Age 60............... 108,390 108,390 250,000
Age 65............... 206,843 206,843 250,000
Age 70............... 373,245 373,245 433,000
Age 75............... 651,600 651,600 697,250
</TABLE>
- ---------------
(1) Assumes a $4,772.50 payment is made at the beginning of each Policy year.
Values will be different if payments are made with a different frequency or
in different amounts.
(2) Assumes that no Policy loan has been made. Excessive loans or withdrawals
may cause this Policy to lapse because of insufficient Policy Value.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN ARE ILLUSTRATIVE ONLY, AND
SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF
RETURN. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN, AND WILL
DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY A POLICY
OWNER, AND THE DIFFERENT INVESTMENT RATES OF RETURN FOR THE UNDERLYING FUNDS.
THE VALUE OF UNITS, POLICY VALUE, AND DEATH BENEFIT FOR A POLICY WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF INVESTMENT RETURN AVERAGED 0%,
6%, AND 12% OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE AND BELOW THOSE
AVERAGES FOR INDIVIDUAL POLICY YEARS, OR IF ANY PREMIUMS WERE ALLOCATED OR
POLICY VALUE TRANSFERRED TO THE FIXED ACCOUNT. NO REPRESENTATIONS CAN BE MADE
THAT THESE HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
D-5
<PAGE> 74
CANADA LIFE INSURANCE COMPANY OF AMERICA
VARIABLE LIFE POLICY
FACE AMOUNT = $250,000
MALE NON-TOBACCO AGE 45
DEATH BENEFIT OPTION 1
BASED ON GUARANTEED MONTHLY COST OF INSURANCE
CHARGES WITHOUT RIDERS
<TABLE>
<CAPTION>
PREMIUMS HYPOTHETICAL 0% HYPOTHETICAL 6%
PAID PLUS GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
INTEREST ------------------------------- -------------------------------
POLICY AT 5% SURRENDER POLICY DEATH SURRENDER POLICY DEATH
YEAR PER YEAR (1) VALUE VALUE (2) BENEFIT VALUE VALUE (2) BENEFIT
------ ------------ --------- --------- ------- --------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
1.................... 5,011 0 3153 250,000 0 3,380 250,000
2.................... 10,273 0 6205 250,000 273 6,858 250,000
3.................... 15,798 3395 9,155 250,000 4,678 10,440 250,000
4.................... 21,599 7100 12,038 250,000 9,225 14,165 250,000
5.................... 27,690 10748 14,865 250,000 13,938 18,053 250,000
6.................... 34,085 13,715 17,008 250,000 18,188 21,480 250,000
7.................... 40,801 16,583 19,050 250,000 22,543 25,013 250,000
8.................... 47,852 19,330 20,978 250,000 26,995 28,640 250,000
9.................... 55,255 21,953 22,775 250,000 31,538 32,363 250,000
10................... 63,029 24,428 24,428 250,000 36,168 36,168 250,000
11................... 71,192 27,010 27,010 250,000 41,205 41,205 250,000
12................... 79,763 29,428 29,428 250,000 46,403 46,403 250,000
13................... 88,762 31,670 31,670 250,000 51,768 51,768 250,000
14................... 98,211 33,728 33,728 250,000 57,308 57,308 250,000
15................... 108,133 35,573 35,573 250,000 63,020 63,020 250,000
16................... 118,551 37,185 37,185 250,000 68,910 68,910 250,000
17................... 129,489 38,533 38,533 250,000 74,975 74,975 250,000
18................... 140,975 39,583 39,583 250,000 81,218 81,218 250,000
19................... 153,035 40,288 40,288 250,000 87,628 87,628 250,000
20................... 165,698 40,598 40,598 250,000 94,210 94,210 250,000
Age 60............... 108,133 35,573 35,573 250,000 63,020 63,020 250,000
Age 65............... 165,698 40,598 40,598 250,000 94,210 94,210 250,000
Age 70............... 239,166 34,433 34,433 250,000 130,195 130,195 250,000
Age 75............... 332,933 6,050 6,050 250,000 173,975 173,975 250,000
<CAPTION>
HYPOTHETICAL 12%
GROSS INVESTMENT RETURN
-------------------------------
POLICY SURRENDER POLICY DEATH
YEAR VALUE VALUE (2) BENEFIT
------ --------- --------- -------
<S> <C> <C> <C>
1.................... 0 3,608 250,000
2.................... 955 7,540 250,000
3.................... 6,075 11,835 250,000
4.................... 11,633 16,570 250,000
5.................... 17,698 21,813 250,000
6.................... 23,685 26,978 250,000
7.................... 30,193 32,660 250,000
8.................... 37,273 38,918 250,000
9.................... 44,985 45,810 250,000
10................... 53,403 53,403 250,000
11................... 63,010 63,010 250,000
12................... 73,675 73,675 250,000
13................... 85,540 85,540 250,000
14................... 98,770 98,770 250,000
15................... 113,550 113,550 250,000
16................... 130,095 130,095 250,000
17................... 148,670 148,670 250,000
18................... 169,575 169,575 250,000
19................... 193,178 193,178 250,000
20................... 219,823 219,823 268,183
Age 60............... 113,550 113,550 250,000
Age 65............... 219,823 219,823 268,183
Age 70............... 404,793 404,793 469559
Age 75............... 719,740 719,740 770,122
</TABLE>
- ---------------
(1) Assumes a $4,772.50 payment is made at the beginning of each Policy year.
Values will be different if payments are made with a different frequency or
in different amounts.
(2) Assumes that no Policy loan has been made. Excessive loans or withdrawals
may cause this Policy to lapse because of insufficient Policy Value.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN ARE ILLUSTRATIVE ONLY, AND
SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF
RETURN. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN, AND WILL
DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY A POLICY
OWNER, AND THE DIFFERENT INVESTMENT RATES OF RETURN FOR THE UNDERLYING FUNDS.
THE VALUE OF UNITS, POLICY VALUE, AND DEATH BENEFIT FOR A POLICY WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF INVESTMENT RETURN AVERAGED 0%,
6% AND 12% OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE AND BELOW THOSE AVERAGES
FOR INDIVIDUAL POLICY YEARS, OR IF ANY PREMIUMS WERE ALLOCATED OR POLICY VALUE
TRANSFERRED TO THE FIXED ACCOUNT. NO REPRESENTATIONS CAN BE MADE THAT THESE
HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
D-6
<PAGE> 75
CANADA LIFE INSURANCE COMPANY OF AMERICA
VARIABLE LIFE POLICY
FACE AMOUNT = $250,000
MALE NON-TOBACCO AGE 45
DEATH BENEFIT OPTION 3
BASED ON CURRENT MONTHLY COST OF INSURANCE
CHARGES WITHOUT RIDERS
<TABLE>
<CAPTION>
PREMIUMS HYPOTHETICAL 0% HYPOTHETICAL 6%
PAID PLUS GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
INTEREST ------------------------------- -------------------------------
POLICY AT 5% SURRENDER POLICY DEATH SURRENDER POLICY DEATH
YEAR PER YEAR (1) VALUE VALUE (2) BENEFIT VALUE VALUE (2) BENEFIT
------ ------------ --------- --------- ------- --------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
1.................... 5,011 0 3153 250,000 0 3,380 250,000
2.................... 10,273 0 6205 250,000 273 6,858 250,000
3.................... 15,798 3395 9,158 250,000 4,680 10,440 250,000
4.................... 21,599 7100 12,038 250,000 9,228 14,165 250,000
5.................... 27,690 10750 14,865 250,000 13,940 18,055 250,000
6.................... 34,085 14,355 17,648 250,000 18,838 22,130 250,000
7.................... 40,801 17,920 20,390 250,000 23,938 26,405 250,000
8.................... 47,852 21,448 23,093 250,000 29,250 30,895 250,000
9.................... 55,255 24,928 25,750 250,000 34,783 35,608 250,000
10................... 63,029 28,355 28,355 250,000 40,543 40,543 250,000
11................... 71,192 31,988 31,988 250,000 46,868 46,868 250,000
12................... 79,763 35,525 35,525 250,000 53,480 53,480 250,000
13................... 88,762 38,943 38,943 250,000 60,383 60,383 250,000
14................... 98,211 42,240 42,240 250,000 67,600 67,600 250,000
15................... 108,133 45,418 45,418 250,000 75,153 75,153 250,000
16................... 118,551 48,400 48,400 250,000 83,008 83,008 250,000
17................... 129,489 51,260 51,260 250,000 91,250 91,250 250,000
18................... 140,975 53,983 53,983 250,000 99,913 99,913 250,000
19................... 153,035 56,563 56,563 250,000 109,025 109,025 250,000
20................... 165,698 58,993 58,993 250,000 118,620 118,620 250,000
Age 60............... 108,133 45,418 45,418 250,000 75,153 75,153 250,000
Age 65............... 165,698 58,993 58,993 250,000 118,620 118,620 250,000
Age 70............... 239,166 68,325 68,325 250,000 175,230 175,230 270,750
Age 75............... 332,933 71,080 71,080 250,000 246,685 246,685 343,250
<CAPTION>
HYPOTHETICAL 12%
GROSS INVESTMENT RETURN
---------------------------------
POLICY SURRENDER POLICY DEATH
YEAR VALUE VALUE (2) BENEFIT
------ --------- --------- ---------
<S> <C> <C> <C>
1.................... 0 3,608 250,000
2.................... 955 7,540 250,000
3.................... 6,075 11,835 250,000
4.................... 11,633 16,573 250,000
5.................... 17,698 21,815 250,000
6.................... 24,340 27,633 250,000
7.................... 31,635 34,103 250,000
8.................... 39,658 41,303 250,000
9.................... 48,490 49,313 250,000
10................... 58,225 58,225 250,000
11................... 69,370 69,370 250,000
12................... 81,778 81,778 250,000
13................... 95,595 95,595 250,000
14................... 111,008 111,008 250,000
15................... 128,225 128,225 255,750
16................... 147,318 147,318 285,750
17................... 168,478 168,478 317,750
18................... 191,923 191,923 352,500
19................... 217,895 217,895 389,500
20................... 246,655 246,655 429,750
Age 60............... 128,225 128,225 255,750
Age 65............... 246,655 246,655 429,750
Age 70............... 443,495 443,495 685,000
Age 75............... 768,380 768,380 1,069,000
</TABLE>
- ---------------
(1) Assumes a $4,772.50 payment is made at the beginning of each Policy year.
Values will be different if payments are made with a different frequency or
in different amounts.
(2) Assumes that no Policy loan has been made. Excessive loans or withdrawals
may cause this Policy to lapse because of insufficient Policy Value.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN ARE ILLUSTRATIVE ONLY, AND
SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF
RETURN. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN, AND WILL
DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY A POLICY
OWNER, AND THE DIFFERENT INVESTMENT RATES OF RETURN FOR THE UNDERLYING FUNDS.
THE VALUE OF UNITS, POLICY VALUE, AND DEATH BENEFIT FOR A POLICY WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF INVESTMENT RETURN AVERAGED 0%,
6% AND 12% OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE AND BELOW THOSE AVERAGES
FOR INDIVIDUAL POLICY YEARS, OR IF ANY PREMIUMS WERE ALLOCATED OR POLICY VALUE
TRANSFERRED TO THE FIXED ACCOUNT. NO REPRESENTATIONS CAN BE MADE THAT THESE
HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
D-7
<PAGE> 76
CANADA LIFE INSURANCE COMPANY OF AMERICA
VARIABLE LIFE POLICY
FACE AMOUNT = $250,000
MALE NON-TOBACCO AGE 45
DEATH BENEFIT OPTION 3
BASED ON GUARANTEED MONTHLY COST OF INSURANCE
CHARGES WITHOUT RIDERS
<TABLE>
<CAPTION>
PREMIUMS HYPOTHETICAL 0% HYPOTHETICAL 6%
PAID PLUS GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
INTEREST ------------------------------- -------------------------------
POLICY AT 5% SURRENDER POLICY DEATH SURRENDER POLICY DEATH
YEAR PER YEAR (1) VALUE VALUE (2) BENEFIT VALUE VALUE (2) BENEFIT
------ ------------ --------- --------- ------- --------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
1.................... 5,011 0 3153 250,000 0 3,380 250,000
2.................... 10,273 0 6205 250,000 273 6,858 250,000
3.................... 15,798 3395 9,155 250,000 4,678 10,440 250,000
4.................... 21,599 7100 12,038 250,000 9,225 14,165 250,000
5.................... 27,690 10748 14,865 250,000 13,938 18,053 250,000
6.................... 34,085 13,715 17,008 250,000 18,188 21,480 250,000
7.................... 40,801 16,583 19,050 250,000 22,543 25,013 250,000
8.................... 47,852 19,330 20,978 250,000 26,995 28,640 250,000
9.................... 55,255 21,953 22,775 250,000 31,538 32,363 250,000
10................... 63,029 24,428 24,428 250,000 36,168 36,168 250,000
11................... 71,192 27,010 27,010 250,000 41,205 41,205 250,000
12................... 79,763 29,428 29,428 250,000 46,403 46,403 250,000
13................... 88,762 31,670 31,670 250,000 51,768 51,768 250,000
14................... 98,211 33,728 33,728 250,000 57,308 57,308 250,000
15................... 108,133 35,573 35,573 250,000 63,020 63,020 250,000
16................... 118,551 37,185 37,185 250,000 68,910 68,910 250,000
17................... 129,489 38,533 38,533 250,000 74,975 74,975 250,000
18................... 140,975 39,583 39,583 250,000 81,218 81,218 250,000
19................... 153,035 40,288 40,288 250,000 87,628 87,628 250,000
20................... 165,698 40,598 40,598 250,000 94,210 94,210 250,000
Age 60............... 108,133 35,573 35,573 250,000 63,020 63,020 250,000
Age 65............... 165,698 40,598 40,598 250,000 94,210 94,210 250,000
Age 70............... 239,166 34,433 34,433 250,000 130,195 130,195 250,000
Age 75............... 332,933 6,050 6,050 250,000 173,975 173,975 250,000
<CAPTION>
HYPOTHETICAL 12%
GROSS INVESTMENT RETURN
-------------------------------
POLICY SURRENDER POLICY DEATH
YEAR VALUE VALUE (2) BENEFIT
------ --------- --------- -------
<S> <C> <C> <C>
1.................... 0 3,608 250,000
2.................... 955 7,540 250,000
3.................... 6,075 11,835 250,000
4.................... 11,633 16,570 250,000
5.................... 17,698 21,813 250,000
6.................... 23,685 26,978 250,000
7.................... 30,193 32,660 250,000
8.................... 37,273 38,918 250,000
9.................... 44,985 45,810 250,000
10................... 53,403 53,403 250,000
11................... 131,260 131,260 250,000
12................... 73,675 73,675 250,000
13................... 85,540 85,540 250,000
14................... 98,770 98,770 250,000
15................... 113,550 113,550 250,000
16................... 130,095 130,095 252,250
17................... 148,438 148,438 280,000
18................... 168,590 168,590 309,500
19................... 190,700 190,700 341,000
20................... 214,935 214,935 374,500
Age 60............... 113,550 113,550 250,000
Age 65............... 214,935 214,935 374,500
Age 70............... 374,923 374,923 579,000
Age 75............... 621,348 621,348 864,500
</TABLE>
- ---------------
(1) Assumes a $4,772.50 payment is made at the beginning of each Policy year.
Values will be different if payments are made with a different frequency or
in different amounts.
(2) Assumes that no Policy loan has been made. Excessive loans or withdrawals
may cause this Policy to lapse because of insufficient Policy Value.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN ARE ILLUSTRATIVE ONLY, AND
SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF
RETURN. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN, AND WILL
DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY A POLICY
OWNER, AND THE DIFFERENT INVESTMENT RATES OF RETURN FOR THE UNDERLYING FUNDS.
THE VALUE OF UNITS, POLICY VALUE, AND DEATH BENEFIT FOR A POLICY WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF INVESTMENT RETURN AVERAGED 0%,
6% AND 12% OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE AND BELOW THOSE AVERAGES
FOR INDIVIDUAL POLICY YEARS, OR IF ANY PREMIUMS WERE ALLOCATED OR POLICY VALUE
TRANSFERRED TO THE FIXED ACCOUNT. NO REPRESENTATIONS CAN BE MADE THAT THESE
HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
D-8
<PAGE> 77
APPENDIX E
CALCULATION OF MAXIMUM SURRENDER CHARGES
A separate surrender charge is computed on the Date of Issue and on each
increase in Face Amount.
A limitation on surrender charges is imposed based on the Standard
Non-Forfeiture Law of each state. The maximum surrender charges at the Date of
Issue and on each increase in Face Amount are shown in the table below. The
surrender charge decreases by one-ninth each year. See -- "Surrender Charge"
under CHARGES AND DEDUCTIONS.
The maximum surrender charges are based on the age (on the Date of Issue or
date of any increase in Face Amount), sex, and Underwriting Class of the Insured
as indicated in the table below.
MAXIMUM SURRENDER CHARGE PER $1,000 FACE AMOUNT
<TABLE>
<CAPTION>
AGE AT
ISSUE OR MALE MALE FEMALE FEMALE UNISEX UNISEX
INCREASE NON-TOBACCO TOBACCO NON-TOBACCO TOBACCO NON-TOBACCO TOBACCO
-------- ----------- ------- ----------- ------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
0................................. N/A 14.46 N/A 13.54 N/A 14.26
1................................. N/A 14.44 N/A 13.53 N/A 14.23
2................................. N/A 14.58 N/A 13.64 N/A 14.36
3................................. N/A 14.73 N/A 13.76 N/A 14.51
4................................. N/A 14.91 N/A 13.89 N/A 14.67
5................................. N/A 15.09 N/A 14.01 N/A 14.85
6................................. N/A 15.29 N/A 14.16 N/A 15.03
7................................. N/A 15.50 N/A 14.31 N/A 15.23
8................................. N/A 15.73 N/A 14.48 N/A 15.44
9................................. N/A 15.96 N/A 14.66 N/A 15.67
10................................ N/A 16.22 N/A 14.87 N/A 15.91
11................................ N/A 16.47 N/A 15.06 N/A 16.16
12................................ N/A 16.75 N/A 15.26 N/A 16.42
13................................ N/A 17.03 N/A 15.48 N/A 16.69
14................................ N/A 17.31 N/A 15.70 N/A 16.96
15................................ N/A 17.60 N/A 15.92 N/A 17.24
16................................ N/A 17.90 N/A 16.15 N/A 17.52
17................................ N/A 18.17 N/A 16.39 N/A 17.80
18................................ 16.62 18.47 15.60 16.64 16.42 18.10
19................................ 16.84 18.78 15.82 16.89 16.63 18.40
20................................ 17.06 19.11 16.04 17.16 16.86 18.71
21................................ 17.30 19.46 16.27 17.45 17.09 19.05
22................................ 17.55 19.83 16.51 17.75 17.34 19.41
23................................ 17.84 20.23 16.78 18.06 17.62 19.79
24................................ 18.14 20.65 17.04 18.38 17.92 20.18
25................................ 18.46 21.08 17.39 18.74 18.24 20.60
26................................ 18.80 21.53 17.69 19.09 18.58 21.03
27................................ 19.16 22.01 18.01 19.46 18.93 21.49
28................................ 19.55 22.52 18.34 19.86 19.30 21.97
29................................ 19.96 23.06 18.69 20.28 19.70 22.49
30................................ 20.38 23.64 19.06 20.73 20.11 23.04
31................................ 20.84 24.25 19.44 21.20 20.55 23.62
32................................ 21.32 24.91 19.85 21.69 21.01 24.24
33................................ 21.82 25.58 20.27 22.21 21.50 24.88
34................................ 22.35 26.29 20.71 22.74 22.01 25.55
35................................ 22.91 27.04 21.18 23.29 22.55 26.26
36................................ 23.43 27.74 21.61 23.79 23.06 26.91
</TABLE>
E-1
<PAGE> 78
<TABLE>
<CAPTION>
AGE AT
ISSUE OR MALE MALE FEMALE FEMALE UNISEX UNISEX
INCREASE NON-TOBACCO TOBACCO NON-TOBACCO TOBACCO NON-TOBACCO TOBACCO
-------- ----------- ------- ----------- ------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
37................................ 23.99 28.48 22.06 24.33 23.59 27.60
38................................ 24.57 29.24 22.54 24.90 24.15 28.32
39................................ 25.19 30.05 23.04 25.50 24.75 29.09
40................................ 25.85 30.91 23.57 26.12 25.38 29.89
41................................ 26.54 31.81 24.13 26.77 26.04 30.73
42................................ 27.28 32.76 24.71 27.45 26.75 31.62
43................................ 28.06 33.77 25.33 28.14 27.49 32.56
44................................ 28.89 34.83 25.99 28.86 28.28 33.54
45................................ 29.76 35.93 26.68 29.62 29.12 34.56
46................................ 30.67 37.12 27.39 30.42 29.99 35.66
47................................ 31.64 38.34 28.15 31.26 30.90 36.79
48................................ 32.64 39.58 28.95 32.13 31.86 37.94
49................................ 33.69 40.88 29.79 33.05 32.87 39.14
50................................ 34.80 42.22 30.67 34.00 33.92 40.39
51................................ 35.98 43.62 31.62 35.04 35.05 41.69
52................................ 37.24 45.08 32.62 36.12 36.26 43.05
53................................ 38.58 46.69 33.68 37.28 37.53 44.54
54................................ 40.00 48.39 34.80 38.49 38.88 46.11
55................................ 41.51 50.17 36.00 39.78 40.32 47.76
56................................ 43.00 51.95 37.21 41.11 41.74 49.41
57................................ 44.57 53.82 38.50 42.52 43.25 51.14
58................................ 46.22 53.76 39.88 44.05 44.83 52.93
59................................ 47.95 53.45 41.34 45.67 46.49 53.76
60................................ 49.76 53.14 42.87 47.36 48.22 53.46
61................................ 51.61 52.94 44.46 49.11 50.01 53.25
62................................ 53.56 52.74 46.14 50.97 51.88 53.04
63................................ 53.30 52.55 47.92 52.87 53.54 52.84
64................................ 52.97 52.36 49.82 53.52 53.23 52.64
65................................ 52.64 52.16 51.84 53.24 52.91 52.42
66................................ 52.53 52.06 53.85 53.16 52.81 52.34
67................................ 52.42 51.96 53.76 53.08 52.70 52.24
68................................ 52.30 51.86 53.66 53.00 52.59 52.15
69................................ 52.18 51.75 53.55 52.91 52.47 52.05
70................................ 52.05 51.64 53.44 52.82 52.35 51.95
71................................ 51.91 51.52 53.30 52.66 52.21 51.83
72................................ 51.77 51.40 53.16 52.53 52.07 51.71
73................................ 51.62 51.28 53.01 52.39 51.93 51.59
74................................ 51.47 51.16 52.85 52.24 51.78 51.47
75................................ 51.32 51.04 52.69 52.09 51.62 51.34
76................................ 51.16 50.90 52.52 51.94 51.46 51.20
77................................ 50.99 50.75 52.34 51.78 51.30 51.06
78................................ 50.83 50.60 52.16 51.62 51.13 50.90
79................................ 50.66 50.45 51.98 51.47 50.96 50.75
80................................ 50.49 50.29 51.79 51.31 50.79 50.59
81................................ 50.33 50.15 51.59 51.15 50.62 50.44
82................................ 50.17 50.01 51.39 51.00 50.45 50.30
83................................ 50.01 49.87 51.19 50.84 50.28 50.14
84................................ 49.85 49.72 50.99 50.63 50.11 49.97
85................................ 49.69 49.56 50.77 50.41 49.93 49.79
</TABLE>
E-2
<PAGE> 79
EXAMPLES
For the purpose of these examples, assume that a male, issue age 35,
non-tobacco purchases a $75,000 Policy. His surrender charge is calculated as
follows:
The surrender charge is equal to $1,718.25 (22.91 x 75).
EXAMPLE 1:
Assume the Policyowner surrenders the Policy in the 10th Policy month. The
surrender charge is $1,718.25.
EXAMPLE 2:
Assume the Policyowner surrenders the Policy in the 61st Policy month. Also
assume that the surrender charge decreases by 1/9th of the original surrender
charge each year. In this example, the surrender charge would be $763.59.
E-3
<PAGE> 80
APPENDIX F
PERFORMANCE INFORMATION
The Policies and interests in the Sub-Accounts were first offered to the
public in 2000 and do not yet have any performance history. However, we may show
average annual total return performance information based on the periods that
the underlying Funds have been in existence, adjusted to reflect certain Policy
fees and charges. The results for any period prior to the Policies and interests
in the Sub-Accounts being offered will be calculated as if the Policies and
interests in the Sub-Accounts had been offered during that period of time,
reflecting only those charges assumed to apply to all Policy Owners ("Common
Charges"). However, charges such as Cost of Insurance Charges, Monthly Expense
Charges, and Surrender Charges, which are based on the Insured's sex, age, and
underwriting class and which therefore vary with each Policy, are not reflected
in the rates of return shown below. IF THESE CHARGES WERE DEDUCTED, PERFORMANCE
WOULD HAVE BEEN SIGNIFICANTLY LOWER. These rates of return are not estimates,
projections or guarantees of future performance. In the future, we will show
total return and average annual total return performance information based on
the periods that the Sub-Accounts have been in existence.
We may compare performance information in reports and promotional
literature to:
- Standard & Poor's 500 Composite Stock Price Index ("S&P 500")
- Dow Jones Industrial Average ("DJIA")
- Shearson Lehman Aggregate Bond Index
- Other unmanaged indices of unmanaged securities widely regarded by
investors as representative of the securities markets
- Other groups of variable life separate accounts or other investment
products tracked by Lipper Inc.
- Other services, companies, publications, or persons such as Morningstar,
Inc., who rank the investment products on performance or other criteria
- The Consumer Price Index
Unmanaged indices may assume the reinvestment of dividends but generally do
not reflect deductions for insurance and administrative charges, separate
account charges and fund management costs and expenses.
In advertising, sales literature, publications or other materials, we may
give information on various topics of interest to Policy owners and prospective
Policy owners. These topics may include:
- The relationship between sectors of the economy and the economy as a
whole and its effect on various securities markets, investment strategies
and techniques (such as value investing, market timing, dollar cost
averaging, asset allocation and automatic account rebalancing)
- The advantages and disadvantages of investing in tax-deferred and taxable
investments
- Customer profiles and hypothetical payment and investment scenarios
- Financial management and tax and retirement planning
- Investment alternatives to certificates of deposit and other financial
instruments, including comparisons between the Policies and the
characteristics of and market for the financial instruments.
At times, the Company may also show the ratings and other information
assigned to it by independent rating organizations such as A.M. Best Company
("A.M. Best"), Moody's Investors Service ("Moody's"), Standard & Poor's
Insurance Rating Services ("S&P") and Duff & Phelps. A.M. Best's and Moody's
ratings reflect their current opinion of the Company's relative financial
strength and operating performance in comparison to the norms of the life/heath
insurance industry. S&P's and Duff & Phelps' ratings measure the ability of an
insurance company to meet its obligations under insurance policies it issues but
do not measure the ability of such companies to meet other non-policy
obligations. The ratings also do not relate to the performance of the underlying
funds.
F-1
<PAGE> 81
The following performance information is based on the periods that the
underlying Funds have been in existence. The performance information is
calculated after deducting total underlying Fund expenses and all Common
Charges, including the Monthly Administration Fee, Monthly Mortality and Expense
Risk Charge, and Payment Expense Charge. The performance information does NOT
reflect Cost of Insurance Charges, Monthly Expense Charges, Surrender Charges,
Partial Withdrawal Charges, or any Monthly Rider Charges, Transfer Charges, or
Other Administrative Charges that may apply under the Policy. The Cost of
Insurance Charge, Monthly Expense Charge, and Surrender Charge vary with each
Policy and depend upon certain factors, such as sex, age, and underwriting class
of the Insured. The Partial Withdrawal Charge is comprised of a 2% transaction
fee of the amount withdrawn (not to exceed $25 for each partial withdrawal). See
CHARGES AND DEDUCTIONS. THE RETURNS WOULD HAVE BEEN SIGNIFICANTLY LOWER IF SUCH
CHARGES WERE REFLECTED.
