As filed with the Securities and Exchange Commission on October 5, 2000
Registration Nos. 333-83719
811-2162
Securities and Exchange Commission
Washington, DC 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. 1 [x]
Post-Effective Amendment No. __ [ ]
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 [ ]
Amendment No. 16 [x]
(Check appropriate box or boxes)
General American Separate Account Two
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(Exact Name of Registrant)
General American Life Insurance Company
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(Name of Depositor)
<PAGE>
700 Market Street
St. Louis, MO 63101
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(Address of Depositor's Principal Executive office)
(314) 231-1700
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Depositor's Telephone Number
William L. Hutton, Esquire
General American Life Insurance Company
700 Market Street
St. Louis, MO 63101
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(Name and address of Agent for Service)
Copy to:
Raymond A. O'Hara III, Esquire
Blazzard, Grodd & Hasenauer, P.C.
943 Post Road East
Westport, CT 06880
Approximate date of proposed public offering:
As soon as practicable after effectiveness of
the Registration Statement
Title of Securities Being Registered: Group Variable Annuity Contracts
1
The registrant hereby amends this registration statement on such date or 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),
shall determine.
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Cross Reference Sheet
Pursuant to Rules 481 and 495, '33 Act
Showing Location in Part A (Prospectus) and Part B (Statement of Additional Information) of Registration
Statement of Information Required by Form N-4
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<PAGE>
PART A
Item of Form N-4 Prospectus Caption
<S> <C>
1. Cover Page....................................................Cover Page
2. Definitions...................................................Index of Special Terms
3. Synopsis......................................................Expense Table
4. Condensed Financial Information...............................Condensed Financial Information
5. General Description of Depositor, Registrant and
Portfolio Companies.................................The Company;
The Funds
6. Deductions and Expenses.......................................Charges and
Deductions
7. General Description of the Variable
Annuity Contracts....................................The Contracts
8. Annuity Period................................................The Contracts
9. Death Benefit.................................................Distributions Under
the Contracts
10. Purchases and Contract Value..................................The Contracts
11. Redemptions...................................................Distributions Under the Contracts
12. Taxes .....................................................Federal Tax Matters
13. Legal Proceedings.............................................None
14. Table of Contents of the
Statement of Additional
Information...................................................Table of Contents for
Statement of Additional Information
PART B
SAI Caption
15. Cover Page....................................................Cover Page
16. Table of Contents.............................................Table of Contents
17. General Information and History...............................The Company and the Separate
Account (Part A)
18. Services.....................................................Not Applicable
19. Purchase of Securities Being Offered.........................Distribution of the Contract
20. Underwriters..................................................Distribution of the Contract
21. Calculation of Performance Data...............................Money Market Yield Calculation
22. Annuity Payments..............................................Annuity Payments (Part A)
23. Financial Statements..........................................Financial Statements
</TABLE>
PART C
Information required to be included in Part C is set forth under the appropriate
Item so numbered, in Part C to this Registration Statement.
<PAGE>
GENERAL AMERICAN SEPARATE ACCOUNT TWO
Prospectus
for the
GROUP VARIABLE ANNUITY CONTRACTS
Offered by
GENERAL AMERICAN LIFE INSURANCE COMPANY
(A Missouri Company)
700 Market Street
St. Louis, Missouri 63101
1-800-449-6447
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This Prospectus describes group variable annuity contracts offered by General
American Life Insurance Company ("we, us, our"). The Contracts are designed to
fund retirement plans and provide for the accumulation of capital on a
tax-favored basis for retirement or other long-term purposes. The Contracts may
be purchased with an initial payment of One Million Dollars ($1,000,000).
You have significant flexibility in determining the frequency and amount of each
Contribution.
Surrenders or partial withdrawals may be made at any time, although they may be
subject to a withdrawal or surrender charge and tax penalty. Any amount
surrendered or withdrawn may be paid in a lump sum. When a plan participant
retires, the Contract allows you to pay the retirees' benefits by purchasing an
annuity from us in the form that we offer at that time.
The Contracts have a variety of investment choices (two different "Funds"). The
Funds available are portfolios of General American Capital Company which are
listed below.
S&P 500 Index Fund
Money Market Fund
You can put your money in either of these Funds, which are offered through our
separate account, General American Separate Account Two. A separate account is
not a separate legal entity but is used to segregate the various types of
products we offer and the investments made by owners of those products. Separate
Account Two is used for investments in our annuity products.
The value of amounts accumulated under the Contract will vary in accordance with
the investment performance of the Funds you select. Because you select the
investment funds and allocations, you bear the entire investment risk under the
Contract for amounts invested in the Funds.
Please read this Prospectus before investing. A Statement of Additional
Information ("SAI") about the Contracts and the Separate Account is available
free by writing us at: Variable Annuity Administration Department, P.O. Box
14490, St. Louis, MO 63178-4490 or by calling 800-449-6447. The SAI, dated
____________, 2000, has been filed with the Securities and Exchange Commission
<PAGE>
and is legally part of the Prospectus. The table of contents of the SAI is on
page ____ of this Prospectus.
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This Prospectus Must Be Accompanied by a Current Prospectus for General American
Capital Company.
The Securities and Exchange Commission (SEC) has not approved or disapproved
these securities or determined that this Prospectus is accurate or complete. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Please Read This Prospectus Carefully And Keep It For Future Reference.
This Prospectus is dated ___________, 2000
The Contract is not available in all States.
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TABLE OF CONTENTS
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<S> <C>
INDEX OF SPECIAL TERMS...............................................................................................4
HIGHLIGHTS...........................................................................................................4
EXPENSE TABLE........................................................................................................5
THE COMPANY AND THE SEPARATE ACCOUNT
The Company..........................................................................................................7
Separate Account Two.................................................................................................7
THE FUNDS............................................................................................................8
ADDITIONS, DELETIONS OR SUBSTITUTIONS OF INVESTMENTS.................................................................9
THE CONTRACTS.......................................................................................................10
Contract Application................................................................................................10
Allocation of Contributions.........................................................................................10
Accumulated Value ..................................................................................................11
Net Investment Factor...............................................................................................11
Transfers...........................................................................................................12
Contract Owner Inquiries............................................................................................12
CHARGES AND DEDUCTIONS..............................................................................................12
Surrender Charges (Contingent Deferred Sales Charge)................................................................12
<PAGE>
Asset Charge........................................................................................................13
Exchange Adjustment.................................................................................................14
Premium Tax.........................................................................................................15
Federal Income Tax..................................................................................................16
Expenses - Capital Company .........................................................................................16
DISTRIBUTIONS UNDER THE CONTRACTS...................................................................................16
Surrenders and Partial Withdrawals..................................................................................16
Deferment of Payment................................................................................................17
FEDERAL TAX MATTERS.................................................................................................17
Introduction........................................................................................................17
Taxation of General American........................................................................................18
Tax Status of Qualified Contracts...................................................................................18
Code Section 403(b) Plans...........................................................................................19
Corporate Pension and Profit-Sharing Plans and H.R. 10 Plans........................................................19
Deferred Compensation Plans.........................................................................................19
Restrictions Under Qualified Contracts..............................................................................20
Possible Tax Law Changes............................................................................................20
DISTRIBUTOR OF THE CONTRACTS........................................................................................20
VOTING RIGHTS.......................................................................................................21
CONDENSED FINANCIAL INFORMATION.....................................................................................22
LEGAL PROCEEDINGS...................................................................................................22
STATEMENT OF ADDITIONAL INFORMATION...................................................................................
</TABLE>
<TABLE>
<CAPTION>
INDEX OF SPECIAL TERMS
We have tried to make this prospectus as readable and understandable for you as
possible. By the very nature of the contract, however, certain technical words
or terms are unavoidable. We have identified the following as some of these
words or terms. The page that is indicated here is where we believe you will
find the best explanation for the word or term.
Page
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Accumulated Value...................................................................................................11
Annuitant...........................................................................................................17
Business Day........................................................................................................10
Companion Contract..................................................................................................10
Contract Year........................................................................................................5
<PAGE>
Exchange Adjustment..............................................................................................14-15
Fund (or "Funds")....................................................................................................8
Participant.........................................................................................................10
Qualified Contracts.................................................................................................17
Valuation Period....................................................................................................11
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HIGHLIGHTS
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The Contracts allow a Plan to accumulate funds on a tax-favored basis and to
provide for the payment of annuity benefits when desired, based on the
investment performance of the funds in which you invest. A "Plan" is a
retirement plan that is the purchaser of a Contract. The Contracts are designed
for use in connection with the following retirement plans: (1) pension and
profit sharing plans, (2) annuity purchase agreements which are adopted for
employees by public school systems and by organizations that are tax exempt
under Section 501(c)(3) of the Code, and (3) plans established under Section 457
of the Internal Revenue Code of 1986, as amended ("Code").
A Contract may be purchased with an Initial Contribution of at least One Million
Dollars ($1,000,000) from any of these retirement plans. Additional
Contributions after the Initial Contribution are permitted but not required. The
source of the funds affects the way annuity investments are taxed, but not the
operation of the Contracts. (See "Federal Tax Matters")
If a Plan wants to transfer assets to a Contract from some other fund or
investment, but would lose a portion of the assets as a result of the
termination provisions of the original investment, we may provide an Exchange
Adjustment as a credit to the Accumulated Value to make up all or a portion of
the difference (up to 3% of the original value of the assets). For contracts
with an Exchange Adjustment a fee ranging from .25% to .75% on account value is
charged to recoup the Exchange Adjustment credit plus interest and, as a result,
the fees and charges are higher than they would be without receiving the
exchange credit. (See "Exchange Adjustment")
You can allocate contributions to two divisions of the Separate Account, each of
which will invest in shares of a corresponding Fund of General American Capital
Company ("Capital Company"). The assets of each Fund are held separately from
the other Funds and each has distinct investment objectives and policies which
are described in the accompanying Prospectus of Capital Company. (See "General
<PAGE>
American Capital Company"). Contributions may be allocated among one or more of
the Funds or to a Companion Contract in accordance with the allocation
percentages selected by you in your Contract application. All allocations must
be in whole percents and total 100%. Allocations for additional contributions
may be changed by sending written notice to us. (See "Allocation of
Contributions")
We deduct a daily charge equal to a percentage of the value of the net assets in
the Separate Account for the expense risks assumed by us and for the cost of
distributing and administering these Contracts. The effective annual rate of
this charge is .85%. If there is an Exchange Adjustment, this rate could be as
high as 1.60% (see "Exchange Adjustment").
In order to permit investment of the entire Contribution, we currently do not
deduct sales charges at the time of investment. All or part of the Accumulated
Value of the Contract may be withdrawn before it is applied to provide
annuitization payments. However, amounts withdrawn may be subject to a surrender
charge depending on how long the contract has been in force to cover certain
expenses relating to the sale of the Contracts, including commissions to
registered representatives and other promotional expenses. (See "Surrender
Charges")
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EXPENSE TABLE
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Owner Transaction Expenses
Sales Load Imposed on Contributions.............0%
Maximum Surrender Charge........................6%
(as a percentage of amount withdrawn)
Contract Years 1-7.............................. 6%
Contract Year 8 +............................... 0%
(The surrender charge applies when amounts are withdrawn. Up to 30% of the
Accumulated Value at the beginning of the Contract Year may be withdrawn in any
Contract Year without incurring a surrender charge if made due to a
Participant's death, disability, retirement, termination of employment or other
distributable event as permitted under the terms of a Plan. A Contract Year is a
period of 12 months starting with the date the Contract becomes effective or the
annual anniversary of such date.)
<PAGE>
Transfer Charge................................ None
Separate Account Annual Fees (as a percentage of Accumulated Value)
Daily Asset Charge.............................. .85%
Exchange Adjustment Charge percentage.......... 0.00% - 0.75%
The Daily Asset Charge covers the expense of administering the Contracts and
mortality and expense risks. (See "Charges and Deductions - Asset Charge"). The
Exchange Adjustment Charge percentage depends on the level of Exchange
Adjustment (if any) and is expressed as a percentage of the Accumulated Value.
Fund Annual Expenses (as a percentage of average net assets of the Fund)
<TABLE>
<CAPTION>
General American Capital Company Annual Fund Expenses:
Investment Administration Total Fund
Fund Advisory Fees Fees Operating Expenses
---- ------------- ---- ------------------
<S> <C> <C> <C> <C>
S & P 500 Index Fund 0.250% 0.050% 0.300%
Money Market Fund 0.125% 0.080% 0.205%
</TABLE>
<TABLE>
<CAPTION>
Examples
If you surrendered your Contract after the end of the specified time period, you
would pay the following aggregate expenses on a $1,000 investment, assuming a 5%
annual return:
1 Year 3 Years
------ -------
<S> <C> <C> <C>
S & P 500 Index Fund $74.03 $103.74
Money Market Fund 73.13 100.95
If you do not surrender your Contract or you annuitize after the end of the
specified time period, you would pay the following aggregate expenses on the
same investment:
1 Year 3 Years
------ -------
S & P 500 Index Fund $11.72 $36.54
Money Market Fund 10.76 33.56
</TABLE>
<PAGE>
The purpose of the tables above is to help you understand the costs and expenses
that you will bear directly or indirectly. The examples above are not a
representation of actual, past or future expenses, and actual expenses may be
higher or lower than those shown. The assumed 5% annual return is hypothetical
and does not represent actual returns, which may be greater or less than the
assumed rate. Neither the table nor the examples reflect any premium taxes that
may be applicable to a Contract; such taxes currently range from 0% to 3.5%. The
above table and examples reflect only the charges for contracts currently
offered by this Prospectus and not any other contracts that may utilize Separate
Account Two. For further details, see Charges and Deductions.
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THE COMPANY AND THE SEPARATE ACCOUNT
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The Company
We are an insurance company that is wholly-owned by GenAmerica Corporation.
GenAmerica Corporation is wholly-owned by Metropolitan Life Insurance Company, a
New York insurance company ("MetLife"). We were chartered in 1933 and since then
have continuously engaged in the business of life insurance, annuities, and
accident and health insurance. Our National Headquarters is located at 700
Market Street, St. Louis, Missouri 63101. The telephone number is 314-231-1700.
We are licensed to do business in 49 states of the U.S., the District of
Columbia, Puerto Rico, and are registered in Canada and licensed in the
Provinces of Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland,
Nova Scotia, Ontario, Prince Edward Island, Quebec, and Saskatchewan.
We conduct a conventional life insurance business. Assets derived from our
business should be considered by purchasers of variable annuity contracts only
as bearing upon our ability to meet our obligations under the variable annuity
contracts and should not be considered as bearing on the investment performance
of the Separate Account.
Separate Account Two
Separate Account Two was established on October 22, 1970. Although the Separate
Account is an integral part of our corporation, it is not a separate legal
entity. The Separate Account is registered as a unit investment trust with the
Securities and Exchange Commission (the "SEC") under the Investment Company Act
of 1940 (the "1940 Act"). This registration does not involve supervision by the
SEC of our management or investment practices or policies or those of the
Separate Account.
<PAGE>
Payments are made into the Separate Account from individual and group variable
annuity contracts entitled to tax benefits under Sections 401, 403(b), 408, and
457 of the Internal Revenue Code ("Code"), and also from individual variable
annuity contracts not entitled to any special tax benefits. Such payments are
pooled together and invested separately from our General Account (the general
assets of the insurance company other than separate account assets). The persons
participating in these Contracts look to the investment experience of the assets
in the Separate Account.
The net assets of the Separate Account are held for the exclusive benefit of you
and the persons entitled to payments under the Contract or other contracts with
funds in Separate Account Two. The net assets of the Separate Account are not
chargeable with liabilities due to any other business conducted by us.
On February 23, 1988, pursuant to the vote of the contract owners, the Separate
Account was changed from a management investment company with a single equity
investment portfolio, to a unit investment trust with various divisions. Each
division invests its assets in shares of the corresponding Funds described
below. We may establish additional divisions as the need arises.
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THE FUNDS
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General American Capital Company
General American Capital Company is a "series mutual fund" company that was
organized as a Maryland corporation on November 5, 1985, and commenced
operations on October 1, 1987.
Conning Asset Management Company ("Investment Adviser") is the adviser to
Capital Company. On August 1, 1996, General American Investment Management
Company changed its name to Conning Asset Management Company. The Investment
Adviser provides investment advisory services to Capital Company in accordance
with the policies, programs, and guidelines established by the Board of
Directors of Capital Company. Each Fund pays the Investment Adviser a monthly
fee for managing its investments and business affairs.
Capital Company currently operates eight separate investment Funds, but only the
S & P 500 Index Fund and the Money Market Fund are available to you under a
Contract. The assets of each Fund are held separate from the assets of the other
Funds and each Fund has separate investment objectives and policies. As a
result, each Fund operates as a separate investment portfolio and the investment
performance of one Fund has no effect on the investment performance of any other
Fund.
<PAGE>
The names and investment objectives of the available Funds are as follows:
S & P 500 INDEX FUND: The investment objective of this Fund is to provide
investment results that parallel the price and yield performance of publicly
traded common stocks in the aggregate. The Fund uses the Standard and Poor's 500
Stock Price Index* as its standard for performance comparison. The Fund attempts
to duplicate the performance of the index and includes dividend income as the
other component of the Fund's total return.
* The term Standard and Poor's 500 Stock Price Index is a registered trademark
of the Standard and Poor's Corporation.
MONEY MARKET FUND: The investment objective of this Fund is the highest level of
current income that is consistent with the preservation of capital and
maintenance of liquidity. This Fund invests primarily in high-quality,
short-term money market instruments.
THERE IS NO ASSURANCE THAT EITHER OF THESE FUNDS WILL ATTAIN ITS STATED
OBJECTIVE, OR THAT THE OBJECTIVE CAN BE SUSTAINED IF ATTAINED.
Additional information concerning the investment objectives and policies of the
Funds and the investment advisory services and charges can be found in the
current Prospectus for Capital Company, which is attached to this Prospectus.
Capital Company's Prospectus should be read carefully before any decision is
made concerning the allocation of Contributions to a Division that corresponds
to a particular Fund.
Capital Company is registered with the SEC as an open-end, diversified,
management investment company. Registration with the SEC does not involve
supervision of the management or investment practices or policies of Capital
Company by the SEC. Shares of Capital Company will be sold to our separate
accounts other than the Separate Account, including those which receive and
invest premiums under variable life insurance policies issued by us. It is
conceivable that in the future it may be disadvantageous for both variable
annuity separate accounts and variable life insurance separate accounts to
invest simultaneously in Capital Company, although currently neither we nor
Capital Company foresees any such disadvantages to owners of either variable
annuity contracts or variable life insurance policies. Capital Company's Board
of Directors intends to monitor events in order to identify any material
conflicts between such owners and to determine what action, if any, should be
taken in response thereto. See the Prospectus for Capital Company for more
details.
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ADDITIONS, DELETIONS OR SUBSTITUTIONS OF INVESTMENTS
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<PAGE>
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We reserve the right, subject to applicable law, to make additions to, deletions
from, or substitutions for the shares that are held by the Separate Account or
that the Separate Account may purchase. We also reserve the right to eliminate
the shares of any of the Funds of Capital Company and to substitute shares of
another Fund of Capital Company, or of another registered open-end, management
investment company. Such a change might occur if the shares of a Fund are no
longer available for investment, or if in our judgment further investment in any
Fund becomes inappropriate in view of the purposes of the Separate Account. We
will not replace any shares attributable to your interest in a division of the
Separate Account without notice to you and prior approval of the SEC, to the
extent required by the 1940 Act or other applicable law. Nothing contained in
this Prospectus shall prevent the Separate Account from purchasing other
securities for other series or classes of policies, or from permitting a
conversion between series or classes of policies on the basis of requests made
by you.
We also reserve the right to establish additional divisions of the Separate
Account, each of which would invest in a new Fund of Capital Company, or in
shares of another investment company, with a specified investment objective. New
divisions may be established when, in our discretion, marketing needs or
investment conditions warrant, and any new division will be made available to
you on a basis to be determined by us. To the extent approved by the SEC (as
required), we may also eliminate or combine one or more divisions, substitute
one division for another division, or transfer assets between divisions if, in
our sole discretion, marketing, tax, or investment conditions warrant.
In the event of a substitution or change, we may make such changes we consider
necessary in the Contracts by appropriate endorsement. We will notify you of any
such changes.
If we deem it to be in the best interests of persons having voting rights under
the Contracts, and to the extent any necessary SEC approvals or votes from you
are obtained, the Separate Account may be: (a) operated as a management company
under the 1940 Act; (b) de-registered under that Act in the event such
registration is no longer required; or (c) combined with our other separate
accounts. To the extent permitted by applicable law, we may also transfer the
assets of the Separate Account associated with the Contracts to another separate
account.
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THE CONTRACTS
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The Contracts consist of a group variable annuity contract for use in qualified
<PAGE>
pension and profit sharing plans including Tax Sheltered Annuity (Section 403(b)
annuity) Plans and also deferred compensation plans under Code Section 457. The
Contracts are to be sold to Plan trustees on an unallocated basis. A Participant
is an eligible employee of the employer for whom benefits are to be provided
under the Contract in accordance with the terms of the Plan. The accounts of
individual Participants may be administered by the Plan or by a third party, but
the contractual relationship is between us and the Plan. Any benefits for
individual Participants are governed by the terms of the Plan. The purpose of
the Contracts is to provide a funding vehicle at the Plan level. The rights and
benefits of the Contracts are described below and in the Contracts; however, we
reserve the right to make any modification to conform the Contracts to, or to
give you the benefit of, any Federal or state statute or any rule or regulation
of the United States Treasury Department.
Contract Application
If you wish to purchase a Contract, you must complete an application and provide
an Initial Contribution. If the application can be accepted in the form
received, the Initial Contribution will be credited within two Business Days
after receipt of the application. A Business Day is any day on which we are open
for business and the New York Stock Exchange is open for trading. Acceptance is
subject to our rules, and we reserve the right to reject any application or
Initial Contribution. We may retain the Initial Contribution for up to five
Business Days while attempting to complete an application that is not in good
order (missing information, etc.). If the application cannot be made in good
order within five Business Days, the Initial Contribution will be returned
immediately unless you consent in writing to our retention of the Initial
Contribution until the application is in good order.
All Contributions received by us will be credited at a price based on the net
asset value for the applicable Fund(s) which is next computed after receipt of
the Contribution(s). The Accumulated Value is determined each Business Day at
4:00 p.m. (Eastern Time).
Contributions are limited to contributions under and proceeds from certain
qualified plans. Additional contributions are credited to the Contract and
increase the amount of the Accumulated Value as of the next close of business
(on a Business Day) following receipt of the payment to us.
For some Contracts, we may credit an Exchange Adjustment, which is an amount
credited to the Contract to make up for a decrease in the amount of Plan assets
following the liquidation or surrender of another investment for the purpose of
investing in the Contract. An Exchange Adjustment has the same effect as a
Contribution, except that if there is an Exchange Adjustment, there will be
additional charges (see "Exchange Adjustment").
Allocation of Contributions
You specify in the Contract application how contributions will be allocated. You
may allocate each contribution to one or more of the divisions and any Companion
<PAGE>
Contracts as long as such portions are in whole number percentages and total
100%. A "Companion Contract" is an additional contract that provides for fixed
benefits. If a Companion Contract is available to you, it will be listed on the
contract specifications page of your Contract. You may choose to allocate
nothing to a particular division or Companion Contract. You may change the
allocation instructions for future additional contributions by sending a Written
Notice.
The contributions (and Exchange Adjustment, if any) then will be allocated among
the divisions and Companion Contracts in accordance with the instructions.
Accumulated Value
The Accumulated Value will be determined each Business Day at 4:00 p.m. (Eastern
Time). On the investment start date (the date the Initial Contribution is
applied to the divisions of the Separate Account, which is the date the Initial
Contribution is received by us), the Accumulated Value in a division will equal
the portion of any Contribution or Exchange Adjustment allocated to the
division.
Thereafter, on each Business Day, the Accumulated Value in a division of the
Separate Account will equal:
(i) The Accumulated Value in the division on the preceding Business Day,
multiplied by the division Net Investment Factor (defined below) for the
current Valuation Period; plus
(ii) Any Contributions received or Exchange Adjustment credited during the
current Valuation Period which are allocated to the division; plus
(iii)Any amounts transferred to the division from a Companion Contract or from
another division during the current Valuation Period; minus
(iv) That portion transferred from the division to a Companion Contract, or
another division during the current Valuation Period (including any
transfer charges); minus
(v) Any partial withdrawals from the division during the current Valuation
Period; minus
(vi) Any withdrawal or surrender charges incurred during the current Valuation
Period in connection with a partial withdrawal.
A Valuation Period is any period between two successive Business Days
commencing at the close of business of the first Business Day and ending at the
close of business of the following Business Day.
Net Investment Factor
The Net Investment Factor measures the investment performance of a division
<PAGE>
during a Valuation Period. The Net Investment Factor for each division for a
Valuation Period is calculated as follows:
(i) The value of the assets at the end of the preceding Valuation Period; plus
(ii) The investment income and capital gains-realized or unrealized-credited to
the assets in the Valuation Period for which the Net Investment Factor is
being determined; minus
(iii)The capital losses, realized or unrealized, charged against those assets
during the Valuation Period; minus
(iv) Any amount charged against each division for taxes, or any amount set aside
during the Valuation Period as a reserve for taxes attributable to the
operation or maintenance of each division; minus
(v) A charge not to exceed .0043836% of the assets for each day in the
Valuation Period. This corresponds to 1.60% per year (including the maximum
Exchange Adjustment Charge percentage); divided by
(vi) The value of the assets at the end of the preceding Valuation Period.
The Accumulated Value is expected to change from Valuation Period to Valuation
Period, reflecting the investment experience of the selected Funds of Capital
Company as well as the daily deduction of charges.
Transfers
You may transfer amounts as follows:
1) Between one or more of the divisions of the Separate Account and a
Companion Contract; or
2) Among the divisions of the Separate Account.
These transfers will be subject to the following rules:
1) Transfers must be made by Written Request or by such other means as is
acceptable to both you and us.
2) Transfers from or among the divisions of the Separate Account may be made
at any time.
3) Transfers from a Companion Contract will be subject to the terms of that
contract.
We may revoke or modify the transfer privilege at any time, including the
minimum amount for a transfer and the transfer charge, if any.
Inquiries from You
<PAGE>
We perform all administrative functions in connection with the Contracts such as
underwriting, record keeping, and reporting. Any questions or inquiries you have
should be addressed to General American Retirement Plans Group, Recordkeeping &
Accounting Department, 9735 Landmark Parkway Drive, St. Louis, Missouri
63127-1690 or made by calling (800) 446-5763. All inquiries should include your
contract number and name.
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CHARGES AND DEDUCTIONS
================================================================================
================================================================================
No deductions are made from the Initial Contribution unless a state premium tax
or other tax is due. (See "Taxes"). Therefore, the full amount of the Initial
Contribution less any applicable state or other tax is invested in one or more
of the divisions of the Separate Account and/or a Companion Contract to increase
the potential for investment gain.
Surrender Charges (Contingent Deferred Sales Charge)
Since no deduction for a sales charge is made from Contributions, a surrender
charge is imposed on certain surrenders and withdrawals to cover certain
expenses relating to the sale of the Contracts, including commissions to
registered representatives and other promotional expenses.
Upon surrender of the Contract or a withdrawal of funds on deposit, we will
deduct a surrender charge. The surrender charge percentage is based on the age
of the Contract as shown in the following schedule:
Surrender Charge
Contract Year Percentage
------------- ----------
1-7 6%
8+ 0%
The surrender charge is calculated by multiplying the applicable surrender
charge percentage by the gross withdrawal amount. The total amount deducted from
the Accumulated Value of the Contract is the sum of the surrender charge and the
amount disbursed to you. If the sum of the disbursed amount and the surrender
charge exceed the Accumulated Value of the Contract, the withdrawal will be
considered a full surrender. Upon full surrender, the surrender charge is
calculated by multiplying the surrender charge percentage by the Contract's
Accumulated Value. The difference between the Accumulated Value and the
surrender charge is disbursed to you.
