<PAGE>
Registration Nos. 333-32387
811-3050
As filed with the Commission on April 26, 1999
______________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [_]
Pre-Effective Amendment No. ___ [_]
Post-Effective Amendment No. 2 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 21 [X]
AMERICAN GENERAL LIFE INSURANCE COMPANY OF NEW YORK
SEPARATE ACCOUNT E
(Exact Name of Registrant)
AMERICAN GENERAL LIFE INSURANCE COMPANY OF NEW YORK
(Name of Depositor)
300 South State Street, P.O. Box 1456
Syracuse, NY 13201-1456
(Address of Depositor's Principal Executive Officers) (Zip Code)
(713) 831-8471
(Depositor's Telephone Number, including Area Code)
Pauletta P. Cohn
Associate General Counsel
American General Life Companies
2727 Allen Parkway
Houston, TX 77019
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: Continuous.
It is proposed that this filing will become effective (check appropriate box)
[_] Immediately upon filing pursuant to paragraph (b) of Rule 485
[X] On April 30, 1999 pursuant to paragraph (b) of Rule 485
[_] 60 days after filing pursuant to paragraph (a)(1) of Rule 485
[_] On (date) pursuant to paragraph (a)(1) of Rule 485
If appropriate, check the following:
[_] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment
Title of Securities Being Registered:
Units of interest in American General Life Insurance Company of New York
Separate Account E under variable annuity certificates.
<PAGE>
GENERATIONS(TM)
FLEXIBLE PAYMENT VARIABLE AND FIXED GROUP
DEFERRED ANNUITY CERTIFICATES
OFFERED BY
AMERICAN GENERAL LIFE INSURANCE COMPANY OF NEW YORK
ADMINISTRATIVE CENTER
P.O. BOX 1401, HOUSTON, TEXAS 77251-1401
1-800-281-8289; 1-713-831-3505
American General Life Insurance Company of New York ("AGNY") is offering, under
a group annuity master contract, the flexible payment variable and fixed group
deferred annuity certificates (the "Certificates") described in this Prospectus.
You may use AGNY's Separate Account E ("Separate Account") for a variable
investment return under the Certificates based on one or more of the following
mutual fund series of the Van Kampen Life Investment Trust ("Trust") and the
Morgan Stanley Dean Witter Universal Funds, Inc. ("Fund"):
<TABLE>
<CAPTION>
<S> <C>
. Van Kampen Life Investment Trust . Morgan Stanley Dean Witter Universal Funds, Inc.
. Domestic Income Portfolio . Asian Equity Portfolio
. Emerging Growth Portfolio . Emerging Markets Equity Portfolio
. Enterprise Portfolio . Equity Growth Portfolio
. Government Portfolio . Global Equity Portfolio
. Growth and Income Portfolio . International Magnum Portfolio
. Money Market Portfolio . Fixed Income Portfolio
. Morgan Stanley Real Estate Securities Portfolio . High Yield Portfolio
. Strategic Stock Portfolio . Mid Cap Value Portfolio
. Value Portfolio
</TABLE>
You may also use AGNY's guaranteed interest option. This option currently has
one Guarantee Period, with a guaranteed interest rate.
We have designed this Prospectus to provide you with information that you should
have before investing in the Certificates. Please read the Prospectus carefully
and keep it for future reference.
For additional information about the Certificates, you may request a copy of the
Statement of Additional Information (the "Statement") dated April 30, 1999. We
have filed the Statement with the Securities and Exchange Commission ("SEC") and
have incorporated it by reference into this Prospectus. The "Contents" of the
Statement appears at page 51 of this Prospectus. You may obtain a free copy of
the Statement if you write or call AGNY's Administrative Center, which is
located at 2727-A Allen Parkway, Houston, Texas 77019-2191. The telephone
number is 1-800-281-8289. You may also obtain the Statement through the SEC's
Web site at http://www.sec.gov.
You should rely only on the information contained in this document or that we
have referred you to. We have not authorized anyone to provide you with
information that is different.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of the Prospectus. Any representation to the contrary is a
criminal offense. The Certificates are not available in all states.
This Prospectus is valid only if you also receive current prospectuses of the
Van Kampen Life Investment Trust and the Morgan Stanley Dean Witter Universal
Funds, Inc.
This Prospectus is dated April 30, 1999.
<PAGE>
CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Definitions................................................................................ 4
Fee Table.................................................................................. 7
Synopsis of Certificate Provisions......................................................... 10
Minimum Investment Requirements......................................................... 10
Purchase Payment Accumulation........................................................... 10
Fixed and Variable Annuity Payments..................................................... 11
Changes in Allocations Among Divisions and Guarantee Periods............................ 11
Surrenders and Withdrawals.............................................................. 11
Cancellation Right...................................................................... 12
Death Proceeds.......................................................................... 12
Limitations Imposed by Retirement Plans and Employers................................... 12
Communications to Us.................................................................... 12
Financial and Performance Information................................................... 13
Other Information....................................................................... 14
Selected Accumulation Unit Data (Unaudited)................................................ 15
Financial Information...................................................................... 15
AGNY....................................................................................... 16
Separate Account E......................................................................... 16
The Series................................................................................. 16
Voting Privileges....................................................................... 18
The Fixed Account.......................................................................... 19
Guarantee Periods....................................................................... 19
Crediting Interest...................................................................... 20
New Guarantee Periods................................................................... 20
Certificate Issuance and Purchase Payments................................................. 21
Minimum Requirements.................................................................... 21
Payments................................................................................ 22
Owner Account Value........................................................................ 22
Variable Account Value.................................................................. 22
Fixed Account Value..................................................................... 23
Transfer, Automatic Rebalancing, Surrender and Partial Withdrawal of Owner Account Value... 24
Transfers............................................................................... 24
Automatic Rebalancing................................................................... 25
Surrenders.............................................................................. 25
Partial Withdrawals..................................................................... 26
Annuity Period and Annuity Payment Options................................................. 27
Annuity Commencement Date............................................................... 27
Application of Owner Account Value...................................................... 27
Fixed and Variable Annuity Payments..................................................... 27
Annuity Payment Options................................................................. 28
Election of Annuity Payment Option...................................................... 28
Available Annuity Payment Options....................................................... 29
Transfers............................................................................... 31
Death Proceeds............................................................................. 31
Death Proceeds Before the Annuity Commencement Date..................................... 31
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Death Proceeds After the Annuity Commencement Date...................................... 33
Proof of Death.......................................................................... 33
Charges Under the Certificates............................................................. 34
Premium Taxes........................................................................... 34
Surrender Charge........................................................................ 34
Transfer Charges........................................................................ 36
Annual Certificate Fee.................................................................. 36
Charge to the Separate Account ......................................................... 36
Miscellaneous........................................................................... 37
Systematic Withdrawal Plan.............................................................. 37
One-Time Reinvestment Privilege......................................................... 37
Reduction in Surrender Charges and Administrative Charges............................... 38
Other Aspects of the Certificates.......................................................... 38
Owners, Annuitants and Beneficiaries; Assignments....................................... 38
Reports................................................................................. 39
Rights Reserved by Us................................................................... 39
Payment and Deferment................................................................... 40
Federal Income Tax Matters................................................................. 40
General................................................................................. 40
Non-Qualified Certificates.............................................................. 41
Individual Retirement Annuities ("IRAs")................................................ 43
Roth IRAs............................................................................... 45
Simplified Employee Pension Plans....................................................... 45
Simple Retirement Accounts.............................................................. 45
Other Qualified Plans................................................................... 46
Private Employer Unfunded Deferred Compensation Plans................................... 47
Federal Income Tax Withholding and Reporting............................................ 47
Taxes Payable by AGNY and the Separate Account.......................................... 48
Distribution Arrangements.................................................................. 48
Services Agreement......................................................................... 49
Legal Matters.............................................................................. 49
Year 2000 Considerations................................................................... 49
Other Information on File.................................................................. 50
Contents of Statement of Additional Information............................................ 51
</TABLE>
3
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DEFINITIONS
WE, OUR AND US - American General Life Insurance Company of New York ("AGNY").
YOU AND YOUR - a reader of this Prospectus who is contemplating making purchase
payments or taking any other action in connection with a Certificate. This is
generally the Owner of a Certificate.
ACCOUNT VALUE - the sum of your Fixed Account Value and Variable Account Value
after deduction of any fees.
ACCUMULATION UNIT - a measuring unit used in calculating your interest in a
Division of Separate Account E before the Annuity Commencement Date.
ADMINISTRATIVE CENTER - our annuity service center to which you should direct
all purchase payments, requests, instructions and other communications. Our
Administrative Center is located at 2727-A Allen Parkway, Houston, Texas 77019-
2191. The mailing address is P.O. Box 1401, Houston, Texas 77251-1401.
ANNUITANT - the person named as Annuitant in the application for a Certificate
and on whose life annuity payments may be based.
ANNUITY COMMENCEMENT DATE - the date on which we begin making payments under an
Annuity Payment Option, unless you elect a single sum payment instead.
ANNUITY PAYMENT OPTION - one of the ways in which you can request us to make
annuity payments to you. An Annuity Payment Option will control the amount of
each payment, how often we make payments, and for how long we make payments.
ANNUITY PERIOD - the period of time during which we make annuity payments under
an Annuity Payment Option.
ANNUITY UNIT - a measuring unit used to calculate the amount of Variable Annuity
Payments.
BENEFICIARY - the person who will receive any proceeds due under a Certificate
following the death of an Owner or an Annuitant.
CERTIFICATE - an individual annuity Certificate offered by this Prospectus.
CERTIFICATE ANNIVERSARY - each anniversary of the date of issue of the
Certificate.
CERTIFICATE YEAR - each year beginning with the date of issue of the
Certificate.
CODE - the Internal Revenue Code of 1986, as amended.
CONTINGENT ANNUITANT - a person whom you designate under a Non-Qualified
Certificate to become the Annuitant if the Annuitant dies before the Annuity
Commencement Date and the Contingent Annuitant is alive when the Annuitant dies.
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CONTINGENT BENEFICIARY - a person whom you designate to receive any proceeds due
under a Certificate following the death of an Owner or an Annuitant, if the
Beneficiary has died but the Contingent Beneficiary is alive when the proceeds
become payable.
DIVISION - one of the several different investment options into which Separate
Account E is divided. Each Division invests in shares of a Series.
FIXED ACCOUNT - the name of the investment option that allows you to allocate
purchase payments to AGNY's General Account.
FIXED ACCOUNT VALUE - the sum of your net purchase payments and transfers in the
Fixed Account, plus accumulated interest, less any partial withdrawals and
transfers you make out of the Fixed Account.
FIXED ANNUITY PAYMENTS - annuity payments that are fixed in amount and do not
vary with the investment experience of any Division of Separate Account E.
GENERAL ACCOUNT - all assets of AGNY other than those in Separate Account E or
any other legally segregated separate account established by AGNY.
GUARANTEED INTEREST RATE - the rate of interest we credit during any Guarantee
Period, on an effective annual basis.
GUARANTEE PERIOD - the period for which we credit a Guaranteed Interest Rate.
HOME OFFICE - our office at the following address and phone number: American
General Life Insurance Company of New York, 300 South State Street, P.O. Box
14356, Syracuse, NY 13201-1456, 1-315-471-1121.
INVESTMENT COMPANY ACT OF 1940 ("1940 ACT") - a federal law governing the
operations of investment companies such as the Series and the Separate Account.
NON-QUALIFIED - not eligible for the kind of federal income tax treatment that
occurs with retirement plans allowed by Sections 401, 403, 408 or 408A of the
Code.
OWNER - the holder of record of a Certificate, except that the employer or
trustee may be the Owner of the Certificate in connection with a retirement
plan.
PARTICIPANT - the Owner of a Certificate.
QUALIFIED - eligible for the kind of federal income tax treatment that occurs
with retirement plans allowed by sections 401, 403, 408 or 408A of the Code.
SEPARATE ACCOUNT E - the segregated asset account of AGNY named Separate Account
E, which receives and invests purchase payments under the Certificates.
SERIES - an individual portfolio of a mutual fund that you may choose for
investment under the Certificates. Currently, the Series are part of either the
Van Kampen Life Investment Trust or the Morgan Stanley Dean Witter Universal
Funds, Inc.
5
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SURRENDER CHARGE - a charge for sales expenses that we may assess when you
surrender a Certificate or receive payment of certain other amounts from a
Certificate.
VALUATION DATE - a day when we are open for business. However, a day is not a
Valuation Date, if the Series in which a Division invests does not calculate the
value of its shares on that day.
VALUATION PERIOD - the period that starts at the close of regular trading on the
New York Stock Exchange on a Valuation Date and ends at the close of regular
trading on the Exchange on the next Valuation Date.
VARIABLE ANNUITY PAYMENTS - annuity payments that vary in amount based on the
investment earnings and losses of one or more of the Divisions.
VARIABLE ACCOUNT VALUE - the sum of your account values in the Separate Account
Divisions. Your account value in a Separate Account Division equals the value
of a Division's Accumulation Unit multiplied by the number of Accumulation Units
you have in that Division.
WRITTEN - signed, dated, and in a form satisfactory to us and received at our
Administrative Center. (See "Synopsis of Certificate Provisions -
Communications to Us.") You must use special forms your sales representative or
we provide to elect an Annuity Option or exercise your one-time reinvestment
privilege.
6
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FEE TABLE
The purpose of this Fee Table is to assist you in understanding the various
costs and expenses that you will bear directly or indirectly under a
Certificate. The table reflects expenses of the Separate Account and the
Series. We may also deduct amounts for state premium taxes or similar
assessments, where applicable.
PARTICIPANT TRANSACTION CHARGES
Front-End Sales Charge Imposed on Purchases....................... 0%
Maximum Surrender Charge/1/....................................... 6%
(computed as a percentage of purchase payments surrendered)
Transfer Fee...................................................... $ 0/2/
ANNUAL CERTIFICATE FEE................................................. $30
SEPARATE ACCOUNT ANNUAL EXPENSES (as a percentage of average daily net
asset value)
Mortality and Expense Risk Charge................................ 1.25%
Administrative Expense Charge..................................... 0.15%
----
Total Separate Account Annual Expenses.............................. 1.40%
====
- ---------------------
/1/ This charge does not apply or is reduced under certain circumstances. See
"Surrender Charge."
/2/ This charge is $25 after the 12th transfer during each Certificate Year
prior to the Annuity Commencement Date.
/3/ This charge does not apply during the Annuity Period.
7
<PAGE>
The Series' Annual Expenses/1/ (as a percentage of average net assets)
<TABLE>
<CAPTION>
Series Management Other
- ------ Fees After Expenses Annual
Expense After Expense Expenses After
Reimbursement Reimbursement Expense Reimbursement
-------------- -------------- ---------------------
<S> <C> <C> <C>
Domestic Income 0.01% 0.59% 0.60%
Emerging Growth 0.32% 0.53% 0.85%
Enterprise 0.46% 0.14% 0.60%
Government 0.37% 0.23% 0.60%
Growth and Income 0.26% 0.49% 0.75%
Money Market 0.11% 0.49% 0.60%
Morgan Stanley Real Estate Securities 1.00% 0.08% 1.08%
Strategic Stock 0.00% 0.65% 0.65%
Asian Equity 0.00% 1.21% 1.21%
Emerging Markets Equity 0.00% 1.95% 1.95%
Equity Growth 0.09% 0.76% 0.85%
Global Equity 0.32% 0.83% 1.15%
International Magnum 0.15% 1.00% 1.15%
Fixed Income 0.06% 0.64% 0.70%
High Yield 0.15% 0.65% 0.80%
Mid Cap Value 0.23% 0.82% 1.05%
Value 0.08% 0.77% 0.85%
</TABLE>
- ---------------------
/1/ Management fees and other expenses would have been the percentages shown in
the following table without certain voluntary expense reimbursements from the
investment adviser.
<TABLE>
<CAPTION>
Management Other Total Annual
Fees Expenses Expenses
---------- -------- ------------
<S> <C> <C> <C>
Domestic Income 0.50% 0.59% 1.09%
Emerging Growth 0.70% 0.53% 1.23%
Enterprise 0.50% 0.14% 0.64%
Government 0.50% 0.23% 0.73%
Growth and Income 0.60% 0.49% 1.09%
Money Market 0.50% 0.49% 0.99%
Morgan Stanley Real Estate Securities 1.00% 0.08% 1.08%
Strategic Stock 0.50% 0.75% 1.25%
Asian Equity 0.80% 2.00% 2.80%
Emerging Markets Equity 1.25% 2.20% 3.45%
Equity Growth 0.55% 0.76% 1.31%
Global Equity 0.80% 0.83% 1.63%
International Magnum 0.80% 1.00% 1.80%
Fixed Income 0.40% 0.64% 1.04%
High Yield 0.50% 0.65% 1.15%
Mid Cap Value 0.75% 0.82% 1.57%
Value 0.55% 0.77% 1.32%
</TABLE>
8
<PAGE>
Example The following expenses would apply to a $1,000 investment at the
- ------- end of the applicable time period, if you surrender your
Certificate (or if you annuitize under circumstances where you owe
a surrender charge)/2/, and if you assume a 5% annual return on
assets:
If all amounts are invested
in one of the following Series 1 year 3 years 5 years 10 years
- ------------------------------ ------ ------- ------- --------
Domestic Income $ 75 $ 110 $ 147 $ 239
Emerging Growth $ 78 $ 118 $ 160 $ 265
Enterprise $ 75 $ 110 $ 147 $ 239
Government $ 75 $ 110 $ 147 $ 239
Growth and Income $ 77 $ 114 $ 155 $ 255
Money Market $ 75 $ 110 $ 147 $ 239
Morgan Stanley Real Estate Securities $ 80 $ 124 $ 172 $ 288
Strategic Stock $ 76 $ 111 $ 150 $ 245
Asian Equity $ 81 $ 128 $ 178 $ 301
Emerging Markets Equity $ 89 $ 150 $ 214 $ 370
Equity Growth $ 78 $ 118 $ 160 $ 265
Global Equity $ 81 $ 127 $ 175 $ 295
International Magnum $ 81 $ 127 $ 175 $ 295
Fixed Income $ 76 $ 113 $ 152 $ 250
High Yield $ 77 $ 116 $ 158 $ 260
Mid Cap Value $ 80 $ 124 $ 170 $ 285
Value $ 78 $ 118 $ 160 $ 265
Example The following expenses would apply to a $1,000 investment at the
- ------- end of the applicable time period, if you do not surrender your
---
Certificate (or if you annuitize under circumstances where a
surrender charge is not payable)/2/, and if you assume a 5% annual
return on assets:
If all amounts are invested
in one of the following Series 1 year 3 years 5 years 10 years
- ------------------------------ ------ ------- ------- --------
Domestic Income $ 75 $ 110 $ 147 $ 239
Domestic Income $ 21 $ 65 $ 111 $ 239
Emerging Growth $ 24 $ 73 $ 124 $ 265
Enterprise $ 21 $ 65 $ 111 $ 239
Government $ 21 $ 65 $ 111 $ 239
Growth and Income $ 23 $ 69 $ 119 $ 255
Money Market $ 21 $ 65 $ 111 $ 239
Morgan Stanley Real Estate Securities $ 26 $ 79 $ 136 $ 288
Strategic Stock $ 22 $ 66 $ 114 $ 245
Asian Equity $ 27 $ 83 $ 142 $ 301
Emerging Markets Equity $ 35 $ 105 $ 178 $ 370
Equity Growth $ 24 $ 73 $ 124 $ 265
Global Equity $ 27 $ 82 $ 139 $ 295
International Magnum $ 27 $ 82 $ 139 $ 295
Fixed Income $ 22 $ 68 $ 116 $ 250
High Yield $ 23 $ 71 $ 122 $ 260
Mid Cap Value $ 26 $ 79 $ 134 $ 285
Value $ 24 $ 73 $ 124 $ 265
- -------------------------
/2/ See "Surrender Charge" for a description of the circumstances when you may
be required to pay the Surrender Charge under annuitization.
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<PAGE>
The examples are not a representation of past or future expenses. Actual
expenses may be greater or less than those shown. The assumed 5% annual rate of
return is not an estimate or a guarantee of future investment performance. The
examples assume an estimated average Account Value of $40,000 for each of the
Divisions.
SYNOPSIS OF CERTIFICATE PROVISIONS
You should read this synopsis together with the other information in this
Prospectus.
The purpose of the Certificates is to provide retirement benefits through:
. the accumulation of purchase payments on a fixed or variable basis; and
. the application of such accumulations to provide Fixed or Variable Annuity
Payments.
MINIMUM INVESTMENT REQUIREMENTS
Your initial purchase payment must be at least $5,000. The amount of any
subsequent purchase payment that you make must be at least $100. If your
Account Value falls below $500, we may cancel your Certificate and treat it as a
full surrender. We also may transfer funds, without charge, from a Division
(other than the Money Market Division) or Guarantee Period under your
Certificate to the Money Market Division, if the Account Value of that Division
or Guarantee Period falls below $500. (See "Certificate Issuance and Purchase
Payments.")
PURCHASE PAYMENT ACCUMULATION
We accumulate purchase payments on a variable or fixed basis until the Annuity
Commencement Date.
For variable accumulation, you may allocate part or all of your Account Value to
one or more of the 17 available Divisions of the Separate Account. Each
Division invests solely in shares of one of 17 corresponding Series. (See "The
Series.") The value of accumulated purchase payments allocated to a Division
increases or decreases, as the value of the investments in a Series' shares
increases or decreases, subject to reduction by charges and deductions. (See
"Variable Account Value.")
For fixed accumulation, you may allocate part or all of your Account Value to
one or more of the Guarantee Periods available in our Fixed Account at the time
you make your allocation. Each Guarantee Period is for a different period of
time and has a different Guaranteed Interest Rate. The value of accumulated
purchase payments increases at the Guaranteed Interest Rate applicable to that
Guarantee Period. (See "The Fixed Account.")
Over the lifetime of your Certificate, you may allocate part or all of your
Account Value to no more than 18 Divisions and Guarantee Periods. This limit
includes those Divisions and Guarantee Periods from which you have either
transferred or withdrawn all of your Account Value previously allocated to such
Divisions or Guarantee Periods.
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<PAGE>
FIXED AND VARIABLE ANNUITY PAYMENTS
You may elect to receive Fixed or Variable Annuity Payments or a combination of
Payments beginning on the Annuity Commencement Date. Fixed Annuity Payments are
periodic payments from AGNY in a fixed amount guaranteed by AGNY. The amount of
the Payments will depend on the Annuity Payment Option chosen, the age and, in
some cases, the gender of the Annuitant, and the total amount of Account Value
applied to the fixed Annuity Payment Option.
Variable Annuity Payments are similar to Fixed Annuity Payments, except that the
amount of each periodic payment from AGNY will vary reflecting the net
investment return of the Division or Divisions you selected under your variable
Annuity Payment Option. The payment for a given month will exceed the previous
month's payment, if the net investment return for a given month exceeds the
assumed interest rate used in the Certificate's annuity tables. The monthly
payment will be less than the previous payment, if the net investment return for
a month is less than the assumed interest rate. The assumed interest rate used
in the Certificate's annuity tables is 3.5%. AGNY may offer other forms of the
Certificate with a lower assumed interest rate and reserves the right to
discontinue the offering of the higher interest rate form of Certificate. (See
"Annuity Period and Annuity Payment Options.")
CHANGES IN ALLOCATIONS AMONG DIVISIONS AND GUARANTEE PERIODS
Before the Annuity Commencement Date, you may change your allocation of future
purchase payments to the various Divisions and Guarantee Periods, without
charge.
In addition, you may reallocate your Account Value among the Divisions and
Guarantee Periods before the Annuity Commencement Date. However, you are
limited in the amount that you may transfer out of a Guarantee Period. See
"Transfer, Automatic Rebalancing, Surrender and Partial Withdrawal of Owner
Account Value - Transfers," for these and other conditions of transfer.
After the Annuity Commencement Date, you may make transfers from a Division to
another Division or to a fixed Annuity Payment Option. However, you may not
make transfers from a fixed Annuity Payment Option. (See "Annuity Period and
Annuity Payment Options - Transfers.")
SURRENDERS AND WITHDRAWALS
You may make a total surrender of or partial withdrawal from your Certificate at
any time before the Annuity Commencement Date by Written request to us. A
surrender or partial withdrawal may require you to pay a Surrender Charge, and
some surrenders and withdrawals may require you to pay tax penalties. (See
"Surrenders and Partial Withdrawals.")
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CANCELLATION RIGHT
You may cancel your Certificate by delivering it or mailing it with a Written
cancellation request to our Administrative Center or to your sales
representative, before the close of business on the 10th day after you receive
the Certificate. If you send the items by mail, properly addressed and postage
prepaid, we will consider them received at our Administrative Center on the date
we actually receive them.
We will refund to you the sum of:
. any purchase payments allocated to a Guarantee Period of the Fixed
Account,
. your Account Value allocated to the Divisions of the Separate Account; and
. any additional amount deducted for premium taxes.
DEATH PROCEEDS
If the Annuitant or Owner dies before the Annuity Commencement Date, we will pay
a benefit to the Beneficiary. (See "Death Proceeds Before the Annuity
Commencement Date.")
LIMITATIONS IMPOSED BY RETIREMENT PLANS AND EMPLOYERS
An employer or trustee who is the Owner under a retirement plan may limit
certain rights you would otherwise have under a Certificate. These limitations
may restrict total and partial withdrawals, the amount or timing of purchase
payments, the start of annuity payments, and the type of Annuity Payment Options
that you may select. You should familiarize yourself with the provisions of any
retirement plan in which a Certificate is used. We are not responsible for
monitoring or assuring compliance with the provisions of any retirement plan.
COMMUNICATIONS TO US
You should include, in communications to us, your Certificate number, your name,
and, if different, the Annuitant's name. You may direct communications to the
addresses and phone numbers on the first page of this Prospectus.
Unless the Prospectus states differently, we will consider purchase payments or
other communications to be received at our Administrative Center on the date we
actually receive them, if they are in proper form. However, we will consider
purchase payments to be received on the next Valuation Date if we receive them
(1) after the close of regular trading on the New York Stock Exchange or (2) on
a date that is not a Valuation Date.
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FINANCIAL AND PERFORMANCE INFORMATION
We include financial statements of AGNY and Separate Account E in the Statement
of Additional Information (see "Contents of Statement of Additional
Information."). The Separate Account financial statements include information
about the Divisions that invest in the Trust and the Fund.
From time to time, the Separate Account may include in advertisements and other
sales materials several types of performance information for the Divisions.
This information may include "average annual total return," "total return," and
"cumulative total return." The Domestic Income Division, the Government
Division, and the Growth and Income Division may also advertise "yield." The
Money Market Division may advertise "yield" and "effective yield."
The performance information that we may present is not an estimate or guarantee
of future investment performance and does not represent the actual investment
experience of amounts invested by a particular Owner. Additional information
concerning a Division's performance appears in the Statement.
Total Return and Yield Quotations. Average annual total return, total return,
and cumulative total return figures measure the net income of a Division and any
realized or unrealized gains or losses of the underlying investments in the
Division, over the period stated. Average annual total return figures are
annualized and represent the average annual percentage change in the value of an
investment in a Division over the period stated. Total return figures are also
annualized, but do not, as described below, reflect deduction of any applicable
Surrender Charge or Annual Certificate Fee. Cumulative total return figures
represent the cumulative change in value of an investment in a Division for
various periods stated.
Yield is a measure of the net dividend and interest income earned over a
specific one-month or 30-day period (seven-day period for the Money Market
Division), expressed as a percentage of the value of the Division's Accumulation
Units. Yield is an annualized figure, which means that we assume that the
Division generates the same level of net income over a one-year period and
compound that income on a semi-annual basis. We calculate the effective yield
for the Money Market Division similarly, but include the increase due to assumed
compounding. The Money Market Division's effective yield will be slightly
higher than its yield due to this compounding effect.
Average annual total return figures reflect deduction of all recurring charges
and fees applicable under the Certificate to all Owner accounts, including the
following:
. the Mortality and Expense Risk Charge,
. the Administrative Expense Charge,
. the applicable Surrender Charge that may be charged at the end of the
period in question; and
. a prorated portion of the Annual Certificate Fee.
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Yield, effective yield, total return, and cumulative total return figures do not
reflect deduction of any Surrender Charge that we may impose upon partial
withdrawal, and thus may be higher than if such charge were deducted. Total
return and cumulative total return figures also do not reflect deduction of the
Annual Certificate Fee.
Division Performance. The investment performance for each Division that invests
in a corresponding Series will reflect the investment performance of that Series
for the periods stated. This information appears in the Statement. For periods
before the date the Certificates became available, we calculate the performance
information for a Division on a hypothetical basis. In so doing, we reflect
deductions of current Separate Account fees and charges under the Certificate
from the historical performance of the corresponding Series. We may waive or
reimburse certain fees or charges applicable to the Certificate. Such waivers
or reimbursements will affect each Division's performance results.
Information about the experience of the investment advisers to the Series of the
Fund appears in the prospectus for the Fund.
AGNY may also advertise or report to Owners its ratings as an insurance company
by the A. M. Best Company. Each year, A. M. Best reviews the financial status
of thousands of insurers, culminating in the assignment of Best's Ratings.
These ratings reflect A.M. Best's current opinion of the relative financial
strength and operating performance of an insurance company in comparison to the
norms of the life/health industry. Best's Ratings range from A++ to F.
AGNY may also advertise or report to Owners its ratings as to claims-paying
ability by the Standard & Poor's Corporation. A Standard & Poor's insurance
claims-paying ability rating is an assessment of an operating insurance
company's financial capacity to meet the obligations of its insurance policies
in accordance with their terms. Standard & Poor's ratings range from AAA to D.
AGNY may additionally advertise its ratings as to claims-paying ability by the
Duff & Phelps Credit Rating Co. A Duff & Phelps claims paying ability rating is
an assessment of a company's insurance claims-paying ability. Duff & Phelps'
ratings range from AAA to CCC.
Current ratings from A.M. Best, Standard & Poor's, and Duff & Phelps may be used
from time to time in any advertising about the Certificates, as well as in any
reports that publish the ratings.
The ratings reflect the claims-paying ability and financial strength of AGNY.
They are not a rating of investment performance that purchasers of insurance
products funded through separate accounts, such as the Separate Account, have
experienced or are likely to experience in the future.
OTHER INFORMATION
AGNY may also advertise endorsements from organizations, individuals or other
parties that recommend AGNY or the Certificates. AGNY may occasionally include
in advertisements (1) comparisons of currently taxable and tax-deferred
investment programs, based on selected tax brackets, or (2) discussions of
alternative investment vehicles and general economic conditions.
14
<PAGE>
SELECTED ACCUMULATION UNIT DATA (UNAUDITED)
The following table shows the Accumulation Unit value for the Divisions
available with the Certificates on the date purchase payments were first
allocated to each Division. It also shows the Accumulation Unit value and the
number of Accumulation Units outstanding at the end of each calendar year since
each Division began operations.
<TABLE>
<CAPTION>
Accumulation Accumulation Accumulation
Unit Values Unit Values Units
(Beginning of at Outstanding
Division Period)* 12/31/98 at 12/31/98
- ---------------------------------------- ------------- ------------ ------------
<S> <C> <C> <C>
Domestic Income ------- ------- -------
Emerging Growth $ 8.880409 $10.774577 4,598.967
Enterprise $16.977333 $21.251787 58.902
Government ------- ------- -------
Growth and Income $ 6.788384 $ 6.947231 5,632.192
Money Market ------- ------- -------
Morgan Stanley Real Estate Securities $ 8.779844 $ 7.783358 569.486
Strategic Stock $ 5.754911 $ 5.874872 868.823
Asian Equity ------- ------- -------
Emerging Markets Equity ------- ------- -------
Equity Growth $ 6.961315 $ 7.342165 22,532.710
Global Equity $ 6.490724 $ 6.608795 17,827.453
International Magnum $ 6.178850 $ 5.715484 8,151.228
Fixed Income ------- ------- -------
High Yield ------- ------- -------
Mid Cap Value $ 7.030381 $ 7.529628 12,432.065
Value $ 6.347456 $ 5.599234 10,620.681
</TABLE>
- -----------------------------
* The dates when the Divisions commenced operations are as follows: Growth &
Income, Morgan Stanley Real Estate Securities, Strategic Stock, and Value
Portfolios, May 5, 1998; Emerging Growth, Equity Growth, and Mid Cap Value
Portfolios, May 28, 1998; Global Equity and International Magnum Portfolios,
June 24, 1998; Enterprise Portfolio, September 9, 1998. No information
appears in the chart for those Divisions which had not commenced operations
(received a purchase payment allocation or a transfer of Accumulation Value)
by December 31, 1998.
FINANCIAL INFORMATION
The financial statements of AGNY appear in the Statement. Please see the first
page of this Prospectus for information on how to obtain a copy of the
Statement. You should consider the financial statements of AGNY only as bearing
on the ability of AGNY to meet its contractual obligations under the
Certificates. The financial statements do not bear on the investment
performance of the Separate Account. (See "Contents of Statement of Additional
Information.")
The financial statements of the Generations Divisions of Separate Account E also
appear in the Statement. They provide financial information about the
Generations Divisions which invest in the Series of the Trust and the Fund. (See
"Contents of Statement of Additional Information.")
15
<PAGE>
AGNY
AGNY is a stock life insurance company, the predecessor of which was organized
under the laws of the State of New York in 1953. AGNY is an indirect, wholly
owned subsidiary of American General Corporation, a diversified financial
services holding company engaged primarily in the insurance business. The
commitments under the Certificates are AGNY's, and American General Corporation
has no legal obligation to back those commitments.
SEPARATE ACCOUNT E
AGNY established Separate Account E on February 15, 1979. From 1992 until the
commencement of the offering of the Certificates described in the Prospectus,
Separate Account E was inactive, funding no Contracts or Certificates and
holding no assets. The Separate Account is registered with the Securities and
Exchange Commission as a unit investment trust under the 1940 Act.
Each Division of the Separate Account is part of AGNY's general business, and
the assets of the Separate Account belong to AGNY. Under New York law and the
terms of the Certificates, the assets of the Separate Account will not be
chargeable with liabilities arising out of any other business that AGNY may
conduct. These assets will be held exclusively to meet AGNY's obligations under
variable annuity Certificates. Furthermore, AGNY credits or charges the
Separate Account with the income, gains, and losses from the Separate Account's
assets, whether or not realized, without regard to other income, gains, or
losses of AGNY.