It is assumed that an annual premium payment of $4,500 was made at the
beginning of each Policy year. "One-Year Total Return" refers to the total of
the income generated by a Sub-Account (had the Sub-Account been in existence for
the period), for the one-year period ended December 31, 1999. "Average Annual
Total Return" is based on the same charges and assumptions, but reflects the
hypothetical annually compounded return that would have produced the same
cumulative return if the Sub-Account's performance had been constant over the
entire period. Because average annual total returns tend to smooth out
variations in annual performance return, they are not the same as actual
year-by-year results.
ADJUSTED AVERAGE ANNUAL TOTAL RETURNS FOR THE UNDERLYING FUNDS
FOR THE PERIODS ENDING DECEMBER 31, 1999
ADJUSTED TO REFLECT COMMON CHARGES AND
EXCLUDING COST OF INSURANCE CHARGES, MONTHLY EXPENSE CHARGES,
PARTIAL WITHDRAWAL CHARGES, AND SURRENDER CHARGES
<TABLE>
<CAPTION>
ONE-YEAR 10 YEARS OR LIFE FUND
TOTAL OF SUB-ACCOUNT INCEPTION
UNDERLYING FUND RETURN 5 YEARS (IF LESS) DATE
--------------- -------- ------- ---------------- ---------
<S> <C> <C> <C> <C>
Alger American Growth.................................. % % % 01/08/89
Alger American Leveraged AllCap........................ % % % 01/25/95
Alger American MidCap Growth........................... % % % 05/03/93
Alger American Small Capitalization.................... % % % 09/20/88
Berger/BIAM IPT-International.......................... % % % 05/01/97
Berger IPT-Small Company Growth........................ % % % 05/01/96
Dreyfus-Appreciation................................... % % % 03/31/93
Dreyfus-Growth and Income.............................. % % % 05/02/94
Dreyfus Socially Responsible........................... % % % 10/07/93
Fidelity VIP Growth.................................... % % % 10/09/86
Fidelity VIP High Income............................... % % % 09/19/85
Fidelity VIP Money Market*............................. % % % 04/01/82
Fidelity VIP Overseas.................................. % % % 01/28/87
Fidelity VIP II Asset Manager.......................... % % % 09/06/89
Fidelity VIP II Contrafund............................. % % % 01/03/95
Fidelity VIP II Index 500.............................. % % % 08/27/92
Fidelity VIP II Investment Grade Bond.................. % % % 12/05/88
Fidelity VIP III Growth Opportunities.................. % % % 01/03/95
Goldman Sachs VIT Capital Growth....................... % % %
Goldman Sachs VIT CORE U.S. Equity..................... % % %
Goldman Sachs VIT Global Income........................ % % %
Goldman Sachs VIT Growth and Income.................... % % %
Montgomery Variable Series: Emerging Markets........... % % % 02/02/96
</TABLE>
F-2
<PAGE> 82
<TABLE>
<CAPTION>
ONE-YEAR 10 YEARS OR LIFE FUND
TOTAL OF SUB-ACCOUNT INCEPTION
UNDERLYING FUND RETURN 5 YEARS (IF LESS) DATE
--------------- -------- ------- ---------------- ---------
<S> <C> <C> <C> <C>
Montgomery Variable Series: Growth..................... % % % 02/09/96
Seligman Communications and Information................ % % % 10/11/94
Seligman Frontier...................................... % % % 10/11/94
</TABLE>
- ---------------
* The yield more closely reflects the current earnings of the Fidelity VIP Money
Market Portfolio than its total return. The Fidelity VIP Money Market
Portfolio current yield (annualized yield for a seven day period ended
December 31, 2000) is [ ]%.
As show below, we may also show average annual total return performance
information based on the periods that the underlying Funds have been in
existence, after deducting total underlying Fund expenses and all Common Charges
except the Payment Expense Charge. The Payment Expense Charge equals 6.00% of
each payment made under the Policy, and is composed of a 2.00% Premium Tax
Charge, a 1.00% Deferred Acquisition Costs (DAC Tax) Charge, and a 3.00%
Front-End Sales Load Charge. See CHARGES AND DEDUCTIONS. The returns would have
been lower if the Payment Expense Charge was reflected.
ADJUSTED AVERAGE ANNUAL TOTAL RETURNS FOR THE UNDERLYING FUNDS
FOR THE PERIODS ENDING DECEMBER 31, 1999
ADJUSTED TO REFLECT COMMON CHARGES
(OTHER THAN THE PAYMENT EXPENSE CHARGE) AND
EXCLUDING PAYMENT EXPENSE CHARGE, COST OF INSURANCE CHARGES,
MONTHLY EXPENSE CHARGES, PARTIAL WITHDRAWAL CHARGES, AND SURRENDER CHARGES
<TABLE>
<CAPTION>
ONE-YEAR 10 YEARS OR LIFE FUND
TOTAL OF SUB-ACCOUNT INCEPTION
UNDERLYING FUND RETURN 5 YEARS (IF LESS) DATE
--------------- -------- ------- ---------------- ---------
<S> <C> <C> <C> <C>
Alger American Growth.................................. % % % 01/08/89
Alger American Leveraged AllCap........................ % % % 01/25/95
Alger American MidCap Growth........................... % % % 05/03/93
Alger American Small Capitalization.................... % % % 09/20/88
Berger/BIAM IPT-International.......................... % % % 05/01/97
Berger IPT-Small Company Growth........................ % % % 05/01/96
Dreyfus Appreciation................................... % % % 03/31/93
Dreyfus-Growth and Income.............................. % % % 05/02/94
Dreyfus Socially Responsible........................... % % % 10/07/93
Fidelity VIP Growth.................................... % % % 10/09/86
Fidelity VIP High Income............................... % % % 09/19/85
Fidelity VIP Money Market*............................. % % % 04/01/82
Fidelity VIP Overseas.................................. % % % 01/28/87
Fidelity VIP II Asset Manager.......................... % % % 09/06/89
Fidelity VIP II Contrafund............................. % % % 01/03/95
Fidelity VIP II Index 500.............................. % % % 08/27/92
Fidelity VIP II Investment Grade Bond.................. % % % 12/05/88
Fidelity VIP III Growth Opportunities.................. % % % 01/03/95
Goldman Sachs VIT Capital Growth....................... % % %
Goldman Sachs VIT CORE U.S. Equity..................... % % %
Goldman Sachs VIT Global Income........................ % % %
Goldman Sachs VIT Growth and Income.................... % % %
Montgomery Variable Series: Emerging Markets........... % % % 02/02/96
</TABLE>
F-3
<PAGE> 83
<TABLE>
<CAPTION>
ONE-YEAR 10 YEARS OR LIFE FUND
TOTAL OF SUB-ACCOUNT INCEPTION
UNDERLYING FUND RETURN 5 YEARS (IF LESS) DATE
--------------- -------- ------- ---------------- ---------
<S> <C> <C> <C> <C>
Montgomery Variable Series: Growth..................... % % % 02/09/96
Seligman Communications and Information................ % % % 10/11/94
Seligman Frontier...................................... % % % 10/11/94
</TABLE>
- ---------------
* The yield more closely reflects the current earnings of the Fidelity VIP Money
Market Portfolio than its total return. The Fidelity VIP Money Market
Portfolio current yield (annualized yield for a seven day period ended
December 31, 2000) is [ ]%.
Performance information reflects only the performance of a hypothetical
investment during the particular time period on which the calculations are
based. One-year total return and average annual total return figures are based
on historical earnings and are not intended to indicate future performance.
Performance information should be considered in light of the investment
objectives and policies, characteristics and quality of the underlying Fund in
which a Sub-Account invests and the market conditions during the given time
period, and should not be considered as a representation of what may be achieved
in the future.
Policy owners should also refer to the hypothetical illustrations set forth
in Appendix D -- examples of death benefit, policy values, and accumulated
payments and should request personalized illustrations which illustrate
variations of the death benefit, policy values, and accumulated payments under
their policy.
F-4
<PAGE> 84
APPENDIX G
MAXIMUM MONTHLY EXPENSE CHARGES
A Monthly Expense Charge is computed on the Date of Issue and on each
increase in Face Amount.
THE MONTHLY EXPENSE CHARGE IS BASED ON THE AGE (ON THE DATE OF ISSUE OR ON
THE DATE OF ANY INCREASE IN FACE AMOUNT), SEX, AND UNDERWRITING CLASS OF THE
INSURED AS INDICATED IN THE TABLE BELOW.
MAXIMUM MONTHLY EXPENSE CHARGES PER $1000 OF FACE AMOUNT
<TABLE>
<CAPTION>
AGE OF
ISSUE OR MALE MALE FEMALE FEMALE UNISEX UNISEX
INCREASE NON-TOBACCO TOBACCO NON-TOBACCO TOBACCO NON-TOBACCO TOBACCO
-------- ----------- ------- ----------- ------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
0................................. N/A $0.11 N/A $0.08 N/A $0.10
1................................. N/A $0.11 N/A $0.08 N/A $0.11
2................................. N/A $0.12 N/A $0.08 N/A $0.11
3................................. N/A $0.12 N/A $0.08 N/A $0.11
4................................. N/A $0.12 N/A $0.09 N/A $0.11
5................................. N/A $0.12 N/A $0.09 N/A $0.12
6................................. N/A $0.13 N/A $0.09 N/A $0.12
7................................. N/A $0.13 N/A $0.09 N/A $0.12
8................................. N/A $0.13 N/A $0.09 N/A $0.12
9................................. N/A $0.14 N/A $0.10 N/A $0.13
10................................ N/A $0.14 N/A $0.10 N/A $0.13
11................................ N/A $0.14 N/A $0.10 N/A $0.13
12................................ N/A $0.14 N/A $0.11 N/A $0.14
13................................ N/A $0.15 N/A $0.11 N/A $0.14
14................................ N/A $0.15 N/A $0.11 N/A $0.14
15................................ N/A $0.15 N/A $0.11 N/A $0.15
16................................ N/A $0.16 N/A $0.12 N/A $0.15
17................................ N/A $0.16 N/A $0.12 N/A $0.15
18................................ $0.12 $0.16 $0.11 $0.12 $0.12 $0.16
19................................ $0.13 $0.17 $0.11 $0.13 $0.12 $0.16
20................................ $0.13 $0.17 $0.12 $0.13 $0.13 $0.16
21................................ $0.13 $0.17 $0.12 $0.13 $0.13 $0.17
22................................ $0.14 $0.18 $0.12 $0.14 $0.13 $0.17
23................................ $0.14 $0.18 $0.12 $0.14 $0.14 $0.17
24................................ $0.15 $0.19 $0.13 $0.15 $0.14 $0.18
25................................ $0.15 $0.19 $0.13 $0.15 $0.15 $0.18
26................................ $0.15 $0.19 $0.13 $0.15 $0.15 $0.19
27................................ $0.16 $0.20 $0.14 $0.16 $0.15 $0.19
28................................ $0.16 $0.20 $0.14 $0.16 $0.16 $0.19
29................................ $0.17 $0.21 $0.14 $0.17 $0.16 $0.20
30................................ $0.17 $0.21 $0.15 $0.17 $0.17 $0.20
31................................ $0.17 $0.21 $0.15 $0.17 $0.17 $0.21
32................................ $0.18 $0.22 $0.15 $0.18 $0.17 $0.21
33................................ $0.18 $0.22 $0.15 $0.18 $0.18 $0.21
34................................ $0.19 $0.23 $0.16 $0.19 $0.18 $0.22
35................................ $0.19 $0.23 $0.16 $0.19 $0.18 $0.22
36................................ $0.21 $0.25 $0.17 $0.21 $0.20 $0.24
37................................ $0.22 $0.27 $0.19 $0.22 $0.21 $0.26
38................................ $0.24 $0.29 $0.20 $0.24 $0.23 $0.28
39................................ $0.25 $0.31 $0.21 $0.25 $0.24 $0.29
</TABLE>
G-1
<PAGE> 85
<TABLE>
<CAPTION>
AGE OF
ISSUE OR MALE MALE FEMALE FEMALE UNISEX UNISEX
INCREASE NON-TOBACCO TOBACCO NON-TOBACCO TOBACCO NON-TOBACCO TOBACCO
-------- ----------- ------- ----------- ------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
40................................ $0.27 $0.33 $0.23 $0.27 $0.26 $0.31
41................................ $0.28 $0.34 $0.24 $0.28 $0.27 $0.33
42................................ $0.30 $0.36 $0.25 $0.30 $0.29 $0.35
43................................ $0.31 $0.38 $0.26 $0.31 $0.30 $0.37
44................................ $0.33 $0.40 $0.28 $0.33 $0.32 $0.39
45................................ $0.34 $0.42 $0.29 $0.34 $0.33 $0.40
46................................ $0.36 $0.44 $0.30 $0.36 $0.35 $0.42
47................................ $0.38 $0.46 $0.32 $0.37 $0.36 $0.44
48................................ $0.39 $0.48 $0.33 $0.39 $0.38 $0.46
49................................ $0.41 $0.50 $0.35 $0.40 $0.40 $0.48
50................................ $0.43 $0.52 $0.36 $0.42 $0.42 $0.50
51................................ $0.44 $0.54 $0.37 $0.43 $0.43 $0.52
52................................ $0.46 $0.56 $0.38 $0.45 $0.44 $0.53
53................................ $0.47 $0.57 $0.40 $0.46 $0.46 $0.55
54................................ $0.49 $0.59 $0.41 $0.48 $0.47 $0.57
55................................ $0.50 $0.61 $0.42 $0.49 $0.48 $0.59
56................................ $0.53 $0.65 $0.45 $0.52 $0.51 $0.62
57................................ $0.56 $0.69 $0.47 $0.55 $0.55 $0.66
58................................ $0.60 $0.72 $0.50 $0.58 $0.58 $0.70
59................................ $0.63 $0.76 $0.52 $0.61 $0.61 $0.73
60................................ $0.66 $0.80 $0.55 $0.64 $0.64 $0.77
61................................ $0.70 $0.82 $0.58 $0.67 $0.68 $0.79
62................................ $0.74 $0.83 $0.61 $0.71 $0.71 $0.81
63................................ $0.78 $0.85 $0.64 $0.74 $0.75 $0.83
64................................ $0.82 $0.86 $0.67 $0.78 $0.79 $0.85
65................................ $0.86 $0.88 $0.70 $0.81 $0.83 $0.87
66................................ $0.86 $0.88 $0.70 $0.80 $0.83 $0.86
67................................ $0.86 $0.87 $0.69 $0.80 $0.82 $0.86
68................................ $0.85 $0.87 $0.69 $0.79 $0.82 $0.85
69................................ $0.85 $0.86 $0.68 $0.79 $0.82 $0.85
70................................ $0.85 $0.86 $0.68 $0.78 $0.82 $0.84
71................................ $0.85 $0.86 $0.68 $0.78 $0.82 $0.84
72................................ $0.85 $0.86 $0.68 $0.78 $0.82 $0.84
73................................ $0.85 $0.86 $0.68 $0.78 $0.82 $0.84
74................................ $0.85 $0.86 $0.68 $0.78 $0.82 $0.84
75................................ $0.85 $0.86 $0.68 $0.78 $0.82 $0.84
76................................ $0.85 $0.86 $0.68 $0.78 $0.82 $0.84
77................................ $0.85 $0.86 $0.68 $0.78 $0.82 $0.84
78................................ $0.85 $0.86 $0.68 $0.78 $0.82 $0.84
79................................ $0.85 $0.86 $0.68 $0.78 $0.82 $0.84
80................................ $0.85 $0.86 $0.68 $0.78 $0.82 $0.84
81................................ $0.85 $0.86 $0.68 $0.78 $0.82 $0.84
82................................ $0.85 $0.86 $0.68 $0.78 $0.82 $0.84
83................................ $0.85 $0.86 $0.68 $0.78 $0.82 $0.84
84................................ $0.85 $0.86 $0.68 $0.78 $0.82 $0.84
85................................ $0.85 $0.86 $0.68 $0.78 $0.82 $0.84
</TABLE>
G-2
<PAGE> 86
EXAMPLES
For a male, issue age 35, non-tobacco with a $75,000 Policy, the maximum
Monthly Expense Charge (per table) would be: $14.25 ($0.19 x 75)
For a male, issue age 50, non-tobacco with a $75,000 Policy, the maximum
Monthly Expense Charge (per table) would be: $32.25 ($0.43 x 75)
For a male, issue age 65, non-tobacco with a $75,000 Policy, the maximum
Monthly Expense Charge (per table) would be: $64.50 ($0.86 x 75)
G-3
<PAGE> 87
PART II - OTHER INFORMATION
UNDERTAKINGS
1. Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned registrant hereby undertakes to
file with the Securities and Exchange Commission (the "SEC") such
supplementary and periodic information, documents, and reports as may
be prescribed by any rule or regulation of the SEC theretofore or
hereafter duly adopted pursuant to authority conferred in that section.
2. Canada Life Insurance Company of America's By-Laws provide in Article
II, Section 10 as follows:
In addition to any indemnification to which a person may be entitled to
under common law or otherwise, each person who is or was a director, an
officer, or an employee of this Corporation, or is or was serving at
the request of the Corporation as a director, an officer, a partner, a
trustee, or an employee of another foreign or domestic corporation,
partnership, joint venture, trust, or other enterprises, whether profit
or not, shall be indemnified by the Corporation to the fullest extent
permitted by the laws of the State of Michigan as they may be in effect
from time to time. This Corporation may purchase and maintain
insurance on behalf of any such person against any liability asserted
against and incurred by such person in any such capacity or arising out
of his or her status as such, whether or not the corporation would have
power to indemnify such person against such liability under the laws of
the State of Michigan.
In addition, Sections 5241 and 5242 of the Michigan Insurance Code
generally provides that a corporation has the power ( and in some
instances the obligation) to indemnify a director, officer, employee or
agent of the corporation, or a person serving at the request of the
corporation as a director, officer, partner, trustee, employee or agent
of another corporation or other entity (the "indemnities") against
reasonably incurred expenses in a civil, administrative, criminal or
investigative action, suit or proceeding if the indemnitee acted in
good faith in a manner he or she reasonably believed to be in or not
opposed to the best interests of the corporation or its shareholders or
policyholders (or, in the case of a criminal action, if the indemnitee
had no reasonable cause to believe his or her conduct was unlawful).
3. 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 1933 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 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 questions
II-1
<PAGE> 88
whether such indemnification by it is against public policy as
expressed in the 1933 Act and will be governed by the final
adjudication of such issue.
REPRESENTATIONS
Canada Life represents that the fees and charges deducted under the Policies,
in the aggregate, are reasonable in relation to the services rendered, the
expenses expected to be incurred, and the risks assumed by Canada Life.
CONTENTS OF REGISTRATION STATEMENT
This registration statement consists of the following papers and
documents:
The facing sheet.
The prospectus consisting of 85 pages.
Undertakings.
Representations.
The signatures.
Written consent or opinion of the following persons:
Craig Edwards
Paul Myers
Ernst & Young, LLP
The following exhibits:
Exhibits required by paragraph A of instructions for Exhibits in Form N-8B-2:
1.A.1. Certified resolutions of the board of directors of Canada
Life Insurance Company of America establishing Canada Life
of America Variable Life Account 1.(3)
1.A.2. None.
1.A.3.a. Form of Distribution Agreement between Canada Life
Insurance Company of America, and Canada Life of America
Financial Services, Inc.
1.A.3.b. Form of Selling Agreement among Canada Life of America
Financial Services, Inc., Canada Life Insurance Company of
America and selling broker-dealers.
1.A.4. Not Applicable.
1.A.5. Form of Contract. (3)
II-2
<PAGE> 89
1.A.5.a. Form of guaranteed death benefit rider.
1.A.5.b. Form of disability waiver of payment rider.
1.A.5.c. Form of term life insurance rider.
1.A.5.d. Form of other insured term insurance rider.
1.A.5.e. Form of accelerated death benefit option rider.
1.A.6.a. Articles of Incorporation of Canada Life Insurance Company of
America.(1)
1.A.6.b. By-Laws of Canada Life Insurance Company of America.(1)
1.A.7. Not applicable.
1.A.8. Not applicable.
1.A.9. Not applicable.
1.A.10. Form of Contract Application.(3)
2. See Exhibits 1.A.
3. Opinion and consent of Counsel.
4. Not applicable.
5. Not applicable.
6. Opinion and consent of Actuary.
7. Consent of Ernst & Young LLP.
8. Description of Canada Life Insurance Company of America's
Issuance, Transfer and Redemption Procedures for Policies.
9. Powers of Attorney.(5)
10. (a) Participation Agreement Between Dreyfus Corporation
and Canada Life Insurance Company of America(1)
(b) Participation Agreement Between Montgomery Asset
Management, L.P. and Canada Life Insurance Company of
America(1)
(c) Participation Agreement Between Fred Alger and Company,
Inc. and Canada Life Insurance Company of America(1)
(d) Participation Agreement Among Variable Insurance Products
Fund, Fidelity Distributors Corporation and Canada Life
Insurance Company of America(2)
(e) Participation Agreement Among Berger Institutional Products
Trust and Canada Life Insurance Company of America(1)
(f) Participation Agreement Among Variable Insurance Products
Fund II, Fidelity Distributors Corporation and Canada Life
Insurance Company of America(2)
(g) Participation Agreement Among Variable Insurance Products
Fund III, Fidelity Distributors Corporation and Canada Life
Insurance Company of America(2)
(h) Participation Agreement Among Berger Institutional Products
Trust, Berger Associates, Inc. and Canada Life Insurance
Company of America(2)
(i) Participation Agreement Between Canada Life Insurance
Company of America and The Dreyfus Socially Responsible
Growth Fund, Inc.(2)
(j) Participation Agreement Between Canada Life Insurance
Company of America and Dreyfus Variable Investment Fund(2)
(k) Amendment to Participation Agreement Among Variable
Insurance Products Fund, Fidelity Distributors Corporation
and Canada Life Insurance Company of America(2)
(l) Amendment to Participation Agreement Among Variable
Insurance Products Fund II, Fidelity Distributors
Corporation and Canada Life Insurance Company of America(2)
(m) Amendment to Participation Agreement By and Among Canada
Life Insurance Company of America and Montgomery Funds III
and Montgomery Asset Management, L.P.(2)
(n) Form of Participation Agreement By and Between Canada Life
Insurance Company of America and GoldmanSachs, Inc.(4)
(o) Amendment to Participation Agreement Among Variable
Insurance Products Fund, Fidelity Distributors Corporation
and Canada Life Insurance Company of America(5)
(p) Amendment to Participation Agreement Among Variable
Insurance Products Fund II, Fidelity Distributors
Corporation and Canada Life Insurance Company of America(5)
(q) Amendment to Participation Agreement Among Variable
Insurance Products Fund III, Fidelity Distributors
Corporation and Canada Life Insurance Company of America(5)
(r) Participation Agreement Among Berger Institutional Products
Trust, Berger Associates, Inc. and Canada Life Insurance
Company of America(5)
II-3
<PAGE> 90
(s) Form of Product Development and Administrative Services Agreement
between Canada Life Insurance Company of American and First
Allmerica Financial Life Insurance Company.
27. Not applicable.
- ------------------
(1) Incorporated herein by reference to Post-Effective Amendment No. 13
to the registration statement on Form N-4 (File No. 33-28889), filed on April
20, 1997.
(2) Incorporated herein by reference to Post-Effective Amendment No. 14 to
the Registration Statement on Form N-4 (File No. 33-28889), filed on April 30,
1998.
(3) Incorporated herein by reference to the registration statement on Form
S-6 (File No. 333-90449), filed on November 5, 1999.
(4) Incorporated herein by reference to Post-Effective Amendment No. 15 to
the Registration Statement on Form N-4 (File No. 33-28889), filed on April 30,
1999.
(5) Incorporated herein by reference to Post-Effective Amendment No. 16 to
the Registration Statement on Form N-4 (File No. 33-28889), filed on April 28,
2000.
(3)
II-4
<PAGE> 91
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
Canada Life of America Variable Life Account 1 has duly caused Pre-Effective
Amendment No. 1 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, and its seal to be hereunto affixed and
attested, all in Fulton County, State of Georgia, on this 1st day of May, 2000.
<TABLE>
<CAPTION>
CANADA LIFE OF AMERICA VARIABLE LIFE
ACCOUNT 1 (REGISTRANT)
<S> <C>
By: CANADA LIFE INSURANCE COMPANY OF
AMERICA (Depositor)
Attest: /s/ CRAIG EDWARDS By: /s/ R.E. BEETTAM
------------------------------------------- -------------------------------------------------
Craig Edwards R.E. Beettam, President
By: CANADA LIFE INSURANCE COMPANY OF
AMERICA (DEPOSITOR)
Attest: /s/ CRAIG EDWARDS By: /s/ R.E. BEETTAM
------------------------------------------- -------------------------------------------------
Craig Edwards R.E. Beettam, President
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this
Pre-Effective Amendment No. 1 to the Registration Statement has been signed
below by the following persons in the capacities indicated on May 1, 2000.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------- -----
<S> <C>
/s/ R.E. BEETTAM Chairman, President & Director
- --------------------------------- (Principal Executive Officer)
R.E. Beettam
* Director
- ---------------------------------
K.T. Ledwos
* Director
- --------------------------------
D.A. Loney
* Director
- --------------------------------
H.A. Rachfalowski
/s/ T.C. SCOTT Director & Financial V.P. (Principal
- --------------------------------- Financial Officer & Principal Accounting
T.C. Scott Officer)
</TABLE>
<PAGE> 92
<TABLE>
<S> <C>
* Director
- ---------------------------------
S.H. Zimmerman
</TABLE>
* By: /S/ Ron Beettam
---------------------
Ron Beettam
Signed pursuant to power of attorney filed herewith
<PAGE> 1
EXHIBIT 1.A.3.A
DISTRIBUTION AGREEMENT
AGREEMENT made this day of , 2000 by and between Canada
---- ----------------
Life of America Financial Services, Inc., a Georgia corporation
(the "Distributor") and Canada Life Insurance Company of America, a Michigan
corporation (the "Company").
WITNESSETH:
WHEREAS, the Company and the Canada Life of America Variable Life Account 1 (the
"Account"), a separate investment account established pursuant to Section 925 of
the Michigan Insurance Code, MCLA 500.925, and a registered investment company
under the Investment Company Act of 1940 (the "1940 Act"), propose to offer for
sale certain variable life insurance policies (the "Policies") which may be
deemed to be securities under the Securities Act of 1933 (the "Act") and the
laws of some states;
WHEREAS, the Distributor, a wholly-owned subsidiary of the Company, is
registered as a broker-dealer with the Securities and Exchange Commission (the
"SEC") under the Securities Exchange Act of 1934 (the "1934 Act) and is a member
of the National Association of Securities Dealers, Inc. (the "NASD");
WHEREAS, the parties desire to have the Distributor act as principal underwriter
for the Account and assume full responsibility for the securities activities of
any "person associated" (as that term is defined is Section 39(a)(18) of the
1934 Act) with the Distributor and engaged directly or indirectly in the
variable life insurance operation (the "associated persons");
WHEREAS, the parties desire to have the Company perform certain services in
connection with the sale of the policies;
NOW THEREFORE, in consideration of the covenants and mutual promises herein
contained, the Distributor and the Company agree as follows:
1. The Distributor will act as the principal underwriter during the term of this
Agreement for the sale of Policies in each state or other jurisdiction where the
Policies may legally be sold. The Distributor will be under no obligation to
effectuate any particular amount of sales of Policies or to promote or make
sales, except to the extent the Distributor deems advisable.