<PAGE>
There will be no surrender charge after the seventh Contract Year. In addition,
surrender charges are not applied to withdrawals made in the event of a
Participant's death, disability, termination of employment, retirement, or other
distributable event permitted by the Plan, unless the sum of such withdrawals
within a Contract Year exceeds 30% of the Accumulated Value at the beginning of
the Contract Year.
The age of the Contract, rather than the length of time a certain sum has been
in the Separate Account, determines the amount of the surrender charge in cases
of withdrawal, so no attempt is made to identify which dollars are being
withdrawn.
The surrender charge may not initially be adequate to recover all distribution
costs. Any shortfall will be borne by us from our general assets, including
profits derived from the Separate Account daily asset charge, if any.
The surrender charge will be allocated pro rata among the divisions based on the
values held in the divisions prior to the withdrawal. In the case of a
surrender, the surrender charge is deducted from the amount paid to you.
Asset Charge
Asset charges cover the expense of administering the Contracts and mortality and
expense risks. Asset charges are made each Business Day as a percentage of the
Accumulated Value of the Contract. A portion of the asset charge also may be
used for distribution expenses of the Contracts. The charge for mortality and
expense risk is 0.85% annually.
The mortality risk we assume is that Annuitants may live longer than the time
estimated when the risk in the Contract is established. We agree to continue to
pay annuity installments, determined in accordance with administrative rules in
effect at the time of annuitization, to each Annuitant regardless of how long he
lives and regardless of how long all Annuitants as a group live.
The expense risk we assume is that if the charge for mortality and expenses is
not sufficient to cover administrative expenses, the deficiency will be met from
our General Account assets.
Further, we can modify a group Contract prospectively. However, modifications
cannot affect an Annuitant in any manner without the Annuitant's written
consent, unless such modification is deemed necessary to give you or Annuitants
the benefit of Federal or state statutes or Treasury Department rules or
regulations.
In addition, we assure that the Separate Account will not be charged with any
further expenses other than taxes applicable to the Separate Account. There
currently are no taxes assessed against the Separate Account with respect to
funds held under the Contracts (See "Federal Tax Matters").
Exchange Adjustment
<PAGE>
We may elect to credit qualifying Contract owners with an "Exchange Adjustment"
if the net amount your Plan receives as a result of the liquidation or surrender
of the Plan's old contract to obtain funds for deposit into our Contract
reflects a reduction in value imposed due to the liquidation or surrender. The
Exchange Adjustment will be in an amount equal to all or a portion of the
charges incurred by the Plan as a result of the liquidation or surrender of its
previous contract. We will determine the availability and amount of the Exchange
Adjustment based upon an analysis of each potential Contract. We are not
offering Exchange Adjustments greater than 3% under our current administrative
rules.
As discussed above under "Asset Charge," we impose a daily asset charge to cover
certain expenses. If your Contract is credited with an Exchange Adjustment, we
attribute a portion of the daily asset charge to cover the cost of the Exchange
Adjustment. Contracts credited with an Exchange Adjustment will incur a
deduction for this "Additional Charge," which is based upon a percentage of the
Accumulated Value. Although additional Contributions are not credited with an
Exchange Adjustment, the Additional Charge is assessed on the Accumulated Value
of the Contract. On an annual basis, the Additional Charge will be as follows:
Additional Charge Exchange Adjustment*
----------------- --------------------
.00% 0%
.25% more than 0 up to 1%
.50% more than 1% up to 2%
.75% more than 2% up to 3%
*As a percent of the sum of the Plan's Initial Contribution and the dollar
amount of the Exchange Adjustment.
The Additional Charge will be the same for all Contract owners who receive the
same level of Exchange Adjustment. For example, all Contract owners who receive
an Exchange Adjustment of 2% will incur the same Additional Charge of .50%.
The Additional Charge will not be assessed for more than seven (7) years after
the Contract's issue date, and in some situations may be assessed for less than
seven (7) years. In order to determine when to stop assessing the Additional
Charge, we will perform a separate calculation at the end of each quarter to
estimate the amount that was deducted from your Contract during the quarter as a
result of the application of the Additional Charge. We estimate this amount by
multiplying the quarterly equivalent of the Additional Charge by the average
Accumulated Value for the quarter. The Average Accumulated Value is the sum of
the Accumulated Values as of the end of each of the three months in the quarter,
divided by three.
A contract with an Exchange Adjustment will initially have an Accumulated Value
greater than a similar contract without an Exchange Adjustment. The situations
where a contract could ultimately have a lower Accumulated Value by having
received the Exchange Adjustment could include the following:
(1) Where the return on the Accumulated Value is less than the interest
charged in the amortization of the Exchange Adjustment.
<PAGE>
(2) Where the average of actual daily Accumulated Values for a quarter is
greater than the average of the Accumulated Values as of the beginning and end
of the quarter in one or more quarters.
The Additional Charge is discontinued when the cumulative estimated amount of
Additional Charges, with accrued interest at the rate specified in your
Contract, equals or exceeds the dollar amount of your Exchange Adjustment, with
interest accumulated at the same rate. Because we review the relative amounts of
cumulative Additional Charges and Exchange Adjustment, both accumulated with
interest, each quarter, it is possible that the Additional Charges, with
interest, could exceed the Exchange Adjustment, with interest, by an amount
ranging from zero to the Additional Charge for one full quarter.
In the future, we may change the Additional Charge and adjust the interest rate
offered to new Contract owners to reflect market conditions.
Premium Tax
Under the laws of certain jurisdictions, taxes are charged on so-called "annuity
considerations." Such taxes range from 0% to 3.50%. Premium tax statutes are
subject to amendment by legislative act and to judicial and administrative
interpretations, both of which may affect the applicable tax rates.
Laws relating to premium taxes and the interpretations of such laws are subject
to changes that may affect the deductions, if any, made under Contracts for such
taxes. Some jurisdictions permit payment of premium tax on the Accumulated Value
that is applied to provide an Annuity. In those places, we do not make any
separate deductions for premium tax from Contributions, as we are permitted to
do under the Contracts, but defer any separate deductions for such taxes until
the Accumulated Value is applied to provide annuity payments. (Although we may
be required in some of these jurisdictions to pay premium tax currently on
surrender charges, we presently intend to pay the taxes out of the deductions
and charges made against all Contracts.) We plan, where permissible, to defer
any separate deductions for premium tax until the Accumulated Value is applied
to provide annuity payments, at which time the amount of any applicable premium
tax will be measured by the Accumulated Value. However, in some jurisdictions
the premium tax rate may be applied to Contributions, and in those cases the
deductions for such taxes will be made when the payments are received. Thus, we
reserve the right to make a separate deduction from each Contribution, or from
the Accumulated Value, depending on which method or combination of methods
results in the appropriate deduction for applicable premium tax.
Federal Income Tax
We do not expect to incur any Federal income tax liability attributable to
investment income or capital gains retained as part of the reserves under the
Contracts (See "Federal Tax Matters"). Based upon these expectations, no charge
is being made currently to the Separate Account for corporate Federal income
taxes which may be attributable to the Separate Account.
We will periodically review the question of a charge to the Separate Account for
<PAGE>
corporate Federal income taxes related to the Separate Account. Such a charge
may be made in future years for any Federal income taxes incurred by us. This
might become necessary if our tax treatment is ultimately determined to be other
than what we currently believe it to be, if there are changes made in the
Federal income tax treatment of annuities at the corporate level, or if there is
a change in our tax status. In the event that we incur Federal income taxes
attributable to investment income or capital gains retained as part of the
reserves under the Contracts, the Unit Values of the divisions would be
correspondingly adjusted by any provision or charge for such taxes.
Expenses - Capital Company
The value of the assets in the Separate Account will reflect the value of the
applicable Capital Company shares and, therefore, the fees and expenses paid by
them. A complete description of the expenses and deductions from the Funds is in
the Capital Company prospectus.
================================================================================
DISTRIBUTIONS UNDER THE CONTRACTS
================================================================================
================================================================================
Surrenders and Partial Withdrawals
You may surrender the Contract or make a partial withdrawal to receive all or
part of the Accumulated Value at any time by sending a Written Request or by
such other form as is acceptable to you and us. The amount available for
surrender or partial withdrawal is the Accumulated Value at the time of the
Valuation Period during which the Written Request is received, less any
surrender or withdrawal charges. In the event of a partial withdrawal, the
amount of any withdrawal charge will be deducted from the remaining Accumulated
Value and not from the amount withdrawn. The amount payable upon surrender or
withdrawal may be paid in a lump sum to you. In the absence of specific
direction from you, amounts will be withdrawn from the divisions on a pro rata
basis.
A partial withdrawal results in cancellation of an appropriate number of
accumulation units; a surrender requires surrender of the Contract and
cancellation of all accumulation units. Any surrender or withdrawal within the
first seven Contract Years will result in the application of a surrender charge
except that you may withdraw up to 30% of the Accumulated Value without the
application of the surrender charge, if such withdrawals are due to a
Participant's death, disability, retirement, termination of employment, or other
distributable event permitted by the Plan (See "Charges and Deductions").
The amount payable on surrender or withdrawal will ordinarily be paid within
seven days after receipt by us of the Written Request on a duly executed form
<PAGE>
which may be obtained from us. Payment may be postponed and the right of
redemption suspended as described under "Deferment of Payment".
Because you assume the investment risk with respect to amounts allocated to the
Separate Account and because certain surrenders and withdrawals are subject to a
surrender or withdrawal charge, the total amount paid under surrender of the
Contract (taking into account any prior withdrawals) may be more or less than
the total Contributions made.
Deferment of Payment
Payment of any cash withdrawal or lump sum benefit due from the Separate Account
will occur within seven days from the date the election becomes effective,
except that we may be permitted to defer such payment if: (l) the New York Stock
Exchange is closed for other than usual weekends or holidays, or trading on the
Exchange is otherwise restricted; or (2) an emergency exists as defined by the
Securities and Exchange Commission or the Commission requires that trading be
restricted; or (3) the Securities and Exchange Commission permits a delay for
the protection of you.
Annuity Payments
Upon retirement of a Plan Participant, the Contract allows you to select payment
of the retiree's benefits by purchasing an annuity from us, in the form that we
offer at that time.
================================================================================
FEDERAL TAX MATTERS
================================================================================
================================================================================
THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX ADVICE.
Introduction
The following discussion is a general description of the Federal income tax
considerations relating to the Contract and is not intended as tax advice. This
discussion is not intended to address the tax consequences resulting from all of
the situations in which a person may be entitled to or may receive a
distribution under the Contract. Any person concerned about these tax
implications should consult a competent tax adviser before initiating any
transaction. The discussion is based upon our understanding of the present
Federal income tax laws as they are currently interpreted by the Internal
Revenue Service. No representation is made as to the likelihood of the
<PAGE>
continuation of the present Federal income tax laws or of the current
interpretation by the Internal Revenue Service. Moreover, no attempt has been
made to consider any applicable state or other tax laws.
The Contract may be purchased and used in connection with plans qualifying for
favorable tax treatment ("Qualified Contract"). Qualified Contracts are intended
to be purchased in connection with retirement plans entitled to special income
tax treatment under Sections 401(a) and 457 of the Code or as tax sheltered
annuities under Section 403(b) of the Code. The ultimate effect of Federal
income taxes on the amounts held under a Contract, on annuity payments, and on
the economic benefit to you, the Annuitant, or the beneficiary depends on the
type of retirement plan and on the tax and employment status of the individual
concerned. An Annuitant is a Participant who may receive annuity payments from
the Plan. In addition, certain requirements must be satisfied in purchasing a
Qualified Contract and receiving distributions from a Qualified Contract in
order to continue receiving favorable tax treatment. Therefore, a purchaser of a
Qualified Contract should seek competent legal and tax advice regarding the
suitability of the Contract for his or her situation, the applicable
requirements and the tax treatment of the rights and benefits of a Contract. The
following discussion assumes that a Qualified Contract is purchased with
proceeds from and/or contributions under retirement plans that qualify for the
intended special Federal income tax treatment.
Taxation of Our Company
We are taxed as a life insurance company under Part I of Subchapter L of the
Code. Since the operations of the Separate Account form a part of our company,
the Separate Account will not be taxed separately as a "regulated investment
company" under Subchapter M of the Code. Investment income and realized capital
gains are automatically applied to increase reserves under the Contract. Under
existing Federal income tax law, we believe that the investment income and
realized net capital gains of the Separate Account will not be taxed to the
extent that such income and gains are applied to increase the reserves under the
Contract.
Accordingly, we do not anticipate that we will incur any Federal income tax
liability attributable to the Separate Account and, therefore, we do not intend
to make provisions for any such taxes. However, if changes in the Federal tax
laws or interpretations of those laws result in us being taxed on income or
gains attributable to the Separate Account, then we may impose a charge against
the Separate Account (with respect to some or all Contracts) in order to set
aside amounts to pay such taxes.
Tax Status of Qualified Contracts
The Contract is designed for use with several types of retirement plans. The tax
rules applicable to participants and beneficiaries in retirement plans vary
according to the type of plan and the terms and conditions of the plan. Special
favorable tax treatment may be available for certain types of contributions and
<PAGE>
distributions. Adverse tax consequences may result from contributions in excess
of specified limits; distributions prior to age 59 1/2 (subject to certain
exceptions); distributions that do not conform to specified commencement and
minimum distribution rules; and in other specified circumstances.
The Code generally provides that any amount received by a Participant under a
Qualified Contract which is included in income may be subject to a penalty. The
amount of the penalty is equal to 10% of the amount that is includible in
income. Some withdrawals will be exempt from the penalty. They include any
amounts:
(1) paid on or after the Participant reaches age 59 1/2;
(2) paid after the Participant dies;
(3) paid if the Participant becomes totally disabled (as that term is
defined in the Code);
(4) paid after the Participant leaves employment in a series of
substantially equal periodic payments made annually (or more
frequently) under a lifetime annuity;
(5) paid after the Participant has attained age 55 and has left
employment;
(6) paid for certain allowable medical expenses (as defined in the Code);
(7) paid pursuant to a qualified domestic relations order; or
(8) paid on account of an IRS levy upon the qualified contract.
We make no attempt to provide more than general information about use of the
Contracts with the various types of retirement plans. Owners and participants
under retirement plans, as well as Annuitants and Beneficiaries, are cautioned
that the rights of any person to any benefits under Qualified Contracts may be
subject to the terms and conditions of the plans themselves, regardless of the
terms and conditions of the Contract issued in connection with such a plan. Some
retirement plans are subject to distribution and other requirements that are not
incorporated in the administration of the Contracts. You are responsible for
determining that contributions, distributions and other transactions with
respect to the Contracts satisfy applicable law. Because this Contract will be
used with a retirement plan, you should consult a competent legal counsel and
tax adviser regarding the suitability of the Contract.
Code Section 403(b) Plans
Section 403(b) of the Code permits the purchase of "tax-sheltered annuities" by
public schools and certain charitable, educational and scientific organizations
described in Section 501(c)(3) of the Code. These qualifying employers may make
contributions to the Contracts for the benefit of their employees. Such
<PAGE>
contributions are not includible in the gross income of the employees until the
employees receive distributions from the Contracts. The amount of contributions
to the tax-sheltered annuity is limited to certain maximums imposed by the Code.
Furthermore, the Code sets forth additional restrictions governing such items as
transferability, distributions, nondiscrimination and withdrawals.
Code Section 403(b) (11) restricts the distribution under Code Section 403(b)
annuity contracts of: (1) elective contributions made in years beginning after
December 31, 1988; (2) earnings on those contributions; and (3) earnings in such
years on amounts held as of the last year beginning before January 1, 1989.
Distribution of those amounts may only occur upon death of the employee,
attainment of age 59 1/2, separation from service, disability, or financial
hardship. Income attributable to elective contributions may not be distributed
in the case of hardship. Distributions prior to age 59 1/2 may be subject to the
nondeductible 10% penalty tax for premature distributions, in addition to income
tax.
The Investment Company Act of 1940 has distribution requirements which differ
from the requirements of Code Section 403(b) set forth above. However, these
Contracts are being offered in reliance upon, and in compliance with, the
provisions of no-action letter number IP-6-88 issued by the Securities and
Exchange Commission to the American Council of Life Insurance. The no-action
letter allows the Separate Account to apply the restrictions created by Code
Section 403(b)(11) as long as specified steps, such as this disclosure, are
taken to ensure that you are aware of the Code restrictions. We believe that we
are in compliance with the provisions of the no-action letter.
Corporate Pension and Profit-Sharing Plans and H.R. 10 Plans
Sections 401(a) and 401(k) of the Code permit employers, including self-employed
individuals, to establish various types of retirement plans for employees. These
retirement plans may permit the purchase of the Contracts to provide benefits
under the Plan. Contributions to the Plan for the benefit of employees will not
be includible in the gross income of the employees until distributed from the
Plan. The tax consequences to participants may vary depending upon the
particular plan design. However, the Code places limitations and restrictions on
all Plans including on such items as: amount of allowable contributions; form,
manner and timing of distributions; transferability of benefits; vesting and
nonforfeitability of interests; nondiscrimination in eligibility and
participation; and the tax treatment of distributions, withdrawals and
surrenders.
Deferred Compensation Plans
Under Code provisions, employees and independent contractors performing services
for state and local governments and other tax-exempt organizations may
participate in Deferred Compensation Plans under Section 457 of the Code. The
<PAGE>
amounts deferred under a Plan which meets the requirements of Section 457 of the
Code are not taxable as income to the participant until paid or otherwise made
available to the Participant or beneficiary. As a general rule, the maximum
amount which can be deferred in any one year is the lesser of $8,000 or 33 1/3
percent of the participant's includible compensation. However, in limited
circumstances, the plan may provide for additional catch-up contributions in
each of the last three years before normal retirement age. Furthermore, the Code
provides additional requirements and restrictions regarding eligibility and
distributions.
All of the assets and income of a Plan established by a governmental employer
after August 20, 1996, must be held in trust for the exclusive benefit of
Participants and their beneficiaries. For this purpose, custodial accounts and
certain annuity contracts are treated as trusts. Plans that were in existence on
August 20, 1996 may be amended to satisfy the trust and exclusive benefit
requirements any time prior to January 1, 1999, and must be amended not later
than that date to continue to receive favorable tax treatment. The requirement
of a trust does not apply to amounts under a Plan of a tax exempt
(non-governmental) employer. In addition, the requirement of a trust does not
apply to amounts under a Plan of a governmental employer if the Plan is not an
eligible plan within the meaning of section 457(b) of the Code. In the absence
of such a trust, amounts under the plan will be subject to the claims of the
employer's general creditors.
In general, distributions from a Plan are prohibited under section 457 of the
Code unless made after the participating employee:
* attains age 70 1/2,
* separates from service,
* dies, or
* suffers an unforeseeable financial emergency as defined in the Code.
Under present federal tax law, amounts accumulated in a Plan under section 457
of the Code cannot be transferred or rolled over on a tax-deferred basis except
for certain transfers to other Plans under section 457.
Due to the uncertainty in this area, we reserve the right to modify the contract
in an attempt to maintain favorable tax treatment.
Restrictions under Qualified Contracts
Qualified Contracts have minimum distribution rules that govern the timing and
amount of distributions. You should refer to your retirement plan, adoption
agreement, or consult a tax advisor for more information about these
distribution rules. Certain distributions from Section 401(a) qualified plans
and Section 403(b) annuities are subject to mandatory Federal income tax
withholding unless directly rolled over into another qualified retirement plan
or individual retirement account or annuity. Distributions from Section 457
<PAGE>
plans are subject to withholding unless the recipient elects otherwise.
Other restrictions with respect to the election, commencement, or distribution
of benefits may apply under Qualified Contracts or under the terms of the plans
in respect of which Qualified Contracts are issued.
Possible Tax Law Changes
Although the likelihood of legislative changes is uncertain, there is always the
possibility that the tax treatment of the Contracts could change by legislation
or otherwise. Consult a tax adviser with respect to legislative developments and
their effect on the Contract.
We have the right to modify the Contract in response to legislative changes that
could otherwise diminish the favorable tax treatment that annuity contract
owners currently receive. We make no guarantee regarding the tax status of any
Contract and do not intend the above discussion as tax advice.
================================================================================
DISTRIBUTOR OF THE CONTRACTS
================================================================================
================================================================================
Walnut Street Securities, Inc. ("Walnut Street"), Suite 1000, 400 South
Fourth Street, St. Louis, Missouri 63132, is the principal underwriter and the
distributor of the Contracts. Walnut Street is a subsidiary of GenAmerica
Corporation, which owns all of our outstanding stock. Walnut Street has entered
into contracts with various broker-dealers and registered representatives
affiliated with Walnut Street to aid in the distribution of the Contracts.
Commissions paid to dealer(s) in varying amounts are not expected to exceed .50%
of Accumulated Value per year for such Contracts, under normal circumstances.
================================================================================
VOTING RIGHTS
================================================================================
================================================================================
To the extent required by law, we will vote the Capital Company shares held in
the divisions of the Separate Account at shareholder meetings of such Funds in
accordance with instructions received from persons having voting interests in
the corresponding divisions of the Separate Account. You hold a voting interest
in each division to which the Accumulated Value is allocated or annuity payments
are generated. If, however, the 1940 Act or any regulation thereunder should be
amended, or if the present interpretation thereof should change, and, as a
result, we determine that we are allowed to vote the Fund shares in our own
<PAGE>
right, we may elect to do so.
The number of votes which are available to you will be calculated separately for
each division of the Separate Account. That number will be determined by
applying the percentage interest, if any, in a particular division to the total
number of votes attributable to the division.
The number of votes is equal to the number of dollars: (a) during the
accumulation period, in the Accumulated Value attributable to a division divided
by the net asset value of a share of the corresponding Fund; and (b) during the
annuity period, in the reserve credited to the annuity units held in the
Division(s) under the variable annuity settlement option in effect divided by
the net asset value of a share of the corresponding Fund. Generally, during the
annuity period the number of votes applicable to the Annuitant will decrease.
At most Fund shareholder meetings, votes may be cast in person or by proxy and
fractional votes will be counted.
The number of votes of a division which are available will be determined as of
the date established by the corresponding Fund for determining shareholders
eligible to vote at the meeting. Voting instructions will be solicited by
written communication from us prior to such meeting in accordance with
procedures established.
Fund shares as to which no timely instructions are received or shares that we
hold as to which you have no beneficial interest will be voted in proportion to
the voting instructions which are received with respect to all Contracts
participating in that Fund. Voting instructions to abstain on any item to be
voted upon will be applied on a pro rata basis to reduce the votes eligible to
be cast.
Each Plan having a voting interest in a Division will receive proxy materials,
reports, and other materials relating to the appropriate Fund.
To the extent that we, as shareholder of the Funds, are entitled to vote any
Fund's interest in Capital Company, we will do so on the same basis as described
above.
================================================================================
CONDENSED FINANCIAL INFORMATION
================================================================================
================================================================================
Our consolidated financial statements (as well as the auditors' report) are in
the Statement of Additional Information. Financial statements for the Separate
Account are also in the Statement of Additional Information.
<PAGE>
LEGAL PROCEEDINGS
There are no legal proceedings to which the Separate Account is a party or to
which the assets of the Separate Account are subject. General American is not
involved in any litigation that is of material importance in relation to its
total assets or that relates to the Separate Account.
================================================================================
STATEMENT OF ADDITIONAL INFORMATION
================================================================================
================================================================================
A Statement of Additional Information is available which contains more details
concerning the subjects discussed in this Prospectus. The following is the Table
of Contents for that Statement:
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
THE CONTRACTS...................................................................................................S-2
MONEY MARKET YIELD CALCULATION..................................................................................S-2
GENERAL MATTERS.................................................................................................S-2
Participating..............................................................................................S-2
Quarterly Reports..........................................................................................S-3
Ownership..................................................................................................S-3
DISTRIBUTION OF THE CONTRACT....................................................................................S-3
SAFEKEEPING OF ACCOUNT ASSETS...................................................................................S-4
STATE REGULATION................................................................................................S-4
RECORDS AND REPORTS.............................................................................................S-4
OTHER INFORMATION...............................................................................................S-4
FINANCIAL STATEMENTS............................................................................................S-4
</TABLE>
PART B Registration Nos. 333-83719
811-2162
GENERAL AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT TWO
STATEMENT OF ADDITIONAL INFORMATION
<PAGE>
FOR THE
GROUP VARIABLE ANNUITY CONTRACT
Offered by
General American Life Insurance Company
(A Missouri Insurance Company)
700 Market Street
St. Louis, MO 63101
***********************
This Statement of Additional Information expands upon subjects discussed in the
current Prospectus for the group variable annuity contracts ("Contracts" or
"Contract" as the context requires) offered by General American Life Insurance
Company. You may obtain a copy of the current Prospectus by calling 800-449-6447
or writing to: Variable Annuity Administration Department, P.O. Box 14490, St.
Louis, MO 63178-4490. Terms defined in the current Prospectus for the Contract
are used in the same way in this Statement.
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND SHOULD BE READ
ONLY IN CONJUNCTION WITH THE PROSPECTUS FOR THE CONTRACTS.
Dated:____________, 2000
THE CONTRACTS
The following provides information about the Contracts that supplements the
description in the Prospectus and may be of interest to the Contract Owners.
MONEY MARKET YIELD CALCULATION
In accordance with regulations adopted by the Securities and Exchange
Commission, General American is required to disclose the current annualized
yield for the division investing in the Money Market Fund of Capital Company
(the "Money Market division") for a seven-day period in a manner which does not
take into consideration any realized or unrealized gains or losses on shares of
the Money Market Fund or on its portfolio securities. This current annualized
yield is computed by determining the net change (exclusive of realized gains and
losses on the sale of securities and unrealized appreciation and depreciation)
in the value of a hypothetical account having a balance of one unit of the Money
Market division at the beginning of such seven-day period, dividing such net
change in account value by the value of the account at the beginning of the
period to determine the base period return and annualizing this quotient on a
365-day basis. The net change in account value reflects the deductions for
administrative expenses of services and the mortality and expense risk charge
<PAGE>
and income and expenses accrued during the period. Because of these deductions,
the yield for the Money Market division of the Separate Account will be lower
than the yield for the Money Market Fund of Capital Company.
The SEC also permits General American to disclose the effective yield of the
Money Market division for the same seven-day period, determined on a compounded
basis. The effective yield is calculated by compounding the unannualized base
period return by adding one to the base period return, raising the sum to a
power equal to 365 divided by seven, and subtracting one from the result.
The yield on amounts held in the Money Market division normally will fluctuate
on a daily basis. Therefore, the disclosed yield for any given past period is
not an indication or representation of future yields or rates of return. The
Money Market division's actual yield is affected by changes in interest rates on
money market securities, average portfolio maturity of the Money Market Fund,
the types and quality of portfolio securities held by the Money Market Fund, and
its operating expenses.
GENERAL MATTERS
Participating
The Contracts share in General American's divisible surplus while they are in
force prior to the annuity commencement date. Each year General American will
determine the share of divisible surplus, if any, accruing to the Contracts.
Investment results are credited directly through the changes in the value of the
accumulation units and annuity units. Also, most mortality and expense savings
are credited directly through decreases in the appropriate charges. Therefore,
the Company expects little or no divisible surplus to be credited to a contract.
If any divisible surplus is credited to a contract, the Contract Owner may
choose to take the distribution in cash, or leave the distribution with General
American to accumulate with interest.
Quarterly Reports
Quarterly, General American will give the contract owner a report of the current
Accumulated Value allocated to each Separate Account or division; and any
Contributions, charges, transfers, or surrenders during that period. This report
will also give the Contract Owner any other information required by law or
regulation. The Contract Owner may ask for a report like this at any time. The
quarterly reports will be distributed without charge. General American reserves
the right to charge a fee for additional reports.
Ownership
The Contractowner is the owner of this contract and all rights of ownership are
vested in the Contractowner unless otherwise provided herein. The contract may
be changed or amended from time to time without the consent of any Participant,
Beneficiary, or other person claiming rights or benefits hereunder.
No assignment of this contract by the Contractholder shall be binding upon
General American unless in writing and until filed at its Home Office. General
<PAGE>
American assumes no responsibility for the validity of any assignment.