THE SERIES
The Separate Account has 17 Divisions funding the variable benefits under the
Certificates. These Divisions invest in shares of eight separate investment
Series of the Trust and nine separate Series of the Fund.
The Trust and the Fund offer shares of these Series, without sales charges,
exclusively to insurance company variable annuity and variable life insurance
separate accounts and not directly to the public. The Trust and the Fund also
offer shares to variable annuity and variable life insurance separate accounts
of insurers that are not affiliated with AGNY.
We do not foresee any disadvantage to you arising out of these arrangements.
Nevertheless, differences in treatment under tax and other laws, as well as
other considerations, could cause the interests of various owners to conflict.
For example, violation of the federal tax laws by one separate account investing
in the Trust or the Fund could cause the contracts or certificates funded
through another separate account to lose their tax deferred status. Such a
result might require us to take remedial action. A separate account may have to
withdraw its participation in the Trust or the Fund, if a material
irreconcilable conflict arises between or among separate accounts. In such
event, the Trust or the Fund may have to liquidate portfolio securities at a
loss to pay for a separate account's redemption of Trust or Fund shares. At the
same time, the Trust's Board of Trustees, the Fund's Board of Directors and we
will monitor events for any
16
<PAGE>
material irreconcilable conflicts that may possibly arise and determine what
action, if any, to take to remedy or eliminate the conflict.
We automatically reinvest any dividends or capital gain distributions that we
receive on shares of the Series held under Certificates. We reinvest at the
Series' net asset value on the date payable. Dividends and distributions will
reduce the net asset value of each share of the corresponding Series and
increase the number of shares outstanding of the Series by an equivalent value.
However, these dividends and distributions do not change your Account Value.
The names of the Series of the Trust in which the available Divisions invest are
as follows:
Van Kampen Life Investment Trust
--------------------------------
Domestic Income Portfolio
Emerging Growth Portfolio
Enterprise Portfolio
Government Portfolio
Growth and Income Portfolio
Money Market Portfolio
Morgan Stanley Real Estate Securities Portfolio
Strategic Stock Portfolio
Van Kampen Asset Management, Inc. is the investment adviser of each Series of
the Trust. Van Kampen Funds Inc. is the distributor of shares of each Series of
the Trust.
The names of the Series of the Fund in which the available Divisions invest are
as follows:
Morgan Stanley Dean Witter Universal Funds, Inc.
------------------------------------------------
Asian Equity Portfolio
Emerging Markets Equity Portfolio
Equity Growth Portfolio
Global Equity Portfolio
International Magnum Portfolio
Fixed Income Portfolio
High Yield Portfolio
Mid Cap Value Portfolio
Value Portfolio
Morgan Stanley Dean Witter Investment Management Inc. is the investment adviser
of the Asian Equity, Emerging Markets Equity, Equity Growth, Global Equity, and
International Magnum Portfolios. (On December 1, 1998 Morgan Stanley Asset
Management Inc. changed its name to Morgan Stanley Dean Witter Investment
Management Inc. The investment advisor continues to use the name Morgan Stanley
Asset Management, in some instances.) Miller Anderson & Sherrerd, LLP is the
investment adviser of the Fixed Income, High Yield, Mid Cap Value and Value
Portfolios. Morgan Stanley & Co. Incorporated is the distributor of shares of
each Series of the Fund.
17
<PAGE>
The investment advisers and the distributors are all wholly-owned subsidiaries
of Morgan Stanley Dean Witter & Co. Morgan Stanley Dean Witter & Co. is a
preeminent global financial services firm that maintains leading market
positions in each of its three primary businesses -- securities, asset
management and credit services.
Before selecting any Division, you should carefully read the prospectus. The
prospectus provides more complete information about the Series in which that
Division invests, including investment objectives and policies, charges and
expenses.
You can find information about the investment performance of the Series of the
Trust in the Statement. You can find information about the experience of the
investment advisers to the Series of the Fund in the prospectus for the Fund.
You may obtain additional copies of a prospectus by contacting AGNY's
Administrative Center at the addresses and phone numbers on the first page of
this Prospectus. When making your request, please indicate the names of the
Series in which you are interested.
High yielding fixed-income securities, such as those in which the Domestic
Income Portfolio and the High Yield Portfolio invest, are subject to greater
market fluctuations and risk of loss of income and principal than investments in
lower yielding fixed-income securities. You should carefully read about these
Series in the Trust and Fund prospectuses and related statements of additional
information and consider your ability to assume the risks of making an
investment in the Divisions that invest in them.
VOTING PRIVILEGES
The following people may give us voting instructions for Series shares held in
the Separate Account Divisions attributable to their Certificate:
. You, as the Owner, before the Annuity Commencement Date; and
. The Annuitant or other payee, during the Annuity Period.
We will vote according to such instructions at meetings of shareholders of the
Series.
We will determine who is entitled to give voting instructions and the number of
votes for which they may give directions as of the record date for a meeting.
We will calculate the number of votes in fractions. We will calculate the
number of votes for any Series as follows:
. For each Owner before the Annuity Commencement Date, we will divide (1)
the Owner's Variable Account Value invested in the corresponding Division
by (2) the net asset value of one share of that Series.
. For each Annuitant or payee during the Annuity Period, we will divide (1)
our liability for future Variable Annuity Payments to the Annuitant or
payee by (2) the value of an Annuity Unit. We will calculate our liability
for future Variable Annuity Payments based on the mortality assumptions
and the assumed interest rate that we use in determining the number of
Annuity Units under a Certificate and the value of an Annuity Unit.
18
<PAGE>
We will vote all shares of each Series owned by the Separate Account as follows:
. Shares for which we receive instructions, in accordance with those
instructions; and
. Shares for which we receive no instructions, in the same proportion as the
shares for which we receive instructions.
Shares of each Series may be owned by separate accounts of insurance companies
other than us. We understand that each Series will see that all insurance
companies vote shares uniformly.
We believe that our voting instruction procedures comply with current federal
securities law requirements. However, we reserve the right to modify these
procedures to conform with legal requirements and interpretations that are put
in effect or modified from time to time.
THE FIXED ACCOUNT
Amounts in the Fixed Account or supporting Fixed Annuity Payments become part of
our General Account. We have not registered interests in the General Account
under the Securities Act of 1933, and we have not registered the General Account
as an investment company under the 1940 Act, based on federal law exclusion and
exemption. The staff of the Securities and Exchange Commission has advised us
that it has not reviewed the disclosures in this Prospectus that relate to the
Fixed Account or Fixed Annuity Payments. At the same time, we have legal
responsibility for the accuracy and completeness of this Prospectus.
Our obligations for the Fixed Account are legal obligations of AGNY. Our
General Account assets support these obligations. These General Account assets
also support our obligations under other insurance and annuity contracts.
Investments purchased with amounts allocated to the Fixed Account are the
property of AGNY. Owners have no legal rights in such investments.
GUARANTEE PERIODS
Account Value that the Owner allocates to the Fixed Account earns a Guaranteed
Interest Rate beginning with the date of the allocation. This Guaranteed
Interest Rate continues for the number of months or years that the Owner selects
from among the Guarantee Periods that we offer at that time.
At the end of a Guarantee Period, we will allocate your Account Value in that
Guarantee Period, including interest you have earned, to a new Guarantee Period
of the same length. In the alternative, the Owner may submit a Written request
to us to allocate this amount to a different Guarantee Period or Periods or to
one or more of the Divisions of the Separate Account. We must receive this
Written request at least three business days before the end of the Guarantee
Period.
We will contact the Owner regarding the scheduled Annuity Commencement Date, if
the Owner has not provided the necessary Written request and the renewed
Guarantee Period extends beyond the scheduled Annuity Commencement Date. If the
Owner elects to annuitize in this case, we may waive the Surrender Charge. (See
"Annuity Payment Options" and "Surrender Charge.")
19
<PAGE>
The first day of the new Guarantee Period (or other reallocation) will be the
day after the end of the prior Guarantee Period. We will notify the Owner in
writing at least 15 days and not more than 45 days before the end of any
Guarantee Period.
If the Owner's Account Value in a Guarantee Period is less than $500, we reserve
the right to transfer, without charge, the balance to the Money Market Division
at the end of that Guarantee Period. However, we will transfer such balance to
a Division selected by the Owner, if we have received Written instructions to
transfer such balance to that Division.
CREDITING INTEREST
We declare the Guaranteed Interest Rates from time to time as market conditions
dictate. We tell an Owner the Guaranteed Interest Rate for a chosen Guarantee
Period at the time we receive a purchase payment, make a transfer, or renew a
Guarantee Period. We may credit a different interest rate to one Guarantee
Period than to another Guarantee Period that is the same length but that began
on a different date. The minimum Guaranteed Interest Rate is an effective
annual rate of 3%.
Proceeds from an exchange, rollover or transfer will accrue interest, if you
allocate them to the Fixed Account within 60 days following the date of
application for a Certificate. We credit interest to such proceeds during the
Guarantee Period. We will calculate interest at a rate that is the higher of:
(1) the current interest rate we use on the date of application for the
Guarantee Period selected; or (2) the current interest rate we use on the date
we receive the proceeds. Proceeds that we receive more than 60 days after the
date the application is signed will receive interest at the rate in effect on
the date we receive the proceeds. The interest rate we use remains in effect for
the duration of the Guarantee Period.
AGNY's management makes the final determination of the Guaranteed Interest Rates
to be declared. AGNY cannot predict or assure the level of any future Guaranteed
Interest Rates in excess of the minimum Guaranteed Interest Rate stated in your
Certificate.
You may obtain information concerning the Guaranteed Interest Rates applicable
to the various Guarantee Periods at any time from your sales representative or
from the addresses or telephone numbers on the first page of this Prospectus.
NEW GUARANTEE PERIODS
Each allocation or transfer of an amount to a Guarantee Period starts the
running of a new Guarantee Period for that amount. That new Guarantee Period
will earn a Guaranteed Interest Rate that will continue unchanged until the end
of that Period. The Guaranteed Interest Rate will never be less than the
minimum Guaranteed Interest Rate stated in your Certificate.
We may offer one or more Guarantee Periods with a required dollar cost averaging
feature. (See "Transfers.") Currently, we make available a one-year Guarantee
Period and no others. However, we reserve the right to change the Guarantee
Periods that we are making available at any time, except that we will always
make available a one-year Guarantee Period.
20
<PAGE>
CERTIFICATE ISSUANCE AND PURCHASE PAYMENTS
We issue the Certificates under a group annuity master contract that we have
issued to the trustee of a group trust. We established the group trust under
Delaware law. The master contract provides for rights under the Certificates
and further provides that nothing in the master contract will invalidate or
impair any right granted to an Owner. The master contract does not provide any
material ownership rights to the master contract owner and, in particular, does
not authorize the master contract owner to surrender the master contract.
The minimum initial purchase payment is $5,000. The minimum subsequent purchase
payment is $100. We reserve the right to modify these minimums at our
discretion.
Your application to purchase a Certificate must be on a Written application that
we provide and that you sign. AGNY and Van Kampen Funds Inc., as distributor of
the Certificates, may agree on a different medium or format for the application.
When a purchase payment accompanies an application to purchase a Certificate and
you have properly completed the application, we will either:
. process the application, credit the purchase payment, and issue the
Certificate, or
. reject the application and return the purchase payment within two
Valuation Dates after receipt of the application at our Administrative
Center.
If you have not completed the application or have not completed it correctly, we
will request additional documents or information within five Valuation Dates
after receipt of the application at our Administrative Center.
If we have not received a correctly completed application within five Valuation
Dates after receipt of the purchase payment at our Administrative Center, we
will return the purchase payment immediately. However, you may specifically
consent to our retaining the purchase payment until you complete the
application. In that case, we will credit the initial purchase payment as of
the end of the Valuation Period in which we receive, at our Administrative
Center, the last information required to process the application.
We will credit subsequent purchase payments as of the end of the Valuation
Period in which we receive them and any required Written information at our
Administrative Center.
We reserve the right to reject any application or purchase payment for any
reason.
MINIMUM REQUIREMENTS
If your Account Value in any Division falls below $500 because of a partial
withdrawal from the Certificate, we reserve the right to transfer, without
charge, the remaining balance to the Money Market Division.
21
<PAGE>
If your Account Value in any Division falls below $500 because of a transfer to
another Division or to the Fixed Account, we reserve the right to transfer the
remaining balance in that Division, without charge and pro rata, to the
investment option or options to which the transfer was made.
We will waive these minimum requirements for transfers under the automatic
rebalancing program. (See "Automatic Rebalancing.")
If your total Account Value falls below $500, we may cancel the Certificate. We
consider such a cancellation a full surrender of the Certificate. We will
provide you with 60 days advance notice of any such cancellation.
So long as the Account Value does not fall below $500, you do not have to make
further purchase payments. You may, however, elect to make subsequent purchase
payments at any time before the Annuity Commencement Date, if the Owner and
Annuitant are still living.
PAYMENTS
You should make checks for subsequent purchase payments payable to American
General Life Insurance Company of New York and forward them directly to our
Administrative Center. We also accept purchase payments by wire or by exchange
from another insurance company. You may obtain further information about how to
make purchase payments by either of these methods from your sales representative
or from us at the addresses and telephone numbers on the first page of this
Prospectus.
You may make purchase payments pursuant to employer sponsored plans only with
our agreement.
Your purchase payments begin to earn a return in the Divisions of the Separate
Account or the Guarantee Periods of the Fixed Account as of the date we credit
the purchase payments to your Certificate. In your application form, you select
(in whole percentages) the amount of each purchase payment that you are
allocating to each Division and Guarantee Period. You can change these
allocation percentages at any time by Written notice to us.
OWNER ACCOUNT VALUE
Before the Annuity Commencement Date, your Account Value under a Certificate is
the sum of your Variable Account Value and Fixed Account Value, as discussed
below.
VARIABLE ACCOUNT VALUE
As of any Valuation Date before the Annuity Commencement Date:
. Your Variable Account Value is the sum of your Variable Account Values in
each Division of the Separate Account.
22
<PAGE>
. Your Variable Account Value in a Division is the product of the number of
your Accumulation Units in that Division multiplied by the value of one
such Accumulation Unit as of that Valuation Date.
There is no guaranteed minimum Variable Account Value. To the extent that your
Account Value is allocated to the Separate Account, you bear the entire
investment risk.
We credit you accumulation Units in a Division when you allocate purchase
payments or transfer amounts to that Division. Similarly, we redeem
Accumulation Units when you transfer or withdraw amounts from a Division or when
we deduct for charges under the Certificate. We determine the value of these
Accumulation Units at the end of the Valuation Date on which we make the credit
or charge.
The value of an Accumulation Unit for a Division on any Valuation Date is equal
to the previous value of that Division's Accumulation Unit multiplied by that
Division's net investment factor for the Valuation Period ending on that
Valuation Date.
The net investment factor for a Division is determined by dividing (1) the net
asset value per share of the Series shares held by the Division, determined at
the end of the current Valuation Period, plus the per share amount of any
dividend or capital gains distribution made for the Series' shares held by the
Division during the current Valuation Period, by (2) the net asset value per
share of the Series' shares held in the Division determined at the end of the
previous Valuation Period. We then subtract from that result a factor
representing the mortality risk, expense risk and administrative expense charge.
FIXED ACCOUNT VALUE
As of any Valuation Date before the Annuity Commencement Date:
. Your Fixed Account Value is the sum of your Fixed Account Value in each
Guarantee Period.
. Your Fixed Account Value in any Guarantee Period is equal to the following
amounts, in each case increased by accrued interest at the applicable
Guaranteed Interest Rate: (1) the amount of net purchase payments,
renewals and transferred amounts allocated to the Guarantee Period, less
(2) the amount of any transfers or withdrawals out of the Guarantee
Period, including withdrawals to pay applicable charges.
AGNY guarantees the Fixed Account Value. AGNY bears the investment risk for
amounts allocated to the Fixed Account, except to the extent that AGNY may vary
the Guaranteed Interest Rate for future Guarantee Periods (subject to the
minimum Guaranteed Interest Rate stated in your Certificate).
23
<PAGE>
TRANSFER, AUTOMATIC REBALANCING, SURRENDER AND PARTIAL
WITHDRAWAL OF OWNER ACCOUNT VALUE
TRANSFERS
You can transfer your Account Value beginning 30 days after we issue your
Certificate and before the Annuity Commencement Date. The following rules
apply:
. You may transfer your Account Value at any time among the available
Divisions of the Separate Account and Guarantee Periods. Transfers will be
effective at the end of the Valuation Period in which we receive your
Written transfer request.
. If a transfer causes your Account Value in any Division or Guarantee
Period to fall below $500, we reserve the right to transfer the remaining
balance in that Division or Guarantee Period in the same proportions as
the transfer request.
. You may make up to 12 transfers each Certificate Year without charge. We
will charge you $25 for each additional transfer.
. You may transfer no more than 25% of the Account Value you allocated to a
Guarantee Period at its inception during any Certificate Year. This 25%
limitation does not apply to transfers (1) within 15 days before or after
the end of the Guarantee Period in which you held the transferred amounts,
or (2) a renewal at the end of the Guarantee Period to the same Guarantee
Period.
You may establish an automatic transfer plan. (We also refer to this plan as a
dollar cost averaging plan.) The rules about transfers, which we describe above,
will apply to this plan. Under this plan, we will automatically transfer
amounts from the Money Market Division or the one-year Guarantee Period (or any
other Guarantee Period that is available at that time) over a 12 month period to
one or more other Divisions. By transferring a set amount on a regular schedule
instead of transferring the total amount at one particular time, you may reduce
the risk of investing in the corresponding Division only when the price is high.
An automatic transfer plan does not guarantee a profit and it does not protect
against a loss if market prices decline. You will select:
. the amount we are to transfer under the plan, and
. the frequency of the transfers--either monthly, quarterly, semi-annually,
or annually.
We may also offer certain "special automatic transfer plans" to Owners who make
new purchase payments. Under such plans, we will make equal monthly transfers
over a period of time that we will determine. We may offer a higher Guaranteed
Interest Rate under such a special automatic transfer plan than we would offer
for another Guarantee Period of the same duration that is not offered under such
a plan. Any such higher interest rate will reflect differences in costs or
services and will not be unfairly discriminatory as to any person. Differences
in costs or services will result from such factors as reduced sales expenses or
administrative efficiencies related to transferring amounts to other Divisions
on an automatic, rather than a discretionary, basis.
24
<PAGE>
Transfers under any automatic transfer plan will:
. not count towards the 12 free transfers each Certificate Year,
. not incur a $25 charge,
. not be subject to the 25% limitation on transfers from a Guarantee Period;
and
. not be subject to the Account Value minimum requirement described above.
You may obtain additional information about how to establish an automatic
transfer plan from your sales representative or from us at the telephone numbers
and addresses on the first page of this Prospectus. You cannot have an
automatic transfer plan in effect at the same time you have Automatic
Rebalancing, described below, in effect.
We have not designed the Certificates for professional market timing
organizations or other entities using programmed and frequent transfers. We may
not unilaterally terminate or discontinue transfer privileges. However, we
reserve the right to suspend such privileges for a reasonable period.
AUTOMATIC REBALANCING
You may arrange for Automatic Rebalancing among the Separate Account Divisions
if your Certificate has an Account Value of $25,000 or more at the time we
receive the application for Automatic Rebalancing. You may apply for Automatic
Rebalancing either at issue or after issue, and you may subsequently discontinue
it.
Under Automatic Rebalancing, we transfer funds among the Separate Account
Divisions to maintain the percentage allocation you have selected among these
Divisions. At your election, we will make these transfers on a quarterly, semi-
annual or annual basis, measured from the Certificate Anniversary date. A
Certificate Anniversary date that falls on the 29th, 30th, or 31st of the month
will result in Automatic Rebalancing starting with the 1st of the next month.
Automatic Rebalancing does not permit transfers to or from any Guarantee Period.
Transfers under Automatic Rebalancing will not count towards the 12 free
transfers each Certificate Year and will not incur a $25 charge. You cannot
have Automatic Rebalancing in effect at the same time you have an automatic
transfer plan, described above, in effect.
SURRENDERS
At any time before the Annuity Commencement Date and while the Annuitant is
still living, the Owner may make a full surrender from a Certificate.
We will pay you the following upon full surrender:
. your Account Value at the end of the Valuation Period in which we receive
a Written surrender request,
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<PAGE>
. minus any applicable Surrender Charge,
. minus any uncollected Certificate Fee (see "Annual Certificate Fee"), and
. minus any applicable premium tax.
Our current practice is to require that you return the Certificate with any
request for a full surrender.
After a full surrender, or if the Owner's Account Value falls to zero, all
rights of the Owner, Annuitant or any other person under the Certificate will
terminate. The Owner will, however, have a right to reinvest the proceeds of
the Certificate. (See "One-Time Reinvestment Privilege.")
All collateral assignees of record must consent to any full surrender.
PARTIAL WITHDRAWALS
Your Written request for a partial withdrawal should specify the Divisions of
the Separate Account, or the Guarantee Periods of the Fixed Account, from which
you wish to make the partial withdrawal. We will take the withdrawal pro rata
from the Divisions and Guarantee Periods, if (1) you do not tell us how to make
the withdrawal, or (2) we cannot make the withdrawal as you requested.
Partial withdrawal requests must be for at least $100 or, if less, all of your
Account Value. If your remaining Account Value in a Division or Guarantee
Period would be less than $500 as a result of the withdrawal (except for the
Money Market Division), we reserve the right to transfer the remaining balance
to the Money Market Division. We will do this without charge.
We will always pay you the amount of your partial withdrawal request, unless it
exceeds the surrender value of your Certificate. In that case, we pay the
surrender value of your Certificate. The value of your Accumulation Units and
Fixed Account interests that we redeem will equal the amount of the withdrawal
request, plus any applicable Surrender Charge and premium tax. You can also
tell us to take Surrender Charges and income tax from the amount you want
withdrawn.
We also make available a systematic withdrawal plan. Under this plan, you may
make automatic partial withdrawals in amounts and at periodic intervals that you
specify. The terms and conditions that apply to other partial withdrawals will
also apply to this plan. You may obtain additional information about how to
establish a systematic withdrawal plan from your sales representative or from us
at the addresses and telephone numbers on the first page of this Prospectus. We
reserve the right to modify or terminate the systematic withdrawal plan at any
time.
The Code imposes a penalty tax on certain premature surrenders or withdrawals.
See the "Federal Income Tax Matters" section for a discussion of this and other
tax implications of total surrenders and systematic and other partial
withdrawals. The Section also discusses tax withholding requirements.
All collateral assignees of record must consent to any partial withdrawal.
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ANNUITY PERIOD AND ANNUITY PAYMENT OPTIONS
ANNUITY COMMENCEMENT DATE
The Annuity Commencement Date may be any day of any month between the
Annuitant's 50th and 90th birthday. You may select the Annuity Commencement
Date in the Certificate application. You may also change a previously selected
date any time before that date by submitting a Written request, subject to our
approval.
See "Federal Income Tax Matters" for a discussion of the penalties that may
result from distributions prior to the Annuitant's reaching age 59 1/2 under any
Certificate or after April 1 of the year following the calendar year in which
the Annuitant reaches age 70 1/2 under certain Qualified Certificates.
APPLICATION OF OWNER ACCOUNT VALUE
We will automatically apply your Variable Account Value in any Division to
provide Variable Annuity Payments based on that Division and your Fixed Account
Value to provide Fixed Annuity Payments. However, we will apply your Account
Value in different proportions, if you give us Written instructions at least 30
days before the Annuity Commencement Date.
We deduct any applicable state and local premium taxes from the amount of
Account Value that we apply to an Annuity Payment Option. In some cases, we may
deduct a Surrender Charge from the amount we apply. (See "Surrender Charge.")
Subject to any such adjustments, we apply your Variable and Fixed Account Values
to an Annuity Payment Option, as discussed below, as of the end of the Valuation
Period that contains the 10th day before the Annuity Commencement Date.
FIXED AND VARIABLE ANNUITY PAYMENTS
We will determine your first monthly Fixed or Variable Annuity Payment using the
annuity tables in the Certificate and the amount of your Account Value that is
applied to provide the Fixed or Variable Annuity Payments.
We determine the amount of each monthly Fixed Annuity Payment thereafter based
on the terms of the Annuity Payment Option selected.
We determine the amount of each monthly Variable Annuity Payment thereafter as
follows:
. We convert the Account Value that we apply to provide Variable Annuity
Payments to a number of Annuity Units. We do this by dividing the amount
of the first Variable Annuity Payment by the value of an Annuity Unit of a
Division as of the end of the Valuation Period that includes the 10th day
before the Annuity Commencement Date. This number of Annuity Units remains
constant for any Annuitant.
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. We determine the amount of each subsequent Variable Annuity Payment by
multiplying the number of Annuity Units by the value of an Annuity Unit as
of the end of the Valuation Period that contains the 10th day before the
date of each payment.
. If we base the Variable Annuity Payments on more than one Division, we
perform these calculations separately for each Division.
. The value of an Annuity Unit at the end of a Valuation Period is the value
of the Annuity Unit at the end of the previous Valuation Period,
multiplied by the net investment factor (see "Variable Account Value") for
the Valuation Period, with an offset for the 3.5% assumed interest rate
used in the Certificate's annuity tables.
The Certificate's annuity tables use a 3.5% assumed interest rate. A Variable
Annuity Payment based on a Division will be greater than the previous month, if
the Division's investment return for the month is at an annual rate greater than
3.5%. Conversely, a Variable Annuity Payment will be less than the previous
month, if the Division's investment return is at an annual rate less than 3.5%.
ANNUITY PAYMENT OPTIONS
Sixty to ninety days before the Scheduled Annuity Commencement Date, we will (1)
notify you that the Certificate is scheduled to mature, and (2) request that you
select an Annuity Payment Option.
If you have not selected an Annuity Payment Option ten days before the Annuity
Commencement Date, we will proceed as follows:
. we will extend the Annuity Commencement Date to the Annuitant's 90th
birthday, if the scheduled Annuity Commencement Date is any date before
the Annuitant's 90th birthday; or
. we will pay the Account Value, less any applicable charges and premium
taxes, in one sum to you, if the scheduled Annuity Commencement Date is
the Annuitant's 90th birthday.
The Code imposes minimum distribution requirements on the Annuity Payment Option
you choose in connection with Qualified Certificates. (See "Federal Income Tax
Matters.") We are not responsible for monitoring or advising Owners whether
they are meeting the minimum distribution requirements, unless we have received
a specific Written request to do so.
ELECTION OF ANNUITY PAYMENT OPTION
You may elect an Annuity Payment Option only if the initial annuity payment
meets the following minimum requirements:
. where you elect only Fixed or Variable Annuity Payments, the initial
payment must be at least $20; or
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. where you elect a combination of Variable and Fixed Annuity Payments, the
initial payment must be at least $10 on each basis.
If the initial annuity payment falls below these amounts, we will reduce the
frequency of annuity payments. If the initial payment still falls below these
amounts, we will make a single payment to the Annuitant or other properly
designated payee equal to your Account Value. We will deduct any applicable
Surrender Charge, uncollected Annual Certificate Fee and premium tax.
You may elect the annuity option that will apply for payments to a Beneficiary,
if you or the Annuitant dies. If you have not made this election, the
Beneficiary may do so within 60 days after your or the Annuitant's death. (See
"Death Proceeds.") Thereafter, the Beneficiary will have all the remaining
rights and powers under the Certificate and be subject to all of its terms and
conditions. We will make the first annuity payment at the beginning of the
second month following the month in which we approve the settlement request. We
will credit Annuity Units based on Annuity Unit Values at the end of the
Valuation Period that contains the 10th day prior to the beginning of that
second month.
When an Annuity Payment Option becomes effective, you must deliver the
Certificate to our Administrative Center, in exchange for a payment contract
providing for the option elected.
We provide information about the relationship between the Annuitant's gender and
the amount of annuity payments, including any requirements for gender-neutral
annuity rates and in connection with certain employee benefit plans under
"Gender of Annuitant" in the Statement. (See "Contents of Statement of
Additional Information.")
We are not permitted to make lifetime only annuity payments to Annuitants who
have reached age 70 before annuity payments begin.
AVAILABLE ANNUITY PAYMENT OPTIONS
Each Annuity Payment Option, except Option 5, is available on both a fixed and
variable basis. Option 5 is available on a fixed basis only.
OPTION 1 - LIFE ANNUITY - We make annuity payments monthly during the lifetime
of the Annuitant. These payments stop with the last payment due before the
death of the Annuitant. We do not guarantee a minimum number of payments under
this arrangement. For example, the Annuitant or other payee might receive only
one annuity payment, if the Annuitant dies before the second annuity payment.
OPTION 2 - LIFE ANNUITY WITH 120, 180, OR 240 MONTHLY PAYMENTS CERTAIN - We make
annuity payments monthly during the lifetime of an Annuitant. In addition, we
guarantee that the Beneficiary will receive monthly payments for the remainder
of the period certain, if the Annuitant dies during that period.
OPTION 3 - JOINT AND LAST SURVIVOR LIFE ANNUITY - We make annuity payments
monthly during the lifetime of the Annuitant and another payee and during the
lifetime of the survivor of the two. We stop making payments with the last
payment before the death of the survivor. We do not guarantee a minimum number
of payments under this arrangement. For example, the Annuitant or other payee
might receive only one annuity payment if both die before the second annuity
payment. The election of
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this option is ineffective if either one dies before the Annuity Commencement
Date. In that case, the survivor becomes the sole Annuitant, and we do not pay
death proceeds because of the death of the other Annuitant.
OPTION 4 - PAYMENTS FOR A DESIGNATED PERIOD - We make annuity payments monthly
to an Annuitant or other properly-designated payee, or at his or her death, to
the Beneficiary, for a selected number of years ranging from five to 40. If this
option is selected on a variable basis, the designated period may not exceed the
life expectancy of the Annuitant or other properly-designated payee. Under the
fourth option, we provide no mortality guarantee, even though we reduce Variable
Annuity Payments as a result of a charge to the Separate Account that is
partially for mortality risks. (See "Charge to the Separate Account.")
A payee receiving Variable (but not Fixed) Annuity Payments under Option 4 can
elect at any time to commute (terminate) the option and receive the current
value of the annuity in a single sum. The current value of an annuity under
Option 4 is the value of all remaining annuity payments, assumed to be level,
discounted to present value at an annual rate of 3.5%. We calculate that value
the next time we determine values after receiving your Written request for
payment. The election of a single sum payment under Option 4 is the only way
you may terminate any Annuity Payment Option once annuity payments have started.
OPTION 5 - PAYMENTS OF A SPECIFIC DOLLAR AMOUNT - We pay the amount due in equal
monthly installments of a designated dollar amount until the remaining balance
is less than the amount of one installment. The amount of each installment may
not be less than $125 or more than $200 each year per $1,000 of the original
amount due. If the person receiving these payments dies, we continue to make
the remaining payments to the Beneficiary. Payments under this option are
available on a fixed basis only. To determine the remaining balance at the end
of any month, we decrease the balance at the end of the previous month by the
amount of any installment paid during the month. We then apply, to the
remainder, interest at a rate not less than 3.5% compounded annually. If the
remaining balance at any time is less than the amount of one installment, we
will pay the balance as the final payment under the option.
The Code may treat the election of Option 4 or Option 5 in the same manner as a
surrender of the total Account Value. For tax consequences of such treatment,
see "Federal Income Tax Matters." In addition, the Code may not give tax-
deferred treatment to subsequent earnings.
ALTERNATIVE AMOUNT UNDER FIXED LIFE ANNUITY OPTIONS - In the case of Fixed
Annuity Payments under one of the first three Annuity Payment Options described
above, we make a special election available. In that case, the Owner (or the
Beneficiary, if the Owner has not elected a payment option) may elect monthly
payments based on single payment immediate fixed annuity rates we offer at that
time. This provision allows the Annuitant or other properly-designated payee to
receive the fixed annuity purchase rate in effect for new single payment
immediate annuity certificates, if it is more favorable.
In place of monthly payments, you may elect payments on a quarterly, semi-annual
or annual basis. In that case, we determine the amount of each annuity payment
on a basis consistent with that described above for monthly payments.
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TRANSFERS
After the Annuity Commencement Date, the Annuitant or other properly designated
payee may make one transfer every 180 days among the available Divisions of the
Separate Account or from the Divisions to a Fixed Annuity Payment Option. We
will assess no charge for the transfer. We do not permit transfers from a Fixed
to a Variable Annuity Payment Option. If a transfer causes the value in any
Division to fall below $500, we reserve the right to transfer the remaining
balance in that Division in the same proportion as the transfer request. We
make transfers effective at the end of the Valuation Period in which we receive
the Written transfer request at our Administrative Center. We reserve the right
to terminate or restrict transfers at any time.
DEATH PROCEEDS
DEATH PROCEEDS BEFORE THE ANNUITY COMMENCEMENT DATE
The death proceeds described below are payable to the Beneficiary under the
Certificate if any of the following events occurs before the Annuity
Commencement Date:
. the Annuitant dies, and no Contingent Annuitant has been named under a
Non-Qualified Certificate,
. the Annuitant dies, and we also receive proof of death of any named
Contingent Annuitant; or
. the Owner (including the first to die in the case of joint Owners) of a
Non-Qualified Certificate dies, regardless of whether the deceased Owner
was also the Annuitant. (However, if the Beneficiary is the Owner's
surviving spouse, or the Owner's surviving spouse is a joint Owner, the
surviving spouse may elect to continue the Certificate as described later
in this Section).
If the deceased Owner was a joint Owner, we will pay the death proceeds to the
surviving joint Owner. In this case, we will treat the surviving joint Owner as
the Beneficiary, and we will not recognize any other designation of Beneficiary.
However, joint Owners may provide written instructions to pay death proceeds in
a different manner.
The death proceeds, before deduction of any premium taxes and other applicable
tax, will equal the greatest of:
. the sum of all net purchase payments made (less any premium taxes and
other applicable tax we deducted previously and all prior partial
withdrawals),
. the Owner's Account Value as of the end of the Valuation Period in which
we receive, at our Administrative Center, proof of death and the Written
request as to the manner of payment; or
. the "highest anniversary value" before the date of death, as defined
below.