2. The Distributor will assume full responsibility for the securities activities
of, and for securities law compliance by, the associated persons, including, as
applicable, compliance with the NASD Rules of Conduct and Federal and state laws
and regulations. The Distributor, directly or through the Company as its agent,
will (a) make timely filings with the SEC, NASD, and any other regulatory
authorities of any sales literature or materials relating to the Account, as
required by law to be filed, (b) make available to the Company copies of any
agreements or plans intended for use in connection with the sale of the Policies
in sufficient number and in adequate time for clearance by the appropriate
regulatory authorities before they are used, and it is agreed that the parties
will use their best efforts to obtain such clearance by the appropriate
regulatory authorities before they are used, and it is agreed that the parties
will use their best efforts to obtain such clearance as expeditiously as
reasonably possible, and (c) train the associated persons, use its best efforts
to prepare them to complete satisfactorily any and all applicable NASD and state
qualification examinations, register the associated persons as its registered
representative before they engage in securities activities, and supervise and
control them in the performance of such activities.
1
<PAGE> 2
3. The Company retains the right to accept or reject policy applications. The
Company shall review and approve all advertising pertaining to the Policies. The
Distributor shall not give any information or make any representations
concerning the Policies unless such information or representations are contained
in the registration statement and the pertinent prospectus filed with the
Securities and Exchange Commission, or are contained in sales or promotional
materials approved by the Company.
4. As between the Company and the Distributor, the Company will, except as
otherwise provided in this Agreement, bear the cost of all services and
expenses, including but not restricted to legal services and expenses and
registration, filing of other fees, in connection with (a) registering and
qualifying the Account, the Policies, and (to the extent requested by the
Distributor) the associated persons with Federal and state regulatory
authorities and the NASD and (b) printing and distributing all registration
statements and prospectuses (including amendments), Policies, notices, periodic
reports, proxy solicitation material, sales literature and advertising filed or
distributed in connection with the sale of the Policies.
5. The Company will, in connection with the sale of the Policies, pay all
amounts (including the sales commissions described in the prospectus for the
Policies) due to the sales representatives or to those broker-dealers who have
entered into sales agreements with the Distributor, and the Distributor shall
have no interest whatsoever in, nor any obligation to pay, such amounts.
6. The Distributor, directly or through the Company as its agent, will (a)
maintain and preserve in accordance with Rules 17a-3 and 17a-4 under the 1934
Act, all books and records required to be maintained in connection with the
officer and sale of the Policies being distributed pursuant to this Agreement,
which books and records shall remain the property of the Distributor and shall
be subject to inspection by the Securities and Exchange Commission in accordance
with Section 17(a) of the Act, and by the National Association of Securities
Dealers, and (b) upon or prior to completion of each transaction for which a
confirmation is legally required, send a written confirmation for each such
transaction reflecting the facts of the transaction. All books and records
maintained by or on behalf of the Account pursuant to Section 31 of the 1940 Act
and Rules 31a-1 and 31a-2 thereunder are the property of the Account. In the
event of termination, all such records shall be returned to the Account free
from any claims or retention of rights by the Distributor.
Such books and records shall be available to properly constituted governmental
authorities as required by state law and/or regulation. The Distributor shall
keep confidential and shall not disclose any such books or records obtained
pursuant to this Agreement except as expressly required by state or Federal law
and/or regulations.
7. The Distributor will execute such papers and do such acts and things as shall
from time to time be reasonably requested by the Company for the purpose of (a)
maintaining the registration of the Policies under the 1933 Act and the Account
under the 1940 Act, and (b) qualifying and maintaining qualification of the
Policies for sale under the applicable laws of any state.
8. Each party hereto shall advise the other promptly of (a) any action of the
SEC or any authorities of any state or territory, of which it has knowledge,
affecting registration or qualification of the Account or the Policies, or the
right to offer the Policies for sale, and (b) the happening of any event which
makes untrue any statement, or which requires the making of any change, in the
registration statement or prospectus in order to make the statements therein not
misleading.
9. The Company shall not be liable to the Distributor for any action taken or
omitted by it, or any of its officers, agents or employees, in performing their
responsibilities under this Agreement in good
2
<PAGE> 3
faith and without gross negligence, willful misfeasance or reckless disregard of
such responsibilities.
10. The Distributor shall not be liable to the Company for any action taken or
omitted by it, or any of its officers, agents or employees, in performing their
responsibilities under this Agreement in good faith and without negligence.
11. As compensation for the Distributor's assuming the expenses and performing
the services to be assumed and performed by it pursuant to this Agreement, the
Distributor shall receive from the Company such amounts and at such times as may
from time to time be agreed upon by the Distributor and the Company.
12. As compensation for its services performed and expenses incurred under this
Agreement, the Company will receive all amounts charged as "Sales Charges" under
the Policies. It is understood that the Company assumes the risk that the above
compensation for its services may not prove sufficient to cover its actual
expenses in connection therewith.
13. The Distributor and the Company shall be free to render similar services to
others, including, without implied limitations, such other separate investment
accounts as are now or hereafter established by the Company, so long as the
services of the Distributor and Company hereunder are not impaired or interfered
with thereby.
14. It is understood that any Policyholder or agent of the Account may be a
policyholder, shareholder, director, officer, employee or agent of, or be
otherwise interested in, the Distributor, any affiliated person of the
Distributor, any organization in which the Distributor may have an interest or
any organization which may have an interest in the Distributor; that the
Distributor, any such affiliated person or any such organization may have an
interest in the Account; and that the existence of any such dual interest shall
not affect the validity hereof or of any transaction hereunder except as may
otherwise be provided in the articles of incorporation or by-laws of the
Distributor or by specific provisions of applicable law.
15. This Agreement shall become effective as of the date of its execution, shall
continue in full force and effect until terminated, may be amended at any time
by mutual agreement of the parties hereto, and may be terminated at any time
without penalty on sixty days written notice by either party to the other. In
the event of termination of this Agreement the Distributor is responsible for
notifying the NASD.
16. Notwithstanding any provision herein, the Company retains ultimate
responsibility and authority for the direction and control of the services
provided herein. This Agreement shall not relieve the Company from any
responsibilities or obligations imposed upon its variable life insurance
business by law or regulation.
17. The Distributor will not assign its responsibilities under the Agreement,
except with the written consent of the Company.
18. For the purpose of this Agreement, the term "affiliated persons" shall have
its respective meaning defined in the 1940 Act subject, however, to such
exemptions as may be governed by and construed in accordance with the laws of
the State of Michigan.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day
and year first above written.
3
<PAGE> 4
CANADA LIFE OF AMERICA
FINANCIAL SERVICES, INC.
By:______________________________
President
CANADA LIFE INSURANCE COMPANY
OF AMERICA
By:______________________________
President
4
<PAGE> 1
EXHIBIT 1.A.3.b.
CANADA LIFE INSURANCE COMPANY OF AMERICA
Variable Products Licensing
6201 Powers Ferry Road
Atlanta, Georgia 30339
(800) 905-1959
SELLING AGREEMENT
AGREEMENT by and between Canada Life Insurance Company of America (CLICA), a
Michigan Corporation; Canada Life of America Financial Services, Inc. (CLAFS), a
registered broker-dealer with the Securities and Exchange Commission under the
Securities Act of 1934 (the 1934 Act), and a member of the National Association
of Securities Dealers, Inc. (NASD); and
- --------------------------------------------------------------------------------
(Selling Broker-Dealer), also a registered broker-dealer and member of the NASD.
I. INTRODUCTION
WHEREAS, CLICA has issued certain variable annuity and variable life contracts,
and these Contracts are registered under the Securities Act of 1933 (the 1933
Act) and the Investment Company Act of 1940 (the 1940 Act) (Contracts or
Contracts collectively); and
WHEREAS, CLICA has authorized CLAFS as principal underwriter to enter into
agreements, subject to the consent of CLICA, with Selling Broker-Dealers for the
distribution of the Contracts; and
WHEREAS, Selling Broker-Dealer wishes to participate in the distribution of
the Contracts;
NOW THEREFORE, in consideration of the promises and the mutual covenants
hereinafter contained, the parties hereto agree as follows:
II. APPOINTMENT
Subject to the terms and conditions of this Agreement, CLICA and CLAFS hereby
appoint Selling Broker-Dealer for the solicitation of applications for the
purchase of the Contracts, and Selling Broker-Dealer accepts such appointment.
III. AUTHORITY AND DUTIES OF SELLING BROKER-DEALER
A. LICENSING AND APPOINTMENT OF REGISTERED REPRESENTATIVES
Selling Broker-Dealer is authorized to appoint Registered Representatives to
solicit sales of the Contracts. Selling Broker-Dealer warrants that all
Registered Representatives appointed by Selling Broker-Dealer pursuant to this
Agreement shall not solicit nor aid, directly or indirectly, in the solicitation
of any application for any Contract until that Registered Representative is
fully licensed under the applicable insurance laws and, in connection with
securities and insurance regulated Contracts, is a fully Registered
Representative of
Effective 3/99
<PAGE> 2
Selling Broker-Dealer. Selling Broker-Dealer shall prepare and transmit the
appropriate licensing and appointment forms to CLICA. Selling Broker-Dealer
shall pay all fees to state insurance regulatory authorities in connection with
obtaining necessary licenses and appointments for Registered Representatives.
All fees payable to regulatory authorities in connection with the initial CLICA
appointment of Registered Representatives who already possess necessary
insurance licenses shall be paid by CLICA. Any renewal license fees due after
the initial appointment shall be paid by CLICA, if there has been any
"production" during the period between the initial appointment and the current
renewal, or between the last previous renewal and current renewal; otherwise,
renewal fees shall be paid by Selling Broker-Dealer. "Production" is defined as
either a new issued Contract or an additional purchase payment on a previously
issued Contract. Selling Broker-Dealer shall periodically provide CLICA with a
list of all Registered Representatives appointed by Selling Broker-Dealer and
the jurisdictions where such Registered Representatives are licensed to solicit
sales of the contracts. CLICA shall periodically provide Selling Broker-Dealer
with a list which shows: 1) the jurisdictions where CLICA is authorized to do
business; and 2) any limitations on the availability of the Contracts in any of
such jurisdictions. Selling Broker-Dealer agrees to fulfill all requirements set
forth in the General Letter of Recommendation attached as Exhibit A in
conjunction with the submission of licensing and appointment papers for all
applicants as Registered Representatives submitted by Selling Broker-Dealer.
B. REJECTION OF REGISTERED REPRESENTATIVES
CLAFS or CLICA may, by written notice to Selling Broker-Dealer, refuse to permit
any Registered Representative the right to solicit applications for the sale of
any of the Contracts, require Selling Broker-Dealer to cause any Registered
Representative to cease such solicitations or sales and cancel the appointment
of any Registered Representative.
C. SUPERVISION OF REGISTERED REPRESENTATIVES
Before a Registered Representative is permitted to sell the Contracts, Selling
Broker-Dealer and Registered Representative shall have entered into a written
agreement pursuant to which: 1) Registered Representative is appointed a
Registered Representative of Selling Broker-Dealer; 2) Registered Representative
agrees that his or her selling activities relating to securities and insurance
regulated contracts shall be under the supervision and control of Selling
Broker-Dealer; and 3) that Registered Representative's right to continue to sell
such Contracts is subject to his or her continued compliance with such agreement
and any procedures, rules or regulations implemented by Selling Broker-Dealer.
Selling Broker-Dealer agrees that it has full responsibility for the training
and supervision of all persons, including Registered Representatives, associated
with Selling Broker-Dealer who are engaged directly or indirectly in the offer
or sale of securities and insurance regulated Contracts. All such persons shall
be subject to the control of Selling Broker-Dealer with respect to their
securities and insurance regulated activities. Broker-Dealer shall: 1) train and
supervise Registered Representatives in all areas of sales practices pertaining
to the sale of securities and insurance regulated Contracts, including, but not
limited to, ensuring: a) a current prospectus, including all effective
supplements, is delivered to all potential contract owners within the allotted
time required by law, and b) appropriate review and approval of all
correspondence pertaining to the sale of securities and insurance regulated
Contracts is conducted; 2) use its best efforts to cause such Registered
Representatives to qualify under applicable federal and state laws to engage in
the sale of securities and insurance regulated Contracts when required; 3)
provide CLICA and CLAFS, to their satisfaction, with evidence of Registered
Representatives' qualifications to sell securities and insurance regulated
Contracts; and 4) notify CLICA if any of such Registered Representatives ceases
to be a Registered Representative of Selling Broker-Dealer. Selling
Broker-Dealer agrees that a Registered Representative must be a Registered
Representative of Selling Broker-Dealer before engaging in the solicitation of
any securities and insurance regulated Contracts and has entered into the
written agreement described above. CLICA and CLAFS shall not have any
responsibility for the supervision of any Registered Representative or any other
employee or affiliate of Selling Broker-Dealer. Copies of confirmation
statements pertaining to any activities under the Contracts shall be forwarded
to the Registered Representative. No other notice of such activities shall be
provided to the Registered Representative. Nothing contained in this Agreement
or otherwise shall be deemed to make any Registered Representative appointed by
Selling
Effective 3/99
<PAGE> 3
Broker-Dealer an employee or agent of CLICA or CLAFS. Selling Broker-Dealer
bears responsibility for all acts and omissions of each Registered
Representative. If the act or omission of a Registered Representative or any
other employee or affiliate of Selling Broker-Dealer is the proximate cause of
any claim, damage or liability (including reasonable attorneys' fees) to CLICA
or CLAFS, Selling Broker-Dealer shall be responsible and liable therefore.
Selling Dealer shall fully comply with the requirements of the National
Association of Securities Dealers, Inc. and of the Securities Exchange Act of
1934 and all other applicable federal and state insurance and securities laws
and regulations. Selling Broker-Dealer shall establish such rules and procedures
as may be necessary to cause diligent supervision of the securities and
insurance activities of the Registered Representatives. Upon request by CLICA or
CLAFS, Broker-Dealer shall furnish such records as may be necessary to establish
diligent supervision.
Suitability
The selling Broker-Dealer shall ensure that the sale of securities and insurance
regulated contracts, including additional premium payment, is suitable for each
contract or policyowner. On an annual basis the Broker-Dealer shall certify to
CLICA that supervision of Registered Representatives in the area of suitability
has been fulfilled. CLICA or CLAFS may request additional documentation to the
certification.
D. NOTICE OF REGISTERED REPRESENTATIVE'S NONCOMPLIANCE
Selling Broker-Dealer shall notify CLAFS in the event a Registered
Representative fails or refuses to submit to the supervision of Selling
Broker-Dealer in accordance with this Agreement, the agreement between Selling
Broker-Dealer and Registered Representative referred to in Section III, or
otherwise fails to meet the rules and standards imposed by Selling
Broker-Dealers. Selling Broker-Dealer shall also immediately notify such
Registered Representative that he or she is no longer authorized to sell the
Contracts, and Selling Broker-Dealer shall take whatever additional action may
be necessary to terminate the sales activities of such Registered Representative
relating to the Contracts.
E. CONTRACTS
The securities and insurance regulated Contracts issued by CLICA to which this
Agreement applies are listed in Schedule I which may be amended from time to
time by CLICA. CLICA, in its sole discretion, with prior or concurrent written
notice to Selling Broker-Dealer, may suspend distribution of any Contracts.
CLICA also has the right to amend any Contracts at any time.
F. SECURING APPLICATION
Each application for a Contract shall be made on an application form provided or
approved by CLICA, and all payments collected by Selling Broker-Dealer or any
Registered Representative shall be remitted promptly in full, together with such
application form and any other required documentation, directly to CLICA at the
address indicated on such application or to such other address as may be
designated. Selling Broker-Dealer shall review all such applications for
completeness. Check or money order in payment of such Contracts should be made
payable to the order of Canada Life Insurance Company of America. All
applications are subject to acceptance or rejection by CLICA in its sole
discretion.
Effective 3/99
<PAGE> 4
G. RECEIPT OF MONEY
All money payable in connection with any of the Contracts, whether as premium,
purchase payment or otherwise and whether paid by or on behalf of any contract
owner or anyone else having an interest in the Contracts, is the property of
CLICA and shall be transmitted immediately in accordance with the administrative
procedures of CLICA without any deduction or offset for any reason including,
but not limited to, any deduction or offset for compensation claimed by Selling
Broker-Dealer, unless there has been a prior arrangement for net wire
transmissions between CLICA and Selling Broker-Dealer.
All money received in connection with any of the Contracts will be considered
solicited by the Registered Representatives of Selling Broker-Dealer, unless
written notification to the contrary is provided by Selling Broker-Dealer to
CLICA. CLICA will provide Selling Broker-Dealer with written confirmation of all
such money received.
H. DELIVERY RECEIPT
Delivery receipts are required for each VARIABLE LIFE POLICY. In each case, the
selling Broker-Dealer agrees to obtain a delivery receipt and promptly submit
the receipt to CLICA.
I. SALES PROMOTION, ADVERTISING AND PROSPECTUSES
No sales promotion or advertising circulars or materials, including, but not
limited to, sales literature, form letters, illustrations, training materials,
speaking or media engagements or presentations, or telephone scripts, relating
to any of the Contracts shall be used by Selling Broker-Dealer or any Registered
Representatives unless the specific item has been approved in writing by CLAFS
and CLICA prior to use. Selling Broker-Dealer shall be provided, without any
expense to Selling Broker-Dealer, with prospectuses and other material
determined to be necessary for use relating to securities and insurance
regulated Contracts.
IV. COMPENSATION
A. COMMISSIONS AND FEES
Commissions and fees payable to Selling Broker Dealer in connection with the
securities and insurance regulated Contracts shall be paid on behalf of CLAFS by
CLICA to Selling Broker-Dealer, or as otherwise directed or required by law.
Selling Broker-Dealer shall pay Registered Representative. CLAFS will provide
Selling Broker-Dealer with a copy of CLICA's current Schedule I. Unless
otherwise provided in Schedule I, commissions will be paid as a percentage of
premiums or purchase payments (collectively, Payments) received in cash or other
legal tender and accepted by CLICA on applications obtained by the various
Registered Representatives appointed by Selling Broker-Dealer hereunder. Upon
termination of this Agreement, all compensation to the Selling Broker-Dealer
hereunder shall cease. However, Selling Broker-Dealer shall be entitled to
receive compensation for all new and additional premium payments which are in
process at the time of termination, and shall continue to be liable for any
chargebacks pursuant to the provisions of said Contracts, Commissions and Fee
Schedule, or for any other amounts advanced by or otherwise due CLAFS or CLICA
hereunder.
B. TIME OF PAYMENT
CLICA will pay any commissions due Selling Broker-Dealer hereunder no later than
within fifteen (15) days after the end of the calendar month in which Payments
upon which such commission is based are accepted by CLICA. Any commission
payable by CLICA based upon Account Value (defined as the sum of the Variable
Account Value and the Fixed Account Value) will be paid on or about the date of
the policy anniversary.
Effective 3/99
<PAGE> 5
C. AMENDMENT OF SCHEDULES
CLAFS and CLICA may, upon at least ten (10 ) days prior written notice to
Selling Broker-Dealer, change the Contracts, Commissions and Fee Schedule by
written amendment of such Schedule. Any such change shall apply to compensation
due on applications received by CLICA after the effective date of such notice.
D. PROHIBITION AGAINST REBATES
CLAFS or CLICA may terminate this Agreement if Selling Broker-Dealer or any
Registered Representative of Selling Broker-Dealer rebates, offers to rebate or
withholds any part of any Payments on the Contracts. If Selling Broker-Dealer or
any Registered Representative of Selling Broker-Dealer at any time induces or
endeavors to induce any owner of any Contract issued hereunder to discontinue
payments or to relinquish any such Contract, except under circumstances where
there is reasonable grounds for believing the Contract is not suitable for such
person, any and all compensation due Selling Broker-Dealer hereunder shall cease
and terminate.
E. INDEBTEDNESS AND RIGHT OF SET OFF
Nothing contained in this Agreement shall be construed as giving Selling
Broker-Dealer the right to issue any indebtedness on behalf of CLICA or CLAFS.
Selling Broker Dealer hereby authorizes CLICA as agent of CLAFS to set off
liabilities of Selling Broker-Dealer to CLICA or CLAFS against any and all
amounts otherwise payable to Selling Broker-Dealer.
V. GENERAL PROVISIONS
A. WAIVER
Failure of any party to insist upon strict compliance with any of the conditions
of this Agreement shall not be construed as a waiver of any of the conditions,
but the same shall remain in full force and effect. No waiver of any of the
provisions of this Agreement shall be deemed to be, or shall constitute, a
waiver of any other provisions, whether or not similar, nor shall any waiver
constitute a continuing waiver.
B. LIMITATIONS
No party other than CLICA shall have the authority to: 1) accept risks of any
kind; 2) make, alter, or discharge any Contract issued by CLICA; 3) waive any
forfeiture or extend the time of making any Payments; or 4) enter into any
proceeding in a court of law or before a regulatory agency in the name of or on
behalf of CLICA. No party other than CLAFS shall have the authority to: 1) alter
the forms or substitute other forms in place of those prescribed by CLAFS; or 2)
enter into any proceeding in a court of law or before a regulatory agency in the
name of or on behalf of CLAFS.
C. FIDELITY BOND AND OTHER LIABILITY COVERAGE
Selling Broker-Dealer hereby assigns any proceeds received from a fidelity
bonding company, error and omissions or other liability coverage to CLICA or
CLAFS, to the extent of their loss due to activities covered by the bond, policy
or other liability coverage. If there is any deficiency amount, whether due to a
deductible or otherwise, Selling Broker-Dealer shall promptly pay such amount on
demand. Selling Broker-Dealer hereby indemnifies and holds harmless CLICA and
CLAFS from any such deficiency and from the costs of collection thereof
(including reasonable attorneys' fees).
Effective 3/99
<PAGE> 6
D. BINDING EFFECT
This Agreement shall be binding on and shall inure to the benefit of the parties
to it and their respective successors and assigns provided that Selling
Broker-Dealer may not assign this Agreement or any rights or obligations
hereunder without the prior written consent of CLICA and CLAFS.
E. REGULATIONS
All parties agree to observe and comply with the existing laws and rules and
regulations of applicable local, state, and federal regulatory authorities and
with those which may be enacted or adopted during the term of this Agreement
regulating the business contemplated hereby in any jurisdiction in which the
business described herein is to be transacted. Selling Broker-Dealer shall
promptly furnish to CLICA and CLAFS or their agent, any reports and information
which the other party may reasonably request for the purpose of meeting their
reporting and recordkeeping requirements under the insurance laws of any state,
and under federal and state securities laws and rules of the NASD.
F. INDEMNIFICATION
1) CLAFS agrees to indemnify and hold harmless Selling Broker-Dealer, its
officers, directors and employees, against any and all losses, claims, damages
or liabilities to which they may become subject under the 1933 Act, the 1934
Act, or other federal or state statutory law or regulations, at common law or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact or any omission or alleged omission to state
a material fact required to be stated or necessary to make the statements made
not misleading in the registration statement for the Contracts or any prospectus
included as a part thereof, as from time to time amended and supplemented.
2) Selling Broker-Dealer agrees to indemnify and hold harmless CLAFS and CLICA,
their affiliates and their officers, directors, and employees, against any and
all losses, claims, damages or liabilities to which they may become subject
under the 1933 Act, the 1934 Act or other federal or state statutory law or
regulation, at common law or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof arise out of or are based upon: a)
any oral or written misrepresentation by Selling Broker-Dealer or its Registered
Representatives, officers, directors, employees or agents, unless such
misrepresentation is contained in the registration statement for the Contracts
or Fund shares, any prospectus included as a part thereof, as from time to time
amended and supplemented, or any advertisement or sales literature approved in
writing by CLICA and CLAFS pursuant to Section III, Paragraph H, of this
Agreement, or b) the failure of Selling Broker-Dealer or its Registered
Representatives, officers, directors, employees or agents to comply with any
applicable provisions of this Agreement.
3) If a Contract is not delivered to the Contract owner within 10 days of its
receipt by the Broker-Dealer and if after delivery the owner returns the
Contract to the Insurance Company and receives a full refund of all payments
made, in any situation where the failure to deliver in a timely manner was due
to the inaction or negligence of the Broker-Dealer or a Registered
Representative, the difference between the payments refunded and the cash value
of the Contract on the date the Contract is received by the Insurance Company at
its Principal Office shall be reimbursed to the Insurance Company by the
Broker-Dealer in any case where the cash value is less than the payments
refunded. Any such reimbursement shall be paid to the affected Insurance Company
within 30 days of receipt of a written request for payment.
G. NOTICES
All notices or communications shall be sent to the address shown in this
Agreement or to such other address as the party may request, by giving written
notice to the other parties.
Effective 3/99
<PAGE> 7
H. GOVERNING LAW
This Agreement shall be construed in accordance with and governed by the laws of
the State of Georgia.
I. AMENDMENT OF AGREEMENT
CLICA reserves the right to amend this Agreement in writing at any time. The
submission of an application for the Contracts by Selling Broker-Dealer five (5)
or more business days after notice of any such amendment has been sent to the
other parties shall constitute agreement to such amendment.
J. COMPLAINTS AND INVESTIGATIONS
Selling Broker-Dealer, CLICA and CLAFS agree to cooperate fully in the event of
any regulatory investigation, inquiry or proceeding, judicial proceeding or
customer complaint involving the Contracts. In furtherance of the foregoing: 1)
each party will notify all other parties of any such investigation, inquiry,
proceeding or complaint involving the Contracts or affecting the ability of a
party to perform pursuant to this Agreement within ten (10) days of obtaining
knowledge of the same; and 2) in the case of a customer complaint, the involved
parties will consult with each other prior to sending any written response with
respect to such complaint.
K. TERMINATION
This Agreement may be terminated, without cause, by any party upon thirty (30)
days prior written notice; and may be terminated, for cause, by any party
immediately; and shall be terminated if CLAFS or Selling Broker-Dealer shall
cease to be a registered broker-dealer under the Securities Exchange Act of 1934
and/or a member of the NASD.
L. ADDRESS FOR NOTICES
Address for Canada Life Insurance Company of America and Canada Life of America
Financial Services, Inc.:
6201 Powers Ferry Road, N.W.
Atlanta, Georgia 30339
Effective 3/99
<PAGE> 8
This Agreement shall be effective upon delivery by Selling Broker-Dealer of the
Agreement to, and execution by, CLICA or CLAFS.
<TABLE>
<CAPTION>
<S> <C>
Dated:
----------------------------------
Canada Life of America Financial Services, Inc. Canada Life Insurance Company of America
By: , President , President
-------------------------------------------------------- -----------------------------------------------
Amy Bard Ronald E. Beettam
Selling Broker-Dealer
By: Name
------------------------------------------------------------------- ----------------------------------------
Selling Broker-Dealer (Please Print) (Please Print)
Title
------------------------------------------------------------------- --------------------------------------
Signature (Please Print)
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
Address
</TABLE>
IMPORTANT - PLEASE COMPLETE THE FOLLOWING:
FOR VARIABLE ANNUITIES
- ----------------------
1. MAILING OF POLICIES: CLICA is directed to mail issued policies to
(SELECT ONE): If you do not make a selection, the policy will be sent
directly to the policyowner.
Policyowner Registered Representative's Business Address
-------- ---------
Broker/Dealer
--------
2. We DO/DO NOT (select one) want to allow our Registered Representatives the
opportunity to select commission options. (IMPORTANT NOTE. Please mark all
options below if you will allow this opportunity. If this question is not
answered but all boxes below are checked, or if this question is answered
in the affirmative but all boxes below are not checked, CLICA will still
allow the Registered Representative to select commission options on a case
by case basis. If this question is not answered and only one option below
is selected, CLICA will not allow Registered Representatives to choose the
commission option.)
____ Option A - 6.5% with no trails for issue ages 0-80.
____ Option B - 5% up front with trails of .25% per year beginning in the
5th quarter after receipt of premium.
____Option C - 1% of premium plus 1% annual trail based on account value.
Please SELECT one as default option (should Rep not make selection):
A B C
---------- ----------- --------------
If no selection is made, Option A will be the default option. See Schedule I for
commission at issue ages 81-90.