DISTRIBUTION OF THE CONTRACT
Walnut Street Securities, Inc. ("Walnut Street"), the principal underwriter of
the Contracts, is registered with the SEC under the Securities Exchange Act of
1934 as a broker-dealer and is a member of the National Association of
Securities Dealers, Inc. Walnut Street is a subsidiary of GenAmerica
Corporation.
The Contracts are offered to the public through individuals licensed under the
federal securities laws and state insurance laws who have entered into
agreements with Walnut Street. The offering of the Contracts is continuous and
Walnut Street does not anticipate discontinuing the offering of the Contracts.
However, Walnut Street does reserve the right to discontinue the offering of the
Contracts.
SAFEKEEPING OF ACCOUNT ASSETS
Title to assets of the Separate Account is held by General American. The assets
are kept physically segregated and held separate and apart from General
American's general account assets. Records are maintained of all purchases and
redemptions of eligible Fund shares held by each of the Divisions of the
Separate Account.
STATE REGULATION
General American is a life insurance company organized under the laws of
Missouri, and is subject to regulation by the Missouri Division of Insurance. An
annual statement is filed with the Missouri Commissioner of Insurance on or
before March 1 of each year covering the operations and reporting on the
financial condition of General American as of December 31 of the preceding
calendar year. Periodically, the Missouri Commissioner of Insurance examines the
financial condition of General American, including the liabilities and reserves
of the Separate Account.
In addition, General American is subject to the insurance laws and regulations
of all the states where it is licensed to operate. The availability of certain
contract rights and provisions depends on state approval and filing and review
processes. Where required by state law or regulation, the Contracts will be
modified accordingly.
RECORDS AND REPORTS
All records and accounts relating to the Separate Account will be maintained by
General American. As presently required by the Investment Company Act of 1940
and regulations promulgated thereunder, General American will mail to all
Contract Owners at their last known address of record, at least semi-annually,
reports containing such information as may be required under that Act or by any
other applicable law or regulation.
OTHER INFORMATION
<PAGE>
A Registration Statement has been filed with the SEC, under the Securities Act
of 1933 as amended, with respect to the Contracts discussed in this Statement of
Additional Information. Not all of the information set forth in the Registration
Statement, amendments, and exhibits thereto has been included in this Statement
of Additional Information. Statements contained in this Statement of Additional
Information concerning the content of the Contracts and other legal instruments
are intended to be summaries. For a complete statement of the terms of these
documents, reference should be made to the instruments filed with the SEC.
FINANCIAL STATEMENTS
The audited financial statements of General American and the Separate Account
have been included in the Statement of Additional Information in reliance on the
reports of KPMG LLP, independent certified public accountants, and on the
authority of said firm as experts in accounting and auditing.
The financial statements of General American should be considered only as
bearing upon its ability to meet its obligations under the Contracts. They
should not be considered as bearing on the investment performance of the assets
held in the Separate Account.
<TABLE>
<CAPTION>
GENERAL AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT TWO
STATEMENT OF ASSETS AND LIABILITIES
May 31, 2000
UNAUDITED
S & P 500 Index
Fund Division
-------------------
Assets:
Investments in General American Capital Company,
<S> <C>
at market value $ 82,288,303
Receivable from General American Life Insurance Company 0
-------------------
Total assets 82,288,303
Liabilities:
Payable to General American Life
Insurance Company 302,271
-------------------
Total net assets $ 81,986,032
===================
Net assets represented by:
Qualified Individual Variable Annuities 60,314,175
Nonqualified Individual Variable Annuities 21,671,857
Group Annuities 0
<PAGE>
-------------------
Total net assets $ 81,986,032
===================
Cost of investments $ 58,429,438
===================
These Financial Statements were designed as internal management reports and,
therefore, do not contain all the financial disclosures required under generally
accepted accounting principles.
Karen Helvey Jennifer Cable Van Nguyen Lynn Nelson
Money Market Bond Index Managed Equity Asset Allocation
Fund Division Fund Division Fund Division Fund Division Total
------------------- ------------------- ------------------- ------------------- -------------------
<C> <C> <C> <C> <C>
$ 3,530,935 $ 3,937,012 $ 18,284,139 $ 26,427,964 $ 134,468,353
143,738 0 0 0 143,738
------------------- ------------------- ------------------- ------------------- -------------------
3,674,673 3,937,012 18,284,139 26,427,964 134,612,091
0 3,301 12,475 22,246 340,293
------------------- ------------------- ------------------- ------------------- -------------------
$ 3,674,673 $ 3,933,711 $ 18,271,664 $ 26,405,718 $ 134,271,798
=================== =================== =================== =================== ===================
2,750,901 2,775,847 7,463,800 19,547,182 92,851,905
920,741 1,157,864 10,807,864 6,858,536 41,416,862
0 0 0 0 0
------------------- ------------------- ------------------- ------------------- -------------------
$ 3,671,642 $ 3,933,711 $ 18,271,664 $ 26,405,718 $ 134,268,767
=================== =================== =================== =================== ===================
$ 3,493,004 $ 4,134,624 $ 16,800,490 $ 18,599,249 $ 101,456,805
=================== =================== =================== =================== ===================
These Financial Statements were designed as internal management reports and,
therefore, do not contain all the financial disclosures required under generally
accepted accounting principles.
</TABLE>
<TABLE>
<PAGE>
<CAPTION>
GENERAL AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT TWO
STATEMENT OF OPERATIONS
For the five months ending May 31, 2000
UNAUDITED
S & P 500 Index
Fund Division
-------------------
Net realized gain (loss) on investments:
<S> <C>
Proceeds from sales $ 4,354,609
Cost of investments sold 2,066,288
-------------------
Net realized gain (loss) on investments 2,288,321
Net realized gain from distribution 0
-------------------
Net realized gain (loss) on investments 2,288,321
Net unrealized gain (loss) on investments:
Unrealized gain (loss) on investments, December 31, 1999 28,334,721
Unrealized gain (loss) on investments, May 31, 2000 23,858,865
-------------------
Net unrealized gain (loss) on investments (4,475,856)
-------------------
Net gain (loss) on investments (2,187,535)
Expenses:
Mortality and expense charge 347,825
-------------------
Increase (decrease) in net assets resulting from operations $ (2,535,360)
===================
These Financial Statements were designed as internal management reports and,
therefore, do not contain all the financial disclosures required under generally
accepted accounting principles.
Money Market Bond Index Managed Equity Asset Allocation
Fund Division Fund Division Fund Division Fund Division Total
------------------- ------------------- ------------------- ------------------- -------------------
<C> <C> <C> <C> <C>
$ 3,770,657 $ 542,737 3,656,794 $ 1,193,632 $ 13,518,429
3,843,601 565,821 3,330,160 710,236 10,516,106
------------------- ------------------- ------------------- ------------------- -------------------
<PAGE>
(72,944) (23,084) 326,634 483,396 3,002,323
0 0 0 0 0
------------------- ------------------- ------------------- ------------------- -------------------
(72,944) (23,084) 326,634 483,396 3,002,323
(132,940) (308,933) 1,880,103 7,026,621 36,799,572
37,931 (197,612) 1,483,649 7,828,715 33,011,548
------------------- ------------------- ------------------- -------------------
170,871 111,321 (396,454) 802,094 (3,788,024)
------------------- ------------------- ------------------- ------------------- -------------------
97,927 88,237 (69,820) 1,285,490 (785,701)
16,576 16,991 74,860 108,330 564,582
------------------- ------------------- ------------------- ------------------- -------------------
$ 81,351 $ 71,246 $ (144,680) $ 1,177,160 $ (1,350,282)
=================== =================== =================== =================== ===================
These Financial Statements were designed as internal management reports and,
therefore, do not contain all the financial disclosures required under generally
accepted accounting principles.
</TABLE>
<TABLE>
<CAPTION>
GENERAL AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT TWO
STATEMENT OF CHANGES IN NET ASSETS
For the five months ending May 31, 2000
UNAUDITED
S & P 500 Index
Fund Division
-------------------
Operations:
<S> <C>
Net realized gain (loss) on investments $ 2,288,321
Net unrealized gain (loss) on investments (4,475,856)
Net expenses (347,825)
-------------------
Increase (decrease) in net assets resulting
from operations (2,535,360)
Net deposits (withdrawals) into Separate Account (1,922,832)
-------------------
<PAGE>
Increase (decrease) in net assets (4,458,192)
Net assets, December 31, 1999 86,444,224
-------------------
Net assets, May 31, 2000 $ 81,986,032
===================
0.00
Money Market Bond Index Managed Equity Asset Allocation
Fund Division Fund Division Fund Division Fund Division Total
------------------- ------------------- ------------------- ------------------- -------------------
<C> <C> <C> <C> <C>
$ (72,944) $ (23,084) $ 326,634 $ 483,396 $ 3,002,323
170,871 111,321 (396,454) 802,094 (3,788,024)
(16,576) (16,991) (74,860) (108,330) (564,582)
------------------- ------------------- ------------------- ------------------- -------------------
81,351 71,246 (144,680) 1,177,160 (1,350,282)
(1,541,020) (345,814) (3,462,690) (120,379) (7,392,735)
------------------- ------------------- ------------------- ------------------- -------------------
(1,459,669) (274,568) (3,607,370) 1,056,781 (8,743,017)
5,131,311 4,208,279 21,879,034 25,348,937 143,011,785
------------------- ------------------- ------------------- ------------------- ===================
$ 3,671,642 $ 3,933,711 $ 18,271,664 $ 26,405,718 $ 134,268,767
=================== =================== =================== =================== ===================
0.00 -0 0.00 0.00
</TABLE>
<TABLE>
<CAPTION>
GENERAL AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT TWO
UNIT VALUE ANALYSIS
May 31, 2000
UNAUDITED
New Contract Plans - '88 Series
S & P 500 Index Money Market
Net Unit Values Fund Division Fund Division
---------------------------- ---------------------------- ----------------------------
<S> <C> <C> <C>
05-31-00 61.55 17.54
04-30-00 62.68 17.47
12-31-99 66.06 17.26
<PAGE>
Changes
in Unit Values: $ % $ %
---------------------------- ------------ ------------ ------------ ------------
Month (1.13) (1.80) 0.07 0.38
Year to Date (4.51) (6.82) 0.28 1.62
Managed Equity Fund Division - Old Qualified & Nonqualified Plans
Net Unit Values Qualified
---------------------------- ------------
05-31-00 84.53
04-30-00 83.87
12-31-99 84.35
Changes
in Unit Values: $ %
---------------------------- ------------ ------------
Month 0.66 0.79
Year to Date 0.18 0.21
Bond Index Managed Equity Asset Allocation
Fund Division Fund Division Fund Division
---------------------------- ---------------------------- ----------------------------
<C> <C> <C>
20.38 43.63 40.59
20.15 43.29 39.60
20.16 43.56 40.46
$ % $ % $ %
------------ ------------- ------------ ------------ ------------- ------------
0.24 1.18 0.34 0.78 0.99 2.49
0.22 1.10 0.07 0.17 0.13 0.32
Nonqualified
-------------------------
<PAGE>
91.98
91.26
91.79
$ %
------------ -------------
0.72 0.79
0.19 0.21
</TABLE>
<TABLE>
<CAPTION>
GERAL AMERICAN SEPARATE ACCOUNT TWO - FIDELITY FUNDS
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 2000
UNAUDITED
EQUITY
FUND DIVISION
-------------------------
Assets:
<S> <C>
Investment in Fidelity Fund, at market value $ 21,913,721
Receivable from General American Life Insurance Company 0
-------------------------
Total assets 21,913,721
Liabilities:
Payable to General American Life
Insurance Company 17,417
-------------------------
Total net assets $ 21,896,304
=========================
Net assets represented by:
Individual Variable Annuity 21,896,304
Seed Assets
-------------------------
Total net assets $ 21,896,304
=========================
Cost of investments $ 20,166,467
<PAGE>
=========================
These Financial Statements were designed as internal management reports and,
therefore, do not contain all the financial disclosures required under
generally accepted accounting principles.
GROWTH OVERSEAS
FUND DIVISION FUND DIVISION TOTAL
--------------------------- -------------------------- ----------------------------
<C> <C> <C>
$ 51,015,561 $ 9,572,817 $ 82,502,099
0 0 0
--------------------------- -------------------------- ----------------------------
51,015,561 9,572,817 82,502,099
44,370 9,423 71,210
--------------------------- -------------------------- ----------------------------
$ 50,971,191 $ 9,563,394 $ 82,430,889
=========================== ========================== ============================
50,971,191 9,563,394 82,430,889
--------------------------- -------------------------- ----------------------------
$ 50,971,191 $ 9,563,394 $ 82,430,889
=========================== ========================== ============================
$ 40,622,473 $ 8,674,753 $ 69,463,692
=========================== ========================== ============================
These Financial Statements were designed as internal management reports and,
therefore, do not contain all the financial disclosures required under
generally accepted accounting principles.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GENERAL AMERICAN SEPARATE ACCOUNT TWO - FIDELITY FUNDS
STATEMENT OF OPERATIONS
FOR THE FIVE MONTHS ENDED MAY 31, 2000
UNAUDITED
EQUITY
FUND DIVISION
-------------------------
<S> <C>
Dividend Income on Fidelity Fund $ 1,895,110
Net realized gain (loss) on investments:
Proceeds from sales 2,727,642
Cost of investments sold 2,315,815
-------------------------
Realized gain (loss) from sales 411,827
Net unrealized gain (loss) on investments:
Unrealized gain (loss) on investments, December 31, 1999 4,001,511
Unrealized gain (loss) on investments, May 31, 2000 1,747,254
-------------------------
Net unrealized gain (loss) on investments (2,254,257)
-------------------------
Net gain (loss) on investments 52,680
-------------------------
Expenses:
Mortality and expense charge 88,896
-------------------------
Increase (decrease) in net assets resulting
from operations $ (36,216)
=========================
These Financial Statements were designed as internal management reports and,
therefore, do not contain all the financial disclosures required under
generally accepted accounting principles.
<PAGE>
GROWTH OVERSEAS
FUND DIVISION FUND DIVISION TOTAL
--------------------------- -------------------------- ----------------------------
<C> <C> <C>
$ 5,691,438 $ 975,041 $ 8,561,588
2,822,207 528,317 6,078,166
1,633,936 375,434 4,325,185
--------------------------- -------------------------- ----------------------------
1,188,271 152,883 1,752,981
18,939,413 2,948,029 25,888,953
10,393,089 898,064 13,038,407
--------------------------- -------------------------- ----------------------------
(8,546,324) (2,049,965) (12,850,546)
--------------------------- -------------------------- ----------------------------
(1,666,615) (922,041) (2,535,977)
--------------------------- -------------------------- ----------------------------
220,563 40,937 350,396
--------------------------- -------------------------- ----------------------------
$ (1,887,178) $ (962,978) $ (2,886,373)
=========================== ========================== ============================
These Financial Statements were designed as internal management reports and,
therefore, do not contain all the financial disclosures required under
generally accepted accounting principles.
</TABLE>
<TABLE>
<CAPTION>
GENERAL AMERICAN SEPARATE ACCOUNT TWO - FIDELITY FUNDS
STATEMENT OF CHANGES IN NET ASSETS
MAY 31, 2000
UNAUDITED
EQUITY
FUND DIVISION
-------------------------
<PAGE>
Operations:
<S> <C>
Dividend Income on Fidelity Fund $ 1,895,110
Net realized gain (loss) on investments 411,827
Net unrealized gain (loss) on investments (2,254,257)
Net expenses (88,896)
-------------------------
Increase (decrease) in net assets resulting
from operations (36,216)
Net deposits (withdrawals) into Separate Account (2,464,961)
-------------------------
Increase (decrease) in net assets (2,501,177)
Net assets, December 31, 1999 24,397,481
-------------------------
Net assets, May 31, 2000 $ 21,896,304
=========================
These Financial Statements were designed as internal management reports and,
therefore, do not contain all the financial disclosures required under
generally accepted accounting principles.
GROWTH OVERSEAS
FUND DIVISION FUND DIVISION TOTAL
--------------------------- -------------------------- ----------------------------
<C> <C> <C>
$ 5,691,438 $ 975,041 $ 8,561,588
1,188,271 152,883 1,752,981
(8,546,324) (2,049,965) (12,850,546)
(220,563) (40,937) (350,396)
--------------------------- -------------------------- ----------------------------
(1,887,178) (962,978) (2,886,373)
1,512,341 974,514 21,895
--------------------------- -------------------------- ----------------------------
(374,837) 11,536 (2,864,478)
51,346,028 9,551,858 85,295,367
--------------------------- -------------------------- ----------------------------
$ 50,971,191 $ 9,563,394 $ 82,430,889
<PAGE>
=========================== ========================== ============================
These Financial Statements were designed as internal management reports and,
therefore, do not contain all the financial disclosures required under
generally accepted accounting principles.
</TABLE>
<TABLE>
<CAPTION>
EQUITY GROWTH OVERSEAS
NET UNIT VALUES FUND DIVISION FUND DIVISION FUND DIVISION
---------------------------- ------------------------------ ------------------------------ ------------------------------
<S> <C> <C> <C> <C>
12-31-99 23.59 34.64 21.09
11-30-99 23.37 31.49 18.90
12-31-98 22.41 25.45 14.93
Monthly Changes in
Net Unit Values: $ % $ % $ %
---------------------------- -------------- -------------- -------------- -------------- -------------- ---------------
Total gain (loss) 0.22 0.94 3.15 10.00 2.19 11.59
-------------- -------------- -------------- -------------- -------------- ---------------
Year to Date Changes
in Net Unit Values : $ % $ % $ %
---------------------------- -------------- -------------- -------------- -------------- -------------- ---------------
Total gain (loss) 1.18 5.29 9.19 36.10 6.16 41.25
-------------- -------------- -------------- -------------- -------------- ---------------
These Financial Statements were designed as internal management reports and,
therefore, do not contain all the financial disclosures required under generally
accepted accounting principles.
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
General American Life Insurance Company
and Contractholders of General American
Separate Account Two:
We have audited the statements of assets and liabilities, including the schedule
of investments, of the S & P 500 Index, Money Market, Bond Index, Managed
Equity, Asset Allocation, Equity-Income, Growth, and Overseas Fund Divisions of
General American Separate Account Two as of December 31, 1999, and the related
statements of operations for the year then ended, changes in net assets for each
of the years in the two year period then ended, and financial highlights
information for the periods presented. These financial statements and financial
highlights information are the responsibility of the management of General
American Separate Account Two. Our responsibility is to express an opinion on
these financial statements and financial highlights information based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights information are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Investments owned as of December 31, 1999, were
verified by audit of the statements of assets and liabilities of the underlying
portfolios of General American Capital Company and confirmation by
correspondence with respect to the Variable Insurance Products Fund sponsored by
Fidelity Investments. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights information
referred to above present fairly, in all material respects, the financial
position of the S & P 500 Index, Money Market, Bond Index, Managed Equity, Asset
Allocation, Equity-Income, Growth, and Overseas Fund Divisions of General
American Separate Account Two as of December 31, 1999, the results of their
operations for the year then ended, the changes in their net assets for each of
the years in the two year period then ended, and financial highlights
information for the periods presented, in conformity with generally accepted
accounting principles.
/s/ KPMG LLP
St. Louis, Missouri
February 25, 2000
<PAGE>
<PAGE>
<TABLE>
GENERAL AMERICAN SEPARATE ACCOUNT TWO
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
<CAPTION>
S & P 500 MONEY BOND MANAGED ASSET
INDEX MARKET INDEX EQUITY ALLOCATION
FUND DIVISION FUND DIVISION FUND DIVISION FUND DIVISION FUND DIVISION
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Assets:
Investments in General American Capital Company,
at market value (see Schedule of Investments) $86,520,558 $5,135,191 $4,211,687 $21,896,770 $25,370,323
----------- ---------- ---------- ----------- -----------
Liabilities:
Payable to General American Life
Insurance Company 76,334 3,880 3,408 17,736 21,386
----------- ---------- ---------- ----------- -----------
Total net assets $86,444,224 $5,131,311 $4,208,279 $21,879,034 $25,348,937
=========== ========== ========== =========== ===========
Net assets represented by:
Tax sheltered annuities in accumulation period 63,962,626 3,936,297 2,993,964 21,778,339 18,749,489
Individually purchased annuities in accumulation
period 22,481,598 1,195,014 1,214,315 77,569 6,599,448
Variable annuities in payment period 0 0 0 23,126 0
----------- ---------- ---------- ----------- -----------
Total net assets $86,444,224 $5,131,311 $4,208,279 $21,879,034 $25,348,937
=========== ========== ========== =========== ===========
Tax sheltered units held - 88 Series 968,190 228,055 148,491 246,016 463,392
Individually purchased units held - 88 Series 340,300 69,235 60,226 49,141 163,105
Tax sheltered units held - 82 Series -- -- -- 106,051 --
Individually purchased units held - 82 Series -- -- -- 845 --
Tax sheltered accumulation unit value - 88 Series $ 66.06 $ 17.26 $ 20.16 $ 43.56 $ 40.46
Individually purchased accumulation unit value
- 88 Series 66.06 17.26 20.16 43.56 40.46
Tax sheltered accumulation unit value - 82 Series -- -- -- 84.35 --
Individually purchased accumulation unit value
- 82 Series -- -- -- 91.79 --
Cost of investments $58,185,837 $5,268,130 $4,520,620 $20,016,667 $18,343,703
=========== ========== ========== =========== ===========
<PAGE>
See accompanying notes to financial statements.
<PAGE>
GENERAL AMERICAN SEPARATE ACCOUNT TWO
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
DECEMBER 31, 1999
<CAPTION>
EQUITY-INCOME GROWTH OVERSEAS
FUND DIVISION FUND DIVISION FUND DIVISION
------------- ------------- -------------
<S> <C> <C> <C>
Assets:
Investments in Fidelity Variable Insurance Products
Fund, at market value (see Schedule of Investments) $24,417,201 $51,387,245 $9,558,915
----------- ----------- ----------
Liabilities:
Payable to General American Life
Insurance Company 19,720 41,217 7,057
----------- ----------- ----------
Total net assets $24,397,481 $51,346,028 $9,551,858
=========== =========== ==========
Net assets represented by:
Tax sheltered annuities in accumulation period 17,355,459 39,526,617 7,337,884
Individually purchased annuities in accumulation period 7,042,022 11,819,411 2,213,974
Variable annuities in payment period 0 0 0
----------- ----------- ----------
Total net assets $24,397,481 $51,346,028 $9,551,858
=========== =========== ==========
Tax sheltered units held - 88 Series 735,818 1,140,987 347,945
Individually purchased units held - 88 Series 298,560 341,183 104,981
Tax sheltered units held - 82 Series -- -- --
Individually purchased units held - 82 Series -- -- --
Tax sheltered accumulation unit value - 88 Series $ 23.60 $ 34.64 $ 21.09
Individually purchased accumulation unit value - 88 Series 23.60 34.64 21.09
Tax sheltered accumulation unit value - 82 Series -- -- --
Individually purchased accumulation unit value - 82 Series -- -- --
Cost of investments $20,415,691 $32,447,833 $6,610,887
=========== =========== ==========
See accompanying notes to financial statements.
<PAGE>
</TABLE>
<PAGE>
<TABLE>
GENERAL AMERICAN SEPARATE ACCOUNT TWO
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
<CAPTION>
S & P 500 MONEY BOND MANAGED ASSET
INDEX MARKET INDEX EQUITY ALLOCATION
FUND DIVISION FUND DIVISION FUND DIVISION FUND DIVISION FUND DIVISION
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Investment income
Dividend income(F*) $ -- $ -- $ -- $ -- $ --
Expenses:
Mortality and expense charge (792,852) (45,647) (49,500) (225,660) (235,101)
----------- --------- --------- ----------- ----------
Net investment expense (792,852) (45,647) (49,500) (225,660) (235,101)
----------- --------- --------- ----------- ----------
Net realized gain on investments:
Realized gain from distributions 5,435,587 241,447 246,102 1,054,269 398,861
Realized gain on sales 6,846,825 47,250 30,028 744,248 1,164,781
----------- --------- --------- ----------- ----------
Net realized gain on investments 12,282,412 288,697 276,130 1,798,517 1,563,642
----------- --------- --------- ----------- ----------
Net unrealized gain (loss) on investments:
Unrealized gain (loss) on investments,
beginning of year 25,704,555 (76,053) 120,643 2,935,033 3,602,884
----------- --------- --------- ----------- ----------
Unrealized gain (loss) on investments, end of year 28,334,721 (132,939) (308,933) 1,880,103 7,026,620
----------- --------- --------- ----------- ----------
Net unrealized gain (loss) on investments 2,630,166 (56,886) (429,576) (1,054,930) 3,423,736
----------- --------- --------- ----------- ----------
Net gain (loss) on investments 14,912,578 231,811 (153,446) 743,587 4,987,378
----------- --------- --------- ----------- ----------
Net increase (decrease) in net assets resulting
from operations $14,119,726 $ 186,164 $(202,946) $ 517,927 $4,752,277
=========== ========= ========= =========== ==========
<FN>
(F*)See Note 2C
</FN>
See accompanying notes to financial statements.
<PAGE>
<PAGE>
GENERAL AMERICAN SEPARATE ACCOUNT TWO
STATEMENTS OF OPERATIONS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1999
<CAPTION>
EQUITY-INCOME GROWTH OVERSEAS
FUND DIVISION FUND DIVISION FUND DIVISION
------------- ------------- -------------
<S> <C> <C> <C>
Investment income:
Dividend income(F*) $ 396,861 $ 67,689 $ 104,514
Expenses:
Mortality and expense charge (260,823) (422,316) (73,429)
----------- ----------- ----------
Net investment income (expense) 136,038 (354,627) 31,085
----------- ----------- ----------
Net realized gain on investments:
Realized gain from distributions 877,273 4,255,947 168,572
Realized gain on sales 1,948,854 1,987,793 244,928
----------- ----------- ----------
Net realized gain on investments 2,826,127 6,243,740 413,500
----------- ----------- ----------
Net unrealized gain (loss) on investments:
Unrealized gain on investments,
beginning of year 5,605,100 11,237,914 639,503
----------- ----------- ----------
Unrealized gain on investments, end of year 4,001,510 18,939,412 2,948,028
----------- ----------- ----------
Net unrealized gain (loss) on investments (1,603,590) 7,701,498 2,308,525
----------- ----------- ----------
Net gain on investments 1,222,537 13,945,238 2,722,025
----------- ----------- ----------
Net increase in net assets resulting
from operations $ 1,358,575 $13,590,611 $2,753,110
=========== =========== ==========
<FN>
(F*)See Note 2C
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
GENERAL AMERICAN SEPARATE ACCOUNT TWO
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<CAPTION>
S & P 500 MONEY BOND
INDEX MARKET INDEX
FUND DIVISION FUND DIVISION FUND DIVISION
-------------------------- ------------------------- -------------------------
1999 1998 1999 1998 1999 1998
----------- ----------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Net investment expense $ (792,852) $ (650,414) $ (45,647) $ (30,761) $ (49,500) $ (54,543)
Net realized gain on investments 12,282,412 9,348,569 288,697 225,619 276,130 362,092
Net unrealized gain (loss) on investments 2,630,166 6,849,805 (56,886) (57,732) (429,576) 89,036
----------- ----------- ---------- ---------- ----------- ----------
Net increase (decrease) in net assets
resulting from operations 14,119,726 15,547,960 186,164 137,126 (202,946) 396,585
Net deposits into (withdrawals from)
Separate Account (1,253,635) 1,283,048 1,589,240 436,791 (1,345,223) 596,366
----------- ----------- ---------- ---------- ----------- ----------
Increase in net assets 12,866,091 16,831,008 1,775,404 573,917 (1,548,169) 992,951
Net assets, beginning of year 73,578,133 56,747,125 3,355,907 2,781,990 5,756,448 4,763,497
----------- ----------- ---------- ---------- ----------- ----------
Net assets, end of year $86,444,224 $73,578,133 $5,131,311 $3,355,907 $ 4,208,279 $5,756,448
=========== =========== ========== ========== =========== ==========
<CAPTION>
MANAGED ASSET
EQUITY ALLOCATION
FUND DIVISION FUND DIVISION
-------------------------- --------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Operations:
Net investment expense $ (225,660) $ (223,158) $ (235,101) $ (203,860)
Net realized gain on investments 1,798,517 3,634,874 1,563,642 2,515,734
Net unrealized gain (loss) on investments (1,054,930) (563,625) 3,423,736 912,972
----------- ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations 517,927 2,848,091 4,752,277 3,224,846
Net deposits into (withdrawals from)
Separate Account (2,773,878) (1,909,564) (1,748,016) (266,538)
----------- ----------- ----------- -----------
Increase in net assets (2,255,951) 938,527 3,004,261 2,958,308
<PAGE>
Net assets, beginning of year 24,134,985 23,196,458 22,344,676 19,386,368
----------- ----------- ----------- -----------
Net assets, end of year $21,879,034 $24,134,985 $25,348,937 $22,344,676
=========== =========== =========== ===========
See accompanying notes to financial statements.