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The highest anniversary value before the date of death will be determined as
follows:
(a) First, we will calculate the Account Values at the end of each of the
past Certificate Anniversaries that occurs before the deceased's 81st
birthday (We will thereafter use only the highest of the Certificate
Anniversary Account Values that occurred before the deceased's 81st
birthday.),
(b) Second, we will increase each of the Account Values by the amount of net
purchase payments the Owner has made since the end of such Certificate
Years; and
(c) Third, we will reduce the result by the amount of any withdrawals the
Owner has made since the end of such Certificate Years.
The highest anniversary value will be an amount equal to the highest of such
values. Net purchase payments are purchase payments less applicable premium
taxes deducted at the time the purchase payment is made.
The death proceeds become payable to the Beneficiary when we receive:
. proof of the Owner's or Annuitant's death, and
. a Written request from the Beneficiary specifying the manner of payment.
If the Owner has not already done so, the Beneficiary may, within 60 days after
the date the death proceeds become payable, elect to receive the death proceeds
as (1) a single sum or (2) in the form of one of the Annuity Payment Options
provided in the Certificate. (See "Annuity Payment Options.") If we do not
receive a request specifying the manner of payment, we will make a single sum
payment, based on values we determine at that time.
If the Owner under a Non-Qualified Certificate dies before the Annuity
Commencement Date, we will distribute all amounts payable under the Certificate
in accordance with the following rules:
. We will distribute all amounts:
(a) within five years of the date of death; or
(b) if the Beneficiary elects, as annuity payments, beginning within one
year of the date of death and continuing over a period not extending
beyond the life or life expectancy of the Beneficiary.
. If the Beneficiary is the Owner's surviving spouse, the spouse may elect
to continue the Certificate as the new Owner. If the original Owner was
the Annuitant, the surviving spouse may also elect to become the new
Annuitant. This election is also available to the surviving spouse who is
a joint Owner, even if the surviving spouse is not the Beneficiary. In
this case, we will treat the surviving spouse as the Beneficiary, and we
will not recognize any other designation of Beneficiary.
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. If the Owner is not a natural person, these distribution requirements
apply at the death of the primary Annuitant, within the meaning of the
Code. Under a parallel section of the Code, similar requirements apply to
retirement plans for which we issue Qualified Certificates.
Failure to satisfy the requirements described in this Section may result in
serious adverse tax consequences.
DEATH PROCEEDS AFTER THE ANNUITY COMMENCEMENT DATE
If the Annuitant dies after the Annuity Commencement Date, the amounts payable
to the Beneficiary or other properly designated payee are any continuing
payments under the Annuity Payment Option in effect. (See "Annuity Payment
Options.") In such case, the payee will:
. have all the remaining rights and powers under a Certificate, and
. be subject to all the terms and conditions of the Certificate.
Also, if the Annuitant dies after the Annuity Commencement Date, no previously
named Contingent Annuitant can become the Annuitant.
If the payee under a Non-Qualified Certificate dies after the Annuity
Commencement Date, we will distribute any remaining amounts payable under the
terms of the Annuity Payment Option at least as rapidly as under the method of
distribution in effect when the payee dies. If the payee is not a natural
person, this requirement applies upon the death of the primary Annuitant, within
the meaning of the Code.
Under a parallel section of the Code, similar requirements apply to retirement
plans for which we issue Qualified Certificates.
Failure to satisfy requirements described in this Section may result in serious
adverse tax consequences.
PROOF OF DEATH
We accept the following as proof of any person's death:
. a certified death certificate,
. a certified decree of a court of competent jurisdiction as to the finding
of death,
. a written statement by a medical doctor who attended the deceased at the
time of death; or
. any other proof satisfactory to us.
Once we have paid the death proceeds, the Certificate terminates, and our
obligations are complete.
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CHARGES UNDER THE CERTIFICATES
PREMIUM TAXES
When applicable, we will deduct premium taxes imposed by certain states. We may
deduct such amount either at the time the tax is imposed or later. We may
deduct the amount as follows:
. from purchase payment(s) when received;
. from the Owner's Account Value at the time annuity payments begin;
. from the amount of any partial withdrawal; or
. from proceeds payable upon termination of the Certificate for any other
reason, including death of the Owner or Annuitant, or surrender of the
Certificate.
If premium tax is paid, AGNY may reimburse itself for the tax when making the
deduction under the second, third, and fourth items on the list immediately
above, by multiplying the sum of Purchase Payments being withdrawn by the
applicable premium tax percentage.
Applicable premium tax rates depend upon the Owner's then-current place of
residence. Applicable rates currently range from 0% to 3.5%. The rates are
subject to change by legislation, administrative interpretations, or judicial
acts. We will not make a profit on this charge.
SURRENDER CHARGE
The Surrender Charge reimburses us for part of our expenses in distributing the
Certificates. We believe, however, that the amount of our expenses will exceed
the amount of revenues generated by the Surrender Charge. We will pay for extra
expenses out of our general surplus, which might include profits from the charge
for the assumption of mortality and expense risks.
Unless a withdrawal is exempt from the Surrender Charge (as discussed below),
the Surrender Charge is a percentage of the amount of each purchase payment that
you withdraw during the first seven years after we receive that purchase
payment. The percentage declines depending on how many years have passed since
we originally credited the withdrawn purchase payment to your Account Value, as
follows:
Surrender Charge as a
Year of Purchase Percentage of Purchase
Payment Withdrawal Payment Withdrawn
------------------ ----------------------
1st 6%
2nd 6%
3rd 5%
4th 5%
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5th 4%
6th 3%
7th 2%
Thereafter 0%
In computing the Surrender Charge, we deem withdrawals from your Account Value
to consist first of purchase payments, in order of contribution, followed by any
amounts in excess of purchase payments. The Surrender Charge will apply to the
following transactions, which we consider to be withdrawals:
. total surrender,
. partial withdrawal,
. commencement of an Annuity Payment Option; and
. termination due to insufficient Account Value.
The Surrender Charge will NOT apply to withdrawals in the following
circumstances:
. the amount of withdrawals that exceeds the cumulative amount of your
purchase payments;
. death of the Annuitant, at any age, after the Annuity Commencement Date;
. death of the Annuitant, at any age, prior to the Annuity Commencement
Date, provided no Contingent Annuitant survives;
. death of the Owner, including the first to die in the case of joint Owners
of a Non-Qualified Certificate;
. annuitization over at least five years, or life contingent annuitization
where the life expectancy is at least five years;
. within the 30-day window under the One-Time Reinvestment Privilege;
. the surrender of a Certificate, or the withdrawal of Certificate Value
(limited to the Variable Account Value and the one year Guarantee Period)
of a Certificate, issued to owners who are bona fide full-time employees
of AGNY at the time they purchased a Certificate;
. the portion of your first withdrawal or total surrender in any Certificate
Year that does not exceed 10% of the amount of your purchase payments that
(1) have not previously been withdrawn and (2) have been credited to the
Certificate for at least one year. The minimum withdrawal is $100. (If you
make multiple withdrawals during a Certificate Year, we will recalculate
the amount eligible for the free withdrawal at the time of each
withdrawal. After the first Certificate Year, you may make non-automatic
and automatic withdrawals in the same Certificate Year subject to the 10%
limitation. For withdrawals under a systematic
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withdrawal plan, Purchase Payments credited for 30 days or more are
eligible for the 10% free withdrawal.); and
. any amounts withdrawn that are in excess of the amount permitted by the
10% free withdrawal privilege, described above, if you are withdrawing the
amounts to obtain or retain favorable tax treatment. (For example, under
certain circumstances the income and estate tax benefits of a charitable
remainder trust may be available only if you withdraw assets from a
Certificate funding the trust more rapidly than the 10% free withdrawal
privilege permits. This exception is subject to our approval.)
We do not consider a free withdrawal under any of the foregoing Surrender Charge
exceptions to be a withdrawal of purchase payments, except for purposes of
computing the 10% free withdrawal described in the preceding paragraph. The
Code may impose a penalty on distributions if the recipient is under age 59 1/2.
(See "Penalty Tax on Premature Distributions.")
Upon selection of an annuity option that does not qualify for a Surrender Charge
exception above, we use the full amount of the Owner's Account Value to pay for
the annuity option. The amount we use will be the greater of:
. the amount payable to the Owner upon full surrender of a Certificate (see
"Surrenders and Partial Withdrawals"); or
. 95% of what the amount payable to the Owner upon full surrender of a
Certificate would be without a Surrender Charge.
TRANSFER CHARGES
We describe the charges to pay the expense of making transfers under "Transfer,
Automatic Rebalancing, Surrender and Partial Withdrawal of Owner Account Value -
Transfers" and "Annuity Period and Annuity Payment Options - Transfers." These
charges are not designed to yield a profit.
ANNUAL CERTIFICATE FEE
We will deduct an Annual Certificate Fee of $30 from your Account Value at the
end of each Certificate Year before the Annuity Commencement Date. This Fee is
for administrative expenses (which do not include expenses of distributing the
Certificates). We do not expect the revenues we derive from this Fee to exceed
the expenses. Unless paid directly, the Fee will be allocated among the
Guarantee Periods and Divisions in proportion to your Account Value in each. We
will deduct the entire Fee for the year from the proceeds of any full surrender.
We reserve the right to waive the Fee.
CHARGE TO THE SEPARATE ACCOUNT
We deduct from Separate Account assets a daily charge at an annualized rate of
1.40% of the average daily net asset value of the Separate Account attributable
to the Certificates. This charge (1) offsets other administrative expenses not
covered by the Annual Certificate Fee discussed above and (2)
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compensates us for assuming mortality and expense risks under the Certificates.
The 1.40% charge divides into .15% for administrative expenses and 1.25% for the
assumption of mortality and expense risks.
We do not expect to earn a profit on that portion of the charge that is for
administrative expenses. However, we do expect to derive a profit from the
portion that is for the assumption of mortality and expense risks. There is no
necessary relationship between the amount of administrative charges deducted for
a given Certificate and the amount of expenses actually attributable to that
Certificate.
In assuming the mortality risk, we incur the risks that:
. our actuarial estimate of mortality rates may prove erroneous,
. Annuitants will live longer than expected; and
. more Owners or Annuitants than expected will die at a time when the death
benefit we guarantee is higher than the net surrender value of their
interests in the Certificates.
In assuming the expense risk, we incur the risk that the revenues from the
expense charges under the Certificates (charges that we guarantee will not
increase) will not cover our expense of administering the Certificates.
MISCELLANEOUS
Each Series pays charges and expenses out of its assets. The prospectus for
each Series describes the charges and expenses.
We reserve the right to impose charges or establish reserves for any federal or
local taxes that we incur today or may incur in the future and that we deem
attributable to the Certificates.
SYSTEMATIC WITHDRAWAL PLAN
You may make automatic partial withdrawals, at periodic intervals, through a
systematic withdrawal program. Minimum payments are $100. You may choose from
payment schedules of monthly, quarterly, semi-annual, or annual payments. You
may start, stop, increase, or decrease payments. You may elect to (1) start
withdrawals as early as 30 days after the issue date of the Certificate and (2)
take withdrawals from the Fixed Account or any Division. Systematic withdrawals
are subject to the terms and conditions applicable to other partial withdrawals,
including Surrender Charges and exceptions to Surrender Charges.
ONE-TIME REINVESTMENT PRIVILEGE
If the Account Value is at least $500, you may elect to reinvest all of the
proceeds that you liquidated from the Certificate within the previous 30 days.
In this case, we will credit the Surrender Charge and the Annual Certificate
Fee, if a new Annual Certificate Fee is not then due, back to the Certificate.
We will reinvest the proceeds at the value we next compute following the date of
receipt of the proceeds.
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Unless you request otherwise, we will allocate the proceeds among the Divisions
and Guarantee Periods in the same proportions as before surrender. You may use
this privilege only once.
REDUCTION IN SURRENDER CHARGES OR ADMINISTRATIVE CHARGES
We may reduce the Surrender Charges or administrative charges imposed under
certain Qualified Certificates for employer sponsored plans. Any such
reductions will reflect differences in costs or services and will not be
unfairly discriminatory as to any person. Differences in costs and services
result from factors such as reduced sales expenses or administrative
efficiencies relating to serving a large number of employees of a single
employer and functions assumed by the employer that we otherwise would have to
perform.
OTHER ASPECTS OF THE CERTIFICATES
Only an officer of AGNY can agree to change or waive the provisions of any
Certificate. The Certificates are non-participating, which means they are not
entitled to share in any dividends, profits or surplus of AGNY.
OWNERS, ANNUITANTS, AND BENEFICIARIES; ASSIGNMENTS
You, as the Owner of a Certificate, will be the same as the Annuitant, unless
you choose a different Annuitant when you purchase a Certificate. In the case
of joint ownership, both Owners must join in the exercise of any rights or
privileges under the Certificate. You choose the Annuitant and any Contingent
Annuitant in the application for a Certificate and may not change that choice.
You choose the Beneficiary and any Contingent Beneficiary when you purchase a
Certificate. You may change a Beneficiary or Contingent Beneficiary before the
Annuity Commencement Date, while the Annuitant is still alive. The payee may
make this change after the Annuity Commencement Date. We will make any
designation of a new Beneficiary or Contingent Beneficiary effective as of the
date it is signed. However, the change in designation will not affect any
payments we make or action we take before we receive the Written request. We
also need the Written consent of any irrevocably-named Beneficiary or Contingent
Beneficiary before we make a change. Under certain retirement programs, the law
may require spousal consent to name or change a Beneficiary to a person other
than the spouse. We are not responsible for the validity of any designation of a
Beneficiary or Contingent Beneficiary.
If the Beneficiary or Contingent Beneficiary is not living at the time we are to
make any payment, you as the Owner will be the Beneficiary. If you are not then
living, your estate will be the Beneficiary.
In the case of joint ownership, we will treat the surviving joint Owner as the
Beneficiary upon the death of a joint Owner. We will not recognize any other
designation of Beneficiary, unless joint Owners provide written instructions to
pay death proceeds in a different manner.
Owners and other payees may assign their rights under Qualified Certificates
only in certain narrow circumstances referred to in the Certificates. Owners
and other payees may assign their rights under Non-Qualified Certificates,
including their ownership rights. We take no responsibility for the validity
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of any assignment. Owners must make a change in ownership rights in Writing and
send a copy to our Administrative Center. We will make the change effective on
the date it was made. However, we are not bound by a change until the date we
record it. The rights under a Certificate are subject to any assignment of
record at our Administrative Center. An assignment or pledge of a Certificate
may have adverse tax consequences. (See "Federal Income Tax Matters.")
REPORTS
We will mail to Owners (or anyone receiving payments following the Annuity
Commencement Date), any reports and communications required by applicable law.
We will mail to the last known address of record. You should, therefore, give
us prompt written notice of any address change.
RIGHTS RESERVED BY US
Upon notice to the Owner, we may modify a Certificate to the extent necessary in
order to:
. reflect a change in the Separate Account or any Division;
. create new separate accounts;
. operate the Separate Account in any form permitted under the 1940 Act or
in any other form permitted by law;
. transfer any assets in any Division to another Division, to one or more
separate accounts, or to the Fixed Account;
. add, combine or remove Divisions in the Separate Account, or combine the
Separate Account with another separate account;
. add, restrict or remove Guarantee Periods of the Fixed Account;
. make any new Division available to you on a basis we determine;
. substitute, for the shares held in any Division, the shares of another
Series or the shares of another investment company or any other investment
permitted by law;
. make any changes required by the Code or by any other law, regulation or
interpretation to continue treatment of the Certificate as an annuity;
. commence deducting premium taxes or adjust the amount of premium taxes
deducted in accordance with state law that applies; or
. make any changes required to comply with the rules of any Series.
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<PAGE>
When required by law, we will obtain (1) your approval of changes and (2) the
approval of any appropriate regulatory authority.
PAYMENT AND DEFERMENT
We will normally pay amounts surrendered or withdrawn from a Certificate within
seven calendar days after the end of the Valuation Period in which we receive
the Written surrender or withdrawal request at our Administrative Center. A
Beneficiary may request the manner of payment of death proceeds within 60 days
after the death proceeds become payable. If we do not receive a Written request
specifying the manner of payment, we will pay the death benefit as a single sum,
normally within seven calendar days after the end of the Valuation Period that
contains the last day of the 60 day period. We reserve the right, however, to
defer payments or transfers out of the Fixed Account for up to six months.
Also, we reserve the right to defer payment of that portion of your Account
Value that is attributable to a purchase payment made by check for a reasonable
period of time (not to exceed 15 days) to allow the check to clear the banking
system.
Finally, we reserve the right to defer payment of any surrender, annuity
payment, or death proceeds out of the Variable Account Value if:
. the New York Stock Exchange is closed other than customary weekend and
holiday closings, or trading on the New York Stock Exchange is restricted
as determined by the SEC;
. the SEC determines that an emergency exists, as a result of which disposal
of securities held in a Division is not reasonably practicable or it is
not reasonably practicable to fairly determine the Variable Account Value;
or
. the SEC by order permits the delay for the protection of Owners.
We may also postpone transfers and allocations of Account Value among the
Divisions and the Fixed Account under these circumstances.
FEDERAL INCOME TAX MATTERS
GENERAL
We cannot comment on all of the federal income tax consequences associated with
the Certificates. Federal income tax law is complex. Its application to a
particular person may vary according to facts peculiar to the person.
Consequently, we do not intend for you to take this discussion as tax advice.
You should consult with a competent tax adviser before purchasing a Certificate.
We base this discussion on our understanding of the law, regulations and
interpretations existing on the date of this Prospectus. Congress, in the past,
has enacted legislation changing the tax treatment of annuities in both the
Qualified and the Non-Qualified markets and may do so again in the future. The
40
<PAGE>
Treasury Department may issue new or amended regulations or other
interpretations of existing tax law. The courts may also interpret the tax law
in ways that affect the tax treatment of annuities. Any such change could have a
retroactive effect. We suggest that you consult your legal or tax adviser on
these issues.
The discussion does not address federal estate and gift tax, social security
tax, or any state or local tax consequences associated with the Certificates.
NON-QUALIFIED CERTIFICATES
Purchase Payments. Purchasers of a Certificate that does not qualify for
special tax treatment and is "Non-Qualified" may not deduct from their gross
income the amount of purchase payments made.
Tax Deferral Before Annuity Commencement Date. Owners who are natural persons
are not taxed currently on (1) increases in their Account Value resulting from
interest earned in the Fixed Account, or (2) the investment experience of the
Separate Account so long as the Separate Account complies with certain
diversification requirements. These requirements mean that the Separate Account
must invest in Series that are "adequately diversified" in accordance with
Treasury Department regulations. We do not control the Series, but we have
received commitments from the investment advisers to the Series to use their
best efforts to operate the Series in compliance with these diversification
requirements. A Certificate investing in a Series that failed to meet the
diversification requirements would subject Owners to current taxation of income
in the Certificate for the period of such diversification failure (and any
subsequent period). Income means the excess of the Account Value over the
Owner's investment in the Certificate (discussed below).
Control over allocation of values among different investment alternatives may
cause Owners or persons receiving annuity payments to be treated as the owners
of the Separate Account's assets for tax purposes. However, current regulations
do not provide guidance as to how to avoid this result. We reserve the right to
amend the Certificates in any way necessary to avoid this result. The Treasury
Department has stated that it may establish standards through regulations or
rulings. These standards may apply only prospectively, although they could
apply retroactively if the Treasury Department considers the standards not to
reflect a new position.
Owners that are not natural persons - that is, Owners such as corporations - are
taxed currently on annual increases in their Account Value, unless an exception
applies. Exceptions apply for, among other things, Owners that are not natural
persons but that hold a Certificate as an agent for a natural person.
Taxation of Annuity Payments. Part of each annuity payment received after the
Annuity Commencement Date is excludible from gross income.
In the case of Fixed Annuity Payments, the excludible portion is found by
multiplying:
. the amount paid by,
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. the ratio of the investment in the Certificate (discussed below) to the
expected return under the Fixed Annuity Payment Option.
In the case of Variable Annuity Payments, the excludible portion is the
investment in the Certificate divided by the number of expected payments.
In both cases, the remaining portion of each annuity payment, and all payments
made after the investment in the Certificate has been reduced to zero, are
included in the payee's income. Should annuity payments stop on account of the
death of the Annuitant before the investment in the Certificate has been fully
paid out, the payee is allowed a deduction for the unpaid amount. If the payee
is the Annuitant, the deduction is taken on the final tax return. If the payee
is a Beneficiary, that Beneficiary may receive the balance of the total
investment as payments are made or on the Beneficiary's final tax return. An
Owner's "investment in the Certificate" is the amount equal to the portions of
purchase payments made by or on behalf of the Owner that have not been excluded
or deducted from the individual's gross income, less amounts previously received
under the Certificate that were not included in income.
Taxation of Partial Withdrawals and Total Surrenders. Partial withdrawals from
a Certificate are includible in income to the extent that the Owner's Account
Value exceeds the investment in the Certificate. In the event you surrender a
Certificate in its entirety, the amount of your investment in the Certificate is
excludible from income, and any amount you receive in excess of your investment
in the Certificate is includible in income. All annuity contracts or
certificates we issue to the same Owner during any calendar year are aggregated
for purposes of determining the amount of any distribution that is includible in
gross income.
Penalty Tax on Premature Distributions. In the case of such a distribution,
there may be imposed a federal tax penalty equal to 10% of the amount treated as
taxable income. The penalty tax will not apply, however, to distributions:
. made on or after the recipient reaches age 59 1/2,
. made on account of the recipient's becoming disabled,
. that are made after the death of the Owner before the Annuity Commencement
Date or of the payee after the Annuity Commencement Date (or if such
person is not a natural person, that are made after the death of the
primary Annuitant, as defined in the Code); or
. that are part of a series of substantially equal periodic payments made at
least annually over the life (or life expectancy) of the Annuitant or the
joint life (or joint life expectancies) of the Annuitant and the
Beneficiary, provided such payments are made for a minimum of 5 years and
the distribution method is not changed before the recipient reaches age 59
1/2 (except in the case of death or disability).
Premature distributions may result from an early Annuity Commencement Date, an
early surrender, partial withdrawal from or assignment of a Certificate, or the
early death of an Annuitant, unless the third clause listed above applies.
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Payment of Death Proceeds. Special rules apply to the distribution of any death
proceeds payable under the Certificate. (See "Death Proceeds.")
Assignments and Loans. An assignment, loan, or pledge under a Non-Qualified
Certificate is taxed in the same manner as a partial withdrawal, as described
above. Repayment of a loan or release of an assignment or pledge is treated as
a new purchase payment.
INDIVIDUAL RETIREMENT ANNUITIES ("IRAS")
Purchase Payments. Individuals who are not active participants in a tax
qualified retirement plan may, in any year, deduct from their taxable income
purchase payments for an IRA equal to the lesser of $2,000 or 100% of the
individual's earned income. In the case of married individuals filing a joint
return, the deduction will, in general, be the lesser of $4,000 or 100% of the
combined earned income of both spouses, reduced by any deduction for an IRA
purchase payment allowed to the spouse. Single persons who participate in a
tax-qualified retirement plan and who have adjusted gross income not in excess
of $31,000 may fully deduct their IRA purchase payments. Those who have
adjusted gross income in excess of $41,000 will not be able to deduct purchase
payments. For those with adjusted gross income in the range between $31,000 and
$41,000, the deduction decreases to zero, based on the amount of income.
Beginning in 2000, that income range will increase, as follows:
--------------------------------------------------------------------------
2000 2001 2002 2003 2004 2005 and
thereafter
--------------------------------------------------------------------------
$32,000 $33,000 $34,000 $40,000 $45,000 $50,000
to to to to to to
$42,000 $43,000 $44,000 $50,000 $55,000 $60,000
--------------------------------------------------------------------------
Similarly, the otherwise deductible portion of an IRA purchase payment will be
phased out, in the case of married individuals filing joint tax returns, with
adjusted gross income between $51,000 and $61,000, and in the case of married
individuals filing separately, with adjusted gross income between $0 and
$10,000. (A husband and wife who file separate returns and live apart at all
times during the taxable year are not treated as married individuals.)
Beginning in 2000, the income range over which the otherwise deductible portion
of an IRA purchase payment will be phased out for married individuals filing
joint tax returns will increase as follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
2000 2001 2002 2003 2004 2005 2006 2007 and
thereafter
--------------------------------------------------------------------------------------------------
$52,000 $53,000 $54,000 $60,000 $65,000 $70,000 $ 75,000 $80,000
to to to to to to to to
$62,000 $63,000 $64,000 $70,000 $75,000 $80,000 $85,000 $100,000
--------------------------------------------------------------------------------------------------
</TABLE>
A married individual filing a joint tax return, who is not an active participant
in a tax-qualified retirement plan, but whose spouse is an active participant in
such a plan, may, in any year, deduct from his or her taxable income purchase
payments for an IRA equal to the lesser of $2,000 or 100% of the individual's
earned income. For the individual, the adjusted gross income range over which
the otherwise deductible portion of an IRA purchase payment will be phased out
is $150,000 to $160,000.
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Tax Free Rollovers. Amounts may be transferred, in a tax-free rollover, from
(1) a tax-qualified plan to an IRA or (2) from one IRA to another IRA if, the
transfer meets certain conditions. All taxable distributions ("eligible
rollover distributions") from tax qualified plans are eligible to be rolled over
with the exception of:
. annuities paid over a life or life expectancy,
. installments for a period of ten years or more; and
. required minimum distributions under section 401(a)(9) of the Code.
Rollovers may be accomplished in two ways. First, we may pay an eligible
rollover distribution directly to an IRA (a "direct rollover"). Second, we may
pay the distribution directly to the Annuitant and then, within 60 days of
receipt, the Annuitant may roll the amount over to an IRA. However, any amount
that was not distributed as a direct rollover will be subject to 20% income tax
withholding.
Distributions from an IRA. Amounts received under an IRA as annuity payments,
upon partial withdrawal or total surrender, or on the death of the Annuitant,
are included in the Annuitant's or other recipients' income. If nondeductible
purchase payments have been made, a pro rata portion of such distributions may
not be includible in income. A 10% penalty tax is imposed on the amount
includible in gross income from distributions that occur before the Annuitant
reaches age 59 1/2 and that are not made on account of death or disability, with
certain exceptions. These exceptions include:
. distributions that are part of a series of substantially equal periodic
payments made at least annually over the life (or life expectancy) of the
Annuitant or the joint lives (or joint life expectancies) of the Annuitant
and the Beneficiary; provided such payments are made for a minimum of 5
years and the distribution method is not changed before the recipient
reaches age 59 1/2 (except in the case of death or disability),
. distributions for medical expenses in excess of 7.5% of the Annuitant's
adjusted gross income and withdrawals for medical insurance (without
regard to the 7.5% AGI floor) if the individual has received unemployment
compensation under federal or state law for at least 12 consecutive weeks
under certain conditions,
. distributions for qualified first-time home purchases for the individual,
a spouse, children, grandchildren, or ancestor of the individual or the
individual's spouse, subject to a $10,000 lifetime maximum; and
. distributions for higher education expenses for the individual, a spouse,
children, or grandchildren.
Distributions of minimum amounts required by the Code must commence by April 1
of the calendar year following the calendar year in which the Annuitant reaches
age 70 1/2 or retires (whichever is later). Additional distribution rules apply
after the death of the Annuitant. These rules are similar to those governing
distributions on the death of an Owner (or other payee during the Annuity
Period) under a
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Non-Qualified Certificate. (See "Death Proceeds.") Failure to comply with the
minimum distribution rules will result in a penalty tax of 50% of the amount by
which the minimum distribution required exceeds the actual distribution.
ROTH IRAS
Beginning in 1998, individuals may purchase a new type of non-deductible IRA,
known as a Roth IRA. Purchase payments for a Roth IRA are limited to $2,000 per
year. This permitted contribution is phased out for adjusted gross income
between $95,000 and $110,000 in the case of single taxpayers, between $150,000
and $160,000 in the case of married taxpayers filing joint returns, and between
$0 and $10,000 in the case of married taxpayers filing separately. An overall
$2,000 annual limitation continues to apply to all of a taxpayer's IRA
contributions, including Roth IRAs and non-Roth IRAs.
An individual may make a rollover contribution from a non-Roth IRA to a Roth
IRA, unless the individual has adjusted gross income over $100,000 or the
individual is a married taxpayer filing a separate return. The individual must
pay tax on any portion of the IRA being rolled over that represents income or a
previously deductible IRA contribution. There are no similar limitations on
rollovers from a Roth IRA to another Roth IRA.
Qualified distributions from Roth IRAs are entirely tax-free. A qualified
distribution requires that (1) the individual has held the Roth IRA for at least
five years and (2) the distribution is made either after the individual reaches
age 59 1/2, on the individual's death or disability, or as qualified first-time
home purchase. Qualified Distributions for a qualified first-time home
purchase, are subject to a $10,000 lifetime maximum for the individual, a
spouse, child, grandchild, or ancestor of such individual or the individual's
spouse.
SIMPLIFIED EMPLOYEE PENSION PLANS
Eligible employers may establish an IRA plan known as a simplified employee
pension plan ("SEP"), if certain requirements are met. An employee may make
contributions to a SEP in accordance with the rules applicable to IRAs discussed
above. Employer contributions to an employee's SEP are deductible by the
employer and are not currently includible in the taxable income of the employee,
provided that total employer contributions do not exceed the lesser of 15% of an
employee's compensation or $30,000.
SIMPLE RETIREMENT ACCOUNTS
Eligible employers may establish an IRA plan known as a simple retirement
account ("SRA"), if they meet certain requirements. Under an SRA, the employer
contributes elective employee compensation deferrals up to a maximum of $6,000 a
year to the employee's SRA. The employer must, in general, make a fully vested
matching contribution for employee deferrals up to a maximum of 3% of
compensation.
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OTHER QUALIFIED PLANS
Purchase Payments. Purchase payments made by an employer under a pension,
profit sharing, or annuity plan qualified under section 401 or 403(a) of the
Code, not in excess of certain limits, are deductible by the employer. The
purchase payments are also excluded from the current income of the employee.
Distributions Before the Annuity Commencement Date. Purchase payments
includible in an employee's taxable income (less any amounts previously received
that were not includible in the employee's taxable income) represent the
employee's "investment in the Certificate." Amounts received before the Annuity
Commencement Date under a Certificate in connection with a section 401 or 403(a)
plan are generally allocated on a pro-rata basis between the employee's
investment in the Certificate and other amounts. A lump-sum distribution will
not be includible in income in the year of distribution, if the employee
transfers, within 60 days of receipt, all amounts received (less the employee's
investment in the Certificate), to another tax-qualified plan, to an individual
retirement account or an IRA in accordance with the rollover rules under the
Code.
However, any amount that is not distributed as a direct rollover will be subject
to 20% income tax withholding. (See "Tax Free Rollovers.") Special tax
treatment may be available, for tax years beginning before December 31, 1999, in
the case of certain lump-sum distributions that are not rolled over to another
plan or IRA.
A 10% penalty tax is imposed on the amount includible in gross income from
distributions that occur before the employee reaches age 59 1/2 and that
are not made on account of death or disability, with certain exceptions.
These exceptions include distributions that are:
. part of a series of substantially equal periodic payments made at least
annually beginning after the employee separates from service and made over
the life (or life expectancy) of the employee or the joint lives (or joint
life expectancies) of the employee and the Beneficiary, provided such
payments are made for at least 5 years and the distribution method is not
changed before the recipient reaches age 59 1/2 (except in the case of
death or disability),
. made after the employee's separation from service on account of early
retirement after attaining age 55,
. made to pay for qualified higher education or first-time home buyer
expenses,
. made to an alternate payee pursuant to a qualified domestic relations
order, if the alternate payee is the spouse or former spouse of the
employee; or
. distributions for medical expenses in excess of 7.5% of the Annuitant's
adjusted gross income and withdrawals for medical insurance (without
regard to the 7.5% AGI floor) if the individual has received unemployment
compensation under federal or state law for at least 12 consecutive weeks
under certain conditions.
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<PAGE>
Annuity Payments. A portion of annuity payments received under Certificates for
section 401 and 403(a) plans after the Annuity Commencement Date may be
excludible from the employee's income, in the manner discussed above, in
connection with Variable Annuity Payments, under "Non-Qualified Certificates -
Taxation of Annuity Payments." The difference is that, here, the number of
expected payments is determined under a provision in the Code. Distributions of
minimum amounts required by the Code generally must commence by April 1 of the
calendar year following the calendar year in which the employee reaches age 70
1/2 (or retires, if later). Failure to comply with the minimum distribution
rules will result in a penalty tax of 50% of the amount by which the minimum
distribution required exceeds the actual distribution.
Self-Employed Individuals. Various special rules apply to tax-qualified plans
established by self-employed individuals.
PRIVATE EMPLOYER UNFUNDED DEFERRED COMPENSATION PLANS
Purchase Payments. Private taxable employers may establish unfunded, Non-
Qualified deferred compensation plans for a select group of management or highly
compensated employees and/or for independent contractors. To avoid current
taxation these benefits must be subject to a substantial risk of forfeiture.
These types of programs allow individuals to defer (1) receipt of up to 100% of
compensation that would otherwise be includible in income and (2) payment of
federal income taxes on the amounts.
Deferred compensation plans represent a contractual promise on the part of the
employer to pay current compensation at some future time. The Certificate is
owned by the employer and is subject to the claims of the employer's creditors.
The individual has no right or interest in the Certificate and is entitled only
to payment from the employer's general assets in accordance with plan
provisions. Purchase payments are not currently deductible by the employer until
benefits are included in the taxable income of the employee.
Taxation of Distributions. Amounts that an individual receives from a private
employer deferred compensation plan are includible in gross income for the
taxable year in which such amounts are paid or otherwise made available.
FEDERAL INCOME TAX WITHHOLDING AND REPORTING
Amounts distributed from a Certificate, to the extent includible in taxable
income, are subject to federal income tax withholding. In some cases, if you
own more than one Qualified annuity contract or certificate, the contracts or
certificates may be considered together to determine whether the federal tax law
requirement for minimum distributions after age 70 1/2, or retirement in
appropriate circumstances, has been satisfied. You may rely on distributions
from another annuity contract or from this Certificate to satisfy the minimum
distribution requirement under a Qualified Certificate we issued. However, you
must sign a waiver releasing us from any liability to you for not calculating
and reporting the amount of taxes and penalties payable for failure to make
required minimum distributions under the Certificate.