3. ADVANCES ON 1035 EXCHANGES AND/OR OTHER TRANSFERS:
(Check only if you do not wish to have this option - See Schedule I for
details.) We do not wish to offer commission advances.
------------
Effective 3/99
<PAGE> 9
FOR VARIABLE LIFE
4. Variable Life policies will be mailed to the registered representative.
5. We DO/DO NOT (select one) want to allow our Registered Representatives the
opportunity to select commission options. (IMPORTANT NOTE. Please mark all
options below if you will allow this opportunity. If this question is not
answered but all boxes below are checked, or if this question is answered
in the affirmative but all boxes below are not checked, CLICA will still
allow the Registered Representative to select commission options on a case
by case basis. If this question is not answered and only one option below
is selected, CLICA will not allow Registered Representatives to choose the
commission option.)
<TABLE>
<CAPTION>
Year 1 Years 2 - 10
- ------------------------ ------------------- --------------------------------------- ----------------------------------------
<S> <C> <C> <C> <C> <C>
Please Option <=Target Excess %Pmt Trail
check below
- ------------------------ ------------------- ------------------ -------------------- ------------------- --------------------
A 90% 4.0% 4.0% 0.00%
- ------------------------ ------------------- ------------------ -------------------- ------------------- --------------------
B 85% 3.5% 4.0% 0.10%
- ------------------------ ------------------- ------------------ -------------------- ------------------- --------------------
C 80% 3.0% 4.0% 0.20%
- ------------------------ ------------------- ------------------ -------------------- ------------------- --------------------
<CAPTION>
Years 11+
- ------------------------ ----------------------------------------
<S> <C> <C>
Please
check below %Pmt Trail
- ------------------------ ------------------- --------------------
3.0% 0.00%
- ------------------------ ------------------- --------------------
3.0% 0.10%
- ------------------------ ------------------- --------------------
3.0% 0.20%
- ------------------------ ------------------- --------------------
</TABLE>
Commissions are reduced over age 70. See Schedule I - Statement of
Compensation.
Please SELECT one as default option (should Rep not make selection):
A B C
- ----- ------ --------
If no selection is made, Option A will be the default option.
Effective 3/99
<PAGE> 10
EXHIBIT A
GENERAL LETTER OF RECOMMENDATION
Selling Broker-Dealer (We) hereby certifies to Canada Life Insurance Company of
America (CLICA) that all of the following requirements will be fulfilled in
conjunction with the submission of appointment papers for all applicants as
Registered Representatives submitted by Selling Broker-Dealer. We will, upon
request, forward proof of compliance with the same to CLICA in a timely manner.
1. We have made a thorough and diligent inquiry and investigation relative
to each applicant's identity, residence and business reputation and
declare that each applicant is personally known to us, has been examined
by us, is known to be of good moral character, has a good business
reputation, is reliable, is financially responsible and is worthy of an
appointment with CLICA. Each individual is trustworthy, competent and
qualified to act as an agent for CLICA to hold himself out in good faith
to the general public. We vouch for each applicant.
2. We have on file an NASD Form U-4 which was completed by each applicant.
We have fulfilled all of the necessary investigative requirements for
the registration of each applicant as a Registered Representative
through our NASD member firm, and each applicant is presently registered
as an NASD Registered Representative.
The above information in our files indicates no fact or condition which would
disqualify the applicant from receiving an appointment and all of the
findings of all investigative information is favorable.
3. We certify that, pursuant to 18 U.S.C. Section 1033 (the Violent Crime
Control and Law Enforcement Act of 1994), no Registered Representative
has ever been convicted of: a) any criminal felony involving dishonesty,
fraud or breach of trust; b) any offense under Section 1033; and/or c)
any other offense which would result in a violation of 18 U.S.C. Section
1033.
4. We certify that all present and continuing educational requirements have
been met for each specific state in which each applicant holds a
license, and that all such persons have fulfilled the appropriate
examination, education and training requirements.
5. If the applicant is required to submit his or her picture and signature
in the state in which he or she holds a license, We certify that those
items forwarded to CLICA are those of the applicant.
6. We certify that each applicant will receive close and adequate
supervision, and that We will make inspection when needed of any or all
risks written by these applicants, to the end that the insurance
interest of the public will be properly protected.
7. We will not permit any applicant to transact securities or insurance
business as an agent or Registered Representative until duly licensed
therefor. No applicants have been given a contract or furnished
supplies, nor have any applicants been permitted to write, solicit
business, or act as an agent or Registered Representative in any
capacity, with respect to the contracts issued by CLICA, and they will
not be so permitted until the appointment applied for is received.
8. We certify that Selling Broker-Dealer and applicant shall have entered
into a written agreement pursuant to which a) applicant is appointed a
Registered Representative of Selling Broker-Dealer; b) applicant agrees
that his or her selling activities relating to securities and insurance
regulated contracts shall be under the supervision and control of
Selling Broker-Dealer; and c) that applicant's right to continue to sell
such contracts is subject to his or her continued compliance with such
agreement and any procedures, rules or regulations implemented by
Selling Broker-Dealer.
Effective 3/99
<PAGE> 11
AMENDMENT TO SELLING AGREEMENT
NETWORKING ARRANGEMENTS
Subject to the terms and conditions of this Agreement, the Agreement is hereby
amended as follows.
Whereas Selling Broker-Dealer hereby certifies that it has made reasonable
efforts to obtain a corporate state license in the following states
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- ------------------------------------------------ ("the Applicable States"); and
Whereas Selling Broker-Dealer has encountered a legitimate and severe impediment
in procuring such a license in the Applicable States; and
Whereas Insurance Agency is organized under applicable state law and is licensed
with, and is regulated by, the appropriate state insurance regulatory authority
in the Applicable States;
Whereas Selling Broker-Dealer and Insurance Agency have executed an arrangement
("Networking Arrangement") whereby Insurance Agency agrees to engage in the
offer and sale of variable insurance products, and all securities services
provided in connection with the sale of variable insurance products will be
provided by Insurance Agency through persons who will be registered
representatives of Selling Broker-Dealer, in the Applicable States;
Selling Broker-Dealer and Insurance Agency hereby agree as follows:
1. Broker-Dealer authorizes CLAFS to direct the payment of all commissions
and fees generated in connection with the sale of variable insurance
products in the Applicable States by registered representatives of Selling
Broker-Dealer to Insurance Agency. Such payments will be issued to
Insurance Agency on behalf of Selling Broker-Dealer.
2. Insurance Agency agrees to be responsible for all tax reporting in
connection with such commissions and fees.
3. All terms and conditions of the Networking Arrangement fully comply with
federal and state law, and any and all notices, bulletins, letters or any
other materials published or distributed by the Securities and Exchange
Commission and/or the National Association of Securities Dealers governing
agreements between broker-dealers and insurance agencies.
4. Insurance Agency is not and will not hold itself out to be a
broker-dealer.
5. Neither Insurance Agency nor any employee or representative of Insurance
Agency is an employee of CLAFS or CLICA.
6. Selling Broker-Dealer agrees to indemnify and hold harmless CLAFS and
CLICA, their officers, directors and employees, against any and all
losses, claims, damages or liabilities to which they may become subject
under the 1933 Act, the 1934 Act, or other federal or state statutory law
or regulations, at common law or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon the payment of commissions and fees to Insurance
Agency.
<TABLE>
<CAPTION>
SELLING BROKER-DEALER: INSURANCE AGENCY:
- ---------------------- -----------------
<S> <C>
- ---------------------------------------------- ------------------------------------------------
Name of Selling Broker-Dealer (please print) Name of Insurance Agency (please print)
- ---------------------------------------------- ------------------------------------------------
Name and Title of signing Officer (please print) Name and Title of signing Officer (please print)
- ---------------------------------------------- ------------------------------------------------
Signature of signing Officer Signature of signing Officer
- ---------------------------------------------- -------------------------------------------------
Date Date
- ---------------------------------------------- -------------------------------------------------
President, Canada Life of America Financial President, Canada Life Insurance Company of America
Services, Inc.
</TABLE>
Effective 3/99
<PAGE> 12
AMENDMENT TO SELLING AGREEMENT
DESIGNATED PRINCIPAL ARRANGEMENT
Subject to the terms and conditions of this Agreement, the Agreement is hereby
amended as follows.
Whereas Selling Broker-Dealer hereby certifies that it has made reasonable
efforts to obtain a corporate state license in the following states
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
("the Applicable States"); and
Whereas Selling Broker-Dealer has encountered a legitimate and severe impediment
in procuring such a license in the Applicable States; and
Whereas Designated Principal is licensed with, and is regulated by, the
appropriate state insurance regulatory authority in the Applicable States;
Whereas Selling Broker-Dealer and Designated Principal have executed an
arrangement ("Designated Principal Arrangement") whereby Designated Principal
agrees to engage in the offer and sale of variable insurance products, and all
securities services provided in connection with the sale of variable insurance
products will be provided by Designated Principal through persons who will be
registered representatives of Selling Broker-Dealer, in the Applicable States;
Selling Broker-Dealer and Designated Principal hereby agree as follows:
1. Broker-Dealer authorizes CLAFS to direct the payment of all commissions
and fees generated in connection with the sale of variable insurance
products in the Applicable States by registered representatives of Selling
Broker-Dealer to Designated Principal. Such payments will be issued to
Designated Principal on behalf of Selling Broker-Dealer.
2. Designated Principal agrees to be responsible for all tax reporting
in connection with such commissions and fees.
3. All terms and conditions of the Designated Principal Arrangement fully
comply with federal and state law, and any and all notices, bulletins,
letters or any other materials published or distributed by the Securities
and Exchange Commission and/or the National Association of Securities
Dealers governing agreements between broker-dealers and insurance
agencies.
4. Designated Principal is not and will not hold itself out to be a
broker-dealer.
5. Neither Designated Principal nor any employee or representative of
Designated Principal is an employee of CLAFS or CLICA.
6. Selling Broker-Dealer agrees to indemnify and hold harmless CLAFS and
CLICA, their officers, directors and employees, against any and all
losses, claims, damages or liabilities to which they may become subject
under the 1933 Act, the 1934 Act, or other federal or state statutory law
or regulations, at common law or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon the payment of commissions and fees to Designated
Principal.
<TABLE>
<CAPTION>
SELLING BROKER-DEALER: DESIGNATED PRINCIPAL:
- ---------------------- ---------------------
<S> <C>
- ------------------------------------------------- ---------------------------------------------
Name of Selling Broker-Dealer (please print) Name of Designated Principal (please print)
- ------------------------------------------------- ---------------------------------------------
Name and Title of signing Officer (please print) Signature of Designated Principal
- ------------------------------------------------- ---------------------------------------------
Signature of signing Officer Date
- -------------------------------------------------
Date
- ------------------------------------------------- ---------------------------------------------
President, Canada Life of America . President, Canada Life Insurance Company
Financial Services, Inc of America
</TABLE>
Effective 3/99
<PAGE> 13
AMENDMENT TO SELLING AGREEMENT
NET COMMISSIONS
FOR VARIABLE ANNUITIES ONLY
Section III.G, Authority and Duties of Selling Broker-Dealer - Receipt of Money,
is hereby amended as follows:
As of the date of this Amendment, CLICA and CLAFS hereby permit the remittance
of all money payable in connection with any of the Contracts net of
Broker-Dealer concession as described in Schedule I, attached to said Selling
Agreement. The Selling Broker-Dealer agrees that in the event CLICA returns all
or a portion of a premium to a contract owner for any reason whatsoever, the
Selling Broker-Dealer will return the concession associated with such returned
premium to CLICA.
This Amendment can be terminated by CLICA or CLAFS by giving thirty (30) days
notice to Selling Broker-Dealer. However, termination of this Amendment does not
automatically terminate the Selling Agreement or any other amendments or addenda
then in effect.
<TABLE>
<CAPTION>
<S> <C>
Dated:
--------------------------------------
Canada Life of America Financial Services, Inc. Canada Life Insurance Company of America
By: , President , President
-------------------------------------------- ------------------------------------------------
Amy Bard Ronald E. Beettam
Selling Broker-Dealer
By: Name
----------------------------------------------------- -------------------------------------------------
Selling Broker-Dealer (Please Print) (Please Print)
Title
------------------------------------------------------ -------------------------------------------------
Signature (Please Print)
</TABLE>
Effective 3/99
<PAGE> 14
PRESTIGE VUL
SCHEDULE I - STATEMENT OF COMPENSATION
CANADA LIFE INSURANCE COMPANY OF AMERICA
AS OF JULY 1, 2000
Commissions are paid to Broker/Dealer in the percentages shown below:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Issue Ages 0-69 Policy year 1 Years 2-10
<target/ <target/
Option excess Trail excess Trail
- -------------------------------- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
A 90%/4.0% 0.00% 4.0/4.0 0.00%
- -------------------------------- ------------ ----------------------------------- ---------------------------
B 85%/3.5% 0.00% 4.0/4.0 0.10%
- -------------------------------- ------------ ----------------------------------- ---------------------------
C 80%/3.0% 0.00% 4.0/4.0 0.20%
- -------------------------------- ------------ ----------------------------------- ---------------------------
<CAPTION>
- ------------------------------------------------------------------------
Issue Ages 0-69 Years 11+
<target/
excess Trail
- ------------------------------------------------------------------------
<S> <C> <C>
3.0/3.0 0.00%
- ------------------------------------- ----------------------------------
3.0/3.0 0.10%
- ------------------------------------- ----------------------------------
3.0/3.0 0.20%
- ------------------------------------- ----------------------------------
Issue A Policy year 1
<target/
Option excess Trail
- ------------------------------------------------------------------------
<S> <C> <C> <C>
A 90%/3.0% 0.00%
- -------------------------------- ------------ --------------------------
B 85%/2.5% 0.00%
- -------------------------------- ------------ --------------------------
C 80%/2.0% 0.00%
- -------------------------------- ------------ --------------------------
Issue Ages 70-85 Years 2-10 Years 11+
<target/ <target/
Option excess Trail excess Trail
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
A 4.0/3.0 0.00% 3.0/3.0 0.00%
- -------------------------------- ---------------------- -------------------------------- ----------------------------------
B 4.0/3.0 0.10% 3.0/3.0 0.10%
- -------------------------------- ---------------------- -------------------------------- ----------------------------------
C 4.0/3.0 0.20% 3.0/3.0 0.20%
- -------------------------------- ---------------------- -------------------------------- ----------------------------------
</TABLE>
Notes:
1. Commission options are elected on a case by case basis unless otherwise
directed by the Broker/Dealer.
2. Targets are "rolling so that unpaid First Year Commission can be paid
on subsequent years up to target. Target premium (also called
basic premium) is determined for each unit of coverage based upon the
Company's current rate manual.
3. Excess premium commissions are payable on premium paid in excess of
target premium.
4. Trail commission rates shown are annual rates expressed as basis points
(bp) paid on unloaned policy value. Trail commissions are paid quarterly
after the first anniversary and will be paid with the next weekly
commission disbursement following the next commission cutoff after the
end of the calendar quarter following the policy anniversary and
following the end of each calendar quarter thereafter. Quarterly trail
commissions will be one fourth of the annual rate (shown above)
multiplied by the unloaned policy value. For purposes of trail commission
calculations, unloaned policy value means the cash value on the last day
of the calendar quarter immediately preceding the payment date less the
principal of any loan and accrued interest thereon.
5. Chargebacks - (i) In the event a policy is returned to Canada Life
Insurance Company of America ("CLICA") pursuant to a "Free Look"
provision, the full B/D Concession paid thereon or retained by Selling
Firm pursuant to net submission of premium or purchase payment shall be
charged back to the Selling Firm. (ii) Should any premium or purchase
payment on any policy issued by CLICA be refunded for any reason, Selling
Firm shall repay or return B/D Concession received by it with respect to
such premium or purchase payment. (iii) If a policy was not issued as a
result of failure of Selling Firm to submit to CLICA an application
sufficient to satisfy state insurance laws or CLICA's eligibility
requirements, then amounts paid to Selling Firm shall be returned or
repaid. (iv) If a policy was tendered to CLICA for redemption within 10
business days of the date of activity, then amounts paid to Selling Firm
shall be returned or repaid.
<PAGE> 15
Page 2
6. To the extent permitted by law, the amount so charged back may, at the
option of CLICA, be set off against B/D Concession otherwise due Selling
Firm. In addition, such other compensation will be payable as are from
time to time agreed by the parties to the foregoing Agreement and which
is in accordance with applicable law, and will be added to the schedule.
7. The rates of concession specified above and any rates of concession
otherwise determined by the company will be subject to change at any time
by the Company but no charge will affect the rates of concession in
connection with any policy effected herein for which the initial premium
was due prior to the effective date of such change. Any such changes of
concession will be binding upon the Broker/Dealer when the Company sends
notice thereof in writing to it and will take effect from the date
specified in such notice.
8. No commissions are payable on term insurance riders or other
insured riders.
9. Issue ages in commission table refer to age of insured.
<PAGE> 1
Exhibit 1.A.5.a
CANADA LIFE INSURANCE COMPANY OF AMERICA
GUARANTEED DEATH BENEFIT RIDER
This Rider is a part of the Policy to which it is attached if it is listed in
the Policy Details pages. The rider is issued in consideration of the payment of
the amount shown in the Policy Details pages.
While this Rider is in effect, the Policy will not lapse if the following tests
are met:
1. Within 48 months following the Date of Issue of this policy or any increase
in the face amount, the sum of Your payments less any outstanding loans,
partial withdrawals and withdrawal charges is greater than the Minimum
Monthly Payment multiplied by the number of months which have elapsed since
that date; and
2. On each Policy anniversary, (a) must exceed (b) where, since the date this
Policy was issued:
a) is the sum of Your payments less any partial withdrawals, partial
withdrawal charges and Outstanding Loan which is classified as a
preferred loan; and
b) is the sum of the minimum guaranteed death benefit payments. The
minimum guaranteed Death Benefit payment amount is shown on the
Policy Details pages or on new Policy Details pages in the event
of a Policy change. The minimum guaranteed Death Benefit payment
will be prorated in any year in which there is a Policy change.
If the Policy Value is less than the surrender charge on a Monthly Processing
Date, the monthly cost of insurance charge will be deducted from the Policy
Value. If the Policy Value is less than the monthly cost of insurance charge,
the entire Policy Value will be applied to this charge.
If this Rider is in effect on the Final Payment Date, a Death Benefit will be
provided while this Rider remains in force. The Death Benefit will be the Face
Amount as of the Final Payment Date or the Policy Value as of the date Due Proof
of Death is received by the Company, whichever is greater. Monthly cost of
insurance charges will not be deducted after the Final Payment Date if the
Policy qualifies for the Guaranteed Death Benefit.
The Guaranteed Death Benefit will end and may not be reinstated on the first to
occur of the following:
- foreclosure of an Outstanding Loan;
- the date on which the sum of Your payments does not meet or
exceed the applicable Guaranteed Death Benefit test;
- any policy change that results in a negative guideline level
premium; the effective date of a change from the Adjustable
Death Benefit Option to
- the Level Death Benefit Option if such change occurs within 5
Policy years of the Final Payment Date; or
- a request for a partial withdrawal or preferred loan is made
after the Final Payment Date.
It is possible that the Policy Value will not be sufficient to keep the Policy
in force on the first Monthly Processing Date following the date this Rider
terminates. The net amount payable to keep the Policy in force will never exceed
the surrender charge plus three Monthly Deductions.
IN WITNESS WHEREOF, the Company has, by its President and Secretary, executed
this rider at Atlanta, Georgia on the Date of Issue of this rider.
[SIG] [SIG]
Secretary President
CL1099-99 PAGE 1
<PAGE> 1
CANADA LIFE INSURANCE COMPANY OF AMERICA
DISABILITY WAIVER OF PAYMENT RIDER
This Rider is a part of the Policy to which it is attached if it is shown in the
Policy Details pages of the Policy. The Insured under the Policy is the insured
under this Rider.
BENEFIT
While the Insured is totally disabled, we will add to the Policy Vvalue the
waiver of payment benefit. This benefit is the larger of:
- the amount shown in the Policy Details pages; or
- the Minimum Monthly Payment for the Face Amount covered by this
Rider during a period when the Minimum Monthly Payment applies;
or
- the monthly cost of insurance charges applicable to the Face
Amounts and other riders covered by this Rider.
The waiver of payment benefit is subject to:
- - our receipt of due proof of such total disability; and
- - evidence the total disability:
- began while this Rider was in force;
- began before the policy anniversary nearest age 65;
- has continued for at least 4 months; and
- the other terms and conditions of this Rider.
The benefit will begin with the Policy month following the date total disability
begins or the Policy anniversary nearest age 5, if later. The benefit will not
be provided for any period more than one year prior to the date we receive
written notice of claim. We will credit the Policy Value with any benefit which
applies to the time during which benefits are payable.
Each monthly benefit will be allocated in accordance with the payment allocation
in effect on the date each benefit is credited to the Policy Value.
If the Insured's total disability occurs before the Policy anniversary nearest
age 60, the benefit will end when total disability ends. If the total disability
occurs on or after the Policy anniversary nearest age 60, the benefit will
continue during such total disability but not beyond the Policy anniversary
nearest age 65 or two years, whichever is longer.
Benefits will cease on the next Monthly Processing Date following the end of a
period of total disability.
DEFINITIONS OF TOTAL DISABILITY
Total disability means the insured is unable to engage in an occupation as a
result of disease or bodily injury. "Occupation" means attendance at school if
the Insured is not old enough to legally end his or her formal education.
Otherwise "occupation" means:
- during the first 60 months of disability, the occupation of the
Insured when such disability began; and
- thereafter, any occupation for which the Insured is or becomes
reasonably fitted by training, education or experience.
Total loss of the following as a result of disease or bodily injury shall be
deemed total disability:
- speech;
- hearing in both ears;
- the sight of both eyes;
- the use of both hands;
- the use of both feet; or
- the use of one hand and one foot.
CL1086-99 PAGE 1
<PAGE> 2
RISKS NOT COVERED
No benefit will be provided if total disability results, directly or indirectly,
from:
- an act of war, whether such war is declared or undeclared, and
the Insured is a member of the armed forces of a country or
combination of countries; or
- any bodily injury occurring or disease first manifesting itself
prior to the Date of Issue of this Rider.
However, no claim for total disability commencing after two years from the Date
of Issue will be denied on the ground that the disease or impairment not
excluded from coverage by name or specific description existed prior to the Date
of Issue of this Rider.
NOTICE AND PROOF OF CLAIM
Written notice of claim must be sent to our Principal Office:
- during the lifetime of the insured;
- while the insured is totally disabled; and
- not later than 12 months after this Rider
terminates.
Proof of claim must be sent to our Principal Office within 6 months of the
notice of claim. Failure to give notice and proof within the time required will
not void or reduce any claim if it can be shown that notice and proof were given
as soon as was reasonably possible.
Proof of continued total disability must be furnished at our request. Failure to
do so will end the benefit. Such proof will include an authorization to disclose
facts concerning the Insured's health, and may include medical exams of the
insured conducted by physicians chosen by Us. Such medical exams will be at our
expense. After total disability has continued for 24 months, proof will not be
required more than once a year, nor after the Policy anniversary nearest age 65.
BENEFIT CHANGES
The benefit may be changed on Written Request. Any increase is subject to:
- Evidence of Insurability;
- the Insured must be under age 60 and insurable according to Our
underwriting rules; and
- payment to Us of the amount needed to keep the Policy in force
if the Cash Surrender Value is less than all charges due on the
Policy.
No increases, when added to the existing benefit, shall exceed the following
limits:
MAXIMUM BENEFIT TABLE
MONTHLY BENEFIT
<TABLE>
<CAPTION>
PER $1,000/ FACE
ATTAINED AGE AMOUNT
<S> <C>
0-19 $1.00
20-29 1.25
30-39 2.00
40-49 3.00
50-54 4.00
55 and above 5.50
</TABLE>
The waiver of payment benefit will be reduced if it exceeds the maximum benefit
after the Face Amount of the Policy is reduced. The monthly benefit may not
exceed the amount shown in the Maximum Benefit Table.
The effective date of the changed benefit will be the first Monthly Processing
Date on or after the date all
CL1086-99 PAGE 2
<PAGE> 3
conditions are met. The changed benefit will be shown on supplementary Policy
Details pages. The charges for an increased benefit will be shown in a
Supplemental Cost of Insurance Charge Table if the Insured's Underwriting Class
changes.
INCONTESTABILITY
Except for failure to pay the monthly cost of insurance charges, this Rider
cannot be contested after the end of the following time periods:
- the initial benefit cannot be contested after the rider has been
in force during the insured's lifetime and without the occurrence
of the total disability of the insured for two years from the
Date of Issue; and
- an increase in the benefit cannot be contested after the
increased benefit has been in force during the Insured's lifetime
and without the occurrence of the total disability of the Insured
for two years from its effective date.
TERMINATION
This rider will terminate on the first to occur of:
- the end of the grace period of a Premium in default;
- the termination or maturity of the Policy;
- the day before the Policy anniversary nearest age 65, except as
provided in the Benefit provision; or
- the end of the Policy month following a request for termination.
RIDER CHARGE
Charges for this Rider are paid as a part of the monthly cost of insurance
charges due under the Policy. The monthly charge is the waiver charge shown in
the Cost of Insurance Charge Table multiplied by the greater of:
- the monthly cost of insurance charges applicable to the Face
Amount and other Riders covered by this Rider; or
- one-half of the waiver of payment benefit shown on the Policy
Details pages.
GENERAL
The Policy Details pages will show the Date of Issue of this Rider.
When an increase in Face Amount or an additional Rider is applied for, waiver of
payment coverage must also be requested. We reserve the right to decline
issuance of the waiver of payment coverage for the increased Face Amount or
additional Rider benefit.
If total disability begins during the grace period of a past due Premium, such a
Premium will be payable.
The waiver of payment benefit will not reduce any amount payable under the
Policy.
Except as otherwise provided, all conditions and provisions of the Policy apply
to this Rider.
[SIG] [SIG]
Secretary President
CL1086-99 PAGE 3
<PAGE> 1
Exhibit 1.A.5.c
CANADA LIFE INSURANCE COMPANY OF AMERICA
TERM LIFE INSURANCE RIDER
DESCRIPTION
This Rider is part of the Policy to which it is attached if it is shown in the
Policy Details pages of the Policy. The Insured under this Rider is shown on the
Term Insurance Schedule Page.
BENEFIT
We will pay the term insurance upon receipt of due proof that the Insured died
prior to the term expiry date, while the Rider is in force. Unless otherwise
requested, the term insurance benefit will be paid to the same Beneficiary who
receives the Policy's Net Death Benefit.
The amount of the term insurance benefit may vary. The benefit will be
determined on each Monthly Processing Date while the Rider is in force. The term
insurance benefit amount will be the lesser of:
- the term insurance amount (as shown in the Term Insurance
Schedule Page); or
- the term insurance amount less the excess of the minimum Death
Benefit of the Policy over the Policy Face Amount (plus the
Policy Value if the Death Benefit Option 2 is in effect).
The Term Insurance Schedule Page will display the following information:
- the name and Age of the Insured;
- the term insurance amount;
- the Date of Issue of the term insurance; and
- the term expiry date.
CHANGE PROVISIONS
You may decrease the amount of term insurance if the request is made:
- during the lifetime of the Insured; and
- in writing while the Policy and term Rider are in force
A request to decrease the amount of term insurance will be effective on the
Monthly Processing Date following the date of the Written Request. A
supplemental Term Insurance Schedule will be issued. The schedule will include
the following information:
- effective date of the decrease in amount of term insurance;
- the amount of the decrease in term insurance; and
- the remaining term insurance amount.
The Company reserves the right to establish a minimum limit for the amount of
any decrease.
INCONTESTABILITY
Except for failure to pay Premiums, this Rider cannot be contested after the
term insurance has been in force during the Insured's lifetime for two years
from the Date of Issue.
SUICIDE EXCLUSION
We will not pay the term insurance amount if the Insured commits suicide, while
sane or insane within two years from the Date of Issue of this Rider. Instead,
We will only be liable for the amount of term cost of insurance charges paid.