<PAGE>
GENERAL AMERICAN SEPARATE ACCOUNT TWO
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<CAPTION>
EQUITY-INCOME GROWTH OVERSEAS
FUND DIVISION FUND DIVISION FUND DIVISION
-------------------------- -------------------------- ------------------------
1999 1998 1999 1998 1999 1998
----------- ----------- ----------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Net investment income (expense) $ 136,038 $ 81,625 $ (354,627) $ (170,916) $ 31,085 $ 60,266
Net realized gain on investments 2,826,127 2,156,183 6,243,740 4,532,258 413,500 618,085
Net unrealized gain (loss) on investments (1,603,590) 312,751 7,701,498 5,806,145 2,308,525 49,088
----------- ----------- ----------- ----------- ---------- ----------
Increase in net assets resulting
from operations 1,358,575 2,550,559 13,590,611 10,167,487 2,753,110 727,439
Net deposits (withdrawals) into Separate
Account (4,305,771) 695,101 365,758 1,296,367 32,879 (469,743)
----------- ----------- ----------- ----------- ---------- ----------
Increase in net assets (2,947,196) 3,245,660 13,956,369 11,463,854 2,785,989 257,696
Net assets, beginning of year 27,344,677 24,099,017 37,389,659 25,925,805 6,765,869 6,508,173
----------- ----------- ----------- ----------- ---------- ----------
Net assets, end of year $24,397,481 $27,344,677 $51,346,028 $37,389,659 $9,551,858 $6,765,869
=========== =========== =========== =========== ========== ==========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
GENERAL AMERICAN SEPARATE ACCOUNT TWO
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
<PAGE>
Note 1 - Organization
General American Life Insurance Company (General American) markets life
insurance and health and pension arrangements to the public. General American
Separate Account Two (the Separate Account) is a part of General American and is
available to tax qualified and non-tax qualified retirement plans for investment
purposes in variable annuity contracts. The Separate Account was reorganized as
a unit investment trust, registered under the Investment Company Act of 1940,
pursuant to a plan of reorganization approved by its contractholders on February
23, 1988. To provide Separate Account contractholders the opportunity to invest
in a more diversified mutual fund portfolio, four additional fund divisions were
also established on this date. Existing contractholders' units in the Separate
Account remained unchanged after the reorganization.
Each Fund Division invests exclusively in shares of a single fund of either
General American Capital Company (the Capital Company) or Variable Insurance
Products Fund, which are open-end diversified management investment companies.
The funds of the General American Capital Company, sponsored by General
American, are the S & P 500 Index Fund, Money Market Fund, Bond Index Fund,
Managed Equity Fund, and Asset Allocation Fund Divisions. The name of the Bond
Index Fund was changed from the Intermediate Bond Fund effective October 1,
1992. The name change reflected a change in investment policies and objectives
of the Fund. The name of the S & P 500 Index Fund was changed from the Equity
Index Fund effective May 1, 1994. The funds of the Variable Insurance Products
Fund, sponsored by Fidelity Investments, are the Equity-Income, Growth, and the
Overseas Fund Divisions. Contractholders have the option of directing their
deposits into one or all of these Funds as well as into the general account of
General American. The unit values for the Separate Account 88 Series for the
above divisions began at $10.00 on May 16, 1988 (date of first deposits into
these fund divisions), except for the Managed Equity Fund Division, which began
at $10.00 on February 23, 1988; the Equity- Income and Growth Fund Divisions
which began at $10.00 on January 6, 1994; and the Overseas Fund Division which
began at $10.00 on January 11, 1994.
On January 6, 2000, Metropolitan Life Insurance Company (MetLife), headquartered
in New York City, purchased 100% of GenAmerica Corporation (the Company) for
$1.2 billion in cash. The acquisition was a result of liquidity problems
encountered by the Company's wholly-owned subsidiary General American Life
Insurance Company (General American) during 1999.
Note 2 - Significant Accounting Policies
The following is a summary of significant accounting policies followed by the
Separate Account in the preparation of its financial statements. The policies
are in conformity with generally accepted accounting principles.
(Continued)
<PAGE>
<PAGE>
GENERAL AMERICAN SEPARATE ACCOUNT TWO
NOTES TO FINANCIAL STATEMENTS
A. Investments
The Separate Account's investments in the eight Funds are valued daily
based on the net asset values of the respective Fund shares held as
reported to General American by General American Capital Company and
Variable Insurance Products. The specific identification method is
used in determining the cost of shares sold on withdrawals by the
Separate Account. Share transactions are recorded on the trade date,
which is the same as the settlement date.
B. Federal Income Taxes
Under current Federal income tax law, the investment income and
capital gains from sales of investments of the Separate Account are
not taxable. Therefore, no Federal income tax expense has been
provided.
C. Distribution of Income and Realized Capital Gains
General American Capital Company follows the federal income tax
practice known as consent dividending, whereby substantially all of
its net investment income and realized gains are deemed to be passed
through to the Separate Account. As a result, General American Capital
Company does not pay any dividends or capital gain distributions.
During December of each year, accumulated investment income and
capital gains of the underlying Capital Company Fund are allocated to
the Separate Account by increasing the cost basis and recognizing a
capital gain in the Separate Account. This adjustment has no impact on
the net assets of the Separate Account.
The Variable Insurance Products Funds intends to pay out all of its
net investment income and net realized capital gains for each year.
Dividends from the funds are distributed at least annually on a per
share basis and are recorded on the ex dividend date. Normally, net
realized capital gains, if any, are distributed each year for each
fund. Such income and capital gain distributions are automatically
reinvested in additional shares of the funds.
(Continued)
<PAGE>
<PAGE>
GENERAL AMERICAN SEPARATE ACCOUNT TWO
NOTES TO FINANCIAL STATEMENTS
D. Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of increase
and decrease in net assets from operations during the period. Actual
results could differ from those estimates.
Note 3 - Contract Charges
General American assumes the mortality and expense risks and provides certain
administrative services related to operating the Separate Account, for which the
Separate Account is charged a daily rate of .002740% of net assets of each Fund
Division of the Separate Account, which equals an annual rate of 1% for those
net assets. For contracts issued prior to the date of reorganization and
invested in the Managed Equity Fund, daily adjustments to values in the Separate
Account are made to offset fully the effect of a .10% administrative fee charged
to the Managed Equity Fund by General American. Since the Separate Account
invests in shares of the Capital Company, as opposed to direct investments in
publicly traded common stocks, the Separate Account is not charged an investment
advisory fee.
Under Separate Account contractual arrangements, General American is entitled to
collect payment for sale charges and annuity taxes. Variable annuity contracts
written prior to May 1, 1982 have a front-end sales charge of 4.75% applied to
each contribution. Contracts written after April 30, 1982 are subject to a
contingent deferred sales charge upon surrender of the contract or partial
withdrawal of funds on deposit. The sales charge is 9% during the first contract
year, decreasing by 1% per year thereafter; the contingent deferred sales charge
is waived in the event of death, disability or annuitization after the fifth
contract year. The amount of sales charges, transfer charges, surrender charges
and premium taxes for 1999 and 1998 are disclosed in Note 6.
<PAGE>
<PAGE>
GENERAL AMERICAN SEPARATE ACCOUNT TWO
NOTES TO FINANCIAL STATEMENT
Note 4 - Purchases and Sales of Shares
During the year ended December 31, 1999, purchases including net realized gain
and income from distribution and proceeds from sales of General American Capital
Company shares were as follows:
<TABLE>
<CAPTION>
S & P 500 Money Managed Asset
Index Market Bond Index Equity Allocation
Fund Fund Fund Fund Fund
----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Purchases $15,570,691 $7,563,741 $1,086,737 $1,944,587 $2,215,470
----------- ---------- ---------- ---------- ----------
Sales $12,464,659 $5,877,750 $2,254,518 $3,886,310 $3,846,096
----------- ---------- ---------- ---------- ----------
</TABLE>
During the year ended December 31, 1999, purchases (including dividend
reinvestment) and proceeds from sales of Variable Insurance Products Fund shares
were as follows:
<TABLE>
<CAPTION>
Equity-
Income Growth Overseas
Fund Fund Fund
---------- ---------- ----------
<S> <C> <C> <C>
Purchases $2,646,564 $9,444,729 $1,379,262
---------- ---------- ----------
Sales $6,032,125 $5,156,148 $1,227,215
---------- ---------- ----------
</TABLE>
<PAGE>
<TABLE>
GENERAL AMERICAN SEPARATE ACCOUNT TWO
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 5 - ACCUMULATION UNIT ACTIVITY
The following is a summary of the accumulation unit activity for the year ended
December 31, 1999 and 1998 (in thousands):
<PAGE>
<CAPTION>
S & P 500 INDEX MONEY MARKET BOND INDEX
FUND DIVISION FUND DIVISION FUND DIVISION
--------------- --------------- -------------
Tax sheltered annuities: 1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net deposits 229 236 327 123 26 61
Net withdrawals (248) (184) (223) (101) (78) (24)
Outstanding units, beginning of year 987 935 124 102 200 163
---- ---- ---- ---- --- ---
Outstanding units, end of year 968 987 228 124 148 200
==== ==== ==== ==== === ===
Individually purchased annuities:
Net deposits 51 53 149 54 11 19
Net withdrawals (53) (77) (159) (49) (26) (25)
Outstanding units, beginning of year 342 366 79 74 75 81
---- ---- ---- ---- --- ---
Outstanding units, end of year 340 342 69 79 60 75
==== ==== ==== ==== === ===
<CAPTION>
MANAGED EQUITY ASSET ALLOCATION
FUND DIVISION FUND DIVISION
-------------------------------------- -----------------
88 Series Other
Tax sheltered annuities: 1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ----- ----
<S> <C> <C> <C> <C> <C> <C>
Net deposits 29 33 2 7 62 63
Net withdrawals (49) (47) (22) (17) (86) (72)
Outstanding units, beginning of year 266 280 126 136 487 496
--- --- --- --- --- ---
Outstanding units, end of year 246 266 106 126 463 487
=== === === === === ===
Individually purchased annuities:
Net deposits 3 10 0 0 9 17
<PAGE>
Net withdrawals (8) (23) 0 (1) (33) (17)
Outstanding units, beginning of year 54 67 1 2 187 187
--- --- --- --- --- ---
Outstanding units, end of year 49 54 1 1 163 187
=== === === === === ===
(continued)
<PAGE>
GENERAL AMERICAN SEPARATE ACCOUNT TWO
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 5 - ACCUMULATION UNIT ACTIVITY (CONTINUED)
The following is a summary of the accumulation unit activity for the year ended
December 31, 1999 and 1998 (in thousands):
<CAPTION>
EQUITY-INCOME GROWTH OVERSEAS
FUND DIVISION FUND DIVISION FUND DIVISION
--------------- ----------------- ---------------
Tax sheltered annuities: 1999 1998 1999 1998 1999 1998
---- ---- ----- ----- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net deposits 82 161 204 205 59 60
Net withdrawals (214) (131) (190) (142) (66) (68)
Outstanding units, beginning of year 868 838 1,127 1,064 355 363
---- ---- ----- ----- --- ---
Outstanding units, end of year 736 868 1,141 1,127 348 355
==== ==== ===== ===== === ===
Individually purchased annuities:
Net deposits 21 51 70 50 23 11
Net withdrawals (74) (50) (71) (51) (16) (37)
Outstanding units, beginning of year 352 351 342 343 98 124
---- ---- ----- ----- --- ---
Outstanding units, end of year 299 352 341 342 105 98
==== ==== ===== ===== === ===
<PAGE>
</TABLE>
<PAGE>
<TABLE>
GENERAL AMERICAN SEPARATE ACCOUNT TWO
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 6 - SUMMARY OF GROSS AND NET DEPOSITS INTO SEPARATE ACCOUNT
Deposits into the Separate Account are used to purchase shares in the Capital
Company or Fidelity's Variable Insurance Products Funds. Net deposits represent
the amounts available for investment in such shares after the deduction of sales
charges, premium taxes, transfer charges, and surrender charges.
<CAPTION>
S & P 500 INDEX MONEY MARKET BOND INDEX
FUND DIVISION FUND DIVISION FUND DIVISION
--------------------------- ------------------------ -------------------------
Tax sheltered annuities: 1999 1998 1999 1998 1999 1998
----------- ------------ ---------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Total gross deposits $ 4,780,975 $ 6,468,331 $ 237,270 $ 551,562 $ 364,130 $ 429,226
Transfers between fund divisions
and General American 1,752,189 1,266,937 2,396,429 309,709 (254,095) 574,600
Surrenders and withdrawals (7,641,939) (5,208,621) (863,973) (514,215) (1,141,258) (277,854)
----------- ----------- ---------- --------- ----------- ---------
Total gross deposits, transfers, and
surrenders between fund divisions (1,108,775) 2,526,647 1,769,726 347,056 (1,031,223) 725,972
Deductions:
Sales charges and premium taxes 673 541 0 33 0 3
Transfer charges 0 0 0 0 0 0
Surrender charges 73,320 39,730 5,148 2,941 4,266 3,061
----------- ----------- ---------- --------- ----------- ---------
73,993 40,271 5,148 2,974 4,266 3,064
Total deposits into (withdrawals from)
Separate Account $(1,182,768) $ 2,486,376 $1,764,578 $ 344,082 $(1,035,489) $ 722,908
=========== =========== ========== ========= =========== =========
<CAPTION>
MANAGED EQUITY ASSET ALLOCATION
FUND DIVISION FUND DIVISION
--------------------------------------------------------- ---------------------------
88 Series Other
Tax sheltered annuities: 1999 1998 1999 1998 1999 1998
------------ ------------ ------------ ------------ ------------ ------------
<PAGE>
<S> <C> <C> <C> <C> <C> <C>
Total gross deposits $ 1,017,574 $ 1,031,883 $ 98,087 $ 128,121 $ 1,099,914 $ 1,377,673
Transfers between fund divisions
and General American (664,792) (215,453) (244,132) 257,403 (21,014) (79,296)
Surrenders and withdrawals (1,195,279) (1,211,325) (1,533,674) (1,191,151) (1,926,140) (1,579,937)
----------- ----------- ----------- ----------- ----------- -----------
Total gross deposits, transfers, and
surrenders between fund divisions (842,497) (394,895) (1,679,719) (805,627) (847,240) (281,560)
Deductions:
Sales charges and premium taxes 64 62 262 244 0 3
Transfer charges 0 0 0 0 0 0
Surrender charges 13,761 17,119 0 0 20,846 12,490
----------- ----------- ----------- ----------- ----------- -----------
13,825 17,181 262 244 20,846 12,493
Total deposits into (withdrawals from)
Separate Account $ (856,322) $ (412,076) $(1,679,981) $ (805,871) $ (868,086) $ (294,053)
=========== =========== =========== =========== =========== ===========
<CAPTION>
S & P 500 INDEX MONEY MARKET BOND INDEX
FUND DIVISION FUND DIVISION FUND DIVISION
--------------------------- ----------------------- -----------------------
Individually purchased annuities: 1999 1998 1999 1998 1999 1998
------------ ------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Total gross deposits $ 753,899 $ 1,765,647 $ 36,328 $ 120,214 $ 17,091 $ 55,283
Transfers between fund divisions
and General American 702,384 (209,771) 44,784 (22,244) (185,048) 67,237
Surrenders and withdrawals (1,504,179) (2,726,185) (256,255) (5,242) (139,177) (244,863)
----------- ----------- --------- --------- --------- ---------
Total gross deposits, transfers, and
surrenders between fund divisions (47,896) (1,170,309) (175,143) 92,728 (307,134) (122,343)
Deductions:
Sales charges and premium taxes 0 0 0 0 0 0
Transfer charges 0 0 0 0 0 0
Surrender charges 22,971 33,019 195 19 2,600 4,199
----------- ----------- --------- --------- --------- ---------
22,971 33,019 195 19 2,600 4,199
Total deposits into (withdrawals from)
Separate Account $ (70,867) $(1,203,328) $(175,338) $ 92,709 $(309,734) $(126,542)
=========== =========== ========= ========= ========= =========
<CAPTION>
<PAGE>
MANAGED EQUITY ASSET ALLOCATION
FUND DIVISION FUND DIVISION
------------------------------------------------------ -------------------------
88 Series Other
Individually purchased annuities: 1999 1998 1999 1998 1999 1998
---------- ----------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Total gross deposits $ 56,049 $ 164,355 $ 0 $ 1,589 $ 78,617 $ 265,936
Transfers between fund divisions
and General American (59,910) (24,136) 0 0 (255,371) (71,336)
Surrenders and withdrawals (216,312) (739,966) (15,347) (72,481) (679,108) (164,660)
--------- --------- -------- -------- --------- ---------
Total gross deposits, transfers, and
surrenders between fund divisions (220,173) (599,747) (15,347) (70,892) (855,862) 29,940
Deductions:
Sales charges and premium taxes 0 0 0 0 0 0
Transfer charges 0 0 0 0 0 0
Surrender charges 2,055 20,978 0 0 24,068 2,425
--------- --------- -------- -------- --------- ---------
2,055 20,978 0 0 24,068 2,425
Total deposits into (withdrawals from)
Separate Account $(222,228) $(620,725) $(15,347) $(70,892) $(879,930) $ 27,515
========= ========= ======== ======== ========= =========
(continued)
<PAGE>
GENERAL AMERICAN SEPARATE ACCOUNT TWO
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 6 - SUMMARY OF GROSS AND NET DEPOSITS INTO SEPARATE ACCOUNT,
(CONTINUED)
<CAPTION>
EQUITY-INCOME GROWTH OVERSEAS
FUND DIVISION FUND DIVISION FUND DIVISION
--------------------------- --------------------------- -----------------------
Tax sheltered annuities: 1999 1998 1999 1998 1999 1998
------------ ------------ ------------ ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Total gross deposits $ 1,407,920 $ 2,099,844 $ 2,689,326 $ 2,854,340 $ 473,024 $ 599,682
<PAGE>
Transfers between fund divisions
and General American (2,034,265) 281,676 1,072,738 665,837 137,849 (134,703)
Surrenders and withdrawals (2,408,056) (1,685,785) (3,327,807) (2,126,620) (673,787) (564,009)
----------- ----------- ----------- ----------- --------- ---------
Total gross deposits, transfers, and
surrenders between fund divisions (3,034,401) 695,735 434,257 1,393,557 (62,914) (99,030)
Deductions:
Sales charges and premium taxes 18 199 149 229 34 12
Transfer charges 0 0 0 0 0 0
Surrender charges 21,503 22,250 41,171 38,955 7,968 7,586
----------- ----------- ----------- ----------- --------- ---------
21,521 22,449 41,320 39,184 8,002 7,598
Total deposits (withdrawals) into
Separate Account $(3,055,922) $ 673,286 $ 392,937 $ 1,354,373 $ (70,916) $(106,628)
=========== =========== =========== =========== ========= =========
<CAPTION>
EQUITY-INCOME GROWTH OVERSEAS
FUND DIVISION FUND DIVISION FUND DIVISION
--------------------------- --------------------------- -----------------------
Individually purchased annuities: 1999 1998 1999 1998 1999 1998
------------ ------------ ------------ ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Total gross deposits $ 136,056 $ 626,962 $ 327,467 $ 674,480 $ 44,310 $ 136,339
Transfers between fund divisions
and General American (1,026,467) 12,989 33,246 (55,684) 135,078 (180,306)
Surrenders and withdrawals (346,195) (604,051) (371,595) (657,597) (73,053) (308,720)
----------- --------- --------- --------- -------- ---------
Total gross deposits, transfers, and
surrenders between fund divisions (1,236,606) 35,900 (10,882) (38,801) 106,335 (352,687)
Deductions:
Sales charges and premium taxes 6 5 22 23 0 0
Transfer charges 0 0 0 0 0 0
Surrender charges 13,237 14,080 16,275 19,182 2,540 10,428
----------- --------- --------- --------- -------- ---------
13,243 14,085 16,297 19,205 2,540 10,428
Total deposits (withdrawals) into
Separate Account $(1,249,849) $ 21,815 $ (27,179) $ (58,006) $103,795 $(363,115)
=========== ========= ========= ========= ======== =========
</TABLE>
<PAGE>
<TABLE>
GENERAL AMERICAN SEPARATE ACCOUNT TWO
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1999
<PAGE>
<CAPTION>
No. of Shares Market Value
-------------- -------------
<S> <C> <C>
S&P 500 Index Fund
General American Capital Company (F*) 1,421,309 $86,520,558
Money Market Fund
General American Capital Company (F*) 253,561 $ 5,135,191
Bond Index Fund
General American Capital Company (F*) 172,157 $ 4,211,687
Managed Equity Fund
General American Capital Company (F*) 596,491 $21,896,770
Asset Allocation Fund
General American Capital Company (F*) 547,671 $25,370,323
Equity-Income Fund
Variable Insurance Products Fund 949,716 $24,417,201
Growth Fund
Variable Insurance Products Fund 935,504 $51,387,245
Overseas Fund
Variable Insurance Products Fund 348,357 $ 9,558,915
<FN>
(F*) These funds use consent dividending. See Note 2C.
</FN>
See accompanying independent auditors' report.
</TABLE>
<PAGE>
<TABLE>
GENERAL AMERICAN SEPARATE ACCOUNT TWO
FINANCIAL HIGHLIGHTS INFORMATION
DECEMBER 31, 1999
<CAPTION>
Tax Qualified Plan Non-Tax Qualified Plan
Units outstanding, Units outstanding,
Accumulation unit value: Accumulation unit value: end of period end of period
Beginning of period(F*) End of period (in thousands) (in thousands)
------------------------ ------------------------ ------------------- ----------------------
<PAGE>
<S> <C> <C> <C> <C>
S & P 500 Index Fund Division (F**)
1999 55.35 66.06 968 340
1998 43.62 55.35 987 342
1997 33.17 43.62 935 366
1996 27.27 33.17 808 325
1995 20.12 27.27 657 297
1994 20.09 20.12 636 265
1993 18.48 20.09 599 241
1992 17.37 18.48 366 152
1991 13.47 17.37 236 109
1990 14.15 13.47 133 67
1989 11.01 14.15 97 23
Money Market Fund Division
1999 16.57 17.26 228 69
1998 15.85 16.57 124 79
1997 15.14 15.85 102 74
1996 14.50 15.14 117 62
1995 13.82 14.50 106 57
1994 13.39 13.82 93 58
1993 13.12 13.39 115 73
1992 12.78 13.12 181 85
1991 12.16 12.78 179 101
1990 11.33 12.16 188 79
1989 10.44 11.33 28 15
Bond Index Fund Division (F***)
1999 20.97 20.16 148 60
1998 19.50 20.97 200 75
1997 18.01 19.50 163 80
1996 17.66 18.01 163 70
1995 14.99 17.66 146 85
1994 15.78 14.99 146 58
1993 14.43 15.78 161 61
1992 13.68 14.43 116 48
1991 12.12 13.68 50 67
1990 11.22 12.12 33 58
1989 10.27 11.22 22 17
Managed Equity Fund Division
82 Series Tax Qualified
1999 82.60 84.35 106 N/A
1998 72.99 82.60 126 N/A
1997 59.73 72.99 136 N/A
1996 49.83 59.73 153 N/A
1995 37.68 49.83 164 N/A
1994 39.42 37.68 188 N/A
1993 36.54 39.42 210 N/A
1992 34.56 36.54 217 N/A
1991 27.62 34.56 216 N/A
1990 28.73 27.62 192 N/A
<PAGE>
1989 22.11 28.73 194 N/A
Non-Tax Qualified
1999 89.89 91.79 N/A 1
1998 79.43 89.89 N/A 1
1997 64.99 79.43 N/A 2
1996 54.22 64.99 N/A 2
1995 41.00 54.22 N/A 17
1994 42.90 41.00 N/A 20
1993 39.76 42.90 N/A 24
1992 37.61 39.76 N/A 25
1991 30.05 37.61 N/A 25
1990 31.27 30.05 N/A 25
1989 24.06 31.27 N/A 25
<FN>
(F*) At the date of first deposits into Separate Account on May 16, 1988,
(continued) except for the Managed Equity Fund, which began on February
24, 1988; the Equity Fund and the Growth Fund which began on January 6,
1994; and the Overseas Fund which began on January 11, 1994.
(F**) The name of the S&P 500 Index Fund was changed from the Equity Fund
effective May 1, 1994.
(F***)The name of the Bond Index Fund was changed from the Intermediate Bond
Fund effective October 1, 1992. The name change reflects a change in
investment policies and objectives of the Fund.
</FN>
See accompanying independent auditors' report.
<PAGE>
GENERAL AMERICAN SEPARATE ACCOUNT TWO
FINANCIAL HIGHLIGHTS INFORMATION
DECEMBER 31, 1999
<CAPTION>
Tax Qualified Plan Non-Tax Qualified Plan
Units outstanding, Units outstanding,
Accumulation unit value: Accumulation unit value: end of period end of period
Beginning of period(F*) End of period (in thousands) (in thousands)
------------------------ ------------------------ ------------------- ----------------------
<S> <C> <C> <C> <C>
Managed Equity Fund Division (continued)
88 Series
1999 42.70 43.56 246 49
1998 37.77 42.70 266 54
1997 30.94 37.77 280 67
1996 25.84 30.94 240 58
1995 19.56 25.84 215 75
1994 20.48 19.56 204 68
<PAGE>
1993 19.00 20.48 197 56
1992 17.99 19.00 158 40
1991 14.39 17.99 101 27
1990 14.99 14.39 56 20
1989 11.54 14.99 21 7
Asset Allocation Fund Division
1999 33.12 40.46 463 163
1998 28.38 33.12 487 187
1997 24.14 28.38 496 187
1996 21.08 24.14 375 178
1995 16.52 21.08 317 168
1994 17.37 16.52 320 180
1993 16.01 17.37 332 166
1992 15.16 16.01 223 119
1991 12.78 15.16 140 66
1990 12.60 12.78 94 35
1989 10.61 12.60 33 16
Equity-Income Fund Division
1999 22.41 23.60 736 299
1998 20.27 22.41 868 352
1997 15.98 20.27 838 351
1996 14.12 15.98 767 317
1995 10.55 14.12 552 207
1994 10.00 10.55 315 82
Growth Fund Division
1999 25.45 34.64 1,141 341
1998 18.42 25.45 1,127 342
1997 15.07 18.42 1,064 343
1996 13.27 15.07 974 362
1995 9.90 13.27 646 261
1994 10.00 9.90 356 116
Overseas Fund Division
1999 14.93 21.09 348 105
1998 13.37 14.93 355 98
1997 12.11 13.37 363 124
1996 10.80 12.11 346 107
1995 9.95 10.80 266 77
1994 10.00 9.95 240 52
<FN>
(F*) At the date of first deposits into Separate Account on May 16, 1988,
except for the Managed Equity Fund, which began on February 24, 1988; the
Equity Fund and the Growth Fund which began on January 6, 1994; and the
Overseas Fund which began on January 11, 1994.
(F**) The name of the S&P 500 Index Fund was changed from the Equity Fund
effective May 1, 1994.
(F***)The name of the Bond Index Fund was changed from the Intermediate Bond
Fund effective October 1, 1992. The name change reflects a change in
<PAGE>
investment policies and objectives of the Fund.
</FN>
See accompanying independent auditors' report.