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<PAGE>
TAXES PAYABLE BY AGNY AND THE SEPARATE ACCOUNT
AGNY is taxed as a life insurance company under the Code. The operations of the
Separate Account are part of the total operations of AGNY and are not taxed
separately. Under existing federal income tax laws, AGNY is not taxed on
investment income derived by the Separate Account (including realized and
unrealized capital gains) with respect to the Certificates. AGNY reserves the
right to allocate to the Certificates any federal, state or other tax liability
that may result in the future from maintenance of the Separate Account or the
Certificates.
Certain Series may elect to pass through to AGNY any taxes withheld by foreign
taxing jurisdictions on foreign source income. Such an election will result in
additional taxable income and income tax to AGNY. The amount of additional
income tax, however, may be more than offset by credits for the foreign taxes
withheld that the Series will also pass through. These credits may provide a
benefit to AGNY.
DISTRIBUTION ARRANGEMENTS
Individuals who sell the Certificates will be licensed by state insurance
authorities as agents of AGNY. The individuals will also be registered
representatives of (1) American General Securities Incorporated ("AGSI"), the
principal underwriter of the Certificates, (2) Van Kampen Funds Inc. ("VK
Funds"), or (3) other broker-dealer firms. However, some individuals may be
representatives of firms that are exempt from broker-dealer regulation. AGSI,
VK Funds and any non-exempt broker-dealer firms are registered with the
Securities and Exchange Commission under the Securities Exchange Act of 1934 as
broker-dealers and are members of the National Association of Securities
Dealers, Inc.
AGSI is an affiliate of AGNY. AGSI's principal business address is 2727 Allen
Parkway, Houston, Texas 77019-2191.
AGNY offers the Certificates on a continuous basis. AGNY and VK Funds have
entered into certain revenue and cost-sharing arrangements in connection with
marketing the Certificates.
AGNY compensates VK Funds and other broker-dealers that sell the Certificates
according to one or more compensation schedules. The schedules provide for
commissions of up to 6.0% of purchase payments that Owners make. Subject to
approval by the New York State Insurance Department, AGNY may also pay "trail"
commissions of up to 0.75% of Owner Account Value. AGNY also has agreed to pay
VK Funds for its promotional activities, such as solicitation of selling group
agreements between broker-dealers and AGNY, agent appointments with AGNY,
printing and development of sales literature to be used by AGNY appointed agents
and related marketing support, and related special promotional campaigns. From
time to time, VK Funds may engage in special promotions where VK Funds pays
additional compensation to one or more of the broker-dealers that sell the
Certificates. None of these distribution expenses results in any additional
charges under the Certificates that are not described under "Charges under the
Certificates."
48
<PAGE>
SERVICES AGREEMENT
American General Life Insurance Company ("AGL") is party to a general services
agreement with AGNY. AGL, an affiliate of AGNY, is a corporation originally
organized under the laws of the state of Delaware in 1917. Its address is 2727-
A Allen Parkway, Houston, Texas 77019-2191. Under this agreement, AGL provides
services to AGNY, including most of the administrative, data processing,
systems, customer services, product development, actuarial, auditing, accounting
and legal services for AGNY and the Certificates.
LEGAL MATTERS
We are not involved in any legal matter about the Separate Account that would be
considered material to the interests of Owners. Sandra M. Smith, Associate
General Counsel of AGNY has passed upon the legality of the Certificates
described in this Prospectus. Freedman, Levy, Kroll & Simonds, Washington,
D.C., has advised AGNY on certain federal securities law matters.
YEAR 2000 CONSIDERATIONS
Internal Systems. AGNY's ultimate parent, American General Corporation
(AGC), has numerous technology systems that are managed on a decentralized
basis. AGC's Year 2000 readiness efforts are being undertaken by its key
business units with centralized oversight. Each business unit, including AGNY,
has developed and is implementing a plan to minimize the risk of a significant
negative impact on its operations.
While the specifics of the plans vary, the plans include the following
activities: (1) perform an inventory of our information technology and non-
information technology systems; (2) assess which items in the inventory may
expose us to business interruptions due to Year 2000 issues; (3) reprogram or
replace systems that are not Year 2000 ready; (4) test systems to prove that
they will function into the next century as they do currently; and (5) return
the systems to operations. As of December 31, 1998, substantially all of our
critical systems are Year 2000 ready and have been returned to operations.
However, activities (3) through (5) for certain systems are ongoing, with vendor
upgrades expected to be received during the first half of 1999.
Third Party Relationships. We have relationships with various third
parties who must also be Year 2000 ready. These third parties provide (or
receive) resources and services to (or from) AGNY and include organizations with
which we exchange information. Third parties include vendors of hardware,
software, and information services; providers of infrastructure services such as
voice and data communications and utilities for office facilities; investors;
customers; distribution channels; and joint venture partners. Third parties
differ from internal systems in that we exercise less, or no, control over Year
2000 readiness. We developed a plan to assess and attempt to reduce the risks
associated with the potential failure of third parties to achieve Year 2000
readiness. The plan includes the following activities: (1) identify and
classify third party dependencies; (2) research, analyze, and document Year 2000
readiness for critical third parties; and (3) test critical hardware and
software products and electronic interfaces. As of December 31, 1998, AGC has
identified and assessed
49
<PAGE>
approximately 700 critical third party dependencies, including those relating to
AGNY. A more detailed evaluation will be completed during first quarter 1999 as
part of our contingency planning efforts. Due to the various stages of third
parties' Year 2000 readiness, our testing activities will extend through 1999.
Contingency Plans. AGNY and its affiliates have commenced contingency
planning to reduce the risk of Year 2000-related business failures. The
contingency plans, which address both internal systems and third party
relationships, include the following activities: (1) evaluate the consequences
of failure of business processes with significant exposure to Year 2000 risk;
(2) determine the probability of a Year 2000-related failure for those processes
that have a high consequence of failure; (3) develop an action plan to complete
contingency plans for those processes that rank high in consequence and
probability of failure; and (4) complete the applicable action plans. We are
currently developing contingency plans and expect to substantially complete all
contingency planning activities during the second quarter of 1999.
Risks and Uncertainties. Based on our plans to make internal systems ready
for Year 2000, to deal with third party relationships, and to develop
contingency actions, we believe that we will experience at most isolated and
minor disruptions of business processes following the turn of the century. Such
disruptions are not expected to have a material effect on AGNY's future results
of operations, liquidity, or financial condition. However, due to the size and
complexity of this project, risks and uncertainties exist, and we cannot predict
a most reasonably likely worst case scenario. If conversion of our internal
systems is not completed on a timely basis (due to non-performance by
significant third-party vendors, lack of qualified personnel to perform the Year
2000 work, or other unforeseen circumstances in completing our plans), or if
critical third parties fail to achieve Year 2000 readiness on a timely basis,
the Year 2000 issues could have a material adverse impact on our operations
following the turn of the century.
Costs. Through December 31, 1998, AGNY has incurred, and anticipates that
it will continue to incur, costs for internal staff, third-party vendors, and
other expenses to achieve Year 2000 readiness. The cost of activities related
to Year 2000 readiness has not had a material adverse effect on our results of
operations or financial condition. In addition, we have elected to accelerate
the planned replacement of certain systems as part of the Year 2000 plans.
Costs of the replacement systems are not passed to Divisions of the Separate
Account.
OTHER INFORMATION ON FILE
We have filed a Registration Statement with the Securities and Exchange
Commission under the Securities Act of 1933 for the Certificates discussed in
this Prospectus. We have not included all of the information in the
Registration Statement and its exhibits. Statements contained in this
Prospectus concerning the group master contract, Certificates and other legal
instruments are intended to be summaries. For a complete statement of their
terms, you should refer to the documents that we filed with the Securities and
Exchange Commission.
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We will send you a Statement on request without charge. Its contents are as
follows:
CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
General Information.................................................... 2
Regulation and Reserves................................................ 2
Independent Auditors................................................... 3
Services............................................................... 4
Principal Underwriter.................................................. 4
Annuity Payments....................................................... 4
Gender of Annuitant.................................................. 4
Misstatement of Age or Gender and Other Errors...................... 5
Change of Investment Adviser or Investment Policy...................... 5
Performance Data for the Divisions..................................... 5
Average Annual Total Return Calculations.............................. 5
Total Return Calculations (without Surrender
Charge or Annual Contract Fee)..................................... 6
Cumulative Total Return Calculations (without
Surrender Charge or Annual Contract Fee)........................... 6
Hypothetical Performance.............................................. 7
Yield Calculations.................................................... 9
Money Market Division Yield and Effective
Yield Calculations................................................. 10
Performance Comparisons............................................... 10
Effect of Tax-Deferred Accumulation.................................... 11
Financial Statements................................................... 12
Index to Financial Statements.......................................... 13
51
<PAGE>
(THIS DOCUMENT IS NOT PART OF A PROSPECTUS)
INDIVIDUAL RETIREMENT ANNUITY DISCLOSURE STATEMENT
INTRODUCTION
THIS DISCLOSURE STATEMENT IS DESIGNED FOR OWNERS OF IRAs ISSUED BY AMERICAN
GENERAL LIFE INSURANCE COMPANY OF NEW YORK ON OR AFTER APRIL 30, 1999.
This Disclosure Statement is not part of your certificate but contains general
and standardized information which must be furnished to each person who is
issued an Individual Retirement Annuity. You must refer to your certificate to
determine your specific rights and obligations thereunder.
REVOCATION
If you are purchasing a new or rollover IRA, then if for any reason you, as a
recipient of this Disclosure Statement, decide within 20 days from the date your
certificate is delivered that you do not desire to retain your IRA, written
notification to the Company must be mailed, together with your certificate,
within that period. If such notice is mailed within 20 days, current
certificate value or contributions if required, without adjustments for any
applicable sales commissions or administrative expenses, will be refunded.
MAIL NOTIFICATION OF REVOCATION AND YOUR CERTIFICATE TO:
American General Life Insurance Company of New York
Administrative Center
P. O. Box 1401
Houston, Texas 77251-1401
(Phone No. (800) 281-8289).
ELIGIBILITY
Under Internal Revenue Code ("Code") Section 219, if you are not an active
participant (see A. below), you may make a contribution of up to the lesser of
$2,000 or 100% of compensation and take a deduction for the entire amount
contributed. If you are a married individual filing a joint return, and your
compensation is less than your spouse's, the total deduction will, in general,
be the lesser of $4,000 or 100% of the combined earned income of both spouses,
reduced by any deduction for an IRA purchase payment allowed to your spouse. If
you are an active participant, but have an adjusted gross income (AGI) below a
certain level (see B. below), you may still make a deductible contribution. If,
however, you or your spouse is an active participant and your combined AGI is
above the specified level, the amount of the deductible contribution you may
make to an IRA will be phased down and eventually eliminated.
A. ACTIVE PARTICIPANT
You are an "active participant" for a year if you are covered by a retirement
plan. You are covered by a "retirement plan" for a year if your employer or
union has a retirement plan under which money is added to your account or you
are eligible to earn retirement credits. For example, if you are covered under
a profit-sharing plan, certain government plans, a salary reduction arrangement
(such as a tax sheltered annuity arrangement or a 401(k) plan), a Simplified
Employee Pension program (SEP), any Simple Retirement Account or a plan which
promises you a retirement benefit which is based upon the number of years of
service you have with the employer, you are likely to be an active participant.
Your Form W-2 for the year should indicate your participation status.
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You are an active participant for a year even if you are not yet vested in your
retirement benefit. Also, if you make required contributions or voluntary
employee contributions to a retirement plan, you are an active participant. In
certain plans, you may be an active participant even if you were only with the
employer for part of the year.
You are not considered an active participant if you are covered in a plan only
because of your service as 1) an Armed Forces Reservist for less than 90 days of
active service, or 2) a volunteer firefighter covered for firefighting service
by a government plan. Of course, if you are covered in any other plan, these
exceptions do not apply.
If you are married, (i) filed a separate tax return, and did not live with your
spouse at any time during the year, or (ii) filed a joint return and have a
joint AGI of less than $150,000, your spouse's active participation will not
affect your ability to make deductible contributions. If you are married and
file jointly, your deduction will be phased out between an AGI of $150,000 to
$160,000.
B. ADJUSTED GROSS INCOME (AGI)
If you are an active participant, you must look at your Adjusted Gross Income
for the year (if you and your spouse file a joint tax return, you use your
combined AGI) to determine whether you can make a deductible IRA contribution.
Your tax return will show you how to calculate your AGI for this purpose. If
you are at or below a certain AGI level, called the Threshold Level, you are
treated as if you were not an active participant and can make a deductible
contribution under the same rules as a person who is not an active participant.
If you are single, the Threshold Level is $30,000. If you are married and file
a joint tax return, the Threshold Level is $50,000. If you are married but file
a separate tax return, the Threshold Level will be $0.
For taxable years beginning in 1999, the Threshold Levels for single individuals
and for married individuals filing jointly will increase as follows:
Threshold Level
---------------
For taxable years beginning in: Single Married
- ------------------------------- ------ -------
(filing jointly)
1999 $31,000 $51,000
2000 $32,000 $52,000
2001 $33,000 $53,000
2002 $34,000 $54,000
2003 $40,000 $60,000
2004 $45,000 $65,000
2005 $50,000 $70,000
2006 $50,000 $75,000
2007 and thereafter $50,000 $80,000
A married individual filing a joint tax return, who is not an active
participant, but whose spouse is, may, in any year, make deductible IRA
contributions equal to the lesser of $2,000 or 100% of the individual's earned
income. The Threshold Level for such individual is $150,000.
If your AGI is less than $10,000 above your Threshold Level, you will still be
able to make a deductible contribution, but it will be limited in amount. The
amount by which your AGI exceeds your Threshold Level
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(AGI - Threshold Level) is called your Excess AGI. The Maximum Allowable
Deduction is $2,000. In the case of a married individual filing jointly and
earning less than his or her spouse, the maximum Allowable Deduction is the
lesser of $2,000 or the spouse's income, less any deductible IRA contributions
or contributions to a Roth IRA. You can estimate your Deduction Limit as
follows:
(Your Deduction Limit may be slightly higher if you use this formula rather than
the table provided by the IRS.)
$10,000 - Excess AGI x Maximum Allowable Deduction = Deduction Limit
--------------------
$10,000
For the taxable year beginning in 2007, the deduction limit for married
individuals filing jointly will be determined as follows:
$10,000 - Excess AGI
--------------------
$20,000 x Maximum Allowable Deduction = Deduction Limit
You must round up the result to the next highest $10 level (the next highest
number which ends in zero). For example, if the result is $1,525, you must
round it up to $1,530. If the final result is below $200 but above zero, your
Deduction Limit is $200. Your Deduction Limit cannot, in any event, exceed 100%
of your compensation.
EXAMPLE 1: Ms. Smith, a single person, is an active participant and has an
AGI of $36,619. In 1998, she would calculate her deductible IRA
contribution as follows:
Her AGI is $36,619
Her Threshold Level is $30,000
Her Excess AGI is (AGI - Threshold Level) or ($36,619 - $30,000) = $6,619
Her Maximum Allowable Deduction is $2,000
So, her IRA deduction limit is:
$10,000 - $6,619
----------------
$10,000 x $2,000 = $676 (rounded to $680)
EXAMPLE 2: Mr. and Mrs. Young file a joint tax return. Each spouse earns
more than $2,000 and one is an active participant. Their 1999 combined AGI
is $55,255. Neither spouse contributed to a Roth IRA. They may each
contribute to an IRA and calculate their deductible contributions to each
IRA as follows:
Their AGI is $55,255
Their Threshold Level is $51,000
Their Excess AGI is (AGI - Threshold Level) or
($55,255 - $51,000) = $4,255
The Maximum Allowable Deduction for each spouse is $2,000
So, each spouse may compute his or her IRA deduction limit as follows:
$10,000 - $4,255
----------------
$10,000 x $2,000 = $1,149 (rounded to $1,150)
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EXAMPLE 3: If, in Example 2, Mr. Young did not earn any compensation, each
spouse could still contribute to an IRA and calculate their deductible
contribution to each IRA as in Example 2.
EXAMPLE 4: In 1998, Mr. Jones, a married person, files a separate tax
return and is an active participant. He has $1,500 of compensation and
wishes to make a deductible contribution to an IRA.
His AGI is $1,500
His Threshold Level is $0
His Excess AGI is (AGI - Threshold Level) or ($1,500 - $0) = $1,500
His Maximum Allowable Deduction is $2,000
So, his IRA deduction limit is:
$10,000 - $1,500 x $2,000 = $1,700
----------------
$10,000
Even though his IRA deduction limit under the formula is $1,700, Mr.
Jones may not deduct an amount in excess of his compensation, so, his
actual deduction is limited to $1,500.
NON-DEDUCTIBLE CONTRIBUTIONS TO IRAs
Even if you are above the Threshold Level and thus may not make a deductible
contribution of up to $2,000 (or up to $4,000 in the case of married individuals
filing a joint return), you may still contribute up to the lesser of 100% of
compensation or $2,000 to an IRA ($4,000 in the case of married individuals
filing a joint return). The amount of your contribution which is not deductible
will be a non-deductible contribution to the IRA. You may also choose to make a
contribution non-deductible even if you could have deducted part or all of the
contribution. Interest or other earnings on your IRA contribution, whether from
deductible or non-deductible contributions, will not be taxed until taken out of
your IRA and distributed to you.
If you make a non-deductible contribution to an IRA, you must report the amount
of the non-deductible contribution to the IRS on Form 8606 as a part of your tax
return for the year.
You may make a $2,000 contribution (or up to $4,000 in the case of married
individuals filing a joint return) at any time during the year, if your
compensation for the year will be at least $2,000 (or up to $4,000 in the case
of married individuals filing a joint return), without having to know how much
will be deductible. When you fill out your return, you may then figure out how
much is deductible.
You may withdraw an IRA contribution made for a year any time before April 15 of
the following year. If you do so, you must also withdraw the earnings
attributable to that portion and report the earnings as income for the year for
which the contribution was made. If some portion of your contribution is not
deductible, you may decide either to withdraw the non-deductible amount, or to
leave it in the IRA and designate that portion as a non-deductible contribution
on your tax return.
IRA DISTRIBUTIONS
Generally, IRA distributions which are not rolled over (see "Rollover IRA
Rules," below) are included in your gross income in the year they are received.
Non-deductible IRA contributions, however, are made using income which has
already been taxed (that is, they are not deductible contributions). Thus, the
portion of the IRA distributions consisting of non-deductible contributions will
not be taxed again when received by you. If you make any non-deductible IRA
contributions, each distribution from your IRA(s) will consist of a non-taxable
portion (return of deductible contributions, if any, and account earnings).
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<PAGE>
Thus, you may not take a distribution which is entirely tax-free. The following
formula is used to determine the non-taxable portion of your distributions for a
taxable year:
Remaining
Non-Deductible Contributions
----------------------------
Year-End Total IRA Balances x Total Distributions = Nontaxable Distributions
(for the year) (for the year)
To figure the year-end total IRA balance, you treat all of your IRAs as a single
IRA. This includes all regular IRAs (whether accounts or annuities), as well as
Simplified Employee Pension (SEP) IRAs, and Rollover IRAs. You also add back
the distributions taken during the year.
EXAMPLE: An individual makes the following contributions to his or her IRA(s).
YEAR DEDUCTIBLE NON-DEDUCTIBLE
---- ---------- --------------
1990 $2,000
1991 1,800
1994 1,000 $1,000
1996 600 1,400
------ ------
$5,400 $2,400
Deductible Contributions: $5,400
Non-Deductible Contributions: 2,400
Earnings on IRAs: 1,200
------
Total Account Balance of IRA(s) as of 12/31/98: $9,000
(before distributions in 1998).
In 1998, the individual takes a distribution of $3,000. The total account
balance in the IRAs on 12/31/98 before 1998 distributions is $9,000. The non-
taxable portion of the distributions for 1998 is figured as follows:
Total non-deductible contributions $2,400
------
Total account balance in the IRAs, before distributions $9,000 x $3,000 = $800
Thus, $800 of the $3,000 distribution in 1998 will not be included in the
individual's taxable income. The remaining $2,200 will be taxable for 1998.
ROLLOVER IRA RULES
1. IRA TO IRA
You may withdraw, tax-free, all or part of the assets from an IRA and reinvest
them in one or more IRAs. The reinvestment must be completed within 60 days of
the withdrawal. No IRA deduction is allowed for the reinvestment. Amounts
required to be distributed because the individual has reached age 70 1/2 may not
be rolled over.
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<PAGE>
2. EMPLOYER PLAN DISTRIBUTIONS TO IRA
All taxable distributions (known as "eligible rollover distributions") from
qualified pension, profit-sharing, stock bonus and tax sheltered annuity plans
may be rolled over to an IRA, with the exception of (1) annuities paid over a
life or life expectancy; (2) installments for a period of ten years or more; and
(3) required minimum distributions under Section 401(a)(9).
Rollovers may be accomplished in two ways. First, you may elect to have an
eligible rollover distribution paid directly to an IRA (a "direct rollover").
Second, you may receive the distribution directly and then, within 60 days of
receipt, roll the amount over to an IRA. Under the law, however, any amount that
you elect not to have distributed as a direct rollover will be subject to 20%
income tax withholding, and, if you are younger than age 59 1/2, may result in a
10% excise tax on any amount of the distribution that is included in income.
Questions regarding distribution options under the Act should be directed to
your Plan Trustee or Plan Administrator, or may be answered by consulting IRS
Regulations (S)1.401(a)(31)-1, (S)1.402(c)-2T and (S)31.3405(c)-1.
PENALTIES FOR PREMATURE DISTRIBUTIONS
If you receive a distribution from your IRA before you reach age 59 1/2, an
additional tax of 10% will be imposed under Code (S)72(t), unless the
distribution (a) occurs because of your death or disability, (b) is for certain
medical care expenses or to an unemployed individual for health insurance
premiums, (c) is received as a part of a series of substantially equal payments
over your life or life expectancy, (d) is received as a part of a series of
substantially equal payments over the lives or life expectancy of you and your
beneficiary, or (e) the distribution is contributed to a rollover IRA, (f) is
used for a qualified first time home purchase for you, your spouse, children,
grandchildren, or ancestor, subject to a $10,000 lifetime maximum, or (g) is for
higher education purposes for you, your spouse, children or grandchildren.
MINIMUM DISTRIBUTIONS
Under the rules set forth in Code (S)408(b)(3) and (S)401(a)(9), you may not
leave the funds in your certificate indefinitely. Certain minimum distributions
are required. These required distributions may be taken in one of two ways: (a)
by withdrawing the balance of your certificate by a "required beginning date,"
usually April 1 of the year following the date at which you reach age 70 1/2; or
(b) by withdrawing periodic distributions of the balance in your certificate by
the required beginning date. These periodic distributions may be taken over (a)
your life; (b) the lives of you and your named beneficiary; (c) a period not
extending beyond your life expectancy; or (d) a period not extending beyond the
joint life expectancy of you and your named beneficiary.
If you do not satisfy the minimum distribution requirements, then, pursuant to
Code (S)4974, you may have to pay a 50% excise tax on the amount not distributed
as required that year.
The foregoing minimum distribution rules are discussed in detail in IRS
Publication 590, "Individual Retirement Arrangements."
REPORTING
You are required to report penalty taxes due on excess contributions, excess
accumulations, premature distributions, and prohibited transactions. Currently,
IRS Form 5329 is used to report such information to the Internal Revenue
Service.
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<PAGE>
PROHIBITED TRANSACTIONS
Neither you nor your beneficiary may engage in a prohibited transaction, as that
term is defined in Code (S)4975.
Borrowing any money from this IRA would, under Code (S)408(e)(3), cause the
certificate to cease to be an Individual Retirement Annuity and would result in
the value of the annuity being included in the owner's gross income in the
taxable year in which such loan is made.
Use of this certificate as security for a loan from the Company, if such loan
were otherwise permitted, would, under Code (S)408(e)(4), cause the portion so
used to be treated as a taxable distribution.
EXCESS CONTRIBUTIONS
Tax Code (S)4973 imposes a 6% excise tax as a penalty for an excess contribution
to an IRA. An excess contribution is the excess of the deductible and
nondeductible amounts contributed by the Owner to an IRA for that year over the
lesser of his or her taxable compensation or $2,000. (Different limits apply in
the case of a spousal IRA arrangement.) If the excess contribution is not
withdrawn by the due date of your tax return (including extensions) you will be
subject to the penalty.
IRS APPROVAL
Your certificate and IRA endorsement have been approved by the Internal Revenue
Service as a tax qualified Individual Retirement Annuity. Such approval by the
Internal Revenue Service is a determination only as to the form of the annuity
and does not represent a determination of the merits of such annuity.
This disclosure statement is intended to provide an overview of the applicable
tax laws relating to Individual Retirement Arrangements. It is not intended to
constitute a comprehensive explanation as to the tax consequences of your IRA.
AS WITH ALL SIGNIFICANT TRANSACTIONS SUCH AS THE ESTABLISHMENT OR MAINTENANCE
OF, OR WITHDRAWAL FROM AN IRA, APPROPRIATE TAX AND LEGAL COUNSEL SHOULD BE
CONSULTED. Further information may also be acquired by contacting your IRS
District Office or consulting IRS Publication 590.
FINANCIAL DISCLOSURE
(GENERATIONS VARIABLE ANNUITY, FORM NO. 96033N)
This Financial Disclosure is applicable to IRAs using a Generations Variable
Annuity (certificate form number 96033N) purchased from American General Life
Insurance Company of New York on or after April 30, 1999.
Earnings under variable annuities are not guaranteed, and depend on the
performance of the investment option(s) selected. As such, earnings cannot be
projected. Set forth below are the charges associated with such annuities.
CHARGES:
(a) A maximum annual certificate maintenance charge of $30 deducted at the
end of each certificate year.
(b) A maximum charge of $25 for each transfer, in excess of 12 free
transfers annually, of certificate value between divisions of the
Separate Account.
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<PAGE>
(c) To compensate for mortality and expense risks assumed under the
certificate, variable divisions only will incur a daily charge at an
annualized rate of 1.25% of the average Separate Account Value of the
certificate during both the Accumulation and the Payout Phase.
(d) Premium taxes, if applicable, may be charged against Accumulation Value
at time of annuitization or upon the death of the Annuitant. If a
jurisdiction imposes premium taxes at the time purchase payments are
made, the Company may deduct a charge at that time, or defer the charge
until the purchase payments are withdrawn, whether on account of a full
or partial surrender, annuitization, or death of the Annuitant.
(e) If the certificate is surrendered, or if a withdrawal is made, there may
be a Surrender Charge. The Surrender Charge equals the sum of the
following:
6% of purchase payments for surrenders and withdrawals made during the
first certificate year following receipt of the purchase payments
surrendered;
6% of purchase payments for surrenders and withdrawals made during the
second certificate year following receipt of the purchase payments
surrendered;
5% of purchase payments for surrenders and withdrawals made during the
third certificate year following receipt of the purchase payments
surrendered;
5% of purchase payments for surrenders and withdrawals made during the
fourth certificate year following receipt of the purchase payments
surrendered;
4% of purchase payments for surrenders and withdrawals made during the
fifth certificate year following receipt of the purchase payments
surrendered;
3% of purchase payments for surrenders and withdrawals made during the
sixth certificate year following receipt of the purchase payments
surrendered;
2% of purchase payments for surrenders and withdrawals made during the
seventh certificate year following receipt of the purchase payments
surrendered.
There will be no charge imposed for surrenders and withdrawals made
during the eighth and subsequent certificate years following receipt of
the purchase payments surrendered.
Under certain circumstances described in the certificate, portions of a
partial withdrawal may be exempt from the Surrender Charge.
(f) To compensate for administrative expenses, a daily charge will be
incurred at an annualized rate of 0.15% of the average Separate Account
Value of the certificate during the Accumulation and the Payout Phase.
(g) Each variable division will be charged a fee for asset management and
other expenses deducted directly from the underlying fund during the
Accumulation and Payout Phase. Total fees will range between 0.60% and
1.95%.
Page 8
<PAGE>
AMERICAN GENERAL LIFE INSURANCE COMPANY
OF NEW YORK
SEPARATE ACCOUNT E
GENERATIONS(TM)
FLEXIBLE PAYMENT VARIABLE AND FIXED GROUP DEFERRED ANNUITY
CERTIFICATES
OFFERED BY
AMERICAN GENERAL LIFE INSURANCE COMPANY
OF NEW YORK
ADMINISTRATIVE CENTER
P.O. BOX 1401, Houston, Texas 77251-1401
1-800-281-8289; (713) 831-3505
STATEMENT OF ADDITIONAL INFORMATION
Dated April 30, 1999
This Statement of Additional Information ("Statement") is not a prospectus. You
should read it with the Prospectus for American General Life Insurance Company
of New York Separate Account E (the "Separate Account"), dated April 30, 1999,
concerning flexible payment variable and fixed group deferred annuity
Generations(TM) Certificates. The Separate Account invests in certain Series of
the Van Kampen Life Investment Trust and the Morgan Stanley Dean Witter
Universal Funds, Inc. You can obtain a copy of the Prospectus for the
Certificates, and any Prospectus supplements, by contacting American General
Life Insurance Company of New York ("AGNY") at the address or telephone numbers
given above. You have the option of receiving benefits on a fixed basis through
AGNY's Fixed Account or on a variable basis through the Separate Account. Terms
used in this Statement have the same meanings as are defined in the Prospectus
under the heading "Glossary."
TABLE OF CONTENTS
General Information.................................................. 2
Regulation and Reserves.............................................. 2
Independent Auditors................................................. 3
Services............................................................. 4
Principal Underwriter................................................ 4
Annuity Payments..................................................... 4
Gender of Annuitant................................................ 4
Misstatement of Age or Gender and Other Errors..................... 5
Change of Investment Adviser or Investment Policy.................... 5
Performance Data for the Divisions................................... 5
Average Annual Total Return Calculations........................... 5
<PAGE>
Total Return Calculations (without Surrender
Charge or Annual Contract Fee).................................... 6
Cumulative Total Return Calculations (without
Surrender Charge or Annual Contract Fee).......................... 6
Hypothetical Performance............................................. 7
Yield Calculations................................................... 9
Money Market Division Yield and Effective
Yield Calculations................................................ 10
Performance Comparisons.............................................. 10
Effect of Tax-Deferred Accumulation.................................. 11
Financial Statements................................................. 12
Index to Financial Statements........................................ 13
GENERAL INFORMATION
AGNY is a stock life insurance company established under the laws of the state
of New York. The Company is a wholly-owned subsidiary of American General Life
Insurance Company ("AGL"), which in turn is a wholly-owned subsidiary of AGC
Life Insurance Company, a Missouri corporation ("AG Missouri") engaged primarily
in the life insurance business and annuity business. AG Missouri, in turn, is a
wholly-owned subsidiary of American General Corporation, a Texas holding
corporation engaged primarily in the insurance business.
REGULATION AND RESERVES
AGNY is subject to regulation and supervision by the State of New York, where it
is licensed to do business. This regulation covers a variety of areas,
including:
. benefit reserve requirements,
. adequacy of insurance company capital and surplus,
. various operational standards, and
. accounting and financial reporting procedures.
AGNY's operations and accounts are subject to periodic examination by insurance
regulatory authorities.
Under most insurance guaranty fund laws, a state can assess insurers doing
business in the state for covered insurance contract losses incurred by
insolvent companies. State laws set limits for these assessments. However, AGNY
cannot reasonably estimate the amount of any future assessments of AGNY under
these laws. Most states have the authority to excuse or defer an assessment, if
it would threaten an insurer's own financial strength.
2
<PAGE>
The federal government generally has not directly regulated the business of
insurance. However, federal initiatives often have an impact on the business in
a variety of ways. Federal measures that may adversely affect the insurance
business include:
. employee benefit regulation,
. tax law changes affecting the taxation of insurance companies or of
insurance products,
. changes in the relative desirability of various personal investment
vehicles, and
. removal of impediments on the entry of banking institutions into the
business of insurance.
Also, both the executive and legislative branches of the federal government are
considering various insurance regulatory matters. This could ultimately result
in direct federal regulation of some aspects of the insurance business. AGNY
cannot predict whether this will occur or, if it does, what the effect on AGNY
would be.
State insurance law requires AGNY to carry reserves on its books, as
liabilities, to meet its obligations under outstanding insurance contracts.
AGNY bases these reserves on assumptions about future claims experience and
investment returns, among other things.
Neither the reserve requirements nor the other aspects of state insurance
regulation provide absolute protection to holders of insurance contracts,
including the Contracts, if AGNY were to incur claims or expenses at rates
significantly higher than expected. This might happen, for example, due to a
spread of acquired immune deficiency syndrome or other infectious diseases or
catastrophes, or significant unexpected losses on its investments.
INDEPENDENT AUDITORS
The 1998 consolidated financial statements of AGNY and the financial statements
of the Generations Divisions of Separate Account E included in this Statement
were audited by Ernst & Young LLP, independent auditors, as set forth in their
reports. We include these financial statements in this Statement in reliance
upon the reports of Ernst & Young LLP that appears later on in this Statement.
Ernst & Young LLP gives its reports upon their authority as experts in
accounting and auditing. Ernst & Young LLP is located at 1221 McKinney, Suite
2400, Houston, TX 77010-2007.
3
<PAGE>
SERVICES
AGNY and American General Life Insurance Company ("AGL") are parties to a
services agreement. Most of the affiliated companies within the American
General Corporation holding company system, including certain life insurance
companies, are also parties to a similar agreement. AGL's Home Office is
located at 2727-A Allen Parkway, Houston, Texas 77019. AGL provides shared
services to AGNY at cost. These services include data processing, systems,
customer services, product development, actuarial, auditing, accounting, and
legal. AGNY paid AGL $8,276,505 in 1998.
PRINCIPAL UNDERWRITER
American General Securities Incorporated ("AGSI") is the principal underwriter
for the Contracts. AGSI also serves as principal underwriter to AGL's Separate
Account A, Separate Account D, and Separate Account VL-R. All of these other
separate accounts are unit investment trusts registered under the Investment
Company Act of 1940. AGSI, a Texas corporation, is a wholly-owned subsidiary of
AGL and a member of the National Association of Securities Dealers, Inc.
As principal underwriter for the Separate Account, AGSI expects to receive less
than $1,000 of compensation from AGNY for each of the next three fiscal years.
AGNY offers the securities under the Certificates on a continuous basis.
ANNUITY PAYMENTS
GENDER OF ANNUITANT
When annuity payments are based on life expectancy, the amount of each annuity
payment ordinarily will be higher if the Annuitant or other measuring life is a
male, as compared with a female, under an otherwise identical Certificate. This
is because, statistically, females tend to have longer life expectancies than
males.