FORM NO. CL1103-99 PAGE 1
<PAGE> 2
MISSTATEMENT OF AGE OR SEX
If the Age or sex of the Insured is misstated, the amount payable under this
Rider will be such that the charges paid on the last Monthly Processing Date
would have purchased at the Insured's correct Age or sex. No adjustment will be
made if the Insured's Underwriting Class is unisex and there has been a
misstatement of sex.
CHARGES
The monthly term cost of insurance charge will be the term Rider benefit amount
as of the current Monthly Processing Date, divided by 1,000 and multiplied by
the term insurance rate shown in the Term Insurance Schedule.
Charges for this Rider are payable as part of the Monthly Deduction due under
this Policy.
The maximum term charges for each year are shown in the Term Insurance Schedule
page. The maximum term charges are based on:
- the 1980 Commissioners Standard Ordinary Mortality Table, Male,
Female or Table B for unisex risks (Smoker or Non-smoker versions
of these tables are used if the Insured is over age 17 year of
age on the date of issue), and
- the appropriate increases in such tables for rated risks.
TERMINATION
This Rider will terminate on the first to occur of:
- the end of the grace period; or
- the termination or maturity of the Policy; or
- the Monthly Processing Date following a request for termination;
or
- the term expiry date.
GENERAL
The Term Insurance Schedule page will show the Date of Issue of this Rider.
Except as otherwise provided, all conditions and provisions of the Policy apply
to this Rider.
[SIG] [SIG]
Secretary President
FORM NO. CL1103-99 PAGE 2
<PAGE> 3
TERM INSURANCE SCHEDULE
YOUR MONTHLY TERM COST OF INSURANCE CHARGES ARE GUARANTEED
NEVER TO GO HIGHER THAN THE FOLLOWING:
<TABLE>
<S> <C> <C> <C>
Insured's Name: John Doe Date of Issue: 11/15/1999
Term Insurance Amount: $50,000 Term Expiry Date: 11/15/2063
</TABLE>
<TABLE>
<CAPTION>
COST OF INSURANCE COST OF COST OF INSURANCE INSURANCE
AGE RATE PER AGE RATE PER AGE RATE PER
$1,000 $1,000 $1,000
<S> <C> <C> <C> <C> <C>
35 0.141 60 1.061 85 13.556
36 0.148 61 1.171 86 14.918
37 0.157 62 1.296 87 16.344
38 0.167 63 1.439 88 17.808
39 0.179 64 1.602 89 19.333
40 0.191 65 1.781 90 20.942
41 0.206 66 1.975 91 22.668
42 0.221 67 2.186 92 24.577
43 0.239 68 2.412 93 26.764
44 0.256 69 2.660 94 29.637
45 0.277 70 2.941 95 33.931
46 0.300 71 3.313 96 41.279
47 0.324 72 3.631 97 56.040
48 0.350 73 4.058 98 83.333
49 0.379 74 4.541 99 83.333
50 0.410 75 5.063
51 0.447 76 5.622
52 0.490 77 6.214
53 0.538 78 6.833
54 0.593 79 7.496
55 0.654 80 8.230
56 0.723 81 9.054
57 0.795 82 9.997
58 0.873 83 11.073
59 0.962 84 12.267
</TABLE>
<PAGE> 1
Exhibit 1.A.5.d
CANADA LIFE INSURANCE COMPANY OF AMERICA
OTHER INSURED TERM INSURANCE RIDER
This Rider is a part of the Policy to which it is attached if it is shown in the
Policy Details pages of the Policy. The Insured under the Policy is the Insured
under this Rider. "Other Insured" is each person other than the Insured who is
insured under this Rider.
BENEFIT
BENEFIT
We will provide term insurance on the life of each "other insured" for whom an
"other insured" Policy Details pages are issued. We will pay the term insurance
benefit upon receipt of due proof that an "other insured" died prior to his or
her term insurance expiry date while this Rider is in force. Unless otherwise
requested, the term insurance benefit will be paid to you.
Other Insured Policy Details pages show for each "other insured":
- the name and Age;
- the administrative charge, if any;
- the term insurance benefit;
- the Date of Issue of the term insurance; and
- the term insurance expiry date
BENEFIT CHANGE PROVISIONS
CHANGE PROVISIONS
You may change the amount of term insurance with respect to each "other insured"
if such request is made:
- during the lifetime of the "other insured"; and
- on Written Request while this Policy is in force.
INCREASE
To increase the amount of term insurance, You and the "other insured" must
complete the application and provide Us with the following:
- Evidence of Insurability;
- the "other insured" must be under age 81; and
- the "other insured" must be approved by us according to our
underwriting rules;
- You must pay us a $50 transaction charge, plus the amount needed
to keep the Policy in force if the Cash Surrender Value is less
than this amount.
The increased amount of term insurance will become effective on the first
Monthly Processing Date on, or following, the date all the conditions are met.
Supplemental Other Insured Policy Details pages will be issued. This page will
include the following information:
- the name of the "other insured";
- the Date of Issue of the increased term insurance;
- the amount of the increase in the term insurance, and
- Minimum Monthly Payment, guideline Premiums and charges.
No increase may be less than our minimum limit in effect on the date of the
request.
FORM NO. CL1088-99 PAGE 1
<PAGE> 2
DECREASE
You may decrease the amount of term insurance on an "other insured" at any time.
It will be effective on the Monthly Processing Date after we receive Your
Written Request. Such term insurance will be decreased or eliminated in the
following order:
- first, the most recent increase;
- second, the next most recent increases successively; and
- last, the original amount of term insurance.
Supplemental Other Insured Policy Details pages issued will include the
following information:
- the name of the "other insured";
- the effective date of the decrease; and
- the amount of the decrease and the benefit remaining in force.
-
Term insurance on an "other insured" may not be reduced to less than
our minimum issue limit.
We reserve the right to establish a minimum limit for the amount of any
decrease.
CONVERSION
CONVERSION
You may convert the insurance on the life of an "other insured" if such request
is made:
- prior to the "other insured's" Age 71;
- while the "other insured" is alive; and
- while this Rider is in force.
Evidence of Insurability will not be required.
NEW POLICY DESCRIPTION
The new Policy will be a flexible premium variable life insurance Policy. The
new Policy will be issued:
- on the life of an "other insured" only;
- for the same Underwriting Class which applies to the "other
insured" under this Rider; and
- at the "other insured's" Age and for the cost of insurance rates
in use on the Date of Issue of the new Policy.
The Date of Issue of the new Policy will be the Monthly Processing Date
following the date conversion is requested and the first Premium is paid. Term
insurance for the "other insured" ends when coverage under the new Policy
begins.
The Net Death Benefit may not be less than our minimum issue limit. The Net
Death Benefit may not exceed the term insurance benefit in effect on the date
conversion is requested.
Riders will be available on the new Policy subject to Evidence of Insurability
and Our consent. The time periods of the suicide and incontestability provisions
of the new Policy will expire on the same date as such provisions in this Rider
would have expired. The new Policy will be subject to any assignments
outstanding against this Rider.
GENERAL
OWNER
You are the owner of this Rider. However, if You are the Insured and at the time
of Your death there is no contingent owner named, each "other insured" will
become the owner of the term insurance on his or her life.
FORM NO. CL1088-99 PAGE 2
<PAGE> 3
CONVERSION FOLLOWING INSURED'S DEATH
If the Insured dies while the Policy and Rider are in force, the owner may
convert any "other insured" insurance within 90 days after the Insured's death.
Conversion is subject to the conversion provisions. Term insurance will continue
on the life of each covered "other insured" during the conversion period. This
term insurance will begin on the date of the Insured's death and will end on the
first to occur of:
- the expiration of the conversion period; or
- the date of issue of the conversion Policy.
OUR RIGHT TO CONTEST THE RIDER IS LIMITED
We cannot contest the initial term insurance benefit if this Rider has been in
force for two years from the date it is issued, and the "other insured" is alive
at the end of this two-year period.
If the term insurance benefit is increased or the Underwriting Class is changed
at Your request, We cannot contest the increase or change after it has been in
force for two years from its effective date and the "other insured" is alive.
SUICIDE EXCLUSION
If an "other insured", while sane or insane, commits suicide within two years of
the date this Rider is issued, We will not pay a death benefit. The beneficiary
will receive only the total amount of payments made to Us for the term insurance
on the life of the "other insured" who committed the suicide. If the term
insurance benefit is increased at Your request, and then an "other insured"
commits suicide within two years, while sane or insane, We will not pay the
increased amount. Instead the beneficiary will receive the administrative charge
and charges paid for this increase, plus any Net Death Benefit otherwise
payable.
MISSTATEMENT OF AGE
If the Age of an "other insured" is not correctly stated, We will adjust the
amount We will pay under this Rider the amount will be the term insurance
benefit that would have been purchased by the last monthly charge for this Rider
using the correct Age.
CHARGES
Charges for this Rider are paid as a part of the monthly cost of insurance
charge due under the Policy.
The maximum charges for each "other insured" are shown in each "Other lnsured's"
Policy Details Pages. There may be no more than five "other insured's" under
this Rider.
TERMINATION
This Rider will terminate on the first to occur of:
- the end of the grace period of a Premium in default;
- the termination or maturity of the Policy; or
- the Monthly Processing Date following a request for termination.
Term insurance for each "other insured" will terminate on that "other insured's"
term expiry date.
GENERAL
The Policy Details pages (of the Policy) will show the Date of Issue of this
Rider. Except as otherwise provided, all conditions and provisions of the Policy
apply to this Rider.
[SIG] [SIG]
Secretary President
FORM NO. CL1088-99 PAGE 3
<PAGE> 1
Exhibit 1.A.5.e
CANADA LIFE INSURANCE COMPANY OF AMERICA
ACCELERATED DEATH BENEFIT OPTION RIDER
This Rider is a part of the Policy to which it is attached. The Insured under
this Rider is the Insured under the Policy. This Rider does not apply to any
benefits provided by Rider.
BENEFIT
While this Rider is in force, You may elect to receive a portion of the Net
Death Benefit, called the "living benefit," prior to the Insured's death under
either the terminal illness option or the nursing home option, subject to the
definitions, conditions and limitations in this Rider. This option may only be
exercised once.
DEFINITIONS
"Option amount" means that portion of the Death Benefit which You elect to apply
under this option.
"Option percentage" is the option amount divided by the Death Benefit.
"Living benefit" is the option amount which has been reduced for interest and
other factors. It is equal to the lump sum benefit under this Rider, and is the
amount used to determine the monthly benefit. The living benefit will not be
less than the Cash Surrender Value of the Policy multiplied by the option
percentage. The following factors will be used to calculate the living benefit:
- Age;
- sex, unless the Policy is issued on a unisex basis;
- life expectancy;
- Policy Value;
- Outstanding Loan;
- rate of interest currently being credited to the Fixed
Account, including those values which are subject to
Outstanding Loan;
- Face Amount;
- Death Benefit option;
- current cost of insurance charges;
- administrative charges; and
- an expense charge not to exceed $500.
An amount equal to the Outstanding Loan multiplied by the option percentage will
be deducted from the living benefit. The remaining Outstanding Loan will
continue in force.
The assumptions We use to calculate the living benefit may change from time to
time. The factors used to compute the living benefit will be set and changed
only prospectively; that is, based on changes in future expectations. We will
not change these factors to recoup any prior losses or distribute past gains
under the Rider.
"Eligible nursing home" means an institution or special nursing unit of a
hospital which meets at least one of the following requirements:
I. it is Medicare - approved as a provider of skilled nursing care
services;
II. it is licensed as a skilled nursing home or as an intermediate care
facility by the state in which it is located; or
III. it meets all the requirements listed below:
- it is licensed as a nursing home by the state in which it is
located;
- its main function is to provide skilled, intermediate or
custodial nursing care;
- it is engaged in providing continuous room and board
accommodations to 3 or more persons;
- it is under the supervision of a registered nurse (RN) or
licensed practical nurse (LPN);
- it maintains a daily medical record of each patient; and
- it maintains control and records for all medications
dispensed.
Institutions which primarily provide residential facilities are not eligible
nursing homes.
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"Proof of claim satisfactory to Us" shall include:
- a request signed by the insured to disclose all facts
concerning the insured's health;
- records of the attending physician, including a prognosis of
the Insured; and
- if We request, a medical examination of the Insured at our
expense conducted by a physician We choose.
CONDITIONS
Upon written request You may elect to receive payment under one of the
accelerated Death Benefit options subject to the following conditions:
- the Policy is in force;
- a written consent has been given by any collateral assignee,
irrevocable beneficiary and the Insured if You are not the
Insured; and
- the Insured qualifies for the option You elect.
TERMINAL ILLNESS OPTION
If You provide proof of claim satisfactory to Us that the insured's life
expectancy is 12 months or less, You may elect to receive equal monthly payments
for 12 months. For each $1,000 of living benefit, each payment will be at least
$85.21. This assumes an annual interest rate of 5%.
If the Insured dies before all the payments have been made, We will pay the
Beneficiary in one sum the present value of the remaining payments due under
this Rider calculated at the interest rate We use to determine those payments.
If You do not wish to receive monthly payments, You may elect to receive an
amount equal to the living benefit in a lump sum.
NURSING HOME OPTION
If (1) the Insured is confined to an eligible nursing home and has been confined
there continuously for the preceding six months; and (2) You provide proof of
claim satisfactory to Us that the Insured is expected to remain in the nursing
home until death, You may elect level monthly payments for the number of years
shown in the table that follows. For each $1,000 of living benefit, each payment
will be at least the minimum amount shown in that table. The table assumes an
annual interest rate of 5%.
If the Insured dies before all the payments have been made, We will pay the
Beneficiary in one sum the present value of the remaining payments due under
this Rider calculated at the interest rate We use to determine those payments.
You may elect a longer payment period than that shown in the table. If You do,
monthly payments will be reduced so that the present value of the monthly
payments for the longer payment period is equal to the present value of the
payments for the period shown in the table, calculated at an interest rate of at
least 5%.
<TABLE>
<CAPTION>
Payment Period in Years Minimum Monthly Payment For Each $1,000 Of Living Benefit
<S> <C>
1 $85.21
2 $43.64
3 $29.80
4 $22.89
5 $18.74
6 $15.99
7 $14.02
8 $12.56
9 $11.42
10 $10.51
11 $9.77
12 $9.16
13 $8.64
</TABLE>
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<TABLE>
<S> <C>
14 $8.20
15 $7.82
16 $7.49
17 $7.20
18 $6.94
19 $6.71
20 $6.51
21 $6.33
22 $6.17
23 $6.02
24 $5.88
25 $5.76
26 $5.65
27 $5.54
28 $5.45
29 $5.36
30 $5.28
</TABLE>
We reserve the right to set a maximum monthly benefit, which will not be less
than $5,000.
If You do not wish to receive monthly payments, You may elect to receive a
single sum equal to the living benefit.
EFFECT ON POLICY
The Policy's Death Benefit will be decreased by the option amount. Such decrease
will be effective on the Monthly Processing Date following the date of the
Written Request. Existing insurance will be decreased or eliminated in the
following order:
- first, the most recent increase;
- second, the next most recent increases successively; and
- last, the initial Face Amount.
Surrender charge applicable to the decrease in the Face Amount will be waived.
The amount of the charge which is waived will be:
- the surrender charge applicable to any increased Face Amount
which is eliminated in the order set forth above; plus
- a Pro-rata share of the surrender charge applicable to a
partial reduction in an increase or in the original Face
Amount.
New Policy Details pages will be issued. These pages will include the following
information:
- the effective date of the decrease;
- the amount of the decrease and the benefit remaining in
force;
- the revised surrender charge;
- the revised minimum monthly factor, if any; and
- the new guideline premiums.
The Policy Value will be reduced in the same proportion as the reduction in the
Death Benefit. Riders will continue in force.
FIRST TO DIE POLICY
The following provisions apply if this Rider is attached to a First to Die
Flexible Premium Adjustable Life Insurance Policy: The "Insured" shall mean the
first insured to qualify for benefits under this Rider. No additional living
benefits will be provided if other Insureds qualify prior to the death of the
first insured to die. If the first to die under the Policy is not the first
insured to qualify under this Rider, the Net Death Benefit as adjusted by this
Rider will be paid to the beneficiary of the Policy and payment of the living
benefit will continue as provided in this Rider.
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EXCLUSION
No benefit will be paid under this Rider if a claim results, directly or
indirectly, from a suicide attempt or a self-inflicted injury (while sane or
insane) for any period during which a suicide exclusion is applicable.
TERMINATION
This Rider will terminate on the first to occur of:
- the end of the grace period of a Premium in default; or
- the termination or maturity of the Policy while the insured
is alive; or
- at any time on Your Written Request.
GENERAL
The Policy Details pages will show the Date of Issue of this Rider.
The living benefit will be made available to You on a voluntary basis only.
Accordingly:
- If You are required by law to exercise this option to satisfy
the claim of creditors, whether in bankruptcy or otherwise,
You are not eligible for this benefit.
- If You are required by a government agency to exercise this
option in order to apply for, obtain, or retain a government
benefit or entitlement, You are not eligible for this
benefit.
Except as otherwise provided, all conditions and provisions of the Policy apply
to this Rider.
[SIG] [SIG]
Secretary President
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<PAGE> 1
Exhibit 3
May 1, 2000
Board of Directors
Canada Life Insurance Company of America
6201 Powers Ferry Road, NW
Atlanta, GA 30339
RE: CANADA LIFE INSURANCE COMPANY OF AMERICA
CANADA LIFE OF AMERICA VARIABLE LIFE ACCOUNT 1
FILE NOS. 333-90449/811-09667
Directors:
I have acted as legal officer to Canada Life Insurance Company of America (the
"Company") and Canada Life of America Variable Life Account 1 (the "Account") in
connection with the registration of an indefinite amount of securities in the
form of variable life insurance policies (the "Policies") with the Securities
and Exchange Commission under the Securities Act of 1933, as amended. I have
examined such corporate records and other documents, including pre-effective
amendment number one to the Form S-6 registration statement for the Policies
(File No. 333-90449) and reviewed such questions of law as I considered
necessary and appropriate, and on the basis of such examination and review, it
is my opinion that:
1. The Company is a corporation duly organized and validly existing as a
stock life insurance company under the laws of the State of Michigan and
is duly authorized by the Department of Insurance of the State of
Michigan to issue the Policies.
2. The Account is a segregated asset account duly established and
maintained by the Company pursuant to the provisions of the Michigan
Insurance Code.
3. The assets of the Account are and will be owned by the Company. To the
extent so provided under the Policies, that portion of the assets of the
Account equal to the reserves and other contract liabilities with
respect to the Account will not be chargeable with liabilities arising
out of any other business that the Company may conduct.
4. The Policies have been duly authorized by the Company and, when issued
as contemplated by the registration statement for the Policies in
jurisdictions authorizing such sales, will constitute legal, validly
issued and binding obligations of the Company.
I hereby consent to the filing of this opinion as an exhibit to the Form S-6
registration statement for the Policies and the Account.
Sincerely,
/s/ CRAIG EDWARDS
Craig Edwards, Assistant Secretary
<PAGE> 1
Exhibit 6
May 1, 2000
Board of Directors
Canada Life Insurance Company of America
6201 Powers Ferry Road, NW
Atlanta, GA 30339
RE: CANADA LIFE INSURANCE COMPANY OF AMERICA
CANADA LIFE OF AMERICA VARIABLE LIFE ACCOUNT 1
FILE NOS. 333-90449/811-09667
Directors:
In my capacity as actuary to Canada Life Insurance Company of America (the
"Company"), I have provided actuarial advice concerning and participated in the
design of the Company's flexible premium variable life insurance policies (the
"Policies"). I have also provided actuarial advice concerning the preparation of
pre-effective amendment number one to the Form S-6 registration statement for
the Policies (File No. 333-90449) and Canada Life of America Variable Life
Account 1 (the "Account") in connection with the registration of an indefinite
amount of securities in the form of such Policies with the Securities and
Exchange Commission under the Securities Act of 1933, as amended.
It is my professional opinion that:
1. The illustrations of death benefits, policy values, and accumulated
payments in Appendix D of the prospectus included in the registration
statement for the Policies (the "Prospectus"), based on the assumptions
stated in the illustrations, are consistent with the provisions of the
Policies. The rate structure of the Policies has not been designed so as
to make the relationship between premiums and benefits, as shown in the
illustrations, appear correspondingly more favorable to prospective
purchasers of Policies ages 35 and 45 in the underwriting classes
illustrated than to prospective purchasers of Policies at other ages and
underwriting classes.
2. The Prospectus information contained in the examples illustrating
the calculation of death benefits under different death benefit options
are consistent with the provisions of the Policies.
3. The maximum monthly expense charges, as set forth per $1000 of face
amount in Appendix G of the Prospectus, as well as the computation of
such charges, are consistent with the provisions of the Policies, and
accurately depict actual monthly expense charges deducted under the
Policies.
I hereby consent to the filing of this opinion as an exhibit to the Form S-6
registration statement for the Policies and the Account.
Sincerely,
/s/ PAUL MYERS
Paul Myers, FSA, MAAA Actuary
<PAGE> 1
EXHIBIT 7
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Financial
Statements" and to the use of our report dated February 4, 2000 with respect to
the statutory-basis financial statements of Canada Life Insurance Company of
America, in Pre-Effective Amendment No. 1 to the Registration Statement (Form
S-6 No. 333-90449) and related Prospectus of Canada Life of America Variable
Life Account I dated May 15, 2000.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Atlanta, Georgia
April 28, 2000
<PAGE> 1
Exhibit 8
Description of Issuance, Transfer and Redemption Procedures for Policies
Offered by the Canada Life of America Variable Life Account 1
of Canada Life Insurance Company of America
Pursuant to Rule 6e-3(T)(b)(12)(ii)
under the Investment Company Act of 1940
The Canada Life of America Variable Life Account 1 ("Variable Account") of
Canada Life Insurance Company of America ("Company") is registered under the
Investment Company Act of 1940 ("1940 Act") as a unit investment trust. There
are currently 26 Sub-Accounts within the Variable Account. Procedures apply
equally to each Sub-Account and for purposes of this description are defined in
terms of the Variable Account, except where a discussion of both the Variable
Account and the individual Sub-Accounts is necessary. Each Sub-Account invests
in shares of a corresponding investment division of The Alger American Fund
("Alger American"), Berger Institutional Products Trust ("Berger Trust"), the
Dreyfus Socially Responsible Growth Fund, Inc. ("Dreyfus Socially Responsible"),
Dreyfus Variable Investment Fund ("Dreyfus"), Fidelity Variable Insurance
Products Fund ("Fidelity VIP"), Fidelity Variable Insurance Products Fund II
("Fidelity VIP II"), Fidelity Variable Insurance Products Fund III ("Fidelity
VIP III"), Goldman Sachs Variable Insurance Trust ("Goldman Sachs VIT"), The
Montgomery Funds III, ("Montgomery"), or Seligman Portfolios, Inc. ("Seligman"),
each of which is a "series" type of mutual fund registered under the 1940 Act.
The investment experience of a Sub-Account of the Variable Account depends on
the market performance of its corresponding investment division of Alger
American, Berger Trust, Dreyfus Socially Responsible, Dreyfus, Fidelity VIP,
Fidelity VIP II, Fidelity VIP III, Goldman Sachs VIT, Montgomery, or Seligman.
Although flexible premium variable life insurance policies funded through the
Variable Account may also provide for fixed benefits supported by the Company's
Fixed Account, this description assumes that net premiums are allocated
exclusively to the Variable Account and that all transactions involve only the
Sub-Accounts of the Variable Account, except as otherwise explicitly stated
herein.
I. "Public Offering Price": Purchase and Related Transactions -- Section
22(d) and Rule 22c-l
This section outlines Policy provisions and administrative procedures which
might be deemed to constitute, either directly or indirectly, a "purchase"
transaction. Because of the insurance nature of the policies, the
procedures involved necessarily differ in certain significant respects from
the purchase procedures for mutual funds and annuity plans. The chief
differences revolve around the structure of the cost of insurance charges
and the insurance underwriting process. Certain Policy provisions, such as
reinstatement and loan repayment, do not result in the issuance of a Policy
but require certain payments by the Policy Owner and involve a transfer of
assets supporting Policy reserve into the Variable Account.
a. Insurance Charges and Underwriting Standards
Premium payments are not limited as to frequency and number, but there
are limitations as to amount. No premium payment may be less than $100
without the Company's consent ($50 if premiums are paid pursuant to an
electronic funds transfer agreement), and the total of all premiums
paid can never exceed the then current maximum premiums determined by
Internal Revenue Service rules. If at any time a premium is paid which
would result in total premiums exceeding the current maximum premium
limitations, the Company will return the
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<PAGE> 2
amount in excess of such maximums to the Policy Owner.
The Policy will remain in force so long as the Policy value less any
Outstanding Loan is sufficient to pay certain monthly charges imposed
in connection with the Policy. Cost of insurance charges for the
policies will not be the same for all Policy Owners. The Owner pays a
cost of insurance charge commensurate with the Insured's mortality
risk, which is actuarially determined based upon factors such as age,
health and occupation. Because a uniform mortality charge (the "cost of
insurance charge") for all Insured's would discriminate unfairly in
favor of those Insured's representing greater mortality risks to the
disadvantage of those representing lesser risks, the Company assesses a
different "price" for each actuarial category of Policy Owners in the
form of different cost of insurance rates. While not all Policy Owners
will be subject to the same cost of insurance rate, there will be a
single "rate" for all Policy Owners in a given actuarial category. The
Policies will be offered and sold pursuant to the Company's
underwriting standards and in accordance with state insurance laws.
Such laws prohibit unfair discrimination among Insureds, but recognize
that premiums must be based upon factors such as age, health and
occupation. Tables showing the maximum cost of insurance charges will
be delivered as part of the Policy.
b. Application and Initial Premium Processing
Upon receipt of a completed application from a prospective Policy
Owner, the Company will follow the following underwriting
procedures designed to determine whether the proposed Insured is
insurable. This process involves such verification procedures as
medical examinations and may require that further information be
provided by the proposed Policy Owner before a determination can
be made. A Policy cannot be issued until this underwriting
procedure has been completed.
If at the time of application a prospective Policy Owner makes a
payment equal to at least one minimum monthly payment (i.e., an
amount shown in the Policy which, if paid each month, guarantees
that the Policy will not lapse before the 49th monthly processing
date from the date of issue or increase in face amount, within
limits) for the Policy as applied for, the Company will provide
fixed conditional insurance in the amount of insurance applied
for, up to a maximum of $500,000, depending on age and
underwriting class, pending underwriting approval. This coverage
will continue for a maximum of 90 days from the date of the
application, and if required, the completed medical exam. If the
application is approved, the Policy will be issued 3 days after
the date on which completion of underwriting occurs If the
prospective Policy Owner does not wish to make any payment until
the Policy is issued, upon delivery of the Policy the Company will
require payment of sufficient premium to place the insurance in
force.
Pending completion of insurance underwriting and Policy issuance
procedures, the initial premium will be held in the Company's
Fixed Account. If the application is approved and the Policy is
issued and accepted, the initial premium held in the Fixed Account
will be credited with interest not later than the date of receipt
of the premium at the Company's Variable Life Service Center. If a
Policy is not issued, the premiums will be returned to the
Applicant without interest.
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<PAGE> 3
If the application is approved and the Policy is issued and
accepted, upon acceptance of the Policy the Company generally
allocates Policy Value according to the Policy Owner's
instructions. However, if the Policy provides for a full refund of
payments under its "Right to Examine Policy" provision as required
in certain states and described below under Section II(g), the
Company will initially allocate Sub-Account investments to the
Money Market Sub-Account. The allocation to the Money Market
Sub-Account will be for four days after the expiration of the
"Right to Examine" provision of the Policy. Generally, this will
be for 14 days from acceptance of the Policy (based on a 10 day
"Right to Examine" period).