</TABLE>
<PAGE>
LEGAL COUNSEL
Stephen E. Roth
Sutherland, Asbill & Brennan, Washington, D.C.
INDEPENDENT AUDITORS
KPMG LLP
If distributed to prospective investors, this report must be preceded or
accompanied by a current prospectus.
The prospectus is incomplete without reference to the financial data contained
in the annual report.
GENERAL AMERICAN LIFE INSURANCE
COMPANY AND SUBSIDIARIES
Consolidated Financial Statements
December 31, 1999 and 1998
(With Independent Auditors' Report Thereon)
INDEPENDENT AUDITORS' REPORT
Board of Directors and Members of General American Life Insurance
Company:
We have audited the accompanying consolidated balance sheets of General American
Life Insurance Company and subsidiaries as of December 31, 1999 and 1998, and
the related consolidated statements of operations, comprehensive income,
stockholder equity, and cash flows for each of the years in the three-year
period ended December 31, 1999. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
<PAGE>
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of General American
Life Insurance Company and subsidiaries as of December 31, 1999 and 1998, and
the results of their operations and their cash flows for each of the years in
the three-year period ended December 31, 1999, in conformity with generally
accepted accounting principles.
St. Louis, Missouri
February 4, 2000
<PAGE>>
<TABLE>
General American Life Insurance Company and Subsidiaries CONSOLIDATED BALANCE
SHEETS (dollars in millions, except share data)
<CAPTION>
As of December 31
-----------------
1999 1998
--------- --------
<S> <C> <C>
ASSETS
- - ----------------------------------------------------------------
Fixed maturities:
Available-for-sale, at fair value $ 6,826.1 11,068.3
Mortgage loans, net 1,678.9 2,337.5
Real estate, net 127.2 129.9
Equity securities, at fair value 49.3 48.6
Policy loans 2,243.9 2,151.0
Short-term investments 292.4 195.3
Other invested assets 898.8 457.6
--------- --------
Total investments 12,116.6 16,388.2
Cash and cash equivalents 790.0 591.1
Accrued investment income 153.9 205.6
Reinsurance recoverables 863.3 905.0
<PAGE>
Other contract deposits 325.5 4,094.8
Deferred tax asset, net 197.6 -
Deferred policy acquisition costs 1,286.1 773.8
Other assets 781.1 675.7
Separate account assets 6,915.6 5,214.8
--------- --------
Total assets $23,429.7 28,849.0
========= ========
LIABILITIES AND STOCKHOLDER EQUITY
- - ----------------------------------------------------------------
Policy and contract liabilities:
Future policy benefits $ 5,995.6 5,589.5
Policyholder account balances:
Universal life 3,032.1 2,960.9
Annuities 3,709.8 3,714.5
Pension funds and interest sensitive contract liabilities 556.8 7,581.3
Policy and contract claims 702.1 591.1
Dividends payable to policyholders 120.6 121.7
--------- --------
Total policy and contract liabilities 14,117.0 20,559.0
Amounts payable to reinsurers 79.2 201.4
Long-term debt and notes payable 216.6 221.9
Other liabilities and accrued expenses 825.0 912.4
Deferred tax liability, net - 75.4
Separate account liabilities 6,892.0 5,194.9
--------- --------
Total liabilities 22,129.8 27,165.0
Minority interests 420.0 383.1
Stockholder equity:
Common stock, $1 par value, 5,000,000 shares authorized,
3,000,000 shares issued and outstanding 3.0 3.0
Additional paid in capital 71.1 3.0
Retained earnings 1,074.1 1,242.0
Accumulated other comprehensive (loss) income (268.3) 52.9
--------- --------
Total stockholder equity 879.9 1,300.9
--------- --------
Total liabilities and stockholder equity $23,429.7 28,849.0
========= ========
See accompanying notes to consolidated financial statements.
</TABLE>
2
<PAGE>
<TABLE>
General American Life Insurance Company and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
<PAGE>
(dollars in millions)
<CAPTION>
Years ended December 31
-----------------------
1999 1998 1997
-------- ------- -------
<S> <C> <C> <C>
REVENUES
- - -------------------------------------------------------
Insurance premiums $2,207.6 2,028.0 1,671.3
Other considerations 183.2 173.6 135.8
Net investment income 1,157.2 1,135.8 945.5
Ceded commissions 21.7 39.9 44.9
Other income 386.0 323.0 362.3
Net realized investment (losses) gains (200.6) 13.7 28.5
-------- ------- -------
Total revenues 3,755.1 3,714.0 3,188.3
-------- ------- -------
BENEFITS AND EXPENSES
- - -------------------------------------------------------
Policy benefits 1,978.4 1,832.9 1,517.7
Interest credited to policyholder account balances 533.9 516.8 399.4
-------- ------- -------
Total policyholder benefits 2,512.3 2,349.7 1,917.1
Dividends to policyholders 191.6 192.1 182.1
Policy acquisition costs 154.0 240.7 171.1
Other insurance and operating expenses 917.5 713.7 712.8
Interest expense 17.7 17.9 20.2
Demutualization expense 13.3 - -
Fees to exit funding agreement business 141.4 - -
-------- ------- -------
Total benefits and expenses 3,947.8 3,514.1 3,003.3
-------- ------- -------
(Loss) income before provision for income taxes (192.7) 199.9 185.0
-------- ------- -------
Income tax (benefit) provision:
Current (23.6) 35.2 65.8
Deferred (40.7) 18.4 (0.1)
-------- ------- -------
Total income tax (benefit) provision (64.3) 53.6 65.7
-------- ------- -------
(Loss) income before minority interest (128.4) 146.3 119.3
<PAGE>
Minority interest in earnings of consolidated subsidiaries (24.8) (29.2) (22.1)
-------- ------- -------
Net (loss) income $ (153.2) 117.1 97.2
======== ======= =======
See accompanying notes to consolidated financial statements.
</TABLE>
3
<PAGE>
<TABLE>
General American Life Insurance Company and Subsidiaries CONSOLIDATED STATEMENTS
OF COMPREHENSIVE INCOME (dollars in millions) <CAPTION>
Years ended December 31
-----------------------
1999 1998 1997
------- ----- -----
<S> <C> <C> <C>
Net (loss) income $(153.2) 117.1 97.2
Other comprehensive (loss) income (321.2) (54.0) 75.6
------- ----- -----
Comprehensive (loss) income $(474.4) 63.1 172.8
======= ===== =====
See accompanying notes to consolidated financial statements.
</TABLE>
4
<PAGE>
<TABLE>
General American Life Insurance Company and Subsidiaries CONSOLIDATED STATEMENTS
OF STOCKHOLDER EQUITY (dollars in millions) <CAPTION>
ACCUMULATED
OTHER
ADDITIONAL COMPREHENSIVE TOTAL
COMMON PAID-IN RETAINED (LOSS) STOCKHOLDER
STOCK CAPITAL EARNINGS INCOME EQUITY
<PAGE>
------ ---------- -------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1996 $ - - 966.5 31.3 997.8
Net income 97.2 97.2
Other comprehensive income 75.6 75.6
Issuance of common stock 3.0 3.0 (6.0) -
Dividend to parent (4.5) (4.5)
Other, net 4.4 4.4
---- ---- ------- ------ -------
Balance at December 31, 1997 3.0 3.0 1,057.6 106.9 1,170.5
Net income 117.1 117.1
Other comprehensive loss (54.0) (54.0)
Parent's share of subsidiary's
issuance of non-voting stock 68.6 68.6
Other, net (1.3) (1.3)
---- ---- ------- ------ -------
Balance at December 31, 1998 3.0 3.0 1,242.0 52.9 1,300.9
Net loss (153.2) (153.2)
Other comprehensive loss (321.2) (321.2)
Parent's share of subsidiaries'
capital stock transactions 25.3 25.3
Capital contribution from parent 68.1 68.1
Dividends (40.0) (40.0)
---- ---- ------- ------ -------
Balance at December 31, 1999 $3.0 71.1 1,074.1 (268.3) 879.9
==== ==== ======= ====== =======
See accompanying notes to consolidated financial statements.
</TABLE>
5
<PAGE>
<TABLE>
General American Life Insurance Company and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in millions)
<CAPTION>
Years ended December 31
-----------------------
1999 1998 1997
--------- ------- -------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
- - ----------------------------------------------------------------
Net (loss) income $ (153.2) 117.1 97.2
Adjustments to reconcile net income to net cash provided by
<PAGE>
(used in) operating activities:
Change in:
Accrued investment income 50.9 (37.4) (20.6)
Reinsurance recoverables and
other contract deposits 463.9 496.1 203.7
Deferred policy acquisition costs (165.9) (102.1) (113.0)
Other assets (39.5) (172.1) (61.8)
Future policy benefits 406.2 655.5 693.1
Policy and contract claims 111.0 132.5 105.5
Other liabilities and accrued expenses (78.1) 48.2 319.8
Deferred income tax provision (40.7) 18.4 (0.1)
Policyholder considerations (183.2) (173.6) (135.8)
Interest credited to policyholder account balances 533.9 516.8 399.4
Amortization and depreciation (32.5) 34.6 32.7
Net realized investment losses (gains) 200.6 (13.7) (28.5)
Other, net 12.0 7.4 0.4
--------- ------- -------
Net cash provided by operating activities 1,085.4 1,527.7 1,492.0
--------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
- - ----------------------------------------------------------------
Proceeds from investments sold or redeemed:
Fixed maturities available-for-sale 10,891.4 2,027.4 2,070.7
Mortgage loans 1,442.8 370.4 594.2
Equity securities 10.3 2.1 31.6
Cost of investments purchased:
Fixed maturities available-for-sale (8,110.5) (4,251.1) (4,463.1)
Mortgage loan originations (800.2) (594.5) (439.0)
Equity securities (19.2) (17.4) (47.3)
Maturity of fixed maturities available-for-sale 310.6 145.3 281.7
Increase in policy loans, net (92.9) (77.9) (153.4)
Increase in short-term and other invested assets, net (521.8) (215.2) (130.4)
Investments in subsidiaries 81.3 (24.5) (6.0)
--------- ------- -------
Net cash provided by (used in) investing activities 3,191.8 (2,635.4) (2,261.0)
--------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
- - ----------------------------------------------------------------
Net policyholder account and contract (withdrawals) deposits (4,186.7) 1,108.8 1,024.5
Proceeds from subsidiary stock offering 124.9 221.8 -
Issuance of debt - 2.3 1.9
Repayment of debt (0.7) (0.4) (80.6)
Dividends (45.8) (3.8) (2.1)
Other, net 28.9 27.5 46.8
--------- ------- -------
Net cash (used in) provided by financing activities (4,079.4) 1,356.2 990.5
--------- ------- -------
Effect of exchange rate changes 1.1 (16.3) (5.3)
--------- ------- -------
<PAGE>
Net increase in cash and cash equivalents 198.9 232.2 216.2
Cash and cash equivalents at beginning of year 591.1 358.9 142.7
--------- ------- -------
Cash and cash equivalents at end of year $ 790.0 591.1 358.9
========= ======= =======
See accompanying notes to consolidated financial statements.
</TABLE>
6
<PAGE>
General American Life Insurance Company and Subsidiaries
(1) BASIS OF PRESENTATION AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES
ACQUISITION BY METLIFE
On January 6, 2000, Metropolitan Life Insurance Company (MetLife), headquartered
in New York City, purchased 100% of GenAmerica Corporation (GenAmerica), General
American Life Insurance Company's (General American or the Company) parent, for
$1.2 billion in cash. The acquisition was a result of liquidity problems
encountered by General American.
On August 10, 1999, at management's request, the Missouri Department of
Insurance placed the Company under an order of administrative supervision (the
order). The immediate cause of the order was the Company's inability to
immediately satisfy approximately $4 billion in institutional funding agreement
contract surrenders. The funding agreements guaranteed the holder a return on
principal at a stated interest rate for a specified period of time. The
contracts also allowed the holder to "put" the contract to the Company for a
payout of principal and interest within designated time periods of 7, 30 or 90
days. The Company had reinsured 50% of the funding agreement contracts with ARM
Financial Group, Inc. (ARM).
In July 1999, Moody's Investors Services, Inc. downgraded the claims paying
ability rating of ARM due to the relative illiquidity of certain of its invested
assets, which resulted in the Company recapturing the obligations and assets
related to the funding agreements reinsured by ARM. As a result of the
recapture, Moody's downgraded the Company's claims paying ability rating. Upon
announcement of the downgrade, a large number of funding agreement holders
surrendered their contracts. The Company was unable to liquidate sufficient
assets in an orderly fashion without incurring significant losses and therefore
management requested the order.
In connection with the acquisition, MetLife offered each holder of a General
American funding agreement the option to exchange its funding agreement for a
MetLife funding agreement with substantially identical terms and conditions or
receive cash equal to the principal amount plus accrued interest. In
consideration of this exchange offer, the Company
<PAGE>
transferred to MetLife assets having a market value equal to the market value of
the funding agreement liabilities, approximately $5.7 billion. As a result of
its efforts to raise liquidity to meet the funding agreement requests and the
transfer of assets to MetLife, the Company incurred approximately $214.7 million
in pretax capital losses. In addition to the capital losses, the Company
incurred $141.4 million in fees associated with the recapture and transfer of
the funding agreement business. With the transfer, the Company fully exited the
funding agreement business.
GenAmerica will operate as a wholly-owned stock subsidiary of MetLife. The $1.2
billion purchase price was paid to GenAmerica's parent General American Mutual
Holding Company (GAMHC) and deposited in an account for the benefit of the
Company's policyholders. Ultimately, these funds, minus adjustments, will be
distributed to participating General American policyholders, with accumulated
interest and GAMHC will be dissolved.
7
<PAGE>
General American Life Insurance Company and Subsidiaries
REORGANIZATION
In September 1996, the Board of Directors of General American adopted the Plan
which authorized the reorganization (Reorganization) of the Company into a
mutual insurance holding company structure. The Missouri Department of Insurance
held a public hearing on the Reorganization on December 19, 1996 and approved
the Plan on January 24, 1997. The policyholders of the Company approved the Plan
on January 28, 1997 and the Reorganization became effective on April 24, 1997
(effective date). The Company was the first company to obtain approval and to
form a mutual insurance holding company under the Missouri Mutual Holding
Company Statute.
Pursuant to the Reorganization, the Company (i) formed GAMHC as a mutual
insurance holding company under the insurance laws of the State of Missouri,
(ii) formed GenAmerica as an intermediate stock holding company under the
general laws of the State of Missouri, and (iii) amended and restated its
Charter and Articles of Incorporation to authorize the issuance of capital stock
and the continuance of its existence as a stock life insurance company under the
same name. GAMHC may, among other things, elect all of the directors of
GenAmerica and approve matters submitted for shareholder approval. As of the
effective date of the Reorganization, the membership interests and the
contractual rights of the policyholders of the Company were separated - the
membership interests automatically became, by operation of law, membership
interests in GAMHC and the contractual rights remained with the Company. Each
person who became the owner of a designated policy or contract of insurance or
annuity issued by the Company after the effective date of the Reorganization
(subject to certain exceptions and conditions set forth in the Articles of
Incorporation of GAMHC) became a member of GAMHC and had a membership interest
in GAMHC by operation of law so long as such policy or contract remains in
force. The
<PAGE>
membership interests in GAMHC follow, and are not severable, from the insurance
or annuity policy or contract from which the membership interest in GAMHC is
derived.
On the effective date, the Company issued three million shares of its authorized
shares of capital stock to GAMHC. GAMHC then contributed all of these to
GenAmerica in exchange for one thousand shares of its common stock. As a result,
GenAmerica directly owned the Company, and GAMHC indirectly owned the Company,
through GenAmerica. The Reorganization was accounted for at historical cost in a
manner similar to a pooling of interests.
The consolidated financial statements include the assets, liabilities, and
results of operations of the Company and the following wholly owned insurance
subsidiaries: Cova Corporation (COVA), an insurance holding company, Paragon
Life Insurance Company, Security Equity Life Insurance Company, General Life
Insurance Company of America, General Life Insurance Company (GLIC), GenAm
Benefits Insurance Company, and its 48.3 percent owned subsidiary, Reinsurance
Group of America, Incorporated (RGA), an insurance holding company. In addition,
the financial statements include the assets, liabilities, and results of
operations of the following wholly owned non-insurance subsidiaries: Red Oak
Realty Company, White Oak Royalty Company, GenMark, Inc., and its 60.4 percent
owned subsidiary, Conning Corporation (Conning).
The Company's principal lines of business, conducted through General American or
one of its subsidiaries, are: Individual Life Insurance, Annuities, Group Life
and Health Insurance, Asset Management, and Reinsurance. The Company distributes
its products and services primarily through a nationwide network of general
agencies, independent brokers, and group sales and claims offices. The Company
and its subsidiaries are licensed to do business in all fifty states, ten
Canadian provinces, Puerto Rico, and the District of Columbia. Through its
subsidiaries, the Company has operations in Europe, Pacific Rim countries, Latin
America, and Africa.
INITIAL PUBLIC OFFERING
In December 1997, Conning successfully completed an Initial Public Offering
of 2.875 million shares of its common stock. Conning received net proceeds
of approximately $34.5 million from the offering. The
8
<PAGE>
General American Life Insurance Company and Subsidiaries
Company owned 60.4 and 62.7 percent of the total shares outstanding of Conning's
common stock at December 31, 1999 and 1998 respectively. The publicly held stock
of Conning is listed on the NASDAQ National Market System.
OTHER OFFERINGS
<PAGE>
At RGA's annual stockholders' meeting on May 27, 1998, a new class of non-
voting common stock was authorized. In June 1998, RGA completed a secondary
public offering in which it sold 7,417,500 million shares of non- voting common
stock traded on the New York Stock Exchange under the symbol RGA.A. The offering
provided net proceeds of approximately $221.8 million, which have been utilized
to finance the continued growth of RGA's operations domestically and
internationally. After the subsequent offering, the Company's ownership
percentage decreased from 63.8% to 53.3%.
On September 14, 1999 RGA held a special shareholder's meeting at which an
amendment to its restated articles of incorporation, as amended, was approved
which converted 7,417,496 shares of non-voting common stock into 7,194,971
shares of voting common stock, with cash paid in lieu of any fractional shares.
After the non-voting stock conversion, the Company's ownership percentage was
53.5%.
On November 23, 1999, RGA completed a private placement of securities in which
it sold 4,784,689 shares of its common stock, $0.01 par value per share to
MetLife. The price per share was $26.125, and the aggregate value of the
transaction was approximately $125 million. Proceeds from the private placement
will be used for general corporate purposes, including the immediate capital
needs associated with the Company's primary businesses. After the private
offering, the Company's ownership percentage was 48.3%.
SIGNIFICANT ACCOUNTING POLICIES
The accompanying consolidated financial statements are prepared on the basis of
generally accepted accounting principles (GAAP) and include the accounts of the
Company and its majority owned subsidiaries. Less than majority-owned entities
in which the Company has at least a 20 percent interest are reported on the
equity basis. The Company continues to consolidate the financial statements of
RGA even though its ownership percentage has declined to below 50 percent since
the Company has retained control of RGA through a majority representation on
RGA's Board of Directors at December 31, 1999 and through January 6, 2000. All
significant intercompany accounts and transactions have been eliminated in
consolidation. The preparation of financial statements requires the use of
estimates by management, which affect the amounts reflected in the financial
statements. Actual results could differ from those estimates. Accounts that the
Company deems to be sensitive to changes in estimates include future policy
benefits and policy and contract claims, deferred acquisition costs, and
investment and deferred tax valuation allowances.
The significant accounting policies of the Company are as follows:
RECOGNITION OF REVENUE
For traditional life insurance policies, including participating businesses,
premiums are recognized when due, less allowances for estimated uncollectible
balances. For limited payment contracts, net premiums are recorded as revenue,
and the difference between the gross premium and the net premium is deferred and
recognized in income in a constant relationship to insurance in force over the
estimated policy life.
<PAGE>
For universal life and annuity products, contract charges for mortality,
surrender, and expense, other than front-end expense charges, are reported as
income when charged to policyholders' accounts.
Other income represents the fees generated from the Company's non-insurance
operations, primarily service and contract fees relating to concessions, asset
management, system development, and third-party administration. Amounts are
recognized when earned.
9
<PAGE>
General American Life Insurance Company and Subsidiaries
INVESTED ASSETS
FIXED MATURITIES AND EQUITY SECURITIES: All of the Company's securities are
classified as available-for-sale. Fixed maturities available-for-sale are
reported at fair value and are so classified based on the possibility that such
securities could be sold prior to maturity if that action enables the Company to
execute its investment philosophy and appropriately match investment results to
operating and liquidity needs. Equity securities are carried at fair value.
Realized gains or losses on the sale of securities are determined on the basis
of specific identification. Unrealized gains and losses are recorded, net of
related income tax effects as well as related adjustments to deferred
acquisition costs, in accumulated other comprehensive income, a separate
component of stockholder equity.
The Company recognizes its proportionate share of the resultant gains or losses
on the issuance or repurchase of its subsidiaries' stock as a direct credit or
charge to retained earnings.
MORTGAGE LOANS: Mortgage loans on real estate are stated at an unpaid principal
balance, net of unamortized discounts, and valuation allowances for possible
impairment in value. The Company discontinues the accrual of interest on
mortgage loans which are more than 90 days delinquent. Interest received on
nonaccrual mortgage loans is generally reported as interest income.
POLICY LOANS, REAL ESTATE AND OTHER INVESTED ASSETS: Policy loans are carried at
an unpaid principal balance and are generally secured by the cash surrender
value of the underlying contracts. Investment real estate which the Company
intends to hold for the production of income is carried at depreciated cost, net
of writedowns for other than temporary declines in fair value and encumbrances.
Properties held for sale (primarily acquired through foreclosure) are carried at
the lower of depreciated cost (fair value at foreclosure plus capital additions
less accumulated depreciation and encumbrances) or fair value. Adjustments to
carrying value of
<PAGE>
properties held for sale are recorded in a valuation reserve when the fair value
is below depreciated cost. The accumulated depreciation and encumbrances on real
estate amounted to $44.0 million and $52.4 million at December 31, 1999 and
1998, respectively. Direct valuation allowances amounted to $4.7 million and
$7.3 million at December 31, 1999 and 1998, respectively. Other invested assets
are principally recorded at fair value.
SHORT-TERM INVESTMENTS: Short-term investments, consisting primarily of money
market instruments and other debt issues purchased with an original maturity of
less than a year, are carried at amortized cost, which approximates fair value.
INVESTED ASSET IMPAIRMENT AND VALUATION ALLOWANCES: Invested assets are
considered impaired when the Company determines that collection of all amounts
due under the contractual terms is doubtful. The Company adjusts invested assets
to their estimated net realizable value at the point at which it determines an
impairment is other than temporary. In addition, the Company has established
valuation allowances for mortgage loans and other invested assets. Valuation
allowances for other than temporary impairments in value are netted against the
asset categories to which they apply. Additions to valuation allowances are
included in realized gains and losses.
10
<PAGE>
General American Life Insurance Company and Subsidiaries
CASH AND CASH EQUIVALENTS: For purposes of reporting cash flows, cash and cash
equivalents represent cash, demand deposits, and highly liquid short- term
investments, which include U.S. Treasury bills, commercial paper, and repurchase
agreements with original or remaining maturities of 90 days or less when
purchased.
INVESTMENT INCOME
Fixed maturity premium and discounts are amortized into income using the
scientific yield method over the term of the security. Amortization of the
premium or discount on mortgage-backed securities is recognized using a
scientific yield method which considers the estimated timing and amount of
prepayments of underlying mortgage loans. Actual prepayment experience is
periodically reviewed and effective yields are adjusted when differences arise
between the prepayments originally anticipated and the actual prepayments
received and those prepayments currently anticipated. When such differences
occur, the net investment in the mortgage-backed security is adjusted to the
amount that would have existed had the new effective yield been applied since
the acquisition of the security with a corresponding charge or credit to
interest income (the "retrospective method").
<PAGE>
POLICY AND CONTRACT LIABILITIES
For traditional life insurance policies, future policy benefits are computed
using a net level premium method taking into account actuarial assumptions as to
mortality, persistency, and interest established at policy issue. Assumptions
established at policy issue as to mortality and persistency are based on
industry standards and the Company's historical experience which, together with
interest and expense assumptions, provide a margin for adverse deviation.
Interest rate assumptions generally range from 2.5 percent to 11.0 percent. When
the liabilities for future policy benefits plus the present value of expected
future gross premiums are insufficient to provide for expected policy benefits
and expenses, unrecoverable deferred policy acquisition costs are written off
and thereafter a premium deficiency reserve is established through a charge to
earnings.
For participating policies, future policy benefits are computed using a net
level premium method based on the guaranteed cash value basis for mortality and
interest. Mortality rates are similar to those used for statutory valuation
purposes. Interest rates generally range from 2.5 percent to 6.0 percent.
Dividend liabilities are established when earned.
Policyholder account balances for universal life and annuity policies are equal
to the policyholder account value before deduction of any surrender charges. The
policyholder account value represents an accumulation of gross premium payments
plus credited interest less expense, mortality charges, and withdrawals. These
expense charges are recognized in income as earned.
The range of weighted average interest crediting rates used by the Company's
life insurance subsidiaries were as follows:
1999 1998 1997
Universal life 4.00-8.00% 5.25-7.10% 6.00-7.10%
Annuities 3.00-9.10% 4.00-9.20% 5.70-9.30%
Accident and health benefits for active lives are calculated using the net level
premium method and assumptions as to future morbidity, withdrawals, and
interest, which provide a margin for adverse deviation. Benefit liabilities for
disabled lives are calculated using the present value of future benefits and
experience assumptions for claim termination, expense, and interest which also
provide a margin for adverse deviation.
11
<PAGE>
General American Life Insurance Company and Subsidiaries
POLICY AND CONTRACT CLAIMS
The Company establishes a liability for unpaid claims based on estimates of the
ultimate cost of claims incurred, which is comprised of aggregate case
<PAGE>
basis estimates, average claim costs for reported claims, and estimates of
incurred but not reported losses based on past experience. Policy and contract
claims include a provision for both life and accident and health claims.
Management believes the liabilities for unpaid claims are adequate to cover the
ultimate liability; however, due to the underlying risks and the high degree of
uncertainty associated with the determination of the liability for unpaid
claims, the amounts which will ultimately be paid to settle these liabilities
cannot be precisely determined and may vary from the estimated amount included
in the consolidated balance sheets.
DEFERRED POLICY ACQUISITION COSTS
The costs, which vary with and are primarily related to the production of new
and renewal business, have been deferred to the extent that such costs are
deemed recoverable from future profitability of the underlying business. Such
costs include commissions, premium taxes, as well as certain other costs of
policy issuance and underwriting.
For limited payment and other nonparticipating traditional life insurance
policies, the deferred policy acquisition costs are amortized, with interest, in
proportion to the ratio of the expected annual premium revenue to the expected
total premium revenue. Expected future premium revenue is estimated utilizing
the same assumptions used for computing liabilities for future policy benefits
for these policies.
For participating life insurance, universal life, and annuity type contracts,
the deferred policy acquisition costs are amortized over a period of not more
than thirty years in relation to the present value of estimated gross profits
arising from interest margin, cost of insurance, policy administration, and
surrender charges.
The range of average rates of assumed interest used by the Company's insurance
subsidiaries in estimated gross margins were as follows:
1999 1998 1997
Participating life 7.76% 8.25% 8.17%
Universal life 6.00-9.20% 6.25-7.50% 6.25-7.79%
Annuities 3.00-7.00% 7.00-7.83% 7.00-7.84%
The estimates of expected gross margins are evaluated regularly and are revised
if actual experience or other evidence indicates that revision is appropriate.
Upon revision, total amortization recorded to date is adjusted by a charge or
credit to current earnings. Deferred policy acquisition costs are adjusted for
the impact on estimated gross margins as if the net unrealized gains and losses
on securities had actually been realized.
REINSURANCE AND OTHER CONTRACT DEPOSITS
In the normal course of business, the Company seeks to limit its exposure to
loss on any single insured by ceding risks to other insurance enterprises or
reinsurers under various types of contracts including coinsurance and excess
coverage. The Company's retention level per individual life ranges between $50
thousand and $2.5 million depending on
<PAGE>
the entity writing the policy.