However, Montana, and certain other jurisdictions, do not permit differences in
annuity payment rates between males and females.
In addition, employers should be aware that, under most employer-sponsored
plans, the law prohibits Certificates that make distinctions based on gender.
Under these plans, AGNY will make available Certificates with no such
differences.
4
<PAGE>
MISSTATEMENT OF AGE OR GENDER AND OTHER ERRORS
If the age or gender of an Annuitant has been misstated to us, any amount
payable will be the amount that the purchase payments paid would have purchased
at the correct age and gender. If we made any overpayments because of incorrect
information about age or gender or any error or miscalculation, we will deduct
the overpayment from the next payment or payments due. We will add any
underpayments to the next payment. We will credit or charge the amount of any
adjustment with interest at the assumed interest rate used in the Certificate's
annuity tables.
CHANGE OF INVESTMENT ADVISER OR INVESTMENT POLICY
Unless otherwise permitted by law or regulation, no Series may change the
investment adviser to any Series or any investment policy without the consent of
the shareholders. If required, we will file approval of or change of any
investment objective with the insurance department of each state where a
Certificate has been delivered. We will notify you (or, after annuity payments
start, the payee) of any material investment policy change that we have
approved. We will also notify you of any investment policy change before its
implementation by the Separate Account, if the change requires your comment or
vote.
PERFORMANCE DATA FOR THE DIVISIONS
AVERAGE ANNUAL TOTAL RETURN CALCULATIONS
Each Division may advertise its average annual total return. We calculate each
Division's average annual total return quotation under the following standard
method that the SEC prescribes:
. We take a hypothetical $1,000 investment in the Division's Accumulation
Units on the first day of the period at the maximum offering price. This
figure is the Accumulation Unit Value per unit ("initial investment").
. We calculate the ending redeemable value ("redeemable value") of that
investment at the end of the period. The redeemable value reflects the
effect of (1) any applicable Surrender Charge at the end of the period and
(2) all other recurring charges and fees applicable under the Certificate
to all Owner accounts. Other charges and fees include the Mortality and
Expense Risk Charge, the Administrative Expense Charge, and the Annual
Certificate Fee. We do not reflect any premium taxes in the calculation.
. We divide the redeemable value by the initial investment.
. We take this quotient to the Nth root (N representing the number of years
in the period), subtract 1 from the result, and express the result as a
percentage.
5
<PAGE>
INVESTMENT DIVISION SINCE DIVISION INCEPTION *
- -------------------------------------------------------------------------
Domestic Income ----
Emerging Growth 27.11 %
Enterprise 76.24 %
Government ----
Growth and Income (5.51)%
Money Market ----
Morgan Stanley Real Estate Securities (25.16)%
Strategic Stock (5.89)%
Asian Equity ----
Emerging Markets Equity ----
Equity Growth (.89)%
Global Equity (7.88)%
International Magnum (24.31)%
Fixed Income ----
High Yield ----
Mid Cap Value 1.86 %
Value (25.76)%
- ----------------------
* The dates when the Divisions commenced operations are as follows: Growth &
Income, Morgan Stanley Real Estate Securities, Strategic Stock, and Value
Divisions, May 5, 1998; Emerging Growth, Equity Growth, and Mid Cap Value
Divisions, May 28, 1998; Global Equity and International Magnum Divisions,
June 24, 1998; Enterprise Division, September 9, 1998. No information
appears in the chart for those Divisions which had not commenced operations
(received a purchase payment allocation or a transfer of Accumulation Value)
by December 31, 1998.
TOTAL RETURN CALCULATIONS (WITHOUT SURRENDER CHARGE OR ANNUAL CONTRACT FEE)
Each Division may also advertise non-standardized total return. We calculate
non-standardized total return in the same manner and for the same time periods
as standardized average annual total return, which we describe immediately
above. However, in making the redeemable value calculation, we do not deduct
any applicable Surrender Charge that we may impose at the end of the period.
This is because we assume that the Certificate will continue through the end of
each period. We also do not deduct the Annual Certificate Fee. Deducting these
charges would reduce the resulting performance results.
CUMULATIVE TOTAL RETURN CALCULATIONS (WITHOUT SURRENDER CHARGE OR ANNUAL
CONTRACT FEE)
Each Division may also advertise non-standardized cumulative total return
performance. Cumulative total return performance is the compound rate of return
on a hypothetical initial investment of $1,000 in each Division's Accumulation
Units on the first day of the period at the maximum offering price. This figure
is the Accumulation Unit value per unit ("initial investment"). Cumulative
total return figures (and the related "Growth of a $1,000 Investment" figures
set forth below) do not include the effect of any premium taxes, any applicable
Surrender Charge, or the Annual Certificate Fee. Cumulative total return
quotations reflect changes in Accumulation Unit value. We calculate these
quotations by finding the cumulative rates of return of the hypothetical initial
investment over various periods, according to the following formula, and then
expressing those rates as a percentage:
6
<PAGE>
C = (ERV/P) - 1
Where:
C = cumulative total return
P = a hypothetical initial investment of $1,000
ERV = ending redeemable value at the end of the applicable period of a
hypothetical $1,000 investment made at the beginning of the applicable
period.
HYPOTHETICAL PERFORMANCE
Each Division may advertise hypothetical performance, based on the calculations
described above, where all or a portion of the actual historical performance of
the corresponding Series in which the Division invests pre-dates the effective
date of the Division.
The tables below provide hypothetical performance information for the available
Divisions of the Separate Account based on the actual historical performance of
the corresponding Series in which each of these Divisions invests. This
information reflects all actual charges and deductions of these Series and the
Separate Account that hypothetically would have been made if the Separate
Account invested assets under the Certificates in these Series for the periods
indicated.
<TABLE>
<CAPTION>
Hypothetical Historical Average Annual Total Returns
(Through December 31, 1998)
<S> <C> <C> <C>
Since
Series
Investment Division One Year Five Years/1/ Inception/2/
- ------------------- -------- ------------- ------------
<S> <C> <C> <C>
Domestic Income (.62)% 6.05 % 5.95 %
Emerging Growth 29.54 % N/A 23.73 %
Enterprise 17.16 % 19.67% 16.57 %
Government 1.00 % 4.15% 6.77 %
Growth and Income 11.86 % N/A 17.69 %
Money Market (2.51)% 2.67% 3.74 %
Morgan Stanley Real Estate Securities (18.92)% N/A 12.45 %
Strategic Stock 8.80 % N/A 10.28 %
Asian Equity (13.83)% N/A (34.61)%
Emerging Markets Equity (31.33)% N/A (16.17)%
Equity Growth 11.59 % N/A 22.00 %
Global Equity 5.81 % N/A 12.66 %
International Magnum 1.37 % N/A 3.97 %
Fixed Income .31 % N/A 4.79 %
High Yield (2.74)% N/A 4.96 %
Mid Cap Value 8.20 % N/A 23.87 %
Value (9.57)% N/A 4.68 %
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Hypothetical Historical Total Returns
(Through December 31, 1998)
Since
Series
Investment Division One Year Five Years/1/ Inception/2/
- ------------------- -------- ------------- ------------
<S> <C> <C> <C>
Domestic Income 5.46 % 6.69 % 6.01 %
Emerging Growth 35.65 % N/A 24.55 %
Enterprise 23.26 % 20.09 % 16.62 %
Government 7.08 % 4.83 % 6.83 %
Growth and Income 17.95 % N/A 19.65 %
Money Market 3.57 % 3.39 % 3.81 %
Morgan Stanley Real Estate Securities (12.85)% N/A 13.49 %
Strategic Stock 14.89 % N/A 14.95 %
Asian Equity (7.75)% N/A (30.46)%
Emerging Markets Equity (25.27)% N/A (13.63)%
Equity Growth 17.68 % N/A 24.30 %
Global Equity 11.90 % N/A 15.13 %
International Magnum 7.45 % N/A 6.63 %
Fixed Income 6.39 % N/A 7.42 %
High Yield 3.34 % N/A 7.59 %
Mid Cap Value 14.29 % N/A 26.13 %
Value (3.49)% N/A 7.33 %
Hypothetical Historical Cumulative Total Returns
(Through December 31, 1998)
Since
Series
Investment Division One Year Five Years/1/ Inception/2/
- ------------------- -------- ------------- ------------
<S> <C> <C> <C>
Domestic Income 5.46% 38.21% 79.31 %
Emerging Growth 35.65 % N/A 115.46 %
Enterprise 23.26 % 149.71% 365.10 %
Government 7.08 % 26.58% 93.68 %
Growth and Income 17.95 % N/A 43.68 %
Money Market 3.57 % 18.11% 45.36 %
Morgan Stanley Real Estate Securities (12.85)% N/A 55.65 %
Strategic Stock 14.89 % N/A 17.51 %
Asian Equity (7.75)% N/A (48.54)%
Emerging Markets Equity (25.27)% N/A (28.07)%
Equity Growth 17.68 % N/A 54.26 %
Global Equity 11.90 % N/A 32.43 %
International Magnum 7.45 % N/A 13.65 %
Fixed Income 6.39 % N/A 15.34 %
High Yield 3.34 % N/A 15.70 %
Mid Cap Value 14.29 % N/A 58.84 %
Value (3.49)% N/A 15.14 %
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Hypothetical Historical Growth of a $1,000 Investment in the Divisions
(Through December 31, 1998)
Since
Series
Investment Division One Year Five Years/1/ Inception/2/
- ------------------- -------- ------------- ------------
<S> <C> <C> <C>
Domestic Income $1055 $1382 $1793
Emerging Growth $1356 $ N/A $2155
Enterprise $1233 $2497 $4651
Government $1071 $1266 $1937
Growth and Income $1179 $ N/A $1437
Money Market $1036 $1181 $1454
Morgan Stanley Real Estate Securities $ 872 $ N/A $1556
Strategic Stock $1149 $ N/A $1175
Asian Equity $ 922 $ N/A $ 515
Emerging Markets Equity $ 747 $ N/A $ 719
Equity Growth $1177 $ N/A $1543
Global Equity $1119 $ N/A $1324
International Magnum $1075 $ N/A $1136
Fixed Income $1064 $ N/A $1153
High Yield $1033 $ N/A $1157
Mid Cap Value $1143 $ N/A $1588
Value $ 965 $ N/A $1151
</TABLE>
__________________________
/1/ If "N/A" appears in the "Five Years" column, the Series is less than five
years old.
/2/ The inception dates for each Series corresponding to the Divisions are:
April 7, 1986 for the Money Market, Enterprise, and Government Series;
November 4, 1987 for the Domestic Income Series; July 3, 1995 for the Emerging
Growth and Morgan Stanley Real Estate Securities Series; October 1, 1996 for the
Emerging Markets Equity Series; November 23, 1996 for the Growth and Income
Series; January 2, 1997 for the Equity Growth, Global Equity, International
Magnum, Fixed Income, High Yield, Mid Cap Value, and Value Series; March 3, 1997
for the Asian Equity Series; and November 3, 1997 for the Strategic Stock
Series.
YIELD CALCULATIONS
We calculate the yields for the Domestic Income, Government, and Growth and
Income Divisions by a standard method that the SEC prescribes. The hypothetical
yields for the Domestic Income, Government, and Growth and Income Divisions,
based upon the one month period ended December 31, 1998, were (1.11)%, were
(.40)%, and (1.19)%, respectively. We calculate the yield quotation by
dividing
. the net investment income per Accumulation Unit earned during the
specified one month or 30-day period by the Accumulation Unit values on
the last day of the period, according to the following formula that
assumes a semi-annual reinvestment of income:
YIELD = 2[((a-b)/cd + 1)/6/ - 1]
a = net dividends and interest earned during the period by the Series
attributable to the Division
9
<PAGE>
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of Accumulation Units outstanding during the
period
d = the Accumulation Unit value per unit on the last day of the period
The yield of each Division reflects the deduction of all recurring fees and
charges that apply to each Division. These fees and charges include the
Mortality and Expense Risk Charge and the Administrative Expense Charge. They
do not reflect the deduction of Surrender Charges or premium taxes.
MONEY MARKET DIVISION YIELD AND EFFECTIVE YIELD CALCULATIONS
We calculate the Money Market Division's yield by a standard method that the SEC
prescribes. Under that method, we base the current yield quotation on a seven
day period and calculate that yield as follows:
. We take the net change in the Accumulation Unit value during the period.
. We divide that net change by the Accumulation Unit value at the beginning
of the period to obtain the base period return.
. We multiply the base period return by the fraction 365/7 to obtain the
current yield figure.
. We carry the current yield figure to the nearest one-hundredth of one
percent.
We do not include realized capital gains or losses and unrealized appreciation
or depreciation of the Division's Portfolio in the calculation. The Money
Market Division's hypothetical historical yield for the seven day period ended
December 31, 1998, was 3.08%.
We determine the Money Market Division's effective yield by taking the base
period return (computed as described above) and calculating the effect of
assumed compounding. The formula for the effective yield is: (base period
return +1)/365/7/-1. The Money Market Division's hypothetical historical
effective yield for the seven day period ended December 31, 1998, was 3.13%.
Yield and effective yield do not reflect the deduction of Surrender Charges or
premium taxes that we may impose when you redeem Accumulation Units.
PERFORMANCE COMPARISONS
In our advertising and sales literature, we may compare the performance of each
or all of the available Divisions of the Separate Account to the performance of
(1) other variable annuities in general or (2) particular types of variable
annuities that invest in mutual funds, or series of mutual funds, with
investment objectives similar to each of the Divisions of the Separate Account.
Lipper Analytical Services, Inc. ("Lipper") and the Variable Annuity Research
and Data Service ("VARDS(R)") are independent services that monitor and rank the
performance of variable annuity issuers in each of the major categories of
investment objectives on an industry-wide basis. Lipper's rankings
10
<PAGE>
include variable life insurance issuers as well as variable annuity issuers.
VARDS(R) rankings compare only variable annuity issuers. The performance
analyses prepared by Lipper and VARDS(R) rank such issuers on the basis of total
return. Total return assumes the reinvestment of dividends and distributions,
but does not take into consideration sales charges, redemption fees or certain
expense deductions at the separate account level. In addition, VARDS(R) prepares
risk-adjusted rankings, which consider the effects of market risk on total
return performance.
In addition, we may compare each Division's performance in advertisements and
sales literature to the following benchmarks:
. the Standard & Poor's 500 Composite Stock Price Index, an unmanaged
weighted index of 500 leading domestic companies that represents
approximately 80% of the market capitalization of the United States equity
market;
. the Dow Jones Industrial Average, an unmanaged unweighted average of 30
blue chip industrial corporations listed on the New York Stock Exchange
and generally considered representative of the United States stock market;
. the Consumer Price Index, published by the U.S. Bureau of Labor
Statistics, a statistical measure of change, over time, in the prices of
goods and services in major spending groups and generally is considered to
be a measure of inflation;
. the Lehman Brothers Government and Domestic Strategic Income Index, the
Salomon Brothers High Grade Domestic Strategic Income Index, and the
Merrill Lynch Government/Corporate Master Index, unmanaged indices that
are generally considered to represent the performance of intermediate and
long term bonds during various market cycles; and
. the Morgan Stanley Capital International Europe Australasia Far East
Index, an unmanaged index that is considered to be generally
representative of major non-United States stock markets.
EFFECT OF TAX-DEFERRED ACCUMULATION
The Certificates qualify for tax-deferred treatment on earnings. This tax-
deferred treatment increases the amount available for accumulation by deferring
taxes on any earnings until the earnings are withdrawn. The longer the taxes are
deferred, the more the potential you have for the assets under your Certificate
to grow over the term of the Certificates.
The hypothetical tables set out below illustrate this potential. The tables
compare accumulations based on a single initial purchase payment of $100,000
compounded annually under:
. a Certificate, whose earnings are not taxed until withdrawn in connection
with a full surrender, partial withdrawal, or annuitization, or
termination due to insufficient Account Value ("withdrawal of earnings")
and
11
<PAGE>
. an investment whose earnings are taxed on a current basis ("Taxable
Investment"), based on an assumed tax rate of 28%, and the assumed earning
rates specified.
5 Years 10 Years 20 Years
------- -------- --------
(7.50% earnings rate)
Certificate $143,563 $206,103 $424,785
Certificate (after Taxes) $131,365 $176,394 $333,845
Taxable Investment $130,078 $169,202 $286,294
(10.00% earnings rate)
Certificate $161,051 $259,374 $672,750
Certificate (after Taxes) $143,957 $214,749 $512,380
Taxable Investment $141,571 $200,423 $401,694
The hypothetical tables do not reflect any fees or charges under a Certificate
or Taxable Investment. However, the Certificates impose:
. a Mortality and Expense Risk Charge of 1.25%,
. a Surrender Charge (applicable to withdrawal of earnings for the first
seven Certificate years) up to a maximum of 6%,
. an Administrative Expense Charge of 0.15%, and
. an Annual Certificate Fee of $30.
A Taxable Investment could incur comparable fees or charges. Fees and charges
would reduce the return from a Certificate or Taxable Investment.
Under the Certificates, a withdrawal of earnings is subject to tax, and may be
subject to an additional 10% tax penalty before age 59 1/2.
These tables are only illustrations of the effect of tax-deferred accumulations
and are not a guarantee of future performance.
FINANCIAL STATEMENTS
Separate Account E has a total of 17 Divisions as of the date of this Statement.
The December 31, 1998 financial statements of the Generations Divisions that are
included in this Statement relate only to these 17 Divisions.
You should consider the financial statements of AGNY that we include in this
Statement primarily as bearing on the ability of AGNY to meet its obligations
under the Certificates.
12
<PAGE>
INDEX TO
FINANCIAL STATEMENTS
Page No.
I. Generations Divisions of Separate Account E Financial Statements
Report of Ernst & Young LLP, Independent Auditors...................E-1
Statement of Net Assets.............................................E-2
Statement of Operations.............................................E-2
Statement of Changes in Net Assets..................................E-3
Notes to Financial Statements.......................................E-4
II. AGNY Financial Statements - Statutory Basis
Report of Ernst & Young LLP, Independent Auditors...................F-1
Balance Sheets......................................................F-3
Statements of Operations............................................F-5
Statements of Changes in Capital and Surplus........................F-6
Statements of Cash Flows............................................F-7
Notes to Statutory Basis Financial Statements.......................F-8
13
<PAGE>
[ERNST & YOUNG LLP LOGO] . One Houston Center . Phone: 713 750 1500
Suite 2400 Fax: 713 750 1501
1221 McKinney
Houston, Texas 77010-2007
Report of Independent Auditors
Board of Directors
American General Life Insurance Company of New York
and
Certificate Owners
American General Life Insurance Company of New York
Generations Divisions
of Separate Account E
We have audited the accompanying statement of net assets of the Generations
Divisions of American General Life Insurance Company of New York (the "Company")
Separate Account E as of December 31, 1998, and the related statements of
operations and changes in net assets for the period then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1998, by correspondence with
the transfer agents. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Generations Divisions of
American General Life Insurance Company of New York Separate Account E at
December 31, 1998, and the results of its operations and changes in its net
assets for the period then ended, in conformity with generally accepted
accounting principles.
/s/ ERNST & YOUNG LLP
---------------------
ERNST & YOUNG LLP
Houston, Texas
February 10, 1999
Ernst & Young LLP is a member of Ernst & Young International, Ltd.
E-1
<PAGE>
AMERICAN GENERAL LIFE INSURANCE COMPANY OF NEW YORK
SEPARATE ACCOUNT E
STATEMENT OF NET ASSETS
December 31, 1998
ASSETS:
Investment securities - at market (cost $572,434) $ 582,326
Due from American General Life Insurance Company of New York 64
---------
NET ASSETS $ 582,390
=========
CERTIFICATE OWNER RESERVES:
Reserves for redeemable annuity certificates $ 582,390
---------
TOTAL CERTIFICATE OWNER RESERVES $ 582,390
=========
STATEMENT OF OPERATIONS
Period Ended December 31, 1998
INVESTMENT INCOME:
Dividends from mutual funds $ 1,965
Other Income 3,963
EXPENSES:
Expense and mortality fees (3,755)
---------
NET INVESTMENT INCOME 2,173
---------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized loss on investments (374)
Capital gain distributions from mutual funds 5,527
Net unrealized gain on investments 9,892
---------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 15,045
---------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 17,218
=========
SEE ACCOMPANYING NOTES.
E-2
<PAGE>
AMERICAN GENERAL LIFE INSURANCE COMPANY OF NEW YORK
SEPARATE ACCOUNT E
STATEMENT OF CHANGES IN NET ASSETS
PERIOD ENDED DECEMBER 31, 1998
OPERATIONS:
Net investment income $ 2,173
Net realized loss on investments (374)
Capital gain distributions from mutual funds 5,527
Net unrealized gain on investments 9,892
---------
Increase in net assets resulting from operations 17,218
---------
PRINCIPAL TRANSACTIONS:
Certificate purchase payments 570,772
Payments to certificate owners:
Terminations and withdrawals (5,600)
---------
Increase in net assets resulting from principal transactions 565,172
---------
TOTAL INCREASE IN NET ASSETS 582,390
NET ASSETS:
Beginning of period 0
---------
End of period $ 582,390
=========
See accompanying notes.
E-3
<PAGE>
NOTES TO FINANCIAL STATEMENTS
SEPARATE ACCOUNT E
NOTE A - ORGANIZATION
The Generations Divisions (the "Divisions") of American General Life Insurance
Company of New York Separate Account E (the "Separate Account") received their
first deposits in May, 1998. The Separate Account was established by resolution
of the Board of Directors of American General Life Insurance Company of New York
(the "Company") on November 19, 1973. From 1992 until the commencement of the
Divisions, Separate Account E was inactive, funding no contracts or certificates
and holding no assets. The Separate Account is registered under the Investment
Company Act of 1940 as a unit investment trust and at December 31, 1998
consisted of seventeen divisions. The Divisions funded by series of the Morgan
Stanley Dean Witter Universal Funds, Inc. and the Van Kampen Life Investment
Trust which are available to Generations certificate owners are as follows:
<TABLE>
<CAPTION>
<S> <C>
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS,
INC. ("MSDWUF"): VAN KAMPEN LIFE INVESTMENT TRUST ("LIT"):
(formerly, "Morgan Stanley Universal Funds, Inc. MSUF") (formerly, "Van Kampen American Capital LIT")
Asian Equity Portfolio Domestic Income Portfolio
Emerging Markets Equity Portfolio Emerging Growth Portfolio
Equity Growth Portfolio Enterprise Portfolio
Global Equity Portfolio Government Portfolio
International Magnum Portfolio Growth and Income Portfolio
Fixed Income Portfolio Money Market Portfolio
High Yield Portfolio Morgan Stanley Real Estate Securities Portfolio
Mid Cap Value Portfolio Strategic Stock Portfolio
Value Portfolio
</TABLE>
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION
The accompanying financial statements of the Divisions of the Separate Account
have been prepared on the basis of generally accepted accounting principles
("GAAP"). The accounting principles followed by the Divisions and the methods
of applying those principles are presented below or in the footnotes which
follow.
SECURITY VALUATION - The investment in shares of Morgan Stanley Dean Witter
Universal Funds, Inc. mutual funds and Van Kampen LIT mutual funds are valued at
the closing net asset value (market) per share as determined by the fund on the
day of measurement.
SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME - Security transactions
are accounted for on the date the order to buy or sell is executed (trade date).
Dividend income and distributions of capital gains are recorded on the ex-
dividend date and reinvested upon receipt. Realized gains and losses from
security transactions are determined on the basis of identified cost.
ADMINISTRATIVE EXPENSES AND MORTALITY AND EXPENSE RISK CHARGES - Deductions
for administrative expenses and mortality and expense risks assumed by the
Company are calculated daily, at an annual rate, on the daily net asset value of
the Divisions and are paid to the Company. The annual rate for the
administrative expense charge is 0.15% and the annual rate for the mortality and
expense risk charge is 1.25%. An annual certificate fee of $30 for
administrative services will be deducted from each owner's account value on the
last day of each certificate year prior to the annuity commencement date. A
surrender charge is applicable to certain withdrawal amounts pursuant to the
certificate and is payable to the Company. No certificate fees or surrender
charges were collected for the period ended December 31, 1998.
The funds pay their investment advisers, Van Kampen Asset Management, Inc.,
Morgan Stanley Dean Witter Investment Management, Inc., and Miller Anderson &
Sherrerd, LLP, a monthly fee based on each fund's average net asset value.
E-4
<PAGE>
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION -
CONTINUED
ANNUITY RESERVES - Annuity reserves are computed for currently payable
contracts according to the 1983a Individual Annuity Mortality Table projected
under Scale G factors. The assumed interest rate is 3.5 percent. Charges to
annuity reserves for mortality and expense risk experience are reimbursed to the
Company if the reserves required are less than originally estimated. If
additional reserves are required, the Company reimburses the Separate Account.
NOTE C - FEDERAL INCOME TAXES
The Company is taxed as a life insurance company under the Internal Revenue
Code and includes the operations of the Separate Account in determining its
federal income tax liability. Under existing federal income tax law, the
investment income and capital gains from sales of investments realized by the
Separate Account are not taxable. Therefore, no federal income tax provision
has been made.
NOTE D - INVESTMENTS
Fund shares are purchased at net asset value with net certificate payments
(certificate purchase payments less terminations, withdrawals and amounts
payable to the Company) and reinvestment of distributions made by the funds. The
following is a summary of fund shares owned as of December 31, 1998.
<TABLE>
<CAPTION>
Net Value of Unrealized
Asset Shares at Cost of Appreciation/
Fund Shares Value Market Shares Held (Depreciation)
<S> <C> <C> <C> <C> <C>
MORGAN STANLEY DEAN WITTER
UNIVERSAL FUNDS, INC.:
Asian Equity Portfolio 0.000 $ 5.23 $ 0 $ 0 $ 0
Emerging Markets Equity Portfolio 0.000 7.11 0 0 0
Fixed Income Portfolio 0.000 10.70 0 0 0
Global Equity Portfolio 8,964.985 13.14 117,800 116,607 1,193
Equity Growth Portfolio 10,954.536 15.10 165,414 161,060 4,354
High Yield Portfolio 0.000 10.35 0 0 0
International Magnum Portfolio 4,148.862 11.23 46,592 49,951 (3,359)
Mid Cap Value Portfolio 6,268.886 14.93 93,594 89,522 4,072
Value Portfolio 5,356.626 11.10 59,459 65,967 (6,508)
VAN KAMPEN LIT:
Domestic Income Portfolio 0.000 8.80 0 0 0
Emerging Growth Portfolio 2,190.289 22.62 49,544 40,450 9,094
Enterprise Portfolio 56.147 22.39 1,257 1,000 257
Government Portfolio 0.000 9.59 0 0 0
Growth and Income Portfolio 2,702.423 14.48 39,131 37,969 1,162
Money Market Portfolio 0.000 1.00 0 0 0
Morgan Stanley Real Estate
Securities Portfolio 322.081 13.76 4,432 4,954 (522)
Strategic Stock Portfolio 427.783 11.93 5,103 4,954 149
---------- --------- --------
Total $ 582,326 $ 572,434 $ 9,892
========== ========= ========
</TABLE>
The aggregate cost of purchases and proceeds from sales of investments for
the period ended December 31, 1998 were $578,979 and $6,168, respectively. The
cost of total investments owned at December 31, 1998 was the same for both
financial reporting and federal income tax purposes. Gross unrealized
appreciation and gross unrealized depreciation as of December 31, 1998 were
$20,281 and $10,389, respectively.
E-5
<PAGE>
SEPARATE ACCOUNT E
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE E - SUMMARY OF CHANGES IN UNITS
SUMMARY OF CHANGES IN UNITS FOR THE PERIOD ENDED DECEMBER 31, 1998
CERTIFICATES IN ACCUMULATION PERIOD:
<TABLE>
<CAPTION>
MSDWUF MSDWUF MSDWUF MSDWUF MSDWUF
Asian Equity Emerging Markets Fixed Income Global Equity Equity Growth
Portfolio Equity Portfolio Portfolio Portfolio Portfolio
<S> <C> <C> <C> <C> <C>
Outstanding at beginning of period 0.000 0.000 0.000 0.000 0.000
Purchase payments 0.000 0.000 0.000 17,827.453 22,969.247
Terminations and withdrawals 0.000 0.000 0.000 0.000 (436.537)
Transfers to annuity 0.000 0.000 0.000 0.000 0.000
Transfers between funds 0.000 0.000 0.000 0.000 0.000
---------- ---------- ----------- ----------- -----------
Outstanding at end of period 0.000 0.000 0.000 17,827.453 22,532.710
========== ========== =========== =========== ===========
MSDWUF MSDWUF MSDWUF Van Kampen LIT
MSDWUF International Mid Cap Value Value Domestic Income
High Yield Portfolio Magnum Portfolio Portfolio Portfolio Portfolio
Outstanding at beginning of period 0.000 0.000 0.000 0.000 0.000
Purchase payments 0.000 8,151.228 12,609.173 10,620.681 0.000
Terminations and withdrawals 0.000 0.000 (177.108) 0.000 0.000
Transfers to annuity 0.000 0.000 0.000 0.000 0.000
Transfers between funds 0.000 0.000 0.000 0.000 0.000
---------- ---------- ----------- ----------- -----------
Outstanding at end of period 0.000 8,151.228 12,432.065 10,620.681 0.000
========== ========== =========== =========== ===========
Van Kampen LIT Van Kampen LIT Van Kampen LIT Van Kampen LIT Van Kampen LIT
Emerging Growth Enterprise Government Growth And Money Market
Portfolio Portfolio Portfolio Income Portfolio Portfolio
Outstanding at beginning of period 0.000 0.000 0.000 0.000 0.000
Purchase payments 4,739.750 58.902 0.000 5,694.977 0.000
Terminations and withdrawals (140.783) 0.000 0.000 (62.785) 0.000
Transfers to annuity 0.000 0.000 0.000 0.000 0.000
Transfers between funds 0.000 0.000 0.000 0.000 0.000
---------- ---------- ----------- ----------- -----------
Outstanding at end of period 4,598.967 58.902 0.000 5,632.192 0.000
========== ========== =========== =========== ===========
Van Kampen LIT
Morgan Stanley Van Kampen LIT
Real Estate Securities Strategic Stock
Portfolio Portfolio
Outstanding at beginning of period 0.000 0.000
Purchase payments 569.486 868.823
Terminations and withdrawals 0.000 0.000
Transfers to annuity 0.000 0.000
Transfers between funds 0.000 0.000
---------- ----------
Outstanding at end of period 569.486 868.823
========== ==========
</TABLE>
E-6
<PAGE>
NOTE F - NET ASSETS REPRESENTED BY:
DECEMBER 31, 1998
CERTIFICATES IN ACCUMULATION PERIOD:
<TABLE>
<CAPTION>
Units Unit Value Amount
<S> <C> <C> <C>
Morgan Stanley Dean Witter Universal Funds, Inc.:
Asian Equity Portfolio 0.000 $ 2.644425 $ 0
Emerging Markets Equity Portfolio 0.000 3.434261 0
Fixed Income Portfolio 0.000 5.754670 0
Global Equity Portfolio 17,827.453 6.608795 117,818
Equity Growth Portfolio 22,532.710 7.342165 165,439
High Yield Portfolio 0.000 5.760334 0
International Magnum Portfolio 8,151.228 5.715484 46,588
Mid Cap Value Portfolio 12,432.065 7.529628 93,609
Value Portfolio 10,620.681 5.599234 59,468
VAN KAMPEN LIT:
Domestic Income Portfolio 0.000 10.315892 0
Emerging Growth Portfolio 4,598.967 10.774577 49,552
Enterprise Portfolio 58.902 21.251787 1,252
Government Portfolio 0.000 10.069069 0
Growth and Income Portfolio 5,632.192 6.947231 39,128
Money Market Portfolio 0.000 8.297154 0
Morgan Stanley Real Estate Securities Portfolio 569.486 7.783358 4,432
Strategic Stock Portfolio 868.823 5.874872 5,104
---------
TOTAL CERTIFICATE OWNER RESERVES $ 582,390
=========
</TABLE>
NOTE G - YEAR 2000 CONTINGENCY (UNAUDITED)
Internal Systems. The Company's ultimate parent, American General
Corporation (AGC), has numerous technology systems that are managed on a
decentralized basis. AGL's Year 2000 readiness efforts are therefore being
undertaken by its key business units with centralized oversight. Each business
unit, including the Company, has developed and is implementing a plan to
minimize the risk of a significant negative impact on its operations.
While the specifics of the plans vary, the plans include the following
activities: (1) perform an inventory of the Company's information technology
and non-information technology systems; (2) assess which items in the inventory
may expose the company to business interruptions due to Year 2000 issues; (3)
reprogram or replace systems that are not Year 2000 ready; (4) test systems to
prove that they will function into the next century as they do currently; and
(5) return the systems to operations. As of December 31, 1998, substantially
all of the Company's critical systems are Year 2000 ready and have been returned
to operations. However, activities (3) through (5) for certain systems are
ongoing, with vendor upgrades expected to be received during the first half of
1999.
E-7
<PAGE>
SEPARATE ACCOUNT E
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE G - YEAR 2000 CONTINGENCY (UNAUDITED) - CONTINUED
Third Party Relationships. The Company has relationships with various
third parties who must also be Year 2000 ready. These third parties provide (or
receive) resources and services to (or from) the Company and include
organizations with which the company exchanges information. Third parties
include vendors of hardware, software, and information services; providers of
infrastructure services such as voice and data communications and utilities for
office facilities; investors; customers; distribution channels; and joint
venture partners. Third parties differ from internal systems in that the
company exercises less, or no, control over Year 2000 readiness. The Company
has developed a plan to assess and attempt to mitigate the risks associated with
the potential failure of third parties to achieve Year 2000 readiness. The plan
includes the following activities: (1) identify and classify third party
dependencies; (2) research, analyze, and document Year 2000 readiness for
critical third parties; and (3) test critical hardware and software products and
electronic interfaces. As of December 31, 1998, AGC has identified and assessed
approximately 700 critical third party dependencies, including those relating to
the Company. A more detailed evaluation will be completed during first quarter
1999 as part of the Company's contingency planning efforts. Due to the various
stages of third parties' Year 2000 readiness, the Company's testing activities
will extend through 1999.