These processing procedures are designed to provide insurance,
starting with the date of the application, to the proposed Policy
Owner in connection with payment of the initial premium and will
not dilute any benefit if payable to any existing Policy Owner.
Although a Policy cannot be issued until the underwriting process
has been completed, the proposed Policy Owner will receive
immediate insurance coverage if he has paid at least one minimum
monthly payment and proves to be insurable.
The Company will require that the Policy be delivered within a
specific delivery period to protect itself against anti-selection
by the prospective Policy Owner resulting from a deterioration of
the health of the proposed Insured. Generally, the period will not
exceed the shorter of 30 days from the date the Policy is issued
and 75 days from the date of Part 2 of the Application.
c. Premium Allocation
"Net premiums" are credited to the Policy as of the date the
premium payments are received by the Company, with the possible
exception of the first net premium. Net premiums are equal to the
payment made minus the payment expense charge. The payment expense
charge compensates the Company for applicable state and local
taxes on premiums paid for the Policy, for federal taxes imposed
for deferred acquisition costs ("DAC taxes"), and partially
compensates the Company for sales expenses.
The Policy Owner may allocate net premiums among the Company's
Fixed Account and up to 26 Sub-Accounts of the Variable Account.
The Policy Owner may change the allocation of net premiums without
charge at any time through telephone request or by providing
written notice to the Variable Life Service Center. The change
will be effective as of the date of receipt of the notice at the
Variable Life Service Center. The Policy Owner may transfer
amounts among all of the Sub-Accounts and the Fixed Account,
subject to certain restrictions.
d. Repayment of Loan
A loan made under this Policy may be repaid with an amount equal
to the original loan plus loan interest.
When a loan is made, the Company will transfer from the Fixed
Account and each Sub-Account of the Variable Account to the Fixed
Account an amount of that
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Sub-Account's Policy value equal to the loan amount allocated to
the Sub-Account. Since the Company will credit such assets with
current annual interest at 4.00%, which is below the interest rate
charged on the loan (currently 4.8%, and guaranteed not to exceed
6.0%), the Company will retain the difference between these rates
in order to cover certain expenses and contingencies. Upon
repayment of debt, the Company will reduce the Policy value in the
Fixed Account attributable to the loan and transfer assets
supporting corresponding reserves to the Sub-Accounts and the
Fixed Account according to either the Policy Owner's instruction
or, if none, the premium payment allocation percentages then in
effect. Loan repayments allocated to the Variable Account cannot
exceed Policy Value previously transferred from the Variable
Account to secure the Outstanding Loan.
A preferred loan option is automatically available, unless the
Policy Owner requests otherwise. The preferred loan option is
available on that part of an Outstanding Loan that is attributable
to policy earnings. The term "policy earnings" means that portion
of the Policy Value that exceeds the sum of the payments made less
all withdrawals and withdrawal charges. The guaranteed annual
interest rate credited to the policy value securing a preferred
loan is 4.0%. The interest rate charged on a preferred loan is
currently 4.0% (guaranteed not to exceed 4.5%).
The Company deducts any Outstanding Loan amount from death benefit
proceeds and from a surrender.
e. Policy Termination and Reinstatement
Unless the Guaranteed Death Benefit Rider is in effect, if the
policy value less any Outstanding Loan is insufficient to cover
the next monthly deduction plus loan interest accrued, or if any
Outstanding Loan exceeds the Policy value, the Company will notify
the Policy Owner and any assignee of record. The Policy Owner will
then have a grace period of 62 days, measured from the date the
notice is mailed, to make sufficient payments to prevent
termination.
Failure to make a sufficient payment within the grace period will
result in termination of the Policy without any Policy value. The
death proceeds payable during the grace period will be reduced by
any overdue charges. If the Insured dies during the grace period,
the death proceeds will still be payable, but any monthly
deductions due and unpaid through the Policy month in which the
Insured dies and any other overdue charge will be deducted from
the death proceeds.
If the Policy has not been surrendered and the Insured is alive,
the terminated Policy may be reinstated anytime within three years
after the date of default and before the final payment date by
submitting the following to the Company: (1) a written application
for reinstatement; (2) evidence of insurability satisfactory to
the Company; and (3) a premium that, after the deduction of the
premium expense charges, is large enough to cover the minimum
amount payable, as described below.
If reinstatement is requested more than 48 monthly processing
dates from the date of issue or increase in face amount, the
Policy Owner must pay three monthly deductions.
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<PAGE> 5
If reinstatement is requested when less than 48 monthly deductions
have been taken since the date of issue or increase in face
amount, the Policy owner must pay the lessor of three minimum
monthly payments or three monthly deductions. The surrender charge
on the date of reinstatement is the surrender charge that was in
effect on the date of termination. The Policy Value on the date of
reinstatement is:
- The net payment made to reinstate the Policy and interest
earned from the date the payment was received at our
Variable Life Service Center; plus
- The Policy Value less any Outstanding Loan on the date of
default (not to exceed the surrender charge on the date of
reinstatement); minus
- The Monthly Deductions due on the date of reinstatement.
f. Correction of Misstatement of Age or Sex
If the Company discovers that the age or sex of the Insured has
been misstated in the application, the death benefit and any rider
benefits will be those which would be purchased by the most recent
deduction for the cost of insurance and the cost of rider benefits
at the correct age and sex.
g. Contestability
A Policy is contestable for two years, measured from the issue
date, for material misrepresentations made in the initial
application for the Policy. An increase in face amount may be
contested for two years after the effective date of the increase,
and a reinstatement may be contested for two years after the
effective date of reinstatement. No statement will be used to
contest a Policy unless it is contained in an application.
h. Reduction in Cost of Insurance Rate Classification
By administrative practice, the Company will reduce the cost of
insurance rate classification for an outstanding Policy if new
evidence of insurability demonstrates that the Policy Owner
qualifies for a lower classification. After the reduced rating is
determined, the Policy Owner will pay a lower monthly cost of
insurance charge each month. If new evidence of insurability
provided in connection with an increase in Face Amount
demonstrates that the Policy Owner is in a higher risk
classification, the higher cost of insurance rate will apply only
to the increase in Face Amount.
II. "Redemption Procedure"': Surrender and Related Transactions
The policies provide for the payment of monies to a Policy Owner or
beneficiary upon presentation of a Policy. Generally except for the
imposition of cost of insurance and administrative charges, and the
possible effect of a contingent surrender charge, the payee will
receive a pro rata or proportionate share of the Variable Account's
assets, within the meaning of the 1940 Act, in any transaction
involving "redemption procedures". The amount received by the payee
will depend-upon the particular benefit for which the Policy is
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<PAGE> 6
presented, including, for example, the cash surrender value or death
benefit. There are also certain Policy provisions (e.g., partial
withdrawals or the loan privilege) under which the Policy will not be
presented to the Company but which will affect the Policy Owner's
benefits and may involve a transfer of the assets supporting the Policy
reserve out of the Variable Account. Any combined transactions on the
same day which counteract the effect of each other will be allowed. The
Company will assume the Policy Owner is aware of the possible
conflicting nature of the transactions and desires their combined
result. If a transaction is requested which the Company will not allow
(e.g., a request for a decrease in Face Amount which lowers the Face
Amount below the stated minimum) the Company will reject the whole
transaction and not just the portion which causes the disallowance. The
Policy Owner will be informed of the rejection and will have an
opportunity to give new instructions.
a. Surrender for Cash Values
The Company will pay the cash surrender value within seven days
after receipt, at its Variable Life Service Center, of a signed
request for surrender. Computations with respect to the investment
experience of each Sub-Account will be made at the close of
trading of the New York Stock Exchange on each day on which the
portfolio values its shares. This will enable the Company to pay a
value on surrender based on the next computed value after the
surrender request is received. For valuation purposes, the
surrender is effective on the date the Company receives the
request at its Variable Life Service Center (although insurance
coverage ends the day the request is received).
The Policy value equal to the value of all accumulations in the
Variable Account may increase or decrease from day to day
depending on the investment experience of the Variable Account.
Calculation of the Policy value for any given day will reflect the
actual premiums paid, expenses charged and deductions taken. The
Company will deduct a charge for premium taxes, DAC taxes, and a
3.0% sales load from each premium payment. The balance (net
premium) is allocated to the Fixed Account and/or the Variable
Account according to Policy Owner's instructions. The Company will
also make monthly deductions from a Policy to cover the cost of
insurance, including optional benefits provided by rider, and to
cover administrative and other expenses. Other possible deductions
from the Policy (which will occur on a Policy-specific basis)
include a charge for partial withdrawals, a charge for increases
in Face Amount and a charge for certain transfers.
A surrender charge on a surrender, a decrease in Face Amount, or
any withdrawal exceeding the preferred partial withdrawal will be
deducted from Policy Value for up to 10 years from Date of Issue
of the Policy or from the date of increase in Face Amount. The
maximum Surrender Charge is equal to a specified amount that
varies with the age, sex, and underwriting class of the Insured
for each $1,000 of the Policy's Face Amount. The amount of the
Surrender Charges decreases by one-ninth annually to 0% by the
beginning of the 10th Contract year.
If there are increases in the Face Amount, each increase will have
a corresponding surrender charge. These charges will be specified
in a supplemental schedule of benefits at the time of the
increase.
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<PAGE> 7
The Company will make the payment of cash surrender value out of
its Fixed Account and, at the same time, transfer assets from the
Variable Account to the Fixed Account in an amount equal to the
Policy reserves in the Variable Account. If the Policy is
surrendered in the first Policy year, in addition to any
contingent surrender charges which may be applicable will be
deducted at surrender, The Company reserves the right to deduct
any unpaid first year monthly administrative charges.
For purposes of calculating actual Surrender Charges, premium and
Policy value will be allocated to the initial Face Amount and
subsequent increases in Face Amount according to the ratio of the
respective Guideline Annual Premiums.
A surrender charge may be deducted on a decrease in the Face
Amount or a partial withdrawal (exceeding the preferred partial
withdrawal). The surrender charge deducted is a fraction of the
charge that would apply to a full surrender. The fraction is the
product of the decrease in Face Amount divided by the current Face
Amount times the surrender charge. Where a decrease causes a
partial reduction in an increase or in the initial Face Amount,
the Company will deduct a proportionate share of the surrender
charge for that increase or for the initial Face Amount.
b. Charges on Partial Withdrawal
For each partial withdrawal, the Company deducts a transaction fee
of 2.0% of the amount withdrawn, not to exceed $25. This fee is
intended to reimburse us for the cost of processing the
withdrawal.
A partial surrender charge may also be deducted from Policy value.
A partial surrender charge will not be applied to preferred
partial withdrawals. A partial withdrawal is considered a
preferred partial withdrawal when the withdrawal amount and the
sum of the prior withdrawal amounts in the same Policy year do not
exceed 10% of the Policy value as of the beginning of the Policy
year. The right to make a preferred partial withdrawal is not
cumulative from Policy year to Policy year.
A partial withdrawal, unless it is a preferred partial withdrawal, will reduce
the Face Amount under both Death Benefit Options 1 and 3. The Face Amount
reductions will be made in the following order: (1) against the most recent
increase in Face Amount; (2) against the next most recent increases in Face
Amount in succession; and (3) against the Face Amount under the original
application. The partial surrender charge deducted is a fraction of the charge
that would apply to a full surrender. The fraction is the product of the
decrease in Face Amount divided by the current Face Amount times the surrender
charge. Where a decrease causes a partial reduction in an increase or in the
initial Face Amount, the Company will deduct a proportionate share of the
surrender charge for that increase or for the initial Face Amount.
7
<PAGE> 8
c. Death Benefit
The Company will normally pay a death benefit to the beneficiary
within seven days after receipt, at its Variable Life Service
Center, of the Policy, due proof of death of the Insured, and all
other requirements necessary to make payment.
The death proceeds payable will depend on the option in effect at
the time of death. Federal tax law requires a Guideline Minimum
Death Benefit in relation to Policy Value for a Contract to
qualify as life insurance. Under current Federal tax law, either
the Guideline Premium Test or the Cash Value Accumulation Test can
be used to determine if the Contract complies with the definition
of "life insurance" under the Code. At the time of application,
the Policy Owner may elect either of the tests. If the Policy
Owner elects the Guideline Premium Test, the Policy Owner will
have the choice of electing the Death Benefit Option 1 or the
Death Benefit Option 2. If the Policy Owner elect the Cash Value
Accumulation Test, the Death Benefit Option 3 will apply.
Guideline Premium Test and Cash Value Accumulation Test - There
are two main differences between the Guideline Premium Test and
the Cash Value Accumulation Test. First, the Guideline Premium
Test limits the amount of premium that may be paid into a
Contract, while no such limits apply under the Cash Value
Accumulation Test. Second, the factors that determine the
Guideline Minimum Death Benefit relative to the Policy Value are
different.
The Guideline Premium Test limits the amount of premiums payable
under a Contract to a certain amount for an Insured of a
particular age, sex, and underwriting class. Under the Guideline
Premium Test, the Policy Owner may choose between the Death
Benefit Option 1 or the Death Benefit Option 2. After issuance of
the Contract, the Policy Owner may change the selection from the
Death Benefit Option 1 to the Death Benefit Option 2, or vice
versa.
The Cash Value Accumulation Test requires that the Death Benefit
must be sufficient so that the cash surrender value does not at
any time exceed the net single premium required to fund the future
benefits under the Contract. Under the Cash Value Accumulation
Test, required increases in the Guideline Minimum Death Benefit
(due to growth in Policy Value) will generally be greater than
under the Guideline Premium Test.
Under the Death Benefit Option 1, the death benefit is the greater
of either the Face Amount of insurance or the Guideline Minimum
Death Benefit. Under the Death Benefit Option 2, the death benefit
is the greater of either (a) the Face Amount of insurance plus
Policy value or (b) the guideline minimum Death Benefit. Under
Death Benefit Option 3, the Death Benefit will equal the greater
of (1) the Face Amount, or (2) the Policy Value multiplied by the
applicable factor, as set forth in the Policy. The applicable
factor depends upon the Underwriting Class, sex (unisex if
required by law), and then-attained age of the Insured. The
factors decrease slightly from year to year as the attained age of
the Insured increases.
For Death Benefit Options 1 and 2, the guideline minimum Death
Benefit is calculated
8
<PAGE> 9
by multiplying the applicable percentage from the following table
for the Insured person's age (nearest birthday) at the beginning
of the Policy year of determination by the Policy value.
GUIDELINE MINIMUM DEATH BENEFIT FACTORS
<TABLE>
<CAPTION>
Age of Insured Percentage of
On Date of Death Policy Value
------------------- ----------------
<S> <C>
40 and under........................................ 250%
45.................................................. 215%
50.................................................. 185%
55.................................................. 150%
60.................................................. 130%
65.................................................. 120%
70.................................................. 115%
75.................................................. 105%
80.................................................. 105%
85.................................................. 105%
90.................................................. 105%
95 and above........................................ 100%
</TABLE>
For the ages not listed, the progression between the listed ages
is linear.
If Death Benefit Option 3 is in effect, the Guideline Minimum
Death Benefit is obtained by multiplying the Policy value by a
percentage set forth in the Policy.
The Company will make payment of the death proceeds out of its
Fixed Account, and will transfer assets from the Variable Account
to the Fixed Account in an amount equal to the reserve in the
Variable Account attributable to the Policy. The excess, if any,
of the death proceeds over the amount transferred will be paid out
of the Fixed Account reserve maintained for that purpose.
d. Default and Options on Lapse
The duration of insurance coverage depends upon the Policy value
(less any Outstanding Loan) being sufficient to cover the monthly
deductions plus loan interest accrued. If the Policy value (less
any Outstanding Loan) at the beginning of a month is less than the
deductions for that month plus loan interest accrued, or, if any
Outstanding Loan exceeds the Policy value, a grace period of 62
days will begin, unless the Guaranteed Death Benefit Rider is in
effect. Written notice will be sent to the Policy Owner and any
assignee on the Company's records stating that such a grace period
has begun and giving the amount of premium payment necessary to
prevent termination.
If sufficient payment is not received during the grace period, the
Policy will terminate without value. Notice of such termination
will be sent to the Owner and any assignee. If
9
<PAGE> 10
the Insured should die during the grace period, an amount
sufficient to cover the overdue monthly deductions and other
charges will be deducted from the death proceeds.
e. Policy Loan
The policy provides that the total amount a Policy Owner may
borrow, including any Outstanding Loan, is the Loan Value. The
Loan Value is 90% of the Policy value less any surrender charges.
The Policy value for this purpose will be that next computed after
receipt, at the Variable Life Service Center, of a loan request.
Payment of the loan amount will generally be made to the Policy
Owner within seven days after receipt of the loan request at the
Variable Life Service Center.
An "Outstanding Loan" is all policy loans taken plus loan interest
due or accrued less any loan payments. When a loan is made, the
portion of the assets in the Variable Account (which is a portion
of the surrender value and which also constitutes a portion of the
reserves for the death benefit) equal to the Policy loan is
transferred by the Company from the Variable Account to the Fixed
Account and the number of Accumulation Units equal to the Policy
value so transferred will be canceled. Allocation of the loan
among Sub-Accounts will be according to the Policy Owner's
request. If this allocation is not specified or not possible, the
loan will be allocated based on the proportion the Policy value in
the Fixed Account, less any Outstanding Loan, and the Policy value
in each Sub-Account bears to the total Policy value, less any
Outstanding Loan. Because of the transfer, a portion of the Policy
is not variable during the loan period and, therefore, the death
benefit and the surrender value are permanently affected by any
Outstanding Loan, whether or not repaid in whole or in part. The
Company credits the Policy value in the Fixed Account attributable
to the loan with a rate of return equal to an effective annual
yield of 4.00%.
Loan Interest is payable in arrears at the current annual rate of
4.80% (4.00% for preferred loans). This rate may change, but is
guaranteed not to exceed 6.00% (4.50% for preferred loans).
Interest is payable at the end of each Policy year or on a pro
rata basis for such shorter period as the loan may exist. Loan
interest is due on each Policy anniversary. If not paid when due,
it is added to the loan principal and bears interest at the same
rate of interest. If the resulting loan principal exceeds the
Policy value in the Fixed Account, the Company will transfer
Policy value equal to the excess debt from the Policy value in
each Sub-Account to the Fixed Account; as security for the excess
debt. The Company will allocate the amount transferred among the
Sub-Accounts in the same proportion that the Policy value in each
Sub-Account bears to the total Policy values in all Sub-Accounts.
Failure to repay a loan will not necessarily terminate the Policy.
If the Outstanding Loan minus the Policy value is not sufficient
to cover the next monthly deduction, the Policy will go into a
62-day grace period as described above.
10
<PAGE> 11
f. Transfers Among Sub-Accounts
Amounts may be transferred, upon request, at any time from while
the insured is still living and the Policy is in force, between
the Fixed Account and any Sub-Account of the Variable Account, or
among the Sub-Accounts. Transfers will take effect as of receipt
of a written request at the Variable Life Service Center. The
first twelve transfers in a Policy year are free of charge;
however, the Company reserves the right to limit the number of
free transfers per Policy year to six. The Company will deduct an
administrative charge of $10 (guaranteed not to exceed $25) for
additional transfers in a Policy year. Transfers resulting from
Policy loans, the exercise of conversion rights, automatic
transfers (such as dollar-cost averaging and account rebalancing),
and reallocation of Policy value within 20 days of issue, will not
be subject to a transfer charge, and will not be counted for
purposes of the limitation on the number of 'free' transfers
allowed in each Policy year.
Transfer charges, if any, will be allocated pro rata to all
Sub-Accounts based on the proportion that the values in each of
the Sub-Accounts of the Variable Account bears to the total
unloaded Policy value.
A Policy owner may only make one transfer involving the Fixed
Account in each Policy quarter. The Amount transferred from the
Fixed Account in each transfer may not exceed the lesser of
$100,000 or 25% of Policy value.
g. Right to Examine Procedures
The Policy Owner has the right to examine and cancel the Policy by
returning it to the Variable Life Service Center or one of the
Company's representatives on or before the 10 days after receipt
of the Policy (or longer when state law so requires).
If the Policy provides for a full refund under its "Right to
Examine Policy" provision as required in a particular state, the
refund will be the greater of the entire payment or the Policy
value plus deductions under the Policy or by the Sub-Account for
taxes, charges or fees. If the Policy does not provide for a full
refund, the refund will be the amounts allocated to the Fixed
Account, the Policy value in the Variable Account, and all fees,
charges and taxes which have been imposed at the Policy level.
A right to examine privilege also applies after a requested
increase in Face Amount. After an increase, the Company will mail
or deliver notice of the right to examine with respect to the
increase. The Policy Owner will have the right to cancel the
increase within 10 days, and receive a credit for charges that
were deducted for the increase. This credit will be added to
Policy value, unless the Policy Owner requests a refund.
11
<PAGE> 1
EXHIBIT 10.S
TABLE OF CONTENTS
TO
PRODUCT DEVELOPMENT
AND ADMINISTRATIVE SERVICES AGREEMENT
<TABLE>
<CAPTION>
ARTICLE TITLE PAGE
- ------- ----- ----
<S> <C> <C>
1 PRODUCT DEVELOPMENT 1
2 SERVICES 4
3 COMPUTER SYSTEM AND PROPRIETARY RIGHTS 7
4 CONFIDENTIALITY AND AUDIT RIGHTS 8
5 RECORDS AND DATA MAINTENANCE 10
6 ALLMERICA FINANCIAL'S OBLIGATIONS 11
7 CANADA LIFE'S OBLIGATIONS 13
8 ACCEPTANCE TESTING 14
9 ADDITIONAL REPRESENTATIONS AND WARRANTIES 15
10 INDEMNITIES AND LIABILITY 15
11 TERM AND TERMINATION 18
12 MISCELLANEOUS 20
</TABLE>
<PAGE> 2
PRODUCT DEVELOPMENT
AND
ADMINISTRATIVE SERVICES AGREEMENT
AGREEMENT, effective this ___ day of _________, 2000 (the "Effective Date"), by
and between First Allmerica Financial Life Insurance Company ("Allmerica
Financial"), a life insurance company organized and existing under the laws of
the Commonwealth of Massachusetts, with a principal place of business at 440
Lincoln Street, Worcester, Massachusetts 01653 and Canada Life Insurance
Company of America ("Canada Life"), a life insurance company organized and
existing under the laws of the State of Michigan, with a principal place of
business at 6201 Powers Ferry Road, NW, Atlanta, GA 30339.
RECITALS:
WHEREAS, Allmerica Financial, directly and through its affiliate, Allmerica
Financial Life Insurance and Annuity Company ("AFLIAC"), has developed and is
marketing various variable universal life insurance policy forms; and
WHEREAS, through such development and marketing efforts Allmerica Financial has
acquired significant expertise in developing, designing and servicing variable
universal life insurance products; and
WHEREAS, through such development and marketing efforts Allmerica Financial has
also acquired significant expertise in obtaining necessary state regulatory
approvals for the sale of variable universal life insurance policies; and
WHEREAS, Canada Life and Allmerica Financial have agreed that Allmerica
Financial shall provide assistance to Canada Life in developing and bringing to
market a flexible premium variable universal life insurance policy (the
"Policy", collectively the "Policies") and certain related forms, as described
herein; and
WHEREAS, Canada Life and Allmerica Financial have also agreed that Allmerica
Financial shall contract with Canada Life to provide, on behalf of Canada Life,
Policy underwriting, claims, and other administrative services;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE 1
PRODUCT DEVELOPMENT
1.01 Development of Policy Forms. Prior to the Effective Date of this
Agreement, Canada Life, with the assistance of Allmerica Financial,
drafted the standard Policy, Policy applications and Policy riders,
which are referred to herein collectively as the "Policy Forms". Such
<PAGE> 3
Policy Forms are based on the AFLIAC Policy Forms listed on
Schedule 1.01 hereto. Canada Life acknowledges that it
approved the final drafts of the standard Policy Forms prior
to the Effective Date of this Agreement.
When required, Allmerica Financial shall appropriately modify
the standard Policy Forms for each jurisdiction in which the
Policy Forms will be offered for sale. Such modifications
shall represent Allmerica Financial's best judgment as to what
changes to the Policy Forms will be necessary in order to
secure insurance department approval. Notwithstanding
anything in this Agreement to the contrary, it is understood
and agreed by Canada Life that Allmerica Financial makes no
representation that the Policy Forms will be approved for sale
by any particular jurisdiction.
1.02 Policy Form Filings and Submission Dates. All insurance
department filings will be made by Allmerica Financial on
behalf of Canada Life. It is the intent of the parties that the
Policy Forms will be filed in ____ jurisdictions. Such
jurisdictions are listed on Schedule 1.02. Canada Life
understands and agrees that Canada Life will be responsible
for all insurance department filing fees, although such fees
will be advanced by Allmerica Financial. Canada Life agrees
to reimburse Allmerica Financial for the amount of any
advanced filing fees within 30 days of receipt of a written
request for reimbursement. Canada Life understands and agrees
that late payments of such reimbursements shall be assessed a
late payment charge at the rate of 12% per annum.
Allmerica Financial acknowledges that prior to the Effective
Date of this Agreement that Canada Life delivered to Allmerica
Financial the following:
(i) The standard Policy Forms in final print,
(ii) The Policy Actuarial Memorandum,
(iii) A draft Policy prospectus, and
(iv) Any other information deemed necessary by
Allmerica Financial for the filing of the
Policy Forms which is not to be prepared by
Allmerica Financial.
Allmerica Financial agrees that prior to the Effective Date of
this Agreement that it will have submitted the Policy Forms to
the ___ jurisdictions listed on Part A of Schedule 1.02 where
Canada Life is licensed to sell variable life insurance
products. Allmerica Financial agrees to submit the Policy
Forms to each of the remaining ___ jurisdictions listed on
Part B of Schedule 1.02 within 10 business days following the
later of (i) the date it is notified in writing by Canada Life
that Canada Life has received a license to sell variable life
insurance products in the jurisdiction and (ii) the date that
Canada Life has furnished Allmerica Financial with all
documentation and other materials which Allmerica Financial
deems
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<PAGE> 4
necessary for it to finalize the Policy Form submission.
1.03 Development and Filing of Policy Prospectus and Registration
Statement; Separate Account State Regulatory Approvals. The
parties understand and agree that the Policy Prospectus and
1940 Act Registration Statement development, printing and
filing with the SEC will be the responsibility of Canada Life,
which will also be responsible for all SEC filing fees.
Further, the parties understand and agree that Canada Life is
responsible for obtaining any necessary state regulatory
approvals of the separate account or accounts that will be
offered as funding choices under the Policy.
1.04 State Submission Follow-Up Assistance. After filing the
insurance department Policy Form submissions contemplated by
this Agreement, Allmerica Financial shall provide all
necessary follow-up to insurance department correspondence in
a prompt manner in order to secure insurance department
approvals on behalf of Canada Life. However, Allmerica
Financial makes no representation that Policy Form approvals
will be obtained from all jurisdictions. Allmerica Financial
understands and agrees that Canada Life must approve all
material changes to Policy Forms requested or required by
insurance departments.
Allmerica Financial agrees to provide Canada Life weekly
written status reports of the approval status of each state
filing.
1.05 Product Development Compensation. For the product development
services described in this Agreement, Canada Life agrees to
pay Allmerica Financial for assistance in developing and
bringing to market the Policy Forms.
The fee shall be paid to Allmerica Financial, as follows:
(i) was paid by Canada Life during December, 1999.
Allmerica Financial acknowledges receipt of such
payment; and
(ii) the remainder, ____, shall be paid by Canada Life
within 30 days following the date of issuance of the
first Policy.
Allmerica Financial and Canada Life each understand and agree
that the aggregate fee set forth herein is based upon
specifications contained in a Financial Proposal prepared by
Allmerica Financial dated September 10, 1999. If such
Proposal is modified, the parties understand and agree that
the fee shall be appropriately adjusted upward or downward.
1.06 Ownership of Policy Forms. Allmerica Financial hereby
transfers all of its right, title and interest in the Policy
Forms, including the actuarial basis for the Policy Forms to
Canada Life.