The Company assumes and retrocedes financial reinsurance contracts, which
represent low mortality risk reinsurance treaties. These contracts are reported
as deposits and are included in other contract deposits in the consolidated
balance sheets. The amount of revenue reported on these contracts represents
fees and the cost of insurance under the terms of the reinsurance agreement.
12
<PAGE>
General American Life Insurance Company and Subsidiaries
Reinsurance activities are accounted for consistent with terms of the underlying
contracts. Premiums ceded to other companies have been reported as a reduction
of premiums. Amounts applicable to reinsurance ceded for future policy benefits
and claim liabilities have been reported as assets for these items, and
commissions and expense allowances received in connection with reinsurance ceded
have been accounted for in income as earned. Reinsurance does not relieve the
Company from its primary responsibility to meet claim obligations. The Company
evaluates the financial conditions of its reinsurers annually.
FEDERAL INCOME TAXES
The Company and certain of its U.S. subsidiaries file consolidated federal
income tax returns. Any acquired life insurance company is not included in the
consolidated return until the acquired company has been a member of the
consolidated group for five years. Prior to satisfying the five-year
requirement, the subsidiary files a separate federal return. RGA Barbados, a
subsidiary of RGA, also files a U.S. tax return. The Company's foreign
subsidiaries are taxed under applicable local statutes. No deferred tax
liabilities have been recognized for the foreign subsidiaries per Accounting
Principles Board (APB) Opinion 23, Accounting for Income Taxes - Special Areas.
The Company uses the asset and liability method to record deferred income taxes.
Accordingly, deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases, using enacted tax rates, expected to apply to taxable income in the years
in which those temporary differences are expected to be recovered or settled.
The Company has not recognized a deferred tax liability for the excess of
financial statement carrying amount over the tax basis of its less-than-80
percent owned domestic subsidiaries as the tax law provides a means by which the
reported amount of that investment can be recovered tax-free and the Company
expects that it will ultimately use that means.
SEPARATE ACCOUNT BUSINESS
<PAGE>
The assets and liabilities of the separate account represent segregated funds
administered and invested by the Company for purposes of funding variable life
insurance and annuity contracts for the exclusive benefit of the
contractholders.
The Company charges the separate account for cost of insurance and
administrative expense associated with a contract and charges related to early
withdrawals by contractholders. The assets and liabilities of the separate
account are carried at fair value. The Company's participation in the separate
account (seed money) is carried at fair value in the separate account, and
amounted to $27.2 million and $19.9 million at December 31, 1999 and 1998,
respectively.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair value estimates are made at a specific point in time, based on relevant
market information and information about the financial instrument. These
estimates do not reflect any premium or discount that could result from offering
for sale at one time the Company's entire holdings of a particular financial
instrument. Although fair value estimates are calculated using assumptions that
management believes are appropriate, changes in assumptions could significantly
affect the estimates and such estimates should be used with care. The following
assumptions were used to estimate the fair value of each class of financial
instrument for which it was practicable to estimate fair value:
INVESTMENT SECURITIES: Fixed maturities are valued using quoted market prices,
if available. For securities not actively traded, fair values are estimated
using values obtained from independent pricing services or in the case of
private placements are estimated by discounting expected future cash flows using
a current market rate applicable to the yield, credit quality, and maturity of
investments. The fair values of equity securities are based on quoted market
prices.
13
<PAGE>
General American Life Insurance Company and Subsidiaries
DERIVATIVES: Derivatives are valued using quoted market prices, if available.
For derivatives not actively traded, fair values are estimated using values
obtained from independent pricing services.
MORTGAGE LOANS: The fair values of mortgage loans are estimated using discounted
cash flow analyses and interest rates currently being offered for similar loans
to borrowers with similar credit ratings. Loans with similar characteristics are
aggregated for purposes of the calculations.
POLICY LOANS: The fair value of policy loans approximates the carrying
value. The majority of these loans are indexed, with a yield tied to a
stated return.
<PAGE>
POLICYHOLDER ACCOUNT BALANCES ON INVESTMENT TYPE CONTRACTS: Fair values for the
Company's liabilities under investment-type contracts are estimated using cash
surrender values. For contracts with no defined maturity date, the carrying
value approximates fair value.
PENSION FUNDS AND INTEREST SENSITIVE CONTRACT LIABILITIES: Fair values for the
Company's interest sensitive contract liabilities are estimated using cash
surrender values. For contracts with no defined maturity date, the carrying
value approximates fair value.
SEPARATE ACCOUNT ASSETS AND LIABILITIES: The separate account assets and
liabilities are carried at fair value as determined by the market value of the
underlying segregated investments.
SHORT-TERM INVESTMENTS AND CASH AND CASH EQUIVALENTS: The carrying amount
approximates fair value.
LONG-TERM DEBT AND NOTES PAYABLE: The fair value of long-term debt and notes
payable is estimated using discounted cash flow calculations based on interest
rates currently being offered for similar instruments.
Refer to Note 3 & Note 4 for additional information on fair value of financial
instruments.
NEW ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative
Instruments and Hedging Activities, effective for fiscal years beginning after
June 15, 2000, and is effective for interim periods in the initial year of
adoption. SFAS No. 133 requires companies to record derivatives on the balance
sheet as assets or liabilities, measured at fair value. It also requires that
gains or losses resulting from changes in the values of those derivatives be
reported depending on the use of the derivative and whether it qualifies for
hedge accounting. The Company has not yet determined the effect of the
implementation of SFAS No. 133 on the results of operation, financial position,
or liquidity. The Company plans to adopt the provisions of SFAS No. 133 in 2001.
RECLASSIFICATION
The Company has reclassified the presentation of certain prior period
information to conform to the 1999 presentation.
(2) ACQUISITIONS AND DIVESTITURES
On September 30, 1999, the Company sold its 100 percent ownership in Consultec,
LLC to ACS Enterprise Solutions, Inc. Proceeds received net of expenses were
$65.7 million and the realized gain, net of tax, on the sale was $28.4 million.
14
<PAGE>
<PAGE>
General American Life Insurance Company and Subsidiaries
(3) INVESTMENTS
Fixed Maturities and Equity Securities
The amortized cost and estimated fair value of fixed maturities and equity
securities at December 31, 1999 and 1998 are as follows (in millions):
<TABLE>
<CAPTION>
1999
- - ---------------------------------------------------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Available-for-sale:
U. S. Treasury securities $ 88.6 0.2 (4.8) 84.0
Government agency
obligations 686.8 55.3 (54.8) 687.3
Corporate securities 4,298.6 104.6 (318.2) 4,085.0
Mortgage-backed securities 970.3 1.2 (106.7) 864.8
Asset-backed securities 1,441.5 1.0 (337.5) 1,105.0
-------- ----- ------ -------
Total fixed maturities
available-for-sale $7,485.8 162.3 (822.0) 6,826.1
======== ===== ====== =======
Equity securities $ 42.7 9.5 (2.9) 49.3
======== ===== ====== =======
<CAPTION>
1998
- - ---------------------------------------------------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Available-for-sale:
U. S. Treasury securities $ 20.7 0.4 -- 21.1
Government agency
obligations 1,151.5 122.5 (11.2) 1,262.8
Corporate securities 6,889.9 380.1 (164.1) 7,105.9
Mortgage-backed securities 1,812.4 34.0 (38.5) 1,807.9
Asset-backed securities 861.7 13.1 (4.2) 870.6
--------- ----- ------ --------
Total fixed maturities
available-for-sale $10,736.2 550.1 (218.0) 11,068.3
========= ===== ====== ========
<PAGE>
Equity securities $ 39.1 9.5 -- 48.6
========= ===== ====== ========
</TABLE>
The Company manages its credit risk associated with fixed maturities by
diversifying its portfolio. At December 31, 1999, the Company held no corporate
debt securities or foreign government debt securities of a single issuer, which
had a carrying value in excess of ten percent of stockholder equity.
15
<PAGE>
General American Life Insurance Company and Subsidiaries
The amortized cost and estimated fair value of fixed maturity investments at
December 31, 1999 are shown by contractual maturity for all securities except,
U.S. Government agencies mortgage-backed securities which are distributed by
maturity year based on the Company's estimate of the rate of future prepayments
of principal over the remaining lives of the securities (in millions). These
estimates are developed using prepayment speeds provided in broker consensus
data. Such estimates are derived from prepayment speed experience at the
interest rate levels projected for the applicable underlying collateral and can
be expected to vary from actual experience. Expected maturities may differ from
contractual maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.
ESTIMATED
AMORTIZED FAIR
COST VALUE
--------- ---------
Due in one year or less $ 147.8 149.0
Due after one year through five years 1,122.9 1,086.1
Due after five years through ten years 1,641.7 1,482.9
Due after ten years through twenty years 3,603.1 3,243.3
Mortgage-backed securities 970.3 864.8
-------- -------
Total $7,485.8 6,826.1
======== =======
The sources of net investment income follow (in millions):
1999 1998 1997
-------- ------- -----
Fixed maturities $ 749.6 744.3 561.7
Mortgage loans 175.4 188.8 194.5
<PAGE>
Real estate 25.0 25.7 34.1
Equity securities 2.0 1.2 1.3
Policy loans 144.9 152.2 148.3
Short-term investments 46.5 22.4 16.6
Other 33.0 18.9 14.0
-------- ------- -----
Investment revenue 1,176.4 1,153.5 970.5
Investment expenses (19.2) (17.7) (25.0)
-------- ------- -----
Net investment income $1,157.2 1,135.8 945.5
======== ======= =====
16
<PAGE>
General American Life Insurance Company and Subsidiaries
Net realized gains (losses) from sales of investments consist of the following
(in millions):
1999 1998 1997
------- ----- -----
Fixed maturities:
Realized gains $ 70.4 19.0 24.0
Realized losses (330.8) (14.0) (16.8)
Equity securities:
Realized gains 48.2 2.0 1.8
Realized losses (0.4) (0.2) (1.5)
Other investments, net 12.0 6.9 21.0
------- ----- -----
Net realized investment gains $(200.6) 13.7 28.5
======= ===== =====
Included in net realized losses are permanent write-downs of approximately $67.6
million and $5.5 million during 1999 and 1998, respectively.
A summary of the components of the net unrealized appreciation (depreciation) on
invested assets carried at fair value is as follows (in millions):
1999 1998
------- ------
Unrealized (depreciation) appreciation:
Fixed maturities available-for-sale $(659.7) 332.1
Equity securities 6.6 9.5
Derivatives (33.8) (5.3)
<PAGE>
Effect of unrealized appreciation (depreciation) on:
Deferred policy acquisition costs 186.0 (155.7)
Present value of future profits 14.6 (0.5)
Deferred income taxes 169.7 (69.1)
Other 1.5 (2.9)
Minority interest, net of taxes 69.4 (19.6)
------- ------
Net unrealized (depreciation) appreciation $(245.7) 88.5
======= ======
The Company has securities on deposit with various state insurance departments
and regulatory authorities with an amortized cost of approximately $881.8
million and $545.7 million at December 31, 1999 and 1998, respectively.
The Company's credit review procedures are designed to promote timely
identification of investments that require a higher-than-normal degree of
scrutiny. Each quarter a review is performed of impaired assets. Factors
considered in the evaluation include the collateral values, credit quality of
the issuer, amount of the exposure, our ability to reduce exposure in situations
of deteriorating credit worthiness, and loss probabilities. Once a charge-off is
taken, income is no longer accrued, all cash is applied to principal. The
Company's total impaired assets amount to $31.8 million and $35.6 million at
December 31, 1999 and 1998, respectively.
17
<PAGE>
General American Life Insurance Company and Subsidiaries
MORTGAGE LOANS
The Company originates mortgage loans on income-producing properties, such as
apartments, retail and office buildings, light warehouses, and light industrial
facilities. Loan to value ratios at the time of loan approval are 75 percent or
less. The Company minimizes risk through a thorough credit approval process and
through geographic and property type diversification.
During 1999, the Company entered into an agreement whereby approximately $625.6
million of mortgage loans were sold by the Company for securitization and resale
by a financial institution as mortgage pass- through certificates. The sale of
these mortgage loans resulted in a net gain of approximately $0.6 million. These
amounts are reflected within net investment income in the consolidated statement
of operations.
The Company's mortgage loans were distributed as follows (in millions):
<PAGE>
<TABLE>
<CAPTION>
1999 1998
-------------------- --------------------
PERCENT PERCENT
CARRYING OF CARRYING OF
VALUE TOTAL VALUE TOTAL
-------------------- --------------------
<S> <C> <C> <C> <C>
Arizona $ 125.6 7.4% $ 167.6 7.1%
California 298.0 17.4 395.3 16.6
Colorado 150.5 8.8 228.1 9.6
Florida 134.0 7.9 171.6 7.2
Georgia 137.6 8.1 176.1 7.4
Illinois 91.9 5.4 162.2 6.8
Maryland 78.2 4.6 102.9 4.3
Missouri 98.1 5.7 93.5 3.9
Texas 157.8 9.2 197.4 8.3
Washington 69.1 4.0 99.6 4.2
Other 367.2 21.5 581.7 24.6
-------------------- --------------------
Subtotal 1,708.0 100.0% 2,376.0 100.0%
===== =====
Valuation reserve (29.1) (38.5)
-------- --------
Total $1,678.9 $2,337.5
======== ========
<CAPTION>
1999 1998
-------------------- --------------------
PERCENT PERCENT
CARRYING OF CARRYING OF
VALUE TOTAL VALUE TOTAL
-------------------- --------------------
<S> <C> <C> <C> <C>
Property type:
Apartment $ 143.0 8.4% $ 77.1 3.2%
Retail 490.8 28.7 872.2 36.7
Office building 604.6 35.4 747.8 31.5
Industrial 391.6 22.9 422.6 17.8
Other commercial 78.0 4.6 256.3 10.8
-------------------- --------------------
Subtotal 1,708.0 100.0% 2,376.0 100.0%
===== =====
Valuation reserve (29.1) (38.5)
-------- --------
Total $1,678.9 $2,337.5
<PAGE>
======== ========
</TABLE>
18
<PAGE>
General American Life Insurance Company and Subsidiaries
An impaired loan is measured at the present value of expected future cash flows
or, alternatively, the observable market price or the fair value of the
collateral.
Mortgage loans which have been non-income producing for the preceding twelve
months were $6.5 million and $20.1 million at December 31, 1999 and 1998,
respectively. At December 31, 1999 and 1998, the recorded investment in mortgage
loans that were considered impaired was $48.8 million and $100.7 million,
respectively, with related allowances for credit losses of $4.0 million and
$12.6 million, respectively. The average recorded investment in impaired loans
during 1999 and 1998 was $74.8 million and $110.2 million, respectively.
For the years ended December 31, 1999, 1998, and 1997, the Company recognized
$3.6 million, $6.8 million, and $9.7 million, respectively, of interest income
on those impaired loans, which included $3.6 million, $7.0 million, and $9.9
million, respectively, of interest income recognized using the cash basis method
of income recognition.
As of December 31, 1999, the Company has outstanding fixed rate Commercial
mortgage loan commitments totaling $68.9 million with a market value of $67.0
million at rates ranging from 7.125% to 8.50%, and total variable rate
commitments totaling $143.3 million with a market value of $140.9 million.
SECURITIES LENDING
The Company participates in a securities lending program. In the Company's
agreements, collateral is held on certain fixed maturity securities loaned to
other institutions through a lending agreement. The minimum collateral on
securities loaned is 102% of the market value of the loaned securities, marked
to market daily. The Company retains full ownership of the loaned securities and
is indemnified by the lending agent in the event a borrower becomes insolvent or
fails to return the securities. The amount on loan at December 31, 1999 and 1998
was $60.3 million and $122.5 million, respectively, and was appropriately
collateralized.
DERIVATIVES
The Company has a variety of reasons to use derivative instruments, such
as to attempt to protect the Company against possible changes in the
market value of its portfolio as a result of interest rate changes and
to manage the portfolio's effective yield, maturity, and duration. The
<PAGE>
Company does not invest in derivatives for speculative purposes. Upon
disposition, a realized gain or loss is recognized accordingly, except when
exercising an option contract or taking delivery of a security underlying a
futures contract. In these instances, the recognition of gain or loss is
postponed until the disposal of the security underlying the option of futures
contract.
Summarized below are the specific types of derivative instruments used by the
Company:
INTEREST RATE SWAPS: The Company manages interest rate risk on certain
contracts, primarily through the utilization of interest rate swaps. Under
interest rate swaps, the Company agrees with counterparties to exchange, at
specified intervals, the payments between floating and fixed-rate interest
amounts calculated by reference to notional amounts. Net interest payments are
recognized within net investment income in the consolidated statements of
operations.
At December 31, 1999, the Company had 19 outstanding interest rate swap
agreements which expire at various dates through 2024. Under 18 of the
agreements, the Company receives a fixed rate ranging from 6.065 percent to
6.842 percent on a notional amount of $1.5 billion and pays a floating rate
based on London Interbank Offered Rate (LIBOR). Under the remaining outstanding
interest rate swap agreement, the Company receives a floating rate based on
LIBOR on a notional amount of $2 million and pays a fixed rate of 6.495 percent.
The estimated fair value of the agreements at December 31, 1999 was a net loss
of approximately $33.8 million, which is recognized in accumulated other
comprehensive income.
19
<PAGE>
General American Life Insurance Company and Subsidiaries
At December 31, 1998, the Company had 35 outstanding interest rate swap
agreements which expire at various dates through 2025. Under 19 outstanding
interest rate swap agreements, the Company receives a floating rate based on
LIBOR on a notional amount of $116.0 million and pays a fixed rate ranging from
3.13 percent to 8.56 percent. Under 15 of the agreements, the Company receives a
fixed rate ranging from 5.79 percent to 7.57 percent on a notional amount of
$80.5 million and pays a floating rate based on LIBOR. On the remaining swap
agreement, the Company receives a floating rate based on LIBOR on a notional
amount of $5 million and pays a floating rate based on LIBOR. The estimated fair
value of the agreements at December 31, 1998 was a net loss of approximately
$4.7 million, which is recognized in accumulated other comprehensive income.
CURRENCY, SWAPS AND CROSS CURRENCY SWAPS: Under foreign currency swaps,
the Company agrees with other parties to exchange at specified
intervals, the difference between two currencies on an exchange rate
<PAGE>
basis the interest amounts calculated by reference to an agreed notional
principal amount. Under cross currency swaps, the Company swaps the difference
between two currencies and between floating and fixed-rate interest amounts
calculated by reference to notional amounts. The Company uses this technique for
foreign denominated assets to match dollar denominated liabilities of various
fixed income products. Net interest payments are recognized within net
investment income in the consolidated statements of operations.
At December 31, 1999, the Company held no currency or cross currency swaps. At
December 31, 1998 the Company had one outstanding currency swap agreement and
five outstanding cross currency swaps which expire at various dates through
2016. The notional amount was $34.2 million. The 1998 estimated fair value of
the agreements was a net loss of $5.5 million and is recognized in accumulated
other comprehensive income.
TOTAL RETURN SWAP: The Company uses the total return swap to construct a
structured product that resembles an equity linked note. The total return swap
is used to obtain equity participation. The Company agrees with other parties to
pay at specified intervals, floating-rate interest amounts calculated by
reference to an agreed notional principal amount. In return the Company receives
equity participation, which is calculated by reference to an agreed equity
market index and a notional principal amount. If the amount is positive at the
termination date, the Company receives such amount. If the amount is negative at
the termination date, the Company pays out such amount to the counterparty.
At December 31, 1999, the Company held no total return swap agreements. At
December 31, 1998, the Company had one outstanding total return swap, which
expires in 2028. The notional amount was $14.0 million and the estimated fair
value of the agreement was a net profit of $1.9 million, which is recognized in
accumulated other comprehensive income.
FUTURES: A futures contract is an agreement involving the delivery of a
particular asset on a specified future date at an agreed upon price. The Company
generally invests in futures on U.S. Treasury Bonds, U.S. Treasury Notes, and
the S&P 500 Index and typically closes the contract prior to the delivery date.
These contracts are generally used to manage the portfolio's effective maturity
and duration.
At December 31, 1999, the Company held no futures contracts. At December 31,
1998, futures contracts outstanding were as follows (in millions):
Net Sold Notional Fair Unrealized
Position Amount Value Gain
-------- -------- ----- -----------
(0.3) $33.1 $32.9 $0.2
The 1998 unrealized gain was recognized in accumulated other comprehensive
income.
<PAGE>
20
<PAGE>
General American Life Insurance Company and Subsidiaries
The Company is exposed to credit related risk in the event of nonperformance by
counterparties to financial instruments but does not expect any counterparties
to fail to meet their obligations. Where appropriate, master netting agreements
are arranged and collateral is obtained in the form of rights to securities to
lower the Company's exposure to credit risk. It is the Company's policy to deal
only with highly rated companies. At December 31, 1999 and 1998, there were not
any significant concentrations with counterparties.
(4) FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of a financial instrument is the amount at which the instrument
could be exchanged in a current transaction between willing parties. The
following table presents the carrying amounts and estimated fair values of the
Company's financial instruments at December 31, 1999 and 1998 (in millions).
Refer to Note 3 for the estimated fair values of the Company's derivative
instruments.
<TABLE>
<CAPTION>
1999 1998
-------------------- --------------------
ESTIMATED ESTIMATED
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
-------------------- --------------------
<S> <C> <C> <C> <C>
Assets:
Fixed maturities $6,826.1 6,826.1 11,068.3 11,068.3
Mortgage loans 1,678.9 1,691.7 2,337.5 2,472.5
Policy loans 2,243.9 2,243.9 2,151.0 2,151.0
Short-term investments 292.4 292.4 195.3 195.3
Other invested assets 898.8 898.8 457.6 457.6
Separate account assets 6,915.6 6,915.6 5,214.8 5,214.8
Liabilities:
Policyholder account balances
relating to investment
Contracts $5,179.4 5,279.8 5,044.8 4,929.7
Pension funds and other
interest sensitive liabilities 556.8 551.2 7,581.3 7,592.0
Long-term debt and
notes payable 216.6 209.8 221.9 216.6
Separate account liabilities 6,892.0 6,892.0 5,194.9 5,194.9
======== ======= ======== ========
</TABLE>
<PAGE>
(5) REINSURANCE
The Company is a reinsurer to the life and health industry. The effect of
reinsurance on premiums and other considerations is as follows (in millions):
<TABLE>
<CAPTION>
1999 1998 1997
-------- ------- -------
<S> <C> <C> <C>
Direct $1,139.5 1,210.8 1,159.1
Assumed 1,667.7 1,422.3 996.9
Ceded (416.4) (431.5) (348.9)
-------- ------- -------
Net insurance premiums and other
considerations $2,390.8 2,201.6 1,807.1
======== ======= =======
</TABLE>
21
<PAGE>
General American Life Insurance Company and Subsidiaries
(6) FEDERAL INCOME TAXES
Income tax (benefit) expense attributable to income from operations consists of
the following (in millions):
<TABLE>
<CAPTION>
1999 1998 1997
------ ---- ----
<S> <C> <C> <C>
Current income tax (benefit) expense $(23.6) 35.2 65.8
Deferred income tax (benefit) expense (40.7) 18.4 (0.1)
------ ---- ----
Provision for income taxes $(64.3) 53.6 65.7
====== ==== ====
</TABLE>
Income tax (benefit) expense attributable to income from operations differed
from the amounts computed by applying the U.S. federal income tax rate of 35
percent to pre-tax income as a result of the following (in millions):
<TABLE>
<PAGE>
<CAPTION>
1999 1998 1997
------ ----- ----
<S> <C> <C> <C>
Computed "expected" tax (benefit) expense $(67.4) 70.0 64.8
Increase (decrease) in income tax resulting
from:
Surplus (benefit) tax on mutual life
insurance companies - (7.5) 5.3
Foreign tax rate in excess of U.S. tax
rate 1.0 0.8 0.6
Tax preferred investment income (11.4) (10.9) (6.6)
State tax net of federal benefit 1.7 1.6 0.8
Corporate owned life insurance (3.3) (3.6) -
Foreign tax credit - (1.3) (0.6)
Goodwill amortization 1.9 1.5 1.0
Difference in book vs. tax basis in
domestic subsidiaries 1.6 2.8 2.2
Valuation allowance for loss
carryforwards 5.7 - -
Capitalized acquisition costs 2.4 - -
Other, net 3.5 0.2 (1.8)
------ ---- ----
Provision for income taxes $(64.3) 53.6 65.7
====== ==== ====
</TABLE>
Total income taxes were allocated as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------- ----- -----
<S> <C> <C> <C>
Provision for income taxes $ (64.3) 53.6 65.7
Income tax from stockholder equity:
Unrealized investment (loss) gain
recognized for financial reporting
purposes (237.0) (22.6) 55.9
Foreign currency translation 7.8 (9.4) (12.1)
Other (2.4) (1.4) (0.5)
------- ----- -----
Provision for income taxes $(295.9) 20.2 109.0
======= ===== =====
</TABLE>
22
<PAGE>
<PAGE>
General American Life Insurance Company and Subsidiaries
The tax effects of temporary differences that give rise to significant portions
of deferred tax assets and liabilities at December 31, 1999 and 1998 are
presented below (in millions):
<TABLE>
<CAPTION>
1999 1998
------ -----
<S> <C> <C>
Deferred tax assets:
Reserve for future policy benefits $158.9 90.9
Deferred acquisition costs capitalized for tax 147.4 128.8
Employee benefits 41.5 28.2
Investments 46.2 -
Net operating and capital loss 57.2 46.8
Unrealized loss on investments 163.9 -
Other, net 95.5 98.5
------ -----
Gross deferred tax assets 710.6 393.2
Less valuation allowance 7.2 1.5
------ -----
Total deferred tax assets after valuation allowance $703.4 391.7
====== =====
<CAPTION>
1999 1998
------- -----
<S> <C> <C>
Deferred tax liabilities:
Unrealized gain on investments $ - 79.1
Deferred acquisition costs capitalized for financial
reporting 385.0 274.5
Investments - 3.7
Other, net 120.8 109.8
------- -----
Total deferred tax liabilities 505.8 467.1
------- -----
Total deferred tax (asset) liability $(197.6) 75.4
======= =====
</TABLE>
The Company has not recognized a deferred tax liability for the undistributed
earnings of its wholly owned domestic and foreign subsidiaries because the
Company currently does not expect those unremitted earnings to become taxable to
the Company in the foreseeable future. In addition, the Company has not
recognized a deferred tax
<PAGE>
liability of approximately $106 million for the excess of financial statement
carrying amount over the tax basis of its less-than-80-percent owned domestic
subsidiaries. This is because the unremitted earnings of foreign subsidiaries
will not be repatriated in the foreseeable future, or because the excess of the
financial statement carrying amount over the tax basis of its less-that-80
percent owned domestic subsidiaries will not become taxable as the tax law
provides a means by which the reported amount of that investment can be
recovered tax-free and the Company expects that it will ultimately use that
means.
The Company believes that it is more likely than not that the deferred tax
assets established will be realized except for the amount of the valuation
allowance. As of December 31, 1999 and 1998, the Company has provided for a 100
percent valuation allowance against the deferred tax asset related to the net
operating losses of the Company's foreign subsidiaries including RGA's
Australian, Argentine, South African and UK subsidiaries and NaviSys' Mexican
subsidiary. At December 31, 1999, the Company's subsidiaries had capital loss
carryforwards of $89.4 million, and net operating loss carryforwards of $146.7
million. The capital and net operating losses are expected to be utilized during
the period allowed for carryforwards.
23
<PAGE>
General American Life Insurance Company and Subsidiaries
The Company has been audited by the Internal Revenue Service for the years
through and including 1994. The Company is currently being audited for the years
1995 and 1996. The Company believes that any adjustments that might be required
for open years will not have a material effect on the Company's consolidated
financial statements. During 1999, 1998, and 1997 the Company paid income taxes
totaling approximately $77.0 million, $59.6 million, and $70.8 million,
respectively.