Contingency Plans. The Company has commenced contingency planning to
reduce the risk of Year 2000-related business failures. The contingency plans,
which address both internal systems and third party relationships, include the
following activities: (1) evaluate the consequences of failure of business
processes with significant exposure to Year 2000 risk; (2) determine the
probability of a Year 2000-related failure for those processes that have a high
consequence of failure; (3) develop an action plan to complete contingency plans
for those processes that rank high in consequence and probability of failure;
and (4) complete the applicable action plans. The Company is currently
developing contingency plans and expects to substantially complete all
contingency planning activities by April 30, 1999.
Risks and Uncertainties. Based on its plans to make internal systems ready
for Year 2000, to deal with third party relationships, and to develop
contingency actions, the Company believes that it will experience at most
isolated and minor disruptions of business processes following the turn of the
century. Such disruptions are not expected to have a material effect on the
Company's future results of operations, liquidity, or financial condition.
However, due to the magnitude and complexity of this project, risks and
uncertainties exist and the Company is not able to predict a most reasonably
likely worst case scenario. If conversion of the Company's internal systems is
not completed on a timely basis (due to non-performance by significant third-
party vendors, lack of qualified personnel to perform the Year 2000 work, or
other unforeseen circumstances in completing the Company's plans), or if
critical third parties fail to achieve Year 2000 readiness on a timely basis,
the Year 2000 issues could have a material adverse impact on the Company's
operations following the turn of the century.
Costs. Through December 31, 1998, the Company has incurred, and
anticipates that it will continue to incur, costs for internal staff, third-
party vendors, and other expenses to achieve Year 2000 readiness. The cost of
activities related to Year 2000 readiness has not had a material adverse effect
on the Company's results of operations or financial condition. In addition, the
Company has elected to accelerate the planned replacement of certain systems as
part of the Year 2000 plans. Costs of the replacement systems are being
capitalized and amortized over their useful lives, in accordance with the
Company's normal accounting policies. These costs are not passed to Divisions
of the Separate Account.
E-8
<PAGE>
ERNST & YOUNG LLP LOGO] . One Houston Center . Phone: 713 750 1500
Suite 2400 Fax: 713 750 1501
1221 McKinney
Houston, Texas 77010-2007
Report of Independent Auditors
Board of Directors
American General Life Insurance Company
of New York
We have audited the accompanying statutory basis balance sheets of American
General Life Insurance Company of New York (the "Company") as of December 31,
1998 and 1997, and the related statutory basis statements of operations, changes
in capital and surplus, and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As discussed in Note A to the financial statements, the Company presents its
financial statements in conformity with accounting practices prescribed or
permitted by the State of New York Insurance Department, which practices differ
from generally accepted accounting principles. The variances between such
practices and generally accepted accounting principles are described in Note A.
The effects on the financial statements of these variances are not reasonably
determinable, but are presumed to be material.
In our opinion, because of the materiality of the effects of the variances
between generally accepted accounting principles and the accounting practices
referred to in the preceding paragraph, the financial statements referred to
above are not intended to and do not present fairly, in conformity with
generally accepted accounting principles, the financial position of American
General Life Insurance Company of New York at December 31, 1998 and 1997, or the
results of its operations or its cash flows for the years then ended.
Ernst & Young LLP is a member of Ernst & Young International, Ltd.
F-1
<PAGE>
[ERNST & YOUNG LLP LOGO]
Also, in our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of American General Life
Insurance Company of New York at December 31, 1998 and 1997, and the results of
its operations and its cash flows for the years then ended in conformity with
accounting practices prescribed or permitted by the State of New York Insurance
Department.
/s/ ERNST & YOUNG LLP
---------------------
ERNST & YOUNG LLP
March 30, 1999
F-2
<PAGE>
American General Life Insurance Company of New York
Balance Sheets - Statutory Basis
December 31
1998 1997
------------------------------
ADMITTED ASSETS
Cash and investments:
Bonds $695,320,400 $707,357,241
Preferred Stocks 850,000 681,726
Common Stocks 220,920 203,130
Cash on hand and on deposit 3,506,964 2,734,161
Short-term investments 3,114,446 6,993,678
Mortgage loans on real estate 6,663,878 9,849,056
Policy loans 108,810,423 100,727,265
Investment in joint ventures 6,580,000 5,700,000
Other invested assets 1,183,453 402,466
------------ ------------
Total cash and investments 826,250,484 834,648,723
Other assets:
Accrued investment income 11,959,646 12,075,881
Premiums due, deferred, and
uncollected, less loading
($888,828 in 1998 and
$1,113,133 in 1997) 8,183,136 10,113,898
Reinsurance receivables and other 6,894,934 7,570,941
------------ ------------
Total assets excluding separate accounts 853,288,200 864,409,443
Assets held in separate accounts 582,326 -
------------ ------------
Total admitted assets $853,870,526 $864,409,443
============ ============
See accompanying notes
F-3
<PAGE>
December 31
1998 1997
------------------------------
LIABILITIES AND CAPITAL AND SURPLUS
Liabilities:
Reserve for future policy benefits $713,508,540 $710,507,413
Premium and other deposit liabilities 38,719,426 41,066,440
General expenses and other liabilities 33,977,411 21,676,979
Policy and contract claims payable 9,597,951 7,323,116
Dividends payable to policyholders 2,624,532 2,481,577
Note payable to parent - 156,000
Federal income taxes (558,772) 2,262,760
Cash overdraft - 339,226
Asset valuation reserve 6,904,850 5,947,928
Interest maintenance reserve 2,905,680 581,931
------------ ------------
Total liabilities excluding separate accounts 807,679,618 792,343,370
Liabilities related to separate accounts 582,326 -
------------ ------------
Total liabilities 808,261,944 792,343,370
Capital and surplus:
Common stock - par value $200 per share;
15,000 shares authorized, issued, and
outstanding 3,000,000 3,000,000
Additional paid-in surplus 44,210,030 44,210,030
Group contingency life reserve 23,593 34,151
Unassigned surplus (deficit) (1,625,041) 24,821,892
------------ ------------
Total capital and surplus 45,608,582 72,066,073
------------ ------------
Total liabilities and capital and surplus $853,870,526 $864,409,443
============ ============
See accompanying notes.
F-4
<PAGE>
American General Life Insurance Company of New York
Statements of Operations - Statutory Basis
Year ended December 31
1998 1997
------------------------------
Revenues:
Premiums and annuity considerations $ 82,703,878 $ 93,034,098
Considerations for supplementary contracts 4,277,814 4,119,705
Net investment income 62,645,263 62,549,844
Amortization of interest maintenance reserve 195,668 61,980
Allowances and reserve adjustments on
reinsurance ceded, net 7,334,375 3,796,001
Other income 5,383,391 4,845,769
------------ ------------
Total revenues 162,540,389 168,407,397
Benefits and expenses:
Benefits paid or provided 104,779,152 98,988,825
Increase in policy reserves and other
deposit funds 464,776 2,549,915
Commissions 9,442,136 10,720,887
General insurance expenses and taxes, other
than federal income taxes 19,530,772 24,548,555
Net transfers to separate accounts 530,994 -
------------ ------------
Total benefits and expenses 134,747,830 136,808,182
Net gain from operations before dividends to
policyholders and federal income taxes 27,792,559 31,599,215
Dividends to policyholders 2,645,871 2,222,995
----------- -----------
Net gain from operations before federal
income taxes 25,146,688 29,376,220
Federal income taxes 7,626,019 10,953,872
------------ ------------
Net gain from operations after dividends to
policyholders and federal income taxes 17,520,669 18,422,348
Net realized capital losses, net of tax benefit
of $1,464,089 in 1998 and $316,519 in 1997,
and excluding net gains of $2,519,417 in 1998
and $224,075 in 1997 transferred to the
interest maintenance reserve (71,164) (84,170)
------------ ------------
Net income $ 17,449,505 $ 18,338,178
============ ============
See accompanying notes.
F-5
<PAGE>
American General Life Insurance Company of New York
Statements of Changes in Capital and Surplus - Statutory Basis
December 31
1998 1997
------------------------------
Capital and surplus:
Balance at beginning of year $ 72,066,073 $ 55,125,310
Net income 17,449,505 18,338,178
Cash dividend to parent (26,999,996) (4,000,000)
(Increase) decrease in asset valuation
reserve (956,922) 2,732,722
(Increase) decrease in nonadmitted assets 962,790 (94,696)
Change in net unrealized capital gains 28,304 19,997
(Increase) decrease in liability for
reinsurance in unauthorized companies (1,642) 90,010
Increase in reserves due to change in
valuation basis (135,449) (145,448)
Prior period reinsurance adjustment 207,568 -
Litigation settlement (17,011,649) -
----------- ------------
Balance at end of year $ 45,608,582 $ 72,066,073
=========== ============
See accompanying notes.
F-6
<PAGE>
American General Life Insurance Company of New York
Statements of Cash Flows - Statutory Basis
December 31
1998 1997
------------------------------
OPERATING ACTIVITIES
Premiums and annuity considerations
received $ 84,944,783 $ 92,858,733
Considerations for supplementary contracts
received 4,277,814 4,108,375
Allowances and reserve adjustments received
on reinsurance ceded, net 1,703,832 7,681,188
Net investment income received 61,614,430 61,731,822
Other income received 5,386,163 6,652,554
Benefits paid (101,885,769) (101,746,348)
Commissions, general insurance expenses,
and taxes paid, other than federal
income taxes (33,650,688) (35,257,597)
Federal income taxes paid, excluding tax
on capital gains (10,447,551) (9,783,580)
Dividends paid to policyholders (2,598,815) (2,062,446)
------------- -------------
Net cash provided by operating activities 9,344,199 24,182,701
INVESTING ACTIVITIES
Proceeds from investments sold, matured,
or repaid, net of federal income taxes
paid on capital gains 127,199,903 129,314,460
Cost of investments acquired (107,958,748) (135,136,436)
Net increase in policy loans (8,092,514) (7,429,562)
------------- -------------
Net cash provided by (used in)
investing activities 11,148,641 (13,251,538)
FINANCING ACTIVITIES
Dividend to parent (26,999,996) (4,000,000)
Proceeds from notes payable to parent 33,317,000 78,272,000
Repayment of notes payable to parent (33,473,000) (78,116,000)
Other 3,556,727 (1,160,034)
------------- -------------
Net cash used in financing activities (23,599,269) (5,004,034)
------------- --------------
Net (decrease) increase in cash and
short-term investments (3,106,429) 5,927,129
Cash and short-term investments at
beginning of year 9,727,839 3,800,710
------------- -------------
Cash and short-term investments at
end of year $ 6,621,410 $ 9,727,839
============= =============
See accompanying notes.
F-7
<PAGE>
American General Life Insurance Company of New York
Notes to Statutory Basis Financial Statements
December 31, 1998
A. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
American General Life Insurance Company of New York (the "Company") is a wholly
owned subsidiary of American General Life Insurance Company ("AGL"), which is
domiciled in the state of Texas. AGL is wholly owned by AGC Life Insurance
Company, which is domiciled in the state of Missouri. American General
Corporation ("AGC"), a general business corporation domiciled in the state of
Texas, owns all the issued and outstanding stock of AGC Life Insurance Company.
The Company has one wholly owned subsidiary, Winchester Agency, Ltd., a life
insurance agency.
The Company's ultimate parent, AGC, completed the merger of USLIFE Corporation
("USLIFE") on June 17, 1997. Certain consolidation activities occurred
subsequent to the merger which resulted in the recognition of $1,505,878 and
$1,513,995 in restructuring charges by the Company in 1998 and 1997,
respectively.
The Company is licensed in 50 states and the District of Columbia, with a
majority of its business written in the state of New York. The Company's
portfolio includes universal life, interest-sensitive whole life, traditional
life, and annuity plans marketed to upper-income consumers and sponsored markets
(payroll deduction, credit unions, and government allotment). During 1998 and
1997, business generated through one general agency accounted for approximately
70% and 59%, respectively, of first-year life insurance premiums and 48% and
46%, respectively, of renewal life insurance premiums.
F-8
<PAGE>
American General Life Insurance Company of New York
Notes to Statutory Basis Financial Statements (continued)
A. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
BASIS OF PRESENTATION
The preparation of financial statements requires management to make estimates
and assumptions that affect (1) the reported amounts of assets and liabilities,
(2) disclosures of contingent assets and liabilities, and (3) the reported
amounts of revenues and expenses during the reporting periods. Such estimates
and assumptions could change in the future as more information becomes known,
which could impact the amounts reported and disclosed herein.
The accompanying financial statements of the Company have been prepared in
conformity with accounting practices prescribed or permitted by the National
Association of Insurance Commissioners ("NAIC") and the Insurance Department of
the State of New York. "Prescribed" statutory accounting practices include state
laws, regulations, and general administrative rules, as well as a variety of
publications of the NAIC. "Permitted" statutory accounting practices encompass
all accounting practices that are not prescribed; such practices may differ from
state to state, may differ from company to company within a state, and may
change in the future. There were no material permitted practices utilized by the
Company in 1998 or 1997.
In 1998, the NAIC adopted codified statutory accounting principles
("Codification"). Codification will likely change, to some extent, prescribed
statutory accounting practices and may result in changes to the accounting
practices that the Company uses to prepare its statutory basis financial
statements. Codification will require adoption by the various states before it
becomes the prescribed statutory basis of accounting for insurance companies
domesticated within those states. Accordingly, before Codification becomes
effective for the Company, the State of New York must adopt Codification as the
prescribed basis of accounting on which domestic insurers must report their
statutory basis results to the Insurance Department. At this time, it is unclear
whether the State of New York will adopt Codification.
The prescribed practices used as a basis to prepare the accompanying financial
statements of the Company differ in certain respects from generally accepted
accounting principles ("GAAP"). The effects on the financial statements of these
variances are not reasonably
F-9
<PAGE>
American General Life Insurance Company of New York
Notes to Statutory Basis Financial Statements
A. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
determinable, but are presumed to be material. The more significant differences
from GAAP are as follows:
Insurance Policy Acquisition Costs
The costs of acquiring and renewing business are expensed when incurred.
Under GAAP, acquisition costs related to traditional life insurance and
certain long-duration accident and health insurance, to the extent
recoverable from future policy revenues, are deferred and amortized over the
premium-paying period of the related policies using assumptions consistent
with those used in computing policy benefit reserves. For universal life
insurance and investment products, to the extent recoverable from future
gross profits, deferred policy acquisition costs are amortized generally in
proportion to the present value of expected gross profits from surrender
charges and investment, mortality, and expense margins.
Investments
Investments in bonds and mandatorily redeemable preferred stocks are
reported at amortized cost or market value based on their NAIC rating; for
GAAP, such fixed-maturity investments are designated at purchase as held-to-
maturity, trading, or available-for-sale. Held-to-maturity fixed investments
are reported at amortized cost, and the remaining fixed-maturity investments
are reported at fair value, with unrealized holding gains and losses
reported in operations for those designated as trading, and as a separate
component of shareholder's equity for those designated as available-for-
sale.
Nonredeemable preferred stocks are reported at cost or amortized cost, if in
good standing. If not in good standing, nonredeemable preferred stocks are
valued at market or other values furnished by the NAIC. Common stocks are
reported at market value. Market values are based on the values prescribed
by the securities valuation office of the NAIC. The related unrealized
capital gain (loss) is reported in unassigned surplus without any
adjustments for federal income taxes. For GAAP, nonredeemable preferred
stock and common stock are designated as trading or available-for-sale and
are reported at fair value with unrealized holding gains and losses reported
in operations for those designated as trading and as a separate component of
shareholder's equity for those designated as available-for-sale.
F-10
<PAGE>
American General Life Insurance Company of New York
Notes to Statutory Basis Financial Statements (continued)
A. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Nonadmitted Assets
Certain assets designated as "nonadmitted" assets, principally receivables
and furniture and equipment, are excluded from the balance sheet and changes
therein are charged directly to unassigned surplus.
Asset Valuation Reserve and Interest Maintenance Reserve
As prescribed by the NAIC, the Company reports an Asset Valuation Reserve
("AVR"). The AVR is computed in accordance with a prescribed formula and
represents a provision for possible fluctuations in the value of bonds,
equity securities, mortgage loans, real estate, and other invested assets.
Changes to the AVR are charged or credited directly to unassigned surplus.
Under GAAP, valuation allowances are provided when there has been a decline
in value deemed other than temporary; the provision for such declines are
charged to earnings.
As also prescribed by the NAIC, the Company reports an Interest Maintenance
Reserve ("IMR"), which represents the net accumulated unamortized realized
capital gains and losses attributable to changes in the general level of
interest rates on sales of fixed-income investments, principally bonds and
mortgage loans. Such gains or losses are amortized into income on a
straight-line basis over the remaining period to maturity based on groupings
of individual securities sold in five-year bands. Under GAAP, realized gains
and losses would be reported in the income statement on a pre-tax basis in
the period that the asset giving rise to the gain or loss is sold.
Subsidiary
The accounts and operations of the Company's subsidiary are not consolidated
with the accounts and operations of the Company, as required under GAAP.
Policy Reserves
Policy reserves are provided based on assumptions and methods prescribed by
insurance regulatory authorities rather than on expected mortality,
morbidity, interest, and withdrawal assumptions deemed appropriate by the
Company, as required under GAAP.
F-11
<PAGE>
American General Life Insurance Company of New York
Notes to Statutory Basis Financial Statements (continued)
A. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Federal Income Taxes
Federal income taxes are provided based on estimated liabilities for taxes
incurred. Under GAAP, deferred income taxes are also provided for
differences between financial reporting and taxable income.
Recognition of Premium Revenues
Life insurance and annuity premiums are recognized as revenue when due.
Accident and health premiums are earned pro rata over the terms of the
policies. Under GAAP, most receipts of premiums for interest-sensitive life
insurance policies and annuities are classified as deposits instead of
revenue. GAAP-basis revenues for these contracts consist of mortality,
expense, and surrender charges assessed against the account balance.
Reinsurance
A liability for reinsurance balances has been provided for unsecured policy
reserves ceded to reinsurers unauthorized by license to assume such
business. Changes to those amounts are credited or charged directly to
unassigned surplus. Under GAAP, an allowance for amounts deemed
uncollectible is established through a charge to earnings.
Policy and contract liabilities ceded to reinsurers have been reported as
reductions of the related reserves, rather than as assets, as required under
GAAP.
Commissions allowed by reinsurers on business ceded are reported as income
when received, rather than being deferred and amortized with deferred policy
acquisition costs, as required under GAAP.
Certain reinsurance contracts meeting risk transfer requirements under
statutory basis accounting practices have been accounted for using
traditional reinsurance accounting, whereas such contracts are accounted for
using deposit accounting under GAAP.
F-12
<PAGE>
American General Life Insurance Company of New York
Notes to Statutory Basis Financial Statements (continued)
A. Nature of Operations and Significant Accounting Policies (continued)
Guaranty Fund Assessments
Guaranty fund assessments are accrued when the Company receives notice that
an amount is payable to a guaranty fund. Under GAAP, future assessments that
are probable and estimable are also accrued.
Policyholder Dividends
Policyholder dividends are recognized when declared rather than over the
terms of the related policies, as required under GAAP.
Other significant accounting policies are as follows:
INVESTMENTS
Short-term investments include investments with maturities of less than one year
at the date of acquisition.
Bonds, preferred stocks, common stocks, and short-term investments are stated at
values prescribed by the NAIC. Bonds not backed by other loans are stated at
amortized cost using the scientific method. Loan-backed bonds and structured
securities are valued at amortized cost using the interest method including
anticipated prepayments. Changes in estimated cash flows from original
assumptions are accounted for using the retrospective method.
Redeemable preferred stocks are reported at cost or amortized cost; and
nonredeemable preferred stocks are reported at cost or amortized cost if in good
standing, and at market or other NAIC-prescribed values if not in good standing.
Common stocks are reported at market value, as prescribed by the NAIC.
Policy loans are reported at unpaid principal balances. Mortgage loans are
reported at unpaid principal balances less an allowance for impairment.
Security transactions are accounted for on the date the order to buy or sell is
executed.
Interest earned on fixed-maturity securities, mortgage loans, and policy loans
is recorded as income when earned and is adjusted for any amortization of
premium or discount. Dividends are recorded as income on the ex-dividend dates.
F-13
<PAGE>
American General Life Insurance Company of New York
Notes to Statutory Basis Financial Statements (continued)
A. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Realized capital gains and losses are recognized using the specific-
identification method. Net realized capital gains and losses in excess of
amounts transferred to the IMR are credited or charged directly to net income,
while net unrealized capital gains and losses are recorded as adjustments of
unassigned surplus.
POLICY RESERVES
The Company computes ordinary business policy reserves using the Modified
Preliminary Term, Net Level Premium, Commissioners' Reserve Valuation, and New
Jersey Standard Valuation methods. Generally, the 1941, 1958, and 1980
Commissioners' Standard Ordinary Mortality Tables with interest rates ranging
from 2% to 6% are utilized. Annuities are valued primarily using the 1983a, 1971
Individual, 1971 Group, and 1951 Group Annuity Mortality Tables with interest
assumptions ranging from 2.5% to 11.0%. Additional minimum reserves are
calculated on policies with a guaranteed gross premium less than the net premium
based on minimum reserve requirements of the laws of the State of New York.
Additional premiums are charged for substandard lives. Mean substandard reserves
are determined by computing the regular mean reserve for the plan and holding in
addition a factor times the extra premium charge for the year. The factor varies
by duration and type of plan and is based on appropriate multiples of standard
rates of mortality. Tabular interest, tabular less actual reserve released, and
tabular cost have been determined by formula, except for universal life
insurance and deferred annuity reserves which include fund accumulations, for
which tabular interest has been determined from basic data. For the
determination of tabular interest on funds not involving life contingencies, the
actual credited interest is used.
The Company waives deduction of deferred fractional premiums upon death of
insured and returns any portion of the final premium beyond the date of death.
Surrender values are not promised in excess of the legally computed reserves.
POLICY AND CONTRACT CLAIMS
Policy and contract claims represent the estimated ultimate net cost of all
reported and unreported claims incurred during the year. Reserves for unpaid
claims are estimated using individual case-basis valuations and statistical
analyses. These estimates are subject to the effects of trends in claim severity
and frequency. The estimates are continually reviewed and adjusted as necessary,
as experience develops or new information becomes known; such adjustments are
included in current operations.
F-14
<PAGE>
American General Life Insurance Company of New York
Notes to Statutory Basis Financial Statements (continued)
B. INVESTMENTS
FIXED-MATURITY SECURITIES
The statement value and NAIC market value of fixed-maturity securities by type
at December 31, 1998 and 1997 were as follows (in 000s):
GROSS GROSS NAIC
STATEMENT UNREALIZE UNREALIZED MARKET
VALUE GAIN LOSS VALUE
-----------------------------------------
DECEMBER 31, 1998
Bonds:
United States and governments
of other countries $ 14,575 $ 1,990 $ 8 $ 16,557
State, municipal, and political
subdivisions 4,471 695 _ 5,166
Special revenue 150,315 - - 150,315
Public utility 83,349 2,335 - 85,684
Industrial and miscellaneous 442,610 22,873 1,949 463,534
-----------------------------------------
Total $695,320 $ 27,893 $1,957 $721,256
=========================================
GROSS GROSS NAIC
STATEMENT UNREALIZE UNREALIZED MARKET
VALUE GAIN LOSS VALUE
-----------------------------------------
DECEMBER 31, 1997
Bonds:
United States and governments
of other countries $ 17,209 $ 1,747 $ 39 $ 18,917
State, municipal, and political
subdivisions 4,452 576 _ 5,028
Special revenue 160,113 - - 160,113
Public utility 93,792 1,771 10 95,553
Industrial and miscellaneous 431,791 21,866 132 453,525
-----------------------------------------
Total $707,357 $ 25,960 $ 181 $733,136
=========================================
F-15
<PAGE>
American General Life Insurance Company of New York
Notes to Statutory Basis Financial Statements (continued)
B. INVESTMENTS (CONTINUED)
NAIC market values generally represent quoted market values for securities
traded in the public marketplace, or analytically determined values using bid or
closing prices for securities not traded in the public marketplace. However, for
certain investments for which the NAIC does not provide a value, the Company
uses the amortized cost amount as a substitute for fair value in accordance with
prescribed guidance. As of December 31, 1998 and 1997, the NAIC market values of
investments in bonds includes $395,148,177 and $387,626,863, respectively, of
bonds that were valued at amortized cost.
Fixed maturities are not intended to be sold in the normal course of business
and are usually held until maturity. Therefore, the presentation of fair values
for fixed maturities without a corresponding revaluation of related policyholder
liabilities can be misinterpreted, and care should be exercised in drawing
conclusions from such data.
The contractual maturities of fixed-maturity securities at December 31, 1998
were as follows (in 000s):
NAIC
Statement Market
Value Value
----------------------
Due in one year or less $ 12,186 $ 12,331
Due after one year through five years 122,463 126,456
Due after five years through ten years 137,897 142,605
Due after ten years 266,032 283,121
Mortgage-backed securities 156,742 156,743
----------------------
$695,320 $721,256
======================
Actual maturities may differ from contractual maturities, as borrowers may have
the right to call or prepay obligations. In addition, corporate requirements and
investment strategies may result in the sale of investments before maturity.
F-16
<PAGE>
American General Life Insurance Company of New York
Notes to Statutory Basis Financial Statements (continued)
B. INVESTMENTS (CONTINUED)
Proceeds from sales and redemptions of fixed maturities were $123,842,834 and
$127,778,692 during 1998 and 1997, respectively. Gross gains of $3,835,592 and
$1,514,194, and gross losses of $544,425 and $1,146,507, were realized on those
sales during 1998 and 1997, respectively.
At December 31, 1998, the Company held unrated or below-investment-grade
corporate bonds of $39,557,123 with an aggregate fair value of $39,566,280.
Those holdings amounted to 5.69% of the Company's investments in bonds and 4.63%
of the Company's total admitted assets. The holdings of below-investment-grade
bonds are widely diversified and of satisfactory quality based on the Company's
investment policies and credit standards.
The Company has fixed-maturity investments on deposit with various state
insurance departments to satisfy regulatory requirements. These investments had
an amortized cost of $1,493,402 and $1,498,906 at December 31, 1998 and 1997,
respectively.
PREFERRED AND COMMON STOCKS
Unrealized gains and losses on investments in preferred and common stocks are
reported directly in unassigned surplus and do not affect operations. The gross
unrealized gains and losses on, and the cost and fair value of, those
investments are summarized as follows (in 000s):
GROSS GROSS
UNREALIZED UNREALIZED
COST GAINS LOSSES FAIR VALUE
-----------------------------------------------------
AT DECEMBER 31, 1998
Preferred stocks $ 850 $ - $ - $ 850
Common stocks 5 216 - 221
-----------------------------------------------------
Total $ 855 $ 216 $ - $1,071
=====================================================
AT DECEMBER 31, 1997
Preferred stocks $ 682 $ 612 $ - $1,294
Common stocks 5 198 - 203
-----------------------------------------------------
Total $ 687 $ 810 $ - $1,497
=====================================================
F-17
<PAGE>
American General Life Insurance Company of New York
Notes to Statutory Basis Financial Statements (continued)
B. INVESTMENTS (CONTINUED)
MORTGAGE LOANS ON REAL ESTATE
Diversification of the geographic location and type of property collateralizing
mortgage loans reduces the concentration of credit risk. The Company requires
collateral on all real estate loans based upon management's credit assessment of
the borrower. Nonperforming mortgage loans are defined as the outstanding
balance of loans 60 days or more past due (includes mortgages over 90 days as
shown in the annual statement, Schedule B, Part 2, Section 2), mortgage loans in
the process of foreclosure, and commercial loans whose original terms have been
modified. There were no nonperforming mortgage loans at December 31, 1998. As of
December 31, 1998, the mortgage loan portfolio was distributed as follows (in
000s):
Outstanding % of
Amount Total Fair Value
------------------------------------------
Geographic distribution:
South Atlantic $ 2,975 45% $ 3,124
West South Central 2,674 40% 2,808
------------------------------------------
Total $ 6,664 100% $ 6,967
==========================================
Property type:
Retail $ 2,674 40% $ 2,808
Industrial 2,975 45% 3,124
------------------------------------------
Total $ 6,664 100% $ 6,967
==========================================
Fair values for mortgage loans were estimated using discounted cash flow
analysis. Cash flows were based upon contractual maturities, with the discount
rates being based on U.S. Treasury rates for similar maturity ranges, adjusted
for risk, based upon property type. Loans with similar characteristics were
aggregated for the calculations. Assumptions regarding future economic activity
have been made in estimating the fair value. Future economic activity may
deviate from the assumptions. Care should be exercised in drawing conclusions
based on the estimated fair value at the end of a year, since the Company
usually holds its mortgage loans until maturity.
F-18
<PAGE>
American General Life Insurance Company of New York
Notes to Statutory Basis Financial Statements (continued)
B. INVESTMENTS (CONTINUED)
At the issuance of a loan, the percentage of loan to value on any one loan does
not exceed 75%. The Company purchased no new mortgage loans in 1998. At December
31, 1998, the Company had no investments in mortgage loans subject to prior
liens. All properties covered by mortgage loans have fire insurance at least
equal to the excess of the loan over the maximum loan that would be allowed on
the land without the building.
POLICY LOANS
The fair value of policy loans at December 31, 1998 was $128,131,044. The fair
value was estimated using discounted cash flow analysis and actuarially
determined assumptions, incorporating market rates. Loans with similar
characteristics were aggregated for the calculations.
INVESTMENT INCOME
Major categories of the Company's net investment income are summarized as
follows (in 000s):
YEAR ENDED DECEMBER 31
1998 1997
----------------------
Investment income:
Bonds $ 55,015 $ 55,852
Preferred stocks 10 104
Common stocks - -
Mortgage loans on real estate 683 886
Policy loans 6,788 6,232
Short-term investments and cash 399 187
Other invested assets 1,120 740
Miscellaneous investment income (55) 142
----------------------
Gross investment income 63,960 64,143
Less investment expenses 1,315 1,593
----------------------
Net investment income $ 62,645 $ 62,550
======================
F-19
<PAGE>
American General Life Insurance Company of New York
Notes to Statutory Basis Financial Statements (continued)
B. INVESTMENTS (CONTINUED)
Realized capital gains and losses are reported net of federal income taxes and
amounts transferred to the IMR as follows (in 000s):
YEAR ENDED DECEMBER 31
1998 1997
----------------------
Realized capital gains $ 3,912 $ 456
Less federal income taxes on tax-basis
realized capital gains before effect
of transfer to IMR (1,464) (316)
----------------------
2,448 140
Less amount transferred to IMR (2,519) (224)
----------------------
Net realized capital losses $ (71) $ (84)
======================
C. NONADMITTED ASSETS
Equipment is recorded at cost ($732,829 at December 31, 1998 and 1997) less
accumulated depreciation ($650,367 and $553,828 at December 31, 1998 and 1997,
respectively). Depreciation expense for 1998 and 1997 was $96,539 and $100,538,
respectively, computed on a straight-line basis over five years. These assets
are considered nonadmitted and their values and related depreciation expense are
excluded from the statutory-basis financial statements.
F-20
<PAGE>
American General Life Insurance Company of New York
Notes to Statutory Basis Financial Statements (continued)
D. ANNUITY RESERVES
At December 31, 1998, the Company's annuity reserves and deposit fund
liabilities that are subject to discretionary withdrawal (with adjustment),
subject to discretionary withdrawal (without adjustment), and not subject to
discretionary withdrawal provisions are summarized as follows (in 000s):
Amount %
-------- -------
Subject to discretionary withdrawal (with adjustment):
With market value adjustment $ 22,429 9.85%
At book value, less surrender charge of 5% or more 46,316 20.33%
At market value 548 0.24%
-------- -------
Total with adjustment (separate accounts) 69,293 30.42%
Subject to discretionary withdrawal (without adjustment)
at book value with minimal or no charge or adjustment 112,621 49.45%
Not subject to discretionary withdrawal 45,854 20.13%
-------- -------
Total annuity reserves and deposit fund liabilities
before reinsurance 227,768 100.00%
Less reinsurance ceded 2,728 =======
-------
Net annuity reserves and deposit fund liabilities,
including separate accounts $225,040
========
The tabular interest, tabular less actual reserve released, and tabular costs
have all been computed in accordance with the regulations of the State of New
York.
E. FAIR VALUE OF INVESTMENT CONTRACTS
Investment contracts are long-duration contracts that do not subject the insurer
to significant risks arising from policyholder mortality or morbidity. The
majority of the Company's annuity products are considered investment contracts.
The carrying amounts and fair values of the Company's liabilities for
investment-type insurance contracts at December 31 are as follows (in 000s):
CARRYING VALUE FAIR VALUE
1998 1997 1998 1997
---------------------------------------------
Investment contracts $ 129,522 $ 202,784 $ 124,250 $ 193,140
F-21
<PAGE>
American General Life Insurance Company of New York
Notes to Statutory Basis Financial Statements (continued)
E. FAIR VALUE OF INVESTMENT CONTRACTS (CONTINUED)
Fair values were estimated using cash flows discounted at market interest rates.
Assumptions regarding future economic activity have been made in estimating fair
value. Care should be exercised in drawing conclusions based on the estimated
fair value of insurance investment contracts, since the liabilities are
scheduled to mature over a number of years.
F. FEDERAL INCOME TAXES
The Company and its subsidiary, together with certain other subsidiaries of AGC,
are included in a life/nonlife consolidated tax return with AGC. The Company
participates in a tax-sharing agreement with other companies included in the
consolidated tax return. Under this agreement, tax payments are made to AGC as
if the companies filed separate tax returns, and companies incurring operating
and/or capital losses are reimbursed for the use of these losses by the
consolidated return group.
In 1998, the Company provided $6,161,930 in federal income taxes, of which
$7,626,019 was related to operations and $1,464,089 in benefits resulted from
net realized tax-basis capital losses.