-3-
<PAGE> 5
1.07 New Products, Product Enhancements, etc. At any time and from
time to time while this Agreement remains in force, Canada
Life may request that Allmerica Financial enhance, modify or
otherwise change the Policy Forms ("Product Changes") or
develop new variable life insurance products ("New Products"),
including New Products to be developed for sale in the State
of New York. After receipt of any such request Allmerica
Financial agrees to negotiate in good faith with Canada Life
the terms and conditions (including compensation and delivery
time frames) under which Allmerica Financial shall develop
and, if so requested, file with the various insurance
departments the requested Product Changes or New Products.
ARTICLE 2
SERVICES
2.01 In General. During the term of this Agreement, Allmerica
Financial shall provide Canada Life the Policy underwriting,
issue, servicing, claims, computer system and other Policy
administrative services described in detail in Schedule 2.01A,
Section 2.02, Section 2.03 and in Article 3 (collectively, the
"Policy Services") in support of the Policies, subject to the
terms and conditions set forth in this Agreement. The
performance of Policy Services shall occur in three (3)
phases described as follows, in accordance with the schedule
of events set forth in Schedule 2.01B hereto. Throughout each
such phase, the parties agree to discharge their respective
obligations as further specified herein. The phases shall
consist of:
(a) The Implementation Phase. This phase will consist of the
recruitment and hiring by Allmerica Financial of any
additional personnel deemed necessary by Allmerica
Financial to perform its Policy Services obligations
hereunder, personnel training and the installation
(including any necessary modifications) by Allmerica
Financial of the Computer System (as defined in Section
3.01(a)) necessary for Allmerica Financial to perform
Policy Services, Computer System testing, business
workflow testing, financial control and compliance testing
and Allmerica Financial/Canada Life systems interface
testing and implementation and delivery of the Computer
System, as described in Articles 3 and 8.
(b) The Operational Phase. This phase will consist of
Allmerica's performance of Policy Services utilizing the
accepted Computer System. all Policy Services to be
accomplished in accordance with the Service Standards
listed on Schedule 2.01C hereto. Whenever the parties have
not agreed to a Service Standard for a particular Policy
Service, Allmerica Financial agrees that the Service
shall be performed utilizing the same service standard as
is then applicable to its own variable life insurance
business.
If at any time Allmerica Financial's performance of a
Policy Service does not meet the applicable Service
Standard listed on Schedule 2.01C or described in the
-4-
<PAGE> 6
preceding paragraph, Allmerica Financial shall use its
best efforts to take necessary curative actions to bring
its performance into compliance within thirty (30) days of
Canada Life giving Allmerica Financial written notice of
its non-compliance. Provided, however, that if the
non-compliance occurs as a result of an unanticipated
event, such as an unanticipated increase in new Policy
sales above the projections set forth below or an
unanticipated level of Policy Service activity, the
parties understand and agree that even with Allmerica's
best efforts, it may not be possible to cure the problem
within such thirty (30) day period.
Notwithstanding anything on this Agreement to the
contrary, Canada Life and Allmerica Financial each
understand and agree that Allmerica Financial shall have
the unilateral right, at any time and from time to time
upon at least thirty days' written notice to Canada Life,
to modify the Service time frames and Service Standards
listed on Schedule 2.01C. Provided, however, Allmerica
Financial agrees that at no time shall the Service time
frames or the Service Standards for the Policy Services
described in this Agreement be less rigorous than the
service time frames or the service standards that are then
applicable to the servicing of Allmerica Financial's own
variable life insurance business.
(c) The Conversion Phase. Upon termination of this Agreement
for any reason (including a default by either party),
Allmerica Financial and Canada Life shall promptly return
all Property (as defined in Section 3.01(b)) held by the
other party, including, but not limited to, data, records,
files, materials and supplies and computer software. A
cooperative conversion work plan and program will be
developed by Allmerica Financial and Canada Life to
accomplish the transfer of records and other Property.
Each party will work in good faith to effect the
conversion and minimize the cost of business interruption
resulting from the conversion. If and to the extent
requested by Canada Life, during the Conversion Phase
Allmerica Financial agrees to continue to provide Policy
Services in accordance with the Service Standards listed
on Schedule 2.01C hereto. If Policy Services are being
provided during the Conversion Phase, Canada Life's rights
under the Agreement to receive such Services and Allmerica
Financial's obligations under the Agreement to provide
such Services shall continue and remain in effect on the
same basis and to the same extent as such rights and
obligations existed under the Agreement prior to its
termination. If Allmerica Financial continues to provide
Policy Services during the Conversion Phase, Canada Life
understands and agrees that it will continue to compensate
Allmerica Financial for such Services as provided in
Section 2.04 hereto, even if the Agreement is being
terminated by Canada Life for cause in accordance with
Sections 11.03 or 11.05 hereof.
All expenses incurred by Canada Life as a result of
termination of this Agreement, including expenses incurred
in connection with the return of Canada Life's Property,
-5-
<PAGE> 7
shall be borne by Canada Life.
Upon completion of the Conversion Phase, each party shall
certify to the other that all records and other Property
has been returned to its owner.
2.02 Policy Underwriting. All Policy underwriting services shall be
performed by Allmerica Financial on behalf of Canada Life.
Policies shall be underwritten based upon Canada Life's
underwriting criteria, requirements and standards ("Underwriting
Standards"). Canada Life's Underwriting Standards relating to
the Policies must be satisfactory to Allmerica Financial, and
cannot be changed without Allmerica Financial's written consent,
which consent shall not be unreasonably withheld. Copies of
Canada Life's underwriting manuals and other relevant materials
necessary for Allmerica Financial to perform its Policy
underwriting obligations hereunder shall be furnished to
Allmerica Financial at Canada Life's expense. Canada Life
underwriting personnel (to be specified by Canada Life) shall be
made available at Canada Life's expense to answer any questions
that might arise from Allmerica Financial's underwriters
relating to Canada Life's Underwriting Standards. Vendors used
for medical underwriting services must be acceptable to both
parties. The costs of medical underwriting shall be paid by
Canada Life.
In addition to the foregoing, in the case of a proposed
underwriting declination, which declination is not clearly a
medical decline described in Canada Life's underwriting manual,
Allmerica Financial shall communicate the proposed declination
to appropriate Canada Life personnel who must agree with and
approve the proposed declination before the underwriting
decision is finalized. Allmerica Financial will communicate
appropriate details of any proposed declination in accordance
with notification procedures to be jointly developed by the
parties. If no response is received within five (5) days of the
transmission, Allmerica Financial shall have the right to
proceed on the basis that Canada Life is in agreement with the
decision to decline the risk.
2.03 Policy Claims. All Policy claims processing services shall be
performed by Allmerica Financial on behalf of Canada Life. All
Policy claims shall be investigated, processed and paid in
accordance with Canada Life's claims processing rules and
requirements. Copies of Canada Life's claims manuals and other
relevant materials necessary for Allmerica Financial to perform
its Policy claims investigation, processing and payment
obligations hereunder shall be furnished to Allmerica Financial
at Canada Life's expense. Canada Life claims personnel (to be
specified by Canada Life) shall be made available at Canada
Life's expense to answer any questions that might arise from
Allmerica Financial's claims personnel relating to the
investigation, processing or payment of Policy claims.
In addition of the foregoing, in the case of a decision by
Allmerica Financial that a Policy claim should be denied,
Allmerica Financial shall communicate its proposed action to
appropriate Canada Life personnel who must agree with and
approve the proposed claim
6
<PAGE> 8
denial before the claims decision is finalized. Allmerica Financial will
communicate appropriate details of any proposed Policy claim denial in
accordance with notification procedures to be jointly developed by the
parties. If no response is received within five (5) days of the
transmission, Allmerica Financial shall have the right to proceed on the
basis that Canada Life is in agreement with the decision to deny the
claim.
2.04 Compensation and Reimbursement for Policy Services. For the Policy
Services described in this Agreement, while this Agreement remains in
force Canada Life agrees to pay Allmerica the following amounts:
Compensation and reimbursements described in this Section 2.04 shall be
payable to Allmerica Financial on such basis and at such time or times as
shall be mutually agreeable to the parties. Provided, however, that in no
event shall compensation and reimbursements payable for a calendar month
be paid later than ten business days from the date of receipt by Canada
Life of Allmerica Financial's bill for the month. Canada Life understands
and agrees that late payments shall be assessed a late payment charge at
the rate of 12% per annum.
ARTICLE 3
COMPUTER SYSTEM AND PROPRIETARY RIGHTS
3.01 Definitions. As used in this Agreement, the following terms shall have the
following meanings.
(a) "Administrative Computer System" or "Computer System" shall refer to
all computer systems and related materials used by Allmerica
Financial to administer the Policies, including Allmerica Financial
proprietary software, third party licensed software and the LifeCAD
MP policy administration system, which system is the property of
NaviSys.
Allmerica Financial's proprietary software and the third party
software used to administer the Policies shall be listed on Schedule
3.01 attached hereto. Such Schedule shall be updated from time to
time to reflect the addition or deletion of software used in the
administration of the Policies.
(b) "Property" shall mean all property of either party related to the
Policies, including, but not limited to, data records, materials,
supplies, computer software, customer records, premium information,
underwriting files, customer lists, sales data, policyholder and
insured data, data on agents, agencies and distribution systems.
3.02 Policy Administration. Canada Life understands and agrees that Allmerica
Financial will initially perform the day-to-day administration of the
Policies utilizing the LifeCAD MP policy administration system, which is a
proprietary computer system owned and maintained by NaviSys. Canada Life
agrees that at any time while this Agreement remains in force, that
-7-
<PAGE> 9
Allmerica Financial may, in its sole discretion, choose to license the
LifeCAD MP system or administer the Policies by using any other suitable
software of Allmerica's choice.
In the event Allmerica Financial decides to replace the LifeCAD MP system,
Allmerica Financial agrees to test the replacement software to be certain
that it will properly perform the Policy Services contemplated by this
Agreement.
ARTICLE 4
CONFIDENTIALITY AND AUDIT RIGHTS
4.01 Confidentiality. Except as otherwise provided in this Agreement, all
information communicated by Canada Life to Allmerica Financial and by
Allmerica Financial to Canada Life pursuant to this Agreement shall be and
is received in confidence and shall be used only for purposes of this
Agreement. No such information shall be disclosed by Allmerica Financial,
by Canada Life or by their respective agents or employees without the prior
written consent of the non-disclosing party, except as may be necessary by
reason of legal, accounting, or regulatory requirements beyond the
reasonable control of the disclosing party. The provisions of this Section
4.01 shall survive termination or expiration of this Agreement for any
reason.
Allmerica Financial and Canada Life each agree not to disclose to any
person, firm or corporation or to utilize or reproduce for their own use
any proprietary or confidential information concerning the business or data
of the other party which it may have acquired pursuant to or in the course
of the performance of its obligations under this Agreement. Proprietary
information shall include, but not be limited to, data, marketing
information and materials, sales data, customer lists, financial plans,
investment strategies, policyholder and insured data, data on agents,
agencies and distribution systems. The foregoing notwithstanding, the
following shall not be considered proprietary information for purposes of
this Agreement: (i) information publicly available or generally known
within the life insurance industry; (ii) information obtained from other
sources, to the knowledge of Allmerica Financial or Canada Life, as the
case may be, not under a duty of confidentiality to Canada Life or
Allmerica Financial with respect to such information; and (iii) information
that is developed or created independently by either party without breach
of this Agreement.
In addition to the foregoing, Allmerica Financial agrees that during the
term of this Agreement and thereafter it shall not, directly or indirectly,
or through any third party utilize confidential information obtained
pursuant to this Agreement to recruit or attempt to recruit any Canada Life
insurance agents, brokers, general agents or other producers.
In addition to the foregoing, Canada Life agrees that during the term of
this Agreement and thereafter it shall not, directly or indirectly, or
through any third party utilize confidential
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information obtained pursuant to this Agreement to recruit or attempt
to recruit any Allmerica Financial or AFLIAC insurance agents, brokers,
general agents or other producers.
4.02 Audit Rights. Allmerica Financial shall provide reasonable access
during normal business hours to any Allmerica Financial location from
which Allmerica Financial conducts its business and provides Policy
Services to Canada Life pursuant to this Agreement to auditors
designated in writing by Canada Life for the purposes of performing
audits for Canada Life. Canada Life shall give reasonable advance
written notice of an audit and include in that notice the matters which
it will audit. Allmerica Financial shall provide the auditors any
assistance they may reasonably require. Such auditors shall have the
right during normal business hours to audit any business record,
activity, procedure or operation of Allmerica Financial that is
reasonably related to the provision the Policy Services provided under
this Agreement, including the right to interview any Allmerica
Financial personnel involved in providing or supporting such Policy
Services.
If Canada Life determines, following an audit, that errors have been
made in Allmerica Financial's records, procedures or operations,
Allmerica Financial will make prompt correction and forward evidence of
such correction to Canada Life. Allmerica Financial will use its best
efforts to make all such corrections within thirty (30) business days.
ARTICLE 5
RECORDS AND DATA MAINTENANCE
5.01 Maintenance of Allmerica Financial Records. Allmerica Financial records
relating to Policies and the Policy Services provided under this
Agreement will be maintained at Allmerica Financial's principal
administrative office and at other storage facilities used for
maintenance of records relating to Allmerica Financial's variable life
insurance business. Such records shall be maintained: (i) in the case
of records relating to a particular Policy, while the Policy remains in
force and for a period of seven (7) years following termination of the
Policy and (ii) for all other such records, for the duration of this
Agreement and, for any records not transferred to Canada Life after
termination of this Agreement, for a period of seven (7) years
following such termination.
Notwithstanding the foregoing, voice recording tapes shall only be
maintained for one (1) year from the date of the call.
5.02 Records and Data Management. Allmerica Financial shall:
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(i) maintain all Policy paper-based files provided to Allmerica
Financial on behalf of Canada Life, including, but not
limited to, Policy applications, transaction documents and
authorizations, correspondence, beneficiary designations and
all other relevant Policy servicing documents.
(ii) maintain voice recording tapes for all telephone based
service requests;
(iii) maintain Policy records, including values, options, status
and payments;
(iv) store Canada Life Computer System data under Allmerica
Financial's retention schedule, as mutually agreed upon, on
magnetic tapes and disc packs when in the possession or
custody of Allmerica Financial in accordance with the
confidentiality and security safeguards specified in this
Agreement;
(v) maintain all records and files relating to Policies and
Policy Services as the Property of Canada Life and promptly
return such Property to Canada Life upon termination of this
Agreement, as provided in Subsection 2.01(c) hereof;
(vi) maintain all such records and files in an accessible and
useable form; and
(vii) not destroy any such records and files without the approval
of Canada Life and only after 30 days' written notice to
Canada Life of the proposed destruction.
5.03 Canada Life's Records. Canada Life's files, records, and documents
described in this Agreement and the data contained therein shall be and
remain Canada Life's Property and shall be returned to Canada Life
promptly upon request or the expiration or termination of this
Agreement or, with respect to any particular data files and data, on
the earlier date the data files and data are no longer required by
Allmerica Financial to provide services to Canada Life pursuant to this
Agreement.
At any time and from time to time, Canada Life may request Allmerica
Financial for copies of Canada Life's files, records and documents then
in the possession of Allmerica Financial. Unless prohibited by its
license agreement with a software vendor, Allmerica Financial shall
promptly comply with any such request for copies. Canada Life
understands and agrees that any costs or expenses, including personnel
costs, incurred by Allmerica Financial in complying with any such
requests for copies shall be reimbursed by Canada Life. Any such
reimbursement shall be paid by Canada Life within 30 business days of
its receipt of a written request for reimbursement.
5.04 Safeguarding Canada Life Data and Records. In order to properly
safeguard Canada Life data and records in its possession, Allmerica
Financial will establish and maintain full and
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complete safeguards no less rigorous than those in effect at Allmerica
Financial to protect its own confidential data and records against
destruction, loss, alteration or unauthorized access.
ARTICLE 6
ALLMERICA FINANCIAL'S OBLIGATIONS
6.01 Implementation Duties and Responsibilities. Allmerica Financial shall, in
accordance with the time schedules set forth in Article I and in Schedule
2.01B:
(a) Assist Canada Life in its development of the Policy Forms and
perform its additional duties and responsibilities as set forth in
Article 1.
(b) Jointly develop with Canada Life the Computer System interfaces to
Canada Life's Atlanta Georgia Principal Office. The Allmerica
Financial time frames for completion of such interfaces will be
negotiated by the parties. Canada Life understands and agrees
that, to the extent compatible, Allmerica Financial intends to
utilize file formats currently in use in developing such
interfaces. Canada Life further understands and agrees that if
customized file formats need to be developed for such interfaces,
that Canada Life shall reimburse Allmerica Financial for any costs
and expenses incurred by Allmerica Financial in developing such
customized file formats, including, but not limited to, employee
personnel costs.
(c) Modify and implement the Administrative Computer System as
necessary to support the Policy and Policy Services covered by
this Agreement. The time frames for Computer System modification
and implementation will be negotiated by the parties.
(d) Develop sales support software to be used with the Policy Forms,
as more fully described in Section 6.04.
6.02 Computer System Operation. Upon the successful completion of acceptance
testing and the implementation of the Computer System, Allmerica
Financial shall provide Canada Life the following Computer System
services:
(a) Process Canada Life business and data in accordance with Schedule
2.01A to achieve the Service Standards called for in Schedule
2.01C.
(b) Provide all necessary man-hours to install new releases of the
Computer System and maintain the Computer System by making routine
corrections and by accomplishing ordinary day-to-day changes to
the Computer System.
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(c) Store Canada Life data, as provided in clause (iv) of Section 5.02
hereof.
6.03 Computer System Maintenance Changes and Enhancements. Allmerica Financial
agrees to perform normal Computer System maintenance at no additional
cost to Canada Life. At any time and from time to time while this
Agreement remains in force Canada Life may request that Allmerica
Financial modify, enhance, make corrections or otherwise make changes to
the Computer System ("System Changes") other than changes required as
part of Allmerica Financial's responsibility to perform normal Computer
System maintenance. After receipt of any such request, Allmerica
Financial agrees to negotiate in good faith with Canada Life the terms
and conditions (including compensation and delivery time frames) under
which Allmerica Financial shall develop and implement any such requested
Systems Change.
6.04 Sales Support Software. Allmerica Financial agrees to develop certain
sales support software to be used with the Policy Forms. Canada Life
understands and agrees that such software shall be substantially similar
to the sales support software currently used by Allmerica Financial in
its variable life insurance business. Allmerica Financial agrees that
such software shall be finalized by Allmerica Financial within a mutually
agreeable time frame.
6.05 Acknowledgement and Additional Responsibilities of Allmerica Financial.
Allmerica Financial shall have no authority, nor shall it represent
itself as having such authority, other than as specifically set forth in
this Agreement. Without limiting the generality of the foregoing
sentence, Allmerica Financial specifically agrees that it will not do any
of the following without the prior written consent of Canada Life:
(a) Litigation. Institute or prosecute and legal proceedings in
connection with any matter pertaining to the Policy Services
provided pursuant to this Agreement or Canada Life's business or
accept service of process on behalf of Canada Life.
(b) Alterations. Waive, amend, modify, alter, terminate or change any
term, provision or condition stated in any Policy Form or
discharge any contract in the name of Canada Life, except as
otherwise specifically provided in this Agreement.
(c) Advice to Policyholders/Prospective Policyholders. Offer tax,
legal, or investment advice to any Policyholder or prospective
Policyholder of Canada Life under any circumstances, with respect
to a Policy or the Policy Services provided pursuant to this
Agreement.
6.06 Administrative Services Provided. Allmerica Financial shall perform the
administrative services specified in Schedule 2.01A within the time
frames and Service Standards specified in Schedule 2.01C.
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6.07 Records and Data Maintenance. Allmerica Financial shall provide the
records and data maintenance, management and other services described in
Article 5.
6.08 Personnel. Allmerica Financial shall use its best efforts to ensure that
adequate personnel are assigned to perform the services required under
this Agreement, to include a Project/Account Manager and the staffing
levels needed in order to achieve the Service Standards specified in
Schedule 2.01C.
ARTICLE 7
CANADA LIFE'S OBLIGATIONS
7.01 Canada Life's Duties and Responsibilites. Canada Life shall:
(a) Develop the Policy Forms, with the assistance of Allmerica
Financial and perform its additional duties and responsibilities
set forth in Article 1, including, but not limited to, Canada
Life's securities law responsibilities outlined in Section 1.03.
(b) Jointly develop with Allmerica Financial an implementation plan
and schedule as set forth in Schedule 2.01B.
(c) Provide designated Canada Life personnel dedicated to work with
Allmerica Financial personnel in the performance of this Agreement
and all other reasonable and necessary cooperation and support.
(d) Provide all the requirements for the operation of the
Administrative Computer System at Canada Life's facilities
necessary for Computer System interfaces and output.
(e) Provide necessary input data for the operation of the Computer
System.
(f) Jointly develop with Allmerica Financial the interface
specifications for the Computer System and Canada Life systems.
(g) Assist Allmerica Financial in the development of the sales support
software described in Section 6.04.
(h) Make all necessary payments due under the terms of this Agreement
upon receipt of a monthly settlement report, the form of which
shall be agreed to by the parties.
ARTICLE 8
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ACCEPTANCE TESTING
8.01 Contents. Allmerica Financial and Canada Life shall conduct tests of the
Computer System. The standard to be used to determine the successful
completion for all tests shall be the Computer System's performance of
those functions and features which will enable Allmerica Financial to
perform those Services described in Schedule 2.01A in accordance with the
Service Standards set forth in Schedule 2.01C.
8.02 Usability Testing. Allmerica Financial and Canada Life shall conduct a
joint usability test as follows:
(a) The test will be performed utilizing Allmerica Financial's
existing test environment.
(b) A test sample of Policies and business transactions shall be
determined and processed by Allmerica Financial and will be made
available to Canada Life for review.
(c) Allmerica Financial and Canada Life will jointly review the test
results to determine completeness, accuracy and performance.
(d) Canada Life will process all Allmerica Financial generated system
interface files to determine successful use by internal Canada
Life systems.
(e) Allmerica Financial and Canada Life will evaluate overall business
and system processing flow for capability to meet operational
performance standards.
(f) Allmerica Financial and Canada Life will make all necessary
revisions to business and technical systems identified in the
usability test.
(g) In order to satisfy usability testing, the Computer System must
process all sample Policies and related transactions to such
standards as would be acceptable to Allmerica Financial in the
processing of AFLIAC's variable life insurance business. Canada
Life and Allmerica Financial must mutually agree that usability
testing has been succesfully accomplished.
ARTICLE 9
ADDITIONAL REPRESENTATIONS AND WARRANTIES
9.01 Corporate Authority, etc. Allmerica Financial represents and warrants:
(a) That it is a corporation duly organized and existing in good
standing under the laws of the Commonwealth of Massachusetts.
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(b) That Allmerica Financial has the power and authority under the laws
of the Commonwealth of Massachusetts and under its charter and
by-laws to enter into and perform the Product Development and
Policy Services contemplated in this Agreement.
(c) That all requisite corporate and other acts or proceedings
required to be taken to authorize the execution, delivery and
performance of this Agreement have been or will be taken.
(d) That it has and will use its best efforts to continue to have and
maintain the necessary facilities to perform Policy Services in
accordance with the provisions of this Agreement.
9.02 Survivability. The warranties provided for in this Article 9 shall
survive termination of this Agreement.
ARTICLE 10
INDEMNITIES AND LIABILITY
10.01 Cross Indemnity. Each party shall indemnify, defend and hold harmless the
other, and the other's subsidiaries, parent and affiliates, from and
against any and all claims, actions, damages, liabilities, costs and
expenses (including reasonable attorneys' fees and expenses), arising out
of the death or bodily injury of any agent, employee, customer, business
invitee or business visitor of the indemnitor occurring on premises under
the control of the indemnitor or its parent or one of its subsidiaries or
affiliates.
10.02 Allmerica Financial Limitation of Liability: Indemnification by Canada
Life. Allmerica Financial, its subsidiaries, parent, affiliates and its
or their officers, directors, employees and agents (collectively
"Allmerica Indemnitees") shall not be responsible for, and Canada Life
shall indemnify and hold harmless Allmerica Indemnitees from and against
any and all claims, demands, losses, damages, charges, costs, expenses
(including reasonable attorneys' fees and expenses), judgments, awards
and settlements, including any punitive, consequential, special or
indirect damages (herein "Losses") arising out of or attributable to:
(a) All actions of Allmerica Indemnitees related to Policy
underwriting or the investigation, processing, denial or payment
of Policy claims, including death claims, provided that:
(i) in the case of an underwriting matter, Allmerica Financial
properly utilized Canada Life's Underwriting Standards (as
described in Section 2.02) in underwriting, rating or
declining an applicant for insurance and, in the event
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of the declination of a proposed insured, which declination
is not clearly a medical decline described in Canada Life's
underwriting manual, that the matter was communicated to
authorized Canada Life personnel who agreed with and
approved the declination; and
(ii) in the case of a Policy claim, Allmerica Financial followed
Canada Life's claims investigation and processing rules and
requirements and, in the event of the denial of a claim,
that the matter was communicated to authorized Canada Life
personnel who agreed with and approved the denial.
Allmerica Financial will communicate appropriate details of any
required communication described in (a)(i) and (ii) above in
accordance with notification procedures to be jointly developed by
the parties. If no response is received within five (5) days from
the day of the transmission, Allmerica Financial shall have the
right to proceed on the basis that Canada Life is in agreement
with the decision to decline the risk or deny the payment of the
claim and will proceed with appropriate action.
(b) A claim against an Allmerica Indemnitee by any third party, to the
extent it arises out of or results from any act or omission of
Canada Life, its employees, agents, brokers or representatives
relating to the sale or servicing of any Policy.
(c) A claim against an Allmerica Indemnitee by any third party, to the
extent it arises out of or results from the reasonable reliance of
an Allmerica Indemnitee on information, records or documents
furnished to it by or on behalf of Canada Life.
(d) A claim against an Allmerica Indemnitee by any third party, to the
extent it arises out of or results from the reasonable reliance
on, or the carrying out of by an Allmerica Indemnitee of, any
instructions of authorized personnel of Canada Life.
10.03 Canada Life Limitation of Liability; Indemnification by Allmerica
Financial. Canada Life, its subsidiaries, affiliates and its or their
officers, directors, employees and agents (collectively "Canada Life
Indemnitees") shall not be responsible for, and Allmerica Financial shall
indemnify and hold harmless Canada Life Indemnitees from and against any
and all Losses arising out of or attributable to:
(a) A breach or negligent failure of Allmerica Financial to perform
any of Allmerica Financial's representations, warranties,
covenants or obligations set forth in this Agreement.
(b) A claim against a Canada Life Indemnitee by any third party, to
the extent it arises out of or results from the reasonable
reliance of a Canada Life Indemnitee on
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information, records or documents furnished to it by or on behalf
of Allmerica Financial.
(c) A claim against a Canada Life Indemnitee by any third party, to
the extent it arises out of or results from the reasonable
reliance on, or the carrying out of by a Canada Life Indemnitee
of, any instructions of authorized personnel of Allmerica
Financial.
10.04 Notice and Opportunity to Defend. Promptly after receipt by any party
hereto of notice of the assertion of any claim for a Loss with respect to
which such party hereto expects to make a request for indemnification
hereunder, such party shall give the party which may become obligated to
provide indemnification hereunder (the "Indemnifying Party") written
notice describing such claim in reasonable detail. The Indemnifying Party
shall have the right, at its option and at its own expense and by its own
counsel, to participate in the defense of any such claim, provided that
the Indemnifying Party shall have agreed in writing to indemnify the
party seeking indemnification hereunder (the "Indemnified Party").
Notwithstanding the foregoing, the Indemnifying Party shall not have the
right to control or to represent the Indemnified Party in the defense of
any claim.