(7) DEFERRED POLICY ACQUISITION COSTS
A summary of the policy acquisition costs deferred and amortized is as follows
(in millions):
<TABLE>
<CAPTION>
1999 1998 1997
-------- ------ ------
<S> <C> <C> <C>
Balance at beginning of year $ 773.8 695.3 652.3
Transfer of present value of future profits -- -- 19.3
Prior year adjustment due to change in
reserving methods -- (0.2) --
Policy acquisition costs deferred 324.6 332.9 267.0
<PAGE>
Policy acquisition cost amortized (214.4) (280.0) (211.9)
Interest credited 60.4 39.3 40.8
Deferred policy acquisition costs relating to
change in unrealized (gain) loss on
investments available-for-sale 341.7 (13.5) (72.2)
-------- ------ ------
Balance at end of year $1,286.1 773.8 695.3
======== ====== ======
</TABLE>
(8) ASSOCIATE BENEFIT PLANS AND POSTRETIREMENT BENEFITS
The Company has a defined benefit plan covering substantially all associates.
The benefits are based on years of service and each associate's compensation
level. The Company's funding policy is to contribute annually the maximum amount
deductible for federal income tax purposes. Contributions provide for benefits
attributed to service to date and for those expected to be earned in the future.
Associates of the Company also are offered several non-qualified, defined
benefit, and defined contribution plans for directors and management associates.
The plans are unfunded and are deductible for federal income tax purposes when
the benefits are paid. Effective April 30, 1999, the liabilities that relate to
these plans are managed at GenAmerica Management Corporation, a subsidiary of
GenAmerica. The Company recognized expense of $12.9 million, $8.2 million, and
$7.7 million for the years ended December 31, 1999, 1998, and 1997,
respectively, related to these plans.
In addition to pension benefits, the Company provides certain health care and
life insurance benefits for retired employees. Substantially all employees may
become eligible for these benefits if they reach retirement age while working
for the Company. Alternatively, retirees may elect certain prepaid health care
benefit plans.
The Company uses the accrual method to account for the costs of its retiree
plans and amortizes its transition obligation for retirees and fully eligible or
vested employees over 20 years. The unamortized transition obligation was $13.4
million and $14.4 million at December 31, 1999 and 1998, respectively.
24
<PAGE>
General American Life Insurance Company and Subsidiaries
The Board of Directors has adopted an associate incentive plan
applicable to full-time salaried associates with at least one year of
service. Contributions to the plan are determined annually by the Board
of Directors and are based upon salaries of eligible associates. Full
<PAGE>
vesting occurs after five years of continuous service. The Company's
contribution to the plan was $4.3 million, $10.4 million, and $10.4 million for
1999, 1998, and 1997 respectively.
At December 31, 1999, plan assets were invested 79.2% in the S&P Stock Fund,
6.9% in the Small-Cap Stock Fund, 9.1% in the Separately Managed Account Fund,
and 4.8% in the Long-Term Bond Fund. At December 31, 1998 plan assets were
invested 70.1% in the S&P 500 Stock Fund, 7.4% in the Small-Cap Stock Fund,
17.3% in the Separately Managed Account Fund, and 5.2% in the Long-Term Bond
Fund. These assets are invested in General American separate accounts and held
in a trust by an unrelated third party administrator.
The following tables summarize the Company's associate benefit plans and
postretirement benefits (in millions):
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
------------------ -----------------
1999 1998 1999 1998
------ ----- ----- ----
<S> <C> <C> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of year $149.1 129.8 $45.7 37.7
Service cost 6.5 5.8 1.7 1.7
Interest cost 10.3 9.2 2.8 2.9
Participant contributions -- -- 0.2 0.2
Plan amendments 0.3 (0.4) -- (1.3)
Curtailments 2.4 -- -- --
Special termination benefits 1.2 -- -- --
Benefits paid (8.0) (6.6) (1.9) (1.4)
Actuarial (gain) loss (1.9) 11.3 (7.8) 5.9
------ ----- ----- ----
Benefit obligation at end of year 159.9 149.1 40.7 45.7
------ ----- ----- ----
Change in plan assets:
Fair value of plan assets at
beginning of year 174.8 150.5 -- --
Actual return on plan assets 10.5 29.2 -- --
Employer contributions 2.1 1.7 1.7 1.2
Associates contributions -- -- 0.2 0.2
Benefits paid (8.0) (6.6) (1.9) (1.4)
------ ----- ----- ----
Fair value of plan assets at end of year $179.4 174.8 $-- --
====== ===== ===== ====
</TABLE>
25
<PAGE>
<PAGE>
General American Life Insurance Company and Subsidiaries
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
1999 1998 1997 1999 1998 1997
------ ----- ----- ------ ----- -----
<S> <C> <C> <C> <C> <C> <C>
Reconciliation of funded status:
Funded status $ 19.4 25.7 20.7 $(40.7) (45.7) (37.7)
Unrecognized actuarial gain (12.3) (14.5) (8.2) (9.6) (1.9) (7.8)
Unrecognized transition
obligation 0.2 0.3 1.1 13.4 14.4 16.8
Unrecognized prior service
cost (0.3) (0.8) (2.2) -- -- --
------ ----- ----- ------ ----- -----
Net amount recognized at end
of year 7.0 10.7 11.4 (36.9) (33.2) (28.7)
------ ----- ----- ------ ----- -----
Amounts recognized in the statement of financial position consist of:
Prepaid benefit cost 40.6 37.9 35.9 -- -- --
Accrued benefit liability (38.2) (32.2) (28.2) (36.9) (33.2) (28.7)
Intangible asset 0.1 0.9 0.9 -- -- --
Accumulated other
comprehensive loss 4.5 4.1 2.8 -- -- --
------ ----- ----- ------ ----- -----
Net amount recognized at end
of year $ 7.0 10.7 11.4 $(36.9) (33.2) (28.7)
====== ===== ===== ====== ===== =====
Other comprehensive loss
(income) attributable to
change in additional
minimum liability
recognition $ 0.3 1.3 (0.5) $ -- -- --
====== ===== ===== ====== ===== =====
</TABLE>
26
<PAGE>
General American Life Insurance Company and Subsidiaries
<TABLE>
<PAGE>
<CAPTION>
Pension Benefits Other Benefits
1999 1998 1997 1999 1998 1997
------ ----- ----- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Additional year-end information for plans with benefit obligations in excess of
plan assets:
Benefit obligation 47.6 36.6 32.2 40.7 45.7 37.7
Additional year-end information for pension plans with accumulated benefit
obligations in excess of plan assets:
Projected benefit
obligation 40.5 36.6 32.2 -- -- --
Accumulated benefit
obligation 37.8 32.1 28.0 -- -- --
Fair value of plan assets 0.1 0.1 -- -- -- --
====== ===== ===== ==== ==== ====
Components of net periodic benefit cost:
Service cost 6.5 5.8 5.9 1.7 1.7 1.7
Interest cost 10.3 9.2 8.6 2.8 2.9 2.5
Expected return on plan
assets (15.3) (13.2) (11.1) -- -- --
Amortization of prior
service cost (0.1) (0.1) 0.1 -- -- --
Amortization of
transitional
obligation 0.1 0.1 0.3 1.0 1.0 1.1
Recognized actuarial
loss (gain) 0.6 0.4 0.4 (0.1) -- (0.2)
------ ----- ----- ---- ---- ----
Net periodic benefit cost $ 2.1 2.2 4.2 5.4 5.6 5.1
====== ===== ===== ==== ==== ====
Additional loss recognized due to:
Curtailment $ 2.3 0.1 -- -- -- --
Special Termination Benefit 1.4 -- -- -- -- --
====== ===== ===== ==== ==== ====
Weighted-average assumptions as of December 31:
Discount rate 7.50% 6.75% 7.25% 7.50% 6.75% 7.25%
Expected long-term rate of
return on plan assets 9.00% 9.00% 9.00% -- -- --
Rate of compensation
increase (qualified plan) 4.95% 4.20% 4.20% -- -- --
====== ===== ===== ==== ==== ====
<PAGE>
</TABLE>
27
<PAGE>
General American Life Insurance Company and Subsidiaries
ASSUMED HEALTH CARE COST TREND: For measurement purposes, a 7.0% annual rate of
increase in the per capita cost of covered health care benefits was assumed for
1999. The rate assumed to decrease gradually to 5% for 2003 and remain at that
level thereafter.
Assumed health care cost trend rates have a significant effect on the amounts
reported for the health care plan. A one-percentage point change in assumed
health care cost trend rates would have the following effects (in thousands):
One Percentage One Percentage
Point Increase Point Decrease
-------------- --------------
Effect on total service and interest cost
components for 1999 $0.9 (0.7)
Effect on end of year 1999
postretirement benefit obligation $5.8 (4.7)
(9) DEBT
The Company's long-term debt and notes payable consists of the following (in
millions):
<TABLE>
<CAPTION>
Face Value at December 31,
Description Rate Maturity 1999 1998
- - ----------- ---- -------- ---- ----
<S> <C> <C> <C> <C>
Long-term debt:
General American surplus note 7.625% January 2024 $107.0 107.0
RGA senior note 7.250% April 2006 100.0 100.0
Notes payable:
RGA Australia Hldgs. 5.180% April 2000 9.5 8.9
------ -----
Total long-term debt and notes payable $216.5 215.9
====== =====
</TABLE>
The difference between the face value of debt and the carrying value per the
consolidated balance sheets is unamortized discount.
<PAGE>
General American's surplus note pays interest on January 15 and July 15 of each
year. The note is not subject to redemption prior to maturity. Payment of
principal and interest on the note may be made only with the approval of the
Missouri Director of Insurance.
The RGA senior note pays interest semiannually on April 1 and October 1. The
ability of RGA to make debt principal and interest payments as well as make
dividend payments to shareholders is ultimately dependent on the earnings and
surplus of its subsidiaries and the investment earnings on the undeployed debt
proceeds. The transfer of funds from the insurance subsidiaries to RGA is
subject to applicable insurance laws and regulations. Principal repayments are
due in April 2000 and are expected to be renewed under the terms of the line of
credit. This agreement contained various restrictive covenants which primarily
pertain to limitations on the quality and types of investments, minimum
requirements of net worth, and minimum rating requirements.
Interest paid on debt during 1999, 1998, and 1997 amounted to $17.8 million,
$17.0 million, and $20.0 million, respectively.
As of December 31, 1999, the Company was in compliance with all covenants under
its debt agreements.
28
<PAGE>
General American Life Insurance Company and Subsidiaries
(10) COMPREHENSIVE INCOME
In June 1997, the Financial Accounting Standards Board issued SFAS No.
130, Reporting Comprehensive Income, effective for years beginning after
December 15, 1997. SFAS No. 130 establishes standards for reporting and
display of comprehensive income but does not affect results of
operations. Effective January 1, 1998, the Company adopted SFAS No. 130.
The components of comprehensive income, other than net income, are as
follows (in millions):
<TABLE>
<CAPTION>
1999
---------------------------------------------
TAX NET-
BEFORE-TAX (EXPENSE) OF-TAX
AMOUNT BENEFIT AMOUNT
---------------------------------------------
<S> <C> <C> <C>
Foreign currency translation adjustments $ 19.5 (6.8) 12.7
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during
period (753.1) 266.9 (486.2)
<PAGE>
Less: Reclassification adjustment for gains
(losses) realized in net income (233.5) 81.5 (152.0)
---------------------------------------------
Net unrealized gains (losses) on securities (519.6) 185.4 (334.2)
Minimum benefit liability (1.0) 1.3 0.3
---------------------------------------------
Total other comprehensive (loss) income $(501.1) 179.9 (321.2)
=============================================
<CAPTION>
1998
---------------------------------------------
TAX NET-
BEFORE-TAX (EXPENSE) OF-TAX
AMOUNT BENEFIT AMOUNT
---------------------------------------------
<S> <C> <C> <C>
Foreign currency translation adjustments $(20.6) 7.2 (13.4)
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during
period (56.6) 19.3 (37.3)
Less: Reclassification adjustment for gains
(losses) realized in net income 4.7 (1.7) 3.0
--------------------------------------------
Net unrealized gains (losses) on securities (61.3) 21.0 (40.3)
Minimum benefit liability (0.3) -- (0.3)
--------------------------------------------
Total other comprehensive (loss) income $(82.2) 28.2 (54.0)
============================================
</TABLE>
29
<PAGE>
General American Life Insurance Company and Subsidiaries
<TABLE>
<CAPTION>
1997
---------------------------------------------
TAX NET-
BEFORE-TAX (EXPENSE) OF-TAX
AMOUNT BENEFIT AMOUNT
---------------------------------------------
<S> <C> <C> <C>
Foreign currency translation adjustments $(14.3) 10.6 (3.7)
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during
<PAGE>
period 132.3 (49.1) 83.2
Less: Reclassification adjustment for gains
(losses) realized in net income 7.4 (2.6) 4.8
---------------------------------------------
Net unrealized gains (losses) on securities 124.9 (46.5) 78.4
Minimum benefit liability 0.9 -- 0.9
---------------------------------------------
Total other comprehensive (loss) income $111.5 (35.9) 75.6
=============================================
</TABLE>
The following schedule reflects the change in net accumulated other
comprehensive (loss) income for the periods ending December 31, 1999 and 1998
(in millions):
<TABLE>
<CAPTION>
CURRENT
BALANCE AS PERIOD BALANCE AS
OF 12/31/98 CHANGE OF 12/31/99
----------- ------- -----------
<S> <C> <C> <C>
Foreign currency adjustments $(32.9) 12.7 (20.2)
Unrealized gains (losses) on securities 88.5 (334.2) (245.7)
Minimum benefit liability (2.7) 0.3 (2.4)
----------- ------- -----------
Total accumulated other comprehensive
(loss) income $ 52.9 (321.2) (268.3)
----------- ------- -----------
<CAPTION>
CURRENT
BALANCE AS PERIOD BALANCE AS
OF 12/31/97 CHANGE OF 12/31/98
----------- ------- -----------
<S> <C> <C> <C>
Foreign currency adjustments $(19.5) (13.4) (32.9)
Unrealized gains (losses) on securities 128.8 (40.3) 88.5
Minimum benefit liability (2.4) (0.3) (2.7)
----------- ------- -----------
Total accumulated other comprehensive
(loss) income $106.9 (54.0) 52.9
=========== ======= ===========
</TABLE>
30
<PAGE>
<PAGE>
General American Life Insurance Company and Subsidiaries
(11) REGULATORY MATTERS
The Company and its insurance subsidiaries are subject to financial statement
filing requirements in their respective state of domicile, as well as the states
in which they transact business. Such financial statements, generally referred
to as statutory financial statements, are prepared on a basis of accounting
which varies in some respects from GAAP. Statutory accounting practices include:
(1) charging of policy acquisition costs to income as incurred; (2)
establishment of a liability for future policy benefits computed using required
valuation standards; (3) nonprovision of deferred federal income taxes resulting
from temporary differences between financial reporting and tax bases of assets
and liabilities; (4) recognition of statutory liabilities for asset impairments
and yield stabilization on fixed maturity dispositions prior to maturity with
asset valuation reserves based on statutorily determined formulas; and (5)
valuation of investments in bonds at amortized cost.
Combined net income and policyholders' surplus of the Company and its
consolidated insurance subsidiaries, for the years ended and at December 31,
1999, 1998, and 1997, as determined in accordance with statutory accounting
practices, are as follows (in millions):
1999 1998 1997
------- ------- -----
Net (loss) income $(190.8) 60.8 39.7
Policyholders' surplus 741.3 1,147.4 844.1
======= ======= =====
For the year ended December 31, 1999, General American has changed its method
for recording equity in earnings of subsidiaries on a statutory basis to reflect
such earnings as a direct charge or credit to surplus, and not a component of
investment income.
Under Risk-Based Capital (RBC) requirements, General American and its insurance
subsidiaries are required to measure their solvency against certain parameters.
As of December 31, 1999, the Company's insurance subsidiaries exceeded the
established RBC minimums. In addition, the Company's insurance subsidiaries
exceeded the minimum statutory capital and surplus requirements of their
respective states of domicile.
The Company's insurance subsidiaries are subject to limitations on the payment
of dividends to the Company. Generally, dividends during any year may not be
paid without prior regulatory approval, in excess of the lessor of (and with
respect to life and health subsidiaries in Missouri, in excess of the greater
of): (a) ten percent of the insurance subsidiaries' statutory surplus as of the
preceding December 31 or (b) the insurance subsidiaries' statutory gain from
operations for the preceding year.
<PAGE>
31
<PAGE>
General American Life Insurance Company and Subsidiaries
(12) PARTICIPATING POLICIES AND DIVIDENDS TO POLICYHOLDERS
Over 18.9 percent and 22.8 percent of the Company's business in force relates to
participating policies as of December 31, 1999 and 1998, respectively. These
participating policies allow the policyholders to receive dividends based on
actual interest, mortality, and expense experience for the related policies.
These dividends are distributed to the policyholders through an annual dividend,
using current dividend scales which are approved by the Board of Directors.
(13) CONTINGENT LIABILITIES
The Company was named as a defendant in a lawsuit that was filed in 1996 in
Arizona State Court. The lawsuit claimed benefits under a disability policy and
damages for bad faith termination of such benefits. In November 1998, the jury
entered a verdict against the Company, awarding the plaintiff approximately $59
million in damages, including $58 million in punitive damages. In January 1999,
the Company filed a motion for judgment notwithstanding the verdict, a motion
for a new trial, and a request for reduction of the punitive damages awarded.
The Trial Court reduced the punitive damage award to $18 million. The Company
has appealed the verdict and the award of the Court.
The Company was named as a defendant in a lawsuit filed in a federal district
court in Phoenix, Arizona along with Paul Revere Life Insurance Company. The
lawsuit claimed that Paul Revere denied benefits which was a breach of the
implied duty of good faith and that both companies were liable due to being in a
joint venture relationship. The jury found for the plaintiff and assessed
punitive damages against the company in the sum of $10.2 million and against
Paul Revere in the sum of $6.8 million. Both companies have filed post-trial
motions aimed at setting aside the jury verdict and/or reducing the jury awards.
The Company intends to vigorously appeal the verdict if it is allowed to stand.
The Company was named as defendant in the following purported class action
lawsuits: Chain v. General American Life Insurance Company (filed in the U.S.
District Court for the Northern District of Mississippi in 1996); Newburg Trust
v. General American Life Insurance Company (filed in the U.S. District Court for
the District of Massachusetts in 1996); and Ludwig, Sippil, DAllesandro and
Cunningham v. General American Life Insurance Company (filed in the U.S.
District Court for the Southern District of Illinois in 1997). These lawsuits
allege that the Company engaged in deceptive sales practices in connection with
the sale of certain life insurance policies. None of these lawsuits has been
certified as a class action. Although the claims asserted in each lawsuit are
not identical, the plaintiffs seek unspecified actual and
<PAGE>
punitive damages under similar claims, including breach of contract, fraud,
intentional or negligent misrepresentation, breach of fiduciary duty and unjust
enrichment. The Company filed a motion to dismiss all of the claims in each of
the lawsuits. The Court in each of these lawsuits has dismissed certain of the
plaintiffs' claims while allowing others to proceed. These three cases have been
consolidated with one individual case in the U.S. District Court for the Eastern
District of Missouri. The Company has negotiated a settlement agreement with
counsel for plaintiffs which resolves all matters concerning the relief for the
class. There is, however, no agreement on the attorneys' fees or expenses of
class counsel. This settlement is in the process of being finalized. It will
then be submitted to the Court for review and approval along with the issue of
attorneys' fees and expenses. If the settlement is not approved the Company
intends to continue to oppose the lawsuits vigorously.
In addition to the matters discussed above, the Company is involved in pending
and threatened litigation in the normal course of its business. While the
outcome of these matters cannot be predicted with certainty, at the present time
and based on information currently available, management does not believe that
the Company's liability arising from pending or threatened litigation will have
a material adverse affect on the Company's financial condition or results of
operations.
32
<PAGE>
General American Life Insurance Company and Subsidiaries
(14) RELATED PARTY TRANSACTIONS
In 1999, GenAmerica made capital contributions to the Company of $38.0 million,
$10.1 million of NaviSys Incorporated's (NaviSys) equity, and $20.0 million of
NaviSys' bonds. The $38.0 million contribution consisted of a promissory note
from ARM, and was expensed by the Company after it became uncollectible.
The following related party transactions occurred in the connection with
MetLife's acquisition of GenAmerica.
The Company paid and expensed approximately $20 million to MetLife as
consideration for MetLife's willingness to accept the funding agreement
business of General American as described in Note 1.
The Company paid $40 million to MetLife during 1999 which ultimately was
returned to GAMHC at the closing on January 6, 2000. This transaction has
been recorded as a dividend by the Company to GAMHC in the accompanying
financial statements.
Subsequent to December 31, 1999 an additional $40 million was paid to
MetLife on behalf of GAMHC.
<PAGE>
During 1999, GenAmerica paid and expensed $12 million of investment
advisory fees for which GAMHC and GenAmerica were jointly and severably
liable.
RGA also has reinsurance transactions between MetLife and certain of its
subsidiaries. Under these agreements, RGA reflected earned premiums of
approximately $108 million and $113 million in 1999 and 1998, respectively. The
earned premiums reflect the net of business assumed from and ceded to MetLife
and its subsidiaries. Underwriting gain (loss) on this business was
approximately $12 million and $13 million in 1999 and 1998, respectively.
(15) SUBSEQUENT EVENTS
On January 1, 2000, the Company exited the Group Health business through the
Asset Purchase Agreement and related reinsurance arrangements with Great-West
Life & Annuity Insurance Company (Great-West). This agreement also includes any
life business that is directly associated to the health business.
The Company is required to reimburse Great-West for up to $10 million in net
operating losses incurred during 2000. These amounts have been fully accrued in
the 1999 consolidated financial statements of the Company. The Company must also
compensate Great-West for certain receivables related to this business should
they be deemed uncollectible.
On January 18, 2000, MetLife proposed to acquire all of Conning's outstanding
shares of common stock not already controlled by MetLife for $10.50 per share in
cash. MetLife acquired a beneficial interest of approximately 61% in Conning as
a result of its January 6, 2000 acquisition of GenAmerica. Conning has received
MetLife's proposal and the Conning Board of Directors is evaluating the proposed
transaction.
33
<PAGE>
General American Life Insurance Company and Subsidiaries
On January 24, 2000, Conning announced that it had learned of a complaint
purporting to be a shareholder class action suit that has been filed in the
Supreme Court of the State of New York, naming Conning and MetLife as
co-defendants. The complaint follows the January 18, 2000 announcement of
MetLife's proposal to acquire all of the outstanding shares of common stock not
already controlled by MetLife for $10.50 per share in cash. The complaint
alleges that MetLife's proposal to acquire the remaining equity interest in
Conning fails to offer a fair price to Conning's shareholders and lacks adequate
procedural protections. Additionally, the complaint alleges that as a result of
MetLife's proposal, the defendants have engaged in acts of self-dealing and
breeches of fiduciary duty in connection with the proposed transaction.
<PAGE>
Conning was subsequently served with the complaint and believes the plaintiff's
claims are without merit.
34
PART C
OTHER INFORMATION
Item 24. Financial statements and Exhibits
(a) Financial Statements
All required financial statements are included in Part B of this
Registration Statement.
(b) Exhibits
(1) Resolutions of the Board of Directors of General American Life Insurance
Company ("General American") authorizing establishment of the Separate
Account (to be filed by amendment)
(2) Not Applicable
(3) (a) Form of Distribution Agreement (to be filed by amendment)
(b) Form of Selling Agreement (to be filed by amendment)
(4) (a) Form of tax deferred group variable annuity contract (No. _______) (to
be filed by amendment)
(b) Endorsement related to the reorganization of Separate Account (to be
filed by amendment)
(c) Form of endorsement allowing other Fund sponsors (No. 1098900) (to be
filed by amendment)
(d) Form of endorsement relating to tax sheltered annuities, Section
403(b) IRC (No. 1098600) (to be filed by amendment)
(e) Form of endorsement relating to tax sheltered annuities with employer
contribution (No. 1098800) (to be filed by amendment)
(5) Form of application (to be filed by amendment)
(6) (a) Amended and Restated Charter and Articles of Incorporation of General
American Life Insurance Company*
<PAGE>
(b) By-laws of General American*
(7) Not applicable
(8) Not applicable
(9) Opinion and Consent of Counsel
(10) Consent of Independent Accountants with financial statements
(11) No financial statements are omitted from item 23
(12) Not applicable
(13) Not applicable
(14) Not applicable
----------------
*incorporated by reference to Post-Effective Amendment No. 43 to the
Registration Statement on Form N-4, File Nos. 002-39272 and 811-02162 as filed
electronically on April 17, 1998
Item 25. Directors and Officers of the Depositor
<TABLE>
<CAPTION>
Officer's Name and Principal Positions and Offices
Business Address* with Depositor
----------------- --------------
<S> <C>
Robert J. Banstetter, Sr. Vice President, General
700 Market Street Counsel & Secretary, Feb.
St. Louis, MO 63101 1991 to present. Vice President and General
Counsel, Jan. 1983 - Feb. 1991.
Barry C. Cooper Vice President and Controller and Chief
700 Market Street Financial Officer (Principal Accounting
St. Louis, MO 63101 and Financial Officer).
Kevin C. Eichner President and Chief Executive Officer
700 Market Street (Principal Executive Officer) from February,
St. Louis, MO 63101 2000 to present; prior thereto, Executive
Vice President
from October 1997
to February, 2000.
E. Thomas Hughes Corporate Actuary and
<PAGE>
700 Market Street Treasurer, Oct. 1994 to
St. Louis, MO 63101 present. Formerly Executive Vice President - Group
Pensions, March 1990 - Oct. 1994.
Richard A. Liddy Chairman, Jan. 1995 to present; prior thereto,
700 Market Street Chairman and Chief Executive Officer, Jan. 1995
St. Louis, MO 63101 to February, 2000; Formerly, President and
Chief Executive Officer, May 1992 - Jan 1995.
President and Chief Operating Officer, May 1988 -
May 1992.
Bernard H. Wolzenski Executive Vice President- Individual, Oct. 1991 to
present. Formerly Vice President, Individual Life
Products, May 1986 - Oct. 1991.
A. Greig Woodring President and Chief
1370 Timberlake Manor Parkway Executive Officer,
St. Louis, MO 63017-6039 Reinsurance Group of America, Dec. 1992 to
present. Also, Executive Vice President
Reinsurance.
</TABLE>
******
* The principal business address of each person listed is General American
Life Insurance Company, 13045 Tesson Ferry Road, St. Louis, MO 63128,
unless otherwise indicated.
<TABLE>
<CAPTION>
Positions and Offices
Directors with Depositor
--------- --------------
<S> <C>
James M. Benson Director
Metropolitan Life Insurance Company
1 Madison Avenue
New York, NY 10010
August A. Busch III Director
Anheuser-Busch Companies, Inc.
One Busch Place
St. Louis, Missouri 63118
William E. Cornelius Director
Union Electric Company
1901 Chouteau Street
<PAGE>
St. Louis, MO 63103
John C. Danforth Director
Bryan Cave
One Metropolitan Square, Suite 3600
St. Louis, Missouri 63102
William E. Maritz Director
Maritz, Inc.
1375 North Highway Drive
Fenton, Missouri 63099
Stewart G. Nagler Director
Metropolitan Life Insurance Company
1 Madison Avenue
New York, NY 10010
Craig D. Schnuck Director
Schnuck Markets, Inc.
11420 Lackland Road
P.O. Box 46928
St. Louis, Missouri 63146
William P. Stiritz Director
Agribrands International, Inc.
9811 South Forty Drive
St. Louis, Missouri 63124
Andrew C. Taylor Director
Enterprise Rent-A-Car
600 Corporate Park Drive
St. Louis, Missouri 63105
Robert L. Virgil Director
Edward Jones and Company
12555 Manchester Road
St. Louis, Missouri 63131-3729
Virginia V. Weldon, M.D. Director
Monsanto Company
800 North Lindbergh Boulevard
St. Louis, Missouri 63167
</TABLE>
Item 26. Persons Controlled by or Under Common Control With the Depositor or
Registrant
<TABLE>
<CAPTION>
LIST OF SUBSIDIARIES AND AFFILIATES OF
GENAMERICA CORPORATION
As of January 27, 2000
<S> <C>
Metropolitan Life Insurance Company: Holds all of the stock in GenAmerica Corporation.