A reconciliation of the statutory tax rate to the Company's effective tax rate
on operations follows (in 000s):
YEAR ENDED DECEMBER 31
1998 1997
------------------------------------
Tax at statutory tax rate $ 8,801 35.0% $ 10,282 35.0%
Sec. 848 (DAC Tax) 813 3.2 1,095 3.7
Change in deferred and uncollected
premiums 672 2.7 (392) (1.3)
Reserve adjustments (1,651) (6.6) (1,079) (3.7)
Adjustment of prior period tax liability 181 0.7 175 0.6
Investment accruals and deductions 104 0.4 (47) (0.2)
Other (1,294) (5.1) 920 3.1
------------------------------------
$ 7,626 30.3% $ 10,954 37.2%
====================================
F-22
<PAGE>
American General Life Insurance Company of New York
Notes to Statutory Basis Financial Statements (continued)
F. FEDERAL INCOME TAXES (CONTINUED)
Prior to 1984, a portion of the Company's income was not taxed, but was
accumulated in a "policyholders' surplus account." In the event that those
amounts are distributed to the Company's shareholder, or the balance of the
account exceeds certain limitations under the Internal Revenue Code, the excess
amounts would become taxable at current rates. The policyholders' surplus
account balance at December 31, 1998 was $4,572,448. Management does not intend
to take actions nor does management expect any events to occur that would cause
income taxes to become payable on that amount.
AGC and the majority of its subsidiaries file a consolidated federal income tax
return. The Internal Revenue Service has completed examinations of the Company's
tax returns through 1988 and is currently examining tax returns for 1989 through
1996. In addition, the tax returns of companies recently acquired are being
examined. Although the final outcome of any issues raised in examination is
uncertain, the Company believes that the ultimate liability, including interest,
will not exceed amounts recorded in the consolidated financial statements.
G. REINSURANCE
The Company is routinely involved in reinsurance transactions covering all lines
of business to help reduce the loss on any insured. The Company limits its
exposure to loss on any single insured to $350,000 by ceding additional risks
through reinsurance contracts with other insurers. The Company diversifies its
risk of exposure to reinsurance loss by using several reinsurers that have
strong claims-paying ability ratings. The Company remains obligated for amounts
ceded in the event that the reinsurers do not meet their obligations.
Reinsurance premiums were as follows (in 000s):
YEAR ENDED DECEMBER 31
1998 1997
----------------------
Assumed premiums $ 20 $ 33
Ceded premiums $21,365 $19,149
Reserve credits for reinsurance ceded reduced the reserve for future policy
benefits by $45,428,197 and $43,824,820 for the years ended December 31, 1998
and 1997, respectively. Reserves related to reinsurance assumed amounted to
$11,745,119 and $12,474,220 at December 31, 1998 and 1997, respectively.
F-23
<PAGE>
American General Life Insurance Company of New York
Notes to Statutory Basis Financial Statements (continued)
G. REINSURANCE (CONTINUED)
Policy and contract claim liabilities were reduced for reinsurance ceded by
$2,719,463 and $1,498,579 in 1998 and 1997, respectively. Claim liabilities
related to reinsurance assumed amounted to $66,097 and $67,162 at December 31,
1998 and 1997, respectively.
Benefits paid or provided for reinsurance ceded totaled $7,598,941 and
$7,731,327 in 1998 and 1997, respectively.
The regulatory required liability for unsecured reserves ceded to unauthorized
reinsurers was $2,890 and $1,248 at December 31, 1998 and 1997, respectively.
Amounts payable or recoverable for reinsurance on policy and contract
liabilities are not subject to periodic or maximum limits. At December 31, 1998,
the Company's reinsurance recoverables are not material and no individual
reinsurer owed the Company an amount that was equal to or greater than 1.7% of
the Company's surplus.
In 1998 and 1997, the Company did not commute any ceded reinsurance, nor did it
enter into or engage in any agreement that reinsures policies or contracts that
were in force or had existing reserves as of the effective date of such
agreements.
No policies issued by the Company have been reinsured with a foreign company
which is controlled, either directly or indirectly, by a party not primarily
engaged in the business of insurance.
The Company has not entered into any reinsurance agreements in which the
reinsurer may unilaterally cancel any reinsurance for reasons other than
nonpayment of premiums or other similar credits. The Company does not have any
reinsurance agreements in effect in which the amount of losses paid or accrued
through December 31, 1998 would result in a payment to the reinsurer of amounts
which, in the aggregate and allowing for offset of mutual credits from other
reinsurance agreements with the same reinsurer, exceed the total direct premiums
collected under the reinsured policies.
F-24
<PAGE>
American General Life Insurance Company of New York
Notes to Statutory Basis Financial Statements (continued)
H. BENEFIT PLANS
Substantially all employees of the Company are covered under noncontributory,
defined-benefit pension plans of AGC. Pension benefits are based on the
participant's average monthly compensation and length of credited service. The
Company's funding policy is to contribute annually no more than the maximum
amount deductible for federal income tax purposes. The Company uses the
projected unit credit method to compute pension expense.
Equity and fixed maturity securities were 66% and 32%, respectively, of the
plans' assets at the plans' most recent balance sheet date. Additionally, 1% of
plan assets was invested in general investment accounts of AGC's subsidiaries
through deposit administration insurance contracts.
The components of pension expense and underlying assumptions were as follows:
1998 1997
------------------------
(In Thousands)
Service cost (benefits earned) $ 783 $ 58
Interest cost 1,159 154
Expected return on plan assets (1,273) (244)
Amortization (188) 15
---------------------
Pension (income) expense 481 (17)
=====================
Discount rate on benefit obligation 7.00% 7.25%
Rate of increase in compensation 4.25% 4.00%
Expected long-term rate of return on plan assets 10.25% 10.00%
F-25
<PAGE>
American General Life Insurance Company of New York
Notes to Statutory Basis Financial Statements (continued)
H. BENEFIT PLANS (CONTINUED)
The Company's funding policy is to contribute annually no more than the maximum
deductible for federal income tax purposes. The funded status of the plans and
the prepaid pension expense in other assets at December 31 were as follows:
1998 1997
-------------------------
(In Thousands)
Projected benefit obligation (PBO) $ 17,774 $ 2,476
Plan assets at fair value 15,679 4,704
-------------------------
Plan assets at fair value in excess of
(less than) PBO (2,095) 2,228
Other unrecognized items, net 2,628 (2,094)
-------------------------
Prepaid pension expense $ 533 $ 134
=========================
The change in PBO was as follows:
1998 1997
-------------------------
(In Thousands)
PBO at January 1 $ 2,476 $ 2,204
Service and interests costs 1,943 212
Benefits paid (208) (91)
Actuarial loss 1,886 (71)
Amendments, transfers, and acquisitions 11,677 222
-------------------------
PBO at December 31 $ 17,774 $ 2,476
=========================
The change in the fair value of plan assets was as follows:
1998 1997
-------------------------
(In Thousands)
Fair value of plan assets as January 1 $ 4,704 $ 3,022
Actual return on plan assets 1,706 688
Benefits paid (285) (91)
Acquisitions and other 9,477 1,085
-------------------------
Fair value of plan assets at
December 31 $ 15,679 $ 4,704
=========================
F-26
<PAGE>
American General Life Insurance Company of New York
Notes to Statutory Basis Financial Statements (continued)
H. BENEFIT PLANS (CONTINUED)
Substantially all employees of AGC, and certain of its subsidiaries, who have
completed at least one year of service or have reached the age of 35 are
eligible to participate in a qualified defined-contribution plan. Additionally,
nonsalaried employees who have completed 1,000 hours of service in one service
year and have attained age 21 are eligible to participate. Employees who elect
to participate may contribute from 1% to 16% of their base pay. The Company's
contributions are based on a rate which will range from 50% to 100% of the first
6% of employee contributions. At December 31, 1998, the fair value of the
defined-contribution plan's assets was approximately $549 million.
Certain officers of the Company participate in American General Corporation's
Stock and Incentive Plan, which provides for the award of stock options,
restricted stock awards, performance awards, and incentive awards to key
employees. Stock options constitute the majority of such awards. Under the Stock
and Incentive Plan, awards may be granted for a total of 6,241,421 shares of
AGC's common stock. For stock options, option prices must be at least 100% of
the fair market value of the common stock on the date of grant. Stock options
were granted during the years 1988 through 1998.
As of December 31, 1998, 4,804,906 shares of AGC's common stock were subject to
options granted under the Stock and Incentive Plan, with stock option prices
ranging from $15.375 to $69.4687. During 1998, options for 605,229 shares of
AGC's common stock became exercisable under the Stock and Incentive Plan, with
option prices ranging from $32.00 to $50.1875. During 1998, 628,933 shares of
AGC's common stock were exercised under options subject to the Stock and
Incentive Plan, with option prices ranging from $15.375 to $44.2688 and the fair
market value prices ranging from $53.1250 to $78.50.
The Company also has an agents' defined-contribution money purchase pension plan
for its independent field force. The Company does not fund this plan.
In addition to pension benefits, the Company provides life, medical, and dental
plans for certain retired employees and agents. Most plans are contributory,
with retiree contributions adjusted annually to limit employer contributions to
predetermined amounts. The Company has reserved the right to change or eliminate
these benefits at any time.
F-27
<PAGE>
American General Life Insurance Company of New York
Notes to Statutory Basis Financial Statements (continued)
I. CAPITAL AND SURPLUS
On January 1, 1993, the NAIC adopted a Risk-Based Capital ("RBC") formula that
can be used to evaluate the adequacy of life insurance companies' statutory
capital and surplus. Calculations at December 31, 1998, using the RBC formula,
indicate the Company's level of capitalization exceeds regulatory requirements.
The amount of dividends which can be paid by the Company during any 12-month
period to its parent, without prior notification to the Superintendent of
Insurance, is limited according to regulations of the State of New York.
J. LEASES
Effective April 1, 1994, the Company extended its lease for eight years for an
annual amount of $1,147,414 on the premises occupied in the home office
building. The Company is a partner in a joint venture which owns the home office
building.
Total rental expense for all leases was $2,257,188 and $2,636,083 in 1998 and
1997, respectively. The future minimum rental commitments for leases as of
December 31, 1998 are approximately $1,147,414 per year for 1999 through 2002.
K. COMMITMENTS AND CONTINGENCIES
In recent years, various life insurance companies have been named as defendants
in class action lawsuits relating to life insurance pricing and sales practices
and a number of these lawsuits have resulted in substantial settlements. The
Company is a defendant in such purported class action lawsuits filed since 1996,
asserting claims related to pricing and sales practices. On December 16, 1998,
American General Corporation announced that certain of its life insurance
subsidiaries had entered into agreements to resolve the market conduct class
action lawsuits. The settlements are not final until approved by the courts and
any appeals are resolved. If court approvals are obtained and appeals are not
taken, it is expected the settlements will be final in the third quarter of
1999. The proposed settlements will not have a material impact on the Company's
financial condition or business operations.
In conjunction with the proposed resolution, the Company recorded a charge to
unassigned surplus of $17,011,649. The charge covers cost of policyholder
benefits and other anticipated expenses resulting from the proposed resolution,
as well as other administrative and legal costs. In addition to the charges
recorded in 1998, the Company
F-28
<PAGE>
American General Life Insurance Company of New York
Notes to Statutory Basis Financial Statements (continued)
K. COMMITMENTS AND CONTINGENCIES (CONTINUED)
will incur additional expenses for claim administration, outside counsel and
actuarial services, and regulatory expenses, related to the resolution of the
litigation, which will be recorded as incurred. Such expenses are not expected
to have a material adverse effect on the Company's financial position or results
of operations.
The Company is a party to various other lawsuits and proceedings arising in the
ordinary course of business. Many of these lawsuits and proceedings arise in
jurisdictions, such as Alabama and Mississippi that permit damage awards
disproportionate to the actual economic damages incurred. Based upon information
presently available, the Company believes that the total amounts that will
ultimately be paid, if any, arising from these lawsuits and proceedings will not
have a material adverse effect on the Company's results of operations and
financial position. However, it should be noted that the frequency of large
damage awards, including large punitive damage awards, that bear little or no
relation to actual economic damages incurred by plaintiffs in jurisdictions like
Alabama and Mississippi continues to create the potential for an unpredictable
judgment in any given suits.
L. TRANSACTIONS WITH AFFILIATES
Various American General companies provide services to the Company, principally
data processing, investment advisory, and professional services. The Company
incurred expenses of approximately $8,816,976 and $9,717,900 for such services
in 1998 and 1997, respectively. Accounts payable for such services at December
31, 1998 and 1997 were not material to the Company's financial position.
As noted previously, the Company is a partner in a joint venture which owns the
home office building. The annual rent for premises occupied in the home office
building is $1,147,414.
Franklin United Life Insurance Company ("FULIC") was merged with and into the
Company effective December 31, 1995. FULIC, in the normal course of business,
established reinsurance treaties with its former parent, The Franklin Life
Insurance Company. One such treaty is a 50% quota share ceded reinsurance
agreement for certain group annuity contracts. In addition, FULIC ceded life
insurance risks in excess of its retention limit to Franklin. Both treaties are
still in effect.
F-29
<PAGE>
American General Life Insurance Company of New York
Notes to Statutory Basis Financial Statements (continued)
L. TRANSACTIONS WITH AFFILIATES (CONTINUED)
The Company may borrow funds from AGC under an intercompany short-term borrowing
agreement. These borrowings are unsecured. Interest is charged on the average
borrowings based on the commercial paper rate. The amounts outstanding under the
borrowing agreement were $0 and $156,000 at December 31, 1998 and 1997,
respectively.
M. PARTICIPATING POLICY CONTRACTS
Participating policy contracts entitle a policyholder to share in earnings
through dividend payments. They represented 5.08% and 4.80% of insurance in
force at December 31, 1998 and 1997, respectively. Dividends of $2,645,871 and
$2,222,995 were paid to policyholders in 1998 and 1997, respectively.
N. YEAR 2000 CONTINGENCY (UNAUDITED)
INTERNAL SYSTEMS
The Company's ultimate parent, American General Corporation, (AGC) has numerous
technology systems that are managed on a decentralized basis. AGC's Year 2000
readiness efforts are therefore being undertaken by its key business units with
centralized oversight. Each business unit, including the Company, has developed
and is implementing a plan to minimize the risk of a significant negative impact
on its operations.
While the specifics of the plans vary, the plans include the following
activities: (1) perform an inventory of the Company's information technology and
non-information technology systems; (2) assess which items in the inventory may
expose the Company to business interruptions due to Year 2000 Issues; (3)
reprogram or replace systems that are not Year 2000 ready; (4) test systems to
prove that they will function into the next century as they do currently; and
(5) return the systems to operation. As of December 31, 1998, substantially all
of the Company's critical systems are Year 2000 ready and have been returned to
operations. However, activities (3) through (5) for certain systems are ongoing,
with vendor upgrades expected to be received during the first half of 1999.
THIRD PARTY RELATIONSHIPS
The Company has relationships with various third parties who must also be Year
2000 ready. These third parties provide, or receive resources and services to
(or from) the
F-30
<PAGE>
American General Life Insurance Company of New York
Notes to Statutory Basis Financial Statements (continued)
N. YEAR 2000 CONTINGENCY (UNAUDITED) (CONTINUED)
Company and include organization with which the Company exchanges information.
Third parties include vendors of hardware, software, and information services;
providers of infrastructure services such as voice and data communication and
utilities for office facilities; investors, customers; distribution channels;
and joint venture partners. Third parties differ from internal systems in that
the Company exercises less, or no, control over Year 2000 readiness. The Company
has developed a plan to assess and attempt to mitigate the risks associated with
the potential failure of third parties to achieve Year 2000 readiness. The plan
includes the following activities (1) identify and classify third party
dependencies; (2) research, analyze, and document Year 2000 readiness for
critical third parties; and (3) test critical hardware and software products and
electronic interfaces. As of December 31, 1998, AGC has identified and assessed
approximately 700 critical third party dependencies, including those related to
the Company. A more detailed evaluation will be completed during the first
quarter 1999 as part of the Company's contingency planning efforts. Due to the
various stages of third parties' Year 2000 readiness, the Company's testing
activities will extend through 1999.
CONTINGENCY PLANS
The Company has commenced contingency planning to reduce the risk of Year 2000-
related business failures. The contingency plans, which address both internal
systems and third party relationships, include the following activities: (1)
evaluate the consequences of failure of business processes with significant
exposure to Year 2000 risk; (2) determine the probability of a Year 2000 related
failure for those processes that have a high consequence of failure; (3) develop
an action plan to complete contingency plans for those processes that rank high
in consequence and probability of failure; and (4) complete the applicable
action plans. The Company is currently developing action plans and expects to
substantially complete all contingency planning activities by April 30, 1999.
RISKS AND UNCERTAINTIES
Based on its plans to make internal systems ready for Year 2000, to deal with
third party relationships, and to develop contingency action, the Company
believes that it will experience at most isolated and minor disruptions of
business processes following the turn of the century. Such disruptions are not
expected to have a material effect on the Company's future results of
operations, liquidity, or financial condition. However, due to the magnitude and
complexity of this project, risks and uncertainties exist and the Company is not
able to predict a most reasonably likely worst case scenario. If conversion
F-31
<PAGE>
American General Life Insurance Company of New York
Notes to Statutory Basis Financial Statements (continued)
N. YEAR 2000 CONTINGENCY (UNAUDITED) (CONTINUED)
of the Company's internal systems is not completed on a timely basis (due to
non-performance by significant third party vendors, lack of qualified personnel
to perform the Year 2000 work, or other unforeseen circumstances in completing
the Company's plans), or if critical third parties fail to achieve Year 2000
readiness on a timely basis, the Year 2000 issue could have a material adverse
impact on the Company's operation following the turn of the century.
COSTS
Through December 31, 1998, the Company has incurred, and anticipates that it
will continue to incur costs for internal staff, third party vendors, and other
expenses to achieve Year 2000 readiness. The cost of activities related to Year
2000 readiness has not had a material adverse effect on the Company results of
operations or financial condition. In addition, the Company has elected to
accelerate the planned replacement of certain systems as part of the Year 2000
plans. Costs of the replacement systems are being capitalized and amortized over
their useful lives, in accordance with the Company's normal accounting policies.
F-32
<PAGE>
PART C
OTHER INFORMATION
-----------------
Item 24. Financial Statements and Exhibits
(a) Financial Statements
PART A: None
PART B:
(1) Financial Statements of Generations Divisions of American General
Life Insurance Company of New York Separate Account E:
Report of Ernst & Young LLP, Independent Auditors
Statement of Net Assets as of December 31, 1998
Statement of Operations for the year ended December 31, 1998
Statement of Changes in Net Assets for the year ended
December 31, 1998
Notes to Financial Statement
(2) Statutory Basis Financial Statements of American General Life
Insurance Company of New York:
Report of Ernst & Young LLP, Independent Auditors
Balance Sheets as of December 31, 1998 and 1997
Statements of Operations for the years ended
December 31, 1998 and 1997
Statements of Changes in Capital and Surplus for the years ended
December 31, 1998 and 1997
Statements of Cash Flows for the years ended
December 31, 1998 and 1997
Notes to Statutory Basis Financial Statements
PART C: None
(b) Exhibits
(1) (a) American General Life Insurance Company of New York
Board of Directors resolution authorizing the
establishment of Separate Account E./1/
(b) Resolution of the Board of Directors of American
General Life Insurance Company of New York providing
for, among other things (i) the reactivation of
Separate Account E of American
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<PAGE>
General Life Insurance Company of New York; and (ii)
the marketing of variable annuity products in New
York./4/
(2) None
(3) (a) Master Marketing and Distribution Agreement By and
Among American General Life Insurance Company of New
York, American General Securities Incorporated and
Van Kampen American Capital Distributors, Inc./5/
(b)(i) Form of Participation Agreement by and among
American General Life Insurance Company of New York,
American General Securities Incorporated, Van Kampen
American Capital Life Investment Trust, Van Kampen
American Capital Asset Management, Inc., and Van
Kampen American Capital Distributors, Inc./5/
(ii) Form of Participation Agreement by and among American
General Life Insurance Company of New York, Morgan
Stanley Universal Funds, Inc., Morgan Stanley Asset
Management, Inc. And Miller Anderson & Sherrerd
LLP./5/
(c) Specimen form of Selling Group Agreement by and among
American General Life Insurance Company of New York,
American General Securities Incorporated, and Van
Kampen American Capital Distributors, Inc./5/
(4) (a) Specimen form of Master Group Annuity Contract
(Form No. 96034N)./5/
(b) Specimen form of Group Annuity Certificate (Form No.
96033N)./5/
(5) (a) Specimen form of Application for Certificate Form
No. 96033N./5/
(b)(i) Specimen form of Generations Service Request./4/
(ii) Specimen form of Generations Service Request, amended
May 1, 1998. (Filed herein)
(c) Specimen form of Special Request for Surrender Charge
Waiver under Certificate Form No. 96033N./4/
(d) Specimen form of Dollar Cost Averaging Form. (Filed
herein)
(6) (a) Copy of the Charter and all amendments thereto of
American General Life Insurance Company of New
York./2/
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<PAGE>
(b) Copy of the Bylaws, as amended, of American General
Life Insurance Company of New York./3/
(7) None
(8) Form of Administrative Services Agreement, Section
1.(f), between American General Life Insurance
Company of New York and American General Life
Insurance Company./5/
(9) Opinion and Consent of Counsel./4/
(10) Consent of Independent Auditors
(11) None
(12) None
(13)(a)(i) Computations of hypothetical historical average
annual total returns for the Emerging Growth,
Enterprise, Domestic Income, Government, and Money
Market Divisions, available under Certificate Form No
96033N for the one and five year periods ended
December 31, 1996, and since inception/6/.
(ii) Computation of hypothetical historical average annual
total returns for the Real Estate Securities
Division, available under Certificate Form No. 96033N
for the one and five year periods ended December 31,
1996, and since inception/6/.
(iii) Computations of hypothetical historical average
annual total returns for the Growth and Income,
Strategic Stock, Asian Equity, Emerging Markets
Equity, Equity Growth, Global Equity, International
Magnum, Fixed Income, High Yield, Mid Cap Value, and
Value Divisions, available under Certificate Form No.
96033N for the one and five year periods ended
December 31, 1997, and since inception./7/
(b)(i) Computations of hypothetical historical total
returns for the Emerging Growth, Enterprise, Domestic
Income, Government, and Money Market Divisions,
available under Certificate Form No. 96033N for the
one and five year periods ended December 31, 1996,
and since inception/6/.
(ii) Computation of hypothetical historical total returns
for the Real Estate Securities Division, available
under Certificate Form No. 96033N for the one and
five year periods ended December 31, 1996, and since
inception/6/.
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<PAGE>
(iii) Computations of hypothetical historical total
returns for the Growth and Income, Strategic Stock,
Asian Equity, Emerging Markets Equity, Equity Growth,
Global Equity, International Magnum, Fixed Income,
High Yield, Mid Cap Value, and Value Divisions,
available under Certificate Form No. 96033N for the
one and five year periods ended December 31, 1997,
and since inception./7/
(c)(i) Computations of hypothetical historical cumulative
total returns for the Emerging Growth, Enterprise,
Domestic Income, Government, and Money Market
Divisions, available under Certificate Form No.
96033N for the one and five year periods ended
December 31, 1996, and since inception/6/.
(ii) Computation of hypothetical historical cumulative
total returns for the Real Estate Securities
Division, available under Certificate Form No. 96033N
for the one and five year periods ended December 31,
1996, and since inception/6/.
(iii) Computations of hypothetical historical
cumulative total returns for the Growth and Income,
Strategic Stock, Asian Equity, Emerging Markets
Equity, Equity Growth, Global Equity, International
Magnum, Fixed Income, High Yield, Mid Cap Value, and
Value Divisions, available under Certificate Form No.
96033N for the one and five year periods ended
December 31, 1997, and since inception./7/
(d) Computations of hypothetical historical 30 day yield
for the Domestic Income Division and the Government
Division, available under Certificate Form No. 96033N
for the one month period ended December 31, 1996./4/
(e) Computations of hypothetical historical seven day
yield and effective yield for the Money Market
Division, available under Certificate Form No. 96033N
for the seven day period ended December 31, 1996./4/
(14) Financial Data Schedule. (See Exhibit 27 below.)
(15) (a) Power of Attorney with respect to Registration
Statements and Amendments thereto signed by the
following persons in their capacities as directors
and, where applicable, officers of American General
Life Insurance Company of New York: Ms. Baetz and
Ms. Ewers, and Messrs. Martin, Newton, D'Agostino,
Slepicka, Herbert, Atnip, Bacas, Corcoran, Fox,
Gibbons, O'Hara, and Trotta./4/
(b) Power of Attorney with respect to Registration
Statements and Amendments thereto signed by the
following person in his
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<PAGE>
capacity as director and, where applicable, officer
of American General Life Insurance Company of New
York: Mr. Christopher Ruisi./5/
(27) (Inapplicable, because, notwithstanding Item 24.(b)
as to Exhibits, the Commission staff has advised that
no such Schedule is required.)
/1/ Incorporated herein by reference to the initial filing of Registrant's
Form S-6 Registration Statement (File No. 2-67441 and No. 811-3050).
/2/ Incorporated herein by reference to Post-Effective Amendment No. 2 to
initial filing of Registrant's Form S-6 Registration Statement (File No. 2-67441
and No. 811-3050).
/3/ Incorporated herein by reference to Post-Effective Amendment No. 3 to
initial filing of Registrant's Form S-6 Registration Statement (File No. 2-
67441 and 811-3050).
/4/ Previously filed in Registrant's Form N-4 Registration Statement (File No.
333-32387 and No. 811-3050), filed on July 30, 1997.
/5/ Previously filed in Pre-Effective Amendment No. 1 to Registrant's Form N-4
Registration Statement (File No. 333-32387 and No. 811-3050), filed on February
6, 1998.
/6/ Previously filed in Pre-Effective Amendment No. 2 to Registrant's Form N-4
Registration Statement (File No. 333-32387 and No. 811-3050), filed on February
18, 1998.
/7/ Previously filed in Post-Effective Amendment No. 1 to Registrant's Form N-
4 Registration Statement (File No. 333-32387 and No. 811-3050), filed on April
29, 1998.
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
The directors, executive officers, and, to the extent responsible for variable
annuity operations, other officers of the depositor are listed below.
Positions and Offices
Name and Principal with the
Business Address Depositor
------------------ ----------------------
Rodney O. Martin, Jr. Director, Chairman of the Board, President
2727-A Allen Parkway & Chief Executive Officer
Houston, TX 77019
Jon P. Newton Director, Senior Chairman
2929 Allen Parkway
Houston, TX 77019
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<PAGE>
Robert F. Herbert, Jr. Director, Senior Vice President,
2727-A Allen Parkway Controller & Treasurer
Houston, TX 77019
William A. Bacas Director
182 Ridge Street
Glens Falls, NY 12801
John R. Corcoran Director
12 Hawthorne Drive
Sudbury, MA 01776
Dr. Patricia O. Ewers Director
Pace University
Pace Plaza
New York, NY 10038
Thomas H. Fox Director
112 Northport Point
Northport, MI 49670
David A. Fravel Director, Executive Vice President
2727-A Allen Parkway
Houston, Texas 77019
William J. O'Hara, Jr. Director
AJ Tech
2590 Pioneer Avenue
Vista, CA 92083
Philip K. Polkinghorn Director, Executive Vice President &
2727-A Allen Parkway Chief Financial Officer
Houston, Texas 77019
Gary D. Reddick Director, Executive Vice President
2727-A Allen Parkway
Houston, Texas 77019
George B. Trotta Director
541 East 20th Street
Apartment 14F
New York, NY 10010
R. Stephen Watson Director
300 South State Street
Syracuse, NY 13202
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<PAGE>
John V. LaGrasse Executive Vice President & Chief
2727-A Allen Parkway Technology Officer
Houston, TX 77019
Simon J. Leech Senior Vice President
2727-A Allen Parkway
Houston, TX 77019
Wayne A. Barnard Senior Vice President & Chief Actuary
2727-A Allen Parkway
Houston, TX 77019
Ross D. Friend Senior Vice President & Chief
2727 Allen Parkway Compliance Officer
Houston, TX 77019
William Guterding Senior Vice President & Chief
125 Maiden Lane Underwriting Officer
New York, NY 10038-4992
Althea R. Johnson Vice President, Assistant Controller
2727-A Allen Parkway and Assistant Secretary
Houston, TX 77019
Rosalia S. Nolan Vice President
2727-A Allen Parkway
Houston, Texas 77019
Larry M. Robinson Vice President
2727-A Allen Parkway
Houston, Texas 77019
Richard W. Scott Vice President & Chief Investment
2929 Allen Parkway Officer
Houston, TX 77019
Thomas M. Zurek Senior Vice President & General Counsel
2929 Allen Parkway
Houston, TX 77019
Don M. Ward Vice President
2727 Allen Parkway
Houston, TX 77019
Sandra M. Smith Associate General Counsel
300 South State Street & Assistant Secretary
Syracuse, NY 13202
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<PAGE>
Pauletta P. Cohn Secretary
2727-A Allen Parkway
Houston, TX 77019
K. David Nunley Assistant Tax Officer
2727-A Allen Parkway
Houston, TX 77019
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT
The following is a list of American General Corporation's subsidiaries as of
March 31, 1999. All subsidiaries listed are corporations, unless otherwise
indicated. Subsidiaries of subsidiaries are indicated by indentations and
unless otherwise indicated, all subsidiaries are wholly owned. Inactive
subsidiaries are denoted by an asterisk (*).
Jurisdiction of
Name Incorporation
- ------------------------------------------------------ ---------------
AGC Life Insurance Company Missouri
American General Life and Accident Insurance Company/6/ Tennessee
Stylistic Distribution Corporation Delaware
Millennium Distribution Corporation Delaware
New Age Distribution Corporation Delaware
Good-To-Great Distribution Corporation Delaware
Next Generation Distribution Corporation Delaware
New Technology Distribution Corporation Delaware
Life Application Distribution Corporation Delaware
American General Exchange, Inc. Tennessee
Independent Fire Insurance Company Florida
American General Property Insurance Company
of Florida Florida
American General Life Insurance Company/7/ Texas
American General Annuity Service Corporation Texas
American General Life Companies Delaware
American General Life Insurance Company of New York New York
The Winchester Agency Ltd. New York
The Variable Annuity Life Insurance Company Texas
PESCO Plus, Inc/15/ Delaware
American General Gateway Services, L.L.C./16/ Delaware
The Variable Annuity Marketing Company Texas
VALIC Investment Services Company Texas
VALIC Retirement Services Company Texas
VALIC Trust Company Texas
American General Property Insurance Company Tennessee
The Franklin Life Insurance Company Illinois
The American Franklin Life Insurance Company Illinois
Franklin Financial Services Corporation Delaware
HBC Development Corporation Virginia
Templeton American General Life of Bermuda, Ltd/14/ Bermuda
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<PAGE>
Western National Corporation Delaware
WNL Holding Corp. Delaware
American General Annuity Insurance Company/8/ Texas
American General Assignment Corporation Texas
AGA Brokerage Services, Inc. Delaware
A.G. Investment Advisory Services, Inc.. Delaware
American General Financial Institution Group, Inc. Delaware
WNL Insurance Services, Inc. Delaware
American General Corporation* Delaware
American General Delaware Management Corporation/1/ Delaware
American General Finance, Inc. Indiana
HSA Residential Mortgage Services of Texas, Inc. Delaware
AGF Investment Corp. Indiana
American General Auto Finance, Inc. . Delaware
American General Finance Corporation/9/ Indiana
American General Finance Group, Inc. Delaware
American General Financial Services, Inc./10/ Delaware
The National Life and Accident Insurance Company Texas
Merit Life Insurance Co. Indiana
Yosemite Insurance Company Indiana
American General Finance, Inc. Alabama
American General Financial Center Utah
American General Financial Center, Inc.* Indiana
American General Financial Center, Incorporated* Indiana
American General Financial Center Thrift Company* California
Thrift, Incorporated* Indiana
American General Investment Advisory Services, Inc.* Texas
American General Investment Holding Corporation/11/ Delaware
American General Investment Management Corporation/11/ Delaware
American General Realty Advisors, Inc. Delaware
American General Realty Investment Corporation Texas
AGLL Corporation/12/ Delaware
American General Land Holding Company Delaware
AG Land Associates, LLC/12/ California
GDI Holding, Inc.*/13/ California
Pebble Creek Service Corporation Florida
SR/HP/CM Corporation Texas
Green Hills Corporation Delaware
Knickerbocker Corporation Texas
American Athletic Club, Inc. Texas
Pavilions Corporation Delaware
USLIFE Corporation Delaware
All American Life Insurance Company Illinois
American General Assurance Company Illinois
American General Indemnity Company Nebraska
USLIFE Credit Life Insurance Company of Arizona Arizona
American General Life Insurance Company of
Pennsylvania Pennsylvania
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<PAGE>
I.C. Cal* California
The Old Line Life Insurance Company of America Wisconsin
The United States Life Insurance Company in the City
of New York New York
USLIFE Agency Services, Inc. Illinois
USMRP, Ltd. Turks & Caicos
USLIFE Financial Institution Marketing Group, Inc. California
USLIFE Insurance Services Corporation Texas
USLIFE Realty Corporation Texas
USLIFE Real Estate Services Corporation Texas
USLIFE Systems Corporation Delaware
American General Finance Foundation, Inc. is not included on this list. It is a
non-profit corporation.
NOTES
/1/ The following limited liability companies were formed in the State of
Delaware on March 28, 1995. The limited liability interests of each are
jointly owned by AGC and AGDMC and the business and affairs of each are
managed by AGDMC:
American General Capital, L.L.C.
American General Delaware, L.L.C.
/2/ On November 26, 1996, American General Institutional Capital A ("AG Cap
Trust A"), a Delaware business trust, was created. On March 10, 1997,
American General Institutional Capital B ("AG Cap Trust B"), also a
Delaware business trust, was created. Both AG Cap Trust A's and AG Cap
Trust B's business and affairs are conducted through their trustees:
Bankers Trust Company and Bankers Trust (Delaware). Capital securities of
each are held by non-affiliated third party investors and common securities
of AG Cap Trust A and AG Cap Trust B are held by AGC.
/3/ On November 14, 1997, American General Capital I, American General Capital
II, American General Capital III, and American General Capital IV
(collectively, the "Trusts"), all Delaware business trusts, were created.
Each of the Trusts' business and affairs are conducted through its
trustees: Bankers Trust (Delaware) and James L. Gleaves (not in his
individual capacity but solely as Trustee).
/4/ On July 10, 1997, the following insurance subsidiaries of AGC became the
direct owners of the indicated percentages of membership units of SBIL B,
L.L.C. ("SBIL B"), a U.S. limited liability company: VALIC (22.6%), FL
(8.1%), AGLA (4.8%) and AGL (4.8%).
Through their aggregate 40.3% interest in SBIL B, VALIC, FL, AGLA and AGL
indirectly own approximately 28% of the securities of SBI, an English
company, and 14% of the securities of ESBL, an English company, SBP, an
English company, and SBFL, a Cayman Islands company. These interests are
held for investment purposes only.