10.05 Processing Liability. Notwithstanding the provisions of Sections 10.02
and 10.03, in the event of any liability incurred by Allmerica Financial
or Canada Life as a result of Policy processing errors made by Allmerica
Financial, Allmerica Financial shall be liable for 50% (or the applicable
Quota Share Reinsurance percentage in effect at the applicable time under
the Reinsurance Agreement in effect between the parties) of such amount
and Canada Life shall be liable for the remaining portion of such amount.
For purposes of this Agreement, the term "processing errors" shall mean
and include:
(i) errors or delays relating to the processing of Policy premium
payments;
(ii) errors or delays relating to the processing of Policy fund
transfer requests;
(iii) errors or delays related to the processing of Policy changes
(e.g., processing of title changes, beneficiary changes or
insurance increases or decreases);
(iv) errors or delays related to the processing of Policy surrenders,
exchanges or withdrawals;
(v) errors or delays related to the processing of Policy loans; and
(vi) other errors or delays related to the Policy Administration
functions described in Part B of Schedule 2.01C.
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10.06 Acknowledgment. Allmerica Financial and Canada Life expressly acknowledge
that the limitations contained in this Article 10 represent the express
agreement of the parties with respect to allocation of risks between the
parties, including the level of risk to be associated with the provision
of the Policy Services described herein as related to the amount of the
payments to be made to Allmerica Financial for such Services, and each
party fully understands and accepts such limitations.
10.07 Survivability. The indemnifications provided for in this Article 10
shall survive termination of this Agreement for any reason.
ARTICLE 11
TERM AND TERMINATION
11.01 Term. The Product Development obligations of the parties and the Policy
Services Implementation Phase shall commence upon the Effective Date of
this Agreement. The Implementation Phase shall expire upon successful
completion of all acceptance testing of the Computer System under Article
8. The Operational Phase shall commence on the date the first Policy is
issued and shall expire sixty (60) full calendar months from such date,
unless terminated earlier or extended in accordance with the provisions
of this Agreement. For example, if the first Policy is issued on July
15, 2000, the Agreement shall expire on July 31, 2005 unless earlier
terminated or extended.
11.02 Extension. This Agreement shall continue in force after the initial
60-month termination date specified in Section 11.01 unless either party
elects to terminate the Agreement on said initial termination date by
notifying the other party in writing of its intention to do so. Such
notice must be given at least twelve months prior to said initial
termination date unless both parties agree to accept a later date of
notification. If this Agreement is continued beyond said initial
termination date, Canada Life and Allmerica Financial shall each have the
right to cancel this Agreement on any date thereafter upon twelve months'
written notice to the other party.
11.03 Termination for Cause. Except as otherwise provided in this Agreement,
in the event either party defaults in the performance of any of that
party's material duties or obligations under this Agreement, which
default shall not be substantially cured within thirty (30) days after
written notice is given to the defaulting party specifying the default
or, with respect to those defaults which cannot reasonably be cured
within (30) days, should the defaulting party fail to proceed within
sixty (60) days to commence curing the default and thereafter to
proceed with all due diligence to substantially cure the default,
the party not in default may terminate this Agreement for cause by
giving written notice to the defaulting party.
For purposes of this Agreement, material breach shall include, but not be
limited to, the
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following events: (i) fraud, material misrepresentation, conversion or
unlawful withholding of funds by either party; (ii) the disqualification
by either party to do business under any applicable state or federal law
where its ability to do business is materially impaired; and (iii) any
breach of confidentiality by either party or the use of confidential
information by either party in a competitive manner. Circumstances
described in clause (i) shall not be subject to the cure provisions
described in the preceding paragraph.
In the event this Agreement is terminated for cause, the party materially
breaching the Agreement shall be liable for all damages incurred by the
aggrieved party as a result of the breach. In the event either party
terminates the Agreement for cause, Canada Life agrees to pay Allmerica
Financial the balance of any compensation for Product Development
required to be paid to Allmerica Financial under Section 1.05 and to pay
compensation for Policy Services rendered, required to be paid to
Allmerica Financial under Section 2.04. In the event that either party
terminates this Agreement for cause, Allmerica Financial and Canada Life
shall jointly develop and implement a cooperative conversion workplan
under Subsection 2.01(c) of this Agreement.
11.04 Termination for Nonpayment. In the event Canada Life defaults in payment
of any amount due Allmerica Financial under this Agreement and does not
cure the default within thirty (30) days after written notice of the
default, Allmerica Financial may terminate this Agreement for cause by
giving thirty (30) days written notice to Canada Life.
11.05 Termination for Insolvency. In the event either party becomes or is
declared insolvent or bankrupt, is the subject of any proceedings
relating to its liquidation, insolvency or for the appointment of a
receiver or similar officer for it, makes an assignment for the benefit
of all or substantially all of its creditors, or enters into an agreement
for the continuation, extension, or readjustment of all or substantially
all of its obligations, the other party may immediately terminate this
Agreement for cause.
11.06 Termination in the Event of Reinsurance Recapture. In the event Canada
Life exercises its right under Section 1 of the Reinsurance Agreement in
effect between the parties to recapture amounts reinsured by Allmerica
Financial, Allmerica Financial shall have the right to terminate this
Agreement at any time after the effective of such recapture, upon at
lest thirty (30) days' written notice to Canada Life. Such termination
shall not be a termination for cause.
In the event Allmerica Financial elects to terminate this Agreement
pursuant to this Section 11.06, Canada Life agrees to pay Allmerica
Financial the balance of any compensation for Product Development
required to be paid to Allmerica Financial under Section 1.05 and to pay
compensation for Policy Services rendered, required to be paid to
Allmerica Financial under Section 2.04. In addition, Allmerica Financial
agrees to jointly develop with Canada Life and implement a cooperative
conversion workplan under Subsection 2.01(c) of this
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Agreement.
ARTICLE 12
MISCELLANEOUS
12.01 Binding Nature and Assignment. This Agreement shall be binding on the
parties and their respective successors and assigns. Neither party may
assign this Agreement without the prior written consent of the other,
which shall not be unreasonably withheld.
12.02 Notices. Any notice or other instrument authorized or required by this
Agreement shall be deemed given upon receipt and shall be effective only
if it is in writing and delivered personally, by facsimile transmission
with telephone confirmation, by registered or certified return receipt
mail, postage prepaid, or by nationally recognized overnight courier
service addressed as set forth below or to such other person or address
as each party may from time to time designate by notice to the other
party.
IN THE CASE OF ALLMERICA FINANCIAL:
Allmerica Financial Life Insurance and Annuity Company
440 Lincoln Street
Worcester, Massachusetts 01653
Attention: Guy R. Sullivan
Senior Vice President
IN THE CASE OF CANADA LIFE:
Canada Life Insurance Company of America
6201 Powers Ferry Road, NW
Atlanta, Georgia 30339
Attention:
-----------------
--------------------
A party may from time to time change its address or designees for
notification purposes by giving the other party prior notice in the
manner specified above of the new address or the new designee and the
subsequent date upon which the change shall be effective.
12.03 Amendment. This Agreement may be amended or modified only by a written
agreement executed by both parties, as evidenced in writings signed by a
Vice President of Allmerica Financial and Canada Life.
12.04 Counterparts. This Agreement may be executed simultaneously in multiple
counterparts,
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<PAGE> 22
each of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument.
12.05 Certain Construction Rules; Governing Law. All Schedules attached hereto
and referred to herein, are hereby incorporated in and made a part of
this Agreement as if set forth herein. Any matter disclosed on any
Schedule referred to herein shall be deemed also to have been disclosed
on any other applicable Schedule referred to herein. All Section titles
or captions contained in this Agreement or in any Schedule are for
convenience only, shall not be deemed a part of this Agreement and shall
not affect the meaning or interpretation of this Agreement. Any
reference to a "Section" or "Schedule" shall be deemed to refer to a
Section of this Agreement or Schedule attached to this Agreement. The
recitals set forth on the first page of this Agreement are incorporated
into and made a part of this Agreement. Unless the context clearly
indicates, words used in the singular include the plural, and words in
the plural include the singular.
This Agreement is to be governed by and construed in accordance with the
laws of the Commonwealth of Massachusetts and without regard to the
conflicts of laws principles thereof.
12.06 Relationship of Parties. Canada Life understands and agrees that
Allmerica Financial in furnishing services to Canada Life is acting only
as an independent contractor. Unless otherwise provided in this
Agreement, Allmerica Financial has the sole right and obligation to
supervise, manage, contract, direct, procure, perform or cause to be
performed all work to be performed by Allmerica Financial pursuant to
this Agreement.
12.07 Approvals and Similar Actions. Where agreement, approval, acceptance,
consent or similar action is required by any provision of this Agreement,
such action shall not be unreasonably delayed or withheld.
12.08 Force Majeure. Each party shall be excused from performance for any
period and to the extent that the party is prevented from performing any
services, in whole or in part, as a result of delays caused by an act of
God, war, civil disturbance, court order, labor dispute, or other cause
beyond that party's reasonable control, including failures or
fluctuations in electrical power, heat, light, air conditioning or
telecommunications equipment and such nonperformance shall not be a
default or a ground for termination.
12.09 Severability. The provisions of this Agreement are severable and the
invalidity or unenforceability of any provision of this Agreement shall
not affect the validity or enforceability of any other provision hereof.
In addition, in the event that any provision of this Agreement (or
portion thereof) is determined by a court of competent jurisdiction to be
unenforceable as drafted by virtue of the scope, duration, extent or
character of any obligation contained therein, it is the mutual
agreement of the parties that such provision (or
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portion thereof) shall, to the extent equitable, be constructed in a
manner designed to effectuate the purposes of such provision to the
maximum extent enforceable under applicable law.
12.10 Construction and Representation by Counsel. The parties hereto represent
that in the negotiation and drafting of this Agreement they have been
represented by and relied upon the advice of counsel of their choice. The
parties affirm that their counsel have had a substantial role in the
drafting and negotiation of this Agreement and, therefore, the rule of
construction to the effect that any ambiguities are to be resolved
against the drafting party shall not be employed in the interpretation of
this Agreement or any Schedule attached hereto.
12.11 Media Releases. Canada Life and Allmerica Financial shall consult with
each other as to the form, substance and timing of any press release or
other public disclosure of matters related to this Agreement or any of
the transactions contemplated hereby, and no such press release or other
public disclosure shall be made without the consent of the other party,
which shall not be unreasonably withheld or delayed; provided, however,
that either party may make such disclosures as are required by legal,
accounting or regulatory requirements after making reasonable efforts in
the circumstances to consult in advance with the other party.
12.12 Reinsurance Agreement. The parties understand and agree that certain
policy expenses and mortality risks assumed under the Policies serviced
under this Agreement will be reinsured by Allmerica Financial pursuant to
the terms of a separate Reinsurance Agreement to be negotiated between
the parties.
12.13 Agreement Relating to Additional Services. The parties understand and
agree that certain investment accounting, separate account and treasury
services to be provided by Allmerica Financial will be set forth in a
separate agreement to be negotiated by the parties.
12.14 Waiver. No delay or omission by either party to exercise any right or
power shall impair such right or power or be construed as a waiver. A
waiver by either of the parties of any of the covenants to be performed
by the other or any breach shall not be construed to be a waiver of any
succeeding breach or of any other covenant.
12.15 Entire Agreement. This Agreement constitutes the entire agreement between
the parties with respect to the subject matter hereof. There are no
representations, understandings or agreements which are not fully
expressed in this Agreement. No change, waiver, or discharge shall be
valid unless in writing and signed by an authorized representative of the
party against whom such change, waiver or discharge is sought to be
enforced.
12.16 Hiring of Employees. During the term of this Agreement and for one (1)
year thereafter, Canada Life and Allmerica Financial and any of their
affiliates shall not, directly or indirectly, solicit for employment any
person employed or working on the services provided
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<PAGE> 24
hereunder within the preceding twelve (12) months by the other party or
any affiliate of the other party without the prior written consent of the
other party, which shall not be unreasonably withheld; provided, however,
that (i) in the event either party uses the services of a professional
recruiter and provides such recruiter solely with generic job duties and
job descriptions (without making any reference to the other party or the
other party's affiliates) and such recruiter contacts a qualified
candidate who happens to be an employee of the other party and that
candidate initiates contact through the recruiter with that party, then
that party may employ that employee, or (ii) in the event an employee of
the other party responds to a general advertisement placed by a party,
then that party may employ that employee.
12.17 Taxes. Any taxes or similar assessments charged against Allmerica
Financial or charged in connection with the services provided under this
Agreement shall be the responsibility of Allmerica Financial, whether
such tax or assessment is imposed by the Federal government, a state, a
municipality or an administrative organization thereof.
12.18 Arbitration. All disputes and differences between the parties with
respect to this Agreement will be decided by arbitration, regardless of
the insolvency of either party, unless the conservator, receiver,
liquidator, or statutory successor is specifically exempted from an
arbitration proceeding by applicable state law. Either party may initiate
arbitration by providing written notification to the other party. Such
written notice shall set forth a brief statement of the issue(s), the
failure of the parties to reach agreement, and the date of the
demand for arbitration.
An arbitration panel shall be chosen consisting of three arbitrators. The
arbitrators must be impartial and must be or must have been officers of
life insurance companies other than the parties or their affiliates. Each
party shall select an arbitrator within thirty days from the date of the
demand. If either party shall refuse or fail to appoint an arbitrator
within the time allowed, the party that has appointed an arbitrator may
notify the other party that, if it has not appointed its arbitrator
within the following ten days, the arbitrator will appoint an arbitrator
on its behalf. The two arbitrators shall select a third arbitrator
within thirty days of the appointment of the second arbitrator. If the
two arbitrators fail to agree on the selection of the third arbitrator
within the time allowed, either party may ask ARIAS*US to appoint the
third arbitrator. However, if ARIAS*US is unable to appoint an arbitrator
who is impartial and who is or was an officer of a life insurance company
other than the parties or their affiliates, then either party may ask a
court to appoint the third arbitrator pursuant to the Uniform Arbitration
Act or any similar statute empowering the court to appoint an arbitrator.
The arbitration panel shall interpret this Agreement as an honorable
engagement rather than merely a legal obligation, and shall consider
practical business and equitable principle as well as industry custom and
practice. The panel is released from judicial formalities and
-23-
<PAGE> 25
shall not be bound by strict rules of procedure and evidence.
The arbitration panel shall determine all arbitration schedules and
procedural rules. Organizational and other meetings shall be held in
Worcester, Massachusetts, unless the panel shall select another
location. The panel shall decide all matters by majority vote.
Decisions of the arbitration panel shall be final and binding on both
parties. The panel may, at its discretion, award costs and expenses it
deems appropriate, including but not limited to attorney's fees and
interest. Judgment may be entered upon the final decision of the panel
in any court of competent jurisdiction. The panel may not award
exemplary or punitive damages. Unless the panel decides otherwise, each
party will be separately responsible for paying all fees and expenses
charged by its respective counsel, accountants, actuaries, and other
representatives in connection with the arbitration, and the parties
shall bear equally the fees and expenses of the arbitrators and any
ancillary expenses associated with a hearing (e.g., any rental fee for
use of the hearing room, etc.).
12.19 Legal Proceedings and Complaints. If Allmerica Financial receives:
(a) notice of the commencement of any legal proceeding involving any
of Canada Life's customers; or
(b) a communication from any insurance department, other
administrative agency or any other person identifying a complaint
by any Canada Life customer or calling a hearing involving any
Canada Life practice; or
(c) written or oral complaints from customers of Canada Life; or
(d) a demand or request by any court, government agency or regulatory
body to examine any of the books and records of Canada Life
relating to Policies or Policy Services;
Allmerica Financial will use its best efforts to notify Canada Life
within one (1) business day. Allmerica Financial will send copies of any
necessary documentation to Canada Life within two (2) business days.
Allmerica Financial and Canada Life will jointly develop a complaint
handling process.
Allmerica Financial will maintain a file containing any correspondence
relating to complaints received from Canada Life customers or service
providers for a period of seven (7) years from receipt of the complaint
letter.
12.20 Trademarks and Tradenames. Allmerica Financial will not use Canada
Life's name, trademarks, logo, or the name of any affiliate of Canada
Life in any way or manner not
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<PAGE> 26
specifically authorized in writing by Canada Life.
Canada Life will not use Allmerica Financial's name, trademarks, logo or
the name of any affiliate of Allmerica Financial in any way or manner
not specifically authorized in writing by Allmerica Financial.
12.21 Advertisement. Allmerica Financial shall not advertise the existence of
this Agreement or announce its existence to other insurance companies or
broker-dealers without the express written consent of Canada Life.
Notwithstanding the foregoing, Canada Life agrees that Allmerica
Financial may disclose the existence of this Agreement to insurance
companies or other organizations that are prospective purchasers of
services similar to the product development and administrative services
to be provided under this Agreement.
12.22 Continuation. Sections 1.05, 1.06, 2.01(c), 3.02, 4.01, 5.01, 12.15,
12.16, 12.17, 12.18, 12.19, 12.20, and Articles 9 and 10 shall survive
termination of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to take
effect on the effective date specified above.
CANADA LIFE INSURANCE FIRST ALLMERICA FINANCIAL LIFE
COMPANY OF AMERICA INSURANCE COMPANY
By: By:
--------------------- ----------------------
Name: Name:
------------------- --------------------
Title: Title:
------------------ -------------------
Date: Date:
------------------- --------------------
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<PAGE> 27
LIST OF SCHEDULES
TO
PRODUCT DEVELOPMENT
AND ADMINISTRATIVE SERVICES AGREEMENT
Schedule 1.01 AFLIAC Policy Forms
Schedule 1.02 Jurisdictions Where Policy Forms Are
to be Initially Submitted and
Jurisdictions Where Policy Forms Are
to be Submitted when Canada Life is
Licensed
Schedule 2.01A Inventory of Services and Functions
Schedule 2.01B Policy Services - Project Schedule of
Events
Schedule 2.01C Service Standards
Schedule 3.01 Computer System Software
<PAGE> 28
SCHEDULE 1.01 TO PRODUCT DEVELOPMENT AND ADMINISTRATIVE SERVICES AGREEMENT
BETWEEN FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY ("ALLMERICA
FINANCIAL") AND CANADA LIFE INSURANCE COMPANY OF AMERICA ("CANADA LIFE"),
EFFECTIVE _______________ .
AFLIAC POLICY FORMS
The Canada Life Policy, Policy Application and related Policy forms contemplated
by the Agreement will be substantially the same as the following Allmerica
Financial Life Insurance and Annuity Company ("AFLIAC") forms:
<TABLE>
<CAPTION>
Name of AFLIAC Form AFLIAC Form Numbers
------------------- -------------------
<S> <C>
1. Flexible Premium Variable Life 1033-99
Insurance Policy
2. Policy Application Forms 11060, VUL2001,
IAM-97
3. Term Insurance Rider 1103-99
4. Other Insured Term Insurance Rider 1088-95
5. Waiver of Payment Rider 1086-94
6. Guaranteed Death Benefit rider 1099-97
</TABLE>
<PAGE> 29
SCHEDULE 1.02 TO PRODUCT DEVELOPMENT AND ADMINISTRATIVE SERVICES AGREEMENT
BETWEEN FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY ("ALLMERICA
FINANCIAL") AND CANADA LIFE INSURANCE COMPANY OF AMERICA ("CANADA LIFE"),
EFFECTIVE ________________ .
A. JURISDICTIONS WHERE POLICY FORMS ARE TO BE INITIALLY SUBMITTED
Alabama Kentucky Oklahoma
Arkansas Maryland Oregon
Connecticut Minnesota Rhode Island
Delaware Mississippi South Carolina
District of Columbia Missouri South Dakota
Florida Montana Tennessee
Hawaii Nebraska Utah
Idaho Nevada Virginia
Illinois New Hampshire Washington
Indiana New Jersey Wisconsin
Iowa New Mexico Wyoming
Kansas North Dakota
B. JURISDICTIONS WHERE POLICY FORMS ARE TO BE SUBMITTED WHEN CANADA LIFE IS
LICENSED
California Ohio
Georgia Pennsylvania
Louisiana Texas
Maine Vermont
Massachusetts West Virginia
North Carolina U.S. Virgin Islands
<PAGE> 30
SCHEDULE 2.01A TO PRODUCT DEVELOPMENT AND ADMINISTRATIVE SERVICES AGREEMENT
BETWEEN FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY ("ALLMERICA FINANCIAL")
AND CANADA LIFE INSURANCE COMPANY OF AMERICA("CANADA LIFE"),
EFFECTIVE ____________ .
<TABLE>
<CAPTION>
INVENTORY OF SERVICES AND FUNCTIONS
<S> <C>
REGISTERED REPRESENTATIVE LICENSING/SELLING FUNCTIONS...............................Canada Life
PRODUCT MARKETING ILLUSTRATION SUPPORT FUNCTONS.....................................Canada Life
RECEIPT OF INITIAL APPLICATION FOR BUSINESS AND INITIAL PREMIUM.............Allmerica Financial
BUSINESS SUITABILITY................................................................Canada Life
UNDERWRITING REVIEW/APPROVAL................................................Allmerica Financial
PROCESS INCOMPLETES/DECLINES................................................Allmerica Financial
POLICY ISSUE................................................................Allmerica Financial
POLICY PRINTING.............................................................Allmerica Financial
POLICY MAILING..............................................................Allmerica Financial
(POLICY LEVEL) FUND ALLOCATION..............................................Allmerica Financial
INITIAL PREMIUM COLLECTION..................................................Allmerica Financial
FREE LOOK REFUNDS/NOT TAKENS................................................Allmerica Financial
COMMISSION PROCESSING/PAYMENT.......................................................Canada Life
BILLING (ANNUAL, SEMI ANNUAL, QUARTERLY)....................................Allmerica Financial
COLLECTIONS.................................................................Allmerica Financial
LOCK BOX MANAGEMENT.........................................................Allmerica Financial
MONTHLY AUTOMATIC PREMIUM...................................................Allmerica Financial
FUND TRANSFER/REALLOCATIONS.................................................Allmerica Financial
800-LINE TELEPHONE CUSTOMER SERVICES........................................Allmerica Financial
POLICY HISTORY REQUESTS.....................................................Allmerica Financial
BENEFICIARY AND OWNER CHANGES...............................................Allmerica Financial
CUSTOMER CONFIRMATIONS (FINANCIAL TRANSACTIONS).............................Allmerica Financial
</TABLE>
<PAGE> 31
<TABLE>
<CAPTION>
POLICY CHANGES..............................................................Allmerica Financial
INVENTORY OF SERVICES AND FUNCTIONS(Continued)
- -----------------------------------
<S> <C>
ADDRESS CHANGES.............................................................Allmerica Financial
LOANS/PARTIAL WITHDRAWALS...................................................Allmerica Financial
1035 EXCHANGES..............................................................Allmerica Financial
SURRENDERS..................................................................Allmerica Financial
CONSERVATION........................................................................Canada Life
WRITTEN CORRESPONDENCE
PRE SALE (i.e. BEFORE APPLICATION SIGNED).....................................Canada Life
POST SALE.............................................................Allmerica Financial
DEATH AND OTHER POLICY CLAIMS
NOTIFICATION..........................................................Allmerica Financial
SYSTEM PROCESSING.....................................................Allmerica Financial
INVESTIGATION/REVIEW..................................................Allmerica Financial
SETTLEMENT OPTIONS..................................................................Canada Life
ANNUAL STATEMENTS...........................................................Allmerica Financial
INSURANCE ACCOUNTING (i.e., POLICY GAAP AND STATUTORY ACCOUNTING)...........Allmerica Financial*
TAX WITHHOLDING AND INFORMATION REPORTING...................................Allmerica Financial
EXCESS REINSURANCE ADMINISTRATION...........................................Allmerica Financial
</TABLE>
* Initially Allmerica Financial's function. This function does not include
Canadian valuation (PPM) accounting The Policy GAAP accounting function will be
assumed by Canada Life no later than January 1, 2002.
<PAGE> 32
SCHEDULE 2.01B TO PRODUCT DEVELOPMENT AND ADMINISTRATIVE SERVICES AGREEMENT
BETWEEN FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY ("ALLMERICA FINANCIAL")
AND CANADA LIFE INSURANCE COMPANY OF AMERICA("CANADA LIFE"),
EFFECTIVE ____________ .
<TABLE>
<CAPTION>
POLICY SERVICES - PROJECT SCHEDULE OF EVENTS
--------------------------------------------
<S> <C>
DEVELOPMENT OF DETAILED BUSINESS SPECIFICATIONS.......................................................February 16, 2000
ALLMERICA FINANCIAL AND CANADA LIFE
INTERFACE SYSTEMS PROGRAMMING AND SYSTEM TESTING...................... .....Anticipated to be completed by July 1, 2000
BUSINESS ACCEPTANCE AND MODEL OFFICE TESTING................................Anticipated to be completed by July 1, 2000
IMPLEMENTATION OF OPERATIONAL PHASE.........................................Anticipated to be completed by July 1, 2000
</TABLE>
<PAGE> 33
SCHEDULE 2.01C TO PRODUCT DEVELOPMENT AND ADMINISTRATIVE SERVICES AGREEMENT
BETWEEN FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY AND CANADA LIFE
INSURANCE COMPANY OF AMERICA, EFFECTIVE ____________ .
<TABLE>
<CAPTION>
SERVICE STANDARDS
-----------------
Service Standard
- -------- --------
<S> <C>
A. Underwriting
------------
Initial Underwriting Review....................................3 Business Days
Final Action...................................................2 Business Days
B. Policy Administration
---------------------
Premium Payments Applied.......................................98% Applied Within 1 Business Day
Fund Transfers/Reallocations Processed.........................98% Applied Within 1 Business Day
New Business*..................................................98% Issued Within 1 Business Day
1035 Exchanges*................................................98% Mailed Within 3 Business Days
Loans/Partial Withdrawals......................................98% Processed Within 2 Business Days
Policy Changes(i.e. increases, decreases
reinstatements)*..............................................98% Processed Within 5 Business Days
Policy Surrenders..............................................98% Processed Within 5 Business Days
Address Changes................................................95% Processed Within 5 Business Days
Beneficiary and Owner Changes..................................95% Processed Within 5 Business Days
C. Customer Service
-----------------
Average Speed to Answer.......................................80% of calls answered within 20 Seconds
Return Calls ...........................................................Within 3 Hours or as Promised
Correspondence..............................Letter to Inquirer within 5 Business Days or as Promised
Complaint Handling..................................Acknowledge within 1 Business Day, Final Response
to be sent within a mutually acceptable time
frame intended to meet all state regulatory
requirements
D. Death and Other Policy Claims.............. Policy claims will be processed within mutually acceptable
----------------------------- time frames intended to meet all state regulatory
requirements
</TABLE>
*Measured from the date of Policy underwriting approval
Note: As provided in Subsection 2.01(b), Allmerica Financial reserves the right
to modify the above Service Standards. Provided, however, that at no time shall
the Service Standards for the Policy Services described in this Agreement be
less rigorous than the service standards that are then applicable to the
servicing of Allmerica Financial's own variable life insurance business
<PAGE> 34
SCHEDULE 3.01 TO PRODUCT DEVELOPMENT AND ADMINISTRATIVE SERVICES AGREEMENT
BETWEEN FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY AND CANADA LIFE
INSURANCE COMPANY OF AMERICA, EFFECTIVE ____________ .
1. LifeCAD MP (Version 4.0) This system is the property of NaviSys and is not
currently licensed to Allmerica Financial
2. Variable Product Administration System - Licensed by Douglas G. Draeseke
3. Triton Valuation System - Licensed by Price Waterhouse
4. R(2) Reinsurance System - Licensed by The Actuarial Network
5. Life Underwriting System - Licensed by Lincoln National
6. Asset Allocator - Allmerica Financial**
7. PeopleSoft General Ledger - Allmerica Financial
** Software that Allmerica Financial is developing specifically for
Canada Life. Canada Life understands and agrees that the source codes
for this software are proprietary to Allmerica Financial and will not
be given to Canada Life under any circumstances.