GenAmerica Corporation: formed to hold all of the stock of General American Life Insurance Company.
GenAmerica Management Corporation: central management corporation.
Walnut Street Securities, Inc.: wholly-owned subsidiary engaged in the process of selling variable life
insurance and variable annuities and other securities.
Walnut Street Advisers, Inc.: wholly-owned subsidiary of Walnut Street Securities engaged in
the business of giving investment advice.
WSS Insurance Agency of Alabama, Inc.: Formed to act as a resident insurance agency for Walnut
Street Securities, Inc. in Alabama.
WSS Insurance Agency of Massachusetts, Inc.: Formed to act as a resident insurance agency for
Walnut Street Securities, Inc. in Massachusetts.
WSS Insurance Agency of Ohio, Inc.: Formed to act as a resident insurance agency for Walnut
Street Securities, Inc. in Ohio.
WSS Insurance Agency of Texas, Inc.: Formed to act as a resident insurance agency for Walnut
Street Securities, Inc. in Texas.
Collaborative Strategies, Inc.: wholly-owned business management consulting company.
GenAmerica Capital I: Wholly-owned Delaware trust formed for the
purpose of issuing securities as an investment vehicle for GenAmerica
Corporation.
Missouri Reinsurance (Barbados), Inc.: wholly-owned Barbados exempt life, accident and health
reinsurance company.
VirtualFinances.Com, Inc.: Wholly-owned company formed for the
E-Commerce initiative of GeneraLife.
Benefit Resource Life Insurance Company (Bermuda) Ltd. (fka RGA Insurance Company (Bermuda) Limited):
subsidiary formed to engage in insurance business.
General American Life Insurance Company: an insurance company selling life and health insurance and
pensions.
GenAm Benefits Insurance Company (fka EBPLife Insurance Company): wholly-owned subsidiary
formed to hold all group business.
Cova Corporation: wholly-owned subsidiary formed to own the former Xerox Life companies.
Cova Financial Services Life Insurance Company: wholly-owned by Cova Corporation,
engaged in the business of selling annuities and life insurance.
<PAGE>
First Cova Life Insurance Company: wholly-owned by Cova Financial Services
Life Insurance Company, engaged in the sale of life insurance in New York.
Cova Financial Life Insurance Company: wholly-owned by Cova Corporation,
engaged in the sale of life insurance and annuities in California.
Cova Life Management Company: wholly-owned by Cova Corporation. Employer of the
individuals operating the Cova companies.
Cova Investment Advisory Corporation: wholly-owned by Cova Life Management
Company. Intended to provide investment advice to Cova Life insureds and
annuity owners.
Cova Investment Allocation Corporation: wholly-owned by Cova Life Management
Company. Intended to provide advice on allocation of premiums to Cova Life
insureds and annuity owners.
Cova Life Sales Company: wholly-owned by Cova Life Management Company.
Broker-dealer established to supervise sales of Cova Life contracts.
Cova Life Administration Services Company: wholly-owned by Cova Life
Management Company. Provides administrative services for Cova annuities.
General Life Insurance Company: wholly-owned subsidiary, domiciled in Texas, engaged in the
business of selling life insurance and annuities.
General Life Insurance Company of America: wholly-owned subsidiary, domiciled in
Illinois, engaged in the business of selling life insurance and annuities.
Paragon Life Insurance Company: wholly-owned subsidiary engaged in employer sponsored sales of
life insurance.
Equity Intermediary Company: wholly-owned subsidiary holding company formed to own stock in
subsidiaries.
Reinsurance Group of America, Incorporated: subsidiary, of which approximately 53.5%
is owned by Equity Intermediary and the balance by the public.
RGA Sudamerica S.A.: Chilean subsidiary, of
which all but one share is owned by RGA and
one share is owned by RGA Reinsurance
Company, existing to hold Chilean
reinsurance operations.
BHIF America Sequros de Vida S.A.:
Chilean subsidiary, of which 50% is
owned by RGA Sudamerica S.A. and 50%
is owned by Chilean interests,
engaged in business as a
life/annuity insurer.
RGA Reinsurance Company Chile S.A.: 100% owned by RGA, engaged in
business of reinsuring life and annuity business of BHIF America.
General American Argentina Sequros de Vida
S.A.: Argentinean subsidiary 100% owned by
RGA, engaged in business as a life, annuity,
disability and survivorship insurer.
<PAGE>
RGA Argentina S.A.: Argentinian subsidiary 100% owned by RGA.
Reinsurance Company of Missouri, Incorporated: wholly owned subsidiary formed
for the purpose of owning RGA Reinsurance Company.
RGA Reinsurance Company: subsidiary engaged in the reinsurance
business.
Fairfield Management Group, Inc.: 100% owned subsidiary.
Reinsurance Partners, Inc.: wholly-owned subsidiary of
Fairfield Management Group, Inc., engaged in business as a
reinsurance brokerage company.
Great Rivers Reinsurance Management, Inc.:
wholly-owned subsidiary of Fairfield Management
Group, Inc., acting as a reinsurance manager.
RGA (U.K.) Underwriting Agency Limited:
wholly-owned by Fairfield Management Group, Inc.
RGA Reinsurance Company (Barbados) Ltd.: subsidiary of Reinsurance Group of
America, Incorporated formed to engage in the exempt insurance business.
RGA/Swiss Financial Group, L.L.C.:
40% owned subsidiary formed to
market and manage financial
reinsurance business to be assumed
by RGA Reinsurance Company.
Triad Re, Ltd.: Reinsurance Group of America, Incorporated owns 100% of all
outstanding and issued shares of the Company's preferred stock. Reinsurance
Group of America, Inc. owns 66.67% of all outstanding and issued shares of the
Company's common stock. Schmitt-Sussman Enterprises, Inc. owns 33.33% of all
outstanding and issued shares of the Company's common stock.
RGA Americas Reinsurance Company, Ltd.: Reinsurance Group of America,
Incorporated owns 100% of this company.
RGA International Ltd.: a New Brunswick corporation wholly-owned by
Reinsurance Group of America, existing to hold Canadian reinsurance operations.
RGA Financial Products Limited: 100% owned by RGA International Ltd.
(100 Class A shares).
RGA Canada Management Company, Ltd.: a New Brunswick corporation
wholly-owned by G.A. Canadian Holdings, existing to accommodate
Canadian investors.
RGA Life Reinsurance Company of Canada: wholly-owned by RGA
Canada Management Company, Ltd.
RGA Holdings Limited: holding company formed in the United Kingdom to own two
operating companies: RGA Managing Agency Limited and RGA Capital Limited.
<PAGE>
RGA Capital Limited: company is a corporate member of a Lloyd's life
syndicate.
RGA Managing Agency Limited: inactive company.
RGA Australian Holdings Pty Limited: holding company formed to own RGA Reinsurance
Company of Australia Limited.
RGA Reinsurance Company of Australia Limited: formed to reinsure the life,
health and accident business of non-affiliated Australian insurance companies.
RGA South African Holdings (Pty) Ltd.: 100% owned by Reinsurance Group of America,
Incorporated formed for the purpose of holding RGA Reinsurance Company of South Africa
Limited.
RGA Reinsurance Company of South Africa Limited: 100% owned by RGA South
African Holdings (Pty) Ltd.
Security Equity Life Insurance Company: wholly-owned subsidiary, domiciled in New York,
engaged in the business of selling life insurance and annuities.
GenAm Holding Company: Formed to hold stock in various non-insurance subsidiaries.
NaviSys Incorporated: wholly-owned subsidiary engaged in the sale of computer
software and in providing third party administrative services.
NaviSys Enterprise Solutions, Inc.: 80% owned by NaviSys Incorporated. New
Jersey corporation providing enterprise life administration software.
NaviSys Illustration Solutions, Inc.: 100% owned by NaviSys Incorporated.
Pennsylvania corporation providing sales illustration software.
NaviSys Asia Pacific Limited: 100% owned by NaviSys Incorporated. Engaged in
licensing of software products in Hong Kong.
NaviSys de Mexico, S.A. de C.V.: 100% owned by NaviSys Incorporated, engaged
in licensing of NaviSys software products in Latin America.
Genelco Software, S.A.: 100% owned by NaviSys Incorporated, engaged in
licensing of NaviSys software products in Spain.
Conning Corporation: 61% owned subsidiary formed to own the Conning companies (with
the remainder owned by MetLife).
Conning, Inc.: a holding company organized under Delaware law.
Conning & Company: a Connecticut corporation engaged in providing asset
management and investment advisory services as well as insurance research
services.
Conning Asset Management Company: a Missouri corporation engaged in providing
investment advice.
<PAGE>
Red Oak Realty Company: wholly-owned subsidiary formed for the purpose of investing
in and operating real estate.
GenMark Incorporated: wholly-owned subsidiary company acting as distribution company.
Stan Mintz Associates, Inc.: wholly-owned subsidiary purchased to maintain a
significant marketing presence in the Madison, Wisconsin area upon the
retirement of General Agent Stan Mintz.
GenMark Insurance Agency of Alabama, Inc.: formed to act as resident
insurance agency in Alabama.
GenMark Insurance Agency of Massachusetts, Inc.: formed to act as resident
insurance agency in Massachusetts.
GenMark Insurance Agency of Ohio, Inc.: formed to act as resident insurance
agency in Ohio.
GenMark Insurance Agency of Texas, Inc.: formed to act as resident insurance
agency in Texas.
White Oak Royalty Company: wholly-owned, second-tier subsidiary formed to own mineral
interests.
</TABLE>
Mutual funds associated with General American Life Insurance Company:
General American Capital Company
Item 27. Number of Contract Owners
This prospectus describes a new product which has not been sold to any contract
owners. However, Separate Account Two had the following number of contract
owners for other contracts offered in accordance with the original prospectus:
As of May 31, 2000:
Title of Class Number of Owners of Record
Qualified 10,002
Non-Qualified 1,580
Item 28. Indemnification
Section 351.355 of the Missouri General and Business Corporation Law, in brief,
allows a corporation to indemnify any person who is a party or is threatened to
be made a party to any threatened, pending, or completed action, suit, or
proceeding, whether civil, criminal, administrative, or investigative by reason
of the fact that he is or was a director, officer, employee, or agent of the
<PAGE>
corporation, against expenses, including attorneys' fees, judgments, fines, and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action if he acted in good faith and in a manner reasonably believed
to be in or not opposed to the best interests of the corporation. Where any
person was or is a party or is threatened to be made a party in an action or
suit by or in the right of the corporation to procure a judgment in its favor,
indemnification may not be paid where such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his duty to the
corporation, unless a court determines that the person is fairly and reasonably
entitled to indemnity. A corporation has the power to give any further
indemnity, to any person who is or was a director, officer, employee or agent,
provided for in the articles of incorporation or as authorized by any by-law
which has been adopted by vote of the shareholders, provided that no such
indemnity shall indemnify any person's conduct which was finally adjudged to
have been knowingly fraudulent, deliberately dishonest, or willful misconduct.
In accordance with Missouri law, General American's Board of Directors, at its
meeting on 19 November 1987 and the policyholders of General American at the
annual meeting held on 26 January 1988 adopted the following resolutions:
"BE IT RESOLVED THAT
1. The company shall indemnify any person who is or was a director,
officer, or employee of the company, or is or was serving at the request of the
company as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against any and all
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement, actually and reasonably incurred by him or her in connection with
any civil, criminal, administrative or investigative action, proceeding or claim
(including an action by or in the right of the company) by reason of the fact
that he or she was serving in such capacity if he or she acted in good faith and
in a manner he or she reasonably believed to be in or not opposed to the best
interests of the company; provided that such person's conduct is not finally
adjudged to have been knowingly fraudulent, deliberately dishonest or willful
misconduct.
2. The indemnification provided herein shall not be deemed exclusive of any
other rights to which a director, officer, or employee may be entitled under any
agreement, vote of policyholders or disinterested directors, or otherwise, both
as to action in his or her official capacity and as to action in another
capacity while holding such office, and shall continue as to a person who has
ceased to be a director, officer, or employee and shall inure to the benefit of
the heirs, executors and administrators of such a person."
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
<PAGE>
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
Item 29. Principal Underwriters
(a) Walnut Street Securities, Inc., serves as the principal underwriter for
the variable annuity contracts funded by Separate Account Two. Walnut Street
Securities also serves as the principal underwriter for variable life insurance
policies funded by Separate Account Eleven of General American.
(b) Directors and Officers
<TABLE>
<CAPTION>
Name and Principal Business Positions and Offices
Address* with Underwriter
-------- ----------------
<S> <C>
Officers
Richard J. Miller President, Chief
Executive Officer
Don P. Wuller Senior Vice President,
Administration and Chief Financial Officer
Stephen E. Abbey Vice President, Special Markets
and Assistant Secretary
E. Thomas Hughes, Jr. Treasurer
Norman R. Lazarus Vice President, Compliance
Directors
Dona L. Barber Director
Kevin C. Eichner Director, Chairman
Matthew P. McCauley Director
Richard J. Miller Director
Steven C. Palmitier Director
Bernard H Wolzenski Director
</TABLE>
* Messrs. Hughes and McCauley, are at 700 Market Street, St. Louis, Missouri
63101. Mr. Wolzenski is at 13045 Tesson Ferry Road, St. Louis, Missouri 63128.
Messrs. Abbey, Anderson, Miller, Palmitier, and Wuller are at 400 South Fourth
Street, Suite 1000, St. Louis, Missouri 63102.
(c) Principal Underwriter
Walnut Street 1999 Brokerage 1999 Net Underwriting
Commission Compensation
$18,682,250 $528,062
<PAGE>
Item 30. Location of Accounts and Records
All accounts and records required to be maintained by Section 31(a) of the 1940
Act and the rules under it are maintained by General American at its
administrative offices, 13045 Tesson Ferry Road, St. Louis, Missouri 63128.
Item 31. Management Services
All management contracts are discussed in Part A or Part B.
Item 32. Undertakings and Representations
(a) Registrant undertakes that it will file post-effective amendments to
this registration statement as frequently as necessary to ensure that the
audited financial statements in the registration statement are never more than
16 months old for so long as payments under the variable annuity contracts may
be accepted.
(b) Registrant undertakes to include, as part of the application to
purchase a contract offered by the prospectus, a space that an applicant can
check to request a Statement of Additional Information.
(c) Registrant undertakes to deliver any Statement of Additional
Information and any financial statements required to be made available under
this Form promptly upon written or oral request to General American at the
address or phone number listed in the prospectus.
(d) Registrant represents that it is relying upon a "no-action" letter (No.
P-6-88) issued to the American Council of Life Insurance concerning the conflict
between the redeemability requirements of sections 22(e), 27(c)(1), and 27(d) of
the Investment Company Act of 1940 and the limits on the redeemability of
variable annuities imposed by section 403(b)(11) of the Internal Revenue Code.
Registrant has included disclosure concerning the 403(b)(11) restrictions in its
prospectus and sales literature, and established a procedure whereby each plan
participant will sign a statement acknowledging these restrictions before the
contract is issued. Sales representatives have been instructed to bring the
restrictions to the attention of potential plan participants.
(e) General American, of which Registrant forms a part, hereby represents
that the fees and charges deducted under the terms of the Contracts are, in the
aggregate, reasonable in relationship to the services rendered, the expenses
expected, and the risks assumed by General American.
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant, General American Separate Account Two has caused this
<PAGE>
Registration Statement to be signed on its behalf in the City of St. Louis,
State of Missouri, on the 3rd day of October, 2000.
GENERAL AMERICAN SEPARATE ACCOUNT
TWO (REGISTRANT)
By: GENERAL AMERICAN LIFE
INSURANCE COMPANY (for
Registrant and as Depositor)
By: *
Kevin C. Eichner
President and Chief Executive Officer
As required by the Securities Act of 1933 and the Investment Company Act of
1940, this amended Registration Statement has been signed below by the following
persons in their capacities with General American Life Insurance Company and on
the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
*
Richard A. Liddy Chairman and Director 10-3-00
*
______________________ President and Chief Executive 10-3-00
Kevin C. Eichner Officer (Principal Executive Officer)
*
-----------------
Barry C. Cooper Vice President and Controller 10-3-00
and Chief Financial Officer
(Principal Accounting and
Financial Officer)
*
James M. Benson Director 10-3-00
<PAGE>
*
August A. Busch, III Director 10-3-00
*
William E. Cornelius Director 10-3-00
*
John C. Danforth Director 10-3-00
*
William E. Maritz Director 10-3-00
*
Stewart G. Nagler Director 10-3-00
*
Craig D. Schnuck Director 10-3-00
*
William P. Stiritz Director 10-3-00
*
Andrew C. Taylor Director 10-3-00
*
Robert L. Virgil, Jr. Director 10-3-00
*
Virginia V. Weldon Director 10-3-00
</TABLE>
*By: /s/WILLIAM L. HUTTON
---------------------
William L. Hutton
* Original powers of attorney authorizing William L. Hutton to sign the
registration statement and amendments thereto on behalf of the Directors of
General American Life Insurance Company are filed herewith.
<PAGE>
LIMITED POWER OF ATTORNEY
WITH RESPECT TO FILINGS WITH THE
SECURITIES AND EXCHANGE COMMISSION
The undersigned Director of General American Life Insurance Company (the
"Company") hereby constitutes and appoints the Company's Secretary and Assistant
Secretaries as well as William L. Hutton, Esq. and Christopher A. Martin, Esq.,
and each of them singly, the Director's limited attorneys-in-fact, each with the
power of substitution, for him or her in any and all capacities, to sign any
registration statement, amendment thereto, or other filing, and to file the
same, with exhibits thereto and other documents in connection therewith, with
the Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact, or his or her substitute or substitutes, may do
or cause to be done by virtue hereof.
/s/JAMES M. BENSON
Date: 6/23/00
LIMITED POWER OF ATTORNEY
WITH RESPECT TO FILINGS WITH THE
SECURITIES AND EXCHANGE COMMISSION
The undersigned Director of General American Life Insurance Company (the
"Company") hereby constitutes and appoints the Company's Secretary and Assistant
Secretaries as well as William L. Hutton, Esq. and Christopher A. Martin, Esq.,
and each of them singly, the Director's limited attorneys-in-fact, each with the
power of substitution, for him or her in any and all capacities, to sign any
registration statement, amendment thereto, or other filing, and to file the
same, with exhibits thereto and other documents in connection therewith, with
the Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact, or his or her substitute or substitutes, may do
or cause to be done by virtue hereof.
/s/AUGUST A. BUSCH, III
--------------------
August A. Busch, III
Date: 7/29/99
<PAGE>
LIMITED POWER OF ATTORNEY
WITH RESPECT TO FILINGS WITH THE
SECURITIES AND EXCHANGE COMMISSION
The undersigned Director of General American Life Insurance Company (the
"Company") hereby constitutes and appoints the Company's Secretary and Assistant
Secretaries as well as William L. Hutton, Esq. and Christopher A. Martin, Esq.,
and each of them singly, the Director's limited attorneys-in-fact, each with the
power of substitution, for him or her in any and all capacities, to sign any
registration statement, amendment thereto, or other filing, and to file the
same, with exhibits thereto and other documents in connection therewith, with
the Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact, or his or her substitute or substitutes, may do
or cause to be done by virtue hereof.
/s/BARRY C. COOPER
--------------------
Barry C. Cooper
Date: 8-25-00
LIMITED POWER OF ATTORNEY
WITH RESPECT TO FILINGS WITH THE
SECURITIES AND EXCHANGE COMMISSION
The undersigned Director of General American Life Insurance Company (the
"Company") hereby constitutes and appoints the Company's Secretary and Assistant
Secretaries as well as William L. Hutton, Esq. and Christopher A. Martin, Esq.,
and each of them singly, the Director's limited attorneys-in-fact, each with the
power of substitution, for him or her in any and all capacities, to sign any
registration statement, amendment thereto, or other filing, and to file the
same, with exhibits thereto and other documents in connection therewith, with
the Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact, or his or her substitute or substitutes, may do
or cause to be done by virtue hereof.
/s/WILLIAM E. CORNELIUS
--------------------
William E. Cornelius
Date: 7/22/99
<PAGE>
LIMITED POWER OF ATTORNEY
WITH RESPECT TO FILINGS WITH THE
SECURITIES AND EXCHANGE COMMISSION
The undersigned Director of General American Life Insurance Company (the
"Company") hereby constitutes and appoints the Company's Secretary and Assistant
Secretaries as well as William L. Hutton, Esq. and Christopher A. Martin, Esq.,
and each of them singly, the Director's limited attorneys-in-fact, each with the
power of substitution, for him or her in any and all capacities, to sign any
registration statement, amendment thereto, or other filing, and to file the
same, with exhibits thereto and other documents in connection therewith, with
the Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact, or his or her substitute or substitutes, may do
or cause to be done by virtue hereof.
/s/JOHN C. DANFORTH
--------------------
John C. Danforth
Date: 7/29/99
LIMITED POWER OF ATTORNEY
WITH RESPECT TO FILINGS WITH THE
SECURITIES AND EXCHANGE COMMISSION
The undersigned Director of General American Life Insurance Company (the
"Company") hereby constitutes and appoints the Company's Secretary and Assistant
Secretaries as well as William L. Hutton, Esq. and Christopher A. Martin, Esq.,
and each of them singly, the Director's limited attorneys-in-fact, each with the
power of substitution, for him or her in any and all capacities, to sign any
registration statement, amendment thereto, or other filing, and to file the
same, with exhibits thereto and other documents in connection therewith, with
the Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact, or his or her substitute or substitutes, may do
or cause to be done by virtue hereof.
/s/KEVIN C. EICHNER
--------------------
Kevin C. Eichner
Date: 8/29/00
<PAGE>
LIMITED POWER OF ATTORNEY
WITH RESPECT TO FILINGS WITH THE
SECURITIES AND EXCHANGE COMMISSION
The undersigned Director of General American Life Insurance Company (the
"Company") hereby constitutes and appoints the Company's Secretary and Assistant
Secretaries as well as William L. Hutton, Esq. and Christopher A. Martin, Esq.,
and each of them singly, the Director's limited attorneys-in-fact, each with the
power of substitution, for him or her in any and all capacities, to sign any
registration statement, amendment thereto, or other filing, and to file the
same, with exhibits thereto and other documents in connection therewith, with
the Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact, or his or her substitute or substitutes, may do
or cause to be done by virtue hereof.
/s/RICHARD A. LIDDY
--------------------
Richard A. Liddy
Date: 7/23/99
LIMITED POWER OF ATTORNEY
WITH RESPECT TO FILINGS WITH THE
SECURITIES AND EXCHANGE COMMISSION
The undersigned Director of General American Life Insurance Company (the
"Company") hereby constitutes and appoints the Company's Secretary and Assistant
Secretaries as well as William L. Hutton, Esq. and Christopher A. Martin, Esq.,
and each of them singly, the Director's limited attorneys-in-fact, each with the
power of substitution, for him or her in any and all capacities, to sign any
registration statement, amendment thereto, or other filing, and to file the
same, with exhibits thereto and other documents in connection therewith, with
the Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact, or his or her substitute or substitutes, may do
or cause to be done by virtue hereof.
/s/WILLIAM E. MARITZ
--------------------
William E. Maritz
Date: 7/22/99
<PAGE>
LIMITED POWER OF ATTORNEY
WITH RESPECT TO FILINGS WITH THE
SECURITIES AND EXCHANGE COMMISSION
The undersigned Director of General American Life Insurance Company (the
"Company") hereby constitutes and appoints the Company's Secretary and Assistant
Secretaries as well as William L. Hutton, Esq. and Christopher A. Martin, Esq.,
and each of them singly, the Director's limited attorneys-in-fact, each with the
power of substitution, for him or her in any and all capacities, to sign any
registration statement, amendment thereto, or other filing, and to file the
same, with exhibits thereto and other documents in connection therewith, with
the Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact, or his or her substitute or substitutes, may do
or cause to be done by virtue hereof.
/S/STEWART G. NAGLER
--------------------
Stewart G. Nagler
Date: August 7, 2000
LIMITED POWER OF ATTORNEY
WITH RESPECT TO FILINGS WITH THE
SECURITIES AND EXCHANGE COMMISSION
The undersigned Director of General American Life Insurance Company (the
"Company") hereby constitutes and appoints the Company's Secretary and Assistant
Secretaries as well as William L. Hutton, Esq. and Christopher A. Martin, Esq.,
and each of them singly, the Director's limited attorneys-in-fact, each with the
power of substitution, for him or her in any and all capacities, to sign any
registration statement, amendment thereto, or other filing, and to file the
same, with exhibits thereto and other documents in connection therewith, with
the Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact, or his or her substitute or substitutes, may do
or cause to be done by virtue hereof.
/s/CRAIG D. SCHNUCK
--------------------
Craig D. Schnuck
Date: 7/22/99
<PAGE>
LIMITED POWER OF ATTORNEY
WITH RESPECT TO FILINGS WITH THE
SECURITIES AND EXCHANGE COMMISSION
The undersigned Director of General American Life Insurance Company (the
"Company") hereby constitutes and appoints the Company's Secretary and Assistant
Secretaries as well as William L. Hutton, Esq. and Christopher A. Martin, Esq.,
and each of them singly, the Director's limited attorneys-in-fact, each with the
power of substitution, for him or her in any and all capacities, to sign any
registration statement, amendment thereto, or other filing, and to file the
same, with exhibits thereto and other documents in connection therewith, with
the Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact, or his or her substitute or substitutes, may do
or cause to be done by virtue hereof.
/s/WILLIAM P. STIRITZ
--------------------
William P. Stiritz
Date: 7/26/99
LIMITED POWER OF ATTORNEY
WITH RESPECT TO FILINGS WITH THE
SECURITIES AND EXCHANGE COMMISSION
The undersigned Director of General American Life Insurance Company (the
"Company") hereby constitutes and appoints the Company's Secretary and Assistant
Secretaries as well as William L. Hutton, Esq. and Christopher A. Martin, Esq.,
and each of them singly, the Director's limited attorneys-in-fact, each with the
power of substitution, for him or her in any and all capacities, to sign any
registration statement, amendment thereto, or other filing, and to file the
same, with exhibits thereto and other documents in connection therewith, with
the Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact, or his or her substitute or substitutes, may do
or cause to be done by virtue hereof.
/s/ANDREW C. TAYLOR
--------------------
Andrew C. Taylor
<PAGE>
Date: 7/23/99
LIMITED POWER OF ATTORNEY
WITH RESPECT TO FILINGS WITH THE
SECURITIES AND EXCHANGE COMMISSION
The undersigned Director of General American Life Insurance Company (the
"Company") hereby constitutes and appoints the Company's Secretary and Assistant
Secretaries as well as William L. Hutton, Esq. and Christopher A. Martin, Esq.,
and each of them singly, the Director's limited attorneys-in-fact, each with the
power of substitution, for him or her in any and all capacities, to sign any
registration statement, amendment thereto, or other filing, and to file the
same, with exhibits thereto and other documents in connection therewith, with
the Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact, or his or her substitute or substitutes, may do
or cause to be done by virtue hereof.
/s/ROBERT L. VIRGIL
--------------------
Robert L. Virgil
Date: July 25, 1999
LIMITED POWER OF ATTORNEY
WITH RESPECT TO FILINGS WITH THE
SECURITIES AND EXCHANGE COMMISSION
The undersigned Director of General American Life Insurance Company (the
"Company") hereby constitutes and appoints the Company's Secretary and Assistant
Secretaries as well as William L. Hutton, Esq. and Christopher A. Martin, Esq.,
and each of them singly, the Director's limited attorneys-in-fact, each with the
power of substitution, for him or her in any and all capacities, to sign any
registration statement, amendment thereto, or other filing, and to file the
same, with exhibits thereto and other documents in connection therewith, with
the Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact, or his or her substitute or substitutes, may do
or cause to be done by virtue hereof.
/s/VIRGINIA V. WELDON
--------------------
Virginia V. Weldon
<PAGE>
Date: 7/23/99
INDEX TO EXHIBITS
EX-99.(b)(9) Opinion and Consent of Counsel
EX-99.(b)(10) Consent of Independent Accountants