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<PAGE>
/5/ Effective December 5, 1997, AGC and Grupo Nacional Provincial, S.A. ("GNP")
completed the purchase by AGC of a 40% interest in Grupo Nacional
Provincial Pensions S.A. de C.V., a new holding company formed by GNP, one
of Mexico's largest financial services companies.
/6/ AGLA owns approximately 12% of Whirlpool Financial Corp. ("Whirlpool")
preferred stock. AGLA's holdings in Whirlpool represents approximately 3%
of the voting power of the capital stock of Whirlpool. The interests in
Whirlpool (which is a corporation that is not associated with AGC) are held
for investment purposes only.
/7/ AGL owns 100% of the common stock of American General Securities
Incorporated ("AGSI"), a full-service NASD broker-dealer. AGSI, in turn,
owns 100% of the stock of the following insurance agencies:
American General Insurance Agency, Inc. (Missouri)
American General Insurance Agency of Hawaii, Inc. (Hawaii)
American General Insurance Agency of Massachusetts, Inc. (Massachusetts)
In addition, the following agencies are indirectly related to AGSI, but not
owned or controlled by AGSI:
American General Insurance Agency of Ohio, Inc. (Ohio)
American General Insurance Agency of Texas, Inc. (Texas)
American General Insurance Agency of Oklahoma, Inc. (Oklahoma)
Insurance Masters Agency, Inc. (Texas)
AGSI and the foregoing agencies are not affiliates or subsidiaries of AGL
under applicable holding company laws, but they are part of the AGC group
of companies under other laws.
/8/ AGA Series Trust is a Massachusetts business trust, all of the shares of
which are held in the separate account of AGA for the benefit of AGA
variable annuity policyholders.
/9/ American General Finance Corporation is the parent of an additional 48
wholly-owned subsidiaries incorporated in 30 states and Puerto Rico for the
purpose of conducting its consumer finance operations, including those
noted in footnote 10 below.
/10/ American General Financial Services, Inc. is the parent of an additional 7
wholly-owned subsidiaries incorporated in 4 states and Puerto Rico for the
purpose of conducting its consumer finance operations.
/11/ American General Investment Management, L.P. is jointly owned by AGIHC and
AGIMC. AGIHC holds a 99% limited partnership interest, and AGIMC owns a 1%
general partnership interest.
/12/ AG Land Associates, LLC is jointly owned by AGLH and AGLL. AGLH holds a
98.75% managing interest and AGLL owns a 1.25% managing interest.
/13/ AGRI owns only a 75% interest in GDI Holding, Inc.
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<PAGE>
/14/ AGCL owns 50% of the common stock of TAG Life. Templeton International,
Inc., a Delaware corporation, owns the remaining 50% of TAG Life. Templeton
International, Inc. is not affiliated with AGC.
/15/ VALIC holds 900 (90%) of the outstanding common shares. The Florida
Education Association/United, a Florida teachers union and unaffiliated
third party, holds the remaining 100 (10%) of the outstanding common
shares.
/16/ VALIC holds (90%) of the outstanding common shares. Gateway Investment
Services, Inc., a California corporation and an unaffiliated third party,
holds the remaining 10% of the outstanding common shares.
COMPANY ABBREVIATIONS AS USED IN ITEM #26:
<TABLE>
<CAPTION>
State/Jur.
Abb. Company of Domicile
- ----------- ------------------------------------------------------- -----------
<S> <C> <C>
AAL All American Life Insurance Company.................... IL
AAth American Athletic Club, Inc............................ TX
AFLI The American Franklin Life Insurance Company........... IL
AGA American General Annuity Insurance Company............. TX
AGAC American General Assurance Company..................... IL
AGAS American General Annuity Service Corporation........... TX
AGBS AGA Brokerage Services, Inc............................ DE
AGC American General Corporation........................... TX
AGCL AGC Life Insurance Company............................. MO
AGDMC American General Delaware Management Corporation....... DE
AGF American General Finance, Inc.......................... IN
AGFC American General Finance Corporation................... IN
AGFCI American General Financial Center, Incorporated........ IN
AGFCT American General Financial Center Thrift Company....... CA
AGFG American General Finance Group, Inc.................... DE
AGF Inv AGF Investment Corp.................................... IN
AGFn American General Financial Center...................... UT
AGFnC American General Financial Center, Inc................. IN
AGFS American General Financial Services, Inc............... DE
AGGS American General Gateway Services, L.L.C............... DE
AGIA American General Insurance Agency, Inc................. MO
AGIAH American General Insurance Agency of Hawaii, Inc....... HI
AGIAM American General Insurance Agency of
Massachusetts, Inc..................................... MA
AGIAO American General Insurance Agency of Ohio, Inc......... OH
AGIAOK American General Insurance Agency of Oklahoma, Inc..... OK
AGIAS A.G. Investment Advisory Services, Inc................. DE
AGIAT American General Insurance Agency of Texas, Inc........ TX
AGIHC American General Investment Holding Corporation........ DE
AGIM American General Investment Management, L.P............ DE
AGIMC American General Investment Management Corporation..... DE
AGIND American General Indemnity Company..................... NE
AGFIG American General Financial Institution Group, Inc...... DE
AGL American General Life Insurance Company................ TX
AGLC American General Life Companies ....................... DE
AGLA American General Life and Accident Insurance Company... TN
AGLH American General Land Holding Company.................. DE
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
AGLL AGLL Corporation....................................... DE
AGNY American General Life Insurance Company of New York.... NY
AGPA American General Life Insurance Company of Pennsylvania PA
AGPIC American General Property Insurance Company............ TN
AGRA American General Realty Advisors, Inc.................. DE
AGRI American General Realty Investment Corporation......... TX
AGSI American General Securities Incorporated............... TX
AGX American General Exchange, Inc......................... TN
ASGN American General Assignment Corporation................ TX
FFSC Franklin Financial Services Corporation................ DE
FL The Franklin Life Insurance Company.................... IL
GHC Green Hills Corporation................................ DE
GGDC Good-To-Great Distribution Corporation................. DE
HBDC HBC Development Corporation............................ VA
IFIC Independent Fire Insurance Company..................... FL
RMST HSA Residential Mortgage Services of Texas, Inc........ DE
KC Knickerbocker Corporation.............................. TX
LADC Life Application Distribution Corporation.............. DE
ML Merit Life Insurance Co................................ IN
MDC Millennium Distribution Corporation.................... DE
NLA The National Life and Accident Insurance Company....... TX
NADC New Age Distribution Corporation....................... DE
NTDC New Technology Distribution Corporation................ DE
NGDC Next Generation Distribution Corporation............... DE
OLL The Old Line Life Insurance Company of America......... WI
PAV Pavilions Corporation.................................. DE
PCSC Pebble Creek Service Corporation....................... FL
PPI PESCO Plus, Inc........................................ DE
PIFLA American General Property Insurance Company of Florida. FL
SRHP SR/HP/CM Corporation................................... TX
SDC Stylistic Distribution Corporation..................... DE
TAG Life Templeton American General Life of Bermuda, Ltd........ BA
TI Thrift, Incorporated................................... IN
UAS USLIFE Agency Services, Inc............................ IL
UC USLIFE Corporation..................................... DE
UCLA USLIFE Credit Life Insurance Company of Arizona........ AZ
UFI USLIFE Financial Institution Marketing Group, Inc...... CA
UIS USLIFE Insurance Services Corporation.................. TX
URC USLIFE Realty Corporation.............................. TX
USC USLIFE Systems Corporation............................. DE
USMRP USMRP, Ltd............................................. T&C
USL The United States Life Insurance Company in the City of
New York NY
VALIC The Variable Annuity Life Insurance Company............ TX
VAMCO The Variable Annuity Marketing Company................. TX
VISCO VALIC Investment Services Company...................... TX
VRSCO VALIC Retirement Services Company...................... TX
VTC VALIC Trust Company.................................... TX
WA The Winchester Agency Ltd.............................. NY
WIS WNL Insurance Services, Inc............................ DE
WNC Western National Corporation........................... DE
WNLH WNL Holding Corp....................................... DE
YIC Yosemite Insurance Company............................. IN
</TABLE>
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ITEM 27. NUMBER OF CERTIFICATE OWNERS
As of March 31, 1999, there were 10 owners of Certificates offered by this
Registration Statement.
ITEM 28. INDEMNIFICATION
AGNY's By-Laws, as amended, include provisions concerning the indemnification of
its officers and directors, and certain other persons, which provide in
substance as follows:
Article X, section 1, of AGNY's By-Laws provide, in part, that AGNY shall have
the power to indemnify any person who was or is a party or is threatened to be
made a party to any proceeding (other than an action by or in the right of AGNY)
by reason of the fact that such person is or was serving at the request of AGNY,
against expenses, judgments, fines, settlements, and other amounts actually and
reasonably incurred in connection with such proceeding if such person acted in
good faith and in a manner such person reasonably believed to be in the best
interests of AGNY and, in the case of a criminal proceeding, had no reasonable
cause to believe the conduct of such person was unlawful.
Article X, section 2, provides that AGNY shall have the power to indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending, or completed action by or in the right of AGNY to procure a
judgement in its favor by reason of the fact that such person is or was acting
in behalf of AGNY, against expenses actually and reasonably incurred by such
person in connection with the defense or settlement of such action if such
person acted in good faith, in a manner such person believed to be in the best
interests of AGNY, and with such care, including reasonable inquiry, as an
ordinarily prudent person in a like position would use under similar
circumstances. No indemnification shall be made under section 2: (1) of
amounts paid in settling or otherwise disposing of a threatened or pending
action; (2) in respect of any claim, issue, or matter as to which such person
shall have been adjudged to be liable to AGNY, unless and only to the extent
that the court in which such action was brought shall determine upon application
that, in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for the expenses which such court shall
determine;
Article X, section 4, provides that, with certain exceptions, any
indemnification under Article X shall be made by AGNY only if authorized in the
specific case, upon a determination that indemnification of the person is proper
in the circumstances because the person has met the applicable standard of
conduct set forth in section 1 of Article X:
(1) By the Board of Directors acting by a quorum consisting of Directors who are
not parties to such action or proceeding upon a finding that the Director
has met the standard of conduct set forth in Section 1 or 2 of this Article
respectively or established pursuant to Sec. 721 of the Business Corporation
Law, as the case may be; or,
(2) If a quorum under sub-paragraph (1) is not obtainable, or even if
obtainable, a quorum of disinterested Directors so directs:
C-14
<PAGE>
(a) By the Board of Directors under the opinion in writing of independent
legal counsel that indemnification is proper in the circumstances
because the applicable standard of conduct set forth in Sections 1 or 2
of this Article or established pursuant to Sec. 721 of the Business
Corporation Law has been met by such officer or Director, or
(b) By the shareholders upon a finding that the Director or officer has met
the applicable standard of conduct set forth in such Sections.
(c) Expenses incurred in defending a civil or criminal action or
proceeding may be paid by AGNY in advance of the final disposition of
such action or proceeding upon receipt of an undertaking by or on
behalf of such Director or officer to repay such amount as, and to the
extent required to be repaid in case the person receiving such
advancement or allowance is ultimately found, under the procedure set
forth in Article X, not to be entitled to indemnification or, where
indemnification is granted, to the extent the expenses so advanced by
the corporation or allowed by the court exceed the indemnification to
which such officer or Director is entitled.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to Directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a Director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
Director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Registrant's principal underwriter, American General Securities
Incorporated, also acts as principal underwriter for American General Life
Insurance Company Separate Account A, American General Life Insurance
Company Separate Account D and American General Life Insurance Company
Separate Account VL-R.
(b) The directors and principal officers of the principal underwriter are:
C-15
<PAGE>
Position and Offices
with Underwriter,
Name and Principal American General
Business Address Securities Incorporated
----------------- -----------------------
F. Paul Kovach, Jr. Director and Chairman,
American General President and Chief Executive Officer
Securities Incorporated
2727 Allen Parkway
Houston, TX 77019
Royce G. Imhoff, II Director
American General Life
Companies
2727-A Allen Parkway
Houston, Texas 77019
Rodney O. Martin, Jr. Director and Vice Chairman
American General Life
Companies
2929 Allen Parkway
Houston, TX 77019
John A. Kalbaugh Vice President - Chief Marketing
American General Life Officer
Companies
2727 Allen Parkway
Houston, TX 77019
Robert M. Roth Vice President -
American General Administration and Compliance,
Securities Treasurer and Secretary
Incorporated
2727 Allen Parkway
Houston, TX 77019
Pauletta P. Cohn Assistant Secretary
American General Lifea
Companies
2727 Allen Parkway
Houston, TX 77019
Robert F. Herbert Assistant Treasurer
American General Life
Companies
2727-A Allen Parkway
Houston, Texas 77019
C-16
<PAGE>
K. David Nunley Assistant Associate Tax Officer
American General Life
Companies
2727-A Allen Parkway
Houston, Texas 77019
(c) Not Applicable.
ITEM 30. LOCATION OF RECORDS
All records referenced under Section 31(a) of the 1940 Act, and Rules 31a-1
through 31a-3 thereunder, are maintained and in the custody of American General
Life Companies at its principal executive office located at 2727-A Allen
Parkway, Houston, Texas 77019.
ITEM 31. MANAGEMENT SERVICES
Not Applicable.
ITEM 32. UNDERTAKINGS
The Registrant undertakes: A) to file a post-effective amendment to this
Registration Statement as frequently as is necessary to ensure that the audited
financial statements in the Registration Statement are never more than 16 months
old for so long as payments under the Certificates may be accepted; B) to
include either (1) as part of any application to purchase a Certificate offered
by a prospectus, a space that an applicant can check to request a Statement of
Additional Information, or (2) a toll-free number or a post card or similar
written communication affixed to or included in the applicable prospectus that
the applicant can remove to send for a Statement of Additional Information; C)
to deliver any Statement of Additional Information and any financial statements
required to be made available under this form promptly upon written or oral
request.
REPRESENTATION REGARDING THE REASONABLENESS OF AGGREGATE FEES AND CHARGES
DEDUCTED UNDER THE CONTRACTS PURSUANT TO SECTION 26(e)(2)(A) OF THE INVESTMENT
COMPANY ACT OF 1940
AGNY represents that the fees and charges deducted under the Contract and the
Certificates, in the aggregate, are reasonable in relation to the services
rendered, the expenses expected to be incurred, and the risks assumed by AGNY
under the Contract and the Certificates.
C-17
<PAGE>
POWERS OF ATTORNEY
Each person whose signature appears below hereby appoints Philip K.
Polkinghorn, Robert F. Herbert, Jr. and Pauletta P. Cohn and each of them, any
one of whom may act without the joinder of the others, as his/her attorney-in-
fact to sign on his/her behalf and in the capacity stated below and to file all
amendments to this amended Registration Statement, which amendment or amendments
may make such changes and additions to this amended Registration Statement as
such attorney-in-fact may deem necessary or appropriate.
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant, American General Life Insurance Company of New York
Separate Account E, certifies that it meets the requirements of Securities Act
Rule 485(b) for effectiveness of this amended Registration Statement and has
duly caused this amended Registration Statement to be signed on its behalf, in
the City of Houston, and State of Texas on this 22nd day of April, 1999.
AMERICAN GENERAL LIFE INSURANCE
COMPANY OF NEW YORK
SEPARATE ACCOUNT E
(Registrant)
BY: AMERICAN GENERAL LIFE INSURANCE
COMPANY OF NEW YORK
(On behalf of the Registrant and itself)
BY: /s/ ROBERT F. HERBERT, JR.
--------------------------
Robert F. Herbert, Jr.
Senior Vice President
[SEAL]
ATTEST: /s/ PAULETTA P. COHN
--------------------
Pauletta P. Cohn
Secretary
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this amended
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ RODNEY O. MARTIN, JR. Principal Executive Officer April 22, 1999
- -------------------------- and Director
(Rodney O. Martin, Jr.)
/s/ PHILIP K. POLKINGHORN Principal Financial Officer April 22, 1999
- -------------------------- and Director
(Philip K. Polkinghorn)
/s/ ROBERT F. HERBERT, JR. Principal Accounting Officer April 22, 1999
- -------------------------- and Director
(Robert F. Herbert, Jr.)
/s/ WILLIAM A. BACAS Director April 22, 1999
- --------------------------
(William A. Bacas)
/s/ JOHN R, CORCORAN Director April 22, 1999
- --------------------------
(John R. Corcoran)
/s/ PATRICIA O. EWERS Director April 22, 1999
- --------------------------
(Patricia O. Ewers)
/s/ THOMAS H. FOX Director April 22, 1999
- --------------------------
(Thomas H. Fox)
/s/ DAVID A. FRAVEL Director April 22, 1999
- --------------------------
(David A. Fravel)
Director April ____, 1999
- --------------------------
(Jon P. Newton)
/s/ WILLIAM J. O'HARA, JR. Director April 22, 1999
- --------------------------
(William J. O'Hara, Jr.)
/s/ GARY D. REDDICK Director April 22, 1999
- --------------------------
(Gary D. Reddick)
/s/ GEORGE B. TROTTA Director April 22, 1999
- --------------------------
(George B. Trotta)
/s/ R. STEPHEN WATSON Director April 22, 1999
- --------------------------
(R. Stephen Watson)
<PAGE>
EXHIBIT INDEX
Exhibit 5(b)(ii) Specimen form of Generations Service Request, amended May 1,
1998
Exhibit 5(d) Specimen form of Dollar Cost Averaging Form.
Exhibit 10 Consent of Independent Auditors
<PAGE>
EXHIBIT 5(b)(ii)
<PAGE>
<TABLE>
<CAPTION>
AMERICAN GENERAL LIFE INSURANCE COMPANY OF NEW YORK ("AGNY")
---------------------------------------------
Complete and return to: A Subsidiary of American General Corporation
Annuity Administration ---------------------------------------------
P.O. Box 1401 Syracuse, New York GENERATIONS(TM)
Houston, TX 77251-1401 ===============
(800) 281-8289 SERVICE REQUEST Variable Annuity
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
[X] CERTIFICATE 1.| CERTIFICATE #:___________________________________________ ANNUITANT:___________________________________
IDENTIFICATION |
| CERTIFICATE OWNERS(S):_________________________________________________________________________________
(COMPLETE SECTIONS |
1 AND 15 | ADDRESS:_______________________________________________________________________________________________
FOR ALL REQUESTS.) |
| [ ] CHECK HERE IF
INDICATE CHANGE OR | CHANGE OF ADDRESS _____________________________________________________________________________________
REQUEST DESIRED BELOW. |
| S.S. NO. OR TAX I.D. NO._________________________________ PHONE NUMBER: ( )______ - _______________
- -----------------------------------------------------------------------------------------------------------------------------------
[ ] NAME 2.| [ ] Annuitant* [ ] Beneficiary* [ ] Owner(s)*
CHANGE | (*DOES NOT CHANGE ANNUITANT, BENEFICIARY OR OWNERSHIP DESIGNATION.)
|
| ______________________________________________________________________________________________________
| FROM (FIRST, MIDDLE, LAST) TO (FIRST, MIDDLE, LAST)
|
| _________________________________________ _________________________________________________
| Reason: [ ] Marriage [ ] Divorce [ ] Correction [ ] Other (ATTACH CERTIFIED COPY OF COURT ORDER)
- -----------------------------------------------------------------------------------------------------------------------------------
[ ] DUPLICATE 3.|
CERTIFICATE | I/we hereby certify that the certificate for the listed number has been
| [ ] LOST [ ] DESTROYED [ ] OTHER____________
| Unless I/we have directed cancellation of the certificate, I/we request that a Certificate of Lost
| Certificate be issued. If the original certificate is located, I/we will return the Certificate of
| Lost Certificate to AGNY to be voided.
- -----------------------------------------------------------------------------------------------------------------------------------
[ ] BENEFICIARY 4.| PRIMARY CONTINGENT
CHANGE |
|
|
- -----------------------------------------------------------------------------------------------------------------------------------
THIS SECTION IS | This change of beneficiary has been approved by AGNY at its Administrative Office, and presentation of
FOR ADMINISTRATIVE | the Certificate for endorsement has been waived.
OFFICE USE ONLY |
| DATE OF APPROVAL:_______________________________By:___________________________________________________
| American General Life Insurance Company of New York
- -----------------------------------------------------------------------------------------------------------------------------------
[ ] AUTOMATIC 5.| ___________ By initialing here, I authorize AGNY to collect $____________________________ (min. $100)
ADDITIONAL | starting month/day ________________________________ by initiating electronic debit entries
PREMIUM PAYMENT | against my bank account with the following frequency:
OPTION | [ ] Monthly [ ] Quarterly [ ] Semiannually [ ] Annually
| (Attach voided check to Service Request.)
- -----------------------------------------------------------------------------------------------------------------------------------
[ ] DOLLAR COST 6.| Dollar cost average [ ] $________ OR [ ] _________% (whole % only) Begin Date:______/________/______
AVERAGING | Taken from the: [ ] Money Market OR [ ] 1-Year Guarantee Period MM DD YY
| Frequency: [ ] Monthly [ ] Quarterly [ ] Semiannually [ ] Annually
| Duration: [ ] 12 months [ ] 24 months [ ] 36 months [ ] 48 months [ ] 60 months
| to be allocated to the following division(s) as indicated. (Use only dollars OR percentages.)
| Asian Equity (140) _________ High Yield (134) _________
| Domestic Income (125) _________ International Magnum (135) _________
| Emerging Growth (126) _________ Mid Cap Value (136) _________
| Emerging Markets Equity (127) _________ Money Market (137) _________
| Enterprise (128) _________ Morgan Stanley
| Equity Growth (132) _________ Real Estate
| Fixed Income (129) _________ Securities (138) _________
| Global Equity (130) _________ Strategic Stock (141) _________
| Government (131) _________ Value (139) _________
| Growth and Income (133) _________ Other _____________________________
- -----------------------------------------------------------------------------------------------------------------------------------
[ ] AUTOMATIC 7.| [ ] Add [ ] Stop Automatic Rebalancing
REBALANCING | [ ] Change Automatic Rebalancing of variable investments to the percentage allocations indicated below:
| [ ] Quarterly [ ] Semiannually [ ] Annually (based on certificate anniversary)
($25,000 MINIMUM) | Asian Equity (140) ________% High Yield (134) ________%
USE WHOLE PERCENTAGES; | Domestic Income (125) ________% International Magnum (135) ________%
TOTAL MUST EQUAL 100%. | Emerging Growth (126) ________% Mid Cap Value (136) ________%
| Emerging Markets Equity (127) ________% Money Market (137) ________%
| Enterprise (128) ________% Morgan Stanley
| Equity Growth (132) ________% Real Estate
| Fixed Income (129) ________% Securities (138) ________%
| Global Equity (130) ________% Strategic Stock (141) ________%
| Government (131) ________% Value (139) ________%
| Growth and Income (133) ________% Other _____________________________
- -----------------------------------------------------------------------------------------------------------------------------------
[ ] CHANGE ALLOCATION 8.| Asian Equity (140) ________% High Yield (134) ________%
OF FUTURE PURCHASE | Domestic Income (125) ________% International Magnum (135) ________%
PAYMENTS | Emerging Growth (126) ________% Mid Cap Value (136) ________%
| Emerging Markets Equity (127) ________% Money Market (137) ________%
USE WHOLE PERCENTAGES; | Enterprise (128) ________% Morgan Stanley
TOTAL MUST EQUAL 100%. | Equity Growth (132) ________% Real Estate
| Fixed Income (129) ________% Securities (138) ________%
| Global Equity (130) ________% Strategic Stock (141) ________%
| Government (131) ________% Value (139) ________%
| Growth and Income (133) ________% Other _____________________________
|
| NOTE: A change to the allocation of future purchase payments will not alter Automatic Rebalancing
allocations.
- -----------------------------------------------------------------------------------------------------------------------------------
PAGE 1 OF 2
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
[ ] TRANSFER OF 9.| Indicate division number along with gross dollar or percentage amount. (Maintain $ or % consistency)
ACCUMULATED |
VALUES | % or $_______ from Div.______ to Div.______ % or $________ from Div. ________ to Div. _______
|
| % or $_______ from Div.______ to Div.______ % or $________ from Div. ________ to Div. _______
|
| % or $_______ from Div.______ to Div.______ % or $________ from Div. ________ to Div. _____
|
| % or $_______ from Div.______ to Div.______ % or $________ from Div. ________ to Div. _______
|
| NOTE: If a tranfer is elected and Automatic Rebalancing is active on your account, you may to consider
| changing the Automatic Rebalancing allocations (Section 7). Otherwise, the Automatic Rebalancing
| will transfer funds in accordance with instructions on file.
- -----------------------------------------------------------------------------------------------------------------------------------
[ ] SYSTEMATIC 10.| Specified Dollar Amount $___________________________
WITHDRAWAL |
| Frequency: [ ] Monthly [ ] Quarterly [ ] Semiannually [ ] Annually
(ALSO COMPLETE |
SECTIONS 13 & 14.) | To begin on _________/_______/_________ (Date must be between the 5th and 24th of the month and at
| MM DD YY least 30 days after issue date.)
($100 MINIMUM | Unless specified below, withdrawals will be taken from the divisions as they are currently allocated
WITHDRAWAL) | in your certificate.
|
PERCENTAGES (WHOLE % | $ or %_______ Div. No.______ $ or %_______ Div. No. ______ $ or %_______ Div. No. ______
ONLY)MUST EQUAL 100%, |
OR DOLLARS MUST EQUAL | $ or %_______ Div. No.______ $ or %_______ Div. No. ______ $ or %_______ Div. No. ______
TOTAL AMOUNT. |
| $ or %_______ Div. No.______ $ or %_______ Div. No. ______ $ or %_______ Div. No. ______
|
| NOTE: The systematic withdrawal option terminates on the certificate's annuity date. You may cancel the
| systematic withdrawal process at any time by notifying AGNY in writing.
- -----------------------------------------------------------------------------------------------------------------------------------
[ ] REQUEST FOR 11.| Amount requested is to be ( ) net OR ( ) gross of applicable charges Total Amount=$___________
PARTIAL |
WITHDRAWAL | $ or %_______ Div. No.______ $ or %_______ Div. No. ______ $ or %_______ Div. No. ______
|
| $ or %_______ Div. No.______ $ or %_______ Div. No. ______ $ or %_______ Div. No. ______
(ALSO COMPLETE |
SECTIONS 13 & 14.) | $ or %_______ Div. No.______ $ or %_______ Div. No. ______ $ or %_______ Div. No. ______
- -----------------------------------------------------------------------------------------------------------------------------------
[ ] REQUEST FOR 12.| [ ] Certificate attached
FULL SURRENDER | [ ] I hereby declare that the certificate specified has been lost, detroyed, or mislaid and request
| that the value of the certificate be paid. I agree to indemnify and hold harmless AGNY against any
(ALSO COMPLETE | claims which may be asserted on my behalf and on the behalf of my heirs, assignees, legal
SECTIONS 13 & 14.) | representatives, or any other person claiming rights derived through me against AGNY on the basis
| of the certificate.
- -----------------------------------------------------------------------------------------------------------------------------------
[ ] METHOD OF 13.| NOTE: If no method is indicated, check(s) will be mailed to the owner of the address of record.
DISTRIBUTION | Check one: [ ] Mail check to owner. [ ] Mail check to alternate address. [ ] Deposit funds directly
| to bank/firm.*
| (available only for
| systematic withdrawals)
| _______________________________________________________________________________________________________
| INDIVIDUAL OR BANK/FIRM
|
| ________________________________________________________ ___________________________________________
| ADDRESS CITY/STATE/ZIP
|
| ________________________________________________________ Type of account: [ ] Checking [ ] Savings
| IF BANK/FIRM, PROVIDE ACCOUNT NUMBER TO BE
| REFERENCED FOR DEPOSIT.
| * Enclose a voided check from account where funds are to be deposited.
| PLEASE DO NO ENCLOSE A DEPOSIT SLIP.
----------------------------------------------------------------------------------------------------------------------------------
[ ] NOTICE OF 14.| The taxable portion of the distribution you receive from you annuity certificate is subject to federal
WITHHOLDING | income tax withholding unless you elect not to have withholding apply. Withholding of state income tax
| may also be required by your state of residence. You may elect not to have withholding apply by
| checking the appropriate box below. If you elect not to have withholding apply to your distribution or
| if you do not have enough income tax withheld, you may be responsible for payment of estimated tax. You
| may incur penalties under the estimated tax rules if your withholding and estimated tax are not
| sufficient.
| Check one: [ ] I do NOT want income tax withheld from this distribution.
| [ ] I do want 10% or ____________% income tax withheld from this distribution.
- -----------------------------------------------------------------------------------------------------------------------------------
[X] AFFIRMATION/ 15.| CERTIFICATION: Under penalties of perjury, I certify (1) that the number shown on this form is my
SIGNATURE | correct taxpayer identification number and (2) that I am not subject to backup withholding under
| Section 3406(a)(1)(C) of the Internal Revenue Code.
(COMPLETE THIS SECTION |
FOR ALL REQUESTS.) | The Internal Revenue Service does not require your consent to any provision of this document other
| than the certification required to avoid backup withholding.
|
|
| ____________________________________ _______________________________________________________________
| DATE SIGNATURE OF CERTIFICATE OWNER(S)
- -----------------------------------------------------------------------------------------------------------------------------------
PAGE 2 OF 2
</TABLE>
<PAGE>
Exhibit (5)(d)
<PAGE>
AMERICAN GENERAL LIFE INSURANCE COMPANY OF NEW YORK
--------------------------------------------
A Subsidiary of American General Corporation
--------------------------------------------
[Logo of American
General appears here] Syracuse, New York G E N E R A T I O N S(TM)
Variable Annuity
-- DOLLAR COST AVERAGING ENROLLMENT FORM --
================================================================================
TO INITIATE DOLLAR COST AVERAGING (AUTOMATIC TRANSFER PLAN):
For new certificates:
. Select your initial investment allocations in Section 6 of the
GENERATIONS(TM) Variable Annuity Application (AGNY 8771-33), allocating
the desired percentage to the 6-Month Guarantee (DCA) or 1-Year Guarantee
(DCA) Period.
(The minimum allocation to the 6-Month Guarantee (DCA) or 1-Year Guarantee
(DCA) Period is $5,000.)
. In lieu of Section 8 of the Application, complete this form to begin
dollar cost averaging from the 6-Month Guarantee (DCA) or 1-Year Guarantee
(DCA) Period.
. Submit this form with your Application.
For existing certificates--certificate # VA__________________:
. Complete this form and submit it with additional payment.
. The entire additional payment will be applied toward the 6-Month Guarantee
(DCA) or 1-Year Guarantee (DCA) Period, as specified below.
. Additional payments may not be invested into the special 6-Month Guarantee
(DCA) or 1-Year Guarantee (DCA) Period while an existing dollar cost
averaging plan is active.
- --------------------------------------------------------------------------------
SECTION I: Investment Allocations
Please allocate entire amount to EITHER the [_] 6-Month Guarantee (DCA) or [_]
1-Year Guarantee (DCA) Period in equal monthly amounts over a period of 6 months
or 12 months to the following Division(s) as indicated. (Use only whole
percentages. Total allocation must equal 100%.)
. Balances in the 1-Year Guarantee (DCA) Period that are subject to dollar
cost averaging, pursuant to this form, will earn interest at the rate of
____%, which represents an increase of ____% over the 1-Year Guaranteed
Interest Rate currently offered, OR
. Balances in the 6-Month Guarantee (DCA) Period that are subject to dollar
cost averaging, pursuant to this form, will earn interest at the rate of
____%.
Asian Equity (140) ___% High Yield (134) ___%
Domestic Income (125) ___% International Magnum (135) ___%
Emerging Growth (126) ___% Mid Cap Value (136) ___%
Emerging Markets Equity (127) ___% Money Market (137) ___%
Enterprise (128) ___% Morgan Stanley ___%
Equity Growth (132) ___% Real Estate Securities (138) ___%
Fixed Income (129) ___% Strategic Stock (141) ___%
Global Equity (130) ___% Value (139) ___%
Government (131) ___% Other_______________________ ___%
Growth and Income (133) ___%
NOTE: All money allocated to the 6-Month Guarantee (DCA) or 1-Year Guarantee
(DCA) Period will be transferred in equal monthly amounts over a 6-month or
12-month period, beginning 30 days after the request date. The final amount
transferred from the 6-Month Guarantee (DCA) or 1-Year Guarantee (DCA) Period
will include all of the remaining balance.
- --------------------------------------------------------------------------------
SECTION II: Signatures
Your signature below indicates you have received a GENERATIONS(TM) prospectus
and authorizes your request to begin dollar cost averaging ("DCA"). All
transactions will be confirmed. Please review the information in these
statements carefully. All errors or corrections must be reported to American
General Life Insurance Company of New York ("AGNY") immediately to assure proper
crediting. AGNY will assume all transactions are accurate unless notified within
30 days.
You may elect to terminate your DCA by calling or writing AGNY, and termination
will become effective prior to the next transfer following this notification.
Upon termination, you will no longer receive the increased interest rate. If
AGNY receives another transfer or liquidation request on the date of a DCA
transfer, AGNY may delay processing the transfer. In addition, AGNY reserves the
right to discontinue, modify, or amend its DCA offer at any time. Any changes
made to the DCA offer will not affect Certificate Owners currently participating
in DCA.
- ------------------------------------- --------------------------------------
SIGNATURE OF PARTICIPANT SOCIAL SECURITY NUMBER OF PARTICIPANT
- ------------------------------------- --------------------------------------
PRINT PARTICIPANT NAME SIGNATURE OF JOINT PARTICIPANT
(IF APPLICABLE)
- ------------------------------------- --------------------------------------
PHONE DATE PRINT LICENSED AGENT NAME
================================================================================
<PAGE>
EXHIBIT 10
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference made to our firm under the caption "Independent
Auditors" and to the use of our report dated February 10, 1999, as to the
Generations Divisions of American General Life Insurance Company of New York
Separate Account E, and March 30, 1999, as to American General Life Insurance
Company of New York, in Post-Effective Amendment No. 2 to the Registration
Statement (Form N-4, Nos. 333-32387 and 811-3050) of American General Life
Insurance Company of New York Separate Account E.
/s/ ERNST & YOUNG LLP
---------------------
ERNST & YOUNG LLP
Houston, Texas
April 26, 1999
